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LOOMIS
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SAYLES
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FUNDS
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STATEMENT OF ADDITIONAL
INFORMATION
January 1, 1999, as revised November 2, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THIS STATEMENT
OF ADDITIONAL INFORMATION RELATES TO THE PROSPECTUS OR PROSPECTUSES OF EACH
SERIES ("FUND") OF LOOMIS SAYLES FUNDS DATED JANUARY 1, 1999, AS REVISED FROM
TIME TO TIME. EACH REFERENCE TO THE PROSPECTUS IN THIS STATEMENT OF ADDITIONAL
INFORMATION SHALL INCLUDE ALL OF THE FUNDS' CURRENT PROSPECTUSES, UNLESS
OTHERWISE NOTED. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH THE APPLICABLE PROSPECTUS. A COPY OF EACH PROSPECTUS MAY BE
OBTAINED FROM LOOMIS SAYLES FUNDS, ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS
02111.
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TABLE OF CONTENTS
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INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS........................... 3
MANAGEMENT OF THE TRUST.................................................... 10
INVESTMENT ADVISORY AND OTHER SERVICES..................................... 23
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 26
DESCRIPTION OF THE TRUST................................................... 28
Voting Rights............................................................ 29
Shareholder and Trustee Liability........................................ 30
How to Buy Shares........................................................ 30
Net Asset Value.......................................................... 30
SHAREHOLDER SERVICES....................................................... 31
Open Accounts............................................................ 31
Systematic Withdrawal Plan............................................... 31
Exchange Privilege....................................................... 32
IRAs..................................................................... 32
Redemptions.............................................................. 32
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS ............... 33
FINANCIAL STATEMENTS....................................................... 36
CALCULATION OF YIELD AND TOTAL RETURN...................................... 36
PERFORMANCE COMPARISONS.................................................... 37
PERFORMANCE DATA........................................................... 40
APPENDIX A--PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION................. 44
APPENDIX B--ADVERTISING AND PROMOTIONAL LITERATURE......................... 46
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INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of each series ("Fund") of Loomis
Sayles Funds (the "Trust"), are summarized in the Prospectus under "Investment
Objectives and Policies" and "More Information About the Funds' Investments
and Risk Factors." The investment policies of each Fund set forth in the
Prospectus and in this Statement of Additional Information may be changed by
the Funds' adviser, subject to review and approval by the Trust's board of
trustees, without shareholder approval except that the investment objective of
each Fund as set forth in the Prospectus and any Fund policy explicitly
identified as "fundamental" may not be changed without the approval of the
holders of a majority of the outstanding shares of the relevant Fund (which in
the Prospectus and this Statement of Additional Information means the lesser
of (i) 67% of the shares of that Fund represented at a meeting at which 50% of
the outstanding shares are represented or (ii) more than 50% of the
outstanding shares). Except in the case of the 15% limitation on illiquid
securities, the percentage limitations set forth below and in the Prospectuses
will apply at the time a security is purchased and will not be considered
violated unless an excess or deficiency occurs or exists immediately after and
as a result of such purchase.
In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of each Fund
(and those marked with an asterisk are fundamental policies of each Fund):
Each Fund will not:
(1) Invest in companies for the purpose of exercising control or
management.
*(2) Act as underwriter, except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.
*(3) Invest in oil, gas or other mineral leases, rights or royalty
contracts or in real estate, commodities or commodity contracts. (This
restriction does not prevent any Fund from engaging in transactions in
futures contracts relating to securities indexes, interest rates or
financial instruments or options, or from investing in issuers that invest
or deal in the foregoing types of assets or from purchasing securities that
are secured by real estate.)
*(4) Make loans, except that each of the Mid-Cap Growth, Mid-Cap Value,
Small Cap Growth, Investment Grade Bond and Intermediate Maturity Bond Funds
may lend its portfolio securities to the extent permitted under the Investment
Company Act of 1940 (the "1940 Act"). (For purposes of this investment
restriction, neither (i) entering into repurchase agreements nor (ii)
purchasing bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
(5) With respect to 75% of its total assets, purchase any security (other
than a U.S. Government Security) if, as a result, more than 5% of the
Fund's total assets (taken at current value) would then be invested in
securities of a single issuer. (For purposes of this restriction, the
Municipal Bond Fund treats each state and each separate political
subdivision, agency, authority or instrumentality of such state, each
multistate agency or authority, and each guarantor, if any, of obligations
of any such issuer, as a separate issuer, provided that the assets and
revenues of the issuer are separate from those of the government(s) that
created the subdivision, agency, authority or instrumentality.)
(6) With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of an issuer.
(7) Pledge, mortgage, hypothecate or otherwise encumber any of its
assets, except that each Fund may pledge assets having a value not
exceeding 10% of its total assets to secure borrowings permitted by
restriction (9) below. (For the purpose of this restriction, collateral
arrangements with respect to options, futures contracts and options on
futures contracts and with respect to initial and variation margin are not
deemed to be a pledge or other encumbrance of assets.)
*(8) Purchase any security (other than U.S. Government Securities) if, as
a result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities
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category, gas, electric, water and telephone companies will be considered
as being in separate industries.) Tax-exempt securities issued by
governments or political subdivisions of governments and purchased by the
Municipal Bond Fund are not subject to this restriction, since such issuers
are not members of any industry.
*(9) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower, nor
borrow any money except as a temporary measure for extraordinary or
emergency purposes.
(10) Purchase securities on margin (except such short term credits as are
necessary for clearance of transactions); or make short sales (except
where, by virtue of ownership of other securities, it has the right to
obtain, without payment of additional consideration, securities equivalent
in kind and amount to those sold).
(11) Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or sale
of portfolio securities with Loomis Sayles or accounts under its management
to reduce brokerage commissions, to average prices among them or to
facilitate such transactions is not considered a trading account in
securities for purposes of this restriction.)
(12) Purchase any illiquid security, including any security that is not
readily marketable, if, as a result, more than 15% of the Fund's net assets
(based on current value) would then be invested in such securities.
(13) Write or purchase puts, calls or combinations of both except that
each Fund may (1) acquire warrants or rights to subscribe to securities of
companies issuing such warrants or rights, or of parents or subsidiaries of
such companies, (2) purchase and sell put and call options on securities
and (3) write, purchase and sell put and call options on currencies and may
enter into currency forward contracts.
*(14) Issue senior securities. (For the purpose of this restriction none
of the following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (7) above; any borrowing
permitted by restriction (9) above; any collateral arrangements with
respect to options, futures contracts and options on futures contracts and
with respect to initial and variation margin; and the purchase or sale of
options, forward contracts, futures contracts or options on futures
contracts.)
Although the Funds have no current intention of investing in repurchase
agreements, they intend, based on the views of the staff of the Securities and
Exchange Commission (the "SEC"), to restrict their investments in repurchase
agreements maturing in more than seven days, together with other investments
in illiquid securities, to the percentage permitted by restriction (12) above.
U.S. Government Securities
U.S. Government Securities include direct obligations of the U.S. Treasury,
as well as securities issued or guaranteed by U.S. Government agencies,
authorities and instrumentalities, including, among others, the Government
National Mortgage Association, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, the Federal Housing Administration, the
Resolution Funding Corporation, the Federal Farm Credit Banks, the Federal
Home Loan Bank, the Tennessee Valley Authority, the Student Loan Marketing
Association and the Small Business Administration. More detailed information
about some of these categories of U.S. Government Securities follows.
U.S. Treasury Bills--Direct obligations of the United States Treasury which
are issued in maturities of one year or less. No interest is paid on Treasury
bills; instead, they are issued at a discount and repaid at full face value
when they mature. They are backed by the full faith and credit of the United
States Government.
U.S. Treasury Notes and Bonds--Direct obligations of the United States
Treasury issued in maturities that vary between one and forty years, with
interest normally payable every six months. They are backed by the full faith
and credit of the United States Government.
"Ginnie Maes"--Debt securities issued by a mortgage banker or other
mortgagee which represent an interest in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home
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Administration or guaranteed by the Veterans Administration. The Government
National Mortgage Association ("GNMA") guarantees the timely payment of
principal and interest when such payments are due, whether or not these
amounts are collected by the issuer of these certificates on the underlying
mortgages. An assistant attorney general of the United States has rendered an
opinion that the guarantee by GNMA is a general obligation of the United
States backed by its full faith and credit. Mortgages included in single
family or multi-family residential mortgage pools backing an issue of Ginnie
Maes have a maximum maturity of up to 30 years. Scheduled payments of
principal and interest are made to the registered holders of Ginnie Maes (such
as the Fund) each month. Unscheduled prepayments may be made by homeowners, or
as a result of a default. Prepayments are passed through to the registered
holder of Ginnie Maes along with regular monthly payments of principal and
interest.
"Fannie Maes"--Fannie Mae is a government-sponsored corporation owned
entirely by private stockholders that purchases residential mortgages from a
list of approved seller/servicers. Fannie Maes are pass-through securities
issued by Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae but are not backed by the full faith and credit of the
United States Government.
"Freddie Macs"--The Federal Home Loan Mortgage Corporation ("FHLMC") is a
corporate instrumentality of the United States Government. Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the United States
Government.
As described in the Prospectus, U.S. Government Securities generally do not
involve the same credit risks associated with investments in other types of
fixed-income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed-income securities. Like other fixed-income securities,
however, the values of U.S. Government Securities change as interest rates
fluctuate. Fluctuations in the value of portfolio securities will not affect
interest income on existing portfolio securities but will be reflected in the
Fund's net asset value.
When-Issued Securities
As described in the Prospectus, each Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-
upon price on a specified future date. Such agreements might be entered into,
for example, when a Fund that invests in fixed income securities anticipates a
decline in interest rates and is able to obtain a more advantageous yield by
committing currently to purchase securities to be issued later. When a Fund
purchases securities in this manner (i.e. on a when-issued or delayed-delivery
basis), it is required to create a segregated account with the Trust's
custodian and to maintain in that account liquid assets in an amount equal to
or greater than, on a daily basis, the amount of the Fund's when-issued or
delayed-delivery commitments. Each Fund will make commitments to purchase on a
when-issued or delayed-delivery basis only securities meeting that Fund's
investment criteria. The Fund may take delivery of these securities or, if it
is deemed advisable as a matter of investment strategy, the Fund may sell
these securities before the settlement date. When the time comes to pay for
when-issued or delayed-delivery securities, the Fund will meet its obligations
from then available cash flow or the sale of securities, or from the sale of
the when-issued or delayed-delivery securities themselves (which may have a
value greater or less than the Fund's payment obligation).
Convertible Securities
Convertible securities include corporate bonds, notes or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities. Convertible securities also include
other securities, such as warrants, that provide an opportunity for equity
participation. Because convertible securities can be converted into equity
securities, their values will normally vary in some proportion
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with those of the underlying equity securities. Convertible securities usually
provide a higher yield than the underlying equity, however, so that the price
decline of a convertible security may sometimes be less substantial than that
of the underlying equity security.
Zero Coupon Bonds
Zero coupon bonds are debt obligations that do not entitle the holder to any
periodic payments of interest either for the entire life of the obligation or
for an initial period after the issuance of the obligations. Such bonds are
issued and traded at a discount from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer. The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates
to a greater degree than do non-zero coupon bonds having similar maturities
and credit quality. In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code (the "Code"),
each Fund must distribute each year at least 90% of its net investment income,
including the original issue discount accrued on zero coupon bonds. Because a
Fund investing in zero coupon bonds will not on a current basis receive cash
payments from the issuer in respect of accrued original issue discount, the
Fund may have to distribute cash obtained from other sources in order to
satisfy the 90% distribution requirement under the Code. Such cash might be
obtained from selling other portfolio holdings of the Fund. In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might
otherwise make it undesirable for the Fund to sell such securities at such
time.
Repurchase Agreements
Each Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or,
to the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days
or less from the date of original purchase). The resale price is in excess of
the purchase price and reflects an agreed upon market rate unrelated to the
coupon rate on the purchased security. Such transactions afford the Funds the
opportunity to earn a return on temporarily available cash at minimal market
risk. While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality
of the United States Government, the obligation of the seller is not
guaranteed by the U.S. Government and there is a risk that the seller may fail
to repurchase the underlying security. In such event, the Fund would attempt
to exercise rights with respect to the underlying security, including possible
disposition in the market. However, the Fund may be subject to various delays
and risks of loss, including (a) possible declines in the value of the
underlying security during the period while the Fund seeks to enforce its
rights thereto, (b) possible reduced levels of income and lack of income
during this period and (c) inability to enforce rights and the expenses
involved in attempted enforcement.
Real Estate Investment Trusts
REITs involve certain unique risks in addition to those risks associated
with investing in the real estate industry in general (such as possible
declines in the value of real estate, lack of availability of mortgage funds
or extended vacancies of property). Equity REITs may be affected by changes in
the value of the underlying property owned by the REITs, while mortgage REITs
may be affected by the quality of any credit extended. REITs are dependent
upon management skills, are not diversified, are subject to heavy cash flow
dependency, risks of default by borrowers and self-liquidation. REITs are also
subject to the possibilities of failing to qualify for tax-free pass-through
of income under the Code, and failing to maintain their exemptions from
registration under the "1940 Act."
Investment in REITs involves risk similar to those associated with investing
in small capitalization companies. REITs may have limited financial resources,
may trade less frequently and in a limited volume and may be subject to more
abrupt or erratic price movements than larger securities.
