<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1996
REGISTRATION NO. 811-8282
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 8 [X]
(CHECK APPROPRIATE BOX OR BOXES)
_____________________
LOOMIS SAYLES INVESTMENT TRUST
(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
-------------------- -------
SANDRA P. TICHENOR, ESQ. J.B. KITTREDGE, ESQ.
LOOMIS, SAYLES & COMPANY, L.P. ROPES & GRAY
ONE FINANCIAL CENTER ONE INTERNATIONAL PLACE
BOSTON, MA 02111 BOSTON, MA 02110
<PAGE>
LOOMIS SAYLES INVESTMENT TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481(A)
ITEMS REQUIRED BY FORM N-1A
<TABLE>
<CAPTION>
PART A
ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN PROSPECTUSES
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Prior Performance
Information
4. General Description of Cover Page; The
Registrant Trust; Investment
Objective and
Policies; and More
Information About the
Fund's Investments
5. Management of the Fund Cover Page; The
Trust; The Fund's
Investment Adviser;
Fund Expenses; and
Portfolio Transactions
5A. Management's Discussion of Not applicable
Fund Performance
6. Capital Stock and Other Cover Page; The
Securities Trust; How to
Redeem Shares; and
Dividends, Capital
Gain Distributions and
Taxes; Other Information
7. Purchase of Securities Being How to Purchase
Offered Shares
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
8. Redemption or Repurchase How to Redeem
Shares
9. Pending Legal Not applicable
Proceedings
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN STATEMENTS OF
ADDITIONAL INFORMATION
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not applicable
History
13. Investment Objectives Investment Objective,
and Policies Policies and Restrictions
14. Management of the Fund Management of the Trust
15. Control Persons and Management of the Trust
Principal Holders of
Securities
16. Investment Advisory and Investment Advisory and
Other Services Other Services
17. Brokerage Allocation and Portfolio Transactions
Other Practices and Brokerage
18 Capital Stock and Other How to Redeem Shares
Securities (Prospectus);
Redemptions; Dividends,
Capital Gain
Distributions and Taxes
(Prospectus); Income
Dividends, Capital Gain
Distributions and Tax
Status; Description of
the Trust
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
19. Purchase, Redemption How to Purchase Shares
and Pricing of Securities (Prospectus); How to
Being Offered Redeem Shares (Prospectus);
Redemptions; Net Asset Value
20. Tax Status Dividends, Capital Gain
Distributions and Taxes
(Prospectus); Income
Dividends, Capital Gain
Distributions and Tax Status
21. Underwriters Not applicable
22. Calculations of Calculation of Yield and
Performance Data Total Return; Performance
Comparisons; Performance
Data
23. Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
-3-
<PAGE>
This Amendment No. 8 to the Registration Statement has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940, as
amended. However, beneficial interests in the Registrant have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), since
such interests have been issued and sold solely in reliance upon the exemption
from registration contained in Section 4(2) of the 1933 Act. Investments in the
Registrant may only be made by individuals or entities which are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This Amendment
No. 8 to the Registration Statement does not constitute an offer to sell or the
solicitation of an offer to buy any beneficial interests in the Registrant.
This Registration Statement relates solely to interests in the Loomis
Sayles Investment Grade Fixed Income Fund series, the Loomis Sayles Fixed Income
Fund series, the Loomis Sayles California Tax-Free Income Fund series, the
Loomis Sayles Core Growth Fund series, the Loomis Sayles High Yield Fixed Income
Fund series, the Loomis Sayles Core Fixed Income Fund series and the Loomis
Sayles Intermediate Duration Fixed Income Fund series of Loomis Sayles
Investment Trust. Private Placement Memoranda and Statements of Additional
Information for the Loomis Sayles Convertible Bond Fund series and the Loomis
Sayles Mortgage Securities Fund series of Loomis Sayles Investment Trust are
neither amended nor superseded by this Registration Statement.
-4-
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES OF +
+THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PROSPECTUS
________ __, 1996
The Loomis Sayles Investment Trust (the "Trust" ) is a group of nine
mutual funds including the Loomis Sayles Investment Grade Fixed Income Fund (the
"Fund"). The other series which are publicly offered by the Trust and are
described in separate prospectuses are:
Loomis Sayles California Tax-Free Income Fund
Loomis Sayles Core Fixed Income Fund
Loomis Sayles Core Growth Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles High Yield Fixed Income Fund
Loomis Sayles Intermediate Duration Fixed Income Fund
Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest. Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.
This Prospectus concisely describes the information that you should know
before investing in the Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated ________ __, 1996 is
available free of charge; to obtain a free copy or to make any inquiries
about the Fund write to Loomis Sayles Investment Trust, One Financial Center,
Boston, Massachusetts 02111 or telephone (617) 482-2450. The Statement of
Additional Information, which contains more detailed information about the Fund,
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
TRANSFERRED OR RESOLD UNLESS SO REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE
SECURITIES ARE REDEEMABLE AS DESCRIBED IN THIS PROSPECTUS. IN CERTAIN CASES
INVESTORS MAY BE REDEEMED "IN KIND" AND RECEIVE PORTFOLIO SECURITIES HELD BY THE
FUND IN LIEU OF CASH UPON REDEMPTION. IN SUCH CASE, AN INVESTOR WILL INCUR
COSTS WHEN THE INVESTOR SELLS THE SECURITIES DISTRIBUTED.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY OF EXPENSES...................................................... -3-
PRIOR PERFORMANCE........................................................ -4-
THE TRUST................................................................ -5-
INVESTMENT OBJECTIVE AND POLICIES........................................ -5-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS............................ -6-
THE FUND'S INVESTMENT ADVISER............................................ -9-
FUND EXPENSES............................................................ -9-
PORTFOLIO TRANSACTIONS................................................... -10-
HOW TO PURCHASE SHARES................................................... -10-
HOW TO REDEEM SHARES..................................................... -11-
OTHER INFORMATION........................................................ -11-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES.......................... -11-
</TABLE>
-2-
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly. The information is based on expenses for the Fund's
fiscal year ended December 31, 1995. The information below should not be
considered a representation of past or future expenses, as actual expenses may
be greater or less than those shown. Also, the assumed 5% annual return in the
example should not be considered a representation of investment performance, as
actual performance will depend upon the actual investment results of securities
held in the Fund's portfolio.
