<PAGE>
LOOMIS SAYLES FUNDS
FIXED INCOME FUNDS
o o o
SEMI-ANNUAL REPORT
JUNE 30, 1998
o Bond Fund
o Global Bond Fund
o High Yield Fund
o Intermediate Maturity Bond Fund
o Investment Grade Bond Fund
o Municipal Bond Fund
o Short-Term Bond Fund
o U.S. Government Securities Fund
A Family of No-Load Funds
LOOMIS
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SAYLES
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FUNDS
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One Financial Center, Boston, Massachusetts 02111
617 o 482 o 2450
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TABLE OF CONTENTS
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Corporate Overview......................................................... 1
Letter from the President, Loomis Sayles Funds............................. 2
Letter from the President, Loomis Sayles Distributors, L.P................. 3
Economic and Market Overview............................................... 4
Institutional Class Total Return vs. Lipper Category and Lipper
Category Index........................................................... 6
Fund and Manager Reviews................................................... 8
Portfolio of Investments................................................... 24
Statements of Assets and Liabilities....................................... 58
Statements of Operations................................................... 60
Statements of Changes in Net Assets........................................ 62
Financial Highlights....................................................... 70
Notes to Financial Statements.............................................. 84
Board of Trustees and Officers............................................. 97
<PAGE>
CORPORATE OVERVIEW
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LOOMIS SAYLES FUNDS
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Loomis Sayles Funds is a Boston-based family of 17 no-load mutual funds advised
by Loomis, Sayles & Company, L.P. At Loomis Sayles Funds, we follow a
simple-strategy -- we pay close attention to what we hear from our clients and
the marketplace, then work to deliver high-quality products and services that
exceed expectations.
Our "listening harder" creed lets us design products and services that truly
answer our clients' needs. We offer a broad range of no-load funds to complement
your investment objectives and strategies. We believe we run one of the most
responsive support organizations in the business, providing timely information
and insightful solutions.
Beyond that, we're structured to take advantage of our institutional heritage.
The research department at Loomis, Sayles & Company provides our portfolio
managers with the fundamental research they need to make sound investment
decisions. Our portfolio managers not only manage mutual funds - they manage
large institutional accounts that demand and appreciate the style consistency
that follows from our disciplined investment approach.
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. For more complete information about any of
the Loomis Sayles Funds, including charges and expenses, please call Loomis
Sayles Distributors, L.P. for a prospectus at 800-633-3330 Monday through
Friday, 8:45 a.m. to 4:45 p.m. EST. Read it carefully before you invest or send
money.
<PAGE>
LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDERS,
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[Photo of Daniel J. Fuss]
Daniel J. Fuss
Federal Reserve Board Chairman Alan Greenspan, recently remarked before
Congress that he had been in the economic forecasting business for over fifty
years and felt he could forecast reasonably well, but "this is a tough one".
I'm sure Chairman Greenspan would be happy to know that I agree with him. This
is a tough one. Many are able to discern the obvious economic guideposts and
extrapolate what might happen in the markets. Of course, the trouble with
forecasting is none of us know what may lurk around the corner.
My letter to you of last year spoke about many of the same issues we face today.
So much has happened in the intervening year, and yet it is remarkable how
little has changed.
Fortunately, the world is still at peace and that's particularly good for
worldwide financial markets. However, the Indian and Pakistani nuclear testing
has jarred complacency about peace and the political instability in Indonesia is
also very unsettling.
There is abundant liquidity in the markets, which has recently become more
unevenly distributed. Currently, there's a lot of money in what are perceived to
be "safe" investments - U.S. Treasuries and the familiar names of large
capitalization stocks, while more risky areas have much less. Liquidity in the
system always invites mischief. Savvy money managers, looking for quick money,
are shorting thinly traded currencies of countries with weak economies. This
increases the risk to those countries and has hampered their attempts at
economic recovery in the longer term.
On the home front, the U.S. economy remains strong. But without clear signs of
resurgent inflation or serious economic repercussions from the Asian crisis, the
Federal Reserve seems reluctant to take significant monetary policy actions.
Valuation levels on equities seem high, particularly as earnings growth is
likely to slow. Large cap stocks have had a good run in this bull market, but
the margin for error is higher now. This puts a premium on paying close
attention to your investments and remaining well diversified. Diversifying into
fixed income assets could be a prudent move for many.
Markets go up and markets go down. That is their nature. It's always been tough
to say just when. We can see the signs and evaluate the risks, but it's hard to
know just when to expect the unexpected.
Thanks for investing with us.
Sincerely,
/s/ Daniel J. Fuss
Daniel J. Fuss
President,
Loomis Sayles Funds
<PAGE>
LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDERS,
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[Photo of John F. Yeager, III]
John F. Yeager, III
One of the basic principles of investing is to broadly diversify investment
holdings in stocks, bonds, money market instruments and the like. With the
strong run-up of the equity markets, your portfolio's exposure to stocks may
be increased enough to warrant adjustment. And with growing uncertainty over
the sustainability of this market, now may be a propitious time to consider
increasing your fixed income investments.
As you know, Loomis Sayles Funds has a wide range of fixed income funds, which
can help you rebalance your portfolio's investment allocation and risk
profile. Loomis Sayles is known for our fixed income capabilities. Fundamental
research is the cornerstone of both our fixed income and equity investment
process. Our fixed income research department studies bonds in the same manner
as other firms research stocks - by understanding industry dynamics, company
specifics of bond issuers, "crunching" the financials of the issuer and
meeting with management.
Our approach to managing fixed income is value-oriented. We seek to provide
superior long-term total rates of return, including capital gains potential, by
focusing on undervalued, preferably "discount" fixed income securities from
around the world.
We offer a comprehensive range of fixed income funds. The Loomis Sayles Short-
Term Bond Fund, U.S. Government Securities Fund, Global Bond Fund and our
well-known Bond Fund, managed by Dan Fuss, all had top quartile performance and
our Municipal Bond Fund was in the top half of its peer group, as ranked by
Lipper Analytical Services, Inc.* We recently added three new fixed income
funds, Intermediate Maturity Bond Fund, Investment Grade Bond Fund and High
Yield Fund, managed by Dan Fuss and his team, to complement our existing funds.
Whether it's your intention to conservatively add bonds, or to significantly
increase fixed income risk to your portfolio, we have a fund that meets your
needs. Please call us, or visit our new website at www.loomissayles.com to learn
more about our fixed income capabilities.
Sincerely,
/s/ John F. Yeager, III
John F. Yeager, III
President,
Loomis Sayles Distributors, L. P.
*For the five-year period ended 6/30/98, the following are the Loomis Sayles
Funds rankings within the appropriate Lipper categories:
Short-Term Bond Fund ranked 9/50 Short Investment Grade Debt Category U.S.
Government Securities Fund ranked 2/96 General U.S. Government Category Global
Bond Fund ranked 5/57 Global Income Category Bond Fund ranked 1/40 Corporate BBB
Debt Category Municipal Bond Fund ranked 50/124 General Municipal Debt Category
<PAGE>
ECONOMIC AND MARKET OVERVIEW
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THE LOOMIS SAYLES FUNDS SEMI-ANNUAL REPORT
ECONOMIC AND MARKET OVERVIEW -- 1998
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The first half of 1998 featured a general decline in interest rates despite
strong economic growth and concerns over tightness in the labor market. The U.S.
economy is in the sixth year of expansion and the Federal Reserve Bank is
concerned about a potential jump in inflation. However, productivity growth and
higher labor force participation rates have helped to keep inflation in check.
For the first six months of the year, Asia's crisis may have made it difficult
for Federal Reserve Bank Chairman Alan Greenspan to raise interest rates. First,
raising rates would have intensified the Asian crisis and second, slower world
economic growth relieved some of the pressure on the U.S. economy.
1ST QUARTER
Yields bounced around during the first quarter and investors were left primarily
with their coupon income. On the corporate side, supply jumped as companies
replaced their high coupon debt with low coupon debt or issued new debt for
business expansion. Despite a healthy supply of new bonds, the corporate and
high yield markets posted strong results versus government bonds as investors
looked for extra yield. The supply of U.S. Treasury bonds is decreasing as the
federal government is a net redeemer of their bonds. In the first quarter, the
Lehman Brothers Government/Corporate Bond Index gained 1.52%, the Merrill Lynch
High Yield Master Index gained 2.79%.
2ND QUARTER
Asia continued to make headlines in the second quarter and most market gains
from earlier in the year were given back. Political unrest in Indonesia led to
the resignation of long-time ruler Suharto. India and Pakistan revived concerns
of a nuclear arms race with testing of their new atomic capabilities. To
compound this, Japan, Asia's largest economy, refused to grapple with its
failing economy. Despite intervention in the foreign exchange markets by the
United States, the Japanese yen fell to new lows versus the U.S. dollar.
Concerned investors now worry that China might devalue its currency, the yuan,
which in turn could incite another round of economic turmoil.
The story during the second quarter was the "flight to quality" in the financial
markets. U.S. Treasury bonds rallied and the 30-year Treasury bond hit all-time
lows as investors focused on "safe" investments. A flat yield curve, where
short-term yields are nearly the same as long-term yields, resulted from a
decline in the yields for long-term bonds. The Lehman Brothers Government Bond
Index posted a strong second quarter gain of 2.64%. Investment grade and high
yield corporate bonds lagged and yield spreads widened versus Treasuries.
Investors moved their money out of areas considered risky, such as Asia and
emerging markets, resulting in a drop in value in those markets and a dramatic
rise in the U.S. dollar as capital flowed to U.S. dollar-denominated assets.
By the end of June, major stock indices had easily outpaced bonds. During the
first half of 1998, the Standard and Poor's 500 Index gained 17.71%, the Dow
Jones Industrial Index gained 13.20% and the Nasdaq Composite Index was up
20.66%. However, the rally in stocks was decidedly weaker among small cap stocks
and the Russell 2000 Index gained only 4.93%. The Lehman Brothers Long
Government Bond Index had a very respectable return of 6.25%. Shorter maturity
bonds posted weaker results, with the Lehman Brothers 1-3 year Government/
Corporate Bond Index gaining 3.03% and the Merrill Lynch High Yield Master Index
posting a 4.51% return. Overseas, many bond markets did well, but U.S. based
investors saw their returns hurt by the rising value of the U.S. dollar. The
Salomon Brothers World Government Bond Index gained 2.79% for the period.
The economic scene at the end of June looks a lot like it did at the beginning
of the year. There appears to be tension between solid economic growth in North
America and Europe and the crisis in Asia. So far, the crisis has had mixed
impact here in the U.S. Falling energy prices, increased imports and lower
interest rates have helped the economy to remain strong, while avoiding price
inflation. However, the Asian crisis, the strike at GM and the old age of this
economic expansion could put a damper on growth. On the other hand, Federal
Reserve Bank Chairman Alan Greenspan, has noted that he is keeping a close eye
on inflationary pressures. These factors will likely continue to affect the U.S.
economy and financial markets but, as always, time will tell how well this
balance can be kept.
<PAGE>
INSTITUTIONAL CLASS
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TOTAL RETURN(1) VS. LIPPER CATEGORY AND LIPPER CATEGORY INDEX(2)
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GLOBAL HIGH
BOND BOND YIELD
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YEAR TO DATE
Loomis Sayles 4.29 1.86 1.61
Lipper 3.82 2.09 4.42
Rank 20 of 106 115 of 151 233 of 245
Percentile 19 77 96
Lipper Category Index 3.82 2.41 4.79
ONE YEAR
Loomis Sayles 11.31 0.62 7.04
Lipper 10.51 4.67 11.45
Rank 33 of 99 127 of 140 201 of 215
Percentile 34 91 94
Lipper Category Index 10.65 5.18 12.11
THREE YEARS
Loomis Sayles 12.90 11.79 N/A
Lipper 8.66 7.61
Rank 1 of 61 17 of 108
Percentile 1 16
Lipper Category Index 8.57 7.67
FIVE YEARS
Loomis Sayles 12.08 8.13 N/A
Lipper 7.53 5.91
Rank 1 of 40 5 of 57
Percentile 1 9
Lipper Category Index 7.28 6.33
MODIFIED INCEPTION(3)
Loomis Sayles 13.84 8.92 8.39
Lipper 9.93 7.22 11.95
Rank 1 of 22 4 of 29 162 of 170
Percentile 1 14 96
Lipper Category Index 9.15 7.51 12.40
ACTUAL INCEPTION(4)
Loomis Sayles 13.70 8.84 8.93
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(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) The 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, Inc. The Lipper Category Index total
return represents the average total return for 30 funds in each Fund's
corresponding investment category as determined by Lipper Analytical
Services, Inc. Rankings are based on the total return of each Fund for
the period relative to the total return of all funds in that Fund's
corresponding investment category.*
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INTERMEDIATE INVESTMENT SHORT-
MATURITY GRADE MUNICIPAL TERM U.S. GOV'T.
BOND BOND BOND BOND SECURITIES
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3.68 3.50 2.16 3.22 4.42
3.61 3.82 2.26 2.82 3.62
111 of 233 80 of 106 150 of 246 9 of 102 14 of 194
48 76 61 9 8
3.77 3.82 2.45 2.90 3.54
6.71 11.81 8.88 7.49 14.68
9.42 10.51 8.39 6.28 10.17
210 of 212 17 of 99 59 of 233 5 of 101 10 of 181
99 18 26 5 6
9.66 10.65 8.67 6.50 9.96
N/A N/A 7.58 6.35 8.99
7.32 5.91 6.91
74 of 192 14 of 80 4 of 151
39 18 3
7.61 6.14 6.96
N/A N/A 5.89 5.90 7.55
5.77 5.34 5.72
50 of 124 9 of 50 2 of 96
41 18 3
5.99 5.49 5.58
6.80 12.02 7.61 5.94 10.20
8.17 9.38 7.53 5.37 7.48
182 of 192 2 of 89 35 of 90 7 of 34 1 of 62
95 3 39 21 1
8.41 9.44 7.60 5.64 7.20
6.80 12.02 7.65 5.94 10.20
(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]
Daniel J. Fuss KEY FUND FACTS
[Photo of Kathleen C. Gaffney] Objective: High total investment return
Kathleen C. Gaffney
Strategy: Invests in debt
securities, although up to 20% of
total assets may be in preferred
stocks.
Fund Inception Date: 5/16/91
Commencement of Operations of
Class: Institutional - 5/16/91,
Retail - 1/2/97, Admin. - 1/2/98
Expense Ratio: Institutional -
0.74%,
Retail - 1.00%, Admin. - 1.25%
Total Net Assets (all classes):
$1,682.6 MM
PERFORMANCE SUMMARY
The Institutional Class of the Loomis Sayles Bond Fund generated a 4.29% return
for the first six months of 1998, slightly outperforming the 4.17% return of the
Lehman Brothers Government/Corporate Bond Index. The Fund's structural and issue
diversity allowed it to achieve returns close its benchmark despite lackluster
performance from its Asian and emerging market holdings. We feel that these
holdings offer attractive long-term opportunities and expect them to recover
strongly.
PORTFOLIO REVIEW
The Fund's 16% exposure to select high yield issues in Asian and emerging market
countries resulted in strong first quarter returns. This was followed by
trailing returns during the quality-driven U.S. Treasury rally during May and
June. The Fund's long U.S. Treasury positions performed well in this
environment, partially offsetting the negative effects of our Asian and emerging
market holdings. However, our emerging market holdings suffered as political,
economic and social turmoil continued for the region. Domestic corporate issues,
including the high yield segment, posted returns in line with the market for the
first six months of the year.
PORTFOLIO POSITIONING
There have been no significant changes in the Bond Fund's portfolio position or
investment strategy. Our focus remains on issue selection across a variety of
global bond market segments. In our search for undervalued issues, we have
exposure to bonds in emerging markets, domestic high yield and investment grade
securities, and Canadian provincial and government bonds. The Fund maintains a
significant position in U.S. Treasury issues as we believe they offer good
yields while we search for more attractive issues. This structural diversity
provides opportunity for growth while containing overall portfolio risk. In
aggregate, our bond selections offer considerable yield advantage, call
protection and value with the potential for significant bond price appreciation.
/s/ Daniel J. Fuss /s/ Kathleen C. Gaffney
Daniel J. Fuss Kathleen C. Gaffney
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a)
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<S> <C> <C> <C> <C> <C>
Loomis Sayles Bond Fund (Institutional) 4.29 11.31 12.90 12.08 13.70
Loomis Sayles Bond Fund (Retail) 4.15 10.94 N/A N/A 11.07
Loomis Sayles Bond Fund (Admin) 4.00 N/A N/A N/A 4.00
Lipper BBB Rated Corporate Bond Fund Index(b) 3.82 10.65 8.57 7.28 9.15
Lehman Brothers Government/Corp. Bond Index(c) 4.17 11.28 7.86 6.88 8.65
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER LEHMAN
As of 5/31/91 10.00 10.00 10.00
Period Ended
6/30/91 09.85 09.97 09.99
9/30/91 10.52 10.55 10.56
12/31/91 10.93 11.14 11.13
3/31/92 11.29 11.03 10.96
6/30/92 11.84 11.47 11.40
9/30/92 12.40 12.04 11.96
12/31/92 12.49 12.04 11.97
3/31/93 13.45 12.67 12.53
6/30/93 14.16 13.08 12.90
9/30/93 14.79 13.55 13.33
12/31/93 15.27 13.58 13.29
3/31/94 15.04 13.13 12.88
6/30/94 14.61 12.88 12.72
9/30/94 14.87 12.98 12.78
12/31/94 14.65 12.96 12.83
3/31/95 15.73 13.58 13.46
6/30/95 17.41 14.53 14.34
9/30/95 18.16 14.88 14.61
12/31/95 19.33 15.58 15.29
3/31/96 19.14 15.26 14.94
6/30/96 19.45 15.33 15.01
9/30/96 20.21 15.66 15.27
12/31/96 21.32 16.24 15.74
3/31/97 21.27 16.13 15.60
6/30/97 22.51 16.80 16.17
9/30/97 23.90 17.46 16.74
12/31/97 24.02 17.91 17.27
3/31/98 24.94 18.22 17.53
6/30/98 25.05 18.59 17.99
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(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 and Admin Classes
of shares are December 31, 1996 and January 2, 1998, respectively.
(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 and Admin Classes of shares would be lower, due
to the higher fees paid by the Retail and Admin Classes of shares.
<PAGE>
FUND AND MANAGER REVIEW
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LOOMIS SAYLES GLOBAL BOND FUND
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[Photo of E. John deBeer]
E. John deBeer KEY FUND FACTS
Objective: High total investment return
Strategy: Invests primarily in investment
grade fixed income obligations (including
convertibles) denominated in various
currencies, including U.S. dollars or
multicurrency units.
Fund Inception Date: 5/10/91
Commencement of Operations of Class:
Institutional - 5/10/91,
Retail - 1/2/97
Expense Ratio: Institutional - 0.90%,
Retail - 1.15%
Total Net Assets (all classes): $36.3 MM
PERFORMANCE SUMMARY
The Institutional Class of the Global Bond Fund returned 1.86% for the first
six months of 1998, slightly lagging the Lipper Average General World Income
Fund at 2.09% and the Salomon Brothers World Government Bond Index at 2.79%.
The Fund's long-term performance remains strong with the three-year annualized
return of 11.79% outpacing the 7.61% for the Lipper Average and 2.84% for the
Salomon Index. For the five year period, the Fund's 8.13% return surpassed the
5.91% return of the Lipper Average and the 6.33% return of the Salomon Index.
PORTFOLIO REVIEW
The Fund's exposure to Asia was the primary driver for performance during the
first half of the year. Asian currencies and countries posted strong first
quarter returns followed by weaker performance during the second quarter.
While our basic portfolio strategy remained unchanged during the first six
months of the year, we did add selectively to the Fund's Asian positions.
Purchases included Bangkok Bank, Tenaga and three Japanese banks, all
denominated in U.S. dollars. We also added to the Fund's Australian dollar and
New Zealand dollar government positions. We deliberately kept average portfolio
quality high, beginning at A1 on December 31 and ending at AA3 on June 30.
PORTFOLIO POSITIONING
Asia-related bonds of various types were the Fund's most important
investments, representing about 36% of the portfolio on June 30. We believe
the extremely bearish market sentiment has created some excellent values,
despite the well-publicized economic slump. Approximately 40% of the Fund is
invested in unhedged European bonds, as we believe Europe offers attractive
opportunities and is somewhat overlooked due to investors' focus on Asia.
/s/ E. John deBeer
E. John deBeer
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loomis Sayles Global Bond Fund (Institutional) 1.86 0.62 11.79 8.13 8.84
Loomis Sayles Global Bond Fund (Retail) 1.78 0.36 N/A N/A 2.56
Lipper General World Income Fund Index(b) 2.41 5.18 7.67 6.33 7.51
Salomon Brothers World Government Bond Index(c) 2.79 4.31 2.84 6.33 8.63
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER SB WORLD
As of 5/31/91 10.00 10.00 10.00
Period Ended
6/30/91 09.56 09.83 09.90
9/30/91 10.53 10.45 10.71
12/31/91 11.69 10.94 11.56
3/31/92 11.11 10.75 11.17
6/30/92 12.04 11.22 11.92
9/30/92 11.85 11.36 12.66
12/31/92 11.79 11.33 12.20
3/31/93 12.36 11.86 12.85
6/30/93 12.39 12.29 13.22
9/30/93 13.19 12.72 13.95
12/31/93 13.51 13.09 13.82
3/31/94 13.01 12.41 13.82
6/30/94 12.19 12.12 13.91
9/30/94 12.16 12.25 14.07
12/31/94 12.33 12.15 14.14
3/31/95 11.97 12.66 15.69
6/30/95 13.12 13.38 16.52
9/30/95 14.18 13.66 16.35
12/31/95 15.28 14.31 16.83
3/31/96 15.40 14.23 16.52
6/30/96 16.15 14.54 16.58
9/30/96 16.79 15.10 17.04
12/31/96 17.57 15.74 17.44
3/31/97 17.49 15.43 16.72
6/30/97 18.20 15.88 17.23
9/30/97 18.56 16.27 17.45
12/31/97 17.98 16.31 17.48
3/31/98 18.51 16.64 17.62
6/30/98 18.31 16.71 17.97
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(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.
<PAGE>
FUND AND MANAGER REVIEW
- --------------------------------------------------------------------------------
LOOMIS SAYLES HIGH YIELD FUND
- --------------------------------------------------------------------------------
[Photo of Daniel J. Fuss]
Daniel J. Fuss KEY FUND FACTS
[Photo of Kathleen C. Gaffney] Objective: High total investment return
Kathleen C. Gaffney
Strategy: Invests in debt
securities, although up to 20% of
total assets may be in preferred
stocks and up to 10% in common
stocks. The Fund normally invests
at least 65% of its assets in
fixed income securities of below
investment grade quality.
