LOOMIS SAYLES FUNDS, 485APOS, 2000-11-30

LOOMIS SAYLES FUNDS
485APOS, 2000-11-30

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 29, 2000
REGISTRATION NOS. 33-39133 AND 811-6241

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 26 /X/
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY AT OF 1940 /X/
AMENDMENT NO. 28 /X/
(CHECK APPROPRIATE BOX OR BOXES)

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

LOOMIS SAYLES FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

ONE FINANCIAL CENTER, BOSTON, MA 02111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 482-2450

NAME AND ADDRESS
OF AGENT FOR SERVICE COPY TO
-------------------- -------
SHEILA M. BARRY, ESQUIRE TRUMAN S. CASNER, ESQUIRE
LOOMIS, SAYLES & COMPANY, L.P. ROPES & GRAY
ONE FINANCIAL CENTER ONE INTERNATIONAL PLACE
BOSTON, MA 02111 BOSTON, MA 02110

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):

/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485

/ / ON , PURSUANT TO PARAGRAPH (B)
--------------------------

/x/ 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)

/ / ON , PURSUANT TO PARAGRPH (A)(1)
--------------------------

/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)

/ / ON , PURSUANT TO PARAGRAPH (A)(2)
--------------------------

IF APPROPRIATE, CHECK THE FOLLOWING BOX:

THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.

----------------------------------
<PAGE>

[LOGO_______________________________________________LOOMIS]SAYLES BOND FUND

LOOMIS SAYLES GLOBAL BOND FUND

LOOMIS SAYLES HIGH YIELD FUND

LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND

LOOMIS SAYLES INVESTMENT GRADE BOND FUND

LOOMIS SAYLES SHORT-TERM BOND FUND

LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND

prospectus . february 1, 2001

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

<TABLE>
<S> <C>
RISK/RETURN SUMMARY 1
General Information 1
Loomis Sayles Bond Fund 2
Loomis Sayles Global Bond Fund 4
Loomis Sayles High Yield Fund 6
Loomis Sayles Intermediate Maturity Bond Fund 9
Loomis Sayles Investment Grade Bond Fund 11
Loomis Sayles Short-Term Bond Fund 13
Loomis Sayles U.S. Government Securities Fund 15

SUMMARY OF PRINCIPAL RISKS 17

EXPENSES OF THE FUNDS 21

MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS 23

MANAGEMENT 33
Investment Adviser 33
Portfolio Managers 33
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 40
Tax Consequences 40

FINANCIAL HIGHLIGHTS 41

APPENDIX A 52
</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. 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 (if
applicable), 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.

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.

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

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
1 Inception
Year 5 Years (5/16/91)
-----------------------------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES BOND FUND
Institutional Class % % %
Retail Class % % %
Admin Class % % %
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX % % %/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, 2000 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, 2000.

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.

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

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years (5/10/91)
----------------------------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES GLOBAL BOND FUND
Institutional Class % % %
Retail Class % % %
SALOMAN BROTHERS WORLD GOVERNMENT BOND INDEX % % %/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, 2000 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, 2000.

5
<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.

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 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, such as the
Loomis Sayles Investment Grade Bond Fund.

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

[CHART]

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

7
<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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year (9/11/96)
-------------------------------------------------------
<S> <C> <C>
LOOMIS SAYLES HIGH YIELD FUND
Institutional Class % %
MERRILL LYNCH HIGH YIELD MASTER INDEX % %/1/
</TABLE>

The Fund's performance through December 31, 2000 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, 2000.
<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 invests primarily 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 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

9
<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.

The Fund's returns will vary. For example, during the period shown in the bar
chart, the Fund's best quarter was up % (second quarter, 199 ), and the Fund's
worst quarter was down % (third quarter, 199 ).

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Since
Inception
1 Year (12/31/96)
-------------------------------------------------------------------------------
<S> <C> <C>
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
Institutional Class % %
LEHMAN BROTHERS GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX % %
</TABLE>

The Fund's performance through December 31, 2000 benefited from Loomis Sayles'
agreement to limit the Fund's expenses.
<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).

11
<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.

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

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
<TABLE>
------------------------------------------------------------------
<CAPTION>
Since
Inception
1 Year (12/31/96)
------------------------------------------------------------------
<S> <C> <C>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Institutional Class % %
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX % %
</TABLE>

The Fund's performance through December 31, 2000 benefited from Loomis Sayles'
agreement to limit the Fund's expenses.
<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.

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.

PRINCIPAL RISKS Among the principal risks of investing in the Fund are the
following:
. interest rate risk (the risk that the value of the Fund's investments will
fall if interest rates rise);
. credit risk (the risk that companies in which the Fund invests, or with
which it does business, will fail financially, and be unwilling or unable to
meet their obligations to the Fund);
. market risk (the risk that the value of the Fund's investments will fall as
a result of movements in financial markets generally); and

13
<PAGE>

. management risk (the risk that Loomis Sayles' investment techniques will be
unsuccessful and may cause the Fund to incur losses).

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.

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

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years (8/3/92)
----------------------------------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES SHORT-TERM BOND FUND
Institutional Class % % %
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND
INDEX % % %/1/
</TABLE>

The Fund's performance through December 31, 2000 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, 2000.
<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.

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

The Fund's returns will vary. For example, during the period shown in the bar
chart, the Fund's best quarter was up % ( quarter, 199 ), and the Fund's
worst quarter was down % ( quarter, 199 ).

15
<PAGE>

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years (5/21/91)
-----------------------------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND
Institutional Class % % %
LEHMAN BROTHERS GOVERNMENT BOND INDEX % % %/1/
</TABLE>

The Fund's performance through December 31, 2000 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, 2000.
<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 such as the Loomis Sayles High Yield Fund.

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. Each Fund
may invest in mortgage-related securities. Except for 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.

17
<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.

Since the Loomis Sayles High Yield 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. default), the Fund may be subject to greater credit risk.

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.
<PAGE>

Each of the Funds, except 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.

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 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.

19
<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.

<PAGE>

EXPENSES OF THE FUNDS

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

Except for the Loomis Sayles High Yield Fund, none of the Funds imposes a sales
charge, a redemption fee, or an exchange fee.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

The following redemption fee applies to the Loomis Sayles High Yield Fund.

<TABLE>
<S> <C>
Redemption Fee Imposed on Shares
of the Fund Redeemed or
Exchanged within One Year of
Fund Purchase
------------------------------------------------------------------------------
Loomis Sayles High Yield Fund 2.00%
</TABLE>

The redemption fee described in the above table applies only to shares of the
Loomis Sayles High Yield 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 or exchange.

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

<TABLE>
<CAPTION>
Total
Annual Fee
Fund Waiver/
Loomis Sayles Management Distribution Other Operating Reimburse- Net
Fund/Class Fees (12b-1) Fees Expenses Expenses ment** Expenses**
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bond Fund
Institutional Class .60% none none %
Retail Class .60% .25% %
Admin Class .60% .25% *** %

Global Bond Fund
Institutional Class .60% none % % %
Retail Class .60% .25% % % %

High Yield Fund
Institutional Class .60% none -- -- -- --

Intermediate Maturity
Bond Fund
Institutional Class .40% none % % %

Investment Grade
Bond Fund
Institutional Class .40% none % %

Short-Term Bond
Fund*
Institutional Class .25% none % % %

U.S. Government
Securities Fund
Institutional Class .30% none % % %
</TABLE>
----------------

* Expense information for the Short-Term Bond Fund has been restated to
reflect current fees.

21
<PAGE>

** Reflects Loomis Sayles' contractual obligation to limit the Funds'
expenses through February 1, 2002. Institutional Class shares of the Bond
Fund are currently unaffected by this expense limitation.

*** Other expenses include and administrative fee of .25% for Admin Class
shares.

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.

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
Retail Class
Admin Class
-----------------------------------------------------------------------------
Loomis Sayles Global Bond Fund
Institutional Class
Retail Class
-----------------------------------------------------------------------------
Loomis Sayles High Yield Fund
Institutional Class (with redemption)
Institutional Class (without redemption)
-----------------------------------------------------------------------------
Loomis Sayles Intermediate Maturity Bond
Fund
Institutional Class
-----------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund
Institutional Class
-----------------------------------------------------------------------------
Loomis Sayles Short-Term Bond Fund
Institutional Class
-----------------------------------------------------------------------------
Loomis Sayles U.S. Government Securities
Fund
Institutional Class
-----------------------------------------------------------------------------
</TABLE>

* 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.
<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 the Loomis Sayles Investment Grade Bond Fund's
investment objective, and any investment policies that are identified as
"fundamental," the investment objectives, policies and strategies of a Fund may
be changed without a vote of its 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 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.

23
<PAGE>

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. A
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, 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. 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.
<PAGE>

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 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

25
<PAGE>

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 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.
<PAGE>

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

27
<PAGE>

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

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.

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

FOREIGN SECURITIES

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.

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

29
<PAGE>

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

A Fund may enter into swap transactions on one or more particular securities,
indices, currencies, or interest rates to gain market exposure at reduced
transaction costs, to preserve a return or spread on a particular investment or
portion of its portfolio, to protect against currency fluctuations, to manage
duration, and/or to protect against any increase in the price of securities the
Fund anticipates purchasing at a later date. A swap transaction involves an
agreement (typically with a bank or a brokerage firm as counter-party) to
exchange two streams of payments (for example, an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal). 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 counter party enter as principals, the Fund may
experience a loss or delay in recovering assets if the counterparty defaults on
its obligations.

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.

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 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.

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.

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.

31
<PAGE>

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.
<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 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 High Yield Fund .60%
--------------------------------------------------------------------
Loomis Sayles Intermediate Maturity Bond Fund .40%
--------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund .40%
--------------------------------------------------------------------
Loomis Sayles Short-Term Bond Fund .25%*
--------------------------------------------------------------------
Loomis Sayles U.S. Government Securities Fund .30%
</TABLE>

* From October 27, 1998 through December 31, 2000,
Loomis Sayles waived the management fee for the
Loomis Sayles Short-Term Bond Fund.

Certain expenses incurred by each Fund, except the Loomis Sayles Bond Fund
(Institutional Class) would have been higher if not for Loomis Sayles'
contractual obligation to limit the Funds' expenses through February 1, 2002.

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.

