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As filed with the Securities and Exchange Commission on August 26, 1999
Registration Nos. 811-6241 and 33-39133
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. 20 [X]
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 22 [X]
(Check appropriate box or boxes)
_______________
LOOMIS SAYLES FUNDS
(Exact name of registrant as specified in charter)
One Financial Center, Boston, MA 02111
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 482-2450
Name and address
of agent for service with a copy to
- -------------------- --------------
Sheila M. Barry Truman S. Casner, Esq.
Loomis, Sayles & Company, L.P. Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on [date], 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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LOOMIS SAYLES FUNDS
Cross Reference Sheet
Items required by Form N-1A
PART A
Item
No. Registration Statement Caption Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; The Trust; Investment
Objectives and Policies; More
Information About the Funds'
Investments and Risk Considerations
5. Management of the Fund Cover Page; The Trust; The Funds'
Investment Adviser; Fund Expenses;
Portfolio Transactions; Back Cover
5A. Management's Discussion of Fund More Information about the Funds'
Performance Investments and Risk Considerations
6. Capital Stock and Other Securities The Trust; Shareholder Services;
Dividends, Capital Gain
Distributions and Taxes
7. Purchase of Securities Being How to Purchase Shares;
Offered Shareholder Services
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
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PART B
Item
No. Registration Statement Caption Caption in Statement of Additional
Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives, Policies and
Restrictions
14. Management of the Fund Management of the Trust
15. Control Persons and Principal Management of the Trust
Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other Services
Services
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices
18. Capital Stock and Other Securities How to Redeem Shares (Prospectus);
Redemptions; Dividends, Capital Gain
Distributions and Taxes (Prospectus);
Income Dividends, Capital Gain
Distributions and Tax Status;
Description of the Trust
19. Purchase, Redemption and Pricing How to Purchase Shares (Prospectus);
of Securities Being Offered Shareholder Services; How to Redeem
Shares (Prospectus); Redemptions; Net
Asset Value and Public Offering Price
20. Tax Status Dividends, Capital Gain Distributions
and Taxes (Prospectus); Income
Dividends, Capital Gain Distributions
and Tax Status
21. Underwriters Not Applicable
22. Calculations of Performance Data Calculation of Total Return
23. Financial Statements Not Applicable
<PAGE>
Prospectus November 8, 1999
Loomis Sayles Emerging Markets Fund
Loomis Sayles Emerging Markets Fund (the "Fund") is a series of Loomis
Sayles Funds (the "Trust"), a registered open-end management investment company.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment adviser of
the Fund.
This prospectus concisely describes the information that an investor should
know before investing in shares of the Fund. Please read it carefully and keep
it for future reference. A Statement of Additional Information ("SAI") dated
November 8, 1999, as revised from time to time, is available free of charge;
write to Loomis Sayles Distributors, L.P. (the "Distributor"), One Financial
Center, Boston, Massachusetts 02111 or telephone 800-633-3330, option 5. The
SAI, which contains more detailed information about the Fund, has been filed
with the Securities and Exchange Commission (the "SEC") and is incorporated by
reference into this Prospectus (legally forms a part of this prospectus).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
SUMMARY OF EXPENSES
THE TRUST
INVESTMENT OBJECTIVES AND POLICIES
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS AND RISK
CONSIDERATIONS
THE FUND'S INVESTMENT ADVISER
FUND EXPENSES
PORTFOLIO TRANSACTIONS
HOW TO PURCHASE SHARES
SHAREHOLDER SERVICES
HOW TO REDEEM SHARES
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
CALCULATION OF PERFORMANCE INFORMATION
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SUMMARY OF EXPENSES
The following information is provided as an aid in understanding the various
expenses that an investor in the Fund will bear indirectly. The information is
based on expenses for the Fund's most recent fiscal year. The information below
should not be considered a representation of past or future expenses, as actual
expenses may be greater or less than those shown. Also, the 5% annual return
assumed in the Example should not be considered a representation of investment
performance, as actual performance will vary.
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases (as % of offering price)............... none
Maximum Sales Load Imposed on Reinvested Dividends (as % of offering price).... none
Maximum Deferred Sales Load (as % of original purchase price or redemption
proceeds)...................................................................... none
Redemption Fees/1/............................................................. 2.00%
Exchange Fees.................................................................. none
Annual Fund Operating Expenses (as a percentage of average net assets):
Management Fees................................................................ 1.25%
12b-1 Fees..................................................................... none
Other Operating Expenses....................................................... 1.00 %
Total Fund Operating Expenses.................................................. 2.25 %/2/
</TABLE>
Example:/3/
An investor would pay the following expenses on a $1,000 investment assuming a
5% annual return (with or without a redemption at the end of each time period):
One Year........... $
Three Years........ $
/1/ A $5 charge applies to any wire transfer of redemption proceeds from the
Fund.
/2/ Loomis Sayles has voluntarily agreed, for an indefinite period, to limit the
Fund's Total Operating Expenses to the percentages of net assets shown in the
table. Without this agreement, Other Expenses and Total Operating expenses are
expected to be ___% and ___%, respectively.
/3/ Under SEC rules, new funds are required to show expenses for the one- and
three-year periods only.
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THE TRUST
The Fund is a series of Loomis Sayles Funds (the ''Trust''). The Trust is a
diversified open-end management investment company organized as a Massachusetts
business trust on February 20, 1991. The Trust is authorized to issue an
unlimited number of full and fractional shares of beneficial interest in
multiple series. Shares are freely transferable and entitle shareholders to
receive dividends as determined by the Trust's board of trustees and to cast a
vote for each share held at shareholder meetings. The Trust does not generally
hold shareholder meetings and will do so only when required by law. Shareholders
may call meetings to consider removal of the Trust's trustees.
INVESTMENT OBEJECTIVE AND POLICIES
The Fund's investment objective is long-term capital growth.
The Fund seeks to obtain its investment objective by investing at least 65%
of its total assets in equity securities of issuers located in countries with
emerging securities markets -- that is, countries with securities markets which
are, in the opinion of Loomis Sayles, emerging as investment markets but have
yet to reach a level of maturity associated with developed foreign stock
markets. Countries with emerging securities markets include, but are not limited
to: Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Greece,
Hungary, India, Indonesia, Israel, Jordan, Malaysia, South Africa, South Korea,
Taiwan, Thailand, Italy and Venezuela.
Loomis Sayles uses a bottom-up, fundamental research process to select
securities for the Fund. Loomis Sayles typically looks for growth oriented
stocks of well-managed companies that are industry leaders globally and that
maintain competitive positions evidenced by attributes such as pricing power and
strong distribution. Improving business or financial fundamentals are catalysts
for buy decisions, while satisfaction of price targets, deteriorating
fundamentals or better opportunities in other companies will trigger sell
decisions. In addition to its bottom-up approach to security selection, an
overlay of country and industry data is used to provide guidelines for portfolio
weighting.
The Fund may invest in Rule 144A securities and may engage in active and
frequent trading of its securities. Frequent trading may produce higher
transaction costs and a higher level of taxable capital gains, which may lower
your return. The Fund may purchase money market or high quality debt securities
for temporary defensive purposes in response to what Loomis Sayles believes are
adverse market, economic or political conditions. These investments may prevent
the Fund from achieving its goal. The Fund may also engage in options and
futures transactions, securities indices, and foreign currency hedging
transactions.
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Except for the Fund's investment objective, and any investment policies
that are identified as "fundamental," all of the investment policies of the Fund
may be changed without a vote of Fund shareholders.
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
AND RISK CONSIDERATIONS
Common Stocks and Other Equity Securities
Common stocks and similar equity securities, such as warrants and
convertibles, are volatile and more risky than some other forms of investment.
The value of an investment in a Fund that invests in equity securities may
sometimes decrease. Equity securities of companies with relatively small market
capitalization may be more volatile than the securities of larger, more
established companies and than the broad equity market indexes.
Foreign Securities
The Fund will invest primarily in securities of issuers organized or
headquartered outside the United States ("foreign securities").
Although investing in foreign securities may increase the Fund's
diversification and reduce portfolio volatility, foreign securities may present
risks not associated with investments in comparable securities of U.S. issuers.
