<PAGE>
LOOMIS SAYLES FUNDS
FIXED INCOME FUNDS
o o o
ANNUAL REPORT
SEPTEMBER 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
------
SAYLES
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FUNDS
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ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111
800 o 633 o 3330
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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...................................... 60
Statements of Operations.................................................. 62
Statements of Changes in Net Assets....................................... 66
Financial Highlights...................................................... 74
Notes to Financial Statements............................................. 88
1998 U.S. Tax and Distribution Information................................ 99
Report of Independent Accountants......................................... 100
Board of Trustees and Officers............................................ 101
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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, L.P. 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.
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LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDERS,
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[Photo of Daniel J. Fuss]
Daniel J. Fuss
There is no doubt about it...it was a miserable quarter and a difficult nine
months. Unless you were fully invested in Treasuries, your portfolio is probably
looking rather unhealthy. However, there is hope on the horizon and, although,
perhaps it is my age, I feel very comfortable with the general outlook of the
market right now.
To use a forest fire analogy, the spark which ignited the global turmoil was
Russia. The fuel for the fire was the enormous amount of leverage which existed
in the global bond markets. Following the announcement last August that Russia
would default on some of their short-term debt, bond prices (other than
Governments) declined. The spread in the yield between U.S. Treasuries and
corporate bonds widened tremendously. The corporate bond market became
relatively illiquid and the spread between bid and ask prices widened by a
factor of 10 or more.
As one might expect, investors fled into Government bonds. Anything with the
slightest hint of risk -- even blue chip, high quality bonds -- were shunned and
their performance lagged that of Treasuries.
It is little wonder that some hedge funds ran into trouble. It is not that the
credits went bad. It was simply that two things happened at once. The Treasuries
they shorted went up, and the positions they owned went down (the same thing
happened to dealers further reducing the liquidity of the corporate bond
market).
Fortunately, we believe that things are not as bad as they seem. For us, it is
strictly a case of "same bonds, new prices", without anything going terribly
wrong with our specific holdings, but rather with global market conditions. The
question remains, how many more sparks are there out there? My guess is that
sparks will continue to fly, but the major inferno is behind us.
For example, Thailand has taken serious steps to fix their banks. Korea's
current account is strong and its foreign exchange reserves have skyrocketed. We
have seen some encouraging signs in Japan.
Luckily, the Federal Reserve appears inclined to act quickly and decisively to
avoid a recession. The two rate cuts which followed each other in quick
succession (and I predict there will be more on the way) demonstrate just how
quickly things can change. Instead of trying to pull liquidity out of the
system, the Reserve Bank is trying to put liquidity into the system.
Forests don't regrow overnight and what is required now is patience. Although it
may hurt over the short run, we believe that these periods of volatility present
opportunities to buy the securities of good companies at lower prices and higher
yields. We believe that buying the securities of good companies at low prices is
the foundation of future performance.
Sincerely,
/s/ Daniel J. Fuss
Daniel J. Fuss
President,
Loomis Sayles Funds
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LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDERS,
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[Photo of John F. Yeager, III]
John F. Yeager, III
As you know, the Year 2000 is approaching rapidly, creating a growing concern
about the ability of many computer systems to handle a rollover to the new
millennium.
Loomis, Sayles & Company is addressing this matter through the creation of a
compliance committee and the formation of a Year 2000 project plan. Loomis,
Sayles is currently working on this project as outlined in its plan and will
continue its assessment, remediation and testing efforts into 1999. We do not
expect the amounts required to be spent on the Year 2000 project to have a
material effect on our financial position.
The Loomis Sayles Funds will share in the work done by Loomis, Sayles & Company,
as well as working with our outside vendors to ensure Year 2000 compliance. Our
transfer agent, Boston Financial Data Services and our custodian bank, State
Street Bank and Trust Company have both established extensive programs to ensure
readiness, and have completed much of their testing. We will, of course, monitor
their progress closely. Additionally, we have contacted firms which have
established agreements to offer our funds to determine their readiness for the
Year 2000.
It is our goal to make sure that all requirements are met to serve the needs of
our shareholders. We will continue to provide you with updates regarding Year
2000 developments. If you have any questions about these issues, please do not
hesitate to call us at 1-800-626-9390.
Sincerely,
/s/ John F. Yeager, III
John F. Yeager, III
President,
Loomis Sayles Distributors, L. P.
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ECONOMIC AND MARKET OVERVIEW
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THE LOOMIS SAYLES FUNDS ANNUAL REPORT
ECONOMIC AND MARKET OVERVIEW -- 1998
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STOCKS
Somehow, the world seems a lot smaller than it did this time last year.
Developments in countries like Russia, Brazil and Japan had a profound effect
on the performance of the U.S. markets over the last 9 months.
FIRST QUARTER
The action started in Asia, where political, economic and market turmoil
combined to create a volatile environment. Economic contraction in nearly all
Asian countries led to a free fall in their financial markets and tremendous
devaluation in their currencies. In response, capital fled those markets in
search of safety. Liquidity, which had been abundant, lessened dramatically.
These troubled markets gained back some of the ground they lost, but remained
shaky.
The strong U.S. economy was able to shake off the Asian contagion throughout the
first half of the year. With economic growth in its sixth year, domestic
investors still seemed willing to bet that U.S. companies would continue to grow
earnings. And with no clear evidence of inflation, the Federal Reserve Bank
refused to raise short-term interest rates.
SECOND QUARTER
Asia continued to make headlines with unrest in Indonesia and atomic rivalry
between India and Pakistan and political inertia in Japan made it difficult for
most investors to see any light at the end of the tunnel. Despite intervention
in the foreign exchange markets by the United States, the Japanese yen fell to
new lows against the U.S. dollar.
THIRD QUARTER
Russia's decision to devalue the ruble and default on some of its short-term
debt sent a sudden and ill-timed tremor through the world's markets. Speculators
and hedge funds that had relied on derivatives and other forms of leverage to
make substantial bets suddenly found themselves having to raise cash. Unable or
unwilling to sell their Russian positions, these investors were forced to sell
their more liquid positions -- in places such as Brazil. This selling led to a
free fall in Brazilian stocks and bonds. As capital fled the country, Brazil's
currency reserves fell to dangerously low levels.
The news that Brazil, which accounts for half of Latin America's economy, might
have to defend its currency with higher interest rates (which would lead to
slower growth), was not well received in the U.S. where falling profit growth
was already causing anxiety. News of heavy Brazilian exposure by major U.S. and
European banks and brokerage firms compounded matters.
The U.S. markets were hit hard. The Dow Jones Industrial Average declined 19.26%
from its high and the S&P 500 Index fell 19.34%. Investors continued to stampede
into the quality and liquidity of U.S. Treasury bonds in an effort to avoid risk
of any sort.
Borrowing through the corporate bond markets dried up as new issuance fell
dramatically and worries about the economy threatened a credit crunch. In an
uncharacteristic move, the Federal Reserve made it known that it would lower
rates. The Fed's aggressive action to ensure economic growth brought some
confidence into the market -- stocks and corporate bonds rebounded slightly.
SUMMARY
By the end of September, high quality bonds outpaced stocks. This Treasury rally
resulted in weak relative performance for virtually all non-Treasury securities.
Lower quality bonds lost a lot of ground in the third quarter and the Merrill
Lynch High Yield Master Index ended the nine month period with a gain of only
0.77%. Municipal bonds also posted mediocre returns. Despite their high quality,
foreign buyers had no use for their tax advantaged status and domestic investors
were more than willing to pay a premium for the liquidity of U.S. Treasuries.
Year-to-date the Lehman Brothers Government/ Corporate Bond Index gained 9.33%
and the Lehman Brothers Government Bond Index turned in a 9.94% return.
Concerns over a faltering U.S. economy caused many investors to favor large cap
stocks for their perceived quality and greater liquidity. While these issues
posted strong returns for the first six months of the year, third quarter
returns were weaker. Small cap stocks fell longer and harder than large caps
throughout the year, with the Russell 2000 Index finishing the nine-month period
with a -16.21% return versus the S&P 500 Index's 6.00% return.
Overseas, the fast approaching deadline for the common European currency helped
European bond markets. Asian markets flattened out and the unexpected weakness
of the U.S. dollar helped performance. The MSCI-EAFE Index posted a -0.55%
year-to-date return while the Salomon Brothers World Government Bond Index
gained 11.35% for the same period.
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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 -0.93 0.85 -15.57
Lipper 5.45 3.01 -2.98
Lipper Category Index 5.11 3.23 -3.12
One Year
Loomis Sayles -0.41 -2.29 -17.96
Lipper 7.91 3.44 -1.77
Rank 88 of 92 126 of 148 229 of 233
Percentile 96 86 99
Lipper Category Index 7.84 3.47 -1.65
Three Years
Loomis Sayles 9.44 8.55 N/A
Lipper 8.25 6.55
Rank 4 of 62 27 of 114
Percentile 7 24
Lipper Category Index 8.15 7.22
Five Years
Loomis Sayles 9.98 6.57 N/A
Lipper 6.94 5.45
Rank 1 of 39 20 of 62
Percentile 1 33
Lipper Category Index 6.79 5.76
Modified Inception(3)
Loomis Sayles 12.55 8.45 -2.18
Lipper 9.70 7.17 6.17
Rank 1 of 22 8 of 29 168 of 170
Percentile 1 28 99
Lipper Category Index 9.01 7.36 6.51
Actual Inception(4)
Loomis Sayles 12.41 8.38 -1.51
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.*
*Source: Lipper Analytical Services
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INTERMEDIATE INVESTMENT SHORT-
MATURITY GRADE MUNICIPAL TERM U.S. GOV'T.
BOND BOND BOND BOND SECURITIES
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3.50 0.04 5.92 6.78 9.56
7.42 5.45 5.24 5.22 5.24
7.75 5.11 5.49 5.16 8.11
3.67 1.54 9.25 8.63 14.43
10.02 7.91 8.20 6.68 8.20
216 of 218 81 of 92 20 of 237 1 of 100 15 of 188
99 89 9 1 8
10.36 7.84 8.52 6.70 11.21
N/A N/A 7.99 7.06 9.64
7.52 6.22 7.52
46 of 194 6 of 79 7 of 152
24 8 5
7.79 6.38 7.88
N/A N/A 5.92 6.32 7.41
5.66 5.43 5.66
46 of 134 3 of 51 5 of 97
35 6 6
5.91 5.57 6.00
5.69 8.08 7.87 6.28 10.56
9.17 8.78 7.69 5.53 7.69
189 of 191 62 of 83 31 of 88 4 of 32 2 of 61
99 75 36 13 4
9.50 8.81 7.76 5.78 7.58
5.69 8.08 7.90 6.28 10.55
(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
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FUND AND MANAGER REVIEW
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LOOMIS SAYLES BOND FUND
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[Photo of Daniel J. Fuss] [Photo of Kathleen C. Gaffney]
Daniel J. Fuss Kathleen C. Gaffney
KEY FUND FACTS
Objective: High total investment return
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 - 0.75%, Retail - 1.00%,
Admin. - 1.25%
Total Net Assets (all classes): $1,509.8 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Institutional, Retail and
Admin classes of the Loomis Sayles Bond Fund had total returns of -0.93%,
- -1.06%, and -1.33%, respectively, as compared to the Fund's benchmark, the
Lehman Brothers Government/Corporate Bond Index, total return of 9.33%. For
the same period, the average BBB rated debt fund, as measured by Lipper
Analytical Services, had a total return of 5.45%.
PORTFOLIO REVIEW
Over the past nine months, global economic turmoil heightened investor
uncertainty and sparked a rally in Treasuries. The Fund's Treasury holdings
were among the strongest performers, benefiting from the ongoing global
"flight to quality" that began with the "Asian Contagion" and gained momentum
with Russia announcing its inability to meet short-term debt obligations.
Further complicating matters was Japan's inability to establish a credible
plan to restore economic order and the subsequent relatively illiquid nature
of the bond market. The rally in Treasuries caused all other market segments
to lag considerably, particularly overseas. The Fund's lower rated issues and
Yankee bonds (foreign issued, U.S. dollar denominated bonds) were especially
hard hit. Cyclical and industrial positions performed well for most of the
period, but retreated recently as investors sold out of bonds perceived to be
exposed to the waning economic cycle.
The Fund's significant position in Canadian government and provincial issues
had a mildly positive impact on performance, despite being hampered by a
weaker Canadian dollar. Our commitment to the telecommunications and cable/
media sectors proved beneficial as telecommunications providers continued to
upgrade their network infrastructures to better accommodate both voice and
data/internet traffic.
PORTFOLIO POSITIONING
We believe that the Fund remains well diversified across 279 issues and 19
countries. We continue to stress call protection, yield advantage, and a
moderate degree of international exposure as a means of boosting total return.
Although the Fund's performance has recently lagged significantly, we believe
that the market has overreacted due to investor fears. We have used these
events to opportunistically purchase bonds with strong fundamentals and
significant yield advantage at a discount to the market.
/s/ Daniel J. Fuss /s/ Kathleen C. Gaffney
Daniel J. Fuss Kathleen C. Gaffney
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 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) -0.93 -0.41 9.44 9.98 12.41
Loomis Sayles Bond Fund (Retail) -1.06 -0.67 N/A N/A 6.25
Loomis Sayles Bond Fund (Admin) -1.33 N/A N/A N/A -1.33
Lipper BBB Rated Corporate Bond Fund Index(b) 5.11 7.84 8.15 6.79 9.01
Lehman Brothers Government/Corp. Bond Index(c) 9.33 12.84 8.92 7.21 9.06
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LEHMAN
As of 5/31/91 10.00 10.00
Period Ended
6/30/91 9.85 9.99
9/30/91 10.52 10.56
12/31/91 10.93 11.13
3/31/92 11.29 10.96
6/30/92 11.84 11.40
9/30/92 12.40 11.96
12/31/92 12.49 11.97
3/31/93 13.45 12.53
6/30/93 14.16 12.90
9/30/93 14.79 13.33
12/31/93 15.27 13.29
3/31/94 15.04 12.88
6/30/94 14.61 12.72
9/30/94 14.87 12.78
12/31/94 14.65 12.83
3/31/95 15.73 13.46
6/30/95 17.41 14.34
9/30/95 18.16 14.61
12/31/95 19.33 15.29
3/31/96 19.14 14.94
6/30/96 19.45 15.01
9/30/96 20.21 15.27
12/31/96 21.32 15.74
3/31/97 21.27 15.60
6/30/97 22.51 16.17
9/30/97 23.90 16.74
12/31/97 24.02 17.27
3/31/98 24.94 17.53
6/30/98 25.05 17.99
9/30/98 23.80 18.89
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>
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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): $36.2 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Institutional and Retail
classes of the Loomis Sayles Global Bond Fund had total returns of 0.85% and
0.68%, respectively, as compared to the Fund's benchmark, the Salomon Brothers
World Government Bond Index, total return of 11.35%. For the same period, the
average global income fund, as measured by Lipper Analytical Services, had a
total return of 3.01%.
PORTFOLIO REVIEW
Over the past nine months, the Fund's investment strategy has continued to
follow the course set at the end of 1997. At the end of the year, the Fund's
duration was fairly long at 6.5 years, which helped performance as bonds
rallied throughout most of 1998. For the past nine months, we have maintained
a 40% allocation in core Europe, which posted strong results when the markets
began to favor the new euro. The Fund's weak year-to-date performance was
driven primarily by its holdings in Japan (7.0% of portfolio on June 30),
Australia/New Zealand (15.5% of portfolio on June 30) and Malaysia, South
Korea, Thailand and the Philippines (13.7%). Over the past three months, we
have continued to buy bonds in these areas that we believe were being
indiscriminately sold.
PORTFOLIO POSITIONING
At the end of September, the Fund's duration was 5.89 years, longer than the
market which has helped our performance but shorter than we had been at the
beginning of the year given that yields are low. The European core currency
commitment has been lowered to 40.1% of the portfolio, nearly neutral versus
the benchmark, in recognition of the strength of the Deutsche mark. Japanese
holdings comprised 5.6% of the portfolio, with Australia/New Zealand at 16.4%,
and Malaysia, the Philippines, South Korea and Thailand at 13.1%. Although the
Asian economies have declined far more than expected, we believe the values
there appear to be excellent. We believe the Asian economies are fundamentally
sound and have the potential to bounce back, so the Fund's commitment to Asia
remains high.
/s/ E. John deBeer
E. John deBeer
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 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) 0.85 -2.29 8.55 6.57 8.38
Loomis Sayles Global Bond Fund (Retail) 0.68 -2.63 N/A N/A 1.55
Lipper General World Income Fund Index(b) 3.23 3.47 7.22 5.76 7.36
Salomon Brothers World Government Bond Index(c) 11.35 11.58 5.99 7.09 9.51
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS SB WORLD
As of 5/31/91 10.00 10.00
Period Ended
6/30/91 9.56 9.90
9/30/91 10.53 10.71
12/31/91 11.69 11.56
3/31/92 11.11 11.17
6/30/92 12.04 11.92
9/30/92 11.85 12.66
12/31/92 11.79 12.20
3/31/93 12.36 12.85
6/30/93 12.39 13.22
9/30/93 13.19 13.95
12/31/93 13.51 13.82
3/31/94 13.01 13.82
6/30/94 12.19 13.91
9/30/94 12.16 14.07
12/31/94 12.33 14.14
3/31/95 11.97 15.69
6/30/95 13.12 16.52
9/30/95 14.18 16.35
12/31/95 15.28 16.83
3/31/96 15.40 16.52
6/30/96 16.15 16.58
9/30/96 16.79 17.04
12/31/96 17.57 17.44
3/31/97 17.49 16.72
6/30/97 18.20 17.23
9/30/97 18.56 17.45
12/31/97 17.98 17.48
3/31/98 18.51 17.62
6/30/98 18.31 17.97
9/30/98 18.13 19.47
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>
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FUND AND MANAGER REVIEW
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LOOMIS SAYLES HIGH YIELD FUND
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[Photo of Daniel J. Fuss] [Photo of Kathleen C. Gaffney]
Daniel J. Fuss Kathleen C. Gaffney
KEY FUND FACTS
Objective: High total investment return
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): $10.6 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Institutional and Retail
classes of the Loomis Sayles High Yield Fund had total returns of -15.57%, and
- -15.78%, respectively, as compared to the Fund's benchmark, the Merrill Lynch
High Yield Master Index, total return of 0.77%. For the same period, the
average high yield fund, as measured by Lipper Analytical Services, had a
total return of -2.98%.
PORTFOLIO REVIEW
1998 has been a challenging year for high yield investors. The lingering
economic crisis in Asia and the inability of Russia to meet short-term debt
obligations triggered a capital flight from high yield bonds that forced hedge
fund managers to unwind their leveraged positions to meet margin calls. What
resulted was a relatively illiquid high yield market, falling bond prices and
the widest yield spreads between Treasuries and all other bonds since the
recessionary period of the early 1990s.
The Fund's 31.4% allocation to convertible bonds hurt performance as equity
markets retreated to twelve-month lows. The liquidity crisis particularly
affected our 37.9% exposure to Yankee bonds (foreign-issued U.S. dollar
denominated securities) as foreign bond yields rose to their highest levels
since the Mexican peso crisis in late 1994. Towards the end of September, the
Federal Reserve Bank's lowering of interest rates and encouraging news from
Brazil helped bring some stability to the bond markets.
PORTFOLIO POSITIONING
As of September 30, 1998, the Fund was diversified across 123 issues with a
concentration in Yankee and industrial sectors such as telecommunications. The
Fund currently has an average dollar price of less than $60, reflecting the
embedded potential for capital appreciation as well as a commitment to call
protection. Over time, we believe the Fund's incremental yield advantage and
international diversification, which has been a source of volatility, will
provide the potential for excellent yields and capital appreciation.
/s/ Daniel J. Fuss /s/ Kathleen C. Gaffney
Daniel J. Fuss Kathleen C. Gaffney
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR INCEPTION(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loomis Sayles High Yield Fund (Institutional) -15.57 -17.96 -1.51
Loomis Sayles High Yield Fund (Retail) -15.78 -18.18 -3.70
Lipper High Current Yield Fund Index(b) - 3.12 - 1.65 6.51
Merrill Lynch High Yield Master Index(c) 0.77 3.37 8.70
</TABLE>
CUMULATIVE PERFORMANCE - SEPTEMBER 30, 1996 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS ML
As of 9/30/96 10.00 10.00
Period Ended
12/31/96 10.17 10.39
3/31/97 10.15 10.50
6/30/97 10.76 11.00
9/30/97 11.66 11.43
12/31/97 11.33 11.73
3/31/98 12.08 12.05
6/30/98 11.51 12.25
9/30/98 09.57 11.82
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): $9.3 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Institutional and Retail
classes of the Loomis Sayles Intermediate Maturity Bond Fund had total returns
of 3.50%, and 3.37%, respectively, as compared to the Fund's benchmark, the
Lehman Brothers Government/Corporate Intermediate Bond Index, total return of
8.12%. For the same period, the average intermediate investment grade debt
fund, as measured by Lipper Analytical Services, had a total return of 7.42%.
PORTFOLIO REVIEW
Like other corporate-oriented bond funds, the Loomis Sayles Intermediate
Maturity Bond Fund was negatively impacted by the dramatic difference between
strong Treasury price gains and all other segments of the bond market as the
year progressed. High quality bonds lagged Treasury returns considerably, and
high yield and emerging market bonds experienced major price declines. This
flight to quality was the dominant factor in determining relative performance
for the Fund. While the Fund's holdings in U.S. Treasury and Canadian
government bonds posted strong results, the effect was muted because of our
underweighting in this sector. The Fund's small allocation to mortgage-backed
securities also underperformed as rates declined and prepayments increased.
(Mortgage-backed securities prices can decline when interest rates fall as
borrowers refinance their loans. The mortgage holders are then forced to
invest the principal at lower interest rates.) Our Yankee bonds (foreign
issued, U.S. dollar denominated bonds) were also negatively affected during
the past quarter as liquidity dramatically decreased in this sector when
buyers fled and dealers backed away from the market.
PORTFOLIO POSITIONING
We believe that the Fund is well diversified and offers a strong yield
advantage and call protection. In our opinion, the widening of yield spreads
between Treasuries and all other bonds has created an appropriate opportunity
to expand positions into corporate and Yankee bonds, where prices have fallen
and yields are attractive versus Treasuries. We are also continuing to focus
on credit specific research, weighing the opportunities to enhance investment
returns against any incremental credit risk we take on. We believe our
portfolio structure continues to offer value to long-term investors.
