<PAGE>
[Translation]
SECURITIES REGISTRATION STATEMENT
ANNUAL SECURITIES REPORT
(For the First Term)
From: 1st October 1998
To: 30th September 1999
AMENDMENT TO THE SECURITIES REGISTRATION STATEMENT
LOOMIS SAYLES FUNDS - LOOMIS SAYLES MANAGED BOND FUND
(2339)
<PAGE>
SECURITIES REGISTRATION STATEMENT
LOOMIS SAYLES FUNDS - LOOMIS SAYLES MANAGED BOND FUND
(2339)
<PAGE>
SECURITIES REGISTRATION STATEMENT
To: Director of the Kanto
Local Finance Bureau
Filing Date: 17th March 2000
Amendment Date 28th March 2000
Name of the Registrant Trust: LOOMIS SAYLES FUNDS
Name and Official Title of: Jeffery L. Meade
the Representative Vice President of the Trust
Address of Principal Office: One Financial Center
Boston, Massachusetts 02111
U. S. A.
Name and Title of Registration Agent: Harume Nakano
Attorney-at-Law
Signature [Harume Nakano]
-------------------------
(Seal)
Ken Miura
Attorney-at-Law
Signature [Ken Miura]
---------------------
(Seal)
Address or Place of Business Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Name of Liaison Contact: Harume Nakano
Ken Miura
Hikaru Kaieda
Attorneys-at-Law
Place of Liaison Contact: Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Phone Number: 03-3580-3377
<PAGE>
PUBLIC OFFERING OR SALE FOR REGISTRATION
Name of the Fund Making Public LOOMIS SAYLES MANAGED BOND FUND
Offering or Sale of Foreign
Investment Fund Securities:
Type and Aggregate Amount of Shares of a series of a diversified
Foreign Investment Fund Securities open-end management investment company
to be Publicly Offered or Sold: organized as a Massachusetts business
trust;
Up to 98,900,000 shares
Up to the amount derived by multiplying
98,900,000 by the respective applicable
issue prices (the estimated maximum
amount is 931,638 thousand dollars
(approximately 100 billion yen))
Note 1: U.S.$ amount is translated into Japanese Yen at the rate of
U.S.$l.00=(Y)107.00 the mean of the exchange rate quotations by The Bank
of Tokyo-Mitsubishi, Ltd. for buying and selling spot dollars by
telegraphic transfer against yen on 31st January, 2000.
Note 2: The estimated maximum amount is an amount calculated by multiplying
the Net Asset Value per Share as of the end of January, 2000 ($ 9.42) by
98,900,000, for convenience.
PLACES WHERE A COPY OF THIS SECURITIES REGISTRATION
STATEMENT IS AVAILABLE FOR PUBLIC INSPECTION
Not applicable.
(Total number of pages of this Securities Registration Statement in Japanese is
8 including front and back pages.)
<PAGE>
C O N T E N T S
Japanese This
Original English
Translation
PART I. INFORMATION CONCERNING SECURITIES 1 1
PART II. INFORMATION CONCERNING ISSUER 3 1
I. DESCRIPTION OF THE FUND 3 6
l. GENERAL INFORMATION 3 6
2. INVESTMENT POLICY 3 6
3. MANAGEMENT STRUCTURE 3 6
4. INFORMATION CONCERNING THE EXERCISE
OF RIGHTS BY SHAREHOLDERS, ETC. 3 6
5. STATUS OF INVESTMENT FUND 3 6
II. OUTLINE OF THE TRUST 3 6
III. OUTLINE OF THE OTHER RELATED COMPANIES 3 6
IV. FINANCIAL CONDITION OF THE FUND 3 6
V. SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT FUND SECURITIES 3 6
VI. MISCELLANEOUS 3 6
PART III. SPECIAL INFORMATION 5 8
I. OUTLINE OF THE SYSTEM OF INVESTMENT
TRUSTS IN MASSACHUSETTS 5 8
II. FINANCIAL CONDITIONS OF THE INVESTMENT
ADVISER AND INVESTMENT MANAGEMENT COMPANY 11 17
<PAGE>
III. FORM OF FOREIGN INVESTMENT
FUND SECURITIES 12 17
<PAGE>
PART I. INFORMATION CONCERNING SECURITIES
1. NAME OF FUND: LOOMIS SAYLES MANAGED BOND FUND
(hereinafter referred to as the "Fund")
2. NATURE OF FOREIGN Shares of a series of a diversified open-end
INVESTMENT FUND SECU- management investment company organized
RITIES CERTIFICATES: as a Massachusetts business trust
3. NUMBER OF SHARES TO Up to 98,900,000 shares
BE OFFERED FOR SALE
(IN JAPAN)
4. TOTAL AMOUNT OF Up to the amount calculated by multiplying
OFFERING PRICE: the respective applicable issue price per
(IN JAPAN) share by the number of respective issues (the
estimated maximum amount will be 931,638
thousand dollar (approximately 100 billion
yen))
Note 1: The maximum amount is calculated for reference purpose only by
multiplying the Net Asset Value per share as of the end of
January, 2000 ($9.42) by 98,900,000 shares.
Note 2: Dollar amount is translated for convenience at the rate of
$1.00=(Y)107.00 (the mean of the exchange rate quotations by
The Bank of Tokyo-Mitsubishi, Ltd. for buying and selling spot
dollars by telegraphic transfer against yen on 31st January,
2000). The same applies hereinafter.
Note 3: In this document, money amounts and percentages have been
rounded. Therefore, there are cases in which the amount of the
"total column" is not equal to the aggregate amount. Also,
translation into yen is made simply by multiplying the
corresponding amount by the conversion rate specified and
rounded up when necessary. As a result, in this document,
there are cases in which Japanese yen figures for the same
information differ from each other.
5. ISSUE PRICE: Net Asset Value per Share next calculated on
the day on which the Fund has received such
application
6. SALES CHARGE: 2.00% of the Sales Price. The Sales Price
means the Issue Price divided by 0.995
(rounded
<PAGE>
to the third decimal place).
7. MINIMUM AMOUNT OR The minimum amount for purchase of
NUMBER OF SHARES Shares is 100 shares and shares may be
FOR SUBSCRIPTION: purchased in integral multiples of 100
shares.
8. PERIOD OF SUBSCRIPTION: From April 3, 2000 (Monday)
To March 30, 2001 (Friday)
Provided that the subscription is handled
only on a Fund Business Day and a business
day when securities companies are open for
business in Japan.
It is expected that the Fund will reject
purchase orders in excess of U.S. $5 million
on each of the five Fund Business Days
preceding the ex-dividend day of each month.
Note: A "Fund Business Day" is any day on which the New York Stock
Exchange is open for business.
9. DEPOSIT FOR SUBSCRIPTION: None.
10. PLACE OF SUBSCRIPTION: Kokusai Securities Co., Ltd. (hereinafter
referred to as " Kokusai")
Tokyo-Sumitomo-Twin-Building, East Building,
27-1, Shinkawa 2-chome, Chuo-ku, Tokyo
Note: The subscription is handled at the head office and the branch
offices in Japan of the above-mentioned securities company.
11. DATE AND PLACE Investors shall pay the Issue Price and Sales
OF PAYMENT: Charge to Kokusai within 4 business days in
Japan when Kokusai confirms the execution of
the order. The total Issue Price and the
0.50% of the net asset value to be returned
by the Distributor will be transferred by
Kokusai to the account of the Fund at State
Street Bank and
<PAGE>
Trust Company, the custodian and transfer
agent, within 3 Fund Business Days from (and
including) the day on which the application
becomes effective.
12. OUTLINE OF UNDERWRITING, ETC.:
(A) Kokusai undertakes to make a public offering of Shares in accordance
with an agreement dated September 14, 1998 with Loomis Sayles Distributors,
L.P. (hereinafter referred to as the "Distributor") in connection with the
sale of the Shares in Japan.
(B) During the public offering period, Kokusai will execute or forward the
purchase orders of the Shares received directly or indirectly through other
Sales and Sales Handling Companies to the Fund.
Note: Sales Handling Company means a securities agent company and/or
registration agent financial institution which shall conclude the
agreement with a distributor concerning agency business of units of
the Fund, act as agent for a distributor for subscription or
redemption of units of the Fund from investors and handle the
business, etc. concerning receipt of subscription money from
investors or payment of redemption proceeds to investors, etc.
(C) The Fund has appointed Kokusai as the Agent Company in Japan.
Note: "The Agent Company" shall mean a securities company which,
under a contract made with a foreign issuer of investment
securities, makes public the net asset value per Share and
submits or forwards the financial reports or other documents
to the Japan Securities Dealers Association ("JSDA") and other
Sales and Sales Handling Companies in Japan) rendering such
other services.
13. MISCELLANEOUS:
(A) Method of Subscription:
Investors who subscribe to Shares shall enter into a Sales and
Sales Handling Company an agreement concerning transactions of foreign
securities. A Sales and Sales Handling Company in Japan shall provide
to the investors a Contract Concerning a Foreign Securities
Transactions Account or other prescribed contract (the "Contract") and
the investors shall submit to the Sales and Sales Handling Company in
Japan an application for requesting the opening of a transactions
account under the Contract. The subscription amount shall be paid in
yen in principle and the yen exchange rate shall be the exchange rate
which shall be based on the foreign exchange rate quoted in the Tokyo
Foreign Exchange Market on the Trade Day of each subscription and which
shall be determined by such Sales and Sales Handling
<PAGE>
Company in Japan.
(B) Expenses summary:
The following tables present the expenses that investors would
pay if investors buy and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM INVESTORS' INVESTMENT)
The following shareholder fees apply to the Fund.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Fund Imposed on Purchases (as a
Fund percentage of offering price)
--------------------------------------------------------------------------------------------------------
<S> <C>
Loomis Sayles Managed Bond Fund 2.50%
--------------------------------------------------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses (Expenses those deducted from Fund assets)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Fund Management Distribution Other Total Annual Fees Expenses Net Expenses*
Fees and Services Expenses Fund Operating Expenses
(12b-1) fees Expenses Reimbursement*
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles
Managed .60% .75% .68% 2.03% .53% 1.50%
Bond Fund
-----------------------------------------------------------------------------------------------------------
* Reflects Loomis Sayles' contractual obligation to limit the Fund's expenses through February 1, 2001.
-----------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
The following example translates the "Total Annual Fund
Operating Expenses" column shown in the preceding table into dollar
amounts. This example is intended to help investors compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
This example makes certain assumptions. It assumes that
investors invest $10,000 in the Fund for the time periods shown and
then redeem all investors' shares at the end of those periods. This
example also assumes that investors' investment has a 5% return each
year and that the Fund's operating expenses remain the same. Investors
should remember that this example is hypothetical, so that investors'
actual costs and returns may be higher or lower.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Fund 1st 3 years* 5 years* 10 years*
Year*
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loomis Sayles Managed Bond Fund $399 $821 1,268 $2,508
-----------------------------------------------------------------------------------------------------
* Expenses shown for the Fund include the fee waiver/reimbursement for the first year of each
period.
-----------------------------------------------------------------------------------------------------
</TABLE>
(C) Offerings other than in Japan:
Shares of the Fund are currently not offered in the U.S.
<PAGE>
PART II. INFORMATION CONCERNING ISSUER
I. DESCRIPTION OF THE FUND
Same as I. DESCRIPTION OF THE FUND of the Annual Securities Report
set forth below (the Annual Securities Report mentioned below, from
page 1 to page 32)
II. OUTLINE OF THE TRUST
Same as II. OUTLINE OF THE TRUST of the Annual Securities Report
set forth below (Ditto, from page 33 to page 47)
III. OUTLINE OF THE OTHER RELATED COMPANIES
Same as III. OUTLINE OF THE OTHER RELATED COMPANIES of the Annual
Securities Report set forth below (Ditto, from page 48 to page 50)
IV. FINANCIAL CONDITIONS OF THE FUND
Same as IV. FINANCIAL CONDITIONS OF THE FUND of the Annual
Securities Report set forth below (Ditto, from page 51 to page 82)
V. SUMMARY OF INFORMATION CONCERNING FOREIGN INVESTMENT FUND SECURITIES
Same as VI. SUMMARY OF INFORMATION CONCERNING FOREIGN INVESTMENT
FUND SECURITIES of the Annual Securities Report set forth below (Ditto,
page 119)
VI. MISCELLANEOUS
1. (1) The ornamental design is used in cover page of the
Japanese Prospectus.
(2) Summarized Preliminary Prospectus will be used.
Attached document (Summarized Preliminary Prospectus) will be used
pursuant to the below, as the document (Summarized Preliminary
Prospectus) as set forth at Item 1.(1)(b), of Article 12 of the
Ordinance Concerning the Disclosure of the
Content, etc. of the Specified Securities.
(i) The summarized Preliminary Prospectus may be used
as letters, pamphlets, direct-mails post-cards, letters),
etc., and may be published in newspapers, magazines, books,
internet, etc.
(ii) The summarized Preliminary Prospectus may be,
depending on the media types, modified as to its lay-out,
kinds of paper, printed-color, design, etc. In addition,
photographs and illustrations attached
<PAGE>
may be added thereto.
(iii) For information of the Fund's achievements, the
changes of the net asset value per share and the fluctuation
rates since the establishment of the Fund or for the latest
3 months, 6 months, one year, two years, three years or five
years may be set out in the figures or graphs, compared to
the recognized bond index from time to time. Such
information regarding the Fund's achievement may be
converted into and presented in yen.
2. As to the Fund, following documents have been filed with the Kanto
Local Finance Bureau of the Ministry of Finance of Japan.
September 4, 1998 Securities Registration Statement.
September 10, 1998 Amendment to the Securities Registration Statement
September 14, 1998 Amendment to the Securities Registration Statement
September 16, 1998 Amendment to the Securities Registration Statement
December 1, 1998 Amendment to the Securities Registration Statement
March 16, 1999 Securities Registration Statement
March 26, 1999 Amendment to the Securities Registration Statement
June 30, 1999 Semi-annual Report (1st)/Amendment to the SRS
<PAGE>
PART III. SPECIAL INFORMATION
I. OUTLINE OF GENERAL INFORMATION ABOUT OPEN-END
MASSACHUSETTS INVESTMENT COMPANIES
Below is an outline of certain general information about open-end U.S.
investment companies. This outline is not intended to provide comprehensive
information about such investment companies or the various laws, rules or
regulations applicable to them, but provides only a brief summary of certain
information which may be of interest to investors. The discussion below is
qualified in its entity by the complete registration statement of the fund and
the full text of any referenced statutes and regulations.
I. Massachusetts Business Trusts
A. General Information
Many investment companies are organized as Massachusetts
business trusts. A Massachusetts business trust is organized pursuant
to a declaration of trust, setting out the general rights and
obligations of the shareholders, trustees, and other related parties.
Generally, the trustees of the trust oversee its business, and its
officers and agents manage its day-to-day affairs.
Chapter 182 of the Massachusetts General Laws applies to
certain "voluntary associations", including many Massachusetts business
trusts. Chapter 182 provides for, among other things, the filing of the
declaration of trust with the Secretary of State of the Commonwealth of
Massachusetts and the filing by the trust of an annual statement
regarding, among other things, the number of its shares outstanding and
the names and addresses of its trustees.
B. Shareholder Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a
trust. Typically, a declaration of trust disclaims shareholder
liability for acts or obligations of the trust and provides for
indemnification out of trust property for all loss and expense of any
shareholder held personally liable for the obligations of a trust.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a particular
trust would be unable to meet its obligations.
II. United States Investment Company Laws and Enforcement
A. General
In the United States, pooled investment management
arrangements which offer shares to the public are governed by a variety
of federal statutes and regulations. Most mutual funds are subject to
these laws. Among the more significant of these statutes are:
<PAGE>
1. Investment Company Act of 1940
The Investment Company Act of 1940, as amended (the "1940
Act"), in general, requires investment companies to register as such
with the U.S. Securities and Exchange Commission (the "SEC"), and to
comply with a number of substantive regulations of their operations.
The 1940 Act requires an investment company, among other things, to
provide periodic reports to its shareholders.
2. Securities Act of 1933
The Securities Act of 1933, as amended (the "1933 Act"),
regulates many sales of securities. The Act, among other things,
imposes various registration requirements upon sellers of securities
and provides for various liabilities for failures to comply with its
provisions or in respect of other specified matters.
3. Securities Exchange Act of 1934
The Securities Exchange Act of 1934, as amended (the "1934
Act"), regulates a variety of matters involving, among other things,
the secondary trading of securities, periodic reporting by the issuers
of securities, and certain of the activities of transfer agents and
brokers and dealers.
4. The Internal Revenue Code of 1986
An investment company is an entity subject to federal income
taxation under the Internal Revenue Code of 1986, as amended. However,
under the Code, an investment company may be relieved of federal taxes
on income and gains it distributes to shareholders if it qualifies as a
"regulated investment company" under the Code for federal income tax
purposes and meets all other necessary requirements.
5. Other laws
The Fund is subject to the provisions of other laws, rules,
and regulations applicable to the Fund or its operations, such as, for
example, various state laws regarding the sale of the Fund's shares.
B. Outline of the Supervisory Authorities
Among the regulatory authorities having jurisdiction over the
Fund or certain of its operations are the SEC and state regulatory
agencies or authorities.
1. The SEC has broad authority to oversee the application and
enforcement of the federal securities laws, including the 1940 Act, the
1933 Act, and the 1934 Act, among others, to the Fund. The 1940 Act
provides the
<PAGE>
SEC broad authority to inspect the records of investment companies, to
exempt investment companies or certain practices from the provisions of
the Act, and otherwise to enforce the provisions of the Act.
2. State authorities typically have broad authority to regulate
the offering and sale of securities to their residents or within their
jurisdictions and the activities of brokers, dealers, or other persons
directly or indirectly engaged in related activities.
C. Offering Shares to the Public
An investment company ("investment company" or fund) offering
its shares to the public must meet a number of requirements, including,
among other things, registration as an investment company under the
1940 Act; registration of the sale of its shares under the 1933 Act;
registration of the fund, the sale of its shares, or both, with state
securities regulators; delivery of a current prospectus to current or
prospective investors; and so forth. Many of these requirements must be
met not only at the time of the original offering of the fund's shares,
but compliance must be maintained or updated from time to time
throughout the life of the fund.
D. Ongoing Requirements
Under U.S. law, a fund is subject to numerous ongoing
requirements, including, but not limited to;
1. Updating its prospectus if it becomes materially inaccurate or
misleading;
2. Annual update of its registration statement;
3. Filing semi-annual and annual financial reports with the SEC
and distributing them to shareholders;
4. Annual trustee approval of investment advisory arrangements,
distribution plans, underwriting arrangements, errors and
omissions/director and officer liability insurance, foreign custody
arrangements, and auditors;
5. Maintenance of a code of ethics; and
6. Periodic board review of certain fund transactions, dividend
payments, and payments under a fund's distribution plan.
III. Management of a Fund
The board of directors or trustees of a fund is responsible for
generally overseeing the conduct of a fund's business. The officers and agents
of a fund are generally responsible for the day-to-day operations of a fund. The
trustees and officers of a fund may or may not receive a fee for their services.
<PAGE>
The investment adviser to a fund is typically responsible for
implementing the fund's investment program. The adviser typically receives a fee
for its services based on a percentage of the net assets of a fund. Certain
rules govern the activities of investment advisers and the fees they may charge.
In the United States, investment advisers to investment companies must be
registered under the Investment Advisers Act of 1940, as amended.
IV. Share Information
A. Valuation
Shares of a fund are generally sold at the net asset
value next determined after an order is received by a fund, plus any
applicable sales charges. A fund normally calculates its net asset
value per share by dividing the total value of its assets, less
liabilities, by the number of its shares outstanding. Shares are
typically valued as of the close of regular trading on the New York
Stock Exchange (4:00) each day the Exchange is open.