33
<PAGE>

LOOMIS SAYLES GLOBAL BOND FUND Kenneth Buntrock and David Rolley, Vice
Presidents of Loomis Sayles Funds and of Loomis Sayles, have served as
portfolio managers of the Fund since September 2000.

LOOMIS SAYLES HIGH YIELD FUND Daniel J. Fuss and Kathleen C. Gaffney have
served as portfolio managers of the Fund since its inception in 1996.

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 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.

DISTRIBUTION PLANS AND ADMINISTRATIVE AND OTHER FEES

For the Retail and Admin Classes of the Funds, the Funds have adopted
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 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.
<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 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.

35
<PAGE>

. 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). Your broker may charge you a fee for effecting such transactions.

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, you will not be permitted to redeem that
investment until it has cleared or 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.
<PAGE>

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. In particular, a Fund will ordinarily reject
any purchase order that appears to be part of a pattern of transactions
intended to take advantage of short-term swings in the market.

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.

The Loomis Sayles High Yield Fund is designed primarily for use by investment
professionals, including but not limited to investment advisers and broker-
dealers. Accordingly, purchases of Loomis Sayles High Yield Fund Shares are
subject to approval by Loomis Sayles.

The minimum initial investment for each Fund generally is $250,000 for
Institutional Class shares (except for the Loomis Sayles Bond Fund and Loomis
Sayles High Yield Fund) and $2,500 for Retail Class shares.

The minimum initial investment for Institutional Class shares of the Loomis
Sayles Bond Fund is $25,000. The minimum initial investment for the Loomis
Sayles High Yield Fund is $1,000,000. 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. Because large redemptions are
likely to require liquidation by the Fund of portfolio holdings, payment for
large redemptions may be delayed for up to seven days to provide for orderly
liquidation of such holdings. 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.

37
<PAGE>

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.

. 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 in writing. 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.
<PAGE>

. 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.

Please remember that a 2.00% redemption fee applies to shares of the Loomis
Sayles High Yield 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 or exchange.

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.

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.

39
<PAGE>

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 Declares and pays
dividends quarterly
Loomis Sayles High Yield Fund
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 Short-Term Bond Fund Declares dividends daily
and pays dividends monthly
---------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund Declares and pays
dividends monthly
---------------------------------------------------------------------------
</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.

. Have checks sent to the address of record for the amount of the distributions
or have the distributions transferred through Automated Clearing House
("ACH") to a bank of your choice.

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 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 (taxable at a maximum rate of 20%).
Distributions from the Loomis
<PAGE>

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, including possible foreign, state and local
taxes.

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 . The report of 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.

41
<PAGE>

LOOMIS SAYLES BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 12.30 $ 12.83 $ 12.38 $ 12.29
--- ---------- ---------- ---------- --------
Income from investment
operations--
Net investment income
(loss) 0.98 0.69 0.86 0.86
Net realized and
unrealized gains
(losses) on
investments (0.06) (0.78) 0.67 0.35
--- ---------- ---------- ---------- --------
Total from investment
operations 0.92 (0.09) 1.53 1.21
--- ---------- ---------- ---------- --------
Less distributions--
Dividends from net
investment income (1.00) (0.44) (0.86) (0.86)
Distributions in excess
of net investment
income 0.00 0.00 0.00 0.00
Distributions from net
realized capital gains (0.52) 0.00 (0.22) (0.26)
--- ---------- ---------- ---------- --------
Total distributions (1.52) (0.44) (1.08) (1.12)
--- ---------- ---------- ---------- --------
Net asset value, end of
period $ 11.70 $ 12.30 $ 12.83 $ 12.38
=== ========== ========== ========== ========
Total return (%)** 7.6 (0.9)+ 12.7 10.3
Net assets, end of
period (000) $1,541,834 $1,455,312 $1,261,910 $541,244
Ratio of operating
expenses to average net
assets (%)*** 0.75 0.75++ 0.75 0.75
Ratio of net investment
income (loss) to
average net assets (%) 8.15 7.34++ 7.36 7.93
Portfolio turnover rate
(%) 33 24+ 41 42
Without giving effect to
the expense
limitations:
Ratio of expenses to
average net assets
would have been (%) 0.75 0.76++ 0.77 0.75
Net investment income
(loss) per share would
have been ($) 0.98 0.69 0.85 0.86
</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.
<PAGE>

LOOMIS SAYLES BOND FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Sept. 30, Sept. 30, Sept. 30, Jan. 2** to
2000 1999 1998* Dec. 31, 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

* 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.

43
<PAGE>

LOOMIS SAYLES BOND FUND (ADMIN CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------
Sept. 30, Sept. 30, Jan. 2* to
2000 1999 Sept. 30, 1998
------------------------------------------------------------------------------
<S> <C> <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>

* 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.
<PAGE>

LOOMIS SAYLES GLOBAL BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.93 $ 11.83 $ 12.35 $ 11.39
--- ------- ------- ------- -------
Income from investment
operations--
Net investment income (loss) 0.79 0.53 0.71 0.44
Net realized and unrealized
gains (losses) on
investments 0.87 (0.43) (0.42) 1.27
--- ------- ------- ------- -------
Total from investment
operations 1.66 0.10 0.29 1.71
--- ------- ------- ------- -------
Less distributions--
Dividends from net
investment income (0.70) 0.00 (0.69) (0.75)
Distributions in excess of
net investment income 0.00 0.00 (0.12) 0.00
Distributions from capital 0.00 0.00 0.00 0.00
Distributions from net
realized capital gains (0.29) 0.00 0.00 0.00
--- ------- ------- ------- -------
Total distributions (0.99) 0.00 (0.81) (0.75)
--- ------- ------- ------- -------
Net asset value, end of
period $ 12.60 $ 11.93 $ 11.83 $ 12.35
=== ======= ======= ======= =======
Total return (%)** 14.2 0.9+ 2.3 15.0
Net assets, end of period
(000) $34,154 $29,860 $28,401 $26,513
Ratio of operating expenses
to average net assets (%)*** 0.90 0.90++ 0.90 1.50
Ratio of net investment
income (loss) to average net
assets (%) 6.32 6.00 5.88 6.37
Portfolio turnover rate (%) 42 28+ 75 131
Without giving effect to the
expense limitations:
Ratio of expenses to average
net assets would have been
(%) 1.10 1.18++ 1.22 1.77
Net investment income (loss)
per share would have been
($) 0.76 0.51 0.67 0.42
</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.

45
<PAGE>

LOOMIS SAYLES GLOBAL BOND FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------
Sept. 30, Sept. 30, Sept. 30, Jan. 2** to
2000 1999 1998* Dec. 31, 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 HIGH YIELD FUND

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Sept. 11** to
2000 1999 1998* 1997 Dec. 31, 1996
--------------------------------------------------------------------------------
<S> <C> <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>

* 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.

47
<PAGE>

LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Sept. 30, Sept. 30, Sept. 30, Jan. 2** to
2000 1999 1998* Sept. 30, 1997**
--------------------------------------------------------------------------------
<S> <C> <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>

* 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.
<PAGE>

LOOMIS SAYLES INVESTMENT GRADE BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Sept. 30, Sept. 30, Sept. 30, Jan. 2** to
2000 1999 1998* Dec. 31, 1997
-------------------------------------------------------------------------------
<S> <C> <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>

* 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.

49
<PAGE>

LOOMIS SAYLES SHORT-TERM BOND FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.96 $ 9.75 $ 9.70 $ 9.81
--- ------- ------- ------- -------
Income from investment
operations--
Net investment income (loss) 0.62 0.44 0.61 0.55
Net realized and unrealized
gains (losses) on investments (0.45) 0.21 0.06 (0.11)
--- ------- ------- ------- -------
Total from investment
operations 0.17 0.65 0.67 0.44
--- ------- ------- ------- -------
Less distributions--
Dividends from net investment
income (0.62) (0.44) (0.62) (0.55)
Net asset value, end of period $ 9.51 $ 9.96 $ 9.75 $ 9.70
=== ======= ======= ======= =======
Total return (%)** 1.8 6.8+ 7.1 4.7
Net assets, end of period
(000) $26,849 $27,288 $18,792 $18,229
Ratio of operating expenses to
average net assets (%)*** 0.27 0.50++ 0.50 1.00
Ratio of net investment income
(loss) to average net assets
(%) 6.38 5.94++ 6.34 5.69
Portfolio turnover rate (%) 81 47+ 91 120
Without giving effect to the
expense limitations:
Ratio of expenses to average
net assets would have
been (%) 0.87 0.83++ 1.19 1.17
Net investment income (loss)
per share would have
been ($) 0.56 0.41 0.55 0.53
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.41 $ 10.70 $ 10.08 $ 10.64
--- ------- ------- ------- -------
Income from investment
operations--
Net investment income (loss) 0.65 0.43 0.63 0.68
Net realized and unrealized
gains (losses) on
investments (1.03) 0.58 0.61 (0.57)
--- ------- ------- ------- -------
Total from investment
operations (0.38) 1.01 1.24 0.11
--- ------- ------- ------- -------
Less distributions--
Dividends from net investment
income (0.65) (0.30) (0.62) (0.67)
--- ------- ------- ------- -------
Net asset value, end of period $ 10.38 $ 11.41 $ 10.70 $ 10.08
=== ======= ======= ======= =======
Total return (%)** (3.5) 9.6+ 12.7 1.3
Net assets, end of period
(000) $16,141 $29,246 $17,668 $14,192
Ratio of operating expenses to
average net assets (%)*** 0.52 0.60++ 0.60 1.00
Ratio of net investment income
(loss) to average net assets
(%) 5.75 5.61++ 6.29 6.23
Portfolio turnover rate (%) 75 84+ 156 137
Without giving effect to the
expense limitations:
Ratio of expenses to average
net assets would have been
(%) 1.03 0.97++ 1.23 1.19
Net investment income (loss)
per share would have been
($) 0.59 0.40 0.57 0.66
</TABLE>

+ Periods less than one year are not annualized.
++ Annualized for periods less than one year.

51
<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
<PAGE>

a situation where a bankruptcy petition has been filed or similar action taken,
but payments on this obligation are being continued. A "C" also will be
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.

53
<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.