/s/ Anthony J. Wilkins
Anthony J. Wilkins
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR INCEPTION(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loomis Sayles Intermediate Maturity Bond Fund (Institutional) 3.50 3.67 5.69
Loomis Sayles Intermediate Maturity Bond Fund (Retail) 3.37 3.52 5.51
Lipper Intermediate Investment Grade Bond Fund Index(b) 7.75 10.36 9.50
Lehman Brothers Gov't/Corp. Intermediate Bond Index(c) 8.12 10.43 9.19
</TABLE>
CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LEHMAN
As of 12/31/96 10.00 10.00
Period Ended
3/31/97 9.99 9.99
6/30/97 10.34 10.28
9/30/97 10.63 10.56
12/31/97 10.64 10.79
3/31/98 10.92 10.95
6/30/98 11.03 11.16
9/30/98 11.02 11.66
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 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): $4.5 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Institutional and Retail
classes of the Loomis Sayles Investment Grade Bond Fund had total returns of
0.04%, and -0.19%, respectively, as compared to the Fund's benchmark, the
Lehman Brothers Corporate/Government Bond Index, total return of 9.33%. For
the same period, the average BBB rated debt fund, as measured by Lipper
Analytical Services, had a total return of 5.45%.
PORTFOLIO REVIEW
For the first nine months of 1998, the Fund was negatively impacted by the
exceptionally strong performance of Treasury bonds versus virtually all other
segments of the bond market. The world economic crisis, losses by leveraged
investors, including hedge funds and broker/dealers, and the subsequent
dramatic lessening of liquidity in world markets resulted in a flight to
quality as many investors rushed to purchase Treasury bonds. Corporate bonds,
Yankee bonds (foreign issued, U.S. dollar denominated bonds) and lower quality
debt all underperformed Treasuries. The Fund stayed true to its style, holding
large positions in corporate bonds and modest positions in Yankee and non-
dollar bonds. While this positioning helped the portfolio during the first
half of the year, the drastic underperformance of nearly all sectors of the
bond market versus Treasury bonds hurt performance, particularly during the
third quarter. The strong performance of the Fund's top quality, liquid U.S.
Treasury and Canadian government bonds was not enough to offset the returns
from the portfolio's lower quality, higher yielding positions.
PORTFOLIO POSITIONING
The Fund continues to maintain its focus on corporate bonds with modest
exposure to foreign issuers including Yankee bonds and non-dollar positions,
primarily in Canada. We have not changed our positions dramatically as we view
this as an opportunity to purchase corporate bonds with significantly higher
yields than Treasury bonds, strong fundamentals and call protection. We
continue to diligently analyze bonds for credit risk to avoid defaults. We
believe that the Fund is well diversified by issues and exhibits very strong
yield advantage, call protection and non market-related factors.
/s/ Daniel J. Fuss
Daniel J. Fuss
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
YEAR SINCE
TO DATE 1 YEAR INCEPTION(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loomis Sayles Investment Grade Bond Fund (Institutional) 0.04 1.54 8.08
Loomis Sayles Investment Grade Bond Fund (Retail) -0.19 1.29 7.83
Lipper BBB Rated Corporate Bond Fund Index(b) 5.11 7.84 8.81
Lehman Brothers Government/Corporate Bond Index(c) 9.33 12.84 10.98
</TABLE>
CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LEHMAN
As of 12/31/96 10.00 10.00
Period Ended
3/31/97 9.94 9.91
6/30/97 10.60 10.27
9/30/97 11.28 10.63
12/31/97 11.45 10.98
3/31/98 11.74 11.14
6/30/98 11.85 11.43
9/30/98 11.46 12.00
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: $10.1 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Loomis Sayles Municipal Bond
Fund had a total return of 5.92%, as compared to the Fund's benchmark, the
Lehman Brothers Municipal Bond Index, total return of 5.84%. For the same
period, the average municipal debt fund, as measured by Lipper Analytical
Services, had a total return of 5.24%.
PORTFOLIO REVIEW
The Fund's positions in non-callable bonds issued in California posted the
strongest returns this year. Non-callable issues generally perform well in a
rally and, with the limited supply of California paper this year, demand
remained strong. Swapping out of higher coupon issues, trading to short call
dates and investing in lower coupon discount issues also added to the Fund's
performance.
PORTFOLIO POSITIONING
We continue to seek undervalued securities and prefer long-term discount bonds
and good call protection in order to avoid reinvestment risk. We also look for
higher coupon, non-callable issues when they can be purchased at a reasonable
price and relative value to provide call protected tax-exempt income.
Currently, municipal bonds are a very attractive alternative since they have
lagged the rally in Treasury securities due to investors' preference for
liquidity. At the end of September, 10-year AAA municipals yielded only 4.03%
and long-term bonds 4.82%. Yet, because of the large decline in Treasury
yields, municipal yields reached new highs by comparison. The yield on
municipals was 97% of the yield on Treasuries. This means that municipal
investors were able to achieve yields almost as high as those on Treasuries
while continuing to benefit from the tax-exempt status of municipal
securities. Historically, these relationships have been closer to 75% on 10-
year bonds and 85% on long-term issues. We anticipate that this relationship
will ultimately return to more historical levels, although the timing is
impossible to determine. Nevertheless, because municipal bonds also tend to be
less volatile than their taxable counterparts, we believe that the current
environment makes investing in tax-exempt municipal bond funds a very
attractive alternative.
/s/ Martha F. Hodgman
Martha F. Hodgman
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 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 5.92 9.25 7.99 5.92 7.90
Lipper General Municipal Bond Fund Index(b) 5.49 8.52 7.79 5.91 7.76
Lehman Brothers Municipal Bond Index(c) 5.84 8.71 7.92 6.39 8.03
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LEHMAN
As of 5/31/91 10.00 10.00
Period Ended
6/30/91 10.01 9.99
9/30/91 10.42 10.38
12/31/91 10.78 10.73
3/31/92 10.78 10.76
6/30/92 11.24 11.17
9/30/92 11.54 11.46
12/31/92 11.79 11.67
3/31/93 12.18 12.11
6/30/93 12.63 12.50
9/30/93 13.07 12.92
12/31/93 13.15 13.11
3/31/94 12.42 12.39
6/30/94 12.58 12.52
9/30/94 12.61 12.61
12/31/94 12.44 12.43
3/31/95 13.26 13.31
6/30/95 13.50 13.63
9/30/95 13.83 14.02
12/31/95 14.50 14.60
3/31/96 14.23 14.42
6/30/96 14.28 14.53
9/30/96 14.60 14.87
12/31/96 14.98 15.24
3/31/97 14.90 15.21
6/30/97 15.44 15.73
9/30/97 15.96 16.21
12/31/97 16.46 16.65
3/31/98 16.58 16.84
6/30/98 16.81 17.09
9/30/98 17.43 17.62
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): $28.1 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Institutional and Retail
classes of the Loomis Sayles Short-Term Bond Fund had total returns of 6.78%,
and 6.58%, respectively, as compared to the Fund's benchmark, the Lehman
Brothers 1-3 Year Government/Corporate Bond Index, total return of 6.10%. For
the same period, the average short investment grade debt fund, as measured by
Lipper Analytical Services, had a total return of 5.22%.
PORTFOLIO REVIEW
Given the extreme rich values in the corporate sector late in 1997 and early
1998, the Fund began to purchase U.S. Treasury securities, and in particular,
zero-coupon Treasuries with a greater sensitivity to changes in Treasury
yields. The Fund also purchased high quality mortgage-backed issues. These
purchases boosted returns as interest rates fell and investors rushed to
purchase Treasuries, avoiding risky securities in a "flight to quality." The
Fund was positioned extremely well with over 50% allocated to U.S. government
and agency securities. In addition, approximately 58% of its securities were
within the three-to-seven year maturity range, which experienced the most
significant interest rate decline for the third quarter and the nine and 12
month periods ending September 30, 1998. Falling interest rates caused bond
prices to rise, which resulted in excellent performance for this segment of
the Fund. The negative effect of the widening yield spread on corporate bonds
was more than offset by the Fund's high concentration of government securities
and advantageous yield curve positioning.
PORTFOLIO POSITIONING
As of September 30, 1998, the Fund is positioned with approximately 46% in
corporate bonds, 40% U.S. Treasuries, 11% mortgage-backed securities, 1.5%
asset-backed securities and 1.5% cash. The average maturity is 2.94 years and
the yield to maturity is 5.17%.
We believe that the Fund continues to be positioned for an environment of
moderate economic growth with low inflationary pressures. Continued emphasis
will be placed on asset selection in order to enhance returns. The Fund will
use the higher yielding sectors of the bond market both prudently and
appropriately and only when opportunities and valuations are present within
the overall context of strong domestic and international fundamentals.
/s/ John Hyll
John Hyll
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 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) 6.78 8.63 7.06 6.32 6.28
Loomis Sayles Short-Term Bond Fund (Retail) 6.58 8.35 N/A N/A 7.73
Lipper Short Investment Grade Bond Fund Index(b) 5.16 6.70 6.38 5.57 5.78
Lehman Brothers 1-3 Year Government/Corp.
Bond Index(c) 6.10 7.87 6.83 5.97 5.90
</TABLE>
CUMULATIVE PERFORMANCE - AUGUST 31, 1992 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
Loomis Lehman
As of 8/31/92 10.00 10.00
10/31/92 9.92 9.94
11/30/92 9.88 9.93
Period Ended
12/31/92 9.95 10.02
3/31/93 10.26 10.24
6/30/93 10.40 10.36
9/30/93 10.55 10.51
12/31/93 10.63 10.58
3/31/94 10.59 10.52
6/30/94 10.61 10.53
9/30/94 10.77 10.63
12/31/94 10.82 10.63
3/31/95 11.18 10.99
6/30/95 11.52 11.35
9/30/95 11.68 11.52
12/31/95 11.97 11.80
3/31/96 11.99 11.85
6/30/96 12.08 11.97
9/30/96 12.27 12.18
12/31/96 12.53 12.41
3/31/97 12.58 12.49
6/30/97 12.89 12.77
9/30/97 13.20 12.87
12/31/97 13.43 13.23
3/31/98 13.64 13.42
6/30/98 13.86 13.63
9/30/98 14.34 14.04
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. government 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: $29.2 MM
PERFORMANCE SUMMARY
For the nine months ended September 30, 1998, the Loomis Sayles U.S.
Government Securities Fund had a total return of 9.56%, as compared to the
Fund's benchmark, the Lehman Brothers Government Bond Index, total return of
9.94%. For the same period, the average U.S. government bond fund, as measured
by Lipper Analytical Services, had a total return of 5.24%.
PORTFOLIO REVIEW
The Fund benefited from the sharp decline in interest rates in 1998 driven by
a growing "flight to quality" rally. The yield on the long-term Treasury bond
has fallen from 5.92% to 5.12%, which would have translated into a return of
14.44% for a hypothetical portfolio comprised entirely of 30-year U.S.
government bonds. The Fund participated in this sharp decline in interest
rates by maintaining its long duration bias. However, the Fund's GNMA position
(31% of the portfolio) had a shortening effect as yields rose as prepayments
of home mortgages accelerated. This moderated some of the Fund's gains. As
long-term yields have declined to around 5.00%, we believe most of the decline
in interest rates is behind us.
Mortgage-backed securities have lagged Treasury bonds over the past 12 months,
but the Fund has a 37% weighting in non-callable long-term Treasury bonds
which have done exceptionally well. This ratio had been close to 50%, but
duration was shortened in mid-September, and long-term Treasury bonds were
replaced by shorter duration Tennessee Valley Authority bonds.
PORTFOLIO POSITIONING
The portfolio is currently positioned for fairly stable interest rates going
forward. The Fund's holdings of bonds with call features, such as Federal
Agencies and GNMAs, currently offer generous relative yields and will offset
the aggressive characteristics of very long-term Treasury bonds.
/s/ Kent P. Newmark
Kent P. Newmark
<PAGE>
AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 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 9.56 14.43 9.64 7.41 10.55
Lipper General U.S. Gov't Bond Fund Index(b) 8.11 11.21 7.88 6.00 7.58
Lehman Brothers Government Bond Index(c) 9.94 13.59 8.99 7.13 8.90
</TABLE>
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998
[A line graph depicting the following plot points appears here.]
LOOMIS LEHMAN
As of 5/31/91 10.00 10.00
Period Ended
6/30/91 9.97 9.99
9/30/91 10.69 10.56
12/31/91 11.49 11.12
3/31/92 11.11 10.93
6/30/92 11.59 11.36
9/30/92 12.40 11.92
12/31/92 12.50 11.92
3/31/93 13.22 12.46
6/30/93 13.83 12.82
9/30/93 14.60 13.24
12/31/93 14.47 13.20
3/31/94 13.71 12.80
6/30/94 13.33 12.65
9/30/94 13.32 12.71
12/31/94 13.56 12.75
3/31/95 14.33 13.35
6/30/95 15.37 14.18
9/30/95 15.84 14.43
12/31/95 16.68 15.09
3/31/96 15.90 14.75
6/30/96 15.91 14.82
9/30/96 16.19 15.07
12/31/96 16.90 15.51
3/31/97 16.49 15.38
6/30/97 17.35 15.91
9/30/97 18.25 16.45
12/31/97 19.06 16.99
3/31/98 19.31 17.25
6/30/98 19.90 17.70
9/30/98 20.88 18.69
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>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES BOND FUND
- ------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998
FACE
AMOUNT VALUE (a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS AND NOTES -- 96.8% OF NET ASSETS
NON-CONVERTIBLE BONDS -- 88.3%
Airlines -- 0.1%
NWA Trust, 9.360%, 3/10/06 ............................. USD 722,700 $ 831,654
-------------
Banks/Savings & Loans -- 0.5%
First Union Institutional Trust, 7.850%, 1/01/27 ....... 2,000,000 2,138,540
First Union Institutional Trust, 8.040%, 12/01/26 ...... 5,000,000 5,502,955
-------------
7,641,495
-------------
Broadcasting -- 0.6%
CBS, Inc., 7.125%, 11/01/23 ............................ 1,435,000 1,356,161
Fox Family Worldwide, Inc., Zero Coupon Bond,
11/01/07 (step to 10.250% on 11/01/02) (b) ........... 13,250,000 8,215,000
--------------
9,571,161
--------------
Building Materials -- 0.3%
Owens Corning, 7.500%, 8/01/18 ......................... 4,500,000 4,413,510
--------------
Canadian -- 19.9%
Canadian Government, Zero Coupon Bond, 6/01/21 ........... CAD 115,650,000 22,908,522
Canadian Government, Zero Coupon Bond, 6/01/22 ......... 11,050,000 2,085,640
Canadian Government, Zero Coupon Bond, 6/01/25 ......... 281,760,000 45,650,756
Clearnet Communications, Inc., Zero Coupon Bond,
8/13/07 (step to 11.750% on 8/13/02) (b) ............. 40,000,000 14,166,257
Clearnet Communications, Inc., Zero Coupon Bond,
5/15/08 (step to 10.400% on 5/15/03) (b) ............. 4,160,000 1,309,592
Hydro Quebec, Zero Coupon Bond, 8/15/20 ................ 35,000,000 5,867,191
International Semi-Tech Corp., Zero Coupon Bond,
8/15/03 (step to 11.500% on 8/15/00) (b) ............. USD 18,275,000 3,106,750
MetroNet Communications Corp., Zero Coupon Bond,
6/15/08 (step to 9.950% on 6/15/03) (b) .............. 1,500,000 825,000
Microcell Telecommunications, Inc., Zero Coupon
Bond, 10/15/07 (step to 11.125% on 10/15/02) (b) ..... CAD 5,000,000 1,770,782
Milit-Air, Inc., 5.750%, 6/30/19 144A (c) .............. 6,950,000 4,631,510
New Brunswick FM Project, Zero Coupon Bond, 11/30/27
(step to 6.470% on 5/30/03) 144A (b) (c) ............. 10,000,000 4,977,209
Province of Alberta, 5.930%, 9/16/16 ................... 27,580,600 19,192,009
Province of British Columbia, Zero Coupon Bond, 8/23/13 33,000,000 9,172,258
Province of British Columbia, Zero Coupon Bond, 6/09/14 10,000,000 2,652,238
Province of British Columbia, Zero Coupon Bond, 9/05/20 54,528,000 9,959,697
Province of British Columbia, Zero Coupon Bond, 6/09/22 96,208,000 15,862,725
Province of British Columbia, Zero Coupon Bond, 8/19/22 25,037,000 4,082,111
Province of British Columbia, Zero Coupon Bond, 9/08/23 37,950,000 5,816,636
Province of British Columbia, Zero Coupon Bond, 8/23/24 CAD 122,250,000 17,727,153
Province of British Columbia, Zero Coupon Bond, 11/19/27 41,600,000 4,992,818
Province of British Columbia, 7.875%, 11/30/23 ......... 1,250,000 1,004,775
Province of British Columbia, 8.000%, 9/08/23 .......... 7,000,000 5,841,207
Province of Manitoba, Zero Coupon Bond, 7/22/13 ........ 2,500,000 712,084
Province of Manitoba, Zero Coupon Bond, 3/05/31 ........ 36,929,000 3,741,945
Province of Manitoba, 6.500%, 9/22/17 .................. 34,300,000 24,475,095
Province of Manitoba, 7.750%, 12/22/25 ................. 39,245,000 32,978,412
Province of Newfoundland, 6.150%, 4/17/28 .............. 2,500,000 1,656,009
Province of Ontario, Zero Coupon Bond, 7/13/22 ......... 13,000,000 2,147,270
Province of Ontario, Zero Coupon Bond, 6/02/27 ......... 96,525,000 12,078,049
Province of Saskatchewan, Zero Coupon Bond, 4/10/14 .... 19,000,000 5,205,857
Province of Saskatchewan, 8.750%, 5/30/25 .............. 11,735,000 10,686,373
Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 2/04/22 ............................ 2,350,000 401,646
Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 5/30/25 ............................ 25,055,000 3,537,853
-------------
301,223,429
-------------
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 8,281,625
Century Communications Corp., 8.375%, 11/15/17 ......... 5,000,000 4,750,000
-------------
13,031,625
-------------
Computers -- 1.6%
Apple Computer, Inc., 6.500%, 2/15/04 .................. 5,665,000 5,013,525
Seagate Technology, Inc., 7.370%, 3/01/07 .............. 6,000,000 5,982,420
Seagate Technology, Inc., 7.450%, 3/01/37 .............. 3,850,000 3,859,047
Seagate Technology, Inc., 7.875%, 3/01/17 .............. 10,250,000 9,776,040
Streamlogic Corp., 14.000%, 10/07/98 (d) (e) ........... 139,170 6,959
-------------
24,637,991
-------------
Electronics -- 1.4%
Pioneer Standard Electronics, Inc., 8.500%, 8/01/06 .... 1,000,000 1,045,832
Westinghouse Electric Corp., 7.875%, 9/01/23 ........... 20,350,000 20,361,600
-------------
21,407,432
-------------
Entertainment -- 5.2%
Boston Celtics Ltd., 6.000%, 6/30/38 ................... 981,000 580,016
Time Warner Entertainment Co., 6.875%, 6/15/18 ......... 8,710,000 9,000,217
Time Warner Entertainment Co., 6.950%, 1/15/28 ......... 36,900,000 38,351,277
Time Warner Entertainment Co., 7.570%, 2/01/24 ......... 27,170,000 30,144,300
-------------
78,075,810
-------------
Food & Beverage -- 0.3%
Borden, Inc., 7.875%, 2/15/23 .......................... 5,500,000 5,084,750
-------------
Foreign Government/Agency -- 5.9%
Escom, 11.000%, 6/01/08 ................................ ZAR 26,500,000 3,060,376
Republic of Argentina, 5.750%, 3/31/23 (step to
6.000% on 3/31/99) (b) ............................... USD 1,000,000 696,250
Republic of Argentina, 6.625%, 3/31/05 (f) ............. 1,104,500 872,555
Republic of Argentina, 9.750%, 9/19/27 ................. 2,250,000 1,831,500
Republic of Brazil, 10.125%, 5/15/27 ................... 42,481,000 26,656,828
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (g) ..... 39,215,207 23,285,990
Republic of Ecuador, 3.500%, 2/28/25 (step to 4.000%
on 2/28/99) (b) ...................................... 1,750,000 701,102
Republic of Ecuador, 6.625%, 2/27/15 PIK (f) (g) ....... 7,129,432 2,424,720
Republic of Korea, 8.875%, 4/15/08 ..................... 2,000,000 1,721,200
Republic of Panama, 4.000%, 7/17/14 (step to 4.250%
on 7/17/99) (b) ...................................... 950,000 657,875
Republic of South Africa, 12.000%, 2/28/05 ............. ZAR 20,000,000 2,690,300
Republic of South Africa, 12.500%, 12/21/06 ............ 42,450,000 5,545,657
Republic of South Africa, 13.500%, 9/15/15 ............. 14,850,000 1,990,000
Republic of Venezuela, 9.250%, 9/15/27 ................. USD 31,350,000 17,399,250
-------------
89,533,603
-------------
Foreign Issuer -- 9.0%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 .............. 11,000,000 7,287,500
Bangkok Bank Public Co. Ltd., 8.250%, 3/15/16 144A (c) . 5,370,000 2,369,351
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (c) . 34,365,000 14,830,560
Compania de Transporte Energia, 9.250%, 4/01/08 144A (c) 2,250,000 1,687,500
Espirito Santo Centrais Eletricas SA, 10.000%, 7/15/07 . 3,000,000 1,620,000
Export Import Bank of Korea, 6.375%, 2/15/06 ........... 1,000,000 661,819
Hyundai Motor Co. Ltd., 7.600%, 7/15/07 144A (c) ....... 4,000,000 2,958,680
Hyundai Semiconductor, 8.625%, 5/15/07 144A (c) ........ 500,000 345,000