B. Redemption
Shareholders may generally sell shares of a fund to
that fund any day the fund is open for business at the net asset value
next computed after receipt of the shareholders' order. Under unusual
circumstances, a fund may suspend redemptions, or postpone payment for
more than seven days, if permitted by U.S. securities laws. A fund may
charge redemption fees as described in its prospectus.
C. Transfer agency
The transfer agent for a fund typically processes the
transfer of shares, redemption of shares, and payment and/or
reinvestment of distributions.
V. Shareholder Information, Rights and Procedures for the Exercise of Such
Rights
A. Voting Rights
Voting rights vary from fund to fund. In the case of
many funds organized as Massachusetts business trusts, shareholders are
entitled to vote on the election of trustees, approval of investment
advisory agreements, underwriting agreements, and distribution plans
(or amendments thereto), certain mergers or other business
combinations, and certain amendments to the declaration of trust.
Shareholder approval is also required to modify or eliminate a
fundamental investment policy.
B. Dividends
Shareholders are typically entitled to receive
dividends when and if declared by a fund's trustees. In declaring
dividends, the trustees will normally set a
<PAGE>
record date, and all shareholders of record on that date will be
entitled to receive the dividend paid.
C. Dissolution
Upon liquidation of a fund, Shareholders would
normally be entitled to receive a portion of the fund's net assets in
accordance with the proportion of the fund's outstanding shares owned.
D. Transferability
Shares of a fund are typically transferable without
restriction.
E. Right to Inspection
Shareholders of a Massachusetts business trust have
the right to inspect the records of the trust as provided in the
declaration of trust or as otherwise provided by applicable law.
VI. U.S. Tax Matters
The following discussion addresses only the U.S. federal income tax
consequences of an investment in the Fund and does not address any Non-U.S.,
state, or local tax consequences. Investors should consult their tax adviser for
more information on how an investment in the Fund affects your own tax
situation, including, for foreign shareholders, the possible imposition of U.S.
income withholding tax at rates of up to 30% on all Fund distributions other
than capital gain distributions.
For U.S. federal income tax purposes, distributions of investment
income from the Fund are taxable as ordinary income. Taxes on distributions of
capital gains are determined by how long the Fund owned the investments that
generated the capital gains, rather than by how long investors have owned their
shares of the Fund. Distributions of short-term capital gains, which result from
the sale of securities that the Fund had held for one year or less, are taxable
as ordinary income. Properly designated distributions of long-term capital
gains, which result from the sale of securities that the Fund had held for more
than one year, are taxable as long-term capital gains (generally at a 20%
federal income tax rate for non-corporate shareholders).
Distributions of income and capital gains are taxable whether you
received them in cash or reinvested them in additional shares. If a dividend or
distribution is made shortly after you purchase shares of the Fund, while in
effect a return of capital to you, the dividend or distribution is taxable, as
described above. This is called "buying a dividend" and should be avoided, if
possible.
The Fund's investment in foreign securities may be subject to foreign
withholding taxes, which would decrease the Fund's yield on those securities.
Shareholders may be entitled to claim a credit or deduction with respect to
foreign taxes. In addition, the Fund's investment in foreign securities may
increase or accelerate the Fund's recognition of income
<PAGE>
and may affect the timing or amount of the Fund's distributions.
In addition to income tax on the Fund's distributions, any gain that
results if you sell or exchange your shares generally is subject to income tax.
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, redeeming or exchanging Fund shares.
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 so to qualify, 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 of foreign currencies, or
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (ii) distribute with respect to each taxable
year at least 90% of the sum of its taxable net investment income, its
tax-exempt income, and the excess, if any, of net short-term capital gains over
net long-term capital losses for such year; (iii) diversify its holdings so that
at the end of each fiscal quarter (a) at least 50% of the value of its assets is
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 is 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 that are engaged in the same,
similar or related trades and businesses. To the extent it qualifies for
treatment as a regulated investment company, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of the Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized 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
<PAGE>
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 taxable at a 20% tax rate for non-corporate
Shareholders) without regard to how long a shareholder has held shares of the
Fund.
Dividends and distributions on the Fund's share are generally subject
to federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
The 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.
Investments by the Fund in "passive foreign investment companies" could
subject the Fund to a U.S. federal income tax or other charge on the proceeds
from the sale of its investment in such a company; however, this tax can be
avoided by making an election to mark such investments to market annually or to
treat the passive foreign investment company as a "qualified electing fund."
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.
If the Fund engages in hedging transactions, including hedging
transactions in options, future 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.
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
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 the 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
<PAGE>
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 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, foreign, state 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 possibility that a non-U.S.
investor may be subject to U.S. tax on capital gain distributions and gains
realized upon the sale of Fund shares if the investor is present in the United
States for more than 182 days during the taxable year (and certain other
conditions apply), or the possibility that a non-U.S. investor may be subject to
U.S. tax on income from the Fund that is "effectively connected" with a U.S.
trade or business carried on by such investor.
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
December 31, 1999 (although transition rules will apply). In some circumstances,
the new rules will increase the certification and filing requirements imposed on
foreign investors in order to qualify for exemption from the 31% back-up
withholding tax and for reduced withholding tax rates under income tax treaties.
Foreign investors in the Fund should consult their tax advisors with respect to
the potential application of these new regulations.
VII. Important Participants in Offering of Mutual Fund Shares
A. Investment Company
Certain pooled investment vehicles qualify as investment
companies under the 1940 Act. There are open-end investment companies
(those which offer redeemable securities) and closed-end investment
companies (any others).
B. Investment Adviser/Administrator
The investment adviser is typically responsible for the
implementation of an investment company's investment program. It, or
another affiliated or unaffiliated entity, may also perform certain
record keeping and administrative functions.
<PAGE>
C. Underwriter
An investment company may appoint one or more principal
underwriters for its shares. The activities of such a principaly
underwriter are generally governed by a number of legal regimes,
including, for example, the 1940 Act, the 1933 Act, the 1934 Act, and
state laws.
D. Transfer Agent
A transfer agent performs certain bookkeeping, data processing,
and administrative services pertaining to the maintenance of
shareholder accounts. A transfer agent may also handle the payment of
any dividends declared by the trustees of a fund.
E. Custodian
A custodian's responsibilities may include, among other things,
safeguarding and controlling a fund's cash and securities, handling the receipt
and delivery of securities, and collecting interest and dividends on a fund's
investments.
<PAGE>
II. FINANCIAL CONDITIONS OF THE INVESTMENT MANAGEMENT COMPANY
Same as V. FINANCIAL CONDITIONS OF INVESTMENT MANAGEMENT
COMPANY of the Annual Securities Report set forth below (the Annual
Securities Report mentioned below, from page 83 to page 118)
III. FORM OF FOREIGN INVESTMENT FUND SECURITIES
[Main items to be set forth on the share certificate of the
Fund (if issued) are as follows:-
(1) Front
a. Name of the Fund
b. Number of shares represented
c. Signatures of the Chairman and Transfer Agent
d. Description stating that the Declaration of Trust applies to
shareholders and assignees therefrom
(2) Back
a. Space for endorsement
b. Description concerning delegation of transfer agency]
<PAGE>
ANNUAL SECURITIES REPORT
(For the First Term)
From: 1st October 1998
To: 30th September 1999
LOOMIS SAYLES FUNDS - LOOMIS SAYLES MANAGED BOND FUND
(2339)
<PAGE>
ANNUAL SECURITIES REPORT
(During the First Fiscal Year)
From: 1st October 1998
To: 30th September 1999
To: Director of Kanto Local Finance Bureau
Filing Date: 17th March 2000
Amendment Date 28th March 2000
Name of the Registrant Trust: LOOMIS SAYLES FUNDS
Name and Official Title of: Jeffery L. Meade
the Representative Vice President of the Trust
Address of Principal Office: One Financial Center, Boston,
Massachusetts 02111, U.S.A.
Name and Title of Harume Nakano
Registration Agent: Attorney-at-law
Signature [Harume Nakano]
-------------------------
(Seal)
Ken Miura
Attorney-at-law
Signature [Ken Miura]
---------------------
(Seal)
Address or Place of Business Hamada & Matsumoto
of Registration Agent: Kasumigaseki Building, 25F
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Name of Liaison Contact: Harume Nakano
Ken Miura
Hikaru Kaieda
Attorneys-at-Law
Place of Liaison Contact: Hamada & Matsumoto
Kasumigaseki Building, 25F
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Phone Number: 03-3580-3377
(Total number of pages of this Annual Securities Report in Japanese is 62
including front and back pages.)
<PAGE>
C O N T E N T S
Japanese This
Original English
Translation
I. DESCRIPTION OF THE FUND 1 1
l. GENERAL INFORMATION 1 1
2. INVESTMENT POLICY 5 6
3. MANAGEMENT STRUCTURE 19 28
4. INFORMATION CONCERNING THE EXERCISE
OF RIGHTS BY SHAREHOLDERS, ETC. 28 42
5. STATUS OF INVESTMENT FUND 31 47
II. OUTLINE OF THE TRUST 33 50
III. OUTLINE OF THE OTHER RELATED COMPANIES 48 73
IV. FINANCIAL CONDITION OF THE FUND 51 78
1. Financial Statements of the Fund 51 78
2. Condition of the Fund 80 78
V. FINANCI AL CONDITION OF THE INVESTMENT
MANAGEMENT COMPANY 83 81
VI. SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT FUND SECURITIES 119 81
VII. REFERENCIAL INFORMATION 120 82
Note 1: U.S.$ amount is translated into Japanese Yen at the rate
of U.S.$l.00=(Y)[ ] the mean of the exchange rate quotations
by The Bank of Tokyo-Mitsubishi, Ltd. for buying and selling
spot dollars by telegraphic transfer against yen on 31st
January, 2000.
Note 2: In this document, money amounts and percentages have been
rounded to the nearest units digits. Therefore, there are
cases in which the amount of the "total column" is not equal
to the aggregate amount. Also, translation into yen is made
simply by multiplying the corresponding amount by the
conversion rate specified and rounded when necessary.
<PAGE>
Note 3: In this Report, "fiscal year" refers to a year from 1st
October to 30th September. The first fiscal year refers to
the period from 1st October 1998 (the date of commencement of
the Fund's operation) to 30th September, 1999.
<PAGE>
I. DESCRIPTION OF THE FUND
1. GENERAL INFORMATION
(A) Outline of Laws Regulating the Fund in the Jurisdiction Where
Established:
(1) Name of the Fund: Loomis Sayles Managed Bond Fund (the "Fund")
(2) Form of the Fund: The Fund is a series of Loomis Sayles Funds
(the "Trust").
The Trust, registered with the United States Securities and
Exchange Commission ("SEC") as a diversified open-ended 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 Trust
currently has nineteen series: Loomis Sayles Bond Fund, Loomis Sayles
Managed Bond Fund, Loomis Sayles Core Value Fund, Loomis Sayles
Emerging Markets Fund, Loomis Sayles Global Bond Fund, Loomis Sayles
Global Technology Fund, Loomis Sayles Growth Fund, Loomis Sayles High
Yield Fund, Loomis Sayles Intermediate Maturity Bond Fund, Loomis
Sayles International Equity Fund, Loomis Sayles Investment Grade Bond
Fund, Loomis Sayles Aggressive Growth Fund, Loomis Sayles Mid-Cap Value
Fund, Loomis Sayles Municipal Bond Fund, Loomis Sayles Short-Term Bond
Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles Small Cap
Value Fund, Loomis Sayles U.S. Government Securities Fund and Loomis
Sayles Worldwide Fund.
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 and 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
that Fund and with a share of the general expenses of the Trust. Any
general expenses of the Trust that are not readily identifiable as
belonging to a particular Fund are allocated by or under the direction
of the trustees in such manner as the trustees determine to be fair and
equitable. While the expenses of the Trust are allocated to the
separate books of account of the Fund, certain expenses may be legally
chargeable against the assets of all Funds.
The Declaration of Trust also permits the trustees, without
shareholder approval, to subdivide any series of shares or Fund into
various classes of shares with such dividend preferences and other
rights as the trustees may designate. The trustee may also, without
shareholder approval, establish one or more additional separate
<PAGE>
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").
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIME.
(3) Governing Laws
The Trust was created under, and is subject to, the
laws of the Commonwealth of Massachusetts. The sale of the Trust's
shares is subject to, among other things, the Securities Act of 1933,
as amended, and certain state securities laws. The Trust also attempts
to qualify each year and elect to be taxed as a regulated investment
company under the United States Internal Revenue Code of 1986, as
amended.
The following is a broad outline of certain of the
principal statutes regulating the operations of the Trust in the U.S.:
a. Massachusetts General Laws, Chapter 182 -
Voluntary Associations and Certain Trusts
Chapter 182 provides in part as follows:
A copy of the declaration of trust must be filed with
the Secretary of State of the Commonwealth of Massachusetts
and with the Clerk of the City of Boston. Any amendment of the
declaration of trust must be filed with the Secretary and the
Clerk within thirty days after the adoption of such amendment.
A trust must annually file with the Secretary of
State on or before June 1 a report providing the name of the
trust, its address, number of shares outstanding and the names
and addresses of its trustees.
Penalties may be assessed against the trust for
failure to comply with certain of the provisions of Chapter
182.
b. Investment Company Act of 1940
The Investment Company Act of 1940, as amended (the
"1940 Act"), in general, requires investment companies to
register as such with the "SEC" and to comply with a number of
substantive regulations of their operations. The 1940 Act
requires an investment company, among other things, to provide
periodic reports to its shareholders.
c. Securities Act of 1933
The Securities Act of 1933, as amended (the "1933
Act"), regulates
<PAGE>
sales of securities. The 1933 Act, among other things, imposes
various registration requirements upon sellers of securities
and provides for various liabilities for failures to comply
with its provisions or in respect of other specified matters.
d. Securities Exchange Act of 1934
The Securities Exchange Act of 1934, as amended (the
"1934 Act"), regulates a variety of matters involving, among
other things, the secondary trading of securities, periodic
reporting by the issuers of securities, and certain of the
activities of transfer agents, brokers and dealers.
e. The Internal Revenue Code
The Trust intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986,
as amended (the "Code") for federal income tax purposes and to
meet all other requirements necessary for it to be relieved of
federal taxes on income and gains it distributes to
shareholders.
f. Other laws
The Trust is subject to the provisions of other laws,
rules, and regulations applicable to the Trust or its
operations, such as, for example, various state laws regarding
the sale of the Trust's shares.
(B) Outline of the Supervisory Authorities
Among the regulatory authorities having jurisdiction
over the Trust or certain of its operations are the SEC and state
regulatory agencies or authorities.
a. The SEC has broad authority to oversee the
application and enforcement of the federal securities laws,
including the 1940 Act, the 1933 Act, and the 1934 Act, among
others, to the Trust. The 1940 Act provides the SEC broad
authority to inspect the records of investment companies, to
exempt investment companies or certain practices from the
provisions of the Act, and otherwise to enforce the provisions
of the Act.
b. State authorities typically have authority
to regulate the offering and sale of securities to their
residents or within their jurisdictions and the activities of
brokers, dealers, or other persons directly or indirectly
engaged in related activities.
(C) Objects and Basic Nature of the Fund:
The Fund's investment objective is high total
investment return through a combination of current income and capital
appreciation.
(D) History of the Fund:
February 20, 1991: Organization of the Trust as a
Massachusetts business trust.
Adoption of the Declaration of
Trust.
<PAGE>
April 27, 1998: Adoption of Resolutions by the Board
of Trustees of the Trust to
establish the Fund.
October 1, 1998 Commencement of management of the
Fund
(E) Affiliated Companies of the Fund:
Names and related business of the affiliated
companies of the Fund are as follows:
(1) LOOMIS, SAYLES & COMPANY, L.P. (a division of Nvest
L.P.) ("Investment Management Company" or "Loomis Sayles")
renders investment management services to the Fund.
(2) STATE STREET BANK AND TRUST COMPANY (the "Custodian"
and "Shareholder Servicing , Transfer and Dividend Paying
Agent") acts as Custodian and Shareholder Servicing , Transfer
and Dividend Paying Servicing Agent.
(3) LOOMIS SAYLES DISTRIBUTORS, L.P. ("Distributor")
engages in providing marketing services to the Fund.
(4) KOKUSAI SECURITIES CO., LTD. ("Distributor in Japan"
and "Agent Company") engages in forwarding the purchase or
repurchase orders for the Shares in Japan and also acts as the
agent company.
<PAGE>
RELATED COMPANIES OF THE FUND
---------------------------------
| Loomis Sayles Funds ("Trust") |
------| |------
| --------------------------------- |
| Loomis Sayles Managed Bond Fund |-----
| | |
| ------------------------- | Shareholder
---------| Trustees |----------- Servicing and
| (Agreement and | | Transfer Agent
| Declaration of Trust) | | Agreement
--------------| | | |
| ------------------------- Custody |
| | | Contract |
Amended and Restated | | | |
Distribution Agreement | | -------------------------
| | | | Custodian |
| | | | Shareholder Servicing |
--------------- | | -----| Transfer and Dividend |----
-----| Distributor |------ | | | | Paying Agent | |
| | | | | | | | | |
| --------------- | | | | ------------------------- |
| | | | | State Street Bank and |
| Loomis Sayles | | | | Trust Company |
| Distributors, L.P. | | | | |
| | | | | (acts as custodian and |
| (acts as distributor) | | | | shareholder servicing transfer |
| | | | | and dividend paying agent of |
| | | | | the Fund) |
-------------------------- | | | |
| | | ----------------------------------
Distribution, Repurchase | |
and Shareholder --------| ----------
Servicing Agreement | |
| | |
| Agent Company Advisory Agreement
| Agreement |
| | |
| | -------------------------
| | | Investment Management |
-------------------------- | Company |
--| Distributor in Japan |----- ---| |---------
| | Agent Company | | | ------------------------- |
| | | | | Loomis Sayles & Company, L.P. |
| -------------------------- | | (a division of Nvest L.P.) |
| Kokusai Securities Co., Ltd. | | |
| | | (acts as investment management of |
| (forwarding of sales in Japan | | the Fund and investment adviser |
| and rendering of service as | | concerning the Fund's assets) |
| agent company) | | |
| | | |
--------------------------------- -------------------------------------
<PAGE>
2. INVESTMENT POLICY
(A) Basic Policy for Investment
GENERAL INFORMATION
The following is a summary of certain key information
about the Fund. Investors will find additional information about the
Fund, including a detailed description of the risks of an investment in
the Fund, after this summary.
This summary describes the Fund's objective,
principal investment strategies, principal risks, and performance. The
summary includes a short discussion of some of the principal risks of
investing in the Fund. A further discussion of these and other
principal risks begins after this summary.
A more detailed description of the Fund, including
some of the additional risks associated with investing in the Fund, can
be found further back in this document after the Summary of Principal
Risks. Please be sure to read this additional information before
investors invest.
The summary includes a bar chart showing the Fund's
annual returns and a table showing the Fund's average annual returns.
The bar chart and table provide an indication of the historical risk of
an investment in the Fund by showing how the Fund's average annual
returns for one year and over the life of the Fund compared to those of
a broad-based securities market index.
The Fund's past performance, of course, does not
necessarily indicate how it will perform in the future.
Investors can lose money by investing in the Fund.
The Fund may not achieve its objective and is not intended to be a
complete investment program. An investment in the Fund is not a deposit
of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
INVESTMENT OBJECTIVE The Fund's investment objective is
high total investment return through a combination of current income
and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests
primarily in investment grade fixed income securities, although it may
invest up to 35% of its assets in lower rated fixed income securities
("junk bonds") and up to 20% of its assets in preferred stocks. The
Fund may invest in fixed income securities of any maturity.
