LOOMIS SAYLES FUNDS, 497, 2000-02-04

LOOMIS SAYLES FUNDS
497, 2000-02-04

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<PAGE>

PROSPECTUS
[LOGO] FEBRUARY 1, 2000
FIXED INCOME FUNDS

LOOMIS SAYLES BOND FUND
LOOMIS SAYLES GLOBAL BOND FUND
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
LOOMIS SAYLES MUNICIPAL BOND FUND
LOOMIS SAYLES SHORT-TERM BOND FUND
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND

Loomis, Sayles & Company, L.P., which has been an investment adviser since 1926,
is the investment adviser of the Funds.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIME.
<PAGE>

TABLE OF CONTENTS

<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles Bond Fund 2
Loomis Sayles Global Bond Fund 4
Loomis Sayles Intermediate Maturity Bond Fund 6
Loomis Sayles Investment Grade Bond Fund 8
Loomis Sayles Municipal Bond Fund 10
Loomis Sayles Short-Term Bond Fund 12
Loomis Sayles U.S. Government Securities Fund 14
Summary of Principal Risks 16

EXPENSES OF THE FUNDS 20

MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS
AND RISK CONSIDERATIONS 22

MANAGEMENT 32
Investment Adviser 32
Portfolio Managers 32
Service and Distribution Plans and Administrative and
Other Fees 33

GENERAL INFORMATION 34
Pricing 34
How to Purchase Shares 34
How to Redeem Shares 36
How to Exchange Shares 38
Dividends and Distributions 38
Tax Consequences Applicable to All Funds 39

FINANCIAL HIGHLIGHTS 40

APPENDIX A 54
</TABLE>

<PAGE>
RISK/RETURN SUMMARY

GENERAL INFORMATION

The following is a summary of certain key information about the Loomis Sayles
Fixed Income Funds. You will find additional information about each Fund,
including a detailed description of the risks of an investment in each Fund,
after this summary.

This Risk/Return summary describes the Funds' objectives, principal investment
strategies, principal risks, and performance. The summary for each Fund includes
a short discussion of some of the principal risks of investing in each Fund. A
further discussion of these and other principal risks begins after this summary.

More detailed descriptions of the Funds, including some of the additional risks
associated with investing in the Funds, can be found further back in this
Prospectus after the Summary of Principal Risks. Please be sure to read this
additional information before you invest.

The Risk/Return summary includes bar charts showing each Fund's annual returns
and tables showing each Fund's average annual returns. The bar charts and tables
provide an indication of the historical risk of an investment in each Fund by
showing:
- - how the Fund's performance varied from year to year over the life of the Fund;
and
- - how the Fund's average annual returns for one year, five years, and over the
life of the Fund compared to those of a broad-based securities market index.

A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future.

You can lose money by investing in a Fund. A Fund may not achieve its objective
and is not intended to be a complete investment program. An investment in a 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.

LOOMIS SAYLES FUNDS 1
<PAGE>
LOOMIS SAYLES BOND FUND

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 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 foreign securities, including emerging
markets 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, real estate investment trusts, 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);
<PAGE>
- - 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 year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 10.7% (SECOND QUARTER, 1995), AND THE
FUND'S WORST QUARTER WAS DOWN 5.0% (THIRD QUARTER, 1998).

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 your comparison of the Fund's performance to a
broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/16/91)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
LOOMIS SAYLES BOND FUND
Institutional Class 4.5% 12.4% 11.8%
Retail Class 4.2% 12.1% 11.5%
Admin Class 4.1% 11.9% 11.3%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -2.2% 7.6% 7.4%(1)
</TABLE>

FOR PERIODS BEFORE THE INCEPTION OF RETAIL CLASS SHARES (DECEMBER 31, 1996) AND
ADMIN CLASS SHARES
(JANUARY 2, 1998), PERFORMANCE SHOWN FOR THOSE CLASSES IS BASED ON THE
PERFORMANCE OF THE FUND'S INSTITUTIONAL CLASS SHARES, ADJUSTED TO REFLECT THE
HIGHER FEES PAID BY RETAIL CLASS AND ADMIN CLASS SHARES. 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.

LOOMIS SAYLES FUNDS 3
<PAGE>
LOOMIS SAYLES GLOBAL BOND FUND

INVESTMENT OBJECTIVE The Fund's investment objective is high total investment
return through a combination of high current income and capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in investment grade
fixed income securities worldwide, although it may invest up to 20% of its
assets in lower rated fixed income securities ("junk bonds"). Securities held by
the Fund may be denominated in any currency and may be from issuers located in
countries with emerging securities markets. 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 stability and volatility of a country's bond markets, the
financial strength of the issuer, current interest rates, and Loomis Sayles'
expectations regarding general trends in interest rates.

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, Loomis Sayles analyzes political,
economic, and other fundamental factors and combines this analysis with a
comparison of the yield 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. Third, if a security that is believed
to be attractive is denominated in a foreign currency, Loomis Sayles analyzes
whether to accept or to hedge the currency risk.

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, 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:
- - foreign risk (the risk that the value of the Fund's foreign investments will
fall as a result of foreign political, social, or economic changes);
- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);
- - 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).
<PAGE>
Because the Fund may invest in emerging markets and developing countries, the
Fund's returns may be significantly more volatile and may differ substantially
from returns in U.S. fixed income securities markets. Your investment in the
Fund also faces the risk that market changes or other factors affecting emerging
markets and developing countries, including political instability and
unpredictable economic conditions, may have a significant effect on the Fund's
net asset value.

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 9.7% (FOURTH QUARTER, 1998), AND THE
FUND'S WORST QUARTER WAS DOWN 6.3% (SECOND QUARTER, 1994).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Saloman Brothers World Government Bond Index, an index that tracks the
performance of a broad range of fixed income securities issued by national
governments of various countries. The index is unmanaged, has no operating
costs, and is included in the table to facilitate your comparison of the Fund's
performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/10/91)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES GLOBAL BOND FUND
Institutional Class 3.8% 10.9% 8.8%
Retail Class 3.6% 10.7% 8.7%
SALOMAN BROTHERS WORLD GOVERNMENT BOND INDEX -4.3% 6.4% 8.0%(1)
</TABLE>

FOR PERIODS BEFORE THE INCEPTION OF RETAIL CLASS SHARES (DECEMBER 31, 1996),
PERFORMANCE SHOWN FOR THE RETAIL CLASS IS BASED ON THE PERFORMANCE OF THE FUND'S
INSTITUTIONAL CLASS SHARES, ADJUSTED TO REFLECT THE HIGHER FEES PAID BY RETAIL
CLASS SHARES. 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.

LOOMIS SAYLES FUNDS 5
<PAGE>
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND

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 generally invests at least 90% of its
assets in investment grade fixed income securities that have an average maturity
of between three and ten years, although it may invest up to 10% of its assets
in lower rated fixed income securities ("junk bonds").

In deciding which securities to buy and sell, Loomis Sayles will consider, among
other things, the financial strength of the issuer, current interest rates, and
comparisons of the level of risk associated with particular investments with
Loomis Sayles' expectations concerning the potential return of those
investments.

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 Canadian securities and up to
20% of its assets in other foreign securities, including emerging markets
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, collateralized mortgage obligations,
asset-backed securities, when-issued securities, real estate investment trusts,
Rule 144A securities, repurchase agreements, and convertible securities. The
Fund may engage in options and futures transactions, foreign currency hedging
transactions, swap transactions, and securities lending.

PRINCIPAL RISKS Among the principal risks of investing in the Fund are in 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
<PAGE>
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses.

Interest rate risk generally is greater for funds that invest in fixed income
securities with relatively long maturities, such as this Fund, than for funds
that invest in fixed income securities with shorter maturities, such as the
Loomis Sayles Short-Term Bond Fund.

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 3.5% (SECOND QUARTER, 1997), AND THE
FUND'S WORST QUARTER WAS DOWN 0.2% (THIRD QUARTER, 1998).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Lehman Brothers Government/Corporate Intermediate Bond Index, an index that
tracks the performance of government and corporate fixed income securities with
an average maturity of one to ten years. The index is unmanaged, has no
operating costs, and is included in the table to facilitate your comparison of
the Fund's performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------------
Since
Inception
1 Year (12/31/96)
<S> <C> <C>
- --------------------------------------------------------------------------------------
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
Institutional Class 3.9% 4.8%
Retail Class 3.7% 4.5%
LEHMAN BROTHERS GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX 0.4% 5.5%
</TABLE>

LOOMIS SAYLES FUNDS 7
<PAGE>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND

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 10% 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, the Fund will consider, among
other things, the financial strength of the issuer, current interest rates,
Loomis Sayles' expectations regarding future changes in interest rates, and
comparisons of the level of risk associated with particular investments with
Loomis Sayles' expectations concerning the potential return of those
investments.

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 securities of other foreign issuers, including
emerging markets securities.

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);
- - 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).
<PAGE>
Interest rate risk generally is greater for funds, such as this Fund, that
invest in fixed income securities with relatively long maturities than for funds
that invest in fixed income securities with shorter maturities, such as the
Loomis Sayles Short-Term Bond Fund.

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 6.6% (SECOND QUARTER, 1997), AND THE
FUND'S WORST QUARTER WAS DOWN 3.3% (THIRD QUARTER, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------
Since
Inception
1 Year (12/31/96)
<S> <C> <C>
- --------------------------------------------------------------------------------------------
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Institutional Class 3.9% 7.1%
Retail Class 3.7% 6.8%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -2.2% 5.5%
</TABLE>

LOOMIS SAYLES FUNDS 9
<PAGE>
LOOMIS SAYLES MUNICIPAL BOND FUND

INVESTMENT OBJECTIVE The Fund's investment objective is as high a level of
current income exempt from federal income tax as is consistent with the
preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in investment grade
fixed income securities the income from which, in the opinion of issuer's
counsel at the time of issuance, is exempt from federal income tax ("tax-exempt
securities"). It is a fundamental policy of the Fund that, during periods of
normal market conditions, at least 80% of its assets will be invested in
tax-exempt securities. The remainder of the Fund's assets may be invested in
securities the income from which is not exempt from federal income tax. The Fund
may invest up to 25% of its assets in lower rated fixed income securities ("junk
bonds"). 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, current interest rates,
Loomis Sayles' expectations regarding general trends in interest rates, and
comparisons of the level of risk associated with particular investments with
Loomis Sayles' expectations concerning the potential return of those
investments.

Loomis Sayles generally prefers securities that are protected against calls
(early redemption by the issuer).

The Fund may engage in options and futures transactions. The Fund also may
invest in private activity bonds, which pay interest that, although exempt from
ordinary federal income taxes, may be subject to federal or state alternative
minimum taxes. The Fund's investments in private activity bonds normally will
not exceed 20% of its net assets.

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);
- - tax risk (the risk that some or all of the interest the Fund receives might be
or become taxable); and
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).

Interest rate risk generally is greater for funds, such as this Fund, that
invest in fixed income securities with relatively long maturities than for funds
that invest in fixed income securities with shorter maturities, such as the
Loomis Sayles Short-Term Bond Fund.
<PAGE>
BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 6.6% (FIRST QUARTER, 1995), AND THE FUND'S
WORST QUARTER WAS DOWN 5.5% (FIRST QUARTER, 1994).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Lehman Brothers Municipal Bond Index, an index that tracks the performance
of a broad range of municipal fixed income securities. The index is unmanaged,
has no operating costs, and is included in the table to facilitate your
comparison of the Fund's performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/29/91)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
LOOMIS SAYLES MUNICIPAL BOND FUND
Institutional Class -4.0% 6.2% 6.2%
LEHMAN BROTHERS MUNICIPAL BOND INDEX -2.1% 6.9% 6.6%(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.
LOOMIS SAYLES FUNDS 11
<PAGE>
LOOMIS SAYLES SHORT-TERM BOND FUND

INVESTMENT OBJECTIVE
The Fund's investment objective is high total investment return through a
combination of current income and capital appreciation with relatively low
fluctuation in net asset value.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in investment grade
fixed income securities, although it may invest up to 20% of its assets in lower
rated fixed income securities ("junk bonds") and up to 20% of its assets in non-
convertible preferred stock. The Fund generally maintains an average dollar-
weighted maturity of between one and three years.

Loomis Sayles generally prefers securities that are protected against calls
(early redemption by the issuer).

The Fund may invest up to 20% of its assets in securities of foreign issuers,
including emerging markets 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, collateralized mortgage obligations,
asset-backed securities, when-issued securities, real estate investment trusts,
Rule 144A securities, repurchase agreements, and convertible securities. The
Fund may engage in options and futures transactions, foreign currency hedging
transactions, and swap transactions.

The Fund also faces the risk that fixed income securities with shorter
durations, such as those typically held by the Fund, often produce lower returns
than fixed income securities with longer durations.

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 3.5% (THIRD QUARTER, 1998), AND THE FUND'S
WORST QUARTER WAS DOWN 0.5% (FIRST QUARTER, 1994).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Lehman Brothers 1-3 Year Government/Corporate Bond Index, an index that
tracks the performance of government and corporate fixed income securities with
maturities of between one and three years. The index is unmanaged, has no
operating costs, and is included in the table to facilitate your comparison of
the Fund's performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (8/3/92)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES SHORT-TERM BOND FUND
Institutional Class 2.0% 6.2% 5.5%
Retail Class 1.8% 6.0% 5.4%
LEHMAN BROTHERS 1-3 YEAR
GOVERNMENT/CORPORATE BOND INDEX 3.2% 6.6% 5.4%(1)
</TABLE>

- ---------------------------

(1)Since inception data for the index covers the period from the month-end
following the Fund's inception date through December 31, 1999.

LOOMIS SAYLES FUNDS 13
<PAGE>
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND

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 generally invests substantially all of
its assets in U.S. Government securities and in certificates representing
undivided interests in the interest or principal of U.S. Treasury securities.
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, Loomis Sayles' expectations regarding general trends in interest
rates and comparisons of the level of risk associated with particular
investments with Loomis Sayles' expectations concerning the potential return on
those investments.

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);
- - 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).

In addition, the Fund's portfolio is not as diversified as some of the other
Funds' portfolios, which means that the Fund generally invests more of its
assets in a smaller number of issuers. As a result, changes in the value of a
single security may have a more significant effect on the Fund's net asset
value.
<PAGE>
BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 7.3% (SECOND QUARTER, 1995), AND THE
FUND'S WORST QUARTER WAS DOWN 5.2% (FIRST QUARTER, 1994).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Lehman Brothers Government Bond Index, an index that tracks the performance
of a broad range of fixed income securities issued by the U.S. Government and
its agencies or instrumentalities. The index is unmanaged, has no operating
costs, and is included in the table to facilitate your comparison of the Fund's
performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/21/91)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND
Institutional Class -4.5% 8.0% 8.4%
LEHMAN BROTHERS GOVERNMENT BOND INDEX -2.2% 7.4% 7.3%(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.

LOOMIS SAYLES FUNDS 15
<PAGE>
SUMMARY OF PRINCIPAL RISKS

The value of your investment in a 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 a Fund's portfolio as a whole.
Each Fund could be subject to additional principal risks because the types of
investments made by each Fund can change over time.

INTEREST RATE RISK

This is the risk that changes in interest rates will affect the value of a
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 each of the Funds.
Increases in interest rates may cause the value of a 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 Loomis Sayles Bond Fund, the Loomis
Sayles Investment Grade Bond Fund, and the Loomis Sayles U.S. Government
Securities 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, such as the Loomis Sayles Intermediate
Maturity Bond Fund and the Loomis Sayles Investment Grade Bond Fund, than for
funds that invest in fixed income securities with shorter maturities, such as
the Loomis Sayles Short-Term Bond Fund.

Interest rate risk is compounded for funds that invest a significant portion of
their assets in mortgage-related or other asset-backed securities. Except for
the Loomis Sayles Municipal Bond Fund, each Fund may invest in mortgage-related
securities. Except for the Loomis Sayles Municipal Bond Fund and the Loomis
Sayles U.S. Government Securities Fund, each Fund may invest in 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 funds that hold these types of securities must
reinvest assets previously invested in these types of securities in fixed income
securities with lower interest rates.

The Funds also face increased interest rate risk when they invest 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.
<PAGE>
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 funds that typically invest a
significant portion of their assets in lower rated fixed income securities
("junk bonds"). Lower rated fixed income securities generally have speculative
elements or are predominately speculative credit risks.

Funds that invest 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) may
be subject to greater credit risk because of these investments.

Funds that invest a significant portion of their assets in foreign securities,
such as the Loomis Sayles Global Bond Fund, also are subject to increased credit
risk because of the difficulties of requiring foreign entities to honor their
contractual commitments and because a number of foreign governments and other
issuers are already in default.

MARKET RISK

This is the risk that the value of a Fund's investments will change as the
markets for fixed income securities fluctuate and that prices overall may
decline.

FOREIGN RISK

This is the risk associated with investments in issuers located in foreign
countries. A Fund's investments in foreign securities may experience more rapid
and extreme changes in value than investments in securities of U.S. companies.

The securities markets of many foreign countries are relatively small, with a
limited number of issuers and a small number of securities. In addition, foreign
companies often are not subject to the same degree of regulation as U.S.
companies. Reporting, accounting, and auditing standards of foreign 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 a Fund's investments in a foreign
country to decline. In the event of nationalization, expropriation, or other
confiscation, a Fund that invests in foreign securities could lose its entire
investment.

Each of the Funds, except the Loomis Sayles Municipal Bond Fund and the Loomis
Sayles U.S. Government Securities Fund, is subject to foreign risk. Furthermore,
when a Fund invests in securities from issuers located in countries with
emerging securities markets, it may face greater foreign risk since emerging
market countries may be more likely to experience political and economic
instability.

LOOMIS SAYLES FUNDS 17
<PAGE>
CURRENCY RISK

This is the risk that fluctuations in exchange rates between the U.S. dollar and
foreign currencies may cause the value of a Fund's investments to decline. Each
of the Funds, except for the Loomis Sayles Municipal Bond Fund and the Loomis
Sayles U.S. Government Securities Fund, is subject to currency risk because it
may invest in securities denominated in, or receiving revenues in, foreign
currencies.

LEVERAGING RISK

When a 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 each of the Funds, except for the Loomis Sayles U.S.
Government Securities Fund, may create leverage by using investments such as
repurchase agreements, inverse floating rate instruments or derivatives, or by
borrowing money, each Fund faces this risk.

DERIVATIVES RISK

Each Fund, except for the Loomis Sayles U.S. Government Securities 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
Funds may use derivatives as part of a strategy designed to reduce other risks
("hedging"). The Funds 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 a 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 a 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 a Fund's objective and could cause your investment in a Fund to lose
value. Each Fund is subject to management risk because each Fund is actively
managed by Loomis Sayles. Loomis Sayles will apply its investment techniques and
risk analyses in making investment decisions for each Fund, but there can be no
<PAGE>
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 a Fund.

TAX RISK

The Loomis Sayles Municipal Bond Fund is subject to the risk that some or all of
the interest it receives might become taxable by law or be determined by the
Internal Revenue Service (or the relevant state tax authority) to be taxable. In
this event, the value of the Fund's investments would likely fall, and some or
all of the income distributions paid by the Fund might become taxable. In
addition, some or all of the income distributions paid by the Fund may be
subject to Federal alternative minimum income tax.

LOOMIS SAYLES FUNDS 19
<PAGE>

EXPENSES OF THE FUNDS

The following table presents the expenses that you would pay if you buy and hold
shares of a Fund.

None of the Funds imposes a sales charge, a redemption fee, or an exchange fee.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Fee
Distribution Total Annual Waiver/
Management and Service Other Fund Operating Reimburse- Net
Loomis Sayles Fund/Class Fees (12b-1) Fees Expenses Expenses ment** Expenses**
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Bond Fund
Institutional Class .60% none .15% .75% none .75%
Retail Class .60% .25% .19% 1.04% .04% 1.00%
Admin Class .60% .25% 1.53%*** 2.38% 1.13% 1.25%
- ----------------------------------------------------------------------------------------------------
Global Bond Fund
Institutional Class .60% none .50% 1.10% .20% .90%
Retail Class .60% .25% .76% 1.61% .46% 1.15%
- ----------------------------------------------------------------------------------------------------
Intermediate Maturity
Bond Fund
Institutional Class .40% none 1.52% 1.92% 1.37% .55%
Retail Class .40% .25% 3.21% 3.86% 3.06% .80%
- ----------------------------------------------------------------------------------------------------
Investment Grade
Bond Fund
Institutional Class .40% none 2.47% 2.87% 2.32% .55%
Retail Class .40% .25% 2.55% 3.20% 2.40% .80%
- ----------------------------------------------------------------------------------------------------
Municipal Bond Fund
Institutional Class .40%+ none 1.33% 1.73% 1.23%++ .50%
- ----------------------------------------------------------------------------------------------------
Short-Term Bond Fund*
Institutional Class .25% none .62% .87% .37% .50%
Retail Class .25% .25% 3.71% 4.21% 3.46% .75%
- ----------------------------------------------------------------------------------------------------
U.S. Government
Securities Fund
Institutional Class .30% none .73% 1.03% .53% .50%
- ----------------------------------------------------------------------------------------------------
* EXPENSE INFORMATION FOR THE SHORT-TERM BOND FUND HAS BEEN RESTATED TO REFLECT CURRENT FEES.
** REFLECTS LOOMIS SAYLES' CONTRACTUAL OBLIGATION TO LIMIT THE FUNDS' EXPENSES THROUGH FEBRUARY 1,
2001. INSTITUTIONAL CLASS SHARES OF THE BOND FUND ARE CURRENTLY UNAFFECTED BY THIS EXPENSE
LIMITATION.
***OTHER EXPENSES INCLUDE AN ADMINISTRATIVE FEE OF .25% FOR ADMIN CLASS SHARES.
+ LOOMIS SAYLES HAS CONTRACTUALLY AGREED TO REDUCE THE MANAGEMENT FEE FOR THE MUNICIPAL BOND FUND
TO .30% THROUGH FEBRUARY 1, 2001.
++ THIS FIGURE INCLUDES THE EFFECT OF THE REDUCTION OF THE MANAGEMENT FEE DESCRIBED IN THE PREVIOUS
FOOTNOTE.
- ----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
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 you compare the cost of investing in a Fund with the cost of
investing in other mutual funds.

This example makes certain assumptions. It assumes that you invest $10,000 in a
Fund for the time periods shown and then redeem all your shares at the end of
those periods. This example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Please
remember that this example is hypothetical, so that your actual costs and
returns may be higher or lower.

<TABLE>
<CAPTION>
Fund/Class 1 Year* 3 Years* 5 Years* 10 Years*
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Loomis Sayles Bond Fund
Institutional Class $ 77 $240 $ 417 $ 930
Retail Class $102 $327 $ 570 $1,267
Admin Class $127 $634 $1,168 $2,630
- --------------------------------------------------------------------------------
Loomis Sayles Global Bond Fund
Institutional Class $ 92 $330 $587 $1,322
Retail Class $117 $463 $833 $1,872
- --------------------------------------------------------------------------------
Loomis Sayles Intermediate
Maturity Bond Fund
Institutional Class $56 $470 $ 909 $2,132
Retail Class $82 $895 $1,728 $3,893
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade
Bond Fund
Institutional Class $56 $669 $1,307 $3,027
Retail Class $82 $761 $1,464 $3,337
- --------------------------------------------------------------------------------
Loomis Sayles Municipal Bond
Fund
Institutional Class $51 $425 $823 $1,938
- --------------------------------------------------------------------------------
Loomis Sayles Short-Term Bond
Fund
Institutional Class $51 $241 $ 446 $1,038
Retail Class $77 $961 $1,860 $4,170
- --------------------------------------------------------------------------------
Loomis Sayles U.S. Government
Securities Fund
Institutional Class $51 $275 $517 $1,211
- --------------------------------------------------------------------------------
* EXPENSES SHOWN FOR EACH CLASS, EXCEPT THE INSTITUTIONAL CLASS OF THE LOOMIS
SAYLES BOND FUND, INCLUDE THE FEE WAIVER/REIMBURSEMENT FOR THE FIRST YEAR OF
EACH PERIOD.
- --------------------------------------------------------------------------------
</TABLE>

LOOMIS SAYLES FUNDS 21
<PAGE>
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS

This section provides more information on each Fund's investments and risk
considerations. Except for each Fund's investment objective, and any investment
policies that are identified as "fundamental," all of the investment policies
and strategies of each Fund may be changed without a vote of the Fund's
shareholders.

Except where specifically noted elsewhere in this Prospectus, each of the Funds
may use any of the investment strategies described in this section. Some of
these investment strategies are principal investment strategies for the Funds,
while others are secondary investment strategies for the Funds.

TEMPORARY DEFENSIVE STRATEGIES

For temporary defensive purposes, each of the Funds 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. A 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 each Fund. Each 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 your 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 foreign 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 a Fund for any particular
period. The net asset value of a 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 agency must have rated the security in one
of
<PAGE>
its top four rating categories at the time a 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 a 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 a 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.
Achievement of the investment objective of a Fund investing in lower rated
fixed income securities may be more dependent on Loomis Sayles' own credit
analysis than is the case with Funds that invest in higher quality fixed
income securities, such as the Loomis Sayles Investment Grade Bond Fund. 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 Appendix A. A 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 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.

LOOMIS SAYLES FUNDS 23
<PAGE>
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 a
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 Funds 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. A Fund that invests in zero coupon
securities 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 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
<PAGE>
prepaid at any time because the underlying mortgage loans generally may be
prepaid at any time. As a result, if a 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 a 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 a 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 a Fund's ability to buy or sell those securities at any
particular time.

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 a Fund is retired
early, the Fund could lose any premium it paid when it acquired the

LOOMIS SAYLES FUNDS 25
<PAGE>
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, a 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

A when-issued security involves a 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 a Fund commits to buy it and the
payment date, the Fund may sustain a loss. The risk of this loss is in addition
to the Fund's risk of loss on the securities actually in its portfolio at the
time. In addition, when the Fund buys a security on a when-issued basis, it is
subject to the risk that market rates of interest will increase before the time
the security is delivered, with the result that the yield on the security
delivered to the Fund may be lower than the yield available on other, comparable
securities at the time of delivery. If a 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 foreign 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
<PAGE>
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. A 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.

REAL ESTATE INVESTMENT TRUSTS

REITs may have limited financial resources, may trade less frequently and in a
limited volume, and may be subject to more abrupt or erratic price movements
than larger securities. A Fund's investment in a REIT may require the Fund to
accrue and distribute income not yet received or may result in the Fund making
distributions that constitute a return of capital to Fund shareholders for
federal income tax purposes. In addition, distributions by a Fund from REITs
will not qualify for the corporate dividends-received deduction.

RULE 144A SECURITIES

LOOMIS SAYLES FUNDS 27
<PAGE>
FOREIGN SECURITIES

Securities of issuers organized or headquartered outside the United States are
known as foreign securities. Foreign securities may present risks not associated
with investments in comparable securities of U.S. issuers. There may be less
information publicly available about a foreign corporate or government issuer
than about a U.S. issuer, and foreign corporate issuers are generally not
subject to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and securities custody costs are often
higher than in the United States. With respect to certain foreign countries,
there is a possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments that
could affect the value of investments in those countries. A Fund's receipt of
interest on foreign government securities may depend on the availability of tax
or other revenues to satisfy the issuer's obligations.

A Fund's investments in foreign 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 foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities, and delays and disruptions in securities settlement procedures.

Since most foreign securities are denominated in foreign currencies or traded
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of a Fund investing in these
securities may be affected by changes in currency exchange rates, exchange
control regulations, or foreign withholding taxes. Changes in the value relative
to the U.S. dollar of a foreign currency in which a Fund's holdings are
denominated will result in a change in the U.S. dollar value of a Fund's assets
and the Fund's income available for distribution.

In addition, although part of a Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that currency,
translated into U.S. dollars, and declared as a dividend, but before payment of
the dividend, the Fund could be required to liquidate portfolio securities to
pay the dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time the Fund accrues expenses in U.S. dollars and
the time such expenses are paid, the amount of foreign currency required to be
converted into U.S. dollars will be greater than the equivalent amount in
foreign currency of the expenses at the time they were incurred.
<PAGE>
In determining whether to invest assets of the Funds in securities of a
particular foreign issuer, Loomis Sayles will consider the likely effects of
foreign taxes on the net yield available to the Fund and its shareholders.
Compliance with foreign tax law may reduce a Fund's net income available for
distribution to shareholders.

FOREIGN CURRENCY HEDGING TRANSACTIONS

Foreign currency exchange transactions may allow a 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 foreign currency
exchange rate between the date on which a 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, a Fund might
purchase or sell a foreign currency on a spot (that is, cash) basis at the
prevailing spot rate. If conditions warrant, the Funds may also enter into
private contracts to purchase or sell foreign currencies at a future date
("forward contracts"). The Funds might also purchase exchange-listed and
over-the-counter call and put options on foreign currencies. Over-the-counter
currency options are generally less liquid than exchange-listed options and will
be treated as illiquid assets. The Funds may not be able to dispose of
over-the-counter options readily.

Foreign currency transactions involve costs and may result in losses.

SWAP TRANSACTIONS

Interest rate or currency swaps involve a 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 a Fund anticipates
purchasing at a later date. Interest rate swaps involve the exchange by a Fund
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating rate payments for fixed rate payments with
respect to a notional amount of principal). A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the relative values
of the specified currencies. The Fund will segregate liquid assets at its
custodian 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.

LOOMIS SAYLES FUNDS 29
<PAGE>
OPTIONS AND FUTURES TRANSACTIONS

Options and futures transactions involve a Fund buying, selling, or writing (or
buying or selling futures contracts) on securities, securities indices, or
currencies. Funds may engage in these transactions either to enhance investment
return or to hedge against changes in the value of other assets that the Funds
own or intend 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 a 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 a Fund is less
than the price of the offsetting purchase, the Fund will realize a loss.

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
<PAGE>
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 a 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), a Fund is at risk that the other party to the
transaction will default on its obligations, or will not permit a Fund to
terminate the transaction before its scheduled maturity.

The options and futures markets of foreign 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, foreign markets may be subject to less
detailed reporting requirements and regulatory controls than U.S. markets.
Furthermore, investments in options in foreign markets are subject to many of
the same risks as other foreign investments. See "Foreign Securities" above.

REPURCHASE AGREEMENTS

In a repurchase agreement, a 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 a 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.

SECURITIES LENDING

Securities lending involves a Fund lending its portfolio securities to
broker-dealers or other parties under contracts calling for the deposit by the
borrower with the Fund's custodian of cash collateral equal to at least the
market value of the securities loaned, marked to market on a daily basis. The
Fund will continue to benefit from interest or dividends on the securities
loaned and will also receive interest through investment of the cash collateral
in short-term liquid investments. No loans will be made if, as a result, the
aggregate amount of such loans outstanding at any time would exceed 33 1/3% of
the Fund's assets (taken at current value). Any voting rights, or rights to
consent, relating to securities loaned pass to the borrower. However, if a
material event affecting the investment occurs, such loans will be called so
that the securities may be voted by the Fund. The Fund pays various fees in
connection with such loans, including shipping fees and reasonable custodial or
placement fees.

Securities loans must be fully collateralized at all times, but involve some
credit risk to the Fund if the borrower defaults on its obligation and the Fund
is delayed or prevented from recovering the collateral.

LOOMIS SAYLES FUNDS 31
<PAGE>
MANAGEMENT

INVESTMENT ADVISER

The Board of Trustees of Loomis Sayles Funds oversees each of the Funds and
supervises the Funds' investment adviser, Loomis, Sayles & Co., L.P. ("Loomis
Sayles"), which is located at One Financial Center, Boston, Massachusetts 02111.

Loomis Sayles was founded in 1926 and is one of the country's oldest and largest
investment firms. Loomis Sayles is responsible for making investment decisions
for each Fund and for managing each Fund's other affairs and business, including
providing executive and other personnel for the management of each Fund.

As previously described in the "Expenses of the Funds" section, each Fund pays
Loomis Sayles a monthly investment advisory fee, also known as a management fee,
for these services. During the past fiscal year, the Funds paid the fees shown
in the following table to Loomis Sayles. These fees are expressed as a
percentage of the Fund's average net assets:

<TABLE>
<CAPTION>
Fund Management Fee
<S> <C>
- --------------------------------------------------------------------------
Loomis Sayles Bond Fund .60%
- --------------------------------------------------------------------------
Loomis Sayles Global Bond Fund .60%
- --------------------------------------------------------------------------
Loomis Sayles Intermediate Maturity
Bond Fund .40%
- --------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond
Fund .40%
- --------------------------------------------------------------------------
Loomis Sayles Municipal Bond Fund .40%
- --------------------------------------------------------------------------
Loomis Sayles Short-Term Bond Fund .25%
- --------------------------------------------------------------------------
Loomis Sayles U.S. Government
Securities Fund .30%
- --------------------------------------------------------------------------
</TABLE>

Certain expenses incurred by each Fund would have been higher if not for Loomis
Sayles' contractual obligation to limit the Funds' expenses through
February 1, 2001.

PORTFOLIO MANAGERS

The following persons have had primary responsibility for the day-to-day
management of each indicated Fund's portfolio since the date stated below.
Except as noted, each of these portfolio managers has been employed by Loomis
Sayles for at least five years.

LOOMIS SAYLES BOND FUND Daniel J. Fuss, President of Loomis Sayles Funds and
Vice Chairman of Loomis Sayles, has served as portfolio manager of the Fund
since its inception in 1991. Kathleen C. Gaffney, Vice President of Loomis
Sayles Funds and of Loomis Sayles, has served as portfolio manager of the Fund
since October 1997.
<PAGE>
LOOMIS SAYLES GLOBAL BOND FUND E. John deBeer, Vice President of Loomis Sayles
Funds and of Loomis Sayles, has served as portfolio manager of the Fund since
its inception in 1991.

LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND Anthony J. Wilkins, Vice President
of Loomis Sayles Funds and Executive Vice President and Director of Loomis
Sayles, has served as portfolio manager of the Fund since its inception in 1996.

LOOMIS SAYLES INVESTMENT GRADE BOND FUND Daniel J. Fuss has served as portfolio
manager of the Fund since its inception in 1996.

LOOMIS SAYLES MUNICIPAL BOND FUND Martha F. Hodgman, Vice President of Loomis
Sayles Funds and of Loomis Sayles, has served as portfolio manager of the Fund
since May 1993.

LOOMIS SAYLES SHORT-TERM BOND FUND John Hyll, Vice President of Loomis Sayles
Funds and of Loomis Sayles, has served as portfolio manager of the Fund since
its inception in 1992.

LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND Kent Newmark, Vice President of
Loomis Sayles Funds and of Loomis Sayles, has served as portfolio manager of the
Fund since its inception in 1991.

SERVICE AND DISTRIBUTION PLANS AND ADMINISTRATIVE AND OTHER FEES

For the Retail and Admin Classes of the Funds, the Funds have adopted service
and distribution plans under Rule 12b-1 of the Investment Company Act of 1940
that allow the Funds to pay fees for the sale and distribution of Retail and
Admin Class shares and for services provided to shareholders. This 12b-1 fee
currently is .25% of a Fund's average daily net assets attributable to the
shares of a particular Class. Because these 12b-1 fees are paid out of the
Funds' assets on an ongoing basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.

Admin Class shares of the Loomis Sayles Bond Fund are offered exclusively
through intermediaries, who will be the record owner of the shares.

Admin Class shares of the Loomis Sayles Bond Fund may pay an administrative fee
at an annual rate of up to .25% of the average daily net assets attributable to
Admin Class shares to securities dealers or financial intermediaries for
providing personal service and account maintenance for their customers who are
shareholders of the Fund.

Loomis Sayles may pay certain broker-dealers and financial intermediaries whose
customers are existing shareholders of the Funds a continuing fee at an annual
rate of up to .25% of the value of any Class of Fund shares held for those
customers' accounts, although this continuing fee is paid by Loomis Sayles out
of its own assets and is not assessed against the Fund.

LOOMIS SAYLES FUNDS 33
<PAGE>
GENERAL INFORMATION

PRICING

The price of each Fund's shares is based on its net asset value ("NAV"). The NAV
per share of each Class 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.

Each Fund values its investments for which market quotations are readily
available at market value. Each Fund values short-term investments that will
mature within 60 days at amortized cost, which approximates market value. Each
Fund values all other investments and assets at fair value.

Each Fund translates prices for its investments quoted in foreign 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 a Fund's NAV.
Because foreign markets may be open at different times than the New York Stock
Exchange, the value of a Fund's shares may change on days when shareholders are
not able to buy or sell shares. If events materially affecting the values of a
Fund's foreign investments occur between the close of foreign markets and the
close of regular trading on the New York Stock Exchange, these foreign
investments may be valued at their fair value.

HOW TO PURCHASE SHARES

You can buy shares of each Fund in several ways:

- - BY MAIL You can mail a completed application form, which is available by
calling Loomis Sayles at 800-626-9390, for the desired Fund or Funds, along
with a check payable to State Street Bank and Trust Company for the amount of
your purchase to:

Boston Financial Data Services
P.O. Box 8314
Boston, MA 02266-8314
Attention: Loomis Sayles Funds

- - THROUGH SYSTEMATIC INVESTING You can make regular investments of $50 or more
per month through automatic deductions from your bank checking or savings
account. Application forms are available through your financial adviser or by
calling Loomis Sayles at 800-626-9390.

- - THROUGH A BROKER-DEALER You may purchase shares of the Funds 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
(800-633-3330).
<PAGE>
Each Fund sells its shares at the NAV next calculated after Boston Financial
Data Services receives a properly completed investment order. Boston Financial
Data Services generally must receive your properly completed order before the
close of regular trading on the New York Stock Exchange for your shares to be
bought or sold at the Fund's NAV on that day.

Shares of each Fund may be purchased by (1) cash, (2) exchanging shares of the
same Class of any other Fund, provided the value of the shares exchanged meets
the investment minimum of the Fund, (3) exchanging securities acceptable to
Loomis Sayles, or (4) a combination of such methods. The exchange of securities
for shares of the Fund is subject to various restrictions, as described in the
Statement of Additional Information.

All purchases made by check should be in U.S. dollars and made payable to State
Street Bank and Trust Company. The Funds will not accept checks made payable to
anyone other than State Street Bank and Trust Company (including checks made
payable to you) or starter checks. When you make an investment by check or by
periodic account investment, to ensure that your investment has cleared, you
will not be permitted to redeem that investment until it has been in your
account for 15 days.

After your account has been established, you may send subsequent investments
directly to Boston Financial Data Services at the above address. Please include
either the account identification slip detached from your account statement or a
note containing the Fund's name, your account number and your name, address,
telephone number, and social security number.

You also may wire subsequent investments to the Funds by using the following
wire instructions:

State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ABA No. 011000028
DDA 9904-622-9
(Your account number)
Attn: Custody and Shareholder Services
(Name of Fund)

Your bank may charge a fee for transmitting funds by wire.

A 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.

The minimum initial investment for each Fund generally is $250,000 for
Institutional Class shares (except for the Loomis Sayles Bond Fund) and $5,000

LOOMIS SAYLES FUNDS 35
<PAGE>

for Retail Class shares. The minimum initial investment for Institutional Class
shares of the Loomis Sayles Bond Fund is $25,000. Loomis Sayles Funds may waive
these minimums in its sole discretion.

Each subsequent investment must be at least $50.

Admin Class shares of the Loomis Sayles Bond Fund are offered exclusively
through intermediaries, who will be the record owner of the shares.

HOW TO REDEEM SHARES

You can redeem shares of each Fund any day the New York Stock Exchange is open,
either through your financial adviser or directly from the Fund. If you are
redeeming shares that you purchased within the past 15 days by check or by
periodic account investment, your redemption will be delayed until your payment
for the shares clears.

Your redemptions generally will be sent to you via first class mail on the
business day after your request is received. Under unusual circumstances, the
Funds may suspend redemptions or postpone payment for more than seven days.
Although most redemptions are made in cash, as described in the Statement of
Additional Information, the Funds reserve the right to redeem shares in kind.

REDEMPTIONS THROUGH YOUR FINANCIAL ADVISER Your adviser must receive your
request in proper form before the close of regular trading on the New York Stock
Exchange for you to receive that day's NAV. Your adviser will be responsible for
furnishing all necessary documents to Loomis Sayles on a timely basis and may
charge you for his or her services.

REDEMPTIONS DIRECTLY FROM THE FUNDS Boston Financial Data Services must receive
your redemption request in proper form before the close of regular trading on
the New York Stock Exchange in order for you to receive that day's NAV.

You may make redemptions directly from each Fund either by mail or by telephone.

- BY MAIL Send a signed letter of instruction that includes the name of the
Fund, the exact name(s) in which the shares are registered, any special
capacity in which you are signing (such as trustee or custodian or on behalf
of a partnership, corporation, or other entity), your address, telephone
number, account number, social security number, and the number of shares or
dollar amount to be redeemed to the following address:

Boston Financial Data Services, Inc.
P.O. Box 8314
Boston, MA 02266
Attention: Loomis Sayles Funds

If you have certificates for the shares you want to sell, you must include
them along with completed stock power forms.
<PAGE>
- BY TELEPHONE You may redeem shares by calling Boston Financial Data Services
at 800-626-9390. Proceeds from telephone redemption requests can be wired to
your bank account or sent by check in the name of the registered owner(s) to
the record address.

Before Boston Financial Data Services can wire redemption proceeds to your
bank account, you must provide specific wire instructions to Boston Financial
Data Services at the time you open your account or make any subsequent
investments. A wire fee (currently $5) will be deducted from the proceeds of
each wire.

A telephone redemption request must be received by Boston Financial Data
Services prior to the close of regular trading on the New York Stock
Exchange. If you telephone a redemption request after the Exchange closes or
on a day when the Exchange is not open for business, Boston Financial Data
Services cannot accept the request, and you must make a new redemption
request during regular trading on the Exchange.

The maximum value of shares that you may redeem by telephone is $50,000. For
your protection, telephone redemption requests will not be permitted if
Boston Financial Data Services or the Fund has been notified of an address
change for your account within the preceding 30 days. Unless you indicate
otherwise on your account application, Boston Financial Data Services will be
authorized to accept redemption and transfer instructions by telephone. If
you prefer, you can decline telephone redemption and transfer privileges.

The telephone redemption privilege may be modified or terminated by the Funds
without notice. Certain of the telephone redemption procedures may be waived
for holders of Institutional Class shares.

- SYSTEMATIC WITHDRAWAL PLAN If the value of your account is $25,000 or more,
you can have periodic redemptions automatically paid to you or to someone you
designate. Please call 800-626-9390 for more information or to set up a
systematic withdrawal plan.

SIGNATURE GUARANTEE You must have your signature guaranteed by a bank, broker-
dealer, or other financial institution that can issue a signature guarantee for
the following types of redemptions:

- - If you are redeeming shares worth more than $50,000.
- - If you are requesting that the proceeds check be made out to someone other
than the registered owner(s) or sent to an address other than the record
address.
- - If the account registration has changed within the past 30 days.
- - If you are instructing us to wire the proceeds to a bank account not
designated on the application.

Please note that a notary public cannot provide a signature guarantee. This
guaranteed signature requirement may be waived by Loomis Sayles in certain
cases.

REDEMPTION BY THE FUNDS If you own fewer shares than the minimum set by the
Trustees, each Fund may redeem your shares and send you the proceeds.

LOOMIS SAYLES FUNDS 37
<PAGE>
HOW TO EXCHANGE SHARES

You may exchange shares of a Fund for shares of the same Class of any other Fund
in the Loomis Sayles Funds series that offers that Class of shares or for shares
of certain money market funds advised by New England Funds Management, L.P., an
affiliate of Loomis Sayles.

The value of Fund shares that you wish to exchange must meet the investment
minimum of the new fund. Exchanges into the Loomis Sayles High Yield Fund must
be specially approved by Loomis Sayles. Please call 800-633-3330 (option 6)
prior to requesting this transaction.

You may make an exchange by sending a signed letter of instruction or by
telephone, unless you have elected on your account application to decline
telephone exchange privileges.

Since excessive exchange activity may interfere with portfolio management and
may have an adverse effect on other shareholders of a Fund, the exchange
privilege should not be viewed as a means for taking advantage of short-term
swings in the market. The Funds reserve the right to terminate or limit your
exchange privilege if you make more than four exchanges in a calendar year. The
Funds may terminate the exchange privilege upon 60 days' notice to shareholders.

Please remember that an exchange may be a taxable event for federal and/or state
income tax purposes, so that you may realize a gain or loss that is subject to
income tax.

DIVIDENDS AND DISTRIBUTIONS

The table below provides information on each Fund's dividend policy.

<TABLE>
<CAPTION>
Fund Dividend Policy
<S> <C>
- --------------------------------------------------------------------------
Loomis Sayles Bond Fund Declare and pay dividends quarterly
Loomis Sayles Intermediate Maturity
Bond Fund
Loomis Sayles U.S. Government
Securities Fund
- --------------------------------------------------------------------------
Loomis Sayles Global Bond Fund Declares and pays dividends annually
- --------------------------------------------------------------------------
Loomis Sayles Municipal Bond Fund Declare dividends daily and pay
dividends monthly
Loomis Sayles Short-Term Bond
Fund
- --------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Declares and pays dividends monthly
Fund
- --------------------------------------------------------------------------
</TABLE>

Each Fund also distributes all of its net capital gains realized from the sale
of portfolio securities. The Funds typically will make capital gain
distributions annually, but the Funds may make more frequent capital gain
distributions.

You may choose to:
- - Reinvest all distributions in additional shares.
- - Receive all distributions in cash.
<PAGE>
If you do not select an option when you open your account, all distributions
will be reinvested.

TAX CONSEQUENCES APPLICABLE TO ALL FUNDS

For federal income tax purposes, distributions of investment income from each of
the Funds, except exempt-interest dividends distributed by the Loomis Sayles
Municipal Bond Fund (as described below), are taxable as ordinary income. Taxes
on distributions of capital gains are determined by how long a Fund owned the
investments that generated the capital gains, rather than by how long you have
owned your shares of the Fund. Distributions of short-term capital gains, which
result from the sale of securities that a 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 a 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 from the
Loomis Sayles Short-Term Bond Fund and the Loomis Sayles U.S. Government
Securities Fund typically are expected to be taxable as ordinary income.

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 a 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.

A Fund's investment in foreign securities may be subject to foreign withholding
taxes, which would decrease a Fund's yield on those securities. Shareholders may
be entitled to claim a credit or deduction with respect to foreign taxes. In
addition, a Fund's investment in foreign securities may increase or accelerate a
Fund's recognition of income and may affect the timing or amount of a Fund's
distributions.

In addition to income tax on a Fund's distributions, any gain that results if
you sell or exchange your shares generally is subject to income tax. You should
consult your tax adviser for more information on how an investment in a Fund
affects your own tax situation.

CERTAIN TAX CONSEQUENCES OF THE LOOMIS SAYLES MUNICIPAL BOND FUND

Dividends paid by the Loomis Sayles Municipal Bond Fund that are derived from
interest on tax-exempt fixed income securities (exempt-interest dividends) may
be excluded from your gross income on your federal tax return. If you receive
social security or railroad retirement benefits, however, you may be taxed on a
portion of those benefits as a result of receiving tax-exempt income. Tax-exempt
income also may be taken into account for the federal alternative minimum tax.

If at least 95% of the Loomis Sayles Municipal Bond Fund's dividends are
designated as exempt-interest dividends, federal backup withholding rules do not
apply with respect to such dividends. See the Statement of Additional
Information for more information on backup withholding rules.

LOOMIS SAYLES FUNDS 39
<PAGE>

The federal exemption for exempt-interest dividends does not result in an
exemption from state and local taxes. Distributions of exempt-interest dividends
may be exempt from local and state taxation to the extent they are derived from
the state or locality in which you resided. The Loomis Sayles Municipal Bond
Fund will report annually on a state-by-state basis the source of income the
Fund received on tax-exempt fixed income securities that was paid out as
dividends during the preceding year.

FINANCIAL HIGHLIGHTS

The financial highlights tables below are intended to help you understand each
Fund's financial performance. Certain information reflects financial results for
a single Fund share. The total returns represent the rate that you would have
earned or lost on an investment in each Fund, assuming reinvestment of all
dividends and distributions.

This information has been audited by PricewaterhouseCoopers LLP. The report of
PricewaterhouseCoopers LLP and each Fund's financial statements are included in
the Funds' annual reports to shareholders, which are available free of charge by
calling 800-626-9390.