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) none
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage of
offering price) none
Deferred Sales Load (as a percentage of original
purchase price or redemption
proceeds as applicable) none
Redemption Fees (as a percentage of amount redeemed) none
Exchange Fees none
Annual Operating Expenses After Expense
Reimbursement (as a
percentage of net assets)/1/:
Management Fees/1/ .01%
12b-1 Fees none
Other Operating Expenses/1/ .54%
Total Operating Expenses/1/ .55%
Example
You would pay the following
expenses on a $1,000 investment
assuming a 5% annual return
(with or without a redemption at
the end of each time period):
One Year $6
Three Years $18
Five Years $31
Ten Years $69
</TABLE>
________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to
limit the Fund's total operating expenses to the percentage of net assets shown
above. In the absence of the voluntary expense limitation, Management Fees and
Total Operating Expenses for the fiscal year ended December 31, 1995 would have
been .40% and .94%, respectively.
-3-
<PAGE>
PRIOR PERFORMANCE
(FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT THE INDICATED PERIODS)
The information presented below relates to periods prior to the
effectiveness of the Fund's registration statement under the Securities Act of
1933, as amended. The information presented below for the six months ended June
30, 1996 is unaudited. The information presented below for other periods is
included in financial statements of the Fund that have been audited by Coopers &
Lybrand L.L.P., independent accountants. The following information should be
read in conjunction with the financial statements and the notes thereto
contained in the Fund's 1996 Semiannual Report and 1995 Annual Report, which are
incorporated by reference in this Prospectus and the Statement of Additional
Information.
<TABLE>
<CAPTION>
Six Months Year Ended July 1* Through
Ended June 30, December 31, December 31,
1996 (Unaudited) 1995 1994
---------------- ---- ----
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 11.56 $ 9.57 $ 10.00
Income from investment operations -
Net investment income...................................... 0.45 0.75 0.41
Net realized and unrealized gain (loss) on investments..... (0.31) 2.05 (0.43)
------- ------- -------
Total from investment operations......................... 0.14 2.80 (0.02)
Less distributions -
Dividends from net investment income....................... (0.42) (0.76) (0.41)
Distributions from net realized capital gains.............. 0.00 (0.05) 0.00
------- ------- -------
Total distributions...................................... (0.42) (0.81) (0.41)
------- ------- -------
Net asset value, end of period............................... $ 11.28 $ 11.56 $ 9.57
Total return (%)............................................. 0.64 30.28 (0.29)
Net assets, end of period (000).............................. $31,612 $21,816 $ 4,649
Ratio of operating expenses to average net assets (%)........ 0.55** 0.55 0.55**
Ratio of net investment income to average net assets (%)..... 7.14** 7.61 8.18**
Portfolio turnover rate (%).................................. 52.3 21.6 112.0
Without giving effect to the voluntary expense limitations:
The ratio of operating expenses to average net assets
would have been (%)........................................ 0.77** 0.94 1.55**
The net income per share would have been..................... $ 0.33 $ 0.71 $ 0.36
</TABLE>
* Commencement of operations.
** Annualized.
Further information about the performance of the Fund is contained in
the Fund's semiannual and annual reports to shareholders, which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.
-4-
<PAGE>
THE TRUST
The Fund is a series of the Trust. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993. The Trust is authorized to issue an unlimited number
of full and fractional shares of beneficial interest in multiple series. Shares
are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with fractional votes for each fractional share held) at
shareholder meetings. The Trust does not generally hold shareholder meetings and
will do so only when required by law. Shareholders may call meetings to consider
removal of the Trustees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is above-average total investment return
through a combination of current income and capital appreciation.
The Fund seeks to achieve its objective by investing in a diversified
portfolio of debt securities, although up to 20% of its assets may be invested
in preferred stocks. These debt securities may include corporate securities,
securities issued or guaranteed by the U.S. Government, its authorities,
agencies or instrumentalities, or certificates representing undivided interest
in the interest or principal of U.S. Treasury securities ("U.S. Government
Securities"), zero coupon securities, collateralized mortgage securities and
when-issued securities, which are described herein (together with their related
risks) under "More Information About the Fund's Investments." The Fund will
normally invest at least 90% of its assets in investment grade securities.
Investment grade securities include those rated BBB and above by Standard &
Poor's ("S&P") or Baa and above by Moody's Investors Service, Inc. ("Moody's")
or unrated securities that Loomis Sayles has determined to be of comparable
quality. The Fund may continue to hold securities that are downgraded in quality
subsequent to their purchase if, in the opinion of Loomis Sayles, it would be
advantageous to do so. The Fund may invest a portion of its assets in securities
of Canadian issuers, and a limited portion of its assets in securities of other
foreign issuers. See "More Information About the Fund's Investments; Foreign
Securities."
The percentages of the Fund's net assets invested during the fiscal
year ended December 31, 1995 in securities assigned to the various rating
categories by S&P and Moody's on a dollar-weighted basis were approximately as
follows: "AAA"/"Aaa," 8.8%; "AA"/"Aa," 10.3%; "A"/"A," 21.2%; "BBB"/"Baa,"
49.2%; "BB"/"Ba," 3.7%; "B"/"B," 2.7%; and below "B" 1.6%. The percentage
of the Fund's net assets invested during such fiscal year in unrated debt
securities as a group was approximately 2.5%. The percentages of the Fund's net
assets invested during such fiscal year in such unrated securities (categorized
by comparable rating category) were approximately as follows: "AAA"/"Aaa," 0%;
"AA"/"Aa," 0%; "A"/"A," 0%; "BBB"/"Baa," 0%; "BB"/"Ba," 2.5%; "B"/"B," 0%; and
below "B," 0%.