In deciding which securities to buy and sell, Loomis
Sayles will consider, among other things, the financial strength of the
issuer of the security, current interest rates, Loomis Sayles'
expectations regarding general trends in interest rates, and
comparisons of the level of risk associated with particular investments
with
<PAGE>
Loomis Sayles' expectations concerning the potential return of those
investments.
Three themes typically drive the Fund's investment
approach. First, Loomis Sayles generally seeks fixed income securities
of issuers whose credit profiles Loomis Sayles believes are improving.
Second, the Fund makes significant use of non-market related
securities, which are securities that may not have a direct correlation
with changes in interest rates. Loomis Sayles believes that the Fund
may generate positive returns by having a portion of the Fund's assets
invested in non-market related securities, rather than by relying
primarily on changes in interest rates to produce returns for the Fund.
Third, Loomis Sayles analyzes different sectors of the economy and
differences in the yields ("spreads") of various fixed income
securities in an effort to find securities that Loomis Sayles believes
may produce attractive returns for the Fund in comparison to their
risk.
Loomis Sayles generally prefers securities that are
protected against calls (early redemption by the issuer).
The Fund may invest any portion of its assets in
securities of Canadian issuers and up to 20% of its assets in other
Non-U.S. securities.
The fixed income securities in which the Fund may
invest include corporate securities, U.S. Government securities,
commercial paper, zero coupon securities, mortgage-backed securities,
stripped mortgage-backed securities, collateralized mortgage
obligations, asset-backed securities, when-issued securities, Rule 144A
securities, repurchase agreements, and convertible securities. The Fund
may engage in options and futures transactions, foreign. currency
hedging transactions, and swap transactions.
PRINCIPAL RISKS Among the principal risks of investing in the
Fund are the following:
- interest rate risk (the risk that the value of the Fund's
investments will fall if interest rates rise);
- credit risk (the risk that companies in which the Fund
invests, or with which it does business, will fail financially, and be
unwilling or unable to meet their obligations to the Fund);
- market risk (the risk that the value of the Fund's
investments will fall as a result of movements in financial markets
generally); and
- management risk (the risk that Loomis Sayles' investment
techniques will be unsuccessful and may cause the Fund to incur
losses).
BAR CHART The following bar chart shows the Fund's annual
performance. The annual return shown in the bar chart does not reflect
sales charges. If sales charges were reflected, the return would be
less than that shown.
<PAGE>
[Bar Chart is omitted in this translation]
THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD
SHOWN IN THE BAR CHART, THE FUND'S BEST QUARTER WAS UP 3.9% (FIRST
QUARTER, 1999), AND THE FUND'S WORST QUARTER WAS DOWN 2.0% (SECOND
QUARTER, 1999).
PERFORMANCE TABLE The following table compares the
performance of the Fund to the Lehman Brothers Government/Corporate
Bond Index, an index that tracks the performance of a broad range of
government and corporate fixed income securities. The index is
unmanaged, has no operating costs, and is included in the table to
facilitate investors' comparison of the Fund's performance to a
broad-based market index. The annual return figures shown for the Fund
in this table reflect the effect of sales charges.
Average Annual Total Return as of December 31, 1999
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
1 year Since Inception
(10/1/98)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loomis Sayles Managed Bond Fund -0.9% 2.4%
--------------------------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate Bond Index -2.2% -1.1% (1)
--------------------------------------------------------------------------------------------------------
</TABLE>
THE FUND'S PERFORMANCE THROUGH DECEMBER 31, 1999 BENEFITED
FROM LOOMIS SAYLES' AGREEMENT TO LIMIT THE FUND'S EXPENSES.
(1) Since inception data for the index covers the period from
the month-end following the Fund's inception date through December 31,
1999.
<PAGE>
(B) Policies of Investment
This section provides more information on the Fund's
investments and risk considerations. Except for the Fund's investment
objective, and any investment policies that are identified as
"fundamental," all of the investment policies and strategies of the
Fund may be changed without a vote of the Fund's shareholders.
Except where specifically noted elsewhere in this document,
the Fund may use any of the investment strategies described in this
section. Some of these investment strategies are principal investment
strategies for the Fund, while others are secondary investment
strategies for the Fund.
TEMPORARY DEFENSIVE STRATEGIES
For temporary defensive purposes, the Fund may invest any
portion of its assets in cash or in any securities Loomis Sayles deems
appropriate. Although Loomis Sayles has the option to use these
defensive strategies, Loomis Sayles may choose not to use them for a
variety of reasons, even in very volatile market conditions. The Fund
may miss certain investment opportunities if it uses defensive
strategies and thus may not achieve its investment objective.
PORTFOLIO TURNOVER
Portfolio turnover considerations will not limit Loomis
Sayles' investment discretion in managing the assets of the Fund. The
Fund anticipates that its portfolio turnover rate will vary
significantly from time to time depending on the volatility of economic
and market conditions. High portfolio turnover may generate higher
costs and higher levels of taxable gains, both of which may hurt the
performance of investors' investment.
FIXED INCOME SECURITIES
Fixed income securities pay a specified rate of interest or
dividends, or a rate that is adjusted periodically by reference to some
specified index or market rate. Fixed income securities include
securities issued by federal, state, local, and Non-U.S. governments
and related agencies, and by a wide range of private or corporate
issuers. Fixed income securities include, among others, bonds,
debentures, notes, bills, and commercial paper. Because interest rates
vary, it is impossible to predict the income of the Fund for any
particular period. The net asset value of the Fund's shares will vary
as a result of changes in the value of the securities in the Fund's
portfolio.
INVESTMENT GRADE FIXED INCOME SECURITIES
To be considered investment grade quality, at least one major
rating
<PAGE>
agency must have rated the security in one of its top four rating
categories at the time the Fund acquires the security or, if the
security is unrated, Loomis Sayles must have determined it to be of
comparable quality.
LOWER RATED FIXED INCOME SECURITIES
A fixed income security will be considered a lower rated fixed
income security ("junk bond") if it is of below investment grade
quality. To be considered investment grade quality, at least one major
rating agency must have rated the security in one of its top four
rating categories at the time the Fund acquires the security or, if the
security is unrated, Loomis Sayles must have determined it to be of
comparable quality. Therefore, lower rated fixed income securities are
securities that, at the time the Fund acquires the security, none of
the major rating agencies has rated in one of its top four rating
categories, or unrated securities that Loomis Sayles has determined to
be of comparable quality.
Lower rated fixed income securities are subject to greater
credit risk and market risk than higher quality fixed income
securities. Lower rated fixed income securities are considered
predominantly speculative with respect to the ability of the issuer to
make timely principal and interest payments. If the Fund invests in
lower rated fixed income securities, the Fund's achievement of its
objective may be more dependent on Loomis Sayles' own credit analysis
than is the case with funds that invest in higher quality fixed income
securities. The market for lower rated fixed income securities may be
more severely affected than some other financial markets by economic
recession or substantial interest rate increases, by changing public
perceptions of this market, or by legislation that limits the ability
of certain categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid for
lower rated fixed income securities. This lack of liquidity at certain
times may affect the values of these securities and may make the
evaluation and sale of these securities more difficult. Lower rated
fixed income securities may be in poor standing or in default and
typically have speculative characteristics.
For more information about the ratings services' descriptions of
the various rating categories, see below. The Fund may continue to hold
fixed income securities that are downgraded in quality subsequent to
their purchase if Loomis Sayles believes it would be advantageous to do
so.
U.S. GOVERNMENT SECURITIES
U.S. Government securities have different kinds of government
support. For example, some U.S. Government securities, such as U.S.
Treasury
<PAGE>
bonds, are supported by the full faith and credit of the United States,
whereas certain other U.S. Government securities issued or guaranteed
by federal agencies or government-sponsored enterprises are not
supported by the full faith and credit of the United States.
Although U.S. Government securities generally do not involve
the credit risks associated with other types of fixed income
securities, the market values of U.S. Government securities fluctuate
as interest rates change. Yields on U.S. Government securities tend to
be lower than those on corporate securities of comparable maturities.
Some U.S. Government securities, such as Government National
Mortgage Association ("GNMA") certificates, are known as
"mortgage-backed" securities. Interest and principal payments on the
mortgages underlying mortgage-backed U.S. Government securities are
passed through to the holders of the security. If the Fund purchases
mortgage-backed securities at a discount or a premium, the Fund will
recognize a gain or loss when the payments of principal, through
prepayment or otherwise, are passed through to the Fund and, if the
payment occurs in a period of falling interest rates, the Fund may not
be able to reinvest the payment at as favorable an interest rate. As a
result of these principal prepayment features, mortgage-backed
securities are generally more volatile investments than many other
fixed income securities.
In addition to investing directly in U.S. Government
securities, the Fund may purchase certificates of accrual or similar
instruments ("strips") evidencing undivided ownership interests in
interest payments or principal payments, or both, in U.S. Government
securities. These investment instruments may be highly volatile.
COMMON STOCKS AND OTHER EQUITY SECURITIES
Common stocks and their equivalents, together called "equity
securities," are generally volatile and more risky than some other
forms of investment. 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
indices.
ZERO COUPON SECURITIES
Zero coupon securities accrue interest at a specified rate,
but do not pay interest in cash on a current basis. If the Fund invests
in zero coupon securities, it is required to distribute the income on
these securities to Fund shareholders as the income accrues, even
though the Fund is not receiving the income in cash on a current basis.
The Fund thus may have to sell other investments to obtain cash to
<PAGE>
make income distributions at times when Loomis Sayles would not
otherwise deem it advisable to do so. The market value of zero coupon
securities often is more volatile than that of other fixed income
securities of comparable quality and maturity.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities, such as GNMA certificates or
securities issued by the Federal National Mortgage Association ("Fannie
Mae"), differ from traditional fixed income securities. Among the major
differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any
time because the underlying mortgage loans generally may be prepaid at
any time. As a result, if the Fund purchases these assets at a premium,
a faster-than-expected prepayment rate will reduce yield to maturity,
and a slower-than-expected prepayment rate will increase yield to
maturity. If the Fund purchases mortgage-backed securities at a
discount, faster-than-expected prepayments will increase, and
slower-than-expected prepayments will reduce, yield to maturity.
Prepayments, and resulting amounts available for reinvestment by the
Fund, are likely to be greater during a period of declining interest
rates and, as a result, are likely to be reinvested at lower interest
rates. Accelerated prepayments on securities purchased at a premium may
result in a loss of principal if the premium has not been fully
amortized at the time of prepayment. These securities will decrease in
value as a result of increases in interest rates generally, and they
are likely to appreciate less than other fixed-income securities when
interest rates decline because of the risk of prepayments.
STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities include interest-only and
principal-only classes of mortgage-backed securities ("IOs" and "POs").
The yield to maturity on an IO or PO is extremely sensitive not only to
changes in prevailing interest rates but also to the rate of principal
payments (including prepayments) on the underlying assets. A rapid rate
of principal prepayments may have a measurably adverse effect on the
Fund's yield to maturity to the extent it invests in IOs. If the assets
underlying the IOs experience greater than anticipated prepayments of
principal, the Fund may fail to recoup fully its initial investment in
these securities. Conversely, POs tend to decline in value if
prepayments are slower than anticipated.
The secondary market for stripped mortgage-backed securities
may be more volatile and less liquid than that for other
mortgage-backed securities, potentially limiting the Fund's ability to
buy or sell those securities at any particular time.
<PAGE>
COLLATERALIZED MORTGAGE OBLIGATIONS
A collateralized mortgage obligation (CMO) is a security
backed by a portfolio of mortgages or mortgage-backed securities held
under an indenture. CMOs may be issued either by U.S. Government
instrumentalities or by non-governmental entities. The issuer's
obligation to make interest and principal payments is secured by the
underlying portfolio of mortgages or mortgage-backed securities. CMOs
are issued with a number of classes or series which have different
maturities and which may represent interests in some or all of the
interest or principal on the underlying collateral or a combination
thereof. CMOs of different classes are generally retired in sequence as
the underlying mortgage loans in the mortgage pool are repaid. In the
event of sufficient early prepayments on such mortgages, the class or
series of CMOs first to mature generally will be retired prior to its
maturity. As with other mortgage-backed securities, if a particular
class or series of CMOs held by the Fund is retired early, the Fund
could lose any premium it paid when it acquired the investment, and the
Fund may have to reinvest the proceeds at a lower interest rate than
the retired CMO paid. Because of the early retirement feature, CMOs may
be more volatile than many other fixed-income investments.
ASSET-BACKED SECURITIES
Through the use of trusts and special purpose corporations,
automobile or credit card receivables may be securitized in
pass-through structures similar to mortgage pass-through structures or
in a pass-through structure similar to the CMO structure. Generally,
the issuers of asset-backed bonds, notes, or pass-through certificates
are special purpose entities and do not have any significant assets
other than the receivables securing such obligations. In general, the
collateral supporting asset-backed securities is of shorter maturity
than mortgage loans. Instruments backed by pools of receivables are
similar to mortgage-backed securities in that they are subject to
unscheduled prepayments of principal prior to maturity. When the
obligations are prepaid, the Fund ordinarily will reinvest the prepaid
amounts in securities the yields of which reflect interest rates
prevailing at the time. Therefore, the Fund's ability to maintain a
portfolio that includes high-yielding asset-backed securities will be
adversely affected to the extent that prepayments of principal must be
reinvested in securities that have lower yields than the prepaid
obligations. Moreover, prepayments of securities purchased at a premium
could result in a realized loss.
WHEN-ISSUED SECURITIES
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A when-issued security involves the Fund entering into a
commitment to buy a 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 the 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 segregate liquid
assets at its custodian bank in an amount sufficient to satisfy these
obligations.
CONVERTIBLE SECURITIES
Convertible securities include corporate bonds, notes, or
preferred stocks of U.S. or Non-U.S. issuers that can be converted into
(that is, exchanged for) common stocks or other equity securities at a
stated price or rate. 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 value will normally vary in some proportion
with those of the underlying equity securities. Due to the conversion
feature, convertible securities generally yield less than
nonconvertible fixed income securities of similar credit quality and
maturity. The Fund's investment in convertible securities may at times
include securities that have a mandatory conversion feature, pursuant
to which the securities convert automatically into common stock at a
specified date and conversion ratio, or that are convertible at the
option of the issuer. When conversion is not at the option of the
holder, the Fund may be required to convert the security into the
underlying common stock even at times when the value of the underlying
common stock has declined substantially.
RULE 144A SECURITIES
Rule 144A securities 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 Loomis Sayles Funds'
trustees, that a particular issue of Rule 144A securities is liquid.
<PAGE>
NON-U.S. SECURITIES
Securities of issuers organized or headquartered outside the
United States are known as Non-U.S. securities. Non-U.S. securities may present
risks not associated with investments in comparable securities of U.S. issuers.
There may be less information publicly available about a Non-U.S. corporate or
government issuer than about a U.S. issuer, and Non-U.S. corporate issuers are
generally not subject to accounting, auditing, and financial reporting standards
and practices comparable to those in the United States. The securities of some
Non-U.S. issuers are less liquid and at times more volatile than securities of
comparable U.S. issuers. Non-U.S. brokerage commissions and securities custody
costs are often higher than in the United States. With respect to certain
Non-U.S. 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 Non-U.S. government securities may depend on the
availability of tax or other revenues to satisfy the issuer's obligations.
The Fund's investments in Non-U.S. securities may include
investments in countries whose economies or securities markets are not yet
highly developed. Special considerations associated with these investments (in
addition to the considerations regarding Non-U.S. 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 Non-U.S. securities are denominated in Non-U.S.
currencies or traded primarily in securities markets in which settlements are
made in Non-U.S. currencies, the value of these investments and the net
investment income available for distribution to shareholders of the Fund may be
affected by changes in currency exchange rates, exchange control regulations, or
Non-U.S. withholding taxes. Changes in the value relative to the U.S. dollar of
a Non-U.S. 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 Non-U.S. 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
<PAGE>
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 Non-U.S. currency required to be converted into
U.S. dollars will be greater than the equivalent amount in Non-U.S. currency of
the expenses at the time they were incurred.
In determining whether to invest assets of the Fund in
securities of a particular Non-U.S. issuer, Loomis Sayles will consider the
likely effects of Non-U.S. taxes on the net yield available to the Fund and its
shareholders. Compliance with Non-U.S. tax law may reduce the Fund's net income
available for distribution to shareholders.
NON-U.S. CURRENCY HEDGING TRANSACTIONS
Non-U.S. currency exchange transactions may allow the Fund to
protect the value of specific portfolio positions or to anticipate 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
Non-U.S. 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 Non-U.S. 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 Non-U.S. currencies at a
future date ("forward contracts"). The Fund might also purchase exchange-listed
and over-the-counter call and put options on Non-U.S. 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.
Non-U.S. currency transactions involve costs and may result in losses.
SWAP TRANSACTIONS
Interest rate or currency swaps involve the Fund entering into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, to manage duration, 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
<PAGE>
flows on a notional amount based on changes in the relative values of the
specified currencies. The Fund will segregate liquid assets at its custodial
bank in an amount sufficient 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
Options and futures transactions involve the Fund buying,
selling, or writing (or buying or selling futures contracts) on securities,
securities indices, or currencies. The Fund may engage in these transactions
either to enhance 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 is less than the price of the offsetting purchase, the Fund
will realize a 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
<PAGE>
some cases, the fluctuations may offset (or be offset by) changes in the
value of securities held in the Fund's portfolio. All transactions in options
and futures involve the possible risk of loss to the Fund of all or a
significant part of the value of its investment. In some cases, the risk of
loss may exceed the amount of the Fund's investment. When the Fund writes a
call option or sells a futures contract without holding the underlying
securities, currencies, or futures contracts, its potential loss is
unlimited. The Fund will be required, however, to set aside with its
custodian bank liquid assets in amounts sufficient at all times to satisfy
its obligations under options and futures contracts.
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 that the
other party to the transaction will default on its obligations, or will not
permit the Fund to terminate the transaction before its scheduled maturity.
The options and futures markets of Non-U.S. countries are
small compared to those of the United States and consequently are characterized
in most cases by less liquidity than U.S. markets. In addition, Non-U.S. markets
may be subject to less detailed reporting requirements and regulatory controls
than U.S. markets. Furthermore, investments in options in Non-U.S. markets are
subject to many of the same risks as other Non-U.S. investments. See "Non-U.S.
Securities" above.
REPURCHASE AGREEMENTS
In a repurchase agreement, 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.
The rating services' description of their ratings is as
follows:
<PAGE>
STANDARD & POOR'S
AAA An obligation rated 'AAA' has the highest rating
assigned by Standard & Poor's. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA An obligation rated 'AA' differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A An obligation rated 'A' is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.
BBB An obligation rated 'BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation. Obligations
rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least
degree of speculation and 'C' the highest. While such obligations will
likely have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated 'BB' is less vulnerable to
nonpayment that other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated 'B' is more vulnerable to
nonpayment than obligations rated 'BB', but the obligor currently has
the capacity to meet its financial commitment on the obligation.
Adverse business, financial, or economic conditions will likely impair
the obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated 'CCC' is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial, and
economic conditions for the obligor to meet its financial commitment on
the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to
meet its financial commitment on the obligation.
CC An obligation rated 'CC' is currently highly vulnerable
to nonpayment.
C A subordinated debt or preferred stock obligation rated
'C' is CURRENTLY HIGHLY VULNERABLE to nonpayment. The 'C' rating may be
used to cover a situation where a bankruptcy petition has been filed or
similar action taken, but payments on this obligation are being
continued. A 'C' also will be
<PAGE>
assigned to a preferred stock issue in arrears on dividends or sinking
fund payments, but that is currently paying.