There may be less information publicly available about a foreign corporate or
government issuer than about a U.S. issuer, and foreign corporate issuers are
not generally subject to accounting, auditing and financial reporting standards
and practices comparable to those in the U.S. The securities of some foreign
issuers are less liquid and at times more volatile than securities of comparable
U.S. issuers. Foreign brokerage commissions and securities custody costs are
often higher than in the U.S. With respect to certain foreign countries, there
is a possibility of governmental expropriation of assets, confiscatory taxation,
political or financial instability and diplomatic developments that could affect
the value of investments in those countries. The Fund's receipt of interest on
foreign government securities may depend on the availability of tax or other
revenues to satisfy the issuer's obligations.
The Fund will invest primarily in foreign securities of issuers from
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.
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Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund investing in these
securities may be affected favorably or unfavorably by changes in currency
exchange rates, exchange control regulations or foreign withholding taxes.
Changes in the value relative to the U.S. dollar of a foreign currency in which
the Fund's holdings are denominated will result in a change in the U.S. dollar
value of the Fund's assets and the Fund's income available for distribution. In
addition, although part of the Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
the dividend, the Fund could be required to liquidate portfolio securities to
pay the dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time the Fund accrues expenses in U.S. dollars and
the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars will be greater than the equivalent amount in such
currency of such expenses at the time they were incurred.
In determining whether to invest assets of the Fund in securities of a
particular foreign issuer, Loomis Sayles will consider the likely effects of
foreign taxes on the net yield available to the Fund and its shareholders.
Compliance with foreign tax law may reduce the Fund's net income available for
distribution to shareholders.
Foreign Currency Hedging Transactions
The Fund may engage in foreign currency exchange transactions to protect
the value of specific portfolio positions or in anticipation of changes in
relative values of currencies in which current or future Fund portfolio holdings
are denominated or quoted. For example, to protect against a change in the
foreign currency exchange rate between the date on which the Fund contracts to
purchase or sell a security and the settlement date for the purchase or sale, or
to "lock in" the equivalent of a dividend or interest payment in another
currency, the Fund might purchase or sell a foreign currency on a spot (that is,
cash) basis at the prevailing spot rate. If conditions warrant, the Fund may
also enter into private contracts to purchase or sell foreign currencies at a
future date ("forward contracts"). The Fund might also purchase exchange-listed
and over-the-counter call and put options on foreign currencies. Over-the-
counter currency options are generally less liquid than exchange-listed options,
and will be treated as illiquid assets. The Fund may not be able to dispose of
over-the-counter options readily.
Foreign currency transactions involve costs and may result in losses.
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When-Issued Securities
The Fund may purchase securities on a "when-issued" basis. This means that
the Fund will enter into a commitment to buy the security before the security
has been issued. The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment. The security
is typically delivered to the Fund 15 to 120 days later. No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is delivered. If the value of the security being purchased falls
between the time a Fund commits to buy it and the payment date, the Fund may
sustain a loss. The risk of this loss is in addition to the Fund's risk of loss
on the securities actually in its portfolio at the time. In addition, when the
Fund buys a security on a when-issued basis, it is subject to the risk that
market rates of interest will increase before the time the security is
delivered, with the result that the yield on the security delivered to the Fund
may be lower than the yield available on other, comparable securities at the
time of delivery. If the Fund has outstanding obligations to buy when-issued
securities, it will maintain liquid assets in a segregated account at its
custodian bank in an amount sufficient to satisfy these obligations.
Rule 144A Securities
The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.
Swap Transactions
The Fund may enter into interest rate or currency swaps. The Fund will
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. Interest rate swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest (for example, an
exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal). A currency swap is an agreement to exchange cash
flows on a notional amount based on changes in the relative values of the
specified currencies. The Fund will maintain liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
Because swap agreements are not exchange-traded, but are private contracts into
which the Fund and a swap counterparty enter as principals, the Fund may
experience a loss or delay in recovering assets if the counterparty were to
default on its obligations.
7
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Options and Futures Transactions
The Fund may buy, sell or write options on securities, securities indexes,
currencies or futures contracts and may buy and sell futures contracts on
securities, securities indexes or currencies. The Fund may engage in these
transactions either for the purpose of enhancing investment return, or to hedge
against changes in the value of other assets that the Fund owns or intends to
acquire. Options and futures fall into the broad category of financial
instruments known as "derivatives" and involve special risks. Use of options or
futures for other than hedging purposes may be considered a speculative
activity, involving greater risks than are involved in hedging.
Options can generally be classified as either "call" or "put" options.
There are two parties to a typical options transaction: the "writer" and the
"buyer." A call option gives the buyer the right to buy a security or other
asset (such as an amount of currency or a futures contract) from, and a put
option gives the buyer the right to sell a security or other asset to, the
option writer at a specified price, on or before a specified date. The buyer of
an option pays a premium when purchasing the option, which reduces the return on
the underlying security or other asset if the option is exercised, and results
in a loss if the option expires unexercised. The writer of an option receives a
premium from writing an option, which may increase its return if the option
expires or is closed out at a profit. If the Fund as the writer of an option is
unable to close out an unexpired option, it must continue to hold the underlying
security or other asset until the option expires, to "cover" its obligation
under the option.
A futures contract creates an obligation by the seller to deliver and the
buyer to take delivery of the type of instrument or cash at the time and in the
amount specified in the contract. Although many futures contracts call for the
delivery (or acceptance) of the specified instrument, futures are usually closed
out before the settlement date through the purchase (or sale) of a comparable
contract. If the price of the sale of the futures contract by the Fund exceeds
(or is less than) the price of the offsetting purchase, the Fund will realize a
gain (or loss).
The value of options purchased by the Fund and futures contracts held by
the Fund may fluctuate based on a variety of market and economic factors. In
some cases, the fluctuations may offset (or be offset by) changes in the value
of securities held in the Fund's portfolio. All transactions in options and
futures involve the possible risk of loss to the Fund of all or a significant
part of the value of its investment. In some cases, the risk of loss may exceed
the amount of the Fund's investment. When the Fund writes a call option or sells
a futures contract without holding the underlying securities, currencies or
futures contracts, its potential loss is unlimited. The Fund will be required,
however, to set aside with its custodian bank liquid assets in amounts
sufficient at all times to satisfy its obligations under options and futures
contracts.
8
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The successful use of options and futures will usually depend on Loomis
Sayles' ability to forecast stock market, currency or other financial market
movements correctly. The Fund's ability to hedge against adverse changes in the
value of securities held in its portfolio through options and futures also
depends on the degree of correlation between changes in the value of futures or
options positions and changes in the values of the portfolio securities. The
successful use of futures and exchange traded options also depends on the
availability of a liquid secondary market to enable the Fund to close its
positions on a timely basis. There can be no assurance that such a market will
exist at any particular time. In the case of options that are not traded on an
exchange ("over-the-counter" options), the Fund is at risk if the other party to
the transaction defaults on its obligations, or will not permit the Fund to
terminate the transaction before its scheduled maturity. As a result of these
characteristics, the Fund will treat most over-the-counter options (and the
assets it segregates to cover its obligations thereunder) as illiquid.
The options and futures markets of foreign countries are small compared to
those of the U.S. and consequently are characterized in most cases by less
liquidity than are the U.S. markets. In addition, foreign markets may be subject
to less detailed reporting requirements and regulatory controls than U.S.
markets. Furthermore, investments in options in foreign markets are subject to
many of the same risks as other foreign investments. See "Foreign Securities"
above.
Repurchase Agreements
The Fund may invest in repurchase agreements. In repurchase agreements, the
Fund buys securities from a seller, usually a bank or brokerage firm, with the
understanding that the seller will repurchase the securities at a higher price
at a later date. Such transactions afford an opportunity for the Fund to earn a
return on available cash at minimal market risk, although the Fund may be
subject to various delays and risks of loss if the seller is unable to meet its
obligations to repurchase.
Year 2000
Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000. Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders. Loomis
Sayles and the Distributor have each advised the Fund that they are reviewing
all of their computer systems with the goal of modifying or replacing such
systems prior to January 1, 2000, to the extent necessary to foreclose any such
negative impact. In addition, Loomis Sayles has been advised by the Fund's
custodian that it is also in the process of reviewing its systems with the same
goal. As of the date of this prospectus, the Fund and Loomis Sayles have no
reason to believe that these goals will not be achieved. Similarly, the values
of certain of the portfolio securities held by the Fund may be adversely
affected by the inability of the securities'
9
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issuers or of third parties to process this type of information properly.