Indah Kiat Finance Mauritius Ltd., 10.000%, 7/01/07 .... 500,000 217,500
Industrial Finance Corp. of Thailand, 7.375%,
1/14/07 144A (c) ...................................... 1,500,000 933,900
Korea Electric Power Corp., 6.750%, 8/01/27 ............ 1,500,000 1,058,610
Korea Electric Power Corp., 7.000%, 2/01/27 ............ 1,500,000 997,470
Korea Electric Power Corp., 7.400%, 4/01/16 ............ 11,998,601 7,772,334
Korea Electric Power Corp., 7.750%, 4/01/13 ............ 8,975,000 5,468,737
Multicanal SA, 10.500%, 4/15/18 144A (c) ............... 4,000,000 2,560,000
National Power Corp., 9.625%, 5/15/28 .................. 3,765,000 2,404,291
Pan Pacific Industrial Investment Plc, Zero Coupon
Bond, 4/28/07 144A (c) ............................... 20,760,000 6,573,239
Perez Companc SA, 8.125%, 7/15/07 144A (c) ............. 3,590,000 2,907,900
Petroleos Mexicanos, 9.500%, 9/15/27 ................... 500,000 378,000
Petroleos Mexicanos, Medium Term, 8.625%, 12/01/23
144A (c) ............................................. 3,100,000 2,216,500
Philippine Long Distance Telephone Co., 8.350%, 3/06/17 4,950,000 3,200,581
Pindo Deli Finance Mauritius Ltd., 10.750%, 10/01/07 ... 7,750,000 3,138,750
Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 ... 15,500,000 5,363,000
Pindo Deli Finance Mauritius Ltd., 11.750%, 10/01/17 ... 1,500,000 618,750
Pohang Iron & Steel Co. Ltd., 7.125%, 11/01/06 ......... USD 1,500,000 1,072,365
Pycsa Panama SA, 10.280%, 12/15/12 144A (c) ............ 2,000,000 1,672,500
Quezon Power Philippines Co., 8.860%, 6/15/17 .......... 7,875,000 4,860,686
Samsung Electronics Co. Ltd., 7.450%, 10/01/02 144A(c) . 1,500,000 1,066,365
Samsung Electronics Co. Ltd., 7.700%, 10/01/27 144A(c) . 12,500,000 5,875,000
Samsung Electronics Co. Ltd., 8.500%, 11/01/02 ......... 1,000,000 741,670
Siam Commercial Bank Public Co., 7.500%, 3/15/06
144A (c) ............................................. 7,000,000 3,150,000
Tata Electric Co., 8.500%, 8/19/17 144A (c) ............ 9,000,000 6,367,500
Telekom Malaysia Berhad, 7.875%, 8/01/25 144A (c) ...... 12,025,000 6,374,332
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c) ...... 9,075,000 3,412,381
TFM SA de CV, Zero Coupon Bond, 6/15/09 (step to
11.750% on 6/15/02) (b) .............................. 4,650,000 2,278,500
Thai Farmers Bank Plc, 8.250%, 8/21/16 144A (c) ........ 10,240,000 4,414,669
Tjiwi Kimia Mauritius Ltd., 10.000%, 8/01/04 ........... 16,200,000 6,804,000
Total Access Communication Public Co. Ltd., 7.625%,
11/04/01 144A (c) .................................... 5,400,000 3,294,000
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 144A (c) .................................... 12,575,000 7,167,750
-------------
136,121,690
------------
Government Agencies -- 2.4%
Federal Home Loan Mortgage Corp., 6.000%, 4/15/28 ...... 5,000,000 5,043,750
Federal National Mortgage Association, Zero Coupon
Bond, 10/29/07 ....................................... NZD 103,925,000 30,512,197
-------------
35,555,947
-------------
Health Care -- Products -- 0.6%
Bausch & Lomb, Inc., 7.125%, 8/01/28 ................... USD 9,500,000 9,370,325
-------------
Health Care -- Services -- 0.5%
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 ........ 6,000,000 5,054,400
Columbia/HCA Healthcare Corp., 7.190%, 11/15/15 ........ 2,000,000 1,762,320
Columbia/HCA Healthcare Corp., 7.580%, 9/15/25 ......... 1,300,000 1,134,926
-------------
7,951,646
-------------
Home Builders -- 0.4%
Pulte Corp., 7.300%, 10/24/05 .......................... 1,000,000 1,028,900
Pulte Corp., 7.625%, 10/15/17 .......................... 5,000,000 4,953,950
-------------
5,982,850
-------------
Insurance -- 0.2%
Loews Corp., 7.000%, 10/15/23 .......................... 3,500,000 3,471,860
-------------
Oil & Gas -- 1.3%
Chesapeake Energy Corp., 8.500%, 3/15/12 ............... 2,075,000 1,597,750
Pioneer Natural Resources Co., 7.200%, 1/15/28 ......... 2,000,000 1,745,840
R & B Falcon Corp., 7.375%, 4/15/18 .................... 14,000,000 13,315,680
Seagull Energy Corp., 7.500%, 9/15/27 .................. 3,850,000 3,487,677
-------------
20,146,947
-------------
Rail -- Transport -- 0.0%
Missouri Pacific Railroad Co., 5.000%, 1/01 /45 ........ USD 248,000 153,760
-------------
Real Estate Investment Trusts -- 3.6%
AMB Property Corp., 7.500%, 6/30/18 .................... 7,500,000 7,194,000
First Industrial, 7.500%, 12/01/17 ..................... 6,000,000 6,180,702
First Industrial, 7.600%, 7/15/28 ...................... 13,000,000 12,244,570
Highwoods Realty LP, 7.500%, 4/15/18 ................... 3,750,000 3,559,200
Security Capital Group, Inc., 7.700%, 6/15/28 144A (c) . 16,725,000 15,763,312
Susa Partnership LP, 7.450%, 7/01/18 ................... 5,300,000 5,002,776
Trinet Corporate Realty Trust, Inc., 7.700%, 7/15/17 ... 4,000,000 3,839,600
-------------
53,784,160
-------------
Retail -- General -- 1.7%
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 .. 2,467,189 2,442,048
Dillon Read Structured Finance Corp., 7.430%, 8/15/18 .. 2,000,000 1,760,000
Dillon Read Structured Finance Corp., 7.600%, 8/15/07 .. 215,224 205,538
Dillon Read Structured Finance Corp., 8.550%, 8/15/19 .. 500,000 477,500
K Mart Corp., 7.950%, 2/01/23 .......................... 14,365,000 13,934,050
Penn Traffic Co., 8.625%, 12/15/03 ..................... 1,000,000 560,000
Penn Traffic Co., 9.625%, 4/15/05 ...................... 17,083,000 3,074,940
Woolworth Corp., 8.500%, 1/15/22 ....................... 3,000,000 2,962,710
-------------
25,421,161
-------------
Steel -- 0.1%
Geneva Steel Co., 9.500%, 1/15/04 ...................... 3,500,000 1,575,000
-------------
Supranational -- 3.8%
International Bank for Reconstruction & Development,
Zero Coupon Bond, 8/20/07 ............................ NZD 159,375,000 46,456,963
International Bank for Reconstruction & Development,
8.000%, 5/23/07 ...................................... 19,000,000 10,543,894
-------------
57,000,857
-------------
Taxable Municipal -- 0.1%
Orange County, California Pension Obligation, Zero
Coupon Bond, 9/01/16 ................................. USD 5,000,000 1,668,500
-------------
Telecommunications -- 7.1%
Hyperion Telecommunications, Inc., Zero Coupon Bond,
4/15/03 (step to 13.000% on 4/15/01) (b) ............. 1,500,000 1,035,000
Nextel Communications, Inc., Zero Coupon Bond,
10/31/07 (step to 9.750% on 10/31/02) (b) ............ 33,180,000 19,908,000
Nextel Communications, Inc., Zero Coupon Bond, 2/15/08
(step to 9.950% on 2/15/03) (b) ...................... 1,800,000 1,062,000
Nextel International, Inc., Zero Coupon Bond, 4/15/08
(step to 12.125% on 4/15/03) (b) ..................... 22,650,000 10,192,500
Nextlink Communications, Inc., Zero Coupon Bond,
4/15/08 (step to 9.450% on 4/15/03) (b) .............. USD 5,000,000 2,900,000
RCN Corp., Zero Coupon Bond, 10/15/07 (step to
11.125% on 10/15/02) (b) ............................. 4,350,000 2,414,250
RCN Corp., Zero Coupon Bond, 2/15/08 (step to 9.800%
on 2/15/03) (b) ...................................... 2,500,000 1,325,000
RCN Corp., Zero Coupon Bond, 7/01/08 (step to
11.000% on 7/01/03) (b) .............................. 15,650,000 7,981,500
TCI Communications, Inc., 7.125%, 2/15/28 .............. 4,760,000 5,201,919
TCI Communications, Inc., 7.875%, 8/01/13 .............. 7,850,000 9,136,379
TCI Communications, Inc., 7.875%, 2/15/26 .............. 35,252,000 41,568,806
Teligent, Inc., Zero Coupon Bond, 3/01/08 (step to
11.500% on 3/01/03) (b) .............................. 7,500,000 2,925,000
Triton Communications, Zero Coupon Bond, 5/01/08
(step to 11.000% on 5/01/03) 144A (b) (c) ............ 5,000,000 2,200,000
-------------
107,850,354
-------------
Textile & Apparel -- 1.0%
Burlington Industries, Inc., 7.250%, 8/01/27 ........... 9,000,000 9,199,440
Fruit of the Loom, Inc., 7.375%, 11/15/23 .............. 3,000,000 2,525,370
Kellwood Co., 7.625%, 10/15/17 ......................... 2,500,000 2,440,525
Phillips Van Heusen Corp., 7.750%, 11/15/23 ............ 1,000,000 967,330
-------------
15,132,665
-------------
Tobacco -- 6.2%
Philip Morris Cos., Inc., 7.750%, 1/15/27 .............. 48,410,000 52,401,889
RJR Nabisco, Inc., 7.625%, 9/15/03 ..................... 12,550,000 12,438,305
RJR Nabisco, Inc., 8.500%, 7/01/07 ..................... 8,150,000 8,193,928
RJR Nabisco, Inc., 8.750%, 8/15/05 ..................... 5,500,000 5,593,335
RJR Nabisco, Inc., 9.250%, 8/15/13 ..................... 14,143,000 14,289,663
-------------
92,917,120
-------------
Transportation -- 0.1%
American President Cos. Ltd., 8.000%, 1/15/24 .......... 1,425,000 1,050,852
-------------
U.S. Government -- 11.6%
U S. Treasury Bonds, 5.500%, 8/15/28 ................... 30,000,000 32,428,200
U.S. Treasury Bonds, 6.000%, 2/15/26 ................... 102,775,000 114,979,531
U.S. Treasury Bonds, 6.250%, 8/15/23 ................... 15,450,000 17,682,989
U.S. Treasury Strips, Zero Coupon Bond, 8/15/20 ........ 14,000,000 4,291,280
U.S. Treasury Strips, Zero Coupon Bond, 8/15/23 ........ 19,000,000 5,054,950
-------------
174,436,950
-------------
Utilities -- 1.9%
AES Corp., 8.875%, 11/01/27 ............................ 5,000,000 4,350,000
Boston Edison Co., 7.800%, 3/15/23 ..................... 1,000,000 1,090,585
Comed Financing II, 8.500%, 1/15/27 .................... 5,000,000 5,387,700
Commonwealth Edison Co., 4.750%, 12/01/11 .............. 901,000 836,083
KN Capital Trust, 7.630%, 4/15/28 ...................... USD 15,750,000 15,178,858
Mobile Energy Services Co. LLC, 8.665%, 1/01/17 ........ 5,961,835 2,086,642
--------------
28,929,868
--------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $1,405,435,826) ..................... 1,333,974,972
--------------
CONVERTIBLE BONDS -- 8.5%
Auto & Related -- 0.1%
Exide Corp., 2.900%, 12/15/05 144A (c) ................. 3,375,000 1,674,844
--------------
Canadian -- 0.1%
Rogers Communications, Inc., 2.000%, 11/26/05 .......... 3,000,000 1,899,360
-------------
Chemicals -- Major -- 0.1%
FMC Corp., 6.750%, 1/16/05 ............................. 1,325,000 1,238,875
Hexcel Corp., 7.000%, 8/01/11 .......................... 675,000 499,500
-------------
1,738,375
-------------
Computers -- 0.6%
Apple Computer, Inc., 6.000%, 6/01/01 .................. 3,190,000 4,202,825
Cray Research, Inc., 6.125%, 2/01/11 ................... 635,000 482,600
Maxtor Corp., 5.750%, 3/01/12 .......................... 3,100,000 1,798,000
Read Rite Corp., Zero Coupon Bond, 9/01/04 ............. 3,125,000 1,750,000
Silicon Graphics, Inc., 5.250%, 9/01/04 ................ 625,000 515,625
Telxon Corp., 5.750%, 1/01/03 .......................... 225,000 215,438
Western Digital, Zero Coupon Bond, 2/18/18 ............. 2,150,000 444,770
-------------
9,409,258
-------------
Diversified Operations -- 0.3%
Ogden Corp., 5.750%, 10/20/02 .......................... 1,750,000 1,693,125
Ogden Corp., 6.000%, 6/01/02 ........................... 500,000 485,000
Thermo Electron Corp., 4.250%, 1/01/03 144A (c) ........ 2,500,000 2,175,000
-------------
4,353,125
-------------
Electronics -- 0.9%
Cirrus Logic, Inc., 6.000%, 12/15/03 ................... 1,600,000 1,016,000
Cypress Semiconductor Corp., 6.000%, 10/01/02 .......... 1,000,000 862,500
EDO Corp., 7.000%, 12/15/11 ............................ 434,000 328,212
Kent Electronics Corp., 4.500%, 9/01/04 ................ 6,800,000 4,692,000
Lam Research Corp., 5.000%, 9/01/02 .................... 5,070,000 3,941,925
National Semiconductor Corp., 6.500%, 10/01/02 ......... 500,000 440,000
Richardson Electronics Ltd., 7.250%, 12/15/06 .......... 450,000 333,000
Thermedics, Inc., Zero Coupon Bond, 6/01/03 ............ 950,000 646,000
Zenith Corp., 6.250%, 4/01/11 (d) ...................... 2,405,000 733,525
-------------
12,993,162
-------------
Environmental Services -- 0.3%
Air & Water Technologies Corp., 8.000%, 5/15/15 ........ USD 1,450,000 1,094,750
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 3,359,988
-------------
4,829,738
-------------
Foreign Issuer -- 2.3%
Advanced Agro Public Co., 3.500%, 6/17/01 .............. 1,625,000 1,405,625
APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 144A (c) 8,125,000 3,087,500
APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 ........ 5,540,000 2,105,200
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 .......... 11,000,000 2,915,000
Banpu Public Co., 2.750%, 4/10/03 ...................... 5,030,000 3,168,900
Burns, Philp, 5.500%, 4/30/04 .......................... 4,480,000 2,284,800
Empresas ICA Sociedad, 5.000%, 3/15/04 ................. 3,700,000 2,460,500
Loxley Public Co. Ltd., 2.500%, 4/04/01 ................ 7,700,000 1,540,000
Piltel, 1.750%, 7/17/06 ................................ 2,100,000 1,228,500
Samsung Corp., 0.250%, 6/26/06 ......................... 3,150,000 2,709,000
Samsung Electronics Co. Ltd., Zero Coupon Bond,
12/31/07 ............................................. 5,925,000 3,851,250
Sappi BVI Finance, 7.500%, 8/01/02 ..................... 4,650,000 3,731,625
Siam Commercial Bank Public Co., 3.250%, 1/24/04 ....... 3,075,000 830,250
Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ..... 1,930,000 897,450
Ssangyong Oil Refining Co., Inc., 3.750%, 12/31/08 ..... 455,000 379,925
Telekom Malaysia Berhad, 4.000%, 10/03/04 .............. 750,000 405,000
Total Access Communication Public Co., Ltd.,
2.00%, 5/31/06 ....................................... 3,400,000 2,346,000
-------------
35,346,525
-------------
Freight Transportation -- 0.1%
Builders Transportation, Inc., 8.000%, 8/15/05 (d) (e) . 1,000,000 1,250
Preston Corp., 7.000%, 5/01/11 ......................... 750,000 577,500
Worldway Corp., 6.250%, 4/15/11 ........................ 1,463,000 1,199,660
-------------
1,778,410
-------------
Health Care -- Drugs -- 0.3%
Chiron Corp., 1.900%, 11/17/00 ......................... 1,000,000 942,500
Dura Pharmaceuticals, Inc., 3.500%, 7/15/02 ............ 375,000 258,750
Glycomed, Inc., 7.500%, 1/01/03 ........................ 1,148,100 1,044,771
NABI, Inc., 6.500%, 2/01/03 ............................ 3,750,000 2,226,563
-------------
4,472,584
-------------
Health Care -- Medical Technology -- 0.0%
Heartport, Inc., 7.250%, 5/01/04 ....................... 1,000,000 470,000
-------------
Home Builders -- 0.0%
Schuler Homes, Inc., 6.500%, 1/15/03 ................... 750,000 639,375
-------------
Insurance -- 0.8%
Loews Corp., 3.125%, 9/15/07 ........................... 14,775,000 11,746,125
-------------
Leisure -- 0.1%
AMF Bowling, Inc., Zero Coupon Bond, 5/12/18 144A(c) ... USD 15,200,000 1,482,000
-------------
Machinery -- 0.1%
Intevac, Inc., 6.500%, 3/01/04 ......................... 1,250,000 871,875
-------------
Multi-Industry -- 0.0%
Thermo Instrument Systems, Inc., 4.500%, 10/15/03
144A (c) ............................................. 450,000 376,313
-------------
Oil & Gas -- 0.6%
Baker Hughes, Inc., Zero Coupon Bond, 5/05/08 .......... 11,900,000 7,854,000
Houston Industries, Inc., 6.000%, 3/15/12 .............. 447,500 429,600
Key Energy Group, Inc., 5.000%, 9/15/04 ................ 2,250,000 1,389,375
-------------
9,672,975
-------------
Publishing -- 0.2%
Scholastic Corp., 5.000%, 8/15/05 144A (c) ............. 2,550,000 2,352,375
-------------
Real Estate Investment Trusts -- 0.6%
Federal Realty Investors Trust, 5.250%, 10/28/03 ....... 2,250,000 2,092,500
Rockefeller Properties, Zero Coupon Bond, 12/31/00 ..... 7,000,000 5,407,500
Sizeler Property Investors, Inc., 8.000%, 7/15/03 ...... 1,175,000 1,101,562
-------------
8,601,562
-------------
Restaurants -- 0.4%
Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 ........ 4,125,000 72,187
Boston Chicken, Inc., 4.500%, 2/01/04 .................. 3,250,000 227,500
Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ............. 2,880,000 1,296,000
Shoney's, Inc., Zero Coupon Bond, 4/11/04 .............. 8,060,000 3,606,850
TPI Enterprises, Inc., 8.250%, 7/15/02 ................. 700,000 591,500
-------------
5,794,037
-------------
Retail -- Specialty -- 0.1%
Bell Sports Corp., 4.250%, 11/15/00 .................... 96,000 82,200
CML Group, Inc., 5.500%, 1/15/03 ....................... 1,224,000 306,000
Jacobson Stores, Inc., 6.750%, 12/15/11 ................ 540,000 469,800
-------------
858,000
-------------
Telecommunications -- 0.4%
Broadband Technologies, Inc., 5.000%, 5/15/01 .......... 9,800,000 5,745,250
-------------
Textile & Apparel -- 0.1%
Dixie Yarns, Inc., 7.000%, 5/15/12 ..................... 282,000 213,615
Fieldcrest Cannon, Inc., 6.000%, 3/15/12 ............... 890,000 738,700
-------------
952,315
-------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $164,036,236) ....................... 128,057,583
--------------
TOTAL BONDS AND NOTES
(Identified Cost $1,569,472,062) ..................... 1,462,032,555
--------------
SHARES
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 0.2% OF NET ASSETS
Computers -- 0.0%
Streamlogic Corp. (d) (h) .............................. 266,066 266
-------------
Restaurants -- 0.2%
Advantica Restaurant Group, Inc. (h) ................... 646,448 3,070,628
-------------
TOTAL COMMON STOCKS
(Identified Cost $8,226,376) ......................... 3,070,894
-------------
PREFERRED STOCKS -- 1.3% of Net Assets
Building Materials -- 0.2%
Owens Corning, 6.500% .................................. 66,000 3,225,750
-------------
Chemicals -- Major -- 0.0%
E.I. du Pont DeNemours & Co., $3.50 .................... 3,775 272,744
-------------
Computer Software & Services -- 0.1%
Unisys Corp., $3.75 .................................... 27,300 1,293,338
-------------
Financial Services -- 0.2%
Hvide Capital Trust, 6.500% ............................ 77,500 2,247,500
-------------
Freight Transportation -- 0.1%
Arkansas Best Corp., $2.875 ............................ 39,670 1,274,399
-------------
Metals -- 0.3%
Aluminum Co. of America, $3.75 ......................... 10,000 743,125
Bethlehem Steel Corp., $3.50 ........................... 99,050 4,036,287
-------------
4,779,412
-------------
Oil & Gas -- 0.2%
Chesapeake Energy Corp., 7.000% 144A (c) ............... 45,000 720,000
Chesapeake Energy Corp., 7.000% ........................ 10,000 160,000
Weatherford International, Inc., 5.000% ................ 63,000 2,016,000
-------------
2,896,000
-------------
Retail -- General -- 0.0%
K Mart Financing Corp., 7.750% ......................... 10,000 500,000
--------------
Telecommunications -- 0.0%
Hyperion Telecommunications, Inc., 12.875% PIK (g) ..... 591 484,983
-------------
Utilities -- 0.2%
Central Maine Power Co., 3.500% ........................ 2,230 122,093
Cleco Corp., 4.750% .................................... 1,500 135,375
Commonwealth Energy Systems, $4.80 ..................... 3,168 277,200
Connecticut Light & Power Co., $1.90 ................... 2,925 78,975
Entergy Louisiana, Inc., 4.160% ........................ 2,600 184,600
Jersey Central Power & Light Co., 4.000% ............... 2,020 137,360
MDU Resources Group, Inc., 5.100% ...................... 4,250 426,062
Minnesota Power & Light Co., 5.000% .................... 200 16,900
Nevada Power Co., 4.700% ............................... 15,886 347,506
Niagara Mohawk Power Corp., 4.850% ..................... 5,000 395,000
Northern States Power Co., $3.60 ....................... 900 58,444
Public Service Co., 4.000% ............................. 360 25,020
-------------
2,204,535
-------------
TOTAL PREFERRED STOCKS
(Identified Cost $20,926,418) ........................ 19,178,661
--------------
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
- ------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 2.4% OF NET ASSETS
Repurchase Agreement with State Street Bank and
Trust Co., dated 9/30/98 at 4.750% to be
repurchased at $36,336,794 on 10/01/98
collateralized by $30,785,000 U.S. Treasury Bond,
6.500%, due 11/15/26 with a value of $37,062,246 ..... USD 36,332,000 36,332,000
--------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $36,332,000) ........................ 36,332,000
--------------
TOTAL INVESTMENTS -- 100.7%
(IDENTIFIED COST $1,634,956,856) (i) ................... 1,520,614,110
Liabilities, Less Cash and Other Assets -- (0.7%) ...... (10,764,239)
--------------
NET ASSETS -- 100% ....................................... $1,509,849,871
==============
(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 September 30, 1998, the net unrealized depreciation on investments based on cost of
$1,634,983,545 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 $96,390,901 and $210,760,336, respectively, resulting in net unrealized depreciation
of $114,369,435.