D An obligation rated 'D' is in payment default. The 'D'
rating category is used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
r This symbol is attached to the ratings of instruments
with significant noncredit risks. It highlights risks to principal or
volatility of expected returns which are not addressed in the credit
rating. Examples include: obligations liked or indexed to equities,
currencies, or commodities; obligations exposed to severe prepayment
risk -- such as interest-only or principal-only mortgage securities;
and obligations with unusually risky interest terms, such as inverse
floaters.
N.R. This indicates that no rating has been requested, that
there is insufficient information on which to base a rating, or that
Standard & Poor's does not rate a particular obligation as a matter of
policy.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be high quality
by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security
<PAGE>
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the
future. Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics
of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long
period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger
with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in default or
have other marked shortcomings. C Bonds which are rated C are the
lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates
that the obligation ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of that generic rating
category.
(C) Principal Risks
The value of investor's investment in the Fund will fluctuate
with changes in the values of the Fund's investments. Many factors can
affect those values. This section describes the principal risks that
may affect the Fund's portfolio as a whole. The Fund could be subject
to additional principal risks because the types of investments made by
the Fund can change over time.
INTEREST RATE RISK
<PAGE>
This is the risk that changes in interest rates will affect
the value of the Fund's investments in fixed income securities, such as
bonds, notes, asset-backed securities, and other income producing
securities. Fixed income securities are obligations of the issuer to
make payments of principal and/or interest on future dates. Interest
rate risk affects the Fund. Increases in interest rates may cause the
value of the Fund's investments to decline.
Even funds that generally invest a significant portion of
their assets in high quality fixed income securities, such as the Fund,
are subject to interest rate risk. Interest rate risk is greater for
funds that generally invest a significant portion of their assets in
lower rated fixed income securities ("junk bonds") or comparable
unrated securities.
Interest rate risk also is greater for funds that generally
invest in fixed income securities with longer maturities than for funds
that invest in fixed income securities with shorter maturities.
Interest rate risk is compounded if the Fund invests a
significant portion of its assets in mortgage-related or other
asset-backed securities. The value of mortgage-related securities and
asset-backed securities generally is more sensitive to changes in
interest rates than other types of fixed income securities. When
interest rates rise, the maturities of mortgage-related and
asset-backed securities tend to lengthen, and the value of the
securities decreases more significantly. In addition, these types of
securities are subject to prepayment when interest rates fall, which
generally results in lower returns because the Fund must reinvest
assets previously invested in these types of securities in fixed income
securities with lower interest rates.
The Fund also faces increased interest rate risk when it
invests in fixed income securities paying no current interest, such as
zero coupon securities, principal-only securities, interest-only
securities, and fixed income securities paying non-cash interest in the
form of other fixed income securities.
CREDIT RISK
This is the risk that the issuer or the guarantor of a fixed
income security, or the counterparty to an over-the-counter
transaction, will be unable or unwilling to make timely payments of
interest or principal or to otherwise honor its obligations. The degree
of risk for a particular security may be reflected in its credit
rating. Credit risk is greater for the Fund if it invests a significant
portion of its assets in lower rated fixed income securities ("junk
bonds"). Lower rated fixed income securities generally have speculative
elements or are predominately speculative credit risks.
<PAGE>
If the Fund invests in fixed income securities issued in
connection with corporate restructurings by highly leveraged issuers or
in fixed income securities that are not current in the payment of
interest or principal (i.e., in default), it may be subject to greater
credit risk because of these investments.
If the Fund invests a significant portion of its assets in
Non-U.S securities, it may be subject to increased credit risk because
of the difficulties of requiring Non-U.S. entities to honor their
contractual commitments and because a number of Non-U.S. governments
and other issuers are already in default.
MARKET RISK
This is the risk that the value of the Fund's investments will
change as the markets for fixed income securities fluctuate and that
prices overall may decline.
NON-U.S. RISK
This is the risk associated with investments in issuers
located in Non-U.S. countries. The Fund's investments in Non-U.S.
securities may experience more rapid and extreme changes in value than
investments in securities of U.S. companies.
The securities markets of many Non-U.S. countries are
relatively small, with a limited number of issuers and a small number
of securities. In addition, Non-U.S. companies often are not subject to
the same degree of regulation as U.S. companies.
Reporting, accounting, and auditing standards of Non-U.S
countries differ, in some cases significantly, from U.S. standards.
Nationalization, expropriation or confiscatory taxation, currency
blockage, political changes, or diplomatic developments can cause the
value of the Fund's investments in a Non-U.S. country to decline. In
the event of nationalization, expropriation, or other confiscation, it
could lose its entire Non-U.S. investment.
CURRENCY RISK
This is the risk that fluctuations in exchange rates between
the U.S. dollar and Non-U.S. currencies may cause the value of the
Fund's investments to decline. The Fund is subject to currency risk
because it may invest in securities denominated in, or receiving
revenues in, Non-U.S. currencies.
LEVERAGING RISK
When the Fund borrows money or otherwise leverages its
portfolio, the value of an investment in the Fund will be more
volatile, and all other risks generally are compounded. Since the Fund
may create leverage by using investments
<PAGE>
such as repurchase agreements, inverse floating rate instruments or
derivatives, or by borrowing money, the Fund faces this risk.
DERIVATIVES RISK
The Fund may use derivatives, which are financial contracts
whose value depends upon or is derived from the value of an underlying
asset, reference rate, or index. Examples of derivatives include
options, futures, and swap transactions. The Fund may use derivatives
as part of a strategy designed to reduce other risks ("hedging"). The
Fund also may use derivatives to earn income, enhance yield, and
broaden Fund diversification. This use of derivatives entails greater
risk than using derivatives solely for hedging purposes. Funds that use
derivatives also face additional risks, such as the credit risk of the
other party to a derivative contract, the risk of difficulties in
pricing and valuation, and the risk that changes in the value of a
derivative may not correlate perfectly with relevant assets, rates, or
indices.
LIQUIDITY RISK
Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing the Fund from
selling out of these illiquid securities at an advantageous price.
Derivatives and securities that involve substantial interest rate risk
or credit risk tend to involve greater liquidity risk. In addition,
liquidity risk tends to increase to the extent the Fund invests in
securities whose sale may be restricted by law or by contract, such as
Rule 144A securities.
MANAGEMENT RISK
Management risk is the risk that Loomis Sayles' investment
techniques could fail to achieve the Fund's objective and could cause
an investor's investment in the Fund to lose value. The Fund is subject
to management risk because the Fund is actively managed by Loomis
Sayles. Loomis Sayles will apply its investment techniques and risk
analyses in making investment decisions for the Fund, but there can be
no guarantee that Loomis Sayles' decisions will produce the desired
results. For example, in some cases derivative and other investment
techniques may be unavailable or Loomis Sayles may determine not to use
them, even under market conditions where their use could have benefited
the Fund.
(D) Restrictions of Investment:
The investment policies of the Fund set forth in this document
may be changed by the Trust's board of trustees, without shareholder
approval, except that the investment objective of the Fund as set forth
in this document and any policy
<PAGE>
explicitly identified as "fundamental" may not be changed without the
approval of the holder of a majority of the outstanding shares of the
relevant Fund (which in this document means the lesser of (i) 67% of
the shares of the Fund represented at a meeting at which 50% of the
outstanding shares are represented by proxy 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 this document, 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
the 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. (For purposes of this investment
restriction, neither (i) entering into repurchase
agreements nor (ii) purchasing debt obligations in
which the Fund may invest consistent with its
investment policies is considered the making of a
loan.)
(5) With respect to 75% of its assets, purchase any
security (other than U.S. Government Security) if, as
a result, more than 5% of the Fund's assets (taken at
current value) would then be invested in securities of
a single issuer.
(6) with respect to 75% of its 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
<PAGE>
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).
*(9) Borrow money in excess of 10% of its total assets
(taken at cost) or 5% of its total assets (taken at
current value), whichever is lower, nor borrow any
money except as a temporary measure for extraordinary
or emergency purposes.
(10) Purchase securities on margin (except such short
term credits as are necessary for clearance of
transactions); or make short sales (except where, by
virtue of ownership of other securities, it has the
right to obtain, without payment of additional
consideration, securities equivalent in kind and
amount to those sold).
(11) Participate on a joint or joint and several basis
in any trading account in securities. (The "bunching"
of orders for the purchase or sale of portfolio
securities with Loomis Sayles or accounts under its
management to reduce brokerage commissions, to average
prices among them or to facilitate such transactions is
not considered a trading account in securities for
purposes of this restriction.)
(12) Purchase any illiquid security, including any
security that is not readily marketable, if, as a
result, more than 15% of the Fund's net assets (based
on current value) would then be invested in such
securities.
(13) Write or purchase puts, calls or combinations of
both except that 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
<PAGE>
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.)
(15) Invest more than 10% of its net assets in the
Securities of other investment companies.
(16) The Fund normally will normally invest at least
65% of its assets in fixed income securities.
The Fund 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.
In connection with the offering of its shares in Japan,
the Fund has undertaken to the Japan Securities Dealers Association:
(1) that the Fund will not invest more than 10% of the Fund's net
assets in securities that are not traded on a recognized exchange: (2)
that the Fund may not acquire more than 10% of the voting securities of
any issuer; (3) that the Fund will not invest more than 5% of its total
assets in the securities of any one issuer (other than the U.S.
Government) and (4) that the Fund will not, together with other
registered investment companies managed by Loomis Sayles, acquire more
than 15% of the voting securities of any issuer.
If the undertaking is violated, the Fund will, promptly
after discovery, take such action as may be necessary to cause the
violation to cease, which shall be the only obligation of the Fund and
the only remedy in respect of the violation. This undertaking will
remain in effect as long as shares of the Fund are qualified for offer
or sale in Japan and such undertaking is required by the Japan
Securities Dealers Association as a condition of such qualification.
(E) Distribution Policy:
The Fund generally declares and pays dividends monthly. 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 be made more frequently. The Fund
normally pays distributions to investors who own shares of the Fund as
of the last day of each month. The Trust's trustees may change the
frequency with which the Fund declares or pays dividends.
Investors may choose to:
* Reinvest all distributions in additional shares.
* Receive all distributions in cash.
If investors do not select an option when investors open
investor's
<PAGE>
account, all distributions will be reinvested.
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 Fund based upon the net asset value
determined as of the close of regular trading on the New York Stock
Exchange on the record date for each dividend or distribution.
Shareholders, however, may elect to receive their income dividends or
capital gain distributions, or both, in cash. The election may be made
on behalf of Japanese Shareholders by Agent Company 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.
The Japanese investors shall receive applicable dividend
monthly through Kokusai. The election to receive distributions in
shares or in cash may be made by Japanese investors by submitting a
written request directly to the Agent Company.
3. MANAGEMENT STRUCTURE
(A) Outline of Management of Assets, etc.:
A. Valuation of assets:
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 New York Stock Exchange on each day on
which that Exchange is open for unrestricted trading, and no less
frequently than once daily on each day during which there is sufficient
trading in 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 Securities Registration Statement, the New York Stock
Exchange 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 sales 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 closing bid price.
Short-term securities with a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market value. Long-term
debt securities are
<PAGE>
valued by a pricing services, 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 and all other assets are taken at fair value as determined in
good faith by the board of trustees on the basis of dealer-supplied
quotations or otherwise, although the actual calculations may be made
by persons acting pursuant to the direction of the board.
Generally, trading in non-U.S. securities markets is
substantially completed each day at various times prior to the close of
regular trading on the New York Stock Exchange. Occasionally, events
affecting the value of non-U.S. fixed income securities and of equity
securities of non-U.S. issuers not traded on a U.S. exchange may occur
between the completion of substantial trading of such securities for
the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of 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.
B. Management Fee, etc.:
(1) Management Fee:
(a) Management Company Fee
The Fund pays Loomis Sayles a monthly investment
advisory fee, also known as a management fee, at an annual
rate of .60% 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.
For the first fiscal year ended on September 30,
1999, the Investment Advisory Fee and all the above-mentioned
expenses not expressly assumed by Loomis Sayles were $ 205,838
and $ 175,915, respectively.
(b) Custodian Fee and Charges of the Shareholder
Servicing, Transfer and Dividend Paying Agent
The Fund pays to State Street Bank and Trust Company,
the Fund's
<PAGE>
Custodian, an annual fee at the rate of .066% on the first $20
million of assets, .033% on the next $80 million of assets and
.0100% on amounts exceeding $80 million, subject to certain
minimum monthly charges.
The Fund pays to State Street Bank and Trust Company,
the Fund's Transfer and Servicing Agent, an annual fee at the
rate of 0.10% of assets subject to certain maximum monthly
charges.
For the first fiscal year ended on September 30,
1999, the Custodian Fee and Charges of he Shareholder
Servicing, Transfer and Dividend Paying Agent were $52,028 and
$7,103, respectively.
(c) Fee on Distribution Plan
The Fund has adopted a Service and Distribution Plan
under Rule 12b-1 of the Investment Company Act of 1940 that
allows the Fund to pay the Distributor a monthly service fee
of 0.25% and a monthly distribution fee of 0.50% of the Fund's
average net assets. The Distributor may pay all or any portion
of the service fee to securities dealers or other
organizations for providing personal service to investors
and/or the maintenance of shareholder accounts. The
Distributor may pay all or any portion of the distribution fee
to securities dealers who are dealers of record with respect
to the Fund's shares, as distribution fees in connection with
the sale of the Fund's shares. The Distributor retains the
balance of these fees as compensation for its services as
distributor. Because these fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase
the cost of investor's investment and may cost investors more
than paying other types of sales charges.
For the first fiscal year ended on September 30,
1999, the Fee on Distribution Plan was $257,298.
(d) Other Expenses:
The Trust pays no compensation to its officers or to
the trustees 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.
COMPENSATION TABLE
for the fiscal period ended September 30, 1999
<TABLE>
<CAPTION>
(3) (5)
Pension or Total
(2) Retirement (4) Compensation From
(1) Aggregate Benefits Accrued Estimated Annual Trust and Fund
Name of Person, Compensation as Part of Fund Benefits upon Complex* Paid to
Position From Trust Expenses Retirement Trustee
------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<PAGE>
Joseph Alaimo, Trustee $ 5,321.50 N/A N/A $ 5,321.50
Daniel J. Fuss, Trustee $ 0 N/A N/A $ 0
Richard S. Holway, Trustee $ 21,562.50 N/A N/A $ 21,562.50
Michael T. Murray, Trustee $ 21,562.50 N/A N/A $ 21,562.50
</TABLE>
* No Trustee receives any compensation from any mutual funds
affiliated with Loomis Sayles, other than the Trust.
As of September 30, 1999, the officers and trustees of the
Trust did not beneficially own any shares of the Fund.
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 the best price and execution for the transaction. This
does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed
to be competitive with generally prevailing rates. Loomis
Sayles will use its best efforts to obtain information as to
the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the
overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such
evaluation, all factors affecting liquidity and execution of
the order, as well as the amount of the capital commitment by
the broker in connection with the order, are taken into
account. The Fund will not pay a broker a commission at a
higher rate than otherwise available for the same transaction
in recognition of the value of research services provided by
the broker or in recognition of the value of any other
services provided by the broker which do not contribute to the
best price and execution of the transaction.
Receipt of research services from brokers may
sometimes be a factor in selecting a broker which Loomis
Sayles believes will provide the 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
<PAGE>
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
serving other client accounts and in some cases may not be
used with respect to the Funds. Receipt of services or
products other than research from brokers is not a factor in
the selection of brokers.
C. Sales, Repurchases and Custody:
(1) Sales of Shares:
a. SALES IN THE UNITED STATES
Investors can buy shares of the Fund through a
broker-dealer. Investors may purchase shares of the Fund
through a broker-dealer that has been approved by Loomis
Sayles Distributors, L.P., which can be contacted at One
Financial Center, Boston, MA 02111.
The Fund sells its shares at the Net Asset Value next
calculated after State Street Bank and Trust Company receives
a properly completed investment order, plus the sales charge
described previously. State Street Bank and Trust Company
generally must receive a properly completed order before the
close of regular trading on the New York Stock Exchange for
shares to be bought or sold at the Fund's Net Asset Value on
that day.
- By Check All purchases made by check through the investor's
broker-dealer should be in U.S. dollars and made payable to
State Street Bank and Trust Company. The Fund will not accept
checks made payable to anyone other than State Street Bank and
Trust Company. When an investor makes an investment by check
through the investor's broker-dealer, to ensure that the
investor's investment has cleared, the investor will not be
permitted to redeem that investment until it has been in the
investor's account for 15 days.
- By Wire The investor's broker-dealer also may wire the
investor's initial and subsequent investments to the Fund by
using the following wire instructions:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ABA No. 011000028
DDA 4133-408-7
<PAGE>
Attn: Custody and Shareholder Services
(Name of Fund)
The investor's broker-dealer may charge a fee for
transmitting funds by wire.
The Fund and the Distributor reserve the right to
reject any purchase order, including orders in connection with
exchanges, 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
its shares. In order to avoid dividend dilution, it is
expected that the Fund will reject purchase orders in excess
of U.S. $5 million on each of the five Fund business days
preceding the ex-dividend date of each month. A "Fund business
day" is any day on which the New York Stock Exchange is open
for business.
The distributor may accept telephone orders from
broker-dealers who have been previously approved by the
distributor. Broker-dealers are responsible for forwarding
purchase or redemption orders to the distributor promptly.
Broker-dealers may charge investors 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.
The Fund may periodically close to new purchases of
shares or refuse any order to buy shares if the Fund
determines that doing so would be in the best interests of the
Fund and its shareholders.
Each initial and subsequent investment must be for at
least 100 shares or multiples of 100 shares.
The price an investor pays will be the per share net
asset value ("NAV") next calculated after a proper investment
order is received by the Trust's transfer or other agent or
subagent plus a 2.50% sales charge (the "public offering
price") which is 2.56% of the net amount invested. The amount
reallowed to broker-dealers is 2.00% as a percentage of the
public offering price. The Fund receives the net asset value.
The Distributor will retain 0.50% of the net asset value.
The price of the Fund's shares is based on its net
asset value, plus the sales charge described previously. The
net asset value per share of the Fund equals the total value
of its assets, less its liabilities, divided by the number of
outstanding shares. Shares are valued as of the close of
regular trading on the New York Stock Exchange on each day the
Exchange is open for trading.
<PAGE>
The Fund values its investments for which market
quotations are readily available at market value. The Fund
values short-term investments that will mature within 60 days
at amortized cost, which approximates market value. The Fund
values all other investments and assets at fair value.
The Fund translates prices for its investments quoted
in Non-U.S. currencies into U.S. dollars at current exchange
rates. As a result, changes in the value of those currencies
in relation to the U.S. dollar may affect the Fund's net asset
value. Because Non-U.S. markets may be open at different times
than the New York Stock Exchange, the value of the Fund's
shares may change on days when shareholders are not able to
buy or sell shares. If events materially affecting the values
of the Fund's Non-U.S. investments occur between the close of
Non-U.S. markets and the close of regular trading on the New
York Stock Exchange, these Non-U.S. investments may be valued
at their fair value.
b. SALES IN JAPAN
In Japan, Shares of the Fund are offered on any Fund
Business Day and any business day of securities company in
Japan during the applicable Subscription Period mentioned in
"8. Period of Subscription, Part I Information concerning
Securities" of a securities registration statement pursuant to
the terms set forth in "Part I. Information concerning
Securities" of the relevant securities registration statement.
A Handling Securities Company shall provide to the investors a
Contract Concerning a Foreign Securities Transactions Account
or other prescribed contract (the "Contract") and receive from
such investors an application for requesting the opening of a
transactions account under the Contract. Shares may be
purchased in the minimum investment amount of 100 shares and
in integral multiples of 100 shares.
The Issue Price is the net asset value per Share next
calculated on the day on which the Fund has received such
application. The contract day in Japan is the day when Kokusai
confirms the execution of the order (usually, the next
business day in Japan following the day of placement of the
order), and the settlement shall be made within 4 business
days from the contract day, and investors shall pay the Sales
Charge by such payment day.
