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Prospectus
November 9, 1999,
as revised
November 19, 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 9, 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
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SUMMARY OF EXPENSES......................................................... 3
THE TRUST................................................................... 4
INVESTMENT OBJECTIVES AND POLICIES.......................................... 4
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS AND RISK
CONSIDERATIONS.............................................................. 5
THE FUND'S INVESTMENT ADVISER............................................... 9
FUND EXPENSES............................................................... 9
PORTFOLIO TRANSACTIONS...................................................... 9
HOW TO PURCHASE SHARES...................................................... 10
SHAREHOLDER SERVICES........................................................ 11
HOW TO REDEEM SHARES........................................................ 11
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............................. 12
CALCULATION OF PERFORMANCE INFORMATION...................................... 13
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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.
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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/ ....................................... 2.25%
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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):
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One Year.................... $23
Three Years................. $73
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/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
would be higher than those shown in the table.
/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 OBJECTIVE 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, when-issued 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, securities
lending, swap transactions, repurchase agreements, foreign currency hedging
transactions and, to the extent permitted by the Investment Company Act of
1940, closed-end investment companies.
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.
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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.
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.
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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.
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.
Securities Lending
Securities lending involves the Fund lending its portfolio securities to
broker-dealers or other parties under contracts calling for the deposit by the
borrower with the Fund's custodian of cash collateral equal to at least the
market value of the securities loaned, marked to market on a daily basis. The
Fund will continue to benefit from interest or dividends on the securities
loaned and will also receive interest through investment of the cash collateral
in short-term liquid investments. No loans will be made if, as a result, the
aggregate amount of such loans outstanding at any time would exceed 33 1/3% of
the Fund's assets (taken at current value). Any voting rights, or rights to
consent, relating to securities loaned pass to the borrower. However, if a
material event affecting the investment occurs, such loans will be called so
that the securities may be voted by the Fund. The Fund pays various fees in
connection with such loans, including shipping fees and reasonable custodial or
placement fees.
Securities loans must be fully collateralized at all times, but involve some
credit risk to the Fund if the borrower defaults on its obligation and the Fund
is delayed or prevented from recovering the collateral.
Closed-end Investment Companies
A closed-end investment company is a fund that does not redeem its shares on
a daily basis. As a result, an investment in a closed-end investment company
may be less liquid than an investment that can be sold any time a Fund holding
such an investment decides to sell. Since the value of a closed-end investment
company is based on the value of the individual securities it holds, a closed-
end investment company's value will fall if the value of its underlying
securities declines. As a shareholder in a closed-end investment company, the
Fund will bear its ratable share of the investment company's expenses,
including management fees, and will remain subject to the investment company's
advisory and administration fees with respect to the assets so invested.
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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.
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
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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.
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' 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.
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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 1990-1995, 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.
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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. The minimum investment may be waived in
whole or in part by Loomis Sayles in its sole discretion. Subsequent
investments must be at least $50.
All purchases made by check should be in U.S. dollars and made payable to
State Street Bank and Trust Company ("State Street bank"). Third party checks
will not be accepted. When purchases are made by check or periodic account
investment, redemption will not be allowed until the investment being redeemed
has been in the account for 15 calendar days.
Upon acceptance of an investor's order, State Street Bank opens an account,
applies the payment to the purchase of full and fractional Fund shares and
mails a statement of the account confirming the transaction.
After an account has been established, an investor may send subsequent
investments at any time directly to State Street Bank at the above address. The
remittance must be accompanied by either the account identification slip
detached from a statement of account or a note containing sufficient
information to identify the account, i.e., the Fund name and the investor's
account number or name and social security number.
Subsequent investments can also be made by federal funds wire. Investors
should instruct their banks to wire federal funds to State Street Bank and
Trust Company, ABA #011000028. The text of the wire should read as follows:
"$ 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.
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SHAREHOLDER SERVICES
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.
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.
11
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The redemption price will be the net asset value per share next determined
after the redemption request and any neccessary 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.
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
12
<PAGE>
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.
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.
13
<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
14
<PAGE>
Statement of Additional
Information
NOVEMBER 9, 1999
as revised November 19, 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 9, 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........................... 3
MANAGEMENT OF THE TRUST.................................................... 8
INVESTMENT ADVISORY AND OTHER SERVICES..................................... 10
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 12
DESCRIPTION OF THE TRUST................................................... 13
Voting Rights.......................................................... 13
Shareholder and Trustee Liability...................................... 14
How to Buy Shares...................................................... 15
Net Asset Value........................................................ 15
SHAREHOLDER SERVICES....................................................... 16
Open Accounts.......................................................... 16
Redemptions............................................................ 16
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS................ 17
FINANCIAL STATEMENTS....................................................... 20
CALCULATION OF TOTAL RETURN................................................ 20
PERFORMANCE COMPARISONS.................................................... 20
APPENDIX A--PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION................. 23
APPENDIX B--ADVERTISING AND PROMOTIONAL LITERATURE......................... 25
</TABLE>
2
<PAGE>
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 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.