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Rule 144A Securities
Each of the Funds may purchase Rule 144A securities. These are privately
offered securities that can be resold only to certain qualified institutional
buyers. Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid. Under the guidelines,
Loomis Sayles considers such factors as: (1) the frequency of trades and
quotes for a security; (2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades therefor.
Tax Exempt Bonds
Tax exempt bonds include debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities such as bridges, highways, hospitals, housing, mass transportation,
schools, streets, and water and sewer works. Other public purposes for which
tax exempt bonds may be issued include the refunding of outstanding
obligations, obtaining funds for general operating expenses, and obtaining
funds to lend to other public institutions and facilities. In addition, prior
to the Tax Reform Act of 1986, certain debt obligations known as industrial
development bonds could be issued by or on behalf of public authorities to
obtain funds to provide privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port
or parking facilities, air or water pollution control facilities and certain
local facilities for water supply, gas, electricity, or sewage or solid waste
disposal. Such obligations are included within the term tax exempt bonds if
the interest paid thereon is, in the opinion of bond counsel, exempt from
federal income tax. Interest on certain industrial development bonds used to
fund the construction, equipment, repair or improvement of privately operated
industrial or commercial facilities may also be exempt from federal income
tax. The Tax Reform Act of 1986 eliminated some types of tax exempt industrial
revenue bonds but retained others under the general category of "private
activity bonds." The interest on so-called "private activity bonds" is exempt
from ordinary federal income taxation but is treated as a tax preference item
in computing a shareholder's alternative minimum tax liability. The Municipal
Bond Fund may invest up to 20% of its net assets in private activity bonds.
The Municipal Bond Fund may not be a desirable investment for "substantial
users" of facilities financed by industrial development bonds or for "related
persons" of substantial users. See "Income Dividends, Capital Gain
Distributions and Tax Status."
The two principal classifications of tax exempt bonds are general obligation
bonds and limited obligation (or revenue) bonds. General obligation bonds are
obligations involving the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues and not from any
particular fund or source. The characteristics and method of enforcement of
general obligation bonds vary according to the law applicable to the
particular issuer, and payment may be dependent upon an appropriation by the
issuer's legislative body. Limited obligation bonds are payable only from the
revenues derived from a particular facility or class of facilities, or in some
cases from the proceeds of a special excise or other specific revenue source
such as the user of the facility. Tax exempt industrial development bonds and
private activity bonds are in most cases revenue bonds and generally are not
payable from the unrestricted revenues of the issuer. The credit and quality
of such bonds are usually directly related to the credit standing of the
corporate user of the facilities. Principal and interest on such bonds is the
responsibility of the corporate user (and any guarantor).
Prices and yields on tax exempt bonds are dependent on a variety of factors,
including general money market conditions, the financial condition of the
issuer, general conditions of the tax exempt bond market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. A number of these factors, including the ratings of particular issues,
are subject to change from time to time. Information about the financial
condition of an issuer of tax exempt bonds may not be as extensive as that
made available by corporations whose securities are publicly traded.
As noted in the Prospectus, obligations of issuers of tax exempt bonds are
subject to the provisions of bankruptcy, insolvency and other laws, such as
the Federal Bankruptcy Reform Act of 1978, affecting the rights
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and remedies of creditors. Congress or state legislatures may seek to extend
the time for payment of principal or interest, or both, or to impose other
constraints upon enforcement of such obligations. There is also the
possibility that, as a result of litigation or other conditions, the power or
ability of issuers to meet their obligations for the payment of interest and
principal on their tax exempt bonds may be materially affected, or their
obligations may be found to be invalid or unenforceable. Such litigation or
conditions may from time to time have the effect of introducing uncertainties
in the market for tax exempt bonds or certain segments thereof, or materially
affecting the credit risk with respect to particular bonds. Adverse economic,
business, legal or political developments might affect all or a substantial
portion of the Fund's tax exempt bonds in the same manner.
From time to time the Municipal Bond Fund may have less than 80% of its net
assets invested in tax exempt bonds (1) for defensive purposes when deemed
prudent in the judgment of Loomis Sayles to protect shareholders' capital or
(2) on a temporary basis for liquidity purposes or pending the investment of
proceeds from sales of Fund shares. The ability of the Fund to invest in
securities other than tax exempt bonds is limited by a requirement of the Code
that at least 50% of the Fund's total assets be invested in tax exempt
securities at the end of each calendar quarter. See "Income Dividends, Capital
Gain Distributions and Tax Status."
The Municipal Bond Fund may purchase and sell portfolio investments to take
advantage of changes or anticipated changes in yield relationships, markets or
economic conditions. The Fund may also sell tax exempt bonds due to changes in
the adviser's evaluation of the issuer or cash needs resulting from redemption
requests for Fund shares. The secondary market for tax exempt bonds typically
has been less liquid than that for taxable debt securities, and this may
affect the Fund's ability to sell particular tax exempt bonds, especially in
periods when other investors are attempting to sell the same securities.
Foreign Currency Transactions
Each of the Funds (except the Municipal Bond Fund) may invest in securities
of foreign issuers and may enter into forward foreign currency exchange
contracts, or buy or sell options on foreign currencies, in order to protect
against uncertainty in the level of future foreign exchange rates. Since
investment in securities of foreign issuers will usually involve currencies of
foreign countries, and since a Fund may temporarily hold funds in bank
deposits in foreign currencies during the course of investment programs, the
value of the assets of a Fund as measured in United States dollars may be
affected by changes in currency exchange rates and exchange control
regulations, and a Fund may incur costs in connection with conversion between
various currencies.
A Fund may enter into forward contracts under two circumstances. First, when
a Fund enters into a contract for the purchase or sale of a security
denominated or traded in a market in which settlement is made in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount
of dollars, of the amount of foreign currency involved in the underlying
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar
and the subject foreign currency during the period between the date on which
the investment is purchased or sold and the date on which payment is made or
received.
Second, when Loomis Sayles believes that the currency of a particular
country may suffer a substantial decline against another currency, it may
enter into a forward contract to sell, for a fixed amount of another currency,
the amount of the first currency approximating the value of some or all of the
Fund's portfolio investments denominated in the first currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in a currency will change as a consequence of market movements in
the value of those investments between the date the forward contract is
entered into and the date it matures.
The Funds generally will not enter into forward contracts with a term of
greater than one year.
Options on foreign currencies are similar to forward contracts, except that
one party to the option (the holder) is not contractually bound to buy or sell
the specified currency. Instead, the holder has discretion whether to
"exercise" the option and thereby require the other party to buy or sell the
currency on the terms specified in
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the option. Options transactions involve transaction costs and, like forward
contract transactions, involve the risk that the other party may default on
its obligations (if the options are not traded on an established exchange) and
the risk that expected movements in the relative value of currencies may not
occur, resulting in an imperfect hedge or a loss to the Fund.
Each Fund, in conjunction with its transactions in forward contracts,
options and futures (including the International Equity, Worldwide and Global
Bond Funds' transactions in options on securities described below), will
maintain in a segregated account with its custodian liquid assets with a
value, marked to market on a daily basis, sufficient to satisfy the Fund's
outstanding obligations under such contracts, options and futures.
Options
As described in the Prospectus, each of the Funds, may for hedging purposes
or to enhance investment return, purchase and sell call and put options.
An option entitles the holder to receive (in the case of a call option) or
to sell (in the case of a put option) a particular security at a specified
exercise price. An "American style" option allows exercise of the option at
any time during the term of the option. A "European style" option allows an
option to be exercised only at the end of its term. Options may be traded on
or off an established securities exchange.
If the holder of an option wishes to terminate its position, it may seek to
effect a closing sale transaction by selling an option identical to the option
previously purchased. The effect of the purchase is that the previous option
position will be canceled. A Fund will realize a profit from closing out an
option if the price received for selling the offsetting position is more than
the premium paid to purchase the option; the Fund will realize a loss from
closing out an option transaction if the price received for selling the
offsetting option is less than the premium paid to purchase the option.
The use of options involves risks. One risk arises because of the imperfect
correlation between movements in the price of options and movements in the
price of the securities that are the subject of the hedge. The Fund's hedging
strategies will not be fully effective if such imperfect correlation occurs.
Price movement correlation may be distorted by illiquidity in the options
markets and the participation of speculators in such markets. If an
insufficient number of contracts are traded, commercial users may not deal in
options because they do not want to assume the risk that they may not be able
to close out their positions within a reasonable amount of time. In such
instances, options market prices may be driven by different forces than those
driving the market in the underlying securities, and price spreads between
these markets may widen. The participation of speculators in the market
enhances its liquidity. Nonetheless, the trading activities of speculators in
the options markets may create temporary price distortions unrelated to the
market in the underlying securities.
An exchange-traded option may be closed out only on an exchange which
generally provides a liquid secondary market for an option of the same series.
If a liquid secondary market for an exchange-traded option does not exist, it
might not be possible to effect a closing transaction with respect to a
particular option, with the result that the Fund would have to exercise the
option in order to accomplish the desired hedge. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation or other clearing organization may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future
date to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding options
on that exchange that had been issued by the Options Clearing Corporation as a
result of trades on that exchange would continue to be exercisable in
accordance with their terms.
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The successful use of options depends in part on the ability of Loomis
Sayles to forecast correctly the direction and extent of interest rate, stock
price or currency value movements within a given time frame. To the extent
interest rates, stock prices or currency values move in a direction opposite
to that anticipated, the Fund may realize a loss on the hedging transaction
that is not fully or partially offset by an increase in the value of portfolio
securities. In addition, whether or not interest rates or the relevant stock
price or relevant currency values move during the period that the Fund holds
options positions, the Fund will pay the cost of taking those positions (i.e.,
brokerage costs). As a result of these factors, the Fund's total return for
such period may be less than if it had not engaged in the hedging transaction.
An over-the-counter option (an option not traded on an established exchange)
may be closed out only with the other party to the original option
transaction. While the Fund will seek to enter into over-the-counter options
only with dealers who agree to or are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that the Fund
will be able to liquidate an over-the-counter option at a favorable price at
any time prior to its expiration. Accordingly, the Fund might have to exercise
an over-the-counter option it holds in order to achieve the intended hedge.
Over-the-counter options are not subject to the protections afforded
purchasers of listed options by the Options Clearing Corporation or other
clearing organization.
The staff of the SEC has taken the position that over-the-counter options
should be treated as illiquid securities for purposes of each Fund's
investment restriction prohibiting it from investing more than 15% of its net
assets in illiquid securities. The Funds intend to comply with this position.
Income earned by a Fund from its hedging activities will be treated as
capital gain and, if not offset by net recognized capital losses incurred by
the Fund, will be distributed to shareholders in taxable distributions.
Although gain from options transactions may hedge against a decline in the
value of a Fund's portfolio securities, that gain, to the extent not offset by
losses, will be distributed in light of certain tax considerations and will
constitute a distribution of that portion of the value preserved against
decline.
Small Companies
Investments in companies with relatively small capitalization may involve
greater risk than is usually associated with more established companies. These
companies often have limited product lines, markets or financial resources and
they may be dependent upon a relatively small management group. Their
securities may have limited marketability and may be subject to more abrupt or
erratic movements in price than securities of companies with larger
capitalization or market averages in general. The net asset values of funds
that invest in companies with smaller capitalization therefore may fluctuate
more widely than market averages.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
JOSEPH ALAIMO--Trustee. 727 N. Bank Lane, Lake Forest, Illinois. President,
Wintrust Asset Management Company.
RICHARD S. HOLWAY--Trustee. 1314 Seaspray Lane, Sanibel, Florida. Retired;
formerly, Vice President, Loomis Sayles. Director, Sandwich Cooperative Bank.
MICHAEL T. MURRAY--Trustee. 404 N. Western Ave., Lake Forest, Illinois.
Retired; formerly, Vice President, Loomis Sayles.
*DANIEL J. FUSS--President and Trustee. Executive Vice President and
Director, Loomis Sayles.
- --------
* Trustee deemed an "interested person" of the Trust, as defined by the 1940
Act.
10
<PAGE>
MARK BARIBEAU--Vice President. Vice President, Loomis Sayles.
SHEILA M. BARRY--Secretary and Compliance Officer. Assistant General Counsel
and Vice President, Loomis Sayles. Formerly, Senior Counsel and Vice
President, New England Funds, L.P.
ROBERT J. BLANDING--Executive Vice President. 465 First Street West, Sonoma,
California. President, Chairman, Director and Chief Executive Officer, Loomis
Sayles.
JAMES C. CARROLL--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles. Formerly, Managing Director and
Senior Energy Analyst at Paine Webber, Inc.
MARY C. CHAMPAGNE--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
E. JOHN DEBEER--Vice President. Vice President, Loomis Sayles.
RODERICK H. DILLON, JR.--Vice President. Vice President, Loomis Sayles.
WILLIAM H. EIGEN, JR.--Vice President. Vice President, Loomis Sayles;
formerly Vice President, INVESCO Funds Group and Vice President, The Travelers
Corp.
CHRISTOPHER R. ELY--Vice President. Vice President, Loomis Sayles; formerly
Senior Vice President and portfolio manager, Keystone Investment Management
Company, Inc.
QUENTIN P. FAULKNER--Vice President. Vice President, Loomis Sayles.
PHILIP C. FINE--Vice President. Vice President, Loomis Sayles; formerly Vice
President and portfolio manager, Keystone Investment Management Company, Inc.