<PAGE>
LOOMIS SAYLES BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------
Sept. 30, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998* 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------

Net asset value, beginning of
period $ 12.30 $ 12.83 $ 12.38 $ 12.29 $ 10.05 $ 11.37
---------- ---------- ---------- -------- -------- -------
Income from investment
operations--
Net investment income (loss) 0.98 0.69 0.86 0.86 0.82 0.83
Net realized and unrealized
gains (losses) on investments (0.06) (0.78) 0.67 0.35 2.32 (1.29)
---------- ---------- ---------- -------- -------- -------
Total from investment
operations 0.92 (0.09) 1.53 1.21 3.14 (0.46)
---------- ---------- ---------- -------- -------- -------
Less distributions--
Dividends from net investment
income (1.00) (0.44) (0.86) (0.86) (0.82) (0.84)
Distributions in excess of net
investment income 0.00 0.00 0.00 0.00 0.00 (0.02)
Distributions from net realized
capital gains (0.52) 0.00 (0.22) (0.26) (0.08) 0.00
---------- ---------- ---------- -------- -------- -------
Total distributions (1.52) (0.44) (1.08) (1.12) (0.90) (0.86)
---------- ---------- ---------- -------- -------- -------
Net asset value, end of period $ 11.70 $ 12.30 $ 12.83 $ 12.38 $ 12.29 $ 10.05
========== ========== ========== ======== ======== =======
Total return (%)** 7.6 (0.9)+ 12.7 10.3 32.0 (4.1)
Net assets, end of period (000) $1,541,834 $1,455,312 $1,261,910 $541,244 $255,710 $82,985
Ratio of operating expenses to
average net assets (%)*** 0.75 0.75++ 0.75 0.75 0.79 0.84
Ratio of net investment income
(loss) to average net assets (%) 8.15 7.34++ 7.36 7.93 8.34 7.92
Portfolio turnover rate (%) 33 24+ 41 42 35 87

Without giving effect to the
expense limitations:
Ratio of expenses to average
net assets would have been
(%) 0.75 0.76++ 0.77 0.75 0.79 0.84
Net investment income (loss)
per share would have been
($) 0.98 0.69 0.85 0.86 0.82 0.83
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
*** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 41
<PAGE>
LOOMIS SAYLES BOND FUND (RETAIL CLASS)

Net asset value, beginning of period $ 12.29 $ 12.82 $ 12.38
------- ------- -------
Income from investment operations--
Net investment income (loss) 0.96 0.66 0.84***
Net realized and unrealized gains (losses) on
investments (0.08) (0.77) 0.65
------- ------- -------
Total from investment operations 0.88 (0.11) 1.49
------- ------- -------
Less distributions--
Dividends from net investment income (0.96) (0.42) (0.83)
Distributions from net realized capital gains (0.52) 0.00 (0.22)
------- ------- -------
Total distributions (1.48) (0.42) (1.05)
------- ------- -------
Net asset value, end of period $ 11.69 $ 12.29 $ 12.82
======= ======= =======
Total return (%)**** 7.3 (1.1)+ 12.4+
Net assets, end of period (000) $55,490 $53,908 $33,240
Ratio of operating expenses to average net assets (%)***** 1.00 1.00++ 1.00++
Ratio of net investment income (loss) to average net
assets (%) 7.90 7.13++ 7.09++
Portfolio turnover rate (%) 33 24+ 41+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 1.04 1.06++ 1.20++
Net investment income (loss) per share would have been
($) 0.96 0.66 0.82***
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THAT PERIOD.
**** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
***** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES BOND FUND (ADMIN CLASS)

<TABLE>
<CAPTION>
Fiscal Year
Ended
-----------
Sept. 30, Jan. 2* to
1999 Sept. 30, 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.28 $12.83
------ ------
Income from investment operations--
Net investment income (loss) 0.92** 0.47
Net realized and unrealized gains (losses) on investments (0.06) (0.62)
------ ------
Total from investment operations 0.86 (0.15)
------ ------
Less distributions--
Dividends from net investment income (0.93) (0.40)
Distributions from net realized capital gains (0.52) 0.00
------ ------
Total distributions (1.45) (0.40)
------ ------
Net asset value, end of period $11.69 $12.28
====== ======
Total return (%)*** 7.1 (1.3)+
Net assets, end of period (000) $1,548 $ 630
Ratio of operating expenses to average net assets (%)**** 1.25 1.25++
Ratio of net investment income (loss) to average net assets
(%) 7.66 7.45++
Portfolio turnover rate (%) 33 24+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been
(%) 2.38 6.32++
Net investment income (loss) per share would have been
($) 0.78*** 0.15
</TABLE>

<TABLE>
<C> <S>
* COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1998.
** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THAT PERIOD.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 43
<PAGE>
LOOMIS SAYLES GLOBAL BOND FUND (INSTITUTIONAL CLASS)

Net asset value, beginning of period $ 11.93 $ 11.83 $ 12.35 $ 11.39 $ 9.82 $ 11.06
------- ------- ------- ------- ------- -------
Income from investment operations--
Net investment income (loss) 0.79 0.53 0.71 0.44 1.04 0.67
Net realized and unrealized gains
(losses) on investments 0.87 (0.43) (0.42) 1.27 1.31 (1.63)
------- ------- ------- ------- ------- -------
Total from investment operations 1.66 0.10 0.29 1.71 2.35 (0.96)
------- ------- ------- ------- ------- -------
Less distributions--
Dividends from net investment income (0.70) 0.00 (0.69) (0.75) (0.78) (0.04)
Distributions in excess of net
investment income 0.00 0.00 (0.12) 0.00 0.00 0.00
Distributions from capital 0.00 0.00 0.00 0.00 0.00 (0.24)
Distributions from net realized capital
gains (0.29) 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- -------
Total distributions (0.99) 0.00 (0.81) (0.75) (0.78) (0.28)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 12.60 $ 11.93 $ 11.83 $ 12.35 $ 11.39 $ 9.82
======= ======= ======= ======= ======= =======
Total return (%)** 14.2 0.9+ 2.3 15.0 23.9 (8.7)
Net assets, end of period (000) $34,154 $29,860 $28,401 $26,513 $10,304 $25,584
Ratio of operating expenses to average net
assets (%)*** 0.90 0.90++ 0.90 1.50 1.50 1.30
Ratio of net investment income (loss) to
average net assets (%) 6.32 6.00 5.88 6.37 8.17 7.02
Portfolio turnover rate (%) 42 28+ 75 131 148 153

Without giving effect to the expense
limitations:
Ratio of expenses to average net
assets
would have been (%) 1.10 1.18++ 1.22 1.77 1.69 1.30
Net investment income (loss) per share
would have been ($) 0.76 0.51 0.67 0.42 1.02 0.67
</TABLE>

LOOMIS SAYLES GLOBAL BOND FUND (RETAIL CLASS)

Net asset value, beginning of period $ 11.91 $ 11.83 $ 12.35
------- ------- -------
Income from investment operations--
Net investment income (loss) 0.76*** 0.44 0.63***
Net realized and unrealized gains (losses) on
investments 0.86 (0.36) (0.37)
------- ------- -------
Total from investment operations 1.62 0.08 0.26
------- ------- -------
Less distributions--
Dividends from net investment income (0.67) 0.00 (0.69)
Distributions in excess of net investment income 0.00 0.00 (0.09)
Distributions from net realized capital gains (0.29) 0.00 0.00
------- ------- -------
Total distributions (0.96) 0.00 (0.78)
------- ------- -------
Net asset value, end of period $ 12.57 $ 11.91 $ 11.83
======= ======= =======
Total return (%)**** 13.8 0.7++ 2.0++
Net assets, end of period (000) $ 7,106 $ 6,376 $ 4,694
Ratio of operating expenses to average net assets (%)***** 1.15 1.15++ 1.15++
Ratio of net investment income (loss) to average net
assets (%) 6.08 5.77++ 5.60++
Portfolio turnover rate (%) 42 28+ 75+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 1.61 1.78++ 2.44++
Net investment income (loss) per share would have been
($) 0.71*** 0.39 0.49***
</TABLE>

LOOMIS SAYLES FUNDS 45
<PAGE>
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------
Sept. 30, Sept. 30, Jan. 2** to
1999 1998* Sept. 30, 1997**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.06 $10.03 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.67 0.51*** 0.64***
Net realized and unrealized gains (losses) on
investments (0.38) (0.16) 0.00
------ ------ ------
Total from investment operations 0.29 0.35 0.64
------ ------ ------
Less distributions--
Dividends from net investment income (0.70) (0.32) (0.56)
Distributions in excess of net investment income 0.00 0.00 (0.03)
Distributions from net realized capital gains (0.09) 0.00 (0.02)
------ ------ ------
Total distributions (0.79) (0.32) (0.61)
------ ------ ------
Net asset value, end of period $ 9.56 $10.06 $10.03
====== ====== ======
Total return (%)**** 3.0 3.5+ 6.4+
Net assets, end of period (000) $8,978 $8,601 $6,305
Ratio of operating expenses to average net assets
(%)***** 0.55 0.55++ 0.55++
Ratio of net investment income (loss) to average net
assets (%) 6.98 6.71++ 6.38++
Portfolio turnover rate (%) 16 32 119+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 1.92 2.27++ 3.66++
Net investment income (loss) per share would have
been ($) 0.54 0.38*** 0.29***
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.
**** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
***** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
++ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------
Sept. 30, Sept. 30, Jan. 2,** to
1999 1998* Dec. 31, 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.06 $10.03 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.64 0.49*** 0.64***
Net realized and unrealized gains (losses) on
investments (0.38) (0.15) (0.02)
------ ------ ------
Total from investment operations 0.26 0.34 0.62
------ ------ ------
Less distributions--
Dividends from net investment income (0.68) (0.31) (0.54)
Distributions in excess of net investment income 0.00 0.00 (0.03)
Distributions from net realized capital gains (0.09) 0.00 (0.02)
------ ------ ------
Total distributions (0.77) (0.31) (0.59)
------ ------ ------
Net asset value, end of period $ 9.55 $10.06 $10.03
====== ====== ======
Total return (%)**** 2.6 3.4+ 6.2+
Net assets, end of period (000) $1,780 $ 663 $ 423
Ratio of operating expenses to average net assets (%)***** 0.80 0.80++ 0.80++
Ratio of net investment income (loss) to average net
assets (%) 6.76 6.47++ 6.13++
Portfolio turnover rate (%) 16 32+ 119+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 3.86 5.64++ 14.56++
Net investment income (loss) per share would have
been ($) 0.35 0.12*** (0.50)***
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.
**** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
***** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 47
<PAGE>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------
Sept. 30, Sept. 30, Jan. 2** to
1999 1998* Dec. 31, 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.28 $10.59 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.76 0.52 0.65
Net realized and unrealized gains (losses) on
investments (0.12) (0.50) 0.77
------ ------ ------
Total from investment operations 0.64 0.02 1.42
------ ------ ------
Less distributions--
Dividends from net investment income (0.70) (0.33) (0.63)
Distributions in excess of net investment income 0.00 0.00 (0.08)
Distributions from net realized capital gains (0.26) 0.00 (0.12)
------ ------ ------
Total distributions (0.96) (0.33) (0.83)
------ ------ ------
Net asset value, end of period $ 9.96 $10.28 $10.59
====== ====== ======
Total return (%)*** 6.5 0.0+ 14.5+
Net assets, end of period (000) $2,427 $2,778 $2,445
Ratio of operating expenses to average net assets (%)***** 0.55 0.55++ 0.55++
Ratio of net investment income (loss) to average net
assets (%) 6.83 6.68++ 6.74++
Portfolio turnover rate (%) 42 48+ 112+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 2.87 4.19++ 7.59++
Net investment income (loss) per share would have
been ($) 0.50 0.24 (0.03)
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------
Sept. 30, Sept. 30, Jan. 2** to
1999 1998* Dec. 31, 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.27 $10.59 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.64 0.48 0.62***
Net realized and unrealized gains (losses) on
investments (0.03) (0.49) 0.78
------ ------ ------
Total from investment operations 0.61 (0.01) 1.40
------ ------ ------
Less distributions--
Dividends from net investment income (0.67) (0.31) (0.62)
Distributions in excess of net investment income 0.00 0.00 (0.07)
Distributions from net realized capital gains (0.26) 0.00 (0.12)
------ ------ ------
Total distributions (0.93) (0.31) (0.81)
------ ------ ------
Net asset value, end of period $ 9.95 $10.27 $10.59
====== ====== ======
Total return (%)**** 6.2 (0.2)+ 14.3+
Net assets, end of period (000) $2,561 $1,743 $ 862
Ratio of operating expenses to average net assets (%)***** 0.80 0.80++ 0.80++
Ratio of net investment income (loss) to average net
assets (%) 6.60 6.43++ 6.51++
Portfolio turnover rate (%) 42 48+ 112+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 3.20 5.25++ 10.95++
Net investment income (loss) per share would have
been ($) 0.41 0.15 (0.31)***
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.
**** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
***** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 49
<PAGE>
LOOMIS SAYLES MUNICIPAL BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------------
Sept. 30, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998* 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $11.96 $ 11.70 $11.29 $11.53 $10.41 $11.54
------ ------- ------ ------ ------ ------
Income from investment
operations--
Net investment income (loss) 0.52 0.40 0.56 0.52 0.52 0.52
Net realized and unrealized
gains (losses) on
investments (0.84) 0.27 0.51 (0.15) 1.16 (1.13)
------ ------- ------ ------ ------ ------
Total from investment
operations (0.32) 0.67 1.07 0.37 1.68 (0.61)
------ ------- ------ ------ ------ ------
Less distributions--
Dividends from net investment
income (0.52) (0.40) (0.56) (0.52) (0.52) (0.52)
Distributions from net
realized capital gains (0.19) (0.01) (0.10) (0.09) (0.04) (0.00)
------ ------- ------ ------ ------ ------
Total distributions (0.71) (0.41) (0.66) (0.61) (0.56) (0.52)
------ ------- ------ ------ ------ ------
Net asset value, end of period $10.93 $ 11.96 $11.70 $11.29 $11.53 $10.41
====== ======= ====== ====== ====== ======
Total return (%)** (2.8) 5.9+ 9.8 3.3 16.5 (5.4)
Net assets, end of period (000) $9,823 $10,056 $8,752 $8,701 $7,961 $7,270
Ratio of operating expenses to
average net assets (%)*** 0.54 0.60++ 0.60 1.00 1.00 1.00
Ratio of net investment income
(loss) to average net assets
(%) 4.54 4.62++ 4.90 4.61 4.72 4.79
Portfolio turnover rate (%) 38 30+ 50 38 41 28

Without giving effect to the
expense limitations:
Ratio of expenses to average
net assets would have been
(%) 1.63 1.70++ 1.80 2.31 2.02 2.37
Net investment income (loss)
per share would have
been ($) 0.40 0.31 0.42 0.37 0.41 0.37
</TABLE>

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------------
Sept. 30, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998* 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 9.96 $ 9.75 $ 9.70 $ 9.81 $ 9.46 $ 9.95
------- ------- ------- ------- ------- -------
Income from investment
operations--
Net investment income (loss) 0.62 0.44 0.61 0.55 0.63 0.66
Net realized and unrealized
gains (losses) on
investments (0.45) 0.21 0.06 (0.11) 0.35 (0.49)
------- ------- ------- ------- ------- -------
Total from investment
operations 0.17 0.65 0.67 0.44 0.98 0.17
------- ------- ------- ------- ------- -------
Less distributions--
Dividends from net investment
income (0.62) (0.44) (0.62) (0.55) (0.63) (0.66)
Net asset value, end of period $ 9.51 $ 9.96 $ 9.75 $ 9.70 $ 9.81 $ 9.46
======= ======= ======= ======= ======= =======
Total return (%)** 1.8 6.8+ 7.1 4.7 10.6 1.8
Net assets, end of period (000) $26,849 $27,288 $18,792 $18,229 $26,039 $19,440
Ratio of operating expenses to
average net assets (%)*** 0.27 0.50++ 0.50 1.00 1.00 1.00
Ratio of net investment income
(loss) to average net assets
(%) 6.38 5.94++ 6.34 5.69 6.46 6.88
Portfolio turnover rate (%) 81 47+ 91 120 214 34

Without giving effect to the
expense limitations:
Ratio of expenses to average
net assets would have been
(%) 0.87 0.83++ 1.19 1.17 1.03 1.33
Net investment income (loss)
per share would have
been ($) 0.56 0.41 0.55 0.53 0.62 0.63
</TABLE>

LOOMIS SAYLES FUNDS 51
<PAGE>
LOOMIS SAYLES SHORT-TERM BOND FUND (RETAIL CLASS)

Net asset value, beginning of period $ 9.96 $ 9.75 $ 9.70
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.59 0.42 0.59
Net realized and unrealized gains (losses) on
investments (0.46) 0.21 0.06
------ ------ ------
Total from investment operations 0.13 0.63 0.65
------ ------ ------
Less distributions--
Dividends from net investment income (0.59) (0.42) (0.60)
------ ------ ------
Net asset value, end of period $ 9.50 $ 9.96 $ 9.75
====== ====== ======
Total return (%)*** 1.4 6.6+ 6.9+
Net assets, end of period (000) $ 786 $ 773 $ 285
Ratio of operating expenses to average net assets (%)**** 0.52 0.75++ 0.75++
Ratio of net investment income (loss) to average net
assets (%) 6.14 5.66++ 6.04++
Portfolio turnover rate (%) 81 47+ 91+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 4.21 6.00++ 17.77++
Net investment income (loss) per share would have
been ($) 0.24 0.03 (1.08)
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND (INSTITUTIONAL CLASS)

Net asset value, beginning of
period $ 11.41 $ 10.70 $ 10.08 $ 10.64 $ 9.22 $ 10.53
------- ------- ------- ------- ------- -------
Income from investment
operations--
Net investment income (loss) 0.65 0.43 0.63 0.68 0.66 0.64
Net realized and unrealized
gains (losses) on
investments (1.03) 0.58 0.61 (0.57) 1.42 (1.30)
------- ------- ------- ------- ------- -------
Total from investment
operations (0.38) 1.01 1.24 0.11 2.08 (0.66)
------- ------- ------- ------- ------- -------
Less distributions--
Dividends from net investment
income (0.65) (0.30) (0.62) (0.67) (0.66) (0.65)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.38 $ 11.41 $ 10.70 $ 10.08 $ 10.64 $ 9.22
======= ======= ======= ======= ======= =======
Total return (%)** (3.5) 9.6+ 12.7 1.3 23.0 (6.3)
Net assets, end of period (000) $16,141 $29,246 $17,668 $14,192 $19,499 $17,341
Ratio of operating expenses to
average net assets (%)*** 0.52 0.60++ 0.60 1.00 1.00 1.00
Ratio of net investment income
(loss) to average net assets
(%) 5.75 5.61++ 6.29 6.23 6.47 6.60
Portfolio turnover rate (%) 75 84+ 156 137 169 242

Without giving effect to the
expense limitations:
Ratio of expenses to average
net assets would have been
(%) 1.03 0.97++ 1.23 1.19 1.22 1.22
Net investment income (loss)
per share would have
been ($) 0.59 0.40 0.57 0.66 0.64 0.62
</TABLE>

LOOMIS SAYLES FUNDS 53
<PAGE>
APPENDIX A

DESCRIPTION OF BOND RATINGS ASSIGNED BY STANDARD & POOR'S AND MOODY'S INVESTORS
SERVICE, INC.

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
<PAGE>
payments on this obligation are being continued. A 'C' also will be 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 B 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.

LOOMIS SAYLES FUNDS 55
<PAGE>
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 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.
<PAGE>
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.

LOOMIS SAYLES FUNDS 57
<PAGE>
FOR MORE INFORMATION ABOUT THE FUNDS:

The Funds' statement of additional information (SAI) and annual and semi-annual
reports to shareholders provide additional information about the Funds. The SAI
and the auditor's report and financial statements included in the Funds' most
recent annual report to shareholders are incorporated by reference into this
Prospectus, which means that they are part of this Prospectus for legal
purposes.

In the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Funds' performance
during the last fiscal year.

You may get free copies of these materials, request other information about the
Funds and other Loomis Sayles Funds, or make shareholder inquiries by contacting
your financial adviser, by visiting the Loomis Sayles web site at
http://www.loomissayles.com, or by calling Loomis Sayles toll-free at
800-633-3330.

You may review and copy information about the Funds, including the SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, DC.
You may call the Commission at 202-942-8090 for information about the operation
of the Public Reference Room. You also may access reports and other information
about the Funds on the EDGAR Database on the Commission's web site at
http://www.sec.gov. You may obtain these reports and other information about the
Funds, with payment of a duplicating fee, by writing the Public Reference
Section of the Commission, Washington, DC 20549-0102, or via e-mail
([email protected]). You may need to refer to the Funds' file number, which is
listed at the bottom of this page.

Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330
www.loomissayles.com

File No. 811-6241

<PAGE>

PROSPECTUS
[LOGO] FEBRUARY 1, 2000
FIXED INCOME FUNDS

LOOMIS SAYLES HIGH YIELD FUND

Loomis, Sayles & Company, L.P., which has been an investment adviser since 1926,
is the investment adviser of the Fund.

<TABLE>
<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles High Yield Fund 2
Summary of Principal Risks 5

EXPENSES OF THE FUND 8

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS AND RISK
CONSIDERATIONS 9

MANAGEMENT 19
Investment Adviser 19
Portfolio Managers 19

GENERAL INFORMATION 20
Pricing 20
How to Purchase Shares 20
How to Redeem Shares 22
How to Exchange Shares 24
Dividends and Distributions 24
Tax Consequences 25

FINANCIAL HIGHLIGHTS 25

APPENDIX A 27
</TABLE>

<PAGE>
RISK/RETURN SUMMARY

GENERAL INFORMATION

The following is a summary of certain key information about the Loomis Sayles
High Yield Fund. You will find additional information about the Fund, including
a detailed description of the risks of an investment in the Fund, after this
summary.

This Risk/Return summary describes the Fund's objective, principal investment
strategies, principal risks, and performance. The summary for the Fund 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
Prospectus after the Summary of Principal Risks. Please be sure to read this
additional information before you invest.

The Risk/Return 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 performance varied from year to year over the life of the Fund;
and
- - 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.

You 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.

LOOMIS SAYLES FUNDS 1
<PAGE>
LOOMIS SAYLES HIGH YIELD FUND

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 lower rated fixed
income securities ("junk bonds"), although it may invest up to 20% of its assets
in preferred stocks and up to 10% of its assets in common stocks. The Fund may
invest in fixed income securities of any maturity.

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 Canadian securities and up to
50% of its assets in other foreign securities, including emerging markets
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, collateralized mortgage obligations,
asset-backed securities, when-issued securities, real estate investment trusts,
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:
- - 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);
- - interest rate risk (the risk that the value of the Fund's investments will
fall if interest rates rise);
- - market risk (the risk that the value of the Fund's investments will fall as a
result of movements in financial markets generally);
<PAGE>
- - foreign risk (the risk that the value of the Fund's foreign investments will
fall as a result of foreign political, social, or economic changes);

- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);

- - derivatives risk (the risk that the value of the Fund's derivative investments
will fall as a result of pricing difficulties or lack of correlation with the
underlying investment);
- - liquidity risk (the risk that the Fund may be unable to find a buyer for its
investments when it seeks to sell them); and
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).

Because the Fund invests in lower rated fixed income securities, your investment
faces significantly more risk than other types of fixed income funds. For
example, the Fund's returns may be more volatile than a fund that invests
primarily in investment grade fixed income securities.

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

The Fund's returns will vary. For example, during the period shown in the bar
chart, the Fund's best quarter was up 8.4% (third quarter, 1997), and the Fund's
worst quarter was down 16.9% (third quarter, 1998).

LOOMIS SAYLES FUNDS 3
<PAGE>

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Merrill Lynch High Yield Master Index, an index that tracks the performance
of lower rated fixed income securities. The index is unmanaged, has no operating
costs, and is included in the table to facilitate your comparison of the Fund's
performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------
Since
Inception
1 Year (9/11/96)
<S> <C> <C>
- ----------------------------------------------------------------------------------------
LOOMIS SAYLES HIGH YIELD FUND
Institutional Class 21.0% 7.3%
MERRILL LYNCH HIGH YIELD MASTER INDEX 1.6% 6.7%(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>
SUMMARY OF PRINCIPAL RISKS

The value of your 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

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. Increases in interest rates may cause the value of the
Fund's investments to decline.

Interest rate risk is greater for the Fund since it generally invests a
significant portion of its assets in lower rated fixed income securities ("junk
bonds") or comparable unrated securities. Even if the Fund invests in high
quality fixed income securities, it is subject to interest rate risk.

Interest rate risk also is greater for the Fund if it invests in fixed income
securities with longer maturities than for funds that invest in fixed income
securities with shorter maturities.

Interest rate risk is compounded for the Fund if it 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 funds that hold these types of securities 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

LOOMIS SAYLES FUNDS 5
<PAGE>
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.

Since the Fund may invest 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), the Fund may be subject to greater credit risk.

If the Fund invests in foreign securities, it also is subject to increased
credit risk because of the difficulties of requiring foreign entities to honor
their contractual commitments and because a number of foreign 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.

FOREIGN RISK

This is the risk associated with investments in issuers located in foreign
countries. The Fund's investments in foreign securities may experience more
rapid and extreme changes in value than investments in securities of U.S.
companies.

The securities markets of many foreign countries are relatively small, with a
limited number of issuers and a small number of securities. In addition, foreign
companies often are not subject to the same degree of regulation as U.S.
companies. Reporting, accounting, and auditing standards of foreign 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
foreign country to decline. In the event of nationalization, expropriation, or
other confiscation, the Fund could lose its entire investment in foreign
securities.

When the Fund invests in securities from issuers located in countries with
emerging securities markets, it may face greater foreign risk since emerging
market countries may be more likely to experience political and economic
instability.

CURRENCY RISK

This is the risk that fluctuations in exchange rates between the U.S. dollar and
foreign 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, foreign currencies.
<PAGE>
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 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. When the Fund uses
derivatives, it also faces 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 your investment in the Fund to
lose value. The Fund is subject to management risk because it 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.

LOOMIS SAYLES FUNDS 7
<PAGE>

EXPENSES OF THE FUND

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

A redemption fee of 2.00% is imposed on shares of the Fund redeemed within one
year of purchase.

Loomis Sayles may, in its discretion, waive this redemption fee if Loomis Sayles
determines that minimal brokerage and transaction costs are incurred in
connection with the redemption.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Distribution Total Annual
Management and Service Other Fund Operating Fee Waiver/ Net
Fund/Class Fees (12b-1) Fees Expenses Expenses Reimbursement* Expenses*
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Loomis Sayles
High Yield Fund**
Institutional
Class .60% none 1.21% 1.81% 1.06% .75%
- -----------------------------------------------------------------------------------------------------
* REFLECTS LOOMIS SAYLES' CONTRACTUAL OBLIGATION TO LIMIT THE FUND'S EXPENSES THROUGH FEBRUARY 1,
2001.
** LOOMIS SAYLES MAY PAY CERTAIN BROKER-DEALERS AND FINANCIAL INTERMEDIARIES WHOSE CUSTOMERS ARE
EXISTING SHAREHOLDERS OF THE FUND A CONTINUING FEE AT AN ANNUAL RATE OF UP TO .25% OF THE VALUE OF
FUND SHARES HELD FOR THOSE CUSTOMERS' ACCOUNTS, ALTHOUGH THIS CONTINUING FEE IS PAID BY LOOMIS
SAYLES OUT OF ITS OWN ASSETS AND IS NOT ASSESSED AGAINST THE FUND.
- -----------------------------------------------------------------------------------------------------
</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 you 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 you invest $10,000 in
the Fund for the time periods shown and then either (1) redeem all your shares
or (2) do not redeem any of your shares at the end of those periods. This
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Please remember that this example is
hypothetical, so that your actual costs and returns may be higher or lower.

<TABLE>
<CAPTION>
Fund/Class 1 Year* 3 Years* 5 Years* 10 Years*
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Loomis Sayles High Yield Fund
Institutional Class (with
redemption) $277 $466 $881 $2,039
Institutional Class (without
redemption) $77 $466 $881 $2,039
- --------------------------------------------------------------------------------
* EXPENSES SHOWN INCLUDE THE FEE WAIVER/REIMBURSEMENT FOR THE FIRST YEAR OF
EACH PERIOD.
- --------------------------------------------------------------------------------
</TABLE>

<PAGE>
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS AND RISK CONSIDERATIONS

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 Prospectus, 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 your 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 foreign 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 agency must have rated the security in one
of

LOOMIS SAYLES FUNDS 9
<PAGE>
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. The
Fund's achievement of its investment 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 Appendix A. 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

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.
<PAGE>
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

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 its
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 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

LOOMIS SAYLES FUNDS 11
<PAGE>
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.

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
<PAGE>
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

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

LOOMIS SAYLES FUNDS 13
<PAGE>
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.

REAL ESTATE INVESTMENT TRUSTS

REITs may have limited financial resources, may trade less frequently and in a
limited volume, and may be subject to more abrupt or erratic price movements
than larger securities. The Fund's investment in a REIT may require the Fund to
accrue and distribute income not yet received or may result in the Fund making
distributions that constitute a return of capital to Fund shareholders for
federal income tax purposes. In addition, distributions by the Fund from REITs
will not qualify for the corporate dividends-received deduction.

RULE 144A SECURITIES

Securities of issuers organized or headquartered outside the United States are
known as foreign securities. Foreign securities may present risks not associated
with investments in comparable securities of U.S. issuers. There may be less
information publicly available about a foreign corporate or government issuer
than about a U.S. issuer, and foreign corporate issuers are generally not
subject to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and securities custody costs are often
higher than in the United States. With respect to certain foreign countries,
there is a possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments that
could affect the value of investments in those countries. The Fund's receipt of
interest on foreign government securities may depend on the availability of tax
or other revenues to satisfy the issuer's obligations.

The Fund's investments in foreign 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 foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities, and delays and disruptions in securities settlement procedures.

Since most foreign securities are denominated in foreign currencies or traded
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected by
changes in currency exchange rates, exchange control regulations, or foreign
withholding taxes. Changes in the value relative to the U.S. dollar of a foreign
currency in which the Fund's holdings are denominated will result in a change in
the U.S. dollar value of the Fund's assets and the Fund's income available for
distribution.

In addition, although part of the Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that currency,
translated into U.S. dollars, and declared as a dividend, but before payment of
the dividend, the Fund could be required to liquidate portfolio securities to
pay the dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time the Fund accrues expenses in U.S. dollars and
the time such expenses are paid, the amount of foreign currency required to be
converted into U.S. dollars will be greater than the equivalent amount in
foreign currency of the expenses at the time they were incurred.

LOOMIS SAYLES FUNDS 15
<PAGE>
In determining whether to invest assets of the Fund in securities of a
particular foreign issuer, Loomis Sayles will consider the likely effects of
foreign taxes on the net yield available to the Fund and its shareholders.
Compliance with foreign tax law may reduce the Fund's net income available for
distribution to shareholders.

FOREIGN CURRENCY HEDGING TRANSACTIONS

Foreign 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 foreign currency
exchange rate between the date on which the Fund contracts to purchase or sell a
security and the settlement date for the purchase or sale, or to "lock in" the
equivalent of a dividend or interest payment in another currency, the Fund might
purchase or sell a foreign currency on a spot (that is, cash) basis at the
prevailing spot rate. If conditions warrant, the Fund may also enter into
private contracts to purchase or sell foreign currencies at a future date
("forward contracts"). The Fund might also purchase exchange-listed and
over-the-counter call and put options on foreign currencies. Over-the-counter
currency options are generally less liquid than exchange-listed options and will
be treated as illiquid assets. The Fund may not be able to dispose of
over-the-counter options readily.

Foreign currency transactions involve costs and may result in losses.

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 flows on a notional amount based on changes in the
relative values of the specified currencies. The Fund will segregate liquid
assets at its custodian 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.
<PAGE>
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 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.

LOOMIS SAYLES FUNDS 17
<PAGE>
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.

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.

SECURITIES LENDING

Securities lending involves the Fund lending its portfolio securities to broker-
dealers or other parties under contracts calling for the deposit by the borrower
with the Fund's custodian of cash collateral equal to at least the market value
of the securities loaned, marked to market on a daily basis. The Fund will
continue to benefit from interest or dividends on the securities loaned and will
also receive interest through investment of the cash collateral in short-term
liquid investments. No loans will be made if, as a result, the aggregate amount
of such loans outstanding at any time would exceed 33 1/3% of the Fund's assets
(taken at current value). Any voting rights, or rights to consent, relating to
securities loaned pass to the borrower. However, if a material event affecting
the investment occurs, such loans will be called so that the securities may be
voted by the Fund. The Fund pays various fees in connection with such loans,
including shipping fees and reasonable custodial or placement fees.

INVESTMENT ADVISER

The Board of Trustees of Loomis Sayles Funds oversees the Fund and supervises
the Fund's investment adviser, Loomis, Sayles & Company, L.P. ("Loomis Sayles"),
which is located at One Financial Center, Boston, Massachusetts 02111.

Loomis Sayles was founded in 1926 and is one of the country's oldest and largest
investment firms. Loomis Sayles is responsible for making investment decisions
for the Fund and for managing the Fund's other affairs and business, including
providing executive and other personnel for the management of the Fund.

As previously described in the "Expenses of the Fund" section, the Fund pays
Loomis Sayles a monthly investment advisory fee, also known as a management fee,
of .60% of the Fund's average net assets for these services.

Certain expenses incurred by the Fund would have been higher if not for Loomis
Sayles' contractual obligation to limit the Fund's expenses through February 1,
2001.

PORTFOLIO MANAGERS

Daniel J. Fuss, President of Loomis Sayles Funds and Vice Chairman of Loomis
Sayles, and Kathleen C. Gaffney, Vice President of Loomis Sayles Funds and of
Loomis Sayles, have served as portfolio managers of the Fund since its inception
in 1996. Each has been employed by Loomis Sayles for more than five years.

LOOMIS SAYLES FUNDS 19
<PAGE>
GENERAL INFORMATION

PRICING

The price of the Fund's shares is based on its net asset value ("NAV"). The NAV
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.

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 foreign 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 NAV.
Because foreign 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 foreign investments occur between the close of foreign markets and
the close of regular trading on the New York Stock Exchange, these foreign
investments may be valued at their fair value.

HOW TO PURCHASE SHARES

You can buy shares of the Fund in several ways:

- - BY MAIL You can mail a completed application form, which is available by
calling Loomis Sayles at 800-626-9390, along with a check payable to State
Street Bank and Trust Company for the amount of your purchase to:

Boston Financial Data Services
P.O. Box 8314
Boston, MA 02266-8314
Attention: Loomis Sayles Funds

- - THROUGH A BROKER-DEALER You 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
(800-633-3330).
<PAGE>
The Fund sells its shares at the NAV next calculated after Boston Financial Data
Services receives a properly completed investment order. Boston Financial Data
Services generally must receive your properly completed order before the close
of regular trading on the New York Stock Exchange for your shares to be bought
or sold at the Fund's NAV on that day.

Shares of the Fund may be purchased by (1) cash, (2) exchanging shares of the
same Class of any other Fund, provided the value of the shares exchanged meets
the investment minimum of the Fund, (3) exchanging securities acceptable to
Loomis Sayles, or (4) a combination of such methods. The exchange of securities
for shares of the Fund is subject to various restrictions, as described in the
Statement of Additional Information.

All purchases made by check 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 (including checks made
payable to you) or starter checks. When you make an investment by check or by
periodic account investment, to ensure that your investment has cleared, you
will not be permitted to redeem that investment until it has been in your
account for 15 days.

You also may wire 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 9904-622-9
(Your account number)
Attn: Custody and Shareholder Services
(Name of Fund)

Your bank may charge a fee for transmitting funds by wire.

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.

THE FUND IS DESIGNED FOR USE BY INVESTMENT PROFESSIONALS, INCLUDING BUT NOT
LIMITED TO INVESTMENT ADVISERS AND BROKER-DEALERS. ACCORDINGLY, PURCHASES OF
FUND SHARES ARE SUBJECT TO APPROVAL BY LOOMIS SAYLES.

LOOMIS SAYLES FUNDS 21
<PAGE>
The Fund's shares may be purchased by all types of tax-deferred retirement
plans. If you wish to open an individual retirement account (IRA) with the Fund,
Loomis Sayles has retirement plan forms available.

The minimum initial investment for the Fund generally is $1,000,000. Loomis
Sayles Funds may waive this minimum in its sole discretion.

Each subsequent investment must be at least $50.

HOW TO REDEEM SHARES

You can redeem shares of the Fund any day the New York Stock Exchange is open,
either through your financial adviser or directly from the Fund. If you are
redeeming shares that you purchased within the past 15 days by check or by
periodic account investment, your redemption will be delayed until your payment
for the shares clears.

Your redemptions generally will be sent to you via first class mail on the
business day after your 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, as described in the Statement of
Additional Information, the Fund reserves the right to redeem shares in kind.

REDEMPTIONS DIRECTLY FROM THE FUND Boston Financial Data Services must receive
your redemption request in proper form before the close of regular trading on
the New York Stock Exchange in order for you to receive that day's NAV.

You may make redemptions directly from the Fund either by mail or by telephone.

Boston Financial Data Services, Inc.
P.O. Box 8314
Boston, MA 02266
Attention: Loomis Sayles Funds

The telephone redemption privilege may be modified or terminated by the Fund
without notice. Certain of the telephone redemption procedures may be waived
for holders of Institutional Class shares.

SIGNATURE GUARANTEE You must have your signature guaranteed by a bank, broker-
dealer, or other financial institution that can issue a signature guarantee for
the following types of redemptions:

Please note that a notary public cannot provide a signature guarantee. This
guaranteed signature requirement may be waived by Loomis Sayles in certain
cases.

PLEASE REMEMBER THAT A 2.00% REDEMPTION FEE APPLIES TO SHARES OF THE FUND THAT
ARE REDEEMED OR EXCHANGED WITHIN ONE YEAR OF PURCHASE. LOOMIS SAYLES

LOOMIS SAYLES FUNDS 23
<PAGE>
MAY, IN ITS DISCRETION, WAIVE THIS REDEMPTION FEE IF LOOMIS SAYLES DETERMINES
THAT MINIMAL BROKERAGE AND TRANSACTION COSTS ARE INCURRED IN CONNECTION WITH THE
REDEMPTION.

REDEMPTION BY THE FUND If you own fewer shares than the minimum set by the
Trustees, the Fund may redeem your shares and send you the proceeds.

HOW TO EXCHANGE SHARES

You may exchange shares of the Fund for Institutional Class shares of any other
Fund in the Loomis Sayles Funds series or for shares of certain money market
funds advised by New England Funds Management, L.P., an affiliate of Loomis
Sayles. The value of Fund shares that you wish to exchange must meet the
investment minimum of the new fund.

You may make an exchange by sending a signed letter of instruction or by
telephone, unless you have elected on your account application to decline
telephone exchange privileges.

Since excessive exchange activity may interfere with portfolio management and
may have an adverse effect on other shareholders of the Fund, the exchange
privilege should not be viewed as a means for taking advantage of short-term
swings in the market. The Fund reserves the right to terminate or limit your
exchange privilege if you make more than four exchanges in a calendar year. The
Fund may terminate the exchange privilege upon 60 days' notice to shareholders.

PLEASE REMEMBER THAT A 2.00% REDEMPTION FEE APPLIES TO SHARES OF THE FUND THAT
ARE REDEEMED OR EXCHANGED WITHIN ONE YEAR OF PURCHASE. LOOMIS SAYLES MAY, IN ITS
DISCRETION, WAIVE THIS REDEMPTION FEE IF LOOMIS SAYLES DETERMINES THAT MINIMAL
BROKERAGE AND TRANSACTION COSTS ARE INCURRED IN CONNECTION WITH THE REDEMPTION.

Please remember that an exchange may be a taxable event for federal and/or state
income tax purposes, so that you may realize a gain or loss that is subject to
income tax.

DIVIDENDS AND DISTRIBUTIONS

The Fund declares and pays dividends quarterly. The Fund also distributes all of
its net capital gains realized from the sale of portfolio securities. The Fund
typically will make capital gain distributions annually, but the Fund may make
more frequent capital gain distributions.

You may choose to:
- - Reinvest all distributions in additional shares.
- - Receive all distributions in cash.

If you do not select an option when you open your account, all distributions
will be reinvested.
<PAGE>
TAX CONSEQUENCES

For 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 you have owned your 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 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. You should
consult your tax adviser for more information on how an investment in the Fund
affects your own tax situation.

FINANCIAL HIGHLIGHTS

The financial highlights table below is intended to help you understand the
Fund's financial performance. Certain information reflects financial results for
a single Fund share. The total returns represent the rate that you would have
earned or lost on an investment in the Fund, assuming reinvestment of all
dividends and distributions.

This information has been audited by PricewaterhouseCoopers LLP. The report of
PricewaterhouseCoopers LLP and the Fund's financial statements are included in
the Fund's annual report to shareholders, which are available free of charge by
calling 800-626-9390.

LOOMIS SAYLES FUNDS 25
<PAGE>
LOOMIS SAYLES HIGH YIELD FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
Sept. 30, Sept. 30, Dec. 31, Sept. 11** to
1999 1998* 1997 Dec. 31, 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------

Net asset value, beginning of period $ 8.17 $10.12 $10.11 $10.00
------- ------ ------ ------
Income from investment operations--
Net investment income (loss) 0.91 0.78*** 0.83 0.20
Net realized and unrealized gains (losses) on
investments 0.68 (2.28) 0.27 0.11
------- ------ ------ ------
Total from investment operations 1.59 (1.50) 1.10 0.31
------- ------ ------ ------
Less distributions--
Dividends from net investment income (0.96) (0.46) (0.86) (0.20)
Distributions from net realized capital gains (0.21) 0.00 (0.26) 0.00
------- ------ ------ ------
Total distributions (1.17) (0.46) (1.12) (0.20)
------- ------ ------ ------
Redemption Fees 0.02 0.01 0.03 0.00
------- ------ ------ ------
Net asset value, end of period $ 8.61 $ 8.17 $10.12 $10.11
======= ====== ====== ======
Total return (%)**** 21.0 (15.6)+ 11.4 3.1+
Net assets, end of period (000) $20,150 $6,624 $5,266 $1,939
Ratio of operating expenses to average net
assets (%)***** 0.75 0.75++ 0.75 0.75++
Ratio of net investment income (loss) to average
net assets (%) 11.61 10.54++ 8.96 8.85++
Portfolio turnover rate (%) 24 33+ 68 0+
Without giving effect to the expense
limitations:
Ratio of expenses to average net assets
would have been (%) 1.81 2.42++ 3.81 12.06++
Net investment income (loss) per share would
have been ($) 0.83 0.65*** 0.54 (0.05)
</TABLE>

<TABLE>
<C> <S>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUND'S FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON SEPTEMBER 11, 1996.
*** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.
**** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
***** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
APPENDIX A

DESCRIPTION OF BOND RATINGS ASSIGNED BY STANDARD & POOR'S AND MOODY'S INVESTORS
SERVICE, INC.

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

LOOMIS SAYLES FUNDS 27
<PAGE>

payments on this obligation are being continued. A C also will be 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.

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.

<PAGE>

MOODY'S INVESTORS SERVICE, INC.

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.

LOOMIS SAYLES FUNDS 29
<PAGE>
FOR MORE INFORMATION ABOUT THE FUND:

The Fund's statement of additional information (SAI) and annual and semi-annual
reports to shareholders provide additional information about the Fund. The SAI
and the auditor's report and financial statements included in the Fund's most
recent annual report to shareholders are incorporated by reference into this
Prospectus, which means that they are part of this Prospectus for legal
purposes.

In the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during the last fiscal year.

You may get free copies of these materials, request other information about the
Fund and other Loomis Sayles Funds, or make shareholder inquiries by contacting
your financial adviser, by visiting the Loomis Sayles web site at
http://www.loomissayles.com, or by calling Loomis Sayles toll-free at
800-633-3330.

You may review and copy information about the Fund, including the SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, DC.
You may call the Commission at 202-942-8090 for information about the operation
of the Public Reference Room. You also may access reports and other information
about the Fund on the EDGAR Database on the Commission's web site at
http://www.sec.gov. You may obtain these reports and other information about the
Fund, with payment of a duplicating fee, by writing the Public Reference Section
of the Commission, Washington, DC 20549-0102, or via e-mail
([email protected]). You may need to refer to the Fund's file number, which is
listed at the bottom of this page.

Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330
www.loomissayles.com

File No. 811-6241
<PAGE>

PROSPECTUS
[LOGO] FEBRUARY 1, 2000
EQUITY FUNDS

LOOMIS SAYLES EMERGING MARKETS FUND

Loomis, Sayles & Company, L.P., which has been an investment adviser since 1926,
is the investment adviser of the Fund.

<PAGE>

TABLE OF CONTENTS

<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles Emerging Markets Fund 2
Summary of Principal Risks 3

EXPENSES OF THE FUND 6

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
AND RISK CONSIDERATIONS 8

MANAGEMENT 14
Investment Adviser 14
Portfolio Managers 14

GENERAL INFORMATION 15
Pricing 15
How to Purchase Shares 15
How to Redeem Shares 16
Dividends and Distributions 18
Tax Consequences 19
</TABLE>

<PAGE>
RISK/RETURN SUMMARY

GENERAL INFORMATION

The following is a summary of certain key information about the Loomis Sayles
Emerging Markets Fund. You will find additional information about the Fund,
including a detailed description of the risks of an investment in the Fund,
after this summary.

This Risk/Return summary describes the Fund's objectives, principal investment
strategies, and principal risks. 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.

LOOMIS SAYLES FUNDS 1
<PAGE>
LOOMIS SAYLES EMERGING MARKETS FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital
growth.

PRINCIPAL INVESTMENT STRATEGIES The Fund pursues its objective by investing
primarily in stocks or other equity securities of issuers located in countries
with emerging securities markets. Countries with emerging markets are those
that, in the opinion of Loomis Sayles, are emerging as investment markets but
have yet to reach a level of maturity associated with developed foreign
securities markets. Countries with emerging securities markets include, among
others, Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Greece,
Hong Kong, Hungary, India, Indonesia, Israel, Italy, Jordan, Malaysia,
Singapore, South Africa, South Korea, Taiwan, Thailand, and Venezuela.

In deciding which securities to buy and sell, Loomis Sayles seeks to identify
companies that Loomis Sayles believes have distinctive products, technologies,
or services, dynamic earnings growth, prospects for high levels of
profitability, and solid management. Loomis Sayles typically does not consider
current income when making buy/sell decisions.

The Fund may engage in options and futures transactions, securities lending, and
foreign currency hedging transactions and also may invest in Rule 144A
securities, when-issued securities, swap transactions, repurchase agreements,
and, to the extent permitted by the Investment Company Act of 1940, closed-end
investment companies.

PERFORMANCE No performance information is available for the Fund because it has
not yet been in operation for a full calendar year.
<PAGE>
SUMMARY OF PRINCIPAL RISKS

FOREIGN RISK

The securities markets of many foreign countries are relatively small, with a
limited number of issuers and a small number of securities. In addition, foreign
companies often are not subject to the same degree of regulation as U.S.
companies. Reporting, accounting, and auditing standards of foreign 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
foreign country to decline. In the event of nationalization, expropriation, or
other confiscation, the Fund could lose its entire investment.

Because the Fund will invest significantly in emerging markets, the Fund may
face greater foreign risk since emerging market countries may be more likely to
experience political and economic instability.

CURRENCY RISK

MARKET RISK

This is the risk that the value of the Fund's investments will change as
financial markets fluctuate and that prices overall may decline. The value of a
company's stock may fall as a result of factors that directly relate to that
company, such as decisions made by its management or lower demand for the
company's products or services. A stock's value also may fall because of factors
affecting not just the company, but companies in its industry or in a number of
different industries, such as increases in production costs. The value of a
company's stock also may be affected by changes in financial market conditions,
such as changes in interest rates or currency exchange rates. In addition, a
company's stock generally pays dividends only after the company makes required
payments to holders of its bonds or other

LOOMIS SAYLES FUNDS 3
<PAGE>
debt. For this reason, the value of the stock will usually react more strongly
than bonds and other fixed income securities to actual or perceived changes in
the company's financial condition or prospects.

Market risk generally is greater for the Fund when it invests substantially in
small and medium-sized companies, since these companies tend to be more
vulnerable to adverse developments than large companies.

LEVERAGING 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
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 your 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
<PAGE>
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.

CREDIT RISK

LOOMIS SAYLES FUNDS 5
<PAGE>
EXPENSES OF THE FUND

The following tables present the expenses that you would pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

The following redemption fee applies to the Fund.

<TABLE>
<CAPTION>
Redemption Fee Imposed on
Fund Shares of the Fund Redeemed
within One Year of Purchase
<S> <C>
- ----------------------------------------------------------------
Loomis Sayles Emerging
Markets Fund 2.00%
- ----------------------------------------------------------------
</TABLE>

The redemption fee described in the above table applies only to shares of the
Fund that are redeemed within one year of purchase. Loomis Sayles may, in its
discretion, waive this redemption fee if Loomis Sayles determines that minimal
brokerage and transaction costs are incurred in connection with the redemption.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Fee
Distribution Total Annual Waiver/
Management and Service Other Fund Operating Reimburse- Net
Fund/Class Fees (12b-1) Fees Expenses* Expenses ment** Expenses**
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Loomis Sayles Emerging
Markets Fund***
Institutional Class 1.25% none 2.00% 3.25% 1.00% 2.25%
- -------------------------------------------------------------------------------------------------------------------------------
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
** REFLECTS LOOMIS SAYLES' CONTRACTUAL OBLIGATION TO LIMIT THE FUND'S EXPENSES THROUGH FEBRUARY 1, 2001.
*** LOOMIS SAYLES MAY PAY CERTAIN BROKER-DEALERS AND FINANCIAL INTERMEDIARIES WHOSE CUSTOMERS ARE EXISTING SHAREHOLDERS OF
THE FUND A CONTINUING FEE AT AN ANNUAL RATE OF UP TO .25% OF THE VALUE OF THE FUND SHARES HELD FOR THOSE CUSTOMERS'
ACCOUNTS, ALTHOUGH THIS CONTINUING FEE IS PAID BY LOOMIS SAYLES OUT OF ITS OWN ASSETS AND IS NOT ASSESSED AGAINST THE
FUND.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
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 you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.

<TABLE>
<CAPTION>
Fund/Class 1 year* 3 years*
<S> <C> <C>
- ---------------------------------------------------------------------
Loomis Sayles Emerging Markets Fund
Institutional Class (with redemption) $428 $908
Institutional Class (without redemption) $228 $908
- ---------------------------------------------------------------------
* EXPENSES SHOWN INCLUDE THE FEE WAIVER/REIMBURSEMENT FOR THE FIRST
YEAR OF EACH PERIOD.
</TABLE>

LOOMIS SAYLES FUNDS 7
<PAGE>
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS AND RISK CONSIDERATIONS

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

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 upon
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 your investment.

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 capitalizations may be more
volatile than the securities of larger, more established companies and than the
broad equity market indices.

GROWTH STOCKS

Stocks of companies that Loomis Sayles believes have earnings that will grow
faster than the economy as a whole are known as growth stocks. The Fund
generally invests a significant portion of its assets in growth stocks.
Growth stocks typically trade at higher multiples of current earnings than
other stocks. As a result, the values of growth stocks may be more sensitive
to changes in current or expected earnings than the values of other stocks.
If Loomis Sayles' assessment of the prospects for a company's earnings
growth is
<PAGE>
wrong, or if its judgment of how other investors will value the company's
earnings growth is wrong, then the price of that company's stock may fall or
may not approach the value that Loomis Sayles has placed on it.

VALUE STOCKS

Stocks of companies that are not expected to experience significant earnings
growth, but whose stocks Loomis Sayles believes are undervalued compared to
their true worth, are known as value stocks. The Fund also may invest in
value stocks. These companies may have experienced adverse business
developments or may be subject to special risks that have caused their
stocks to be out of favor. If Loomis Sayles' assessment of a company's
prospects is wrong, or if other investors do not eventually recognize the
value of the company, then the price of the company's stock may fall or may
not approach the value that Loomis Sayles has placed on it.

FOREIGN SECURITIES

Securities of issuers organized or headquartered outside the United States are
foreign securities. The Fund may invest any portion of its assets in foreign
securities.

Foreign securities may present risks not associated with investments in
comparable securities of U.S. issuers. There may be less information publicly
available about a foreign corporate or governmental issuer than about a U.S.
issuer, and foreign 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 foreign issuers are less liquid and at
times more volatile than securities of comparable U.S. issuers. Foreign
brokerage commissions and securities custody costs are often higher than in the
United States. With respect to certain foreign countries, there is a possibility
of governmental expropriation of assets, confiscatory taxation, political or
financial instability, and diplomatic developments that could affect the value
of investments in those countries. The Fund's receipt of interest on foreign
government securities may depend on the availability of tax or other revenues to
satisfy the issuer's obligations.

LOOMIS SAYLES FUNDS 9
<PAGE>
distribution to shareholders of the Fund may be affected by changes in currency
exchange rates, exchange control regulations, or foreign withholding taxes.
Changes in the value relative to the U.S. dollar of a foreign currency in which
the Fund's holdings are denominated will result in a change in the U.S. dollar
value of the Fund's assets and the Fund's income available for distribution.

In determining whether to invest assets of the Fund in securities of a
particular foreign issuer, Loomis Sayles will consider the likely effects of
foreign taxes on the net yield available to the Fund and its shareholders.
Compliance with foreign tax law may reduce the Fund's net income available for
distribution to shareholders.

FOREIGN CURRENCY HEDGING TRANSACTIONS

Foreign currency hedging transactions are an effort 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 foreign currency
exchange rate between the date on which the Fund contracts to purchase or sell a
security and the settlement date for the purchase or sale, or to "lock in" the
equivalent of a dividend or interest payment in another currency, the Fund might
purchase or sell a foreign currency on a spot (that is, cash) basis at the
prevailing spot rate. If conditions warrant, the Fund may also enter into
private contracts to purchase or sell foreign currencies at a future date
("forward contracts"). The Fund might also purchase exchange-listed and
over-the-counter call and put options on foreign currencies. Over-the-counter
currency options are generally less liquid than exchange-listed options and will
be treated as illiquid assets. The Fund may not be able to dispose of
over-the-counter options readily.

Foreign currency transactions involve costs and may result in losses.

OPTIONS AND FUTURES TRANSACTIONS

Options and futures transactions involve the Fund buying, selling, or writing
options (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
<PAGE>
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 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

LOOMIS SAYLES FUNDS 11
<PAGE>
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 foreign countries are small compared to those
of the U.S. and consequently are characterized in most cases by less liquidity
than U.S. markets. In addition, foreign markets may be subject to less detailed
reporting requirements and regulatory controls than U.S. markets. Furthermore,
investments in options in foreign markets are subject to many of the same risks
as other foreign investments. See "Foreign Securities" above.

SECURITIES LENDING

RULE 144A SECURITIES

WHEN-ISSUED SECURITIES

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 a Fund commits to buy it and the
payment date, the Fund may sustain a loss. The risk of this loss is in addition
to the Fund's
<PAGE>
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 a 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.

REPURCHASE AGREEMENTS

A repurchase agreement involves the Fund buying 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 a 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.

SWAP TRANSACTIONS

The Fund may enter into interest rate or currency swaps. The Fund will enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, 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 flows on a
notional amount based on changes in the relative values of the specified
currencies. The Fund will segregate liquid assets at its custodian 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 defaults on
its obligations.

CLOSED-END INVESTMENT COMPANIES

A closed-end investment company is a fund that does not redeem its shares on a
daily basis. As a result, an investment in a closed-end investment company may
be less liquid than an investment that can be sold any time the Fund decides to
sell. Since the value of a closed-end investment company is based on the value
of the individual securities it holds, a closed-end investment company's value
will fall if the value of its underlying securities declines. As a shareholder
in a closed-end investment company, the Fund will bear its ratable share of the
investment company's expenses, including management fees, and will remain
subject to the investment company's advisory and administration fees with
respect to the assets so invested.

LOOMIS SAYLES FUNDS 13
<PAGE>
MANAGEMENT

INVESTMENT ADVISER

As previously described in the "Expenses of the Fund" section, the Fund pays
Loomis Sayles a monthly investment advisory fee, also known as a management fee,
at the annual rate of 1.25% of its average net assets for these services.

Certain expenses incurred by the Fund would be higher if not for Loomis Sayles'
contractual obligation to limit the Fund's expenses through February 1, 2001.

PORTFOLIO MANAGERS

Alex Muromcew, John Tribolet, and Eswar Menon, Vice Presidents of Loomis Sayles
and of Loomis Sayles Funds, have served as portfolio managers of the Fund since
its inception in 1999. Prior to joining Loomis Sayles in 1999, Mr. Muromcew was
a portfolio manager at Nicholas Applegate Capital Management since 1996. From
1993 to 1996, he was an investment analyst with Teton Partners L.P. Prior to
joining Loomis Sayles in 1999, Mr. Tribolet was a portfolio manager at Nicholas
Applegate Capital Management since 1997. From 1995 to 1997, he was a full-time
MBA student at the University of Chicago. Prior to 1995, he spent three years as
an investment banker, most recently at PaineWebber Inc. Prior to joining Loomis
Sayles in 1999, Mr. Menon was a portfolio manager at Nicholas Applegate Capital
Management since 1995. From 1990 to 1995, he was employed as an equity analyst
by Koaneman Management and as a senior engineer by Integrated Device Technology.

<PAGE>
GENERAL INFORMATION

PRICING

HOW TO PURCHASE SHARES

You can buy shares of the Fund in several ways:

State Street Bank and Trust Company
P.O. Box 1978
Boston, MA 02105
Attention: Loomis Sayles Funds

- - THROUGH A FINANCIAL ADVISER Your financial adviser will be responsible for
furnishing all necessary documents to Loomis Sayles or State Street Bank and
Trust Company. Your financial adviser may charge you for his or her services.

The Fund sells its shares at the NAV next calculated after State Street Bank and
Trust Company receives a properly completed investment order. State Street Bank
and Trust Company generally must receive your properly completed order before
the close of regular trading on the New York Stock Exchange for your shares to
be bought or sold at the Fund's NAV on that day.

LOOMIS SAYLES FUNDS 15
<PAGE>
Shares of the Fund may be purchased by (1) cash, (2) exchanging securities
acceptable to Loomis Sayles, or (3) a combination of such methods. The exchange
of securities for shares of the Fund is subject to various restrictions, as
described in the Statement of Additional Information.

After your account has been established, you may send subsequent investments
directly to State Street Bank and Trust Company at the above address. Please
include either the account identification slip detached from your account
statement or a note containing the Fund's name, your account number and your
name, address, telephone number, and social security number.

You also may wire 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 9904-622-9
(Your account number)
Attn: Custody and Shareholder Services
(Name of Fund)

Your bank may charge a fee for transmitting funds by wire.

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.

The Fund's shares may be purchased by all types of tax-deferred retirement
plans. If you wish to open an individual retirement account (IRA) with the Fund,
Loomis Sayles has retirement plan forms available.

The minimum initial investment for the Fund generally is $5,000. Loomis Sayles
Funds may waive this minimum in its sole discretion.