3
<PAGE>
*(9) Borrow money in excess of 33 1/3 % of the value of its total assets
at the time the borrowing is made.
(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.
4
<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 market movements in
the value of those investments between the date the forward contract is entered
into and the date it matures.
5
<PAGE>
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 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
6
<PAGE>
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.
7
<PAGE>
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
JOSEPH ALAIMO--Trustee. 727 N. Bank Lane, Lake Forest, Illinois. President,
Wintrust Asset Management Company.
RICHARD S. HOLWAY--Trustee. 1314 Seaspray Lane, Sanibel, Florida. Retired;
formerly, Vice President, Loomis Sayles. Director, Sandwich Cooperative Bank.
MICHAEL T. MURRAY--Trustee. 404 N. Western Ave., Lake Forest, Illinois.
Retired; formerly, Vice President, Loomis Sayles.
*DANIEL J. FUSS--President and Trustee. Executive Vice President and
Director, Loomis Sayles.
MARK B. 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 L. CARROLL--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles. Formerly, Managing Director and Senior
Energy Analyst at Paine Webber, Inc.
MARY C. CHAMPAGNE--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
E. JOHN DEBEER--Vice President. Vice President, Loomis Sayles.
RODERICK H. DILLON, JR.--Vice President. 2001 Pennsylvania Avenue, NW Suite
200, Washington, DC. Vice President, Loomis Sayles.
WILLIAM H. EIGEN, JR.--Vice President. Vice President, Loomis Sayles;
formerly Vice President, INVESCO Funds Group and Vice President, The Travelers
Corp.
CHRISTOPHER R. ELY--Vice President. Vice President, Loomis Sayles; formerly
Senior Vice President and portfolio manager, Keystone Investment Management
Company, Inc.
QUENTIN P. FAULKNER--Vice President. Vice President, Loomis Sayles.
PHILIP C. FINE--Vice President. Vice President, Loomis Sayles; formerly Vice
President and portfolio manager, Keystone Investment Management Company, Inc.
KATHLEEN C. GAFFNEY--Vice President. Vice President, Loomis Sayles.
ISAAC H. GREEN--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Executive Vice President and Director, Loomis Sayles.
MARTHA F. HODGMAN--Vice President. Vice President, Loomis Sayles.
MARK W. HOLLAND--Treasurer. Vice President and Director, Loomis Sayles.
JOHN HYLL--Vice President. 555 California Street, San Francisco, California.
Vice President, Loomis Sayles.
* Trustee deemed an "interested person" of the Trust, as defined by the 1940
Act.
8
<PAGE>
JEFFREY L. MEADE--Vice President. Executive Vice President, Chief Operating
Officer and Director, Loomis Sayles.
ESWAR MENON--Vice President. 555 California Street, San Francisco,
California. 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. 555 California Street, San Francisco,
California. 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. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
JEFFREY C. PETHERICK--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
BRUCE G. PICARD, JR.--Vice President. Vice President, Loomis Sayles.
LAUREN B. PITALIS--Vice President. Vice President, Loomis Sayles; formerly
Vice President and Assistant Secretary of Harris Associates Investment Trust.
DAVID L. SMITH--Vice President. Vice President, Loomis Sayles; formerly Vice
President and portfolio manager, Keystone Investment Management Company, Inc.
SANDRA P. TICHENOR--Vice President. 555 California Street, San Francisco
California. General Counsel, Executive Vice President, Secretary and Clerk,
Loomis Sayles. Formerly, Partner, Heller, Ehrman, White & McAuliffe.
JOHN TRIBOLET--Vice President. 555 California Street, San Francisco,
California. 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. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
ANTHONY J. WILKINS--Vice President. Executive Vice President and Director,
Loomis Sayles.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different. Except as indicated above, the address of
each trustee and officer of the Trust affiliated with Loomis Sayles is One
Financial Center, Boston, Massachusetts. The Trust pays no compensation to its
officers or to the trustees listed above who are directors, officers or
employees of Loomis Sayles. Each trustee who is not a director, officer or
employee of Loomis Sayles is compensated at the rate of $1,250 per fund per
annum.
9
<PAGE>
COMPENSATION TABLE
for the nine months ended September 30, 1998 *
<TABLE>
<CAPTION>
(3)
(5)
Pension or Total
Retirement (4) Compensation
(2) Benefits From Trust
Accrued as Estimated and
Aggregate Part of Annual Fund Complex
Compensation Fund Benefits upon Paid to
(1) From Trust Expenses Retirement Trustee**
Name of Person, Position ------------ ---------- ------------- ------------
<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 November 1, 1999. 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 1.25% of the 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 agreements or in relevant state
regulations and excludes brokerage commissions, taxes, interest, distribution-
related expenses and extraordinary expenses.