KATHLEEN C. GAFFNEY--Vice President. Vice President, Loomis Sayles.
ISAAC GREEN--Vice President. 1533 N. Woodward, Bloomfield Hills, Michigan.
Executive Vice President and Director, Loomis Sayles.
MARTHA F. HODGMAN--Vice President. Vice President, Loomis Sayles.
MARK W. HOLLAND--Treasurer. Vice President and Director, Loomis Sayles.
JOHN HYLL--Vice President. 155 North Lake Avenue, Pasadena, California. Vice
President, Loomis Sayles.
JEFFREY L. MEADE--Vice President. Executive Vice President, Chief Operating
Officer and Director, Loomis Sayles.
ESWAR MENON--Vice President. Vice President, Loomis Sayles. Formerly,
Portfolio Manager at Nicholas-Applegate Capital Management since 1995. From 1990
- - 1995, he was employed as an Equity Analyst by Koaneman Capital Management and
as a Senior Engineer by Integrated Device Technology.
ALEX MUROMCEW--Vice President. Vice President, Loomis Sayles. Formerly,
Portfolio Manager at Nicholas-Applegate Capital Management since 1996. From
1993 - 1996, he was an investment analyst with Teton Partners, L.P.
KENT P. NEWMARK--Vice President. 555 California Street, San Francisco,
California. Vice President, Managing Partner and Director, Loomis Sayles.
DAWN ALSTON-PAIGE--Vice President. Vice President, Loomis Sayles.
11
<PAGE>
JEFFREY C. PETHERICK--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
BRUCE G. PICARD, JR.--Vice President. Vice President, Loomis Sayles.
LAUREN B. PITALIS--Vice President. Vice President, Loomis Sayles; formerly
Vice President and Assistant Secretary of Harris Associates Investment Trust.
DAVID L. SMITH--Vice President. Vice President, Loomis Sayles; formerly Vice
President and portfolio manager, Keystone Investment Management Company, Inc.
SANDRA P. TICHENOR--Vice President. 465 First Street West, Sonoma,
California. General Counsel, Executive Vice President, Director, Secretary and
Clerk, Loomis Sayles. Formerly, Partner, Heller, Ehrman, White & McAuliffe.
JOHN TRIBOLET--Vice President. Vice President, Loomis Sayles. Formerly,
Portfolio Manager at Nicholas-Applegate Capital Management since 1997. From
1995 to 1997, he was a full time MBA student at the Universary of Chicago. Prior
to 1995, he spent three years in the investment banking industry, most recently
at Paine Webber, Inc.
JEFFREY W. WARDLOW--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
GREGG D. WATKINS--Vice President. Vice President, Loomis Sayles.
ANTHONY J. WILKINS--Vice President. Executive Vice President and Director,
Loomis Sayles.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different.
Except as indicated above, the address of each trustee and officer of the
Trust affiliated with Loomis Sayles is One Financial Center, Boston,
Massachusetts. The Trust pays no compensation to its officers or to the
trustees listed above who are directors, officers or employees of Loomis
Sayles. Each trustee who is not a director, officer or employee of Loomis
Sayles is compensated at the rate of $1,250 per fund per annum.
12
<PAGE>
COMPENSATION TABLE
for the nine months ended September 30, 1998
<TABLE>
<CAPTION>
(5)
Total
(3) (4) Compensation
(2) Pension or Estimated From Trust and
(1) Aggregate Retirement Benefits Annual Fund Complex*
Name of Person, Compensation Accrued as Part of Benefits upon Paid to
Position From Trust Fund Expenses Retirement Trustee
--------------- ------------ ------------------- ------------- --------------
<S> <C> <C> <C> <C>
Earl W. Foell, Trustee***.................................... $15,937.50 N/A N/A $15,937.50
Richard S. Holway, Trustee................................... $15,937.50 N/A N/A $15,937.50
Terry R. Lautenbach**, Trustee............................... $15,937.50 N/A N/A $15,937.50
Michael T. Murray, Trustee................................... $15,937.50 N/A N/A $15,937.50
</TABLE>
- --------
* No Trustee receives any compensation from any mutual funds affiliated with
Loomis Sayles, other than the Trust.
** Mr. Lautenbach retired from the Board of Trustees on October 26, 1998.
*** Mr. Foell passed away on July 10, 1999.
As of September 30, 1998, the officers and trustees of the Trust owned
beneficially shares of each Fund as follows: 427,495.680 shares of the Bond
Fund, 18,173.581 shares of the Core Value Fund, 26,813.759 shares of the
Global Bond Fund, 16,668.673 shares of the Growth Fund, 272,926.72 shares of
the High Yield Fund, 18,468.166 shares of the International Equity Fund,
11,473.108 shares of the Investment Grade Bond Fund, 1,239.933 of the Mid-Cap
Value Fund, 69,218.193 shares of the Municipal Bond Fund, 65,428.296 shares of
the Short-Term Bond Fund, 2,742.817 shares of the Small Cap Growth Fund,
37,257.122 shares of the Small Cap Value Fund, 1,480.432 shares of the U.S.
Government Securities Fund, and 15,647.889 shares of the Worldwide Fund. These
amounts include shares held by the Loomis Sayles Employees' Profit Sharing Plan
(the "Profit Sharing Plan") for the accounts of officers and trustees of the
Trust, but exclude all other holdings of the Profit Sharing Plan and the Loomis-
Sayles Funded Pension Plan (the "Pension Plan"). As of September 30, 1998, the
Pension Plan owned the following percentages of the outstanding Institutional
Class shares of the indicated Funds: 0.06% of the Bond Fund, 9.24% of the Core
Value Fund, 21.12% of the Global Bond Fund, 6.33% of the Growth Fund, 34.06% of
the Intermediate Maturity Bond Fund, 15.69% of the International Equity Fund,
0.11% of the Short Term Bond Fund, 13.18% of the Small Cap Growth Fund, 0.71% of
the Small Cap Value Fund, 28.98% of the U.S. Government Securities Fund, and
80.98% of the Worldwide Fund. As of September 30, 1998, the Profit Sharing Plan
owned the following percentages of the outstanding Institutional Class shares of
the indicated Funds: 0.08% of the Bond Fund, 12.14% of the Core Value Fund,
7.02% of the Global Bond Fund, 32.58% of the Growth Fund, 18.19% of the High
Yield Fund, 14.92% of the Intermediate Maturity Bond Fund, 6.42% of the
International Equity Fund, 12.39% of the Investment Grade Bond Fund, 78.73% of
the Mid-Cap Growth Fund, 39.83% of the Mid-Cap Value Fund, 11.43% of the Short-
Term Bond Fund, 13.47% of the Small Cap Growth Fund, 3.95% of the Small Cap
Value Fund, 20.27% of the U.S. Government Securities Fund, and 12.41% of the
Worldwide Fund. The trustee of the Pension Plan is Fleet Investment Management.
The Pension Plan's Advisory Committee, which is composed of the same individuals
listed below as trustees of the Profit Sharing Plan, has the sole voting and
investment power with respect to the Pension Plan's shares. The trustees of the
Profit Sharing Plan are E. John deBeer, Quentin P. Faulkner, Sandra P. Tichenor,
Larry K. Shaw, Kathleen C. Gaffney, Mark W. Holland, and Patrick P. Hurley, all
of whom are officers and employees of Loomis Sayles and (except for Messrs.
Hurley and Shaw) trustees or officers of the Trust. Plan participants are
entitled to exercise investment and voting power over shares owned of record by
the Profit Sharing Plan. Shares not voted by participants are voted in the same
proportion as the shares voted by the voting participants. The address for the
Profit Sharing Plan and the Pension Plan is One Financial Center, Boston,
Massachusetts. At the date of this Statement of Additional Information, no
officer or trustee, and as of October 31, 1998, except as noted below, no
person, owns more than 5% of the outstanding shares of any Fund.
13
<PAGE>
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares held
- ----------- ------- -------------
BOND FUND
<S> <C> <C>
Charles Schwab & Co. Inc. 101 Montgomery St. 49.45%
San Francisco, CA 94104
CORE VALUE FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 22.64%
San Francisco, CA 94104
First Trust NA Trustee P.O. Box 64010 7.29%
Green Tree Financial Corp St. Paul, MN 55164
401K Plan
Asbestos Workers Local C/O Loomis Sayles & Co. Inc. 6.41%
#84 Pension Fund 1593 North Woodward, Ste 300
Bloomfield Hills, MI 48304
John W. George, Trustee 590 Renaud 5.88%
John W. George Trust Grosse Pointe, MI 48236
U/A/D 12/6/90
GLOBAL BOND FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 38.58%
San Francisco, CA 94104
Northwest Bank MN NA P.O. Box 1450 NW 8477 18.64%
C/F Desert States UFCW Union Minneapolis, MN 55480
Employees Pension AC#1327982D
Fleet National Bank TTEE P.O. Box 92800 15.92%
Kaman Corp Master Trust Fixed Rochester, NY 14692
Income Fund U/A/D 10-1-96
Attn A/C# 0004884410
San Diego Transit Pension Plan P.O. Box 2511 9.54%
San Diego, CA 92112
GROWTH FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 41.19%
San Francisco, CA 94104
Fiduciary Trust Co. Cust P.O. Box 3199 6.33%
FBO Scott R. Shoemaker Church St. Station
New York, NY 10008
Fiduciary Trust Co. Cust P.O. Box 3199 5.58%
FBO Charles Grant Shoemaker Church St. Station
New York, NY 10048
HIGH YIELD FUND
Daniel J. Fuss 44 Longfellow Road 32.38%
Wellesley, MA 02181
Charles Schwab & Co. Inc. 101 Montgomery St. 30.29%
San Francisco, CA 94104
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares held
- ----------- ------- -------------
<S> <C> <C>
Rosemary B. Fuss 44 Longfellow Road 12.06%
Wellesley, MA 02181
INTERMEDIATE MATURITY BOND FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 52.48%
San Francisco, CA 94104
Hawaii Sheet Metal Workers 1405 N. King St. Rm 403 28.00%
Health & Welfare Fund Honolulu, HI 96817
Pomona College Alexander Hall 7.95%
550 N. College Ave.
Claremont, CA 91711
INTERNATIONAL EQUITY FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 22.13%