Some of the Fund's investment restrictions are "fundamental" and
cannot be changed without a majority vote of the Fund's shareholders . Such
restrictions include: (1) a restriction prohibiting the Fund from making
loans; (2) a restriction prohibiting the Fund from purchasing a security (other
than U.S. Government Securities) if, as a result, more than 25% of the Fund's
total assets (taken at current value) would be invested in any one industry; (3)
a restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a 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 security. For additional
investment restrictions, see the Statement of Additional Information.
-5-
<PAGE>
Although authorized to invest in restricted securities, the Fund, as
a matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than 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 Trustees, that
the particular issue of Rule 144A securities is liquid.
The investment objective of the Fund is "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders. All investment
policies other than those that are identified as "fundamental" may be changed
by the Trustees without a vote of the Fund's shareholders.
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The net asset value of the Fund's shares will vary as a result of changes
in the value of securities in the Fund's portfolio. The following describes the
types of securities in which the Fund will principally invest and the risks
associated with them. Additional information about the Fund's investment
practices can be found in the Statement of Additional Information.
FIXED INCOME SECURITIES
- -----------------------
The Fund may invest in fixed income securities of any maturity. 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 foreign and
domestic private issuers. Because interest rates vary, it is impossible to
predict the income of the Fund for any particular period.
Fixed income securities are subject to market and credit risk. Market
risk relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest. Generally, the longer the maturity of a fixed income security,
the greater the fluctuations in its value because of market and credit risk.
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 will fluctuate as interest rates change. Thus, for
example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities,
representing interests in "pools" of mortgage loans secured by residential or
commercial real property. 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
-6-
<PAGE>
securities. See "Collateralized Mortgage obligations" below for additional
information regarding the risks associated with mortgage-backed 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. Treasury securities. These investment instruments
may be highly volatile.
ZERO COUPON SECURITIES
- ----------------------
The Fund may invest in "zero coupon" fixed income securities. These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis. The Fund is required to distribute the income on zero coupon
securities to Fund shareholders as the income accrues, even though the Fund is
not receiving the income in cash on a current basis. Thus the Fund may be forced
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 is generally more volatile than that of non-zero
coupon fixed income securities of comparable quality and maturity.
COLLATERALIZED MORTGAGE OBLIGATIONS
- -----------------------------------
The Fund may invest in collateralized mortgage obligations ("CMOs").
A CMO is a limited recourse security backed by a portfolio of mortgages or, more
typically, by mortgage-backed securities held under an indenture. CMOs may be
issued by instrumentalities of the U.S. Government or by non-governmental
entities. The issuer's obligation to make interest and principal payments is
derived from and 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 payments on the underlying collateral or a combination
thereof. CMOs of different classes or series 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, the early retirement of a particular class or series
of CMOs held by the Fund could involve the loss of any premium the Fund paid
when it acquired the investment and could result in the Fund's reinvesting the
proceeds at a lower interest rate than the interest rate paid by the retired
CMO. Because of the early retirement feature, CMOs may be more volatile than
many other fixed income investments. In addition, slower than anticipated
prepayments on the underlying mortgages can extend the effective maturities of
CMOs, subjecting them to a greater risk of decline in market value in response
to rising interest rates than traditional debt securities.
COMMERCIAL MORTGAGE-BACKED SECURITIES
- -------------------------------------
The Fund may invest in commercial mortgage-backed securities. Commercial
mortgage-backed securities are securities that represent an interest in, or are
secured by, mortgage loans secured by commercial property, such as industrial
and warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals, and senior living centers. The commercial mortgage-backed
securities market is newer and in terms of total outstanding principal amount of
issues is relatively small compared to the total size of the market for
residential mortgage-backed securities.
Commercial mortgage-backed securities are generally structured similarly to
pass-through securities or to CMOs, although other structures are possible. They
may pay fixed or adjustable rates of interest. Commercial mortgage-backed
securities have been issued in public or private transactions by a variety of
public and private issuers.
-7-
<PAGE>
The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics. Commercial mortgage
loans generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties. Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial mortgage-
backed securities may relate only to a few properties or a single property. The
risk involved in single property financings is highly concentrated. In
addition, commercial properties, particularly industrial and warehouse
properties, are subject to environmental risks and the burdens and costs of
compliance with environmental laws and regulations. At the same time,
commercial mortgage-backed securities may have a lower prepayment risk than
residential mortgage-backed securities, because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In
addition, commercial mortgage-backed securities often are structured with some
form of credit enhancement to protect against potential losses on the underlying
mortgage loans.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis. This means that
the Fund will enter into a commitment to buy the security before the security
has been issued. The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment. The security
is typically delivered to the Fund 15 to 120 days later. No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued. 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 held in its portfolio at the time. When the Fund buys
a security on a when-issued basis, it is subject to the risk that market rates
of interest will increase before the time the security is delivered, with the
result that the yield on the security delivered to the Fund may be lower than
the yield available on other, comparable securities at the time of delivery. If
the Fund has outstanding obligations to buy when-issued securities, it will
maintain liquid assets in a segregated account at its custodian bank in an
amount sufficient to satisfy these obligations.
FOREIGN SECURITIES
- ------------------
The Fund may invest in securities of issuers organized or headquartered
outside the United States ("foreign securities"). The Fund will not purchase a
foreign security (for purposes of this limitation securities of Canadian issuers
publicly traded in the United States will not be treated as foreign securities)
if, as a result, the Fund's total holdings of foreign securities would exceed
20% of the Fund's total assets.
Foreign securities may present risks not associated with investments in
comparable securities of U.S. issuers. There may be less information publicly
available about a foreign corporate or governmental issuer than about a U.S.
issuer, and foreign issuers are not generally 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 . In addition, the remedies of the Fund may be
extremely limited if a foreign issuer defaults on its 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
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.
-8-
<PAGE>
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 favorably
or unfavorably by changes in currency exchange rates or exchange control
regulations. Changes in the value relative to the U.S. dollar of a foreign
currency in which the Fund's holdings are denominated will result in a change in
the U.S. dollar value of the Fund's assets and the Fund's income available for
distribution.