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<PAGE>
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 of making information about the Fund
available through advertising and other means and the cost
11
<PAGE>
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
PricewaterhouseCoopers LLP, One Post Office Square, Boston Massachusetts.
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the 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.
12
<PAGE>
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 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.
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.
13
<PAGE>
The Declaration of Trust provides that on any matter submitted to a vote of
all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote, in which case a
separate vote of that series or sub-series shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect that a
class shall be deemed to be affected by a matter unless it is clear that the
interests of each class in the matter are substantially identical or that the
matter does not affect any interest of such class. On matters affecting an
individual series, only shareholders of that series are entitled to vote.
Consistent with the current position of the SEC, shareholders of all series
vote together, irrespective of series, on the election of trustees and the
selection of the Trust's independent accountants, but shareholders of each
series vote separately on other matters requiring shareholder approval, such as
certain changes in investment policies of that series or the approval of the
investment advisory agreement relating to that series.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the board of trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be 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
14
<PAGE>
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No
officer or trustee may be indemnified against any liability to the Trust or the
Trust's shareholders to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.
How to Buy Shares
The procedures for purchasing shares of 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.
15
<PAGE>
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.
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 Loomis Sayles at 800-633-3330 option 6. 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
16
<PAGE>
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."
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.
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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
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
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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.
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.
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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 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
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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.
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.
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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.
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APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
Financial Services Week
ABC and Affiliates
Adam Smith's Money World Financial World
America On Line Fitch Insights
Anchorage Daily News Forbes
Atlanta Constitution Fort Worth Star-Telegram
Atlanta Journal Fortune
Arizona Republic Fox Network and affiliates
Austin American Statesman Fund Action
Baltimore Sun Fund Decoder
Bank Investment Marketing Global Finance
Barron's (the) Guarantor
Bergen County Record (NJ) Hartford Courant
Bloomberg Business News Houston Chronicle
Bond Buyer INC
Boston Business Journal Indianapolis Star
Boston Globe Individual Investor
Boston Herald Institutional Investor
Broker World International Herald Tribune
Business Radio Network Internet
Business Week Investment Advisor
CBS and affiliates Investment Company Institute
CDA Investment Technologies Investment Dealers Digest
CFO Investment Profiles
Changing Times Investment Vision
Chicago Sun Times Investor's Daily
Chicago Tribune IRA Reporter
Christian Science Monitor Journal of Commerce
Christian Science Monitor News Service Kansas City Star
Cincinnati Enquirer KCMO (Kansas CityI)
Cincinnati Post KOA-AM (DenverI)
CNBC LA Times
CNN Leckey, Andrew (syndicated column)
Columbus Dispatch Life Association News
CompuServe Lifetime Channel
Dallas Morning News Miami Herald
Dallas Times-Herald Milwaukee Sentinel
Denver Post Money Magazine
Des Moines Register Money Maker
Detroit Free Press Money Management Letter
Donoghues Money Fund Report Morningstar
Dorfman, Dan (syndicated columnI) Mutual Fund Market News
Dow Jones News Service Mutual Funds Magazine
Economist National Public Radio
FACS of the Week National Underwriter
Fee Adviser NBC and affiliates
Financial News Network New England Business
Financial Planning New England Cable News
Financial Planning on Wall Street New Orleans Times-Picayune
Financial Research Corp. New York Daily News
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<PAGE>
New York Times Securities Industry Management
Newark Star Ledger Smart Money
Newsday St. Louis Post Dispatch
Newsweek St. Petersburg Times
Nightly Business Report Standard & Poor's Outlook
Orange County Register Standard & Poor's Stock Guide
Orlando Sentinel Stanger's Investment Advisor
Palm Beach Post Stockbroker's Register
Pension World Strategic Insight
Pensions and Investments Tampa Tribune
Personal Investor Time
Philadelphia Inquirer Tobias, Andrew (syndicated columnI)
Porter, Sylvia (syndicated column) Toledo Blade
Portland Oregonian UP
Prodigy US News and World Report
Public Broadcasting Service USA Today
Quinn, Jane Bryant (syndicated column) USA TV Network
Registered Representative Value Line
Research Magazine Wall Street Journal
Resource Wall Street Week
Reuters Washington Post
Rocky Mountain News WBZ
Rukeyser's Business (syndicated columnI) WBZ-TV
Sacramento Bee WCVB-TV
San Diego Tribune WEEI
San Francisco Chronicle WHDH
San Francisco Examiner Worcester Telegram
San Jose Mercury World Wide Web
Seattle Post-Intelligencer Worth Magazine
Seattle Times WRKO
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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.
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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
26