The sales charge in Japan shall be 2% of the Sales
Price.
The Investors having entrusted a Sales and Sales
Handling Company in Japan with safekeeping of the certificates
for Fund shares will receive a certificate of safekeeping in
exchange for the purchase price. In such case payment shall be
made in yen in principle and the applicable exchange rate
<PAGE>
shall be the exchange rate which shall be based on the foreign
exchange rate quoted in the Tokyo Foreign Exchange Market on
the Trade Day and which shall be determined by such Sales and
Sales Handling Company in Japan. The payment may be made in
dollars to the extent that the Sales and Sales Handling
Companies in Japan can agree.
In addition, Sales and Sales Handling Companies in
Japan who are members of the Japan Securities Dealers
Association cannot continue sales of the Shares in Japan when
the net assets of the Fund are less than (Y)100,000,000 or the
Shares otherwise cease to comply with the "Standards of
Selection of Foreign Investment Fund Securities" established
by the Association.
The Fund and the Distributor reserve the right to
reject any purchase order from the Distributor in Japan 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 its
shares. In order to avoid dividend dilution, it is expected
that the Fund will reject purchase orders in excess of U.S.$5
million on each of the five Fund business days preceding the
ex-dividend date of each month. A "Fund business day" is any
day on which the New York Stock Exchange is open for business.
(2) Repurchase of Shares:
a. REPURCHASE IN THE UNITED STATES
An investor can redeem shares of the Fund through the
investor's broker-dealer any day the New York Stock Exchange
is open. If investors are redeeming shares that the investors
purchased within the past 15 days by check the investor's
redemption will be delayed until the investor's payment for
the shares clears.
The investor's redemptions generally will be wired to
the investor's broker-dealer on the third business day after
the investor's request is received. Under unusual
circumstances, the Fund may suspend redemptions or postpone
payment for more than seven days. Although most redemptions
are made in cash, the Fund reserves the right to redeem shares
in kind.
To redeem shares, investors should send a signed
letter of instruction to the investor's broker-dealer that
includes the name of the Fund, the exact name(s) in which the
shares are registered, any special capacity in which investors
are signing (such as trustee or custodian or on behalf of a
partnership, corporation, or other entity), the investor's
address, telephone number, account number, and the number of
shares or dollar amount to be redeemed. The investor's
broker-dealer will send the investor's redemption
<PAGE>
request to State Street Bank and Trust Company.
If investors have certificates for the shares that the
investors want to sell, the investors must include them along
with completed stock power forms.
Before State Street Bank and Trust Company can wire
redemption proceeds to the investor's bank account, the
investor's broker-dealer must provide specific wire
instructions to State Street Bank and Trust Company.
REDEMPTION BY THE FUND If investors own fewer shares than the
minimum set by the Trustees, the Fund may redeem the
investors' shares and send the investors the proceeds.
b. REPURCHASE IN JAPAN
Shareholders in Japan may at any time request
repurchase of their Shares. Repurchase requests in Japan may
be made to State Street Bank through the Sales and Sales
Handling Company in Japan on a Fund Business Day that is a
business day of securities companies in Japan. The repurchase
of shares will be in full share amounts in the amount of one
share except in the case of a shareholder who is closing an
account for whom full and fractional shares will be
repurchased.
The price a shareholder in Japan will receive is the
net asset value next calculated after the Fund receives the
repurchase request from Kokusai, provided the request is
received before the close of regular trading on the New York
Stock Exchange. The payment of the price shall be made in yen
through the Sales and Sales Handling Companies in Japan
pursuant to the Contracts or, if the Sales and Sales Handling
Companies in Japan agree, in dollars. The payment for
repurchase proceeds shall ordinarily be on the third business
day by the Fund to the Agent Company. The payment for
repurchase proceeds ordinarily shall be made on the fourth
business day of securities companies in Japan after and
including the day when Sales and Sales Handling Companies in
Japan confirm the execution of the order (ordinarily the
business day in Japan next following the placement or
repurchase request). The Fund may suspend the right of
repurchase and may postpone payment for more than seven days
when the New York Stock Exchange 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.
(3) Custody of Shares:
<PAGE>
Share certificates shall be held by Shareholders at
their own risk.
The custody of the Share certificates (if issued)
representing Shares sold to Japanese Shareholders shall,
unless otherwise instructed by the Shareholder, be held, in
the name of the custodian, by the custodian of Kokusai.
Certificates of custody for the Shares shall be delivered by
the Sales and Sales Handling Companies in Japan to the
Japanese Shareholders.
D. Miscellaneous:
(1) Duration and Liquidation:
The Declaration of Trust provides for the perpetual
existence of the Trust. The Declaration of Trust further
provides that the trustees may also terminate the Trust or the
Fund upon written notice to the shareholders.
(2) Accounting Year:
The Fund's fiscal year ends on September 30.
(3) Authorized Shares:
There is no limit on the number of shares to be
issued.
(4) Agreement and Declaration of Trust:
Originals or copies of the Declaration of Trust, as
amended, are maintained in the office of the Trust and are
made available for public inspection by the Shareholders.
Originals or copies of the Declaration of Trust, as amended,
are on file in the United States with the Secretary of State
of The Commonwealth of Massachusetts and with the Clerk of the
City of Boston.
The Declaration of Trust may be amended at any time by
an instrument in writing signed by a majority of the Trustees
when authorized to do so by vote of Shareholders holding a
majority of the Shares entitled to vote, except that an
amendment which in the determination of the Trustees shall
affect the holders of one or more series or classes of Shares
but not the holders of all outstanding series and classes
shall be authorized by vote of the Shareholders holding a
majority of the Shares entitled to vote of each series and
class affected and no vote of Shareholders of a series or
class not affected shall be required. Amendments having the
purpose of changing the name of the Trust, of establishing,
changing or eliminating the par value of any series or of
supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent
provision contained therein shall not require authorization by
vote of any Shareholders.
In Japan, material changes in the Declaration of Trust
shall be published and notice thereof shall be sent to the
Japanese Shareholders.
(5) Issue of Warrants, Subscription Rights, etc.:
<PAGE>
The Fund may not grant privileges to purchase shares
of the Fund to shareholders or investors by issuing warrants,
subscription rights or options, or other similar rights.
(6) Calculation of Yield and Total Return:
YIELD. Yield with respect to the Fund will be computed
by dividing the Fund's net investment income for a recent
30-day period by the maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net
investment income will reflect amortization of any market
value premium or discount of fixed income securities (except
for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The
Fund's yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and
operating expenses of the Trust allocated to the Fund. These
factors, and possible differences in the methods used in
calculating yield, should be considered when comparing the
Fund's yield to yields published for other investment
companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's
shares and to the relative risks associated with the
investment objectives and policies of the Fund.
At any time in the future, yields may be higher or
lower than past yields and there can be no assurance that any
historical results will continue.
Investors in the Fund 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
the Fund may result in the investor's misunderstanding the
total return he or she may derive from the 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
<PAGE>
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.
YIELD AND 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 the yield and/or total
return of its shares in advertisements or 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. or Standard & Poor's Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the
Fund by Morningstar, Inc. based on the Fund's risk-adjusted or
straight performance relative to other mutual funds in its
broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds
in its general investment category as determined by
CDA/Weisenberger's Management Results.
VOLATILITY 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 its
volatility and average annual total return. The Fund may also
discuss or illustrate examples of interest rate sensitivity.
(B) Outline of Disclosure System:
(1) Disclosure in U.S.A.:
(i) Disclosure to shareholders
In accordance with the Investment Company Act of 1940,
the fund is required to send to its shareholders annual and
semi-annual reports containing financial information. Audited
financial statements will be prepared and distributed annually
and unaudited financial statements will be prepared and
distributed semi-annually.
(ii) Disclosure to the SEC
The Fund has filed a registration statement with the
SEC on Form N-
<PAGE>
1A; the Fund updates that registration statement periodically
in accordance with the Investment Company Act of 1940.
(2) Disclosure in Japan:
(i) Disclosure under Securities and Exchange Law of Japan
a. Disclosure to the Supervisory Authority:
When the Fund intends to offer the Shares amounting to
more than 100 million yen in Japan, it shall submit to the
Director of Kanto Local Financial Bureau of the Ministry of
Finance securities registration statements together with the
copies of the Agreement and Declaration of the Fund and the
agreements with major related companies as attachments
thereto. These documents are made available for public
inspection for investors and any other persons who desire at
the Kanto Local Finance Bureau of the Ministry of Finance.
The Sales and Sales Handling Companies in Japan of the
Shares shall deliver to the investors prospectuses the
contents of which are substantially identical to Part I and
Part II of the securities registration statements. For the
purpose of disclosure of the financial conditions, etc., the
Trustees shall submit to the Director of Kanto Local Finance
Bureau of the Ministry of Finance of Japan securities reports
within 6 months of the end of each fiscal year, semi-annual
reports within 3 months of the end of each semi-annual period
and extraordinary reports from time to time when material
changes in the operation of the Fund occur as to material
subjects of the Fund. These documents are available for public
inspection for the investors and any other persons who desire
at the Kanto Local Finance Bureau of the Ministry of Finance
of Japan.
(ii) Notifications, etc. under the Law Concerning
Securities
Investment Trusts and Securities Investment Companies
If the Investment Management Company offers for sale
of shares of the Fund, etc., it must file in advance the
prescribed matters on the Fund with the Commissioner of
Financial Supervisory Agent under the Law Concerning
Securities Investment Trusts and Securities Investment
Companies (the Law No.198, 1951) (hereinafter referred to the
"Investment Trusts Law"). In addition, if the Investment
Management Company amends the Agreement and the Declaration of
Trust of the Fund, it must file in advance such amendment and
the details thereof with the Commissioner of Financial
Supervisory Agent. Further, the Investment Management Company
must prepare the Management Report on the prescribed matters
concerning the assets of the Fund under the Investment Trusts
Law immediately after the end of each calculation period of
<PAGE>
the Fund and must file such Report with the Commissioner of
Financial Supervisory Agent.
b. Disclosure to Japanese Shareholders:
If the Investment Management Company makes any
material amendment to the Agreement and the Declaration of
Trust of the Fund, the substance of which is important, it
must give in advance public notice concerning its intention to
make such amendment and the substance of such amendment at
least 30 days prior to such amendment, and must deliver the
written documents containing the above matters to the
unitholders known in Japan. Provided, however, that if the
said written documents are delivered to all the shareholders
in Japan, the relevant public notice is not required to be
given.
The Japanese Shareholders will be notified of the
material facts which would change their position, including
material amendments to the Declaration of Trust of the Fund,
and of notices from the Trustees, through the Sales and Sales
Handling Companies in Japan.
The financial statements shall be sent to the Japanese
Shareholders through the Handling Securities Companies or the
summary thereof shall be carried in daily newspapers.
The above-described Management Report on the Fund will
be sent to the known shareholders in Japan.
(C) Restrictions on Transactions with Interested Parties:
Portfolio securities of the Fund may not be purchased
from or sold or loaned to any Trustee of the Fund, Loomis, Sayles &
Company, L.P., acting as investment manager of the Fund, or any
affiliate thereof or any of their directors, officers, or employees,
or any major shareholder thereof (meaning a shareholder who holds to
the actual knowledge of Investment Management Company, on his own
account whether in his own or other name (as well as a nominee's
name), 10% or more of the total issued outstanding shares of such a
company) acting as principal or for their own account unless the
transaction is made within the investment restrictions set forth in
the Fund's prospectus and statement of additional information and
either (i) at a price determined by current publicly available
quotations (including a dealer quotation) or (ii) at competitive
prices or interest rates prevailing from time to time on
internationally recognized securities markets or internationally
recognized money markets (including a dealer quotation).
4. INFORMATION CONCERNING THE EXERCISE OF RIGHTS BY
SHAREHOLDERS, ETC.
(A) Rights of Shareholders and Procedures for Their Exercise:
<PAGE>
Shareholders must register their shares in their own
name in order to exercise directly their rights as Shareholders.
Therefore, the Shareholders in Japan who entrust the custody of their
Shares to the Sales and Sales Handling Companies in Japan cannot
exercise directly their Shareholder rights, because their Shares are
registered in the name of the custodian. Shareholders in Japan may
have the Sales and Sales Handling Companies in Japan exercise their
rights on their behalf in accordance with the Account Agreement with
the Sales and Sales Handling Companies in Japan. Shareholders in
Japan who do not entrust the custody of their Shares to the Sales and
Sales Handling Companies in Japan are responsible for exercising
their rights in accordance with their own arrangement under their own
responsibility.
The major rights enjoyed by Shareholders are as
follows:
(i) Voting rights
Shareholders are entitled to one vote for each full
share held (with fractional votes for each fractional share
held) and may vote (to the extent provided in the Declaration
of Trust) on the election of trustees and the termination of
the Trust and on other matters submitted to the vote of
shareholders.
The Declaration of Trust provides that on any matter
submitted to a vote of all Trust shareholders, all Trust
shares entitled to vote shall be voted together irrespective
of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote,
in which case a separate vote of that series or sub-series
shall also be required to decide the question. Also, a
separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under the 1940 Act provides
in effect that a class shall be deemed to be affected by a
matter unless it is clear that the interests of each class in
the matter are substantially identical or that the matter does
not affect any interest of such class. On matters affecting an
individual series, only shareholders of that series are
entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of
series, on the election of trustees and the selection of the
Trust's independent accountants, but shareholders of each
series vote separately on other matters requiring shareholder
approval, such as certain changes in investment policies of
that series or the approval of the investment management
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
<PAGE>
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).
(ii) Repurchase rights
Shareholders are entitled to request repurchase of
Shares at their Net Asset Value at any time.
(iii) Rights to receive dividends
The Fund generally declares and pays dividends
monthly. 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
be made more frequently. The Fund normally pays distributions
to investors who own shares of the Fund as of the last day of
each month. The Trust's trustees may change the frequency with
which the Fund declares or pays dividends.
(iv) Right to receive distributions upon dissolution
Shareholders of a fund are entitled to receive
distributions upon dissolution in proportion to the number of
shares then held by them, except as otherwise required.
(v) Right to inspect accounting books and the like
<PAGE>
Shareholders are entitled to inspect the Declaration
of Trust, the accounting books at the discretion of the Court
and the minutes of any shareholders' meetings.
(vi) Right to transfer shares
Shares are transferable without restriction except as
limited by applicable law.
(vii) Rights with respect to the U.S. registration statement
If, under the 1933 Act, there is any false statement
concerning any material matter in the U.S. Registration
Statement, or any omission of any statement of material
matters to be stated therein or necessary in order not to
cause any misunderstanding of an important matter,
shareholders are generally entitled to institute a lawsuit,
against the person who had signed the relevant Registration
Statement, the trustee of the issuer (or any person placed in
the same position) at the time of filing such Statement, any
person involved in preparing such Statement or any subscriber
of the relevant shares.
(B) Tax Treatment of Shareholders in Japan:
The tax treatment of Shareholders in Japan shall be as
follows:
(1) The distributions to be made by the Fund will be
treated as distributions made by a domestic investment trust.
a. The distributions made by the Fund to Japanese
individual shareholders will be subject to separate taxation
from other income (i.e. withholding of income tax at the rate
of 15% and withholding of local taxes at the rate of 5% in
Japan). In this case, no report concerning distributions will
be filed with the Japanese tax authorities.
b. The distributions made by the Fund to Japanese
corporate shareholders will be subject to withholding of
income tax at the rate of 15% and to withholding of local
taxes at the rate of 5% in Japan. In certain cases, the
Handling Securities Companies will prepare a report concerning
distributions and file such report with the Japanese tax
authorities.
c. Net investment returns such as dividends, etc. and
distributions of short-term net realized capital gain, among
distributions on Shares of the Fund, will be, in principle,
subject to withholding of U. S. federal income tax at the rate
of 15% and the amount obtained after such deduction will be
paid in Japan.
Distributions of long-term net realized capital gain
will not be subject to withholding of U. S. federal income tax
and the full amount thereof will be paid in Japan. The amount
subject to withholding of U. S. federal income tax may be
deducted from the tax levied on a foreign entity in Japan.
<PAGE>
The Japanese withholding tax imposed on distributions
as referred to in a. and b. above will be collected by way of
so-called "difference collecting method". In this method only
the difference between the amount equivalent to 20% of the
distributions before U.S. withholding tax and the amount of
U.S. withholding tax withheld in the U.S. will be collected in
Japan.
(2) The provisions of Japanese tax laws giving the
privilege of a certain deduction from taxable income to corporations,
which may apply to dividends paid by a domestic corporation, shall
not apply.
(3) Capital gains and losses arising from purchase and
repurchase of the Shares shall be treated in the same way as those
arising from purchase and sale of a domestic investment trust. The
distribution of the net liquidation assets shall be also treated in
the same way as those arising from liquidation of a domestic
investment trust.
(4) The Japanese securities transaction tax will not be
imposed so far as the transactions concerned are conducted outside
Japan. Such tax, however, is applicable to dealers' transactions for
their own account and to privately negotiated transactions conducted
in Japan.
(C) Foreign Exchange Control in U.S.A.:
In the U.S.A., there are no foreign exchange control
restrictions on remittance of dividends, repurchase money, etc. of
the Shares to Japanese Shareholders.
(D) Agent in Japan:
Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
The foregoing law firm is the true and lawful agent of
the Fund to represent and act for the Fund in Japan for the purpose
of:
(1) the receipt of any and all legal claims, actions,
proceedings, process, and communications addressed to the Trust or
the Fund.
(2) representation in and out of court in connection with
any and all disputes, controversies or differences regarding the
transactions relating to the public offering, sale and repurchase
in Japan of the Shares of the Fund.
The agent for the registration with the Director of
Kanto Local Finance Bureau and the Commissioner of the Financial
Supervisory Agency of the initial public offering concerned as well
as for the continuous disclosure is each of the following persons:
Harume Nakano
Ken Miura
<PAGE>
Attorneys-at-law
Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki, 3-chome
Chiyoda-ku, Tokyo
(E) Jurisdiction:
Limited only to litigation brought by Japanese
investors regarding transactions relating to (D)(2) above, the Fund
has agreed that the following court has jurisdiction over such
litigation and the Japanese law is applicable thereto:
Tokyo District Court
1-4, Kasumigaseki 1-chome
Chiyoda-ku, Tokyo
<PAGE>
5. STATUS OF INVESTMENT FUND
(1) Diversification of Investment Portfolio (Diversification of
Investment Portfolio by Types of Assets and Geographic Regions):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
(As of the end of January, 2000)
----------------------------------------------------------------------------------------------------------------------
Market Value Investment Ratio
Types of Assets Name of Country Total Dollar (%)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-Convertible Bonds U.S.A. 22,365,863 49.01
----------------------------------------------------------------------------------------------------------------------
Canada 763,994 1.67
----------------------------------------------------------------------------------------------------------------------
Supranational 539,341 1.18
----------------------------------------------------------------------------------------------------------------------
United Kingdom 426,888 0.94
----------------------------------------------------------------------------------------------------------------------
Convertible Bonds U.S.A. 9,465,375 20.74
----------------------------------------------------------------------------------------------------------------------
Government Agencies U.S.A. 7,194,334 15.76
----------------------------------------------------------------------------------------------------------------------
Foreign Government Canada 4,419,811 9.68
----------------------------------------------------------------------------------------------------------------------
Preferred Stock U.S.A. 1,608,131 3.52
----------------------------------------------------------------------------------------------------------------------
Common Stock U.S.A. 11,943 0.03
----------------------------------------------------------------------------------------------------------------------
Sub-total 46,795,680 102.53
----------------------------------------------------------------------------------------------------------------------
Cash, Deposit and -1,156,921 -2.53
Other Assets (After
Deduction of Liabilities)
----------------------------------------------------------------------------------------------------------------------
Total 45,638,759 100.00
----------------------------------------------------------------------------------------------------------------------
(Net Asset Value) (4,883 million JPY)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Investment Ratio is calculated by dividing the types of asset
at their market value by the total net asset value. The same
applies hereinafter.