Debt and Other Fixed Income Securities
The Fund may invest in fixed income securities of any maturity. Fixed
income securities include securities issued by federal, state, local and foreign
governments and related agencies, and by a wide range of private issuers.
Because interest rates vary, it is impossible to predict the income of a Fund
that invests in fixed income securities for any particular period. The net asset
value of such a Fund's shares will vary as a result of changes in the value of
the securities in the Fund's portfolio.
Fixed income securities are subject to market risk and credit risk. Market
risk relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase when
prevailing interest rates fall and decrease when interest rates rise. Credit
risk relates to the ability of the issuer to make payments of principal and
interest.
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. 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 ("NYSE"). Nvest Corporation
is the sole general partner of Nvest L.P.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Funds.
The Fund's board of trustees supervises Loomis Sayles' conduct of the affairs of
the Funds.
Alex Muromcew, Vice President, John Tribolet, Vice President and Eswar
Menon, Vice President are managers of the Fund. Prior to joining Loomis Sayles,
Mr. Muromcew was a portfolio manager at Nicholas Applegate Capital Management
since 1996. From 1993-1996, he was an investment analyst with Teton Partners,
L.P. Prior to joining Loomis Sayles, Mr. Tribolet was a portfolio manager at
Nicholas Applegate Capital Management since 1997. From 1995 to 1997 he was a
full time MBA student at the University of Chicago. Prior to 1995, he spent
three years as an investment banker, most recently at Paine Webber Inc. Prior to
joining Loomis Sayles, Mr. Menon was a portfolio manager at Nicholas-Applegate
Capital Management since 1995. From 1990-
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1995, he was employed as an Equity Analyst by Koaneman Capital Management and as
a Senior Engineer by Integrated Device Technology.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee of 1.25% of
the Fund's average daily net assets. In addition to the investment advisory fee,
the Fund pays all expenses not expressly assumed by Loomis Sayles, including
taxes, brokerage commissions, fees and expenses of registering or qualifying the
Fund's shares under federal and state securities laws, fees of the Fund's
custodian, transfer agent, independent accountants and legal counsel, expenses
of shareholders' and trustees' meetings, expenses of preparing, printing and
mailing prospectuses to existing shareholders and fees of trustees who are not
directors, officers or employees of Loomis Sayles or its affiliated companies.
PORTFOLIO TRANSACTIONS
Portfolio turnover considerations will not limit Loomis Sayles' investment
discretion in managing the Fund's assets. The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions. The Fund anticipates that its
portfolio turnover rate will be 125% during its first full fiscal year. High
portfolio turnover may generate higher costs and higher levels of taxable gains.
HOW TO PURCHASE SHARES
An investor may make an initial purchase of shares of the Fund by
submitting a completed application form and payment to:
State Street Bank and Trust Company
Mutual Fund Services
One Heritage Drive
North Quincy, Massachusetts 02171
The minimum initial investment for the Fund is $5,000. A $2,500 minimum
investment applies to the current and retired trustees of the Trust, investment
advisory clients of Loomis Sayles (and their directors, officers and employees),
and current and retired employees of Loomis Sayles and the parents, spouses and
children of the foregoing. There will be no Retail Class. The minimum
investment may be waived in whole or in part by Loomis Sayles in its sole
discretion. Subsequent investments must be at least $50.
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All purchases made by check should be in U.S. dollars and made payable to
State Street Bank and Trust Company ("State Street bank"). Third party checks
will not be accepted. When purchases are made by check or periodic account
investment, redemption will not be allowed until the investment being redeemed
has been in the account for 15 calendar days.
Upon acceptance of an investor's order, State Street Bank opens an account,
applies the payment to the purchase of full and fractional Fund shares and mails
a statement of the account confirming the transaction.
After an account has been established, an investor may send subsequent
investments at any time directly to State Street Bank at the above address. The
remittance must be accompanied by either the account identification slip
detached from a statement of account or a note containing sufficient information
to identify the account, i.e., the Fund name and the investor's account number
or name and social security number.
Subsequent investments can also be made by federal funds wire. Investors
should instruct their banks to wire federal funds to State Street Bank and Trust
Company, ABA #011000028. The text of the wire should read as follows: "$______
amount, STATE STREET BANK BOS ATTN Mutual Funds. Credit Loomis Sayles Emerging
Markets Fund, DDA #4133-408-7, Account Name, Account Number". A bank may charge
a fee for transmitting funds by wire.
The Fund and the Distributor reserve the right to reject any purchase for
any reason which the Fund or the Distributor in its sole discretion deems
appropriate. Although the Fund does not presently anticipate that it will do so,
the Fund reserves the right to suspend or change the terms of the offering of
shares. The price an investor pays will be the per share net asset value next
calculated after a proper investment order is received by the Trust's transfer
or other agent or subagent. Shares of the Fund are sold with no sales charge.
The net asset value of the Fund's shares is calculated once daily as of the
close of regular trading on the NYSE on each day the Exchange is open for
trading, by dividing the Fund's net assets by the number of shares outstanding.
Portfolio securities are valued at their market value as more fully described in
the Statement of Additional Information.
The Distributor may accept telephone orders from broker-dealers who have
been previously approved by the Distributor. It is the responsibility of such
broker-dealers to promptly forward purchase or redemption orders to the
Distributor. Although there is no sales charge imposed by the Fund or the
Distributor, broker-dealers may charge the investor a transaction-based fee or
other fee for their services at either the time of purchase or the time of
redemption. Such charges may vary among broker-dealers but in all cases will be
retained by the broker-dealer and not remitted to the Fund.
SHAREHOLDER SERVICES
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Telephone redemptions will be established automatically when an investor
opens an account unless an investor elects on the application to decline the
privilege. A signature guarantee will be required to establish telephone
redemptions after an account is opened if the privilege is initially declined.
HOW TO REDEEM SHARES
An investor can redeem shares by sending a written request to State Street
Bank and Trust Company, Mutual Fund Services, One Heritage Drive, North Quincy,
Massachusetts 02171. Proceeds from a written request may be sent to the
investor in the form of a check. As described below, an investor may also
redeem shares by calling Loomis Sayles at 800-633-3330, option 5. Proceeds
resulting from a written or telephone redemption request can be wired to an
investor's bank account for a fee (currently $5) or sent by check in the name of
the registered owners to their record address.
The written request must include the name of the Fund, the account number,
the exact name(s) in which the shares are registered, and the number of shares
or the dollar amount to be redeemed. All owners of the shares must sign the
request in the exact names in which the shares are registered (this appears on
an investor's confirmation statement) and should indicate any special capacity
in which they are signing (such as trustee or custodian or on behalf of a
partnership, corporation or other entity). Investors requesting that redemption
proceeds be wired to their bank accounts must provide specific wire
instructions.
When an investor telephones a redemption request, the proceeds are wired to
the bank account previously chosen by the investor. A wire fee (currently $5)
will be deducted from the proceeds. A telephonic redemption request must be
received by State Street Bank prior to the close of regular trading on the NYSE.
If an investor telephones a request to State Street Bank after the Exchange
closes or on a day when the Exchange is not open for business, State Street Bank
cannot accept the request and a new one will be necessary.
If (1) an investor is redeeming shares worth more than $50,000, (2) an
investor is requesting that the proceeds check be made out to someone other than
the registered owners or be sent to an address other than the record address,
(3) the account registration has changed within the last 30 days or (4) an
investor is instructing us to wire the proceeds to a bank account not designated
on the application, the investor must have his or her signature guaranteed by an
eligible guarantor. This requirement may be waived by Loomis Sayles in its sole
discretion. Eligible guarantors include commercial banks, trust companies,
savings associations, credit unions and brokerage firms that are members of
domestic securities exchanges. Before submitting the redemption request, an
investor should verify with the guarantor institution that it is an eligible
guarantor. Signature guarantees by notaries public are not acceptable.