San Francisco, CA 94104
Comerica Bank FBO P.O. Box 75000 MC 3446 11.95%
City of Livonia Employee Detroit, MI 48275
Retirement System A/C 82150B
The Security Mutual Life 200 Centennial Mall North 6.99%
Insurance Co. of P.O. Box 82248
Lincoln Nebraska Lincoln, NE 68501
INVESTMENT GRADE BOND FUND
Loomis Sayles & Company,
L.P. Attn: Paul Sherba 43.92%
One Financial Center
Boston, MA 02111
Charles Schwab & Co. Inc. 101 Montgomery St. 21.57%
San Francisco, CA 94104
Pomona College Alexander Hall 7.23%
550 N. College Ave.
Claremont, CA 91711
MID-CAP GROWTH FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 82.15%
San Francisco, CA 94104
American National Bank 120 So. LaSalle St. 9.77%
Howard Siegel or Catherine Chicago, IL 60603
Siegel Trust
MID-CAP VALUE FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 41.61%
San Francisco, CA 94104
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares held
- ----------- ------- -------------
<S> <C> <C>
John W. George, Jr. Trustee 590 Renaud 8.10%
John W. George, Jr. Trust Grosse Pointe, MI 48236
U/A/D 12/6/90
Carey & Co. P.O. Box 1558 8.04%
C/O Huntington National Bank Columbus, OH 43260
Attn: Mutual Funds HC1024
MUNICIPAL BOND FUND
John W. George Jr. Trustee 590 Renaud 19.57%
John W. George Jr. Trust Grosse Pointe, MI 48236
U/A/D 12/6/90
Ann A. Morris Trustee General Delivery 13.90%
Ann A. Morris Trust Lummi Island, WA 98262
SHORT-TERM BOND FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 21.30%
San Francisco, CA 94104
NFSC FEBO #179-257206 54 Jemez Canyon Road 14.63%
Santa Ana Non-Profit
Enterprise Box 9201
Bernalillo, NM 87004
George R. Rodrigues, Jr. 1109 Bethel St. Ste. 403 7.92%
Herbert S K Kaopua Sr TTEES Honolulu, HI 96813
Pamcah-UA Local 675
Health & Welfare DTD 9/1/61
John W. George Jr. Trustee 590 Renaud 6.51%
John W. George Jr. Trust Grosse Pointe, MI 48236
U/A/D 12/6/90
SMALL CAP GROWTH FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 32.65%
San Francisco, CA 94104
The Community Foundation 456 King St. 12.59%
Serving Coastal SC Charleston, SC 29403
Donaldson Lufkin Jenrette P.O. Box 2052 8.32%
Securities Corporation Jersey City, NJ 07303
Trussal & Co. P.O. Box 771072 6.77%
Detroit, MI 48277
Fifth Third Bank, Trustee P.O. Box 630074 6.51%
Catholic Community
Foundation Cincinnati, OH 45263
Covie & Co. 5101 N. Francisco Ave. 6.43%
C/O Covenant Trust Co. Chicago, IL 60625
Carey & Co. P.O. Box 1558 6.28%
Columbus, OH 43216
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares held
- ----------- ------- -------------
SMALL CAP VALUE FUND
<S> <C> <C>
Charles Schwab & Co. Inc. 101 Montgomery St. 12.41%
San Francisco, CA 94104
Smith Barney Inc. 333 West 34th St.; 7th Fl. 11.95%
Book Entry Account New York, NY 10001
U.S. GOVERNMENT SECURITIES FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 68.30%
San Francisco, CA 94104
WORLDWIDE FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 94.84%
San Francisco, CA 94104
</TABLE>
17
<PAGE>
RETAIL CLASS SHARES
<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- -------------
<S> <C> <C>
BOND FUND
Reliance Trust Co. P.O. Box 48449 6.09
FBO Clear Channel Comm Atlanta, GA 30362-1449
401K
CORE VALUE FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 34.15%
San Francisco, CA 94104
Jupiter & Co. P.O. Box 9130 30.11%
C/O Investors Bank & Trust Boston, MA
NFSC FEBO 2651 Sleepy Hollow Dr. 7.52%
Stephen M. Keil State College, PA 16803
GLOBAL BOND FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 48.00%
Attn. Mutual Fund Dept. San Francisco, CA 94104
Southwest Securities, Inc. P.O. Box 509002 16.05%
FBO First National Bank Edinburg Dallas, TX 75250
GROWTH FUND
Angelo V. Glorioso 225 Summit Dr. 53.34%
Pittsburgh, PA 15238
Charles Schwab & Co. Inc. 101 Montgomery St. 25.88%
Attn. Mutual Fund Dept. San Francisco, CA 94104
NFSC FEBO 900 Palisade Ave. 14.49%
FMT CO CUST IRA Rollover Fort Lee, NJ 07024
Leslie G. Brady
HIGH YIELD FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 51.08%
San Francisco, CA 94104
METLIFE Defined Contribution Group 72 Eagle Rock Ave. 6.75%
Attn: Peter Hall East Hanover, NJ 07936
INTERMEDIATE MATURITY BOND FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 89.10%
San Francisco, CA 94104
INTERNATIONAL EQUITY FUND
CIBC Oppenheimer Corp. P.O. Box 3484 16.44%
FBO 371-11893-10 Church St. Station
New York, NY 10008
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- -------------
<S> <C> <C>
CIBC Oppenheimer Corp. P.O. Box 3484 12.05%
FBO 071-90207-11 Church St. Station
New York, NY 10008
CIBC Oppenheimer Corp. P.O. Box 3484 9.04%
FBO 371-11726-13 Church St. Station
New York, NY 10008
Charles Schwab & Co. Inc. 101 Montgomery St. 8.97%
San Francisco, CA 94104
Saxon & Co. P.O. Box 7780-1888 6.78%
FBO Boes Anna Marie Ilita Philadelphia, PA 19182
NFSC FEBO #x08-233420 P.O. Box 750633 5.96%
Bawa N. Mallick Forest Hills, NY 11375
CIBC Oppenheimer Corp. P.O. Box 3484 5.68%
FBO 324-63220-14 Church St. Station
New York, NY 10008
CIBC Oppenheimer Corp. P.O. Box 3484 5.59%
FBO 371-11854-17 Church St. Station
New York, NY 10008
CIBC Oppenheimer Corp. P.O. Box 3484 5.34%
FBO 392-14139-14 Church St. Station
New York, NY 10008
CIBC Oppenheimer Corp. P.O. Box 3484 5.08%
FBO 324-22271-18 Church St. Station
New York, NY 10008
INVESTMENT GRADE BOND FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 41.28%
San Francisco, CA 94104
NFSC FEBO #157-197300 4 Buxton Lane 5.45%
FBO George D. Dugan Riverside, CT 06878
NFSC FEBO #z11-056570 4545 SW 97th Terrace 5.36%
Sappington Revocable Living Trust Gainesville, FL 32608
MID-CAP GROWTH FUND
Jane F. Clark 140 Enid Ln 72.78%
Northfield, IL 60093
Charles Schwab & Co. Inc. 101 Montgomery St. 12.67%
San Francisco, CA 94104
NFSC FEBO #127-599832 306 Hackensack St. 8.13%
FBO Santo J. Pittsman Wood Ridge, NJ 07075
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- -------------
MID-CAP VALUE FUND
<S> <C> <C>
Charles Schwab & Co. Inc. 101 Montgomery St. 59.14%
San Francisco, CA 94104
Donaldson Lufkin Jenrette One Pershing Plaza--7th Fl 25.15%
Securities Corporation Inc. Jersey City, 07303
SHORT-TERM BOND FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 54.17%
San Francisco, CA 94104
Donaldson Lufkin Jenrette P.O. Box 2052 12.56%
Securities Corporation Inc. Jersey City, 07303
NFSC FEBO #201-528218 245 Tower Rd. 8.10%
FBO Carmine A. Greco Lincoln, MA 01773
Donaldson Lufkin Jenrette P.O. Box 2052 5.93%
Securities Corporation Inc. Jersey City, 07303
State Street Bank & Trust Co. 405 S. Yucca Dr. 5.83%
C/F The IRA of Wickenburg, AZ 85390
Roger E. Wakefield
SMALL CAP GROWTH FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 51.44%
San Francisco, CA 94104
MO Institute of Sports Medicine 621 New Ballas 32.79%
Profit Sharing Plan & Trust Suite 101
DTD 5/1/80 St. Louis, MO 63141
SMALL CAP VALUE FUND
Charles Schwab & Co. Inc. 101 Montgomery St. 33.74%
San Francisco, CA 94104
First Trust National Association 180 East Fifth St. 20.63%
Trustee for United Healthcare P.O. Box 64488
401K Savings Plan St. Paul, MN 55164
Chase Manhattan Bank Trustee 770 Broadway 19.41%
Metlife Defined Contribution 10th Floor
Group; Attn: Cindy Chu New York, NY 10003
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- -------------
WORLDWIDE FUND
<S> <C> <C>
Donaldson Lufkin Jenrette P.O. Box 2052 30.85%
Securities Corporation Inc. Jersey City, 07303
State Street Bank &Trust Co. 235 Arlington Road Apt. 214 28.44%
Custodian for the IRA of Redwood City, CA 94062
Benjamin T. Ream
Charles Schwab & Co. Inc. 101 Montgomery St. 18.42%
San Francisco, CA 94104
National Investor Services 55 Water St. 9.77%
Corp. New York, NY 10041
FBO Our Customers
Mutual Funds Dept. 32nd Floor
Donaldson Lufkin Jenrette P.O. Box 2052 6.17%
Securities Corporation Inc. Jersey City, 07303
</TABLE>
21
<PAGE>
ADMIN CLASS SHARES
<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- -------------
<S> <C> <C>
BOND FUND
Smith Barney Corp. Trust Two Tower Center 99.98%
Smith Barney 401k Adviser P.O. Box 1063
Group Trust E. Brunswick, NJ 08816
San Francisco, CA 94104
SMALL CAP VALUE FUND
Smith Barney Corp. Trust Two Tower Center 67.87%
Smith Barney 401k Adviser P.O. Box 1063
Group Trust E. Brunswick, NJ 08816
San Francisco, CA 94104
Merrill Lynch Trust Co. 265 Davidson Ave. 28.60%
FBO Qualified Retirement Plans Somerset NJ 08873
</TABLE>
To the extent any of the shareholders listed above beneficially owns more
than 25% of a Fund, it may be deemed to "control" such Fund.
22
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreements. Loomis Sayles serves as investment adviser under a
separate advisory agreement relating to each of the Bond and High Yield Funds,
each dated August 30, 1996, relating to the Growth, Core Value, Small Cap Value,
International Equity, Worldwide, Global Bond, U.S. Government Securities,
Municipal Bond and Short-Term Bond Funds, each dated August 30, 1996, as amended
January 1, 1997, and relating to each of the Small Cap Growth, Mid-Cap Value,
Mid-Cap Growth, Investment Grade Bond, and Intermediate Maturity Bond Funds,
each dated December 1, 1996. The advisory agreements relating to each of the
Growth, Core Value, Small Cap Value, International Equity, Worldwide, Global
Bond, U.S. Government Securities, Municipal Bond and Short-Term Bond Funds were
amended effective January 1, 1997, and; in addition, effective December 1, 1998,
for U.S. Government Securities Fund, solely for the purpose of reducing the fees
payable thereunder. Under each advisory agreement, Loomis Sayles manages the
investment and reinvestment of the assets of the relevant Fund and generally
administers its affairs, subject to supervision by the board of trustees of the
Trust. Loomis Sayles furnishes, at its own expense, all necessary office space,
facilities and equipment, services of executive and other personnel of the Fund
and certain administrative services. For these services, the advisory agreements
provide that each Fund shall pay Loomis Sayles a monthly investment advisory fee
at the following annual percentage rates of the particular Fund's average daily
net assets:
<TABLE>
<CAPTION>
Fund Rate
---- ----
<S> <C>
Growth.............................................................. .50%
Core Value.......................................................... .50
Small Cap Value..................................................... .75
International Equity................................................ .75
Worldwide........................................................... .75
Small Cap Growth.................................................... .75
Mid-Cap Value....................................................... .75
Mid-Cap Growth...................................................... .75
Bond................................................................ .60
High Yield.......................................................... .60
Global Bond......................................................... .60
U.S. Government Securities.......................................... .30
Municipal Bond...................................................... .40
Short-Term Bond..................................................... .25
Investment Grade Bond............................................... .40
Intermediate Maturity Bond.......................................... .40
</TABLE>
During the periods shown below, pursuant to the advisory agreements
described above and advisory agreements in effect prior to January 1, 1997
under which fees were payable to Loomis Sayles at the following annual rates
by the indicated Funds (expressed as a percentage of average daily net
assets): Growth, 0.75%; Core Value, 0.75%; International Equity, 1.00%; Small
Cap Value, 1.00%; Bond, 0.60%; Global Bond, 0.75%; U.S. Government Securities,
0.60%; Municipal Bond, 0.60%; Short Term Bond, 0.50%; Worldwide, 0.75%; High
Yield, 0.60%, and an advisory agreement in effect from January 1, 1997 through
November 30, 1998 under which the U.S. Government Securities Fund paid Loomis
Sayles 0.40%, Loomis Sayles received the following amount of investment
advisory fees from each Fund (before voluntary fee reductions and expense
assumptions) and bore the following amounts of fee reductions and expense
assumptions for each Fund:
23
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year ended 12/31/96 Fiscal Year ended 12/31/97 Nine Months ended 9/30/98*
----------------------------- ----------------------------- -----------------------------
Fee Waivers Fee Waivers Fee Waivers
Advisory and Expense Advisory and Expense Advisory and Expense
Fund Fees Assumptions Fees Assumptions Fees Assumptions
---- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Growth.................. $ 318,602 $ 0 $ 174,976 $ 74,929 $ 114,917 $ 52,384
Core Value.............. 297,001 0 269,200 29,404 264,693 12,673
Small Cap Value......... 1,125,160 0 1,581,667 12,741 1,981,662 5,254
International Equity.... 848,205 0 705,111 178,102 451,871 124,877
Worldwide............... 23,335 84,635 55,489 148,392 32,580 112,466
Small Cap Growth**...... N/A N/A 24,894 170,503 67,049 117,517
Mid-Cap Value**......... N/A N/A 18,691 158,363 23,688 117,826
Mid-Cap Growth**........ N/A N/A 11,993 151,104 11,818 109,517
Bond.................... 2,205,461 0 5,460,675 197,170 6,920,645 112,593
Global Bond............. 119,648 43,855 178,622 123,445 155,995 85,930
US. Government
Securities............. 130,189 40,922 55,096 87,088 65,031 60,872
Municipal Bond.......... 48,518 105,784 34,082 102,318 28,142 77,070
Short-Term Bond......... 100,693 34,987 41,211 143,266 45,845 74,443
High Yield.............. 2,544 47,964 34,062 185,981 50,667 141,220
Investment Grade
Bond**................. N/A N/A 8,585 162,568 12,300 119,899
Intermediate Maturity
Bond**................. N/A N/A 17,125 147,955 25,473 122,162
</TABLE>
- --------
* The fiscal year-end for each of the Funds has changed to September 30.
** The Small Cap Growth, Mid-Cap Value, Mid-Cap Growth, Investment Grade Bond
and Intermediate Maturity Bond Funds commenced investment operations on
January 2, 1997.
The Trust pays the compensation of its trustees who are not directors,
officers or employees of Loomis Sayles or its affiliates (other than
registered investment companies); registration, filing and other fees in
connection with requirements of regulatory authorities; all charges and
expenses of its custodian and transfer agent; the charges and expenses of its
independent accountants; all brokerage commissions and transfer taxes in
connection with portfolio transactions; all taxes and fees payable to
governmental agencies; the cost of any certificates representing shares of the
Funds; the expenses of meetings of the shareholders and trustees of the Trust;
the charges and expenses of the Trust's legal counsel; interest on any
borrowings by the Funds; the cost of services, including services of counsel,
required in connection with the preparation of, and the cost of printing, the
Trust's registration statements and prospectuses, including amendments and
revisions thereto, annual, semiannual and other periodic reports of the Trust,
and notices and proxy solicitation material furnished to shareholders or
regulatory authorities, to the extent that any such materials relate to the
Trust or its shareholders; and the Trust's expenses of bookkeeping,
accounting, auditing and financial reporting, including related clerical
expenses.