Each subsequent investment must be at least $50.

HOW TO REDEEM SHARES

You can redeem shares of the Fund any day the New York Stock Exchange is open,
either through your financial adviser or directly from the Fund. If you are
<PAGE>
redeeming shares that you purchased within the past 15 days by check or by
periodic account investment, your redemption will be delayed until your payment
for the shares clears.

REDEMPTIONS DIRECTLY FROM THE FUND State Street Bank and Trust Company must
receive your redemption request in proper form before the close of regular
trading on the New York Stock Exchange in order for you to receive that day's
NAV.

You may make redemptions directly from the Fund either by mail or by telephone.
- - BY MAIL Send a signed letter of instruction that includes the name of the
Fund, the exact name(s) in which the shares are registered, any special
capacity in which you are signing (such as trustee or custodian or on behalf
of a partnership, corporation, or other entity), your address, telephone
number, account number, social security number, and the number of shares or
dollar amount to be redeemed to the following address:

State Street Bank and Trust Company
P.O. Box 1978
Boston, MA 02105
Attention: Loomis Sayles Funds

If you have certificates for the shares you want to sell, you must include
them along with completed stock power forms.

- - BY TELEPHONE You may redeem shares by calling Loomis Sayles at 800-633-3330.
Proceeds from telephone redemption requests can be wired to your bank account
or sent by check in the name of the registered owner(s) to the record address.

Before State Street Bank and Trust Company can wire redemption proceeds to
your bank account, you must provide specific wire instructions to State Street
Bank and Trust Company at the time you open your account or make any
subsequent investments. A wire fee (currently $5) will be deducted from the
proceeds of each wire.

A telephone redemption request must be received by State Street Bank and Trust
Company prior to the close of regular trading on the New York Stock Exchange.
If you telephone a redemption request after the Exchange closes or on a day

LOOMIS SAYLES FUNDS 17
<PAGE>
when the Exchange is not open for business, State Street Bank and Trust
Company cannot accept the request, and you must make a new redemption request
during regular trading on the Exchange.

The maximum value of shares that you may redeem by telephone is $50,000. For
your protection, telephone redemption requests will not be permitted if State
Street Bank and Trust Company or the Fund has been notified of an address
change for your account within the preceding 30 days. Unless you indicate
otherwise on your account application, State Street Bank and Trust Company
will be authorized to accept redemption and transfer instructions by
telephone. If you prefer, you can decline telephone redemption and transfer
privileges.

The telephone redemption privilege may be modified or terminated by the Fund
without notice.

SIGNATURE GUARANTEE You must have your signature guaranteed by a bank, broker-
dealer, or other financial institution that can issue a signature guarantee for
the following types of redemptions:
- - If you are redeeming shares worth more than $50,000.
- - If you are requesting that the proceeds check be made out to someone other
than the registered owner(s) or sent to an address other than the record
address.
- - If the account registration has changed within the past 30 days.
- - If you are instructing us to wire the proceeds to a bank account not
designated on the application.

Please note that a notary public cannot provide a signature guarantee. This
guaranteed signature requirement may be waived by Loomis Sayles in certain
cases.

PLEASE REMEMBER THAT A 2.00% REDEMPTION FEE APPLIES TO SHARES OF THE FUND THAT
ARE REDEEMED WITHIN ONE YEAR OF PURCHASE. LOOMIS SAYLES MAY, IN ITS DISCRETION,
WAIVE THIS REDEMPTION FEE IF LOOMIS SAYLES DETERMINES THAT MINIMAL BROKERAGE AND
TRANSACTION COSTS ARE INCURRED IN CONNECTION WITH THE REDEMPTION.

REDEMPTION BY THE FUND If you own fewer shares than the minimum set by the
Trustees, the Fund may redeem your shares and send you the proceeds.

DIVIDENDS AND DISTRIBUTIONS

The Fund declares and pays its net investment income to shareholders as
dividends annually. The Fund also distributes all of its net capital gains
realized from the sale of portfolio securities. The Fund typically will make
capital gain distributions annually, but the Fund may make more frequent capital
gain distributions.

You may choose to:
- - Reinvest all distributions in additional shares.
- - Receive all distributions in cash.

If you do not select an option when you open your account, all distributions
will be reinvested.
<PAGE>
TAX CONSEQUENCES

Distributions of income and capital gains are taxable whether you receive them
in cash or reinvest 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 these 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 and may affect the
timing or amount of the Fund's distributions.

LOOMIS SAYLES FUNDS 19
<PAGE>
FOR MORE INFORMATION ABOUT THE FUND:

The Fund's statement of additional information (SAI) and annual and semi-annual
reports to shareholders provide additional information about the Fund. The SAI
is incorporated by reference into this Prospectus, which means that it is part
of this Prospectus for legal purposes.

You may get free copies of the SAI, request other information about the Fund and
other Loomis Sayles Funds, or make shareholder inquiries by contacting your
financial adviser, by visiting the Loomis Sayles web site at
http://www.loomissayles.com, or by calling Loomis Sayles toll-free at
800-633-3330.

Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330
www.loomissayles.com

File No. 811-6241
<PAGE>

PROSPECTUS
[LOGO] FEBRUARY 1, 2000
FIXED INCOME FUNDS

LOOMIS SAYLES INVESTMENT GRADE BOND FUND

(CLASS J)

Loomis, Sayles & Company, L.P., which has been an investment adviser since 1926,
is the investment adviser of the Fund.

TABLE OF CONTENTS

<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles Investment Grade Bond Fund 2
Summary of Principal Risks 4

EXPENSES OF THE FUND 7

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
AND RISK CONSIDERATIONS 8

MANAGEMENT 18
Investment Adviser 18
Portfolio Manager 18
Service and Distribution Plan 18
Sales Charge 18

GENERAL INFORMATION 20
Pricing 20
How to Purchase Shares 20
How to Redeem Shares 21
Dividends and Distributions 22
Tax Consequences 22

FINANCIAL HIGHLIGHTS 23

APPENDIX A 25
</TABLE>

<PAGE>
RISK/RETURN SUMMARY

GENERAL INFORMATION

The following is a summary of certain key information about Class J shares of
the Loomis Sayles Investment Grade Bond Fund. You will find additional
information about the Fund, including a detailed description of the risks of an
investment in the Fund, after this summary.

This Risk/Return 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 descriptions of the Fund, including some of the additional risks
associated with investing in the Fund, can be found further back in this
Prospectus after the Summary of Principal Risks. Please be sure to read this
additional information before you invest.

LOOMIS SAYLES FUNDS 1
<PAGE>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND

INVESTMENT OBJECTIVE The Fund's investment objective is high total investment
return through a combination of current income and capital appreciation.

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 securities of other foreign issuers, including
emerging markets securities.

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);
- - 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).
<PAGE>
Interest rate risk generally is greater for Funds, such as the Loomis Sayles
Investment Grade Bond Fund, that invest in fixed income securities with
relatively long maturities than for Funds that invest in fixed income securities
with shorter maturities.

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares. The annual returns shown in the bar
chart do not reflect sales charges and additional expenses borne by Class J
shares of the Fund. If these sales charges and additional expenses were
reflected, returns would be less than those shown.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Since
Inception
of the Fund
1 Year (12/31/96)
<S> <C> <C>
- --------------------------------------------------------------------------------
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Class J -0.1% 5.7%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -2.2% 5.5%
</TABLE>

FOR PERIODS BEFORE THE INCEPTION OF CLASS J SHARES (MAY 24, 1999), PERFORMANCE
SHOWN FOR CLASS J SHARES IS BASED ON THE PERFORMANCE OF THE FUND'S INSTITUTIONAL
CLASS SHARES, ADJUSTED TO REFLECT THE HIGHER FEES PAID BY CLASS J SHARES. THE
FUND'S PERFORMANCE THROUGH DECEMBER 31, 1999 BENEFITED FROM LOOMIS SAYLES'
AGREEMENT TO LIMIT THE FUND'S EXPENSES.

LOOMIS SAYLES FUNDS 3
<PAGE>
SUMMARY OF PRINCIPAL RISKS

INTEREST RATE RISK

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 Loomis Sayles Investment Grade Bond
Fund, are subject to interest rate risk.

Interest rate risk also is greater for funds that generally invest in fixed
income securities with longer maturities, such as the Loomis Sayles Investment
Grade Bond Fund, than for funds that invest in fixed income securities with
shorter maturities.

Interest rate risk is compounded for the Fund when it invests a significant
portion of its assets in mortgage-related securities or other asset-backed
securities. The value of mortgage-related 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.

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
<PAGE>
credit rating. Credit risk is greater for the Fund if it invests in lower rated
fixed income securities ("junk bonds"). Lower rated fixed income securities
generally have speculative elements or are predominately speculative credit
risks.

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), the Fund may be subject to greater credit risk because of these
investments.

If the Fund invests in foreign securities, it is subject to increased credit
risk because of the difficulties of requiring foreign entities to honor their
contractual commitments and because a number of foreign 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.

FOREIGN RISK

The securities markets of many foreign countries are relatively small, with a
limited number of issuers and a small number of securities. In addition, foreign
companies often are not subject to the same degree of regulation as U.S.
companies. Reporting, accounting, and auditing standards of foreign 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
foreign country to decline. In the event of nationalization, expropriation, or
other confiscation, the Fund could lose its entire foreign investment.

CURRENCY RISK

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

LOOMIS SAYLES FUNDS 5
<PAGE>

compounded. Since the Fund may create leverage by using investments 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. If the Fund uses
derivatives, it also faces 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

MANAGEMENT RISK

Management risk is the risk that Loomis Sayles' investment techniques could fail
to achieve the Fund's objective and could cause your 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.
<PAGE>
EXPENSES OF THE FUND

The following tables present the expenses that you would pay if you buy and hold
Class J shares of the Fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

The following shareholder fees apply to Class J shares of the Fund.

<TABLE>
<CAPTION>
Maximum Sales Charge (Load)
Class of Fund Shares Imposed on Purchases (as a
percentage of offering price)
<S> <C>
- ----------------------------------------------------------------
Class J 3.50%
- ----------------------------------------------------------------
</TABLE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Distribution Total Annual Fee
Management and Service Other Fund Operating Waiver/ Net
Fund/Class Fees (12b-1) Fees Expenses Expenses Reimbursement* Expenses*
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Loomis Sayles Investment
Grade Bond Fund
Class J .40% .75% 1.01% 2.16% .86% 1.30%
- -------------------------------------------------------------------------------------------------------------------------------
* 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 you 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 you invest $10,000 in
the Fund for the time periods shown and then redeem all your shares at the end
of those periods. This example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Please
remember that this example is hypothetical, so that your actual costs and
returns may be higher or lower.

<TABLE>
<CAPTION>
Fund/Class 1 year* 3 years* 5 years* 10 years*
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund
Class J $478 $922 $1,393 $2,690
- ---------------------------------------------------------------------------------------------
* EXPENSES SHOWN INCLUDE THE FEE WAIVER/REIMBURSEMENT FOR THE FIRST YEAR OF EACH PERIOD.
- ---------------------------------------------------------------------------------------------
</TABLE>

LOOMIS SAYLES FUNDS 7
<PAGE>
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS AND RISK CONSIDERATIONS

TEMPORARY DEFENSIVE STRATEGIES

PORTFOLIO TURNOVER

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 foreign 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.
<PAGE>
INVESTMENT GRADE FIXED INCOME SECURITIES

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.

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.

U.S. GOVERNMENT SECURITIES

LOOMIS SAYLES FUNDS 9
<PAGE>
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.

COMMON STOCKS AND OTHER EQUITY SECURITIES

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 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.
<PAGE>
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.

COLLATERALIZED MORTGAGE OBLIGATIONS

LOOMIS SAYLES FUNDS 11
<PAGE>
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

Convertible securities include corporate bonds, notes, or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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.

REAL ESTATE INVESTMENT TRUSTS

REITs may have limited financial resources, may trade less frequently and in a
limited volume, and may be subject to more abrupt or erratic price movements
than larger securities. The Fund's investment in a REIT may require the Fund to
accrue and distribute income not yet received or may result in the Fund making
distributions that constitute a return of capital to Fund shareholders for
federal income tax purposes. In addition, distributions by the Fund from REITs
will not qualify for the corporate dividends-received deduction.

RULE 144A SECURITIES

LOOMIS SAYLES FUNDS 13
<PAGE>
FOREIGN SECURITIES

Securities of issuers organized or headquartered outside the United States are
known as foreign securities. Foreign securities may present risks not associated
with investments in comparable securities of U.S. issuers. There may be less
information publicly available about a foreign corporate or government issuer
than about a U.S. issuer, and foreign corporate issuers are generally not
subject to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and securities custody costs are often
higher than in the United States. With respect to certain foreign countries,
there is a possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments that
could affect the value of investments in those countries. The Fund's receipt of
interest on foreign government securities may depend on the availability of tax
or other revenues to satisfy the issuer's obligations.

Since most foreign securities are denominated in foreign currencies or traded
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund investing in these
securities may be affected by changes in currency exchange rates, exchange
control regulations, or foreign withholding taxes. Changes in the value relative
to the U.S. dollar of a foreign currency in which the Fund's holdings are
denominated will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution.

FOREIGN CURRENCY HEDGING TRANSACTIONS

Foreign currency transactions involve costs and may result in losses.

SWAP TRANSACTIONS

OPTIONS AND FUTURES TRANSACTIONS

LOOMIS SAYLES FUNDS 15
<PAGE>
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 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
<PAGE>
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.

REPURCHASE AGREEMENTS

SECURITIES LENDING

LOOMIS SAYLES FUNDS 17
<PAGE>
MANAGEMENT

INVESTMENT ADVISER

As previously described in the "Expenses of the Fund" section, the Fund pays
Loomis Sayles a monthly investment advisory fee, also known as a management fee,
at an annual rate of .40% of the Fund's average net assets for these services.

Certain expenses incurred by the Fund would have been higher if not for Loomis
Sayles' contractual obligation to limit the Fund's expenses through
February 1, 2001.

PORTFOLIO MANAGER

Daniel J. Fuss, President of Loomis Sayles Funds and Vice Chairman of Loomis
Sayles, has served as portfolio manager of the Fund since its inception in 1996.
Mr. Fuss has been employed by Loomis Sayles since 1976.

SERVICE AND 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 .25% of the Fund's average daily net assets attributable
to Class J shares and a monthly distribution fee of .50% of the Fund's average
daily net assets attributable to Class J shares. The distributor may pay all or
any portion of the service fee to securities dealers or other organizations for
providing personal service to you or for maintaining 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 your investment
and may cost you more than paying other types of sales charges.

SALES CHARGE

A sales charge of 3.50% of the Fund's offering price will apply each time you
purchase shares of the Fund. This sales charge is not imposed on shares
purchased with reinvested dividends or other distributions.
<PAGE>
The price you pay will be the per share net asset value ("NAV") next calculated
after a proper investment order is received by Loomis Sayles Funds' transfer or
other agent or subagent plus the 3.50% sales charge (the public offering price),
which is 3.63% of the net amount invested. The amount reallowed to broker-
dealers is 3.00% as a percentage of the public offering price. The Fund receives
the net asset value. The sales charge is allocated between your broker-dealer
and the distributor.

LOOMIS SAYLES FUNDS 19
<PAGE>
GENERAL INFORMATION

PRICING

The price of the Fund's shares is based on its NAV, plus the sales charge
described previously. The NAV 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.

HOW TO PURCHASE SHARES

You can buy shares of the Fund through a broker-dealer. You 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 (800-633-3330).

The Fund sells its shares at the NAV 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 NAV on
that day.
- - BY CHECK All purchases made by check through a 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 you make an investment by check through your
broker-dealer, to ensure that your investment has cleared, you will not be
permitted to redeem that investment until it has been in your account for
15 days.
<PAGE>
- - BY WIRE Your broker-dealer also may wire your 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
Attn: Custody and Shareholder Services
(Name of Fund)

Your 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 that 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 you 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.

HOW TO REDEEM SHARES

You can redeem shares of the Fund through your broker-dealer any day the New
York Stock Exchange is open. If you are redeeming shares that you purchased
within the past 15 days, your redemption will be delayed until your payment for
the shares clears.

LOOMIS SAYLES FUNDS 21
<PAGE>
To redeem shares, send a signed letter of instruction to your broker-dealer that
includes the name of the Fund, the exact name(s) in which the shares are
registered, any special capacity in which you are signing (such as trustee or
custodian or on behalf of a partnership, corporation, or other entity), your
address, telephone number, account number, and the number of shares or dollar
amount to be redeemed. Your broker-dealer will send your redemption request to
State Street Bank and Trust Company.

If you have certificates for the shares you want to sell, you must include them
along with completed stock power forms.

Before State Street Bank and Trust Company can wire redemption proceeds to your
bank account, your broker-dealer must provide specific wire instructions to
State Street Bank and Trust Company.

REDEMPTION BY THE FUND If you own fewer shares than the minimum set by the
Trustees, the Fund may redeem your shares and send you the proceeds.

DIVIDENDS AND DISTRIBUTIONS

The Fund generally declares dividends daily and makes payments 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. Loomis Sayles Funds' trustees may change the
frequency with which the Fund declares or pays dividends.

You may choose to:
- - Reinvest all distributions in additional shares.
- - Receive all distributions in cash.

If you do not select an option when you open your account, all distributions
will be reinvested.

TAX CONSEQUENCES

The following discussion addresses only the U.S. federal income tax consequences
of an investment in the Fund and does not address any foreign, state, or local
tax consequences. You should consult your 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 you have owned your 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
<PAGE>
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.

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.

FINANCIAL HIGHLIGHTS

This information has been audited by PricewaterhouseCoopers LLP. The report of
PricewaterhouseCoopers LLP and the Fund's financial statements are included in
the Fund's annual reports to shareholders, which are available free of charge by
calling 800-633-3330.

LOOMIS SAYLES FUNDS 23
<PAGE>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND (CLASS J SHARES)

<TABLE>
<CAPTION>
May 24* to
Sept. 30, 1999
<S> <C>
- -----------------------------------------------------------------------------------

Net asset value, beginning of period $ 10.29
-------
Income from investment operations--
Net investment income (loss) 0.21
Net realized and unrealized gains (losses) on investments (0.36)
-------
Total from investment operations (0.15)
-------
Less distributions--
Dividends from net investment income (0.19)
-------
Net asset value, end of period $ 9.95
=======
Total return (%)** (1.5)+
Net assets, end of period (000) $16,307
Ratio of operating expenses to average net assets (%)*** 1.30++
Ratio of net investment income (loss) to average net assets (%) 6.11++
Portfolio turnover rate (%) 42+
Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been (%) 2.16++
Net investment income (loss) per share would have been ($) 0.18
</TABLE>

* COMMENCEMENT OF OPERATIONS ON MAY 24, 1999.

** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT REDUCED ITS ADVISORY
FEES AND/OR BORNE OTHER OPERATING EXPENSES. TOTAL RETURN DOES NOT INCLUDE
THE EFFECT OF ANY FRONT END SALES CHARGES.

*** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S RATIO OF OPERATING
EXPENSES WOULD HAVE BEEN HIGHER.

+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.

++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.

<PAGE>
APPENDIX A

DESCRIPTION OF BOND RATINGS ASSIGNED BY STANDARD & POOR'S AND MOODY'S INVESTORS
SERVICE, INC.

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.

CC An obligation rated 'CC' is currently highly vulnerable to nonpayment.

LOOMIS SAYLES FUNDS 25
<PAGE>

payments on this obligation are being continued. A 'C' also will be assigned to
a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying.

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.

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.

<PAGE>

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.

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.

LOOMIS SAYLES FUNDS 27
<PAGE>
FOR MORE INFORMATION ABOUT THE FUND:

In the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during the last fiscal year.

Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330
www.loomissayles.com

File No. 811-6241
<PAGE>

PROSPECTUS
[LOGO] FEBRUARY 1, 2000
FIXED INCOME FUNDS

LOOMIS SAYLES MANAGED BOND FUND

Loomis, Sayles & Company, L.P., which has been an investment adviser since 1926,
is the investment adviser of the Fund.

TABLE OF CONTENTS

<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles Managed Bond Fund 2
Summary of Principal Risks 4

EXPENSES OF THE FUND 7

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
AND RISK CONSIDERATIONS 8

MANAGEMENT 17
Investment Adviser 17
Portfolio Managers 17
Service and Distribution Plan 17
Sales Charge 18

GENERAL INFORMATION 19
Pricing 19
How to Purchase Shares 19
How to Redeem Shares 20
Dividends and Distributions 21
Tax Consequences 21

FINANCIAL HIGHLIGHTS 22

APPENDIX A 24
</TABLE>

<PAGE>
RISK/RETURN SUMMARY

GENERAL INFORMATION

The following is a summary of certain key information about the Loomis Sayles
Managed Bond Fund. You will find additional information about the Fund,
including a detailed description of the risks of an investment in the Fund,
after this summary.

The Risk/Return 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.

LOOMIS SAYLES FUNDS 1
<PAGE>
LOOMIS SAYLES MANAGED BOND FUND

INVESTMENT OBJECTIVE The Fund's investment objective is high total investment
return through a combination of current income and capital appreciation.

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 foreign securities, including emerging
markets 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.

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.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

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).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------
Since
Inception
1 year (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.
LOOMIS SAYLES FUNDS 3
<PAGE>
SUMMARY OF PRINCIPAL RISKS

INTEREST RATE RISK

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 Loomis Sayles Managed Bond 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.

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
<PAGE>
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.

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 foreign securities,
it may be subject to increased credit risk because of the difficulties of
requiring foreign entities to honor their contractual commitments and because a
number of foreign 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.

FOREIGN RISK

The securities markets of many foreign countries are relatively small, with a
limited number of issuers and a small number of securities. In addition, foreign
companies often are not subject to the same degree of regulation as U.S.
companies. Reporting, accounting, and auditing standards of foreign 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
foreign country to decline. In the event of nationalization, expropriation, or
other confiscation, it could lose its entire foreign investment.

CURRENCY RISK

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

LOOMIS SAYLES FUNDS 5
<PAGE>

compounded. Since the Fund may create leverage by using investments 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

MANAGEMENT RISK

Management risk is the risk that Loomis Sayles' investment techniques could fail
to achieve the Fund's objective and could cause your 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.
<PAGE>
EXPENSES OF THE FUND

The following tables present the expenses that you would pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

The following shareholder fees apply to the Fund.

<TABLE>
<CAPTION>
Maximum Sales Charge (Load)
Fund Imposed on Purchases (as a
percentage of offering price)
<S> <C>
- ----------------------------------------------------------------
Loomis Sayles Managed Bond
Fund 2.50%
- ----------------------------------------------------------------
</TABLE>

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Distribution Total Annual Fee
Management and Service Other Fund Operating Waiver/ Net
Fund Fees (12b-1) Fees Expenses Expenses Reimbursement* Expenses*
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Loomis Sayles Managed Bond
Fund .60% .75% .68% 2.03% .53% 1.50%
- -------------------------------------------------------------------------------------------------------------------------------
* 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 you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.

<TABLE>
<CAPTION>
Fund 1 year* 3 years* 5 years* 10 years*
<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>

LOOMIS SAYLES FUNDS 7
<PAGE>
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS AND RISK CONSIDERATIONS

TEMPORARY DEFENSIVE STRATEGIES

PORTFOLIO TURNOVER

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 foreign 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.
<PAGE>
INVESTMENT GRADE FIXED INCOME SECURITIES

LOWER RATED FIXED INCOME SECURITIES

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.

U.S. GOVERNMENT SECURITIES

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.

COMMON STOCKS AND OTHER EQUITY SECURITIES

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 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.
<PAGE>
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.

COLLATERALIZED MORTGAGE OBLIGATIONS

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

Convertible securities include corporate bonds, notes, or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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

FOREIGN SECURITIES

Securities of issuers organized or headquartered outside the United States are
known as foreign securities. Foreign securities may present risks not associated
with investments in comparable securities of U.S. issuers. There may be less
information publicly available about a foreign corporate or government issuer
than about a U.S. issuer, and foreign corporate issuers are generally not
subject to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and securities custody costs are often
higher than in the United States. With respect to certain foreign countries,
there is a possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments that
could affect the value of investments in those countries. The Fund's receipt of
interest on foreign government securities may depend on the availability of tax
or other revenues to satisfy the issuer's obligations.

LOOMIS SAYLES FUNDS 13
<PAGE>
commodities or on international aid or development assistance, currency transfer
restrictions, highly limited numbers of potential buyers for such securities,
and delays and disruptions in securities settlement procedures.

Since most foreign securities are denominated in foreign currencies or traded
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected by
changes in currency exchange rates, exchange control regulations, or foreign
withholding taxes. Changes in the value relative to the U.S. dollar of a foreign
currency in which the Fund's holdings are denominated will result in a change in
the U.S. dollar value of the Fund's assets and the Fund's income available for
distribution.

FOREIGN CURRENCY HEDGING TRANSACTIONS

Foreign currency transactions involve costs and may result in losses.
<PAGE>
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 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 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.

LOOMIS SAYLES FUNDS 15
<PAGE>
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 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.

REPURCHASE AGREEMENTS

INVESTMENT ADVISER

As previously described in the "Expenses of the Fund" section, 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 net assets for these services.

Certain expenses incurred by the Fund would have been higher if not for Loomis
Sayles' contractual obligation to limit the Fund's expenses through
February 1, 2001.

PORTFOLIO MANAGERS

Daniel J. Fuss, President of Loomis Sayles Funds and Vice Chairman of Loomis
Sayles, has served as portfolio manager of the Fund since its inception in 1998.
Kathleen C. Gaffney, Vice President of Loomis Sayles Funds and of Loomis Sayles,
has served as associate portfolio manager of the Fund since its inception in
1998. Each has been employed by Loomis Sayles for more than five years.

SERVICE AND 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 .25% and a monthly distribution fee of .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 you or maintaining 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 your investment and may cost you more than paying other types of sales
charges.

LOOMIS SAYLES FUNDS 17
<PAGE>
SALES CHARGE

A sales charge of 2.50% of the Fund's offering price will apply each time you
purchase shares of the Fund. This sales charge is not imposed on shares
purchased with reinvested dividends or other distributions.

The price you pay will be the per share net asset value ("NAV") next calculated
after a proper investment order is received by Loomis Sayles Funds' transfer or
other agent or subagent plus the 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 sales charge is allocated between your broker-dealer
and the distributor.
<PAGE>
GENERAL INFORMATION

PRICING

HOW TO PURCHASE SHARES

The Fund sells its shares at the NAV 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 NAV on
that day.
- - BY CHECK All purchases made by check through your 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 you make an investment by check through your
broker-dealer, to ensure that your investment has cleared, you will not be
permitted to redeem that investment until it has been in your account for
15 days.

LOOMIS SAYLES FUNDS 19
<PAGE>
- - BY WIRE Your broker-dealer also may wire your 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
Attn: Custody and Shareholder Services
(Name of Fund)

Your broker-dealer may charge a fee for transmitting funds by wire.

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.

HOW TO REDEEM SHARES

You can redeem shares of the Fund through your broker-dealer any day the New
York Stock Exchange is open. If you are redeeming shares that you purchased
within the past 15 days by check your redemption will be delayed until your
payment for the shares clears.

Your redemptions generally will be wired to your broker-dealer on the third
business day after your 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, as described in the Statement of
Additional Information, the Fund reserves the right to redeem shares in kind.
<PAGE>
To redeem shares, send a signed letter of instruction to your broker-dealer that
includes the name of the Fund, the exact name(s) in which the shares are
registered, any special capacity in which you are signing (such as trustee or
custodian or on behalf of a partnership, corporation, or other entity), your
address, telephone number, account number, and the number of shares or dollar
amount to be redeemed. Your broker-dealer will send your redemption request to
State Street Bank and Trust Company.

If you have certificates for the shares you want to sell, you must include them
along with completed stock power forms.

Before State Street Bank and Trust Company can wire redemption proceeds to your
bank account, your broker-dealer must provide specific wire instructions to
State Street Bank and Trust Company.

REDEMPTION BY THE FUND If you own fewer shares than the minimum set by the
Trustees, the Fund may redeem your shares and send you the proceeds.

DIVIDENDS AND DISTRIBUTIONS

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 22nd day of each month. Loomis Sayles Funds'
trustees may change the frequency with which the Fund declares or pays
dividends.

You may choose to:
- - Reinvest all distributions in additional shares.
- - Receive all distributions in cash.

If you do not select an option when you open your account, all distributions
will be reinvested.

TAX CONSEQUENCES

LOOMIS SAYLES FUNDS 21
<PAGE>
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.

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.

FINANCIAL HIGHLIGHTS

This information has been audited by PricewaterhouseCoopers LLP. The report of
PricewaterhouseCoopers LLP and the Fund's financial statements are included in
the Fund's annual reports to shareholders, which are available free of charge by
calling 800-633-3330.

<PAGE>
LOOMIS SAYLES MANAGED BOND FUND

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Oct. 1, 1998*
to
Sept. 30, 1999
<S> <C>
- -----------------------------------------------------------------------------------

Net asset value, beginning of period $ 9.95
-------
Income from investment operations--
Net investment income (loss) 0.68
Net realized and unrealized gains (losses) on investments (0.22)
-------
Total from investment operations 0.46
-------
Less distributions--
Dividends from net investment income (0.62)
-------
Net asset value, end of period $ 9.79
=======
Total return (%)** 4.6+
Net assets, end of period (000) $34,264
Ratio of operating expenses to average net assets (%)*** 1.50++
Ratio of net investment income (loss) to average net assets (%) 6.77++
Portfolio turnover rate (%) 34+
Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been (%) 2.03++
Net investment income (loss) per share would have been ($) 0.63

* COMMENCEMENT OF OPERATIONS ON OCTOBER 1, 1998.
** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/ OR BORNE OTHER OPERATING
EXPENSES. TOTAL RETURN DOES NOT INCLUDE THE EFFECT OF ANY
FRONT END SALES CHARGES FOR THE FUND.
*** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE
FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS
REIMBURSEMENT, THE FUND'S RATIO OF OPERATING EXPENSES
WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
APPENDIX A

DESCRIPTION OF BOND RATINGS ASSIGNED BY STANDARD & POOR'S AND MOODY'S INVESTORS
SERVICE, INC.

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.

CC An obligation rated 'CC' is currently highly vulnerable to nonpayment.

<PAGE>

payments on this obligation are being continued. A 'C' also will be assigned to
a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying.

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.

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.

LOOMIS SAYLES FUNDS 25
<PAGE>

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.

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.

<PAGE>
FOR MORE INFORMATION ABOUT THE FUND:

In the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during the last fiscal year.

Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330
www.loomissayles.com

File No. 811-6241

<PAGE>

<TABLE>
<S> <C>
PROSPECTUS
[LOGO] FEBRUARY 1,
EQUITY FUNDS 2000
</TABLE>

LOOMIS SAYLES AGGRESSIVE GROWTH FUND
LOOMIS SAYLES CORE VALUE FUND
LOOMIS SAYLES GLOBAL TECHNOLOGY FUND
LOOMIS SAYLES GROWTH FUND
LOOMIS SAYLES INTERNATIONAL EQUITY FUND
LOOMIS SAYLES MID-CAP VALUE FUND
LOOMIS SAYLES SMALL CAP GROWTH FUND
LOOMIS SAYLES SMALL CAP VALUE FUND
LOOMIS SAYLES WORLDWIDE FUND

Loomis, Sayles & Company, L.P., which has been an investment adviser since 1926,
is the investment adviser of the Funds.

<TABLE>
<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles Aggressive Growth Fund 2
Loomis Sayles Core Value Fund 4
Loomis Sayles Global Technology Fund 6
Loomis Sayles Growth Fund 7
Loomis Sayles International Equity Fund 9
Loomis Sayles Mid-Cap Value Fund 11
Loomis Sayles Small Cap Growth Fund 13
Loomis Sayles Small Cap Value Fund 15
Loomis Sayles Worldwide Fund 17
Summary of Principal Risks 19

EXPENSES OF THE FUNDS 22

MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS
AND RISK CONSIDERATIONS 24

MANAGEMENT 32
Investment Adviser 32
Portfolio Managers 32
Service and Distribution Plans and Administrative and
Other Fees 34

GENERAL INFORMATION 35
Pricing 35
How to Purchase Shares 35
How to Redeem Shares 37
How to Exchange Shares 39
Dividends and Distributions 39
Tax Consequences 39

FINANCIAL HIGHLIGHTS 40
</TABLE>

<PAGE>
RISK/RETURN SUMMARY

GENERAL INFORMATION

The following is a summary of certain key information about the Loomis Sayles
Equity Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
summary.

The Risk/Return summary includes bar charts showing the Funds' annual returns
and tables showing the Funds' average annual returns. The bar charts and tables
provide an indication of the historical risk of an investment in each Fund by
showing:
- - how the Fund's performance varied from year to year over the life of the Fund;
and
- - how the Fund's average annual returns for one year, five years, and over the
life of the Fund compared to those of a broad-based securities market index.

A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future.

LOOMIS SAYLES FUNDS 1
<PAGE>
LOOMIS SAYLES AGGRESSIVE GROWTH FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital growth
from investments in common stocks or their equivalent.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in common stocks or
other equity securities of companies with market capitalizations that fall
within the capitalization range of companies included in the Russell Mid-Cap
Growth Index, although the Fund may invest in companies of any size.

The Fund may invest any portion of its assets in securities of Canadian issuers
and up to 20% of its assets in other foreign securities, including emerging
markets securities. The Fund may engage in foreign currency hedging
transactions, options and futures transactions, and securities lending. The Fund
also may invest in real estate investment trusts and Rule 144A securities.

- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares. Until May 7, 1999, the Fund's name was
the Loomis Sayles Mid-Cap Growth Fund.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 83.4% (FOURTH QUARTER, 1999), AND THE
FUND'S WORST QUARTER WAS DOWN 16.1% (THIRD QUARTER, 1998).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Russell Mid-Cap Growth Index, a market capitalization weighted index of
medium capitalization stocks determined by Russell to be growth stocks as
measured by their price-to-book ratios and forecasted growth values. The index
is unmanaged, has no operating costs, and is included in the table to facilitate
your comparison of the Fund's performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------------
Since
Inception
1 Year (12/31/96)
<S> <C> <C>
- --------------------------------------------------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
Institutional Class 197.8% 59.7%
Retail Class 196.9% 59.3%
RUSSELL MID-CAP GROWTH INDEX 51.3% 29.8%
</TABLE>

THE FUND'S PERFORMANCE THROUGH DECEMBER 31, 1999 BENEFITED FROM LOOMIS SAYLES'
AGREEMENT TO LIMIT THE FUND'S EXPENSES.

LOOMIS SAYLES FUNDS 3
<PAGE>
LOOMIS SAYLES CORE VALUE FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term growth of
capital and income.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests substantially all of its assets
in common stocks or their equivalent. The Fund invests primarily in medium-sized
and large-sized companies, although it may invest in companies of any size.

In deciding which securities to buy and sell, Loomis Sayles generally looks for
companies that Loomis Sayles believes are undervalued by the market in relation
to earnings, dividends, assets, and growth prospects. The Fund's investments may
include companies that have suffered significant business problems but that
Loomis Sayles believes have favorable prospects for recovery.

Loomis Sayles does not consider current income when making buy/sell decisions.
Loomis Sayles seeks to identify companies that Loomis Sayles believes have,
among other things, attractive price/earnings, price/book, and price/cash flow
ratios. Loomis Sayles generally seeks to find value by selecting individual
stocks that Loomis Sayles believes are attractive, rather than by attempting to
achieve investment growth by rotating the Fund's holdings among various sectors
of the economy.

PRINCIPAL RISKS Among the principal risks of investing in the Fund are the
following:
- - market risk (the risk that the value of the Fund's investments will fall as a
result of movements in financial markets generally);
- - foreign risk (the risk that the value of the Fund's foreign investments will
fall as a result of foreign political, social, or economic changes);
- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);
- - liquidity risk (the risk that the Fund may be unable to find a buyer for its
investments when it seeks to sell them); and
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).
<PAGE>

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 15.7% (FOURTH QUARTER, 1998), AND THE
FUND'S WORST QUARTER WAS DOWN 12.9% (THIRD QUARTER, 1999).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Standard & Poor's 500 Index, a commonly used benchmark of U.S. equity
securities. The index is unmanaged, has no operating costs, and is included in
the table to facilitate your comparison of the Fund's performance to a
broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/13/91)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
LOOMIS SAYLES CORE VALUE FUND
Institutional Class -1.3% 18.2% 14.1%
Retail Class -1.6% 18.0% 14.0%
STANDARD & POOR'S 500 INDEX 21.0% 28.6% 19.4%(1)
</TABLE>

- ---------------------------

(1)Since inception data for the index covers the period from the month-end
following the Fund's inception date through December 31, 1999.

LOOMIS SAYLES FUNDS 5
<PAGE>
LOOMIS SAYLES GLOBAL TECHNOLOGY FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital
growth.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in common stocks or
other equity securities of technology companies located in the United States or
abroad. Technology companies include any companies that Loomis Sayles believes
extensively use technology in their product development or operations.

The Fund may engage in options and futures transactions and foreign currency
hedging transactions and also may invest in securities from issuers located in
countries with emerging securities markets.

- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);

PERFORMANCE No performance information is available for the Fund because it has
not yet been in operation for a full calendar year.
<PAGE>
LOOMIS SAYLES GROWTH FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term growth of
capital.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests substantially all of its assets
in common stocks or their equivalent. The Fund focuses on stocks of large
capitalization companies, but the Fund may invest in companies of any size.

In deciding which securities to buy and sell, Loomis Sayles first seeks to
identify well-managed companies that Loomis Sayles believes have a leading
position within their industry. Loomis Sayles then targets those companies that
Loomis Sayles believes have the potential for strong revenue growth,
accelerating earnings growth, and rising profit margins.

Loomis Sayles typically does not consider current income when making buy/sell
decisions. Instead, Loomis Sayles looks for companies that Loomis Sayles
believes have dynamic earnings growth and prospects for high levels of
profitability, sustainable competitive advantages driven by proprietary products
or technologies, and solid management whose interests are aligned with those of
the company's shareholders.

The Fund typically buys stocks of companies that Loomis Sayles believes are
undervalued relative to future growth prospects. The Fund typically sells a
stock when Loomis Sayles believes the company's expected earnings or competitive
situation no longer meet Loomis Sayles' expectations.

LOOMIS SAYLES FUNDS 7
<PAGE>

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 33.2% (FOURTH QUARTER, 1999), AND THE
FUND'S WORST QUARTER WAS DOWN 16.0% (THIRD QUARTER, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/16/91)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
LOOMIS SAYLES GROWTH FUND
Institutional Class 42.5% 25.7% 18.4%
Retail Class 42.2% 25.6% 18.3%
STANDARD & POOR'S 500 INDEX 21.0% 28.6% 19.4%(1)
</TABLE>

- ---------------------------

(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>
LOOMIS SAYLES INTERNATIONAL EQUITY FUND

INVESTMENT OBJECTIVE The Fund's investment objective is high total investment
return through a combination of capital appreciation and current income.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in common stocks or
other equity securities issued by companies headquartered or organized outside
the United States. The Fund generally focuses on stocks of larger companies, but
the Fund may invest in securities issued by companies of any size and in
securities from countries with emerging markets.

The Fund may engage in foreign currency hedging transactions and options and
futures transactions and also may invest in real estate investment trusts,
Rule 144A securities and, to the extent permitted by the Investment Company Act
of 1940, securities of closed-end investment companies.

LOOMIS SAYLES FUNDS 9
<PAGE>

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 65.8% (FOURTH QUARTER, 1999), AND THE
FUND'S WORST QUARTER WAS DOWN 12.7% (THIRD QUARTER, 1998).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the MSCI EAFE Index, an index that tracks the performance of more than 1,000
foreign stocks from 20 countries. The index is unmanaged, has no operating
costs, and is included in the table to facilitate your comparison of the Fund's
performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/10/91)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
LOOMIS SAYLES INTERNATIONAL EQUITY FUND
Institutional Class 90.2% 21.5% 15.8%
Retail Class 89.5% 21.3% 15.6%
MSCI EAFE INDEX 27.0% 12.8% 10.4%(1)
</TABLE>

FOR PERIODS BEFORE THE INCEPTION OF RETAIL CLASS SHARES (DECEMBER 31, 1996),
PERFORMANCE SHOWN FOR RETAIL CLASS SHARES IS BASED ON THE PERFORMANCE OF THE
FUND'S INSTITUTIONAL CLASS SHARES, ADJUSTED TO REFLECT THE HIGHER FEES PAID BY
RETAIL CLASS SHARES. 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>
LOOMIS SAYLES MID-CAP VALUE FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital growth
from investments in common stocks or their equivalent.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity securities
of companies with market capitalizations that fall within the capitalization
range of companies included in the Standard & Poor's Mid-Cap 400 Index.

PRINCIPAL RISKS Among the principal risks of investing in the Fund are the
following:
- - market risk (the risk that the value of the Fund's investments will fall as a
result of movements in financial markets generally);
- - foreign risk (the risk that the value of the Fund's foreign investments will
fall as a result of foreign political, social, or economic changes);
- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);
- - derivatives risk (the risk that the value of the Fund's derivative investments
will fall as a result of pricing difficulties or lack of correlation with the
underlying investment);
- - liquidity risk (the risk that the Fund may be unable to find a buyer for its
investments when it seeks to sell them); and
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).

LOOMIS SAYLES FUNDS 11
<PAGE>

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 17.6% (FOURTH QUARTER, 1998), AND THE
FUND'S WORST QUARTER WAS DOWN 19.0% (THIRD QUARTER, 1998).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Standard & Poor's Mid-Cap 400 Index, an index that tracks the performance of
stocks of 400 mid-sized companies. The index is unmanaged, has no operating
costs, and is included in the table to facilitate your comparison of the Fund's
performance to a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------------
Since
Inception
1 Year (12/31/96)
<S> <C> <C>
- --------------------------------------------------------------------------------------
LOOMIS SAYLES MID-CAP VALUE FUND
Institutional Class 6.7% 11.5%
Retail Class 6.5% 11.2%
STANDARD & POOR'S MID-CAP 400 INDEX 14.7% 21.8%
</TABLE>

THE FUND'S PERFORMANCE THROUGH DECEMBER 31, 1999 BENEFITED FROM LOOMIS SAYLES'
AGREEMENT TO LIMIT THE FUND'S EXPENSES.

<PAGE>
LOOMIS SAYLES SMALL CAP GROWTH FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital growth
from investments in common stocks or their equivalent.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity securities
of companies with market capitalizations that fall within the capitalization
range of the Russell 2000 Index, an index that tracks stocks of 2,000 of the
smallest U.S. companies. The Fund may invest the rest of its assets in larger
companies.

PRINCIPAL RISKS Among the principal risks of investing in the Fund are the
following:
- - market risk (the risk that the value of the Fund's investments will fall as a
result of movements in financial markets generally);
- - foreign risk (the risk that the value of the Fund's foreign investments will
fall as a result of foreign political, social, or economic changes);
- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);
- - derivatives risk (the risk that the value of the Fund's derivative investments
will fall as a result of pricing difficulties or lack of correlation with the
underlying investment);
- - liquidity risk (the risk that the Fund may be unable to find a buyer for its
investments when it seeks to sell them); and
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).

LOOMIS SAYLES FUNDS 13
<PAGE>

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 54.0% (FOURTH QUARTER, 1999), AND THE
FUND'S WORST QUARTER WAS DOWN 21.9% (THIRD QUARTER, 1998).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Russell 2000 Index. The index is unmanaged, has no operating costs, and is
included in the table to facilitate your comparison of the Fund's performance to
a broad-based market index.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------------
Since
Inception
1 Year (12/31/96)
<S> <C> <C>
- --------------------------------------------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH FUND
Institutional Class 91.8% 39.6%
Retail Class 91.3% 39.3%
RUSSELL 2000 INDEX 43.1% 17.8%
</TABLE>

THE FUND'S PERFORMANCE THROUGH DECEMBER 31, 1999 BENEFITED FROM LOOMIS SAYLES'
AGREEMENT TO LIMIT THE FUND'S EXPENSES.
<PAGE>
LOOMIS SAYLES SMALL CAP VALUE FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital growth
from investments in common stocks or their equivalents.

The Fund may invest up to 20% of its assets in securities of foreign issuers,
including emerging markets securities. The Fund may engage in foreign currency
hedging transactions and also may invest in real estate investment trusts,
Rule 144A securities, and, to the extent permitted by the Investment Company Act
of 1940, securities of closed-end investment companies.

LOOMIS SAYLES FUNDS 15
<PAGE>

BAR CHART The following bar chart shows year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 18.1% (FOURTH QUARTER, 1998), AND THE
FUND'S WORST QUARTER WAS DOWN 18.6% (THIRD QUARTER, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years (5/31/91)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE FUND
Institutional Class 0.4% 16.6% 16.1%
Retail Class 0.0% 16.4% 16.0%
Admin Class -0.3% 16.2% 15.9%
RUSSELL 2000 INDEX 21.3% 16.7% 14.6%(1)
</TABLE>

FOR PERIODS BEFORE THE INCEPTION OF RETAIL CLASS SHARES (DECEMBER 31, 1996) AND
ADMIN CLASS SHARES (JANUARY 2, 1998), PERFORMANCE SHOWN FOR THOSE CLASSES IS
BASED ON THE PERFORMANCE OF THE FUND'S INSTITUTIONAL CLASS SHARES, ADJUSTED TO
REFLECT THE HIGHER FEES PAID BY RETAIL CLASS AND ADMIN CLASS SHARES. 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>
LOOMIS SAYLES WORLDWIDE FUND

INVESTMENT OBJECTIVE The Fund's investment objective is high total investment
return through a combination of capital appreciation and current income.

PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity and fixed
income securities of U.S. and foreign issuers, including securities from issuers
located in countries with emerging securities markets. Loomis Sayles' Global
Asset Allocation Group allocates the Fund's assets among the following four
sectors:
- - Domestic equities.
- - International equities.
- - Domestic fixed income securities.
- - International fixed income securities.

In deciding how to allocate the Fund's assets among the four sectors, Loomis
Sayles' Global Asset Allocation Group attempts to determine the relative
attractiveness of each of the four sectors based on fundamental factors such as
economic cycles, relative interest rates, stock market valuations, and currency
considerations.

In deciding which domestic equity securities to buy and sell, Loomis Sayles
generally looks for companies that Loomis Sayles believes have the potential for
superior earnings growth relative to current value.

In deciding which international equity securities to buy and sell, Loomis Sayles
generally looks for companies that Loomis Sayles believes have the potential for
superior earnings growth.

In deciding which domestic and international fixed income securities to buy and
sell, Loomis Sayles generally looks for securities that Loomis Sayles believes
are undervalued and have the potential for credit upgrades. Loomis Sayles may
hedge currency risk for the Fund if Loomis Sayles believes the outlook for a
particular foreign currency is unfavorable.

The Fund may engage in foreign currency hedging transactions and options and
futures transactions. The Fund also may invest in collateralized mortgage
obligations, zero coupon securities, when-issued securities, real estate
investment trusts, and Rule 144A securities.

LOOMIS SAYLES FUNDS 17
<PAGE>
- - derivatives risk (the risk that the value of the Fund's derivative investments
will fall as a result of pricing difficulties or lack of correlation with the
underlying investment);
- - liquidity risk (the risk that the Fund may be unable to find a buyer for its
investments when it seeks to sell them); 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 year-to-year changes in the performance
of the Fund's Institutional Class shares.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

THE FUND'S RETURNS WILL VARY. FOR EXAMPLE, DURING THE PERIOD SHOWN IN THE BAR
CHART, THE FUND'S BEST QUARTER WAS UP 45.1% (FOURTH QUARTER, 1999), AND THE
FUND'S WORST QUARTER WAS DOWN 10.8% (THIRD QUARTER, 1998).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
- -------------------------------------------------------------------------------------
Since
Inception
1 Year (5/1/96)
<S> <C> <C>
- -------------------------------------------------------------------------------------
LOOMIS SAYLES WORLDWIDE FUND
Institutional Class 60.5% 18.6%
Retail Class 60.1% 18.2%
STANDARD & POOR'S 500 INDEX 21.0% 26.6%(1)
</TABLE>

- ---------------------------

(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>
SUMMARY OF PRINCIPAL RISKS

The value of your investment in a 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 a Fund's portfolio as a whole. All
Funds could be subject to additional principal risks because the types of
investments made by each Fund can change over time.

MARKET RISK

This is the risk that the value of a Fund's investments will change as financial
markets fluctuate and that prices overall may decline. The value of a company's
stock may fall as a result of factors that directly relate to that company, such
as decisions made by its management or lower demand for the company's products
or services. A stock's value also may fall because of factors affecting not just
the company, but companies in its industry or in a number of different
industries, such as increases in production costs. The value of a company's
stock also may be affected by changes in financial market conditions, such as
changes in interest rates or currency exchange rates. In addition, a company's
stock generally pays dividends only after the company makes required payments to
holders of its bonds or other debt. For this reason, the value of the stock will
usually react more strongly than bonds and other fixed income securities to
actual or perceived changes in the company's financial condition or prospects.

Market risk generally is greater for Funds that invest substantially in small
and medium-sized companies, such as the Loomis Sayles Aggressive Growth Fund,
the Loomis Sayles Mid-Cap Value Fund, the Loomis Sayles Small Cap Growth Fund,
and the Loomis Sayles Small Cap Value Fund, since these companies tend to be
more vulnerable to adverse developments than large companies.

FOREIGN RISK

LOOMIS SAYLES FUNDS 19
<PAGE>
Funds that may invest in emerging markets, such as the Loomis Sayles Global
Technology Fund, the Loomis Sayles International Equity Fund, and the Loomis
Sayles Worldwide Fund, may face greater foreign risk since emerging market
countries may be more likely to experience political and economic instability.

CURRENCY RISK

This is the risk that fluctuations in exchange rates between the U.S. dollar and
foreign currencies may cause the value of a Fund's investments to decline. Each
of the Funds is subject to currency risk because it may invest in securities
denominated in, or receiving revenues in, foreign currencies.

LEVERAGING RISK

When a 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 Funds may create leverage by using investments such as
repurchase agreements, inverse floating rate instruments or derivatives, or by
borrowing money, each Fund faces this risk.

DERIVATIVES RISK

Each 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 Funds may use derivatives as part of a strategy designed to reduce other
risks ("hedging"). The Funds 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 a Fund from selling out of these illiquid securities
at an advantageous price. Derivatives and securities that involve substantial
credit risk tend to involve greater liquidity risk. In addition, liquidity risk
tends to increase to the extent a Fund invests in securities whose sale may be
restricted by law or by contract, such as Rule 144A securities.

<PAGE>
MANAGEMENT RISK

Management risk is the risk that Loomis Sayles' investment techniques could fail
to achieve a Fund's objective and could cause your investment in a Fund to lose
value. Each Fund is subject to management risk because each Fund is actively
managed by Loomis Sayles. Loomis Sayles will apply its investment techniques and
risk analyses in making investment decisions for each 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 a Fund.

CREDIT RISK

Funds that may invest a significant portion of their assets in foreign fixed
income securities, such as the Loomis Sayles Worldwide Fund, are subject to
increased credit risk because of the difficulties of requiring foreign entities
to honor their contractual commitments.

Funds that invest in lower rated fixed income securities ("junk bonds") are
subject to greater credit risk and market risk than Funds that invest in 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.

LOOMIS SAYLES FUNDS 21
<PAGE>

EXPENSES OF THE FUNDS

The following table presents the expenses that you would pay if you buy and hold
shares of a Fund.