13
<PAGE>
If an investor decides to change the bank account to which proceeds are to
be wired, the investor must send in this change in writing with a signature
guarantee. Telephonic redemptions may only be made if the investor's bank is a
member of the Federal Reserve System or has a correspondent bank that is a
member of the System. Unless the investor indicates otherwise on the account
application, State Street Bank will be authorized to act upon redemption and
exchange instructions received by telephone from the investor or any person
claiming to act as the investor's representative who can provide State Street
Bank with the investor's account registration and address as it appears on the
records of State Street Bank. State Street Bank will employ these or other
reasonable procedures to confirm that instructions communicated by telephone are
genuine; the Fund, State Street Bank, the Distributor and Loomis Sayles will not
be liable for any losses due to unauthorized or fraudulent instructions if these
or other reasonable procedures are followed. For more information on telephone
redemptions, consult State Street Bank. In times of heavy market activity, an
investor who encounters difficulty in placing a redemption order by telephone
may wish to place the order by mail as described above.
The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by State Street Bank in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to an investor within seven days after receipt of the investor's request
in good order. Telephonic redemption proceeds will normally be wired to an
investor's bank on the first business day following receipt of a proper
redemption request. If an investor purchased shares by check and the check was
deposited less than fifteen days prior to the redemption request, the Fund may
withhold redemption proceeds until the check has cleared.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the NYSE is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Fund declares and pays net investment income to shareholders as
dividends annually. The Fund also distributes all of its net capital gains
realized from the sale of portfolio securities. Any capital gain distributions
are normally made annually, but may, to the extent permitted by law, be made
more frequently as deemed advisable by the trustees of the Trust. The Trust's
trustees may change the frequency with which the Fund declares or pays
dividends.
14
<PAGE>
Dividends and capital gain distributions will automatically be reinvested
in additional shares of the same Fund unless an investor has elected to receive
cash. The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended. As such, so long as the Fund
distributes substantially all its net investment income and net capital gains to
its shareholders, the Fund itself does not pay any federal income tax to the
extent such income and gains are so distributed.
An investor's income dividends and short-term capital gain distributions
(that is, net gains from securities held for not more than a year) are taxable
as ordinary income whether distributed in cash or additional shares.
Distributions designated by the Fund as deriving from net gains on securities
held for more than one year will be taxable as such (generally at a 20% rate for
noncorporate shareholders) whether distributed in cash or additional shares and
regardless of how long an investor has owned shares of the Fund.
A dividend or distribution made shortly after the purchase of shares of the
Fund by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above. If a shareholder
held shares six months or less and during that period received a distribution of
net capital gains, any loss realized on the sale of such shares during such six-
month period would be a long-term capital loss to the extent of such
distribution.
The Fund generally is required to withhold 31% of any redemption proceeds
(including the value of shares exchanged) and all income dividends and capital
gain distributions it pays to an investor (1) if an investor does not provide a
correct, certified taxpayer identification number, (2) if the Fund is notified
that an investor has underreported income in the past, or (3) if an investor
fails to certify to the Fund that the investor is not subject to such
withholding.
Certain designated dividends from the Fund may be eligible for the
dividends-received deduction for corporate shareholders that meet a holding
period requirement. Dividends which relate to the Fund's investments in foreign
securities generally will not be eligible for the dividends-received deduction.
The Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, the Fund's yield on those securities would be
decreased. Shareholders may be entitled to claim a credit or deduction with
respect to foreign taxes. In addition, the Fund's investments in foreign
securities or foreign currencies may increase or accelerate the Fund's
recognition of ordinary income and may affect the timing or amount of the Fund's
distributions.
State Street Bank will send each investor and the Internal Revenue Service
an annual statement detailing federal tax information, including information
about dividends and distributions paid to the investor during the preceding
year. Be sure to keep this statement as a permanent record. A fee may be charged
for any duplicate information that an investor requests.
15
<PAGE>
NOTE: The foregoing summarizes certain tax consequences of investing in the
Fund. Before investing, an investor should consult his or her own tax adviser
for more information concerning the federal, foreign, state and local tax
consequences of investing in or redeeming Fund shares.
CALCULATION OF PERFORMANCE INFORMATION
"Total return" for the one-, five- and ten-year periods (or for the life
of the class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in a
Fund. Total return may also be presented for other periods.
16
<PAGE>
INVESTMENT ADVISER
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
DISTRIBUTOR
Loomis Sayles Distributors, L.P.
One Financial Center
Boston, Massachusetts 02111
SHAREHOLDER SERVICING, TRANSFER AND DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, Massachusetts 02102
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
17
<PAGE>
LOGO
Statement of Additional
Information
NOVEMBER 8, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THIS STATEMENT
OF ADDITIONAL INFORMATION RELATES TO THE PROSPECTUS OF THE LOOMIS SAYLES
EMERGING MARKETS FUND (THE "FUND") A SERIES OF LOOMIS SAYLES FUNDS DATED
NOVEMBER 8, 1999, AS REVISED FROM TIME TO TIME. EACH REFERENCE TO THE PROSPECTUS
IN THIS STATEMENT OF ADDITIONAL INFORMATION INCLUDES THE FUND'S CURRENT
PROSPECTUS, UNLESS OTHERWISE NOTED. THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS. A COPY OF THE PROSPECTUS MAY
BE OBTAINED FROM LOOMIS SAYLES FUNDS, ONE FINANCIAL CENTER, BOSTON,
MASSACHUSETTS 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
MANAGEMENT OF THE TRUST
INVESTMENT ADVISORY AND OTHER SERVICES
PORTFOLIO TRANSACTIONS AND BROKERAGE
DESCRIPTION OF THE TRUST
Voting Rights
Shareholder and Trustee Liability
How to Buy Shares
Net Asset Value
SHAREHOLDER SERVICES
Open Accounts
Redemptions
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
FINANCIAL STATEMENTS
CALCULATION OF TOTAL RETURN
PERFORMANCE COMPARISONS
PERFORMANCE DATA
APPENDIX A--PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
APPENDIX B--ADVERTISING AND PROMOTIONAL LITERATURE
</TABLE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles Emerging Markets
Fund ( the "Fund") of Loomis Sayles Funds (the "Trust"), are summarized in
the Prospectus under "Investment Objectives and Policies" and "More
Information About the Fund's Investments and Risk Considerations." The
investment policies of the Fund set forth
<PAGE>
in the Prospectus and in this Statement of Additional Information ("SAI") may be
changed by the Fund's adviser ("Loomis Sayles"), subject to review and approval
by the Trust's board of trustees, without shareholder approval, except that the
investment objective of the 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 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 Prospectus
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 the Fund (and
those marked with an asterisk are fundamental policies of the Fund):
The 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 the Fund 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.
(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 the Fund may pledge assets having a value not exceeding 10% of its
total assets to secure borrowings permitted by restriction (9) below. (For the
purpose of this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to initial
and variation margin are not deemed to be a pledge or other encumbrance of
assets.)
*(8) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value) would
be invested in any one industry (in the utilities category, gas, electric, water
and telephone companies will be considered as being in separate industries.)
Tax-exempt securities issued by governments or political subdivisions of
governments are not subject to this restriction, since such issuers are not
members of any industry.
*(9) Borrow money in excess of 33 1/3 % of the value of its total assets at
the time the borrowing is made.
<PAGE>
(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 the
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 Fund has no current intention of investing in repurchase
agreements, it intends, based on the views of the staff of the Securities and
Exchange Commission (the "SEC"), to restrict its 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.
When-Issued Securities
As described in the Prospectus, the 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 the Fund 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 the 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. The Fund will make commitments to
purchase on a when-issued or delayed-delivery basis only securities meeting that
Fund's investment criteria. The Fund may take delivery of these securities or,
if it is deemed advisable as a matter of investment strategy, the Fund may sell
these securities before the settlement date. When the time comes to pay for
when-issued or delayed-delivery securities, the Fund will meet its obligations
from then available cash flow or the sale of securities, or from the sale of the
when-issued or delayed-delivery securities themselves (which may have a value
greater or less than the Fund's payment obligation).
Convertible Securities
Convertible securities include corporate bonds, notes or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities. Convertible securities also include
other securities, such as warrants, that provide an opportunity for equity
participation. Because convertible securities can be converted into equity
securities, their values will normally vary in some proportion with those of the
underlying equity securities.