</TABLE>
Key to Abbreviations:
CAD: Canadian Dollar
NZD: New Zealand Dollar
USD: United States Dollar
ZAR: South African Rand
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES GLOBAL BOND FUND
- ------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998
FACE
AMOUNT VALUE (a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS AND NOTES -- 90.8% OF NET ASSETS
Argentina -- 1.2%
Republic of Argentina, 5.750%, 3/31/23 (step to 6.000%
on 3/31/99) (b) ...................................... USD 600,000 $ 417,750
-------------
Australia -- 11.7%
New South Wales Trust, 6.500%, 5/01/06 ................... AUD 1,900,000 1,193,898
News America Holdings, Inc., 8.625%, 2/07/14 ........... 1,240,000 816,720
Queensland Treasury, 6.500%, 6/14/05 ................... 730,000 464,127
Queensland Treasury, 8.000%, 9/14/07 ................... 1,600,000 1,124,515
South Australia Government Finance Authority, Zero
Coupon Bond, 12/21/15 ................................ 2,750,000 636,904
-------------
4,236,164
-------------
Canada -- 4.1%
Government of Canada, 8.750%, 12/01/05 ................... CAD 700,000 564,701
Province of British Columbia, Zero Coupon Bond, 9/05/20. 5,025,000 917,831
-------------
1,482,532
-------------
Finland -- 4.3%
Republic of Finland, 6.000%, 4/25/08 ..................... FIM 7,000,000 1,556,688
------------
Germany -- 25.4%
Bayerische Vereinsbank, 6.000%, 1/23/06 ................ DEM 2,000,000 1,332,894
Deutsche Finance BV, 7.500%, 2/10/03 ................... 2,300,000 1,549,355
Federal Republic of Germany, 6.500%, 3/15/00 ........... 2,000,000 1,247,627
Geberit International SA, 10.125%, 4/16/07 ............. 800,000 524,535
Germany Unity, 8.000%, 1/21/02 ......................... 2,200,000 1,494,638
Kreditanstalt Wierdarauf, 6.000%, 2/09/06 .............. 1,100,000 736,385
Treuhandanstalt, 6.625%, 7/09/03 ....................... 300,000 202,072
Treuhandanstalt, 6.750%, 5/13/04 ....................... 1,700,000 1,167,773
Westdt Landesbank, 5.250%, 10/14/05 .................... 1,500,000 957,457
-------------
9,212,736
-------------
Ireland -- 6.9%
Republic of Ireland, 6.000%, 8/18/08 ................... IEP 642,000 1,090,666
Republic of Ireland, 8.000%, 8/18/06 ................... 750,000 1,398,476
-------------
2,489,142
-------------
Japan -- 2.9%
MBL International Finance (Bermuda), 3.000%, 11/30/02 (c) USD 300,000 256,125
MBL International Finance (Bermuda), 3.000%, 11/30/02 (c) 950,000 795,625
-------------
1,051,750
-------------
Malaysia -- 2.2%
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (d) ...... 2,125,000 799,043
-------------
Netherlands -- 3.1%
Dutch Government, 5.750%, 9/15/02 ...................... NLG 2,000,000 1,139,459
-------------
New Zealand -- 4.7%
Government of New Zealand, 7.000%, 7/15/09 ............. NZD 1,820,000 1,005,892
Government of New Zealand, 8.000%, 11/15/06 ............ 1,200,000 689,069
-------------
1,694,961
-------------
Philippines -- 5.1%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 ................ USD 1,300,000 861,250
FLI Capital Cayman, 3.750%, 2/01/02 (step to 6.250%
on 8/01/99) (b) (c) .................................. 900,000 544,500
MBIA, Inc., Zero Coupon Bond, 12/18/01 (c) ............. 800,000 438,000
-------------
1,843,750
-------------
Poland -- 2.1%
Government of Poland, 4.000%, 10/27/14 (step to 5.000%
on 10/27/98) (b) .................................... 900,000 770,670
-------------
South Africa -- 5.5%
Escom, 11.000%, 6/01/08 ................................ ZAR 6,000,000 692,915
Republic of South Africa, 8.500%, 6/23/17 .............. USD 1,000,000 570,000
Sappi BVI Finance, 7.500%, 8/01/02 .................... 900,000 722,250
-------------
1,985,165
-------------
South Korea -- 3.0%
Korea Development Bank, 6.625%, 11/21/03 ............... 500,000 387,355
Korea Development Bank, 6.750%, 12/01/05 ............... 200,000 147,236
Samsung Electronics Co. Ltd., Zero Coupon Bond,
12/31/07 (c) ......................................... 500,000 325,000
Samsung Electronics Co. Ltd., 5.375%, 12/16/01 ......... DEM 500,000 242,508
-------------
1,102,099
-------------
Supranational -- 1.2%
International Bank for Reconstruction & Development,
Zero Coupon Bond, 8/20/07 .............................. NZD 1,500,000 437,242
-------------
Thailand -- 2.8%
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 (c) ...... USD 2,100,000 556,500
Kingdom of Thailand, 7.750%, 4/15/07 ................... 400,000 317,420
Loxley Public Co. Ltd., 2.500%, 4/04/01 (c) ............ 700,000 140,000
------------
1,013,920
-------------
United Kingdom -- 0.4%
Colt Telecom Group Plc, 7.625%, 7/31/08 .................. DEM 300,000 158,977
-------------
United States -- 4.2%
Federal National Mortgage Association, 6.375%, 8/15/07 . AUD 525,000 331,569
Federal National Mortgage Association, 7.250%, 6/20/02 . NZD 1,300,000 669,336
RJR Nabisco, Inc., 9.250%, 8/15/13 ..................... USD 500,000 505,185
-------------
1,506,090
-------------
TOTAL BONDS AND NOTES
(Identified Cost $35,533,105) ........................ 32,898,138
-------------
SHARES
- -------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 2.7% OF NET ASSETS
Japan -- 2.7%
Sakura Finance, 0.750% ................................. 186,000,000 $ 528,974
Sanwa International Ltd. (Bermuda), 1.250% 144A (d) .... 102,000,000 448,582
-------------
977,556
-------------
TOTAL PREFERRED STOCKS
(Identified Cost $1,931,253) ......................... 977,556
-------------
FACE
AMOUNT
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 4.6% OF NET ASSETS
Repurchase Agreement with State Street Bank and Trust
Co., dated 9/30/98 at 4.750% to be repurchased at
$1,682,222 on 10/01/98 collateralized by $1,430,000
U.S. Treasury Bond, 6.500%, due 11/15/26 with a value
of $1,721,586 ........................................ USD 1,682,000 1,682,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $1,682,000) ........................ 1,682,000
-------------
TOTAL INVESTMENTS -- 98.1%
(IDENTIFIED COST $39,146,358) (d) ..................... 35,557,694
Cash and Other Assets, Less Liabilities -- 1.9% ....... 677,853
-------------
NET ASSETS -- 100% ...................................... $36,235,547
===========
LOOMIS SAYLES GLOBAL BOND FUND (continued)
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments -- As of September 30, 1998
(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) Convertible Bond.
(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 September 30, 1998, the net unrealized depreciation on investments based on cost of
$39,155,200 for federal income tax purposes was as follows: Aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there is an excess of tax cost over
value were $1,331,465 and $4,928,971, respectively, resulting in net unrealized depreciation of
$3,597,506.
Key to Abbreviations:
AUD: Australian Dollar NLG: Dutch Guilder
CAD: Canadian Dollar NZD: New Zealand Dollar
DEM: Deutsche Mark USD: United States Dollar
FIM: Finnish Markka ZAR: South African Rand
IEP: Irish Punt
Ten Largest Sector Holdings
at September 30, 1998 as a Percentage of Net Assets
Foreign Government/Agency 49.2%
Banking & Finance 18.5%
Financial 12.2%
U.S. Government 2.8%
Media & Entertainment 2.3%
Utilities 2.2%
Electronics 1.6%
Consumer Durables 1.4%
Tobacco 1.4%
Supranational 1.2%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES HIGH YIELD FUND
- -------------------------------------------------------------------------------------------------------
Portfolio of Investments -- As of September 30, 1998
<CAPTION>
FACE
AMOUNT VALUE (a)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS AND NOTES -- 87.1% of Net Assets
NON-CONVERTIBLE BONDS -- 55.7%
Broadcasting -- 1.2%
Fox Family Worldwide, Inc., Zero Coupon Bond, 11/01/07
(step to 10.250% on 11/01/02) (b) ...................... USD 200,000 $ 124,000
-----------
Canadian -- 5.8%
Clearnet Communications, Inc., Zero Coupon Bond,
8/13/07 (step to 11.750% on 8/13/02) (b) ............... CAD 600,000 212,494
Clearnet Communications, Inc., Zero Coupon Bond,
5/15/08 (step to 10.400% on 5/15/03) (b) ............... 300,000 94,441
International Semi-Tech Corp., Zero Coupon Bond, 8/15/03
(step to 11.500% on 8/15/00) (b) ....................... USD 525,000 89,250
MetroNet Communications Corp., Zero Coupon Bond,
6/15/08 (step to 9.950% on 6/15/03) (b) ................ 250,000 137,500
Microcell Telecommunications, Inc., Zero Coupon Bond,
10/15/07 (step to 11.125% on 10/15/02) (b) ............. CAD 235,000 83,227
-----------
616,912
-----------
Communications -- 1.5%
Arch Communications Group, Inc., Zero Coupon Bond,
3/15/08 (step to 10.875% on 3/15/01) (b) .............. USD 340,000 161,500
-----------
Entertainment -- 0.3%
Boston Celtics Ltd., 6.000%, 6/30/38 ..................... 62,000 36,658
-----------
Foreign Government/Agency -- 8.8%
Escom, 11.000%, 6/01/08 .................................. ZAR 275,000 31,759
Republic of Argentina, 6.625%, 3/31/05 (c) ............... USD 47,000 37,130
Republic of Brazil, 10.125%, 5/15/27 ..................... 255,000 160,012
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (d) ....... 493,090 292,797
Republic of Ecuador, 6.625%, 2/27/15 PIK (c) (d) ......... 169,747 57,731
Republic of Panama, 4.000%, 7/17/14 (step to 4.250% on
7/17/99) (b) ........................................... 150,000 103,875
Republic of Peru, 3.250%, 3/07/17 (step to 3.750% on
3/07/99) (b) ........................................... 200,000 92,500
Republic of South Africa, 12.500%, 12/21/06 .............. ZAR 500,000 65,320
Republic of Venezuela, 9.250%, 9/15/27 ................... USD 175,000 97,125
-----------
938,249
-----------
Foreign Issuer -- 23.5%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 ................ 350,000 231,875
Bangkok Bank Public Co. Ltd., 8.250%, 3/15/16 144A (e) ... 150,000 66,183
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (e) ... 250,000 107,890
Espirito Santo Centrais Eletricas SA, 10.000%, 7/15/07 ... 100,000 54,000
Export Import Bank of Korea, 6.375%, 2/15/06 ............. 50,000 33,091
Hyundai Motor Co. Ltd., 7.600%, 7/15/07 144A (e) ......... 100,000 73,967
Korea Electric Power Corp., 7.400%, 4/01/16 .............. 238,067 154,213
Korea Electric Power Corp., 7.750%, 4/01/13 .............. 200,000 121,866
Multicanal SA, 10.500%, 2/01/07 .......................... 125,000 77,500
Multicanal SA, 10.500%, 4/15/18 144A (e) ................. 125,000 80,000
Murrin Murrin Holdings Property Ltd., 9.375%, 8/31/07 .... USD 50,000 41,500
National Power Corp., 9.625%, 5/15/28 .................... 100,000 63,859
Pan Pacific Industrial Investment Plc, Zero Coupon Bond,
4/28/07 144A (e) ....................................... 300,000 94,989
Petroleos Mexicanos, Medium Term, 8.625%, 12/01/23 144A(e) 145,000 103,675
Philippine Long Distance Telephone Co., 8.350%, 3/06/17 .. 200,000 129,316
Pindo Deli Finance Mauritius Ltd., 10.750%, 10/01/07 ..... 300,000 121,500
Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 ..... 360,000 124,560
Pycsa Panama SA, 10.280%, 12/15/12 144A (e) .............. 100,000 83,625
Quezon Power Philippines Co., 8.860%, 6/15/17 ............ 225,000 138,877
Samsung Electronics Co. Ltd., 8.500%, 11/01/02 ........... 100,000 74,167
Siam Commercial Bank Public Co., 7.500%, 3/15/06 144A(e) . 100,000 45,000
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (e) ........ 500,000 188,010
Tjiwi Kimia Mauritius Ltd., 10.000%, 8/01/04 ............. 150,000 63,000
Total Access Communication Public Co. Ltd., 7.625%,
11/04/01 144A (e) ...................................... 100,000 61,000
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 144A (e) ...................................... 300,000 171,000
-----------
2,504,663
-----------
Health Care -- Services -- 0.6%
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 .......... 75,000 63,180
-----------
Oil & Gas -- 2.2%
Chesapeake Energy Corp., 7.875%, 3/15/04 ................. 50,000 42,000
Chesapeake Energy Corp., 8.500%, 3/15/12 ................. 250,000 192,500
-----------
234,500
-----------
Rail -- Transport -- 0.2%
Missouri Pacific Railroad Co., 4.750%, 1/01/20 ........... 30,000 20,400
-----------
Retail -- General -- 2.9%
Dillon Read Structured Finance Corp., 7.430%, 8/15/18 .... 300,000 264,000
Penn Traffic Co., 9.625%, 4/15/05 ........................ 275,000 49,500
-----------
313,500
-----------
Steel -- 0.6%
Geneva Steel Co., 9.500%, 1/15/04 ........................ 150,000 67,500
-----------
Telecommunications -- 4.3%
Nextel Communications, Inc., Zero Coupon Bond, 10/31/07
(step to 9.750% on 10/31/02) (b) ....................... 145,000 87,000
Nextel Communications, Inc., Zero Coupon Bond, 2/15/08
(step to 9.950% on 2/15/03) (b) ........................ 100,000 59,000
RCN Corp., Zero Coupon Bond, 10/15/07 (step to 11.125%
on 10/15/02) (b) ....................................... 175,000 97,125
RCN Corp., Zero Coupon Bond, 2/15/08 (step to 9.800%
on 2/15/03) (b) ........................................ 100,000 53,000
RCN Corp., Zero Coupon Bond, 7/01/08 (step to 11.000%
on 7/01/03) (b) ........................................ USD 100,000 51,000
Teligent, Inc., Zero Coupon Bond, 3/01/08 (step to 11.500%
on 3/01/03) (b) ........................................ 275,000 107,250
-----------
454,375
-----------
Textile & Apparel -- 2.3%
Phillips Van Heusen Corp., 7.750%, 11/15/23 .............. 250,000 241,832
-----------
Transportation -- 0.7%
American President Cos. Ltd., 8.000%, 1/15/24 ............ 100,000 73,744
-----------
Utilities -- 0.8%
Mobile Energy Services Co. LLC, 8.665%, 1/01/17 .......... 229,301 80,255
-----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $8,042,945) ........................... 5,931,268
-----------
CONVERTIBLE BONDS -- 31.4%
Canadian -- 1.1%
Rogers Communications, Inc., 2.000%, 11/26/05 ............ 190,000 120,293
-----------
Computers -- 2.7%
Cray Research, Inc., 6.125%, 2/01/11 ..................... 113,000 85,880
Data General Corp., 6.000%, 5/15/04 ...................... 50,000 39,562
HMT Technology Corp., 5.750%, 1/15/04 .................... 75,000 50,250
Read Rite Corp., 6.500%, 9/01/04 ......................... 150,000 84,000
S3, Inc., 5.750%, 10/01/03 ............................... 50,000 29,500
-----------
289,192
-----------
Electronics -- 9.4%
Cirrus Logic, Inc., 6.000%, 12/15/03 ..................... 150,000 95,250
Cypress Semiconductor Corp., 6.000%, 10/01/02 ............ 100,000 86,250
EDO Corp., 7.000%, 12/15/11 .............................. 25,000 18,906
Integrated Device Technology, 5.500%, 6/01/02 ............ 50,000 38,000
Kent Electronics Corp., 4.500%, 9/01/04 .................. 250,000 172,500
Lam Research Corp., 5.000%, 9/01/02 ...................... 575,000 447,063
Richardson Electronics Ltd., 7.250%, 12/15/06 ............ 50,000 37,000
Zenith Corp., 6.250%, 4/01/11 (f) ........................ 350,000 106,750
-----------
1,001,719
-----------
Environmental Services -- 0.2%
Air & Water Technologies Corp., 8.000%, 5/15/15 .......... 25,000 18,875
-----------
Foreign Issuer -- 5.6%
Advanced Agro Public Co., 3.500%, 6/17/01 ................ 125,000 108,125
APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 144A (e) . 125,000 47,500
APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 .......... 50,000 19,000
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 ............ 225,000 59,625
Banpu Public Co., 2.750%, 4/10/03 ........................ 25,000 15,750
Burns, Philp, 5.500%, 4/30/04 ............................ USD 50,000 25,500
Empresas ICA Sociedad, 5.000%, 3/15/04 ................... 75,000 49,875
Loxley Public Co. Ltd., 2.500%, 4/04/01 .................. 100,000 20,000
Samsung Electronics Co. Ltd., Zero Coupon Bond, 12/31/07 . 100,000 65,000
Sappi BVI Finance, 7.500%, 8/01/02 ....................... 75,000 60,187
Siam Commercial Bank Public Co., 3.250%, 1/24/04 ......... 250,000 67,500
Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ....... 125,000 58,125
-----------
596,187
-----------
Freight Transportation -- 0.5%
Builders Transportation, Inc., 8.000%, 8/15/05 (f) (g) ... 75,000 94
Worldway Corp., 6.250%, 4/15/11 .......................... 62,000 50,840
-----------
50,934
-----------
Health Care -- Drugs -- 2.4%
Dura Pharmaceuticals, Inc., 3.500%, 7/15/02 .............. 125,000 86,250
Glycomed, Inc., 7.500%, 1/01/03 .......................... 100,000 91,000
NABI, Inc., 6.500%, 2/01/03 .............................. 125,000 74,219
-----------
251,469
-----------
Health Care -- Services -- 0.6%
Tenet Healthcare Corp., 6.000%, 12/01/05 ................. 75,000 62,062
-----------
Home Builders -- 0.6%
Schuler Homes, Inc., 6.500%, 1/15/03 ..................... 70,000 59,675
-----------
Insurance -- 3.7%
Loews Corp., 3.125%, 9/15/07 ............................. 500,000 397,500
-----------
Leisure -- 0.5%
AMF Bowling, Inc., Zero Coupon Bond, 5/12/18 144A (e) .... 600,000 58,500
-----------
Machinery -- 0.2%
Intevac, Inc., 6.500%, 3/01/04 ........................... 25,000 17,438
-----------
Oil & Gas -- 0.3%
Key Energy Group, Inc., 5.000%, 9/15/04 .................. 50,000 30,875
-----------
Real Estate Investment Trusts -- 0.1%
Sizeler Property Investors, Inc., 8.000%, 7/15/03 ........ 15,000 14,063
-----------
Restaurants -- 2.1%
Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 .......... 625,000 10,937
Boston Chicken, Inc., 4.500%, 2/01/04 .................... 100,000 7,000
Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ............... 50,000 22,500
Shoney's, Inc., Zero Coupon Bond, 4/11/04 ................ 350,000 156,625
TPI Enterprises, Inc., 8.250%, 7/15/02 ................... 25,000 21,125
-----------
218,187
-----------
Retail -- Specialty -- 0.6%
CML Group, Inc., 5.500%, 1/15/03 ......................... USD 100,000 25,000
Jacobson Stores, Inc., 6.750%, 12/15/11 .................. 50,000 43,500
-----------
68,500
-----------
Telecommunications -- 0.6%
Broadband Technologies, Inc., 5.000%, 5/15/01 ............ 100,000 58,625
-----------
Textile & Apparel -- 0.2%
Converse, Inc., 7.000%, 6/01/04 .......................... 50,000 24,500
-----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $4,315,745) ........................... 3,338,594
-----------
TOTAL BONDS AND NOTES
(Identified Cost $12,358,690) .......................... 9,269,862
-----------
SHARES
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 3.7% of Net Assets
Foreign Issuer -- 0.6%
Sappi Ltd., ADR (h) ...................................... 17,500 61,250
Siam Commercial Bank Public Co. (h) ...................... 16,500 4,276
-----------
65,526
-----------
Oil & Gas -- 0.2%
Chesapeake Energy Corp. .................................. 16,000 19,000
-----------
Real Estate Investment Trusts -- 2.6%
Associated Estates Realty Corp. .......................... 7,200 131,400
Berkshire Realty Co., Inc. ............................... 8,000 83,500
Meditrust Corp. .......................................... 3,500 59,719
-----------
274,619
-----------
Restaurants -- 0.3%
Advantica Restaurant Group, Inc. (h) ..................... 7,197 34,186
-----------
TOTAL COMMON STOCKS
(Identified Cost $639,150) ............................. 393,331
-----------
PREFERRED STOCKS -- 3.5% of Net Assets
Computer Software & Services -- 0.4%
Unisys Corp., $3.75 ...................................... 1,000 47,375
-----------
Foreign Issuer -- 0.9%
Philippine Long Distance Telephone Co., $3.50, GDS ....... 1,000 39,000
Sakura Finance, 0.750% ................................... 18,000,000 51,191
-----------
90,191
-----------
Metals -- 0.8%
Bethlehem Steel Corp., $3.50 ............................. 2,000 81,500
-----------
Oil & Gas -- 0.7%
Chesapeake Energy Corp., 7.000% 144A (e) ................. 3,500 56,000
Chesapeake Energy Corp., 7.000% .......................... 1,250 20,000
-----------
76,000
-----------
Utilities -- 0.7%
Central Maine Power Co., 3.500% .......................... 1,260 68,985
Entergy Gulf States, Inc., 4.400% ........................ 150 9,300
-----------
78,285
-----------
TOTAL PREFERRED STOCKS
(Identified Cost $500,729) ............................. 373,351
-----------
FACE
AMOUNT
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 2.1% of Net Assets
Repurchase Agreement with State Street Bank and Trust
Co., dated 9/30/98 at 4.750% to be repurchased at
$224,030 on 10/01/98 collateralized by $180,000 U.S. ...
Treasury Bond, 7.500%, due 11/15/16 with a value of
$232,875 ............................................... USD 224,000 224,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $224,000) ............................. 224,000
-----------
TOTAL INVESTMENTS -- 96.4%
(IDENTIFIED COST $13,722,569) (i) ........................ 10,260,544
Cash and Other Assets, Less Liabilities -- 3.6% .......... 383,869
-----------
NET ASSETS -- 100% ......................................... $10,644,413
===========
(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) Floating Rate Bond: Coupon is six month London Interbank Offered Rate (LIBOR) plus .8125%.