<PAGE>
(2) Results of Past Operations
(a) Record of Changes in Net Assets
Record of changes in net assets as of the end of the first
fiscal year (the end of September, 1999) and as of the end of each
month for one year starting from February, 1999 are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Net Asset Value per
Total Net Asset Value Share
-------------------------------------------------------------------------------------------------------------
Dollar Yen
(thousands) (millions) Dollar Yen
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
End of First Fiscal Year
(1999 End of September) 34,264 3,666 9.79 1,048
-------------------------------------------------------------------------------------------------------------
February 32,876 3,518 10.17 1,088
-------------------------------------------------------------------------------------------------------------
March 35,236 3,770 10.46 1,119
-------------------------------------------------------------------------------------------------------------
April 33,462 3,580 10.58 1,132
-------------------------------------------------------------------------------------------------------------
May 36,035 3,856 10.24 1,096
-------------------------------------------------------------------------------------------------------------
June 38,583 4,128 10.08 1,079
-------------------------------------------------------------------------------------------------------------
July 36,787 3,936 9.97 1,067
-------------------------------------------------------------------------------------------------------------
August 35,121 3,758 9.86 1,055
-------------------------------------------------------------------------------------------------------------
September 34,264 3,666 9.79 1,048
-------------------------------------------------------------------------------------------------------------
October 21,616 2,313 9.89 1,058
-------------------------------------------------------------------------------------------------------------
November 35,532 3,802 9.72 1,040
-------------------------------------------------------------------------------------------------------------
December 44,207 4,730 9.52 1,019
-------------------------------------------------------------------------------------------------------------
2000 End of January 45,639 4,883 9.45 1,011
-------------------------------------------------------------------------------------------------------------
</TABLE>
(Note) The Fund commenced its operation on October 1, 1998,
when the net asset value per share was $9.95.
(b) Record of Distributions Paid
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Distribution Date Ex-distribution Date Distribution
per Share
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
November, 1998 December 4, 1999 December 1, 1999 US$0.105((Y)11.235)
------------------------------------------------------------------------------------------------------------------
December, 1998 January 6, 1999 December 31, 1998 US$ 0.065((Y)6.955)
------------------------------------------------------------------------------------------------------------------
January, 1999 February 4, 1999 February 1, 1999 US$ 0.054((Y)5.778)
------------------------------------------------------------------------------------------------------------------
February, 1999 March 4, 1999 March 1, 1999 US$ 0.054((Y)5.778)
------------------------------------------------------------------------------------------------------------------
March, 1999 April 6, 1999 April 1, 1999 US$ 0.060((Y)6.420)
------------------------------------------------------------------------------------------------------------------
April, 1999 May 6, 1999 May 3, 1999 US$ 0.057((Y)6.099)
------------------------------------------------------------------------------------------------------------------
May, 1999 June 4, 1999 June 1, 1999 US$ 0.053((Y)5.671)
------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
June, 1999 July 7, 1999 July 1, 1999 US$ 0.057((Y)6.099)
------------------------------------------------------------------------------------------------------------------
July, 1999 August 5, 1999 August 2, 1999 US$ 0.059((Y)6.313)
------------------------------------------------------------------------------------------------------------------
August, 1999 September 7, 1999 September 1, 1999 US$ 0.057((Y)6.099)
------------------------------------------------------------------------------------------------------------------
September, 1999 October 6, 1999 October 1, 1999 US$ 0.063((Y)6.741)
------------------------------------------------------------------------------------------------------------------
October, 1999 November 4, 1999 November 1, 1999 US$ 0.062((Y)6.634)
------------------------------------------------------------------------------------------------------------------
November, 1999 December 6, 1999 December 1, 1999 US$ 0.202((Y)21.614)
------------------------------------------------------------------------------------------------------------------
December, 1999 January 5, 2000 December 31, 1999 US$ 0.043((Y)4.601)
------------------------------------------------------------------------------------------------------------------
January, 2000 February 4, 2000 February 1, 2000 US$ 0.052((Y)5.564)
------------------------------------------------------------------------------------------------------------------
February, 2000 March 6, 2000 March 1, 2000 [US$ 0.058((Y)6.206)]
------------------------------------------------------------------------------------------------------------------
</TABLE>
(c) Record of Sales and Redemption
Record of sales and repurchases from the commencement of the
management of the Fund to the end of the first fiscal year (end of
September, 1999) and number of outstanding Shares of the Fund as at the
end of the first fiscal year are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------
Number of Shares Number of Shares Number of Shares
Sold Redeemed Outstanding
------------------------------------------------------------------
<S> <C> <C>
5,370,740 1,872,540 3,498,200
(4,770,400) (1,272,200) (3,498,200)
------------------------------------------------------------------
</TABLE>
Note 1: The figures in parentheses show those sold, redeemed or
outstanding in Japan.
Note 2: The number of shares sold includes those held during the
initial public offering.
<PAGE>
II. OUTLINE OF THE TRUST
1. Trust
(A) Law of Place of Incorporation
The Trust is a Massachusetts business trust organized in
Massachusetts, U.S.A. on February 20, 1991.
Chapter 182 of the Massachusetts General Laws prescribes
the fundamental matters in regard to the operations of certain
business trusts constituting voluntary associations under that
chapter.
The Trust is an open-end, diversified management company
under the Investment Company Act of 1940.
(B) Outline of the Supervisory Authority
Refer to I - l (B) Outline of the Supervisory Authority.
(C) Purpose of the Trust
The purpose of the Trust is to provide investors a
managed investment primarily in securities, debt instruments and
other instruments and rights of a financial character and to carry
on such other businesses as the Trustees may from time to time
determine pursuant to their authority under the Declaration of
Trust.
(D) History of the Trust
February 20, 1991: Organization of the Trust as a
Massachusetts business trust.
Adoption of the Declaration of Trust.
(E) Amount of Capital Stock Not applicable.
(F) Structure of the Management of the Trust
Subject to the provisions of the Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that
responsibility. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with the Declaration of Trust
providing for the conduct of the business of the Trust and may amend
and repeal them to the extent that such By-Laws do not reserve that
right to the Shareholders; they may fill vacancies, including
vacancies caused by enlargement of their number, and may remove
Trustees with or without cause; they may elect and remove, with or
without cause, such officers and appoint and terminate such agents
as they consider appropriate; they may appoint from their own
number, and terminate, any one or more committees consisting of two
or more Trustees, including an executive committee which may, when
the Trustees are not in session, exercise some or all of the power
and authority of the Trustees as the Trustees may determine; they
may
<PAGE>
employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all
or any part of such assets in a system or systems for the central
handling of securities, retain a transfer agent or a Shareholder
servicing agent, or both, provide for the distribution of Shares by
the Trust, through one or more principal underwriters or otherwise,
set record dates for the determination of Shareholders with respect
to various matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of
the Trustees and to any agent or employee of the Trust or to any
such custodian or underwriter.
Except as otherwise provided in the Declaration of Trust
or from time to time in the By-Laws, any action to be taken by the
Trustees may be taken (A) by a majority of the Trustees present at a
meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference
telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same
time (participation by which means shall for all purposes constitute
presence in person at a meeting), or (B) by written consents of a
majority of the Trustees then in office (which written consents
shall be filed with the records of the meetings of the Trustees and
shall be treated for all purposes as a vote taken at a meeting of
Trustees).
The Shareholders shall have power to vote only (i) for
the election of Trustees as provided in Article IV, Section 1 of the
Declaration of Trust, PROVIDED, HOWEVER, that no meeting of
Shareholders is required to be called for the purpose of electing
Trustees unless and until such time as less than a majority of the
Trustees have been elected by the Shareholders, (ii) with respect to
any Investment Management Company or Sub-Adviser as provided in
Article IV, Section 6 of the Declaration of Trust to the extent
required by the 1940 Act, (iii) with respect to any termination of
the Trust to the extent and as provided in Article IX, Section 4 of
the Declaration of Trust, (iv) with respect to any amendment of the
Declaration of Trust to the extent and as provided in Article IX,
Section of 7 of the Declaration of Trust, (v) to the same extent as
the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should
not be brought or maintained derivatively or as a class action on
behalf of the Trust or the Shareholders, and (vi) with respect to
such additional matters relating to the Trust as may be required by
law, the Declaration of Trust, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which
it is entitled to vote and each fractional Share shall be entitled
to a proportionate fractional vote. On any matter submitted to a
vote of
<PAGE>
Shareholders all Shares of the Trust then entitled to vote shall be
voted by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual
Series and (ii) when the Trustees have determined that the matter
affects only the interests of one or more Series or Classes, then
only Shareholders of such Series or Classes shall be entitled to
vote thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise
of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by
or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take
any action permitted or required of the Shareholders by law, the
Declaration of Trust or the By-Laws.
Meetings of the Shareholders may be called by the
Trustees for the purpose of electing Trustees as provided in Article
IV, Section 1 of the Declaration of Trust and for such other
purposes as may be prescribed by law, by the Declaration of Trust or
by the By-Laws. Meetings of the Shareholders may also be called by
the Trustees from time to time for the purpose of taking action upon
any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place
designated by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage
prepaid, stating the time and place of the meeting, to each
Shareholder entitled to vote at such meeting at the Shareholder's
address as it appears on the records of the Trust. Whenever notice
of a meeting is required to be given to a Shareholder under the
Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his or
her attorney thereunto authorized and filed with the records of the
meeting, shall be deemed equivalent to such notice.
Forty percent (40%) of the Shares entitled to vote shall
be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of the
Declaration of Trust or the By-Laws permits or requires that holders
of any Series or Class shall vote as a Series or Class, then forty
percent (40%) of the aggregate number of Shares of that Series or
Class entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that Series or Class. Any lesser
number shall be sufficient for adjournments. Any adjourned session
or sessions may be held, within a reasonable time after the date set
for the original meeting, without the necessity of further notice.
Except when a larger vote is
<PAGE>
required by any provision of law or the Declaration of Trust or the
By-Laws, a majority of the Shares voted shall decide any questions
and a plurality shall elect a Trustee, provided that where any
provision of law or of the Declaration of Trust or the By-Laws
permits or requires that the holders of any Series or Class shall
vote as a Series or Class, then a majority of the Shares of that
Series or Class voted on the matter (or a plurality with respect to
the election of a Trustee) shall decide that matter insofar as that
Series or Class is concerned.
Any action taken by Shareholders may be taken without a
meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by any
express provision of law or the Declaration of Trust or the By-Laws)
consent to the action in writing and such written consents are filed
with the records of the meetings of Shareholders. Such consent shall
be treated for all purposes as a vote taken at a meeting of
Shareholders.
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 each
agreement, obligation or instrument entered into or executed by the
Trust or the trustees. The Declaration of Trust provides for
indemnification out of Fund property for all loss and expenses 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 matters as to which any such person
did not act in good faith in the reasonable belief that such action
was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or
the Trust's shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office.
The Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or management
services with any
<PAGE>
corporation, trust, association or other organization (the
"Manager"), every such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such
contract may provide for one or more sub-advisers who shall perform
all or part of the obligations of the Manager under such contract
and may contain such other terms interpretive of or in addition to
said requirements and restrictions as the Trustees may determine,
including, without limitation, authority to determine from time to
time what investments shall be purchased, held, sold or exchanged
and what portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments. The
Trustees may also, at any time and from time to time, contract with
the Manager or any other corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor or
principal underwriter for the Shares, every such contract to comply
with such requirements and restrictions as may be set forth in the
By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and restrictions
as the Trustees may determine.
Unless terminated as provided in the Declaration of
Trust, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by vote of Shareholders holding
at least sixty-six and two-thirds percent (66 2/3%) of the shares
entitled to vote, or by the Trustees by written notice to the
Shareholders. Any Series or Class of shares may be terminated at any
time by vote of Shareholders holding at least sixty-six and
two-thirds percent (66 2/3%) of the shares of such Series or Class
entitled to vote, or by the Trustees by written notice to the
Shareholders of such Series or Class. Upon termination of the Trust
or of any one or more Series or Classes of shares, after paying or
otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust or
of the particular Series or Class as may be determined by the
Trustees, the Trust shall in accordance with such procedures as the
Trustees consider appropriate reduce the remaining assets to
distributable form in cash or shares or other property, or any
combination thereof, and distribute the proceeds to the Shareholders
of the Series involved, ratably according to the number of shares of
such Series held by the several Shareholders of such Series on the
date of termination, except to the extent otherwise required or
permitted by the preferences and special or relative rights and
privileges of any Classes of shares of that Series, provided that
any distribution to the Shareholders of a particular Class of shares
shall be made to such Shareholders pro rata in proportion to the
number of shares of such Class held by each of them.
<PAGE>
(G) Information Concerning Major Shareholders
Not applicable.
(H) Information Concerning Directors, Officers and Employees
(1) Trustees and Officers of the Trust
<TABLE>
<CAPTION>
as of the end of January, 2000
------------------------------------------------------------------------------------------------------------------
Shares
Name Office and Title Resume Owned
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JOSEPH ALAIMO Trustee present: President, Wintrust Asset
Management Company 4,674.152
------------------------------------------------------------------------------------------------------------------
RICHARD S. HOLWAY Trustee formerly: Vice President, Loomis 64,117.677
Sayles. Director, Sandwich
Cooperative Bank.
------------------------------------------------------------------------------------------------------------------
MICHAEL T. MURRAY Trustee formerly: Vice President, Loomis 23,414.005
Sayles
------------------------------------------------------------------------------------------------------------------
DANIEL J. FUSS President and Trustee present: Vice Chairman and Director, 571,237.355
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
SHEILA M. BARRY Secretary and present: Assistant General Counsel 210.396
Compliance Officer and Vice President, Loomis
Sayles
formerly: Senior Counsel and Vice
President, New England
Funds, L.P.
------------------------------------------------------------------------------------------------------------------
ROBERT J. BLANDING Executive Vice present: President, Chairman, 16,375.966
President Director and Chief Executive
Officer, Loomis Sayles
------------------------------------------------------------------------------------------------------------------
MARK BARIBEAU Vice President present: Vice President, 0
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
JAMES C. CARROLL Vice President present: Vice President, 0
Loomis Sayles
formerly: Managing Director and
Senior Energy Analyst at
Paine Webber, Inc.
------------------------------------------------------------------------------------------------------------------
PAMELA CZEKANSKI Vice President present: Vice President, 0
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
E. JOHN DEBEER Vice President present: Vice President, 0.064
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
WILLIAM H. EIGEN, JR. Vice President present: Vice President, 0
Loomis Sayles
formerly: Vice President,
INVESCO Funds Group
and Vice President,
The Travelers Corp.
------------------------------------------------------------------------------------------------------------------
CHRISTOPHER R. ELY Vice President present: Vice President, 2,260.203
Loomis Sayles
formerly: Senior Vice
President and portfolio
manager, Keystone
Investment Management
Company, Inc.
------------------------------------------------------------------------------------------------------------------
QUENTIN P. FAULKNER Vice President present: Vice President, 0
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
PHILIP C. FINE Vice President present: Vice President, 0
Loomis Sayles
formerly: Vice President
and portfolio manager,
Keystone Investment
Management Company, Inc.
------------------------------------------------------------------------------------------------------------------
KATHLEEN C. GAFFNEY Vice President present: Vice President, 0
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
JOSEPH R. GATZ Vice President present Vice President, 0
Loomis Sayles
formerly Portfolio Manager
at Banc One Investment
Advisers Corporation
------------------------------------------------------------------------------------------------------------------
ISAAC GREEN Vice President present: Vice President and 95.116
Director, Loomis Sayles
------------------------------------------------------------------------------------------------------------------
DEAN A. GULIS Vice President present: Vice President,
Loomis Sayles
formerly: Principal and Director
of Research at Roney & Company 1,531,296
------------------------------------------------------------------------------------------------------------------
MARTHA F. HODGMAN Vice President present: Vice President, 6,565.150
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
MARK W. HOLLAND Treasurer present: Vice President and 66,897.115
Director, Loomis Sayles
------------------------------------------------------------------------------------------------------------------
JOHN HYLL Vice President present: Vice President, 0
Loomis Sayles
------------------------------------------------------------------------------------------------------------------
ART LUTSCHAUNIG Vice President present: Managing Director 0
Mutual Funds
------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
JEFFREY L. MEADE Vice President present: Executive Vice President, 134,795.54
Chief Operating Officer and
Director, Loomis Sayles
------------------------------------------------------------------------------------------------------------------
ESWAR MENON Vice President present: Vice President, Loomis 0
Sayles
formerly: Portfolio Manager at
Nicholas Applegate Capital
Management, Equity Analyst at
Koaneman Capital Management
and Senior Engineer at
Integrated Device Technology
------------------------------------------------------------------------------------------------------------------
ALEX MUROMCEW Vice President present: Vice President, Loomis 1,026.365
Sayles
formerly: Portfolio Manager at
Nicholas Applegate Capital
Management and Investment
Analyst at Teton Partners, L.P.
------------------------------------------------------------------------------------------------------------------
PHILIP R. MURRAY Assistant Treasurer present: Vice President and 0
Treasurer, Loomis Sayles
------------------------------------------------------------------------------------------------------------------
KENT P. NEWMARK Vice President present: Vice President, Managing 104,695.882
Partner and Director, Loomis
Sayles
------------------------------------------------------------------------------------------------------------------
DAWN ALSTON PAIGE Vice President present: Vice President, Loomis 0
Sayles
------------------------------------------------------------------------------------------------------------------
BRUCE G. PICARD, JR. Vice President present: Vice President, Loomis 0
Sayles
------------------------------------------------------------------------------------------------------------------
LAUREN B. PITALIS Vice President present: Vice President, Loomis 1,337.462
Sayles
formerly: Vice President and
Assistant Secretary of Harris
Associates Investment Trust
------------------------------------------------------------------------------------------------------------------
RICHARD SKAGGS Vice President present: Vice President, Loomis 0
Sayles
------------------------------------------------------------------------------------------------------------------
DAVID L. SMITH Vice President present: Vice President, Loomis 0
Sayles
formerly: Vice President and
portfolio manager, Keystone
Investment Management Company,
Inc.
------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
SANDRA P. TICHENOR Vice President present: General Counsel, Executive 0
Vice President, Director,
Secretary and Clerk, Loomis
Sayles
formerly: Partner, Heller, Ehrman,
White & McAuliffe
------------------------------------------------------------------------------------------------------------------
JOHN TRIBOLET Vice President present: Vice President, Loomis 0
Sayles
formerly: Portfolio Manager at
Nicholas Applegate Capital
Management, MBA student at the
University of Chicago, and
Investment banker, most
recently at PaineWebber, Inc.
------------------------------------------------------------------------------------------------------------------
JEFFREY W. WARDLOW Vice President present: Vice President, Loomis 0
Sayles
------------------------------------------------------------------------------------------------------------------
GREGG D. WATKINS Vice President present: Vice President, Loomis 0
Sayles
------------------------------------------------------------------------------------------------------------------
ANTHONY J. WILKINS Vice President present: Executive Vice President 12,172.536
and Director, Loomis Sayles
------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: Previous positions during the past five years with Loomis
Sayles are omitted, if not materially different.
(2) Employees of the Trust
The Trust has no employees.
(I) Description of Business and Outline of Operation
The Trust may carry out any administrative and
managerial act, including the purchase, sale, subscription and
exchange of any securities, and the exercise of all rights directly
or indirectly pertaining to the Fund's assets. The Trust has
retained Loomis Sayles & Company, L.P., the investment adviser, to
render investment advisory services and State Street Bank and Trust
Company, to hold the assets of the Fund in custody and act as
Transfer, Dividend Payment and Shareholder Servicing Agent.