Fund Inception Date: 9/11/96
Commencement of Operations of
Class: Institutional - 9/11/96,
Retail - 1/2/97
Expense Ratio: Institutional -
0.75%,
Retail - 1.00%
Total Net Assets (all classes):
$13.0 MM
PERFORMANCE SUMMARY
The first six months of 1998 were challenging for the High Yield Fund. The
Institutional Class of the Fund returned 1.61% for the first half of the year,
underperforming the 4.51% return of the Merrill Lynch High Yield Master Index.
PORTFOLIO REVIEW
In the U.S., mutual fund inflows continued to be strong, providing liquidity for
the increased amount of new issuance in high yield markets. Demand for
Treasuries and high quality corporate bonds pushed the yield on the 30-year
Treasury to 5.62% at the end of the second quarter. After posting strong first
quarter results, economic and political turmoil resurfaced throughout Asia,
dampening returns on emerging market and Asian securities. This volatile
environment resulted in a "flight to quality" affecting markets around the
world.
Strong returns from the telecommunications and cable/media sectors following
AT&T's landmark acquisition of Telecommunications Inc., a leading cable
provider, helped to partially offset lackluster results in the emerging markets.
Solid gains were also made among select consumer cyclicals, which continued to
benefit from a strong domestic economy and high consumer confidence.
International convertible issues were negatively influenced by weak results in
global equity markets. Reduced demand for technology hardware in Asia hurt the
performance of some of our convertible issues.
PORTFOLIO POSITIONING
We remain committed to our current international exposure as a means of
diversifying the Fund and adding additional yield. We are comfortable with the
portfolio's overall structure and will continue to focus on discounted bonds
with call protection that offer good yield advantage. We believe that, over
the long-term, economic growth will return to the Pacific Rim and Latin
America and we have positioned the Fund to take advantage of opportunities in
these areas.
/s/ Daniel J. Fuss /s/ Kathleen C. Gaffney
Daniel J. Fuss Kathleen C. Gaffney
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR INCEPTION(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loomis Sayles High Yield Fund (Institutional) 1.61 7.04 8.93
Loomis Sayles High Yield Fund (Retail) 1.45 6.79 8.37
Lipper High Current Yield Fund Index(b) 4.79 12.11 12.40
Merrill Lynch High Yield Master Index(c) 4.51 11.40 12.32
</TABLE>
CUMULATIVE PERFORMANCE - SEPTEMBER 30, 1996 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER ML
As of 9/30/96 10.00 10.00 10.00
Period Ended
12/31/96 10.17 10.35 10.39
3/31/97 10.15 10.39 10.50
6/30/97 10.76 10.94 11.00
9/30/97 11.66 11.54 11.43
12/31/97 11.33 11.71 11.73
3/31/98 12.08 12.22 12.05
6/30/98 11.51 12.27 12.25
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(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.
<PAGE>
FUND AND MANAGER REVIEW
- --------------------------------------------------------------------------------
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
- --------------------------------------------------------------------------------
[Photo of Anthony J. Wilkins]
Anthony J. Wilkins KEY FUND FACTS
Objective: High total investment return
Strategy: Invests in investment grade debt
securities, with a dollar-weighted average
maturity between three and ten years.
Fund Inception Date: 12/31/96
Commencement of Operations of Class:
Institutional - 1/2/97,
Retail - 1/2/97
Expense Ratio: Institutional - 0.55%,
Retail - 0.80%
Total Net Assets (all classes): $9.0 MM
PERFORMANCE SUMMARY
For the first half of 1998, the Institutional Class of the Intermediate
Maturity Bond Fund returned 3.68%, outpacing the 3.47% return of the Lehman
Brothers Government/Corporate Intermediate Bond Index. While the Fund gave
back some of its first quarter gains during the second quarter, it finished
ahead of its benchmark for the first six months of the year.
PORTFOLIO REVIEW
Strong returns from the telecommunications and cable/media sectors following
AT&T's landmark acquisition of Telecommunications Inc., a leading cable
provider, helped to partially offset lackluster returns in Latin American and
Asian issues. Solid gains were also made in the finance sector, which
continued to benefit from a strong domestic economy and high consumer
confidence. Tobacco-related issues weakened over the first half of the year,
as uncertainty remains over a national settlement agreement currently under
negotiation.
PORTFOLIO POSITIONING
We have maintained the overall structure of the portfolio with a bias towards
the longer end of our maturity parameters and good diversification among U.S.
corporate, U.S. government and foreign issues. We are focusing on undervalued
bonds with call protection that offer good yield advantage. The Fund's
duration remains longer than that of its benchmark index to capture the higher
yields offered by longer maturity corporate issues and to enhance capital
appreciation if yield spreads narrow.
/s/ Anthony J. Wilkins
Anthony J. Wilkins
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR INCEPTION(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loomis Sayles Intermediate Maturity Bond Fund (Institutional) 3.68 6.71 6.80
Loomis Sayles Intermediate Maturity Bond Fund (Retail) 3.61 6.46 6.63
Lipper Intermediate Investment Grade Bond Fund Index(b) 3.77 9.66 8.41
Lehman Brothers Gov't/Corp. Intermediate Bond Index(c) 3.47 8.54 7.60
</TABLE>
CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER LEHMAN
As of 12/31/96 10.00 10.00 10.00
Period Ended
3/31/97 09.99 09.95 09.99
6/30/97 10.34 10.29 10.28
9/30/97 10.63 10.62 10.56
12/31/97 10.64 10.88 10.79
3/31/98 10.92 11.05 10.95
6/30/98 11.03 11.29 11.16
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(a): Inception date of 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 a 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.
<PAGE>
FUND AND MANAGER REVIEW
- --------------------------------------------------------------------------------
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
- --------------------------------------------------------------------------------
[Photo of Daniel J. Fuss]
Daniel J. Fuss KEY FUND FACTS
Objective: High total investment return
Strategy: Invests in investment grade debt
securities, including convertibles, although
up to 20% of assets may be in preferred
stocks.
Fund Inception Date: 12/31/96
Commencement of Operations of Class:
Institutional - 1/2/97,
Retail - 1/2/97
Expense Ratio: Institutional - 0.55%, Retail -
0.80%
Total Net Assets (all classes): $4.4 MM
PERFORMANCE SUMMARY
The first half of 1998 was a challenging time for fixed income investors.
Volatility in global markets brought uncertainty to investors, which meant
that even purchasing high quality bonds did not guarantee positive results.
The Institutional Class of the Investment Grade Bond Fund posted a 3.50%
return in this environment, lagging the 4.17% return of the Lehman Brothers
Government/Corporate Bond Index.
PORTFOLIO REVIEW
Home construction, realty, and consumer related issues turned in positive
results for the first half of the year as they continued to benefit from
historically low interest rates, strong domestic consumption, and mild
inflation. Asian and Latin American spreads widened during the second quarter
as countries such as Japan, Korea, and Thailand have yet to establish a
credible plan to reform their troubled banking systems. While Canadian
provincial and government debt issues posted modest gains, they underperformed
on a relative basis as the U.S. dollar appreciated versus the Canadian dollar.
The Fund benefited from its modest allocation to preferred issues, which
comprised approximately 6.3% of the portfolio.
PORTFOLIO POSITIONING
There has been no significant change in the Fund's management strategy over
the past six months. Our focus continues to be on uncovering longer maturity,
call-protected bonds selling at a discount to par value. We believe that the
portfolio remains well structured and offers significant yield versus
comparable Treasuries. The Fund is diversified among U.S. government, U.S.
corporate, foreign issues and other areas which should help to provide a
buffer against general market movements.
/s/ Daniel J. Fuss
Daniel J. Fuss
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR INCEPTION(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loomis Sayles Investment Grade Bond Fund (Institutional) 3.50 11.81 12.02
Loomis Sayles Investment Grade Bond Fund (Retail) 3.24 11.45 11.69
Lipper BBB Rated Corporate Bond Fund Index(b) 3.82 10.65 9.44
Lehman Brothers Government/Corporate Bond Index(c) 4.17 11.28 9.34
</TABLE>
CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER LEHMAN
As of 12/31/96 10.00 10.00 10.00
Period Ended
3/31/97 09.94 09.93 09.91
6/30/97 10.60 10.35 10.27
9/31/97 11.28 10.75 10.63
12/31/97 11.45 11.03 10.98
3/31/98 11.74 11.22 11.14
6/30/98 11.85 11.45 11.43
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(a): Inception date of 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.
<PAGE>
FUND AND MANAGER REVIEW
- --------------------------------------------------------------------------------
LOOMIS SAYLES MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
[Photo of Martha F. Hodgman]
Martha F. Hodgman KEY FUND FACTS
Objective: Current income
Strategy: Invests in fixed income securities the
income of which is exempt from federal income tax.
Fund Inception Date: 5/29/91
Commencement of Operations of Class:
Institutional - 5/29/91
Expense Ratio: Institutional - 0.60%,
Total Net Assets: $9.4 MM
PERFORMANCE SUMMARY
For the first half of 1998, the Loomis Sayles Municipal Bond Fund's 2.16%
return performed in line with the Lipper General Municipal Bond Fund Average's
2.26% return and slightly lagged the 2.69% return of the Lehman Brothers
Municipal Bond Index. The Fund's best performing issues were long-term
discount bonds, such as our Foothills zero coupon bond of 2023. Short-term
premium bonds were the weakest performing issues for the period.
PORTFOLIO REVIEW
Two competing forces have been difficult to ignore during the past six months
and have held the municipal market in check. First, low interest rates enticed
many issuers into the market. $142 billion has been issued so far this year,
which is over 50% more than last year at this time. Second, demand barely kept
pace with the supply so while other fixed income markets rallied for much of
the first part of 1998, municipals lagged their taxable counterparts.
Municipals appear particularly attractive to us at the present time since we
anticipate that this relationship should revert to more traditional levels as
new issue supply winds down over the balance of the year.
PORTFOLIO POSITIONING
We continue to maintain a portfolio of well-researched, undervalued securities
with good call protection. We have added a few new names during this year's
crush of new issuance including, Long Island Power Authority which came to
market in mid-May with a $2.3 billion issue, and Pocahontas Parkway, which
issued bonds for a new toll road in Richmond, Virginia. We have also pared
back our holdings in pre-refunded securities as these issues have become
relatively more expensive and we believe they have limited potential for price
improvement.
/s/ Martha F. Hodgman
Martha F. Hodgman
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loomis Sayles Municipal Bond Fund 2.16 8.88 7.58 5.89 7.65
Lipper General Municipal Bond Fund Index(b) 2.45 8.67 7.61 5.99 7.60
Lehman Brothers Municipal Bond Index(c) 2.69 8.66 7.85 6.46 7.86
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER LEHMAN
As of 5/31/91 10.00 10.00 10.00
Period Ended
6/30/91 10.01 09.97 09.99
9/30/91 10.42 10.37 10.38
12/31/91 10.78 10.73 10.73
3/31/92 10.78 10.74 10.76
6/30/92 11.24 11.20 11.17
9/30/92 11.54 11.45 11.46
12/31/92 11.79 11.68 11.67
3/31/93 12.18 12.15 12.11
6/30/93 12.63 12.56 12.50
9/30/93 13.07 12.99 12.92
12/31/93 13.15 13.13 13.11
3/31/94 12.42 12.41 12.39
6/30/94 12.58 12.48 12.52
9/30/94 12.61 12.54 12.61
12/31/94 12.44 12.34 12.43
3/31/95 13.26 13.22 13.31
6/30/95 13.50 13.49 13.63
9/30/95 13.83 13.82 14.02
12/31/95 14.50 14.48 14.60
3/31/96 14.23 14.22 14.42
6/30/96 14.28 14.30 14.53
9/30/96 14.60 14.64 14.87
12/31/96 14.98 15.00 15.24
3/31/97 14.90 14.94 15.21
6/30/97 15.44 15.46 15.73
9/30/97 15.96 15.95 16.21
12/31/97 16.46 16.40 16.65
3/31/98 16.58 16.58 16.84
6/30/98 16.81 16.81 17.09
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(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.
<PAGE>
FUND AND MANAGER REVIEW
- --------------------------------------------------------------------------------
LOOMIS SAYLES SHORT-TERM BOND FUND
- --------------------------------------------------------------------------------
[Photo of John Hyll]
John Hyll KEY FUND FACTS
Objective: High total investment return
Strategy: Invest in debt securities (including
convertibles), although up to 20% may be
invested in non-convertible preferred stocks.
Fund Inception Date: 8/3/92
Commencement of Operations of Class:
Institutional - 8/3/92,
Retail - 1/2/97
Expense Ratio: Institutional - 0.50%, Retail -
0.75%
Total Net Assets (all classes): $27.3 MM
PERFORMANCE SUMMARY
For the first six months of 1998, the Institutional Class of the Loomis Sayles
Short-Term Bond Fund's 3.22% return outpaced the 3.03% return of the Lehman
Brothers 1-3 year Government/Corporate Bond Index.
PORTFOLIO REVIEW
Our strategy of maintaining the Fund's maturity at the longer end of its
three-year maximum proved beneficial as yields declined during the first half
of the year. Bond prices have an inverse relationship to yields, with prices
rising when yields decline and vice versa. During the second quarter, the
Fund's heavy weighting in corporate bonds put a drag on performance when
Treasuries rallied sharply. However, our higher than usual allocation to
Treasuries buoyed performance during this period. The yield advantage of our
mortgage holdings helped them to outperform equal-duration U.S. Treasury
securities.
PORTFOLIO POSITIONING
As of June 30, 1998, the Fund holds approximately 43.3% in corporates, 10.4%
in mortgages, 1.3% in asset backed securities, 36.6% in U.S. Treasuries and
8.4% in cash and equivalents. The average maturity is 2.89 years, which is
near the longer end of its three-year maturity limit. The average yield-to-
maturity is 5.93%.
The Fund is positioned for an environment of moderate economic growth with low
inflationary pressures. Our focus remains on the long end of the Fund's maturity
range with an emphasis on government and corporate issues. We will continue to
stress asset selection as we believe this strategy will enhance yield and
provide the potential for capital appreciation.
/s/ John Hyll
John Hyll
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loomis Sayles Short-Term Bond Fund (Institutional) 3.22 7.49 6.35 5.90 5.94
Loomis Sayles Short-Term Bond Fund (Retail) 3.08 7.15 N/A N/A 6.69
Lipper Short Investment Grade Bond Fund Index(b) 2.90 6.50 6.14 5.49 5.64
Lehman Brothers 1-3 Year Government/Corp.
Bond Index(c) 3.03 6.79 6.32 5.64 5.63
</TABLE>
CUMULATIVE PERFORMANCE - AUGUST 31, 1992 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER LEHMAN
As of 8/31/92 10.00 10.00 10.00
10/31/92 09.92 09.94 09.94
11/30/92 09.88 09.96 09.93
Period Ended
12/31/92 09.95 10.03 10.02
3/31/93 10.26 10.31 10.24
6/30/93 10.40 10.47 10.36
9/30/93 10.55 10.66 10.51
12/31/93 10.63 10.79 10.58
3/31/94 10.59 10.72 10.52
6/30/94 10.61 10.70 10.53
9/30/94 10.77 10.80 10.63
12/31/94 10.82 10.78 10.63
3/31/95 11.18 11.07 10.99
6/30/95 11.52 11.44 11.35
9/30/95 11.68 11.61 11.52
12/31/95 11.97 11.90 11.80
3/31/96 11.99 11.91 11.85
6/30/96 12.08 12.03 11.97
9/30/96 12.27 12.24 12.18
12/31/96 12.53 12.48 12.41
3/31/97 12.58 12.57 12.49
6/30/97 12.89 12.85 12.77
9/30/97 13.20 13.10 12.87
12/31/97 13.43 13.30 13.23
3/31/98 13.64 13.49 13.42
6/30/98 13.86 13.68 13.63
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(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.
<PAGE>
FUND AND MANAGER REVIEW
- --------------------------------------------------------------------------------
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
[Photo of Kent P. Newmark]
Kent P. Newmark KEY FUND FACTS
Objective: High total investment return
Strategy: Invests in securities issued or
guaranteed by the U.S. Government or its
authorities, agencies or instrumentalities
Fund Inception Date: 5/21/91
Commencement of Operations of Class:
Institutional - 5/21/91
Expense Ratio: Institutional - 0.60%,
Total Net Assets: $21.3 MM
PERFORMANCE SUMMARY
The U.S. Government Securities Fund returned 4.42% for the first half of 1998,
surpassing the 3.62% return of the average fund in Lipper's General U.S.
Government category, and the 4.18% return of the Lehman Brothers Government
Bond Index. A long duration and tactical swapping among Treasury and Federal
Agency sectors helped performance.
PORTFOLIO REVIEW
We maintained the Fund's duration at 7.7 years when long-term yields fell
below 5.70% in January. We also increased our mortgage position when the
sector was out of favor. Lastly, we extended the Fund's duration to 8.1 years
when long-term Treasuries yielded over 6% during the first quarter. The result
was strong first quarter returns, as the yield advantage added to our
performance in a relatively stable interest rate environment. During the
second quarter, we made a series of successful timing decisions and ended the
period with a portfolio duration of 7.3 years. Only one-third of the Fund was
invested in long-term Treasuries, so we did not capture the full benefit of
the strong June rally.
PORTFOLIO POSITIONING
As of June 30, approximately 33% percent of the portfolio was invested in
Government National Mortgage Association (GNMA) securities, which currently
offer higher yields than Treasuries. GNMAs tend to do well in a stable
interest rate environment but post weaker returns when interest rates are
declining. The Fund's commitment to Treasury Inflation Protected Securities
(TIPS) is now approximately 23%. We believe this sector has been overlooked
since inflation has been low, but should gain favor if inflation begins to
rise.
While the U.S. economy continues to be strong, Asian markets are experiencing a
deep recession. The Federal Reserve Bank is not likely to raise interest rates
in this environment and we believe that the Treasury market will remain stable
or move slightly higher for the remainder of the year.