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.
<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

55
<PAGE>

[LOGO] LOOMIS SAYLES AGGRESSIVE GROWTH FUND

LOOMIS SAYLES EMERGING MARKETS FUND

LOOMIS SAYLES GLOBAL TECHNOLOGY FUND

LOOMIS SAYLES GROWTH FUND

LOOMIS SAYLES INTERNATIONAL EQUITY FUND

LOOMIS SAYLES RESEARCH FUND

LOOMIS SAYLES SMALL CAP GROWTH FUND

LOOMIS SAYLES SMALL CAP VALUE FUND

LOOMIS SAYLES VALUE FUND

LOOMIS SAYLES WORLDWIDE FUND

PROSPECTUS . FEBRUARY 1, 2001

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

TABLE OF CONTENTS

<TABLE>
<S> <C>
RISK/RETURN SUMMARY
General Information 1
Loomis Sayles Aggressive Growth Fund 2
Loomis Sayles Emerging Markets Fund 4
Loomis Sayles Global Technology Fund 6
Loomis Sayles Growth Fund 7
Loomis Sayles International Equity Fund 9
Loomis Sayles Research Fund 11
Loomis Sayles Small Cap Growth Fund 12
Loomis Sayles Small Cap Value Fund 14
Loomis Sayles Value Fund 16
Loomis Sayles Worldwide Fund 18

SUMMARY OF PRINCIPAL RISKS 20

EXPENSES OF THE FUNDS 23

MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS 26

MANAGEMENT 34
Investment Adviser 34
Portfolio Managers 34
Loomis Sayles' Past Performance as it Relates to the Research Fund 36
Distribution Plans and Administrative and Other Fees 37

GENERAL INFORMATION 39
Pricing 39
How to Purchase Shares 39
How to Redeem Shares 41
How to Exchange Shares 43
Dividends and Distributions 43
Tax Consequences 44

FINANCIAL HIGHLIGHTS 44
</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.

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.

Where applicable, 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 (if
applicable), 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.

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.

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.

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.

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).
<PAGE>

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.

(CHART)

The Fund's returns will vary./1/ For example, during the period shown in the
bar chart, the Fund's best quarter was up % ( quarter, ), and the Fund's
worst quarter was down % ( quarter, ).

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year (12/31/96)
-------------------------------------------------------
<S> <C> <C>
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
Institutional Class
Retail Class
Admin Class
RUSSELL MID-CAP GROWTH INDEX
</TABLE>

For periods before the inception of Admin Class shares (August 1, 2000),
performance shown for Admin Class shares is based on the performance of the
Fund's Institutional Class shares, adjusted to reflect the higher fees paid by
Admin Class shares. The Fund's performance through December 31, 2000 benefited
from Loomis Sayles' agreement to limit the Fund's expenses.

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

/1/During the periods shown, a significant portion of the Fund's return was
attributable to its investments in initial public offerings. No assurance can
be given that the Fund will continue to be able to invest in intitial public
offerings to the same extent, or that, if made, such investments will have the
same effect on the Fund's performance.

3
<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.

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

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);
. market risk (the risk that the value of the Fund's investments will fall as
a result of movements in financial markets generally);
. 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).
<PAGE>

BAR CHART The following bar chart shows the performance of the Fund's
Institutional Class shares.

(CHART)

The Fund's returns will vary. For example, during the period shown in the bar
chart, the Fund's best quarter was up % ( quarter, 2000), and the Fund's
worst quarter was . % ( quarter, 2000 ).

PERFORMANCE TABLE The following table compares the performance of the Fund to
the Morgan Stanley Capital International Emerging Market Index, an unmanaged
regional index comprising of 25 emerging market 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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year (11/9/99)
----------------------------------------------------------------------------
<S> <C> <C>
LOOMIS SAYLES EMERGING MARKETS FUND
Institutional Class
Retail Class
MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKET INDEX /1/
</TABLE>

For periods before the inception of Retail Class shares (May 24, 2000),
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, 2000 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, 2000.

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.

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.
<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 equity securities, including common stocks, convertible securities,
and warrants. 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.

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).

7
<PAGE>

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

(CHART)

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

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years (5/16/91)
-----------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES GROWTH FUND
Institutional Class
Retail Class
Admin Class
STANDARD & POOR'S 500 INDEX /1/
</TABLE>

For periods before the inception of Retail Class shares (December 31, 1996) and
Admin Class shares (August 1, 2000), performance shown for Retail and Admin
Class shares is based on the performance of the Fund's Institutional Class
shares, adjusted to reflect the higher fees paid by Retail and Admin Class
shares. The Fund's performance through December 31, 2000 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, 2000.
<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, investment companies.

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);
. market risk (the risk that the value of the Fund's investments will fall as
a result of movements in financial markets generally);
. 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).

9
<PAGE>

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

(CHART)

The Fund's returns will vary. For example, during the period shown in the bar
chart, the Fund's best quarter was up (fourth quarter, ), and the Fund's
worst quarter was down ( quarter, ).

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years (5/10/91)
-----------------------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES INTERNATIONAL EQUITY FUND
Institutional Class
Retail Class
Admin Class
MSCI EAFE INDEX /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, 2000.
<PAGE>

LOOMIS SAYLES RESEARCH FUND

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

Loomis Sayles industry research analysts, who are grouped in teams representing
the sectors of the S&P 500 Index, meet by team to decide which securities to
buy and sell. The teams meet regularly to compare fundamental trends across the
various industries in the sectors and use this information along with common
valuation procedures to determine which stocks are best positioned to
outperform the industry or sector. Sell decisions are made when there is a
deterioration in fundamentals, a stock reaches a target price, or when a more
attractive opportunity is found. The Fund is "style neutral" --Loomis Sayles
uses a research-driven, company-by-company approach to identify stocks for the
Fund, and invests without regard to the "growth" or "value" aspects of the
Fund's overall portfolio. The Fund allocates its assets across sectors in
weightings that are relatively similar to the S&P 500 Index.

. 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).

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

11
<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 other equity securities.

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.

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

(CHART)

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

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.

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

13
<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 other equity securities.

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.

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, investment 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);
. 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.

(CHART)

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

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.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
1 Inception
Year 5 Years (5/13/91)
----------------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES SMALL CAP VALUE FUND
Institutional Class
Retail Class
Admin Class
RUSSELL 2000 INDEX /1/
</TABLE>

For periods before the inception of Retail Class shares (December 31, 1996) and
Admin Class shares (January 2, 1998), performance shown for Retail and Admin
Class shares is based on the performance of the Fund's Institutional Class
shares, adjusted to reflect the higher fees paid by Retail and Admin Class
shares. The Fund's performance through December 31, 2000 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, 2000.

15
<PAGE>

LOOMIS SAYLES 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 equity securities, including common stocks, convertible securities,
and warrants. The Fund invests primarily in medium-sized and large-sized
companies, although it may invest in companies of any size.

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. Until , 2000 the Fund's name was
the Loomis Sayles Core Value Fund.

(CHART)

The Fund's returns will vary. For example, during the period shown in the bar
chart, the Fund's best quarter was up % ( quarter, 199 ), and the Fund's
worst quarter was down % ( quarter, ).

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years (5/13/91)
-----------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES VALUE FUND
Institutional Class
STANDARD & POOR'S 500 INDEX /1/
</TABLE>

For periods before the inception of Retail Class shares (December 31, 1996),
performance shown for the 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, 2000
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, 2000.

17
<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.

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);
. market risk (the risk that the value of the Fund's investments will fall as
a result of movements in financial markets generally);
. 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>

. 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.

[CHART]

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

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 Year (5/1/96)
----------------------------------------------
<S> <C> <C>
LOOMIS SAYLES WORLDWIDE FUND
Institutional Class
STANDARD & POOR'S 500 INDEX /1/
</TABLE>

The Fund's performance through December 31, 2000 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, 2000.

19
<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 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. Furthermore for Funds that invest in fixed income
securities, market risk tends to be greater when a Fund invests in fixed income
securities with longer maturities.

FOREIGN RISK

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.

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

21
<PAGE>

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.
<PAGE>

EXPENSES OF THE FUNDS

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

Except for the Loomis Sayles Emerging Markets Fund, none of the Funds imposes a
sales charge, a redemption fee, or an exchange fee.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

The following redemption fee applies to the Loomis Sayles Emerging Markets
Fund.

<TABLE>
<CAPTION>
Redemption Fee Imposed on
Shares
of the Fund Redeemed or
exchanged within One Year
Fund 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
Loomis Sayles Emerging Markets Fund that are redeemed or exchange 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 or exchange.

23
<PAGE>

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

<TABLE>
<CAPTION>
Total
Annual Fee
Fund Waiver/
Management Distribution Other 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
Retail Class .75% .25%
Admin Class .75% .25%
-------------------------------------------------------------------------------------------
Value Fund
Institutional Class .50% none
-------------------------------------------------------------------------------------------
Emerging Markets Fund
Institutional Class 1.25% none
Retail Class 1.25% .25%
-------------------------------------------------------------------------------------------
Global Technology Fund*
Institutional Class 1.00% none
Retail Class 1.00% .25%
-------------------------------------------------------------------------------------------
Growth Fund
Institutional Class .50% none
Retail Class .50% .25%
Admin Class .50% .25%
-------------------------------------------------------------------------------------------
International Equity
Fund
Institutional Class .75% none
Retail Class .75% .25%
Admin Class .75% .25%
-------------------------------------------------------------------------------------------
Research Fund*
Institutional Class .75% none .20%
-------------------------------------------------------------------------------------------
Small Cap Growth Fund
Institutional Class .75% none
Retail Class .75% .25%
Admin Class .75% .25%
-------------------------------------------------------------------------------------------
Small Cap Value Fund
Institutional Class .75% none none
Retail Class .75% .25% none
Admin Class .75% .25%
-------------------------------------------------------------------------------------------
Worldwide Fund
Institutional Class .75% none
-------------------------------------------------------------------------------------------
</TABLE>

* Other expenses for the Global Technology Fund,
and the Research Fund are based on estimated
amounts for the current fiscal year.