(J) Miscellaneous
(1) Changes of Trustees and Officers
Trustees may be removed or replaced by, among other
things, a resolution adopted by a vote of two-thirds of the
outstanding shares at a meeting called for the purpose. In
the event of vacancy, the remaining Trustees may fill such
vacancy by appointing for the remaining term of the
<PAGE>
predecessor Trustee such other person as they in their
discretion shall see fit. The Trustees may add to their
number as they consider appropriate. The Trustees may elect
and remove officers as they consider appropriate.
(2) Amendment to the Declaration of Trust
The Declaration of Trust may be amended at any time
by an instrument in writing signed by a majority of the then
Trustees when authorized to do so by vote of Shareholders
holding a majority of the Shares entitled to vote, except
that an amendment which in the determination of the Trustees
shall affect the holders of one or more Series or Classes of
Shares but not the holders of all outstanding Series and
Classes shall be authorized by vote of the Shareholders
holding a majority of the Shares entitled to vote of each
Series and Class affected and no vote of Shareholders of a
Series or Class not affected shall be required. Amendments
having the purpose of changing the name of the Trust, of
establishing, changing or eliminating the par value of any
Shares or of supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require
authorization by vote of any Shareholders.
(3) Litigation and Other Significant Events
There is no litigation or no other proceeding in
which the Trust is involved. The fiscal year end of the
Trust is September 30. 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 Trust or the
Fund, respectively. The Declaration of Trust further
provides that the trustees may also terminate the Trust or
the Fund upon written notice to the shareholders.
<PAGE>
2. Loomis, Sayles & Company, L.P. (a division of Nvest L.P.)
(Investment Management Company)
(A) Law of Place of Incorporation
Loomis Sayles is a limited partnership organized
under the Law of the State of Delaware, U.S.A. At present, the sole
general partner of the investment management company is Nvest L.P.,
a division thereof. Its investment advisory business is regulated
under the Investment Advisers Act of 1940.
Under the Investment Advisers Act of 1940, an
investment adviser means, with certain exceptions, any person who,
for compensation, engages in the business of advising others, either
directly or through publications or writings, as to the value of
securities or as to the advisability of investing in, purchasing or
selling securities, or who, for compensation and as part of a
regular business, issues analyses or reports concerning securities.
Investment advisers under the Act may not conduct their business
unless they are registered with the SEC.
(B) Outline of the Supervisory Authority
Investment Management Company is registered with SEC
as an investment adviser under the Investment Advisers Act of 1940.
(C) Purpose of the Company
Investment Management Company's predominant business
is investment management, which includes the buying, selling,
exchanging and trading of securities of all descriptions on behalf
of mutual funds in any part of the world.
(D) History of the Company
Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles' sole
general partner is a wholly-owned subsidiary of Nvest Companies,
L.P. ("Nvest Companies"). Nvest Companies' advising general partner
is Nvest Corporation is a direct wholly-owned subsidiary of
Metropolitan Life Insurance Company, a mutual life insurance
company. Nvest, L.P. is a publicly traded company listed on the New
York Stock Exchange. Nvest Corporation is the sole general partner
of Nvest, L.P.
In addition to selecting and reviewing the Fund's
investments, Loomis Sayles provides executive and other personnel
for the management of the Fund. The Trust's board of trustees
supervises Loomis Sayles' conduct of the affairs of the Fund.
(E) Amount of Capital Stock (as of the end of January, 2000)
1. Amount of Capital (issued capital stock at par value):
<PAGE>
Not applicable. Provided, however, that the partner capital
was $51,337,000.
2. Number of authorized shares of capital stock:
Not applicable.
3. Number of outstanding shares of capital stock:
Not applicable.
4. Amount of capital :
Not applicable. See, Note 5 to the consolidated financial
statements included in PART III SPECIAL INFORMATION, II.
FINANCIAL CONDITIONS OF THE INVESTMENT MANAGEMENT COMPANY
herein.
(F) Structure of the Management of the Company
The general partner of the Investment Management
Company is a special purpose corporation that is an indirect
wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies"). Nvest Companies' managing general partner, Nvest
Corporation, is a direct wholly-owned subsidiary of Metropolitan
Life Insurance Company ("Met Life"), a mutual life insurance
company. Nvest Companies' advising general partner, Nvest, L.P., is
a publicly traded company listed on the New York Stock Exchange.
Nvest Corporation is the sole general partner of Nvest L.P.
<PAGE>
---------------------------------------------------
Capital Relationship and Assets under Operation
---------------------------------------------------
-------------------------------------------------------------
Metropolitan Life Insurance Company
The second largest life insurance company in the U.S.A.
Total Consolidated Assets 227 billion dollars
as of September 30, 1999
Holder of 48% ownership interest in Nvest Companies, L.P.
-------------------------------------------------------------
--------------------------------------------------------------------------
Nvest Companies, L.P.
----------------------------------------------------------------------
Holding Company of the U.S. first grade investment companies
Total Assets under management 133 billion dollars at December 31, 1999
Holder of 100% shares of Loomis Sayles and other operating companies
--------------------------------------------------------------------------
---------------------------------------------------------------------
Loomis Sayles and Company L.P.
-------------------------------------------------------------------
Assets under operation 66.97 billion dollars as of January 31, 2000
Bonds 51.50 billion dollars
Bond Assets under operation ranked 12th worldwide
511 employees
10 offices in the U.S.
-------------------------------------------------------------
Loomis Sayles serves as investment manager under a
separate advisory agreement relating to the Loomis Sayles Managed
Bond Fund dated August 26, 1998. 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 management agreement provides that the Fund shall pay Loomis
Sayles a monthly investment advisory fee at the annual percentage
rate of 0.60 % 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
<PAGE>
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 Code. The term
"expenses" is defined in the management agreements or in relevant
state regulations and excludes brokerage commissions, taxes,
interest, distribution-related expenses and extraordinary expenses.
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 each 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
<PAGE>
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 Small Cap
Fund and New England Balanced Fund, which are series of New England
Funds Trust I, a registered open-end management investment company,
New England High Income Fund, a series of New England Fund Trust II,
a registered, open-end management investment company, the Loomis
Sayles Small Cap Series of New England Zenith Fund, which is also a
registered open-end management investment company, as well as to
Loomis Sayles Investment Trust, also 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.
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 amount desired
to be purchased or sold for each. It is recognized that in some
cases the practices described in this paragraph could have a
detrimental effect on the price or amount of the securities which
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.
Daniel J. Fuss, President of the Trust and Vice
Chairman and Director of Loomis Sayles, will serve as the portfolio
manager of the Loomis Sayles Managed Bond Fund . Kathleen C.
Gaffney, Vice President of the Trust and Loomis Sayles, will serve
as associate portfolio manager of Loomis Sayles Managed Bond Fund.
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Names Year Business Experience
(at least 5 years)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Daniel J. Fuss 1976 Vice Chairman, Director and Managing Partner of Loomis, Sayles
& Company, L.P.
BS, Marquette University
MBA, Marquette University
Joined Loomis Sayles in 1976
began investment career in 1961
Past Professional Experience:
The Boston Company; Vice President, Investment Counsel
Endowment Management & Research Co.: Vice President,
Investment Management
Continental Illinois National Bank: Second Vice President and
Trust Officer
---------------------------------------------------------------------------------------------------
Kathleen C. Gaffney 1984 Vice President of Loomis, Sayles & Company, L.P.
BA, University of Massachusetts
joined Loomis Sayles in 1984
began investment career in 1984
---------------------------------------------------------------------------------------------------
</TABLE>
(G) Information Concerning Major Stockholders
Not applicable.
(H) Information Concerning Officers and Employees
The following table lists the names of various officers and
directors of Investment Management Company and their respective
positions with Investment Management Company. (Although,
technically, the Investment Management Company does not have
officers and directors because it is a limited partnership, the
officers and directors of the General Partner serve the same
function for the Investment Management Company and therefore, assume
the same titles. Hereinafter the same.)For each named individual,
the table lists: (i) any other organizations (excluding other
Investment Management Company's funds) with which the officer and/or
director has recently had or has substantial involvement; and (ii)
positions held with such organization:
List of Officers and Directors of Loomis, Sayles & Company, L.P.
<TABLE>
<CAPTION>
(as of the end of January, 2000)
----------------------------------------------------------------------------------------------
Position with
Loomis, Sayles &
Name Company, L.P.. Other Business Affiliation
----------------------------------------------------------------------------------------------
<S> <C> <C>
Daniel J. Fuss Vice Chairman and President and Trustee of the Trust
Director
----------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C>
----------------------------------------------------------------------------------------------
Sheila M. Barry Assistant General Secretary and Compliance Officer of
Counsel and Vice the Trust
President
----------------------------------------------------------------------------------------------
Robert J. Blanding President, Chairman, Executive Vice President of the Trust
Director and Chief
Executive Officer
----------------------------------------------------------------------------------------------
Mark B. Baribeau Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
James C. Carroll Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
E. John DeBeer Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
William H. Eigen, Jr. Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Christopher R. Ely Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Quentin P. Faulkner Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Philip C. Fine Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Kathleen C. Gaffney Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Isaac H. Green Vice President and Vice President of the Trust
Director
----------------------------------------------------------------------------------------------
Martha F. Hodgman Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Mark W. Holland Vice President and Treasurer of the Trust
Director
----------------------------------------------------------------------------------------------
John Hyll Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Jeffrey L. Meade Executive Vice Vice President of the Trust
President, Chief
Operating Officer
and Director
----------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C>
----------------------------------------------------------------------------------------------
Eswar Menon Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Alex Muromcew Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Philip R. Murray Vice President and Assistant Treasurer of the Trust
Treasurer
----------------------------------------------------------------------------------------------
Kent P. Newmark Managing Partner, Vice President of the Trust
Vice President and
Director
----------------------------------------------------------------------------------------------
Dawn M. Alston Paige Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Bruce G. Picard, Jr. Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Lauren B. Pitalis Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
David L. Smith Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
John Tribolet Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Sandra P. Tichenor General Counsel, Vice President of the Trust
Executive Vice
President, Secretary,
Clerk and Director
----------------------------------------------------------------------------------------------
Jeffrey W. Wardlow Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Gregg D. Watkins Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Anthony J. Wilkins Executive Vice
President and
Director Vice President of the Trust
----------------------------------------------------------------------------------------------
Pamela Czekanski Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Joseph R. Gatz Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
Dean A. Gulis Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C>
----------------------------------------------------------------------------------------------
Richard Skaggs Vice President Vice President of the Trust
----------------------------------------------------------------------------------------------
</TABLE>
(I) Summary of Business Lines and Business Operation
Investment Management Company is engaged in the business of
providing investment management and investment advisory services to
mutual funds. As of the end of January, 2000, Investment Management
Company managed, advised, and/or administered the following [40] funds
and fund portfolios:
<TABLE>
<CAPTION>
Fund List
(as of the end of January, 2000)
----------------------------------------------------------------------------------------------------------------------------
Month/Date Principal Total Net Net Asset
Year Characteristics Asset Value Value per
Fund Established ($ million) share ($)
R=Retail R=Retail
I=Institutional I=Institutional
A=Admin A=Admin
----------------------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES FUNDS
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bond 5/16/91 Fixed Income/Open 63.6(R) 11.49(R)
1,509.3(I) 11.50(I)
2.6(A) 11.48(A)
----------------------------------------------------------------------------------------------------------------------------
Global Bond 5/10/91 Global/Open 8.4(R) 11.17(R)
32.7(I) 11.18(I)
----------------------------------------------------------------------------------------------------------------------------
Global Technology 2/1/00 Global/Open N/A N/A
----------------------------------------------------------------------------------------------------------------------------
Growth 5/16/91 Equity/Open 0.8(R) 13.04(R)
37.7(I) 13.18(I)
----------------------------------------------------------------------------------------------------------------------------
Core Value 5/13/91 Equity/Open 0.5(R) 14.40(R)
60.9(I) 14.43(I)
----------------------------------------------------------------------------------------------------------------------------
High Yield 9/11/96 Fixed Income/Open 22.2(I) 8.74(I)
----------------------------------------------------------------------------------------------------------------------------
Intermediate Maturity Bond 12/31/96 Fixed Income/Open 1.8(R) 9.32(R)
9.4(I) 9.33(I)
----------------------------------------------------------------------------------------------------------------------------
International Equity 5/10/91 Global/Open 3.4(R) 20.41(R)
129.0(I) 20.49(I)
----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond 12/31/96 Fixed Income/Open 2.8(R) 9.78(R)
2.4(I) 9.78(I)
16.3(J) 9.77(J)
----------------------------------------------------------------------------------------------------------------------------
Aggressive Growth 12/31/96 Equity/Open 11.5(R) 36.10(R)
(formerly Mid-Cap Growth) 29.4(I) 36.31(I)
----------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value 12/31/96 Equity/Open 0.3(R) 10.92(R)
4.9(I) 10.93(I)
---------------------------------------------------------------------------------------------------------------------------
Municipal Bond 5/29/91 Fixed Income/Open 8.2(I) 10.56(I)
----------------------------------------------------------------------------------------------------------------------------
Short-Term Bond 8/3/92 Fixed Income/Open 0.6(R) 9.36(R)
28.9(I) 9.36(I)
----------------------------------------------------------------------------------------------------------------------------
Small Cap Growth 12/31/96 Equity/Open 17.9(R) 25.14(R)
145.5(I) 25.31(I)
----------------------------------------------------------------------------------------------------------------------------
Small Cap Value 5/13/91 Equity/Open 81.1(R) 17.11(R)
279.5(I) 17.12(I)
6.3(A) 17.11(A)
----------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities 5/21/91 Fixed Income/Open 14.6(I) 10.00(I)
----------------------------------------------------------------------------------------------------------------------------
Worldwide 5/1/96 Global/Open 0.2(R) 13.29(R)
9.1(I) 13.32(I)
----------------------------------------------------------------------------------------------------------------------------
Emerging Markets 11/9/99 Emerging Markets/Open 3.4(I) 16.36(I)
----------------------------------------------------------------------------------------------------------------------------
Managed Bond 10/1/98 Equity/Open 45.6 9.45
----------------------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES INVESTMENT TRUST
----------------------------------------------------------------------------------------------------------------------------
California Tax-Free Income 6/1/95 Fixed Income/Open 16.5 9.97
----------------------------------------------------------------------------------------------------------------------------
Core Fixed Income 4/24/96 Fixed income/Open 23.5 9.89
----------------------------------------------------------------------------------------------------------------------------
Provident Fund 10/1/95 Equity/Open 20.8 9.42
----------------------------------------------------------------------------------------------------------------------------
Fixed Income 1/17/95 Fixed Income/Open 369.6 11.48
----------------------------------------------------------------------------------------------------------------------------
High Yield Fixed Income 6/5/96 Fixed Income/Open 26.2 8.07
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
Intermediate Duration 1/28/98 Fixed Income/Open 15.8 9.38
----------------------------------------------------------------------------------------------------------------------------
Investment Grade Fixed Income 7/1/94 Fixed Income/Open 146.9 10.82
----------------------------------------------------------------------------------------------------------------------------
Small Company Growth 5/1/99 Equity/Open 55.7 17.94
----------------------------------------------------------------------------------------------------------------------------
Small Company Value 6/30/99 Equity/Open 39.6 9.49
----------------------------------------------------------------------------------------------------------------------------
NVEST FUNDS
----------------------------------------------------------------------------------------------------------------------------
Nvest Balanced 11/27/68 Balanced/Open Cl. A= 153.6 A= 11.35
B= 59.9 B= 11.24
C= 3.8 C= 11.19
Y= 43.6 D= 11.37
----------------------------------------------------------------------------------------------------------------------------
Nvest High Income Fund 2/22/84 Fixed Income/Open Cl. A= 70.2 A= 8.15
B= 68.6 B= 8.15
C= 9.0 C= 8.15
----------------------------------------------------------------------------------------------------------------------------
Nvest International Equity 5/21/92 Global/Open Cl. A= 65.2 A= 24.14
B= 29.2 B= 23.47
C= 1.2 C= 23.55
Y= 13.5 Y= 24.54
----------------------------------------------------------------------------------------------------------------------------
Mvest Star Advisers 7/7/94 Equity/Open Cl. A= 618.6 A= 24.20
B= 740.2 B= 22.84
C= 140.1 C= 22.86
Y= 77.8 Y= 24.78
----------------------------------------------------------------------------------------------------------------------------
Nvest Star Small Cap 12/31/96 Equity/Open Cl. A= 86.7 A= 23.39
B= 104.1 B= 22.80
C= 27.5 C= 22.80
----------------------------------------------------------------------------------------------------------------------------
Nvest Strategic Income 5/1/95 Fixed Income/Open Cl. A= 122.3 A= 11.48
B= 124.8 B= 11.48
C= 39.8 C= 11.47
----------------------------------------------------------------------------------------------------------------------------
Nvest Value 6/5/70 Equity/Open Cl. A= 201.2 A= 7.22
B= 53.9 B= 6.91
C= 3.0 C= 6.91
Y= 9.3 Y= 7.19
----------------------------------------------------------------------------------------------------------------------------
NEW ENGLAND ZENITH FUND
----------------------------------------------------------------------------------------------------------------------------
Balanced 10/31/94 Balanced/Open 179.9 13.45
----------------------------------------------------------------------------------------------------------------------------
Small Cap 5/2/94 Equity/Open 327.3 196.01
----------------------------------------------------------------------------------------------------------------------------
UNRELATED FUNDS
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
Manager's Bond 5/84 Fixed Income/Open 34.0 21.44
----------------------------------------------------------------------------------------------------------------------------
Maxim Small-Cap Aggressive Growth 11/1/94 Equity/Open 83.8 1.28
----------------------------------------------------------------------------------------------------------------------------
Maxim Corporate Bond 11/1/94 Fixed Income/Open 186.4 1.06
----------------------------------------------------------------------------------------------------------------------------
Metropolitan High Yield Bond 3/97 Fixed Income/Open 63.2 9.15
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(J) Miscellaneous
1. Election and Removal of Directors
Directors of the General Partner of the Investment Management
Company are elected to office or removed from office by vote of either
stockholders or directors, in accordance with the By-Laws of the
General Partner of Investment Management Company.
2. Results of operations
Officers of the General Partner of the Investment Management
Company are elected by the Board of Directors. The Board of Directors
may remove any officer without cause.
3. Supervision by SEC of Changes in Directors and Certain
Officers Loomis Sayles files certain reports with the SEC
in accordance with Sections 203 and 204 of the Investment
Advisers Act of 1940, which reports list and provide certain
information relating to directors and officers of Investment
Management Company.
4. Amendment to the Agreement of Limited Partnership of
Investment Management Company, Articles of Organization and
By-Laws of its General Partner, Transfer of Business and Other
Important Matters.
5. Litigation, etc.
On March 26, 1999, the United States District Court for the
Middle District of California, Western Division issued Findings of Fact
and Conclusions of Law in a suit captioned CALIFORNIA IRONWORKERS FIELD
PENSION TRUST, ET. AL. VS. LOOMIS, SAYLES & COMPANY, L.P., ET. AL. (Case
No. CV-96-4036-CAS (Jgx)). The defendants in the case were Loomis Sayles
& Company, L.P. and its general partner, Loomis Sayles & Company,
Incorporated (collectively, "Loomis Sayles"). The plaintiffs in the case
included three of Loomis Sayles' investment advisory clients - a pension
plan, annuity plan and health & welfare plan for the California
Ironworkers. The plaintiffs sought recovery for losses resulting from
investment in inverse floaters, a form of collateralized mortgage
obligation ("CMO"), during the 1992 to 1994 period.