None of the Funds imposes a sales charge, a redemption fee, or an exchange fee.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Fee
Distribution Total Annual Waiver/
Management and Service Other Fund Operating Reimburse- Net
Loomis Sayles Fund/Class Fees (12b-1) Fees Expenses Expenses ment** Expenses**
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Aggressive Growth Fund
Institutional Class .75% none 2.21% 2.96% 1.96% 1.00%
Retail Class .75% .25% 8.05% 9.05% 7.80% 1.25%
- ----------------------------------------------------------------------------------------------------
Core Value Fund
Institutional Class .50% none .28% .78% none .78%
Retail Class .50% .25% 2.60% 3.35% 2.25% 1.10%
- ----------------------------------------------------------------------------------------------------
Global Technology Fund*
Institutional Class 1.00% none .95% 1.95% .45% 1.50%
Retail Class 1.00% .25% 1.08% 2.33% .58% 1.75%
- ----------------------------------------------------------------------------------------------------
Growth Fund
Institutional Class .50% none .68% 1.18% .33% .85%
Retail Class .50% .25% 3.68% 4.43% 3.33% 1.10%
- ----------------------------------------------------------------------------------------------------
International Equity
Fund
Institutional Class .75% none .47% 1.22% .22% 1.00%
Retail Class .75% .25% 11.33% 12.33% 11.08% 1.25%
- ----------------------------------------------------------------------------------------------------
Mid-Cap Value Fund
Institutional Class .75% none 3.26% 4.01% 3.01% 1.00%
Retail Class .75% .25% 12.62% 13.62% 12.37% 1.25%
- ----------------------------------------------------------------------------------------------------
Small Cap Growth Fund
Institutional Class .75% none .36% 1.11% .11% 1.00%
Retail Class .75% .25% .80% 1.80% .55% 1.25%
- ----------------------------------------------------------------------------------------------------
Small Cap Value Fund
Institutional Class .75% none .15% .90% none .90%
Retail Class .75% .25% .20% 1.20% none 1.20%
Admin Class .75% .25% .70%*** 1.70% 0.20% 1.50%
- ----------------------------------------------------------------------------------------------------
Worldwide Fund
Institutional Class .75% none 2.71% 3.46% 2.46% 1.00%
Retail Class .75% .25% 19.19% 20.19% 18.94% 1.25%
- ----------------------------------------------------------------------------------------------------
* OTHER EXPENSES FOR THE GLOBAL TECHNOLOGY FUND ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT
FISCAL YEAR.
** REFLECTS LOOMIS SAYLES' CONTRACTUAL OBLIGATION TO LIMIT THE FUNDS' EXPENSES THROUGH
FEBRUARY 1, 2001. INSTITUTIONAL CLASS SHARES OF THE CORE VALUE FUND AND INSTITUTIONAL AND
RETAIL CLASS SHARES OF THE SMALL CAP VALUE FUND ARE CURRENTLY UNAFFECTED BY THE EXPENSE
LIMITATION.
*** OTHER EXPENSES INCLUDE AN ADMINISTRATIVE FEE OF .25% FOR ADMIN CLASS SHARES.
- ----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
EXAMPLE

<TABLE>
- --------------------------------------------------------------------------------
Fund/Class 1 Year* 3 Years* 5 Years* 10 Years*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loomis Sayles Aggressive Growth
Fund
Institutional Class $102 $730 $1,385 $3,140
Retail Class $127 $1,930 $3,589 $7,185
- --------------------------------------------------------------------------------
Loomis Sayles Core Value Fund
Institutional Class $80 $249 $433 $966
Retail Class $112 $820 $1,551 $3,487
- --------------------------------------------------------------------------------
Loomis Sayles Global Technology
Fund
Institutional Class $153 $569 n/a n/a
Retail Class $178 $672 n/a n/a
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund
Institutional Class $87 $342 $617 $1,402
Retail Class $112 $1,038 $1,974 $4,362
- --------------------------------------------------------------------------------
Loomis Sayles International
Equity Fund
Institutional Class $102 $365 $649 $1,458
Retail Class $127 $2,502 $4,541 $8,466
- --------------------------------------------------------------------------------
Loomis Sayles Mid-Cap Value
Fund
Institutional Class $102 $944 $1,803 $4,027
Retail Class $127 $2,715 $4,876 $8,845
- --------------------------------------------------------------------------------
Loomis Sayles Small Cap Growth
Fund
Institutional Class $102 $342 $601 $1,342
Retail Class $127 $513 $924 $2,071
- --------------------------------------------------------------------------------
Loomis Sayles Small Cap Value
Fund
Institutional Class $92 $287 $498 $1,108
Retail Class $122 $381 $660 $1,455
Admin Class $153 $516 $904 $1,992
- --------------------------------------------------------------------------------
Loomis Sayles Worldwide Fund
Institutional Class $102 $833 $1,586 $3,574
Retail Class $127 $3,705 $6,278 $9,977
- --------------------------------------------------------------------------------
* EXPENSES SHOWN FOR EACH CLASS, EXCEPT FOR THE INSTITUTIONAL CLASS OF THE
LOOMIS SAYLES CORE VALUE FUND AND THE INSTITUTIONAL AND RETAIL CLASSES OF THE
LOOMIS SAYLES SMALL CAP VALUE FUND, INCLUDE THE FEE WAIVER/ REIMBURSEMENT FOR
THE FIRST YEAR OF EACH PERIOD.
- --------------------------------------------------------------------------------
</TABLE>

LOOMIS SAYLES FUNDS 23
<PAGE>
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS

Each of the Funds may use any of the investment strategies described in this
section. Some of these investment strategies are principal investment strategies
for the Funds, while others are secondary investment strategies for the Funds.

TEMPORARY DEFENSIVE STRATEGIES

PORTFOLIO TURNOVER

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 capitalizations may be more
volatile than the securities of larger, more established companies and than the
broad equity market indices.

GROWTH STOCKS

Stocks of companies that Loomis Sayles believes have earnings that will grow
faster than the economy as a whole are known as growth stocks. The Loomis Sayles
Aggressive Growth Fund, the Loomis Sayles Global Technology Fund, the Loomis
Sayles International Equity Fund, and the Loomis Sayles Small Cap Growth Fund
generally invest a significant portion of their assets in growth stocks. Growth
stocks typically trade at higher multiples of current earnings than other
stocks. As a result, the values of growth stocks may be more sensitive to
changes in current or expected earnings than the values of other stocks. If
Loomis Sayles' assessment of
<PAGE>
the prospects for a company's earnings growth is wrong, or if its judgment of
how other investors will value the company's earnings growth is wrong, then the
price of that company's stock may fall or may not approach the value that Loomis
Sayles has placed on it.

VALUE STOCKS

Stocks of companies that are not expected to experience significant earnings
growth, but whose stocks Loomis Sayles believes are undervalued compared to
their true worth, are known as value stocks. The Loomis Sayles Core Value Fund,
the Loomis Sayles Mid-Cap Value Fund, and the Loomis Sayles Small Cap Value Fund
generally invest a significant portion of their assets in value stocks. These
companies may have experienced adverse business developments or may be subject
to special risks that have caused their stocks to be out of favor. If Loomis
Sayles' assessment of a company's prospects is wrong, or if other investors do
not eventually recognize the value of the company, then the price of the
company's stock may fall or may not approach the value that Loomis Sayles has
placed on it.

WHEN-ISSUED SECURITIES

A "when-issued" security involves a 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 a Fund commits to buy it and the
payment date, the Fund may sustain a loss. The risk of this loss is in addition
to the Fund's risk of loss on the securities actually in its portfolio at the
time. In addition, when the Fund buys a security on a when-issued basis, it is
subject to the risk that market rates of interest will increase before the time
the security is delivered, with the result that the yield on the security
delivered to the Fund may be lower than the yield available on other, comparable
securities at the time of delivery. If a 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.

RULE 144A SECURITIES

FOREIGN SECURITIES

Securities of issuers organized or headquartered outside the United States are
foreign securities. Foreign securities may present risks not associated with

LOOMIS SAYLES FUNDS 25
<PAGE>

investments in comparable securities of U.S. issuers. There may be less
information publicly available about a foreign corporate or governmental issuer
than about a U.S. issuer, and foreign 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 foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and securities custody costs are often
higher than in the United States. With respect to certain foreign countries,
there is a possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability, and diplomatic developments that
could affect the value of investments in those countries. A Fund's receipt of
interest on foreign government securities may depend on the availability of tax
or other revenues to satisfy the issuer's obligations.

In determining whether to invest assets of the Funds in securities of a
particular foreign issuer, Loomis Sayles will consider the likely effects of
foreign taxes on the net yield available to the Fund and its shareholders.
Compliance with foreign tax law may reduce a Fund's net income available for
distribution to shareholders.
<PAGE>
FOREIGN CURRENCY HEDGING TRANSACTIONS

Foreign currency hedging transactions are an effort 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 foreign currency
exchange rate between the date on which a 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, a Fund might
purchase or sell a foreign currency on a spot (that is, cash) basis at the
prevailing spot rate. If conditions warrant, the Funds may also enter into
private contracts to purchase or sell foreign currencies at a future date
("forward contracts"). The Funds might also purchase exchange-listed and
over-the-counter call and put options on foreign currencies. Over-the-counter
currency options are generally less liquid than exchange-listed options and will
be treated as illiquid assets. The Funds may not be able to dispose of
over-the-counter options readily.

Foreign currency transactions involve costs and may result in losses.

REPURCHASE AGREEMENTS

A repurchase agreement involves a Fund buying 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 a 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.

REAL ESTATE INVESTMENT TRUSTS

LOOMIS SAYLES FUNDS 27
<PAGE>
distributions that constitute a return of capital to Fund shareholders for
federal income tax purposes. In addition, distributions by a Fund from REITs
will not qualify for the corporate dividends-received deduction.

OPTIONS AND FUTURES TRANSACTIONS

Options and futures transactions involve a Fund buying, selling, or writing
options (or buying or selling futures contracts) on securities, securities
indices, or currencies. Funds may engage in these transactions either to enhance
investment return or to hedge against changes in the value of other assets that
the Funds own or intend 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.

The value of options purchased by a Fund and futures contracts held by a Fund
may fluctuate based on a variety of market and economic factors. In some cases,
the fluctuations may offset (or be offset by) changes in the value of securities
held in a 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 a 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.
<PAGE>
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 a 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), a Fund is at risk that the other party to the
transaction will default on its obligations, or will not permit a Fund to
terminate the transaction before its scheduled maturity.

SECURITIES LENDING

FIXED INCOME SECURITIES

LOOMIS SAYLES FUNDS 29
<PAGE>
the income of a Fund for any particular period. If a Fund holds fixed income
securities, the net asset value of the Fund's shares will vary as a result of
changes in the value of the fixed income securities in the Fund's portfolio. A
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.

ZERO COUPON SECURITIES

These securities are fixed income securities that accrue interest at a specified
rate, but do not pay interest in cash on a current basis. A Fund investing in
zero coupon securities 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 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.

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 a Fund is retired
early, the Fund would 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.

CLOSED-END INVESTMENT COMPANIES

A closed-end investment company is a fund that does not redeem its shares on a
daily basis. As a result, an investment in a closed-end investment company may
be less liquid than an investment that can be sold any time a Fund decides to
sell. Since the value of a closed-end investment company is based on the value
of the individual securities it holds, a closed-end investment company's value
will fall if the value of its underlying securities declines. As a shareholder
in a closed-end investment company, a Fund will bear its ratable share of the
investment

<PAGE>

company's expenses, including management fees, and will remain subject to the
investment company's advisory and administration fees with respect to the assets
so invested.

CONVERTIBLE SECURITIES

Convertible securities include corporate bonds, notes, or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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. A 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.

LOOMIS SAYLES FUNDS 31
<PAGE>
MANAGEMENT

INVESTMENT ADVISER

As previously described in the "Expenses of the Funds" section, each Fund pays
Loomis Sayles a monthly investment advisory fee, also known as a management fee,
for these services. These fees are expressed as a percentage of the Fund's
average net assets:

<TABLE>
<CAPTION>
Fund Management Fee
<S> <C>
- --------------------------------------------------------------------------
Loomis Sayles Aggressive Growth
Fund .75%
- --------------------------------------------------------------------------
Loomis Sayles Core Value Fund .50%
- --------------------------------------------------------------------------
Loomis Sayles Global Technology
Fund 1.00%
- --------------------------------------------------------------------------
Loomis Sayles Growth Fund .50%
- --------------------------------------------------------------------------
Loomis Sayles International Equity
Fund .75%
- --------------------------------------------------------------------------
Loomis Sayles Mid-Cap Value Fund .75%
- --------------------------------------------------------------------------
Loomis Sayles Small Cap Growth Fund .75%
- --------------------------------------------------------------------------
Loomis Sayles Small Cap Value Fund .75%
- --------------------------------------------------------------------------
Loomis Sayles Worldwide Fund .75%
- --------------------------------------------------------------------------
</TABLE>

Certain expenses incurred by each Class of each Fund, except the Loomis Sayles
Core Value Fund (Institutional Class) and the Loomis Sayles Small Cap Value Fund
(Institutional Class and Retail Class) would have been higher if not for Loomis
Sayles' contractual obligation to limit the Funds' expenses through February 1,
2001.

PORTFOLIO MANAGERS

LOOMIS SAYLES AGGRESSIVE GROWTH FUND Christopher R. Ely, David L. Smith, and
Philip C. Fine, Vice Presidents of Loomis Sayles Funds and of Loomis Sayles,
have served as portfolio managers of the Fund since 1999. Prior to joining
Loomis Sayles in 1996, Mr. Ely was senior vice president and portfolio manager,
and Mr. Fine and Mr. Smith were vice presidents and portfolio managers, of
Keystone Investment Management Company, Inc.

LOOMIS SAYLES CORE VALUE FUND Jeffrey W. Wardlow, Vice President of Loomis
Sayles Funds and of Loomis Sayles, has served as portfolio manager of the Fund
<PAGE>
since its inception in 1991. Isaac H. Green, Director, Vice President and
Managing Partner of Loomis Sayles and Vice President of Loomis Sayles Funds, and
James L. Carroll, Vice President of Loomis Sayles Funds and of Loomis Sayles,
have served as portfolio managers of the Fund since 1997. Prior to joining
Loomis Sayles in 1996, Mr. Carroll was a managing director and senior energy
analyst at PaineWebber, Inc.

LOOMIS SAYLES GLOBAL TECHNOLOGY FUND Christopher R. Ely leads a team of
portfolio managers for the Fund.

LOOMIS SAYLES GROWTH FUND Mark B. Baribeau, Vice President of Loomis Sayles and
of Loomis Sayles Funds, has served as portfolio manager of the Fund since 1999.
Pamela N. Czekanski and Richard D. Skaags, Vice Presidents of Loomis Sayles and
of Loomis Sayles Funds, have served as portfolio managers of the Fund since
2000.

LOOMIS SAYLES INTERNATIONAL EQUITY FUND Alex Muromcew, John Tribolet, and Eswar
Menon, Vice Presidents of Loomis Sayles and of Loomis Sayles Funds, have served
as portfolio managers of the Fund since 1999. Prior to joining Loomis Sayles in
1999, Mr. Muromcew was a portfolio manager at Nicholas Applegate Capital
Management since 1996. From 1993 to 1996, he was an investment analyst with
Teton Partners L.P. Prior to joining Loomis Sayles in 1999, Mr. Tribolet was a
portfolio manager at Nicholas Applegate Capital Management since 1997. From 1995
to 1997, he was a full time MBA student at the University of Chicago. Prior to
1995, he spent three years as an investment banker, most recently at PaineWebber
Inc. Prior to joining Loomis Sayles in 1999, Mr. Menon was a portfolio manager
at Nicholas Applegate Capital Management since 1995. From 1990 to 1995, he was
employed as an equity analyst by Koaneman Management and as a senior engineer by
Integrated Device Technology.

LOOMIS SAYLES MID-CAP VALUE FUND Joseph R. Gatz and Dawn Alston Paige, Vice
Presidents of Loomis Sayles and of Loomis Sayles Funds, are the portfolio
managers of the Fund. Mr. Gatz has served as portfolio manager of the Fund since
1999. Prior to joining Loomis Sayles in 1999, Mr. Gatz was a portfolio manager
at Banc One Investment Advisers Corporation and certain of its corporate
predecessors since 1993. Ms. Paige has served as portfolio manager of the Fund
since 1998.

LOOMIS SAYLES SMALL CAP GROWTH FUND Christopher R. Ely, Philip C. Fine, and
David L. Smith have served as portfolio managers of the Fund since its inception
in 1996.

LOOMIS SAYLES SMALL CAP VALUE FUND Joseph R. Gatz and Dawn Alston Paige have
served as portfolio managers of the Fund since 2000.

LOOMIS SAYLES WORLDWIDE FUND Daniel J. Fuss, President of Loomis Sayles Funds
and Vice Chairman of Loomis Sayles, has served as the portfolio manager of the
domestic fixed income securities sector of the Fund since its inception in 1996.
E. John deBeer, Vice President of Loomis Sayles Funds and of Loomis Sayles, has
served as portfolio manager of the international fixed income securities sector
of the Fund since its inception in 1996. Quentin P. Faulkner, Vice President of
Loomis Sayles Funds and of Loomis Sayles, has served as the portfolio manger of
the domestic equity securities sector of

LOOMIS SAYLES FUNDS 33
<PAGE>

the Fund since its inception in 1996. Alex Muromcew, John Tribolet, and Eswar
Menon have served as portfolio managers of the international equity securities
sector of the fund since 1999.

SERVICE AND DISTRIBUTION PLANS AND ADMINISTRATIVE AND OTHER FEES

For the Retail Class and Admin Class shares of the Funds, the Funds have adopted
service and distribution plans under Rule 12b-1 of the Investment Company Act of
1940 that allow the Funds to pay fees for the sale and distribution of Retail
and Admin Class shares and for services provided to shareholders. This 12b-1 fee
currently is .25% of a Fund's average daily net assets attributable to the
shares of a particular Class. Because these fees are paid out of the Funds'
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

Admin Class shares of the Loomis Sayles Small Cap Value Fund are offered
exclusively through intermediaries, who will be the record owner of the shares.

Admin Class shares of the Loomis Sayles Small Cap Value Fund may pay an
administrative fee at an annual rate of up to .25% of the average daily net
assets attributable to Admin Class shares to securities dealers or financial
intermediaries for providing personal service and account maintenance for their
customers who hold these shares.

<PAGE>
GENERAL INFORMATION

PRICING

The price of each Fund's shares is based on its net asset value ("NAV") The NAV
per share of each Class 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.

HOW TO PURCHASE SHARES

You can buy shares of each Fund in several ways:

Boston Financial Data Services
P.O. Box 8314
Boston, MA 02266-8314
Attention: Loomis Sayles Funds

- - THROUGH A FINANCIAL ADVISER Your financial adviser will be responsible for
furnishing all necessary documents to Loomis Sayles or Boston Financial Data
Services. Your financial adviser may charge you for his or her services.
- - THROUGH SYSTEMATIC INVESTING You can make regular investments of $50 or more
per month through automatic deductions from your bank checking or savings
account. Application forms are available through your financial adviser or by
calling Loomis Sayles at 800-626-9390.

LOOMIS SAYLES FUNDS 35
<PAGE>
Each Fund sells its shares at the NAV next calculated after Boston Financial
Data Services receives a properly completed investment order. Boston Financial
Data Services generally must receive your properly completed order before the
close of regular trading on the New York Stock Exchange for your shares to be
bought or sold at the Fund's NAV on that day.

Shares of each Fund may be purchased by (1) cash, (2) exchanging shares of the
same Class of any other Fund, provided the value of the shares exchanged meets
the investment minimum of that Fund, (3) exchanging securities acceptable to
Loomis Sayles, or (4) a combination of such methods. The exchange of securities
for shares of a Fund is subject to various restrictions, as described in the
Statement of Additional Information.

You also may wire subsequent investments to the Funds by using the following
wire instructions:

State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ABA No. 011000028
DDA 9904-622-9
(Your account number)
Attn: Custody and Shareholder Services
(Name of Fund)

Your bank may charge a fee for transmitting funds by wire.

A 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 Fund's shares may be purchased by all types of tax-deferred retirement
plans. If you wish to open an individual retirement account (IRA) with a Fund,
Loomis Sayles has retirement plan forms available.
<PAGE>
The minimum initial investment for each Fund generally is $250,000 for
Institutional Class shares and $5,000 for Retail Class shares. Loomis Sayles
Funds may waive these minimums in its sole discretion.

Each subsequent investment must be at least $50.

HOW TO REDEEM SHARES

You may make redemptions directly from each Fund either by mail or by telephone.

- - BY MAIL Send a signed letter of instruction that includes the name of the
Fund, the exact name(s) in which the shares are registered, any special
capacity in which you are signing (such as trustee or custodian or on behalf
of a partnership, corporation, or other entity), your address, telephone
number, account number, social security number, and the number of shares or
dollar amount to be redeemed to the following address:

Boston Financial Data Services, Inc.
P.O. Box 8314
Boston, MA 02266
Attention: Loomis Sayles Funds

If you have certificates for the shares you want to sell, you must include
them along with completed stock power forms.

LOOMIS SAYLES FUNDS 37
<PAGE>
- - BY TELEPHONE You may redeem shares by calling Boston Financial Data Services
at 800-626-9390. Proceeds from telephone redemption requests can be wired to
your bank account or sent by check in the name of the registered owner(s) to
the record address.

A telephone redemption request must be received by Boston Financial Data
Services prior to the close of regular trading on the New York Stock Exchange.
If you telephone a redemption request after the Exchange closes or on a day
when the Exchange is not open for business, Boston Financial Data Services
cannot accept the request, and you must make a new redemption request during
regular trading on the Exchange.

The maximum value of shares that you may redeem by telephone is $50,000. For
your protection, telephone redemption requests will not be permitted if Boston
Financial Data Services or the Fund has been notified of an address change for
your account within the preceding 30 days. Unless you indicate otherwise on
your account application, Boston Financial Data Services will be authorized to
accept redemption and transfer instructions by telephone. If you prefer, you
can decline telephone redemption and transfer privileges.

The telephone redemption privilege may be modified or terminated by the Funds
without notice. Certain of the telephone redemption procedures may be waived
for holders of Institutional Class shares.

- - SYSTEMATIC WITHDRAWAL PLAN If the value of your account is $25,000 or more,
you can have periodic redemptions automatically paid to you or to someone you
designate. Please call 800-626-9390 for more information or to set up a
systematic withdrawal plan.

Please note that a notary public cannot provide a signature guarantee. This
guaranteed signature requirement may be waived by Loomis Sayles in certain
cases.

REDEMPTION BY THE FUNDS If you own fewer shares than the minimum set by the
Trustees, each Fund may redeem your shares and send you the proceeds.
<PAGE>
HOW TO EXCHANGE SHARES

You may make an exchange by sending a signed letter of instruction or by
telephone, unless you have elected on your account application to decline
telephone exchange privileges.

Please remember that an exchange may be a taxable event for federal and/or state
income tax purposes, so that you may realize a gain or loss that is subject to
income tax.

DIVIDENDS AND DISTRIBUTIONS

Each of the Funds declares and pays its net investment income to shareholders as
dividends annually. Each Fund also distributes all of its net capital gains
realized from the sale of portfolio securities. The Funds typically will make
capital gain distributions annually, but the Funds may make more frequent
capital gain distributions.

You may choose to:
- - Reinvest all distributions in additional shares.
- - Receive all distributions in cash.

If you do not select an option when you open your account, all distributions
will be reinvested.

TAX CONSEQUENCES

For federal income tax purposes, distributions of investment income from each of
the Funds are taxable as ordinary income. Taxes on distributions of capital
gains are determined by how long a Fund owned the investments that generated the
capital gains, rather than by how long you have owned your shares of the Fund.
Distributions of short-term capital gains, which result from the sale of
securities that a Fund had held for one year or less, are taxable as ordinary
income. Properly

LOOMIS SAYLES FUNDS 39
<PAGE>
designated distributions of long-term capital gains, which result from the sale
of securities that a Fund had held for more than one year, are taxable as
long-term capital gains (generally at a 20% federal income tax rate for
noncorporate shareholders).

Distributions of income and capital gains are taxable whether you receive them
in cash or reinvest them in additional shares. If a dividend or distribution is
made shortly after you purchase shares of a 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.

A Fund's investment in foreign securities may be subject to foreign withholding
taxes, which would decrease a Fund's yield on these securities. Shareholders may
be entitled to claim a credit or deduction with respect to foreign taxes. In
addition, a Fund's investment in foreign securities may increase or accelerate a
Fund's recognition of income and may affect the timing or amount of a Fund's
distributions.

FINANCIAL HIGHLIGHTS

<PAGE>
LOOMIS SAYLES AGGRESSIVE GROWTH FUND (INSTITUTIONAL CLASS)

Net asset value, beginning of period $ 10.51 $11.49 $10.00
------- ------ ------
Income from investment operations--
Net investment income (loss) (0.09)*** (0.03) (0.03)
Net realized and unrealized gains (losses) on investments 10.05 (0.95) 2.26
------- ------ ------
Total from investment operations 9.96 (0.98) 2.23
------- ------ ------
Less distributions--
Distributions in excess of net investment income 0.00 0.00 (0.12)
Distributions from net realized capital gains (0.39) 0.00 (0.62)
------- ------ ------
Total distributions (0.39) 0.00 (0.74)
------- ------ ------
Net asset value, end of period $ 20.08 $10.51 $11.49
======= ====== ======
Total return (%)**** 97.9 (8.5)+ 22.7+
Net assets, end of period (000) $13,308 $2,073 $1,848
Ratio of operating expenses to average net assets (%)***** 1.00 1.00++ 1.00++
Ratio of net investment income (loss) to average net assets (%) (0.56) (0.35)++ (0.38)++
Portfolio turnover rate (%) 199 82+ 174+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been (%) 2.96 7.13++ 9.35++
Net investment income (loss) per share would have been ($) (0.42)*** (0.50) (0.60)
</TABLE>

* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE FUNDS' FISCAL
YEAR END CHANGED FROM DECEMBER 31 TO SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE BASIS OF THE
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD.
**** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT REDUCED ITS
ADVISORY FEES AND/OR BORNE OTHER OPERATING EXPENSES.
***** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S RATIO OF
OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.

LOOMIS SAYLES FUNDS 41
<PAGE>
LOOMIS SAYLES AGGRESSIVE GROWTH FUND (RETAIL CLASS)

Net asset value, beginning of period $10.49 $11.49 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) (0.14)*** (0.05) (0.06)
Net realized and unrealized gains (losses) on
investments 10.03 (0.95) 2.27
------ ------ ------
Total from investment operations 9.89 (1.00) 2.21
------ ------ ------
Less distributions--
Distributions in excess of net investment income 0.00 0.00 (0.10)
Distributions from net realized capital gains (0.39) 0.00 (0.62)
------ ------ ------
Total distributions (0.39) 0.00 (0.72)
------ ------ ------
Net asset value, end of period $19.99 $10.49 $11.49
====== ====== ======
Total return (%)**** 97.5 (8.7)+ 22.4+
Net assets, end of period (000) $1,175 $ 85 $ 74
Ratio of operating expenses to average net assets (%)***** 1.25 1.25++ 1.25++
Ratio of net investment income (loss) to average net
assets (%) (0.80) (0.60)++ (0.67)++
Portfolio turnover rate (%) 199 82+ 174+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 9.05 27.97+ 36.58++
Net investment income (loss) per share would have been
($) (1.50)*** (2.08) (3.29)
</TABLE>

<TABLE>
<S> <C>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.
**** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
***** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES CORE VALUE FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------
Sept. 30, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998* 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.85 $ 17.64 $ 15.60 $ 14.57 $ 11.80 $ 12.49
------- ------- ------- ------- ------- -------
Income from investment operations--
Net investment income (loss) 0.22 0.18 0.18 0.22 0.23 0.15
Net realized and unrealized gains
(losses) on investments 1.53 (0.97) 4.32 2.83 3.93 (0.26)
------- ------- ------- ------- ------- -------
Total from investment operations 1.75 (0.79) 4.50 3.05 4.16 (0.11)
------- ------- ------- ------- ------- -------
Less distributions--
Dividends from net investment income (0.24) 0.00 (0.19) (0.22) (0.23) (0.15)
Distributions from net realized capital
gains (1.82) 0.00 (2.27) (1.80) (1.16) (0.43)
------- ------- ------- ------- ------- -------
Total distributions (2.06) 0.00 (2.46) (2.02) (1.39) (0.58)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 16.54 $ 16.85 $ 17.64 $ 15.60 $ 14.57 $ 11.80
======= ======= ======= ======= ======= =======
Total return (%)** 10.5 (4.5)+ 29.2 21.2 35.2 (0.9)
Net assets, end of period (000) $66,726 $66,928 $63,303 $43,715 $36,465 $25,946
Ratio of operating expenses to average net
assets (%)*** 0.78 0.79++ 0.84 1.13 1.20 1.33
Ratio of net investment income (loss) to
average net assets (%) 1.20 1.36++ 1.12 1.44 1.61 1.28
Portfolio turnover rate (%) 59 49+ 64 58 60 48

Without giving effect to the expense
limitations:
Ratio of expenses to average net
assets would have been (%) 0.78 0.79++ 0.84 1.13 1.20 1.33
Net investment income (loss) per share
would have been ($) 0.22 0.18 0.18 0.22 0.23 0.15
</TABLE>

<TABLE>
<S> <C>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
*** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 43
<PAGE>
LOOMIS SAYLES CORE VALUE FUND (RETAIL CLASS)

Net asset value, beginning of period $16.79 $17.62 $15.60
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.18 0.15*** 0.15***
Net realized and unrealized gains (losses) on
investments 1.52 (0.98) 4.30
------ ------ ------
Total from investment operations 1.70 (0.83) 4.45
------ ------ ------
Less distributions--
Dividends from net investment income (0.19) 0.00 (0.16)
Distributions from net realized capital gains (1.82) 0.00 (2.27)
------ ------ ------
Total distributions (2.01) 0.00 (2.43)
------ ------ ------
Net asset value, end of period $16.48 $16.79 $17.62
====== ====== ======
Total return (%)**** 10.2 (4.7)+ 28.9+
Net assets, end of period (000) $ 605 $1,015 $1,324
Ratio of operating expenses to average net assets (%)***** 1.10 1.10++ 1.10++
Ratio of net investment income (loss) to average net
assets (%) 0.88 1.07++ 0.84++
Portfolio turnover rate (%) 59 49+ 64+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 3.35 2.20++ 6.17++
Net investment income (loss) per share would have been
($) (0.28) 0.00*** (0.73)***
</TABLE>

<PAGE>
LOOMIS SAYLES GROWTH FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------------------
Sept. 30, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998* 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.65 $ 12.63 $ 13.44 $ 15.27 $ 12.50 $ 13.02
------- --------- --------- ------- ------- -------
Income from investment operations--
Net investment income (loss) (0.04) (0.03) (0.04) (0.07) 0.00 (0.02)
Net realized and unrealized gains
(losses) on investments 3.01 (0.95) 3.17 3.08 3.86 (0.45)
------- --------- --------- ------- ------- -------
Total from investment operations 2.97 (0.98) 3.13 3.01 3.86 (0.47)
------- --------- --------- ------- ------- -------
Less distributions--
Dividends from net investment income 0.00 0.00 0.00 0.00 0.00 (0.01)
Distributions from net realized
capital gains (3.45) 0.00 (3.94) (4.84) (1.09) (0.04)
------- --------- --------- ------- ------- -------
Total distributions (3.45) 0.00 (3.94) (4.84) (1.09) (0.05)
------- --------- --------- ------- ------- -------
Net asset value, end of period $ 11.17 $ 11.65 $ 12.63 $ 13.44 $ 15.27 $ 12.50
======= ========= ========= ======= ======= =======
Total return (%)** 30.9 (7.8)+ 24.5 19.9 30.9 (3.7)
Net assets, end of period (000) $28,235 $ 24,663 $ 32,149 $39,497 $45,011 $36,580
Ratio of operating expenses to average
net assets (%)*** 0.85 0.85++ 0.85 1.10 1.08 1.16
Ratio of net investment income (loss) to
average net assets (%) (0.40) (0.32)++ (0.26) (0.47) (0.29) (0.14)
Portfolio turnover rate (%) 164 118+ 116 99 48 46

Without giving effect to the expense
limitations:
Ratio of expenses to average net
assets would have been (%) 1.18 1.02++ 0.98 1.10 1.08 1.16
Net investment income (loss) per
share would have been ($) (0.08) (0.05) (0.05) (0.07) 0.00 (0.02)
</TABLE>

* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE FUNDS' FISCAL
YEAR END CHANGED FROM DECEMBER 31 TO SEPTEMBER 30.
** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT REDUCED ITS
ADVISORY FEES AND/OR BORNE OTHER OPERATING EXPENSES.
*** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S RATIO OF OPERATING
EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.

LOOMIS SAYLES FUNDS 45
<PAGE>
LOOMIS SAYLES GROWTH FUND (RETAIL CLASS)

Net asset value, beginning of period $ 11.59 $ 12.59 $ 13.44
------- ------- -------
Income from investment operations--
Net investment income (loss) (0.06) (0.03) (0.07)
Net realized and unrealized gains (losses) on
investments 2.98 (0.97) 3.16
------- ------- -------
Total from investment operations 2.92 (1.00) 3.09
------- ------- -------
Less distributions--
Dividends from net investment income 0.00 0.00 0.00
Distributions from net realized capital gains (3.45) 0.00 (3.94)
------- ------- -------
Total distributions (3.45) 0.00 (3.94)
------- ------- -------
Net asset value, end of period $ 11.06 $ 11.59 $ 12.59
======= ======= =======
Total return (%)*** 30.6 (7.9)+ 24.2+
Net assets, end of period (000) $ 649 $ 516 $ 194
Ratio of operating expenses to average net assets (%)**** 1.10 1.10++ 1.10++
Ratio of net investment income (loss) to average net
assets (%) (0.65) (0.58)++ (0.42)++
Portfolio turnover rate (%) 164 118+ 116+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 4.43 4.74++ 12.96++
Net investment income (loss) per share would have been
($) (0.38) (0.19) (2.00)
</TABLE>

<TABLE>
<S> <C>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES INTERNATIONAL EQUITY FUND (INSTITUTIONAL CLASS)

Net asset value, beginning of period $ 10.74 $ 11.30 $ 13.16 $ 11.65 $ 11.61 $ 12.90
------- ------- ------- ------- ------- -------
Income from investment operations--
Net investment income (loss) 0.07 0.14 0.15** 0.12 0.14 0.15
Net realized and unrealized gains
(losses) on investments 3.31 (0.70) (0.27) 2.01 0.87 (0.38)
------- ------- ------- ------- ------- -------
Total from investment operations 3.38 (0.56) (0.12) 2.13 1.01 (0.23)
------- ------- ------- ------- ------- -------
Less distributions--
Dividends from net investment income (0.13) 0.00 (0.19) (0.09) (0.14) (0.14)
Distributions from net realized capital
gains (0.20) 0.00 (1.55) (0.53) (0.83) (0.92)
------- ------- ------- ------- ------- -------
Total distributions (0.33) 0.00 (1.74) (0.62) (0.97) (1.06)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 13.79 $ 10.74 $ 11.30 $ 13.16 $ 11.65 $ 11.61
======= ======= ======= ======= ======= =======
Total return (%)*** 32.0 (5.0)+ (1.0) 18.3 8.7 (1.8)
Net assets, end of period (000) $79,415 $68,464 $82,188 $90,662 $79,488 $73,189
Ratio of operating expenses to average net
assets (%)**** 1.00 1.00++ 1.00 1.42 1.45 1.46
Ratio of net investment income (loss) to
average net assets (%) 0.53 1.49++ 1.12 0.96 1.16 1.30
Portfolio turnover rate (%) 207 96+ 119 151 133 116

Without giving effect to the expense
limitations:
Ratio of expenses to average net
assets would have been (%) 1.22 1.18++ 1.16 1.42 1.45 1.46
Net investment income (loss) per share
would have been ($) 0.04 0.12 0.13** 0.12 0.14 0.15
</TABLE>

<TABLE>
<S> <C>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE
BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 47
<PAGE>
LOOMIS SAYLES INTERNATIONAL EQUITY FUND (RETAIL CLASS)

Net asset value, beginning of period $ 10.70 $ 11.28 $ 13.16
------- ------- -------
Income from investment operations--
Net investment income (loss) 0.05 0.10 0.10***
Net realized and unrealized gains (losses) on
investments 3.28 (0.68) ( 0.26)
------- ------- -------
Total from investment operations 3.33 (0.58) (0.16)
------- ------- -------
Less distributions--
Dividends from net investment income (0.10) 0.00 (0.17)
Distributions from net realized capital gains (0.20) 0.00 (1.55)
------- ------- -------
Total distributions (0.30) 0.00 (1.72)
------- ------- -------
Net asset value, end of period $ 13.73 $ 10.70 $ 11.28
======= ======= =======
Total return (%)**** 31.6 (5.1)+ (1.3)+
Net assets, end of period (000) $ 261 $ 150 $ 233
Ratio of operating expenses to average net assets (%)***** 1.25 1.25++ 1.25++
Ratio of net investment income (loss) to average net
assets (%) 0.29 1.16++ 0.73++
Portfolio turnover rate (%) 207 96+ 119+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 12.33 10.26++ 16.24++
Net investment income (loss) per share would have been
($) (1.81) (0.67) (1.93)***
</TABLE>

<PAGE>
LOOMIS SAYLES MID-CAP VALUE FUND (INSTITUTIONAL CLASS)

Net asset value, beginning of period $10.09 $11.53 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.03 0.02 0.07
Net realized and unrealized gains (losses) on
investments 1.26 (1.46) 2.54
------ ------ ------
Total from investment operations 1.29 (1.44) 2.61
------ ------ ------
Less distributions--
Dividends from net investment income (0.03) 0.00 (0.14)
Distributions from net realized capital gains (0.36) 0.00 (0.94)
------ ------ ------
Total distributions (0.39) 0.00 (1.08)
------ ------ ------
Net asset value, end of period $10.99 $10.09 $11.53
====== ====== ======
Total return (%)*** 12.9 (12.5)+ 26.3+
Net assets, end of period (000) $5,062 $3,291 $3,736
Ratio of operating expenses to average net assets (%)**** 1.00 1.00++ 1.00++
Ratio of net investment income (loss) to average net
assets (%) 0.28 0.22++ 0.74++
Portfolio turnover rate (%) 232 225+ 130+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 4.01 4.33++ 6.65++
Net investment income (loss) per share would have been
($) (0.27) (0.29) (0.49)
</TABLE>

<TABLE>
<S> <C>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 49
<PAGE>
LOOMIS SAYLES MID-CAP VALUE FUND (RETAIL CLASS)

Net asset value, beginning of period $10.07 $11.53 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) 0.00 (0.01) 0.03
Net realized and unrealized gains (losses) on
investments 1.25 (1.45) 2.55
------ ------ ------
Total from investment operations 1.25 (1.46) 2.58
------ ------ ------
Less distributions--
Dividends from net investment income 0.00 0.00 (0.11)
Distributions from net realized capital gains (0.36) 0.00 (0.94)
------ ------ ------
Total distributions (0.36) 0.00 (1.05)
------ ------ ------
Net asset value, end of period $10.96 $10.07 $11.53
====== ====== ======
Total return (%)*** 12.5 (12.7)+ 26.0+
Net assets, end of period (000) $ 231 $ 121 $ 168
Ratio of operating expenses to average net assets (%)**** 1.25 1.25++ 1.25++
Ratio of net investment income (loss) to average net
assets (%) (0.02) (0.03)++ 0.42++
Portfolio turnover rate (%) 232 225+ 130+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 13.62 13.31++ 27.99++
Net investment income (loss) per share would have been
($) (2.67) (2.40) (1.90)
</TABLE>

<TABLE>
<S> <C>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1997.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES SMALL CAP GROWTH FUND (INSTITUTIONAL CLASS)

Net asset value, beginning of period $ 9.83 $ 11.32 $10.00
------- ------- ------
Income from investment operations--
Net investment income (loss) (0.08) (0.02) (0.07)***
Net realized and unrealized gains (losses) on
investments 6.99 (1.47) 1.99
------- ------- ------
Total from investment operations 6.91 (1.49) 1.92
------- ------- ------
Less distributions--
Distributions in excess of net investment income 0.00 0.00 (0.01)
Distributions in excess of net realized capital gains 0.00 0.00 (0.59)
------- ------- ------
Total distributions 0.00 0.00 (0.60)
------- ------- ------
Net asset value, end of period $ 16.74 $ 9.83 $11.32
======= ======= ======
Total return (%)**** 70.3 (13.2)+ 19.4+
Net assets, end of period (000) $81,132 $17,174 $3,893
Ratio of operating expenses to average net assets (%)***** 1.00 1.00++ 1.00++
Ratio of net investment income (loss) to average net
assets (%) (0.80) (0.53)++ (0.65)++
Portfolio turnover rate (%) 163 116+ 211+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 1.11 2.15++ 5.81++
Net investment income (loss) per share would have been
($) (0.09) (0.07) (0.56)***
</TABLE>

LOOMIS SAYLES FUNDS 51
<PAGE>
LOOMIS SAYLES SMALL CAP GROWTH FUND (RETAIL CLASS)

Net asset value, beginning of period $ 9.80 $11.30 $10.00
------ ------ ------
Income from investment operations--
Net investment income (loss) (0.08) (0.08) (0.10)***
Net realized and unrealized gains (losses) on
investments 6.93 (1.42) 1.99
------ ------ ------
Total from investment operations 6.85 (1.50) 1.89
------ ------ ------
Less distributions--
Distributions in excess of net investment income 0.00 0.00 0.00
Distributions in excess of net realized capital gains 0.00 0.00 (0.59)
------ ------ ------
Total distributions 0.00 0.00 (0.59)
------ ------ ------
Net asset value, end of period $16.65 $ 9.80 $11.30
====== ====== ======
Total return (%)**** 69.9 (13.3)+ 19.2+
Net assets, end of period (000) $6,032 $1,057 $1,139
Ratio of operating expenses to average net assets (%)***** 1.25 1.25++ 1.25++
Ratio of net investment income (loss) to average net
assets (%) (1.04) (0.80)++ (0.94)++
Portfolio turnover rate (%) 163 116+ 211+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 1.80 3.70++ 7.82++
Net investment income (loss) per share would have been
($) (0.12) (0.34) (0.77)***
</TABLE>

<PAGE>
LOOMIS SAYLES SMALL CAP VALUE FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------
Sept. 30, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998* 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.60 $ 18.62 $ 17.39 $ 15.33 $ 12.86 $ 14.13
-------- -------- -------- -------- ------- -------
Income from investment operations--
Net investment income (loss) 0.16 0.12 0.17 0.11 0.04 (0.04)
Net realized and unrealized gains
(losses) on investments 1.83 (3.14) 4.26 4.47 4.06 (1.12)
-------- -------- -------- -------- ------- -------
Total from investment operations 1.99 (3.02) 4.43 4.58 4.10 (1.16)
-------- -------- -------- -------- ------- -------
Less distributions--
Dividends from net investment income (0.12) 0.00 (0.15) (0.11) (0.04) 0.00
Distributions from net realized
capital gains (0.14) 0.00 (3.05) (2.41) (1.59) (0.11)
-------- -------- -------- -------- ------- -------
Total distributions (0.26) 0.00 (3.20) (2.52) (1.63) (0.11)
-------- -------- -------- -------- ------- -------
Net asset value, end of period $ 17.33 $ 15.60 $ 18.62 $ 17.39 $ 15.33 $ 12.86
======== ======== ======== ======== ======= =======
Total return (%)** 12.8 (16.2)+ 26.0 30.4 32.1 (8.2)
Net assets, end of period (000) $301,496 $296,116 $245,177 $163,625 $90,455 $73,126
Ratio of operating expenses to average
net assets (%)*** 0.90 0.92++ 0.94 1.19 1.25 1.27
Ratio of net investment income (loss)
to average net assets (%) 0.87 1.04++ 0.97 0.80 0.29 (0.30)
Portfolio turnover rate (%) 113 78+ 94 73 155 87

Without giving effect to the expense
limitations:
Ratio of expenses to average net
assets would have been (%) 0.90 0.92++ 0.94 1.19 1.25 1.27
Net investment income (loss) per
share would have been ($) 0.16 0.12 0.17 0.11 0.04 (0.04)
</TABLE>

LOOMIS SAYLES FUNDS 53
<PAGE>
LOOMIS SAYLES SMALL CAP VALUE FUND (RETAIL CLASS)

Net asset value, beginning of period $ 15.57 $ 18.62 $ 17.39
------- ------- -------
Income from investment operations--
Net investment income (loss) 0.09 0.10 0.15***
Net realized and unrealized gains (losses) on
investments 1.84 (3.15) 4.21
------- ------- -------
Total from investment operations 1.93 (3.05) 4.36
------- ------- -------
Less distributions--
Dividends from net investment income (0.08) 0.00 (0.08)
Distributions from net realized capital gains (0.14) 0.00 (3.05)
------- ------- -------
Total distributions (0.22) 0.00 (3.13)
------- ------- -------
Net asset value, end of period $ 17.28 $ 15.57 $ 18.62
======= ======= =======
Total return (%)**** 12.4 (16.4)+ 25.6+
Net assets, end of period (000) $75,302 $54,060 $34,353
Ratio of operating expenses to average net assets (%)***** 1.20 1.19++ 1.25++
Ratio of net investment income (loss) to average net
assets (%) 0.57 0.79++ 0.79++
Portfolio turnover rate (%) 113 78+ 94+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 1.20 1.19++ 1.35++
Net investment income (loss) per share would have been
($) 0.09 0.10 0.13***
</TABLE>

<PAGE>
LOOMIS SAYLES SMALL CAP VALUE FUND (ADMIN CLASS)

<TABLE>
<CAPTION>
Fiscal
Year
Ended
---------
Sept. 30, Jan. 2** to
1999 Dec. 31, 1998**
<S> <C> <C>
- --------------------------------------------------------------------------------------------

Net asset value, beginning of period $15.54 $18.62
------ ------
Income from investment operations--
Net investment income (loss) 0.04 0.03
Net realized and unrealized gains (losses) on investments 1.83 (3.11)
------ ------
Total from investment operations 1.87 (3.08)
------ ------
Less distributions--
Dividends from net investment income (0.03) 0.00
Distributions from net realized capital gains (0.14) 0.00
------ ------
Total distributions (0.17) 0.00
------ ------
Net asset value, end of period $17.24 $15.54
====== ======
Total return (%)*** 12.0 (16.5)+
Net assets, end of period (000) $4,863 $1,046
Ratio of operating expenses to average net assets (%)**** 1.50 1.50++
Ratio of net investment income (loss) to average net assets
(%) 0.30 0.95++
Portfolio turnover rate (%) 113 78+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been
(%) 1.70 3.99++
Net investment income (loss) per share would have been
($) 0.01 (0.05)
</TABLE>

<TABLE>
<S> <C>
* COMMENCEMENT OF OPERATIONS ON JANUARY 2, 1998.
** FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

LOOMIS SAYLES FUNDS 55
<PAGE>
LOOMIS SAYLES WORLDWIDE FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
Sept. 30, Sept. 30, Dec. 31, May 1** to
1999 1998* 1997 Dec. 31, 1996
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------

Net asset value, beginning of period $ 8.79 $ 9.86 $ 10.63 $10.00
------ ------ ------- ------
Income from investment operations--
Net investment income (loss) 0.50 0.33 0.47 0.30
Net realized and unrealized gains (losses) on
investments 1.82 (1.40) (0.10) 0.63
------ ------ ------- ------
Total from investment operations 2.32 (1.07) 0.37 0.93
------ ------ ------- ------
Less distributions--
Dividends from net investment income (0.44) 0.00 (0.47) (0.30)
Distributions from net realized capital gains (0.39) 0.00 (0.67) 0.00
------ ------ ------- ------
Total distributions (0.83) 0.00 (1.14) (0.30)
------ ------ ------- ------
Net asset value, end of period $10.28 $ 8.79 $ 9.86 $10.63
====== ====== ======= ======
Total return (%)*** 27.8 (10.9)+ 3.5 9.2+
Net assets, end of period (000) $6,233 $4,907 $ 5,597 $5,189
Ratio of operating expenses to average net
assets (%)**** 1.00 1.00++ 1.00 1.00++
Ratio of net investment income (loss) to average
net assets (%) 5.07 4.37++ 3.89 4.62++
Portfolio turnover rate (%) 165 93+ 134 76+

Without giving effect to the expense
limitations:
Ratio of expenses to average net assets
would have been (%) 3.46 3.28++ 2.62 3.72++
Net investment income (loss) per share would
have been ($) 0.26 0.16 0.27 0.13
</TABLE>

<TABLE>
<S> <C>
* FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. IN 1998, THE
FUNDS' FISCAL YEAR END CHANGED FROM DECEMBER 31 TO
SEPTEMBER 30.
** COMMENCEMENT OF OPERATIONS ON MAY 1, 1996.
*** TOTAL RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT
REDUCED ITS ADVISORY FEES AND/OR BORNE OTHER OPERATING
EXPENSES.
**** THE ADVISER HAS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE
FUND'S RATIO OF OPERATING EXPENSES WOULD HAVE BEEN HIGHER.
+ PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
++ ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
</TABLE>

<PAGE>
LOOMIS SAYLES WORLDWIDE FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------
Sept. 30, Sept. 30, Jan. 2** to
1999 1998* Dec. 31, 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.76 $ 9.86 $ 10.63
------ ------ -------
Income from investment operations--
Net investment income (loss) 0.44 0.30*** 0.38***
Net realized and unrealized gains (losses) on
investments 1.86 (1.40) (0.03)
------ ------ -------
Total from investment operations 2.30 (1.10) 0.35
------ ------ -------
Less distributions--
Dividends from net investment income (0.42) 0.00 (0.45)
Distributions from net realized capital gains (0.39) 0.00 (0.67)
------ ------ -------
Total distributions (0.81) 0.00 (1.12)
------ ------ -------
Net asset value, end of period $10.25 $ 8.76 $ 9.86
====== ====== =======
Total return (%)**** 27.6 (11.2)+ 3.3+
Net assets, end of period (000) $ 138 $ 73 $ 20
Ratio of operating expenses to average net assets (%)***** 1.25 1.25++ 1.25++
Ratio of net investment income (loss) to average net
assets (%) 4.88 3.88++ 3.58++
Portfolio turnover rate (%) 165 93+ 134+

Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%) 20.19 24.69++ 214.91++
Net investment income (loss) per share would have been
($) (1.28) (1.49)*** (23.33)***
</TABLE>

LOOMIS SAYLES FUNDS 57
<PAGE>
FOR MORE INFORMATION ABOUT THE FUNDS:

In the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Funds' performance
during the last fiscal year.

Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330
www.loomissayles.com

File No. 811-6241

<PAGE>

EQUITY FUNDS
Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330

www.loomissayles.com

<PAGE>

PROSPECTUS
[LOGO] FEBRUARY 1, 2000
EQUITY FUNDS

LOOMIS SAYLES AGGRESSIVE GROWTH FUND
LOOMIS SAYLES GLOBAL TECHNOLOGY FUND

(CLASS A)

Loomis, Sayles & Company, L.P., which has been an investment adviser since 1926,
is the investment adviser of the Funds.

TABLE OF CONTENTS

<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles Aggressive Growth Fund 2
Loomis Sayles Global Technology Fund 3
Summary of Principal Risks 4

EXPENSES OF THE FUNDS 7

MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND
RISK CONSIDERATIONS 9

MANAGEMENT 16
Investment Adviser 16
Portfolio Managers 16
Service and Distribution Plans and Other Fees 16
Sales Charges for Class A Shares 17

GENERAL INFORMATION 19
Pricing 19
How to Purchase Shares 19
How to Redeem Shares 21
How to Exchange Shares 23
Dividends and Distributions 23
Tax Consequences 23
</TABLE>

<PAGE>
RISK/RETURN SUMMARY

GENERAL INFORMATION

The following is a summary of certain key information about the Loomis Sayles
Aggressive Growth Fund and the Loomis Sayles Global Technology Fund. You will
find additional information about each Fund, including a detailed description of
the risks of an investment in each Fund, after this summary.

The Risk/Return summary for the Loomis Sayles Aggressive Growth Fund 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 performance varied from year to year over the life of the Fund;
and
- - 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.

No performance information is available for the Loomis Sayles Global Technology
Fund since it has not yet been in operation for a full calendar year.

A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future.

LOOMIS SAYLES FUNDS 1
<PAGE>
LOOMIS SAYLES AGGRESSIVE GROWTH FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital growth
from investments in common stocks or their equivalent.

PRINCIPAL RISKS Among the principal risks of investing in the Fund are the
following:
- - market risk (the risk that the value of the Fund's investments will fall as a
result of movements in financial markets generally);
- - foreign risk (the risk that the value of the Fund's foreign investments will
fall as a result of foreign political, social, or economic changes);
- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);
- - derivatives risk (the risk that the value of the Fund's derivative investments
will fall as a result of pricing difficulties or lack of correlation with the
underlying investment);
- - liquidity risk (the risk that the Fund may be unable to find a buyer for its
investments when it seeks to sell them); and
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).

PERFORMANCE No performance information is available for Class A shares of the
Fund because the Class has not been in operation for a full calendar year.
<PAGE>
LOOMIS SAYLES GLOBAL TECHNOLOGY FUND

INVESTMENT OBJECTIVE The Fund's investment objective is long-term capital
growth.

The Fund may engage in options and futures transactions and foreign currency
hedging transactions and also may invest in securities from issuers located in
countries with emerging securities markets.

PRINCIPAL RISKS Among the principal risks of investing in the Fund are the
following:
- - technology risk (the risk that the value of the Fund's shares will fall more
as a result of adverse developments affecting the technology industries than
shares of Funds that invest in a broader range of industries);
- - market risk (the risk that the value of the Fund's investments will fall as a
result of movements in financial markets generally);
- - foreign risk (the risk that the value of the Fund's foreign investments will
fall as a result of foreign political, social, or economic changes);
- - currency risk (the risk that the value of the Fund's investments will fall as
a result of changes in exchange rates);
- - derivatives risk (the risk that the value of the Fund's derivative investments
will fall as a result of pricing difficulties or lack of correlation with the
underlying investment);
- - liquidity risk (the risk that the Fund may be unable to find a buyer for its
investments when it seeks to sell them); and
- - management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).

PERFORMANCE No performance information is available for the Fund because it has
not yet been in operation for a full calendar year.

LOOMIS SAYLES FUNDS 3
<PAGE>
SUMMARY OF PRINCIPAL RISKS

MARKET RISK

Market risk generally is greater for Funds that invest substantially in small
and medium-sized companies, such as the Loomis Sayles Aggressive Growth Fund,
since these companies tend to be more vulnerable to adverse developments than
large companies.

FOREIGN RISK

Funds that invest in emerging markets may face greater foreign risk since
emerging market countries may be more likely to experience political and
economic instability.
<PAGE>
CURRENCY RISK

LEVERAGING RISK

DERIVATIVES RISK

LIQUIDITY RISK

Liquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing a Fund from selling out of these illiquid securities
at an advantageous price. Derivatives and securities that involve substantial
credit risk tend to involve greater liquidity risk. In addition, liquidity risk
tends to increase to the extent a Fund invests in securities whose sale may be
restricted by law or by contract, such as Rule 144A securities.

MANAGEMENT RISK

LOOMIS SAYLES FUNDS 5
<PAGE>
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 a Fund.

CREDIT RISK

The following tables present the expenses that you would pay if you buy and hold
shares of a Fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

The following sales charges apply to Class A shares of the Funds.