/s/ Kent P. Newmark
Kent P. Newmark
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loomis Sayles U.S. Government Securities Fund 4.42 14.68 8.99 7.55 10.20
Lipper General U.S. Gov't Bond Fund Index(b) 3.54 9.96 6.96 5.58 7.20
Lehman Brothers Government Bond Index(c) 4.18 11.25 7.68 6.66 8.40
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO JUNE 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LIPPER LEHMAN
As of 5/31/91 10.00 10.00 10.00
Period Ended
6/30/91 09.97 09.97 09.99
9/30/91 10.69 10.54 10.56
12/31/91 11.49 11.07 11.12
3/31/92 11.11 10.88 10.93
6/30/92 11.59 11.27 11.36
9/30/92 12.40 11.72 11.92
12/31/92 12.50 11.75 11.92
3/31/93 13.22 12.16 12.46
6/30/93 13.83 12.47 12.82
9/30/93 14.60 12.77 13.24
12/31/93 14.47 12.73 13.20
3/31/94 13.71 12.33 12.80
6/30/94 13.33 12.09 12.65
9/30/94 13.32 12.11 12.71
12/31/94 13.56 12.12 12.75
3/31/95 14.33 12.67 13.35
6/30/95 15.37 13.37 14.18
9/30/95 15.84 13.61 14.43
12/31/95 16.68 14.18 15.09
3/31/96 15.90 13.84 14.75
6/30/96 15.91 13.85 14.82
9/30/96 16.19 14.07 15.07
12/31/96 16.90 14.48 15.51
3/31/97 16.49 14.37 15.38
6/30/97 17.35 14.88 15.91
9/30/97 18.25 15.36 16.45
12/31/97 19.06 15.80 16.99
3/31/98 19.31 16.01 17.25
6/30/98 19.90 16.36 17.70
Note: Past performance is not predictive of future performance. Total return
assumes reinvestment of dividends and capital gains distributions. The
investment return and principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
(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.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
LOOMIS SAYLES BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- ----------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 96.0% of Net Assets
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS -- 88.8%
Airlines -- 0.0%
NWA Trust, 9.360%, 3/10/06 ...................... USD 748,800 $ 839,721
---------------
Banks/Savings & Loans -- 0.4%
First Union Institutional Trust, 7.850%, 1/01/27 2,000,000 2,124,360
First Union Institutional Trust, 8.040%, 12/01/26. 5,000,000 5,427,415
---------------
7,551,775
---------------
Broadcasting -- 0.6%
CBS, Inc., 7.125%, 11/01/23 ..................... 1,435,000 1,370,439
Fox Family Worldwide, Inc., Zero Coupon Bond, 11/
01/07 (step to 10.250% on 11/01/02) (b) ....... 13,000,000 8,450,000
---------------
9,820,439
---------------
Canadian -- 17.9%
Canadian Government, Zero Coupon Bond, 6/01/21 .. CAD 115,650,000 22,199,731
Canadian Government, Zero Coupon Bond, 6/01/22 .. 11,050,000 2,015,312
Canadian Government, Zero Coupon Bond, 6/01/25 .. 302,435,000 47,440,379
Clearnet Communications, Inc., Zero Coupon Bond,
8/13/07 (step to 11.750% on 8/13/02) (b) ...... 40,000,000 17,965,905
Clearnet Communications, Inc., Zero Coupon Bond,
5/15/08 (step to 10.400% on 5/15/03) (b) ...... USD 1,250,000 502,952
Hydro Quebec, Zero Coupon Bond, 8/15/20 ......... CAD 35,000,000 6,264,249
International Semi-Tech Corp., Zero Coupon Bond,
8/15/03 (step to 11.500% on 8/15/00) (b) ...... USD 15,525,000 4,657,500
MetroNet Communications Corp., Zero Coupon Bond,
6/15/08 (step to 9.500% on 6/15/03) 144A (b)(c). 1,500,000 928,125
Milit Air, Inc., 5.750%, 6/30/19 144A (c) ....... CAD 6,950,000 4,735,809
New Brunswick FM Project, Zero Coupon Bond,
11/30/27 (step to 6.470% on 5/30/03) 144A (b)(c) 10,000,000 5,263,262
Province of Alberta, 5.930%, 9/16/16 ............ 28,018,127 19,658,164
Province of British Columbia, Zero Coupon Bond,
8/23/13 ........................................ 33,000,000 9,378,202
Province of British Columbia, Zero Coupon Bond,
6/09/14 ........................................ 10,000,000 2,707,816
Province of British Columbia, Zero Coupon Bond,
9/05/20 ........................................ 54,528,000 10,030,228
Province of British Columbia, Zero Coupon Bond,
6/09/22 ........................................ 96,208,000 15,955,555
Province of British Columbia, Zero Coupon Bond,
8/19/22 ........................................ 25,037,000 4,104,538
Province of British Columbia, Zero Coupon Bond,
9/08/23 ........................................ 37,950,000 5,847,004
Province of British Columbia, Zero Coupon Bond,
8/23/24 ........................................ 122,250,000 17,803,600
Province of British Columbia, Zero Coupon Bond,
11/19/27 ...................................... 41,600,000 4,934,418
Province of British Columbia, 7.875%, 11/30/23 .. 1,250,000 1,058,006
Province of British Columbia, 8.000%, 9/08/23 ... 7,000,000 6,109,381
Province of Manitoba, Zero Coupon Bond, 7/22/13 . 2,500,000 706,897
Province of Manitoba, Zero Coupon Bond, 3/05/31 . 36,929,000 3,729,466
Province of Manitoba, 6.500%, 9/22/17 ........... 34,300,000 25,512,880
Province of Manitoba, 7.750%, 12/22/25 .......... 39,245,000 34,039,218
Province of Newfoundland, 6.150%, 4/17/28 ....... 2,500,000 1,742,999
Province of Ontario, Zero Coupon Bond, 7/13/22 .. 13,000,000 2,167,478
Province of Saskatchewan, Zero Coupon Bond,
4/10/14 ........................................ CAD 19,000,000 5,195,277
Province of Saskatchewan, 8.750%, 5/30/25 ....... 11,735,000 11,148,430
Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 2/04/22 ..................... 2,350,000 403,488
Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 5/30/25 ..................... 25,055,000 3,543,114
Rogers Cablesystems Ltd., 9.650%, 1/15/14 ....... 5,550,000 4,355,964
---------------
302,105,347
---------------
Communications -- 0.9%
Arch Communications Group, Inc., Zero Coupon Bond,
3/15/08 (step to 10.875% on 3/15/01) (b) ...... USD 17,435,000 9,937,950
Century Communications Corp., 8.375%, 11/15/17 .. 5,000,000 4,787,500
---------------
14,725,450
---------------
Computers -- 2.0%
Apple Computer, Inc., 6.500%, 2/15/04 ........... 14,945,000 13,749,400
Seagate Technology, Inc., 7.370%, 3/01/07 ....... 6,000,000 5,933,580
Seagate Technology, Inc., 7.450%, 3/01/37 ....... 3,850,000 3,781,894
Seagate Technology, Inc., 7.875%, 3/01/17 ....... 10,250,000 9,910,212
Streamlogic Corp., 14.000%, 10/07/98 (d) (e) .... 139,170 6,958
---------------
33,382,044
---------------
Electronics -- 1.3%
Pioneer Standard Electronics, Inc., 8.500%,
8/01/06 ........................................ 1,000,000 1,075,596
Westinghouse Electric Corp., 7.875%, 9/01/23 .... 20,350,000 20,915,119
---------------
21,990,715
---------------
Entertainment -- 4.4%
Time Warner Entertainment Co., 6.875%, 6/15/18 .. 8,710,000 8,743,969
Time Warner Entertainment Co., 6.950%, 1/15/28 .. 36,900,000 37,005,534
Time Warner Entertainment Co., 7.570%, 2/01/24 .. 27,170,000 29,224,595
---------------
74,974,098
---------------
Environmental Services -- 0.1%
Envirotest Systems Corp., 9.625%, 4/01/03 ....... 1,525,000 1,494,500
---------------
Food & Beverage -- 0.3%
Borden, Inc., 7.875%, 2/15/23 ................... 5,500,000 5,410,790
---------------
Foreign Government/Agency -- 6.0%
BCO Central Costa Rica, 6.250%, 5/21/10 ......... 3,200,000 2,848,000
Escom, 11.000%, 6/01/08 ......................... ZAR 26,500,000 3,419,538
Republic of Argentina, 6.625%, 3/31/05 (f) ...... USD 1,116,250 985,091
Republic of Brazil, 10.125%, 5/15/27 ............ 42,481,000 36,576,141
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (g) 34,342,325 25,327,465
Republic of Ecuador, 6.625%, 2/27/15 PIK (f) (g) 6,175,293 3,693,442
Republic of Korea, 8.875%, 4/15/08 .............. 2,000,000 1,808,900
Republic of South Africa, 12.000%, 2/28/05 ...... ZAR 20,000,000 2,893,348
Republic of South Africa, 12.500%, 12/21/06 ..... 42,450,000 6,143,800
Republic of South Africa, 13.500%, 9/15/15 ...... ZAR 14,850,000 2,219,490
Republic of Venezuela, 9.250%, 9/15/27 .......... USD 19,150,000 14,793,375
---------------
100,708,590
---------------
Foreign Issuer -- 10.1%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 ....... 10,550,000 9,073,000
Bangkok Bank Public Co. Ltd., 8.250%, 3/15/16 144A(c) 5,370,000 4,020,036
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A(c) 31,275,000 22,874,222
Compania de Transporte Energia, 9.250%,
4/01/08 144A (c) .............................. 2,250,000 2,193,750
Espirito Santo-Escelsa, 10.000%, 7/15/07 144A (c). 2,000,000 1,680,000
Export Import Bank of Korea, 6.375%, 2/15/06 .... 1,000,000 751,602
Hyundai Motor Co. Ltd., 7.600%, 7/15/07 144A (c) 4,000,000 3,112,480
Hyundai Semiconductor, 8.625%, 5/15/07 144A (c) . 500,000 365,000
Industrial Finance Corp. of Thailand, 7.375%,
1/14/07 144A (c) .............................. 1,500,000 1,312,875
Korea Electric Power Corp., 6.750%, 8/01/27 ..... 1,500,000 1,193,265
Korea Electric Power Corp., 7.000%, 2/01/27 ..... 1,500,000 1,141,770
Korea Electric Power Corp., 7.400%, 4/01/16 ..... 11,903,375 9,544,007
Korea Electric Power Corp., 7.750%, 4/01/13 ..... 8,975,000 6,635,397
Multicanal SA, 10.500%, 4/15/18 144A (c) ........ 4,000,000 3,720,000
National Power Corp., 9.625%, 5/15/28 ........... 3,765,000 3,463,800
Pan Pacific Industrial Investment Plc, Zero Coupon
Bond, 4/28/07 144A (c) ........................ 8,760,000 3,370,322
Perez Companc SA, 8.125%, 7/15/07 144A (c) ...... 3,590,000 3,275,875
Petroleos Mexicanos, Medium Term, 8.625%, 12/01/23 3,100,000 2,669,875
Philippine Long Distance Telephone Co., 8.350%,
3/06/17 ........................................ 4,950,000 4,220,212
Pindo Deli Finance Mauritius Ltd., 10.750%,
10/01/07 ....................................... 7,750,000 5,425,000
Pindo Deli Finance Mauritius Ltd., 10.875%,
10/01/27 ....................................... 15,500,000 9,145,000
Pindo Deli Finance Mauritius Ltd., 11.750%,
10/01/17 ....................................... 1,500,000 1,003,125
Pohang Iron & Steel Co. Ltd., 7.125%, 11/01/06 .. 1,500,000 1,157,835
Pycsa Panama SA, 10.280%, 12/15/12 144A (c) ..... 2,000,000 1,887,500
Quezon Power Philippines Co., 8.860%, 6/15/17 ... 7,675,000 6,602,035
Samsung Electronics Co. Ltd., 7.450%, 10/01/02
144A (c) ....................................... 1,500,000 1,212,915
Samsung Electronics Co. Ltd., 7.700%, 10/01/27
144A (c) ....................................... 12,500,000 8,125,000
Samsung Electronics Co. Ltd., 8.500%, 11/01/02
144A (c) ....................................... 1,000,000 906,820
Siam Commercial Bank Public Co., 7.500%,
3/15/06 144A (c) .............................. 7,000,000 5,749,660
Tata Electric Co., 8.500%, 8/19/17 144A (c) ..... 9,000,000 7,560,000
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c). 6,825,000 5,098,685
TFM SA de CV, Zero Coupon Bond, 6/15/09 (step to
11.750% on 6/15/02) (b) ....................... 4,650,000 2,906,250
Thai Farmers Bank Plc, 8.250%, 8/21/16 144A (c) . 7,740,000 5,450,972
Tjiwi Kimia Mauritius Ltd., 10.000%, 8/01/04 .... 16,200,000 11,502,000
Total Access Communication Public Co. Ltd.,
7.625%, 11/04/01 144A (c) ..................... USD 5,400,000 4,104,000
Total Access Communication Public Co. Ltd.,
8.375%, 11/04/06 144A (c) ..................... 10,575,000 7,614,000
---------------
170,068,285
---------------
Government Agencies -- 2.3%
Federal Home Loan Mortgage Corp., 6.000%, 4/15/28. 5,000,000 4,760,900
Federal National Mortgage Association, Zero Coupon
Bond, 10/29/07 ................................ NZD 103,925,000 29,216,057
Federal National Mortgage Association, 5.000%,
9/25/22 ....................................... USD 1,000,000 945,000
Federal National Mortgage Association,
6.000%, 11/25/08 PIK (g) ...................... 3,848,428 3,726,933
---------------
38,648,890
---------------
Health Care -- Services -- 0.3%
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 . 3,500,000 3,135,195
Columbia/HCA Healthcare Corp., 7.580%, 9/15/25 .. 1,300,000 1,243,372
---------------
4,378,567
---------------
Home Builders -- 0.4%
Pulte Corp., 7.300%, 10/24/05 ................... 1,000,000 1,019,340
Pulte Corp., 7.625%, 10/15/17 ................... 5,000,000 5,259,700
---------------
6,279,040
---------------
Oil & Gas -- 1.2%
Chesapeake Energy Corp., 8.500%, 3/15/12 ........ 2,075,000 1,940,125
R&B Falcon Corp., 7.375%, 4/15/18 144A (c) ...... 14,000,000 14,258,580
Seagull Energy Corp., 7.500%, 9/15/27 ........... 3,850,000 3,838,604
---------------
20,037,309
---------------
Rail -- Transport -- 0.0%
Missouri Pacific Railroad Co., 5.000%, 1/01/45 .. 108,000 69,525
---------------
Real Estate Investment Trusts -- 2.2%
AMB Property Corp., 7.500%, 6/30/18 ............. 7,500,000 7,536,150
First Industrial, 7.500%, 12/01/17 .............. 5,000,000 5,101,830
Highwoods Forsyth LP, 7.500%, 4/15/18 ........... 3,750,000 3,824,100
Security Capital Group, Inc., 7.700%, 6/15/28 144A
(c) ........................................... 16,725,000 16,920,682
Trinet Corporate Realty Trust, 7.700%, 7/15/17 .. 4,000,000 4,157,240
---------------
37,540,002
---------------
Retail -- General -- 1.9%
Bradlees, Inc., 9.250%, 3/01/03 (d) (e) ......... 250,000 1,875
Bradlees, Inc., 11.000%, 8/01/02 (d) (e) ........ 250,000 2,500
Dillon Read Structured Finance Corp., 6.660%,
8/15/10 ....................................... 2,533,264 2,349,703
Dillon Read Structured Finance Corp., 7.430%,
8/15/18 ....................................... 2,000,000 1,862,500
Dillon Read Structured Finance Corp., 7.600%,
8/15/07 ....................................... 223,465 217,878
Dillon Read Structured Finance Corp., 8.375%,
8/15/15 ....................................... 2,425,000 2,421,969
Dillon Read Structured Finance Corp., 8.550%,
8/15/19 ....................................... 500,000 500,625
K Mart Corp., 7.950%, 2/01/23 ................... 14,365,000 14,472,737
Penn Traffic Co., 8.625%, 12/15/03 .............. 1,000,000 750,000
Penn Traffic Co., 9.625%, 4/15/05 ............... 17,083,000 6,619,663
Woolworth Corp., 8.500%, 1/15/22 ................ 3,000,000 3,308,910
---------------
32,508,360
---------------
Supranational -- 3.3%
International Bank for Reconstruction &
Development, Zero Coupon Bond, 8/20/07 ........ NZD 159,375,000 44,456,807
International Bank for Reconstruction &
Development, 8.000%, 5/23/07 .................. 19,000,000 10,481,462
---------------
54,938,269
---------------
Taxable Municipal -- 0.1%
Orange County, California Pension Obligation, Zero
Coupon Bond, 9/01/16 .......................... USD 5,000,000 1,561,000
---------------
Telecommunications -- 7.1%
Nextel Communications, Inc., Zero Coupon Bond,
10/31/07 (step to 9.750% on 10/31/02) (b) ..... 29,160,000 19,026,900
Nextel Communications, Inc., Zero Coupon Bond, 2/
15/08 (step to 9.950% on 2/15/03) 144A (b) (c) 1,800,000 1,147,500
Nextel International, Inc., Zero Coupon Bond, 4/
15/08 (step to 12.125% on 4/15/03) 144A (b) (c). 19,650,000 11,298,750
RCN Corp., Zero Coupon Bond, 10/15/07 (step to
11.125% on 10/15/02) (b) ...................... 4,350,000 2,794,875
RCN Corp., Zero Coupon Bond, 2/15/08 (step to
9.800% on 2/15/03) (b) ........................ 2,500,000 1,500,000
RCN Corp., Zero Coupon Bond, 7/01/08 (step to
11.000% on 7/01/03) (b) ....................... 15,650,000 9,311,750
TCI Communications, Inc., 7.125%, 2/15/28 ....... 14,700,000 15,346,800
TCI Communications, Inc., 7.875%, 8/01/13 ....... 12,850,000 14,340,985
TCI Communications, Inc., 7.875%, 2/15/26 ....... 35,252,000 40,073,064
Teligent, Inc., Zero Coupon Bond, 3/01/08 (step to
11.500% on 3/01/03) 144A (b) (c) .............. 7,500,000 4,143,750
---------------
118,984,374
---------------
Textile & Apparel -- 0.9%
Burlington Industries, Inc., 7.250%, 8/01/27 .... 9,000,000 9,284,760
Fruit of the Loom, Inc., 7.375%, 11/15/23 ....... 3,000,000 2,715,360
Kellwood Co., 7.625%, 10/15/17 .................. 2,500,000 2,648,825
Phillips Van Heusen Corp., 7.750%, 11/15/23 ..... 1,000,000 928,570
---------------
15,577,515
---------------
Tobacco -- 5.4%
Loews Corp., 7.000%, 10/15/23 ................... USD 3,500,000 3,389,365
Philip Morris Cos., Inc., 7.750%, 1/15/27 ....... 48,410,000 51,782,241
RJR Nabisco, Inc., 7.625%, 9/15/03 .............. 12,550,000 12,477,837
RJR Nabisco, Inc., 8.500%, 7/01/07 .............. 1,550,000 1,609,381
RJR Nabisco, Inc., 8.750%, 8/15/05 .............. 5,500,000 5,735,785
RJR Nabisco, Inc., 9.250%, 8/15/13 .............. 14,143,000 15,255,488
---------------
90,250,097
---------------
Transportation -- 0.1%
American President Cos. Ltd., 8.000%, 1/15/24 ... 1,425,000 1,005,509
---------------
U.S. Government -- 17.6%
U.S. Treasury Bonds, 6.000%, 2/15/26 ............ 182,775,000 190,142,660
U.S. Treasury Bonds, 6.250%, 8/15/23 ............ 71,200,000 76,228,144
U.S. Treasury Bonds, 6.500%, 11/15/26 ........... 18,750,000 20,821,313
U.S. Treasury Strips, Zero Coupon Bond, 8/15/20 . 14,000,000 3,960,040
U.S. Treasury Strips, Zero Coupon Bond, 8/15/23 . 19,000,000 4,606,550
---------------
295,758,707
---------------
Utilities -- 2.0%
AES Corp., 8.875%, 11/01/27 ..................... 5,000,000 4,937,500
Boston Edison Co., 7.800%, 3/15/23 .............. 1,000,000 1,059,981
Comed Financing II, 8.500%, 1/15/27 ............. 5,000,000 5,352,900
Commonwealth Edison Co., 4.750%, 12/01/11 ....... 901,000 757,984
KN Capital Trust, 7.630%, 4/15/28 ............... 15,750,000 16,137,135
Mobile Energy Services Co. LLC, 8.665%, 1/01/17 . 6,064,985 3,093,143
Niagara Mohawk Power Corp., Zero Coupon Bond,
7/01/10 (step to 8.500% on 7/01/03) (b) ....... 2,500,000 1,728,125
---------------
33,066,768
---------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $1,448,604,565) ............... 1,493,675,686
---------------
CONVERTIBLE BONDS -- 7.2%
Auto & Related -- 0.1%
Exide Corp., 2.900%, 12/15/05 144A (c) .......... 3,375,000 2,084,063
---------------
Canadian -- 0.1%
Rogers Communications, Inc., 2.000%, 11/26/05 ... 3,000,000 1,860,000
---------------
Chemicals -- Major -- 0.1%
FMC Corp., 6.750%, 1/16/05 ...................... 1,325,000 1,245,500
Hexcel Corp., 7.000%, 8/01/11 ................... 675,000 695,250
---------------
1,940,750
---------------
Commercial Services -- 0.0%
Molten Metal Technology, Inc., 5.500%, 5/01/06 (d) 4,600,000 184,000
Molten Metal Technology, Inc., 5.500%, 5/01/06
144A (c) (d) .................................. 3,000,000 120,000
---------------
304,000
---------------
Computers -- 0.9%
Apple Computer, Inc., 6.000%, 6/01/01 ........... USD 3,190,000 3,610,666
Cray Research, Inc., 6.125%, 2/01/11 ............ 635,000 517,525
Maxtor Corp., 5.750%, 3/01/12 ................... 3,100,000 2,170,000
Read Rite Corp., 6.500%, 9/01/04 ................ 2,225,000 1,401,750
Silicon Graphics, Inc., 5.250%, 9/01/04 ......... 625,000 533,200
Softkey International, Inc., 5.500%, 11/01/00 ... 6,965,000 6,660,281
Telxon Corp., 5.750%, 1/01/03 ................... 225,000 266,906
---------------
15,160,328
---------------
Diversified Operations -- 0.1%
Ogden Corp., 5.750%, 10/20/02 ................... 1,750,000 1,719,375
Ogden Corp., 6.000%, 6/01/02 .................... 500,000 495,000
---------------
2,214,375
---------------
Electronics -- 0.8%
Cirrus Logic, Inc., 6.000%, 12/15/03 144A (c) ... 1,600,000 1,266,000
Cypress Semiconductor Corp., 6.000%, 10/01/02 ... 1,000,000 875,000
EDO Corp., 7.000%, 12/15/11 ..................... 434,000 347,200
Kent Electronics Corp., 4.500%, 9/01/04 ......... 5,850,000 4,782,375
Lam Research Corp., 5.000%, 9/01/02 ............. 4,570,000 3,747,400
National Semiconductor Corp., 6.500%, 10/01/02 .. 500,000 456,250
Richardson Electronics Ltd., 7.250%, 12/15/06 ... 450,000 432,000
Thermedics, Inc., Zero Coupon Bond, 6/01/03 ..... 950,000 712,500
Zenith Corp., 6.250%, 4/01/11 (d) ............... 2,405,000 610,269
---------------
13,228,994
---------------
Environmental Services -- 0.3%
Air & Water Technologies Corp., 8.000%, 5/15/15 . 1,450,000 1,203,500
Thermo TerraTech, Inc., 4.625%, 5/01/03 ......... 400,000 375,000
Thermo TerraTech, Inc., 4.625%, 5/01/03 144A (c) 3,890,000 3,486,412
---------------
5,064,912
---------------
Foreign Issuer -- 2.5%
Advanced Agro Public Co., 3.500%, 6/17/01 ....... 1,625,000 1,462,500
APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 . 1,250,000 990,625
APP Finance VII Mauritius Ltd., 3.500%, 4/30/03
144A (c) 8,125,000 6,439,062
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 ... 10,250,000 3,331,250
Banpu Public Co., 2.750%, 4/10/03 ............... 5,030,000 3,445,550
Burns, Philp, 5.500%, 4/30/04 ................... 4,480,000 2,553,600
Empresas ICA Sociedad, 5.000%, 3/15/04 .......... 3,700,000 2,640,875
Loxley Public Co. Ltd., 2.500%, 4/04/01 ......... 7,700,000 2,464,000
Piltel, 1.750%, 7/17/06 ......................... 1,350,000 1,049,625
Samsung Corp., 0.250%, 6/26/06 .................. 3,150,000 2,898,000
Samsung Electronics Co. Ltd., Zero Coupon Bond,
12/31/07 ...................................... 4,175,000 3,256,500
Sappi BVI Finance, 7.500%, 8/01/02 .............. 4,400,000 4,103,000
Siam Commercial Bank Public Co., 3.250%, 1/24/04 3,075,000 1,045,500
Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 1,930,000 907,100
Foreign Issuer -- continued
Ssangyong Oil Refining Co., Inc., 3.750%, 12/31/08 USD 330,000 $ 262,350
Telekom Malaysia Berhad, 4.000%, 10/03/04 ....... 600,000 438,000
Telekom Malaysia Berhad, 7.875%, 8/01/25 144A (c). 1,900,000 1,530,260
Total Access Communication Public Co. Ltd.,
2.000%, 5/31/06 ............................... 3,400,000 2,584,000
---------------
41,401,797
---------------
Freight Transportation -- 0.1%
Builders Transportation, Inc., 8.000%, 8/15/05 (d) 1,000,000 100,000
Preston Corp., 7.000%, 5/01/11 .................. 750,000 611,250
Worldway Corp., 6.250%, 4/15/11 ................. 1,463,000 1,214,290
---------------
1,925,540
---------------
Health Care -- Drugs -- 0.3%
Chiron Corp., 1.900%, 11/17/00 144A (c) ......... 1,000,000 913,750
Glycomed, Inc., 7.500%, 1/01/03 ................. 1,148,100 1,079,214
NABI, Inc., 6.500%, 2/01/03 ..................... 3,750,000 2,470,312
---------------
4,463,276
---------------
Health Care -- Medical Technology -- 0.1%
Heartport, Inc., 7.250%, 5/01/04 ................ 1,000,000 700,000
---------------
Health Care -- Services -- 0.0%
Physicians Resource Group, Inc., 6.000%,
12/01/01 144A (c) ............................. 850,000 670,438
---------------
Home Builders -- 0.0%
Schuler Homes, Inc., 6.500%, 1/15/03 ............ 750,000 675,000
---------------
Machinery -- 0.1%
Intevac, Inc., 6.500%, 3/01/04 .................. 1,250,000 1,071,875
---------------
Oil & Gas -- 0.1%
Houston Industries, Inc., 6.000%, 3/15/12 ....... 447,500 425,125
Key Energy Group, Inc., 5.000%, 9/15/04 ......... 2,000,000 1,525,000
---------------
1,950,125
---------------
Publishing -- 0.1%
Scholastic Corp., 5.000%, 8/15/05 144A (c) ...... 2,550,000 2,342,813
---------------
Real Estate Investment Trusts -- 0.5%
Federal Realty Investors Trust, 5.250%, 10/28/03 2,250,000 2,103,750
Rockefeller Properties, Zero Coupon Bond, 12/31/00 7,000,000 5,442,500
Sizeler Property Investors, Inc., 8.000%, 7/15/03. 1,175,000 1,169,125
---------------
8,715,375
---------------
Restaurants -- 0.4%
Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 . USD 4,125,000 206,250
Boston Chicken, Inc., 4.500%, 2/01/04 ........... 3,250,000 503,750
Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ...... 2,880,000 1,872,000
Shoney's, Inc., Zero Coupon Bond, 4/11/04 ....... 8,060,000 3,385,200
TPI Enterprises, Inc., 8.250%, 7/15/02 .......... 700,000 581,000
---------------
6,548,200
---------------
Retail -- Specialty -- 0.1%
Bell Sports Corp., 4.250%, 11/15/00 ............. 500,000 431,250
CML Group, Inc., 5.500%, 1/15/03 ................ 1,224,000 758,880
Jacobson Stores, Inc., 6.750%, 12/15/11 ......... 540,000 465,075
---------------
1,655,205
---------------
Telecommunications -- 0.4%
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 .............. 282,000 245,340
Fieldcrest Cannon, Inc., 6.000%, 3/15/12 ........ 890,000 778,750
---------------
1,024,090
---------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $143,545,416) ................. 121,469,156
---------------
TOTAL BONDS AND NOTES
(Identified Cost $1,592,149,981) ............... 1,615,144,842
---------------
SHARES
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 0.4% of Net Assets
Computers -- 0.0%
Streamlogic Corp. (d) (h) ....................... 266,066 266
---------------
Restaurants -- 0.4%
Advantica Restaurant Group, Inc. (h) ............ 646,448 6,302,868
---------------
TOTAL COMMON STOCKS
(Identified Cost $8,226,376) ................... 6,303,134
---------------
PREFERRED STOCKS -- 1.2% of Net Assets
Building Materials -- 0.2%
Owens Corning, 6.500% 144A (c) .................. 66,000 3,522,750
---------------
Chemicals -- Major -- 0.0%
E.I. du Pont DeNemours & Co., $3.50 ............. 3,775 261,419
---------------
Computers -- 0.1%
Unisys Corp., $3.75 ............................. 27,300 1,426,425
---------------
Entertainment -- 0.0%
Time Warner Entertainment Co., 10.250% PIK (g) .. 297 329,670
---------------
Financial Services -- 0.2%
Hvide Capital Trust, 6.500% ..................... 77,500 3,313,125
---------------
Freight Transportation -- 0.1%
Arkansas Best Corp., $2.875 ..................... 39,670 1,492,584
---------------
Metals -- 0.3%
Aluminum Co. of America, $3.75 .................. 10,000 746,250
Bethlehem Steel Corp., $3.50 144A (c) ........... 99,050 4,519,156
---------------
5,265,406
---------------
Oil & Gas -- 0.1%
Chesapeake Energy Corp., 7.000% 144A (c) ........ 35,000 1,496,250
---------------
Retail -- General -- 0.1%
K Mart Financing Corp., 7.750% .................. 10,000 700,000
---------------
Telecommunications -- 0.0%
Hyperion Telecommunications, Inc., 12.875% PIK (g) 573 570,135
---------------
Utilities -- 0.1%
Central Maine Power Co., 3.500% ................. 2,190 120,998
Cleco Corp., 4.750% ............................. 1,500 127,687
Commonwealth Energy Systems, $4.80 .............. 3,206 261,289
Connecticut Light & Power Co., $1.90 ............ 2,925 67,275
Entergy Louisiana, Inc., 4.160% ................. 2,600 172,250
Jersey Central Power & Light Co., 4.000% ........ 2,020 129,280
MDU Resources Group, Inc., 5.100% ............... 4,250 393,125
Minnesota Power & Light Co., 5.000% ............. 200 16,250
Nevada Power Co., 4.700% ........................ 16,845 326,372
Niagara Mohawk Power Corp., 4.850% .............. 5,000 400,000
Northern States Power Co., $3.60 ................ 900 54,000
Public Service Co., 4.000% ...................... 360 24,434
---------------
2,092,960
---------------
TOTAL PREFERRED STOCKS
(Identified Cost $18,459,745) .................. 20,470,724
---------------
WARRANTS -- 0.0% of Net Assets
Computers -- 0.0%
Streamlogic Corp., expiring 10/7/01 (d) (h) ..... 1,228 0
---------------
TOTAL WARRANTS
(Identified Cost $0) ........................... 0
---------------
Face
Amount Value (a)
- ------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 0.4% OF NET ASSETS
Repurchase Agreement with State Street Bank and
Trust Co., dated 6/30/98 at 5.000% to be
repurchased at $6,943,964 on 7/01/98
collateralized by $5,395,000 U.S. Treasury Bond,
8.125%, due 8/15/19 with a value
of $7,086,775 ................................. USD 6,943,000 $ 6,943,000
---------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $6,943,000) ................... 6,943,000
---------------
TOTAL INVESTMENTS -- 98.0%
(IDENTIFIED COST $1,625,779,102) (i) ............. 1,648,861,700
Cash and Other Assets, Less Liabilities -- 2.0% .... 33,748,749
---------------
NET ASSETS -- 100% ................................. $ 1,682,610,449
===============
(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) Company in Chapter 11 Bankruptcy.