In addition, although part of the Fund's income may be received or realized
in foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
the dividend, the Fund could be required to liquidate portfolio securities to
pay the dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time the Fund accrues expenses in U.S. dollars and
the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars will be greater than the equivalent amount in such
currency of such expenses at the time they were incurred.
LOWER RATED FIXED INCOME SECURITIES
- -----------------------------------
The Fund may invest a portion of its assets in securities rated below
investment grade ("lower rated fixed income securities"), including securities
in the lowest rating categories, and unrated securities determined by Loomis
Sayles to be of comparable quality. Lower rated fixed income securities
generally provide higher yields, but are subject to greater credit and market
risk than higher quality fixed income securities. Lower rated fixed income
securities are considered speculative with respect to the ability of the issuer
to meet principal and interest payments. Achievement of the fund's investment
objective through investments in lower rated fixed income securities may be more
dependent on Loomis Sayles's credit analysis than is the case with higher
quality bonds. The market for lower rated fixed income securities may be more
severely affected than other financial markets by economic recession or
substantial interest rate increases. The value and liquidity of lower rated
fixed income securities may be diminished by adverse publicity and investor
perceptions. In addition, legislation that limits the tax benefits to issuers
or holders of taxable lower rated fixed income securities or that limits the
ability of certain categories of financial institutions to invest in these
securities may adversely affect their market value. the secondary market for
lower rated fixed income securities may be less liquid than the secondary market
for higher rated fixed income securities. This lack of liquidity at certain
times may affect the values of these securities and may make the valuation and
sale of these securities by the fund more difficult. Certain lower rated fixed
income securities do not pay interest on a current basis. However, the fund
will accrue and distribute this interest on a current basis, and may be required
to sell securities at times when loomis sayles would not otherwise deem it
advisable to do so in order to generate cash for distributions. Securities of
below investment grade quality are commonly referred to as "junk bonds."
Securities in the lowest rating categories may be in poor standing or in
default. Investment grade fixed income securities may share some of the
characteristics of lower rated fixed income securities described above.
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's sole general
partner is indirectly owned by New England Investment Companies, L.P., a
publicly traded limited partnership whose sole general partner is indirectly
owned by Metropolitan Life Insurance Company.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.
-9-
<PAGE>
The portfolio manager for the Fund since its inception has been Daniel
J. Fuss, who has been with Loomis Sayles since 1976 and is head of the Fixed
Income Management Group. Mr. Fuss is an Executive Vice President of Loomis
Sayles.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This fee is
paid at the annual rate of 0.40% of the Fund's average weekly net assets.
In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.
Loomis Sayles has voluntarily undertaken for an indefinite period to
waive its fees and, to the extent necessary, to bear other Fund expenses in
order to limit the Fund's annualized total operating expenses to .55% of
average annual net assets.
PORTFOLIO TRANSACTIONS
Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund. Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets. The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions. High portfolio turnover may
involve higher costs such as higher brokerage commissions and higher levels of
taxable gains. Portfolio turnover rates for the life of the Fund are set forth
above under the heading "Prior Performance." See "Dividends, Capital Gain
Distributions and Taxes" for information on the tax consequences of investing in
the Fund.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.
The minimum initial investment in the Fund is $3,000,000. Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.
Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund. Securities accepted by Loomis Sayles in exchange for Fund shares will
be valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer. A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered. A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (617) 482-2450.
Loomis Sayles will not approve the acceptance of securities in exchange for
shares of the Fund unless (1) Loomis Sayles, in its sole discretion, believes
the securities are appropriate investments for the Fund; (2) the investor
represents and agrees that all securities offered to the Fund can be resold by
the Fund without restriction under the Securities Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by the exchange of securities.
-10-
<PAGE>
Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction. After an account has been
established, you may send subsequent investments at any time.
The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate. Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust. Shares of the Fund are
sold without any sales charge. The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding. Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading. Portfolio securities are valued at their
market value as more fully described in the Statement of Additional
Information.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to the Trust.
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed. All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).
The redemption price will be the net asset value per share next determined
after the written redemption request and any necessary special documentation are
received by the Trust in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order. If
you purchased your shares by check and your check was deposited less than
fifteen days prior to the redemption request, the Trust may withhold
redemption proceeds until your check has cleared.
Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
OTHER INFORMATION
The Board of Trustees may, without shareholder approval, divide the
Trust's shares of beneficial interest into multiple series. The Trust is
currently divided into nine series, including the Fund, the other publicly-
offered funds listed on the cover of this Prospectus, and two other funds,
Loomis Sayles Convertible Bond Fund and Loomis Sayles Mortgage Securities Fund,
shares of which are not presently being publicly offered.
As of November 7, 1996, each of Peabody Essex Museum and Wichita State
University Endowment Association may be deemed to control the Fund because it
possessed beneficial ownership, either directly or indirectly, of more than 25%
of the Fund's shares.
-11-
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes. The Fund pays any net investment income to shareholders as
monthly dividends. The Fund also distributes all of its net realized capital
gains after applying any capital loss carryovers. Any capital gain distributions
are normally made annually in December, but may, to the extent permitted by law,
be made more frequently as deemed advisable by the Trustees. The Trustees may
change the frequency with which the Fund declares or pays dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash. Dividends and capital gain distributions will be taxed
as described below whether received in cash or additional shares.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended. As such, so long as the Fund
distributes substantially all its net investment income and net realized capital
gains to its shareholders on a current basis, the Fund itself does not pay any
federal income or excise tax. The Fund intends to make sufficient distributions
to be relieved of federal taxes.
Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares. Long-
term capital gain distributions are treated as long-term capital gains to you
whether distributed in cash or additional shares and regardless of how long you
have held your shares. However, any loss recognized by you on the taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain distribution you received with
respect to the shares.
The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.
In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.
The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund. Before investing, you should consult your own tax adviser
for more information concerning the federal, state and local tax consequences of
investing in, redeeming or exchanging Fund shares.
TRANSFER AND DIVIDEND INVESTMENT ADVISER
PAYING AGENT AND Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS One Financial Center
State Street Bank and Trust Company Boston, Massachusetts 02111
Boston, Massachusetts 02102
-12-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS ASSIGNED BY
STANDARD & POOR'S AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S
- -----------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C
The rating C is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" 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 that 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 edge."