(d) All or a portion of income may be received as additional securities.
(e) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(f) Company in Chapter 11 Bankruptcy.
(g) Security in default.
(h) Non-income producing security.
(i) At September 30, 1998, the net unrealized depreciation on investments based on cost of $13,722,569
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 $80,435 and
$3,542,460, respectively, resulting in net unrealized depreciation of $3,462,025.
Key to Abbreviations:
ADR: American Depositary Receipts
CAD: Canadian Dollar
GDS: Global Depositary Shares
USD: United States Dollar
ZAR: South African Rand
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
- ------------------------------------------------------------------------------------------------------
Portfolio of Investments -- As of September 30, 1998
<CAPTION>
FACE
AMOUNT VALUE (a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS AND NOTES -- 96.6% of Net Assets
Banks/Savings & Loans -- 4.6%
Capital One Bank, 5.950%, 2/15/01 ........................ USD 200,000 $ 199,998
Capital One Bank, 6.375%, 2/15/03 ........................ 100,000 100,079
Capital One Bank, 6.830%, 5/17/99 ........................ 70,000 70,613
NationsBank Corp., 7.000%, 9/15/01 ....................... 55,000 57,757
----------
428,447
----------
Canadian -- 3.2%
Government of Canada, 5.500%, 6/01/09 .................... CAD 150,000 102,656
International Semi-Tech Corp., Zero Coupon Bond, 8/15/03
(step to 11.500% on 8/15/00) (b) ....................... USD 250,000 42,500
MacMillan Bloedel Ltd., 6.750%, 2/15/06 .................. 150,000 148,583
----------
293,739
----------
Entertainment -- 1.9%
Time Warner Entertainment Co., Inc., 7.750%, 6/15/05 ..... 155,000 172,806
----------
Financial Services -- 9.1%
Associated Manufactured Housing, 6.475%, 3/15/28 ......... 50,000 51,750
Green Tree Financial Corp., 6.950%, 3/15/27 .............. 200,000 208,346
Household Finance Corp., 5.875%, 9/25/04 ................. 350,000 353,479
OSCC Home Equity Loan Trust, 6.025%, 6/15/08 ............. 223,096 225,624
----------
839,199
----------
Foreign Government/Agency -- 3.3%
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (c) ....... 174,032 103,340
Republic of South Africa, 8.375%, 10/17/06 ............... 250,000 205,000
----------
308,340
----------
Foreign Issuer -- 9.0%
Espirito Santo Centrais Eletricas SA, 10.000%, 7/15/07 ... 150,000 81,000
Gruma SA de CV, 7.625%, 10/15/07 ......................... 150,000 123,000
Perez Companc SA, 8.125%, 7/15/07 144A (d) ............... 250,000 202,500
Southern Peru Ltd., 7.900%, 5/30/07 ...................... 220,000 218,064
Tenaga Nasional Berhad, 7.625%, 4/29/07 144A (d) ......... 125,000 60,000
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 144A (d) ...................................... 220,000 125,400
YPF SA, 7.000%, 10/26/02 ................................. 26,894 26,501
----------
836,465
----------
Government Agencies -- 9.5%
Federal Home Loan Mortgage Corp., 6.000%, 4/15/06 ........ 55,000 55,515
Federal Home Loan Mortgage Corp., 6.250%, 10/15/07 ....... 55,000 57,372
Federal National Mortgage Association, 5.500%, 4/25/06 ... 250,000 251,250
Federal National Mortgage Association, 6.000%, 5/25/08 ... 169,629 171,378
Federal National Mortgage Association, 6.500%, 1/18/16 ... 180,000 181,181
Federal National Mortgage Association, 6.500%, 8/15/16 ... 165,000 167,216
----------
883,912
----------
Health Care -- Products -- 2.7%
Bausch & Lomb, Inc., 6.500%, 8/01/05 ..................... 250,000 255,572
----------
Oil & Gas -- 5.8%
Pioneer Natural Resources Co., 6.500%, 1/15/08 ........... USD 250,000 $ 235,720
R & B Falcon Corp., 6.750%, 4/15/05 ...................... 300,000 303,930
----------
539,650
----------
Real Estate Investment Trusts -- 20.3%
American Health Properties, Inc., 7.050%, 1/15/02 ........ 65,000 65,668
American Health Properties, Inc., 7.500%, 1/15/07 ........ 275,000 280,621
Excel Realty Trust, Inc., 6.875%, 10/15/04 ............... 165,000 172,555
First Industrial, 7.000%, 12/01/06 ....................... 250,000 251,382
Highwoods Realty LP, 6.750%, 12/01/03 .................... 350,000 349,363
Oasis Residential, Inc., 6.750%, 11/15/01 ................ 350,000 356,013
Trinet Corporate Realty Trust, Inc., 6.750%, 3/01/03 ..... 335,000 350,728
Trinet Corporate Realty Trust, Inc., 7.300%, 5/15/01 ..... 55,000 55,866
----------
1,882,196
----------
Securities -- 4.9%
Lehman Brothers Holdings, Inc., 5.750%, 11/15/98 ......... 190,000 189,724
Lehman Brothers Holdings, Inc., 6.125%, 2/01/01 .......... 60,000 58,441
Lehman Brothers Holdings, Inc., 7.125%, 9/15/03 .......... 100,000 100,920
Salomon, Inc., 6.700%, 12/01/98 .......................... 105,000 105,310
----------
454,395
----------
Telecommunications -- 6.6%
Cox Communications, Inc., 6.500%, 11/15/02 ............... 165,000 170,422
Intermedia Communications, Inc., 8.600%, 6/01/08 ......... 125,000 123,750
TCI Communications, Inc., 6.875%, 2/15/06 ................ 290,000 314,322
----------
608,494
----------
Textile & Apparel -- 2.2%
Tommy Hilfiger Corp., 6.500%, 6/01/03 .................... 200,000 201,300
----------
Tobacco -- 4.2%
Philip Morris Cos., Inc., 7.250%, 9/15/01 ................ 65,000 68,084
RJR Nabisco, Inc., 7.625%, 9/15/03 ....................... 65,000 64,421
RJR Nabisco, Inc., 8.250%, 7/01/04 ....................... 90,000 90,497
RJR Nabisco, Inc., 8.750%, 8/15/05 ....................... 160,000 162,715
----------
385,717
----------
Trucking & Leasing -- 2.3%
Amerco, 7.490%, 9/18/01 .................................. 200,000 211,490
----------
U.S. Government -- 7.0%
U.S. Treasury Notes, 5.250%, 8/15/03 ..................... 150,000 156,704
U.S. Treasury Notes, 5.500%, 5/31/00 ..................... 240,000 244,049
U.S. Treasury Notes, 5.500%, 2/15/08 ..................... 100,000 108,172
U.S. Treasury Notes, 5.625%, 2/15/06 ..................... 130,000 140,176
----------
649,101
----------
TOTAL BONDS AND NOTES
(Identified Cost $9,211,604) ........................... 8,950,823
----------
SHORT-TERM INVESTMENT -- 2.0% of Net Assets
Repurchase Agreement with State Street Bank and Trust Co.,
dated 9/30/98 at 4.750% to be repurchased at $180,024 on
10/01/98 collateralized by $145,000 U.S. Treasury Bond,
7.500%, due 11/15/16 with a value of $187,594 .......... USD 180,000 180,000
----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $180,000) ............................. 180,000
----------
TOTAL INVESTMENTS -- 98.6%
(IDENTIFIED COST $9,391,604) (d) ......................... 9,130,823
Cash and Other Assets, Less Liabilities -- 1.4% .......... 133,053
----------
NET ASSETS -- 100% ......................................... $9,263,876
==========
(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 September 30, 1998, the net unrealized depreciation on investments based on cost of $9,394,082
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 $213,501
and $476,760, respectively, resulting in net unrealized depreciation of $263,259.
Key to Abbreviations:
CAD: Canadian Dollar
USD: United States Dollar
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
- -------------------------------------------------------------------------------------------------------
Portfolio of Investments -- As of September 30, 1998
<CAPTION>
FACE
AMOUNT VALUE (A)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS AND NOTES -- 88.9% of Net Assets
NON-CONVERTIBLE BONDS -- 78.3%
Canadian -- 22.4%
Canadian Government, Zero Coupon Bond, 6/01/21 ........... CAD 150,000 $ 29,712
Canadian Government, Zero Coupon Bond, 6/01/25 ........... 940,000 152,299
MacMillan Bloedel Ltd., 7.700%, 2/15/26 .................. USD 100,000 97,553
New Brunswick FM Project, Zero Coupon Bond, 11/30/27 (step
to 6.470% on 5/30/03) 144A (b) (c) ..................... CAD 75,000 37,329
Ontario Hydro, 8.900%, 8/18/22 ........................... 55,000 50,172
Province of Alberta, 5.930%, 9/16/16 ..................... 47,800 33,262
Province of British Columbia, Zero Coupon Bond, 6/09/22 .. 250,000 41,220
Province of British Columbia, Zero Coupon Bond, 8/19/22 .. 605,000 98,641
Province of British Columbia, Zero Coupon Bond, 8/23/24 .. 200,000 29,001
Province of Manitoba, Zero Coupon Bond, 3/05/31 .......... 1,100,000 111,461
Province of Manitoba, 6.500%, 9/22/17 .................... 25,000 17,839
Province of Manitoba, 7.750%, 12/22/25 ................... 55,000 46,218
Province of Ontario, Zero Coupon Bond, 6/02/27 ........... 1,000,000 125,129
Province of Saskatchewan (Certificate of Deposit), Zero
Coupon Bond, 2/04/22 ................................... 650,000 111,093
Province of Saskatchewan (Certificate of Deposit), Zero
Coupon Bond, 5/30/25 ................................... 215,000 30,359
----------
1,011,288
----------
Communications -- 0.5%
Arch Communications Group, Inc., Zero Coupon Bond,
3/15/08 (step to 10.875% on 3/15/01) (b) ............... USD 50,000 23,750
----------
Computers -- 2.1%
Seagate Technology, Inc., 7.450%, 3/01/37 ................ 25,000 25,059
Seagate Technology, Inc., 7.875%, 3/01/17 ................ 75,000 71,532
----------
96,591
----------
Foreign Government/Agency -- 3.7%
New South Wales Treasury, Zero Coupon Bond, 11/23/20 ..... AUD 300,000 52,890
Republic of Brazil, 10.125%, 5/15/27 ..................... USD 10,000 6,275
Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (d) ....... 29,005 17,223
Republic of South Africa, 12.500%, 12/21/06 .............. ZAR 400,000 52,256
Republic of South Africa, 13.000%, 8/31/10 ............... 125,000 16,531
Republic of South Africa, 13.500%, 9/15/15 ............... 150,000 20,101
----------
165,276
----------
Foreign Issuer -- 7.4%
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (c) ... USD 50,000 21,578
Pan Pacific Industrial Investment Plc, Zero Coupon Bond,
4/28/07 144A (c) ....................................... 125,000 39,579
PDVSA Finance Ltd., 7.500%, 11/15/28 144A (c) ............ 50,000 41,076
Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 ..... 100,000 34,600
Quezon Power Philippines Co., 8.860%, 6/15/17 ............ 50,000 30,862
Samsung Electronics Co. Ltd., 7.700%, 10/01/27 144A (c) .. 100,000 47,000
Telekom Malaysia Berhad, 7.875%, 8/01/25 144A (c) ........ 125,000 66,261
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c) ........ USD 100,000 37,602
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 144A (c) ...................................... 25,000 14,250
----------
332,808
----------
Government Agencies -- 1.3%
Federal National Mortgage Association, Zero Coupon Bond,
10/29/07 ............................................... NZD 200,000 58,720
----------
Health Care -- Products -- 2.2%
Bausch & Lomb, Inc., 7.125%, 8/01/28 ..................... USD 100,000 98,635
----------
Health Care -- Services -- 2.8%
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 .......... 150,000 126,360
----------
Home Builders -- 0.5%
Pulte Corp., 7.625%, 10/15/17 ............................ 25,000 24,770
----------
Oil & Gas -- 6.5%
Pioneer Natural Resources Co., 7.200%, 1/15/28 ........... 40,000 34,917
R & B Falcon Corp., 7.375%, 4/15/18 ...................... 100,000 95,112
Seagull Energy Corp., 7.500%, 9/15/27 .................... 180,000 163,060
----------
293,089
----------
Paper Products -- 3.2%
Mead Corp., 7.125%, 8/01/25 .............................. 50,000 48,014
Westvaco Corp., 7.000%, 8/15/23 .......................... 100,000 95,266
----------
143,280
----------
Rail -- Transport -- 3.5%
Louisville & Nashville Railroad Co., 2.875%, 4/01/03 ..... 4,000 3,561
Louisville & Nashville Railroad Co., 3.375%, 4/01/03 ..... 12,000 11,195
Missouri Pacific Railroad Co., 4.250%, 1/01/05 ........... 39,000 35,925
Missouri Pacific Railroad Co., 4.750%, 1/01/20 ........... 34,000 23,120
Missouri Pacific Railroad Co., 4.750%, 1/01/30 ........... 86,000 56,868
Missouri Pacific Railroad Co., 5.000%, 1/01/45 ........... 46,000 28,520
----------
159,189
----------
Real Estate Investment Trusts -- 12.8%
First Industrial, 7.500%, 12/01/17 ....................... 100,000 103,012
First Industrial, 7.600%, 7/15/28 ........................ 150,000 141,283
Highwoods Realty LP, 7.500%, 4/15/18 ..................... 50,000 47,456
Security Capital Group, Inc., 7.700%, 6/15/28 144A (c) ... 125,000 117,813
Trinet Corporate Realty Trust, Inc., 7.700%, 7/15/17 ..... 175,000 167,982
----------
577,546
----------
Supranational -- 3.3%
International Bank for Reconstruction & Development, Zero
Coupon Bond, 8/20/07 ................................... NZD 425,000 123,885
International Bank for Reconstruction & Development,
8.000%, 5/23/07 ........................................ 45,000 24,973
----------
148,858
----------
Textile & Apparel -- 0.5%
Kellwood Co., 7.625%, 10/15/17 ........................... USD 25,000 24,405
----------
Tobacco -- 4.2%
Philip Morris Cos., Inc., 7.750%, 1/15/27 ................ 120,000 129,895
RJR Nabisco, Inc., 9.250%, 8/15/13 ....................... 60,000 60,622
----------
190,517
----------
Utilities -- 1.4%
Comed Financing II, 8.500%, 1/15/27 ...................... 60,000 64,652
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $3,721,558) ........................... 3,539,734
----------
CONVERTIBLE BONDS -- 10.6%
Electronics -- 1.5%
Thermedics, Inc., Zero Coupon Bond, 6/01/03 ............ 100,000 68,000
----------
Environmental Services -- 2.1%
Thermo TerraTech, Inc., 4.625%, 5/01/03 144A (c) ......... 110,000 95,013
----------
Foreign Issuer -- 2.2%
Banpu Public Co., 2.750%, 4/10/03 ........................ 20,000 12,600
Burns, Philp, 5.500%, 4/30/04 ............................ 20,000 10,200
Samsung Corp., 0.250%, 6/26/06 ........................... 20,000 17,200
Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ....... 30,000 13,950
Telekom Malaysia Berhad, 4.000%, 10/03/04 ................ 50,000 27,000
Total Access Communication Public Co. Ltd., 2.000%,
5/31/06 ................................................ 30,000 20,700
----------
101,650
----------
Insurance -- 2.0%
Loews Corp., 3.125%, 9/15/07 ............................. 115,000 91,425
----------
Multi-Industry -- 0.5%
Thermo Instrument Systems, Inc., 4.500%, 10/15/03 144A (c) 25,000 20,906
----------
Oil & Gas -- 1.3%
Houston Industries, Inc., 6.000%, 3/15/12 ................ 60,000 57,600
----------
Publishing -- 1.0%
Scholastic Corp., 5.000%, 8/15/05 144A (c) ............... 50,000 46,125
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $536,410) ............................. 480,719
----------
TOTAL BONDS AND NOTES
(Identified Cost $4,257,968) ........................... 4,020,453
----------
SHARES
- -------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 7.2% of Net Assets
Chemicals -- Major -- 3.0%
E.I. du Pont DeNemours & Co., $3.50 ...................... 1,250 90,312
E.I. du Pont DeNemours & Co., $4.50 ...................... 500 45,250
----------
135,562
----------
Oil & Gas -- 0.4%
Weatherford International, Inc., 5.000% .................. 500 16,000
----------
Utilities -- 3.8%
Duquesne Light Co., 3.750% ............................... 100 3,550
Duquesne Light Co., 4.000% ............................... 600 20,025
Entergy Gulf States, Inc., $4.52 ......................... 50 3,250
Entergy New Orleans, Inc., 4.750% ........................ 175 14,044
Houston Lighting & Power Co., $4.00 ...................... 79 5,688
Jersey Central Power & Light Co., 4.000% ................. 310 21,080
New York State Electric & Gas Corp., 3.750% .............. 460 28,520
Northern Indiana Public Service Co., 4.250% .............. 210 15,409
Northern States Power Co., $3.60 ......................... 110 7,143
Wisconsin Electric Power Co., 3.600% ..................... 850 53,550
----------
172,259
----------
TOTAL PREFERRED STOCKS
(Identified Cost $276,656) ............................. 323,821
----------
TOTAL INVESTMENTS -- 96.1%
(IDENTIFIED COST $4,534,624) (d) ......................... 4,344,274
Cash and Other Assets, Less Liabilities -- 3.9% .......... 176,380
----------
NET ASSETS -- 100% ......................................... $4,520,654
==========
(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 September 30, 1998, the net unrealized depreciation on investments based on cost of $4,534,624
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 $240,603
and $430,953, respectively, resulting in net unrealized depreciation of $190,350.
Key to Abbreviations:
AUD: Australian Dollar
CAD: Canadian Dollar
NZD: New Zealand Dollar
USD: United States Dollar
ZAR: South African Rand
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES MUNICIPAL BOND FUND
- ------------------------------------------------------------------------------------------------------
Portfolio of Investments -- As of September 30, 1998
<CAPTION>
FACE
AMOUNT VALUE (a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 97.6% of Net Assets
Alaska -- 1.0%
Alaska State Housing Finance Corp., 6.600%, 12/01/15 ..... $ 90,000 $ 96,628
-----------
Arizona -- 1.6%
Phoenix Street & Highway User, 6.250%, 7/01/11 ........... 150,000 164,007
-----------
California -- 11.5%
California State Department Water Resources,
5.625%, 12/01/12 ....................................... 100,000 107,391
California State Public Works Lease, 5.500%, 6/01/14 ..... 300,000 332,379
Foothill Eastern Transportation Corridor, Zero Coupon
Bond, 1/01/23 .......................................... 500,000 144,990
Foothill Eastern Transportation Corridor, 6.000%,
1/01/16 ................................................ 250,000 276,057
Fresno Sewer Revenue, (AMBAC Insured), 6.250%, 9/01/14 ... 250,000 299,655
-----------
1,160,472
-----------
Connecticut -- 2.1%
Connecticut State Resources Recovery Authority,
7.625%, 1/01/09 ..................................... 200,000 207,240
-----------
District of Columbia -- 2.7%
District of Columbia Water & Sewer, (FSA Insured),
5.500%, 10/01/11 ....................................... 250,000 275,185
-----------
Florida -- 5.6%
Florida State Board of Education, Capital Outlay,
5.000%, 6/01/19 ........................................ 300,000 302,946
Florida State, General Obligation, 5.250%, 7/01/15 ....... 250,000 263,845
-----------
566,791
-----------
Hawaii -- 5.0%
Hawaii State, 4.750%, 4/01/18 ............................ 300,000 297,363
Honolulu, Hawaii, General Obligation, 5.000%, 10/01/13 ... 200,000 209,264
-----------
506,627
-----------
Illinois -- 14.0%
Chicago Metropolitan Water Reclamation, 5.950%, 12/01/07 . 300,000 341,799
Chicago O'Hare International Airport, 5.000%, 1/01/16 .... 300,000 299,634
Chicago, Illinois, General Obligation, (AMBAC Insured),
5.250%, 1/01/15 ........................................ 250,000 260,202
Illinois Development Finance Authority Pollution Control,
7.250%, 6/01/11 ........................................ 25,000 27,048
Illinois State Sales Tax Revenue, 6.375%, 6/15/14 ........ 150,000 169,839
Illinois State Sales Tax Revenue, (FGIC Insured),
5.000%, 6/15/16 ........................................ 300,000 305,523
-----------
1,404,045
-----------
Louisiana -- 2.1%
Regional Transportation Authority, (FGIC Insured),
8.000%, 12/01/08 ....................................... 200,000 205,474
-----------
Maryland -- 2.5%
Baltimore Maryland Pollution Control, 5.350%, 4/01/08 .... 225,000 245,655
-----------
Massachusetts -- 2.5%
Commonwealth of Massachusetts Water Pollution Control,
5.000%, 8/01/14 ........................................ 250,000 254,913
-----------
Michigan -- 5.1%
Detroit, Michigan, (MBIA Insured), 5.000%, 4/01/06 ....... 250,000 265,210
Michigan State Trunk Line, Refunding Series A, 4.750%,
11/01/20 ............................................... 250,000 244,965
-----------
510,175
-----------
New Jersey -- 5.1%
New Jersey Building Authority State Building,
5.750%, 6/15/09 ........................................ 250,000 281,482
New Jersey State Turnpike Authority, 6.500%, 1/01/08 ..... 200,000 232,450
-----------
513,932
-----------
New York -- 20.4%
Long Island Power Authority New York, (FSA Insured),
5.000%, 12/01/18 ....................................... 250,000 253,740
New York City Housing Development Corp., 5.625%, 5/01/12 . 150,000 158,822
New York City Transitional Finance Authority,
5.000%, 8/15/13 ........................................ 200,000 205,740
New York State Certificates of Participation, 5.650%, 8/01/02 . 160,000 169,526
New York State Dormitory Authority, 5.100%, 2/15/12 ...... 250,000 258,230
New York State Dormitory Authority, 6.375%, 7/01/08 ...... 85,000 92,743
New York State Dormitory Authority, 6.500%, 5/15/05 ...... 250,000 285,420
New York State Environmental Pollution Control,
5.150%, 6/15/13 ........................................ 125,000 131,115
New York State Environmental Pollution Control,
5.750%, 6/15/10 ........................................ 250,000 283,302
New York State, General Obligation, 5.250%, 7/15/10 ...... 200,000 213,890
-----------
2,052,528
-----------
Pennsylvania -- 2.7%
Indiana County Pennsylvania Industrial Development
Authority, 5.350%, 11/01/10 ............................ 250,000 274,780
-----------
Puerto Rico -- 2.6%
Puerto Rico Electric Power Authority, 6.125%, 7/01/09 .... 225,000 258,365
-----------
Rhode Island -- 2.7%
Rhode Island Convention Center Authority, (MBIA Insured),
5.000%, 5/15/10 ........................................ 250,000 265,630
-----------
Tennessee -- 0.3%
Metropolitan Nashville Airport, (FGIC Insured),
6.600%, 7/01/15 ........................................ 30,000 32,624
-----------
Virginia -- 5.6%
Pocahontas Parkway Associates Virginia Toll,
5.000%, 8/15/11 ........................................ 300,000 297,456
Southeastern Public Service Authority Virginia,
5.150%, 7/01/09 ........................................ 250,000 268,125
-----------
565,581
-----------
Washington -- 2.5%
Tacoma, Washington Electric Systems Revenue, (FGIC
Insured), 6.100%, 1/01/07 .............................. 225,000 249,917
-----------
TOTAL MUNICIPAL BONDS AND NOTES
(Identified Cost $9,183,072)............................ 9,810,569
-----------
SHORT-TERM INVESTMENT -- 1.0% of Net Assets
Repurchase Agreement with State Street Bank and Trust Co.,
dated 9/30/98 at 4.750% to be repurchased at $100,013 on
10/01/98 collateralized by $90,000 U.S. Treasury Note,
6.625%, due 5/15/07 with a value of $105,244 ........... 100,000 100,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $100,000).............................. 100,000
-----------
TOTAL INVESTMENTS -- 98.6%
(IDENTIFIED COST $9,283,072) (b) ....................... 9,910,569
Cash and Other Assets, Less Liabilities -- 1.4% ........ 145,791
-----------
NET ASSETS -- 100% ....................................... $10,056,360
===========
(a) See Note 1.