(e) Security in default.
(f) Floating Rate Bond: Coupon is six month London Interbank Offered Rate (LIBOR) plus .8125%.
(g) All or a portion of income may be received as additional securities.
(h) Non-income producing security.
(i) At June 30, 1998, the net unrealized appreciation on investments based on cost of $1,625,779,102
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
$110,652,196 and $87,569,598, respectively, resulting in net unrealized appreciation of
$23,082,598.
Key to Abbreviations:
CAD: Canadian Dollar
NZD: New Zealand Dollar
USD: United States Dollar
ZAR: South African Rand
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES GLOBAL BOND FUND
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- ------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 90.0% OF NET ASSETS
<S> <C> <C> <C>
Australia -- 10.9%
New South Wales Trust, 6.500%, 5/01/06 ............. AUD 1,900,000 $ 1,213,438
News America Holdings, Inc., 8.625%, 2/07/14 ....... 1,240,000 856,966
QTC Global Aud Bon, 8.000%, 9/14/07 ................ 1,600,000 1,143,868
Queensland Treasury, 6.500%, 6/14/05 ............... 215,000 139,238
South Australia Government Finance Authority, Zero
Coupon Bond, 12/21/15 ............................ 2,750,000 589,978
----------------
3,943,488
----------------
Canada -- 4.1%
Government of Canada, 8.750%, 12/01/05 ............. CAD 700,000 574,177
Province of British Columbia, Zero Coupon Bond, 9/05/
20 ................................................ 5,025,000 924,330
----------------
1,498,507
----------------
Denmark -- 3.1%
Kingdom of Denmark, 8.000%, 5/15/03 ................ DKK 6,800,000 1,129,974
----------------
Finland -- 3.8%
Republic of Finland, 6.000%, 4/25/08 ............... FIM 7,000,000 1,378,840
----------------
Germany -- 26.4%
Bayerische Vereinsbank, 6.000%, 1/23/06 ............ DEM 2,000,000 1,185,698
Deutsche Finance BV, 7.500%, 2/10/03 ............... 2,300,000 1,413,073
Federal Republic of Germany, 6.000%, 2/16/06 ....... 2,050,000 1,227,481
Federal Republic of Germany, 6.500%, 3/15/00 ....... 2,000,000 1,152,156
Geberit International SA, 10.125%, 4/16/07 ......... 800,000 507,002
Germany Unity, 8.000%, 1/21/02 ..................... 2,200,000 1,363,691
Kreditanstalt Wierdarauf, 6.000%, 2/09/06 .......... 1,100,000 654,812
Treuhandanstalt, 6.625%, 7/09/03 ................... 300,000 182,006
Treuhandanstalt, 6.750%, 5/13/04 ................... 1,700,000 1,045,575
Westdt Landesbank, 5.250%, 10/14/05 ................ 1,500,000 852,908
----------------
9,584,402
----------------
Ireland -- 4.0%
Irish Permanent Plc, 8.500%, 7/15/04 ............... IEP 600,000 978,239
Ulysses Securitization Plc, 7.625%, 8/18/06 ........ 300,000 474,273
----------------
1,452,512
----------------
Japan -- 3.3%
MBL International Finance (Bermuda), 3.000%, 11/30/02 USD 300,000 285,375
MBL International Finance (Bermuda), 3.000%,
11/30/02(b) ....................................... 950,000 912,000
----------------
1,197,375
----------------
Malaysia -- 1.2%
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c) .. 575,000 429,560
----------------
Netherlands -- 2.8%
Dutch Government, 5.750%, 9/15/02 .................. NLG 2,000,000 1,031,938
----------------
New Zealand -- 4.6%
Government of New Zealand, 7.000%, 7/15/09 ......... NZD 1,820,000 991,251
Government of New Zealand, 8.000%, 11/15/06 ........ 1,200,000 685,051
----------------
1,676,302
----------------
Philippines -- 5.3%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 .......... USD 900,000 774,000
FLI Capital Cayman, 3.750%, 2/01/02
(step to 6.250% on 8/01/99) (b) (d) .............. 900,000 688,500
MBIA, Inc., Zero Coupon Bond, 12/18/01 (b) ......... 800,000 480,000
----------------
1,942,500
----------------
Poland -- 2.2%
Government of Poland, 4.000%, 10/27/14 (step to
5.000% on 10/27/98) (d) .......................... 900,000 804,420
----------------
South Africa -- 6.6%
Escom, 11.000%, 6/01/08 ............................ ZAR 6,000,000 774,235
Republic of South Africa, 8.500%, 6/23/17 .......... USD 1,000,000 952,780
Sappi BVI Finance, 7.500%, 8/01/02 ................. 700,000 652,750
----------------
2,379,765
----------------
South Korea -- 4.0%
Korea Development Bank, 6.625%, 11/21/03 ........... 800,000 646,360
Korea Development Bank, 6.750%, 12/01/05 ........... 200,000 160,740
Samsung Electronics Co. Ltd., 5.375%, 12/16/01 ..... DEM 500,000 246,305
Samsung Electronics Co. Ltd., Zero Coupon Bond,
12/31/07 (b) ..................................... USD 500,000 390,000
----------------
1,443,405
----------------
Supranational -- 1.2%
International Bank for Reconstruction & Development,
Zero Coupon Bond, 8/20/07 ........................ NZD 1,500,000 418,417
----------------
Thailand -- 3.2%
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 (b) .. USD 1,850,000 601,250
Kingdom of Thailand, 7.750%, 4/15/07 ............... 400,000 347,084
Loxley Public Co. Ltd., 2.500%, 4/04/01 (b) ........ 700,000 224,000
----------------
1,172,334
----------------
United States -- 3.3%
Federal National Mortgage Association, 7.250%,
6/20/02 ........................................... NZD 1,300,000 666,844
RJR Nabisco, Inc., 9.250%, 8/15/13 ................. USD 500,000 539,330
----------------
1,206,174
----------------
TOTAL BONDS AND NOTES
(Identified Cost $34,827,842) ..................... 32,689,913
----------------
SHARES VALUE (A)
- ------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 3.7% OF NET ASSETS
Japan -- 3.7%
Sakura Finance, 0.750% ............................. 186,000,000 948,293
Sanwa International Ltd. (Bermuda), 1.250%, 144A (c). 54,000,000 396,371
----------------
1,344,664
----------------
TOTAL PREFERRED STOCKS
(Identified Cost $1,725,040) ...................... 1,344,664
----------------
Face
AMOUNT
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 4.6% OF NET ASSETS
Repurchase Agreement with State Street Bank and Trust
Co., dated 6/30/98 at 5.000% to be repurchased at
$1,679,233 on 7/01/98 collateralized by $1,305,000
U.S. Treasury Bond, 8.125%, due 8/15/19 with a
value of $1,714,225 .............................. USD 1,679,000 1,679,000
----------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $1,679,000) ...................... 1,679,000
----------------
TOTAL INVESTMENTS -- 98.3%
(IDENTIFIED COST $38,231,882) (d) ................... 35,713,577
Cash and Other Assets, Less Liabilities -- 1.7% ....... 623,518
----------------
NET ASSETS -- 100% .................................... $ 36,337,095
================
(a) See Note 1.
(b) Convertible Bond.
(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) Step Bond: Coupon is zero or below market rate for an initial period and then increases at a
specified date and rate.
(e) At June 30, 1998, the net unrealized depreciation on investments based on cost of $38,231,882
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 $629,995
and $3,148,300, respectively, resulting in net unrealized depreciation of $2,518,305.
Key to Abbreviations:
AUD: Australian Dollar IEP: Irish Punt
CAD: Canadian Dollar NLG: Dutch Guilder
DEM: Deutsche Mark NZD: New Zealand Dollar
DKK: Danish Krone USD: United States Dollar
FIM: Finnish Markka ZAR: South African Rand
Ten Largest Sector Holdings at June 30, 1998 as a Percentage of Net Assets
Foreign Government/Agency 44.0% U.S. Government 1.8%
Banking & Finance 19.6% Electronics 1.7%
Financial Services 14.2% Tobacco 1.5%
Canadian 4.1% Consumer Durables 1.4%
Media & Entertainment 2.4% Utilities 1.2%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES HIGH YIELD FUND
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- ------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 87.5% OF NET ASSETS
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS -- 61.5%
Broadcasting -- 1.4%
CBS, Inc., 7.125%, 11/01/23 ............................ USD 50,000 $ 47,751
Fox Family Worldwide, Inc., Zero Coupon Bond, 11/01/07
(step to 10.250% on 11/01/02) (b) .................... 200,000 130,000
----------------
177,751
----------------
Canadian -- 5.2%
Clearnet Communications, Inc., Zero Coupon Bond, 8/13/07
(step to 11.750% on 8/13/02) (b) ..................... CAD 600,000 269,489
International Semi-Tech Corp., Zero Coupon Bond, 8/15/03
(step to 11.500% on 8/15/00) (b) ..................... USD 525,000 157,500
MetroNet Communications Corp., Zero Coupon Bond, 6/15/08
(step to 9.500% on 6/15/03) 144A (b)(c) .............. 250,000 154,687
Microcell Telecommunications, Inc., Zero Coupon Bond,
10/15/07 (step to 11.125% on 10/15/02)(b) ............ CAD 235,000 100,752
----------------
682,428
----------------
Communications -- 2.4%
Arch Communications Group, Inc., Zero Coupon Bond,
3/15/08 (step to 10.875% on 3/15/01) (b) ............. USD 540,000 307,800
----------------
Computers -- 1.1%
Apple Computer, Inc., 6.500%, 2/15/04 .................. 155,000 142,600
----------------
Electronics -- 1.6%
Westinghouse Electric Corp., 7.875%, 9/01/23 ........... 200,000 205,554
----------------
Foreign Government/Agency -- 9.2%
Escom, 11.000%, 6/01/08 ................................ ZAR 275,000 35,486
Republic of Argentina, 6.625%, 3/31/05 (d) ............. USD 47,500 41,919
Republic of Brazil, 10.125%, 5/15/27 ................... 255,000 219,555
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (e) ..... 493,090 363,654
Republic of Ecuador, 6.625%, 2/27/15 PIK (d) (e) ....... 166,898 99,822
Republic of Panama, 3.750%, 7/17/14 (step to 4.000%
on 7/17/98) (b) ...................................... 150,000 117,375
Republic of Peru, 3.250%, 3/07/17 (step to 3.750%
on 3/07/99) (b) ...................................... 200,000 118,500
Republic of South Africa, 12.500%, 12/21/06 ............ ZAR 500,000 72,365
Republic of Venezuela, 9.250%, 9/15/27 ................. USD 175,000 135,187
----------------
1,203,863
----------------
Foreign Issuer -- 23.0%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 .............. 350,000 301,000
Bangkok Bank Public Co. Ltd., 8.250%, 3/15/16 144A (c) . 100,000 74,861
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (c) . 250,000 182,848
Export Import Bank of Korea, 6.375%, 2/15/06 ........... 50,000 37,580
Hyundai Motor Co. Ltd., 7.600%, 7/15/07 144A (c) ....... 100,000 77,812
Korea Electric Power Corp., 7.400%, 4/01/16 ............ 238,067 190,880
Korea Electric Power Corp., 7.750%, 4/01/13 ............ 200,000 147,864
Multicanal SA, 10.500%, 4/15/18 144A (c) ............... 125,000 116,250
Murrin Murrin Holdings Property Ltd., 9.375%, 8/31/07 .. USD 50,000 49,000
National Power Corp., 9.625%, 5/15/28 .................. 100,000 92,000
Pan Pacific Industrial Investment Plc, Zero Coupon Bond,
4/28/07 144A (c) ..................................... 200,000 76,948
Petroleos Mexicanos, Medium Term, 8.625%, 12/01/23 ..... 145,000 124,881
Philippine Long Distance Telephone Co., 8.350%, 3/06/17 150,000 127,885
Pindo Deli Finance Mauritius Ltd., 10.750%, 10/01/07 ... 200,000 140,000
Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 ... 360,000 212,400
Pycsa Panama SA, 10.280%, 12/15/12 144A (c) ............ 100,000 94,375
Quezon Power Philippines Co., 8.860%, 6/15/17 .......... 225,000 193,545
Samsung Electronics Co. Ltd., 8.500%, 11/01/02 144A (c) 100,000 90,682
Siam Commercial Bank Public Co., 7.500%, 3/15/06 144A (c) 100,000 82,138
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c) ...... 250,000 186,765
Tjiwi Kimia Mauritius Ltd., 10.000%, 8/01/04 ........... 150,000 106,500
Total Access Communication Public Co. Ltd., 7.625%,
11/04/01 144A (c) .................................... 100,000 76,000
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 144A (c) .................................... 300,000 216,000
----------------
2,998,214
----------------
Health Care -- Services -- 0.5%
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 ........ 75,000 67,183
----------------
Oil & Gas -- 2.2%
Chesapeake Energy Corp., 7.875%, 3/15/04 ............... 50,000 46,875
Chesapeake Energy Corp., 8.500%, 3/15/12 ............... 250,000 233,750
----------------
280,625
----------------
Rail -- Transport -- 0.2%
Missouri Pacific Railroad Co., 4.750%, 1/01/20 ......... 30,000 20,663
----------------
Retail -- General -- 3.5%
Dillon Read Structured Finance Corp., 7.430%, 8/15/18 .. 300,000 279,375
Dillon Read Structured Finance Corp., 8.375%, 8/15/15 .. 65,000 64,919
Penn Traffic Co., 9.625%, 4/15/05 ...................... 275,000 106,562
----------------
450,856
----------------
Telecommunications -- 4.2%
Nextel Communications, Inc., Zero Coupon Bond, 10/31/07
(step to 9.750% on 10/31/02) (b) ..................... 145,000 94,612
Nextel Communications, Inc., Zero Coupon Bond, 2/15/08
(step to 9.950% on 2/15/03) 144A (b) (c) ............. 100,000 63,750
RCN Corp., Zero Coupon Bond, 10/15/07 (step to 11.125%
on 10/15/02) (b) ..................................... 175,000 112,437
RCN Corp., Zero Coupon Bond, 2/15/08 (step to 9.800%
on 2/15/03) (b) ...................................... 100,000 60,000
RCN Corp., Zero Coupon Bond, 7/01/08
(step to 11.000% on 7/01/03) (b) ..................... USD 100,000 59,500
Teligent, Inc., Zero Coupon Bond, 3/01/08 (step to
11.500% on 3/01/03) 144A (b) (c) ..................... 275,000 151,938
----------------
542,237
----------------
Textile & Apparel -- 1.8%
Phillips Van Heusen Corp., 7.750%, 11/15/23 ............ 250,000 232,142
----------------
Transportation -- 0.5%
American President Cos. Ltd., 8.000%, 1/15/24 .......... 100,000 70,562
----------------
U.S. Government -- 3.8%
U.S. Treasury Bonds, 6.000%, 2/15/26 ................... 475,000 494,147
----------------
Utilities -- 0.9%
Mobile Energy Services Co. LLC, 8.665%, 1/01/17 ........ 233,269 118,967
----------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $8,435,286) .......................... 7,995,592
----------------
CONVERTIBLE BONDS -- 26.0%
Auto & Related -- 0.5%
Exide Corp., 2.900%, 12/15/05 144A (c) ................. 100,000 61,750
----------------
Canadian -- 0.9%
Rogers Communications, Inc., 2.000%, 11/26/05 .......... 190,000 117,800
----------------
Commercial Services -- 0.0%
Molten Metal Technology, Inc., 5.500%, 5/01/06 (f) (g) . 75,000 3,000
----------------
Computers -- 2.9%
Apple Computer, Inc., 6.000%, 6/01/01 .................. 100,000 113,187
Cray Research, Inc., 6.125%, 2/01/11 ................... 113,000 92,095
Data General Corp., 6.000%, 5/15/04 .................... 50,000 45,250
Read Rite Corp., 6.500%, 9/01/04 ....................... 150,000 94,500
S3, Inc., 5.750%, 10/01/03 ............................. 50,000 36,062
----------------
381,094
----------------
Electronics -- 7.7%
Cirrus Logic, Inc., 6.000%, 12/15/03 144A (c) .......... 150,000 118,687
Cypress Semiconductor Corp., 6.000%, 10/01/02 .......... 100,000 87,500
EDO Corp., 7.000%, 12/15/11 ............................ 25,000 20,000
Integrated Device Technology, 5.500%, 6/01/02 .......... 50,000 40,250
Kent Electronics Corp., 4.500%, 9/01/04 ................ 150,000 122,625
Lam Research Corp., 5.000%, 9/01/02 .................... 575,000 471,500
Richardson Electronics Ltd., 7.250%, 12/15/06 .......... 50,000 48,000
Zenith Corp., 6.250%, 4/01/11 (f) ...................... 350,000 88,813
----------------
997,375
----------------
Environmental Services -- 0.2%
Air & Water Technologies Corp., 8.000%, 5/15/15 ........ 25,000 20,750
----------------
Foreign Issuer -- 5.3%
Advanced Agro Public Co., 3.500%, 6/17/01 .............. USD 125,000 112,500
APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 144A (c) 125,000 99,062
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 .......... 175,000 56,875
Banpu Public Co., 2.750%, 4/10/03 ...................... 25,000 17,125
Burns, Philp, 5.500%, 4/30/04 .......................... 50,000 28,500
Empresas ICA Sociedad, 5.000%, 3/15/04 ................. 75,000 53,531
Loxley Public Co. Ltd., 2.500%, 4/04/01 ................ 100,000 32,000
Samsung Electronics Co. Ltd., Zero Coupon Bond, 12/31/07 100,000 78,000
Sappi BVI Finance, 7.500%, 8/01/02 ..................... 75,000 69,938
Siam Commercial Bank Public Co., 3.250%, 1/24/04 ....... 250,000 85,000
Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ..... 125,000 58,750
----------------
691,281
----------------
Freight Transportation -- 0.4%
Builders Transportation, Inc., 8.000%, 8/15/05 (g) ..... 75,000 7,500
Worldway Corp., 6.250%, 4/15/11 ........................ 62,000 51,460
----------------
58,960
----------------
Health Care -- Drugs -- 2.2%
Dura Pharmaceuticals, Inc., 3.500%, 7/15/02 ............ 125,000 110,781
Glycomed, Inc., 7.500%, 1/01/03 ........................ 100,000 94,000
NABI, Inc., 6.500%, 2/01/03 ............................ 125,000 82,344
----------------
287,125
----------------
Health Care -- Services -- 0.5%
Tenet Healthcare Corp., 6.000%, 12/01/05 ............... 75,000 63,938
----------------
Home Builders -- 0.5%
Schuler Homes, Inc., 6.500%, 1/15/03 ................... 70,000 63,000
----------------
Leisure -- 0.5%
AMF Bowling, Inc., Zero Coupon Bond, 5/12/18 ........... 250,000 65,937
----------------
Machinery -- 0.2%
Intevac, Inc., 6.500%, 3/01/04 ......................... 25,000 21,438
----------------
Metals -- 0.3%
Battle Mountain Gold Co., 6.000%, 1/04/05 .............. 50,000 40,500
----------------
Oil & Gas -- 0.3%
Key Energy Group, Inc., 5.000%, 9/15/04 ................ 50,000 38,125
----------------
Real Estate Investment Trusts -- 0.2%
Sizeler Property Investors, Inc., 8.000%, 7/15/03 ...... 25,000 24,875
----------------
Restaurants -- 1.9%
Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 ........ USD 625,000 31,250
Boston Chicken, Inc., 4.500%, 2/01/04 .................. 100,000 15,500
Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ............. 50,000 32,500
Shoney's, Inc., Zero Coupon Bond, 4/11/04 .............. 350,000 147,000
TPI Enterprises, Inc., 8.250%, 7/15/02 ................. 25,000 20,750
----------------
247,000
----------------
Retail -- Specialty -- 0.8%
CML Group, Inc., 5.500%, 1/15/03 ....................... 100,000 62,000
Jacobson Stores, Inc., 6.750%, 12/15/11 ................ 50,000 43,062
----------------
105,062
----------------
Telecommunications -- 0.5%
Broadband Technologies, Inc., 5.000%, 5/15/01 .......... 100,000 66,000
----------------
Textile & Apparel -- 0.2%
Converse, Inc., 7.000%, 6/01/04 ........................ 50,000 32,313
----------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $3,912,819) .......................... 3,387,323
----------------
TOTAL BONDS AND NOTES
(Identified Cost $12,348,105) ......................... 11,382,915
----------------
SHARES
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 5.2% OF NET ASSETS
Foreign Issuer -- 0.6%
Sappi Ltd., ADR (h) .................................... 17,500 65,275
Siam Commercial Bank Public Co. (h) .................... 16,500 5,285
----------------
70,560
----------------
Oil & Gas -- 0.5%
Chesapeake Energy Corp. (h) ............................ 16,000 64,000
----------------
Real Estate Investment Trusts -- 1.6%
Associated Estates Realty Corp. ........................ 7,200 134,550
Berkshire Realty Co., Inc. ............................. 6,000 70,125
----------------
204,675
----------------
Restaurants -- 0.5%
Advantica Restaurant Group, Inc. (h) ................... 7,197 70,171
----------------
Utilities -- 2.0%
Eastern Utilities Associates ........................... 10,000 262,500
----------------
TOTAL COMMON STOCKS
(Identified Cost $717,938) ............................ 671,906
----------------
PREFERRED STOCKS -- 3.8% of Net Assets
Computers -- 0.4%
Unisys Corp., $3.75 .................................... 1,000 52,250
----------------
Foreign Issuer -- 0.4%
Philippine Long Distance Telephone Co., $3.50, GDS ..... 1,000 46,000
----------------
Metals -- 0.7%
Bethlehem Steel Corp., $3.50 144A (c) .................. 2,000 91,250
----------------
Oil & Gas -- 1.2%
Chesapeake Energy Corp., 7.000% 144A (c) ............... 3,500 149,625
----------------
Utilities -- 1.1%
Central Maine Power Co., 3.500% ........................ 1,260 69,615
Consumers Energy Co., $4.16 ............................ 250 17,500
Entergy Gulf States, Inc., 4.400% ...................... 150 9,375
Niagara Mohawk Power Corp., 3.600% ..................... 200 11,725
Niagara Mohawk Power Corp., 3.900% ..................... 100 6,500
Ohio Edison Co., 4.440% ................................ 450 31,725
----------------
146,440
----------------
TOTAL PREFERRED STOCKS
(Identified Cost $443,962) ............................ 485,565
----------------
FACE
AMOUNT
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 1.6% OF NET ASSETS
Repurchase Agreement with State Street Bank and Trust
Co., dated 6/30/98 at 5.000% to be repurchased at
$212,029 on 7/01/98 collateralized by $165,000 U.S.