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 that 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 are other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A
Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds that are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often, the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
<PAGE>
C
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designed by the symbols Aa1, A1,
Baa1, Ba1 and B1, and those with the weakest investment attributes are
designated by the symbols Aa3, A3, Baa3, Ba3 and B3.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES OF +
+THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES FIXED INCOME FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PROSPECTUS
______ __, 1996
The Loomis Sayles Investment Trust (the "Trust") is a group of nine mutual
funds including the Loomis Sayles Fixed Income Fund (the "Fund"). The other
series which are publicly offered by the Trust and are described in separate
prospectuses are:
Loomis Sayles California Tax-Free Income Fund
Loomis Sayles Core Fixed Income Fund
Loomis Sayles Core Growth Fund
Loomis Sayles High Yield Fixed Income Fund
Loomis Sayles Intermediate Duration Fixed Income Fund
Loomis Sayles Investment Grade Fixed Income Fund
Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest. Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.
This Prospectus concisely describes the information that you should know
before investing in the Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated ______ __, 1996 is
available free of charge; to obtain a free copy or to make any inquiries about
the Fund write to Loomis Sayles Investment Trust, One Financial Center, Boston,
Massachusetts 02111 or telephone (617) 482-2450. The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
TRANSFERRED OR RESOLD UNLESS SO REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE
SECURITIES ARE REDEEMABLE AS DESCRIBED IN THIS PROSPECTUS. IN CERTAIN CASES
INVESTORS MAY BE REDEEMED "IN KIND" AND RECEIVE PORTFOLIO SECURITIES HELD BY THE
FUND IN LIEU OF CASH UPON REDEMPTION. IN SUCH CASE, AN INVESTOR WILL INCUR COSTS
WHEN THE INVESTOR SELLS THE SECURITIES DISTRIBUTED.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF EXPENSES...................................................... -3-
PRIOR PERFORMANCE........................................................ -4-
THE TRUST................................................................ -5-
INVESTMENT OBJECTIVE AND POLICIES........................................ -5-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS............................ -6-
THE FUND'S INVESTMENT ADVISER............................................ -10-
FUND EXPENSES............................................................ -10-
PORTFOLIO TRANSACTIONS................................................... -10-
HOW TO PURCHASE SHARES................................................... -10-
HOW TO REDEEM SHARES..................................................... -11-
OTHER INFORMATION........................................................ -12-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES.......................... -12-
</TABLE>
-2-
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly. The information is based on annualized expenses for the
Fund's fiscal year ended December 31, 1995. The information below should not be
considered a representation of past or future expenses, as actual expenses may
be greater or less than those shown. Also, the assumed 5% annual return in the
example should not be considered a representation of investment performance, as
actual performance will depend upon the actual investment results of securities
held in the Fund's portfolio.
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) none
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage of
offering price) none
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable) none
Redemption Fees (as a percentage of
amount redeemed) none
Exchange Fees none
Annual Operating Expenses After
Expense Reimbursement (as a
percentage of net assets):
Management Fees .50%
12b-1 Fees none
Other Operating Expenses/1/ .15%
Total Operating Expenses/1/ .65%
Example
You would pay the following
expenses on a $1,000 investment
assuming a 5% annual return
(with or without a redemption at
the end of each time period):
One Year $7
Three Years $21
Five Years $36
Ten Years $81
</TABLE>
______________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total operating expenses to the percentage of net assets shown above.
In the absence of the voluntary expense limitation, annualized Other Operating
Expenses and Total Operating Expenses would have been .33% and .83%,
respectively.
-3-
<PAGE>
PRIOR PERFORMANCE
(For a share of the Fund outstanding throughout the indicated periods)
The information presented below relates to periods prior to the
effectiveness of the Fund's registration statement under the Securities Act of
1933, as amended. The information presented below for the six months ended June
30, 1996 is unaudited. The information presented below for other periods is
included in financial statements of the Fund that have been audited by Coopers &
Lybrand L.L.P., independent accountants. The following information should be
read in conjunction with the financial statements and the notes thereto
contained in the Fund's 1996 Semiannual Report and 1995 Annual Report, which are
incorporated by reference in this Prospectus and the Statement of Additional
Information.
<TABLE>
<CAPTION>
SIX MONTHS JANUARY 17* THROUGH
ENDED JUNE 30, DECEMBER 31,
1996 (UNAUDITED) 1995
----------------- -------------------
<S> <C> <C>
Net asset value, beginning of period......................... $ 12.08 $ 10.00
Income from investment operations -
Net investment income....................................... 0.37 0.53
Net realized and unrealized gain on investments............. (0.39) 2.21
-------- -------
Total from investment operations........................... (0.02) 2.74
-------- -------
Less Distributions -
Dividends from net investment income........................ 0.00 (0.52)
Distributions from net realized capital gains............... 0.00 (0.14)
-------- -------
Total distributions........................................ 0.00 (0.66)
-------- -------
Net asset value, end of period............................... $ 12.06 $ 12.08
Total return (%)............................................. (0.12) 27.4
Net assets, end of period (000).............................. $111,736 $58,332
Ratio of operating expenses to average net assets (%)........ 0.62** 0.75**
Ratio of net investment income to average net assets (%)..... 7.90** 8.15**
Portfolio turnover rate (%).................................. 40.1 76.0
Without giving effect to the voluntary expense limitations:
The ratio of operating expenses to average net assets
would have been (%)......................................... 0.62** 0.83**
The net income per share would have been.................... $ 0.37 $ 0.52
</TABLE>
* Commencement of operations.
** Annualized.
Further information about the performance of the Fund is contained in the
Fund's semiannual and annual reports to shareholders, which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.
-4-
<PAGE>
THE TRUST
The Fund is a series of the Trust. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993. The Trust is authorized to issue an unlimited number
of full and fractional shares of beneficial interest in multiple series. Shares
are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with fractional votes for each fractional share held) at
shareholder meetings. The Trust does not generally hold shareholder meetings and
will do so only when required by law. Shareholders may call meetings to consider
removal of the Trustees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is high total investment return through a
combination of current income and capital appreciation.