** Reflects Loomis Sayles' contractual obligation
to limit the Funds' expenses through February 1,
2002. Institutional Class shares of the 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.
<PAGE>

EXAMPLE

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 or, in the case of the Loomis Sayles Emerging Markets Fund, that
you 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>
3 5 10
Fund/Class 1 Year* Years* Years* Years*
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loomis Sayles Aggressive Growth Fund
Institutional Class $ $ $ $
Retail Class $ $ $ $
Admin Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Value Fund
Institutional Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Emerging Markets Fund
Institutional Class (with redemption) $ $ $ $
Institutional Class (without redemption) $ $ $ $
Retail Class (with redemption) $ $ $ $
Retail Class (without redemption) $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Global Technology Fund
Institutional Class $ $ $ $
Retail Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Growth Fund
Institutional Class $ $ $ $
Retail Class $ $ $ $
Admin Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles International Equity Fund
Institutional Class $ $ $ $
Retail Class $ $ $ $
Admin Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Research Fund
Institutional Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Small Cap Growth Fund
Institutional Class $ $ $ $
Retail Class $ $ $ $
Admin Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Small Cap Value Fund
Institutional Class $ $ $ $
Retail Class $ $ $ $
Admin Class $ $ $ $
----------------------------------------------------------------------
Loomis Sayles Worldwide Fund
Institutional Class $ $ $ $
----------------------------------------------------------------------
</TABLE>

* Expenses shown for each class, except for the
Institutional Class of the Loomis Sayles 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.

25
<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 any investment policies that are identified as
"fundamental," the investment objectives and the investment policies and
strategies of each Fund may be changed without a vote of the Fund's
shareholders.

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'
<PAGE>

assessment of 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 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

27
<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.

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

29
<PAGE>

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.

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.

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 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

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. 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

31
<PAGE>

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.

INVESTMENT COMPANIES

Investment companies, including companies such as iShares, "SPIDERS" and
"WEBS," are essentially pools of securities. Since the value of an investment
company is based on the value of the individual securities it holds, the value
of a Fund's investment in an investment company will fall if the value of the
investment company's underlying securities declines. As a shareholder in an
investment company, a 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.
<PAGE>

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.

SWAP TRANSACTIONS

A Fund may enter into a interest rate or currency swap transaction primarily
costs, to preserve a return or spread on a particular investment or portion of
its portfolio, to protect against currency fluctuations, to manage duration,
and/or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. A swap transaction involves an
agreement (typically with a bank or a brokerage firm as counterparty) to
exchange two streams of payments (for example, an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal). 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.

33
<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 Value Fund .50%
-------------------------------------------------------
Loomis Sayles Emerging Markets Fund 1.25%
-------------------------------------------------------
Loomis Sayles Global Technology Fund 1.00%
-------------------------------------------------------
Loomis Sayles Growth Fund .50%
-------------------------------------------------------
Loomis Sayles International Equity Fund .75%
-------------------------------------------------------
Loomis Sayles Research 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
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, 2002.

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
<PAGE>

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 VALUE FUND Jeffrey W. Wardlow, Vice President of Loomis Sayles
Funds and of Loomis Sayles, has served as portfolio manager of the Fund since
its inception in 1991. Tricia Mills and Warren Koontz, Vice Presidents of
Loomis Sayles Funds and of Loomis Sayles, have served as portfolio managers of
the Fund since 2000.

LOOMIS SAYLES EMERGING MARKETS FUND Alex Muromcew, John Tribolet, and Eswar
Menon, Vice Presidents of Loomis Sayles Funds and of Loomis Sayles, 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.

LOOMIS SAYLES GLOBAL TECHNOLOGY FUND Eswar Menon leads a team of portfolio
managers responsible for the international segment of the Fund. Christopher R.
Ely leads a team of portfolio managers responsible for the domestic segment of
the Fund.

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

LOOMIS SAYLES INTERNATIONAL EQUITY FUND Alex Muromcew, John Tribolet, and Eswar
Menon have served as portfolio managers of the Fund since 1999.

LOOMIS SAYLES RESEARCH FUND Lauriann Kloppenburg, Vice President, Loomis Sayles
Funds and Vice President and Director of Equity Research of Loomis Sayles leads
a team of Loomis Sayles research analysts in managing the Fund.

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 Daniel G. Thelen, Vice
Presidents of Loomis Sayles Funds and of Loomis Sayles, have served as
portfolio managers of the Fund since 2000. Mr. Thelen joined Loomis Sayles in
1996. From 1990 to 1996, Mr. Thelen was a manager at PricewaterhouseCoopers
LLP.

35
<PAGE>

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. David Rolley, 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 2000. 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 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.

LOOMIS SAYLES' PAST PERFORMANCE AS IT RELATES TO THE RESEARCH FUND

Prior performance of the Loomis Sayles Private Account (the "Private Account")
represents the total returns of a segment of the Loomis Sayles Pension Plan
managed by Loomis Sayles. The investment objective, policies and strategies of
the Loomis Sayles Research Fund are substantially similar to those of the
Private Account. The Private Account is not subject to expenses, and the
performance information shown below for the Private Account is adjusted to give
effect to the projected expenses for the Fund's Institutional Class for the
2001 fiscal year.

This information is provided merely to illustrate the past performance of the
Private Account measured against a specified market index and does not
represent the performance of the Fund, which does not yet have a performance
record of its own for a full calendar year. Investors should not consider this
performance data as an indication of the future performance of the Fund or
Loomis Sayles. The Private Account is not subject to frequent inflows and
outflows of assets as are most mutual funds, including the Fund. Such inflows
and outflows of assets make it more difficult to manage the Fund and thus may
adversely affect its performance relative to the Private Account. In addition,
the Private Account is not subject to the diversification requirements,
specific tax restrictions and investment limitations imposed on the Fund by the
Investment Company Act of 1940, as amended, and Subchapter M of the Internal
Revenue Code of 1986, as amended. Consequently, the performance results for the
Private Account could have been lower than what is shown had it been regulated
as a registered investment company under federal securities laws.
<PAGE>

The Private Account's returns (and the Loomis Sayles Research Fund's returns)
will vary. For example, during the period shown in the bar chart, the Private
Account's best quarter was up % ( quarter ), and the Private Account's
worst quarter was down % ( quarter, ).

PERFORMANCE TABLE The following table compares the performance of the Private
Account 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 Private Account's
performance to a broad-based market index.

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception/1/
----------------------------------------------------------
<S> <C> <C> <C>
LOOMIS SAYLES PRIVATE ACCOUNT N/A N/A N/A
LOOMIS SAYLES RESEARCH FUND N/A N/A N/A
S&P 500 INDEX
</TABLE>

/1/The Loomis Sayles Private Account's inception was . The Loomis Sayles
Research Fund inception was August 1, 2000.

DISTRIBUTION PLANS AND ADMINISTRATIVE AND OTHER FEES

For the Retail Class and Admin Class shares of the Funds, the Funds have
adopted 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 Aggressive Growth Fund, the Loomis
Sayles Growth Fund, the Loomis Sayles International Equity Fund, the Loomis
Sayles Small Cap Growth Funds' and 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 these Funds may pay an administrative fee at an
annual rate of up to .25% of the average daily net assets attributable to Admin

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

37
<PAGE>

Class shares to securities dealers or financial intermediaries for providing
personal service and account maintenance for their customers who hold these
shares.

GENERAL INFORMATION

PRICING

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

39
<PAGE>

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.

The minimum initial investment for each Fund generally is $250,000 for
Institutional Class shares and $2,500 for Retail Class shares. Because Admin
class shares are purchased exclusively through intermediaries, there is no
investment minimum. 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.

41
<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 in writing. 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.

. 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 LOOMIS
SAYLES EMERGING MARKETS FUND THAT ARE REDEEMED OR EXCHANGED
<PAGE>

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 OR EXCHANGE.

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.

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 A 2.00% REDEMPTION FEE APPLIES TO SHARES OF THE LOOMIS
SAYLES EMERGING MARKETS 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 OR EXCHANGE.

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.

43
<PAGE>

. Have checks sent to the address of record for the amount of the
distributions or have the distributions transferred through Automated
Clearing House ("ACH") to a bank of your choice.

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

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 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

This information has been audited by . The report of
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 AGGRESSIVE GROWTH FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------
Jan. 2** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31,
2000 1999 1998* 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

***** 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.

45
<PAGE>

LOOMIS SAYLES AGGRESSIVE GROWTH FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------
Jan. 2** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31,
2000 1999 1998* 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

* 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.
<PAGE>

LOOMIS SAYLES AGGRESSIVE GROWTH FUND (ADMIN CLASS)

<TABLE>
<CAPTION>
Aug. 1 to
Sept. 30,
2000
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period
---
Income from investment operations--
Net investment income (loss)
Net realized and unrealized gains (losses) on investments
---
Total from investment operations
---
Less distributions--
Distributions in excess of net investment income
Distributions from net realized capital gains
---
Total distributions
---
Net asset value, end of period
===
Total return (%)****
Net assets, end of period (000)
Ratio of operating expenses to average net assets (%)*****
Ratio of net investment income (loss) to average net assets
(%)
Portfolio turnover rate (%)
Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been (%)
Net investment income (loss) per share would have been ($)
</TABLE>

* Commencement of operations on August 1, 2000.

** 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.

<PAGE>

LOOMIS SAYLES EMERGING MARKETS FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Nov. 9, 1999 to
Sept. 30,
2000
------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period
-------
Income from investment operations--
Net investment income (loss)
Net realized and unrealized gains (losses) on investments
-------
Total from investment operations
-------
Less distributions--
Distributions in excess of net investment income
Distributions from net realized capital gains
-------
Total distributions
-------
Net asset value, end of period
=======
Total return (%)***
Net assets, end of period (000)
Ratio of operating expenses to average net assets (%)****
Ratio of net investment income (loss) to average net assets
(%)
Portfolio turnover rate (%)
Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have
been (%)
Net investment income (loss) per share would have been ($)
</TABLE>

* Commencement of operations on November 9, 1999.

** 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.

<PAGE>

LOOMIS SAYLES EMERGING MARKETS FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
May 24 to
Sept. 30,
2000
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period
---
Income from investment operations--
Net investment income (loss)
Net realized and unrealized gains (losses) on investments
---
Total from investment operations
---
Less distributions--
Distributions in excess of net investment income
Distributions from net realized capital gains
---
Total distributions
---
Net asset value, end of period
===
Total return (%)****
Net assets, end of period (000)
Ratio of operating expenses to average net assets (%)*****
Ratio of net investment income (loss) to average net assets
(%)
Portfolio turnover rate (%)
Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been (%)
Net investment income (loss) per share would have been ($)
</TABLE>

* Commencement of operations on May 24, 2000.