Treasury Bond, 8.125%,
due 8/15/19 with a value of $216,741 ................. USD 212,000 212,000
----------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $212,000) ............................ 212,000
----------------
TOTAL INVESTMENTS -- 98.1%
(IDENTIFIED COST $13,722,005) (i) ....................... 12,752,386
Cash and Other Assets, Less Liabilities -- 1.9% ........... 252,378
----------------
NET ASSETS -- 100% ........................................ $ 13,004,764
================
(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 Offered 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 June 30, 1998, the net unrealized depreciation on investments based on cost of $13,722,005
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 $396,318
and $1,365,937, respectively, resulting in net unrealized depreciation of $969,619.
Key to Abbreviations:
ADR: American Depositary Receipts
CAD: Canadian Dollar
GDS: Global Depositary Shares
USD: United States Dollar
ZAR: South African Rand
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- -------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 94.2% OF NET ASSETS
<S> <C> <C>
Banks/Savings & Loans -- 4.7%
Capital One Bank, 5.950%, 2/15/01 ........................... $ 200,000 $ 198,388
Capital One Bank, 6.375%, 2/15/03 ........................... 100,000 100,090
Capital One Bank, 6.830%, 5/17/99 ........................... 70,000 70,492
NationsBank Corp., 7.000%, 9/15/01 .......................... 55,000 56,523
---------------
425,493
---------------
Canadian -- 2.5%
International Semi-Tech Corp., Zero Coupon Bond, 8/15/03 (step
to 11.500% on 8/15/00) (b) ................................ 250,000 75,000
MacMillan Bloedel Ltd., 6.750%, 2/15/06 ..................... 150,000 147,420
---------------
222,420
---------------
Entertainment -- 1.9%
Time Warner Entertainment Co., Inc., 7.750%, 6/15/05 ........ 155,000 166,355
---------------
Financial Services -- 5.5%
Associated Manufactured Housing, 6.475%, 3/15/28 ............ 50,000 50,870
Green Tree Financial Corp., 6.950%, 3/15/27 ................. 200,000 204,342
OSCC Home Equity Loan Trust, 6.025%, 6/15/08 ................ 243,999 243,184
---------------
498,396
---------------
Foreign Government/Agency -- 4.2%
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (c) .......... 174,032 128,349
Republic of South Africa, 8.375%, 10/17/06 .................. 250,000 252,627
---------------
380,976
---------------
Foreign Issuer -- 11.3%
Espirito Santo-Escelsa, 10.000%, 7/15/07 144A (d) ........... 150,000 126,000
Gruma SA de CV, 7.625%, 10/15/07 ............................ 150,000 150,814
Perez Companc SA, 8.125%, 7/15/07 144A (d) .................. 250,000 228,125
Southern Peru Ltd., 7.900%, 5/30/07 ......................... 220,000 221,474
Tenaga Nasional Berhad, 7.625%, 4/29/07 144A (d) ............ 125,000 107,231
Total Access Communication Public Co. Ltd., 8.375%, 11/04/06
144A (d) .................................................. 220,000 158,400
YPF SA, 7.000%, 10/26/02 .................................... 28,304 28,369
---------------
1,020,413
---------------
Government Agencies -- 7.3%
Federal Home Loan Mortgage Corp., 6.000%, 4/15/06 ........... 55,000 54,914
Federal Home Loan Mortgage Corp., 6.250%, 10/15/07 .......... 55,000 55,515
Federal National Mortgage Association, 6.000%, 5/25/08 ...... 197,588 196,847
Federal National Mortgage Association, 6.500%, 1/18/16 ...... 180,000 180,731
Federal National Mortgage Association, 6.500%, 8/15/16 ...... 165,000 165,721
---------------
653,728
---------------
Oil & Gas -- 6.0%
Pioneer Natural Resources Co., 6.500%, 1/15/08 .............. 250,000 242,313
R&B Falcon Corp., 6.750%, 4/15/05 144A (d) .................. 300,000 298,389
---------------
540,702
---------------
Real Estate Investment Trusts -- 20.7%
American Health Properties, Inc., 7.050%, 1/15/02 ........... 65,000 66,410
American Health Properties, Inc., 7.500%, 1/15/07 ........... 275,000 282,040
Excel Realty Trust, Inc., 6.875%, 10/15/04 .................. 165,000 168,114
First Industrial, 7.000%, 12/01/06 .......................... 250,000 252,403
Highwoods/Forsyth Ltd., 6.750%, 12/01/03 .................... 350,000 350,206
Oasis Residential, Inc., 6.750%, 11/15/01 ................... 350,000 355,320
Trinet Corporate Realty Trust, Inc., 6.750%, 3/01/03 ........ 335,000 335,342
Trinet Corporate Realty Trust, Inc., 7.300%, 5/15/01 ........ 55,000 55,870
---------------
1,865,705
---------------
Retail -- General -- 0.7%
Woolworth Corp., 7.000%, 6/01/00 ............................ 65,000 65,781
---------------
Securities -- 5.1%
Lehman Brothers Holdings, Inc., 5.750%, 11/15/98 ............ 190,000 189,818
Lehman Brothers Holdings, Inc., 6.125%, 2/01/01 ............. 60,000 59,993
Lehman Brothers Holdings, Inc., 7.125%, 9/15/03 ............. 100,000 103,574
Salomon, Inc., 6.700%, 12/01/98 ............................. 105,000 105,363
---------------
458,748
---------------
Telecommunications -- 6.6%
Cox Communications, Inc., 6.500%, 11/15/02 .................. 165,000 165,972
Intermedia Communications, Inc., 8.600%, 6/01/08 144A (d) ... 125,000 125,938
TCI Communications, Inc., 6.875%, 2/15/06 ................... 290,000 299,149
---------------
591,059
---------------
Textile & Apparel -- 2.2%
Tommy Hilfiger Corp., 6.500%, 6/01/03 ....................... 200,000 199,824
---------------
Tobacco -- 4.3%
Philip Morris Cos., Inc., 7.250%, 9/15/01 ................... 65,000 66,672
RJR Nabisco, Inc., 7.625%, 9/15/03 .......................... 65,000 64,627
RJR Nabisco, Inc., 8.250%, 7/01/04 .......................... 90,000 91,591
RJR Nabisco, Inc., 8.750%, 8/15/05 .......................... 160,000 166,859
---------------
389,749
---------------
Trucking & Leasing -- 2.3%
Amerco, 7.490%, 9/18/01 ..................................... 200,000 206,716
---------------
U.S. Government -- 8.7%
U.S. Treasury Notes, 5.500%, 5/31/00 ........................ 300,000 299,952
U.S. Treasury Notes, 5.625%, 2/15/06 ........................ 480,000 481,949
---------------
781,901
---------------
Utilities -- 0.2%
Salton Sea Funding Corp., 7.020%, 5/30/00 .................... 20,107 20,262
---------------
TOTAL BONDS AND NOTES
(Identified Cost $8,547,633)................................ 8,488,228
---------------
SHORT-TERM INVESTMENT -- 7.5% OF NET ASSETS
Repurchase Agreement with State Street Bank and Trust Co.,
dated 6/30/98 at 5.000% to be repurchased at $678,094 on 7/
01/98 collateralized by $530,000 U.S. Treasury Bond, 8.125%,
due 8/15/19 with a value of $696,198 ....................... 678,000 678,000
---------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $678,000).................................. 678,000
---------------
TOTAL INVESTMENTS -- 101.7%
(IDENTIFIED COST $9,225,633) (d) ............................. 9,166,228
Liabilities, Less Cash and Other Assets -- (1.7%)............... (154,003)
---------------
NET ASSETS -- 100% ............................................. $ 9,012,225
===============
(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 June 30, 1998, the net unrealized depreciation on investments based on cost of $9,225,633 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 $132,114
and $191,519, respectively, resulting in net unrealized depreciation of $59,405.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- ------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 89.2% OF NET ASSETS
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS -- 78.5%
Canadian -- 20.4%
Canadian Government, Zero Coupon Bond, 6/01/21 ........ CAD 150,000 $ 28,793
Canadian Government, Zero Coupon Bond, 6/01/25 ........ 940,000 147,450
Canadian Pacific Ltd., 4.000%, 1/29/49 ................ USD 15,000 11,250
MacMillan Bloedel, 7.700%, 2/15/26 .................... 100,000 100,460
New Brunswick FM Project, Zero Coupon Bond, 11/30/27
(step to 6.470% on 5/30/03) 144A (b) (c) ............ CAD 75,000 39,474
Ontario Hydro, 8.900%, 8/18/22 ........................ 55,000 52,146
Province of Alberta, 5.930%, 9/16/16 .................. 48,558 34,070
Province of British Columbia, Zero Coupon Bond, 6/09/22. 250,000 41,461
Province of British Columbia, Zero Coupon Bond, 8/19/22. 605,000 99,183
Province of British Columbia, Zero Coupon Bond, 8/23/24
...................................................... 200,000 29,127
Province of Manitoba, Zero Coupon Bond, 3/05/31 ....... 1,100,000 111,089
Province of Manitoba, 6.500%, 9/22/17 ................. 25,000 18,596
Province of Manitoba, 7.750%, 12/22/25 ................ 55,000 47,704
Province of Saskatchewan (Certificate of Deposit), Zero
Coupon Bond, 2/04/22 ................................ 650,000 111,603
Province of Saskatchewan (Certificate of Deposit), Zero
Coupon Bond, 5/30/25 ................................ 215,000 30,404
---------------
902,810
---------------
Communications -- 0.7%
Arch Communications Group, Inc., Zero Coupon Bond, 3/15/
08 (step to 10.875% on 3/15/01) (b) ................. USD 50,000 28,500
---------------
Computers -- 2.2%
Seagate Technology, Inc., 7.450%, 3/01/37 ............. 25,000 24,558
Seagate Technology, Inc., 7.875%, 3/01/17 ............. 75,000 72,514
---------------
97,072
---------------
Foreign Government/Agency -- 4.0%
New South Wales Treasury, Zero Coupon Bond, 11/23/20 .. AUD 300,000 49,527
Republic of Brazil, 10.125%, 5/15/27 .................. USD 10,000 8,610
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (d) .... 29,005 21,391
Republic of South Africa, 12.500%, 12/21/06 ........... ZAR 400,000 57,892
Republic of South Africa, 13.000%, 8/31/10 ............ 125,000 18,313
Republic of South Africa, 13.500%, 9/15/15 ............ 150,000 22,419
---------------
178,152
---------------
Foreign Issuer -- 5.7%
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (c) USD 50,000 36,569
Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 .. 100,000 59,000
Samsung Electronics Co. Ltd., 7.700%, 10/01/27 144A (c). 100,000 65,000
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c) ..... 100,000 74,706
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 144A (c) ................................... 25,000 18,000
---------------
253,275
---------------
Government Agencies -- 1.3%
Federal National Mortgage Association, Zero Coupon Bond,
10/29/07 ............................................ NZD 200,000 56,225
---------------
Health Care -- Services -- 3.0%
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 ....... USD 150,000 134,365
---------------
Home Builders -- 0.6%
Pulte Corp., 7.625%, 10/15/17 ......................... 25,000 26,299
---------------
Oil & Gas -- 7.3%
Pioneer Natural Resources Co., 7.200%, 1/15/28 ........ 40,000 38,914
R&B Falcon Corp., 7.375%, 4/15/18 144A (c) ............ 100,000 101,847
Seagull Energy Corp., 7.500%, 9/15/27 ................. 180,000 179,467
---------------
320,228
---------------
Paper Products -- 3.4%
Mead Corp., 7.125%, 8/01/25 ........................... 50,000 50,303
Westvaco Corp., 7.000%, 8/15/23 ....................... 100,000 99,711
---------------
150,014
---------------
Rail -- Transport -- 3.5%
Louisville & Nashville Railroad Co., 2.875%, 4/01/03 .. 1,000 847
Louisville & Nashville Railroad Co., 3.375%, 4/01/03 .. 12,000 10,660
Missouri Pacific Railroad Co., 4.250%, 1/01/05 ........ 39,000 34,011
Missouri Pacific Railroad Co., 4.750%, 1/01/20 ........ 34,000 23,418
Missouri Pacific Railroad Co., 4.750%, 1/01/30 ........ 86,000 56,760
Missouri Pacific Railroad Co., 5.000%, 1/01/45 ........ 46,000 29,612
---------------
155,308
---------------
Real Estate Investment Trusts -- 10.4%
First Industrial, 7.500%, 12/01/17 .................... 100,000 102,037
Highwoods Forsyth LP, 7.500%, 4/15/18 ................. 50,000 50,988
Security Capital Group, Inc., 7.700%, 6/15/28 144A (c) 125,000 126,462
Trinet Corporate Realty Trust, 7.700%, 7/15/17 ........ 175,000 181,879
---------------
461,366
---------------
Supranational -- 3.3%
International Bank for Reconstruction & Development,
Zero Coupon Bond, 8/20/07 ........................... NZD 425,000 118,551
International Bank for Reconstruction & Development,
8.000%, 5/23/07 ..................................... 45,000 24,825
---------------
143,376
---------------
Textile & Apparel -- 0.6%
Kellwood Co., 7.625%, 10/15/17 ........................ USD 25,000 26,488
---------------
Tobacco -- 5.9%
Loews Corp., 7.000%, 10/15/23 ......................... USD 70,000 $ 67,787
Philip Morris Cos., Inc., 7.750%, 1/15/27 ............. 120,000 128,359
RJR Nabisco, Inc., 9.250%, 8/15/13 .................... 60,000 64,720
---------------
260,866
---------------
U.S. Government -- 4.7%
U.S. Treasury Bonds, 6.000%, 2/15/26 .................. 200,000 208,062
---------------
Utilities -- 1.5%
Comed Financing II, 8.500%, 1/15/27 ................... 60,000 64,235
---------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $3,406,225) ......................... 3,466,641
---------------
CONVERTIBLE BONDS -- 10.7%
Electronics -- 1.7%
Thermedics, Inc., Zero Coupon Bond, 6/01/03 ........... 100,000 75,000
---------------
Environmental Services -- 2.2%
Thermo TerraTech, Inc., 4.625%, 5/01/03 144A (c) ...... 110,000 98,587
---------------
Foreign Issuer -- 4.5%
Banpu Public Co., 2.750%, 4/10/03 ..................... 20,000 13,700
Burns, Philp, 5.500%, 4/30/04 ......................... 20,000 11,400
Samsung Corp., 0.250%, 6/26/06 ........................ 20,000 18,400
Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 .... 30,000 14,100
Telekom Malaysia Berhad, 4.000%, 10/03/04 ............. 50,000 36,500
Telekom Malaysia Berhad, 7.875%, 8/01/25 144A (c) ..... 100,000 80,540
Total Access Communication Public Co. Ltd., 2.000%,
5/31/06 ............................................. 30,000 22,800
---------------
197,440
---------------
Oil & Gas -- 1.3%
Houston Industries, Inc., 6.000%, 3/15/12 ............. 60,000 57,000
---------------
Publishing -- 1.0%
Scholastic Corp., 5.000%, 8/15/05 144A (c) ............ 50,000 45,938
---------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $502,360) ........................... 473,965
---------------
TOTAL BONDS AND NOTES
(Identified Cost $3,908,585) ......................... 3,940,606
---------------
PREFERRED STOCKS -- 6.3% OF NET ASSETS
Chemicals -- Major -- 3.0%
E.I. du Pont DeNemours & Co., $3.50 ................... 1,250 $ 86,562
E.I. du Pont DeNemours & Co., $4.50 ................... 500 44,250
---------------
130,812
---------------
Utilities -- 3.3%
Duquesne Light Co., 3.750% ............................ 100 3,500
Duquesne Light Co., 4.000% ............................ 500 16,500
Entergy New Orleans, Inc., 4.750% ..................... 175 12,819
Houston Lighting & Power Co., $4.00 ................... 79 5,214
Jersey Central Power & Light Co., 4.000% .............. 310 19,840
New York State Electric & Gas Corp., 3.750% ........... 460 28,060
Northern Indiana Public Service Co., 4.250% ........... 210 14,490
Wisconsin Electric Power Co., 3.600% .................. 850 48,025
---------------
148,448
---------------
TOTAL PREFERRED STOCKS
(Identified Cost $246,209) ........................... 279,260
---------------
Face
Amount
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 8.5% OF NET ASSETS
Repurchase Agreement with State Street Bank and Trust
Co., dated 6/30/98 at 5.000% to be repurchased at
$374,052
on 7/01/98 to be collateralized by $295,000 U.S.