(b) At September 30, 1998, the net unrealized appreciation on investments based on cost of $9,283,072
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 $648,812
and $21,315, respectively, resulting in net unrealized appreciation of $627,497.
Key to Abbreviations:
AMBAC: American Municipal Bond Assurance Corporation
FGIC: Federal Guaranty Insurance Corporation
FSA: Financial Security Assurance
MBIA: Municipal Bond Insurance Association
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES SHORT-TERM BOND FUND
- -------------------------------------------------------------------------------------------------------
Portfolio of Investments -- As of September 30, 1998
<CAPTION>
FACE
AMOUNT VALUE (A)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS AND NOTES -- 97.7% of Net Assets
Aerospace/Defense -- 2.0%
Lockheed Martin Corp., 6.550%, 5/15/99 ................... $ 570,000 $ 574,326
-----------
Airlines -- 4.4%
Delta Air Lines, Inc., 7.790%, 12/01/98 .................. 800,000 802,920
Northwest Airlines Corp., 8.375%, 3/15/04 ................ 400,000 433,152
-----------
1,236,072
-----------
Banks/Savings & Loans -- 4.3%
Capital One Bank, 6.830%, 5/17/99 ........................ 560,000 564,071
Household Bank FSB, 6.250%, 4/01/99 ...................... 625,000 628,150
-----------
1,192,221
-----------
Computers -- 2.4%
Comdisco, Inc., 5.760%, 1/19/99 .......................... 670,000 669,859
-----------
Consumer Services -- 2.1%
Loewen Group International, Inc., 7.750%, 10/15/01 ....... 560,000 588,543
-----------
Diversified Operations -- 3.1%
Williams Companies, Inc., 5.950%, 2/15/00 ................ 800,000 855,320
-----------
Electronics -- 1.0%
Tektronix, Inc., 7.625%, 8/15/02 ......................... 250,000 269,580
-----------
Entertainment -- 0.7%
Time Warner, Inc., 7.950%, 2/01/00 ....................... 200,000 206,546
-----------
Financial Services -- 5.1%
Fleetwood Credit Grantor Trust, 6.900%, 3/15/12 .......... 338,390 347,665
Ford Motor Credit Co., 6.125%, 4/28/03 ................... 710,000 735,638
Sears Roebuck Acceptance Corp., 6.950%, 5/15/02 .......... 340,000 358,979
-----------
1,442,282
-----------
Foreign Issuer -- 2.2%
PDVSA Finance Ltd., 6.650%, 2/15/06 ...................... 645,000 610,667
-----------
Government Agencies -- 10.2%
Federal Home Loan Mortgage Corp., 6.000%, 2/01/13 ........ 472,542 477,706
Federal Home Loan Mortgage Corp., 6.500%, 5/15/08 ........ 501,876 515,517
Federal National Mortgage Association, 6.000%, 3/01/13 ... 1,080,882 1,092,026
Federal National Mortgage Association, 6.000%, 4/01/13 ... 781,821 789,881
-----------
2,875,130
-----------
Oil & Gas -- 3.6%
Occidental Petroleum Corp., 5.850%, 11/09/98 ............. 500,000 499,995
Occidental Petroleum Corp., 6.400%, 4/01/03 .............. 500,000 506,855
-----------
1,006,850
-----------
Paper Products -- 1.3%
Fort James Corp., 6.625%, 9/15/04 ........................ 360,000 375,412
-----------
Real Estate Investment Trusts -- 0.8%
Oasis Residential, Inc., 7.000%, 11/15/03 ................ 200,000 213,010
-----------
Retail -- General -- 1.5%
Dillard's, Inc., 6.430%, 8/01/04 ......................... 410,000 432,493
-----------
Securities -- 3.9%
Salomon Brothers, Inc., 5.500%, 1/15/99 .................. 640,000 641,139
Salomon Brothers, Inc., 7.125%, 8/01/99 .................. 450,000 456,449
-----------
1,097,588
-----------
Telecommunications -- 1.7%
Sprint Spectrum L.P., Zero Coupon Bond, 8/15/06 (step to
12.500% on 8/15/01) (b) ................................ 560,000 470,400
-----------
Textile & Apparel -- 1.1%
Tommy Hilfiger Corp., 6.500%, 6/01/03 .................... 300,000 301,950
-----------
Trucking & Leasing -- 1.6%
Amerco, 7.850%, 5/15/03 .................................. 420,000 445,788
-----------
U.S. Government -- 40.4%
U.S. Treasury Notes, 6.125%, 7/31/00 ..................... 1,495,000 1,539,850
U.S. Treasury Notes, 6.250%, 10/31/01 .................... 1,000,000 1,052,970
U.S. Treasury Notes, 6.250%, 1/31/02 ..................... 3,245,000 3,431,068
U.S. Treasury Notes, 6.250%, 2/15/03 ..................... 1,265,000 1,360,267
U.S. Treasury Notes, 6.375%, 4/30/99 ..................... 300,000 302,907
U.S. Treasury Notes, 6.625%, 7/31/01 ..................... 900,000 952,875
U.S. Treasury Notes, 6.875%, 8/31/99 ..................... 800,000 815,872
U.S. Treasury Strips, Zero Coupon Bond, 11/15/01 ......... 800,000 699,416
U.S. Treasury Strips, Zero Coupon Bond, 2/15/04 .......... 1,510,000 1,193,912
-----------
11,349,137
-----------
Utilities -- 4.3%
Detroit Edison Co., 6.340%, 3/15/00 ...................... 670,000 681,652
El Paso Electric Co., 7.250%, 2/01/99 .................... 520,000 522,085
-----------
1,203,737
-----------
TOTAL BONDS AND NOTES
(Identified Cost $26,729,072)........................... 27,416,911
-----------
SHORT-TERM INVESTMENT -- 1.5% of Net Assets
Repurchase Agreement with State Street Bank and Trust Co.,
dated 9/30/98 at 4.750% to be repurchased at $432,057 on
10/01/98 collateralized by $310,000 U.S. Treasury Bond,
8.500%, due 2/15/20 with a value of $440,878 ........... 432,000 432,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $432,000) ............................. 432,000
-----------
TOTAL INVESTMENTS -- 99.2%
(IDENTIFIED COST $27,161,072) (c) ...................... 27,848,911
Cash and Other Assets, Less Liabilities -- 0.8% ........ 212,412
-----------
NET ASSETS -- 100% ....................................... $28,061,323
===========
(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 September 30, 1998, the net unrealized appreciation on investments based on cost of $27,167,813
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 $716,303
and $35,205, respectively, resulting in net unrealized appreciation of $681,098.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND
- ------------------------------------------------------------------------------------------------------
Portfolio of Investments -- As of September 30, 1998
<CAPTION>
FACE
AMOUNT VALUE (A)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS AND NOTES -- 99.0% of Net Assets
Government Agencies -- 44.8%
Federal Home Loan Bank, Zero Coupon Bond, 8/04/17 ........ $5,400,000 $ 1,214,460
Government National Mortgage Association, 6.500%, 5/15/28 3,312,889 3,386,369
Government National Mortgage Association, 6.500%, 8/15/28 1,298,909 1,327,719
Government National Mortgage Association, 6.500%, 8/15/28 749,342 765,962
Government National Mortgage Association, 7.000%, 1/15/28 957,391 988,200
Government National Mortgage Association, 7.500%, 8/15/26 516,805 535,699
Government National Mortgage Association, 7.500%, 9/15/27 2,051,593 2,126,600
Tennessee Valley Authority, 8.625%, 11/15/29 ............. 2,514,000 2,744,785
-----------
13,089,794
-----------
U.S. Government -- 54.2%
U.S. Treasury Bonds, 3.625%, 4/15/28 (b) ................. 2,797,181 2,789,321
U.S. Treasury Bonds, 6.125%, 11/15/27 .................... 2,050,000 2,363,261
U.S. Treasury Bonds, 7.250%, 5/15/16 ..................... 3,525,000 4,375,406
U.S. Treasury Bonds, 7.500%, 11/15/24 .................... 2,910,000 3,861,657
U.S. Treasury Notes, 3.375%, 1/15/07 (b) ................. 2,265,890 2,231,902
U.S. Treasury Notes, 5.750%, 11/15/00 .................... 235,000 241,425
-----------
15,862,972
-----------
TOTAL BONDS AND NOTES
(Identified Cost $27,584,230) .......................... 28,952,766
-----------
TOTAL INVESTMENTS -- 99.0%
(IDENTIFIED COST $27,584,230) (c) ..................... 28,952,766
Cash and Other Assets, Less Liabilities -- 1.0% ...... 293,141
-----------
NET ASSETS -- 100% .......................................... $29,245,907
===========
(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 September 30, 1998, the net unrealized appreciation on investments based on cost of $27,584,230
for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost and aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over value were $1,368,536
and $0, respectively, resulting in net unrealized appreciation of $1,368,536.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1998
GLOBAL
BOND BOND
FUND FUND
--------------- ---------------
<S> <C> <C>
ASSETS
Investments at value ............................................... $ 1,520,614,110 $ 35,557,694
Cash ............................................................... 260 832
Foreign currency at value .......................................... 61 148
Receivable for:
Fund shares sold ................................................. 3,508,700 39,178
Securities sold .................................................. 15,653,125 1,426,405
Dividends and interest -- net .................................... 23,137,217 830,456
Due from the adviser (Note 3) ...................................... 101,445 18,094
Other assets ....................................................... 0 0
--------------- ---------------
1,563,014,918 37,872,807
--------------- ---------------
LIABILITIES
Payable for:
Securities purchased ............................................. 50,641,504 0
Fund shares redeemed ............................................. 1,464,440 1,405
Forward foreign currency exchange contracts (Note 1D) ............ 0 149,024
Dividends declared ............................................... 0 0
Payable to custodian bank .......................................... 0 1,426,405
Accrued expenses:
Management fees (Note 3) ......................................... 733,238 17,557
Trustees' fees (Note 3A) ......................................... 1,568 1,568
Administrative fees .............................................. 59,854 1,805
Other .............................................................. 264,443 39,496
--------------- ---------------
53,165,047 1,637,260
--------------- ---------------
NET ASSETS ........................................................... $ 1,509,849,871 $ 36,235,547
=============== ===============
Net Assets consist of:
Capital paid in .................................................. $ 1,551,346,834 $ 37,341,928
Undistributed (or Distribution in excess of) net
investment income .............................................. 30,934,988 1,753,479
Accumulated net realized gain (loss) ............................. 41,919,124 853,078
Unrealized appreciation (depreciation) on:
Investments .................................................... (114,342,746) (3,588,664)
Foreign currency translations .................................. (8,329) (124,274)
--------------- ---------------
NET ASSETS ........................................................... $ 1,509,849,871 $ 36,235,547
=============== ===============
INSTITUTIONAL CLASS:
Net assets ......................................................... $ 1,455,312,061 $ 29,859,958
Shares of beneficial interest outstanding, no par value ............ 118,291,602 2,501,977
Net asset vlue redemption price per Institutional share* ........... $ 12.30 $ 11.93
RETAIL CLASS:
Net assets ......................................................... $ 53,908,199 $ 6,375,589
Shares of beneficial interest outstanding, no par value ............ 4,386,184 535,150
Net asset vlue redemption price per Retail share* .................. $ 12.29 $ 11.91
ADMIN CLASS:
Net assets ......................................................... $ 629,611 --
Shares of beneficial interest outstanding, no par value ............ 51,258 --
Net asset vlue redemption price per Admin share .................... $ 12.28 $ --
Identified cost of investments ....................................... $ 1,634,956,856 $ 39,146,358
=============== ===============
* 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
(Note 1I).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
<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>
$10,260,544 $ 9,130,823 $ 4,344,274 $ 9,910,569 $27,848,911 $28,952,766
926 640 81,883 161 199 34,195
0 0 0 0 0 0
246,815 0 59,966 0 1,793 0
30,917 0 82,244 269,409 0 0
273,506 145,557 60,594 150,581 330,629 427,119
23,428 16,627 18,525 10,861 13,743 9,528
5,158 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
10,841,294 9,293,647 4,647,486 10,341,581 28,195,275 29,423,608
----------- ----------- ----------- ----------- ----------- -----------
58,111 0 101,042 247,736 0 0
96,438 0 0 0 88,318 146,907
0 0 0 0 0 0
0 0 0 16,941 13,936 0
0 0 0 0 0 0
5,038 3,047 1,466 3,334 5,721 9,496
1,568 1,568 1,579 1,568 1,568 1,568
643 833 651 421 1,411 1,234
35,083 24,323 22,094 15,221 22,998 18,496
----------- ----------- ----------- ----------- ----------- -----------
196,881 29,771 126,832 285,221 133,952 177,701
----------- ----------- ----------- ----------- ----------- -----------
$10,644,413 $ 9,263,876 $ 4,520,654 $10,056,360 $28,061,323 $29,245,907
=========== =========== =========== =========== =========== ===========
$13,413,582 $ 9,274,647 $ 4,568,600 $ 9,278,171 $27,767,646 $27,931,509
330,861 183,124 75,724 9,525 (1,502) 348,449
361,875 66,882 66,608 141,167 (392,660) (402,587)
(3,462,025) (260,781) (190,350) 627,497 687,839 1,368,536
120 4 72 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
$10,644,413 $ 9,263,876 $ 4,520,654 $10,056,360 $28,061,323 $29,245,907
=========== =========== =========== =========== =========== ===========
$ 6,624,363 $ 8,601,184 $ 2,778,076 $10,056,360 $27,288,330 $29,245,907
810,885 854,576 270,313 840,667 2,739,693 2,562,661
$ 8.17 $ 10.06 $ 10.28 $ 11.96 $ 9.96 $ 11.41
$ 4,020,050 $ 662,692 $ 1,742,578 -- $ 772,993 --
492,458 65,903 169,753 -- 77,616 --
$ 8.16 $ 10.06 $ 10.27 -- $ 9.96 --
-- -- -- -- -- -----------
-- -- -- -- -- -----------
-- -- -- -- -- -----------
$13,722,569 $ 9,391,604 $ 4,534,624 $ 9,283,072 $27,161,072 $27,584,230
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
GLOBAL
BOND BOND
FUND FUND
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME
Dividends* ......................................................... $ 1,170,034 $ 3,104
Interest ........................................................... 92,192,719 1,791,344
--------------- ---------------
93,362,753 1,794,448
--------------- ---------------
Expenses
Management fees (Note 3) ......................................... 6,920,645 155,995
12b-1 fees (Retail Class) ........................................ 90,481 9,472
12b-1 fees (Admin Class) ......................................... 284 0
Trustees' fees and expenses (Note 3A) ............................ 4,210 4,249
Administrative fees .............................................. 543,148 14,509
Custodian and accounting fees .................................... 346,393 58,067
Transfer agent fees (Institutional Class) ........................ 249,079 13,804
Transfer agent fees (Retail Class) ............................... 26,998 15,329
Transfer agent fees (Admin Class) ................................ 5,975 0
Audit and tax services fees ...................................... 38,980 23,683
Registration fees ................................................ 316,927 20,879
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
Other expenses ................................................... 310,716 12,923
--------------- ---------------
Total expenses ................................................... 8,854,410 329,395
Less expenses waived and reimbursed by the investment
adviser (Note 3) ............................................... (112,593) (85,930)
--------------- ---------------
Net expenses ..................................................... 8,741,817 243,465
--------------- ---------------
Net investment income .............................................. 84,620,936 1,550,983
--------------- ---------------
NET REALIZED GAIN (LOSS) ON:
Investments ........................................................ 33,419,958 797,698
Foreign currency transactions ...................................... (290,148) 299,618
--------------- ---------------
Total net realized gain (loss) ..................................... 33,129,810 1,097,316
--------------- ---------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments ........................................................ (145,219,192) (2,246,596)
Foreign currency translations ...................................... 59,219 (271,530)
--------------- ---------------
Total net change in unrealized appreciation
(depreciation) ................................................... (145,159,973) (2,518,126)
--------------- ---------------
Total net realized gain (loss) and change in unrealized
appreciation (depreciation) ...................................... (112,030,163) (1,420,810)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............ $ (27,409,227) $ 130,173
=============== ===============
* Net of foreign withholding taxes of $463 for the High Yield Fund.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
<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>
$ 54,959 $ 0 $ 10,801 $ 0 $ 0 $ 0
893,606 462,506 211,560 366,941 1,181,688 1,008,898
----------- ----------- ----------- ----------- ----------- -----------
948,565 462,506 222,361 366,941 1,181,688 1,008,898
----------- ----------- ----------- ----------- ----------- -----------
50,667 25,473 12,300 28,142 45,845 65,031
9,690 1,017 2,453 0 694 0
0 0 0 0 0 0
4,249 4,249 4,221 4,249 4,249 4,249
6,672 5,918 4,429 3,243 7,865 7,783
52,928 44,503 46,365 36,206 44,711 30,162
13,647 13,810 13,502 13,740 14,308 13,932
13,936 13,590 13,668 0 13,602 0
0 0 0 0 0 0
27,183 18,858 18,858 15,234 15,333 15,233
25,873 21,511 15,990 11,402 19,435 13,433
1,280 0 0 0 0 0
0 5,191 738 0 0 0
522 336 298 0 784 0
7,611 3,749 6,442 7,068 0 8,596
----------- ----------- ----------- ----------- ----------- -----------
214,258 158,205 139,264 119,284 166,826 158,419
(141,220) (122,162) (119,899) (77,070) (74,443) (60,872)
----------- ----------- ----------- ----------- ----------- -----------
73,038 36,043 19,365 42,214 92,383 97,547
----------- ----------- ----------- ----------- ----------- -----------
875,527 426,463 202,996 324,727 1,089,305 911,351
----------- ----------- ----------- ----------- ----------- -----------
281,516 67,050 48,174 145,955 27,770 513,739
(1,244) 0 (1,276) 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
280,272 67,050 46,898 145,955 27,770 513,739
----------- ----------- ----------- ----------- ----------- -----------
(3,203,309) (224,308) (283,786) 92,266 531,158 750,226
171 4 249 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
(3,203,138) (224,304) (283,537) 92,266 531,158 750,226
----------- ----------- ----------- ----------- ----------- -----------
(2,922,866) (157,254) (236,639) 238,221 558,928 1,263,965
----------- ----------- ----------- ----------- ----------- -----------
$(2,047,339) $ 269,209 $ (33,643) $ 562,948 $ 1,648,233 $ 2,175,316
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
GLOBAL
BOND BOND
FUND FUND
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME
Dividends* ......................................................... $ 2,009,993 $ 6,786
Interest ........................................................... 71,767,785 2,009,694
--------------- ---------------
73,777,778 2,016,480
--------------- ---------------
Expenses
Management fees (Note 3) ......................................... 5,460,675 178,622
12b-1 fees (Retail Class) ........................................ 43,311 7,484
Trustees' fees and expenses (Note 3A) ............................ 5,929 5,816
Administrative fees (Note 3C) .................................... 449,885 11,644
Custodian and accounting fees .................................... 328,497 75,735
Transfer agent fees (Institutional Class) ........................ 333,172 25,267
Transfer agent fees (Retail Class) ............................... 33,873 21,667
Audit and tax services fees ...................................... 29,122 25,091
Registration fees ................................................ 219,956 27,724
Amortization of organization expenses (Note 1J):
Institutional Class ............................................ 0 0
Amortization of deferred registration costs (Note 1J):
Institutional Class ............................................ 0 0
Retail Class ................................................... 13,394 11,343
Other expenses ................................................... 148,525 8,467
--------------- ---------------
Total expenses ................................................... 7,066,339 398,860
Less expenses waived and reimbursed by the investment
adviser (Note 3) ............................................... (197,170) (123,445)
--------------- ---------------
Net expenses ..................................................... 6,869,169 275,415
--------------- ---------------
Net investment income (loss) ....................................... 66,908,609 1,741,065
--------------- ---------------
NET REALIZED GAIN (LOSS) ON:
Investments ........................................................ 27,841,001 699,462
Foreign currency transactions ...................................... (159,264) 276,509
--------------- ---------------
Total net realized gain (loss) ..................................... 27,681,737 975,971
--------------- ---------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments ........................................................ 12,005,127 (2,303,180)
Foreign currency translations ...................................... (58,201) 154,594
--------------- ---------------
Total net change in unrealized appreciation (depreciation) ......... 11,946,926 (2,148,586)
--------------- ---------------
Total net realized gain (loss) and change in unrealized
appreciation (depreciation) ...................................... 39,628,663 (1,172,615)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............ $ 106,537,272 $ 568,450
=============== ===============
* Net of foreign withholding taxes of $5,732, $1,696, and $182 for the Bond, Global Bond, and High
Yield Funds, respectively.