<TABLE>
<CAPTION>
Maximum Sales Charge (Load)
Class of Fund Shares Imposed on Purchases (as a Redemption Fee
percentage of offering price)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Class A 5.75% none*
- --------------------------------------------------------------------------------------------------
*FOR PURCHASES OF $1,000,000 OR MORE OF CLASS A SHARES OR PURCHASES OF CLASS A SHARES BY
QUALIFIED RETIREMENT PLANS THAT HAVE INVESTMENTS OF $1,000,000 OR MORE OR THAT HAVE 100 OR MORE
ELIGIBLE EMPLOYEES, THERE IS NO FRONT-END SALES CHARGE, BUT A CONTINGENT DEFERRED SALES CHARGE
OF 1.00% MAY APPLY TO REDEMPTIONS OF YOUR SHARES WITHIN ONE YEAR OF THE DATE OF PURCHASE.
- --------------------------------------------------------------------------------------------------
</TABLE>

For a more detailed description of the sales charges for Class A shares,
including a description of ways to lower the sales charge you pay for Class A
shares, please see the "Sales Charges for Class A Shares" section below.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
Distribution Total Annual Fee
Management and Service Other Fund Operating Waiver/ Net
Fund/Class Fees (12b-1) Fees Expenses Expenses Reimbursement* Expenses*
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Loomis Sayles Aggressive
Growth Fund
Class A .75% .25% 1.22% 2.22% .97% 1.25%
- -------------------------------------------------------------------------------------------------------------------------------
Loomis Sayles Global
Technology Fund
Class A 1.00% .25% 1.15% 2.40% .65% 1.75%
- -------------------------------------------------------------------------------------------------------------------------------
*Reflects Loomis Sayles' contractual obligation to limit the Funds' expenses through February 1, 2001.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

LOOMIS SAYLES FUNDS 7
<PAGE>
EXAMPLE

<TABLE>
<CAPTION>
Fund/Class 1 year* 3 years* 5 years* 10 years*
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Loomis Sayles Aggressive Growth Fund
Class A $695 $1,141 $1,613 $2,911
- ---------------------------------------------------------------------------------------------
Loomis Sayles Global Technology Fund
Class A $743 $1,222 n/a n/a
- ---------------------------------------------------------------------------------------------
* EXPENSES SHOWN FOR EACH FUND'S CLASS A SHARES INCLUDE THE FEE WAIVER/REIMBURSEMENT FOR THE
FIRST YEAR OF EACH PERIOD.
- ---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS

TEMPORARY DEFENSIVE STRATEGIES

PORTFOLIO TURNOVER

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 capitalizations may be more
volatile than the securities of larger, more established companies and than the
broad equity market indices.

GROWTH STOCKS

Stocks of companies that Loomis Sayles believes have earnings that will grow
faster than the economy as a whole are known as growth stocks. Each of the
Funds generally invests a significant portion of its assets in growth
stocks. Growth stocks typically trade at higher multiples of current
earnings than other stocks. As a result, the values of growth stocks may be
more sensitive to changes in current or expected earnings than the values of
other stocks. If Loomis Sayles' assessment of the prospects for a company's
earnings growth is

LOOMIS SAYLES FUNDS 9
<PAGE>
wrong, or if its judgment of how other investors will value the company's
earnings growth is wrong, then the price of that company's stock may fall or
may not approach the value that Loomis Sayles has placed on it.

VALUE STOCKS

Stocks of companies that are not expected to experience significant earnings
growth, but whose stocks Loomis Sayles believes are undervalued compared to
their true worth, are known as value stocks. These companies may have
experienced adverse business developments or may be subject to special risks
that have caused their stocks to be out of favor. If Loomis Sayles'
assessment of a company's prospects is wrong, or if other investors do not
eventually recognize the value of the company, then the price of the
company's stock may fall or may not approach the value that Loomis Sayles
has placed on it.

WHEN-ISSUED SECURITIES

RULE 144A SECURITIES

FOREIGN SECURITIES

Securities of issuers organized or headquartered outside the United States are
foreign securities. The Loomis Sayles Aggressive Growth Fund may invest any
portion of its assets in securities of Canadian issuers, but will not purchase a
foreign security other than those of Canadian issuers if, as a result, the
Fund's
<PAGE>
holding of non-U.S. and non-Canadian securities would exceed 20% of the Fund's
assets. The Loomis Sayles Global Technology Fund may invest any portion of its
assets in foreign securities.

Foreign securities may present risks not associated with investments in
comparable securities of U.S. issuers. There may be less information publicly
available about a foreign corporate or governmental issuer than about a U.S.
issuer, and foreign 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 foreign issuers are less liquid and at
times more volatile than securities of comparable U.S. issuers. Foreign
brokerage commissions and securities custody costs are often higher than in the
United States. With respect to certain foreign countries, there is a possibility
of governmental expropriation of assets, confiscatory taxation, political or
financial instability, and diplomatic developments that could affect the value
of investments in those countries. A Fund's receipt of interest on foreign
government securities may depend on the availability of tax or other revenues to
satisfy the issuer's obligations.

LOOMIS SAYLES FUNDS 11
<PAGE>
In determining whether to invest assets of the Funds in securities of a
particular foreign issuer, Loomis Sayles will consider the likely effects of
foreign taxes on the net yield available to the Fund and its shareholders.
Compliance with foreign tax law may reduce a Fund's net income available for
distribution to shareholders.

FOREIGN CURRENCY HEDGING TRANSACTIONS

Foreign currency hedging transactions are an effort 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 foreign currency
exchange rate between the date on which a 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, a Fund might
purchase or sell a foreign currency on a spot (that is, cash) basis at the
prevailing spot rate. If conditions warrant, the Funds may also enter into
private contracts to purchase or sell foreign currencies at a future date
("forward contracts"). The Funds might also purchase exchange-listed and
over-the-counter call and put options on foreign currencies. Over-the-counter
currency options are generally less liquid than exchange-listed options and will
be treated as illiquid assets. The Funds may not be able to dispose of
over-the-counter options readily.

Foreign currency transactions involve costs and may result in losses.

REPURCHASE AGREEMENTS

REAL ESTATE INVESTMENT TRUSTS

Real estate investment trusts (REITs) involve certain unique risks in addition
to those risks associated with investing in the real estate industry in general
(such as possible declines in the value of real estate, lack of availability of
mortgage funds, or extended vacancies of property). Equity REITs may be affected
by changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, and are subject to heavy
cash flow dependency, risks of default by borrowers, and self-liquidation. REITs
are also subject to the possibilities of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code of 1986, as amended, and
failing to maintain their exemptions from registration under the Investment
Company Act of 1940.
<PAGE>
REITs may have limited financial resources, may trade less frequently and in a
limited volume, and may be subject to more abrupt or erratic price movements
than larger securities. A Fund's investment in a REIT may require the Fund to
accrue and distribute income not yet received or may result in the Fund making
distributions that constitute a return of capital to Fund shareholders for
federal income tax purposes. In addition, distributions by a Fund from REITs
will not qualify for the corporate dividends-received deduction.

OPTIONS AND FUTURES TRANSACTIONS

LOOMIS SAYLES FUNDS 13
<PAGE>
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 a 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), a Fund is at risk that the other party to the
transaction will default on its obligations, or will not permit a Fund to
terminate the transaction before its scheduled maturity.

SECURITIES LENDING

Convertible securities include corporate bonds, notes, or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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. A 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.

LOOMIS SAYLES FUNDS 15
<PAGE>
MANAGEMENT

INVESTMENT ADVISER

The Board of Trustees of Loomis Sayles Funds oversees each of the Funds and
supervises the Funds' investment adviser, Loomis, Sayles & Company, L.P.
("Loomis Sayles"), which is located at One Financial Center, Boston,
Massachusetts.

As previously described in the "Expenses of the Funds" section, each Fund pays
Loomis Sayles a monthly investment advisory fee, also known as a management fee,
for these services. These fees are expressed as a percentage of the Fund's
average net assets:

<TABLE>
<CAPTION>
Fund Management Fee
<S> <C>
- ----------------------------------------------------------------
Loomis Sayles Aggressive
Growth Fund .75%
- ----------------------------------------------------------------
Loomis Sayles Global
Technology Fund 1.00%
- ----------------------------------------------------------------
</TABLE>

Certain expenses incurred by Class A shares of each Fund would have been higher
if not for Loomis Sayles' contractual obligation to limit the Funds' expenses
through February 1, 2001.

PORTFOLIO MANAGERS

The following persons have had primary responsibility for the day-to-day
management of each indicated Fund's portfolio since the date stated below.

LOOMIS SAYLES GLOBAL TECHNOLOGY FUND Christopher R. Ely leads a team of
portfolio managers for the Fund.

SERVICE AND DISTRIBUTION PLANS AND OTHER FEES

For Class A shares of the Funds, the Funds have adopted service and distribution
plans under Rule 12b-1 of the Investment Company Act of 1940 that allow the
Funds to pay fees for the sale and distribution of Class A shares and for
services provided to shareholders. This 12b-1 fee currently is .25% of a Fund's
average
<PAGE>
daily net assets attributable to Class A shares. Because these fees are paid out
of the Fund's assets on an ongoing basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.

SALES CHARGES FOR CLASS A SHARES

The price you pay when you buy Class A shares of the Funds is their net asset
value (as described below), plus a front-end sales charge, which varies
depending upon the size of your purchase, as shown in the table below.

<TABLE>
<CAPTION>
Maximum Amount
Your Investment Class A Sales Charge Class A Sales Charge of Sales Charge
(as a % of (as a % of Reallowed to Dealers
Offering Price) Your Investment) (as a % of
Offering Price)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
- ---------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.50% 4.71% 4.00%
- ---------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.50% 3.63% 3.00%
- ---------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.50% 2.56% 2.15%
- ---------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 2.04% 1.70%
- ---------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0.00% 0.00% 1.00%**
- ---------------------------------------------------------------------------------------------------------------
Excess over $3,000,000* 0.00% 0.00% 0.50%**
- ---------------------------------------------------------------------------------------------------------------
* FOR PURCHASES OF $3,000,000 OR MORE OF CLASS A SHARES OR PURCHASES OF CLASS A SHARES BY QUALIFIED RETIREMENT
PLANS THAT HAVE INVESTMENTS OF $1,000,000 OR MORE OR THAT HAVE 100 OR MORE ELIGIBLE EMPLOYEES, THERE IS NO
FRONT-END SALES CHARGE, BUT A CONTINGENT DEFERRED SALES CHARGE OF 1.00% MAY APPLY TO REDEMPTIONS OF YOUR
SHARES WITHIN ONE YEAR OF THE DATE OF PURCHASE. ALSO, THE DISTRIBUTOR MAY PAY A REALLOWANCE OF 0.50% ON SUCH
PURCHASES.
** THE REALLOWANCE IS NOT PAYABLE TO DEALERS IF THE PURCHASE REPRESENTS THE REINVESTMENT OF A REDEMPTION MADE
DURING THE PREVIOUS YEAR.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

The sales charge is not imposed on shares purchased with reinvested dividends or
other distributions.

There are several ways you can lower your sales charge for Class A shares,
including the following:
- - LETTER OF INTENT A Letter of Intent allows you to purchase Class A shares of
the Funds over a 13-month period but pay sales charges as if you had purchased
all shares at once. The program can save you money if you plan to invest
$50,000 or more over a 13-month period.
- - ELIMINATION OF SALES CHARGE Class A shares may be offered without a sales
charge to the following individuals and institutions:
- Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;
- Selling brokers, sales representatives, or other intermediaries;

LOOMIS SAYLES FUNDS 17
<PAGE>
- Fund trustees and other individuals who are affiliated with Loomis Sayles
Funds (this also applies to any spouse, parents, children, siblings,
grandparents, grandchildren, and in-laws of those mentioned);
- Participants in certain qualified retirement plans with at least 100 members
(although these persons may be subject to a continent deferred sales charge
of 1.00% for redemptions within one year of the date of purchase);
- Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities;
- Investments of $25,000 or more in Loomis Sayles Funds by clients of an
adviser or sub-adviser to Loomis Sayles Funds; and
- Persons who have redeemed Class A shares of the Funds and then repurchased
Class A shares of a different series of Loomis Sayles Funds. To qualify, you
must reinvest some or all of the proceeds within 120 days after your
redemption and notify Loomis Sayles Funds or your financial representative at
the time of reinvestment that you are taking advantage of this privilege. You
may reinvest your proceeds either by returning the redemption check or by
sending a new check for some or all of the redemption amount. Please note
that for income tax purposes, a redemption is a sale that involves tax
consequences, even if the proceeds are later reinvested. Please consult your
tax adviser for how a redemption would affect you. If you repurchase
$1,000,000 or more of Class A shares within 30 days after you redeem such
shares, you will receive a rebate for the amount of the contingent deferred
sales charge charged on your redemption.
<PAGE>
GENERAL INFORMATION

PRICING

The price of each Fund's Class A shares is based on its net asset value ("NAV"),
plus a sales charge (as described previously). The NAV per share of each Class
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.

HOW TO PURCHASE SHARES

You can buy shares of each Fund in several ways:

Boston Financial Data Services
P.O. Box 8314
Boston, MA 02266-8314
Attention: Loomis Sayles Funds

LOOMIS SAYLES FUNDS 19
<PAGE>
Each Fund sells its Class A shares at the NAV, plus the previously described
sales charge, next calculated after Boston Financial Data Services receives a
properly completed investment order. Boston Financial Data Services generally
must receive your properly completed order before the close of regular trading
on the New York Stock Exchange for your shares to be bought or sold at the
Fund's NAV on that day.

Shares of each Fund may be purchased by (1) cash, (2) exchanging Class A shares
of any other Fund, provided the value of the shares exchanged meets the
investment minimum of that Fund, (3) exchanging securities acceptable to Loomis
Sayles, or (4) a combination of such methods. The exchange of securities for
shares of a Fund is subject to various restrictions, as described in the
Statement of Additional Information.

You also may wire subsequent investments to the Funds by using the following
wire instructions:

State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ABA No. 011000028
DDA 9904-622-9
(Your account number)
Attn: Custody and Shareholder Services
(Name of Fund)

Your bank may charge a fee for transmitting funds by wire.

A 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 Fund's shares may be purchased by all types of tax-deferred retirement
plans. If you wish to open an individual retirement account (IRA) with a Fund,
Loomis Sayles has retirement plan forms available.
<PAGE>
The minimum initial investment for Class A shares of each Fund generally is
$2,500. Loomis Sayles Funds may waive this minimum in its sole discretion.

Each subsequent investment must be at least $50.

HOW TO REDEEM SHARES

You may make redemptions directly from each Fund either by mail or by telephone.
- - BY MAIL Send a signed letter of instruction that includes the name of the
Fund, the exact name(s) in which the shares are registered, any special
capacity in which you are signing (such as trustee or custodian or on behalf
of a partnership, corporation, or other entity), your address, telephone
number, account number, social security number, and the number of shares or
dollar amount to be redeemed to the following address:

Boston Financial Data Services, Inc.
P.O. Box 8314
Boston, MA 02266
Attention: Loomis Sayles Funds

If you have certificates for the shares you want to sell, you must include
them along with completed stock power forms.

- - BY TELEPHONE You may redeem shares by calling Boston Financial Data Services
at 800-626-9390. Proceeds from telephone redemption requests can be wired to
your bank account or sent by check in the name of the registered owner(s) to
the record address.

LOOMIS SAYLES FUNDS 21
<PAGE>
Before Boston Financial Data Services can wire redemption proceeds to your
bank account, you must provide specific wire instructions to Boston Financial
Data Services at the time you open your account or make any subsequent
investments. A wire fee (currently $5) will be deducted from the proceeds of
each wire.

A telephone redemption request must be received by Boston Financial Data
Services prior to the close of regular trading on the New York Stock Exchange.
If you telephone a redemption request after the Exchange closes or on a day
when the Exchange is not open for business, Boston Financial Data Services
cannot accept the request, and you must make a new redemption request during
regular trading on the Exchange.

The maximum value of shares that you may redeem by telephone is $50,000. For
your protection, telephone redemption requests will not be permitted if Boston
Financial Data Services or the Fund has been notified of an address change for
your account within the preceding 30 days. Unless you indicate otherwise on
your account application, Boston Financial Data Services will be authorized to
accept redemption and transfer instructions by telephone. If you prefer, you
can decline telephone redemption and transfer privileges.

The telephone redemption privilege may be modified or terminated by the Funds
without notice. Certain of the telephone redemption procedures may be waived
for holders of Institutional Class shares.

Please note that a notary public cannot provide a signature guarantee. This
guaranteed signature requirement may be waived by Loomis Sayles in certain
cases.

REDEMPTION BY THE FUNDS If you own fewer shares than the minimum set by the
Trustees, each Fund may redeem your shares and send you the proceeds.
<PAGE>
HOW TO EXCHANGE SHARES

You may exchange Class A shares of a Fund for Class A shares of any other Fund
in the Loomis Sayles Funds series that offers Class A shares or for shares of
certain money market funds advised by New England Funds Management, L.P., an
affiliate of Loomis Sayles.

The value of Fund shares that you wish to exchange must meet the investment
minimum of the new fund. Please call 800-633-3330 prior to requesting this
transaction.

You may make an exchange by sending a signed letter of instruction or by
telephone, unless you have elected on your account application to decline
telephone exchange privileges.

Please remember that an exchange may be a taxable event for federal and/or state
income tax purposes, so that you may realize a gain or loss that is subject to
income tax.

DIVIDENDS AND DISTRIBUTIONS

You may choose to:
- - Reinvest all distributions in additional shares.
- - Receive all distributions in cash.

If you do not select an option when you open your account, all distributions
will be reinvested.

TAX CONSEQUENCES

LOOMIS SAYLES FUNDS 23
<PAGE>
securities that a Fund had held for more than one year, are taxable as long-term
capital gains (generally at a 20% federal income tax rate for noncorporate
shareholders).

Distributions of income and capital gains are taxable whether you receive them
in cash or reinvest them in additional shares. If a dividend or distribution is
made shortly after you purchase shares of a 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.

In the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Funds' performance
during the last fiscal year.

Loomis Sayles Funds
One Financial Center
Boston, MA 02111
800-633-3330
www.loomissayles.com

File No. 811-6241

LOOMIS SAYLES FUNDS 25

<PAGE>

[LOGO]

STATEMENT OF ADDITIONAL
INFORMATION

February 1, 2000

This Statement of Additional Information is not a Prospectus. This
Statement of Additional Information relates to the Prospectus or Prospectuses of
each series ("Fund") of Loomis Sayles Funds dated February 1, 2000, as revised
from time to time. Each reference to the Prospectus in this Statement of
Additional Information shall include all of the Funds' current Prospectuses,
unless otherwise noted. This Statement of Additional Information should be read
in conjunction with the applicable Prospectus. A copy of each Prospectus may be
obtained from Loomis Sayles Funds, One Financial Center, Boston, Massachusetts
02111.

LOOMIS SAYLES FUNDS
- Loomis Sayles Aggressive Growth Fund
- Loomis Sayles 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 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
- Loomis Sayles Worldwide Fund

<PAGE>

<TABLE>
TABLE OF CONTENTS

<S> <C>
THE TRUST.........................................................................................................1

INVESTMENT STRATEGIES AND RISKS...................................................................................1
Investment Restrictions..................................................................................1
Investment Strategies....................................................................................4
U.S. Government Securities ..............................................................................4
When-Issued Securities...................................................................................5
Zero Coupon Bonds........................................................................................6
Repurchase Agreements....................................................................................6
Real Estate Investment Trusts............................................................................6
Rule 144A Securities.....................................................................................7
Tax-Exempt Fixed Income Securities.......................................................................7
Foreign Currency Transactions............................................................................8
Options..................................................................................................9
Small Companies.........................................................................................10
Private Placements......................................................................................10
Closed-end Investment Companies and Unit Investment Trusts..............................................11

MANAGEMENT OF THE TRUST..........................................................................................12

PRINCIPAL HOLDERS................................................................................................17

INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................29

PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................34

DESCRIPTION OF THE TRUST.........................................................................................37
Voting Rights ..........................................................................................37
Shareholder and Trustee Liability ......................................................................38
How to Buy Shares ......................................................................................39
Net Asset Value ........................................................................................39

SHAREHOLDER SERVICES ............................................................................................39
Open Accounts ..........................................................................................39
Systematic Withdrawal Plan .............................................................................40
Exchange Privilege .....................................................................................40
IRAs ...................................................................................................41
Redemptions ............................................................................................41

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS .....................................................42

FINANCIAL STATEMENTS ............................................................................................45

CALCULATION OF YIELD AND TOTAL RETURN ...........................................................................45

PERFORMANCE COMPARISONS .........................................................................................46
</TABLE>

i
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<TABLE>
<S> <C>
PERFORMANCE DATA.................................................................................................50

APPENDIX A

PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION .............................................56

APPENDIX B

ADVERTISING AND PROMOTIONAL LITERATURE .................................................................60
</TABLE>

ii
<PAGE>

THE TRUST

Loomis Sayles Funds (the "Trust") is a diversified, registered, open-end
management investment company. The Trust includes 19 series (collectively, the
"Funds," with each series being known as a "Fund"). The Trust was organized as a
Massachusetts business trust on February 20, 1991.

Shares of the Funds are freely transferable and entitle shareholders to
receive dividends as determined by the Trust's Board of Trustees and to cast a
vote for each share held at shareholder meetings. The Trust generally does not
hold shareholder meetings and expects to do so only when required by law.
Shareholders may call meetings to consider removal of the Trust's trustees.

INVESTMENT STRATEGIES AND RISKS

The investment objective and principal investment strategies of each Fund
are described in the Prospectus. The investment policies of each Fund set forth
in the Prospectus and in this Statement of Additional Information may be changed
by the Trust's Board of Trustees without shareholder approval, except that the
investment objective of each Fund as set forth in the Prospectus and any policy
explicitly identified as "fundamental" may not be changed without the approval
of the holders of a majority of the outstanding shares of the relevant Fund
(which in the Prospectus and this Statement of Additional Information means the
lesser of (i) 67% of the shares of that Fund present at a meeting at which more
than 50% of the outstanding shares are present or 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.

INVESTMENT RESTRICTIONS

In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of each Fund (and
those marked with an asterisk are fundamental policies of each Fund):

Each Fund will not:

(1) Invest in companies for the purpose of exercising control or
management.

*(2) Act as underwriter, except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal securities laws.

*(3) Invest in oil, gas or other mineral leases, rights or royalty
contracts or in real estate, commodities or commodity contracts. (This
restriction does not prevent any Fund from engaging in transactions in futures
contracts relating to securities indices, interest rates or financial
instruments or options, or from investing in issuers that invest or deal in the
foregoing types of assets or from purchasing securities that are secured by real
estate.)

*(4) Make loans, except that each of the Loomis Sayles Aggressive Growth
Fund, the Loomis Sayles Emerging Markets Fund, the Loomis Sayles Intermediate
Maturity Bond Fund, the Loomis Sayles Investment Grade Bond Fund, the Loomis
Sayles Mid-Cap Value Fund, and the Loomis Sayles Small Cap Growth Fund may lend
its portfolio securities to the extent permitted under the Investment Company
Act of 1940, as amended (the "1940 Act"). (For purposes of this investment
restriction, neither (i) entering into repurchase agreements nor (ii) purchasing
debt obligations in which a Fund may invest consistent with its investment
policies is considered the making of a loan.)

<PAGE>

(5) With respect to 75% of its assets, purchase any security (other than
U.S. Government securities) 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. (For purposes of this restriction, the Loomis Sayles Municipal Bond Fund
treats each state and each separate political subdivision, agency, authority or
instrumentality of such state, each multistate agency or authority, and each
guarantor, if any, of obligations of any such issuer as a separate issuer,
provided that the assets and revenues of the issuer are separate from those of
the government(s) that created the subdivision, agency, authority or
instrumentality.)

(6) With respect to 75% of its assets, acquire more than 10% of the
outstanding voting securities of an issuer.

(7) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
except that each Fund may pledge assets having a value not exceeding 10% of its
assets to secure borrowings permitted by restriction (9) below. (For purposes 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 assets (taken at current value) would be
invested in any one industry (in the utilities category, gas, electric, water
and telephone companies will be considered as being in separate industries).
Tax-exempt securities issued by governments or political subdivisions of
governments and purchased by the Loomis Sayles Municipal Bond Fund are not
subject to this restriction, since such issuers are not members of any industry.

*(9) Borrow money in excess of 10% of its assets (taken at cost) or 5% of
its 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 & Company, L.P. ("Loomis Sayles") or
accounts under its management to reduce brokerage commissions, to average prices
among them or to facilitate such transactions is not considered a trading
account in securities for purposes of this restriction.)

(12) Purchase any illiquid security, including any security that is not
readily marketable, if, as a result, more than 15% of the Fund's net assets
(based on current value) would then be invested in such securities.

(13) Write or purchase puts, calls, or combinations of both, except that
each Fund may (1) acquire warrants or rights to subscribe to securities of
companies issuing such warrants or rights, or of parents or subsidiaries of such
companies, (2) purchase and sell put and call options on securities, and (3)
write, purchase and sell put and call options on currencies and enter into
currency forward contracts.

*(14) Issue senior securities. (For purposes of this restriction, none of
the following is deemed to be a senior security: any pledge or other encumbrance
of assets permitted by restriction (7) above; any borrowing permitted by
restriction (9) above; any collateral arrangements with respect to options,
futures contracts, and options on futures contracts and with respect to initial
and variation margin; and the purchase or sale of options, forward contracts,
futures contracts, or options on futures contracts.)

2
<PAGE>

(15) Certain Funds have other non-fundamental investment parameters, as
listed below.

LOOMIS SAYLES AGGRESSIVE GROWTH FUND

The Fund normally will invest at least 65% of its assets in
equity securities of companies with market capitalizations that fall
within the capitalization range of companies included in the Russell
Mid-Cap Growth Index.

LOOMIS SAYLES BOND FUND

The Fund normally will invest at least 65% of its assets in fixed
income securities.

LOOMIS SAYLES EMERGING MARKETS FUND

The Fund normally will invest at least 65% of its assets in
stocks or other equity securities of issuers located in countries with
emerging securities markets.

LOOMIS SAYLES GLOBAL BOND FUND

The Fund normally will invest at least 65% of its assets in fixed
income securities of issuers from at least three countries, which may
include the United States, and no more than 40% of its assets in
issuers headquartered in any one country.

LOOMIS SAYLES GLOBAL TECHNOLOGY FUND

The Fund normally will invest at least 65% of its assets in
equity securities of technology companies located in the United States
or abroad.

LOOMIS SAYLES HIGH YIELD FUND

The Fund normally will invest at least 65% of its assets in lower
rated fixed income securities ("junk bonds").

LOOMIS SAYLES INTERNATIONAL EQUITY FUND

The Fund normally will invest at least 65% of its assets in
equity securities of issuers from at least three countries outside the
United States.

LOOMIS SAYLES INVESTMENT GRADE BOND FUND

The Fund normally will invest at least 65% of its assets in
investment grade fixed income securities.

LOOMIS SAYLES MID-CAP VALUE FUND

The Fund normally will invest at least 65% of its assets in
equity securities of companies with a market capitalization that falls
within the capitalization range of companies included in the Standard
& Poor's Mid-Cap 400 Index.

LOOMIS SAYLES MUNICIPAL BOND FUND

3
<PAGE>

The Fund normally will invest at least 65% of its assets in fixed
income securities.

LOOMIS SAYLES SHORT-TERM BOND FUND

The Fund normally will invest at least 65% of its assets in fixed
income securities with a remaining maturity of five years or less.

LOOMIS SAYLES SMALL CAP GROWTH FUND

The Fund normally will invest at least 65% of its assets in
equity securities of companies with market capitalizations that fall
within the capitalization range of the Russell 2000 Index.

LOOMIS SAYLES SMALL CAP VALUE FUND

The Fund normally will invest at least 65% of its assets in
equity securities of companies with market capitalizations that fall
within the capitalization range of the Russell 2000 Index.

LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND

The Fund normally will invest at least 65% of its assets in U.S.
Government securities.

Each 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.

INVESTMENT STRATEGIES

Except to the extent prohibited by a Fund's investment policies as set
forth in the Prospectus or in this Statement of Additional Information, the
investment strategies used by Loomis Sayles in managing each of the Funds may
include investments in the types of securities described below.

U.S. GOVERNMENT SECURITIES

U.S. Government securities include direct obligations of the U.S. Treasury,
as well as securities issued or guaranteed by U.S. Government agencies,
authorities, and instrumentalities, including, among others, the Government
National Mortgage Association, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, the Federal Housing Administration, the
Resolution Funding Corporation, the Federal Farm Credit Banks, the Federal Home
Loan Bank, the Tennessee Valley Authority, the Student Loan Marketing
Association, and the Small Business Administration. More detailed information
about some of these categories of U.S. Government securities follows.

U.S. Treasury Bills--U.S. Treasury Bills are direct obligations of the U.S.
Treasury that are issued in maturities of one year or less. No interest is paid
on Treasury bills; instead, they are issued at a discount and repaid at full
face value when they mature. They are backed by the full faith and credit of the
U.S. Government.

U.S. Treasury Notes and Bonds--U.S. Treasury Notes and Bonds are direct
obligations of the U.S. Treasury that are issued in maturities that vary between
one and forty years, with interest normally payable every six months. They are
backed by the full faith and credit of the U.S. Government.

4
<PAGE>

"Ginnie Maes"--Ginnie Maes are debt securities issued by a mortgage banker
or other mortgagee that represent an interest in a pool of mortgages insured by
the Federal Housing Administration or the Farmer's Home Administration or
guaranteed by the Veterans Administration. The Government National Mortgage
Association ("GNMA") guarantees the timely payment of principal and interest
when such payments are due, whether or not these amounts are collected by the
issuer of these certificates on the underlying mortgages. An assistant attorney
general of the United States has rendered an opinion that the guarantee by GNMA
is a general obligation of the United States backed by its full faith and
credit. Mortgages included in single family or multi-family residential mortgage
pools backing an issue of Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the registered holders
of Ginnie Maes (such as the Funds) each month. Unscheduled prepayments may be
made by homeowners or as a result of a default. Prepayments are passed through
to the registered holder of Ginnie Maes along with regular monthly payments of
principal and interest.

"Fannie Maes"--The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders that
purchases residential mortgages from a list of approved seller/servicers. Fannie
Maes are pass-through securities issued by FNMA that are guaranteed as to timely
payment of principal and interest by FNMA but are not backed by the full faith
and credit of the U.S. Government.

"Freddie Macs"--The Federal Home Loan Mortgage Corporation ("FHLMC") is a
corporate instrumentality of the U.S. Government. Freddie Macs are participation
certificates issued by FHLMC that represent an interest in residential mortgages
from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest
and ultimate collection of principal, but Freddie Macs are not backed by the
full faith and credit of the U.S. Government.

As described in the Prospectus, the yields available from U.S. Government
securities are generally lower than the yields available from corporate
fixed-income securities. Like other fixed-income securities, however, the values
of U.S. Government securities change as interest rates fluctuate. Fluctuations
in the value of portfolio securities will not affect interest income on existing
portfolio securities but will be reflected in the Fund's net asset value.

WHEN-ISSUED SECURITIES

When-issued securities are agreements with banks or broker-dealers for the
purchase or sale of securities at an agreed-upon price on a specified future
date. Such agreements might be entered into, for example, when a Fund that
invests in fixed income securities anticipates a decline in interest rates and
is able to obtain a more advantageous yield by committing currently to purchase
securities to be issued later. When a Fund purchases securities on a when-issued
or delayed-delivery basis, it is required to create a segregated account with
the Trust's custodian and to maintain in that account liquid assets in an amount
equal to or greater than, on a daily basis, the amount of the Fund's when-issued
or delayed-delivery commitments. Each Fund will make commitments to purchase on
a when-issued or delayed-delivery basis only securities meeting that Fund's
investment criteria. The Fund may take delivery of these securities or, if it is
deemed advisable as a matter of investment strategy, the Fund may sell these
securities before the settlement date. When the time comes to pay for
when-issued or delayed- delivery securities, the Fund will meet its obligations
from then available cash flow or the sale of securities, or from the sale of the
when-issued or delayed-delivery securities themselves (which may have a value
greater or less than the Fund's payment obligation).

5
<PAGE>

ZERO COUPON BONDS

Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligation
or for an initial period after the issuance of the obligation. Such bonds are
issued and traded at a discount from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security, and the
perceived credit quality of the issuer. The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than non-zero coupon bonds having similar maturities and credit
quality. In order to satisfy a requirement for qualification as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), each Fund must distribute each year at least 90% of its net investment
income, including the original issue discount accrued on zero coupon bonds.
Because a Fund investing in zero coupon bonds will not on a current basis
receive cash payments from the issuer in respect of accrued original issue
discount, the Fund may have to distribute cash obtained from other sources in
order to satisfy the 90% distribution requirement under the Code. Such cash
might be obtained from selling other portfolio holdings of the Fund. In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell such securities at such time.

REPURCHASE AGREEMENTS

Under a repurchase agreement, a Fund purchases a security and obtains a
simultaneous commitment from the seller (a bank or, to the extent permitted by
the 1940 Act, a recognized securities dealer) to repurchase the security at an
agreed upon price and date (usually seven days or less from the date of original
purchase). The resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the purchased security.
Such transactions afford the Fund the opportunity to earn a return on
temporarily available cash at minimal market risk. While the underlying security
may be a bill, certificate of indebtedness, note, or bond issued by an agency,
authority, or instrumentality of the U.S. Government, the obligation of the
seller is not guaranteed by the U.S. Government, and there is a risk that the
seller may fail to repurchase the underlying security. In such event, the Fund
would attempt to exercise rights with respect to the underlying security,
including possible disposition in the market. However, the Fund may be subject
to various delays and risks of loss, including (a) possible declines in the
value of the underlying security during the period while the Fund seeks to
enforce its rights thereto, (b) possible reduced levels of income and lack of
income during this period, and (c) inability to enforce rights and the expenses
involved in attempted enforcement.

REAL ESTATE INVESTMENT TRUSTS

REITs involve certain unique risks in addition to those risks associated
with investing in the real estate industry in general (such as possible declines
in the value of real estate, lack of availability of mortgage funds, or extended
vacancies of property). Equity REITs may be affected by changes in the value of
the underlying property owned by the REITs, while mortgage REITs may be affected
by the quality of any credit extended. REITs are dependent upon management
skills, are not diversified, and are subject to heavy cash flow dependency,
risks of default by borrowers, and self-liquidation. REITs are also subject to
the possibilities of failing to qualify for tax-free pass-through of income
under the Code and failing to maintain their exemptions from registration under
the 1940 Act.

Investment in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume, and may be subject
to more abrupt or erratic price movements than larger securities.

6
<PAGE>

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 the Trust's trustees, that the particular issue of Rule 144A securities is
liquid. Under the guidelines, Loomis Sayles considers such factors as: (1) the
frequency of trades and quotes for a security; (2) the number of dealers willing
to purchase or sell the security and the number of other potential purchasers;
(3) dealer undertakings to make a market in the security; and (4) the nature of
the security and the nature of the marketplace trades in the security.

TAX-EXEMPT FIXED INCOME SECURITIES

Tax-exempt fixed income securities include debt obligations issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities such as bridges, highways, hospitals, housing, mass
transportation, schools, streets, and water and sewer works. Other public
purposes for which tax-exempt fixed income securities may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses, and obtaining funds to lend to other public institutions and
facilities. In addition, prior to the Tax Reform Act of 1986, certain debt
obligations known as industrial development bonds could be issued by or on
behalf of public authorities to obtain funds to provide privately operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, port or parking facilities, air or water pollution
control facilities, and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. Such obligations are included
within the term tax-exempt fixed income securities if the interest paid thereon
is, in the opinion of bond counsel, exempt from federal income tax. Interest on
certain industrial development bonds used to fund the construction, equipment,
repair, or improvement of privately operated industrial or commercial facilities
may also be exempt from federal income tax. The Tax Reform Act of 1986
eliminated some types of tax-exempt industrial revenue bonds but retained others
under the general category of "private activity bonds." The interest on
so-called "private activity bonds" is exempt from ordinary federal income
taxation but is treated as a tax preference item in computing a shareholder's
alternative minimum tax liability. The Loomis Sayles Municipal Bond Fund may
invest up to 20% of its net assets in private activity bonds.

The Loomis Sayles Municipal Bond Fund may not be a desirable investment for
"substantial users" of facilities financed by industrial development bonds or
for "related persons" of substantial users. See "Income Dividends, Capital Gain
Distributions and Tax Status."

The two principal classifications of tax-exempt fixed income securities are
general obligation bonds and limited obligation (or revenue) bonds. General
obligation bonds are obligations involving the credit of an issuer possessing
taxing power and are payable from the issuer's general unrestricted revenues and
not from any particular fund or source. The characteristics and method of
enforcement of general obligation bonds vary according to the law applicable to
the particular issuer, and payment may be dependent upon an appropriation by the
issuer's legislative body. Limited obligation bonds are payable only from the
revenues derived from a particular facility or class of facilities, or in some
cases from the proceeds of a special excise or other specific revenue source
such as the user of the facility. Tax-exempt industrial development bonds and
private activity bonds are in most cases revenue bonds and generally are not
payable from the unrestricted revenues of the issuer. The credit and quality of
such fixed income securities are usually directly related to the credit standing
of the corporate user of the facilities. Principal and interest on such fixed
income securities is the responsibility of the corporate user (and any
guarantor).

Prices and yields on tax-exempt fixed income securities are dependent on a
variety of factors, including general money market conditions, the financial
condition of the issuer, general conditions of the tax-exempt bond market, the
size of a particular offering, the maturity of the obligation, and the rating of
the issue. A number of these factors, including the ratings of particular
issues, are subject to change from time to time. Information about

<PAGE>

the financial condition of an issuer of tax-exempt fixed income securities may
not be as extensive as that made available by corporations whose securities are
publicly traded.

Obligations of issuers of tax-exempt fixed income securities are subject to
the provisions of bankruptcy, insolvency, and other laws, such as the Federal
Bankruptcy Reform Act of 1978, affecting the rights and remedies of creditors.
Congress or state legislatures may seek to extend the time for payment of
principal or interest, or both, or to impose other constraints upon enforcement
of such obligations. There is also the possibility that, as a result of
litigation or other conditions, the power or ability of issuers to meet their
obligations for the payment of interest and principal on their tax-exempt fixed
income securities may be materially affected, or their obligations may be found
to be invalid or unenforceable. Such litigation or conditions may from time to
time have the effect of introducing uncertainties in the market for tax-exempt
fixed income securities or certain segments thereof, or materially affecting the
credit risk with respect to particular fixed income securities. Adverse
economic, business, legal, or political developments might affect all or a
substantial portion of a Fund's tax-exempt fixed income securities in the same
manner.

From time to time the Loomis Sayles Municipal Bond Fund may have less than
80% of its net assets invested in tax-exempt fixed income securities (1) for
defensive purposes when deemed prudent in the judgment of Loomis Sayles to
protect shareholders' capital or (2) on a temporary basis for liquidity purposes
or pending the investment of proceeds from sales of Fund shares. The ability of
the Fund to invest in securities other than tax-exempt fixed income securities
is limited by a requirement of the Code that at least 50% of the Fund's assets
be invested in tax-exempt securities at the end of each calendar quarter in
order to pass through to shareholders the tax-exempt interest earned by the
Fund. See "Income Dividends, Capital Gain Distributions and Tax Status."

The Loomis Sayles Municipal Bond Fund may purchase and sell portfolio
investments to take advantage of changes or anticipated changes in yield
relationships, markets, or economic conditions. The Fund may also sell
tax-exempt fixed income securities due to changes in the adviser's evaluation of
the issuer or cash needs resulting from redemption requests for Fund shares. The
secondary market for tax-exempt fixed income securities typically has been less
liquid than that for taxable debt securities, and this may affect the Fund's
ability to sell particular tax-exempt fixed income securities, especially in
periods when other investors are attempting to sell the same securities.

FOREIGN CURRENCY TRANSACTIONS

Since investment in securities of foreign issuers will usually involve
currencies of foreign countries, and since a Fund may temporarily hold funds in
bank deposits in foreign currencies during the course of investment programs,
the value of the assets of a Fund as measured in U.S. dollars may be affected by
changes in currency exchange rates and exchange control regulations, and a Fund
may incur costs in connection with conversion between various currencies.

A Fund may enter into forward contracts under two circumstances. First,
when a Fund enters into a contract for the purchase or sale of a security
denominated or traded in a market in which settlement is made in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency involved in the underlying
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date on which the
investment is purchased or sold and the date on which payment is made or
received.

8
<PAGE>

securities involved will not generally be possible since the future value of
such securities in a currency will change as a consequence of market movements
in the value of those investments between the date the forward contract is
entered into and the date it matures.

The Funds generally will not enter into forward contracts with a term of
greater than one year.

Options on foreign currencies are similar to forward contracts, except that
one party to the option (the holder) is not contractually bound to buy or sell
the specified currency. Instead, the holder has discretion whether to "exercise"
the option and thereby require the other party to buy or sell the currency on
the terms specified in the option. Options transactions involve transaction
costs and, like forward contract transactions, involve the risk that the other
party may default on its obligations (if the options are not traded on an
established exchange) and the risk that expected movements in the relative value
of currencies may not occur, resulting in an imperfect hedge or a loss to the
Fund.

Each Fund, in conjunction with its transactions in forward contracts,
options, and futures, will maintain in a segregated account with its custodian
liquid assets with a value, marked to market on a daily basis, sufficient to
satisfy the Fund's outstanding obligations under such contracts, options, and
futures.

OPTIONS

An option entitles the holder to receive (in the case of a call option) or
to sell (in the case of a put option) a particular security at a specified
exercise price. An "American style" option allows exercise of the option at any
time during the term of the option. A "European style" option allows an option
to be exercised only at the end of its term. Options may be traded on or off an
established securities exchange.

If the holder of an option wishes to terminate its position, it may seek to
effect a closing sale transaction by selling an option identical to the option
previously purchased. The effect of the purchase is that the previous option
position will be canceled. A Fund will realize a profit from closing out an
option if the price received for selling the offsetting position is more than
the premium paid to purchase the option; the Fund will realize a loss from
closing out an option transaction if the price received for selling the
offsetting option is less than the premium paid to purchase the option.

The use of options involves risks. One risk arises because of the imperfect
correlation between movements in the price of options and movements in the price
of the securities that are the subject of the hedge. A Fund's hedging strategies
will not be fully effective if such imperfect correlation occurs.

Price movement correlation may be distorted by illiquidity in the options
markets and the participation of speculators in such markets. If an insufficient
number of contracts are traded, commercial users may not deal in options because
they do not want to assume the risk that they may not be able to close out their
positions within a reasonable amount of time. In such instances, options market
prices may be driven by different forces than those driving the market in the
underlying securities, and price spreads between these markets may widen. The
participation of speculators in the market enhances its liquidity. Nonetheless,
the trading activities of speculators in the options markets may create
temporary price distortions unrelated to the market in the underlying
securities.

9
<PAGE>

both; (iii) trading halts, suspensions, or other restrictions may be imposed
with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation or other clearing organization may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by the Options Clearing Corporation as a result of trades
on that exchange would continue to be exercisable in accordance with their
terms.

The successful use of options depends in part on the ability of Loomis
Sayles to forecast correctly the direction and extent of interest rate, stock
price, or currency value movements within a given time frame. To the extent
interest rates, stock prices, or currency values move in a direction opposite to
that anticipated, a Fund may realize a loss on the hedging transaction that is
not fully or partially offset by an increase in the value of portfolio
securities. In addition, whether or not interest rates or the relevant stock
price or relevant currency values move during the period that the Fund holds
options positions, the Fund will pay the cost of taking those positions (i.e.,
brokerage costs). As a result of these factors, the Fund's total return for such
period may be less than if it had not engaged in the hedging transaction.

An over-the-counter option (an option not traded on an established
exchange) may be closed out only with the other party to the original option
transaction. While the Fund will seek to enter into over-the-counter options
only with dealers who agree to or are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that the Fund will
be able to liquidate an over-the-counter option at a favorable price at any time
prior to its expiration. Accordingly, the Fund might have to exercise an
over-the-counter option it holds in order to achieve the intended hedge.
Over-the-counter options are not subject to the protections afforded purchasers
of listed options by the Options Clearing Corporation or other clearing
organization.

The staff of the SEC has taken the position that over-the-counter options
should be treated as illiquid securities for purposes of each Fund's investment
restriction prohibiting it from investing more than 15% of its net assets in
illiquid securities. The Funds intend to comply with this position.

Income earned by a Fund from its hedging activities will be treated as
capital gain and, if not offset by net recognized capital losses incurred by the
Fund, will be distributed to shareholders in taxable distributions. Although
gain from options transactions may hedge against a decline in the value of a
Fund's portfolio securities, that gain, to the extent not offset by losses, will
be distributed in light of certain tax considerations and will constitute a
distribution of that portion of the value preserved against decline.

SMALL COMPANIES

Investments in companies with relatively small market capitalizations may
involve greater risk than is usually associated with more established companies.
These companies often have limited product lines, markets, or financial
resources, and they may be dependent upon a relatively small management group.
Their securities may have limited marketability and may be subject to more
abrupt or erratic movements in price than securities of companies with larger
capitalizations or market averages in general. The net asset values of funds
that invest in companies with smaller capitalizations therefore may fluctuate
more widely than market averages.

PRIVATE PLACEMENTS

The Funds may invest in securities that are purchased in private placements
and, accordingly, are subject to restrictions on resale as a matter of contract
or under federal securities laws. Because there may be relatively few potential
purchasers for these securities, especially under adverse market or economic
conditions or in the

10
<PAGE>

event of adverse changes in the financial condition of the issuer, a Fund could
find it more difficult to sell the securities when Loomis Sayles believes that
it is advisable to do so or may be able to sell the securities only at prices
lower than if the securities were more widely held. At times, it also may be
more difficult to determine the fair value of the securities for purposes of
computing a Fund's net asset value.

While private placements may offer opportunities for investment that are
not otherwise available on the open market, the securities so purchased are
often "restricted securities," which are securities that cannot be sold to the
public without registration under the Securities Act of 1933, as amended (the
"Securities Act") or the availability of an exemption from registration (such as
Rule 144 or Rule 144A under the Securities Act), or that are not readily
marketable because they are subject to other legal or contractual delays or
restrictions on resale.

The absence of a trading market can make it difficult to ascertain a market
value for illiquid investments such as private placements. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for a Fund to sell them promptly at an acceptable
price. A Fund may have to bear the extra expense of registering the securities
for resale and the risk of substantial delay in effecting the registration. In
addition, market quotations typically are less readily available for these
securities. The judgment of Loomis Sayles may at times play a greater role in
valuing these securities than in the case of unrestricted securities.

Generally speaking, restricted securities may be sold only to qualified
institutional buyers, in a privately negotiated transaction to a limited number
of purchasers, in limited quantities after they have been held for a specified
period of time and other conditions are met pursuant to an exemption from
registration, or in a public offering for which a registration statement is in
effect under the Securities Act. A Fund may be deemed to be an underwriter for
purposes of the Securities Act when selling restricted securities to the public
so that the Fund may be liable to purchasers of the securities if the
registration statement prepared by the issuer, or the prospectus forming a part
of the registration statement, is materially inaccurate or misleading.

CLOSED-END INVESTMENT COMPANIES AND UNIT INVESTMENT TRUSTS

A closed-end investment company is an investment company that does not
redeem its shares on a daily basis. As a result, an investment in a closed-end
investment company may be illiquid (hard to sell). A unit investment trust
("UIT") is an investment company that does not have a board of directors and
that issues redeemable securities. Since the value of a closed-end investment
company or UIT is based on the value of the individual securities it holds, that
value will fall if the value of its underlying securities declines. As a
shareholder in a closed-end investment company or UIT, a Fund will bear its
ratable share of the investment company's expenses, including management fees,
and the Fund's shareholders will bear such expenses indirectly, in addition to
similar expenses of the Fund.

11
<PAGE>

MANAGEMENT OF THE TRUST

The trustees of the Trust supervise the affairs of the Trust and have the
other responsibilities assigned to them by the laws of The Commonwealth of
Massachusetts. The trustees and officers of the Trust, their ages, and their
principal occupations during the past five years are as follows:

JOSEPH ALAIMO (69)--Trustee. 727 N. Bank Lane, Lake Forest, Illinois.
President, Wintrust Asset Management Company.

RICHARD S. HOLWAY (73)--Trustee. 1314 Seaspray Lane, Sanibel, Florida.
Retired. Formerly Vice President, Loomis Sayles. Director, Sandwich Cooperative
Bank.

MICHAEL T. MURRAY (69)--Trustee. 404 N. Western Ave., Lake Forest,
Illinois. Retired. Formerly Vice President, Loomis Sayles.

DANIEL J. FUSS(1) (66)--President and Trustee. Vice Chairman and Director,
Loomis Sayles.

ROBERT J. BLANDING (52)--Executive Vice President. 555 California Street,
San Francisco, California. President, Chairman, Director, and Chief Executive
Officer, Loomis Sayles.

MARK W. HOLLAND (50)--Treasurer. Vice President, Finance and Administration
and Director, Loomis Sayles.

SHEILA M. BARRY (54)--Secretary and Compliance Officer. Assistant General
Counsel and Vice President, Loomis Sayles. Formerly, Senior Counsel and Vice
President, New England Funds, L.P.

DAWN M. ALSTON-PAIGE (35)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

MARK BARIBEAU (40)--Vice President. Vice President, Loomis Sayles.

JAMES C. CARROLL (49)--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles. Formerly Managing Director and Senior
Energy Analyst at Paine Webber, Inc.

E. JOHN DEBEER (61)--Vice President. Vice President, Loomis Sayles.

RODERICK H. DILLON, JR. (43)--Vice President. 2001 Pennsylvania Avenue,
N.W., Suite 200, Washington, DC. Vice President, Loomis Sayles.

WILLIAM H. EIGEN, JR. (62)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President, INVESCO Funds Group and Vice President, The Travelers
Corp.

CHRISTOPHER R. ELY (44)--Vice President. Vice President, Loomis Sayles.
Formerly Senior Vice President and Portfolio Manager, Keystone Investment
Management Company, Inc.

- --------

(1) Trustee deemed an "interested person" of the Trust, as defined by the
1940 Act.

12
<PAGE>

QUENTIN P. FAULKNER (60)--Vice President. Vice President, Loomis Sayles.

PHILIP C. FINE (50)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Portfolio Manager, Keystone Investment Management
Company, Inc.

KATHLEEN C. GAFFNEY (38)--Vice President. Vice President, Loomis Sayles.

ISAAC GREEN (38)--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Executive Vice President and Director, Loomis Sayles.

MARTHA F. HODGMAN (48)--Vice President. Vice President, Loomis Sayles.

JOHN HYLL (45)--Vice President. 555 California Street, San Francisco,
California.

JEFFREY L. MEADE (49)--Vice President. Executive Vice President, Chief
Operating Officer and Director, Loomis Sayles.

ESWAR MENON (35)--Vice President. 555 California Street, San Francisco,
California. Vice President, Loomis Sayles. Formerly Portfolio Manager at
Nicholas Applegate Capital Management, Equity Analyst at Koaneman Capital
Management, and Senior Engineer at Integrated Device Technology.

ALEX MUROMCEW (36)--Vice President. 555 California Street, San Francisco,
California. Vice President, Loomis Sayles. Formerly Portfolio Manager at
Nicholas Applegate Capital Management and Investment Analyst at Teton Partners,
L.P.

KENT P. NEWMARK (61)--Vice President. 555 California Street, San Francisco,
California. Vice President, Managing Partner and Director, Loomis Sayles.

BRUCE G. PICARD, JR. (30)--Vice President. Vice President, Loomis Sayles.

LAUREN B. PITALIS (39)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Assistant Secretary, Harris Associates Investment
Trust.

DAVID L. SMITH (46)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Portfolio Manager, Keystone Investment Management
Company, Inc.

SANDRA P. TICHENOR (50)--Vice President. 555 California Street, San
Francisco, California. General Counsel, Executive Vice President, Secretary and
Clerk, Loomis Sayles. Formerly Partner, Heller, Ehrman, White & McAuliffe.

JOHN TRIBOLET (29)--Vice President. 555 California Street, San Francisco,
California. Vice President, Loomis 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 (39)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

13
<PAGE>

GREGG D. WATKINS (51)--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.

ANTHONY J. WILKINS (57)--Vice President. Executive Vice President and
Director, Loomis Sayles.

Previous positions during the past five years with Loomis Sayles are
omitted if not materially different.

Except as indicated above, the address of each trustee and officer of the
Trust affiliated with Loomis Sayles is One Financial Center, Boston,
Massachusetts. The Trust pays no compensation to its officers or to the trustees
listed above who are directors, officers, or employees of Loomis Sayles. Each
trustee who is not a director, officer, or employee of Loomis Sayles is
compensated at the rate of $1,250 per Fund per annum.

14
<PAGE>

<TABLE>
<CAPTION>
COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999

(1) (2) (3) (4) (5)
---- ---- ---- ---- ----
TOTAL
-----
PENSION OR COMPENSATION
---------- ------------
RETIREMENT BENEFITS ESTIMATED FROM TRUST AND
------------------- --------- --------------
AGGREGATE ACCRUED AS PART OF ANNUAL FUND COMPLEX*
--------- ------------------ ------ -------------
NAME OF PERSON, COMPENSATION FUND EXPENSES BENEFITS UPON PAID TO
-------------- ------------ ------------- ------------- -------
POSITION FROM TRUST RETIREMENT TRUSTEE
-------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Joseph Alaimo, Trustee $5,312.50 N/A N/A $5,312.50

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

Daniel J. Fuss, Trustee $0 N/A N/A $0
</TABLE>

- ------

* No Trustee receives 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
collectively owned beneficially the following percentages of each fund: 9.83% Of
the Loomis Sayles Aggressive Growth Fund, less than 1% of the Loomis Sayles Bond
Fund, 1.71% of the Loomis Sayles Core Value Fund, 5.12% of the Loomis Sayles
Global Bond Fund, 1.57% of the Loomis Sayles Growth Fund, 26.20% of the Loomis
Sayles High Yield Fund, 2.23% of the Loomis Sayles Intermediate Maturity Bond
Fund, 1.44% of the Loomis Sayles International Equity Fund, 3.96% of the Loomis
Sayles Investment Grade Bond Fund, 9.34% of the Loomis Sayles Mid-cap Value
Fund, 8.30% of the Loomis Sayles Municipal Bond Fund, 3.74% of the Loomis Sayles
Short-Term Bond Fund, 1.43% of the Loomis Sayles Small Cap Growth Fund, less
than 1% of the Loomis Sayles Small Cap Value Fund, 3.21% of the Loomis Sayles
U.S. Government Securities Fund, and 10.46% of the Loomis Sayles Worldwide Fund.
These amounts include shares held by the Loomis Sayles Employees' Profit Sharing
Plan (the "Profit Sharing Plan") for the accounts of officers and trustees of
the Trust, but exclude all other holdings of the Profit Sharing Plan and the
Loomis Sayles Funded Pension Plan (the "Pension Plan").