Under each advisory agreement, if the total ordinary business expenses of a
Fund or the Trust as a whole for any fiscal year exceed the lowest applicable
limitation (based on percentage of average net assets or income) prescribed by
any state in which the shares of the Fund or the Trust are qualified for sale,
Loomis Sayles shall pay such excess. Loomis Sayles will not be required to
reduce its fee or pay such expenses to an extent or under circumstances which
would result in any Fund's inability to qualify as a regulated investment
company under the Code. The term "expenses" is defined in the advisory
agreements or in relevant state regulations and excludes brokerage
commissions, taxes, interest, distribution-related expenses and extraordinary
expenses.
As described in the Prospectus, Loomis Sayles has agreed to certain
additional, voluntary arrangements to limit Fund expenses. These arrangements
may be modified or terminated by Loomis Sayles at any time.
Each advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
relevant Fund and (ii) by vote of a
24
<PAGE>
majority of the Trustees who are not "interested persons" of the Trust, as
that term is defined in the 1940 Act, cast in person at a meeting called for
the purpose of voting on such approval. Any amendment to an advisory agreement
must be approved by vote of a majority of the outstanding voting securities of
the relevant Fund and by vote of a majority of the Trustees who are not such
interested persons, cast in person at a meeting called for the purpose of
voting on such approval. Each agreement may be terminated without penalty by
vote of the Board of Trustees or by vote of a majority of the outstanding
voting securities of the relevant Fund, upon sixty days' written notice, or by
Loomis Sayles upon ninety days' written notice, and each terminates
automatically in the event of its assignment. In addition, each agreement will
automatically terminate if the Trust or the Fund shall at any time be required
by Loomis Sayles to eliminate all reference to the words "Loomis" and "Sayles"
in the name of the Trust or the Fund, unless the continuance of the agreement
after such change of name is approved by a majority of the outstanding voting
securities of the relevant Fund and by a majority of the Trustees who are not
interested persons of the Trust or Loomis Sayles.
Each advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Loomis Sayles acts as investment adviser or subadviser to New England Value
Fund, New England Strategic Income Fund, New England Star Advisers Fund; New
England Star Small Cap Fund and New England Balanced Fund, which are series of
New England Funds Trust I, a registered open-end management investment company,
New England High Income Fund, a series of New England Fund Trust II, a
registered, open-end management investment company, and to the Loomis Sayles
Balanced Series and the Loomis Sayles Small Cap Series of New England Zenith
Fund, which is also a registered open-end management investment company, as well
as to Loomis Sayles Investment Trust, also a registered open-end management
investment company. Loomis Sayles also provides investment advice to certain
other open-end management investment companies and numerous other corporate and
fiduciary clients.
The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies"). Nvest Companies' managing general partner, Nvest Corporation, is
a direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company. Nvest Companies' advising general
partner, Nvest L.P., is a publicly traded company listed on the New York Stock
Exchange. Nvest Corporation is the sole general partner of Nvest L.P.
Certain officers and trustees of the Trust also serve as officers, directors
and trustees of other investment companies and clients advised by Loomis
Sayles. The other investment companies and clients sometimes invest in
securities in which the Funds also invest. If a Fund and such other investment
companies or clients desire to buy or sell the same portfolio securities at
the same time, purchases and sales may be allocated, to the extent
practicable, on a pro rata basis in proportion to the amounts desired to be
purchased or sold for each. It is recognized that in some cases the practices
described in this paragraph could have a detrimental effect on the price or
amount of the securities which a Fund purchases or sells. In other cases,
however, it is believed that these practices may benefit the Funds. It is the
opinion of the trustees that the desirability of retaining Loomis Sayles as
adviser for the Funds outweighs the disadvantages, if any, which might result
from these practices.
Distribution Agreement and Rule 12b-1 Plans. Under an agreement with the
Trust (the "Distribution Agreement"), Loomis Sayles Distributors, L.P. serves
as the general distributor of each class of shares of the Funds. Under this
agreement, Loomis Sayles Distributors, L.P. is not obligated to sell a
specific number of shares. Loomis Sayles Distributors, L.P. bears the cost of
making information about the Funds available through advertising and other
means and the cost of printing and mailing prospectuses to persons other than
shareholders. The Funds pay the cost of registering and qualifying their
shares under state and federal securities laws and the distribution of
prospectuses to existing shareholders.
As described in the Prospectuses, the Funds (other than the U.S. Government
Securities and Municipal Bond Funds) have adopted Rule 12b-1 plans ("Plans")
for their Retail Class shares. The Bond and Small Cap Value
25
<PAGE>
Funds have adopted Plans for their Admin Class shares. The Plans, among other
things, permit the relevant classes of the Funds to pay the Funds' distributor
(currently Loomis Sayles Distributors, L.P.) monthly fees, at annual rates not
exceeding 0.25% of the assets of the Retail Class and Admin Class
respectively. Pursuant to Rule 12b-1 under the 1940 Act, each Plan (together
with the Distribution Agreement) was approved by the board of trustees,
including a majority of the trustees who are not interested persons of the
Trust (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operations of the Plan or the Distribution Agreement
(the "Independent Trustees").
Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of the
relevant class of shares of the Fund to which the Plan relates. Each Plan may
be amended by vote of the trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose. Any change in
any Plan that would materially increase the fees payable thereunder by the
Retail Class or Admin Class shares of a Fund requires approval of the Retail
Class or Admin Class shareholders of that Fund. The Trust's trustees review
quarterly written reports of such costs and the purposes for which such costs
have been incurred. Each Plan provides that, for so long as that Plan is in
effect, selection and nomination of those trustees who are not interested
persons of the Trust shall be committed to the discretion of such
disinterested persons.
The Distribution Agreement may be terminated at any time with respect to a
Fund on 60 days' written notice without payment of any penalty by the Trust or
by vote of a majority of the outstanding voting securities of that Fund or by
vote of a majority of the Independent Trustees.
The Distribution Agreement and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the entire board of
trustees and (ii) by the vote of a majority of the Independent Trustees, in
each case cast in person at a meeting called for that purpose.
Custodial Arrangements. State Street Bank and Trust Company ("State Street
Bank"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street Bank holds in safekeeping certificated securities and cash belonging to
the Funds and, in such capacity, is the registered owner of securities held in
book entry form belonging to the Funds. Upon instruction, State Street Bank
receives and delivers cash and securities of the Funds in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. State Street Bank also maintains certain
accounts and records of the Funds and calculates the total net asset value,
total net income and net asset value per share of each Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts.
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and
federal and state income taxation. The information under the caption
"Financial Highlights" included in the Prospectus has been so included, and
the financial statements incorporated by reference herein from the Fund's 1998
Annual Report have been so incorporated, in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of portfolio securities for each
Fund, Loomis Sayles always seeks the best price and execution. Transactions in
unlisted securities are carried out through broker-dealers who make the
primary market for such securities unless, in the judgment of Loomis Sayles, a
more favorable price can be obtained by carrying out such transactions through
other brokers or dealers.
26
<PAGE>
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates.
Loomis Sayles will use its best efforts to obtain information as to the
general level of commission rates being charged by the brokerage community
from time to time and will evaluate the overall reasonableness of brokerage
commissions paid on transactions by reference to such data. In making such
evaluation, all factors affecting liquidity and execution of the order, as
well as the amount of the capital commitment by the broker in connection with
the order, are taken into account. The Funds, other than the International
Equity and Worldwide Funds, will not pay a broker a commission at a higher
rate than otherwise available for the same transaction in recognition of the
value of research services provided by the broker or in recognition of the
value of any other services provided by the broker which do not contribute to
the best price and execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although
it is not possible to assign an exact dollar value to these services, they
may, to the extent used, tend to reduce Loomis Sayles' expenses. Such services
may be used by Loomis Sayles in servicing other client accounts and in some
cases may not be used with respect to the Funds. Receipt of services or
products other than research from brokers is not a factor in the selection of
brokers.
International Equity and Worldwide Funds. In placing orders for the purchase
and sale of securities for the International Equity and Worldwide Funds,
Loomis Sayles follows the same policies as for the other Funds, except that
Loomis Sayles may cause the International Equity and Worldwide Funds to pay a
broker-dealer that provides brokerage and research services to Loomis Sayles
an amount of commission for effecting a securities transaction for those Funds
in excess of the amount another broker-dealer would have charged for effecting
that transaction. Loomis Sayles must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and
research services provided by the executing broker-dealer viewed in terms of
that particular transaction or Loomis Sayles' overall responsibilities to the
Trust and its other clients. Loomis Sayles's authority to cause the
International Equity and Worldwide Funds to pay such greater commissions is
also subject to such policies as the Trustees of the Trust may adopt from time
to time.
The following three tables set forth, for the 1996 and 1997 fiscal years and
the 1998 fiscal period (January 1, 1998 through September 30, 1998),
respectively, (1) the aggregate dollar amount of brokerage commissions paid on
portfolio transactions during such period, (2) the dollar amount of
transactions on which brokerage commissions were paid during such period that
were directed to brokers providing research services ("directed transactions")
and (3) the dollar amount of commissions paid on directed transactions during
such period. Funds not listed in a table did not pay brokerage commissions
during the relevant period.
27
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(1) (3)
Aggregate (2) Commissions
Brokerage Directed on Directed
Fund Commissions Transactions Transactions
---- ----------- ------------- ------------
<S> <C> <C> <C>
Growth............................. $ 81,708 $ 97,799,290 $ 81,708
Core Value......................... $ 64,033 $ 17,907,024 $ 28,782
Small Cap Value.................... $ 248,992 $ 15,896,278 $ 45,316
International Equity............... $1,002,393 $ 257,530,857 $1,002,393
Worldwide.......................... $ 9,631 $ 0 $ 0
FISCAL YEAR ENDED DECEMBER 31, 1997
<CAPTION>
(1) (3)
Aggregate (2) Commissions
Brokerage Directed on Directed
Fund Commissions Transactions Transactions
---- ----------- ------------- ------------
<S> <C> <C> <C>
Growth............................. $ 81,395 $ 3,200,161 $ 4,782
Mid-Cap Growth..................... $ 6,261 $ 45,426 $ 84
Small Cap Growth................... $ 9,774 $ 181,489 $ 672
Small Cap Value.................... $ 579,295 $ 29,877,865 $ 71,938
Mid-Cap Value...................... $ 7,298 $ 83,840 $ 319
Core Value......................... $ 81,471 $ 22,718,537 $ 21,202
International Equity............... $ 759,784 $220, 336,814 $ 28,794
Worldwide.......................... $ 9,953 $ 4,261,122 $ 489
NINE MONTHS ENDED SEPTEMBER 30, 1998
<CAPTION>
(1) (3)
Aggregate (2) Commissions
Brokerage Directed on Directed
Fund Commissions Transactions Transactions
---- ----------- ------------- ------------
<S> <C> <C> <C>
Growth............................. $ 84,990 $ 114,400 $ 6,864
Mid-Cap Growth..................... $ 5,336 $ 4,300 $ 256
Small Cap Growth................... $ 22,443 $ 154,320 $ 348
Small Cap Value.................... $ 872,492 $ 42,599,200 $ 78,151
Mid-Cap Value...................... $ 14,031 $ 246,357 $ 569
Core Value......................... $ 76,841 $ 23,336,695 $ 27,893
International Equity............... $ 466,218 $ 6,619,778 $ 15,145
Worldwide.......................... $ 20,610 $ 3,333,161 $ 520
</TABLE>
DESCRIPTION OF THE TRUST
The Trust, registered with the SEC as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of Massachusetts by an Agreement and Declaration of Trust (the
"Declaration of Trust") dated February 20, 1991.
The Declaration of Trust currently permits the trustees to issue an
unlimited number of full and fractional shares of each series. Each share of
each Fund represents an equal proportionate interest in such Fund with each
other share of that Fund and is entitled to a proportionate interest in the
dividends and distributions from that
28
<PAGE>
Fund. The shares of each Fund do not have any preemptive rights. Upon
termination of any Fund, whether pursuant to liquidation of the Trust or
otherwise, shareholders of that Fund are entitled to share pro rata in the net
assets of that Fund available for distribution to shareholders. The
Declaration of Trust also permits the trustees to charge shareholders directly
for custodial, transfer agency and servicing expenses.
The assets received by each Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets
of, that Fund. The underlying assets are segregated and are charged with the
expenses with respect to that Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular Fund are allocated by or under the direction of
the trustees in such manner as the trustees determine to be fair and
equitable. While the expenses of the Trust are allocated to the separate books
of account of each Fund, certain expenses may be legally chargeable against
the assets of all Funds.
The Declaration of Trust also permits the trustees, without shareholder
approval, to subdivide any series of shares or Fund into various classes of
shares with such dividend preferences and other rights as the trustees may
designate. Shares of each Fund (other than the U.S. Government Securities and
Municipal Bond Funds) are currently divided into two classes, designated
Retail Class and Institutional Class. Additionally, the Bond Fund and Small
Cap Value Fund offer a third class of shares designated the Admin Class. The
trustees may also, without shareholder approval, establish one or more
additional separate portfolios for investments in the Trust or merge two or
more existing portfolios. Shareholders' investments in such an additional or
merged portfolio would be evidenced by a separate series of shares (i.e., a
new "Fund").
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or any Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of each Fund affected. The
Declaration of Trust further provides that the trustees may also terminate the
Trust or any Fund upon written notice to the shareholders.