** Commencement of operations, January 2, 1997.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
<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>
$ 43,956 $ 0 $ 5,939 $ 0 $ 0 $ 0
507,793 298,034 151,002 469,008 1,127,685 948,463
----------- ----------- ----------- ----------- ----------- -----------
551,749 298,034 156,941 469,008 1,127,685 948,463
----------- ----------- ----------- ----------- ----------- -----------
34,062 17,125 8,585 34,082 41,211 55,096
4,264 342 885 0 449 0
5,816 5,540 5,729 5,816 5,816 5,816
2,892 2,158 1,097 3,960 7,470 6,187
63,118 51,290 56,182 46,480 60,751 36,450
19,019 17,690 18,951 21,061 23,997 22,052
20,947 16,502 18,251 0 18,437 0
21,091 14,175 14,175 21,091 23,091 21,091
31,176 18,055 18,651 15,057 23,483 15,953
1,545 0 0 0 892 0
10,657 20,550 21,851 0 0 0
11,385 481 3,670 0 11,140 0
6,852 8,084 7,230 5,894 9,399 7,086
----------- ----------- ----------- ----------- ----------- -----------
232,824 171,992 175,257 153,441 226,136 169,731
(185,981) (147,955) (162,568) (102,318) (143,266) (87,087)
----------- ----------- ----------- ----------- ----------- -----------
46,843 24,037 12,689 51,123 82,870 82,644
----------- ----------- ----------- ----------- ----------- -----------
504,906 273,997 144,252 417,885 1,044,815 865,819
----------- ----------- ----------- ----------- ----------- -----------
281,905 34,360 53,364 70,207 4,131 377,725
(451) 0 (150) 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
281,454 34,360 53,214 70,207 4,131 377,725
----------- ----------- ----------- ----------- ----------- -----------
(263,120) (36,473) 93,436 291,399 82,076 420,082
(34) 0 (177) 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
(263,154) (36,473) 93,259 291,399 82,076 420,082
----------- ----------- ----------- ----------- ----------- -----------
18,300 (2,113) 146,473 361,606 86,207 797,807
----------- ----------- ----------- ----------- ----------- -----------
$ 523,206 $ 271,884 $ 290,725 $ 779,491 $ 1,131,022 $ 1,663,626
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
BOND FUND
---------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ..................... $ 84,620,936 $ 66,908,609 $ 29,104,161
Net realized gain (loss) .................. 33,129,810 27,681,737 9,930,396
Change in unrealized appreciation
(depreciation) .......................... (145,159,973) 11,946,926 1,537,274
-------------- -------------- --------------
Increase (decrease) in net assets from
operations ............................ (27,409,227) 106,537,272 40,571,831
-------------- -------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................... (51,713,345) (65,355,045) (28,834,672)
Net realized gain on investments ........ 0 (20,396,586) (10,362,123)
RETAIL CLASS
Net investment income ................... (1,623,641) (1,374,734) 0
Net realized gain on investments ........ 0 (518,253) 0
ADMIN CLASS
Net investment income ................... (5,149) 0 0
-------------- -------------- --------------
(53,342,135) (87,644,618) (39,196,795)
-------------- -------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets
derived from capital share
transactions ............................ 295,451,399 735,013,367 284,158,620
-------------- -------------- --------------
Total increase (decrease) in net assets ... 214,700,037 753,906,021 285,533,656
NET ASSETS
Beginning of the period ................... 1,295,149,834 541,243,813 255,710,157
-------------- -------------- --------------
End of the period ......................... $1,509,849,871 $1,295,149,834 $ 541,243,813
============== ============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period ...................... $ 30,934,988 $ (72,275) $ 537,972
============== ============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- ---------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL BOND FUND
---------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ..................... $ 1,550,983 $ 1,741,065 $ 1,015,932
Net realized gain (loss) .................. 1,097,316 975,971 848,733
Change in unrealized appreciation
(depreciation) .......................... (2,518,126) (2,148,586) 503,763
------------ ------------ ------------
Increase (decrease) in net assets from
operations ............................ 130,173 568,450 2,368,428
------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................... 0 (1,536,299) (1,502,252)
In excess of net investment income ...... 0 (277,442) 0
RETAIL CLASS
Net investment income ................... 0 (205,307) 0
In excess of net investment income ...... 0 (34,122) 0
------------ ------------ ------------
0 (2,053,170) (1,502,252)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived
from capital share transactions ......... 3,010,563 8,066,659 15,342,391
------------ ------------ ------------
Total increase (decrease) in net assets ... 3,140,736 6,581,939 16,208,567
NET ASSETS
Beginning of the period ................... 33,094,811 26,512,872 10,304,305
------------ ------------ ------------
End of the period ......................... $ 36,235,547 $ 33,094,811 $ 26,512,872
============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period ......................... $ 1,753,479 $ (156,023) $ (34,950)
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
HIGH YIELD FUND
---------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996*
------------ ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ..................... $ 875,527 $ 504,906 $ 37,520
Net realized gain (loss) .................. 280,272 281,454 (36)
Change in unrealized appreciation
(depreciation) .......................... (3,203,138) (263,154) 4,387
------------ ------------ ------------
Increase (decrease) in net assets from
operations ............................ (2,047,339) 523,206 41,871
------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net Investment Income ................... (283,957) (358,018) (36,708)
Net realized gain on investments ........ 0 (122,085) 0
RETAIL CLASS
Net investment income ................... (259,684) (165,367) 0
Net realized gain on investments ........ 0 (77,373) 0
------------ ------------ ------------
(543,641) (722,843) (36,708)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived
from capital share transactions ......... 4,814,422 6,653,668 1,933,717
------------ ------------ ------------
Redemption Fees (Note 1I) ............... 13,317 14,733 0
------------ ------------ ------------
Total increase (decrease) in net assets ... 2,236,759 6,468,764 1,938,880
NET ASSETS
Beginning of the period ................... 8,407,654 1,938,890 10
------------ ------------ ------------
End of the period ......................... $ 10,644,413 $ 8,407,654 $ 1,938,890
============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period ......................... $ 330,861 $ (313) $ 8,960
============ ============ ============
* Commencement of operations on September 11, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- ----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
INTERMEDIATE MATURITY
BOND FUND
--------------------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997*
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income .............................................. $ 426,463 $ 273,997
Net realized gain (loss) ........................................... 67,050 34,360
Change in unrealized appreciation (depreciation) ................... (224,304) (36,473)
------------ ------------
Increase (decrease) in net assets from operations ................ 269,209 271,884
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ............................................ (255,807) (261,480)
In excess of net investment income ............................... 0 (21,107)
Net realized gain on investments ................................. 0 (9,770)
RETAIL CLASS
Net investment income ............................................ (15,521) (12,922)
In excess of net investment income ............................... 0 (1,154)
Net realized gain on investments ................................. 0 (660)
------------ ------------
(271,328) (307,093)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from capital
share transactions ............................................... 2,538,483 6,762,701
------------ ------------
Total increase (decrease) in net assets ............................ 2,536,364 6,727,492
NET ASSETS
Beginning of the period ............................................ 6,727,512 20
------------ ------------
End of the period .................................................. $ 9,263,876 $ 6,727,512
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period .................................................. $ 183,124 $ (768)
============ ============
* Commencement of operations on January 2, 1997.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
INVESTMENT GRADE BOND FUND
--------------------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997*
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income .............................................. $ 202,996 $ 144,252
Net realized gain (loss) ........................................... 46,898 53,214
Change in unrealized appreciation (depreciation) ................... (283,537) 93,259
------------ ------------
Increase (decrease) in net assets from operations ................ (33,643) 290,725
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ............................................ (87,749) (116,549)
In excess of net investment income ............................... 0 (18,144)
Net realized gain on investments ................................. 0 (26,811)
RETAIL CLASS
Net investment income ............................................ (39,214) (27,969)
In excess of net investment income ............................... 0 (5,864)
Net realized gain on investments ................................. 0 (9,286)
------------ ------------
(126,963) (204,623)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from capital
share transactions ............................................... 1,374,285 3,220,853
------------ ------------
Total increase (decrease) in net assets ............................ 1,213,679 3,306,955
NET ASSETS
Beginning of the period ............................................ 3,306,975 20
------------ ------------
End of the period .................................................. $ 4,520,654 $ 3,306,975
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period .................................................. $ 75,724 $ (44)
============ ============
* Commencement of operations on January 2, 1997.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
MUNICIPAL BOND FUND
---------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ..................... $ 324,727 $ 417,885 $ 372,837
Net realized gain (loss) .................. 145,955 70,207 54,589
Change in unrealized appreciation
(depreciation) .......................... 92,266 291,399 (147,252)
------------ ------------ ------------
Increase (decrease) in net assets from
operations ............................ 562,948 779,491 280,174
------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................... (324,727) (421,574) (372,889)
Net realized gain on investments ........ (11,732) (76,418) (65,728)
------------ ------------ ------------
(336,459) (497,992) (438,617)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived
from capital share transactions ......... 1,077,927 (230,703) 898,750
------------ ------------ ------------
Total increase (decrease) in net assets ... 1,304,416 50,796 740,307
NET ASSETS
Beginning of the period ................... 8,751,944 8,701,148 7,960,841
------------ ------------ ------------
End of the period ......................... $ 10,056,360 $ 8,751,944 $ 8,701,148
============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period ......................... $ 9,525 $ 0 $ 3,777
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
SHORT-TERM BOND FUND
---------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ..................... $ 1,089,305 $ 1,044,815 $ 1,145,418
Net realized gain (loss) .................. 27,770 4,131 (48,327)
Change in unrealized appreciation
(depreciation) .......................... 531,158 82,076 (248,733)
------------ ------------ ------------
Increase (decrease) in net assets from
operations ............................ 1,648,233 1,131,022 848,358
------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................... (1,073,593) (1,046,180) (1,145,361)
RETAIL CLASS
Net investment income ................... (15,712) (10,909) 0
------------ ------------ ------------
(1,089,305) (1,057,089) (1,145,361)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived
from capital share transactions ......... 8,425,891 773,904 (7,513,762)
------------ ------------ ------------
Total increase (decrease) in net assets ... 8,984,819 847,837 (7,810,765)
NET ASSETS
Beginning of the period ................... 19,076,504 18,228,667 26,039,432
------------ ------------ ------------
End of the period ......................... $ 28,061,323 $ 19,076,504 $ 18,228,667
============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period ......................... $ (1,502) $ (3,124) $ 10,736
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
---------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ..................... $ 911,351 $ 865,819 $ 1,351,371
Net realized gain (loss) .................. 513,739 377,725 (716,728)
Change in unrealized appreciation
(depreciation) .......................... 750,226 420,082 (437,793)
------------ ------------ ------------
Increase (decrease) in net assets from
operations ............................ 2,175,316 1,663,626 196,850
------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income ................... (566,117) (857,571) (1,334,711)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived
from capital share transactions ......... 9,968,273 2,670,263 (4,169,172)
------------ ------------ ------------
Total increase (decrease) in net assets ... 11,577,472 3,476,318 (5,307,033)
NET ASSETS
Beginning of the period ................... 17,668,435 14,192,117 19,499,150
------------ ------------ ------------
End of the period ......................... $ 29,245,907 $ 17,668,435 $ 14,192,117
============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period ......................... $ 348,449 $ 3,216 $ (4,942)
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Year Ended December 31,
<TABLE>
<CAPTION>
BOND FUND
---------------------------------------------
INSTITUTIONAL CLASS
---------------------------------------------
1998* 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period ................ $ 12.83 $ 12.38 $ 12.29
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ...................... 0.69 0.86 0.86
Net realized and unrealized gain (loss) on
investments ..................................... (0.78) 0.67 0.35
----------- ----------- -----------
Total from investment operations ................ (0.09) 1.53 1.21
----------- ----------- -----------
LESS DISTRIBUTIONS --
Dividends from net investment income .............. (0.44) (0.86) (0.86)
Distributions in excess of net investment income .. 0.00 0.00 0.00
Distributions from net realized capital gains ..... 0.00 (0.22) (0.26)
----------- ----------- -----------
Total distributions ............................. (0.44) (1.08) (1.12)
----------- ----------- -----------
Net asset value, end of period ...................... $ 12.30 $ 12.83 $ 12.38
=========== =========== ===========
Total return (%)(a)(b) .............................. (0.9) 12.7 10.3
Net assets, end of period (000) ..................... $ 1,455,312 $ 1,261,910 $ 541,244
Ratio of operating expenses to average net
assets (%)(c)(d) .................................. 0.75 0.75 0.75
Ratio of net investment income to average net
assets (%)(c) ..................................... 7.34 7.36 7.93
Portfolio turnover rate (%)(a) ...................... 24 41 42
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 (%)(c) ................. 0.76 0.77 0.75
Without giving effect to the voluntary expense
limitations described in Note 3 to the Financial
Statements net investment income per share would
have been ......................................... $ 0.69 $ 0.85 $ 0.86
* For the nine months ended September 30, 1998.
** From commencement of class operations on January 2, 1997.
*** From commencement of class operations on January 2, 1998.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the period.
Without this reimbursement the Fund's ratio of operating expenses would have been higher.
(e) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND
- -----------------------------------------------------------------------------------------------
ADMIN
INSTITUTIONAL CLASS RETAIL CLASS CLASS
- -------------------------------------------- ---------------------------- ------------
1995 1994 1993 1998* 1997** 1998***
- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 10.05 $ 11.37 $ 10.36 $ 12.82 $ 12.38 $ 12.83
- ----------- ----------- ----------- ----------- ----------- -----------
0.82 0.83 0.84 0.66 0.84(e) 0.47
2.32 (1.29) 1.43 (0.77) 0.65 (0.62)
- ----------- ----------- ----------- ----------- ----------- -----------
3.14 (0.46) 2.27 (0.11) 1.49 (0.15)
- ----------- ----------- ----------- ----------- ----------- -----------
(0.82) (0.84) (0.81) (0.42) (0.83) (0.40)
0.00 (0.02) 0.00 0.00 0.00 0.00
(0.08) 0.00 (0.45) 0.00 (0.22) 0.00
- ----------- ----------- ----------- ----------- ----------- -----------
(0.90) (0.86) (1.26) (0.42) (1.05) (0.40)
- ----------- ----------- ----------- ----------- ----------- -----------
$ 12.29 $ 10.05 $ 11.37 $ 12.29 $ 12.82 $ 12.28
=========== =========== =========== =========== =========== ===========
32.0 (4.1) 22.2 (1.1) 12.4 (1.3)
$ 255,710 $ 82,985 $ 64,222 $ 53,908 $ 33,240 $ 630
0.79 0.84 0.94 1.00 1.00 1.25
8.34 7.92 8.26 7.13 7.09 7.45
35 87 170 24 41 24
0.79 0.84 0.94 1.06 1.20 6.32
$ 0.82 $ 0.83 $ 0.84 $ 0.66 $ 0.82(e) $ 0.15
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Year Ended December 31,
<TABLE>
<CAPTION>
GLOBAL BOND FUND
----------------------------
INSTITUTIONAL CLASS
----------------------------
1998* 1997
----------- -----------
<S> <C> <C>
Net asset value, beginning of period ........................... $ 11.83 $ 12.35
----------- -----------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ................................. 0.53 0.71
Net realized and unrealized gain (loss) on investments ....... (0.43) (0.42)
----------- -----------
Total from investment operations ........................... 0.10 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 ................................. $ 11.93 $ 11.83
=========== ===========
Total return (%)(a)(b) ......................................... 0.9 2.3
Net assets, end of period (000) ................................ $ 29,860 $ 28,401
Ratio of operating expenses to average net assets (%)(c)(d) .... 0.90 0.90
Ratio of net investment income to average net assets (%)(c) .... 6.00 5.88
Portfolio turnover rate (%)(a) ................................. 28 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 (%)(c) .................. 1.18 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 ............................. $ 0.51 $ 0.67
* For the nine months ended September 30, 1998.
** From commencement of class operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the period. Without
this reimbursement the Fund's ratio of operating expenses would have been higher.
(e) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BOND FUND
- -----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
- ------------------------------------------------------------- ----------------------------
1996 1995 1994 1993 1998* 1997**
- ----------- ----------- ----------- ----------- ----------- -----------
<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 0.44 0.63(e)
1.27 1.31 (1.63) 0.96 (0.36) (0.37)
- ----------- ----------- ----------- ----------- ----------- -----------
1.71 2.35 (0.96) 1.50 0.08 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 $ 11.91 $ 11.83
=========== =========== =========== =========== =========== ===========
15.0 23.9 (8.7) 14.6 0.7 2.0
$ 26,513 $ 10,304 $ 25,584 $ 21,378 $ 6,376 $ 4,694
1.50 1.50 1.30 1.50 1.15 1.15
6.37 8.17 7.02 5.54 5.77 5.60
131 148 153 150 28 75
1.77 1.69 1.30 1.51 1.78 2.44
$ 0.42 $ 1.02 $ 0.67 $ 0.54 $ 0.39 $ 0.49(e)
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended December 31,
HIGH YIELD
FUND
------------
INSTITUTIONAL
CLASS
------------
1998*
------------
Net asset value, beginning of period ........................... $ 10.12
---------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ................................. 0.78(e)
Net realized and unrealized gain (loss) on investments ....... (2.28)
---------
Total from investment operations ........................... (1.50)
---------
LESS DISTRIBUTIONS --
Dividends from net investment income ......................... (0.46)
Distributions from net realized capital gains ................ 0.00
---------
Total distributions ........................................ (0.46)
---------
Redemption Fees .............................................. 0.01
---------
Net asset value, end of period ................................. $ 8.17
=========
Total return (%)(a)(b) ......................................... (15.6)
Net assets, end of period (000) ................................ $ 6,624
Ratio of operating expenses to average net assets (%)(c)(d) .... 0.75
Ratio of net investment income to average net assets (%)(c) .... 10.54
Portfolio turnover rate (%)(a) ................................. 33
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 (%)(c) .... 2.42
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been .................. $ 0.65(e)
* For the nine months ended September 30, 1998.
** Commencement of operations on September 11, 1996, and January 2, 1997,
for the Institutional and Retail Classes, respectively.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement the Fund's ratio of
operating expenses would have been higher.
(e) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
<PAGE>
- --------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------
HIGH YIELD FUND
- --------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
- --------------------------- ----------------------------
1997 1996** 1998* 1997**
- ----------- ----------- ----------- -----------
$ 10.11 $ 10.00 $ 10.12 $ 10.11
- ----------- ----------- ----------- -----------
0.83 0.20 0.75(e) 0.85(e)
0.27 0.11 (2.27) 0.23
- ----------- ----------- ----------- -----------
1.10 0.31 (1.52) 1.08
- ----------- ----------- ----------- -----------
(0.86) (0.20) (0.45) (0.84)
(0.26) 0.00 0.00 (0.26)
- ----------- ----------- ----------- -----------
(1.12) (0.20) (0.45) (1.10)
- ----------- ----------- ----------- -----------
0.03 0.00 0.01 0.03
- ----------- ----------- ----------- -----------
$ 10.12 $ 10.11 $ 8.16 $ 10.12
=========== =========== =========== ===========
11.4 3.1 (15.8) 11.2
$ 5,266 $ 1,939 $ 4,020 $ 3,141
0.75 0.75 1.00 1.00
8.96 8.85 10.17 8.75
68 0 33 68
3.81 12.06 2.67 4.79
$ 0.54 $ (0.05) $ 0.63(e) $ 0.48(e)
<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**
----------- ----------- ----------- -----------
<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) (e) .................... 0.51 0.64 0.49 0.64
Net realized and unrealized gain (loss) on
investments ....................................... (0.16) 0.00 (0.15) (0.02)
----------- ----------- ----------- -----------
Total from investment operations .................. 0.35 0.64 0.34 0.62
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS --
Dividends from net investment income ................ (0.32) (0.56) (0.31) (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 ............................... (0.32) (0.61) (0.31) (0.59)
----------- ----------- ----------- -----------
Net asset value, end of period ........................ $ 10.06 $ 10.03 $ 10.06 $ 10.03
=========== =========== =========== ===========
Total return (%)(a)(b) ................................ 3.5 6.4 3.4 6.2
Net assets, end of period (000) ....................... $ 8,601 $ 6,305 $ 663 $ 423
Ratio of operating expenses to average net assets
(%)(c)(d) ........................................... 0.55 0.55 0.80 0.80
Ratio of net investment income to average net assets
(%)(c) .............................................. 6.71 6.38 6.47 6.13
Portfolio turnover rate (%)(a) ........................ 32 119 32 119
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 (%)(c) .............................. 2.27 3.66 5.64 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 (e) ....................................... $ 0.38 $ 0.29 $ 0.12 $ (0.50)
* For the nine months ended September 30, 1998.
** Commencement of fund operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the period. Without
this reimbursement the Fund's ratio of operating expenses would have been higher.
(e) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Year Ended December 31,
<TABLE>
<CAPTION>
INVESTMENT GRADE BOND FUND
---------------------------------------------------------------
INSTITUTIONAL
CLASS RETAIL CLASS
---------------------------- ----------------------------
1998* 1997** 1998* 1997**
----------- ----------- ----------- -----------
<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) ........................ 0.52 0.65 0.48 0.62(e)
Net realized and unrealized gain (loss) on
investments ....................................... (0.50) 0.77 (0.49) 0.78
----------- ----------- ----------- -----------
Total from investment operations .................. 0.02 1.42 (0.01) 1.40
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS --
Dividends from net investment income ................ (0.33) (0.63) (0.31) (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 ............................... (0.33) (0.83) (0.31) (0.81)
----------- ----------- ----------- -----------
Net asset value, end of period ........................ $ 10.28 $ 10.59 $ 10.27 $ 10.59
=========== =========== =========== ===========
Total return (%)(a)(b) ................................ 0.0 14.5 (0.2) 14.3
Net assets, end of period (000) ....................... $ 2,778 $ 2,445 $ 1,743 $ 862
Ratio of operating expenses to average net assets
(%)(c)(d) ........................................... 0.55 0.55 0.80 0.80
Ratio of net investment income to average net assets
(%)(c) .............................................. 6.68 6.74 6.43 6.51
Portfolio turnover rate (%)(a) ........................ 48 112 48 112
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 (%)(c) .............................. 4.19 7.59 5.25 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 ........................................... $ 0.24 $ (0.03) $ 0.15 $ (0.31)(e)
* For the nine months ended September 30, 1998.
** Commencement of fund operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the period. Without
this reimbursement the Fund's ratio of operating expenses would have been higher.