The Court held that Loomis Sayles did not act in bad faith,
did not engage in intentionally wrongful conduct, did not breach its
duty of loyalty to its clients, and did not violate any express
investment guidelines for any of the three plans. The Court also found
that Loomis Sayles had exercised "procedural due care" (i.e., had
conducted an appropriate analysis of the investments) in purchasing the
inverse floaters and that
<PAGE>
Loomis Sayles' inclusion of three types of securities in the three
plans' accounts was not PER SE inappropriate. The Court went on to
find that Loomis Sayles did not breach its duty of care with respect
to the pension and annuity plans in any fashion and managed those assets
prudently. However, the Court held that even though the health & welfare
plan's guidelines specifically authorized the use of CMOs and the use of
inverse floaters was not inappropriate for that account PER SE, Loomis
Sayles had been imprudent under the standards of Section 404(a)(1)(B) of
the Employment Retirement Income Security Act of 1974, as amended, in
that too high a percentage of than plan's assets had been invested in
inverse floaters, given that plan's inherently conservative investment
objectives. The Court reached this result even though the health &
welfare plan would not have suffered any losses if the inverse floaters
had been held to the date of the trial rather than being sold in 1995
and even though a party other than Loomis Sayles made the decision to
sell the inverse floaters. The Court's decision does not have a material
adverse effect on Loomis Sayles' financial condition. Both parties are
currently appealing the Court's decision.
<PAGE>
III. OUTLINE OF THE OTHER RELATED COMPANIES
(A) State Street Bank and Trust Company (the Transfer Agent, Shareholder
Service Agent, Dividend Paying Agent and Custodian)
(1) Amount of Capital
U.S.$5.9 trillion as of the end of January, 2000
(2) Description of Business
State Street Bank and Trust Company, 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.
(3) Outline of Business Relationship with the Fund
State Street Bank and Trust Company provides transfer
agent services, shareholder services, dividend paying services
and custody services to the Fund.
(B) Loomis Sayles Distributors, L.P. (the Distributor)
(1) Amount of Capital
U.S.$634,000 as of the end of January, 2000
(2) Description of Business
Under an agreement with the Trust (the "Distribution
Agreement"), Loomis Sayles Distributors, L.P. serves as the
general distributor 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 of printing and
mailing prospectuses to persons other than shareholders. The
Fund pays the cost of registering and qualifying their shares
under state and federal securities laws and the distribution
of prospectuses to existing shareholders.
The Fund has adopted a Service and Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act (the "Plan")
under which the Fund pays the Distributor, a subsidiary of
Loomis Sayles, a monthly service fee at an annual rate not to
exceed 0.25% of the Fund's average net assets and a
<PAGE>
monthly distribution fee at an annual rate not to exceed
0.50% of the Fund's average net assets. Pursuant to Rule 12b-1
under the 1940 Act, the Plan (together with the Distribution
Agreement) was approved by the board of trustees, including a
majority of the trustees who are not interested persons of the
Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operations of the Plan or
the Distribution Agreement (the "Independent Trustees").
The Plan may be terminated by vote of a majority of
the Independent Trustees, or by vote of a majority of the
outstanding voting securities of the Fund. The Plan may be
amended by vote of the trustees, including a majority of the
Independent Trustees, cast in person at a meeting called for
the purpose. The Trust's trustees review quarterly written
reports of such costs and the purposes for which such costs
have been incurred. The Plan provides that, for so long as
that Plan is in effect, selection and nomination of those
trustees who are not interested persons of the Trust shall be
committed to the discretion of such disinterested persons.
The Distribution Agreement may be terminated at all
time with respect to the Fund on 60 days' written notice
without payment of any penalty by the Trust or by vote of
majority of the outstanding voting securities of the Fund or
by vote of a majority of the Independent Trustees.
The Distribution Agreement and the Plan 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 purposes.
(3) Outline of Business Relationship with the Fund
Loomis Sayles Distributors, L.P. engages in providing
marketing services to the Fund.
(C) Kokusai Securities Co., Ltd. (Distributor in Japan and Agent Company)
(1) Amount of Capital
(Y)55.6 billion as of the end of January, 2000
(2) Description of Business
Kokusai Securities Co., Ltd. is a diversified securities company in
Japan. It engages in the handling of the sale and repurchase of Units
of the Fund in respect of the investment trusts issued by Kokusai
Investment Trust Management Co., Ltd. and engages in selling and
repurchasing, as a Distribution and Repurchase Company and as an Agent
Company, of Units of foreign investment trusts, namely International
<PAGE>
Bond Index Fund, Fidelity Special Growth Fund, ACM International
Healthcare Fund, European and Asian Fund, ACM Global Growth Trend
Portfolio, Evergreen Small Company Growth Fund, Evergreen Global
Opportunities Fund, Fresh Korea Fund, Putnam High Yield Advantage Fund,
Putnam US Government Income Fund, Super Fenix Fund, Salomon Euro Bond
Fund, Loomis Sayles Managed Bond Fund and Super Fenix Fund II and as
the Underwriting Company for AGF Growth Equity Fund, G.T. Investment
Fund, Sci/Tech ASA Fund and Morgan Stanley Money Market Family.
(3) The Company acts as a Distributor in Japan and Agent Company for the
Fund in connection with the offering of shares in Japan.
(D) Capital Relationships N/A.
(E) Interlocking Directors and Auditors
Names and functions of officers of the Fund who also are
officers of the related companies are as follows:
<TABLE>
<CAPTION>
(as of the end of January,2000)
------------------------------------------------------------------------------------------------------
Transfer Agent
Name of Investment and
Officer or Management Shareholder
Trustee Trust Company Service Agent
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Daniel J. Fuss President & Trustee Vice Chairman and Director None
------------------------------------------------------------------------------------------------------
Sheila M. Barry Secretary and Assistant General Councel None
Compliance Officer & Vice President
------------------------------------------------------------------------------------------------------
Robert J. Blanding Executive Vice President Executive Vice President. None
President, Chairman,
Director & Chief Executive
Officer
------------------------------------------------------------------------------------------------------
Mark W. Holland Treasurer Vice President-Chief Financial None
Officer and Director
------------------------------------------------------------------------------------------------------
Dawn Alston Paige Vice President Vice President None
------------------------------------------------------------------------------------------------------
Mark Baribeau Vice President Vice President None
------------------------------------------------------------------------------------------------------
James C. Carroll Vice President Vice President None
------------------------------------------------------------------------------------------------------
E. John deBeer Vice President Vice President None
------------------------------------------------------------------------------------------------------
William H. Elgen Jr. Vice President Vice President None
------------------------------------------------------------------------------------------------------
<PAGE>
Christopher R. Ely Vice President Vice President None
------------------------------------------------------------------------------------------------------
Quentin P. Faulker Vice President Vice President None
------------------------------------------------------------------------------------------------------
Philip C. Fine Vice President Vice President None
------------------------------------------------------------------------------------------------------
Kathleen C. Gaffney Vice President Vice President None
------------------------------------------------------------------------------------------------------
Isaac Green Vice President Vice President and Director None
------------------------------------------------------------------------------------------------------
Martha F. Hodgman Vice President Vice President None
------------------------------------------------------------------------------------------------------
John Hyll Vice President Vice President None
------------------------------------------------------------------------------------------------------
Jeffrey L. Mcade Vice President Executive Vice President, Chief None
Operating Officer & Director,
Clerk
------------------------------------------------------------------------------------------------------
Eswar Menon Vice President Vice President None
------------------------------------------------------------------------------------------------------
Alex Muromcew Vice President Vice President None
------------------------------------------------------------------------------------------------------
Philip R. Murray Assistant Treasurer Vice President and Treasurer None
------------------------------------------------------------------------------------------------------
Kent P. Newmark Vice President Managing Partner, Vice President None
& Director
------------------------------------------------------------------------------------------------------
Bruce G. Picard Vice President Vice President None
------------------------------------------------------------------------------------------------------
Lauren B. Pitalis Vice President Vice President None
------------------------------------------------------------------------------------------------------
David L. Smith Vice President Vice President None
------------------------------------------------------------------------------------------------------
Sandra P. Tichenor Vice President General Counsel, Executive None
Vice President, Secretary and
Director
------------------------------------------------------------------------------------------------------
John Tribolet Vice President Vice President None
------------------------------------------------------------------------------------------------------
Jeffrey W. Wardlow Vice President Vice President None
------------------------------------------------------------------------------------------------------
Gregg D. Watkins Vice President Vice President None
------------------------------------------------------------------------------------------------------
Anthony J. Wilkins Vice President Executive Vice President and None
Director
------------------------------------------------------------------------------------------------------
Pamela Czekanski Vice President Vice President None
------------------------------------------------------------------------------------------------------
Joseph R. Gatz Vice President Vice President None
------------------------------------------------------------------------------------------------------
<PAGE>
Dean A. Gulis Vice President Vice President None
------------------------------------------------------------------------------------------------------
Richard Skaggs Vice President Vice President None
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
IV. FINANCIAL CONDITION OF THE FUND
1. [The audited financial statements of the Fund and its Japanese
translation are attached hereto.]
2. Conditions of the Fund
(a) Statement of Net Assets
<TABLE>
---------------------------------------------------------------------------------------------------------
(As of the end of January 2000)
---------------------------------------------------------------------------------------------------------
U.S.$ Japanese Yen
---------------------------------------------------------------------------------------------------------
(in thousands except
column e.)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
a. Total Asset 50,978,422.46 5,454,691
---------------------------------------------------------------------------------------------------------
b. Total Liabilities 5,339,663.23 571,344
---------------------------------------------------------------------------------------------------------
c. Total Net Assets 45,638,759.23 4,883,347
---------------------------------------------------------------------------------------------------------
(a-b)
---------------------------------------------------------------------------------------------------------
d. Total Number of Units 4,827,450.00
---------------------------------------------------------------------------------------------------------
Outstanding
---------------------------------------------------------------------------------------------------------
e. Net Asset Value 9.45 1,011
---------------------------------------------------------------------------------------------------------
per Unit (c/d)
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
(b) Names of Major Portfolio Eqiuty Shares
Not applicable.
<PAGE>
Top30-1
<PAGE>
Top30-2
<PAGE>
V. FINANCIAL CONDITION OF THE INVESTMENT MANAGEMENT COMPANY
[Omitted in this translation.]
VI. SUMMARY OF INFORMATION CONCERNING FOREIGN INVESTMENT TRUST
SECURITIES
1. Transfer of the Shares
The transfer agent for the registered share certificates is
State Street Bank and Trust Company, Boston, Massachusetts 02102,
U. S. A.
The Japanese investors who entrust the custody of their shares
to a Sales and Sales Handling Company shall have their shares
transferred under the responsibility of such company, and the other
investors shall make their own arrangements.
No fee is chargeable for the transfer of shares.
2. The Closing Period of the Shareholders' Book
For the purpose of determining the shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a time, which
shall be not more than 90 days before the date of any meeting of
shareholders or the date for the payment of any dividend or of any
other distribution, as the record date for determining the shareholders
having the right to notice of and to vote at such meeting and any
adjournment thereof or the right to receive such dividend or
distribution, and in such case only shareholders of record on such
record date shall have such right notwithstanding any transfer of
shares on the books of the Trust after the record date; or without
fixing such record date the Trustees may for any of such purposes close
the register or transfer books for all or any part of such period.
3. There are no annual shareholders' meetings. Special shareholders'
meeting may be held from time to time as required by the Declaration of
Trust and the Investment Company Act of 1940.
4. No special privilege is granted to Shareholders.
The acquisition of Shares by any person may be restricted.
<PAGE>
VII. REFERENCIAL INFORMATION
As to the Fund, following documents have been filed with the Kanto Local Finance
Bureau of the Ministry of Finance of Japan.
September 4, 1998 Securities Registration Statement.
September 10, 1998 Amendment to the Securities Registration Statement
September 14, 1998 Amendment to the Securities Registration Statement
September 16, 1998 Amendment to the Securities Registration Statement
December 1, 1998 Amendment to the Securities Registration Statement
March 16, 1999 Securities Registration Statement
March 26, 1999 Amendment to the Securities Registration Statement
June 30, 1999 Semi-annual Report (1st)/Amendment to the SRS
<PAGE>
AMENDMENT TO THE
SECURITIES REGISTRATION STATEMENT
LOOMIS SAYLES FUNDS - LOOMIS SAYLES MANAGED BOND FUND
(2339)
<PAGE>
AMENDMENT TO THE SECURITIES REGISTRATION STATEMENT
<TABLE>
<S> <C> <C> <C>
To: Director of the Kanto
Local Finance Bureau
Filing Date: 17th March 2000
Amendment Date 28th March 2000
</TABLE>
Name of the Registrant Trust: LOOMIS SAYLES FUNDS
Name and Official Title of: Jeffery L. Meade
the Representative Vice President of the Trust
Address of Principal Office: One Financial Center
Boston, Massachusetts 02111
U. S. A.
Name and Title of Registration Agent: Harume Nakano
Attorney-at-Law
Signature [Harume Nakano]
--------------------------
(Seal)
Ken Miura
Attorney-at-Law
Signature [Ken Miura]
--------------------------
(Seal)
Address or Place of Business Kasumigaseki Building,
25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Name of Liaison Contact: Harume Nakano
Ken Miura
Hikaru Kaieda
Attorneys-at-Law
Place of Liaison Contact: Hamada & Matsumoto
Kasumigaseki Building,
25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Phone Number: 03-3580-3377
<PAGE>
PUBLIC OFFERING OR SALE FOR REGISTRATION
Name of the Fund Making Public LOOMIS SAYLES MANAGED BOND FUND
Offering or Sale of Foreign
Investment Fund Securities:
Type and Aggregate Amount of Shares of a series of a diversified
Foreign Investment Fund Securities open-end management investment
to be Publicly Offered or Sold: company organized as a Massachusetts
business trust;
Up to 82,100,000 shares
Up to the amount derived by
multiplying 82,100,000 by
the respective applicable
issue prices (the estimated
maximum amount is 859.587
million dollars (approximately
92 billion yen))
Note 1: U.S.$ amount is translated into Japanese Yen at the rate of
U.S.$l.00=(Y)107.00 the mean of the exchange rate quotations by The
Bank of Tokyo-Mitsubishi, Ltd. for buying and selling spot dollars by
telegraphic transfer against yen on 31st January, 2000.
Note 2: The estimated maximum amount is an amount calculated by
multiplying the Net Asset Value per Share as of the end of January,
2000 ($ 10.47) by 82,100,000, for convenience.
PLACES WHERE A COPY OF THIS AMENDMENT TO THE SECURITIES REGISTRATION
STATEMENT IS AVAILABLE FOR PUBLIC INSPECTION
Not applicable.
(Total number of pages of this Amendment to the Securities Registration
Statement in Japanese is 2 including front and back pages.)
<PAGE>
I. REASON FOR FILING THIS AMENDMENT TO SECURITIES REGISTRATION
STATEMENT:
This statement purports to amend and of the Securities
Registration Statement ("SRS") filed on 16 March 1999 (amended in
accordance with the Amendments to the SRS filed on 26th March 1999)
due to the fact that the aforementioned Annual Securities Report
was filed today.
The exchange rates used in this statement to translate the
amended amounts of foreign currencies are different from those used
before these amendments, as the latest exchange rates are used in
this statement.
II. CONTENTS OF THE AMENDMENTS
PART II. INFORMATION CONCERNING ISSUER (page 3 of the
original SRS)
The following matters in the original Japanese SRS are
amended to have the same contents as those provided in the
following items of the aforementioned Annual Securities Report:
<TABLE>
<CAPTION>
BEFORE AMENDMENT AFTER AMENDMENT
[Original Japanese SRS] [Aforementioned Annual Securities Report]
<S> <C>
I. DESCRIPTION OF THE FUND I. DESCRIPTION OF THE FUND (the aforementioned
Japanese Annual Securities Report, from page 1
to page 32)
II. OUTLINE OF THE TRUST II. OUTLINE OF THE TRUST
(Ditto, from page 33 to page 47)
III. OUTLINE OF THE OTHER III. OUTLINE OF THE OTHER
RELATED COMPANIES RELATED COMPANIES
(Ditto, from page 48 to page 50)
IV. FINANCIAL CONDITIONS OF IV. FINANCIAL CONDITIONS OF
THE FUND THE FUND
(Ditto, from page 51 to page 82)
V. OUTLINE OF PROCEDURES OF VI. OUTLINE OF PROCEDURES OF
EXERCISE OF RIGHTS OF FOREIGN EXERCISE OF RIGHTS OF
INVESTMENT FUND SECURITIES FOREIGN INVESTMENT FUND SECURITIES (Ditto, page
119)
</TABLE>
<PAGE>
Note 1: Dollar amount is translated for convenience at the rate of
$1.00=(Y)107.00 (the mean of the exchange rate quotations by
The Bank of Tokyo-Mitsubishi, Ltd. for buying and selling
spot dollars by telegraphic transfer against yen on 31st
January, 2000). The same applies hereinafter.
Note 2: In this document, money amounts and percentages have been
rounded to the nearest units digits. Therefore, there are
cases in which the amount of the "total column" is not equal
to the aggregate amount. Also, translation into yen is made
simply by multiplying the corresponding amount by the
conversion rate specified and rounded when necessary.
Note 3: In this Report, "fiscal year" refers to a year from 1st
October to 30th September. The first fiscal year refers to
the period from 1st October 1998 (the date of commencement of
the Fund's operation) to 30th September, 1999.
Section VI. Miscellaneous in the original SRS (page 59 of the original SRS) is
amended as follows:
1. (1) The ornamental design is used in cover page of the
Japanese Prospectus.
(2) Summarized Preliminary Prospectus will be used.
Attached document (Summarized Preliminary Prospectus) will be
used pursuant to the below, as the document (Summarized
Preliminary Prospectus) as set forth at Item 1.(1)(b), of
Article 12 of the Ordinance Concerning the Disclosure of the
Content, etc. of the Specified Securities.
(i) The summarized Preliminary Prospectus may be
used as letters, pamphlets, direct-mails post-cards,
letters), etc., and may be published in newspapers,
magazines, books, internet, etc.
(ii) The summarized Preliminary Prospectus may be,
depending on the media types, modified as to its
lay-out, kinds of paper, printed-color, design, etc.
In addition, photographs and illustrations attached
may be added thereto.
(iii) For information of the Fund's achievements, the
changes of the net asset value per share and the
fluctuation rates since the establishment of the Fund
or for the latest 3 months, 6 months, one year, two
years, three years or five years may be set out in
the figures or graphs, compared to the recognized
bond index from time to time. Such information
regarding the Fund's achievement may be converted
into and presented in yen.
2. As to the Fund, following documents have been filed with the Kanto Local
Finance
<PAGE>
Bureau of the Ministry of Finance of Japan.
<TABLE>
<S> <C>
September 4, 1998 Securities Registration Statement.
September 10, 1998 Amendment to the Securities Registration Statement
September 14, 1998 Amendment to the Securities Registration Statement
September 16, 1998 Amendment to the Securities Registration Statement
December 1, 1998 Amendment to the Securities Registration
Statement
March 16, 1999 Securities Registration Statement
March 26, 1999 Amendment to the Securities Registration Statement
June 30, 1999 Semi-annual Report (1st)/Amendment to the SRS
</TABLE>
PART III. SPECIAL INFORMATION (page 60 of the original SRS)
The following matter in the original Japanese SRS is amended to
have the same content as that provided in the following item of the
aforementioned Annual Securities Report:
<TABLE>
<CAPTION>
BEFORE AMENDMENT AFTER AMENDMENT
[Original Japanese SRS] [Aforementioned Annual Securities Report]
<S> <C>
II. FINANCIAL CONDITIONS OF THE V. FINANCIAL CONDITIONS OF THE
INVESTMENT MANAGEMENT INVESTMENT MANAGEMENT
COMPANY COMPANY
(Ditto, from page 83 to page 118)
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