<PAGE>
Repurchase Agreements
The 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.
Rule 144A Securities
The Fund 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.
Foreign Currency Transactions
The Fund will 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 the Fund may
temporarily hold funds in bank deposits in foreign currencies during the course
of investment programs, the value of the assets of the Fund as measured in
United States ("U.S.") dollars may be affected by changes in currency exchange
rates and exchange control regulations, and the Fund may incur costs in
connection with conversion between various currencies.
The Fund may enter into forward contracts under two circumstances. First, when
the 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
<PAGE>
market movements in the value of those investments between the date the forward
contract is entered into and the date it matures.
The Fund generally will not enter into forward contracts with a term of
greater than one year.
Options on foreign currencies are similar to forward contracts, except that
one party to the option (the holder) is not contractually bound to buy or sell
the specified currency. Instead, the holder has discretion whether to
"exercise" the option and thereby require the other party to buy or sell the
currency on the terms specified in the option. Options transactions involve
transaction costs and, like forward contract transactions, involve the risk that
the other party may default on its obligations (if the options are not traded on
an established exchange) and the risk that expected movements in the relative
value of currencies may not occur, resulting in an imperfect hedge or a loss to
the Fund.
The Fund, in conjunction with its transactions in forward contracts, options
and futures, 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, the Fund may, for hedging purposes or to
enhance investment return, purchase and sell call and put options futures.
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. The 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 the 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 that 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
<PAGE>
of options or underlying securities; (iv) unusual or unforeseen circumstances
may interrupt normal operations on an exchange; (v) the facilities of an
exchange or the Options Clearing Corporation or other clearing organization may
not at all times be adequate to handle current trading volume; or (vi) one or
more exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
The successful use of options depends in part on the ability of Loomis Sayles
to forecast correctly the direction and extent of interest rate, stock price or
currency value movements within a given time frame. To the extent interest
rates, stock prices or currency values move in a direction opposite to that
anticipated, the Fund may realize a loss on the hedging transaction that is not
fully or partially offset by an increase in the value of portfolio securities.
In addition, whether or not interest rates or the relevant stock price or
relevant currency values move during the period that the Fund holds options
positions, the Fund will pay the cost of taking those positions (i.e., brokerage
costs). As a result of these factors, the Fund's total return for such period
may be less than if it had not engaged in the hedging transaction.
An over-the-counter option (an option not traded on an established exchange)
may be closed out only with the other party to the original option transaction.
While the Fund will seek to enter into over-the-counter options only with
dealers who agree to or are expected to be capable of entering into closing
transactions with the Fund, there can be no assurance that the Fund will be able
to liquidate an over-the-counter option at a favorable price at any time prior
to its expiration. Accordingly, the Fund might have to exercise an over-the-
counter option it holds in order to achieve the intended hedge. Over-the-counter
options are not subject to the protections afforded purchasers of listed options
by the Options Clearing Corporation or other clearing organization.
The staff of the SEC has taken the position that over-the-counter options
should be treated as illiquid securities for purposes of the Fund's investment
restriction prohibiting it from investing more than 15% of its net assets in
illiquid securities. The Fund intends to comply with this position.
Income earned by the 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
gains from options transactions may hedge against a decline in the value of the
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
funds that invest in larger capitalization companies other 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,
Winfield Asset Management Company.
<PAGE>
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.
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. 555 California Street, San
Francisco 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.
PAUL H. DREXLER--Vice President. Vice President, Loomis Sayles; formerly
Deputy Manager, Brown Brothers Harriman & Co.
WILLIAM H. EIGEN, JR.--Vice President. Vice President, Loomis Sayles; formerly
Vice President, INVESCO Funds Group and Vice President, The Travelers Corp.
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.
Vice President and Director, Loomis Sayles.
DEAN A. GULIS--Vice President. 1533 N. Woodward, Bloomfield Hills, Michigan.
Vice President, Loomis Sayles. Formerly, Principal and Director of Research at
Roney & Company.
MARTHA F. HODGMAN--Vice President. Vice President, Loomis Sayles.
JOHN HYLL--Vice President. 155 North Lake Avenue, Pasadena, California. Vice
President, Loomis Sayles.
<PAGE>
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.
PHILIP R. MURRAY--Assistant Treasurer, Vice President, Loomis Sayles.
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.
JEFFREY C. PETHERICK--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
LAUREN B. PITALIS--Vice President. Vice President, Loomis Sayles; formerly
Vice President and Assistant Secretary of Harris Associates Investment Trust.
PETER RAMSDEN--Vice President. Vice President and Director, Loomis Sayles.
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. 555 California Street, San Francisco
California. General Counsel, Vice President, 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 University 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. 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.
<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>
* The Trust changed its fiscal year end from December 31 to September 30.
. **No Trustee received any compensation during the fiscal period ended
September 30, 1999 from any mutual funds affiliated with Loomis Sayles, other
than the Trust.
. ***Mr. Foell passed away on July 10, 1999.
****Mr. Lautenbach retired from the Board of Trustees on October 26, 1998.
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser under a
separate advisory agreement relating to the Fund, dated ________. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the 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 the 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:
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 Fund; 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 Fund; 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 the advisory agreement, if the total ordinary business expenses of the
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 the Fund's inability to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended, (the "Code"). The
term "expenses" is defined in the advisory
<PAGE>
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.
The 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 Fund and (ii) by
vote of a majority of the Trustees who are not "interested persons" of the
Trust, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the 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. The 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 Fund, upon sixty days' written notice, or by Loomis Sayles
upon ninety days' written notice, and terminates automatically in the event of
its assignment. In addition, the 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 Fund and by a
majority of the Trustees who are not interested persons of the Trust or Loomis
Sayles.
The 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 SmallCap 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, a registered open-end management investment company, as well as to Loomis
Sayles Investment Trust, 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 ("NYSE"). 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 Fund also invests. If the 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 the Fund.
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 that
the Fund purchases or sells. In other cases, however, it is believed that these
practices may benefit the Fund. It is the opinion of the trustees that the
desirability of retaining Loomis Sayles as adviser for the Fund outweighs the
disadvantages, if any, which might result from these practices.
Distribution Agreement. Under an agreement with the Trust (the
"Distribution Agreement"), Loomis Sayles Distributors, L.P. serves as the
general distributor of shares of the Fund. 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
<PAGE>
of making information about the Fund available through advertising and other
means and the cost of printing and mailing prospectuses to persons other than
shareholders. The Fund pays the cost of registering and qualifying its shares
under state and federal securities laws and the distribution of prospectuses to
existing shareholders.
The Distribution Agreement may be terminated at any time with respect to the
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 the Fund or by
vote of a majority of the Independent Trustees.
The Distribution Agreement 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 Fund and, in such capacity, is the registered owner of securities held in
book entry form belonging to the Fund. Upon instruction, State Street Bank
receives and delivers cash and securities of the Fund 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 Fund and calculates the total net asset value, total
net income and net asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are ____________
_____________________________. _________________________________ conducts an
annual audit of the Trust's financial statements, assists in the preparation of
the Fund's federal and state income tax returns and consults with the Funds as
to matters of accounting and federal and state income taxation.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of portfolio securities for the
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.
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.
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 Fund. Receipt of services or products other than
research from brokers is not a factor in the selection of brokers.
In placing orders for the purchase and sale of securities for the Fund, Loomis
Sayles follows the same policies as for the other Funds, except that Loomis
Sayles may cause the Fund to pay a broker-dealer that provides
<PAGE>
brokerage and research services to Loomis Sayles an amount of commission for
effecting a securities transaction for the Fund 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 and
Loomis Sayles' overall responsibilities to the Trust and its other clients.
Loomis Sayles' authority to cause the Fund to pay such greater commissions is
also subject to such policies as the Trustees of the Trust may adopt from time
to time.
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 the Fund. Each share of the Fund
represents an equal proportionate interest in the Fund with each other share of
the Fund and is entitled to a proportionate interest in the dividends and
distributions from the Fund. The shares of the Fund do not have any preemptive
rights. Upon termination of the Fund, whether pursuant to liquidation of the
Trust or otherwise, shareholders of the Fund are entitled to share pro rata in
the net assets of the 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 the 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,
the Fund. The underlying assets are segregated and are charged with the expenses
with respect to the 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 the 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 the Fund, certain
expenses may be legally chargeable against the assets of all funds of the Trust.