Voting Rights
As summarized in the Prospectus, shareholders are entitled to one vote for
each full share held (with fractional votes for each fractional share held)
and may vote (to the extent provided in the Declaration of Trust) on the
election of trustees and the termination of the Trust and on other matters
submitted to the vote of shareholders.
The Declaration of Trust provides that on any matter submitted to a vote of
all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a
particular series or sub-series would be adversely affected by the vote, in
which case a separate vote of that series or sub-series shall also be required
to decide the question. Also, a separate vote shall be held whenever required
by the 1940 Act or any rule thereunder. Rule 18f-2 under the 1940 Act provides
in effect that a class shall be deemed to be affected by a matter unless it is
clear that the interests of each class in the matter are substantially
identical or that the matter does not affect any interest of such class. On
matters affecting an individual series, only shareholders of that series are
entitled to vote. Consistent with the current position of the SEC,
shareholders of all series vote together, irrespective of series, on the
election of trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the board of trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders.
In addition, trustees may be
29
<PAGE>
removed from office by a written consent signed by the holders of two-thirds
of the outstanding shares and filed with the Trust's custodian or by a vote of
the holders of two-thirds of the outstanding shares at a meeting duly called
for that purpose, which meeting shall be held upon the written request of the
holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such shareholders wish
to communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).
Except as set forth above, the trustees shall continue to hold office and
may appoint successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Trust, except (i) to
change the Trust's name or to cure technical problems in the Declaration of
Trust and (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value).
Shareholder and Trustee Liability
Under Massachusetts law shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund of which they are
shareholders. However, the Declaration of Trust disclaims shareholder
liability for acts or obligations of each Fund and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or the trustees. The Declaration of Trust
provides for indemnification out of Fund property for all loss and expense of
any shareholder held personally liable for the obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which
the disclaimer is inoperative and the Fund itself would be unable to meet its
obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. The By-Laws of the Trust provide for indemnification by
the Trust of the trustees and officers of the Trust except with respect to any
matter as to which any such person did not act in good faith in the reasonable
belief that such action was in or not opposed to the best interests of the
Trust. No officer or trustee may be indemnified against any liability to the
Trust or the Trust's shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
How to Buy Shares
The procedures for purchasing shares of each Fund are summarized in the
Prospectus under "How to Purchase Shares."
Net Asset Value
The net asset value of the shares of each Fund is determined by dividing
that Fund's total net assets (the excess of its assets over its liabilities)
by the total number of shares of the Fund outstanding and rounding to the
nearest cent. Such determination is made as of the close of regular trading on
the New York Stock Exchange on each day on which that Exchange is open for
unrestricted trading, and no less frequently than once daily on each day
during which there is sufficient trading in a Fund's portfolio securities that
the value of that Fund's shares might be materially affected. During the 12
months following the date of this Statement of Additional Information, the New
York Stock Exchange is expected to be closed on the following weekdays: New
Year's
30
<PAGE>
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Equity
securities listed on an established securities exchange or on the Nasdaq
National Market System are normally valued at their last sale price on the
exchange where primarily traded or, if there is no reported sale during the
day, and in the case of over-the-counter securities not so listed, at the last
bid price. Long-term debt securities are valued by a pricing service, which
determines valuations of normal institutional-size trading units of long-term
debt securities. Such valuations are determined using methods based on market
transactions for comparable securities and on various relationships between
securities which are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at
fair value as determined in good faith by the board of trustees, although the
actual calculations may be made by persons acting pursuant to the direction of
the board.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the New
York Stock Exchange. Occasionally, events affecting the value of foreign fixed
income securities and of equity securities of non-U.S. issuers not traded on a
U.S. exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of any Fund's
portfolio securities occur during such period, then these securities may be
valued at their fair value as determined in good faith by or in accordance
with procedures approved by the trustees.
SHAREHOLDER SERVICES
Open Accounts
A shareholder's investment in any Fund is automatically credited to an open
account maintained for the shareholder by Boston Financial Data Services, Inc.
("BFDS"), the shareholder servicing agent for State Street Bank. Certificates
representing shares are issued only upon written request to BFDS but are not
issued for fractional shares. Following each transaction in the account, a
shareholder will receive an account statement disclosing the current balance
of shares owned and the details of recent transactions in the account. After
the close of each fiscal year BFDS will send each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. This should be retained as a permanent record.
Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional shares
and, by making the issuance and delivery of certificates representing shares
unnecessary, eliminates the problems of handling and safekeeping certificates,
and the cost and inconvenience of replacing lost, stolen, mutilated or
destroyed certificates.
The costs of maintaining the open account system are borne by the Trust, and
no direct charges are made to shareholders. Although the Trust has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
Systematic Withdrawal Plan
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of an eligible shareholder, as provided therein, provided that the
account has a value of at least $25,000 at the time the plan is established.
Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a signature guarantee will be required on the
Plan application. All shares in an account that is subject to a Systematic
Withdrawal Plan must be held in an open account rather than in certificated
form. Income dividends and capital gain distributions will be reinvested
31
<PAGE>
at the net asset value determined as of the close of regular trading on the
New York Stock Exchange on the record date for the dividend or distribution.
Since withdrawal payments represent proceeds from liquidation of shares, the
shareholder should recognize that withdrawals may reduce and possibly exhaust
the value of the account, particularly in the event of a decline in net asset
value. Accordingly, the shareholder should consider whether a Systematic
Withdrawal Plan and the specified amounts to be withdrawn are appropriate in
the circumstances. The Fund makes no recommendations or representations in
this regard. It may be appropriate for the shareholder to consult a tax
adviser before establishing such a plan. See "Redemptions" and "Income
Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
Exchange Privilege
Shareholders may redeem their shares of any Fund and have the proceeds
applied on the same day to purchase shares of any other Fund or of New England
Cash Management Trust or New England Tax Exempt Money Market Trust. Exchange
of shares of the High Yield Fund purchased within one year of such exchanges
will be subject to a redemption fee of 2.00% of the amount exchanged. For
purposes of determining whether a redemption fee is payable with respect to
shares of the High Yield Fund purchased by exchange of shares of another fund,
the one-year period shall be deemed to begin on the date of such purchase by
exchange. This option is summarized in the Prospectus under "Shareholder
Services--Free Exchange Privilege."
Exchanges may be effected by (1) making a telephone request by calling 800-
626-9390, provided that a special authorization form is on file with BFDS, or
(2) sending a written exchange request to BFDS accompanied by an account
application for the appropriate fund. The Trust reserves the right to modify
this exchange privilege without prior notice. An exchange constitutes a sale
of the shares for federal income tax purposes on which the investor may
realize a capital gain or loss.
IRAs
Under "Shareholder Services--Retirement Plans," the Prospectus refers to
IRAs established under a prototype plan made available by Loomis Sayles. These
plans may be funded with shares of any Fund, although it is expected that
shares of the Municipal Bond Fund would ordinarily not be an appropriate
investment for these plans.
All income dividends and capital gain distributions of plan participants
must be reinvested. Plan documents and further information can be obtained
from Loomis Sayles.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
Redemptions
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be guaranteed
by commercial banks, trust companies, savings associations, credit unions or
brokerage firms that are members of domestic securities exchanges. Signature
guarantees by notaries public are not acceptable. However, as noted in the
Prospectus, a signature guarantee will not be required if the proceeds of the
redemption do not exceed $50,000 and the proceeds check is made payable to the
registered owner(s) and mailed to the record address.
If a shareholder selects the telephone redemption service in the manner
described in the next paragraph, Fund shares may be redeemed by making a
telephone call directly to BFDS at 800-626-9390. When a telephonic redemption
request is received, the proceeds are wired to the bank account previously
chosen by the shareholder and a nominal wire fee (currently $5.00) is
deducted. Telephonic redemption requests must be received by BFDS
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<PAGE>
prior to the close of regular trading on the New York Stock Exchange on a day
when the Exchange is open for business. Requests made after that time or on a
day when the New York Stock Exchange is not open for business cannot be
accepted by BFDS and a new request will be necessary.
In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently
in writing. When selecting the service, a shareholder must designate a bank
account to which the redemption proceeds should be wired. Any change in the
bank account so designated must be made by furnishing to BFDS a written
request with a signature guarantee. Telephone redemptions may only be made if
an investor's bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. The Trust, BFDS, Loomis Sayles Distributors, L.P. and State Street
Bank are not responsible for the authenticity of withdrawal instructions
received by telephone.
The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by BFDS in proper form, less, in the case of the High Yield Fund, a
redemption fee of 2.00% of the amount redeemed with respect to shares of that
Fund redeemed within one (1) year of purchase, if applicable. Proceeds
resulting from a written redemption request will normally be mailed to the
shareholder within seven days after receipt of a request in good order.
Telephonic redemption proceeds will normally be wired on the first business
day following receipt of a proper redemption request. In those cases where a
shareholder has recently purchased shares by check and the check was received
less than fifteen days prior to the redemption request, the Fund may withhold
redemption proceeds until the check has cleared.
Each Fund will normally redeem shares for cash; however, each Fund reserves
the right to pay the redemption price wholly or partly in kind if the board of
trustees of the Trust determines it to be advisable in the interest of the
remaining shareholders. If portfolio securities are distributed in lieu of
cash, the shareholder will normally incur brokerage commissions upon
subsequent disposition of any such securities. However, the Trust has elected
to be governed by Rule 18f-1 under the 1940 Act pursuant to which the Trust is
obligated to redeem shares solely in cash for any shareholder during any 90-
day period up to the lesser of $250,000 or 1% of the total net asset value of
the Trust at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain
or loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of each Fund to pay its shareholders, as
dividends, substantially all net investment income and to distribute annually
all net realized capital gains, if any, after offsetting any capital loss
carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of the particular Fund based upon the net asset value
determined as of the close of regular trading on the New York Stock Exchange
on the record date for each dividend or distribution. Shareholders, however,
may elect to receive their income dividends or capital gain distributions, or
both, in cash. The election may be made at any time by submitting a written
request directly to BFDS. In order for a change to be in effect for any
dividend or distribution, it must be received by BFDS on or before the record
date for such dividend or distribution.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31
of the succeeding year.
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify and to qualify for the
favorable tax treatment accorded regulated investment companies and
33
<PAGE>
their shareholders, the Fund must, among other things, (i) derive at least 90%
of its gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (ii) distribute with respect to each taxable
year at least 90% of the sum of its taxable net investment income, its tax-
exempt income and the excess, if any, of net short-term capital gains over net
long-term capital losses for such year (iii) at the end of each fiscal quarter
maintain at least 50% of the value of its total assets in cash, U.S.
government securities, securities of other regulated investment companies, and
other securities of issuers which represent, with respect to each issuer, no
more than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer; and (iv) at the end of each
fiscal quarter, not more than 25% of its assets invested in the securities
(other than those of the U.S. government or other regulated investment
companies) of any one issuer or of two or more issuers which the Fund controls
and which are engaged in the same, similar or related trades and businesses.
To the extent it qualifies for treatment as a regulated investment company,
the Fund will not be subject to federal income tax on income paid to its
shareholders in the form of dividends or capital gain distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. Each Fund
intends to make distributions sufficient to avoid imposition of the excise
tax. Distributions declared by a Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which
declared.
Shareholders of each Fund will be subject to federal income taxes on
distributions made by the Fund (other than "exempt-interest dividends" paid by
the Municipal Bond Fund, as described in the Prospectus) whether received in
cash or additional shares of the Fund. Distributions by each Fund of net
income and short-term capital gains, if any, will be taxable to shareholders
as ordinary income. Distributions designated by a Fund as deriving from net
gains on securities held for more than one year will be taxable to
shareholders as long-term capital gain (generally taxed at a rate of 20% for
noncorporate shareholders), without regard to how long a shareholder has held
shares of the Fund.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a
time when a Fund's net asset value reflects gains that are either unrealized,
or realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized
losses.
The International Equity, Worldwide and Global Bond Funds each may be
eligible to make an election under Section 853 of the Code so that its
shareholders will be able to claim a credit or deduction on their income tax
returns for, and will be required to treat as part of the amounts distributed
to them, their pro rata portion of qualified taxes paid by the relevant Fund
to foreign countries. The ability of shareholders of the Fund to claim a
foreign tax credit is subject to certain limitations imposed by Section 904 of
the Code, which in general limit the amount of foreign tax that may be used to
reduce a shareholder's U.S. tax liability to that amount of U.S. tax which
would be imposed on the amount and type of income in respect of which the
foreign tax was paid. In addition, a shareholder must hold shares of the Fund
(without protection from risk of loss) on the ex-dividend date and for at
least 16 days during the 30-day period beginning on the date that is 15 days
before the ex-dividend date in order to be eligible to claim a foreign credit
for his or her share of these foreign taxes. A shareholder who for U.S. income
tax purposes claims a foreign tax credit in respect of Fund distributions may
not claim a deduction for foreign taxes paid by the Fund, regardless of
whether the shareholder itemizes deductions. Also, under Section 63 of the
Code, no deduction for foreign taxes may be claimed by shareholders who do not
itemize deductions on their federal income tax returns. It should also be
noted that a tax-exempt shareholder, like other
34
<PAGE>
shareholders, will be required to treat as part of the amounts distributed to
it a pro rata portion of the income taxes paid by the Fund to foreign
countries. However, that income will generally be exempt from United States
taxation by virtue of such shareholder's tax-exempt status and such a
shareholder will not be entitled to either a tax credit or a deduction with
respect to such income. The International Equity, Worldwide and Global Bond
Funds will notify shareholders each year of the amount of dividends and
distributions and the shareholder's pro rata share of qualified taxes paid by
each such Fund to foreign countries.