Treasury Bond, 8.125%, due 8/15/19 with a value of
$387,507 ............................................. USD 374,000 374,000
---------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $374,000) ........................... 374,000
---------------
TOTAL INVESTMENTS -- 104.0%
(IDENTIFIED COST $4,528,794) (d) ....................... 4,593,866
Liabilities, Less Cash and Other Assets -- (4.0%) ........ (175,949)
---------------
NET ASSETS -- 100% ....................................... $ 4,417,917
===============
(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 June 30, 1998, the net unrealized appreciation on investments based on cost of $4,528,794 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 $253,487
and $188,415, respectively, resulting in net unrealized appreciation of $65,072.
Key to Abbreviations:
AUD: Australian Dollar
CAD: Canadian Dollar
NZD: New Zealand Dollar
USD: United States Dollar
ZAR: South African Rand
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- -------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES - 94.7% OF NET ASSETS
<S> <C> <C>
Alaska - 1.0%
Alaska State Housing Finance Corp., 6.600%, 12/01/15 ........ $ 90,000 $ 95,747
---------------
Arizona - 1.7%
Phoenix Street & Highway User, 6.250%, 7/01/11 .............. 150,000 163,124
---------------
California - 11.8%
California State Department Water Resources, 5.625%, 12/01/12. 100,000 105,071
California State Public Works Lease, 5.500%, 6/01/14 ........ 300,000 320,754
Foothill Eastern Transportation Corridor, Zero Coupon Bond,
1/01/23 ................................................... 500,000 132,310
Foothill Eastern Transportation Corridor, 6.000%, 1/01/16 ... 250,000 269,397
Fresno Sewer Revenue, (AMBAC Insured), 6.250%, 9/01/14 ...... 250,000 289,505
---------------
1,117,037
---------------
Connecticut - 2.2%
Connecticut State Resources Recovery Authority, 7.625%,
1/01/09 .................................................... 200,000 207,280
---------------
District of Columbia - 2.8%
District of Columbia Water & Sewer, (FSA Insured),
5.500%, 10/01/11 .......................................... 250,000 266,992
---------------
Florida - 2.7%
Florida State, General Obligation, 5.250%, 7/01/15 .......... 250,000 255,268
---------------
Hawaii - 2.2%
Honolulu, Hawaii, General Obligation, 5.000%, 10/01/13 ...... 200,000 203,344
---------------
Illinois - 14.6%
Chicago Metropolitan Water Reclamation, 5.950%, 12/01/07 .... 300,000 334,062
Chicago O'Hare International Airport, 5.000%, 1/01/16 ....... 300,000 295,872
Chicago, Illinois, General Obligation, (AMBAC Insured),
5.250%, 1/01/15 ........................................... 250,000 253,360
Illinois Development Finance Authority Pollution Control,
7.250%, 6/01/11 ........................................... 25,000 27,077
Illinois State Sales Tax Revenue, 6.375%, 6/15/14 ........... 150,000 166,743
Illinois State Sales Tax Revenue, (FGIC Insured), 5.000%,
6/15/16 ................................................... 300,000 295,797
---------------
1,372,911
---------------
Louisiana - 2.2%
Regional Transportation Authority, (FGIC Insured), 8.000%,
12/01/08 .................................................. 200,000 207,486
---------------
Maryland - 2.3%
Baltimore, Maryland Pollution Control, 5.350%, 4/01/08 ...... 200,000 212,474
---------------
Massachusetts - 4.9%
Commonwealth of Massachusetts Water Pollution Control, 5.000%,
8/01/14 250,000 248,622
Plymouth County Certificates of Participation, 6.500%, 4/01/01 200,000 211,772
---------------
460,394
---------------
Michigan - 2.7%
Detroit, Michigan, (MBIA Insured), 5.000%, 4/01/06 .......... 250,000 259,065
---------------
New Jersey - 5.3%
New Jersey Building Authority State Building, 5.750%, 6/15/09. 250,000 274,622
New Jersey State Turnpike Authority, 6.500%, 1/01/08 ........ 200,000 227,338
---------------
501,960
---------------
New York - 22.6%
Long Island Power Authority New York, (FSA Insured), 5.000%,
12/01/18 .................................................. $250,000 $ 244,667
New York City Housing Development Corp., 5.625%, 5/01/12 .... 150,000 155,433
New York City Transitional Finance Authority, 5.000%, 8/15/13. 200,000 199,568
New York City, General Obligation, 7.000%, 8/01/98 .......... 5,000 5,014
New York State Certificates of Participation, 5.650%, 8/01/02. 160,000 167,826
New York State Dormitory Authority, 5.100%, 2/15/12 ......... 250,000 250,115
New York State Dormitory Authority, 6.375%, 7/01/08 ......... 85,000 92,169
New York State Dormitory Authority, 6.500%, 5/15/05 ......... 250,000 279,425
New York State Dormitory Authority Prerefunded, 6.375%,
7/01/08 .................................................... 115,000 126,433
New York State Environmental Pollution Control, 5.150%,
6/15/13 .................................................... 125,000 127,328
New York State Environmental Pollution Control, 5.750%,
6/15/10 .................................................... 250,000 275,002
New York State, General Obligation, 5.250%, 7/15/10 ......... 200,000 208,232
---------------
2,131,212
---------------
Pennsylvania - 1.5%
Pennsylvania Finance Authority Revenue Bond, 6.600%, 11/01/09. 125,000 138,474
---------------
Puerto Rico - 2.7%
Puerto Rico Electric Power Authority, 6.125%, 7/01/09 ....... 225,000 251,071
---------------
Rhode Island - 2.7%
Rhode Island Convention Center Authority, (MBIA Insured),
5.000%, 5/15/10 ............................................ 250,000 258,133
---------------
Tennessee - 0.3%
Metropolitan Nashville Airport, (FGIC Insured), 6.600%,
7/01/15 .................................................... 30,000 32,488
---------------
Virginia - 3.1%
Pocahontas Parkway Association Virginia Toll, 5.000%, 8/15/11. 300,000 292,932
---------------
Washington - 2.6%
Tacoma, Washington Electric Systems Revenue, (FGIC Insured),
6.100%, 1/01/07 ........................................... 225,000 247,057
---------------
Wyoming - 2.8%
Platte County Pollution Control, (MBIA Insured), 5.100%,
1/01/08 .................................................... 250,000 260,120
---------------
TOTAL MUNICIPAL BONDS AND NOTES
(Identified Cost $8,506,642)................................ 8,934,569
---------------
U.S. GOVERNMENT - 2.2% OF NET ASSETS
U.S. Government - 2.2%
U.S. Treasury Notes, 5.625%, 12/31/02 ....................... 200,000 200,874
---------------
TOTAL U.S. GOVERNMENT
(Identified Cost $201,766).................................. 200,874
---------------
SHORT-TERM INVESTMENTS - 4.8% OF NET ASSETS
Repurchase Agreement with State Street Bank and Trust Co.,
dated 6/29/98 at 5.000% to be repurchased at $336,093 on 7/
01/98 collateralized by $335,000 U.S. Treasury Notes,
6.125%, due 7/31/00 with a value of $347,214 .............. 336,000 336,000
Repurchase Agreement with State Street Bank and Trust Co.,
dated 6/30/98 at 5.000% to be repurchased at $117,016 on 7/
01/98 collateralized by $120,000 U.S. Treasury Notes 6.250%
due 6/30/02 with a value of $122,642 ...................... 117,000 117,000
---------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $453,000).................................. 453,000
---------------
TOTAL INVESTMENTS - 101.7%
(IDENTIFIED COST $9,161,408) (b) ............................. 9,588,443
Liabilities, Less Cash and Other Assets -- (1.7%)............... (156,287)
---------------
NET ASSETS - 100% .............................................. 9,432,156
===============
(a) See Note 1.
(b) At June 30, 1998, the net unrealized appreciation on investments based on cost of $9,161,408 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 $447,787
and $20,752, respectively, resulting in net unrealized appreciation of $427,035.
Key to Abbreviations:
AMBAC: American Municipal Bond Assurance Corporation
FGIC: Federal Guaranty Insurance Corporation
FSA: Financial Security Assurance
MBIA: Municipal Bond Insurance Association
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES SHORT-TERM BOND FUND
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- -------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 91.6% OF NET ASSETS
<S> <C> <C>
Aerospace -- 2.1%
Lockheed Martin Corp., 6.550%, 5/15/99 ................... $ 570,000 $ 572,713
----------------
Airlines -- 4.5%
Delta Air Lines, Inc., 7.790%, 12/01/98 .................. 800,000 806,184
Northwest Airlines Corp., 8.375%, 3/15/04 ................ 400,000 412,464
----------------
1,218,648
----------------
Banks/Savings & Loans -- 4.4%
Capital One Bank, 6.830%, 5/17/99 ........................ 560,000 562,492
Household Bank FSB, 6.250%, 4/01/99 ...................... 625,000 626,612
----------------
1,189,104
----------------
Computers -- 2.4%
Comdisco, Inc., 5.760%, 1/19/99 .......................... 670,000 669,169
----------------
Consumer Services -- 2.1%
Loewen Group International, Inc., 7.750%, 10/15/01 ....... 560,000 583,442
----------------
Diversified Operations -- 2.9%
Williams Companies, Inc., 5.950%, 2/15/00 ................ 800,000 797,272
----------------
Electronics -- 1.0%
Tektronix, Inc., 7.625%, 8/15/02 ......................... 250,000 260,337
----------------
Entertainment -- 0.8%
Time Warner, Inc., 7.950%, 2/01/00 ....................... 200,000 205,512
----------------
Financial Services -- 5.3%
Fleetwood Credit Grantor Trust, 6.900%, 3/15/12 .......... 372,011 377,286
Ford Motor Credit Co., 6.125%, 4/28/03 ................... 710,000 710,050
Sears Roebuck Acceptance Corp., 6.950%, 5/15/02 .......... 340,000 349,462
----------------
1,436,798
----------------
Foreign Issuer -- 2.3%
PDVSA Finance Ltd., 6.650%, 2/15/06 ...................... 645,000 634,648
----------------
Government Agencies -- 10.5%
Federal Home Loan Mortgage Corp., 6.000%, 2/01/13 ........ 483,449 478,765
Federal Home Loan Mortgage Corp., 6.500%, 5/15/08 ........ 520,000 523,411
Federal National Mortgage Association, 6.000%, 3/01/13 ... 1,095,010 1,083,030
Federal National Mortgage Association, 6.000%, 4/01/13 ... 796,429 787,716
----------------
2,872,922
----------------
Oil & Gas -- 1.8%
Occidental Petroleum Corp., 5.850%, 11/09/98 ............. 500,000 499,555
----------------
Paper Products -- 1.3%
Fort James Corp., 6.625%, 9/15/04 ........................ 360,000 365,393
----------------
Real Estate Investment Trusts -- 0.7%
Oasis Residential, Inc., 7.000%, 11/15/03 ................ 200,000 203,538
----------------
Securities -- 4.0%
Salomon Brothers, Inc., 5.500%, 1/15/99 .................. 640,000 639,501
Salomon Brothers, Inc., 7.125%, 8/01/99 .................. 450,000 455,346
----------------
1,094,847
----------------
Telecommunications -- 1.8%
Sprint Spectrum L.P., Zero Coupon Bond, 8/15/06
(step to 12.500% on 8/15/01) (b) ....................... 560,000 478,800
----------------
Textile & Apparel -- 1.1%
Tommy Hilfiger Corp., 6.500%, 6/01/03 .................... 300,000 299,736
----------------
Trucking & Leasing -- 1.6%
Amerco, 7.850%, 5/15/03 .................................. 420,000 436,510
----------------
U.S. Government -- 36.6%
U.S. Treasury Notes, 6.125%, 7/31/00 ..................... 1,495,000 1,512,745
U.S. Treasury Notes, 6.250%, 10/31/01 .................... 1,000,000 1,020,780
U.S. Treasury Notes, 6.250%, 1/31/02 ..................... 2,995,000 3,061,908
U.S. Treasury Notes, 6.250%, 2/15/03 ..................... 1,090,000 1,121,676
U.S. Treasury Notes, 6.375%, 4/30/99 ..................... 300,000 302,109
U.S. Treasury Notes, 6.625%, 7/31/01 ..................... 1,500,000 1,545,465
U.S. Treasury Notes, 6.875%, 8/31/99 ..................... 800,000 812,000
U.S. Treasury Strips, Zero Coupon Bond, 2/15/04 .......... 860,000 633,476
----------------
10,010,159
----------------
Utilities -- 4.4%
Detroit Edison Co., 6.340%, 3/15/00 ...................... 670,000 674,060
El Paso Electric Co., 7.250%, 2/01/99 .................... 520,000 521,815
----------------
1,195,875
----------------
TOTAL BONDS AND NOTES
(Identified Cost $24,858,826)............................ 25,024,978
----------------
SHORT-TERM INVESTMENTS -- 6.8% OF NET ASSETS
Financial Services -- 6.8%
American Express Co., 5.950%, 7/01/98 .................... 900,000 900,000
Associates Corp. of North America, 5.950%, 7/01/98 ....... 960,000 960,000
----------------
1,860,000
----------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $1,860,000)............................. 1,860,000
----------------
TOTAL INVESTMENTS -- 98.4%
(IDENTIFIED COST $26,718,826) (c) ......................... 26,884,978
Cash and Other Assets, Less Liabilities -- 1.6%.............. 435,182
----------------
TOTAL NET ASSETS -- 100% .................................... $ 27,320,160
================
(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 June 30, 1998, the net unrealized appreciation on investments based on cost of $26,718,826
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 $196,440
and $30,288, respectively, resulting in net unrealized appreciation of $166,152.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
- -------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 98.8% OF NET ASSETS
<S> <C> <C>
Government Agencies -- 41.3%
Federal Home Loan Bank, Zero Coupon Bond, 8/04/17 ........ $ 5,400,000 $ 1,188,000
Government National Mortgage Association, 6.500%, 5/15/28 3,328,685 3,322,361
Government National Mortgage Association, 7.000%, 1/15/28 995,533 1,011,392
Government National Mortgage Association, 7.500%, 8/15/26 561,405 577,017
Government National Mortgage Association, 7.500%, 9/15/27 2,083,961 2,141,916
Tennessee Valley Authority, 8.625%, 11/15/29 ............. 514,000 558,461
----------------
8,799,147
----------------
U.S. Government -- 57.5%
U.S. Treasury Bonds, 3.625%, 4/15/28 (b) ................. 2,786,813 2,752,842
U.S. Treasury Bonds, 7.250%, 5/15/16 ..................... 3,125,000 3,661,125
U.S. Treasury Bonds, 7.500%, 11/15/24 .................... 2,810,000 3,486,592
U.S. Treasury Notes, 3.375%, 1/15/07 (b) ................. 2,256,166 2,184,961
U.S. Treasury Notes, 5.750%, 11/15/00 .................... 140,000 140,700
----------------
12,226,220
----------------
TOTAL BONDS AND NOTES
(Identified Cost $20,499,041)............................ 21,025,367
----------------
TOTAL INVESTMENTS -- 98.8%
(IDENTIFIED COST $20,499,041) (c) ......................... 21,025,367
Cash and Other Assets, Less Liabilities -- 1.2%.............. 258,509
----------------
NET ASSETS -- 100% .......................................... $ 21,283,876
================
(a) See Note 1.
(b) Treasury Inflation Protection Securities (TIPS): Face amount of these bonds and notes will be
adjusted for changes in the level of inflation as indexed to the non-seasonally adjusted
consumer price index (CPI).
(c) At June 30, 1998, the net unrealized appreciation on investments based on cost of $20,499,041
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 $566,578
and $40,252, respectively, resulting in net unrealized appreciation of $526,326.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------------
June 30, 1998 (unaudited)
Global
Bond Bond
Fund Fund
------------------ ---------------
<S> <C> <C>
ASSETS
Investments at value .................................... $ 1,648,861,700 $ 35,713,577
Cash .................................................... 312 121
Foreign currency at value ............................... 18 24,534
Receivable for:
Fund Shares sold ...................................... 8,419,485 57,726
Securities sold ....................................... 572,832 0
Forward foreign currency exchange contracts (Note 1D) . 0 32,296
Dividends and interest -- net ......................... 28,370,657 589,349
Due from the adviser (Note 3) ........................... 1,470 20,621
Other assets ............................................ 0 0
--------------- ---------------
1,686,226,474 36,438,224
--------------- ---------------
LIABILITIES
Payable for:
Securities purchased .................................. 767,498 0
Fund Shares redeemed .................................. 1,897,467 56,315
Dividends declared .................................... 0 0
Accrued expenses:
Management fees (Note 3) .............................. 813,039 18,092
Trustees' fees (Note 3A) .............................. 1,571 1,555
Administrative fees ................................... 69,439 2,010
Other expenses ........................................ 67,011 23,157
--------------- ---------------
3,616,025 101,129
--------------- ---------------
NET ASSETS ................................................ $ 1,682,610,449 $ 36,337,095
=============== ===============
Net Assets consist of:
Capital paid in ....................................... $ 1,607,789,251 $ 37,081,228
Undistributed (or Distribution in excess of) net
investment income ................................... 28,960,384 836,162
Accumulated net realized gain (loss) .................. 22,844,872 911,417
Unrealized appreciation (depreciation) on:
Investments ......................................... 23,082,598 (2,518,305)
Foreign currency translations ....................... (66,656) 26,593
--------------- ---------------
NET ASSETS ................................................ $ 1,682,610,449 $ 36,337,095
=============== ===============
INSTITUTIONAL CLASS:
Net assets .............................................. $ 1,626,806,086 $ 30,692,268
Shares of beneficial interest outstanding, no par value . 123,534,539 2,546,266
Net asset value and redemption price per Institutional
share* ................................................ $ 13.17 $ 12.05
RETAIL CLASS:
Net assets .............................................. $ 55,478,149 $ 5,644,827
Shares of beneficial interest outstanding, no par value . 4,217,286 468,822
Net asset value and redemption price per Retail share* .. $ 13.15 $ 12.04
ADMIN CLASS:
Net assets .............................................. $ 326,214 --
Shares of beneficial interest outstanding, no par value . 24,811 --
Net asset value and redemption price per Admin share .... $ 13.15 $ --
Identified cost of investments ............................ $ 1,625,779,102 $ 38,231,882
=============== ===============
*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 Note 1I)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
HIGH INTERMEDIATE INVESTMENT MUNICIPAL SHORT-TERM U.S. GOVERNMENT
YIELD MATURITY BOND GRADE BOND BOND SECURITIES
FUND FUND BOND FUND FUND FUND FUND
- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 12,752,386 $ 9,166,228 $ 4,593,866 $ 9,588,443 $ 26,884,978 $ 21,025,367
555 67 107 724 127 78,699
0 0 0 0 0 0
80,148 0 49,990 11,657 59,316 70,120
0 0 0 0 0 0
0 0 0 0 0 0
225,179 137,511 62,742 134,657 417,197 159,297
40,807 39,015 35,578 23,496 14,281 17,492
5,587 0 0 0 0 0
- ------------ ------------ ------------ ------------ ------------ ------------
13,104,662 9,342,821 4,742,283 9,758,977 27,375,899 21,350,975
- ------------ ------------ ------------ ------------ ------------ ------------
53,570 301,280 301,616 293,277 0 0
2,373 0 0 0 0 33,177
0 0 0 11,757 15,583 0
19,108 8,578 4,051 9,104 15,881 20,998
1,555 1,555 1,575 1,555 1,555 1,555
1,671 893 656 383 1,768 903
21,621 18,290 16,468 10,745 20,952 10,466
- ------------ ------------ ------------ ------------ ------------ ------------
99,898 330,596 324,366 326,821 55,739 67,099
- ------------ ------------ ------------ ------------ ------------ ------------
$ 13,004,764 $ 9,012,225 $ 4,417,917 $ 9,432,156 $ 27,320,160 $ 21,283,876
============ ============ ============ ============ ============ ============
$ 13,410,494 $ 8,869,051 $ 4,239,414 $ 8,894,726 $ 27,555,416 $ 20,961,896
302,255 143,398 67,740 0 (3,124) 305,014
261,696 59,181 46,062 110,395 (398,284) (509,360)
(969,619) (59,405) 65,072 427,035 166,152 526,326
(62) 0 (371) 0 0 0
- ------------ ------------ ------------ ------------ ------------ ------------
$ 13,004,764 $ 9,012,225 $ 4,417,917 $ 9,432,156 $ 27,320,160 $ 21,283,876
============ ============ ============ ============ ============ ============
$ 6,190,499 $ 8,477,938 $ 2,940,333 $ 9,432,156 $ 27,065,423 $ 21,283,876
615,029 827,645 272,328 807,532 2,770,217 1,928,955
$ 10.07 $ 10.24 $ 10.80 $ 11.68 $ 9.77 $ 11.03
$ 6,814,265 $ 534,287 $ 1,477,584 -- $ 254,737 --
677,317 52,201 137,015 -- 26,075 --
$ 10.06 $ 10.24 $ 10.78 -- $ 9.77 --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
$ 13,722,005 $ 9,225,633 $ 4,528,794 $ 9,161,408 $ 26,718,826 $ 20,499,041
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL
BOND BOND
FUND FUND
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME
Dividends* .............................................. $ 771,927 $ 0
Interest ................................................ 58,413,825 1,150,045
--------------- ---------------
59,185,752 1,150,045
--------------- ---------------
Expenses
Management fees (Note 3) .............................. 4,486,732 101,422
12b-1 fees (Retail Class) ............................. 55,931 5,726
12b-1 fees (Admin Class) .............................. 26 0
Trustees' fees and expenses (Note 3A) ................. 2,791 2,815
Administrative fees ................................... 363,260 9,356
Custodian and accounting fees ......................... 206,355 39,490
Transfer agent fees (Institutional Class) ............. 143,813 9,140
Transfer agent fees (Retail Class) .................... 15,224 10,138
Transfer agent fees (Admin Class) ..................... 1,500 0
Audit and tax services fees ........................... 6,338 6,347
Legal fees ............................................ 1,674 2,125
Printing fees ......................................... 56,098 1,303
Registration fees ..................................... 224,301 11,724
Amortization of organization expenses (Note 1J):
Institutional Class ................................. 0 0
Amortization of deferred registration costs (Note 1J):
Institutional Class ................................. 0 0
Retail Class ........................................ 574 485
Miscellaneous expenses ................................ 1,671 2,499
--------------- ---------------
Total expenses ........................................ 5,566,288 202,570
Less expenses waived and reimbursed by the investment
adviser (Note 3) .................................... (8,871) (44,710)
--------------- ---------------
Net expenses .......................................... 5,557,417 157,860
--------------- ---------------
Net investment income (loss) ............................ 53,628,335 992,185
--------------- ---------------
NET REALIZED GAIN (LOSS) ON:
Investments ............................................. 14,530,104 592,319
Foreign currency transactions ........................... (203,007) 204,817
--------------- ---------------
Total net realized gain (loss) .......................... 14,327,097 797,136
--------------- ---------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments ............................................. (7,793,848) (1,176,237)
Foreign currency translations ........................... 892 (120,663)
--------------- ---------------
Total net change in unrealized appreciation (depreciation) (7,792,956) (1,296,900)
--------------- ---------------
Total net realized gain (loss) and change in unrealized
appreciation (depreciation) ........................... 6,534,141 (499,764)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ..... $ 60,162,476 $ 492,421
=============== ===============
*Net of foreign withholding taxes of $309 for the High Yield Fund.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
HIGH INTERMEDIATE INVESTMENT MUNICIPAL SHORT-TERM U.S. GOVERNMENT
YIELD MATURITY BOND GRADE BOND BOND SECURITIES
FUND FUND BOND FUND FUND FUND FUND
- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 29,827 $ 0 $ 6,626 $ 0 $ 0 $ 0
563,618 294,320 133,193 236,957 750,396 626,935
- ------------ ------------ ------------ ------------ ------------ ------------
593,445 294,320 139,819 236,957 750,396 626,935
- ------------ ------------ ------------ ------------ ------------ ------------
33,404 16,141 7,732 17,997 28,916 40,138
6,314 613 1,431 0 417 0
0 0 0 0 0 0
2,815 2,815 2,796 2,815 2,815 2,815
5,056 3,695 2,675 2,108 7,104 4,951
34,893 30,069 29,607 24,313 28,841 20,000
9,040 9,149 8,947 9,102 9,473 9,229
9,228 9,001 9,053 0 9,009 0
0 0 0 0 0 0
8,851 6,808 6,808 6,347 6,347 6,347
2,124 2,124 2,331 2,124 2,124 2,124
393 304 148 338 839 734
16,379 12,721 10,139 7,307 12,022 8,212
843 0 0 0 0 0
0 5,191 738 0 0 0
522 336 298 0 784 0
1,518 268 1,801 1,677 2,257 1,695
- ------------ ------------ ------------ ------------ ------------ ------------
131,380 99,235 84,504 74,128 110,948 96,245
(83,297) (76,427) (72,441) (47,133) (52,699) (36,038)
- ------------ ------------ ------------ ------------ ------------ ------------
48,083 22,808 12,063 26,995 58,249 60,207
- ------------ ------------ ------------ ------------ ------------ ------------
545,362 271,512 127,756 209,962 692,147 566,728