As of September 30, 1999, the Pension Plan owned the following percentages
of the outstanding Institutional Class shares of the indicated Funds: 20.54% of
the Loomis Sayles Aggressive Growth Fund, less than 1% of the Loomis Sayles Bond
Fund, 7.57% of the Loomis Sayles Core Value Fund, 24.59% of the Loomis Sayles
Global Bond Fund, 7.39% of the Loomis Sayles Growth Fund, 11.34% of the Loomis
Sayles High Yield Fund, 36.16% of the Loomis Sayles Intermediate Maturity Bond
Fund, 21.94% of the Loomis Sayles International Equity Fund, 38.83% of the
Loomis Sayles Mid-Cap Value Fund, less than 1% of the Loomis Sayles Short-term
Bond Fund, 5.45% of the Loomis Sayles Small Cap Growth Fund, 1.27% of the Loomis
Sayles Small Cap Value Fund, 11.06% of the Loomis Sayles U.s. Government
Securities Fund, and 82.71% of the Loomis Sayles Worldwide Fund.

<PAGE>

As of September 30, 1999, the Profit Sharing Plan owned the following
percentages of the outstanding Institutional Class shares of the indicated
Funds: 67.90% of the Aggressive Growth Fund, less than 1% of the Loomis
Sayles Bond Fund, 13.47% of the Loomis Sayles Core Value Fund, 8.93% of the
Loomis Sayles Global Bond Fund, 40.19% of the Loomis Sayles Growth Fund,
25.11% of the Loomis Sayles High Yield Fund, 16.14% of the Loomis Sayles
Intermediate Maturity Bond Fund, 6.82% of the Loomis Sayles International
Equity Fund, 30.02% of the Loomis Sayles Mid-Cap Value Fund, 12.54% of the
Loomis Sayles Short-Term Bond Fund, 7.98% of the Loomis Sayles Small Cap
Growth Fund, 4.04% of the Loomis Sayles Small Cap Value Fund, 14.12% of the
Loomis Sayles U.S. Government Securities Fund, and 13.33% of the Loomis
Sayles Worldwide Fund.

The trustee of the Pension Plan is Fleet Investment Management. The
Pension Plan's Advisory Committee, which is composed of the same individuals
listed below as trustees of the Profit Sharing Plan, has the sole voting and
investment power with respect to the Pension Plan's shares. The trustees of
the Profit Sharing Plan are E. John deBeer, Quentin P. Faulkner, Sandra P.
Tichenor, Larry K. Shaw, Kathleen C. Gaffney, Mark W. Holland, and Patrick P.
Hurley, all of whom are officers and employees of Loomis Sayles and (except
for Messrs. Hurley and Shaw) trustees or officers of the Trust. Plan
participants are entitled to exercise investment and voting power over shares
owned of record by the Profit Sharing Plan. Shares not voted by participants
are voted in the same proportion as the shares voted by the voting
participants. The address for the Profit Sharing Plan and the Pension Plan is
One Financial Center, Boston, Massachusetts.

For current and retired Trustees of the Trust, investment advisory
clients of Loomis Sayles (and their directors, officers, and employees), and
current and retired employees of Loomis Sayles and the parents, spouses, and
children of the foregoing, the Trust has reduced the minimum initial
investment for Institutional Class shares of each Fund to $2,500.

<PAGE>

PRINCIPAL HOLDERS

The following table provides information on the principal holders of each
Fund. A principal holder is a person who owns of record or beneficially 5% or
more of any class of a Fund's outstanding securities. Information provided in
this table is as of December 27, 1999.

<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES

PERCENTAGE OF
-------------
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- ------------

<S> <C> <C>
LOOMIS SAYLES AGGRESSIVE
GROWTH FUND

The Charles Schwab Corp. 101 Montgomery St. 87.33%
San Francisco, CA 94104

LOOMIS SAYLES BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 46.88%
San Francisco, CA 94104

National Financial Services Corp. 200 Liberty St. 13.36%
FEBO Customers One World Financial Center
New York, NY 10281

LOOMIS SAYLES CORE VALUE FUND

The Charles Schwab Corp. 101 Montgomery St. 20.90%
San Francisco, CA 94104

US Bank National Association (Custodian) P.O. Box 64010 11.26%
Green Tree Financial Corp St. Paul, MN 55164
Equity Income Trust
Mutual Funds #21739732

Asbestos Workers Local c/o Loomis Sayles & Co. Inc. 7.24%
#84 Pension Fund 1533 North Woodward, Suite 300
Bloomfield Hills, MI 48304
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
John W. George, Trustee 590 Renaud 6.95%
John W. George Trust Grosse Pointe, MI 48236
U/A/D 12/6/90

LOOMIS SAYLES EMERGING
MARKETS FUND

Loomis Sayles & Co., L.P. One Financial Center 55.62%
Boston, MA 02111

LOOMIS SAYLES GLOBAL BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 36.32%
San Francisco, CA 94104

Norwest Bank MN NA P.O. Box 1533 18.68%
FBO Desert States UFCW Union Minneapolis, MN 55480
Employees Pension AC#13279801

Fleet National Bank TTEE P.O. Box 92800 15.95%
Kaman Corp Master Trust Fixed Rochester, NY 14692
Income Fund U/A/D 10-1-96
Attn A/C# 0004884410

San Diego Transit Pension Plan P.O. Box 2511 9.56%
San Diego, CA 92112

BNY Clearing Services LLC Wrap Account 111 E. Kilbourn Ave. 5.47%
Milwaukee, WI 53202

LOOMIS SAYLES GROWTH FUND

The Charles Schwab Corp. 101 Montgomery St. 48.49%
San Francisco, CA 94104

National City Bank Columbus (Trustee) P.O. Box 94984 5.82%
Columbus Distributing Co. PSP Cleveland, Ohio 44101
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
LOOMIS SAYLES HIGH YIELD FUND

The Charles Schwab Corp. 101 Montgomery St. 49.53%
San Francisco, CA 94104

Daniel J. Fuss 44 Longfellow Road 13.10%
Wellesley, MA 02181

LOOMIS SAYLES
INTERMEDIATE MATURITY BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 51.56%
San Francisco, CA 94104

Pacific Century Trust (Agent) P.O. Box 1930 29.83%
Hawaii Sheet Metal Workers Honolulu, HI 96805

Health & Welfare Fund

Pomona College Alexander Hall 7.72%
550 N. College Ave.
Claremont, CA 91711

LOOMIS SAYLES
INTERNATIONAL EQUITY FUND

The Charles Schwab Corp. 101 Montgomery St. 30.55%
San Francisco, CA 94104

Comerica Bank FBO P.O. Box 75000, MC 3446 12.23%
City of Livonia Employee Detroit, MI 48275
Retirement System A/C 02 01 100 0302406

Church Mutual Insurance Co. 3000 Schuster Lane 5.41%
Merrill, WI 54452
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
LOOMIS SAYLES
INVESTMENT GRADE BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 51.13%
San Francisco, CA 94104

Pomona College Alexander Hall 24.35%
550 N. College Ave.
Claremont, CA 91711

Daniel J. Fuss 44 Longfellow Road 5.09%
Wellesley, MA 02481

Rosemary B. Fuss 44 Longfellow Road 5.09%
Wellesley, MA 02481

LOOMIS SAYLES MID-CAP VALUE FUND

The Charles Schwab Corp. 101 Montgomery St. 69.00%
San Francisco, CA 94104

John W. George, Jr. Trustee 590 Renaud 6.31%
John W. George, Jr. Trust Grosse Pointe, MI 48236
U/A/D 12/6/90

LOOMIS SAYLES MUNICIPAL BOND FUND

John W. George Jr. Trustee 590 Renaud 20.46%
John W. George Jr. Trust Grosse Pointe, MI 48236
U/A/D 12/6/90

Ann A. Morris Trustee 1842 Nugent Sound Road 14.84%
Ann A. Morris Trust Lummi Island, WA 98262

The Charles Schwab Corp. 101 Montgomery Street
San Francisco, CA 94104 7.36%
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
LOOMIS SAYLES SHORT-TERM
BOND FUND

NFSC FEBO Customers 200 Liberty 25.75%
One World Financial Center
New York, NY 10281

John W. George Jr. Trustee 590 Renaud 22.57%
John W. George Trust Grosse Pointe, MI 48236
U/A/D

The Charles Schwab Corp. 101 Montgomery St. 16.53%
San Francisco, CA 94104

LOOMIS SAYLES SMALL CAP
GROWTH FUND

The Charles Schwab Corp. 101 Montgomery St. 22.15%
San Francisco, CA 94104

National Financial Services Corp. 200 Liberty Street 19.84%
FEBO Customers One World Financial Center
New York, NY 10281

LOOMIS SAYLES SMALL CAP
VALUE FUND

The Charles Schwab Corp. 101 Montgomery St. 13.38%
San Francisco, CA 94104

Smith Barney Inc. 388 Greenwich St. 10.34%
00109801250 New York, NY 10001

LOOMIS SAYLES U.S.
GOVERNMENT SECURITIES FUND

The Charles Schwab Corp. 101 Montgomery St. 54.90%
San Francisco, CA 94104

National City Bank Columbus (Trustee) P.O. Box 94984 9.24%
Columbus Distributing Co. PSP Cleveland, Oh 44101
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
LOOMIS SAYLES WORLDWIDE FUND

The Charles Schwab Corp. 101 Montgomery St. 95.83%
San Francisco, CA 94104
</TABLE>

22
<PAGE>

<TABLE>
<CAPTION>
RETAIL CLASS SHARES
PERCENTAGE OF
-------------
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- ------------

<S> <C> <C>
LOOMIS SAYLES AGGRESSIVE
GROWTH FUND

The Charles Schwab Corp. 101 Montgomery St. 43.01%
San Francisco, CA 94104

National Financial Services Corp. 200 Liberty Street 26.11%
FEBO Customers One World Financial Center
New York, NY 10281

BOND FUND

National Financial Services Crop. 200 Liberty Street 28.54%
FEBO Customers One World Financial Center
New York, NY 10281

LOOMIS SAYLES CORE VALUE FUND

The Charles Schwab Corp. 101 Montgomery St. 48.15%
San Francisco, CA 94104

National Financial Services Corp. 200 Liberty Street 32.05%
FEBO Customers One World Financial Center
New York, NY 10281

Whitelaw & Co. New Plan Worlds P.O. Box 94984 8.71%
c/o National City Bank Cleveland, OH 44101

State Street Bank & Trust Company Harbor House 400 5.49%
Custodian for the IRA of Gerald L. Hindman Key Largo, FL 33037

LOOMIS SAYLES GLOBAL BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 59.75%
San Francisco, CA 94104
</TABLE>

23
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
National Financial Services Corp. 200 Liberty St. 16.36%
FEBO Customers One World Financial Center
New York, NY 10281

National Investor Services Corp. 55 Water St. 11.27%
FEBO Customers New York, NY 10041

LOOMIS SAYLES GROWTH FUND

Angelo V. Glorioso 225 Summit Dr. 56.88%
Pittsburgh, PA 15238

The Charles Schwab Corp. 101 Montgomery St. 28.20%
San Francisco, CA 94104

Whitelaw & Co. New Plan Worlds P.O. Box 94984 8.80%
c/o National City Bank Cleveland, OH 44101

LOOMIS SAYLES
INTERMEDIATE MATURITY BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 34.52%
San Francisco, CA 94104

Donaldson Lufkin & Jenrette P.O. Box 2052 5.42%
Securities Corp. Inc. Jersey City, NJ 07303

LOOMIS SAYLES
INTERNATIONAL EQUITY FUND

National Investor Services Corp. 55 Water St. 47.47%
FEBO Customers New York, NY 10041

The Charles Schwab Corp. 101 Montgomery St. 36.92%
San Francisco, CA 94104

National Financial Services Corp. 200 Liberty St. 9.34%
FEBO Customers One World Financial Center
New York, NY 10281
</TABLE>

24
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 42.42%
San Francisco, CA 94104

Donaldson Lufkin & Jenrette P.O. Box 2052 30.96%
Securities Corp. Inc. Jersey City, NJ 07303

National Financial Services Corp. 200 Liberty St. 18.78%
FEBO Customers One World Financial Center
New York, NY 10281

LOOMIS SAYLES MID-CAP VALUE FUND

The Charles Schwab Corp. 101 Montgomery St. 37.79%
San Francisco, CA 94104

Donaldson Lufkin & Jenrette P.O. Box 2052 33.18%
Securities Corp. Inc. Jersey City, NJ 07303

Fiserv Security Inc. One Commerce Square 14.51%
2005 Market St.
Philadelphia, PA 19103

National Financial Services Corp. 200 Liberty St. 8.21%
FEBO Customers One World Financial Center
New York, NY 10281

LOOMIS SAYLES SHORT-TERM BOND FUND

The Charles Schwab Corp. 101 Montgomery St. 33.43%
San Francisco, CA 94104

National Financial Services Corp. 200 Liberty St. 30.56%
FEBO Customers One World Financial Center
New York, NY 10281

Donaldson Lufkin & Jenrette P.O. Box 2052 16.19%
Securities Corp. Inc. Jersey City, NJ 07303

National Investor Services Corp. 55 Water St. 7.73%
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
FEBO Customers New York, NY 10041

E. Scott Glacken 9221 Vendome Dr. 6.60%
Z. Margaret Glacken Bethesda, MD 20817
JT WROS

LOOMIS SAYLES SMALL CAP GROWTH FUND

The Charles Schwab Corp. 101 Montgomery St. 48.02%
San Francisco, CA 94104

Chase Manhattan Bank (Trustee) 770 Broadway, Floor 10 17.94%
MetLife Defined Contribution Group New York, NY 10003
Attn: Cindy Chu

MO Institute of Sports Medicine 621 S. New Ballas 9.70%
Profit Sharing Plan & Trust Suite 101
DTD 5/1/80 St. Louis, MO 63141

National Financial Services Corp. 200 Liberty St. 8.37%
FEBO Customers One World Financial Center
New York, NY

LOOMIS SAYLES SMALL CAP VALUE FUND

The Charles Schwab Corp. 101 Montgomery St. 26.48%
San Francisco, CA 94104

Chase Manhattan Bank Trustee 770 Broadway 19.20%
Metlife Defined Contribution 10th Floor
Group; Attn: Cindy Chu New York, NY 10003

First Trust National Association 180 East Fifth St. 18.61%
Trustee for United Healthcare P.O. Box 64488
401K Savings Plan St. Paul, MN 55164

Fidelity Investments Institutional 100 Magellan Way KWIC 12.05%
FIIOC Agent for Certain Employee Covington, KY 41015
Benefits Plans
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
LOOMIS SAYLES WORLDWIDE FUND

The Charles Schwab Corp. 101 Montgomery St. 43.51%
San Francisco, CA 94104

National Investor Services 55 Water St. 35.52%
Corp. New York, NY 10041
FBO Customers

State Street Bank & Trust Company 235 Arlington Road, Apt. 214 20.83%
Custodian for the IRA of Redwood City, CA 94062
Benjamin T. Ream
</TABLE>

27
<PAGE>

<TABLE>
<CAPTION>
ADMIN CLASS SHARES
PERCENTAGE OF
-------------
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- ------------

<S> <C> <C>
LOOMIS SAYLES BOND FUND

Smith Barney Corp Trust Co. (Trustee) Two Tower Center 76.88%
Smith Barney 401(k) Advisor Group Trust dated P.O. Box 1063
1/1/98 E. Brunswick, NJ 08816

New York Life Trust Co. 51 Madison Ave., Rm. 117A 23.11%
Client Account New York, NY 10010

LOOMIS SAYLES SMALL CAP VALUE FUND

Merrill Lynch Pierce Fenner & Smith Inc. 4800 Deer Lake Dr. E 40.24%
FBO Customers 3rd Floor
Jacksonville, FL 32246

Smith Barney Corp. Trust Co. (Trustee) Two Tower Center 37.05%
Smith Barney 401(k) Advisor P.O. Box 1063
Group Trust E. Brunswick, NJ 08816

Wilmington Trust Co. (Trustee) 1100 N. Market St. 9.31%
various 401(K) Plans Drop Code 2030
Wilmington, DE 19801

Smith Barney Corp. Trust Co. (Trustee) Two Tower Center 7.56%
The Copeland Retirement P.O. Box 1063
Group Trust dated 4/21/95 E. Brunswick, NJ 08816
</TABLE>

To the extent that any shareholder listed above beneficially owns more
than 25% of a Fund, it may be deemed to "control" such Fund within the
meaning of the 1940 Act. The Charles Schwab Corporation is organized under
the laws of Delaware. Loomis, Sayles & Company, L.P. is a limited partnership
organized under the laws of Delaware whose corporate parent is Loomis, Sayles
& Company, Inc., a Massachusetts corporation. Loomis, Sayles & Company, Inc.
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. Nvest
Companies, L.P.'s managing general partner, Nvest Corporation, is a direct
wholly-owned subsidiary of Metropolitan Life Insurance Company, a mutual life
insurance company. Nvest Companies, L.P.'s 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.

28
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISORY AGREEMENTS. Under each advisory agreement, Loomis Sayles manages
the investment and reinvestment of the assets of the relevant Fund and generally
administers its affairs, subject to supervision by the Board of Trustees of the
Trust. Loomis Sayles furnishes, at its own expense, all necessary office space,
facilities and equipment, services of executive and other personnel of the
Funds, and certain administrative services. For these services, the advisory
agreements provide that each Fund shall pay Loomis Sayles a monthly investment
advisory fee at the following annual percentage rates of the particular Fund's
average daily net assets:

Fund Rate
---- ----
Loomis Sayles Aggessive Growth Fund .75%
Loomis Sayles Bond Fund .60
Loomis Sayles Core Value Fund .50
Loomis Sayles Emerging Markets Fund 1.25
Loomis Sayles Global Bond Fund .60
Loomis Sayles Global Technology Fund 1.00
Loomis Sayles Growth Fund .50
Loomis Sayles High Yield Fund .60
Loomis Sayles Intermediate Maturity Bond Fund .40
Loomis Sayles International Equity Fund .75
Loomis Sayles Investment Grade Bond Fund .40
Loomis Sayles Mid-Cap Value Fund .75
Loomis Sayles Municipal Bond Fund .40*
Loomis Sayles Short-Term Bond Fund .25
Loomis Sayles Small Cap Growth Fund .75
Loomis Sayles Small Cap Value Fund .75
Loomis Sayles U.S. Government Securities Fund .30
Loomis Sayles Worldwide Fund .75

* Loomis Sayles has contractually agreed to reduce the management fee for
the Municipal Bond Fund to .30% through February 1, 2001.

During the periods shown below, pursuant to the advisory agreements
described above, Loomis Sayles received the following amount of investment
advisory fees from each Fund (before voluntary fee reductions and expense
assumptions) and bore the following amounts of fee reductions and expense
assumptions for each Fund:

29
<PAGE>

FISCAL YEAR ENDED FISCAL PERIOD ENDED FISCAL YEAR ENDED
12/31/97 9/30/98* 9/30/99

Fee Waivers Fee Waivers Fee Waivers
Advisory and Expense Advisory and Expense Advisory and Expense
Fund Fees Assumptions Fees Assumptions Fees Assumptions
- ---- ---- ----------- ---- ----------- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund $ 11,993 $151,104 $ 11,818 $ 109,517 $ 51,041 $ 151,062
Loomis Sayles Bond Fund 5,460,675 197,170 6,920,645 112,593 9,494,667 39,426
Loomis Sayles Core Value Fund 269,200 29,404 264,693 12,673 380,288 18,860
Loomis Sayles Global Bond Fund 178,622 123,445 155,995 85,930 240,399 95,735
Loomis Sayles Growth Fund 174,976 74,929 114,917 52,384 139,736 110,695
Loomis Sayles High Yield Fund 34,062 185,981 50,667 141,220 108,323 168,537
Loomis Sayles Intermediate Maturity 17,125 147,955 25,473 122,162 40,062 154,766
Bond Fund
Loomis Sayles International Equity Fund 705,111 178,102 451,871 124,877 543,750 179,012
Loomis Sayles Investment Grade Bond 8,585 162,568 12,300 119,899 40,491 167,270
Fund
Loomis Sayles Mid-Cap Value Fund 18,691 158,363 23,688 117,826 34,645 157,358
Loomis Sayles Municipal Bond Fund 34,082 102,318 28,142 77,070 34,119 111,048
Loomis Sayles Short-Term Bond Fund 41,211 143,266 45,845 74,443 69,499 187,089
Loomis Sayles Small Cap Growth Fund 24,894 170,503 67,049 117,517 379,428 75,249
Loomis Sayles Small Cap Value Fund 1,581,667 12,741 1,981,662 5,254 2,941,342 6,827
Loomis Sayles U.S. Government 55,096 87,088 65,031 60,872 64,112 99,919
Securities Fund
Loomis Sayles Worldwide Fund 55,489 148,392 32,580 112,466 44,837 165,386
</TABLE>

- ------
* The fiscal year-end for each of the Funds changed to September 30 in 1998.

The Trust pays the compensation of its trustees who are not directors,
officers, or employees of Loomis Sayles or its affiliates (other than registered
investment companies); registration, filing and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Funds; the expenses of
meetings of the shareholders and trustees of the Trust; the charges and expenses
of the Trust's legal counsel; interest on any borrowings by the Funds; the cost
of services, including services of counsel, required in connection with the
preparation of, and the cost of printing, the Trust's registration statements
and Prospectuses, including amendments and revisions thereto, annual, semiannual
and other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders or regulatory authorities, to the extent that
any such materials relate to the Trust or its shareholders; and the Trust's
expenses of bookkeeping, accounting, auditing, and financial reporting,
including related clerical expenses.

Under each advisory agreement, if the total ordinary business expenses of a
Fund or the Trust as a whole for any fiscal year exceed the lowest applicable
limitation (based on percentage of average net assets or income) prescribed by
any state in which the shares of the Fund or the Trust are qualified for sale,
Loomis Sayles shall pay

30
<PAGE>

such excess. Loomis Sayles will not be required to reduce its fee or pay such
expenses to an extent or under circumstances that would result in any Fund's
inability to qualify as a regulated investment company under the Code. The term
"expenses" is defined in the advisory agreements or in relevant state
regulations and excludes brokerage commissions, taxes, interest,
distribution-related expenses, and extraordinary expenses.

As described in the Prospectuses, Loomis Sayles has agreed to certain
additional, voluntary arrangements to limit Fund expenses. These arrangements
may be modified or terminated by Loomis Sayles at any time.

Each advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
relevant Fund and (ii) by vote of a majority of the Trustees who are not
"interested persons" of the Trust, as that term is defined in the 1940 Act, cast
in person at a meeting called for the purpose of voting on such approval. Any
amendment to an advisory agreement must be approved by vote of a majority of the
outstanding voting securities of the relevant Fund and by vote of a majority of
the Trustees who are not such interested persons, cast in person at a meeting
called for the purpose of voting on such approval. Each agreement may be
terminated without penalty by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the relevant Fund, upon sixty
days' written notice, or by Loomis Sayles upon ninety days' written notice, and
each terminates automatically in the event of its assignment. In addition, each
agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" and "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the relevant Fund and by a majority of
the Trustees who are not interested persons of the Trust or Loomis Sayles.

Each advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties.

Loomis Sayles acts as investment adviser or subadviser to New England Value
Fund, New England Strategic Income Fund, New England Star Advisers Fund, New
England Star Small Cap Fund, and New England Balanced Fund, which are series of
New England Funds Trust I, a registered open-end management investment company;
New England High Income Fund, a series of New England Funds Trust II, a
registered, open-end management investment company; the Loomis Sayles Balanced
Series and the Loomis Sayles Small Cap Series of New England Zenith Fund, a
registered open-end management investment company; and Loomis Sayles Investment
Trust, a registered open-end management investment company. Loomis Sayles also
provides investment advice to certain other open-end management investment
companies and numerous other corporate and fiduciary clients.

The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. Nvest Companies,
L.P.'s managing general partner, Nvest Corporation, is a direct wholly-owned
subsidiary of Metropolitan Life Insurance Company, a mutual life insurance
company. Nvest Companies, L.P.'s advising general partner, Nvest L.P., is a
publicly traded company listed on the New York Stock Exchange. Nvest Corporation
is the sole general partner of Nvest L.P.

Certain officers and trustees of the Trust also serve as officers,
directors, and trustees of other investment companies and clients advised by
Loomis Sayles. The other investment companies and clients sometimes invest in
securities in which the Funds also invest. If a Fund and such other investment
companies or clients desire to buy or sell the same portfolio securities at the
same time, purchases and sales may be allocated, to the extent practicable, on a
pro rata basis in proportion to the amounts desired to be purchased or sold for
each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities a Fund purchases or sells. In other cases, however, it is believed
that these practices may benefit the

31
<PAGE>

Funds. It is the opinion of the trustees that the desirability of retaining
Loomis Sayles as adviser for the Funds outweighs the disadvantages, if any, that
might result from these practices.

DISTRIBUTION AGREEMENT AND RULE 12b-1 PLANS. Under an agreement with the
Trust (the "Distribution Agreement"), Loomis Sayles Distributors, L.P., One
Financial Center, Boston, Massachusetts 02111 (the "Distributor") serves as the
general distributor of each class of shares of the Funds. Under this agreement,
the Distributor is not obligated to sell a specific number of shares. The
Distributor bears the cost of making information about the Funds available
through advertising and other means and the cost of printing and mailing the
Prospectuses to persons other than shareholders. The Funds pay the cost of
registering and qualifying their shares under state and federal securities laws
and the distribution of the Prospectuses to existing shareholders.

As described in the Prospectuses, the Funds have adopted Rule 12b-1 plans
("Plans") for their Retail Class, Admin Class, and Class A shares. The Plans,
among other things, permit the relevant classes of the Funds to pay the
Distributor monthly fees, at annual rates not exceeding 0.25% of the assets of
the Retail Class, Admin Class, and Class A, respectively, as compensation for
its services as principal underwriter of the shares of these classes. Pursuant
to Rule 12b-1 under the 1940 Act, each Plan (together with the Distribution
Agreement) was approved by the Board of Trustees, including a majority of the
trustees who are not interested persons of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operations of
the Plan or the Distribution Agreement (the "Independent Trustees"). The
principal types of activities for which payments under these Plans may be made
include payments to intermediaries for shareholder servicing, for no transaction
fee or wrap programs, and for retirement plan record keeping. Payments under
these Plans also may be made for activities such as advertising, printing, and
mailing the Prospectuses to persons who are not current shareholders,
compensation to underwriters, compensation to broker-dealers, compensation to
sales personnel, and interest, carrying, or other financing charges.

The following table provides information on the amount of fees paid by the
Funds under these Plans during the past fiscal year.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND/CLASS 12b-1 Fees paid by the Fund
- -------------------------------------------------------------------------------
<S> <C>
Loomis Sayles Aggressive Growth Fund
Retail Class $536
- -------------------------------------------------------------------------------
Loomis Sayles Bond Fund
Retail Class $137,433
Admin Class $3,323
- -------------------------------------------------------------------------------
Loomis Sayles Core Value Fund
Retail Class $2,184
- -------------------------------------------------------------------------------
Loomis Sayles Global Bond Fund
Retail Class $15,884
- -------------------------------------------------------------------------------
Loomis Sayles Growth Fund
Retail Class $1,521
- -------------------------------------------------------------------------------
Loomis Sayles Intermediate Maturity Bond Fund
Retail Class $2,391
- -------------------------------------------------------------------------------
Loomis Sayles International Equity Fund
Retail Class $416
- -------------------------------------------------------------------------------
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND/CLASS 12b-1 Fees paid by the Fund
<S> <C>
- -------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund
Retail Class $5,871
- -------------------------------------------------------------------------------
Loomis Sayles Mid-Cap Value Fund
Retail Class $465
- -------------------------------------------------------------------------------
Loomis Sayles Short-Term Bond Fund
Retail Class $1,542
- -------------------------------------------------------------------------------
Loomis Sayles Small Cap Growth Fund
Retail Class $9,021
- -------------------------------------------------------------------------------
Loomis Sayles Small Cap Value Fund
Retail Class $167,609
Admin Class $7,110
- -------------------------------------------------------------------------------
Loomis Sayles Worldwide Fund
Retail Class $269
- -------------------------------------------------------------------------------
</TABLE>

Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of the
relevant class of shares of the Fund to which the Plan relates. Each Plan may be
amended by vote of the trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose. Any change in any
Plan that would materially increase the fees payable thereunder by the Retail
Class, Admin Class, or Class A shares of a Fund requires approval of the Retail
Class, Admin Class, or Class A shareholders of that Fund. The Trust's trustees
review quarterly written reports of such costs and the purposes for which such
costs have been incurred. Each Plan provides that, for so long as that Plan is
in effect, selection and nomination of those trustees who are not interested
persons of the Trust shall be committed to the discretion of such disinterested
persons.

The Distribution Agreement may be terminated at any time with respect to a
Fund on 60 days' written notice without payment of any penalty by the Trust or
by vote of a majority of the outstanding voting securities of that Fund or by
vote of a majority of the Independent Trustees.

The Distribution Agreement and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the entire Board of Trustees and (ii)
by the vote of a majority of the Independent Trustees, in each case cast in
person at a meeting called for that purpose.

CUSTODIAL ARRANGEMENTS. State Street Bank and Trust Company ("State Street
Bank"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street Bank holds in safekeeping certificated securities and cash belonging to
the Funds and, in such capacity, is the registered owner of securities held in
book entry form belonging to the Funds. Upon instruction, State Street Bank
receives and delivers cash and securities of the Funds in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. State Street Bank also maintains certain
accounts and records of the Funds and calculates the total net asset value,
total net income, and net asset value per share of each Fund on a daily basis.

33
<PAGE>

federal and state income taxation. The information under the caption "Financial
Highlights" included in the Prospectuses has been so included, and the financial
statements incorporated by reference herein from the Funds' 1999 Annual Report
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers
LLP, given on the authority of said firm as experts in auditing and accounting.

PORTFOLIO TRANSACTIONS AND BROKERAGE

In placing orders for the purchase and sale of portfolio securities for
each Fund, Loomis Sayles always seeks the best price and execution. Transactions
in unlisted securities are carried out through broker-dealers who make the
primary market for such securities unless, in the judgment of Loomis Sayles, a
more favorable price can be obtained by carrying out such transactions through
other brokers or dealers.

Loomis Sayles selects only brokers or dealers that it believes are
financially responsible, will provide efficient and effective services in
executing, clearing, and settling an order, and will charge commission rates
that, when combined with the quality of the foregoing services, will produce
best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates.
Loomis Sayles will use its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage community from time to
time and will evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount of
the capital commitment by the broker in connection with the order, are taken
into account. The Funds, other than the Loomis Sayles Emerging Markets Fund, the
Loomis Sayles Global Bond Fund, the Loomis Sayles Global Technology Fund, the
Loomis Sayles International Equity Fund, and the Loomis Sayles Worldwide 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 that 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 that Loomis Sayles believes will provide best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation, and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Loomis Sayles' expenses. Such services may be
used by Loomis Sayles in servicing other client accounts and in some cases may
not be used with respect to the Funds. Receipt of services or products other
than research from brokers is not a factor in the selection of brokers.

LOOMIS SAYLES EMERGING MARKETS FUND, LOOMIS SAYLES GLOBAL BOND FUND, LOOMIS
SAYLES GLOBAL TECHNOLOGY FUND, LOOMIS SAYLES INTERNATIONAL EQUITY FUND, AND
LOOMIS SAYLES WORLDWIDE FUND. In placing orders for the purchase and sale of
securities for the Loomis Sayles Emerging Markets Fund, the Loomis Sayles Global
Bond Fund, the Loomis Sayles Global Technology Fund, the Loomis Sayles
International Equity Fund, and the Loomis Sayles Worldwide Fund, Loomis Sayles
follows the same policies as for the other Funds, except that Loomis Sayles may
cause these Funds to pay a broker-dealer that provides brokerage and research
services to Loomis Sayles an amount of commission for effecting a securities
transaction for these Funds in excess of the amount another broker-dealer would
have charged for effecting that transaction. Loomis Sayles must determine in
good faith that such greater commission is reasonable in relation to the value
of the brokerage and research services provided by the executing broker-dealer
viewed in terms of that particular transaction or Loomis Sayles' overall
responsibilities to the Trust and its other clients. Loomis Sayles' authority to
cause these Funds to pay such greater commissions is also subject to such
policies as the trustees of the Trust may adopt from time to time.

34
<PAGE>

The following tables set forth, for the 1997 and 1999 fiscal years and
the 1998 fiscal period (January 1, 1998 through September 30, 1998),
respectively, (1) the aggregate dollar amount of brokerage commissions paid on
portfolio transactions during such period, (2) the dollar amount of transactions
on which brokerage commissions were paid during such period that were directed
to brokers providing research services ("directed transactions") and (3) the
dollar amount of commissions paid on directed transactions during such period.
Funds not listed in a table did not pay brokerage commissions during the
relevant period.

FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
(1) (2) (3)
AGGREGATE COMMISSIONS
BROKERAGE DIRECTED ON DIRECTED
FUND COMMISSIONS TRANSACTIONS TRANSACTIONS
<S> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund $ 6,261 $ 45,426 $ 84
Loomis Sayles Core Value Fund $ 81,471 $ 22,718,537 $21,202
Loomis Sayles Growth Fund $ 81,395 $ 3,200,161 $ 4,782
Loomis Sayles International Equity Fund $759,784 $220,336,814 $28,794
Loomis Sayles Mid-Cap Value Fund $ 7,298 $ 83,840 $ 319
Loomis Sayles Small Cap Growth Fund $ 9,774 $ 181,489 $ 672
Loomis Sayles Small Cap Value Fund $579,295 $ 29,877,865 $71,938
Loomis Sayles Worldwide Fund $ 9,953 $ 4,261,122 $ 489
</TABLE>

FISCAL PERIOD ENDED SEPTEMBER 30, 1998
(January 1, 1998 - September 30, 1998)
<TABLE>
<CAPTION>
(1) (2) (3)
AGGREGATE COMMISSIONS
BROKERAGE DIRECTED ON DIRECTED
FUND COMMISSIONS TRANSACTIONS TRANSACTIONS
- ---- ----------- ------------ ------------
<S> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund $ 5,336 $ 4,300 $ 256
Loomis Sayles Core Value Fund $ 76,841 $23,336,695 $27,893
Loomis Sayles Growth Fund $ 84,990 $ 114,400 $ 6,864
Loomis Sayles International Equity Fund $466,218 $ 6,619,778 $15,145
Loomis Sayles Mid-Cap Value Fund $ 14,031 $ 246,357 $ 569
Loomis Sayles Small Cap Growth Fund $ 22,443 $ 154,320 $ 348
Loomis Sayles Small Cap Value Fund $872,492 $42,599,200 $78,151
Loomis Sayles Worldwide Fund $ 20,610 $ 3,333,161 $ 520
</TABLE>

35
<PAGE>

FISCAL YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
(1) (2) (3)
AGGREGATE COMMISSIONS
BROKERAGE DIRECTED ON DIRECTED
FUND COMMISSIONS TRANSACTIONS TRANSACTIONS
- ---- ----------- ------------ ------------
<S> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund 14,322 145,236 336
Loomis Sayles Core Value Fund 968,669 15,827,491 21,747
Loomis Sayles Growth Fund 137,480 7,272,139 8,616
Loomis Sayles International Equity Fund 731,793 3,476,533 7,758
Loomis Sayles Mid-Cap Value Fund 207,746 492,747 750
Loomis Sayles Small Cap Growth Fund 80,746 2,061,538 5,511
Loomis Sayles Small Cap Value Fund 20,973,745 8,248,982 21,687
Loomis Sayles Worldwide Fund 31,971 103,464 126
</TABLE>

The table below presents information regarding the securities of the Funds'
regular broker-dealers that were held by the Funds as of September 30, 1999.

<TABLE>
<CAPTION>
% OF FUND'S
FUND MARKET VALUE ASSETS
<S> <C> <C>
Loomis Sayles Aggressive Growth Fund
Charles Schwab $50,531 0.34%

Loomis Sayles Growth Fund
Merrill Lynch $530,781 1.83%

Loomis Sayles Core Value Fund
Bear Stearns $576,575 0.84%
Morgan Stanley $856,200 1.25%

Loomis Sayles Intermediate Maturity Bond Fund
Credit Suisse (First Boston) $49,809 0.46%
Lehman Brothers Inc. $159,288 1.47%
Morgan Stanley $191,092 1.77%

Loomis Sayles Investment Grade Bond Fund
Lehman Brothers Inc. $232,372 1.09%

Loomis Sayles Mid-Cap Value Fund
Knight Trimark Group $109,750 1.90%
Lehman Brothers Inc. $69,975 1.21%

Loomis Sayles Small Cap Value Fund
Federated Investors Inc. $3,417,225 0.86%
</TABLE>

36
<PAGE>

DESCRIPTION OF THE TRUST

The Trust, registered with the SEC as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of Massachusetts by an Agreement and Declaration of Trust (the "Declaration
of Trust") dated February 20, 1991.

The Declaration of Trust currently permits the trustees to issue an
unlimited number of full and fractional shares of each series. Each share of
each Fund represents an equal proportionate interest in such Fund with each
other share of that Fund and is entitled to a proportionate interest in the
dividends and distributions from that Fund. The shares of each Fund do not have
any preemptive rights. Upon termination of any Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of that Fund are entitled to
share pro rata in the net assets of that Fund available for distribution to
shareholders. The Declaration of Trust also permits the trustees to charge
shareholders directly for custodial, transfer agency, and servicing expenses.

The assets received by each Fund for the issue or sale of its shares and
all income, earnings, profits, losses, and proceeds therefrom, subject only to
the rights of creditors, are allocated to, and constitute the underlying assets
of, that Fund. The underlying assets are segregated and are charged with the
expenses with respect to that Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular Fund are allocated by or under the direction of the
trustees in such manner as the trustees determine to be fair and equitable.
While the expenses of the Trust are allocated to the separate books of account
of each Fund, certain expenses may be legally chargeable against the assets of
all Funds.

The Declaration of Trust also permits the trustees, without shareholder
approval, to subdivide any series of shares or Fund into various classes of
shares with such dividend preferences and other rights as the trustees may
designate. Shares of each Fund (other than the Loomis Sayles Emerging Markets
Fund, the Loomis Sayles High Yield Fund, the Loomis Sayles Municipal Bond Fund,
and the Loomis Sayles U.S. Government Securities Fund) are currently divided
into two classes, designated Retail Class and Institutional Class shares. The
Loomis Sayles Bond Fund and the Loomis Sayles Small Cap Value Fund offer a third
class of shares designated Admin Class shares. The Loomis Sayles Aggressive
Growth Fund and the Loomis Sayles Global Technology Fund offer a third class of
shares designated Class A shares, which have a front-end sales charge of up to
5.75%. The trustees may also, without shareholder approval, establish one or
more additional separate portfolios for investments in the Trust or merge two or
more existing portfolios. Shareholders' investments in such an additional or
merged portfolio would be evidenced by a separate series of shares (i.e., a new
"Fund").

The Declaration of Trust provides for the perpetual existence of the Trust.
The Declaration of Trust, however, provides that the trustees may terminate the
Trust or any Fund upon written notice to the shareholders.

VOTING RIGHTS

As summarized in the Prospectus, shareholders are entitled to one vote for
each full share held (with fractional votes for each fractional share held) and
may vote (to the extent provided in the Declaration of Trust) on the election of
trustees and the termination of the Trust and on other matters submitted to the
vote of shareholders.

37
<PAGE>

by a matter unless it is clear that the interests of each class in the matter
are substantially identical or that the matter does not affect any interest of
such class. On matters affecting an individual series, only shareholders of that
series are entitled to vote. Consistent with the current position of the SEC,
shareholders of all series vote together, irrespective of series, on the
election of trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series.

There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the Board of Trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for that purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.

Upon written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).

Except as set forth above, the trustees shall continue to hold office and
may appoint successor trustees. Voting rights are not cumulative.

No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
(i) to change the Trust's name or to cure technical problems in the Declaration
of Trust and (ii) to establish, change, or eliminate the par value of any shares
(currently all shares have no par value).

SHAREHOLDER AND TRUSTEE LIABILITY

Under Massachusetts law shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund of which they are
shareholders. However, the Declaration of Trust disclaims shareholder liability
for acts or obligations of each Fund and requires that notice of such disclaimer
be given in each agreement, obligation, or instrument entered into or executed
by the Trust or the trustees. The Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which the disclaimer
is inoperative and the Fund itself would be unable to meet its obligations.

38
<PAGE>

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 office.

HOW TO BUY SHARES

The procedures for purchasing shares of each Fund are summarized in the
Prospectuses under "General Information-How to Purchase Shares."

NET ASSET VALUE

The net asset value of the shares of each Fund is determined by dividing
that Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares of the Fund outstanding and rounding to the nearest
cent. Such determination is made as of the close of regular trading on the New
York Stock Exchange (generally 4:00 p.m. Eastern time) on each day on which that
Exchange is open for unrestricted trading, and no less frequently than once
daily on each day during which there is sufficient trading in a Fund's portfolio
securities that the value of that Fund's shares might be materially affected.
During the 12 months following the date of this Statement of Additional
Information, the New York Stock Exchange is expected to be closed on the
following weekdays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. Equity securities listed on an established securities
exchange or on the Nasdaq National Market System are normally valued at their
last sale price on the exchange where primarily traded or, if there is no
reported sale during the day, and in the case of over-the-counter securities not
so listed, at the 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 valued by a pricing service, which
determines valuations of normal institutional-size trading units of long-term
debt securities. Such valuations are determined using methods based on market
transactions for comparable securities and on various relationships between
securities that are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available and all
other assets are valued 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 foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the New York
Stock Exchange. Occasionally, events affecting the value of foreign fixed income
securities and of equity securities of non-U.S. issuers not traded on a U.S.
exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of any Fund's
portfolio securities occur during such period, then these securities may be
valued at their fair value as determined in good faith by or in accordance with
procedures approved by the trustees.

SHAREHOLDER SERVICES

OPEN ACCOUNTS

A shareholder's investment in any Fund, except the Loomis Sayles Emerging
Markets Fund, is automatically credited to an open account maintained for the
shareholder by Boston Financial Data Services, Inc. ("BFDS"), the shareholder
servicing agent for State Street Bank. The shareholder servicing agent for the
Loomis Sayles Emerging Markets Fund is State Street Bank. Certificates
representing shares are issued only upon written request to the shareholder
servicing agent but are not issued for fractional shares. Following each
transaction in the account, a shareholder will receive an account statement
disclosing the current balance of shares owned and the

39
<PAGE>

details of recent transactions in the account. After the close of each fiscal
year, the shareholder servicing agent will send each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. This should be retained as a permanent record.
Shareholders will be charged a fee for duplicate information.

The open account system permits the purchase of full and fractional shares
and, by making the issuance and delivery of certificates representing shares
unnecessary, eliminates the problems of handling and safekeeping certificates,
and the cost and inconvenience of replacing lost, stolen, mutilated, or
destroyed certificates.

The costs of maintaining the open account system are borne by the Trust,
and no direct charges are made to shareholders. Although the Trust has no
present intention of making such direct charges to shareholders, it reserves the
right to do so. Shareholders will receive notice before any such charges are
made.

SYSTEMATIC WITHDRAWAL PLAN

A Systematic Withdrawal Plan, referred to in the Prospectus under "General
Information--How to Redeem Shares," provides for monthly, quarterly, semiannual,
or annual withdrawal payments of $50 or more from the account of an eligible
shareholder, as provided therein, provided that the account has a value of at
least $25,000 at the time the plan is established. The Systematic Withdrawal
Plan is not available for the Loomis Sayles Emerging Markets Fund.

Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a signature guarantee will be required on the Plan
application. All shares in an account that is subject to a Systematic Withdrawal
Plan must be held in an open account rather than in certificated form. Income
dividends and capital gain distributions will be reinvested at the net asset
value determined as of the close of regular trading on the New York Stock
Exchange on the record date for the dividend or distribution.

Since withdrawal payments represent proceeds from liquidation of shares,
the shareholder should recognize that withdrawals may reduce and possibly
exhaust the value of the account, particularly in the event of a decline in net
asset value. Accordingly, the shareholder should consider whether a Systematic
Withdrawal Plan and the specified amounts to be withdrawn are appropriate under
the circumstances. The Fund makes no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a plan. See "Redemptions" and "Income Dividends,
Capital Gain Distributions and Tax Status" below for certain information
regarding federal income taxes.

EXCHANGE PRIVILEGE

Shareholders may redeem their shares of any Fund, except the Loomis Sayles
Emerging Markets Fund, and have the proceeds applied on the same day to purchase
shares of the same class of any other Fund or of New England Cash Management
Trust or New England Tax Exempt Money Market Trust, as long as the investment
minimum of the Fund into which the exchange is made is met. An exchange of
shares of the Loomis Sayles High Yield Fund purchased within one year of such
exchange will be subject to a redemption fee of 2.00% of the amount exchanged.
For purposes of determining whether a redemption fee is payable with respect to
shares of the Loomis Sayles High Yield Fund purchased by exchange of shares of
another Fund, the one-year period shall be deemed to begin on the date of such
purchase by exchange. Class A shares of the Loomis Sayles Aggressive Growth Fund
and the Loomis Sayles Global Technology Fund can be exchanged into Class A
shares of any series of Loomis Sayles Funds or New England Funds that offers
Class A shares. This exchange privilege is summarized in the Prospectuses under
"General Information--How to Exchange Shares."

40
<PAGE>

Exchanges may be effected by (1) making a telephone request by calling
800-626-9390, provided that a special authorization form is on file with BFDS or
(2) sending a written exchange request to BFDS accompanied by an account
application for the appropriate Fund. The Trust reserves the right to modify
this exchange privilege without prior notice. An exchange constitutes a sale of
shares for federal income tax purposes on which the investor may realize a
capital gain or loss.

This exchange privilege is not available to shareholders of the Loomis
Sayles Emerging Markets Fund.

IRAS

IRAs may be established under a prototype plan made available by Loomis
Sayles. These plans may be funded with shares of any Fund, although it is
expected that shares of the Loomis Sayles Municipal Bond Fund would ordinarily
not be an appropriate investment for these plans.

All income dividends and capital gain distributions of plan participants
must be reinvested. Plan documents and further information can be obtained from
Loomis Sayles.

Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.

REDEMPTIONS

The procedures for redemption of Fund shares are summarized in the
Prospectuses under "General Information--How to Redeem Shares."

Except as noted below, signatures on redemption requests must be guaranteed
by commercial banks, trust companies, savings associations, credit unions, or
brokerage firms that are members of domestic securities exchanges. Signature
guarantees by notaries public are not acceptable. However, as noted in the
Prospectuses, a signature guarantee will not be required if the proceeds of the
redemption do not exceed $50,000 and the proceeds check is made payable to the
registered owner(s) and mailed to the record address for an account whose
account registration has not changed in the past 30 days.

If a shareholder selects the telephone redemption service in the manner
described in the next paragraph, Fund shares may be redeemed by making a
telephone call directly to BFDS at 800-626-9390. When a telephone redemption
request is received, the proceeds are wired to the bank account previously
chosen by the shareholder and a nominal wire fee (currently $5.00) is deducted.
Telephone redemption requests must be received by BFDS prior to the close of
regular trading on the New York Stock Exchange on a day when the Exchange is
open for business. Requests made after that time or on a day when the New York
Stock Exchange is not open for business cannot be accepted by BFDS, and a new
request will be necessary.

In order to redeem shares by telephone, a shareholder either must select
this service when completing the Fund application or must do so subsequently in
writing. When selecting the service, a shareholder must designate a bank account
to which the redemption proceeds should be wired. Any change in the bank account
so designated must be made by furnishing to BFDS a written request with a
signature guarantee. Telephone redemptions may be made only if an investor's
bank is a member of the Federal Reserve System or has a correspondent bank that
is a member of the System. If the account is with a savings bank, it must have
only one correspondent bank that is a member of the System. The Trust, BFDS,
Loomis Sayles Distributors, L.P., and State Street Bank are not responsible for
the authenticity of withdrawal instructions received by telephone.

Telephone redemptions are not available for the Loomis Sayles Emerging
Markets Fund.

41
<PAGE>

The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by BFDS in proper form, less, in the case of the Loomis Sayles High
Yield Fund and the Loomis Sayles Emerging Markets Fund, a redemption fee of
2.00% of the amount redeemed with respect to shares of that Fund redeemed within
one (1) year of purchase, if applicable. Proceeds resulting from a written
redemption request will normally be mailed to the shareholder within seven days
after receipt of a request in good order. Telephonic redemption proceeds will
normally be wired on the first business day following receipt of a proper
redemption request. In those cases where a shareholder has recently purchased
shares by check and the check was received less than fifteen days prior to the
redemption request, the Fund may withhold redemption proceeds until the check
has cleared.

Each Fund will normally redeem shares for cash; however, each Fund reserves
the right to pay the redemption price wholly or partly in kind. If portfolio
securities are distributed in lieu of cash, the shareholder will normally incur
brokerage commissions upon subsequent disposition of any such securities.
However, the Trust has elected to be governed by Rule 18f-1 under the 1940 Act,
pursuant to which the Trust is obligated to redeem shares solely in cash for any
shareholder during any 90-day period up to the lesser of $250,000 or 1% of the
total net asset value of the Trust at the beginning of such period.

A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long-term or short-term capital
gain or loss. See "Income Dividends, Capital Gain Distributions and Tax Status."

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

As described in the Prospectuses under "Dividends and Distributions," it is
the policy of each Fund to pay its shareholders, as dividends, substantially all
net investment income and to distribute annually all net realized capital gains,
if any, after offsetting any capital loss carryovers.

Income dividends and capital gain distributions are payable in full and
fractional shares of the particular Fund based upon the net asset value
determined as of the close of regular trading on the New York Stock Exchange on
the record date for each dividend or distribution. Shareholders, however, may
elect to receive their income dividends or capital gain distributions, or both,
in cash. The election may be made at any time by submitting a written request
directly to the shareholder servicing agent (BFDS for all Funds except the
Loomis Sayles Emerging Markets Fund, and State Street Bank for the Loomis Sayles
Emerging Markets Fund). In order for a change to be in effect for any dividend
or distribution, it must be received by the shareholder servicing agent on or
before the record date for such dividend or distribution.

As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.

The Internal Revenue Service ("IRS") requires any Fund to withhold 31% of
any redemption proceeds (including the value of shares exchanged) and of any
income dividends and capital gain distributions in the following situations:

- - If you do not provide a correct, certified taxpayer identification number
to the Fund.

- - If the IRS notifies the Fund that you have under reported your income in
the past and thus are subject to backup withholding.

- - If you fail to certify to the Fund that you are not subject to such backup
withholding.

42
<PAGE>

Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to qualify as such and to qualify for
the favorable tax treatment accorded regulated investment companies and their
shareholders, each Fund must, among other things, (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities, or currencies; (ii) distribute with respect to each taxable
year at least 90% of the sum of its taxable net investment income, its
tax-exempt income, and the excess, if any, of net short-term capital gains over
net long-term capital losses for such year; and (iii) diversify its holdings so
that at the end of each fiscal quarter (a) at least 50% of the value of its
assets is invested in cash, U.S. Government securities, securities of other
regulated investment companies, and other securities of issuers that represent,
with respect to each issuer, no more than 5% of the value of the Fund's 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 that 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, a Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions.

An excise tax at the rate of 4% will be imposed on the excess, if any, of
each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. Each Fund
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by a Fund during October, November, or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which they were
declared.

Shareholders of each Fund will be subject to federal income taxes on
distributions made by the Fund (other than "exempt-interest dividends" paid by
the Loomis Sayles Municipal Bond Fund, as described in its Prospectus) whether
received in cash or additional shares of the Fund. Distributions by each Fund of
net income and short-term capital gains, if any, will be taxable to shareholders
as ordinary income. Distributions designated by a Fund as deriving from net
gains on securities held for more than one year will be taxable to shareholders
as long-term capital gains (generally taxed at a rate of 20% for noncorporate
shareholders), without regard to how long the shareholder has held shares of the
Fund.

Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur for 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 Loomis Sayles Emerging Markets Fund, the Loomis Sayles Global Bond
Fund, the Loomis Sayles Global Technology Fund, the Loomis Sayles International
Equity Fund, and the Loomis Sayles Worldwide Fund each may be eligible to make
an election under Section 853 of the Code so that its shareholders will be able
to claim a credit or deduction on their income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid by the relevant Fund to foreign countries. The
ability of shareholders of the Fund to claim a foreign tax credit is subject to
certain limitations imposed by Section 904 of the Code, which in general limits
for the amount of foreign tax that may be used to reduce a shareholder's U.S.
tax liability to that amount of U.S. tax that would be imposed on the amount and
type of income for which the foreign tax was paid. In addition, a shareholder
must hold shares of the Fund (without protection from risk of loss) on the

43
<PAGE>

ex-dividend date and for at least 16 days during the 30-day period beginning on
the date that is 15 days before the ex-dividend date in order to be eligible to
claim a foreign credit for his or her share of these foreign taxes. A
shareholder who for U.S. income tax purposes claims a foreign tax credit in
respect of Fund distributions may not claim a deduction for foreign taxes paid
by the Fund, regardless of whether the shareholder itemizes deductions. Also,
under Section 63 of the Code, no deduction for foreign taxes may be claimed by
shareholders who do not itemize deductions on their federal income tax returns.
It should also be noted that a tax-exempt shareholder, like other shareholders,
will be required to treat as part of the amounts distributed to it a pro rata
portion of the income taxes paid by the Fund to foreign countries. However, that
income will generally be exempt from United States taxation by virtue of such
shareholder's tax-exempt status, and such a shareholder will not be entitled to
either a tax credit or a deduction with respect to such income. The Loomis
Sayles Emerging Markets Fund, the Loomis Sayles Global Bond Fund, the Loomis
Sayles Global Technology Fund, the Loomis Sayles International Equity Fund, and
the Loomis Sayles Worldwide Fund will notify shareholders each year of the
amount of dividends and distributions and the shareholder's pro rata share of
qualified taxes paid by each such Fund to foreign countries.