Each Fund's transactions, if any, in foreign currencies are likely to result
in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to
constitute a return of capital for tax purposes or require the Fund to make
distributions exceeding book income to avoid excise tax liability and to
qualify as a regulated investment company.
Investment by a Fund in "passive foreign investment companies" could subject
the Fund to U.S. federal income tax or other charge on the proceeds from the
sale of its investment in such a company; however, this tax can be avoided by
making an election to mark such investments to market annually or to treat the
passive foreign investment company as a "qualified electing fund."
If a Fund engages in hedging transactions, including hedging transactions in
options, futures contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, mark-to-
market, straddle, wash sale, and short sale rules), the effect of which may be
to accelerate income to the Fund, defer losses to the Fund, cause adjustments
in the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. Each Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.
A Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received. In such
cases, a Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as
dividends to its shareholders all of its income and gains and therefore to
eliminate any tax liability at the Fund level.
Generally a Fund may designate dividends eligible for the dividends-received
deduction only to the extent that such dividends are derived from dividends
paid to the Fund with respect to which Fund could have taken the dividends-
received deduction if it had been a regular corporation. The dividends-
received deduction is not available to non-corporate shareholders, Subchapter
S corporations or corporations who do not hold their shares for at least 46
days during the 90-day period beginning on the date that is 45 days before the
ex-dividend date.
Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
In general, any gain realized upon a taxable disposition of shares will be
treated as long-term capital gain if the shares have been held for more than
one year. Otherwise the gain on the sale, exchange or redemption of Fund
shares will be treated as short-term capital gain. However, if a shareholder
sells Fund shares at a loss within six months after purchasing the shares, the
loss will be treated as a long-term capital loss to the extent of any long-
term capital gain distributions received by the shareholder. Furthermore, no
loss will be allowed on the sale of Fund shares to the extent the shareholder
acquired other shares of the same Fund within 30 days prior to the sale of the
loss shares or 30 days after such sale.
At September 30, 1998, the Short-Term Bond Fund had a net tax basis capital
loss carryforward of approximately $390,181 which may be applied against any
realized net taxable gains of each succeeding year until fully utilized or
expiration of $101,591 of such loss carryforward on September 30, 2002, and
$288,590 of such loss carryforward on September 30, 2004, whichever occurs
first.
At September 30, 1998, the U.S. Government Securities Fund had a net tax
basis capital loss carryforward of approximately $402,587 which may be applied
against any realized net taxable gains of each succeeding year until fully
utilized or expiration of $402,587 of such loss carryforward on September 30,
2004, whichever occurs first.
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<PAGE>
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action.
Dividends and distributions also may be subject to foreign, state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, foreign, or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law. Non-
U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility
that distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty). The Internal Revenue Service
recently revised its regulations affecting the application to foreign
investors of the back-up withholding tax rules. The new regulations will
generally be effective for payments made on or after January 1, 1999 (although
transition rules will apply). In some circumstances, the new rules will
increase the certification and filing requirements imposed on foreign
investors in order to qualify
The foregoing discussion relates solely to U.S. federal income tax law. Non-
U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility
that distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty). The Internal Revenue Service
recently revised its regulations affecting the application to foreign
investors of the back-up withholding tax rules. The new regulations will
generally be effective for payments made on or after January 1, 1999 (although
transition rules will apply). In some circumstances, the new rules will
increase the certification and filing requirements imposed on foreign
investors in order to qualify for exemption from the 31% back-up withholding
tax and for reduced withholding tax rates under income tax treaties. Foreign
investors in each Fund should consult their advisors with respect to the
potential application of these new regulations.
FINANCIAL STATEMENTS
The financial statements of each Fund included in the Trust's 1998 Annual
Report, filed with the Securities and Exchange Commission on November 25,
1998, are incorporated by reference to such Report.
CALCULATION OF YIELD AND TOTAL RETURN
Yield. Yield with respect to a Fund will be computed by dividing such Fund's
net investment income for a recent 30-day period by the maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and
may include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Funds' yields will vary from time to
time depending upon market conditions, the composition of the Funds'
portfolios and operating expenses of the Trust allocated to each Fund. These
factors, and possible differences in the methods used in calculating yield,
should be considered when comparing a Fund's yield to yields published for
other investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Funds' shares and to the
relative risks associated with the investment objectives and policies of the
Funds.
At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.
Investors in the Funds are specifically advised that the net asset value per
share of each Fund may vary, just as yields for each Fund may vary. An
investor's focus on yield to the exclusion of the consideration of the value
of shares of that Fund may result in the investor's misunderstanding the total
return he or she may derive from that Fund.
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<PAGE>
Total Return. Total Return with respect to a Fund is a measure of the change
in value of an investment in such Fund over the period covered, and assumes
any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares
which would have been purchased if all dividends and distributions paid or
distributed during the period had been immediately reinvested; (2) calculating
the value of the hypothetical initial investment of $1,000 as of the end of
the period by multiplying the total number of shares owned at the end of the
period by the net asset value per share on the last trading day of the period;
(3) assuming redemption at the end of the period; and (4) dividing the
resulting account value by the initial $1,000 investment.
PERFORMANCE COMPARISONS
Yield and Total Return. Each Fund may from time to time include its total
return information in advertisements or in information furnished to present or
prospective shareholders. Each of the Bond, Global Bond, U.S. Government
Securities, Municipal Bond, Short-Term Bond, Investment Grade Bond,
Intermediate Maturity Bond, High Yield and Worldwide Funds may from time to
time include the yield and/or total return of its shares in advertisements or
information furnished to present or prospective shareholders. Each Fund may
from time to time include in advertisements or information furnished to
present or prospective shareholders (i) the ranking of performance figures
relative to such figures for groups of mutual funds categorized by Lipper
Analytical Services, Inc. or Micropal, Inc. as having similar investment
objectives, (ii) the rating assigned to the Fund by Morningstar, Inc. based on
the Fund's risk-adjusted performance relative to other mutual funds in its
broad investment class, and/or (iii) the ranking of performance figures
relative to such figures for mutual funds in its general investment category
as determined by CDA/Weisenberger's Management Results.
Volatility. Each Fund may quote various measures of its volatility and
benchmark correlation. In addition, a Fund may compare these measures to those
of other funds and indices. Measures of volatility seek to compare a Fund's
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate the extent to which a Fund's
returns change in ways similar to those of the benchmark. All measures of
volatility and correlation are calculated using averages of historical data.
Each Fund may utilize charts and graphs to present a Fund's volatility and
average annual total return. Each Fund may also discuss or illustrate examples
of interest rate sensitivity.
Lipper Analytical Services, Inc. distributes mutual fund rankings monthly.
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect deduction of any sales
charges. Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies
mutual funds by investment objective and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
rankings are based upon performance calculated by Micropal, generally
reflecting changes in net asset value that can be adjusted for the
reinvestment of capital gains and dividends. If deemed appropriate by the
user, performance can also reflect deductions for sales charges. Micropal
rankings cover a variety of performance periods, including year-to-date, 1-
year, 5-year and 10-year performance. Micropal classifies mutual funds by
investment objective and asset category.
Morningstar, Inc. distributes mutual fund ratings monthly. The ratings are
divided into five groups: highest, above average, neutral, below average and
lowest. They represent a fund's historical risk/reward ratio relative to other
funds in its broad investment class as determined by Morningstar, Inc.
Morningstar ratings cover a variety of performance periods, including 3-year,
5-year, 10-year and overall performance. The performance factor for the
overall rating is a weighted-average return performance (if available)
reflecting deduction of expenses and sales charges. Performance is adjusted
using quantitative techniques to reflect the risk profile of the fund. The
ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as
Standard & Poor's and Moody's Investor Service, Inc.
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CDA/Weisenberger's Management Results publishes mutual fund rankings and is
distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year,
5-year and 10-year Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of sales charges or
fees.
Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S. Bureau
of Labor Statistics, is a statistical measure of changes, over time, in the
prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a market
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate
debt securities and U.S. dollar-denominated, SEC-registered non-convertible
debt issued by foreign governmental entities or international agencies used as
a general measure of the performance of fixed-income securities.
Lehman Brothers Government/Corporate Intermediate Bond Index. 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.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed rate
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at
least $100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government Bond
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or
corporate debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from 20
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index consists of all
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.
Merrill Lynch Government/Corporate Index. The Merrill Lynch
Government/Corporate Index is a composite of approximately 4,900 U.S.
government and corporate debt issues with at least $25 million outstanding,
greater than one year maturity, and credit ratings of investment grade or
higher.
Merrill Lynch High Yield Master Index. The 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.
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000 smallest
of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
Salomon Brothers World Government Bond Index. The Salomon Brothers World
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded. The index generally
excludes floating- or variable-rate bonds, securities aimed principally at
non-institutional investors (such as U.S. Savings Bonds) and private-placement
type securities.
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Standard & Poor's/Barra Growth Index. The Standard & Poor's/Barra Growth
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the highest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.
Standard & Poor's/Barra Value Index. The Standard & Poor's/Barra Value Index
is constructed by ranking the securities in the S&P 500 by price-to-book ratio
and including the securities with the lowest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.
Standard & Poor's ("S&P") Mid-Cap 400 Index. The S&P Mid-Cap 400 Index
consists of 400 domestic stocks chosen for market size, liquidity and industry
group representation. It is a market-weighted (stock price times shares
outstanding) with each stock affecting the index in proportion to its value.
The index is comprised of industrial, utility, financial and transportation
stocks, in size order.
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"). The S&P
500 is a market value-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on
the New York Stock Exchange, although the common stocks of a few companies
listed on the American Stock Exchange or traded over-the-counter are included.
The 500 companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. The S&P 500 is the
most common index for the overall U.S. stock market.
From time to time, articles about the Funds regarding performance, rankings
and other characteristics of the Funds may appear in publications including,
but not limited to, the publications included in Appendix A. In particular,
some or all of these publications may publish their own rankings or
performance reviews of mutual funds, including the Funds. References to or
reprints of such articles may be used in the Funds' promotional literature.
References to articles regarding personnel of Loomis Sayles who have portfolio
management responsibility may also be used in the Funds' promotional
literature. For additional information about the Funds' advertising and
promotional literature, see Appendix B.
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INSTITUTIONAL CLASS
PERFORMANCE DATA*
The manner in which total return and yield of the Funds will be calculated
for public use is described above. The table summarizes the calculation of
total return and yield for Institutional Class shares of the Funds, where
applicable, (i) for the one-year period ended September 30, 1998, (ii) for the
three-year period ended September 30, 1998, (iii) the five-year period ended
September 30, 1998, and (iv) since the modified inception and (v) since actual
inception (May, 1991 for all Funds other than the High Yield, Intermediate
Maturity Bond, Investment Grade Bond, Mid-Cap Growth, Mid-Cap Value, Short-
Term Bond, Small Cap Growth, and Worldwide Funds, December 31, 1996 for the
Intermediate Maturity Bond, Investment Grade Bond, Mid-Cap Growth, Mid-Cap Value
and Small Cap Growth, August, 1992 for the Short-Term Bond Fund, May, 1996 for
the Worldwide Fund and September, 1996 for the High Yield Fund) through December
31, 1997.