The Fund seeks to attain its objective by normally investing substantially
all of its assets in a broad range of debt securities, although up to 20% of its
assets may be invested in preferred stocks. These debt securities may include
corporate securities, securities issued or guaranteed by the U.S. Government,
its authorities, agencies or instrumentalities or certificates representing
undivided interests in the interest or principal of U.S. Treasury securities
("U.S. Government Securities"), zero coupon securities, collateralized mortgage
securities, convertible bonds and when-issued securities, which are described
herein (together with their related risks) under "More Information About the
Fund's Investments." The Fund may invest any portion of its assets in securities
of Canadian issuers, and a limited portion of its assets in securities of other
foreign issuers. See "More Information About the Fund's Investments; Foreign
Securities."
The Fund may invest up to 35% of its assets in securities of below
investment grade quality, which are securities rated below BBB by Standard &
Poor's ("S&P") or below Baa by Moody's Investors Service, Inc. ("Moody's"), and
in unrated securities determined by Loomis Sayles to be of comparable quality.
See "More Information About the Fund's Investments; Lower Rated Fixed Income
Securities" below. For purposes of the foregoing percentage, a security will be
treated as being of investment grade quality if, at the time of purchase, it is
rated at least BBB by S&P or at least Baa by Moody's, or, if unrated, is
determined by Loomis Sayles to be of investment grade quality. The Fund may
continue to hold securities that are downgraded in quality subsequent to their
purchase if, in the opinion of Loomis Sayles, it would be advantageous to do
so.
The percentages of the Fund's net assets invested during the fiscal year
ended December 31, 1995 in securities assigned to the various rating categories
by S&P and Moody's on a dollar-weighted basis were approximately as follows:
"AAA"/ "Aaa," 11.4%; "AA"/"Aa," 9.2%; "A"/"A," 8.2%; "BBB"/"Baa," 37.9%;
"BB"/"Ba," 12.0%; "B"/"B," 11.1%; and below "B," 3.7%. The percentage of the
Fund's net assets invested during such fiscal year in unrated debt securities as
a group was approximately 6.5%. The percentages of the Fund's net assets
invested during such fiscal year in such unrated securities (categorized by
comparable rating category) were approximately as follows: "AAA"/"Aaa," 0%;
"AA"/"Aa," 0%; "A"/"A," 0%; "BBB"/"Baa," 0%; "BB"/"Ba," 6.5%; "B"/"B," 0%; and
below "B," 0%.
Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders. Such restrictions
include: (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from purchasing a security (other than U.S.
Government Securities) if, as a result, more than 25% of the Fund's total assets
(taken at current value) would be invested in any one industry; (3) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a security that is not
readily marketable if, as a result, more than 15% of
-5-
<PAGE>
the Fund's net assets based on current value would then be invested in such
security. For additional investment restrictions, see the Statement of
Additional Information.
Although authorized to invest in restricted securities, the Fund, as a
matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than 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 Trustees, that
the particular issue of Rule 144A securities is liquid.
The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders. All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The net asset value of the Fund's shares will vary as a result of changes
in the value of securities in the Fund's portfolio. The following describes the
types of securities in which the Fund will principally invest and the risks
associated with them. Additional information about the Fund's investment
practices can be found in the Statement of Additional Information.
FIXED INCOME SECURITIES
- -----------------------
The Fund may invest in fixed income securities of any maturity. 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 foreign and
domestic private issuers. Because interest rates vary, it is impossible to
predict the income of the Fund for any particular period.
Fixed income securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase when
prevailing interest rates fall and decrease when interest rates rise. Credit
risk relates to the ability of the issuer to make payments of principal and
interest. Generally, the longer the maturity of a fixed income security, the
greater the fluctuations in its value because of market and credit risk.
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 will fluctuate as interest rates change. Thus, for
example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities,
representing interests in "pools" of mortgage loans secured by residential or
commercial real property. 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
-6-
<PAGE>
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. See
"Collateralized Mortgage obligations" below for additional information regarding
the risks associated with mortgage-backed 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. Treasury securities. These investment instruments may
be highly volatile.
ZERO COUPON SECURITIES
- ----------------------
The Fund may invest in "zero coupon" fixed income securities. These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis. The Fund is required to distribute the income on zero coupon
securities to Fund shareholders as the income accrues, even though the Fund is
not receiving the income in cash on a current basis. Thus the Fund may be forced
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 is generally more volatile than that of non-zero
coupon fixed income securities of comparable quality and maturity.
COLLATERALIZED MORTGAGE OBLIGATIONS
- -----------------------------------
The Fund may invest in collateralized mortgage obligations ("CMOs"). A CMO
is a limited recourse security backed by a portfolio of mortgages or, more
typically, by mortgage-backed securities held under an indenture. CMOs may be
issued by instrumentalities of the U.S. Government or by non-governmental
entities. The issuer's obligation to make interest and principal payments is
derived from and 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 payments on the underlying collateral or a combination
thereof. CMOs of different classes or series 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, the early retirement of a particular class or series
of CMOs held by the Fund could involve the loss of any premium the Fund paid
when it acquired the investment and could result in the Fund's reinvesting the
proceeds at a lower interest rate than the interest rate paid by the retired
CMO. Because of the early retirement feature, CMOs may be more volatile than
many other fixed income investments. In addition, slower than anticipated
prepayments on the underlying mortgages can extend the effective maturities of
CMOs, subjecting them to a greater risk of decline in market value in response
to rising interest rates than traditional debt securities.
COMMERCIAL MORTGAGE-BACKED SECURITIES
- -------------------------------------
The Fund may invest in commercial mortgage-backed securities. Commercial
mortgage-backed securities are securities that represent an interest in, or are
secured by, mortgage loans secured by commercial property, such as industrial
and warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals, and senior living centers. The commercial mortgage-backed
securities market is newer and in terms of total outstanding principal amount of
issues is relatively small compared to the total size of the market for
residential mortgage-backed securities.