** 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.

<PAGE>

LOOMIS SAYLES GROWTH FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.65 $ 12.63 $ 13.44 $ 15.27
--- ------- ------- ------- -------
Income from investment
operations--
Net investment income
(loss) (0.04) (0.03) (0.04) (0.07)
Net realized and
unrealized gains
(losses) on
investments 3.01 (0.95) 3.17 3.08
--- ------- ------- ------- -------
Total from investment
operations 2.97 (0.98) 3.13 3.01
--- ------- ------- ------- -------
Less distributions--
Dividends from net
investment income 0.00 0.00 0.00 0.00
Distributions from net
realized capital gains (3.45) 0.00 (3.94) (4.84)
--- ------- ------- ------- -------
Total distributions (3.45) 0.00 (3.94) (4.84)
--- ------- ------- ------- -------
Net asset value, end of
period $ 11.17 $ 11.65 $ 12.63 $ 13.44
=== ======= ======= ======= =======
Total return (%)** 30.9 (7.8)+ 24.5 19.9
Net assets, end of
period (000) $28,235 $24,663 $32,149 $39,497
Ratio of operating
expenses to average net
assets (%)*** 0.85 0.85++ 0.85 1.10
Ratio of net investment
income (loss) to
average net assets (%) (0.40) (0.32)++ (0.26) (0.47)
Portfolio turnover rate
(%) 164 118+ 116 99
Without giving effect to
the expense
limitations:
Ratio of expenses to
average net assets
would have been (%) 1.18 1.02++ 0.98 1.10
Net investment income
(loss) per share would
have been ($) (0.08) (0.05) (0.05) (0.07)
</TABLE>

LOOMIS SAYLES GROWTH FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Jan. 2** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31,
2000 1999 1998* 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

**** 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 to average net assets would have been higher.
+ Periods less than one year are not annualized.
++ Annualized for periods less than one year.
<PAGE>

LOOMIS SAYLES GROWTH FUND (ADMIN CLASS)

<TABLE>
<CAPTION>
Aug. 1 to
Sept. 30,
2000*
--------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period
---
Income from investment operations--
Net investment income (loss)
Net realized and unrealized gains (losses) on investments
---
Total from investment operations
---
Less distributions--
Dividends from net investment income
Distributions from net realized capital gains
---
Total distributions
---
Net asset value, end of period
===
Total return (%)***
Net assets, end of period (000)
Ratio of operating expenses to average net assets (%)****
Ratio of net investment income (loss) to average net assets (%)
Portfolio turnover rate (%)
Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been (%)
Net investment income (loss) per share would have been ($)
</TABLE>

* Commencement of operations on August 1, 2000.

** Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.

+ Periods less than one year are not annualized.

++ Annualized for periods less than one year.

52
<PAGE>

LOOMIS SAYLES INTERNATIONAL EQUITY FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.74 $ 11.30 $ 13.16 $ 11.65
--- ------- ------- ------- -------
Income from investment
operations--
Net investment income
(loss) 0.07 0.14 0.15** 0.12
Net realized and
unrealized gains
(losses) on
investments 3.31 (0.70) (0.27) 2.01
--- ------- ------- ------- -------
Total from investment
operations 3.38 (0.56) (0.12) 2.13
--- ------- ------- ------- -------
Less distributions--
Dividends from net
investment income (0.13) 0.00 (0.19) (0.09)
Distributions from net
realized capital gains (0.20) 0.00 (1.55) (0.53)
--- ------- ------- ------- -------
Total distributions (0.33) 0.00 (1.74) (0.62)
--- ------- ------- ------- -------
Net asset value, end of
period $ 13.79 $ 10.74 $ 11.30 $ 13.16
=== ======= ======= ======= =======
Total return (%)*** 32.0 (5.0)+ (1.0) 18.3
Net assets, end of
period (000) $79,415 $68,464 $82,188 $90,662
Ratio of operating
expenses to average net
assets (%)**** 1.00 1.00++ 1.00 1.42
Ratio of net investment
income (loss) to
average net assets (%) 0.53 1.49++ 1.12 0.96
Portfolio turnover rate
(%) 207 96+ 119 151
Without giving effect to
the expense
limitations:
Ratio of expenses to
average net assets
would have been (%) 1.22 1.18++ 1.16 1.42
Net investment income
(loss) per share would
have been ($) 0.04 0.12 0.13** 0.12
</TABLE>

* 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.
+ Periods less than one year are not annualized.
++ Annualized for periods less than one year.

53
<PAGE>

LOOMIS SAYLES INTERNATIONAL EQUITY FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Jan. 2** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31,
2000 1999 1998* 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

***** 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 to average net assets would have been higher.
+ Periods less than one year are not annualized.
++ Annualized for periods less than one year.
<PAGE>

LOOMIS SAYLES INTERNATIONAL EQUITY FUND (ADMIN CLASS)

* Commencement of operations on August 1, 2000.

** 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.

+ Periods less than one year are not annualized.

++ Annualized for periods less than one year.

55
<PAGE>

LOOMIS SAYLES SMALL CAP GROWTH FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Jan. 2** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31,
2000 1999 1998* 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

* 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.

56
<PAGE>

LOOMIS SAYLES SMALL CAP GROWTH FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Jan. 2** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31,
2000 1999 1998* 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

LOOMIS SAYLES SMALL CAP GROWTH FUND (ADMIN CLASS)

<TABLE>
<CAPTION>
Fiscal
Year
Ended
-----------------
Aug. 1 to
Sept. 30,
2000
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period
------
Income from investment operations--
Net investment income (loss)
Net realized and unrealized gains (losses) on investments
------
Total from investment operations
------
Less distributions--
Distributions in excess of net investment income
Distributions in excess of net realized capital gains
------
Total distributions
------
Net asset value, end of period
======
Total return (%)****
Net assets, end of period (000)
Ratio of operating expenses to average net assets (%)*****
Ratio of net investment income (loss) to average net assets
(%)
Portfolio turnover rate (%)
Without giving effect to the expense limitations:
Ratio of expenses to average net assets would have been (%)
Net investment income (loss) per share would have been ($)
</TABLE>

* Commencement of operations on August 1, 2000.

** 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.

+ Periods less than one year are not annualized.

++ Annualized for periods less than one year.

58
<PAGE>

LOOMIS SAYLES SMALL CAP VALUE FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 15.60 $ 18.62 $ 17.39 $ 15.33
--- -------- -------- -------- --------
Income from investment
operations--
Net investment income
(loss) 0.16 0.12 0.17 0.11
Net realized and
unrealized gains
(losses) on
investments 1.83 (3.14) 4.26 4.47
--- -------- -------- -------- --------
Total from investment
operations 1.99 (3.02) 4.43 4.58
--- -------- -------- -------- --------
Less distributions--
Dividends from net
investment income (0.12) 0.00 (0.15) (0.11)
Distributions from net
realized capital gains (0.14) 0.00 (3.05) (2.41)
--- -------- -------- -------- --------
Total distributions (0.26) 0.00 (3.20) (2.52)
--- -------- -------- -------- --------
Net asset value, end of
period $ 17.33 $ 15.60 $ 18.62 $ 17.39
=== ======== ======== ======== ========
Total return (%)** 12.8 (16.2)+ 26.0 30.4
Net assets, end of
period (000) $301,496 $296,116 $245,177 $163,625
Ratio of operating
expenses to average net
assets (%)*** 0.90 0.92++ 0.94 1.19
Ratio of net investment
income (loss) to
average net assets (%) 0.87 1.04++ 0.97 0.80
Portfolio turnover rate
(%) 113 78+ 94 73
Without giving effect to
the expense
limitations:
Ratio of expenses to
average net assets
would have been (%) 0.90 0.92++ 0.94 1.19
Net investment income
(loss) per share would
have been ($) 0.16 0.12 0.17 0.11
</TABLE>

59
<PAGE>

LOOMIS SAYLES SMALL CAP VALUE FUND (RETAIL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------
Jan. 2** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31,
2000 1999 1998* 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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>

***** 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>

LOOMIS SAYLES SMALL CAP VALUE FUND (ADMIN CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
Sept. 30, Sept. 30, Jan. 2* to
2000 1999 Sept. 30, 1998
------------------------------------------------------------------------------
<S> <C> <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>

* Commencement of operations on January 2, 1998.
** Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.

61
<PAGE>

LOOMIS SAYLES VALUE FUND (INSTITUTIONAL CLASS)

(FORMERLY LOOMIS SAYLES CORE VALUE FUND)

<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.85 $ 17.64 $ 15.60 $ 14.57
--- ------- ------- ------- -------
Income from investment
operations--
Net investment income
(loss) 0.22 0.18 0.18 0.22
Net realized and
unrealized gains
(losses) on
investments 1.53 (0.97) 4.32 2.83
--- ------- ------- ------- -------
Total from investment
operations 1.75 (0.79) 4.50 3.05
--- ------- ------- ------- -------
Less distributions--
Dividends from net
investment income (0.24) 0.00 (0.19) (0.22)
Distributions from net
realized capital gains (1.82) 0.00 (2.27) (1.80)
--- ------- ------- ------- -------
Total distributions (2.06) 0.00 (2.46) (2.02)
--- ------- ------- ------- -------
Net asset value, end of
period $ 16.54 $ 16.85 $ 17.64 $ 15.60
=== ======= ======= ======= =======
Total return (%)** 10.5 (4.5)+ 29.2 21.2
Net assets, end of
period (000) $66,726 $66,928 $63,303 $43,715
Ratio of operating
expenses to average net
assets (%)*** 0.78 0.79++ 0.84 1.13
Ratio of net investment
income (loss) to
average net assets (%) 1.20 1.36++ 1.12 1.44
Portfolio turnover rate
(%) 59 49+ 64 58
Without giving effect to
the expense
limitations:
Ratio of expenses to
average net assets
would have been (%) 0.78 0.79++ 0.84 1.13
Net investment income
(loss) per share would
have been ($) 0.22 0.18 0.18 0.22
</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.
<PAGE>

LOOMIS SAYLES WORLDWIDE FUND (INSTITUTIONAL CLASS)

<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------
May 1** to
Sept. 30, Sept. 30, Sept. 30, Dec. 31, Dec. 31,
2000 1999 1998* 1997 1996
--------------------------------------------------------------------------------
<S> <C> <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>

* 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.