Each Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.

Investment by a Fund in "passive foreign investment companies" could
subject the Fund to U.S. federal income tax or other charge on the proceeds from
the sale of its investment in such a company; however, this tax can be avoided
by making an election to mark such investments to market annually or to treat
the passive foreign investment company as a "qualified electing fund."

If a Fund engages in hedging transactions, including hedging transactions
in options, futures contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale,
mark-to-market, straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. Each Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund.

A Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received. In such
cases, a Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

Generally a Fund may designate dividends eligible for the
dividends-received deduction only to the extent that such dividends are derived
from dividends paid to the Fund with respect to which the Fund could have taken
the dividends-received deduction if it had been a regular corporation. The
dividends-received deduction is not available to non-corporate shareholders,
Subchapter S corporations, or corporations that do not hold their shares for at
least 46 days during the 90-day period beginning on the date that is 45 days
before the ex-dividend date. The dividends-received deduction also is not
available with respect to dividends derived from a Fund's investment in foreign
securities or REITs.

Redemptions and exchanges of each Fund's shares are taxable events, and,
accordingly, shareholders may realize gains and losses on these transactions. In
general, any gain realized upon a taxable disposition of shares will be treated
as long-term capital gain if the shares have been held for more than one year.
Otherwise the gain on the sale, exchange, or redemption of Fund shares will be
treated as short-term capital gain. However, if a shareholder

44
<PAGE>

sells Fund shares at a loss within six months after purchasing the shares, the
loss will be treated as a long-term capital loss to the extent of any long-term
capital gain distributions received by the shareholder. Furthermore, no loss
will be allowed on the sale of Fund shares to the extent the shareholder
acquired other shares of the same Fund within 30 days prior to the sale of the
loss shares or 30 days after such sale.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action.

Dividends and distributions also may be subject to foreign, state, and
local taxes. Shareholders are urged to consult their tax advisers regarding
specific questions as to federal, state, foreign, or local taxes.

The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty). The IRS recently revised its
regulations affecting the application to foreign investors of the back-up
withholding tax rules. The new regulations will generally be effective for
payments made on or after January 1, 2001 (although transition rules will
apply). In some circumstances, the new rules will increase the certification and
filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax and for reduced withholding tax
rates under income tax treaties. Foreign investors in each Fund should consult
their advisers with respect to the potential application of these new
regulations.

FINANCIAL STATEMENTS

The financial statements of each Fund included in the Trust's 1999 Annual
Report, filed with the SEC on November 29, 1999, are incorporated by reference
to such Report.

CALCULATION OF YIELD AND TOTAL RETURN

YIELD. Yield with respect to a Fund will be computed by dividing 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 Funds' yields will vary from time to
time depending upon market conditions, the composition of the Funds' portfolios
and operating expenses of the Trust allocated to each Fund. These factors, and
possible differences in the methods used in calculating yield, should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the 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 Funds are specifically advised that the net asset value
per share of each Fund may vary, just as yields for each Fund may vary. An
investor's focus on yield to the exclusion of the consideration of the value of
shares of a Fund may result in the investor's misunderstanding the total return
he or she may derive from that Fund.

TOTAL RETURN. Total Return with respect to a Fund is a measure of the
change in value of an investment in such Fund over the period covered and
assumes that any dividends or capital gain distributions are reinvested

45
<PAGE>

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 that would have been purchased if all dividends and distributions paid or
distributed during the period had been immediately reinvested; (2) calculating
the value of the hypothetical initial investment of $1,000 as of the end of the
period by multiplying the total number of shares owned at the end of the period
by the net asset value per share on the last trading day of the period; (3)
assuming redemption at the end of the period; and (4) dividing the resulting
account value by the initial $1,000 investment.

PERFORMANCE COMPARISONS

YIELD AND TOTAL RETURN. Each Fund may from time to time include its total
return information in advertisements or in information furnished to present or
prospective shareholders. Each of the Loomis Sayles Bond, Loomis Sayles Global
Bond, Loomis Sayles High Yield, Loomis Sayles Intermediate Maturity Bond, Loomis
Sayles Investment Grade Bond, Loomis Sayles Municipal Bond, Loomis Sayles
Short-Term Bond, Loomis Sayles U.S. Government Securities, and Loomis Sayles
Worldwide Funds may from time to time include the yield and/or total return of
its shares in advertisements or information furnished to present or prospective
shareholders. Each Fund may from time to time include in advertisements or
information furnished to present or prospective shareholders (i) the ranking of
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, Inc. or 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. Each Fund may quote various measures of its volatility and
benchmark correlation. In addition, a Fund may compare these measures to those
of other funds and indices. Measures of volatility seek to compare a Fund's
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate the extent to which a Fund's returns
change in ways similar to those of the benchmark. All measures of volatility and
correlation are calculated using averages of historical data. Each Fund may
utilize charts and graphs to present its volatility and average annual total
return. Each Fund may also discuss or illustrate examples of interest rate
sensitivity.

LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect deduction of any sales
charges. Lipper rankings cover a variety of performance periods, including, but
not limited to, year-to-date, 1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset category.

STANDARD & POOR'S MICROPAL, INC. distributes mutual fund rankings weekly
and monthly. The rankings are based upon performance calculated by Standard &
Poor's Micropal, generally reflecting changes in net asset value that can be
adjusted for the reinvestment of capital gains and dividends. If deemed
appropriate by the user, performance can also reflect deductions for sales
charges. Standard & Poor's Micropal rankings cover a variety of performance
periods, including, but not limited to, year-to-date, 1-year, 5-year, and
10-year performance. Standard & Poor's Micropal classifies mutual funds by
investment objective and asset category.

MORNINGSTAR, INC. distributes mutual fund ratings monthly. The ratings are
divided into five groups: highest, above average, neutral, below average, and
lowest. They represent a fund's historical risk/reward ratio relative to other
funds in its broad investment class as determined by Morningstar, Inc.
Morningstar ratings cover a variety of performance periods, including 3-year,
5-year, 10-year, and overall performance. The performance factor for the overall
rating is a weighted-average return performance (if available) reflecting
deduction of expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the fund. The

46
<PAGE>

ratings are derived from a purely quantitative system that does not utilize the
subjective criteria customarily employed by rating agencies such as Standard &
Poor's and Moody's Investors Service, Inc.

STANDARD & POOR'S SELECT FUNDS are funds selected by Standard & Poor's that
have demonstrated above-average absolute and volatility-adjusted returns
relative to funds with the same investment style, along with having investment
management attributes that are consistent with the fund's investment style.
Select Fund designation is based on a six-month moving average of three years of
absolute and volatility-adjusted performance. A Select Fund designation does not
address the market risk, credit risk, or counterparty risk of a fund, nor does
it address a fund's suitability as a counterparty or obligor.

VALUE LINE INVESTMENT SURVEY is an investment advisory service that ranks
approximately 1,700 stocks for "timeliness" and safety. Using a computerized
model based on earnings momentum, Value Line projects which stocks will have the
best or worst relative price performance over the next 6 to 12 months. In
addition, each stock is assigned a risk rating, which identifies the volatility
of a stock's price behavior relative to the market average. The service also
ranks all major industry groups for timeliness.

CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year, and
10-year. Mutual funds are ranked in general categories (e.g., international
bond, international equity, municipal bond, and maximum capital gain).
Weisenberger rankings do not reflect deduction of sales charges or fees.

Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

CONSUMER PRICE INDEX. The Consumer Price Index, published by the U.S.
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

DOW JONES INDUSTRIAL AVERAGE. The Dow Jones Industrial Average is a market
value-weighted and unmanaged index of 30 large industrial stocks.

LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX. The Lehman Brothers
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible, investment-grade
corporate debt securities, and U.S. dollar-denominated, SEC-registered
non-convertible debt issued by foreign governmental entities or international
agencies used as a general measure of the performance of fixed-income
securities.

LEHMAN BROTHERS GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX. The Lehman
Brothers Government/Corporate Intermediate Bond Index consists of those bonds
held within the Lehman Brothers Government/Corporate Bond Index that have an
average maturity of 1-10 years.

LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX. The Index consists of fixed rate
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX. The Index is a
market value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities of between one and three years.

47
<PAGE>

LEHMAN BROTHERS GOVERNMENT BOND INDEX. The Lehman Brothers Government Bond
Index is composed of all publicly issued, non-convertible, domestic debt of the
U.S. government or any of its agencies or quasi-federal corporations, or
corporate debt guaranteed by the U.S. government.

LEHMAN BROTHERS MUNICIPAL BOND INDEX. The Lehman Brothers Municipal Bond
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds,
and 13% pre-refunded bonds.

MSCI-EAFE INDEX. The MSCI-EAFE Index contains over 1,000 stocks from 20
different countries with Japan (approximately 50%), the United Kingdom, France,
and Germany being the most heavily weighted.

MSCI-EAFE EX-JAPAN INDEX. The MSCI-EAFE ex-Japan Index consists of all
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

MERRILL LYNCH HIGH YIELD MASTER INDEX. The Merrill Lynch High Yield Master
Index consists of fixed-rate, coupon-bearing bonds with an outstanding par that
is greater than or equal to $50 million, a maturity range greater than or equal
to one year, and a rating of less than BBB/Baa3 but not in default.

RUSSELL 2000 INDEX. The Russell 2000 Index is comprised of the 2,000
smallest companies included in the Russell 3000 Index, which represents
approximately 98% of the investable U.S. equity market.

RUSSELL MID-CAP GROWTH INDEX. The Russell Mid-Cap Growth Index is a market
capitalization weighted index of medium capitalization stocks determined by
Russell to be growth stocks as measured by their price-to-book ratios and
forecasted growth values.

SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX. The Salomon Brothers World
Government Bond Index includes a broad range of institutionally traded
fixed-rate government securities issued by the national governments of 17
countries, including the United States. The index generally excludes floating-
or variable-rate bonds, securities aimed principally at non-institutional
investors (such as U.S. Savings Bonds), and private-placement type securities.

STANDARD & POOR'S/BARRA VALUE INDEX. The Standard & Poor's/Barra Value
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the lowest price-to- book ratios that
represent approximately half of the market capitalization of the S&P 500.

STANDARD & POOR'S ("S&P") MID-CAP 400 INDEX. The S&P Mid-Cap 400 Index
consists of 400 domestic stocks chosen for market size, liquidity, and industry
group representation. It is market-weighted (stock price times shares
outstanding) with each stock affecting the index in proportion to its value. The
index is comprised of industrial, utility, financial, and transportation stocks,
in size order.

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX (THE "S&P 500"). The S&P
500 is a market value- weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on the
New York Stock Exchange, although the common stocks of a few companies listed on
the American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation, and

48
<PAGE>

40 financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. The S&P 500 is the
most common index for the overall U.S. stock market.

From time to time, articles about the Funds regarding performance,
rankings, and other characteristics of the Funds may appear in publications
including, but not limited to, the publications included in Appendix A. In
particular, some or all of these publications may publish their own rankings or
performance reviews of mutual funds, including the Funds. References to or
reprints of such articles may be used in the Funds' promotional literature.
References to articles regarding personnel of Loomis Sayles who have portfolio
management responsibility may also be used in the Funds' promotional literature.
For additional information about the Funds' advertising and promotional
literature, see Appendix B.

49
<PAGE>

INSTITUTIONAL CLASS

PERFORMANCE DATA*

The manner in which total return and yield of the Funds will be calculated
for public use is described above. The table summarizes the calculation of total
return and yield for Institutional Class shares of the Funds, where applicable,
(i) for the one-year period ended September 30, 1999, (ii) for the three-year
period ended September 30, 1999, (iii) for the five-year period ended September
30, 1999, (iv) from modified inception through September 30, 1999, and (v) from
actual inception through September 30, 1999.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN

FOR THE
FOR THE THREE- FOR THE FROM FROM
CURRENT ONE-YEAR YEAR FIVE-YEAR MODIFIED ACTUAL
SEC PERIOD PERIOD PERIOD INCEPTION** INCEPTION***
YIELD AT ENDED ENDED ENDED THROUGH THROUGH
FUND 9/30/99 9/30/99 9/30/99 9/30/99 9/30/99 9/30/99
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund N/A 97.94% N/A N/A 33.66% 33.66%
Loomis Sayles Bond Fund 8.45% 7.61% 8.22% 11.48% 11.95% 11.83%
Loomis Sayles Core Value Fund N/A 10.51% 14.20% 16.59% 13.50% 14.13%
Loomis Sayles Emerging Markets Fund N/A N/A N/A N/A N/A N/A
Loomis Sayles Global Bond Fund 6.58% 14.19% 7.23% 11.24% 9.13% 9.05%
Loomis Sayles Growth Fund N/A 30.91% 16.62% 18.74% 14.16% 14.94%
Loomis Sayles High Yield Fund 12.01% 21.03% 5.01% N/A 5.01% 5.37%
Loomis Sayles Intermediate Maturity Bond 7.41% 2.98% N/A N/A 4.69% 4.69%
Fund
Loomis Sayles International Equity Fund N/A 31.96% 10.32% 9.41% 9.56% 9.48%
Loomis Sayles Investment Grade Bond 7.52% 6.53% N/A N/A 7.51% 7.51%
Fund
Loomis Sayles Mid-Cap Value Fund N/A 12.86% N/A N/A 8.38% 8.38%
Loomis Sayles Municipal Bond Fund 4.75% (2.83%) 5.07% 6.06% 6.53% 6.55%
Loomis Sayles Short-Term Bond Fund 6.98% 1.77% 5.94% 6.27% 5.65% 5.64%
Loomis Sayles Small Cap Growth Fund N/A 70.30% N/A N/A 22.98% 22.98%
Loomis Sayles Small Cap Value Fund N/A 12.80% 9.35% 14.70% 15.77% 15.97%
Loomis Sayles U.S. Government Securities 6.21% (3.50%) 7.57% 8.63% 8.78% 8.77%
Fund
Loomis Sayles Worldwide Fund N/A 27.82% 7.61% N/A 7.62% 7.70%
</TABLE>

- ------------
* Performance (for other than (i) the one-year and five-year periods for the
Loomis Sayles Bond Fund and (ii) the one-year, three-year, and five-year
periods for the Loomis Sayles Core Value and Loomis Sayles Small Cap Value
Funds) would have been lower if a portion of the management fee had not
been waived by Loomis Sayles. In the absence of this limitation, actual
yield and total return would have been as follows:

50
<PAGE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN

FOR THE
FOR THE THREE- FOR THE FROM FROM
CURRENT ONE-YEAR YEAR FIVE-YEAR MODIFIED ACTUAL
SEC PERIOD PERIOD PERIOD INCEPTION** INCEPTION***
YIELD AT ENDED ENDED ENDED THROUGH THROUGH
FUND 9/30/99 9/30/99 9/30/99 9/30/99 9/30/99 9/30/99
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund N/A 94.07% N/A N/A 25.23% 25.23%
Loomis Sayles Bond Fund 8.45% 7.61% 8.21% 11.48% 11.76% 11.65%
Loomis Sayles Core Value Fund N/A 10.51% 14.20% 16.59% 13.24% 13.88%
Loomis Sayles Emerging Markets Fund N/A N/A N/A N/A N/A N/A
Loomis Sayles Global Bond Fund 6.39% 13.97% 6.85% 10.96% 8.48% 8.42%
Loomis Sayles Growth Fund N/A 30.48% 16.38% 18.59% 14.04% 14.84%
Loomis Sayles High Yield Fund 11.26% 19.75% (1.35%) N/A (1.35%) (0.91%)
Loomis Sayles Intermediate Maturity Bond 6.09% 1.57% N/A N/A 2.29% 2.29%
Fund
Loomis Sayles International Equity Fund N/A 31.67% 10.12% 9.29% 8.99% 8.92%
Loomis Sayles Investment Grade Bond 6.12% 4.06% N/A N/A 2.20% 2.20%
Fund
Loomis Sayles Mid-Cap Value Fund N/A 9.47% N/A N/A 3.46% 3.46%
Loomis Sayles Municipal Bond Fund 3.64% (3.89%) 3.40% 4.51% 0.90% 0.91%
Loomis Sayles Short-Term Bond Fund 6.61% 1.16% 5.30% 5.81% 4.81% 4.82%
Loomis Sayles Small Cap Growth Fund N/A 70.11% N/A N/A 20.22% 20.22%
Loomis Sayles Small Cap Value Fund N/A 12.80% 9.35% 14.70% 15.63% 15.83%
Loomis Sayles U.S. Government Securities 5.39% (3.99%) 6.96% 8.16% 8.13% 8.13%
Fund
Loomis Sayles Worldwide Fund N/A 24.68% 4.25% N/A 4.58% 4.74%
</TABLE>

** Periods less than one year are not annualized. For the Loomis Sayles
Aggressive Growth Fund, Loomis Sayles Mid-Cap Value Fund, Loomis Sayles
Small Cap Growth Fund, Loomis Sayles Intermediate Maturity Bond Fund, and
Loomis Sayles Investment Grade Bond Fund, the modified inception date is
December 31, 1996. For the Loomis Sayles Short-Term Bond Fund, the modified
inception date is August 31, 1992, for the Loomis Sayles Worldwide Fund--
May 31, 1996, for the Loomis Sayles High Yield Fund-- September 30, 1996,
and for all other Funds-- May 31, 1991.

*** Actual Inception Dates:

Loomis Sayles Aggressive Growth Fund December 31, 1996
Loomis Sayles Bond Fund May 16, 1991
Loomis Sayles Core Value Fund May 13, 1991
Loomis Sayles Emerging Markets Fund November 9, 1999

51
<PAGE>

Loomis Sayles Global Bond Fund May 10, 1991
Loomis Sayles Growth Fund May 16, 1991
Loomis Sayles High Yield Fund September 11, 1996
Loomis Sayles Intermediate Maturity Bond Fund December 31, 1996
Loomis Sayles International Equity Fund May 10, 1991
Loomis Sayles Investment Grade Bond Fund December 31, 1996
Loomis Sayles Mid-Cap Value Fund December 31, 1996
Loomis Sayles Municipal Bond Fund May 29, 1991
Loomis Sayles Short-Term Bond Fund August 3, 1992
Loomis Sayles Small Cap Value Fund May 13, 1991
Loomis Sayles Small Cap Growth Fund December 31, 1996
Loomis Sayles U.S. Government Securities Fund May 21, 1991
Loomis Sayles Worldwide Fund May 1, 1996

52
<PAGE>

RETAIL CLASS

PERFORMANCE DATA*

The manner in which total return and yield of the Funds will be calculated
for public use is described above. This table summarizes the calculation of
total return and yield for Retail Class shares of the Funds, where applicable,
(i) for the one-year period ended September 30, 1999 and (ii) since actual
inception through September 30, 1999.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
FOR THE FROM
CURRENT ONE-YEAR ACTUAL
SEC PERIOD INCEPTION**
YIELD AT ENDED THROUGH
FUND 9/30/99 9/30/99 9/30/99
- ---- -------- -------- -----------
<S> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund N/A 97.45% 33.33%
Loomis Sayles Bond Fund 8.43% 7.30% 6.63%
Loomis Sayles Core Value Fund N/A 10.18% 11.62%
Loomis Sayles Global Bond Fund 6.34% 13.84% 5.86%
Loomis Sayles Growth Fund N/A 30.56% 15.68%
Loomis Sayles Intermediate Maturity Bond Fund 7.15% 2.62% 4.44%
Loomis Sayles International Equity Fund N/A 31.56% 7.89%
Loomis Sayles Investment Grade Bond Fund 7.28% 6.23% 7.24%
Loomis Sayles Mid-Cap Value Fund N/A 12.51% 8.08%
Loomis Sayles Short-Term Bond Fund 6.74% 1.41% 5.39%
Loomis Sayles Small Cap Growth Fund N/A 69.90% 22.72%
Loomis Sayles Small Cap Value Fund N/A 12.39% 6.23%
Loomis Sayles Worldwide Fund N/A 27.59% 5.92%
- --------------------------------------------------------
</TABLE>

* Performance (for other than the one-year period for the Loomis Sayles
Small Cap Value Fund) would have been lower if a portion of the
management fee had not been waived by Loomis Sayles. In the absence of
this limitation, actual yield and total return would have been as
follows:

53
<PAGE>

AVERAGE ANNUAL
TOTAL RETURN
FOR THE FROM
CURRENT ONE-YEAR ACTUAL
SEC PERIOD INCEPTION**
YIELD AT ENDED THROUGH
FUND 9/30/99 9/30/99 9/30/99
- ---- -------- -------- -----------
<S> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund N/A 82.05% (13.80%)
Loomis Sayles Bond Fund 8.40% 7.26% 6.52%
Loomis Sayles Core Value Fund N/A 7.70% 8.13%
Loomis Sayles Global Bond Fund 5.92% 13.32% 4.95%
Loomis Sayles Growth Fund N/A 26.21% 7.25%
Loomis Sayles Intermediate Maturity Bond Fund 4.90% (0.53%) (4.43%)
Loomis Sayles International Equity Fund N/A 16.98% (7.81%)
Loomis Sayles Investment Grade Bond Fund 5.90% 3.68% 0.21%
Loomis Sayles Mid-cap Value Fund N/A (1.41%) (16.74%)
Loomis Sayles Short-term Bond Fund 3.93% (2.33%) (5.54%)
Loomis Sayles Small Cap Growth Fund N/A 68.96% 18.32%
Loomis Sayles Small Cap Value Fund N/A 12.39% 6.19%
Loomis Sayles Worldwide Fund N/A 3.32% (62.95%)
- ----------------------------------------------------
</TABLE>

** The actual inception date for the Retail Class of each of the Funds is
December 31, 1996.

54
<PAGE>

ADMIN CLASS

PERFORMANCE DATA*

The manner in which total return and yield of the Funds will be calculated
for public use is described above. This table summarizes the calculation of
total return and yield for Admin Class shares of the Funds, where applicable,
(i) for the one-year period ended September 30, 1999, (ii) from modified
inception through September 30, 1999, and (iii) from actual inception through
September 30, 1999.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN

FOR THE FROM FROM
CURRENT ONE-YEAR MODIFIED ACTUAL
SEC PERIOD INCEPTION** INCEPTION**
YIELD AT ENDED THROUGH THROUGH
FUND 9/30/99 9/30/99 9/30/99 9/30/99
- ---- -------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Loomis Sayles Bond Fund 8.16% 7.11% 2.66% 3.23%
Loomis Sayles Small Cap Value Fund N/A 12.03% (2.64%) (3.79%)
</TABLE>

* Performance would have been lower if a portion of the management fee had
not been waived by Loomis Sayles. In the absence of this limitation, actual
yield and total return would have been as follows:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN

FOR THE FROM FROM
CURRENT ONE-YEAR MODIFIED ACTUAL
SEC PERIOD INCEPTION** INCEPTION**
YIELD AT ENDED THROUGH THROUGH
FUND 9/30/99 9/30/99 9/30/99 9/30/99
- ---- -------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Loomis Sayles Bond Fund 7.64% 5.90% (1.21%) (0.50%)
Loomis Sayles Small Cap Value Fund N/A 11.80% (4.22%) (5.28%)
</TABLE>

** The modified and actual inception dates for the Admin Class of each of the
Funds is January 31, 1998 and January 2, 1998, respectively.

55
<PAGE>

APPENDIX A

PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION

ABC and affiliates
Adam Smith's Money World
America Online
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CDA Investment Technologies
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning

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Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money Magazine
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger

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Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV

58
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WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO

59
<PAGE>

APPENDIX B

ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Funds' advertising and promotional material may include, but
is not limited to, discussions of the following information:

Loomis Sayles Funds' participation in wrap fee and no transaction fee
programs

Loomis Sayles Funds' and Loomis, Sayles & Company, L.P. Website

Loomis Sayles Publications, including fact sheets for each Fund,

Characteristics of Loomis Sayles, including the number and locations of its
offices, its investment practices and clients, and assets under management

Specific and general investment philosophies, strategies, processes, and
techniques

Specific and general sources of information, economic models, forecasts,
and data services utilized, consulted, or considered in the course of providing
advisory or other services

Industry conferences at which Loomis Sayles participates

Current capitalization, levels of profitability, and other financial
information

Identification of portfolio managers, researchers, economists, principals,
and other staff members and employees and descriptions of Loomis Sayles'
resources devoted to such staff

The specific credentials of the above individuals, including but not
limited to previous employment, current, and past positions, titles and duties
performed, industry experience, educational background and degrees, awards, and
honors

Specific identification of, and general reference to, current individual,
corporate, and institutional clients, including pension and profit sharing plans

Current and historical statistics relating to:

--total dollar amount of assets managed
--Loomis Sayles assets managed in total and by Fund
--the growth of assets
--asset types managed

Loomis Sayles Funds' tag line -- "Listening Harder, Delivering More" -- and
statements that and examples of how Loomis Sayles Funds listens to its clients
and works hard to deliver results that exceed their expectations.

References may be included in Loomis Sayles Funds' advertising and
promotional literature about 401(k) and retirement plans that offer the Funds.
The information may include, but is not limited to:

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<PAGE>

vehicles, participants, sponsors, and other demographic data relating to plans,
participants and sponsors, third party and other administrators, benefits
consultants, and firms with whom Loomis Sayles may or may not have a
relationship.

Specific and general reference to comparative ratings, rankings, and other
forms of evaluation as well as statistics regarding the Funds as 401(k) or
retirement plan funding vehicles produced by industry authorities, research
organizations, and publications.

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[LOGO ]

STATEMENT OF ADDITIONAL
INFORMATION

February 1, 2000

This Statement of Additional Information is not a Prospectus. This
Statement of Additional Information relates to the Prospectus of Class J shares
of the Loomis Sayles Investment Grade Bond Fund series ("Fund") of Loomis Sayles
Funds dated February 1, 2000, as revised from time to time. This Statement of
Additional Information should be read in conjunction with the applicable
Prospectus. A copy of the Prospectus may be obtained from Loomis Sayles Funds,
One Financial Center, Boston, Massachusetts 02111.

LOOMIS SAYLES FUNDS
Loomis Sayles Investment Grade Bond Fund (Class J shares)

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
THE TRUST......................................................................1

INVESTMENT STRATEGIES AND RISKS................................................1
Investment Restrictions.................................................1
Investment Strategies...................................................3
U.S. Government Securities .............................................3
When-Issued Securities..................................................4
Zero Coupon Bonds.......................................................4
Repurchase Agreements...................................................5
Real Estate Investment Trusts...........................................5
Rule 144A Securities....................................................5
Foreign Currency Transactions...........................................6
Options ...............................................................6

MANAGEMENT OF THE TRUST........................................................9

INVESTMENT ADVISORY AND OTHER SERVICES........................................14

PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................17

DESCRIPTION OF THE TRUST......................................................19
Voting Rights..........................................................19
Shareholder and Trustee Liability .....................................20
How to Buy Shares .....................................................21
Net Asset Value .......................................................21

SHAREHOLDER SERVICES .........................................................21
Open Accounts .........................................................21
Redemptions ...........................................................22

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS ..................22

FINANCIAL STATEMENTS .........................................................25

CALCULATION OF YIELD AND TOTAL RETURN ........................................25

PERFORMANCE COMPARISONS ......................................................25

PERFORMANCE DATA..............................................................29

APPENDIX A

PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION ............30

APPENDIX B

ADVERTISING AND PROMOTIONAL LITERATURE ................................34
</TABLE>

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<PAGE>

THE TRUST

Loomis Sayles Funds (the "Trust") is a diversified, registered, open-end
management investment company. The Trust includes 19 series (collectively, the
"Funds"), including the Loomis Sayles Investment Grade Bond Fund (the "Fund").
The Trust was organized as a Massachusetts business trust on February 20, 1991.

Class J shares of the Fund are freely transferable and entitle
shareholders to receive dividends as determined by the Trust's Board of Trustees
and to cast a vote for each share held at shareholder meetings. The Trust
generally does not hold shareholder meetings and expects to do so only when
required by law. Shareholders may call meetings to consider removal of the
Trust's trustees.

INVESTMENT STRATEGIES AND RISKS

The investment objective and principal investment strategies of the Fund
are described in the Prospectus. The investment policies of the Fund set forth
in the Prospectus and in this Statement of Additional Information 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 the Prospectus and any policy
explicitly identified as "fundamental" may not be changed without the approval
of the holders of a majority of the outstanding shares of the relevant Fund
(which in the Prospectus and this Statement of Additional Information means the
lesser of (i) 67% of the shares of the Fund present at a meeting at which more
than 50% of the outstanding shares are present or 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.

INVESTMENT RESTRICTIONS

In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

The Fund will not:

(1) Invest in companies for the purpose of exercising control or
management.

*(2) Act as underwriter, except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.

*(3) Invest in oil, gas or other mineral leases, rights or royalty
contracts or in real estate, commodities or commodity contracts. (This
restriction does not prevent the Fund from engaging in transactions in futures
contracts relating to securities indices, interest rates or financial
instruments or options, or from investing in issuers that invest or deal in the
foregoing types of assets or from purchasing securities that are secured by real
estate.)

*(4) Make loans, except that the Fund may lend its portfolio securities
to the extent permitted under the Investment Company Act of 1940, as amended
(the "1940 Act"). (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.)

<PAGE>

(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 assets to secure borrowings permitted by restriction (9) below. (For
purposes 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.)

*(9) Borrow money in excess of 10% of its assets (taken at cost) or 5%
of its 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).

(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 enter into
currency forward contracts.

*(14) Issue senior securities. (For purposes of this restriction, none
of the following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (7) above; any borrowing
permitted by restriction (9) above; any collateral arrangements with respect to
options, futures contracts, and options on futures contracts and with respect to
initial and variation margin; and the purchase or sale of options, forward
contracts, futures contracts, or options on futures contracts.)

(15) The Fund normally will invest at least 65% of its assets in
investment grade 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.

2
<PAGE>

In connection with the offering of its shares in Japan, the Fund has
undertaken to the Japanese 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 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
Japanese Securities Dealers Association as a condition of such qualification.

INVESTMENT STRATEGIES

Except to the extent prohibited by the Fund's investment policies as set
forth in the Prospectus or in this Statement of Additional Information, the
investment strategies used by Loomis Sayles in managing the Fund may include
investments in the types of securities described below.

U.S. GOVERNMENT SECURITIES

U.S. Government securities include direct obligations of the U.S.
Treasury, as well as securities issued or guaranteed by U.S. Government
agencies, authorities, and instrumentalities, including, among others, the
Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the Federal Housing
Administration, the Resolution Funding Corporation, the Federal Farm Credit
Banks, the Federal Home Loan Bank, the Tennessee Valley Authority, the Student
Loan Marketing Association, and the Small Business Administration. More detailed
information about some of these categories of U.S. Government securities
follows.

U.S. Treasury Bills--U.S. Treasury Bills are direct obligations of the
U.S. Treasury that are issued in maturities of one year or less. No interest is
paid on Treasury bills; instead, they are issued at a discount and repaid at
full face value when they mature. They are backed by the full faith and credit
of the U.S. Government.

"Ginnie Maes"--Ginnie Maes are debt securities issued by a mortgage
banker or other mortgagee that represent an interest in a pool of mortgages
insured by the Federal Housing Administration or the Farmer's Home
Administration or guaranteed by the Veterans Administration. The Government
National Mortgage Association ("GNMA") guarantees the timely payment of
principal and interest when such payments are due, whether or not these amounts
are collected by the issuer of these certificates on the underlying mortgages.
An assistant attorney general of the United States has rendered an opinion that
the guarantee by GNMA is a general obligation of the United States backed by its
full faith and credit. Mortgages included in single family or multi-family
residential mortgage pools backing an issue of Ginnie Maes have a maximum
maturity of up to 30 years. Scheduled payments of principal and interest are
made to the registered holders of Ginnie Maes (such as the Fund) each month.
Unscheduled prepayments may be made by homeowners or as a result of a default.
Prepayments are passed through to the registered holder of Ginnie Maes along
with regular monthly payments of principal and interest.

3
<PAGE>

WHEN-ISSUED SECURITIES

When-issued securities are agreements with banks or broker-dealers for
the purchase or sale of securities at an agreed-upon price on a specified future
date. Such agreements might be entered into, for example, when the Fund that
invests in fixed income securities anticipates a decline in interest rates and
is able to obtain a more advantageous yield by committing currently to purchase
securities to be issued later. When the Fund purchases securities on a
when-issued or delayed-delivery basis, it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting that Fund's investment criteria. The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

ZERO COUPON BONDS

Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligation
or for an initial period after the issuance of the obligation. Such bonds are
issued and traded at a discount from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security, and the
perceived credit quality of the issuer. The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than non-zero coupon bonds having similar maturities and credit
quality. In order to satisfy a requirement for qualification as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), the Fund must distribute each year at least 90% of its net investment
income, including the original issue discount accrued on zero coupon bonds.
Because a Fund investing in zero coupon bonds will not on a current basis
receive cash payments from the issuer in respect of accrued original issue
discount, the Fund may have to distribute cash obtained from other sources in
order to satisfy the 90% distribution requirement under the Code. Such cash
might be obtained from selling other portfolio holdings of the Fund. In

4
<PAGE>

some circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell such securities at such time.

REPURCHASE AGREEMENTS

Under a repurchase agreement, the Fund purchases a security and obtains a
simultaneous commitment from the seller (a bank or, to the extent permitted by
the 1940 Act, a recognized securities dealer) to repurchase the security at an
agreed upon price and date (usually seven days or less from the date of original
purchase). The resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the purchased security.
Such transactions afford the Fund the opportunity to earn a return on
temporarily available cash at minimal market risk. While the underlying security
may be a bill, certificate of indebtedness, note, or bond issued by an agency,
authority, or instrumentality of the U.S. Government, the obligation of the
seller is not guaranteed by the U.S. Government, and there is a risk that the
seller may fail to repurchase the underlying security. In such event, the Fund
would attempt to exercise rights with respect to the underlying security,
including possible disposition in the market. However, the Fund may be subject
to various delays and risks of loss, including (a) possible declines in the
value of the underlying security during the period while the Fund seeks to
enforce its rights thereto, (b) possible reduced levels of income and lack of
income during this period, and (c) inability to enforce rights and the expenses
involved in attempted enforcement.

REAL ESTATE INVESTMENT TRUSTS

REITs involve certain unique risks in addition to those risks associated
with investing in the real estate industry in general (such as possible declines
in the value of real estate, lack of availability of mortgage funds or extended
vacancies of property). Equity REITs may be affected by changes in the value of
the underlying property owned by the REITs, while mortgage REITs may be affected
by the quality of any credit extended. REITs are dependent upon management
skills, are not diversified, are subject to heavy cash flow dependency, risks of
default by borrowers and self-liquidation. REITs are also subject to the
possibilities of failing to qualify for tax-free pass-through of income under
the Code, and failing to maintain their exemptions from registration under the
1940 Act.

Investment in REITs involves risk similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger securities.

RULE 144A SECURITIES

5
<PAGE>

FOREIGN CURRENCY TRANSACTIONS

Since investment in securities of foreign issuers will usually involve
currencies of foreign countries, and since the Fund may temporarily hold funds
in bank deposits in foreign currencies during the course of investment programs,
the value of the assets of the Fund as measured in U.S. dollars may be affected
by changes in currency exchange rates and exchange control regulations, and the
Fund may incur costs in connection with conversion between various currencies.

The Fund may enter into forward contracts under two circumstances. First,
when the Fund enters into a contract for the purchase or sale of a security
denominated or traded in a market in which settlement is made in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency involved in the underlying
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date on which the
investment is purchased or sold and the date on which payment is made or
received.

Second, when Loomis Sayles believes that the currency of a particular
country may suffer a substantial decline against another currency, it may enter
into a forward contract to sell, for a fixed amount of another currency, the
amount of the first currency approximating the value of some or all of the
Fund's portfolio investments denominated in the first currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in a currency will change as a consequence of market movements in the
value of those investments between the date the forward contract is entered into
and the date it matures.

The Fund generally will not enter into forward contracts with a term of
greater than one year.

Options on foreign currencies are similar to forward contracts, except
that one party to the option (the holder) is not contractually bound to buy or
sell the specified currency. Instead, the holder has discretion whether to
"exercise" the option and thereby require the other party to buy or sell the
currency on the terms specified in the option. Options transactions involve
transaction costs and, like forward contract transactions, involve the risk that
the other party may default on its obligations (if the options are not traded on
an established exchange) and the risk that expected movements in the relative
value of currencies may not occur, resulting in an imperfect hedge or a loss to
the Fund.

The Fund, in conjunction with its transactions in forward contracts,
options and futures, will maintain in a segregated account with its custodian
liquid assets with a value, marked to market on a daily basis, sufficient to
satisfy the Fund's outstanding obligations under such contracts, options and
futures.

OPTIONS

An option entitles the holder to receive (in the case of a call option)
or to sell (in the case of a put option) a particular security at a specified
exercise price. An "American style" option allows exercise of the option at any
time during the term of the option. A "European style" option allows an option
to be exercised only at the end of its term. Options may be traded on or off an
established securities exchange.

If the holder of an option wishes to terminate its position, it may seek
to effect a closing sale transaction by selling an option identical to the
option previously purchased. The effect of the purchase is that the previous
option position will be canceled. The Fund will realize a profit from closing
out an option if the price received for selling the offsetting position is more
than the premium paid to purchase the option; the Fund will realize a

6
<PAGE>

loss from closing out an option transaction if the price received for selling
the offsetting option is less than the premium paid to purchase the option.

The use of options involves risks. One risk arises because of the
imperfect correlation between movements in the price of options and movements in
the price of the securities that are the subject of the hedge. The Fund's
hedging strategies will not be fully effective if such imperfect correlation
occurs.

An exchange-traded option may be closed out only on an exchange that
generally provides a liquid secondary market for an option of the same series.
If a liquid secondary market for an exchange-traded option does not exist, it
might not be possible to effect a closing transaction with respect to a
particular option, with the result that the Fund would have to exercise the
option in order to accomplish the desired hedge. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions, or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
or other clearing organization may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

7
<PAGE>

The staff of the SEC has taken the position that over-the-counter options
should be treated as illiquid securities for purposes of the Fund's investment
restriction prohibiting it from investing more than 15% of its net assets in
illiquid securities. The Fund intends to comply with this position.

Income earned by the Fund from its hedging activities will be treated as
capital gain and, if not offset by net recognized capital losses incurred by the
Fund, will be distributed to shareholders in taxable distributions. Although
gain from options transactions may hedge against a decline in the value of the
Fund's portfolio securities, that gain, to the extent not offset by losses, will
be distributed in light of certain tax considerations and will constitute a
distribution of that portion of the value preserved against decline.

8
<PAGE>

MANAGEMENT OF THE TRUST

JOSEPH ALAIMO (69)--Trustee. 727 N. Bank Lane, Lake Forest, Illinois.
President, Wintrust Asset Management Company.

RICHARD S. HOLWAY (73)--Trustee. 1314 Seaspray Lane, Sanibel, Florida.
Retired. Formerly Vice President, Loomis Sayles. Director, Sandwich Cooperative
Bank.

MICHAEL T. MURRAY (69)--Trustee. 404 N. Western Ave., Lake Forest,
Illinois. Retired. Formerly Vice President, Loomis Sayles.

DANIEL J. FUSS(1) (66)--President and Trustee. Vice Chairman and
Director, Loomis Sayles.

ROBERT J. BLANDING (52)--Executive Vice President. 555 California Street,
San Francisco, California. President, Chairman, Director, and Chief Executive
Officer, Loomis Sayles.

MARK W. HOLLAND (50)--Treasurer. Vice President, Finance and
Administration and Director, Loomis Sayles. .

SHEILA M. BARRY (54)--Secretary and Compliance Officer. Assistant General
Counsel and Vice President, Loomis Sayles. Formerly, Senior Counsel and Vice
President, New England Funds, L.P.

DAWN M. ALSTON-PAIGE (35)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

MARK BARIBEAU (40)--Vice President. Vice President, Loomis Sayles.

JAMES C. CARROLL (49)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles. Formerly Managing Director and
Senior Energy Analyst at Paine Webber, Inc.

E. JOHN DEBEER (61)--Vice President. Vice President, Loomis Sayles.

RODERICK H. DILLON, JR. (43)--Vice President. 2001 Pennsylvania Avenue,
N.W., Suite 200, Washington, DC. Vice President, Loomis Sayles.

WILLIAM H. EIGEN, JR. (62)--Vice President. Vice President, Loomis
Sayles. Formerly Vice President, INVESCO Funds Group and Vice President, The
Travelers Corp.

CHRISTOPHER R. ELY (44)--Vice President. Vice President, Loomis Sayles.
Formerly Senior Vice President and Portfolio Manager, Keystone Investment
Management Company, Inc.

- -----------------------

(1) Trustee deemed an "interested person" of the Trust, as defined by the
1940 Act.

9
<PAGE>

QUENTIN P. FAULKNER (60)--Vice President. Vice President, Loomis Sayles.

PHILIP C. FINE (50)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Portfolio Manager, Keystone Investment Management
Company, Inc.

KATHLEEN C. GAFFNEY (38)--Vice President. Vice President, Loomis Sayles.

ISAAC GREEN (38)--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Executive Vice President and Director, Loomis Sayles.

MARTHA F. HODGMAN (48)--Vice President. Vice President, Loomis Sayles.

JOHN HYLL (45)--Vice President. 555 California Street, San Francisco,
California.

JEFFREY L. MEADE (49)--Vice President. Executive Vice President, Chief
Operating Officer and Director, Loomis Sayles.

KENT P. NEWMARK (61)--Vice President. 555 California Street, San
Francisco, California. Vice President, Managing Partner and Director, Loomis
Sayles.

BRUCE G. PICARD, JR. (30)--Vice President. Vice President, Loomis Sayles.

LAUREN B. PITALIS (39)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Assistant Secretary, Harris Associates Investment
Trust.

DAVID L. SMITH (46)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Portfolio Manager, Keystone Investment Management
Company, Inc.

JEFFREY W. WARDLOW (39)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

10
<PAGE>

GREGG D. WATKINS (51)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

ANTHONY J. WILKINS (57)--Vice President. Executive Vice President and
Director, Loomis Sayles.

Previous positions during the past five years with Loomis Sayles are
omitted if not materially different.

11
<PAGE>

COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999

<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
--- --- --- --- ---
TOTAL
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM TRUST AND
AGGREGATE BENEFITS ANNUAL FUND COMPLEX*
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON PAID TO
POSITION FROM TRUST FUND EXPENSES RETIREMENT TRUSTEE
-------------- ------------ ------------------ ------------- --------------
<S> <C> <C> <C> <C>
Joseph Alaimo, Trustee $5,312.50 N/A N/A $5,312.50

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 Class J shares of the Fund.

For current and retired Trustees of the Trust, investment advisory
clients of Loomis Sayles (and their directors, officers, and employees), and
current and retired employees of Loomis Sayles and the parents, spouses, and
children of the foregoing, the Trust has reduced the minimum initial investment
for Institutional Class shares of the Fund to $2,500.

12
<PAGE>

PRINCIPAL HOLDERS

The following table provides information on the principal holders of
Class J shares of the Fund. A principal holder is a person who owns of record or
beneficially 5% or more of the outstanding Class J shares of the Fund.
Information provided in this table is as of December 27, 1999.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- -------------
<S> <C> <C>
Marusan Securities Co., Ltd. 2-5-2 Nihonbashi,Chuo- 49.16%
Ku, Tokyo, Japan

Izumi Securities Co. 17-24 Shinkawa, I-Chome 46.73%
Chuo-Ku, Tokyo, Japan
</TABLE>

Since these shareholders beneficially own more than 25% of the Class J
shares of the Fund, they may be deemed to "control" Class J of the Fund within
the meaning of the 1940 Act.

Marusan Securities Co., Ltd. and Izumi Securities Co. are organized under
the laws of Japan. Izumi Securities Co. is controlled by Sumitomo Life Insurance
Company.

13
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISORY AGREEMENT. Under an advisory agreement, Loomis Sayles manages
the investment and reinvestment of the assets of the Fund and generally
administers its affairs, subject to supervision by the Board of Trustees of the
Trust. Loomis Sayles furnishes, at its own expense, all necessary office space,
facilities and equipment, services of executive and other personnel of the Fund,
and certain administrative services. For these services, the advisory agreement
provides that the Fund shall pay Loomis Sayles a monthly investment advisory fee
of .40% of the Fund's average daily net assets.

During the periods shown below, pursuant to the advisory agreement
described above, Loomis Sayles received the following amount of investment
advisory fees from the Fund (before voluntary fee reductions and expense
assumptions) and bore the following amounts of fee reductions and expense
assumptions for the Fund:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL PERIOD ENDED FISCAL YEAR ENDED
12/31/97 9/30/98* 9/30/99
----------------- ------------------- -----------------

- -----------
* The fiscal year-end for the Fund changed to September 30 in 1998.

The Trust pays the compensation of its trustees who are not directors,
officers, or employees of Loomis Sayles or its affiliates (other than registered
investment companies); registration, filing, and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Fund; the expenses of
meetings of the shareholders and trustees of the Trust; the charges and expenses
of the Trust's legal counsel; interest on any borrowings by the Fund; the cost
of services, including services of counsel, required in connection with the
preparation of, and the cost of printing, the Trust's registration statements
and Prospectus, 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 that would result in the Fund's inability to qualify as a
regulated investment company under the

14
<PAGE>

Code. The term "expenses" is defined in the advisory agreements or in relevant
state regulations and excludes brokerage commissions, taxes, interest,
distribution-related expenses, and extraordinary expenses.

As described in the Prospectus, Loomis Sayles has agreed to certain
additional, voluntary arrangements to limit Fund expenses. These arrangements
may be modified or terminated by Loomis Sayles at any time.

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 an
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 relevant Fund, upon sixty days' written notice, or by Loomis
Sayles upon ninety days' written notice, and the agreement 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 relevant Fund and by a majority of the Trustees who are not
interested persons of the Trust or Loomis Sayles.

The advisory agreement provides that Loomis Sayles shall not be subject
to any liability in connection with the performance of its services thereunder
in the absence of willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties.

Loomis Sayles acts as investment adviser or subadviser to New England
Value Fund, New England Strategic Income Fund, New England Star Advisers Fund,
New England Star 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 Funds Trust II, a
registered, open-end management investment company; the Loomis Sayles Balanced
Series and the Loomis Sayles Small Cap Series of New England Zenith Fund, a
registered open-end management investment company; and Loomis Sayles Investment
Trust, a registered open-end management investment company. Loomis Sayles also
provides investment advice to certain other open-end management investment
companies and numerous other corporate and fiduciary clients.

The general partner of Loomis Sayles is a special purpose corporation
that is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies"). Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company. Nvest Companies' advising general
partner, Nvest L.P., is a publicly traded company listed on the New York Stock
Exchange. Nvest Corporation is the sole general partner of Nvest L.P.

Certain officers and trustees of the Trust also serve as officers,
directors, and trustees of other investment companies and clients advised by
Loomis Sayles. The other investment companies and clients sometimes invest in
securities in which the Fund also invests. If the Fund and such other investment
companies or clients desire to buy or sell the same portfolio securities at the
same time, purchases and sales may be allocated, to the extent practicable, on a
pro rata basis in proportion to the amounts desired to be purchased or sold for
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 that the Fund purchases or sells. In other cases, however, it is
believed that these

15
<PAGE>

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, that might result from these practices.

DISTRIBUTION AGREEMENT AND RULE 12b-1 PLANS. Under an agreement with the
Trust (the "Distribution Agreement"), Loomis Sayles Distributors, L.P., One
Financial Center, Boston, Massachusetts 02111 (the "Distributor") serves as the
general distributor of the Fund. Under this agreement, the Distributor is not
obligated to sell a specific number of shares. The Distributor bears the cost of
making information about the Fund available through advertising and other means
and the cost of printing and mailing the Prospectus to persons other than
shareholders. The Fund pays the cost of registering and qualifying its shares
under state and federal securities laws and distributing its Prospectus to
existing shareholders.

As described in the Prospectus, the Fund has adopted a Service and
Distribution Plan for Class J shares 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 attributable to Class J shares and a monthly
distribution fee at an annual rate not to exceed 0.50% of the Fund's average net
assets attributable to Class J shares. Payments under the Plan are made to
Japanese broker-dealers and to Loomis Sayles sales representatives. Payments
also may be made under the Plan to intermediaries for shareholder servicing, for
no transaction fee or wrap programs, and for retirement plan recordkeeping. In
addition, payments under the Plan may be made for activities such as
advertising, printing, and mailing the Prospectus to persons who are not current
shareholders, compensation to underwriters, compensation to broker-dealers,
compensation to sales personnel, and interest, carrying, or other financing
charges. 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 following table provides information on the amount of fees paid by
the Fund under the Plan during the past fiscal year. A portion of these fees was
paid out to intermediaries in Japan for shareholder servicing, and a portion was
retained by the Distributor and paid out entirely in commission to the
Distributor's Japanese representative.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
FUND 12b-1 Fees paid by the Fund
- ---------------------------------------------------------------------------------
<S> <C>
Loomis Sayles Investment Grade Bond Fund
Class J $35,566

- ---------------------------------------------------------------------------------
</TABLE>

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's Class J shares. 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 the Plan is in effect, selection and nomination of
those trustees who are not interested persons of the Trust shall be committed to
the discretion of such disinterested persons.

The Distribution Agreement may be terminated at any time with respect to
the Fund on 60 days' written notice without payment of any penalty by the Trust
or by vote of a majority of the outstanding voting securities of that Fund's
Class J shares or by vote of a majority of the Independent Trustees.

16
<PAGE>

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 purpose.

The following table provides information on the amount of underwriting
commissions received and retained by the Distributor in conjunction with the
Fund during the past fiscal period.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
UNDERWRITING COMMISSIONS RECEIVED AND Since Inception
RETAINED BY THE DISTRIBUTOR (5/24/99) through 9/30/99
- ------------------------------------------------------------------------
<S> <C>
Loomis Sayles Investment Grade Bond Fund $91,760
(Class J)
- ------------------------------------------------------------------------
</TABLE>

CUSTODIAL ARRANGEMENTS. State Street Bank and Trust Company ("State
Street Bank"), Boston, Massachusetts 02102, is the Trust's custodian. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to the Fund. Upon instruction,
State Street Bank receives and delivers cash and securities of the Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Fund and calculates the total
net asset value, total net income, and net asset value per share of the Fund on
a daily basis.

INDEPENDENT ACCOUNTANTS. The Trust's independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts an annual audit
of the Trust's financial statements, assists in the preparation of the Fund's
federal and state income tax returns, and consults with the Fund as to matters
of accounting and federal and state income taxation. The information under the
caption "Financial Highlights" included in the Prospectus has been so included,
and the financial statements incorporated by reference herein from the Fund's
1999 Annual Report have been so incorporated, in reliance on the reports of
PricewaterhouseCoopers LLP, given on the authority of said firm as experts in
auditing and accounting.

PORTFOLIO TRANSACTIONS AND BROKERAGE

In placing orders for the purchase and sale of portfolio securities for
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 that it believes are
financially responsible, will provide efficient and effective services in
executing, clearing, and settling an order, and will charge commission rates
that, when combined with the quality of the foregoing services, will produce
best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates.
Loomis Sayles will use its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage community from time to
time and will evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount of
the capital commitment by the broker in connection with the order, are taken
into account. The 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 that do not contribute to the best price
and execution of the transaction.

17
<PAGE>

Receipt of research services from brokers may sometimes be a factor in
selecting a broker that Loomis Sayles believes will provide best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation, and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Loomis Sayles' expenses. Such services may be
used by Loomis Sayles in servicing other client accounts and in some cases may
not be used with respect to the Fund. Receipt of services or products other than
research from brokers is not a factor in the selection of brokers.

18
<PAGE>

DESCRIPTION OF THE TRUST

The Declaration of Trust currently permits the trustees to issue an
unlimited number of full and fractional shares of the Fund. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the trustees to charge shareholders
directly for custodial, transfer agency, and servicing expenses.

The assets received by the Fund for the issue or sale of its shares and
all income, earnings, profits, losses, and proceeds therefrom, subject only to
the rights of creditors, are allocated to, and constitute the underlying assets
of, the Fund. The underlying assets are segregated and are charged with the
expenses with respect to 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 Fund currently offers Class J shares, as described in this
Prospectus, and Institutional and Retail Class shares, which are described in a
separate Prospectus. The trustees may also, without shareholder approval,
establish one or more additional separate portfolios for investments in the
Trust or merge two or more existing portfolios. Shareholders' investments in
such an additional or merged portfolio would be evidenced by a separate series
of shares (i.e., a new "Fund").

The Declaration of Trust provides for the perpetual existence of the
Trust. The Declaration of Trust, however, provides that the trustees may
terminate the Trust or the Fund upon written notice to the shareholders.

VOTING RIGHTS

As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for each fractional share held)
and may vote (to the extent provided in the Declaration of Trust) on the
election of trustees and the termination of the Trust and on other matters
submitted to the vote of shareholders.

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

19
<PAGE>

approval, such as certain changes in investment policies of that series or the
approval of the investment advisory agreement relating to that series.