-7-
<PAGE>
Commercial mortgage-backed securities are generally structured similarly to
pass-through securities or to CMOs, although other structures are possible. They
may pay fixed or adjustable rates of interest. Commercial mortgage-backed
securities have been issued in public or private transactions by a variety of
public and private issuers.
The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics. Commercial mortgage loans
generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties. Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial mortgage-backed
securities may relate only to a few properties or a single property. The risk
involved in single property financings is highly concentrated. In addition,
commercial properties, particularly industrial and warehouse properties, are
subject to environmental risks and the burdens and costs of compliance with
environmental laws and regulations. At the same time, commercial mortgage-backed
securities may have a lower prepayment risk than residential mortgage-backed
securities, because commercial mortgage loans generally prohibit or impose
penalties on prepayments of principal. In addition, commercial mortgage-backed
securities often are structured with some form of credit enhancement to protect
against potential losses on the underlying mortgage loans.
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. Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. Due to the conversion
feature, convertible securities generally yield less than nonconvertible
securities of similar credit quality and maturity. The Fund's investments 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. Because conversion of such securities 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.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis. This means that
the Fund will enter into a commitment to buy the security before the security
has been issued. The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment. The security
is typically delivered to the Fund 15 to 120 days later. No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued. 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 held in its portfolio at the time. When the Fund buys
a security on a when-issued basis, it is subject to the risk that market rates
of interest will increase before the time the security is delivered, with the
result that the yield on the security delivered to the Fund may be lower than
the yield available on other, comparable securities at the time of delivery. If
the Fund has outstanding obligations to buy when-issued securities, it will
maintain liquid assets in a segregated account at its custodian bank in an
amount sufficient to satisfy these obligations.
-8-
<PAGE>
LOWER RATED FIXED INCOME SECURITIES
- -----------------------------------
The Fund may invest a portion of its assets in securities rated below
investment grade ("lower rated fixed income securities"), including securities
in the lowest rating categories, and unrated securities determined by Loomis
Sayles to be of comparable quality. Lower rated fixed income securities
generally provide higher yields, but are subject to greater credit and market
risk than higher quality fixed income securities. Lower rated fixed income
securities are considered speculative with respect to the ability of the issuer
to meet principal and interest payments. Achievement of the Fund's investment
objective through investments in Lower rated fixed income securities may be more
dependent on Loomis Sayles's credit analysis than is the case with higher
quality bonds. The market for lower rated fixed income securities may be more
severely affected than other financial markets by economic recession or
substantial interest rate increases. The value and liquidity of lower rated
fixed income securities may be diminished by adverse publicity and investor
perceptions. In addition, legislation that limits the tax benefits to issuers or
holders of taxable lower rated fixed income securities or that limits the
ability of certain categories of financial institutions to invest in these
securities may adversely affect their market value. The secondary market for
lower rated fixed income securities may be less liquid than the secondary market
for higher rated fixed income securities. This lack of liquidity at certain
times may affect the values of these securities and may make the valuation and
sale of these securities by the Fund more difficult. Certain lower rated fixed
income securities do not pay interest on a current basis. However, the Fund will
accrue and distribute this interest on a current basis, and may be required to
sell securities at times when Loomis Sayles would not otherwise deem it
advisable to do so in order to generate cash for distributions. Securities of
below investment grade quality are commonly referred to as "junk bonds."
Securities in the lowest rating categories may be in poor standing or in
default. Investment grade fixed income securities may share some of the
characteristics of lower rated fixed income securities described above.
FOREIGN SECURITIES
- ------------------
The Fund may invest in securities of issuers organized or headquartered
outside the United States ("foreign securities"). The Fund will not purchase a
foreign security (for purposes of this limitation securities of Canadian issuers
publicly traded in the United States will not be treated as foreign securities)
if, as a result, the Fund's total holdings of foreign securities would exceed
20% of the Fund's total assets.
Foreign securities may present risks not associated with investments in
comparable securities of U.S. issuers. There may be less information publicly
available about a foreign corporate or governmental issuer than about a U.S.
issuer, and foreign issuers are not generally 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. In addition, the remedies of the Fund may be
extremely limited if a foreign issuer defaults on its 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
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.
-9-
<PAGE>
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 favorably
or unfavorably by changes in currency exchange rates or exchange control
regulations. Changes in the value relative to the U.S. dollar of a foreign
currency in which the Fund's holdings are denominated will result in a change in
the U.S. dollar value of the Fund's assets and the Fund's income available for
distribution.
In addition, although part of the Fund's income may be received or realized
in foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
the dividend, the Fund could be required to liquidate portfolio securities to
pay the dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time the Fund accrues expenses in U.S. dollars and
the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars will be greater than the equivalent amount in such
currency of such expenses at the time they were incurred.
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's sole general
partner is indirectly owned by New England Investment Companies, L.P., a
publicly traded limited partnership whose sole general partner is indirectly
owned by Metropolitan Life Insurance Company.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.
The portfolio manager for the Fund since its inception has been Daniel
J. Fuss, who has been with Loomis Sayles since 1976 and is head of the Fixed
Income Management Group. Mr. Fuss is an Executive Vice President of Loomis
Sayles.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This fee is
paid at the annual rate of 0.50% of the Fund's average weekly net assets.
In addition to the investment advisory fee, the Fund pays all expenses
not expressly assumed by Loomis Sayles, including taxes, brokerage commissions,
fees of the Fund's custodian, independent accountants and legal counsel and fees
of the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.
Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's annualized total operating expenses to .65% of average annual
net assets.
PORTFOLIO TRANSACTIONS
Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund. Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets. The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions. High portfolio turnover may
involve higher costs such as higher
-10-
<PAGE>
brokerage commissions and higher levels of taxable gains. Portfolio turnover
rates for the life of the Fund are set forth above under the heading "Prior
Performance." See "Dividends, Capital Gain Distributions and Taxes" for
information on the tax consequences of investing in the Fund.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.
The minimum initial investment in the Fund is $3,000,000. Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.
Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund. Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer. A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered. A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (617) 482-2450.