63
<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK

<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK

65
<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>

LOOMIS SAYLES INVESTMENT GRADE BOND FUND

(CLASS J)

PROSPECTUS . FEBRUARY 1, 2001

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

TABLE OF CONTENTS

<TABLE>
<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 description of the Fund, including some of the additional risks
associated with investing in the Fund, can be found further back in this
Prospectus. 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.

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.

(CHART TO COME)

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

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
<TABLE>
-------------------------------------------------------------------
<CAPTION>
Since
Inception
of the Fund
1 Year (12/31/96)
-------------------------------------------------------------------
<S> <C> <C>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Class J
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
</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, benefited from Loomis
Sayles' agreement to limit the Fund's expenses.

3
<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. 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.

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

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

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 foreign
investment.

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.

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.

5
<PAGE>

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

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

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

<TABLE>
<CAPTION>
Total Annual Fee
Distribution Fund Waiver/
Management and Service Other Operating Reimburse- Net
Fund/Class Fees (12b-1) Fees Expenses Expenses ment* Expenses*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles Investment
Grade Bond Fund
Class J .40% % % % % %
--------------------------------------------------------------------------------------------
</TABLE>

* Reflects Loomis Sayles' contractual obligation to
limit the Fund's expenses through February 1,
2002.

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 $ $ $ $
-----------------------------------------------------------------------------
</TABLE>

* Expenses shown include the fee
waiver/reimbursement for the first year of each
period.

7
<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 its top four rating categories at
the
<PAGE>

time the Fund acquires the security or, if the security is unrated, Loomis
Sayles must have determined it to be of comparable quality.

LOWER RATED FIXED INCOME SECURITIES

A fixed income security will be considered a lower rated fixed income
security ("junk bond") if it is of below investment grade quality. To be
considered investment grade quality, at least one major rating agency must
have rated the security in one of its top four rating categories at the
time the Fund acquires the security or, if the security is unrated, Loomis
Sayles must have determined it to be of comparable quality. Therefore,
lower rated fixed income securities are securities that, at the time the
Fund acquires the security, none of the major rating agencies has rated in
one of its top four rating categories, or unrated securities that Loomis
Sayles has determined to be of comparable quality.

Lower rated fixed income securities are subject to greater credit risk and
market risk than higher quality fixed income securities. Lower rated fixed
income securities are considered predominantly speculative with respect to
the ability of the issuer to make timely principal and interest payments.
If the Fund invests in lower rated fixed income securities, the Fund's
achievement of its objective may be more dependent on Loomis Sayles' own
credit analysis than is the case with funds that invest in higher quality
fixed income securities. The market for lower rated fixed income securities
may be more severely affected than some other financial markets by economic
recession or substantial interest rate increases, by changing public
perceptions of this market, or by legislation that limits the ability of
certain categories of financial institutions to invest in these securities.
In addition, the secondary market may be less liquid for lower rated fixed
income securities. This lack of liquidity at certain times may affect the
values of these securities and may make the evaluation and sale of these
securities more difficult. Lower rated fixed income securities may be in
poor standing or in default and typically have speculative characteristics.

For more information about the ratings services' descriptions of the various
rating categories, see 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

9
<PAGE>

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 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
<PAGE>

fixed income securities. Among the major differences are that interest and
principal payments are made more frequently, usually monthly, and that
principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time. As a result, if the Fund purchases these
assets at a premium, a faster-than-expected prepayment rate will reduce yield
to maturity, and a slower-than-expected prepayment rate will increase yield to
maturity. If the Fund purchases mortgage-backed securities at a discount,
faster-than-expected prepayments will increase, and slower-than-expected
prepayments will reduce, yield to maturity. Prepayments, and resulting amounts
available for reinvestment by the Fund, are likely to be greater during a
period of declining interest rates and, as a result, are likely to be
reinvested at lower interest rates. Accelerated prepayments on securities
purchased at a premium may result in a loss of principal if the premium has not
been fully amortized at the time of prepayment. These securities will decrease
in value as a result of increases in interest rates generally, and they are
likely to appreciate less than other fixed-income securities when interest
rates decline because of the risk of prepayments.

STRIPPED MORTGAGE-BACKED SECURITIES

Stripped mortgage-backed securities include interest-only and principal-only
classes of mortgage-backed securities ("IOs" and "POs"). The yield to maturity
on an IO or PO is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the underlying assets. A rapid rate of principal prepayments
may have a measurably adverse effect on the Fund's yield to maturity to the
extent it invests in IOs. If the assets underlying the IOs experience greater
than anticipated prepayments of principal, the Fund may fail to recoup fully
its initial investment in these securities. Conversely, POs tend to decline in
value if prepayments are slower than anticipated.

The secondary market for stripped mortgage-backed securities may be more
volatile and less liquid than that for other mortgage-backed securities,
potentially limiting the Fund's ability to buy or sell those securities at any
particular time.

COLLATERALIZED MORTGAGE OBLIGATIONS

11
<PAGE>

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

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.
<PAGE>

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.
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

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.

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 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.

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.
<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.

OPTIONS AND FUTURES TRANSACTIONS

15
<PAGE>

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.

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
<PAGE>

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.

17
<PAGE>

MANAGEMENT

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, 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,
2002.

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.

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.

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 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, you will not be permitted to redeem that investment until it
has cleared or 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.

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.

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.

. Have checks sent to the address of record for the amount of distribution or
have the distribution transferred through Automated Clearing House ("ACH") to
a bank of your choice.

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 (of up to 30%) or backup withholding tax (of up to 31%) on Fund
distributions.

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 (taxable at a maximum rate of 20%).

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, including possible foreign, state and local
taxes.

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 . The report of 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.

23
<PAGE>

LOOMIS SAYLES INVESTMENT GRADE BOND FUND (CLASS J SHARES)

<TABLE>
<CAPTION>
Fiscal Year May 24* to
Ended Sept. 30, 2000 Sept. 30, 1999
-------------------------------------------------------------------------------
<S> <C> <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 to average net assets 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.

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.

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

25
<PAGE>

situation where a bankruptcy petition has been filed or similar action taken,
but payments on this obligation are being continued. A "C" also will be
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.

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.

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.

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.

27
<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

29
<PAGE>

LOOMIS SAYLES MANAGED BOND FUND

PROSPECTUS . FEBRUARY 1, 2001

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

TABLE OF CONTENTS

<TABLE>
<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.

. 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 the 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.

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.

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 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.

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

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
1 year (10/1/98)
-----------------------------------------------------------------
<S> <C> <C>
LOOMIS SAYLES MANAGED BOND FUND % %
Lehman Brothers Government/Corporate Bond Index % %/1/
</TABLE>

The Fund's performance through December 31, 2000 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, 2000.

3
<PAGE>

SUMMARY OF PRINCIPAL RISKS

INTEREST RATE RISK

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

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

5
<PAGE>

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

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

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

<TABLE>
<CAPTION>
Total
Annual Fee
Distribution Fund Waiver/
Management and Service Other Operating Reimburse- Net
Fund Fees (12b-1) Fees Expenses Expenses ment* Expenses*
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles Managed
Bond Fund .60% % % % % %
--------------------------------------------------------------------------------------
</TABLE>

* Reflects Loomis Sayles' contractual obligation to
limit the Fund's expenses through February 1,
2002.

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 $ $ $ $
--------------------------------------------------------------------
</TABLE>

* Expenses shown for the Fund include the fee
waiver/reimbursement for the first year of each
period.

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.

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
<PAGE>

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

9
<PAGE>

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

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities, such as GNMA certificates or securities issued by
the Federal National Mortgage Association ("Fannie Mae"), differ from
traditional
<PAGE>

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

11
<PAGE>

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

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

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 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.

15
<PAGE>

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

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 .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,
2002.

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.

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

You can buy 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).

. 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, you will not be permitted to redeem that investment until it
has cleared or has been in your account for 15 days.

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.
<PAGE>

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.

. Have checks sent to the address of record for the amount of distribution or
have the distribution transferred through Automated Clearing House ("ACH")
to a bank of your choice.

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%) or backup with holding tax (of up to
31%) on Fund distributions on all Fund distributions other than capital gain
distributions.

21
<PAGE>

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 sale of securities that the Fund had held for more than one
year, are taxable as long-term capital gains (taxable at a maximum rate of
20%).

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.

FINANCIAL HIGHLIGHTS

This information has been audited by . The report of 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>
Fiscal Year Oct. 1, 1998*
Ended to
Sept. 1, 2000 Sept. 30, 1999
--------------------------------------------------------------------------------
<S> <C> <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
</TABLE>

* 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.

23
<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.

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.

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
<PAGE>

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.

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.

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>

[LOGO]
STATEMENT OF ADDITIONAL
INFORMATION

FEBRUARY 1, 2001

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, 2001, AS REVISED FROM TIME TO TIME. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS. A
COPY OF THE PROSPECTUS MAY BE OBTAINED FROM LOOMIS SAYLES FUNDS, ONE FINANCIAL
CENTER, BOSTON, MASSACHUSETTS 02111.

LOOMIS SAYLES FUNDS

. Loomis Sayles Investment Grade Bond Fund (Class J shares)
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
THE TRUST.................................................................. 3

INVESTMENT STRATEGIES AND RISKS............................................ 3

Investment Restrictions.................................................. 3

Investment Strategies.................................................... 5

U.S. Government Securities............................................... 5

When-Issued Securities................................................... 6

Zero Coupon Bonds........................................................ 6

Repurchase Agreements.................................................... 7

Real Estate Investment Trusts............................................ 7

Rule 144A Securities..................................................... 7

Foreign Currency Transactions............................................ 8

Options.................................................................. 8

MANAGEMENT OF THE TRUST.................................................... 11

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....................................................... 26

CALCULATION OF YIELD AND TOTAL RETURN...................................... 26

PERFORMANCE COMPARISONS.................................................... 26

PERFORMANCE DATA........................................................... 30

APPENDIX A--PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION..... 31

APPENDIX B--ADVERTISING AND PROMOTIONAL LITERATURE......................... 33
</TABLE>

2
<PAGE>

THE TRUST

Loomis Sayles Funds (the "Trust") is a diversified, registered, open-end
management investment company. The Trust includes 18 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.)

3
<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.

(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.)

*(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).

*(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
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.)

The Fund normally will invest at least 65% of its assets in investment
grade fixed income securities.