The Declaration of Trust also permits the trustees, without shareholder
approval, to subdivide the Fund into various classes of shares with such
dividend preferences and other rights as the trustees may designate. 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 the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Fund. The Declaration of Trust
further provides that the trustees may also terminate the Trust or the Fund upon
written notice to the shareholders. As a matter of policy, however, the trustees
will not terminate the Trust or the Fund without submitting the matter to a vote
of the shareholders of the Trust or the Fund.
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
<PAGE>
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 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 the Fund and requires that notice of such disclaimer
be given in the 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.
<PAGE>
How to Buy Shares
The procedures for purchasing shares of the Fund are summarized in the
Prospectus under "How to Purchase Shares."
Net Asset Value
The net asset value of the shares of the Fund is determined by dividing the
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 NYSE 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 the Fund's portfolio securities that the value of the Fund's shares might be
materially affected. During the 12 months following the date of this Statement
of Additional Information, the NYSE is expected to be closed on the following
weekdays: New Year's 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 NYSE.
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 NYSE, which events will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of the 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 the Fund is automatically credited to an open
account maintained for the shareholder by State Street Bank and Trust Company,
the shareholder servicing agent for State Street Bank. Certificates representing
shares are issued only upon written request to State Street Bank but are not
issued for fractional shares. Following each transaction in the account, a
shareholder will receive an account statement disclosing the current balance of
shares owned and the details of recent transactions in the account. After the
close of each fiscal year State Street Bank will send each shareholder a
statement providing federal tax information on dividends and distributions paid
to the shareholder during the year. This should be retained as a permanent
record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional shares
and, by making the issuance and delivery of certificates representing shares
unnecessary, eliminates the problems of handling and safekeeping certificates,
and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are borne by the Trust, and
no direct charges are made to shareholders. Although the Trust has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
<PAGE>
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 State Street Bank at 800-________. 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 State Street Bank
prior to the close of regular trading on the NYSE on a day when the Exchange is
open for business. Requests made after that time or on a day when the NYSE is
not open for business cannot be accepted by State Street Bank 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 State Street Bank 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,
State Street Bank, 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 State Street Bank in proper form, less a redemption fee of 2.00% of
the amount redeemed with respect to shares of the 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.
The Fund will normally redeem shares for cash; however, the 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."
<PAGE>
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 the 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 NYSE 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 State Street
Bank. In order for a change to be in effect for any dividend or distribution, it
must be received by State Street Bank 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.
The Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Code. In order to qualify as such and to qualify for the
favorable tax treatment accorded regulated investment companies and 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; and (iii) diversify its holdings so that
at the end of each fiscal quarter (a) at least 50% of the value of its total
assets are invested 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 (b) not
more than 25% of its assets are 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 the
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. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by the 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 the Fund will be subject to federal income taxes on
distributions made by the Fund whether received in cash or additional shares of
the Fund. Distributions by the Fund of net income and short-term capital gains,
if any, will be taxable to shareholders as ordinary income. Distributions
designated by the 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 the 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 the Fund's net asset value reflects gains that are either unrealized, or
<PAGE>
realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses.
The Fund 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 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 Fund will notify shareholders each
year of the amount of dividends and distributions and the shareholder's pro rata
share of qualified taxes paid by the such Fund to foreign countries.
The 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 the Fund in "passive foreign investment companies" could
subject the Fund to U.S. federal income tax or other charges 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."
A "passive foreign investment company" is any foreign corporation: (i) 75% or
more of the income of which for the taxable year is passive income, or (ii) the
average percentage of the assets of which (generally by value, but by adjusted
tax basis in certain cases) that produce or are held for the production of
passive income as at least 50 percent. Generally, passive income for this
purpose means dividends, interest (including income equivalent to interest),
royalties, rents, annuities, the excess gains over losses from certain property
transactions and commodities transactions, and foreign currency gains. Passive
income for this purpose does not include rents and royalties received by the
foreign corporation from active business and certain income received from
related persons.
If the 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. The 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.
The 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, the 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.
<PAGE>
Generally, the 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 the Fund could have taken the
dividends-received deduction if it had been a regular corporation. Generally,
dividends derived from the Fund's investment in foreign securities are not
available for the dividends-received deduction. 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 the 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.
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, 2001 (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 the Fund should consult
their advisors with respect to the potential application of these new
regulations.
FINANCIAL STATEMENTS
The Fund's fiscal year ends on September 30. Audited financial statements will
be prepared and distributed annually and unaudited financial statements will be
prepared and distributed semi-annually.
CALCULATION OF TOTAL RETURN
Investors in the Funds are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary. An investor's
focus on yield to the exclusion of the consideration of the value of shares of
that Fund may result in the investor's misunderstanding the total return he or
she may derive from that Fund.
Total Return. Total Return with respect to the Fund is a measure of the
change in value of an investment in the 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
<PAGE>
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
Total Return. The Fund may from time to time include its total return
information in advertisements or in information furnished to present or
prospective shareholders. The 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. 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 a mutual fund in its general investment category as
determined by CDA/Weisenberger's Management Results.
Volatility. The Fund may quote various measures of its volatility and
benchmark correlation. In addition, the Fund may compare these measures to those
of other funds and indices. Measures of volatility seek to compare the Fund's
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate the extent to which the 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. The
Fund may utilize charts and graphs to present the Fund's volatility and average
annual total return. The 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.
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.
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
NYSE.
<PAGE>
MSCI Emerging Market Free Index measures performance for a universe of
emerging markets. The emerging markets as defined by MSCI shares some of the
following characteristics: (1) Gross National Product substantially below the
average for developed economies, which is consistent with the World Bank's
classification criteria; (2) less sophisticated regulatory environment, trading
hours or back office operations; (3) restrictions on repatriation of initial
capital, dividends, interest and/or capital gains; (4) greater perceived risk
than in developed markets and (5) a general perception by the investment
community that the country should be considered emerging. The index is market
capitalization weighed and seeks to obtain 60% market coverage. The index
includes only markets that are open to foreign investment and excludes those
shares in otherwise free markets which are not purchasable by foreigners.
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.
The Morgan Stanley Capital International Europe, Australasia and Far East
(Gross Domestic Product) Index (the EAFE (GDP) Index) is a market
capitalization-weighted and unmanaged index of common stocks traded outside the
United States. The stocks in the index are selected with reference to national
and industry representation and weighted in the EAFE (GDP) Index according to
their relative market values. The relative market value of each country is
further weighted with reference to the country's relative gross domestic
product.
The Morgan Stanley Capital International World ND Index (the MSCI World
Index) is a market capitalization-weighted and unmanaged index that includes
common stock from all 23 MSCI developed market countries. The "ND" indicates
that the index is listed in U.S. dollars, with net dividends reinvested.
The Fund may compare its performance to the Salomon-Russell Broad Market Index
Global X-US and to universes of similarly managed investment pools compiled by
Frank Russell Company and Intersec Research Corporation.
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
NYSE, 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
NYSE. The S&P 500 is the most common index for the overall U.S. stock market.
From time to time, articles about the Fund 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 Fund. References to or reprints of such articles may
be used in the Fund's promotional literature. References to articles regarding
personnel of Loomis Sayles who have portfolio management responsibility may also
be used in the Fund's promotional literature. For additional information about
the Fund's advertising and promotional literature, see Appendix B.
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America On Line
<PAGE>
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CDA Investment Technologies
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated columnI)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
<PAGE>
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas CityI)
KOA-AM (DenverI)
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money Magazine
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
<PAGE>
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated columnI)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated columnI)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO
<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 Fund. 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.
<PAGE>
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.
INVESTMENT ADVISER
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
DISTRIBUTOR
Loomis Sayles Distributors, L.P.
One Financial Center
Boston, Massachusetts 02111
SHAREHOLDER SERVICING, TRANSFER AND DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, Massachusetts 02102
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
This Post-Effective Amendment relates solely to Loomis Sayles Emerging Markets
Fund, a series of Loomis Sayles Funds. Information contained in the Registrant's
Registration Statement relating to any other series of the Registrant is neither
amended nor superseded hereby.