- ------------ ------------ ------------ ------------ ------------ ------------
182,584 36,118 28,432 93,926 20,524 406,966
(1,244) 0 (778) 0 0 0
- ------------ ------------ ------------ ------------ ------------ ------------
181,340 36,118 27,654 93,926 20,524 406,966
- ------------ ------------ ------------ ------------ ------------ ------------
(710,903) (22,932) (28,364) (108,196) 9,471 (91,984)
(11) 0 (194) 0 0 0
- ------------ ------------ ------------ ------------ ------------ ------------
(710,914) (22,932) (28,558) (108,196) 9,471 (91,984)
- ------------ ------------ ------------ ------------ ------------ ------------
(529,574) 13,186 (904) (14,270) 29,995 314,982
- ------------ ------------ ------------ ------------ ------------ ------------
$ 15,788 $ 284,698 $ 126,852 $ 195,692 $ 722,142 $ 881,710
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
--------------- ----------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 53,628,335 $ 66,908,609
Net realized gain (loss) ................................ 14,327,097 27,681,737
Change in unrealized appreciation (depreciation) ........ (7,792,956) 11,946,926
--------------- ---------------
Increase (decrease) in net assets from
operations .......................................... 60,162,476 106,537,272
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. (23,880,402) (65,355,045)
Net realized gain on investments ...................... 0 (20,396,586)
RETAIL CLASS
Net investment income ................................. (715,274) (1,374,734)
Net realized gain on investments ...................... 0 (518,253)
ADMIN CLASS
Net investment income ................................. 0 0
Net realized gain on investments ...................... 0 0
--------------- ---------------
(24,595,676) (87,644,618)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets derived from
capital share transactions .......................... 351,893,815 735,013,367
--------------- ---------------
Total increase (decrease) in net assets ................. 387,460,615 753,906,021
NET ASSETS
Beginning of the period ................................. 1,295,149,834 541,243,813
--------------- ---------------
End of the period ....................................... $ 1,682,610,449 $ 1,295,149,834
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period ................................. $ (72,275) $ 537,972
=============== ===============
End of the period ....................................... $ 28,960,384 $ (72,275)
=============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BOND FUND
--------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------- ---------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 992,185 $ 1,741,065
Net realized gain (loss) ................................ 797,136 975,971
Change in unrealized appreciation
(depreciation) ........................................ (1,296,900) (2,148,586)
--------------- ---------------
Increase (decrease) in net assets from
operations .......................................... 492,421 568,450
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. 0 (1,536,299)
In excess of net investment income .................... 0 (277,442)
Net realized gain on investments ...................... 0 0
RETAIL CLASS
Net investment income ................................. 0 (205,307)
In excess of net investment income .................... 0 (34,122)
Net realized gain on investments ...................... 0 0
--------------- ---------------
0 (2,053,170)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets derived
from capital share transactions ..................... 2,749,863 8,066,659
--------------- ---------------
Total increase (decrease) in net assets ................. 3,242,284 6,581,939
NET ASSETS
Beginning of the period ................................. 33,094,811 26,512,872
--------------- ---------------
End of the period ....................................... $ 36,337,095 $ 33,094,811
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period ................................. $ (156,023) $ (34,950)
=============== ===============
End of the period ....................................... $ 836,162 $ (156,023)
=============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 545,362 $ 504,906
Net realized gain (loss) ................................ 181,340 281,454
Change in unrealized appreciation
(depreciation) ........................................ (710,914) (263,154)
--------------- ---------------
Increase in net assets from operations ................ 15,788 523,206
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. (137,577) (358,018)
Net realized gain on investments ...................... 0 (122,085)
RETAIL CLASS
Net investment income ................................. (105,217) (165,367)
Net realized gain on investments ...................... 0 (77,373)
--------------- ---------------
(242,794) (722,843)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets derived
from capital share transactions ..................... 4,820,071 6,653,668
--------------- ---------------
Redemption Fees (Note 1I) ............................. 4,045 14,733
--------------- ---------------
Total increase (decrease) in net assets ................. 4,597,110 6,468,764
NET ASSETS
Beginning of period ..................................... 8,407,654 1,938,890
--------------- ---------------
End of period ........................................... $ 13,004,764 $ 8,407,654
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of period ..................................... $ (313) $ 8,960
=============== ===============
End of period ........................................... $ 302,255 $ (313)
=============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MATURITY BOND FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997*
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 271,512 $ 273,997
Net realized gain (loss) ................................ 36,118 34,360
Change in unrealized appreciation
(depreciation) ........................................ (22,932) (36,473)
--------------- ---------------
Increase (decrease) in net assets from
operations .......................................... 284,698 271,884
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. (120,073) (261,480)
In excess of net investment income .................... 0 (21,107)
Net realized gain on investments ...................... 0 (9,770)
RETAIL CLASS
Net investment income ................................. (7,273) (12,922)
In excess of net investment income .................... 0 (1,154)
Net realized gain on investments ...................... 0 (660)
--------------- ---------------
(127,346) (307,093)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets
derived from capital share
transactions ........................................ 2,127,361 6,762,701
--------------- ---------------
Total increase (decrease) in net assets ................. 2,284,713 6,727,492
NET ASSETS
Beginning of the period ................................. 6,727,512 20
--------------- ---------------
End of the period ....................................... $ 9,012,225 $ 6,727,512
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period ................................. $ (768) $ 0
=============== ===============
End of the period ....................................... $ 143,398 $ (768)
=============== ===============
* Commencement of operations, January 2, 1997.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT GRADE BOND FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997*
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 127,756 $ 144,252
Net realized gain (loss) ................................ 27,654 53,214
Change in unrealized appreciation
(depreciation) ........................................ (28,558) 93,259
--------------- ---------------
Increase (decrease) in net assets from
operations .......................................... 126,852 290,725
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. (42,543) (116,549)
In excess of net investment income .................... 0 (18,144)
Net realized gain on investments ...................... 0 (26,811)
RETAIL CLASS
Net investment income ................................. (17,429) (27,969)
In excess of net investment income .................... 0 (5,864)
Net realized gain on investments ...................... 0 (9,286)
--------------- ---------------
(59,972) (204,623)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets
derived from capital share
transactions ........................................ 1,044,062 3,220,853
--------------- ---------------
Total increase (decrease) in net assets ................. 1,110,942 3,306,955
NET ASSETS
Beginning of the period ................................. 3,306,975 20
--------------- ---------------
End of the period ....................................... $ 4,417,917 $ 3,306,975
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period ................................. $ (44) $ 0
=============== ===============
End of the period ....................................... $ 67,740 $ (44)
=============== ===============
* Commencement of operations, January 2, 1997
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BOND FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997*
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 209,962 $ 417,885
Net realized gain (loss) ................................ 93,926 70,207
Change in unrealized appreciation
(depreciation) ........................................ (108,196) 291,399
--------------- ---------------
Increase (decrease) in net assets from
operations .......................................... 195,692 779,491
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. (209,962) (421,574)
Net realized gain on investments ...................... 0 (76,418)
--------------- ---------------
(209,962) (497,992)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets derived
from capital share transactions ..................... 694,482 (230,703)
--------------- ---------------
Total increase (decrease) in net assets ................. 680,212 50,796
NET ASSETS
Beginning of the period ................................. 8,751,944 8,701,148
--------------- ---------------
End of the period ....................................... $ 9,432,156 $ 8,751,944
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period ................................. $ 0 $ 3,777
=============== ===============
End of the period ....................................... $ 0 $ 0
=============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM BOND FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997*
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 692,147 $ 1,044,815
Net realized gain (loss) ................................ 20,524 4,131
Change in unrealized appreciation
(depreciation) ........................................ 9,471 82,076
--------------- ---------------
Increase (decrease) in net assets from operations ..... 722,142 1,131,022
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. (682,660) (1,046,180)
Net realized gain on investments ...................... 0 0
RETAIL CLASS
Net investment income ................................. (9,487) (10,909)
Net realized gain on investments ...................... 0 0
--------------- ---------------
(692,147) (1,057,089)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets derived
from capital share transactions ..................... 8,213,661 773,904
--------------- ---------------
Total increase (decrease) in net assets ................. 8,243,656 847,837
NET ASSETS
Beginning of the period ................................. 19,076,504 18,228,667
--------------- ---------------
End of the period ....................................... $ 27,320,160 $ 19,076,504
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period ................................. $ (3,124) $ 10,736
=============== ===============
End of the period ....................................... $ (3,124) $ (3,124)
=============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997*
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ............................ $ 566,728 $ 865,819
Net realized gain (loss) ................................ 406,966 377,725
Change in unrealized appreciation
(depreciation) ........................................ (91,984) 420,082
--------------- ---------------
Increase (decrease) in net assets from
operations .......................................... 881,710 1,663,626
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................................. (264,930) (857,571)
Net realized gain on investments ...................... 0 0
--------------- ---------------
(264,930) (857,571)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 5)
Increase (decrease) in net assets derived
from capital share transactions ..................... 2,998,661 2,670,263
--------------- ---------------
Total increase (decrease) in net assets ................. 3,615,441 3,476,318
NET ASSETS
Beginning of the period ................................. 17,668,435 14,192,117
--------------- ---------------
End of the period ....................................... $ 21,283,876 $ 17,668,435
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period ................................. $ 3,216 $ (4,942)
=============== ===============
End of the period ....................................... $ 305,014 $ 3,216
=============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
BOND FUND
------------------------------------
INSTITUTIONAL CLASS
------------------------------------
1998* 1997
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period ...................... $ 12.83 $ 12.38
--------------- ---------------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ............................ 0.44 0.86
Net realized and unrealized gain (loss) on investments .. 0.11 0.67
--------------- ---------------
Total from investment operations ...................... 0.55 1.53
--------------- ---------------
LESS DISTRIBUTIONS --
Dividends from net investment income .................... (0.21) (0.86)
Distributions in excess of net investment income ........ 0.00 0.00
Distributions from net realized capital gains ........... 0.00 (0.22)
--------------- ---------------
Total distributions ................................... (0.21) (1.08)
--------------- ---------------
Net asset value, end of period ............................ $ 13.17 $ 12.83
=============== ===============
Total return (%)(a) ....................................... 4.3 12.7
Net assets, end of period (000) ........................... $ 1,626,806 $ 1,261,910
Ratio of operating expenses to average net assets (%)(b)(c) 0.74 0.75
Ratio of net investment income to average net assets (%)(b) 7.18 7.36
Portfolio turnover rate (%) ............................... 9 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) 0.74 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: ............ $ 0.44 $ 0.85
* For the six months ended June 30, 1998.
** From commencement of class operations on January 2, 1997.
*** From commencement of class operations on January 2, 1998.
(a) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(b) Annualized for periods less than one year.
(c) 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.
(d) 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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND
- ------------------------------------------------------------------------------------------------------------------
RETAIL ADMIN
INSTITUTIONAL CLASS CLASS CLASS
------------------------------------------------------------------ --------------------------- ------------
1996 1995 1994 1993 1998* 1997** 1998***
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
$ 12.29 $ 10.05 $ 11.37 $ 10.36 $ 12.82 $ 12.38 $ 12.83
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
0.86 0.82 0.83 0.84 0.43 0.84(d) 0.23
0.35 2.32 (1.29) 1.43 0.10 0.65 0.29
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
1.21 3.14 (0.46) 2.27 0.53 1.49 0.52
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
(0.86) (0.82) (0.84) (0.81) (0.20) (0.83) (0.20)
0.00 0.00 (0.02) 0.00 0.00 0.00 0.00
(0.26) (0.08) 0.00 (0.45) 0.00 (0.22) 0.00
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
(1.12) (0.90) (0.86) (1.26) (0.20) (1.05) (0.20)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 12.38 $ 12.29 $ 10.05 $ 11.37 $ 13.15 $ 12.82 $ 13.15
============ ============ ============ ============ ============ ============ ============
10.3 32.0 (4.1) 22.2 4.2 12.4 4.0
$ 541,244 $ 255,710 $ 82,985 $ 64,222 $ 55,478 $ 33,240 $ 326
0.75 0.79 0.84 0.94 1.00 1.00 1.25
7.93 8.34 7.92 8.26 6.93 7.09 7.64
42 35 87 170 9 41 9
0.75 0.79 0.84 0.94 1.03 1.20 15.51
$ 0.86 $ 0.82 $ 0.83 $ 0.84 $ 0.42 $ 0.82(d) $ (0.20)
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
GLOBAL BOND FUND
------------------------------------
INSTITUTIONAL CLASS
------------------------------------
1998* 1997
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period ...................... $ 11.83 $ 12.35
--------------- ---------------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ............................ 0.34 0.71
Net realized and unrealized gain (loss) on investments .. (0.12) (0.42)
--------------- ---------------
Total from investment operations ...................... 0.22 0.29
--------------- ---------------
LESS DISTRIBUTIONS --
Dividends from net investment income .................... 0.00 (0.69)
Distributions in excess of net investment income ........ 0.00 (0.12)
Distributions from capital .............................. 0.00 0.00
Distributions from net realized capital gains ........... 0.00 0.00
--------------- ---------------
Total distributions ................................... 0.00 (0.81)
--------------- ---------------
Net asset value, end of period ............................ $ 12.05 $ 11.83
=============== ===============
Total return (%)(a) ....................................... 1.9 2.3
Net assets, end of period (000) ........................... $ 30,692 $ 28,401
Ratio of operating expenses to average net assets (%)(b)(c) 0.90 0.90
Ratio of net investment income to average net assets (%)(b) 5.90 5.88
Portfolio turnover rate (%) ............................... 13 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) 1.11 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: ............ $ 0.33 $ 0.67
* For the six months ended June 30, 1998.
** From commencement of class operations on January 2, 1997.
(a) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(b) Annualized for periods less than one year.
(c) 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.
(d) 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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
- ------------------------------------------------------------------- ---------------------------
1996 1995 1994 1993 1998* 1997**
- ------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
$ 11.39 $ 9.82 $ 11.06 $ 10.32 $ 11.83 $ 12.35
- ------------ ------------ ------------ ------------ ------------ ------------
0.44 1.04 0.67 0.54 0.29 0.63(d)
1.27 1.31 (1.63) 0.96 (0.08) (0.37)
- ------------ ------------ ------------ ------------ ------------ ------------
1.71 2.35 (0.96) 1.50 0.21 0.26
- ------------ ------------ ------------ ------------ ------------ ------------
(0.75) (0.78) (0.04) (0.49) 0.00 (0.69)
0.00 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 0.00 (0.27) 0.00 0.00
- ------------ ------------ ------------ ------------ ------------ ------------
(0.75) (0.78) (0.28) (0.76) 0.00 (0.78)
- ------------ ------------ ------------ ------------ ------------ ------------
$ 12.35 $ 11.39 $ 9.82 $ 11.06 $ 12.04 $ 11.83
============ ============ ============ ============ ============ ============
15.0 23.9 (8.7) 14.6 1.8 2.0
$ 26,513 $ 10,304 $ 25,584 $ 21,378 $ 5,645 $ 4,694
1.50 1.50 1.30 1.50 1.15 1.15
6.37 8.17 7.02 5.54 5.65 5.60
131 148 153 150 13 75
1.77 1.69 1.30 1.51 1.74 2.44
$ 0.42 $ 1.02 $ 0.67 $ 0.54 $ 0.26 $ 0.49(d)
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
HIGH YIELD
FUND
-------------
INSTITUTIONAL
CLASS
-------------
1998*
-------------
(UNAUDITED)
Net asset value, beginning of period ......................... $ 10.12
---------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ............................... 0.49
Net realized and unrealized gain (loss) on investments ..... (0.32)
---------
Total from investment operations ......................... 0.17
---------
LESS DISTRIBUTIONS --
Dividends from net investment income ....................... (0.22)
Distributions from net realized capital gains .............. 0.00
---------
Total distributions ...................................... (0.22)
---------
Redemption Fees ............................................ 0.00
---------
Net asset value, end of period ............................... $ 10.07
=========
Total return (%)(a) .......................................... 1.6
Net assets, end of period (000) .............................. $ 6,190
Ratio of operating expenses to average net assets (%)(b)(c) .. 0.75
Ratio of net investment income to average net assets (%)(b) .. 9.93
Portfolio turnover rate (%) .................................. 17
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) .. 2.23
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: ............... $ 0.41
* For the six months ended June 30, 1998.
** Commencement of operations on September 11, 1996 and January 2, 1997,
for the Institutional and Retail Classes, respectively.
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(b) Annualized for periods less than one year.
(c) 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.
(d) 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
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD FUND
- ------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
- ------------------------------------------------- -----------------------------------------------
1997 1996** 1998* 1997**
- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
$ 10.11 $ 10.00 $ 10.12 $ 10.11
- ------------ ------------ ------------ ------------
0.83 0.20 0.44 0.85(d)
0.27 0.11 (0.28) 0.23
- ------------ ------------ ------------ ------------
1.10 0.31 0.16 1.08
- ------------ ------------ ------------ ------------
(0.86) (0.20) (0.22) (0.84)
(0.26) 0.00 0.00 (0.26)
- ------------ ------------ ------------ ------------
(1.12) (0.20) (0.22) (1.10)
- ------------ ------------ ------------ ------------
0.03 0.00 0.00 0.03
- ------------ ------------ ------------ ------------
$ 10.12 $ 10.11 $ 10.06 $ 10.12
============ ============ ============ ============
11.4 3.1 1.5 11.2
$ 5,266 $ 1,939 $ 6,814 $ 3,141
0.75 0.75 1.00 1.00
8.96 8.85 9.64 8.75
68 0 17 68
3.81 12.06 2.52 4.79
$ 0.54 $ (0.05) $ 0.37 $ 0.48(d)
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERMEDIATE MATURITY BOND FUND
----------------------------------------------
INSTITUTIONAL
CLASS RETAIL CLASS
---------------------- --------------------
1998* 1997** 1998* 1997**
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 10.03 $ 10.00 $ 10.03 $ 10.00
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss)(d) ................ 0.34 0.64 0.33 0.64
Net realized and unrealized gain (loss) on
investments .................................. 0.03 0.00 0.03 (0.02)
--------- --------- --------- ---------
Total from investment operations ............. 0.37 0.64 0.36 0.62
--------- --------- --------- ---------
LESS DISTRIBUTIONS --
Dividends from net investment income ........... (0.16) (0.56) (0.15) (0.54)
Distributions in excess of net investment income 0.00 (0.03) 0.00 (0.03)
Distributions from net realized capital gains .. 0.00 (0.02) 0.00 (0.02)
--------- --------- --------- ---------
Total distributions .......................... (0.16) (0.61) (0.15) (0.59)
--------- --------- --------- ---------
Net asset value, end of period ................... $ 10.24 $ 10.03 $ 10.24 $ 10.03
========= ========= ========= =========
Total return (%)(a) .............................. 3.7 6.4 3.6 6.2
Net assets, end of period (000) .................. $ 8,478 $ 6,305 $ 534 $ 423
Ratio of operating expenses to average net assets
(%)(b)(c) ...................................... 0.55 0.55 0.80 0.80
Ratio of net investment income to average net
assets (%)(b) .................................. 6.74 6.38 6.49 6.13
Portfolio turnover rate (%) ...................... 24 119 24 119
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) .............. 2.24 3.66 5.91 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: (d) ................................. $ 0.26 $ 0.29 $ 0.07 $ (0.50)
* For the six months ended June 30, 1998.
** Commencement of operations on January 2, 1997.
(a) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(b) Annualized for periods less than one year.
(c) 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.