4
<PAGE>

The Fund intends, based on the views of the staff of the Securities and
Exchange Commission (the "SEC"), to restrict its investments in repurchase
agreements maturing in more than seven days, together with other investments in
illiquid securities, to the percentage permitted by restriction (12) above.

In connection with the offering of its shares in Japan, the Fund has
undertaken to the 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.

For purposes of the foregoing restrictions, the Fund does not consider a swap
contract on one or more securities, indices, currencies or interest rates to be
a commodity contract; nor consistent with the position of the Securities and
Exchange Commission, does the Fund consider such swap contracts to involve the
issuance of a senior security, provided the Fund aggregates with its custodian
liquid assets (marked to market on a daily basis) sufficient to meet its
obligations under such contracts.

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.

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.

5
<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 Fund) each month. Unscheduled
prepayments may be made by homeowners or as a result of a default. Prepayments
are passed through to the registered holder of Ginnie Maes along with regular
monthly payments of principal and interest.

"Fannie Maes"--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 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).

6
<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"), 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.

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.

7
<PAGE>

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

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

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.

8
<PAGE>

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.

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.

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

9
<PAGE>

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.

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.

In accordance with Commodity Futures Trading Commission Rule 4.5, the Fund
may engage in futures transactions, including without limitation futures and
options on futures, will use futures transactions solely for bona fide hedging
purposes or will limit its investment in futures transactions for other than
bona fide hedging purposes so that the aggregate initial margin and premiums
required to establish such positions will not exceed 5% of the liquidation
value of the Fund, after taking into account unrealized profits and unrealized
losses on any such futures transactions.

10
<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 (70)--Trustee. 727 N. Bank Lane, Lake Forest, Illinois.
President, Wintrust Asset Management Company.

PAUL G. CHENAULT (67)--Trustee. 6546 Neville Court, Mason, Ohio. Retired;
Trustee of Variable Investors Series Trust. From August 1997 to September 1997,
Vice President of Loomis Sayles and prior to October 1995, Senior Vice
President and Chief Investment Officer, XL Capital Ltd., Hamilton, Bermuda.

RICHARD S. HOLWAY (74)--Trustee. 1314 Seaspray Lane, Sanibel, Florida.
Retired. Formerly Vice President, Loomis Sayles. Director, Sandwich Cooperative
Bank.

MICHAEL T. MURRAY (70)--Trustee. 404 N. Western Ave., Lake Forest, Illinois.
Retired. Formerly Vice President, Loomis Sayles.

DANIEL J. FUSS(1) (67)--President and Trustee. Vice Chairman and Director,
Loomis Sayles.

ROBERT J. BLANDING (53)--Executive Vice President. 555 California Street, San
Francisco, California. President, Chairman, Director, and Chief Executive
Officer, Loomis Sayles.

MARK W. HOLLAND (51)--Treasurer. Vice President, Finance and Administration
and Director, Loomis Sayles.

SHEILA M. BARRY (55)--Secretary and Compliance Officer. Assistant General
Counsel and Vice President, Loomis Sayles. Formerly, Senior Counsel and Vice
President, New England Funds, L.P.

MARK BARIBEAU (41)--Vice President. Vice President, Loomis Sayles.

KENNETH BUNTROCK ( )--Vice President. Vice President, Loomis Sayles.

PERRY CONCHINHA (31)--Vice President. Vice President, Loomis Sayles.

PAMELA N. CZEKANSKI (42)--VIce President. Vice President, Loomis Sayles.

WILLIAM H. EIGEN, JR. (63)--Vice President. 520 Ocean Boulevard, St. Simons
Island, Georgia. Vice President, Loomis Sayles. Formerly Vice President,
INVESCO Funds Group and Vice President, The Travelers Corp.

CHRISTOPHER R. ELY (45)--Vice President. Vice President, Loomis Sayles.
Formerly Senior Vice President and Portfolio Manager, Keystone Investment
Management Company, Inc.

QUENTIN P. FAULKNER (61)--Vice President. Vice President, Loomis Sayles.

PHILIP C. FINE (51)--Vice President. Vice President, Loomis Sayles. Formerly
Vice President and Portfolio Manager, Keystone Investment Management Company,
Inc.

KATHLEEN C. GAFFNEY (39)--Vice President. Vice President, Loomis Sayles.

JOSEPH R. GATZ (39)--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles. Formerly Portfolio Manager, Bank One
Investment.

-----------------
(1) Trustee deemed an "interested person" of the Trust, as defined by the 1940
Act.

11
<PAGE>

DEAN A. GULIS ( )--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President Loomis Sayles.

JOHN HYLL (45)--Vice President. 555 California Street, San Francisco,
California.

LAURIANN KLOPPENBURG (37)--Vice President. Vice President, Loomis Sayles.

ESWAR MENON (36)--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.

TRICIA MILLS( )--Vice President. Vice President, Loomis Sayles.

ALEX MUROMCEW (37)--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 (62)--Vice President. 555 California Street, San Francisco,
California. Vice President, Managing Partner and Director, Loomis Sayles.

LAUREN B. PITALIS (40)--Vice President. Vice President, Loomis Sayles.
Formerly Vice President and Assistant Secretary, Harris Associates Investment
Trust.

DAVID ROLLEY ( )--Vice President. Vice President, Loomis Sayles.

DAVID L. SMITH (47)--Vice President. Vice President, Loomis Sayles. Formerly
Vice President and Portfolio Manager, Keystone Investment Management Company,
Inc.

DANIEL G. THELEN ( )--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.

SANDRA P. TICHENOR (51)--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 (30)--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 (40)--Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.

ANTHONY J. WILKINS (58)--Vice President. Executive Vice President and
Director, Loomis Sayles.

Previous positions during the past five years with Loomis Sayles are omitted
if not materially different.

Except as indicated above, the address of each trustee and officer of the
Trust affiliated with Loomis Sayles is One Financial Center, Boston,
Massachusetts. The Trust pays no compensation to its officers or to the
trustees listed above who are directors, officers, or employees of Loomis
Sayles. Each trustee who is not a director, officer, or employee of Loomis
Sayles is compensated at the rate of $1,250 per Fund per annum.

12
<PAGE>

COMPENSATION TABLE

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999

<TABLE>
<CAPTION>
(5)
TOTAL
(3) (4) COMPENSATION
(2) PENSION OR ESTIMATED FROM TRUST AND
(1) AGGREGATE RETIREMENT BENEFITS ANNUAL FUND COMPLEX*
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON PAID TO
POSITION FROM TRUST FUND EXPENSES RETIREMENT TRUSTEE
--------------- ------------ ------------------- ------------- --------------
<S> <C> <C> <C> <C>
Joseph Alaimo, Trustee.. $ N/A N/A $

Paul G. Chenault**......

Daniel J. Fuss,
Trustee................ $ N/A N/A $

Richard S. Holway,
Trustee................ $ N/A N/A $

Michael T. Murray,
Trustee................ $ N/A N/A $
</TABLE>
-----------------
* No Trustee receives any compensation from any mutual funds affiliated with
Loomis Sayles, other than the Trust.
** Paul G Chenault was elected as a trustee on April 28, 2000.

As of September 30, 2001, 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.

The Trust, Loomis Sayles, and Loomis Sayles Distributors, Inc. each have
adopted a code of ethics under Rule 17j-1 the 1940 Act. These codes of ethics
permit the personnel of these entities to invest in securities, including
securities that the Funds may purchase or hold.

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 , 2000.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS SHARES HELD
----------- ------- -------------
<S> <C> <C>
Marusan Securities Co., Ltd. 2-5-2 Nihonbashi,Chuo-Ku, %
Tokyo, Japan

Izumi Securities Co. 17-24 Shinkawa, I-Chome 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>

Loomis Sayles is a registered investment adviser whose origins date back to
1926. Loomis Sayles is a limited partnership whose general partner, Loomis,
Sayles & Company, Inc. is a wholly-owned subsidiary of Nvest Holdings, Inc.
("Nvest Holdings"). Nvest Holdings is a wholly-owned subsidiary of Nvest
Companies, L.P. ("Nvest Companies"). Nvest Companies' general partner, CDCAM
North America, LLC ("CDCAM NA LLC"], is a wholly-owned subsidiary of CDC Asset
Management North America Corporation ("CDCAM NA"). CDCAM NA is the sole limited
partner of Nvest Companies. CDCAM NA is a wholly-owned subsidiary of CDC Asset
Management S.A., a French company ("CDCAM"). CDCAM is majority-owned by CDC
Finance and indirectly owned, through CDC Finance, Caisse Nationale des Caisses
D'Epargne and CNP Assurances, by Caisse des Depots et Consignations ("CDC").
CDC was created by French Government legislation and currently is supervised by
the French Parliament.

The eighteen principal subsidiary or affiliated asset management firms of
Nvest Companies, collectively, have more than $130 billion in assets under
management or administration as of September 30, 2000.

14
<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 PERIOD ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
9/30/98* 9/30/99 9/30/00
-------------------- -------------------- --------------------
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 Investment
Grade Bond Fund........ $12,300 $119,899 $40,491 $167,270
</TABLE>
-----------------
* 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 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.

15
<PAGE>

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 Nvest Star Value
Fund, Nvest Strategic Income Fund, Nvest Star Advisers Fund, Nvest Star Small
Cap Fund, and Nvest Balanced Fund, which are series of Nvest Funds Trust I, a
registered open-end management investment company; Nvest High Income Fund, a
series of Nvest Funds Trust II, a registered, open-end management investment
company; 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.

16
<PAGE>

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>
12B-1 FEES
FUND PAID BY THE FUND
---- ----------------
<S> <C>
Loomis Sayles Investment Grade Bond Fund Class J.......... $
</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.

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.

17
<PAGE>

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 year.

<TABLE>
<CAPTION>
UNDERWRITING COMMISSIONS RECEIVED FISCAL YEAR 2000
AND RETAINED BY THE DISTRIBUTOR (10/1/99- 9/30/00)
--------------------------------- ------------------
<S> <C>
Loomis Sayles Investment Grade Bond Fund (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
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 2000 Annual Report have been so
incorporated, in reliance on the reports of , 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.

18
<PAGE>

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.

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<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 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 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

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<PAGE>

series are entitled to vote. Consistent with the current position of the SEC,
shareholders of all series vote together, irrespective of series, on the
election of trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series.

There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the Board of Trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by
the holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares
at a meeting duly called for that purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.