<PAGE>
Part C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements: Not Applicable
(b) Exhibits:
1. Agreement and Declaration of Trust. (5)
2. By-Laws. (5)
3. Not Applicable.
4. Not Applicable.
5(a). Form of Advisory Agreement. (7)
5(b). Form of Amendment No. 1 to Advisory Agreement between the Trust and
Loomis Sayles Core Value Fund. (3)
5(c). Form of Amendment No. 1 to Advisory Agreement between the Trust and
Loomis Sayles Global Bond Fund. (3)
5(d). Form of Amendment No. 1 to Advisory Agreement between the Trust and
Loomis Sayles Growth Fund. (3)
5(e). Form of Advisory Agreement between the Trust and
Loomis Sayles High Yield Fund. (2)
5(f). Form of Advisory Agreement between the Trust and Loomis Sayles High
Yield Fund II. (6)
5(g). Form of Amendment No. 1 to Advisory Agreement between the Trust and
Loomis Sayles Intermediate Maturity Bond Fund. (3)
5(h). Form of Amendment No. 1 to Advisory Agreement between the Trust and
Loomis Sayles International Equity Fund. (3)
5(i). Form of Advisory Agreement between the Trust and Loomis Sayles
Investment Grade Bond Fund. (3)
5(j). Form of Advisory Agreement between the Trust and Loomis Sayles
Managed Bond Fund. (5)
<PAGE>
5(k). Form of Advisory Agreement between the Trust and Loomis Sayles Mid-
Cap Growth Fund. (3)
5(l). Form of Advisory Agreement between the Trust and Loomis Sayles Mid-
Cap Value Fund. (3)
5(m). Form of Amendment No. 1 to Advisory Agreement between the Trust
and Loomis Sayles Municipal Bond Fund. (3)
5(n). Form of Amendment No. 1 to Advisory Agreement between the Trust
and Loomis Sayles Short-Term Bond Fund. (3)
5(o). Form of Advisory Agreement between the Trust and Loomis Sayles Small
Cap Growth Fund. (3)
5(p). Form of Amendment No. 1 to Advisory Agreement between the Trust
and Loomis Sayles Small Cap Value Fund. (3)
5(q). Form of Advisory Agreement between the Trust and Loomis Sayles
Select Opportunities. (9)
5(r). Form of Amended and Restated Investment Advisory Agreement between
the Trust and Loomis Sayles U.S. Government Securities Fund. (7)
5(s). Form of Amendment No. 1 to Advisory Agreement between the Trust
and Loomis Sayles Worldwide Fund. (3)
5(t). Form of Advisory Agreement between the Trust and Loomis Sayles Emerging
Markets Fund is filed herein.
6(a). Form of Amended and Restated Distribution Agreement. (8)
6(b). Form of Selected Dealer Agreement. (9)
6(c). Form of Agent Company Agreement (for use in sales of Fund shares in
Japan). (9)
6(d). Form of Distribution, Repurchase and Shareholders Servicing Agreement
(for use in sales of Fund shares in Japan). (9)
7. Not Applicable.
8(a). Form of Custodian Agreement. (5)
8(b). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Custodian Agreement to
Loomis Sayles Short-Term Bond Fund. (4)
8(c). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Custodian Agreement to
Loomis Sayles High Yield Fund. (4)
8(d). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Custodian Agreement to
Loomis Sayles Intermediate Maturity Bond Fund, Loomis Sayles Investment
Grade Bond Fund, Loomis Sayles Mid-Cap Growth Fund, Loomis Sayles
Mid-Cap Value Fund and Loomis Sayles Small Cap Growth Fund. (4)
<PAGE>
8(e). Form of Letter Agreement between the Trust and State Street Bank and
Trust Company relating to the applicability of the Custodian
Agreement to Loomis Sayles Worldwide Fund. (4)
8(f). Form of Letter Agreement between the Trust and State Street Bank and
Trust Company relating to the applicability of the Custodian
Agreement to Loomis Sayles Managed Bond Fund. (7)
9(a). Form of Transfer Agency and Service Agreement between the Trust and
State Street Bank and Trust Company. (5)
9(b). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Transfer Agency and
Service Agreement to Loomis Sayles Short-Term Bond Fund. (4)
9(c). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Transfer Agency and
Service Agreement to Loomis Sayles High Yield Fund and Loomis Sayles
Worldwide Fund. (4)
9(d). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Transfer Agency and Service
Agreement to Loomis Sayles Intermediate Maturity Bond Fund, Loomis
Sayles Investment Grade Bond Fund, Loomis Sayles Mid-Cap Growth Fund,
Loomis Sayles Mid-Cap Value Fund and Loomis Sayles Small Cap Growth
Fund. (4)
9(e). Transfer Agency and Service Agreement between the Trust on behalf of
the Loomis Sayles Managed Bond Fund and State Street Bank and Trust
Company. (7)
9(f). Transfer Agency and Service Agreement between the Trust on behalf of
the Class J shares of Loomis Sayles Investment Grade Bond Fund. (9)
9(g). Form of Letter Agreement between the Trust and State Street Bank
relating to the applicability of the Transfer Agency and Service
Agreement and Custodian Agreement to Loomis Sayles Select Opportunities
Fund is filed herein.
9(h). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Custodian Agreement to the
Loomis Sayles Emerging Markets Fund is filed herein.
9(i). Transfer Agency and Service Agreement between the Trust and Loomis
Sayles Emerging Markets Fund to be filed by amendment.
10(a). Opinion and Consent of Counsel. (3)
10(b). Form of Opinion and Consent of Counsel relating to Loomis Sayles
Managed Bond Fund and Loomis Sayles High Yield Fund II. (6)
11. Not Applicable
12. Not Applicable.
13(a). Investment Representation Regarding Initial Shares. (5)
13(b). Form of Organizational Expense Reimbursement Agreement. (5)
14. Form of IRA prototype documents. (5)
15(a). Form of Distribution Plan - Retail Class. (3)
15(b). Form of Distribution Plan - Admin Class. (5)
<PAGE>
15(c). Form of Service and Distribution Plan relating to Loomis Sayles
Managed Bond Fund. (6)
15(d). Form of Service and Distribution Plan relating to Loomis Sayles
Investment Grade Bond Fund - J Class. (8)
16. Schedule for Performance Computations. (3)
17. Not Applicable
18. Amended and Restated Rule 18f-3(d) Plan. (9)
19. Powers of Attorney. (1)
- --------------------
(1) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 7 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on February 16,
1996.
(2) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 10 to the Trust Registration Statement under the
Securities Act of 1933 filed with the Commission on August 30, 1996.
(3) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 11 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on October 9, 1996.
(4) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 12 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on March 10, 1997.
(5) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 13 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on October 31,
1997.
(6) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 15 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on August 5, 1998.
(7) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 17 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on November 30,
1998.
(8) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 18 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on April 7, 1999.
(9) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 19 to the Trust's Registration Statement under
the Securities Act of 1933 filed with the Commission on May 19, 1999.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Not Applicable.
<PAGE>
Item 26. Number of Holders of Securities
-------------------------------
No Longer Applicable.
Item 27. Indemnification
---------------
Article VIII of the Registrant's Agreement and Declaration of Trust (Exhibit 1
hereto) and Article 4 of the Registrant's By-Laws (Exhibit 2 hereto) provide for
indemnification of its Trustees and Officers. The effect of these provisions is
to provide indemnification for each of the Registrant's Trustees and Officers
against liabilities and counsel fees reasonably incurred in connection with the
defense of any legal proceeding in which such Trustee or Officer may be involved
by reason of being or having been a Trustee or Officer, except with respect to
any matter as to which such Trustee or Officer shall have been adjudicated not
to have acted in good faith in the reasonable belief that such Trustee's or
Officer's action was in the best interest of the Registrant, and except that no
Trustee or Officer shall be indemnified against any liability to the Registrant
or its shareholders to which such Trustee or Officer otherwise would be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Trustee's or Officer's
office.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to Trustees, Officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, Officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, Officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the adviser of the
Registrant, provides investment advice to the eight series of Loomis Sayles
Investment Trust, six series of New England Funds Trust I, one series of New
England Funds Trust II, and two series of New England Zenith Funds, all of which
are registered investment companies, and to other registered investment
companies, organizations and individuals.