(e) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Year Ended December 31,
<TABLE>
<CAPTION>
MUNICIPAL BOND FUND
-----------------------
INSTITUTIONAL CLASS
-----------------------
1998*
-----------------------
<S> <C>
Net asset value, beginning of period ............................. $ 11.70
---------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ................................... 0.40
Net realized and unrealized gain (loss) on investments ......... 0.27
---------
Total from investment operations ............................. 0.67
---------
LESS DISTRIBUTIONS --
Dividends from net investment income ........................... (0.40)
Distributions from net realized capital gains .................. (0.01)
---------
Total distributions .......................................... (0.41)
---------
Net asset value, end of period ................................... $ 11.96
=========
Total return (%)(a)(b) ........................................... 5.9
Net assets, end of period (000) .................................. $ 10,056
Ratio of operating expenses to average net assets (%)(c)(d) ...... 0.60
Ratio of net investment income to average net assets (%)(c) ...... 4.62
Portfolio turnover rate (%)(a) ................................... 30
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 (%)(c) ... 1.70
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been .................... $ 0.31
* For the nine months ended September 30, 1998.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during
the period. Without this reimbursement the Fund's ratio of operating
expenses would have been higher.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------- ----------- ----------- ----------- -----------
$ 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
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Year Ended December 31,
<TABLE>
<CAPTION>
SHORT-TERM
BOND FUND
-------------------------------
INSTITUTIONAL
CLASS
-------------------------------
1998* 1997
----------- -----------
<S> <C> <C>
Net asset value, beginning of period ........................... $ 9.75 $ 9.70
----------- -----------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ................................. 0.44 0.61
Net realized and unrealized gain (loss) on investments ....... 0.21 0.06
----------- -----------
Total from investment operations ........................... 0.65 0.67
----------- -----------
LESS DISTRIBUTIONS --
Dividends from net investment income ......................... (0.44) (0.62)
----------- -----------
Net asset value, end of period ................................. $ 9.96 $ 9.75
=========== ===========
Total return (%)(a)(b) ......................................... 6.8 7.1
Net assets, end of period (000) ................................ $ 27,288 $ 18,792
Ratio of operating expenses to average net assets (%)(c)(d) .... 0.50 0.50
Ratio of net investment income to average net assets (%)(c) .... 5.94 6.34
Portfolio turnover rate (%)(a) ................................. 47 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 (%)(c) .................. 0.83 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 ............................. $ 0.41 $ 0.55
* For the nine months ended September 30, 1998.
** From commencement of class operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne
other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the period. Without
this reimbursement the Fund's ratio of operating expenses would have been higher.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM BOND FUND
- -----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
- ------------------------------------------------------------- ----------------------------
1996 1995 1994 1993 1998* 1997**
- ----------- ----------- ----------- ----------- ----------- -----------
<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 0.42 0.59
(0.11) 0.35 (0.49) 0.08 0.21 0.06
- ----------- ----------- ----------- ----------- ----------- -----------
0.44 0.98 0.17 0.67 0.63 0.65
- ----------- ----------- ----------- ----------- ----------- -----------
(0.55) (0.63) (0.66) (0.59) (0.42) (0.60)
- ----------- ----------- ----------- ----------- ----------- -----------
$ 9.70 $ 9.81 $ 9.46 $ 9.95 $ 9.96 $ 9.75
=========== =========== =========== =========== =========== ===========
4.7 10.6 1.8 7.0 6.6 6.9
$ 18,229 $ 26,039 $ 19,440 $ 15,226 $ 773 $ 285
1.00 1.00 1.00 1.00 0.75 0.75
5.69 6.46 6.88 5.97 5.66 6.04
120 214 34 81 47 91
1.17 1.03 1.33 1.55 6.00 17.77
$ 0.53 $ 0.62 $ 0.63 $ 0.54 $ 0.03 $ (1.08)
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Year Ended December 31,
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES FUND
-----------------------
INSTITUTIONAL CLASS
-----------------------
1998*
-----------------------
<S> <C>
Net asset value, beginning of period ............................. $ 10.70
---------
INCOME FROM INVESTMENT OPERATIONS --
Net investment income (loss) ................................... 0.43
Net realized and unrealized gain (loss) on investments ......... 0.58
---------
Total from investment operations ............................. 1.01
---------
LESS DISTRIBUTIONS --
Dividends from net investment income ........................... (0.30)
Distributions from net realized capital gains .................. 0.00
---------
Total distributions .......................................... (0.30)
---------
Net asset value, end of period ................................... $ 11.41
=========
Total return (%)(a)(b) ........................................... 9.6
Net assets, end of period (000) .................................. $ 29,246
Ratio of operating expenses to average net assets (%)(c)(d) ...... 0.60
Ratio of net investment income to average net assets (%)(c) ...... 5.61
Portfolio turnover rate (%)(a) ................................... 84
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 (%)(c) ...... 0.97
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been .................... $ 0.40
* For the nine months ended September 30, 1998.
(a) Periods less than one year are not annualized.
(b) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(c) Annualized for periods less than one year.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement the Fund's ratio of
operating expenses would have been higher.
</TABLE>
<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
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
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 includes the following Funds:
<TABLE>
<CAPTION>
Fixed Income Funds Equity Funds
- ------------------ ------------
<S> <C>
Loomis Sayles Bond Fund Loomis Sayles Core Value Fund
Loomis Sayles Global Bond Fund Loomis Sayles Growth Fund
Loomis Sayles High Yield Fund Loomis Sayles International Equity Fund
Loomis Sayles Intermediate Maturity Bond Fund Loomis Sayles Mid-Cap Growth Fund
Loomis Sayles Investment Grade Bond Fund Loomis Sayles Mid-Cap Value Fund
Loomis Sayles Municipal Bond Fund Loomis Sayles Small Cap Growth Fund
Loomis Sayles Short-Term Bond Fund Loomis Sayles Small Cap Value Fund
Loomis Sayles U.S. Government Securities Fund Loomis Sayles Strategic Value Fund
Loomis Sayles Worldwide Fund
</TABLE>
The Fixed Income Funds (excluding the Municipal Bond and U.S. Government
Securities Funds which only offer Institutional shares) offer Institutional
and Retail Class shares, each 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 class'
average net assets, pursuant to a distribution plan adopted in accordance with
Rule 12b-1 under the Investment Company Act of 1940. Retail Class shares have
exclusive voting rights with respect to its distribution plan.
On January 2, 1998, the Bond Fund commenced operations of an additional class
of shares ("Admin Class"). Each class has equal pro rata interest in the
assets of the relevant fund and general voting privileges. 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 service and account
maintenance fees at an annual rate of 0.25% of the Fund's average daily net
assets attributable to the Admin Class. Admin Class shares have exclusive
voting rights with respect to its distribution plan.
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. Effective September 30,
1998, the Board of Trustees approved a change in the fiscal year end of the
Funds to September 30, 1998. Certain amounts in the Statements of Operations
and Statements of Changes in Net Assets for prior periods have been
reclassified to conform to current period presentations. 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 exchange 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 exchange
contracts is determined using contractual currency exchange rates established
at the time of each trade. The cost of foreign currency exchange 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 of 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 September 30, 1998, the Global Bond Fund had
the following open forward foreign currency exchange contracts:
<TABLE>
<CAPTION>
Local Aggregate Unrealized
Delivery Currency Face Total Appreciation
Date Amount Amount Value (Depreciation)
-------- -------- --------- ----- --------------
<S> <C> <C> <C> <C> <C>
Deutsche Mark (sell) 1/21/99 4,300,000 $2,512,269 $2,588,788 $ (76,519)
Japanese Yen (sell) 11/30/98 40,560,000 281,413 299,845 (18,432)
Japanese Yen (buy) 11/30/98 35,560,000 265,462 262,881 (2,581)
Japanese Yen (sell) 2/26/99 145,000,000 1,033,794 1,085,286 (51,492)
---------
$(149,024)
=========
</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 has been 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 September 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.
At September 30, 1998, the Funds listed below had available capital loss
carryforwards. These realized losses are intended to be used to offset future
net capital gains.
Fund Amount
- ---- ------
Short-Term Bond Fund ................................... $390,181*
U.S. Government Securities Fund ........................ 402,587**
*$101,591 and $288,590 will expire on September 30, 2002 and 2004,
respectively.
**$402,587 will expire on September 30, 2004.
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, 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
nine months ended September 30, 1998, the redemption fees amounted to $6,700
and $6,617 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 were 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 nine months ended September 30, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases
----------------------------------
U.S. Government Other
--------------- -----
<S> <C> <C>
Bond Fund ................................................... $150,202,032 $525,082,756
Global Bond Fund ............................................ 298,072 13,353,856
High Yield Fund ............................................. 696,047 7,441,647
Intermediate Maturity Bond Fund ............................. 1,671,347 3,789,452
Investment Grade Bond Fund .................................. 553,306 2,758,836
Municipal Bond Fund ......................................... 952,000 2,910,769
Short-Term Bond Fund ........................................ 15,775,184 3,792,285
U.S. Government Securities Fund ............................. 28,747,530 0
Sales
----------------------------------
U.S. Government Other
--------------- -----
Bond Fund ................................................... $174,818,953 $175,282,623
Global Bond Fund ............................................ 0 9,033,327
High Yield Fund ............................................. 715,559 2,730,909
Intermediate Maturity Bond Fund ............................. 1,610,714 986,011
Investment Grade Bond Fund .................................. 868,559 980,239
Municipal Bond Fund ......................................... 955,328 1,770,140
Short-Term Bond Fund ........................................ 7,785,978 3,425,291
U.S. Government Securities Fund ............................. 18,411,388 0
</TABLE>
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES -- For the nine
months ended September 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 nine months
ended September 30, 1998 provided for fees at the following annual percentage
rate of each Fund's average daily net assets indicated below. 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:
<TABLE>
<CAPTION>
Maximum Expense Ratios
------------------------------------
Management Institutional Retail Admin
Fund Fees Class Class Class
---- ---------- ------------- ----- -----
<S> <C> <C> <C> <C>
Bond Fund .................................... 0.60% 0.75% 1.00% 1.25%
Global Bond Fund ............................. 0.60% 0.90% 1.15% --
High Yield Fund .............................. 0.60% 0.75% 1.00% --
Intermediate Maturity Bond Fund .............. 0.40% 0.55% 0.80% --
Investment Grade Bond Fund ................... 0.40% 0.55% 0.80% --
Municipal Bond Fund .......................... 0.40% 0.60% -- --
Short-Term Bond Fund ......................... 0.25% 0.50% 0.75% --
U.S. Government Securities Fund .............. 0.40% 0.60% -- --
</TABLE>
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 September 30, 1998, Loomis Sayles held 113,817 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 ............................................ 683,281 955,007
Global Bond Fund ..................................... 641,305 213,173
High Yield Fund ...................................... 0 237,018
Intermediate Maturity Bond Fund ...................... 313,522 137,326
Investment Grade Bond Fund ........................... 0 54,525
Short-Term Bond Fund ................................. 3,047 322,032
U.S. Government Securities Fund ...................... 742,734 519,509
C. ADMINISTRATIVE FEES -- Through May 31, 1997, New England Funds, L.P. (a
subsidiary of New England Investment Companies) performed certain
administrative, accounting and other services for the Trust. The expenses of
those services, which were paid by the Trust, include the following: (i)
expenses for personnel performing bookeeping, accounting, internal auditing,
financial reporting functions and clerical functions relating to the Funds,
and (ii) expenses for services required in connection with preparation of
registration statements and prospectuses, shareholder reports and reports and
questionnaires for SEC compliance. For the period ended May 31, 1997, these
expenses amounted to $66,997 for the eight Loomis Sayles Funds presented
herein and are included in the financial statements as Administrative fees.
Effective June 1, 1997, Loomis Sayles contracted with State Street Bank and
Trust Company ("State Street") as Administrator to perform these services.
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. LINE OF CREDIT -- On March 5, 1998, the Trust entered into an agreement
which enables each Fund to borrow under a $25 million unsecured line of
credit. Borrowings will be made solely to temporarily finance the repurchase
of capital shares. Interest is charged to each participating Fund based on its
borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In
addition, a commitment fee of 0.07% per annum, payable at the end of each
calendar quarter, is accrued by the Trust and apportioned among the Funds
based on each Fund's average daily unused portion of the line of credit.
During the nine months ended September 30, 1998, the Funds had no borrowings
under the agreement.
6. CAPITAL STOCK TRANSACTIONS -- The tables below summarize the transactions
in Fund shares for the periods indicated:
<TABLE>
<CAPTION>
Loomis Sayles Bond Fund
--------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended Year Ended
September 30, 1998 December 31, 1997 December 31, 1996
------------------------------ ----------------------------- ------------------------------
Institutional Class
Shares Shares Amount Shares Amount Shares Amount
- ------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Issued from the sale
of shares ............. 49,569,713 $643,942,732 63,069,086 $809,023,819 30,770,089 $380,541,907
Issued in connection
with the reinvestment
of distributions ...... 3,232,707 42,426,449 5,492,835 70,465,752 2,592,881 31,775,376
Redeemed ............... (32,878,290) (415,107,300) (13,902,007) (177,561,664) (10,467,220) (128,158,663)
----------- ------------ ----------- ------------ ----------- ------------
Net change ............. 19,924,130 $271,261,881 54,659,914 $701,927,907 22,895,750 $284,158,620
=========== ============ =========== ============ =========== ============
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ------ ------ ------- -------
Issued from the sale
of shares ............. 2,932,181 $ 38,054,173 2,944,758 $ 37,693,272
Issued in connection
with the
reinvestment of
distributions ......... 108,877 1,427,318 124,248 1,597,794
Redeemed ............... (1,247,077) (15,934,708) (476,803) (6,205,606)
----------- ------------ ----------- ------------
Net change ............. 1,793,981 $ 23,546,783 2,592,203 $ 33,085,460
=========== ============ =========== ============
Admin Class Shares** Shares Amount
- -------------------- ------ ------
Issued from the sale
of shares ............. 56,540 $ 710,656
Issued in connection
with the
reinvestment of
distributions ......... 273 3,555
Redeemed ............... (5,555) (71,476)
----------- ------------
Net change ............. 51,258 $ 642,735
=========== ============
*From January 2, 1997 (commencement of class operations).
**From January 2, 1998 (commencement of class operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Global Bond Fund
--------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended Year Ended
September 30, 1998 December 31, 1997 December 31, 1996
------------------------------ ----------------------------- ------------------------------
Institutional Class Shares Shares Amount Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Issued from the sale
of shares ............. 318,651 $ 3,936,730 450,349 $ 5,703,587 1,525,167 $ 18,653,771
Issued in connection
with the
reinvestment of
distributions ......... 0 0 141,324 1,676,109 92,817 1,145,834
Redeemed ............... (217,195) (2,625,824) (338,278) (4,226,586) (375,310) (4,457,214)
----------- ------------ ----------- ------------ ----------- ------------
Net change ............. 101,456 $ 1,310,906 253,395 $ 3,153,110 1,242,674 $ 15,342,391
=========== ============ =========== ============ =========== ============
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ------ ------ ------- -------
Issued from the sale
of shares ............. 348,774 $ 4,233,202 568,889 $ 7,115,633
Issued in connection
with the
reinvestment of
distributions ......... 0 0 18,404 218,453
Redeemed ............... (210,389) (2,533,545) (190,528) (2,420,537)
----------- ------------ ----------- ------------
Net change ............. 138,385 $ 1,699,657 396,765 $ 4,913,549
=========== ============ =========== ============
*From January 2, 1997 (commencement of class operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles High Yield Fund
--------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended Year Ended
September 30, 1998 December 31, 1997 December 31, 1996**
------------------------------ ----------------------------- ------------------------------
Institutional Class Shares Shares Amount Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Issued from the sale
of shares ............. 403,057 $ 3,805,612 345,923 $ 3,577,772 189,979 $ 1,915,483
Issued in connection
with the
reinvestment of
distributions ......... 24,997 253,653 41,158 424,573 3,048 30,815
Redeemed ............... (137,504) (1,355,726) (58,540) (600,500) (1,234) (12,581)
----------- ------------ ----------- ------------ ----------- ------------
Net change ............. 290,550 $ 2,703,539 328,541 $ 3,401,845 191,793 $ 1,933,717
=========== ============ =========== ============ =========== ============
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ------ ------ ------- -------
Issued from the sale
of shares ......... 518,798 $ 5,290,659 343,422 $ 3,602,850
Issued in connection
with the
reinvestment of
distributions ..... 20,313 204,878 20,171 207,933
Redeemed ........... (357,083) (3,384,654) (53,163) (558,960)
------- ------------ ------- ------------
Net change ......... 182,028 $ 2,110,883 310,430 $ 3,251,823
======= ============ ======= ============
*From January 2, 1997 (commencement of class operations).
**From September 11, 1996 (commencement of operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Intermediate Maturity Bond Fund
-------------------------------------------------------------------
Nine Months Ended Year Ended
September 30, 1998 December 31, 1997*
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Institutional Class Shares Shares Amount Shares Amount
Issued from the sale
of shares ............ 233,463 $ 2,368,867 713,449 $ 7,196,630
Issued in connection
with the reinvestment of
distributions ......... 22,897 232,444 26,496 269,072
Redeemed ............... (30,328) (303,969) (111,401) (1,136,539)
----------- ------------ ----------- ------------
Net change ............. 226,032 $ 2,297,342 628,544 $ 6,329,163
=========== ============ =========== ============
Retail Class Shares Shares Amount Shares Amount
- ------------------- ------ ------ ------ ------
Issued from the sale
of shares ............ 24,281 $ 245,832 40,713 $ 419,211
Issued in connection
with the reinvestment of
distributions ......... 1,478 15,004 1,410 14,327
Redeemed ............... (1,979) (19,695) 0 0
----------- ------------ ----------- ------------
Net change ............. 23,780 $ 241,141 42,123 $ 433,538
=========== ============ =========== ============
*From January 2, 1997 (commencement of operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Investment Grade Bond Fund
-------------------------------------------------------------------
Nine Months Ended Year Ended
September 30, 1998 December 31, 1997*
------------------------------ ------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued from the sale
of shares ............ 83,930 $ 899,316 217,283 $ 2,218,354
Issued in connection
with the reinvestment of
distributions ......... 6,974 75,189 14,216 150,066
Redeemed ............... (51,401) (544,680) (689) (7,042)
----------- ------------ ----------- ------------
Net change ............. 39,503 $ 429,825 230,810 $ 2,361,378
=========== ============ =========== ============
Retail Class Shares Shares Amount Shares Amount
- ------------------- ------ ------ ------ ------
Issued from the sale
of shares ............ 175,281 $ 1,867,621 80,460 $ 849,980
Issued in connection
with the reinvestment of
distributions ......... 3,339 35,976 3,968 42,198
Redeemed ............... (90,210) (959,137) (3,085) (32,703)
----------- ------------ ----------- ------------
Net change ............. 88,410 $ 944,460 81,343 $ 859,475
=========== ============ =========== ============
*From January 2, 1997 (commencement of operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Municipal Bond Fund
--------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended Year Ended
September 30, 1998 December 31, 1997 December 31, 1996
------------------------------ ----------------------------- ------------------------------
Institutional Class Shares Shares Amount Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Issued from the sale
of shares ............. 143,442 $ 1,678,346 146,945 $ 1,692,152 130,141 $ 1,455,513
Issued in connection
with the reinvestment
of distributions ...... 18,995 222,768 29,000 331,863 28,120 315,911
Redeemed ............... (70,077) (823,187) (198,471) (2,254,718) (77,656) (872,674)
----------- ------------ ----------- ------------ ----------- ------------
Net change ............. 92,360 $ 1,077,927 (22,526) $ (230,703) 80,605 $ 898,750
=========== ============ =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Short-Term Bond Fund
--------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended Year Ended
September 30, 1998 December 31, 1997 December 31, 1996
------------------------------ ----------------------------- ------------------------------
Institutional Class Shares Shares Amount Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Issued from the sale
of shares ............. 1,356,852 $ 13,272,732 1,184,127 $ 11,497,925 1,283,882 $ 12,426,078
Issued in connection
with the reinvestment
of distributions ...... 96,022 940,824 94,766 918,722 106,059 1,027,017
Redeemed ............... (639,795) (6,265,207) (1,232,069) (11,926,660) (2,163,540) (20,966,857)
----------- ------------ ----------- ------------ ----------- ------------
Net change ............. 813,079 $ 7,948,349 46,824 $ 489,987 (773,599) $ (7,513,762)
=========== ============ =========== ============ =========== ============
Retail Class Shares Shares Amount Shares* Amount*
- ------------------- ------ ------ ------- -------
Issued from the sale
of shares ............. 82,800 $ 812,944 45,040 $ 436,711
Issued in connection
with the reinvestment
of distributions ...... 1,371 13,467 1,073 10,404
Redeemed ............... (35,738) (348,869) (16,930) (163,198)
----------- ------------ ----------- ------------
Net change ............. 48,433 $ 477,542 29,183 $ 283,917
=========== ============ =========== ============
*From January 2, 1997 (commencement of class operations).
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles U.S. Government Securities Fund
--------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended Year Ended
September 30, 1998 December 31, 1997 December 31, 1996
------------------------------ ----------------------------- ------------------------------
Institutional Class Shares Shares Amount Shares Amount Shares Amount
- ------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Issued from the sale
of shares ............. 1,006,132 $ 11,019,527 444,723 $ 4,676,742 864,647 $ 8,983,613
Issued in connection
with the reinvestment
of distributions ...... 47,646 517,587 77,074 792,744 129,259 1,274,113
Redeemed ............... (142,676) (1,568,841) (277,818) (2,799,223) (1,418,646) (14,426,898)
----------- ------------ ----------- ------------ ----------- ------------
Net change ............. 911,102 $ 9,968,273 243,979 $ 2,670,263 (424,740) $ (4,169,172)
=========== ============ =========== ============ =========== ============
</TABLE>
1998 U.S. TAX AND DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
A. CAPITAL GAINS DISTRIBUTIONS -- Pursuant to Internal Revenue Section
852(b), the Municipal Bond Fund paid distributions of $11,732, which have been
designated as capital gains distributions for the fiscal year ended September
30, 1998.
B. CORPORATE DIVIDENDS RECEIVED DEDUCTION -- For the fiscal year ended September
30, 1998, a percentage of dividends distributed by the Funds listed below
qualify for the dividends received deduction for corporate shareholders. These
percentages are as follows:
Qualifying
Percentage
----------
Bond Fund .............................................. 1.17%
High Yield Fund ........................................ 3.67%
Investment Grade Bond Fund ............................. 4.86%
C. EXEMPT INTEREST DIVIDENDS -- 100% of the dividends paid by the Municipal
Bond Fund from net investment income for the nine months ended September 30,
1998, constituted exempt interest dividends for Federal income tax purposes.
<PAGE>
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- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of the Loomis Sayles Fixed Income Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Fixed Income Funds (consisting of the Loomis Sayles Bond Fund, Global Bond
Fund, High Yield Fund, Intermediate Maturity Bond Fund, Investment Grade Bond
Fund, Municipal Bond Fund, Short-Term Bond Fund, and U.S. Government
Securities Fund) (collectively, the "Funds") at September 30, 1998, and the
results of their operations, the changes in their net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statements presentation. We believe that
our audits, which included confirmation of investments owned at September 30,
1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 18, 1998
<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.