Except as set forth above, the trustees shall continue to hold office and
may appoint successor trustees. Voting rights are not cumulative.

SHAREHOLDER AND TRUSTEE LIABILITY

Under Massachusetts law shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund of which they are
shareholders. However, the Declaration of Trust disclaims shareholder liability
for acts or obligations of the Fund and requires that notice of such disclaimer
be given in each agreement, obligation, or instrument entered into or executed
by the Trust or the trustees. The Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which the disclaimer
is inoperative and the Fund itself would be unable to meet its obligations.

The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.

20
<PAGE>

HOW TO BUY SHARES

The procedures for purchasing shares of the Fund are summarized in the
Prospectus under "General Information-How to Purchase Shares."

NET ASSET VALUE

The net asset value of the shares of the Fund is determined by dividing
the Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares of the Fund outstanding and rounding to the nearest
cent. Such determination is made as of the close of regular trading on the 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 Statement of Additional Information, 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 sale price on the exchange where primarily traded
or, if there is no reported sale during the day, and in the case of
over-the-counter securities not so listed, at the 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 valued by a
pricing service, which determines valuations of normal institutional-size
trading units of long-term debt securities. Such valuations are determined using
methods based on market transactions for comparable securities and on various
relationships between securities which are generally recognized by institutional
traders. Other securities for which current market quotations are not readily
available and all other assets are valued 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 foreign securities markets is substantially
completed each day at various times prior to the close of regular trading on the
New York Stock Exchange. Occasionally, events affecting the value of foreign
fixed income securities and of equity securities of non-U.S. issuers not traded
on a U.S. exchange may occur between the completion of substantial trading of
such securities for the day and the close of regular trading on the New York
Stock Exchange, which events will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of the Fund's
portfolio securities occur during such period, then these securities may be
valued at their fair value as determined in good faith by or in accordance with
procedures approved by the trustees.

SHAREHOLDER SERVICES

OPEN ACCOUNTS

A shareholder's investment in Class J shares of the Fund is automatically
credited to an open account maintained for the shareholder by State Street Bank.
Certificates representing shares are issued only upon written request to State
Street Bank but are not issued for fractional shares. Following each transaction
in the account, a shareholder will receive an account statement disclosing the
current balance of shares owned and the details of recent transactions in the
account. After the close of each fiscal year, State Street Bank will send each
shareholder a statement providing U.S. federal tax information on dividends and
distributions paid to the shareholder during the year. This should be retained
as a permanent record.

21
<PAGE>

REDEMPTIONS

The procedures for redemption of Fund shares are summarized in the
Prospectus under "General Information--How to Redeem Shares."

The redemption price will be the net asset value per share next
determined after the redemption request and any necessary special documentation
are received by State Street Bank in proper form.

The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind. If portfolio
securities are distributed in lieu of cash, the shareholder will normally incur
brokerage commissions upon subsequent disposition of any such securities.
However, the Trust has elected to be governed by Rule 18f-1 under the 1940 Act,
pursuant to which the Trust is obligated to redeem shares solely in cash for any
shareholder during any 90-day period up to the lesser of $250,000 or 1% of the
total net asset value of the Trust at the beginning of such period.

A redemption constitutes a sale of the shares for U.S. federal income tax
purposes on which the investor may realize a long-term or short-term capital
gain or loss. See "Income Dividends, Capital Gain Distributions and Tax Status."

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

As described in the Prospectus under "Dividends and Distributions," 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 at any time by submitting a written request directly to
State Street Bank. In order for a change to be in effect for any dividend or
distribution, it must be received by State Street Bank on or before the record
date for such dividend or distribution.

As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.

The following discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty). The Internal Revenue Service
recently revised its regulations affecting the application to foreign investors
of the back-up withholding tax rules. The new regulations will generally be
effective for payments made on or after January 1, 2001 (although transition
rules will apply). In some circumstances, the new rules will increase the
certification and filing requirements imposed on foreign investors in order to
qualify for exemption from the 31% back-up withholding tax and for reduced
withholding tax rates under income tax treaties. Foreign investors in the Fund
should consult their advisers with respect to the potential application of these
new regulations.

22
<PAGE>

- - If you do not provide a correct, certified taxpayer identification number
to the Fund.

- - If the IRS notifies the Fund that you have underreported your income in
the past and thus are subject to backup withholding.

- - If you fail to certify to the Fund that you are not subject to such
backup withholding because, for example, of your foreign (non-U.S.)
status.

The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to qualify as such and to qualify for
the favorable tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things, (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities, or currencies; (ii) distribute with respect to each taxable
year at least 90% of the sum of its taxable net investment income, its
tax-exempt income, and the excess, if any, of net short-term capital gains over
net long-term capital losses for such year; and (iii) diversify its holdings so
that at the end of each fiscal quarter (a) at least 50% of the value of its
assets is invested in cash, U.S. Government securities, securities of other
regulated investment companies, and other securities of issuers that represent,
with respect to each issuer, no more than 5% of the value of the Fund's 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 that 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 recognized
during the one-year period ending on October 31 (or December 31, if the Fund so
elects) plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by the Fund during October, November, or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which they were declared.

Shareholders of the Fund will be subject to federal income taxes on
distributions made by the Fund whether received in cash or additional shares of
the Fund. Distributions by the Fund of net income and short-term capital gains,
if any, will be taxable to shareholders as ordinary income. Distributions
designated by the Fund as deriving from net gains on securities held for more
than one year will be taxable to shareholders as long-term capital gains
(generally taxed at a rate of 20% for noncorporate shareholders), without regard
to how long the shareholder has held shares of the Fund.

Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur for shares purchased at a time when the
Fund's net asset value reflects gains that are either

23
<PAGE>

unrealized or realized but not distributed. Such realized gains may be required
to be distributed even when the Fund's net asset value also reflects unrealized
losses.

The Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.

Investment by the Fund in "passive foreign investment companies" could
subject the Fund to U.S. federal income tax or other charge on the proceeds from
the sale of its investment in such a company; however, this tax can be avoided
by making an election to mark such investments to market annually or to treat
the passive foreign investment company as a "qualified electing fund."

If the Fund engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. The Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund.

The Fund's investment in securities issued at a discount and certain
other obligations will (and investments in securities purchased at a discount
may) require the Fund to accrue and distribute income not yet received. In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

Generally the Fund may designate dividends eligible for the
dividends-received deduction only to the extent that such dividends are derived
from dividends paid to the Fund with respect to which the Fund could have taken
the dividends-received deduction if it had been a regular corporation. The
dividends-received deduction is not available to non-corporate shareholders,
Subchapter S corporations, or corporations that do not hold their shares for at
least 46 days during the 90-day period beginning on the date that is 45 days
before the ex-dividend date. The dividends-received deduction also is not
available with respect to dividends derived from the Fund's investment in
foreign securities or REITs.

Redemptions and exchanges of the Fund's shares are taxable events, and,
accordingly, shareholders may realize gains and losses on these transactions. In
general, any gain realized upon a taxable disposition of shares will be treated
as long-term capital gain if the shares have been held for more than one year.
Otherwise the gain on the sale, exchange, or redemption of Fund shares will be
treated as short-term capital gain. However, if a shareholder sells Fund shares
at a loss within six months after purchasing the shares, the loss will be
treated as a long-term capital loss to the extent of any long-term capital gain
distributions received by the shareholder. Furthermore, no loss will be allowed
on the sale of Fund shares to the extent the shareholder acquired other shares
of the same Fund within 30 days prior to the sale of the loss shares or 30 days
after such sale.

24
<PAGE>

FINANCIAL STATEMENTS

The financial statements of the Fund included in the Trust's 1999 Annual
Report, filed with the SEC on November 29, 1999, are incorporated by reference
to such Report.

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 yields will vary from time to
time depending upon market conditions, the composition of the Fund's portfolios
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
that any dividends or capital gain 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 that
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.

PERFORMANCE COMPARISONS

YIELD AND TOTAL RETURN. 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.

25
<PAGE>

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.

LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated by
Lipper, generally reflecting changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of performance
periods, including, but not limited to, year-to-date, 1-year, 5-year, and
10-year performance. Lipper classifies mutual funds by investment objective and
asset category.

MORNINGSTAR, INC. distributes mutual fund ratings monthly. The ratings
are divided into five groups: highest, above average, neutral, below average,
and lowest. They represent the Fund's historical risk/reward ratio relative to
other funds in its broad investment class as determined by Morningstar, Inc.
Morningstar ratings cover a variety of performance periods, including 3-year,
5-year, 10-year, and overall performance. The performance factor for the overall
rating is a weighted-average return performance (if available) reflecting
deduction of expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the fund. The ratings are
derived from a purely quantitative system that does not utilize the subjective
criteria customarily employed by rating agencies such as Standard & Poor's and
Moody's Investors Service, Inc.

STANDARD & POOR'S SELECT FUNDS are funds selected by Standard & Poor's
that have demonstrated above-average absolute and volatility-adjusted returns
relative to funds with the same investment style, along with having investment
management attributes that are consistent with the fund's investment style.
Select Fund designation is based on a six-month moving average of three years of
absolute and volatility-adjusted performance. A Select Fund designation does not
address the market risk, credit risk, or counterparty risk of a fund, nor does
it address a fund's suitability as a counterparty or obligor.

CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and
is distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year,
5-year, and 10-year. Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of sales charges or fees.

26
<PAGE>

Performance information may also be used to compare the performance of
the Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as the following:

DOW JONES INDUSTRIAL AVERAGE. The Dow Jones Industrial Average is a
market value-weighted and unmanaged index of 30 large industrial stocks.

LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX. The Lehman Brothers
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible, investment-grade
corporate debt securities and U.S. dollar-denominated, SEC-registered
non-convertible debt issued by foreign governmental entities or international
agencies used as a general measure of the performance of fixed-income
securities.

LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX. The Index consists of fixed
rate debt issues of the U.S. government or its agencies rated investment grade
or higher with at least one year maturity and an outstanding par value of at
least $100 million for U.S. government issues.

LEHMAN BROTHERS GOVERNMENT BOND INDEX. The Lehman Brothers Government
Bond Index is composed of all publicly issued, non-convertible, domestic debt of
the U.S. government or any of its agencies or quasi-federal corporations, or
corporate debt guaranteed by the U.S. government.

MSCI-EAFE INDEX. The MSCI-EAFE Index contains over 1,000 stocks from 20
different countries with Japan (approximately 50%), the United Kingdom, France,
and Germany being the most heavily weighted.

MSCI-EAFE EX-JAPAN INDEX. The MSCI-EAFE ex-Japan Index consists of all
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

MERRILL LYNCH HIGH YIELD MASTER INDEX. The Merrill Lynch High Yield
Master Index consists of fixed-rate, coupon-bearing bonds with an outstanding
par that is greater than or equal to $50 million, a maturity range greater than
or equal to one year, and a rating of less than BBB/Baa3 but not in default.

RUSSELL 2000 INDEX. The Russell 2000 Index is comprised of the 2,000
smallest companies included in the Russell 2000 Index, which represents
approximately 98% of the investable U.S. equity market.

SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX. The Salomon Brothers World
Government Bond Index includes a broad range of institutionally traded
fixed-rate government securities issued by the national

27
<PAGE>

governments of 17 countries, including the United States. The index generally
excludes floating- or variable-rate bonds, securities aimed principally at
non-institutional investors (such as U.S. Savings Bonds), and private-placement
type securities.

STANDARD & POOR'S/BARRA VALUE INDEX. The Standard & Poor's/Barra Value
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the lowest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX (THE "S&P 500"). The
S&P 500 is a market value-weighted and unmanaged index showing the changes in
the aggregate market value of 500 stocks relative to the base period 1941-43.
The S&P 500 is composed almost entirely of common stocks of companies listed on
the New York Stock Exchange, although the common stocks of a few companies
listed on the American Stock Exchange or traded over-the-counter are included.
The 500 companies represented include 400 industrial, 60 transportation, and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. The S&P 500 is the
most common index for the overall U.S. stock market.

From time to time, articles about the Fund regarding performance,
rankings, and other characteristics of the Fund may appear in publications
including, but not limited to, the publications included in Appendix A. In
particular, some or all of these publications may publish their own rankings or
performance reviews of mutual funds, including the Fund. References to or
reprints of such articles may be used in the Fund's promotional literature.
References to articles regarding personnel of Loomis Sayles who have portfolio
management responsibility may also be used in the Fund's promotional literature.
For additional information about the Fund's advertising and promotional
literature, see Appendix B.

28
<PAGE>

PERFORMANCE DATA*

The manner in which total return and yield of the Fund will be calculated
for public use is described above. The table summarizes the calculation of total
return and yield for the Fund.

<TABLE>
<CAPTION>
FROM FROM
CURRENT MODIFIED ACTUAL
SEC INCEPTION** INCEPTION**
YIELD AT THROUGH THROUGH
FUND 9/30/99 9/30/99 9/30/99
- ---- -------- ----------- -----------
<S> <C> <C> <C>
Loomis Sayles Investment Grade Bond 6.54% (4.70%) (4.88%)
Fund (Class J)
</TABLE>

- -----------
* Performance for the Fund would have been lower if a portion of the management
fee had not been waived by Loomis Sayles. In the absence of this limitation,
actual yield and total return would have been as follows:

** The modified and actual inception dates for Class J shares of the Fund are
May 31, 1999 and May 24, 1999, respectively.

29
<PAGE>

APPENDIX A

PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION

30
<PAGE>

Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money Magazine
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business

31
<PAGE>

New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal

32
<PAGE>

Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO

33
<PAGE>

APPENDIX B

ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Funds' advertising and promotional material may include,
but is not limited to, discussions of the following information:

Loomis Sayles Funds' participation in wrap fee and no transaction fee
programs

Loomis Sayles Funds and Loomis, Sayles & Company, L.P. Website

Loomis Sayles Publications, including fact sheets for each Fund

Characteristics of Loomis Sayles, including the number and locations of
its offices, its investment practices and clients, and assets under management

Specific and general investment philosophies, strategies, processes, and
techniques

Specific and general sources of information, economic models, forecasts,
and data services utilized, consulted, or considered in the course of providing
advisory or other services

Industry conferences at which Loomis Sayles participates

Current capitalization, levels of profitability, and other financial
information

Identification of portfolio managers, researchers, economists,
principals, and other staff members and employees and descriptions of Loomis
Sayles' resources devoted to such staff

The specific credentials of the above individuals, including but not
limited to previous employment, current and past positions, titles and duties
performed, industry experience, educational background and degrees, awards, and
honors

Specific identification of, and general reference to, current individual,
corporate, and institutional clients, including pension and profit sharing plans

Current and historical statistics relating to:

-- total dollar amount of assets managed

-- Loomis Sayles assets managed in total and by Fund

-- the growth of assets

-- asset types managed

Loomis Sayles Funds' tag line -- "Listening Harder, Delivering More" --
and statements that and examples of how Loomis Sayles Funds listens to its
clients and works hard to deliver results that exceed their expectations.

References may be included in Loomis Sayles Funds' advertising and
promotional literature about 401(k) and retirement plans that offer the Funds.
The information may include, but is not limited to:

34
<PAGE>

Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends and
forecasts regarding the growth of assets, numbers of plans, funding vehicles,
participants, sponsors, and other demographic data relating to plans,
participants and sponsors, third party and other administrators, benefits
consultants, and firms with whom Loomis Sayles may or may not have a
relationship.

Specific and general reference to comparative ratings, rankings, and
other forms of evaluation as well as statistics regarding Loomis Sayles Funds as
401(k) or retirement plan funding vehicles produced by industry authorities,
research organizations, and publications.

35
<PAGE>

[LOGO]

STATEMENT OF ADDITIONAL
INFORMATION

February 1, 2000

This Statement of Additional Information is not a Prospectus. This
Statement of Additional Information relates to the Prospectus of the Managed
Bond Fund series ("Fund") of Loomis Sayles Funds dated February 1, 2000, as
revised from time to time. This Statement of Additional Information should be
read in conjunction with the applicable Prospectus. A copy of the Prospectus may
be obtained from Loomis Sayles Funds, One Financial Center, Boston,
Massachusetts 02111.

LOOMIS SAYLES FUNDS
Loomis Sayles Managed Bond Fund

<PAGE>

TABLE OF CONTENTS

<TABLE>

<S> <C>
THE TRUST ................................................................. 1

INVESTMENT STRATEGIES AND RISKS ........................................... 1
Investment Restrictions .......................................... 1
Investment Strategies ............................................ 3
U.S. Government Securities ....................................... 3
When-Issued Securities ........................................... 4
Zero Coupon Bonds ................................................ 4
Repurchase Agreements ............................................ 5
Rule 144A Securities ............................................. 5
Foreign Currency Transactions .................................... 5
Options .......................................................... 6

MANAGEMENT OF THE TRUST ................................................... 8

INVESTMENT ADVISORY AND OTHER SERVICES .................................... 13

PORTFOLIO TRANSACTIONS AND BROKERAGE ...................................... 16

DESCRIPTION OF THE TRUST .................................................. 17
Voting Rights .................................................... 17
Shareholder and Trustee Liability ................................ 18
How to Buy Shares ................................................ 19
Net Asset Value .................................................. 19

SHAREHOLDER SERVICES ...................................................... 19
Open Accounts .................................................... 19
Redemptions ...................................................... 20

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS ............... 20

FINANCIAL STATEMENTS ...................................................... 23

CALCULATION OF YIELD AND TOTAL RETURN ..................................... 23

PERFORMANCE COMPARISONS ................................................... 23

PERFORMANCE DATA .......................................................... 27

APPENDIX A

PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION ....... 28

APPENDIX B

ADVERTISING AND PROMOTIONAL LITERATURE ........................... 32
</TABLE>

<PAGE>

THE TRUST

Loomis Sayles Funds (the "Trust") is a diversified, registered,
open-end management investment company. The Trust includes 19 series
(collectively, the "Funds"), including the Loomis Sayles Managed Bond Fund (the
"Fund"). The Trust was organized as a Massachusetts business trust on February
20, 1991.

Shares of the Fund are freely transferable and entitle shareholders to
receive dividends as determined by the Trust's Board of Trustees and to cast a
vote for each share held at shareholder meetings. The Trust generally does not
hold shareholder meetings and expects to do so only when required by law.
Shareholders may call meetings to consider removal of the Trust's trustees.

INVESTMENT STRATEGIES AND RISKS

The investment objective and principal investment strategies of the
Fund are described in the Prospectus. The investment policies of the Fund set
forth in the Prospectus and in this Statement of Additional Information 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 the Prospectus and any
policy explicitly identified as "fundamental" may not be changed without the
approval of the holders of a majority of the outstanding shares of the relevant
Fund (which in the Prospectus and this Statement of Additional Information means
the lesser of (i) 67% of the shares of the Fund present at a meeting at which
more than 50% of the outstanding shares are present or 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.

INVESTMENT RESTRICTIONS

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.

*(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.)

<PAGE>

(6) With respect to 75% of its assets, acquire more than 10% of the
outstanding voting securities of an issuer.

*(9) Borrow money in excess of 10% of its assets (taken at cost) or 5%
of its 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).

*(14) Issue senior securities. (For purposes of this restriction, none
of the following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (7) above; any borrowing
permitted by restriction (9) above; any collateral arrangements with respect to
options, futures contracts, and options on futures contracts, and with respect
to initial and variation margin; and the purchase or sale of options, forward
contracts, futures contracts, or options on futures contracts.)

(15) The Fund normally will invest at least 65% of its assets in fixed
income securities.

<PAGE>

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 Japanese Securities Dealers Association as a condition of such
qualification.

INVESTMENT STRATEGIES

Except to the extent prohibited by the Fund's investment policies as
set forth in the Prospectus or in this Statement of Additional Information, the
investment strategies used by Loomis Sayles in managing the Fund may include
investments in the types of securities described below.

U.S. GOVERNMENT SECURITIES

U.S. Government securities include direct obligations of the U.S.
Treasury, as well as securities issued or guaranteed by U.S. Government
agencies, authorities, and instrumentalities, including, among others, the
Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the Federal Housing
Administration, the Resolution Funding Corporation, the Federal Farm Credit
Banks, the Federal Home Loan Bank, the Tennessee Valley Authority, the Student
Loan Marketing Association, and the Small Business Administration. More detailed
information about some of these categories of U.S. Government securities
follows.

U.S. Treasury Bills--U.S. Treasury Bills are direct obligations of the
U.S. Treasury that are issued in maturities of one year or less. No interest is
paid on Treasury bills; instead, they are issued at a discount and repaid at
full face value when they mature. They are backed by the full faith and credit
of the U.S. Government.

"Ginnie Maes"--Ginnie Maes are debt securities issued by a mortgage
banker or other mortgagee that represent an interest in a pool of mortgages
insured by the Federal Housing Administration or the Farmer's Home
Administration or guaranteed by the Veterans Administration. The Government
National Mortgage Association ("GNMA") guarantees the timely payment of
principal and interest when such payments are due, whether or not these amounts
are collected by the issuer of these certificates on the underlying mortgages.
An assistant attorney general of the United States has rendered an opinion that
the guarantee by GNMA is a general obligation of the United States backed by its
full faith and credit. Mortgages included in single family or multi-family
residential mortgage pools backing an issue of Ginnie Maes have a maximum
maturity of up to 30 years. Scheduled payments of principal and interest are
made to the registered holders of Ginnie Maes (such as the Fund) each month.
Unscheduled prepayments may be made by homeowners or as a result of a default.
Prepayments are passed through to the registered holder of Ginnie Maes along
with regular monthly payments of principal and interest.

<PAGE>

payment of principal and interest by FNMA but are not backed by the full faith
and credit of the U.S. Government.

"Freddie Macs"--The Federal Home Loan Mortgage Corporation ("FHLMC") is
a corporate instrumentality of the U.S. Government. Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's national portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the U.S.
Government.

As described in the Prospectus, the yields available from U.S.
Government securities are generally lower than the yields available from
corporate fixed-income securities. Like other fixed-income securities, however,
the values of U.S. Government securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

WHEN-ISSUED SECURITIES

When-issued securities are agreements with banks or broker-dealers for
the purchase or sale of securities at an agreed-upon price on a specified future
date. Such agreements might be entered into, for example, when the Fund that
invests in fixed income securities anticipates a decline in interest rates and
is able to obtain a more advantageous yield by committing currently to purchase
securities to be issued later. When the Fund purchases securities on a
when-issued or delayed-delivery basis, it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting that Fund's investment criteria. The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

ZERO COUPON BONDS

Zero coupon bonds are debt obligations that do not entitle the holder
to any periodic payments of interest either for the entire life of the
obligation or for an initial period after the issuance of the obligation. Such
bonds are issued and traded at a discount from their face amounts. The amount of
the discount varies depending on such factors as the time remaining until
maturity of the bonds, prevailing interest rates, the liquidity of the security,
and the perceived credit quality of the issuer. The market prices of zero coupon
bonds generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than non-zero coupon bonds having similar maturities and credit
quality. In order to satisfy a requirement for qualification as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), the Fund must distribute each year at least 90% of its net investment
income, including the original issue discount accrued on zero coupon bonds.
Because a Fund investing in zero coupon bonds will not on a current basis
receive cash payments from the issuer in respect of accrued original issue
discount, the Fund may have to distribute cash obtained from other sources in
order to satisfy the 90% distribution requirement under the Code. Such cash
might be obtained from selling other portfolio holdings of the Fund. In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell such securities at such time.

<PAGE>

REPURCHASE AGREEMENTS

Under a repurchase agreement, the Fund purchases a security and obtains
a simultaneous commitment from the seller (a bank or, to the extent permitted by
the Investment Company Act of 1940, as amended (the "1940 Act"), a recognized
securities dealer) to repurchase the security at an agreed upon price and date
(usually seven days or less from the date of original purchase). The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
the Fund the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill, certificate of
indebtedness, note, or bond issued by an agency, authority, or instrumentality
of the U.S. Government, the obligation of the seller is not guaranteed by the
U.S. Government, and there is a risk that the seller may fail to repurchase the
underlying security. In such event, the Fund would attempt to exercise rights
with respect to the underlying security, including possible disposition in the
market. However, the Fund may be subject to various delays and risks of loss,
including (a) possible declines in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (b) possible
reduced levels of income and lack of income during this period, and (c)
inability to enforce rights and the expenses involved in attempted enforcement.

RULE 144A SECURITIES

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 the Trust's trustees, that the particular issue of Rule 144A
securities is liquid. Under the guidelines, Loomis Sayles considers such factors
as: (1) the frequency of trades and quotes for a security; (2) the number of
dealers willing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the marketplace trades in
the security.

FOREIGN CURRENCY TRANSACTIONS

The Fund may enter into forward contracts under two circumstances.
First, when the Fund enters into a contract for the purchase or sale of a
security denominated or traded in a market in which settlement is made in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the
security. By entering into a forward contract for the purchase or sale, for a
fixed amount of dollars, of the amount of foreign currency involved in the
underlying transactions, the Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the investment is purchased or sold and the date on which payment is
made or received.

<PAGE>

The Fund generally will not enter into forward contracts with a term of
greater than one year.

Options on foreign currencies are similar to forward contracts, except
that one party to the option (the holder) is not contractually bound to buy or
sell the specified currency. Instead, the holder has discretion whether to
"exercise" the option and thereby require the other party to buy or sell the
currency on the terms specified in the option. Options transactions involve
transaction costs and, like forward contract transactions, involve the risk that
the other party may default on its obligations (if the options are not traded on
an established exchange) and the risk that expected movements in the relative
value of currencies may not occur, resulting in an imperfect hedge or a loss to
the Fund.

OPTIONS

An option entitles the holder to receive (in the case of a call option)
or to sell (in the case of a put option) a particular security at a specified
exercise price. An "American style" option allows exercise of the option at any
time during the term of the option. A "European style" option allows an option
to be exercised only at the end of its term. Options may be traded on or off an
established securities exchange.

If the holder of an option wishes to terminate its position, it may
seek to effect a closing sale transaction by selling an option identical to the
option previously purchased. The effect of the purchase is that the previous
option position will be canceled. The Fund will realize a profit from closing
out an option if the price received for selling the offsetting position is more
than the premium paid to purchase the option; the Fund will realize a loss from
closing out an option transaction if the price received for selling the
offsetting option is less than the premium paid to purchase the option.

The use of options involves risks. One risk arises because of the
imperfect correlation between movements in the price of options and movements in
the price of the securities that are the subject of the hedge. The Fund's
hedging strategies will not be fully effective if such imperfect correlation
occurs.

Price movement correlation may be distorted by illiquidity in the
options markets and the participation of speculators in such markets. If an
insufficient number of contracts are traded, commercial users may not deal in
options because they do not want to assume the risk that they may not be able to
close out their positions within a reasonable amount of time. In such instances,
options market prices may be driven by different forces than those driving the
market in the underlying securities, and price spreads between these markets may
widen. The participation of speculators in the market enhances its liquidity.
Nonetheless, the trading activities of speculators in the options markets may
create temporary price distortions unrelated to the market in the underlying
securities.

<PAGE>

more exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

The staff of the SEC has taken the position that over-the-counter
options should be treated as illiquid securities for purposes of the Fund's
investment restriction prohibiting it from investing more than 15% of its net
assets in illiquid securities. The Fund intends to comply with this position.

Income earned by the Fund from its hedging activities will be treated
as capital gain and, if not offset by net recognized capital losses incurred by
the Fund, will be distributed to shareholders in taxable distributions. Although
gain from options transactions may hedge against a decline in the value of the
Fund's portfolio securities, that gain, to the extent not offset by losses, will
be distributed in light of certain tax considerations and will constitute a
distribution of that portion of the value preserved against decline.

<PAGE>

MANAGEMENT OF THE TRUST

The trustees of the Trust supervise the affairs of the Trust and have
the other responsibilities assigned to them by the laws of The Commonwealth of
Massachusetts. The trustees and officers of the Trust, their ages, and their
principal occupations during the past five years are as follows:

JOSEPH ALAIMO (69)--Trustee. 727 N. Bank Lane, Lake Forest, Illinois.
President, Wintrust Asset Management Company.

RICHARD S. HOLWAY (73)--Trustee. 1314 Seaspray Lane, Sanibel, Florida.
Retired. Formerly Vice President, Loomis Sayles. Director, Sandwich Cooperative
Bank.

MICHAEL T. MURRAY (69)--Trustee. 404 N. Western Ave., Lake Forest,
Illinois. Retired. Formerly Vice President, Loomis Sayles.

DANIEL J. FUSS(1) (66)--President and Trustee. Vice Chairman and
Director, Loomis Sayles.

ROBERT J. BLANDING (52)--Executive Vice President. 555 California
Street, San Francisco, California. President, Chairman, Director, and Chief
Executive Officer, Loomis Sayles.

MARK W. HOLLAND (50)--Treasurer. Vice President, Finance and
Administration and Director, Loomis Sayles.

SHEILA M. BARRY (54)--Secretary and Compliance Officer. Assistant
General Counsel and Vice President, Loomis Sayles. Formerly, Senior Counsel and
Vice President, New England Funds, L.P.

DAWN M. ALSTON-PAIGE (35)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

MARK BARIBEAU (40)--Vice President. Vice President, Loomis Sayles.

JAMES C. CARROLL (49)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles. Formerly Managing Director and
Senior Energy Analyst at Paine Webber, Inc.

E. JOHN DEBEER (61)--Vice President. Vice President, Loomis Sayles.

RODERICK H. DILLON, JR. (43)--Vice President. 2001 Pennsylvania Avenue,
N.W., Suite 200, Washington, DC. Vice President, Loomis Sayles.

WILLIAM H. EIGEN, JR. (62)--Vice President. Vice President, Loomis
Sayles. Formerly Vice President, INVESCO Funds Group and Vice President, The
Travelers Corp.

CHRISTOPHER R. ELY (44)--Vice President. Vice President, Loomis Sayles.
Formerly Senior Vice President and Portfolio Manager, Keystone Investment
Management Company, Inc.

- --------------------------

(1) Trustee deemed an "interested person" of the Trust, as defined by the 1940
Act.

<PAGE>

QUENTIN P. FAULKNER (60)--Vice President. Vice President, Loomis
Sayles.

PHILIP C. FINE (50)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Portfolio Manager, Keystone Investment Management
Company, Inc.

KATHLEEN C. GAFFNEY (38)--Vice President. Vice President, Loomis
Sayles.

ISAAC GREEN (38)--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Executive Vice President and Director, Loomis Sayles.

MARTHA F. HODGMAN (48)--Vice President. Vice President, Loomis Sayles.

JOHN HYLL (45)--Vice President. 555 California Street, San Francisco,
California.

JEFFREY L. MEADE (49)--Vice President. Executive Vice President, Chief
Operating Officer and Director, Loomis Sayles.

ALEX MUROMCEW (36)--Vice President. 555 California Street, San
Francisco, California. Vice President, Loomis Sayles. Formerly Portfolio Manager
at Nicholas Applegate Capital Management and Investment Analyst at Teton
Partners, L.P.

KENT P. NEWMARK (61)--Vice President. 555 California Street, San
Francisco, California. Vice President, Managing Partner and Director, Loomis
Sayles.

BRUCE G. PICARD, JR. (30)--Vice President. Vice President, Loomis
Sayles.

LAUREN B. PITALIS (39)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Assistant Secretary, Harris Associates Investment
Trust.

DAVID L. SMITH (46)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Portfolio Manager, Keystone Investment Management
Company, Inc.

JOHN TRIBOLET (29)--Vice President. 555 California Street, San
Francisco, California. Vice President, Loomis 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 (39)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

<PAGE>

GREGG D. WATKINS (51)--Vice President. 1533 N. Woodward, Bloomfield
Hills, Michigan. Vice President, Loomis Sayles.

ANTHONY J. WILKINS (57)--Vice President. Executive Vice President and
Director, Loomis Sayles.

Previous positions during the past five years with Loomis Sayles are
omitted if not materially different.

Except as indicated above, the address of each trustee and officer of
the Trust affiliated with Loomis Sayles is One Financial Center, Boston,
Massachusetts. The Trust pays no compensation to its officers or to the trustees
listed above who are directors, officers, or employees of Loomis Sayles. Each
trustee who is not a director, officer, or employee of Loomis Sayles is
compensated at the rate of $1,250 per Fund per annum.

<PAGE>

COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999

(1) (2) (3) (4) (5)
---- ---- ---- ---- ---
TOTAL
COMPENSATION
PENSION OR ESTIMATED FROM TRUST AND
AGGREGATE RETIREMENT BENEFITS ANNUAL FUND COMPLEX*
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON PAID TO
POSITION FROM TRUST FUND EXPENSES RETIREMENT TRUSTEE
-------- ---------- ------------- ---------- -------

<S> <C> <C> <C> <C>
Joseph Alaimo, Trustee $5,312.50 N/A N/A $5,312.50

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.

<PAGE>

PRINCIPAL HOLDERS

The following table provides information on the principal holders of
the Fund. A principal holder is a person who owns of record or beneficially 5%
or more of the Fund's outstanding securities. Information provided in this table
is as of December 27, 1999.

PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
- ----------- ------- -----------
<S> <C> <C>
Kokusai Securities Co. Ltd. 27-1 Shinkawa, 100%
2-Chome, Chuo-Ku
Tokyo, Japan
</TABLE>

Since Kokusai Securities Co. Ltd. ("Kokusai") owns more than 25% of the
Fund, it may be deemed to "control" the Fund within the meaning of the 1940 Act.
Kokusai is organized under the laws of Japan.

<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

Fee Waivers
Advisory and Expense
Fund Fees Assumptions
- ---- ---- -----------

<S> <C> <C>
Loomis Sayles Managed Bond Fund $205,838 $183,586
</TABLE>

The Trust pays the compensation of its trustees who are not directors,
officers, or employees of Loomis Sayles or its affiliates (other than registered
investment companies); registration, filing, and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Fund; the expenses of
meetings of the shareholders and trustees of the Trust; the charges and expenses
of the Trust's legal counsel; interest on any borrowings by the Fund; the cost
of services, including services of counsel, required in connection with the
preparation of, and the cost of printing, the Trust's registration statements
and Prospectus, 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 that would result in the Fund's inability to qualify as a
regulated investment company under the Code. The term "expenses" is defined in
the advisory agreements or in relevant state regulations and excludes brokerage
commissions, taxes, interest, distribution-related expenses, and extraordinary
expenses.

<PAGE>

Trustees who are not "interested persons" of the Trust, as that term is defined
in the 1940 Act, cast in person at a meeting called for the purpose of voting on
such approval. Any amendment to an advisory agreement must be approved by vote
of a majority of the outstanding voting securities of the 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 relevant Fund, upon sixty
days' written notice, or by Loomis Sayles upon ninety days' written notice, and
the agreement 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 relevant Fund and by a majority of
the Trustees who are not interested persons of the Trust or Loomis Sayles.

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 Funds Trust II, a
registered, open-end management investment company; the Loomis Sayles Balanced
Series and the Loomis Sayles Small Cap Series of New England Zenith Fund, a
registered open-end management investment company; and Loomis Sayles Investment
Trust, a registered open-end management investment company. Loomis Sayles also
provides investment advice to certain other open-end management investment
companies and numerous other corporate and fiduciary clients.

Certain officers and trustees of the Trust also serve as officers,
directors, and trustees of other investment companies and clients advised by
Loomis Sayles. The other investment companies and clients sometimes invest in
securities in which the Fund also invests. If the Fund and such other investment
companies or clients desire to buy or sell the same portfolio securities at the
same time, purchases and sales may be allocated, to the extent practicable, on a
pro rata basis in proportion to the amounts desired to be purchased or sold for
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 that the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
trustees that the desirability of retaining Loomis Sayles as adviser for the
Fund outweighs the disadvantages, if any, that might result from these
practices.

DISTRIBUTION AGREEMENT AND RULE 12b-1 PLANS. Under an agreement with
the Trust (the "Distribution Agreement"), Loomis Sayles Distributors, L.P., One
Financial Center, Boston, Massachusetts 02111 (the "Distributor") serves as the
general distributor of the Fund. Under this agreement, the Distributor is not
obligated to sell a specific number of shares. The Distributor bears the cost of
making information about the Fund available through advertising and other means
and the cost of printing and mailing the Prospectus to persons other than
shareholders. The Fund pays the cost of registering and qualifying its shares
under state and federal securities laws and distributing its Prospectus to
existing shareholders.

<PAGE>

As described in the Prospectus, the Fund has adopted a Service and
Distribution Plan 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 monthly distribution fee at an annual rate not to exceed 0.50% of
the Fund's average net assets. Payments under the Plan are made to Japanese
broker-dealers and to Loomis Sayles sales representatives. Payments also may be
made under the Plan to intermediaries for shareholder servicing, for no
transaction fee or wrap programs, and for retirement plan recordkeeping. In
addition, payments under the Plan may be made for activities such as
advertising, printing, and mailing the Prospectus to persons who are not current
shareholders, compensation to underwriters, compensation to broker-dealers,
compensation to sales personnel, and interest, carrying, or other financing
charges. 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 following table provides information on the amount of fees paid
by the Fund under the Plan during the past fiscal period. A portion of these
fees was paid out to intermediaries in Japan for shareholder servicing, and a
portion was retained by the Distributor and paid out entirely in commission
to the Distributor's Japanese representative.

-------------------------------------------------------------------------
-------------------------------------------------------------------------
FUND/CLASS 12b-1 Fees paid by the Fund
-------------------------------------------------------------------------
-------------------------------------------------------------------------
<S> <C>
Loomis Sayles Managed Bond Fund $257,298
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>

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 the Plan is in effect, selection and nomination of those trustees who
are not interested persons of the Trust shall be committed to the discretion of
such disinterested persons.

The Distribution Agreement may be terminated at any time with respect
to the Fund on 60 days' written notice without payment of any penalty by the
Trust or by vote of a majority of the outstanding voting securities of that Fund
or by vote of a majority of the Independent Trustees.

The following table provides information on the amount of underwriting
commissions received and retained by the Distributor in conjunction with the
Fund.

-------------------------------------------------------------------------
-------------------------------------------------------------------------
UNDERWRITING COMMISSIONS RECEIVED AND RETAINED Fiscal Period 1999
BY THE DISTRIBUTOR (10/1/98 - 9/30/99)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
<S> <C>
Loomis Sayles Managed Bond Fund $241,380
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>

<PAGE>

CUSTODIAL ARRANGEMENTS. State Street Bank and Trust Company ("State
Street Bank"), Boston, Massachusetts 02102, is the Trust's custodian. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to the Fund. Upon instruction,
State Street Bank receives and delivers cash and securities of the Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Fund and calculates the total
net asset value, total net income, and net asset value per share of the Fund on
a daily basis.

INDEPENDENT ACCOUNTANTS. The Trust's independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts an annual audit
of the Trust's financial statements, assists in the preparation of the Fund's
federal and state income tax returns and consults with the Fund as to matters of
accounting and federal, and state income taxation. The information under the
caption "Financial Highlights" included in the Prospectus has been so included,
and the financial statements incorporated by reference herein from the Fund's
1999 Annual Report have been so incorporated, in reliance on the reports of
PricewaterhouseCoopers LLP, given on the authority of said firm as experts in
auditing and accounting.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Loomis Sayles selects only brokers or dealers that it believes are
financially responsible, will provide efficient and effective services in
executing, clearing, and settling an order, and will charge commission rates
that, when combined with the quality of the foregoing services, will produce
best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates.
Loomis Sayles will use its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage community from time to
time and will evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount of
the capital commitment by the broker in connection with the order, are taken
into account. The 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 that 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 that Loomis Sayles believes will provide best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation, and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Loomis Sayles' expenses. Such services may be
used by Loomis Sayles in servicing other client accounts and in some cases may
not be used with respect to the Fund. Receipt of services or products other than
research from brokers is not a factor in the selection of brokers.

<PAGE>

DESCRIPTION OF THE TRUST

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 trustees may also, without shareholder approval, establish one or
more additional separate portfolios for investments in the Trust or merge two or
more existing portfolios. Shareholders' investments in such an additional or
merged portfolio would be evidenced by a separate series of shares (i.e., a new
"Fund").

VOTING RIGHTS

As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for each fractional share held)
and may vote (to the extent provided in the Declaration of Trust) on the
election of trustees and the termination of the Trust and on other matters
submitted to the vote of shareholders.

The Declaration of Trust provides that on any matter submitted to a
vote of all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote, in which case a
separate vote of that series or sub-series shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect that a
class shall be deemed to be affected by a matter unless it is clear that the
interests of each class in the matter are substantially identical or that the
matter does not affect any interest of such class. On matters affecting an
individual series, only shareholders of that series are entitled to vote.
Consistent with the current position of the SEC, shareholders of all series vote
together, irrespective of series, on the election of trustees and the selection
of the Trust's independent accountants, but shareholders of each series vote
separately on other matters requiring shareholder approval, such as certain
changes in investment policies of that series or the approval of the investment
advisory agreement relating to that series.

<PAGE>

Except as set forth above, the trustees shall continue to hold office
and may appoint successor trustees. Voting rights are not cumulative.

SHAREHOLDER AND TRUSTEE LIABILITY

Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund of
which they are shareholders. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each agreement, obligation, or instrument
entered into or executed by the Trust or the trustees. The Declaration of Trust
provides for indemnification out of Fund property for all loss and expense of
any shareholder held personally liable for the obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the Fund itself would be unable to meet its
obligations.

<PAGE>

HOW TO BUY SHARES

The procedures for purchasing shares of the Fund are summarized in the
Prospectus under "General Information-How to Purchase Shares."

NET ASSET VALUE
The net asset value of the shares of the Fund is determined by dividing
the Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares of the Fund outstanding and rounding to the nearest
cent. Such determination is made as of the close of regular trading on the 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 Statement of Additional Information, 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 sale price on the exchange where primarily traded
or, if there is no reported sale during the day, and in the case of
over-the-counter securities not so listed, at the 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 valued by a
pricing service, which determines valuations of normal institutional-size
trading units of long-term debt securities. Such valuations are determined using
methods based on market transactions for comparable securities and on various
relationships between securities which are generally recognized by institutional
traders. Other securities for which current market quotations are not readily
available and all other assets are valued 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 foreign securities markets is substantially
completed each day at various times prior to the close of regular trading on the
New York Stock Exchange. Occasionally, events affecting the value of foreign
fixed income securities and of equity securities of non-U.S. issuers not traded
on a U.S. exchange may occur between the completion of substantial trading of
such securities for the day and the close of regular trading on the New York
Stock Exchange, which events will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of the Fund's
portfolio securities occur during such period, then these securities may be
valued at their fair value as determined in good faith by or in accordance with
procedures approved by the trustees.

SHAREHOLDER SERVICES

OPEN ACCOUNTS

A shareholder's investment in the Fund is automatically credited to an
open account maintained for the shareholder by State Street Bank. Certificates
representing shares are issued only upon written request to State Street Bank
but are not issued for fractional shares. Following each transaction in the
account, a shareholder will receive an account statement disclosing the current
balance of shares owned and the details of recent transactions in the account.
After the close of each fiscal year, State Street Bank will send each
shareholder a statement providing U.S. federal tax information on dividends and
distributions paid to the shareholder during the year. This should be retained
as a permanent record.

<PAGE>

The costs of maintaining the open account system are borne by the
Trust, and no direct charges are made to shareholders. Although the Trust has no
present intention of making such direct charges to shareholders, it reserves the
right to do so. Shareholders will receive notice before any such charges are
made.

REDEMPTIONS

The procedures for redemption of Fund shares are summarized in the
Prospectus under "General Information--How to Redeem Shares."

The redemption price will be the net asset value per share next
determined after the redemption request and any necessary special documentation
are received by State Street Bank in proper form.

The Fund will normally redeem shares for cash; however, the Fund
reserves the right to pay the redemption price wholly or partly in kind. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities. However, the Trust has elected to be governed by Rule 18f-1 under
the 1940 Act, pursuant to which the Trust is obligated to redeem shares solely
in cash for any shareholder during any 90-day period up to the lesser of
$250,000 or 1% of the total net asset value of the Trust at the beginning of
such period.

A redemption constitutes a sale of the shares for U.S. federal income
tax purposes on which the investor may realize a long-term or short-term capital
gain or loss. See "Income Dividends, Capital Gain Distributions and Tax Status."

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

As described in the Prospectus under "Dividends and Distributions," 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.

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.

<PAGE>

The Internal Revenue Service ("IRS") requires any Fund to withhold 31%
of any redemption proceeds (including the value of shares exchanged) and of any
income dividends and capital gain distributions in the following situations:

- - If you do not provide a correct, certified taxpayer identification
number to the Fund.

- - If the IRS notifies the Fund that you have underreported your income in
the past and thus are subject to backup withholding.

- - If you fail to certify to the Fund that you are not subject to such
backup withholding because, for example, of your foreign (non-U.S.)
status.

An excise tax at the rate of 4% will be imposed on the excess, if any,
of the Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. The Fund
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by the Fund during October, November, or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which they were
declared.

Dividends and distributions on the Fund's shares are generally subject
to federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur for shares purchased at a time when the
Fund's net asset value reflects gains that are either

<PAGE>

unrealized or realized but not distributed. Such realized gains may be required
to be distributed even when the Fund's net asset value also reflects unrealized
losses.

<PAGE>

FINANCIAL STATEMENTS

The financial statements of the Fund included in the Trust's 1999
Annual Report, filed with the SEC on November 29, 1999, are incorporated by
reference to such Report.

CALCULATION OF YIELD AND TOTAL RETURN

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.

PERFORMANCE COMPARISONS

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.

<PAGE>

LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated by
Lipper, generally reflecting changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of performance
periods, including, but not limited to, year-to-date, 1-year, 5-year, and
10-year performance. Lipper classifies mutual funds by investment objective and
asset category.

STANDARD & POOR'S MICROPAL, INC. distributes mutual fund rankings
weekly and monthly. The rankings are based upon performance calculated by
Standard & Poor's Micropal, generally reflecting changes in net asset value that
can be adjusted for the reinvestment of capital gains and dividends. If deemed
appropriate by the user, performance can also reflect deductions for sales
charges. Standard & Poor's Micropal rankings cover a variety of performance
periods, including, but not limited to, year-to-date, 1-year, 5-year, and
10-year performance. Standard & Poor's Micropal classifies mutual funds by
investment objective and asset category.

MORNINGSTAR, INC. distributes mutual fund ratings monthly. The ratings
are divided into five groups: highest, above average, neutral, below average,
and lowest. They represent the Fund's historical risk/reward ratio relative to
other funds in its broad investment class as determined by Morningstar, Inc.
Morningstar ratings cover a variety of performance periods, including 3-year,
5-year, 10-year, and overall performance. The performance factor for the overall
rating is a weighted-average return performance (if available) reflecting
deduction of expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the fund. The ratings are
derived from a purely quantitative system that does not utilize the subjective
criteria customarily employed by rating agencies such as Standard & Poor's and
Moody's Investors Service, Inc.

STANDARD & POOR'S SELECT FUNDS are funds selected by Standard & Poor's
that have demonstrated above-average absolute and volatility-adjusted returns
relative to funds with the same investment style, along with having investment
management attributes that are consistent with the fund's investment style.
Select Fund designation is based on a six-month moving average of three years of
absolute and volatility-adjusted performance. A Select Fund designation does not
address the market risk, credit risk, or counterparty risk of a fund, nor does
it address a fund's suitability as a counterparty or obligor.

VALUE LINE INVESTMENT SURVEY is an investment advisory service that
ranks approximately 1,700 stocks for "timeliness" and safety. Using a
computerized model based on earnings momentum, Value Line projects which stocks
will have the best or worst relative price performance over the next 6 to 12
months. In addition, each stock is assigned a risk rating, which identifies the
volatility of a stock's price behavior relative to the market average. The
service also ranks all major industry groups for timeliness.

CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings
and is distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year,
5-year, and 10-year. Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of sales charges or fees.

<PAGE>

Performance information may also be used to compare the performance of
the Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as the following:

DOW JONES INDUSTRIAL AVERAGE. The Dow Jones Industrial Average is a
market value-weighted and unmanaged index of 30 large industrial stocks.

LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX. The Lehman Brothers
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible, investment-grade
corporate debt securities and U.S. dollar-denominated, SEC-registered
non-convertible debt issued by foreign governmental entities or international
agencies used as a general measure of the performance of fixed-income
securities.

LEHMAN BROTHERS GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX. The
Lehman Brothers Government/Corporate Intermediate Bond Index consists of those
bonds held within the Lehman Brothers Government/Corporate Bond Index that have
an average maturity of 1-10 years.

LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX. The Index consists of fixed
rate debt issues of the U.S. government or its agencies rated investment grade
or higher with at least one year maturity and an outstanding par value of at
least $100 million for U.S. government issues.

LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX. The Index is
a market value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities of between one and three years.

LEHMAN BROTHERS GOVERNMENT BOND INDEX. The Lehman Brothers Government
Bond Index is composed of all publicly issued, non-convertible, domestic debt of
the U.S. government or any of its agencies or quasi-federal corporations, or
corporate debt guaranteed by the U.S. government.

LEHMAN BROTHERS MUNICIPAL BOND INDEX. The Lehman Brothers Municipal
Bond Index is computed from the prices of approximately 21,000 bonds consisting
of roughly 30% revenue bonds, 30% government obligation bonds, 27% insured
bonds, and 13% pre-refunded bonds.

MSCI-EAFE INDEX. The MSCI-EAFE Index contains over 1,000 stocks from 20
different countries with Japan (approximately 50%), the United Kingdom, France,
and Germany being the most heavily weighted.

MSCI-EAFE EX-JAPAN INDEX. The MSCI-EAFE ex-Japan Index consists of all
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

MERRILL LYNCH HIGH YIELD MASTER INDEX. The Merrill Lynch High Yield
Master Index consists of fixed-rate, coupon-bearing bonds with an outstanding
par that is greater than or equal to $50 million, a maturity range greater than
or equal to one year, and a rating of less than BBB/Baa3 but not in default.

RUSSELL 2000 INDEX. The Russell 2000 Index is comprised of the 2,000
smallest companies included in the Russell 2000 Index, which represents
approximately 98% of the investable U.S. equity market.

SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX. The Salomon Brothers
World Government Bond Index includes a broad range of institutionally traded
fixed-rate government securities issued by the national

<PAGE>

STANDARD & POOR'S/BARRA GROWTH INDEX. The Standard & Poor's/Barra
Growth Index is constructed by ranking the securities in the S&P 500 by
price-to-book ratio and including the securities with the highest price-to-book
ratios that represent approximately half of the market capitalization of the S&P
500.
STANDARD & POOR'S/BARRA VALUE INDEX. The Standard & Poor's/Barra Value
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the lowest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX (THE "S&P 500"). The
S&P 500 is a market value-weighted and unmanaged index showing the changes in
the aggregate market value of 500 stocks relative to the base period 1941-43.
The S&P 500 is composed almost entirely of common stocks of companies listed on
the New York Stock Exchange, although the common stocks of a few companies
listed on the American Stock Exchange or traded over-the-counter are included.
The 500 companies represented include 400 industrial, 60 transportation, and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. The S&P 500 is the
most common index for the overall U.S. stock market.

<PAGE>

PERFORMANCE DATA*

The manner in which total return and yield of the Fund will be
calculated for public use is described above. The table summarizes the
calculation of total return and yield for the Fund.

<TABLE>
<CAPTION>
FROM FROM
CURRENT MODIFIED ACTUAL
SEC INCEPTION** INCEPTION**
YIELD AT THROUGH THROUGH
FUND 9/30/99 9/30/99 9/30/99
---- ------- ------- -------

<S> <C> <C> <C>
Loomis Sayles Managed Bond Fund 7.32% 1.89% 3.62%
</TABLE>

- -----------
* Performance for the Fund would have been lower if a portion of the
management fee had not been waived by Loomis Sayles. In the absence of
this limitation, actual yield and total return would have been as
follows:

<TABLE>
<CAPTION>
FROM FROM
CURRENT MODIFIED ACTUAL
SEC INCEPTION** INCEPTION**
YIELD AT THROUGH THROUGH
FUND 9/30/99 9/30/99 9/30/99
- ---- ------- ------- -------
<S> <C> <C> <C>
Loomis Sayles Managed Bond Fund 6.99% 1.35% 3.07%
</TABLE>

** The modified inception date for the Fund is October 31, 1998. The Fund's
actual inception date is October 1, 1998.

27
<PAGE>

APPENDIX A

PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION

<PAGE>

Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money Magazine
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates

<PAGE>

New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line

<PAGE>

Wall Street Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO

<PAGE>

APPENDIX B

ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Funds' advertising and promotional material may include,
but is not limited to, discussions of the following information:

Loomis Sayles Funds' participation in wrap fee and no transaction fee
programs

Loomis Sayles Funds and Loomis, Sayles & Company, L.P. Website

Loomis Sayles Publications, including fact sheets for each Fund

Characteristics of Loomis Sayles, including the number and locations of
its offices, its investment practices and clients, and assets under management

Specific and general investment philosophies, strategies, processes,
and techniques

Specific and general sources of information, economic models,
forecasts, and data services utilized, consulted, or considered in the course of
providing advisory or other services

Industry conferences at which Loomis Sayles participates

Current capitalization, levels of profitability, and other financial
information

Identification of portfolio managers, researchers, economists,
principals, and other staff members and employees and descriptions of Loomis
Sayles' resources devoted to such staff

Specific identification of, and general reference to, current
individual, corporate, and institutional clients, including pension and profit
sharing plans

Current and historical statistics relating to:

--total dollar amount of assets managed
--Loomis Sayles assets managed in total and by Fund
--the growth of assets
--asset types managed

Loomis Sayles Funds' tag line -- "Listening Harder, Delivering
More" -- and statements that and examples of how Loomis Sayles Funds listens to
its clients and works hard to deliver results that exceed their expectations.

References may be included in Loomis Sayles Funds' advertising and
promotional literature about 401(k) and retirement plans that offer the Funds.
The information may include, but is not limited to:

<PAGE>