<TABLE>
<CAPTION>
Average Annual Total Return
----------------------------------------------------------------
For the
For the Three- From From
Current One-Year Year For the Modified Actual
SEC Period Period Five-Year Inception Inception***
Yield Ended Ended Period Through Through
at 9/30/98 9/30/98 9/30/98 Ended 9/30/98 9/30/98** 9/30/98
---------- -------- ------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
FUND
Growth.................. NA (9.92)% 11.36% 11.28% 12.04 % 12.94 %
Core Value.............. NA (5.39)% 15.92% 15.89% 13.90 % 14.63 %
Small Cap Value......... NA (18.32)% 12.51% 11.13% 16.17 % 16.39 %
International Equity.... NA (14.60)% 3.14% 5.96% 6.80 % 6.75 %
Worldwide............... NA (17.84)% NA NA (0.04)% 0.33 %
Mid-Cap Growth.......... NA (10.75)% NA NA 6.80 % 6.80 %
Mid-Cap Value........... NA (13.03)% NA NA 5.90 % 5.90 %
Small Cap Growth........ NA (17.37)% NA NA 2.10 % 2.10 %
Bond.................... 8.47% (0.41)% 9.44% 9.98% 12.55 % 12.41 %
Global Bond............. 6.37% (2.29)% 8.55% 6.57% 8.45 % 8.38 %
U.S. Government Securi-
ties................... 5.09% 14.43 % 9.64% 7.41% 10.56 % 10.55 %
Municipal Bond.......... 4.23% 9.25 % 7.99% 5.92% 7.87 % 7.90 %
Short-Term Bond......... 4.82% 8.63 % 7.06% 6.32% 6.28 % 6.28 %
High Yield.............. 14.00% (17.96)% NA NA (2.18)% (1.51)%
Intermediate Maturity
Bond................... 6.73% 3.67 % NA NA 5.69 % 5.69 %
Investment Grade Bond... 7.64% 1.54 % NA NA 8.08 % 8.08 %
</TABLE>
- --------
* Performance (for other than the one-year, three-year and five-year periods
for the Core Value and Small Cap Value Funds, and the three-year and five-
year periods for the Bond Fund) would have been lower if a portion of the
management fee had not been waived by Loomis Sayles. In the absence of
this limitation, actual yield and total return would have been as follows:
Growth, (10.08)%, 11.29%, 11.24%, 12.01% and 12.91% for the one-year
period, the three-year period, the five-year period, the period since
modified inception and the period since actual inception, respectively;
Core Value, (5.34)%, 15.94%, 15.90%, 13.81% and 14.55% for the one-year
period, the three-year period, the five-year period, the period since
modified inception and the period since actual inception, respectively;
Small Cap Value, 16.12% and 16.35% for the period since modified inception
and the period since actual inception, respectively; International Equity,
(14.78)%, 3.04%, 5.91%, 6.53% and 6.46% for the one-year period, the
three-year period, the five-year period, the period since modified
inception and the period since actual inception, respectively; Worldwide,
(19.96)%, (2.18)% and (1.82)% for the one-year period, the period since
modified inception and the period since actual inception, respectively;
Mid-Cap Growth, (17.44)%, (0.43)% and (0.43)% for the one-year period, the
period since modified inception and the period since actual inception,
respectively; Mid-Cap Value, (16.94)%, 1.36% and 1.36% for the one-year
period, the
40
<PAGE>
period since modified inception and the period since actual inception,
respectively; Small Cap Growth, (19.43)%, (1.13)% and (1.13)% for the one-
year period, the period since modified inception and the period since
actual inception, respectively; Bond, 8.39% (yield) and (0.42)%, 9.43%,
9.97%, 12.47% and 12.34% for the one-year period, the three-year period, the
five-year period, the period since modified inception, and the period since
actual inception, respectively; Global Bond, 5.70% (yield), and (2.58)%,
8.31%, 6.42%, 8.15% and 8.08% for the one-year period, the three-year
period, the five-year period, the period since modified inception and the
period since actual inception, respectively; U.S. Government Securities,
4.69% (yield), and 13.99%, 9.32%, 7.17%, 10.28% and 10.28% for the one-year
period, the three-year period, the five-year period, the period since
modified inception and the period since actual inception, respectively;
Municipal Bond, 2.90% (yield), and 8.12%, 6.96%, 4.91%, 5.45% and 5.49% for
the one-year period, the three-year period, the five-year period, the period
since modified inception and the period since actual inception,
respectively; Short-Term Bond, 4.31% (yield), and 8.03%, 6.75%, 6.12%, 5.93%
and 5.88% for the one-year period, the three-year period, the five-year
period, the period since modified inception and the period since actual
inception, respectively; High Yield, 11.15% (yield), (19.98)%, (5.92)% and
(5.43)% for the one-year period, the period since modified inception and the
period since actual inception, respectively; Intermediate Maturity Bond,
4.60% (yield), and 1.60%, 3.25% and 3.25% for the one-year period, the
period since modified inception and the period since actual inception,
respectively; and Investment Grade Bond, 3.09% (yield), and (2.95)%, 2.71%
and 2.71% for the one-year period, the period since modified inception and
the period since actual inception, respectively.
** For the Mid-Cap Growth Fund, Mid-Cap Value Fund, Small Cap Growth Fund,
Intermediate Maturity Bond Fund, and Investment Grade Bond Fund, the
modified inception date is December 31, 1996. For the Short-Term Bond Fund
the modified inception date is August 31, 1992, for the Worldwide Fund--May
31, 1996, for the High Yield Fund--September 30, 1996 and for all other
Funds--May 31, 1991.
*** Actual Inception Dates:
<TABLE>
<S> <C>
Growth................................................. May 16, 1991
Core Value............................................. May 13, 1991
Small Cap Value........................................ May 13, 1991
International Equity................................... May 10, 1991
Worldwide.............................................. May 1, 1996
Mid-Cap Growth......................................... December 31, 1996
Mid-Cap Value.......................................... December 31, 1996
Small Cap Growth....................................... December 31, 1996
Bond................................................... May 16, 1991
Global Bond............................................ May 10, 1991
U.S. Government Securities............................. May 21, 1991
Municipal Bond......................................... May 29, 1991
Short-Term Bond........................................ August 3, 1992
High Yield............................................. September 11, 1996
Intermediate Maturity Bond............................. December 31, 1996
Investment Grade Bond.................................. December 31, 1996
</TABLE>
41
<PAGE>
RETAIL CLASS
PERFORMANCE DATA*
The manner in which total return and yield of the Funds will be calculated
for public use is described above. The table summarizes the calculation of
total return and yield for Retail Class shares of the Funds, where applicable,
(i) for the one-year period ended September 30, 1998, (ii) since the modified
inception December 31, 1996 through September 30, 1998 and (iii) since the
actual inception December 31, 1996 through September 30, 1998.
<TABLE>
<CAPTION>
Average Annual Total
Return
---------------------
For the
Current One-Year From Actual
SEC Period Inception **
Yield Ended Through
at 9/30/98 9/30/98 9/30/98
---------- -------- ------------
<S> <C> <C> <C>
FUND
Growth......................................... NA (10.15)% 7.97 %
Core Value..................................... NA (5.69)% 12.47 %
Small Cap Value................................ NA (18.57)% 2.85 %
International Equity........................... NA (14.81)% (3.68)%
Worldwide...................................... NA (18.15)% (4.78)%
Mid-Cap Growth................................. NA (11.07)% 6.54 %
Mid-Cap Value.................................. NA (13.29)% 5.63 %
Small Cap Growth............................... NA (17.59)% 1.90 %
Bond........................................... 8.22% (0.67)% 6.25 %
Global Bond.................................... 6.13% (2.63)% 1.55 %
Short-Term Bond................................ 4.56% 8.35 % 7.73 %
High Yield..................................... 13.75% (18.18)% (3.70)%
Intermediate Maturity Bond..................... 6.48% 3.52 % 5.51 %
Investment Grade Bond.......................... 7.39% 1.29 % 7.83 %
</TABLE>
* Performance would have been lower if a portion of the management fee had
not been waived by Loomis Sayles. In the absence of this limitation,
actual yield and total return would have been as follows: Growth,
(15.85)%, (0.14)% and (0.14)% for the one-year period, the period since
modified inception and the period since actual inception, respectively;
Core Value, (7.72)%, 9.39% and 9.39% for the one-year period, the period
since modified inception and the period since actual inception,
respectively; Small Cap Value, (18.60)%, 2.80% and 2.80% for the one-year
period, the period since modified inception and the period since actual
inception, respectively; International Equity, (25.32)%, (17.19)% and
(17.19)% for the one-year period, the period since modified inception and
the period since actual inception, respectively; Worldwide, (89.15)%,
(141.76)% and (141.76)% for the one-year period, the period since modified
inception and the period since actual inception, respectively; Mid-Cap
Growth, (39.94)%, (27.99)% and (27.99)% for the one-year period, the
period since modified inception and the period since actual inception,
respectively; Mid-Cap Value, (29.02)%, (15.66)% and (15.66)% for the one-
year period, the period since modified inception and the period since
actual inception, respectively; Small Cap Growth, (21.15)%, (2.99)% and
(2.99)% for the one-year period, the period since modified inception and
the period since actual inception, respectively; Bond 8.10% (yield),
(0.77)%, 6.11% and 6.11% for the one-year period, the period since modified
inception and the period since actual inception, respectively; Global Bond,
5.19% (yield), (3.43)%, 0.55% and 0.55% for the one-year period, the period
since modified inception and the period since actual inception,
respectively; Short-Term Bond, 1.85%, 0.16%, (4.10)% and (4.10)% for the
one-year period, the period since modified inception and the period since
actual inception, respectively; High Yield, 10.75% (yield), (20.38)%,
(6.70)% and (6.70)% for the one-year period, the period since modified
inception and the period since actual inception, respectively; Intermediate
Maturity Bond, 1.86% (yield), (3.55)%, (4.40)% and (4.40)% for the one-year
period, the period since modified inception and the period since actual
inception, respectively; and Investment Grade Bond, 2.41% (yield), (4.59)%,
0.34% and 0.34% for the one-year period, the period since modified inception
and the period since actual inception, respectively.
** The modified inception date and actual inception date for each of the
Retail Class of each of the Funds is December 31, 1996.
42
<PAGE>
ADMIN CLASS
PERFORMANCE DATA
<TABLE>
<CAPTION>
Average
Annual
Total
Return Average Annual Total Return
---------- ----------------------------
From From From
Current Actual For the Modified Actual
SEC Inception* One-Year Inception Inception
Yield Through Period Through Through
at 9/30/98 9/30/98 Ended 7/30/98 9/30/98
---------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
FUND
Small Cap Value......... N/A (16.54)% N/A (2.47)% (1.33)%
Bond.................... 7.98% (1.33)% N/A (14.62)% (16.54)%
</TABLE>
- --------
* Actual Inception Date for each of the Admin Class of each of the Funds is
January 2, 1998.
43
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates Financial Services Week
Adam Smith's Money World Financial World
America On Line Fitch Insights
Anchorage Daily News Forbes
Atlanta Constitution Fort Worth Star-Telegram
Atlanta Journal Fortune
Arizona Republic Fox Network and affiliates
Austin American Statesman Fund Action
Baltimore Sun Fund Decoder
Bank Investment Marketing Global Finance
Barron's (the) Guarantor
Bergen County Record (NJ) Hartford Courant
Bloomberg Business News Houston Chronicle
Bond Buyer INC
Boston Business Journal Indianapolis Star
Boston Globe Individual Investor
Boston Herald Institutional Investor
Broker World International Herald Tribune
Business Radio Network Internet
Business Week Investment Advisor
CBS and affiliates Investment Company Institute
CDA Investment Technologies Investment Dealers Digest
CFO Investment Profiles
Changing Times Investment Vision
Chicago Sun Times Investor's Daily
Chicago Tribune IRA Reporter
Christian Science Monitor Journal of Commerce
Christian Science Monitor News Service Kansas City Star
Cincinnati Enquirer KCMO (Kansas City)
Cincinnati Post KOA-AM (Denver)
CNBC LA Times
CNN Leckey, Andrew (syndicated column)
Columbus Dispatch Life Association News
CompuServe Lifetime Channel
Dallas Morning News Miami Herald
Dallas Times-Herald Milwaukee Sentinel
Denver Post Money Magazine
Des Moines Register Money Maker
Detroit Free Press Money Management Letter
Donoghues Money Fund Report Morningstar
Dorfman, Dan (syndicated column) Mutual Fund Market News
Dow Jones News Service Mutual Funds Magazine
Economist National Public Radio
FACS of the Week National Underwriter
Fee Adviser NBC and affiliates
Financial News Network New England Business
Financial Planning New England Cable News
Financial Planning on Wall Street New Orleans Times-Picayune
Financial Research Corp. New York Daily News
44
<PAGE>
New York Times Smart Money
Newark Star Ledger St. Louis Post Dispatch
Newsday St. Petersburg Times
Newsweek Standard & Poor's Outlook
Nightly Business Report Standard & Poor's Stock Guide
Orange County Register Stanger's Investment Advisor
Orlando Sentinel Stockbroker's Register
Palm Beach Post Strategic Insight
Pension World Tampa Tribune
Pensions and Investments Time
Personal Investor Tobias, Andrew (syndicated column)
Philadelphia Inquirer Toledo Blade
Porter, Sylvia (syndicated column) UP
Portland Oregonian US News and World Report
Prodigy USA Today
Public Broadcasting Service USA TV Network
Quinn, Jane Bryant (syndicated column) Value Line
Registered Representative Wall Street Journal
Research Magazine Wall Street Letter
Resource Wall Street Week
Reuters Washington Post
Rocky Mountain News WBZ
Rukeyser's Business (syndicated column) WBZ-TV
Sacramento Bee WCVB-TV
San Diego Tribune WEEI
San Francisco Chronicle WHDH
San Francisco Examiner Worcester Telegram
San Jose Mercury World Wide Web
Seattle Post-Intelligencer Worth Magazine
Seattle Times WRKO
Securities Industry Management
45
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Funds' advertising and promotional material may include, but
is not limited to, discussions of the following information:
Loomis Sayles Funds' participation in wrap fee and no transaction fee
programs
Loomis Sayles Funds and Loomis, Sayles & Company, L.P. Website
Characteristics of Loomis Sayles including the number and locations of
its offices, its investment practices and clients and assets under
management
Specific and general investment philosophies, strategies, processes and
techniques
Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
Industry conferences at which Loomis Sayles participates
Current capitalization, levels of profitability and other financial
information
Identification of portfolio managers, researchers, economists, principals
and other staff members and employees and descriptions of Loomis Sayles'
resources devoted to such staff
The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
Current and historical statistics relating to:
--total dollar amount of assets managed
--Loomis Sayles assets managed in total and by Fund
--the growth of assets
--asset types managed
Loomis Sayles Funds' tag line--"Listening Harder, Delivering More" and
statements that and examples of how Loomis Sayles Funds listens to its clients
and works hard to deliver results which exceed their expectations.
References may be included in Loomis Sayles Funds' advertising and
promotional literature about 401(k) and retirement plans that offer the Funds.
The information may include, but is not limited to:
Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as 401(k) or
retirement plan funding vehicles produced by industry authorities, research
organizations and publications.
46