The sole general partner of Loomis Sayles is Loomis, Sayles & Company,
Incorporated, One Financial Center, Boston, Massachusetts 02111.
Item 29. Principal Underwriters
----------------------
The Trust's principal underwriter is Loomis Sayles Distributors, L.P., the sole
general partner of which is Loomis Sayles Distributors, Incorporated.
Item 30. Location of Accounts and Records
--------------------------------
The following companies maintain possession of the documents required by the
specified rules:
(a) Registrant
Rule 31a-1(b)(4), (9), (10), (11)
Rule 31a-2(a)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)
<PAGE>
(c) Loomis, Sayles & Company, L.P.
One Financial Center
Boston, MA 02111
Rule 31a-1(f)
Rule 31a-2(e)
(d) Loomis, Sayles Distributors, L.P.
One Financial Center
Boston, MA 02111
Rule 31a-1(d)
Rule 31a-2(c)
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(I) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 as though such provisions of the Act
were applicable to the Registrant.
(ii) The Registrant undertakes to furnish each person to whom a prospectus
is delivered a copy of Registrant's most recent annual report upon
request and without charge.
********************
NOTICE
A copy of the Agreement and Declaration of Trust of Loomis Sayles Funds (the
"Trust") is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this Registration Statement has
been executed on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the obligations of or
arising out of this Registration Statement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this amendment to its
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, in the Commonwealth of Massachusetts on
the 26th day of August, 1999.
LOOMIS SAYLES FUNDS
By: DANIEL J. FUSS*
- -----------------------------
Daniel J. Fuss, President
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this amendment to the Registration Statement of Loomis
Sayles Funds has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title
- --------- -----
DANIEL J. FUSS* President and Trustee
- ------------------
Daniel J. Fuss
MARK W. HOLLAND* Treasurer
- ------------------
Mark W. Holland
Trustee
__________________
Joseph Alaimo
RICHARD S. HOLWAY* Trustee
- ------------------
Richard S. Holway
MICHAEL T. MURRAY* Trustee
- ------------------
Michael T. Murray
*By :/s/ Mark W. Holland
----------------------------
Mark W. Holland, for himself
and as Attorney-in-fact
August 26, 1999.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO.
- -------------
5(t). Form of Advisory Agreement between the Trust and Loomis Sayles Select
Emerging Markets Fund.
9(g). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Transfer Agency and Service
Agreement and Custodian Agreement to Loomis Sayles Select Opportunities
Fund is filed herein.
9(h). Letter Agreement between the Trust and State Street Bank and Trust
Company relating to the applicability of the Custodian Agreement to
Loomis Sayles Emerging Markets Fund is filed herein.
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this ___________ day of ____________________, 1999, by
and between Loomis Sayles Funds, a Massachusetts business trust (the "Trust"),
with respect to its Loomis Sayles Emerging Markets Fund series (the "Series"),
and Loomis, Sayles & Company, L.P., a Delaware limited partnership (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Series;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision of the Board of Trustees
of the Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial
data and information and undertake such additional investment research
as it shall believe necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including
the placing of orders for such purchase and sale with brokers or
dealers selected by the Adviser. In the selection of such brokers or
dealers and the placing of such orders, the Adviser shall always seek
best execution (except to the extent permitted by the next sentence
hereof), which is to place the Series' portfolio transactions where it
can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis
by a broker or dealer, and to deal directly with a principal market
maker in connection with over-the-counter transactions, except when it
is believed that best execution is obtainable elsewhere. Subject to
such policies, if any, as the Board of Trustees of the Trust may
determine, the Adviser shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise
solely by reason of having caused the Series to pay a broker or dealer
that provides brokerage and research services to the Adviser an amount
of commission
<PAGE>
for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determines in good faither
that such amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Series and to
other clients of the Adviser as to which the Adviser exercises
investment discretion; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs
of the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Trust acting pursuant
to like authority.
4. In addition to performing at its expense the obligations set
forth in section 2 hereof, the Adviser shall furnish to the Trust at the
Adviser's own expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the entity or entities selected to perform such
services and exclusive of any managerial functions described in
section 5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Except as the Adviser may otherwise agree from time to time,
nothing in section 4 hereof shall require the Adviser to bear, or to reimburse
the Trust for:
(a) any of the costs of printing and distributing the items
referred to in subsection (n) of this section 5;
(b) any of the costs of preparing, printing and distributing
sales literature;
(c) compensation of Trustees of the Trust who are not directors,
officers, partners or employees of the Adviser or of any affiliated
person (other than a registered investment company) of the Adviser;
2
<PAGE>
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the
Trust for custodial, paying agent, transfer agent and plan agent
services;
(f) charges and expenses of independent accountants retained
by the Trust;
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable
to the Trust in connection with securities transactions to which the
Trust is a party;
(i) taxes and fees payable by the Trust to Federal, State or
other governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of
the Trust including registering and qualifying its shares with Federal
and State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the
Trust;
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel,
required in connection with the preparation of the Trust's
registration statements and prospectuses, including amendments and
revisions thereto, annual, semiannual and other periodic reports of
the Trust, and notices and proxy solicitation material furnished to
shareholders of the Trust or regulatory authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities
furnished and expenses borne by the Adviser hereunder, the Trust shall pay the
Adviser compensation at the annual percentage rate of 1.25%, or such lesser rate
as the Adviser may agree to from time to time. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as
3
<PAGE>
the Board of Trustees of the Trust may from time to time determine and specify
in writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter only so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Series, and (ii) by
vote of a majority of the Trustees of the Trust who are not interested
persons of the Trust or the Adviser, cast in person at a meeting called for
the purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days' written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall
4
<PAGE>
automatically terminate at the time of such change unless the continuance
of this Agreement after such change shall have been specifically approved
by vote of a majority of the outstanding voting securities of the Series
and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purposes of voting on such approval.
12. For the purposes of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its
Loomis Sayles Emerging Markets Fund
By: __________________________
Name:
Title:
5
<PAGE>
LOOMIS, SAYLES & COMPANY, L.P.
By __________________________
Name:
Title:
A copy of the Agreement and Declaration of Trust establishing the
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's Loomis Sayles Emerging Markets Fund series on behalf of
the Trust by officers of the Trust as officers and not individually and that the
obligations of or arising out of this Agreement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property belonging to the Series.
6
<PAGE>
__________, 1999
State Street Bank and Trust Company
One Heritage Drive
North Quincy, Massachusetts 02121
Gentlemen:
This is to advise you that Loomis Sayles Funds (the "Trust") has
established a new fund to be known as the Loomis Sayles Select Opportunities
Fund. In accordance with the Additional Funds provision in Section 17 of the
Custodian Contract dated April 23, 1991 between the Trust and State Street Bank
and Trust Company, the Trust hereby requests that you act as custodian for the
new fund under the terms of the contract.
Please indicate your acceptance of the foregoing by executing two copies of
this Letter Agreement, returning one copy to the Trust and retaining one copy
for your records.
By:________________________________
Sheila M. Barry
Secretary, Loomis Sayles Funds
Agreed to this ____ day of __________, 1999
By:____________________________________
State Street Bank and Trust Company
1
<PAGE>
_____, 1999
State Street Bank and Trust Company
One Heritage Drive
North Quincy, Massachusetts 02121
Gentlemen:
This is to advise you that Loomis Sayles Funds (the "Trust") has
established a new fund to be known as the Loomis Sayles Emerging Markets Fund.
In accordance with the Additional Funds provision in Section 17 of the Custodian
Contract dated April 23, 1991 between the Trust and State Street Bank and Trust
Company, the Trust hereby requests that you act as custodian for the new fund
under the terms of the contract.
Please indicate your acceptance of the foregoing by executing two copies of
this Letter Agreement, returning one copy to the Trust and retaining one copy
for your records.
By:__________________________________
Sheila M. Barry
Secretary, Loomis Sayles Funds
Agreed to this ________ day of ________, 1999
By:____________________________________
State Street Bank and Trust Company