Upon written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such shareholders wish
to communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).

Except as set forth above, the trustees shall continue to hold office and may
appoint successor trustees. Voting rights are not cumulative.

No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Trust, except (i) to change
the Trust's name or to cure technical problems in the Declaration of Trust and
(ii) to establish, change, or eliminate the par value of any shares (currently
all shares have no par value).

SHAREHOLDER AND TRUSTEE LIABILITY

Under Massachusetts law shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund of which they are
shareholders. However, the Declaration of Trust disclaims shareholder liability
for acts or obligations of the Fund and requires that notice of such disclaimer
be given in 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

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<PAGE>

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 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.

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<PAGE>

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.

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.

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.

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<PAGE>

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.

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.

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.

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<PAGE>

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 without regard to how long the shareholder has held shares of the
Fund. Long-term capital gains will generally be taxed at a federal income tax
rate of 20% to shareholders who are individuals. However, for taxable years
beginning after December 31, 2000, the maximum capital gain tax rates for
capital assets (including Fund shares) held by non-corporate shareholders for
more than 5 years will be 8% and 18% (rather than 10% and 20%). The 18% rate
applies only to assets the holding period for which begins after December 31,
2000 (including by way of an election to mark the asset to the market, and to
pay the tax in any given gain thereon, as of January 2, 2001), the mark to
market election may be disadvantageous from a federal tax perspective and
shareholders should consult their tax advisers before such election.

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 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.

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<PAGE>

Redemptions and exchanges of the Fund's shares are taxable events, and,
accordingly, shareholders may realize gains and losses on these transactions.
In general, any gain realized upon a taxable disposition of shares will be
treated as long-term capital gain if the shares have been held for more than
one year. Otherwise the gain on the sale, exchange, or redemption of Fund
shares will be treated as short-term capital gain. However, if a shareholder
sells Fund shares at a loss within six months after purchasing the shares, the
loss will be treated as a long-term capital loss to the extent of any long-term
capital gain distributions received by the shareholder. Furthermore, no loss
will be allowed on the sale of Fund shares to the extent the shareholder
acquired other shares of the same Fund within 30 days prior to the sale of the
loss shares or 30 days after such sale.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action.

Dividends and distributions also may be subject to foreign, state, and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, foreign, or local taxes.

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<PAGE>

FINANCIAL STATEMENTS

The financial statements of the Fund included in the Trust's 2000 Annual
Report, filed with the SEC on , 2000, 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.

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<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.

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

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<PAGE>

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 the following:

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.

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.

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<PAGE>

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 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 Growth Index. The Standard & Poor's/Barra Growth
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the highest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.

Standard & Poor's/Barra Value Index. The Standard & Poor's/Barra Value Index
is constructed by ranking the securities in the S&P 500 by price-to-book ratio
and including the securities with the lowest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.

Standard & Poor's ("S&P") Mid-Cap 400 Index. The S&P Mid-Cap 400 Index
consists of 400 domestic stocks chosen for market size, liquidity, and industry
group representation. It is market-weighted (stock price times shares
outstanding) with each stock affecting the index in proportion to its value.
The index is comprised of industrial, utility, financial, and transportation
stocks, in size order.

Standard & Poor's 500 Composite Stock Price Index (The "S&P 500"). The S&P
500 is a market value-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on the
New York Stock Exchange, although the common stocks of a few companies listed
on the American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation, and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. The S&P 500 is the
most common index for the overall U.S. stock market.

From time to time, articles about the 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.

30
<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>
CURRENT FROM FROM
SEC YIELD AT MODIFIED INCEPTION** ACTUAL INCEPTION**
FUND 9/30/00 THROUGH 9/30/00 THROUGH 9/30/00
---- ------------ -------------------- ------------------
<S> <C> <C> <C>
Loomis Sayles Investment
Grade Bond 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:

<TABLE>
<CAPTION>
CURRENT FROM FROM
SEC YIELD AT MODIFIED INCEPTION** ACTUAL INCEPTION**
FUND 9/30/00 THROUGH 9/30/00 THROUGH 9/30/00
---- ------------ -------------------- ------------------
<S> <C> <C> <C>
Loomis Sayles Investment
Grade Bond Fund (Class
J).....................
</TABLE>
-----------------
** The modified and actual inception dates for Class J shares of the Fund are
May 31, 1999 and May 24, 1999, respectively.

31
<PAGE>

APPENDIX A

PUBLICATIONS AND OUTLETS THAT MAY CONTAIN FUND INFORMATION

ABC and affiliates Financial News Network
Adam Smith's Money World Financial Planning
America Online Financial Planning on Wall Street
Anchorage Daily News Financial Research Corp.
Arizona Republic Financial Services Week
Atlanta Constitution Financial World
Atlanta Journal Fitch Insights
Austin American Statesman Forbes
Baltimore Sun Fort Worth Star-Telegram
Bank Investment Marketing Fortune
Barron's Fox Network and affiliates
Bergen County Record (NJ) Fund Action
Bloomberg Business News Fund Decoder
Bond Buyer Global Finance
Boston Business Journal (the) Guarantor
Boston Globe Hartford Courant
Boston Herald Houston Chronicle
Broker World INC
Business Radio Network Indianapolis Star
Business Week Individual Investor
CBS and affiliates Institutional Investor
CDA Investment Technologies International Herald Tribune
CFO Internet
Changing Times Investment Advisor
Chicago Sun Times Investment Company Institute
Chicago Tribune Investment Dealers Digest
Christian Science Monitor Investment Profiles
Christian Science Monitor News Service
Investment Vision
Cincinnati Enquirer Investor's Daily
Cincinnati Post IRA Reporter
CNBC Journal of Commerce
CNN Kansas City Star
Columbus Dispatch KCMO (Kansas City)
CompuServe KOA-AM (Denver)
Dallas Morning News LA Times
Dallas Times-Herald Leckey, Andrew (syndicated column)
Denver Post Life Association News
Des Moines Register Lifetime Channel
Detroit Free Press Miami Herald
Donoghues Money Fund Report Milwaukee Sentinel
Dorfman, Dan (syndicated column) Money Magazine
Dow Jones News Service Money Maker
Economist Money Management Letter
FACS of the Week Morningstar
Fee Adviser Mutual Fund Market News

32
<PAGE>

Mutual Funds Magazine San Jose Mercury
National Public Radio Seattle Post-Intelligencer
National Underwriter Seattle Times
NBC and affiliates Securities Industry Management
New England Business Smart Money
New England Cable News St. Louis Post Dispatch
New Orleans Times-Picayune St. Petersburg Times
New York Daily News Standard & Poor's Outlook
New York Times Standard & Poor's Stock Guide
Newark Star Ledger Stanger's Investment Advisor
Newsday Stockbroker's Register
Newsweek Strategic Insight
Nightly Business Report Tampa Tribune
Orange County Register Time
Orlando Sentinel Tobias, Andrew (syndicated column)
Palm Beach Post Toledo Blade
Pension World UP
Pensions and Investments US News and World Report
Personal Investor USA Today
Philadelphia Inquirer USA TV Network
Porter, Sylvia (syndicated column) Value Line
Portland Oregonian Wall Street Journal
Prodigy Wall Street Letter
Public Broadcasting Service Wall Street Week
Quinn, Jane Bryant (syndicated column)
Washington Post
Registered Representative WBZ
Research Magazine WBZ-TV
Resource WCVB-TV
Reuters WEEI
Rocky Mountain News WHDH
Rukeyser's Business (syndicated column)
Worcester Telegram
Sacramento Bee World Wide Web
San Diego Tribune Worth Magazine
San Francisco Chronicle WRKO
San Francisco Examiner

33
<PAGE>

APPENDIX B

ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Funds' advertising sales literature, communications to
shareholders and other promotional material may include, but is not limited to:

A total return figure or modified inception date that more accurately
compares a Fund's performance with other measures of investment return
such as data published by Lipper Analytical Services, Inc. or with the
performance of any other index.

Hypothetical calculations of a Fund's aggregate total return for a
period of time assuming the investment of a particular investment in
shares of a Fund and assuming the reinvestment of all dividends and
distributions.

Specific and general investment philosophies, objectives, strategies,
processes and techniques.

Discussions and/or illustrations of the potential investment goals of
a prospective investor, investment management strategies, techniques,
policies or investment suitability of a Fund (such as value investing,
market timing, dollar cost averaging, asset allocation, constant ratio
transfer, automatic account rebalancing, and the advantages and
disadvantages of investing in tax-deferred and taxable investments).

Discussions of economic conditions, the relationship between sectors
of the economy and the economy as a whole, various securities markets,
the effects of inflation, sources of information, economic models,
forecasts, data services utilized, consulted or considered in the
course of providing advisory or other services, as well as historical
performance of various asset classes, including but not limited to,
stocks, bonds and Treasury securities.

A summary of the substance of information contained in shareholder
reports (including the investment composition of a Fund by investment,
industry sector and country weighting), as well as the views of Loomis
Sayles as to current market, economic, trade and interest rate trends,
legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to a Fund.
This information may be updated as of a current date (such as the date
of the performance data, if any).

Charts, graphs or drawings which compare the investment objective,
return potential, relative stability and/or growth possibilities of the
Funds and/or other mutual funds, or illustrate the potential risks and
rewards of investment in various investment vehicles, including but not
limited to, stocks, bonds, Treasury securities and shares of a Fund
and/or other mutual funds.

A discussion of certain attributes or benefits to be derived by an
investment in a Fund and/or other mutual funds, shareholder profiles
and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments.

Inclusion of symbols, headlines or other material which highlight or
summarize the information discussed in more detail therein.

Specific and general references to industry statistics regarding
401(k) and retirement plans including historical information and
industry trends and forecasts regarding the

34
<PAGE>

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 the Funds as
401(k) or retirement plan funding vehicles produced by industry
authorities, research organizations, and publications.

In addition, Loomis Sayles Funds' advertising, sales literature,
communications to shareholders and other 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' 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

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

The types of clients Loomis Sayles advises, and specific identification
of, and general reference to, current individual, corporate, and
institutional clients, including pension and profit sharing plans

Loomis Sayles' method of operation, personnel, internal work
environment, procedure and philosophy

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.

35
<PAGE>

[LOGO]
STATEMENT OF ADDITIONAL
INFORMATION

FEBRUARY 1, 2001

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, 2001, 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>