(d) 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
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT GRADE BOND FUND
----------------------------------------------
INSTITUTIONAL
CLASS RETAIL CLASS
---------------------- --------------------
1998* 1997** 1998* 1997**
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 10.59 $ 10.00 $ 10.59 $ 10.00
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ................... 0.34 0.65 0.32 0.62(d)
Net realized and unrealized gain (loss) on
investments .................................. 0.03 0.77 0.02 0.78
--------- --------- --------- ---------
Total from investment operations ............. 0.37 1.42 0.34 1.40
--------- --------- --------- ---------
LESS DISTRIBUTIONS --
Dividends from net investment income ........... (0.16) (0.63) (0.15) (0.62)
Distributions in excess of net investment income 0.00 (0.08) 0.00 (0.07)
Distributions from net realized capital gains .. 0.00 (0.12) 0.00 (0.12)
--------- --------- --------- ---------
Total distributions .......................... (0.16) (0.83) (0.15) (0.81)
--------- --------- --------- ---------
Net asset value, end of period ................... $ 10.80 $ 10.59 $ 10.78 $ 10.59
========= ========= ========= =========
Total return (%)(a) .............................. 3.5 14.5 3.2 14.3
Net assets, end of period (000) .................. $ 2,940 $ 2,445 $ 1,478 $ 862
Ratio of operating expenses to average net assets
(%)(b)(c) ...................................... 0.55 0.55 0.80 0.80
Ratio of net investment income to average net
assets (%)(b) .................................. 6.69 6.74 6.42 6.51
Portfolio turnover rate (%) ...................... 39 112 39 112
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) .............. 4.03 7.59 5.20 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: .................................... $ 0.16 $ (0.03) $ 0.10 $ (0.31)(d)
* For the six months ended June 30, 1998.
** Commencement of operations on January 2, 1997.
(a) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(b) Annualized for periods less than one year.
(c) 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.
(d) 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
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
MUNICIPAL BOND FUND
-------------------
INSTITUTIONAL CLASS
-------------------
1998*
-------------------
(UNAUDITED)
Net asset value, beginning of period ......................... $ 11.70
---------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ............................... 0.27
Net realized and unrealized gain (loss) on investments ..... (0.02)
---------
Total from investment operations ......................... 0.25
---------
LESS DISTRIBUTIONS --
Dividends from net investment income ....................... (0.27)
Distributions from net realized capital gains .............. 0.00
---------
Total distributions ...................................... (0.27)
---------
Net asset value, end of period ............................... $ 11.68
========
Total return (%)(a) .......................................... 2.2
Net assets, end of period (000) .............................. $ 9,432
Ratio of operating expenses to average net assets (%)(b)(c) .. 0.60
Ratio of net investment income to average net assets (%)(b) .. 4.67
Portfolio turnover rate (%) .................................. 14
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) .. 1.65
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: ............... $ 0.21
* For the six months ended June 30, 1998.
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(b) Annualized for periods less than one year.
(c) 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>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 11.29 $ 11.53 $ 10.41 $ 11.54 $ 10.95
-------- -------- -------- -------- --------
0.56 0.52 0.52 0.52 0.51
0.51 (0.15) 1.16 (1.13) 0.74
-------- -------- -------- -------- --------
1.07 0.37 1.68 (0.61) 1.25
-------- -------- -------- -------- --------
(0.56) (0.52) (0.52) (0.52) (0.51)
(0.10) (0.09) (0.04) 0.00 (0.15)
-------- -------- -------- -------- --------
(0.66) (0.61) (0.56) (0.52) (0.66)
-------- -------- -------- -------- --------
$ 11.70 $ 11.29 $ 11.53 $ 10.41 $ 11.54
======== ======== ======== ======== ========
9.8 3.3 16.5 (5.4) 11.6
$ 8,752 $ 8,701 $ 7,961 $ 7,270 $ 5,160
0.60 1.00 1.00 1.00 1.00
4.90 4.61 4.72 4.79 4.50
50 38 41 28 36
1.80 2.31 2.02 2.37 3.22
$ 0.42 $ 0.37 $ 0.41 $ 0.37 $ 0.26
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SHORT-TERM
BOND FUND
-------------------------------------------
INSTITUTIONAL
CLASS
-------------------------------------------
1998* 1997
------- -------
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period .............................. $ 9.75 $ 9.70
------- -------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) .................................... 0.29 0.61
Net realized and unrealized gain (loss) on investments .......... 0.02 0.06
------- -------
Total from investment operations .............................. 0.31 0.67
------- -------
LESS DISTRIBUTIONS --
Dividends from net investment income ............................ (0.29) (0.62)
Distributions from net realized capital gains ................... 0.00 0.00
------- -------
Total distributions ........................................... (0.29) (0.62)
------- -------
Net asset value, end of period .................................... $ 9.77 $ 9.75
======= =======
Total return (%)(a) ............................................... 3.2 7.1
Net assets, end of period (000) ................................... $27,065 $18,792
Ratio of operating expenses to average net assets (%)(b)(c) ....... 0.50 0.50
Ratio of net investment income to average net assets (%)(b) ....... 5.99 6.34
Portfolio turnover rate (%) ....................................... 40 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) ..................... 0.88 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: ............................... $ 0.27 $ 0.55
* For the six months ended June 30, 1998.
** From commencement of class operations on January 2, 1997.
(a) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(b) Annualized for periods less than one year.
(c) 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>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM BOND FUND
- ---------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
- ------------------------------------------------------------------- -----------------------------
1996 1995 1994 1993 1998* 1997**
- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
$ 9.81 $ 9.46 $ 9.95 $ 9.87 $ 9.75 $ 9.70
- ---------- ---------- ---------- ---------- ---------- ----------
0.55 0.63 0.66 0.59 0.28 0.59
(0.11) 0.35 (0.49) 0.08 0.02 0.06
- ---------- ---------- ---------- ---------- ---------- ----------
0.44 0.98 0.17 0.67 0.30 0.65
- ---------- ---------- ---------- ---------- ---------- ----------
(0.55) (0.63) (0.66) (0.59) (0.28) (0.60)
0.00 0.00 0.00 0.00 0.00 0.00
- ---------- ---------- ---------- ---------- ---------- ----------
(0.55) (0.63) (0.66) (0.59) (0.28) (0.60)
- ---------- ---------- ---------- ---------- ---------- ----------
$9.70 $ 9.81 $ 9.46 $ 9.95 $9.77 $9.75
========== ========== ========== ========== ========== ==========
4.7 10.6 1.8 7.0 3.1 6.9
$ 18,229 $ 26,039 $ 19,440 $ 15,226 $ 255 $ 285
1.00 1.00 1.00 1.00 0.75 0.75
5.69 6.46 6.88 5.97 5.68 6.04
120 214 34 81 40 91
1.17 1.03 1.33 1.55 6.67 17.77
$ 0.53 $ 0.62 $ 0.63 $ 0.54 $ (0.01) $ (1.08)
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
U.S. GOVERNMENT
SECURITIES FUND
-------------------
INSTITUTIONAL CLASS
-------------------
1998*
-------------------
(UNAUDITED)
Net asset value, beginning of period ......................... $ 10.70
----------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ............................... 0.30
Net realized and unrealized gain (loss) on investments ..... 0.17
----------
Total from investment operations ......................... 0.47
----------
LESS DISTRIBUTIONS --
Dividends from net investment income ....................... (0.14)
Distributions from net realized capital gains .............. 0.00
----------
Total distributions ...................................... (0.14)
----------
+Net asset value, end of period ............................... $ 11.03
Total return (%)(a) .......................................... 4.4
Net assets, end of period (000) .............................. $ 21,284
Ratio of operating expenses to average net assets (%)(b)(c) .. 0.60
Ratio of net investment income to average net assets (%)(b) .. 5.65
Portfolio turnover rate (%) .................................. 79
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) .. 0.96
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: ............... $ 0.28
* For the six months ended June 30, 1998.
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(b) Annualized for periods less than one year.
(c) 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>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------- ---------- ---------- ---------- ----------
$ 10.08 $ 10.64 $ 9.22 $ 10.53 $ 10.45
- ---------- ---------- ---------- ---------- ----------
0.63 0.68 0.66 0.64 0.64
0.61 (0.57) 1.42 (1.30) 1.00
- ---------- ---------- ---------- ---------- ----------
1.24 0.11 2.08 (0.66) 1.64
- ---------- ---------- ---------- ---------- ----------
(0.62) (0.67) (0.66) (0.65) (0.65)
0.00 0.00 0.00 0.00 (0.91)
- ---------- ---------- ---------- ---------- ----------
(0.62) (0.67) (0.66) (0.65) (1.56)
- ---------- ---------- ---------- ---------- ----------
$ 10.70 $ 10.08 $ 10.64 $ 9.22 $ 10.53
========== ========== ========== ========== ==========
12.7 1.3 23.0 (6.3) 15.7
$ 17,668 $ 14,192 $ 19,499 $ 17,341 $ 18,317
0.60 1.00 1.00 1.00 1.00
6.29 6.23 6.47 6.60 5.95
156 137 169 242 277
1.23 1.19 1.22 1.22 1.29
$ 0.57 $ 0.66 $ 0.64 $ 0.62 $ 0.61
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998 (UNAUDITED)
1. The Loomis Sayles Funds is comprised of seventeen no-load mutual funds (the
"Funds").
Each Fund is a series of Loomis Sayles Funds (the "Trust"). The Trust is a
diversified open-end management investment company organized as a Massachusetts
business trust. The Trust is authorized to issue an unlimited number of full and
fractional shares of beneficial interest in multiple series.
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:
Fixed Income Funds Equity Funds
- ------------------ -------------
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
Loomis Sayles Intermediate Maturity Equity Fund
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 Loomis Sayles Strategic Value Fund
Fund Loomis Sayles Worldwide Fund
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 of which has equal pro rata interest in the assets of
the relevant fund and general voting privileges. 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.
January 2, 1998, the Bond Fund commenced operations of an additional class of
shares ("Admin Class"). 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.
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 may 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 AND FOREIGN INVESTMENTS -- 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 exchange 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 foreign currency contracts is included in the cost basis
of the associated investment.
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.
D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Each Fund that may invest in
foreign securities may enter into forward foreign currency exchange contracts to
protect securities against changes in future foreign exchange rates. A forward
foreign currency exchange contract is an agreement between two parties to buy or
sell currency at a set price on a future date.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily using the forward
currency exchange rate and the change in market value is recorded as unrealized
appreciation (depreciation) on foreign currency translations in the Funds'
Statements of Assets and Liabilities. Realized gain or loss is recognized when
the contract is closed equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed and recorded
as realized gain (loss) on foreign currency transactions in the Funds'
Statements of Operations.
Risks may arise upon entering into forward foreign currency exchange contracts
from the potential inability of the counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. At June 30, 1998, the Global Bond Fund had the
following open forward foreign currency exchange contracts:
<TABLE>
<CAPTION>
Local Aggregate Unrealized
Delivery Curreny Face Total Appreciation
Date Amount Amount Value (Depreciation)
------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Japanese Yen (sell) 8/31/98 40,000,000 $ 307,811 $ 291,870 $15,941
Japanese Yen (buy) 8/31/98 16,000,000 113,993 116,748 2,755
Japanese Yen (sell) 8/31/98 180,000,000 1,327,013 1,313,413 13,600
-------
$32,296
=======
</TABLE>
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 can be directly attributed to a particular fund.
Expenses which cannot be directly attributed are apportioned among the Funds
based on relative net assets.
Investment income, realized and unrealized gains and losses, and the common
expenses of the 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 -- Each Fund may purchase securities on a when- issued
basis. Securities purchased on a when-issued basis are purchased for delivery
beyond the normal settlement period at a stated price and yield, and no income
accrues to the Fund on such securities prior to delivery. Each Fund instructs
the custodian to establish a segregated account in which it maintains liquid
assets at least equal to the amount of its when-issued purchase commitments.
Purchasing securities on a when-issued basis may involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery. At June
30, 1998, 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.
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 are determined in accordance with
Federal 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 book and tax treatments for
litigation proceeds, foreign currency transactions, capital loss carryforwards,
non-deductible organization costs, deferred losses due to wash sales and excise
tax regulations 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 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 June 30, 1998, the redemption fees amounted to $1,939 and $2,106 for the
Institutional and Retail Classes, respectively.
J. ORGANIZATION EXPENSE AND DEFERRED REGISTRATION COSTS -- Amortization of
initial registration costs incurred in 1996 and 1997 related to commencement of
new Funds and/or classes are being amortized over 12 months. Organization costs
incurred by the High Yield Fund are being amortized over 60 months.
2. PURCHASES AND SALES OF SECURITIES -- (excluding short-term investments) for
each Fund for the period ended June 30, 1998 were as follows:
Purchases
-------------------------------
U.S. Government Other
--------------- ------------
Bond Fund ............................. $118,472,922 $385,320,743
Global Bond Fund ...................... 0 8,341,061
High Yield Fund ....................... 696,047 6,033,975
Intermediate Maturity Bond Fund ....... 916,097 3,095,637
Investment Grade Bond Fund ............ 553,306 2,017,102
Municipal Bond Fund ................... 201,766 1,734,229
Short-Term Bond Fund .................. 12,676,883 2,884,320
U.S. Government Securities Fund ....... 19,183,250 0
Sales
-------------------------------
U.S. Government Other
--------------- ------------
Bond Fund ............................. $ 0 $130,309,729
Global Bond Fund ...................... 0 4,340,224
High Yield Fund ....................... 226,484 1,584,128
Intermediate Maturity Bond Fund ....... 921,734 877,464
Investment Grade Bond Fund ............ 652,533 797,341
Municipal Bond Fund ................... 0 1,222,511
Short-Term Bond Fund .................. 5,686,807 3,391,671
U.S. Government Securities Fund ....... 15,895,134 0
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES -- During the period
ended June 30, 1998, 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
NVEST, 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 June 30, 1998
provided for fees at the following annual percentage rate of each Fund's average
daily net 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 each Fund to the following percentage rate of the
Fund's average daily net assets:
Maximum Expense Ratios
--------------------------------------
Institutional Retail Admin
Fund Class Class Class
---- ------------- ------ -----
Bond Fund ......................... 0.75% 1.00% 1.25%
Global Bond Fund .................. 0.90% 1.15% --
High Yield Fund ................... 0.75% 1.00% --
Intermediate Maturity Fund ........ 0.55% 0.80% --
Investment Grade Bond Fund ........ 0.55% 0.80% --
Municipal Bond Fund ............... 0.60% -- --
Short-Term Bond Fund .............. 0.50% 0.75% --
U.S. Government Securities Fund ... 0.60% -- --
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. 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.
B. SHAREHOLDERS -- At June 30, 1998, Loomis Sayles held 109,732 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 ............................... 671,767 1,167,488
Global Bond Fund ........................ 641,305 228,753
High Yield Fund ......................... -- 157,215
Intermediate Maturity Bond Fund ......... 308,517 150,112
Investment Grade Bond Fund .............. -- 66,934
Short-Term Bond Fund .................... 3,017 239,642
U.S. Government Securities Fund ......... 732,263 288,042
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. CAPITAL STOCK TRANSACTIONS -- The tables below summarize the transactions in
Fund shares for the period ended June 30, 1998:
<TABLE>
<CAPTION>
Loomis Sayles Bond Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 37,137,029 $486,841,122 63,069,086 $809,023,819
Issued in connection with the
reinvestment of distributions .. 1,475,711 19,567,923 5,492,835 70,465,752
Redeemed ......................... (13,445,673) (176,142,981) (13,902,007) (177,561,664)
---------- ------------ ---------- ------------
Net change ....................... 25,167,067 $330,266,064 54,659,914 $701,927,907
========== ============ ========== ============
<CAPTION>
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 2,156,122 $ 28,273,924 2,944,758 $ 37,693,272
Issued in connection with the
reinvestment of distributions .. 47,683 631,801 124,248 1,597,794
Redeemed ......................... (578,722) (7,602,395) (476,803) (6,205,606)
---------- ------------ ---------- ------------
Net change ....................... 1,625,083 $ 21,303,330 2,592,203 $ 33,085,460
========== ============ ========== ============
<CAPTION>
Admin Class Shares** Shares Amount
- -------------------- ---------- ------------
<S> <C> <C>
Issued from the sale of shares ... 25,180 $ 329,255
Issued in connection with the
reinvestment of distributions .. 0 0
Redeemed ......................... (369) (4,834)
---------- ------------
Net change ....................... 24,811 $ 324,421
========== ============
*From January 2, 1997 (commencement of class operations).
**From January 2, 1998 (commencement of class operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Global Bond Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 295,457 $ 3,659,164 450,349 $ 5,703,587
Issued in connection with the
reinvestment of distributions .. 0 0 141,324 1,676,109
Redeemed ......................... (149,712) (1,823,185) (338,278) (4,226,586)
---------- ------------ ---------- ------------
Net change ....................... 145,745 $ 1,835,979 253,395 $ 3,153,110
========== ============ ========== ============
<CAPTION>
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 247,222 $ 3,024,837 568,889 $ 7,115,633
Issued in connection with the
reinvestment of distributions .. 0 0 18,404 218,453
Redeemed ......................... (175,165) (2,110,953) (190,528) (2,420,537)
---------- ------------ ---------- ------------
Net change ....................... 72,057 $ 913,884 396,765 $ 4,913,549
========== ============ ========== ============
*From January 2, 1997 (commencement of class operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles High Yield Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 164,087 $ 1,710,475 345,923 $ 3,577,772
Issued in connection with the
reinvestment of distributions .. 11,670 122,654 41,158 424,573
Redeemed ......................... (81,063) (835,702) (58,540) (600,500)
---------- ------------ ---------- ------------
Net change ....................... 94,694 $ 997,427 328,541 $ 3,401,845
========== ============ ========== ============
<CAPTION>
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 435,585 $ 4,525,968 343,422 $ 3,602,850
Issued in connection with the
reinvestment of distributions .. 7,651 80,409 20,171 207,933
Redeemed ......................... (76,349) (783,733) (53,163) (558,960)
---------- ------------ ---------- ------------
Net change ....................... 366,887 $ 3,822,644 310,430 $ 3,251,823
========== ============ ========== ============
*From January 2, 1997 (commencement of class operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Intermediate Maturity Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997*
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 189,686 $ 1,928,814 713,449 $ 7,196,630
Issued in connection with the
reinvestment of distributions .. 10,650 108,631 26,496 269,072
Redeemed ......................... (1,235) (12,640) (111,401) (1,136,539)
---------- ------------ ---------- ------------
Net change ....................... 199,101 $ 2,024,805 628,544 $ 6,329,163
========== ============ ========== ============
<CAPTION>
Retail Class Shares Shares Amount Shares Amount
- ------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 9,391 $ 95,547 40,713 $ 419,211
Issued in connection with the
reinvestment of distributions .. 688 7,020 1,410 14,327
Redeemed ......................... (1) (11) 0 0
---------- ------------ ---------- ------------
Net change ....................... 10,078 $ 102,556 42,123 $ 433,538
========== ============ ========== ============
*From January 2, 1997 (commencement of operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Investment Grade Bond Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997*
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 72,180 $ 774,182 217,283 $ 2,218,354
Issued in connection with the
reinvestment of distributions .. 3,273 35,516 14,216 150,066
Redeemed ......................... (33,935) (366,341) (689) (7,042)
---------- ------------ ---------- ------------
Net change ....................... 41,518 $ 443,357 230,810 $ 2,361,378
========== ============ ========== ============
<CAPTION>
Retail Class Shares Shares Amount Shares Amount
- ------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 121,109 $ 1,303,162 80,460 $ 849,980
Issued in connection with the
reinvestment of distributions .. 1,545 16,764 3,968 42,198
Redeemed ......................... (66,982) (719,221) (3,085) (32,703)
---------- ------------ ---------- ------------
Net change ....................... 55,672 $ 600,705 81,343 $ 859,475
========== ============ ========== ============
*From January 2, 1997 (commencement of operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Municipal Bond Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 74,302 $ 870,757 146,945 $ 1,692,152
Issued in connection with the
reinvestment of distributions .. 12,083 140,998 29,000 331,863
Redeemed ......................... (27,160) (317,273) (198,471) (2,254,718)
---------- ------------ ---------- ------------
Net change ....................... 59,225 $ 694,482 (22,526) $ (230,703)
========== ============ ========== ============
<CAPTION>
Loomis Sayles Short-Term Bond Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 1,097,366 $ 10,724,422 1,184,127 $ 11,497,925
Issued in connection with the
reinvestment of distributions .. 60,892 594,920 94,766 918,722
Redeemed ......................... (314,655) (3,077,324) (1,232,069) (11,926,660)
---------- ------------ ---------- ------------
Net change ....................... 843,603 $ 8,242,018 46,824 $ 489,987
========== ============ ========== ============
<CAPTION>
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 25,620 $ 251,373 45,040 $ 436,711
Issued in connection with the
reinvestment of distributions .. 784 7,662 1,073 10,404
Redeemed ......................... (29,512) (287,392) (16,930) (163,198)
---------- ------------ ---------- ------------
Net change ....................... (3,108) $ (28,357) 29,183 $ 283,917
========== ============ ========== ============
*From January 2, 1997 (commencement of class operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles U.S. Government Securities Fund
------------------------------------------------------------------------
Period Ended Period Ended
June 30, 1998 December 31, 1997
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued from the sale of shares ... 340,439 $ 3,688,197 444,723 $ 4,676,742
Issued in connection with the
reinvestment of distributions .. 22,291 240,963 77,074 792,744
Redeemed ......................... (85,334) (930,499) (277,818) (2,799,223)
---------- ------------ ---------- ------------
Net change ....................... 277,396 $ 2,998,661 243,979 $ 2,670,263
========== ============ ========== ============
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
BOARD OF TRUSTEES AND OFFICERS
- -------------------------------------------------------------------------------
BOARD OF TRUSTEES
- -------------------------------------------------------------------------------
Earl W. Foell Terry R. Lautenbach
Daniel J. Fuss Michael T. Murray
Richard S. Holway
OFFICERS
- -------------------------------------------------------------------------------
PRESIDENT
Daniel J. Fuss
EXECUTIVE VICE PRESIDENT TREASURER
Robert J. Blanding Mark W. Holland
VICE PRESIDENTS ASSISTANT TREASURERS
James L. Carroll Philip R. Murray
Jerome A. Castellini Nicholas H. Palmerino
Mary C. Champagne
E. John deBeer SECRETARY
Paul H. Drexler Sheila M. Barry
William H. Eigen, Jr.
Christopher R. Ely ASSISTANT SECRETARY
Quentin P. Faulkner Bonnie S. Thompson
Philip C. Fine
Kathleen C. Gaffney
Isaac H. Green
Dean A. Gulis
Martha F. Hodgman
John Hyll
Jeffrey L. Meade
Kent P. Newmark
Scott S. Pape
Jeffrey C. Petherick
Lauren B. Pitalis
Philip J. Schettewi
David L. Smith
Sandra P. Tichenor
Jeffrey W. Wardlow
Gregg D. Watkins
Anthony J. Wilkins
John F. Yeager III
<PAGE>
INVESTMENT ADVISER
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
TRANSFER AND DIVIDEND PAYING AGENT AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, Massachusetts 02102
SHAREHOLDER SERVICING AGENT
FOR STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8314
Boston, Massachusetts 02266
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 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.