Loomis Sayles will not approve the acceptance of securities in exchange for
shares of the Fund unless (1) Loomis Sayles, in its sole discretion, believes
the securities are appropriate investments for the Fund; (2) the investor
represents and agrees that all securities offered to the Fund can be resold by
the Fund without restriction under the Securities Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by the exchange of securities.
Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction. After an account has been
established, you may send subsequent investments at any time.
The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate. Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust. Shares of the Fund are
sold without any sales charge. The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding. Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading. Portfolio securities are valued at their
market value as more fully described in the Statement of Additional
Information.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to the Trust.
-11-
<PAGE>
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed. All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).
The redemption price will be the net asset value per share next determined
after the written redemption request and any necessary special documentation are
received by the Trust in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order. If
you purchased your shares by check and your check was deposited less than
fifteen days prior to the redemption request, the Trust may withhold redemption
proceeds until your check has cleared.
Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
OTHER INFORMATION
The Board of Trustees may, without shareholder approval, divide the Trust's
shares of beneficial interest into multiple series. The Trust is currently
divided into nine series, including the Fund, the other publicly-offered funds
listed on the cover of this Prospectus, and two other funds, Loomis Sayles
Convertible Bond Fund and Loomis Sayles Mortgage Securities Fund, shares of
which are not presently being publicly offered.
As of November 7, 1996, Exeter Reassurance Company, Ltd. may be deemed to
control the Fund because it possessed beneficial ownership, either directly or
indirectly, of more than 25% of the Fund's shares.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes. The Fund pays any net investment income to shareholders as
dividends annually in December. The Fund also distributes all of its net
realized capital gains after applying any capital loss carryovers. Any capital
gain distributions are normally made annually in December, but may, to the
extent permitted by law, be made more frequently as deemed advisable by the
Trustees. The Trustees may change the frequency with which the Fund declares or
pays dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash. Dividends and capital gain distributions will be taxed
as described below whether received in cash or in additional shares.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended. As such, so long as the Fund
distributes substantially all its net investment income and net realized capital
gains to its shareholders on a current basis, the Fund itself does not pay any
federal income or excise tax. The Fund intends to make sufficient distributions
to be relieved of federal taxes.
-12-
<PAGE>
Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares. Long-
term capital gain distributions are treated as long-term capital gains to you
whether distributed in cash or additional shares and regardless of how long you
have held your shares. However, any loss recognized by you on the taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain distribution you received with
respect to the shares.
The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.
In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.
The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund. Before investing, you should consult your own tax adviser
for more information concerning the federal, state and local tax consequences of
investing in, redeeming or exchanging Fund shares.
TRANSFER AND DIVIDEND INVESTMENT ADVISER
PAYING AGENT AND Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS One Financial Center
State Street Bank and Trust Company Boston, Massachusetts 02111
Boston, Massachusetts 02102
-13-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS ASSIGNED BY
STANDARD & POOR'S AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S
- -----------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C
The rating C is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
1
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
- -------------------------------
Aaa
Bonds that 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 edge."
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 that 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 are other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A
Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds that 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.
2
<PAGE>
C
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designed by the symbols Aa1, A1,
Baa1, Ba1 and B1, and those with the weakest investment attributes are
designated by the symbols Aa3, A3, Baa3, Ba3 and B3.
3
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES OF +
+THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CALIFORNIA TAX-FREE INCOME FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PROSPECTUS
_______ __, 1996
The Loomis Sayles Investment Trust (the "Trust") is a group of nine mutual
funds including the Loomis Sayles California Tax-Free Income Fund (the "Fund").
The other series which are publicly offered by the Trust and are described in
separate prospectuses are:
Loomis Sayles Core Fixed Income Fund
Loomis Sayles Core Growth Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles High Yield Fixed Income Fund
Loomis Sayles Intermediate Duration Fixed Income Fund
Loomis Sayles Investment Grade Fixed Income Fund
Except for the Fund, the funds are designed specifically for tax-exempt
investors such as pension plans, endowments and foundations, although other
institutions and high net-worth individuals are eligible to invest. Each of the
funds is separately managed and has its own investment objective and policies.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment adviser of
each of the funds.
This Prospectus concisely describes the information that you should know
before investing in the Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated ________ __, 1996 is
available free of charge; to obtain a free copy or to make any inquiries about
the Fund write to Loomis Sayles Investment Trust, One Financial Center, Boston,
Massachusetts 02111 or telephone (617) 482-2450. The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
TRANSFERRED OR RESOLD UNLESS SO REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE
SECURITIES ARE REDEEMABLE AS DESCRIBED IN THIS PROSPECTUS. IN CERTAIN CASES
INVESTORS MAY BE REDEEMED "IN KIND" AND RECEIVE PORTFOLIO SECURITIES HELD BY THE
FUND IN LIEU OF CASH UPON REDEMPTION. IN SUCH CASE, AN INVESTOR WILL INCUR
COSTS WHEN THE INVESTOR SELLS THE SECURITIES DISTRIBUTED.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF EXPENSES.................................................-3-
PRIOR PERFORMANCE...................................................-4-
THE TRUST...........................................................-5-
INVESTMENT OBJECTIVE AND POLICIES...................................-5-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS.......................-6-
THE FUND'S INVESTMENT ADVISER.......................................-8-
FUND EXPENSES.......................................................-8-
PORTFOLIO TRANSACTIONS..............................................-8-
HOW TO PURCHASE SHARES..............................................-8-
HOW TO REDEEM SHARES................................................-9-
OTHER INFORMATION...................................................-9-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES....................-10-
</TABLE>
-2-
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly. The information is based on annualized expenses for the
Fund's fiscal year ended December 31, 1995. The information below should not be
considered a representation of past or future expenses, as actual expenses may
be greater or less than those shown. Also, the assumed 5% annual return in the
example should not be considered a representation of investment performance, as
actual performance will depend upon the actual investment results of securities
held in the Fund's portfolio.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) none
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage of
offering price) none
Deferred Sales Load (as a percentage of original
purchase price or redemption
proceeds as applicable) none
Redemption Fees (as a percentage of amount
redeemed) none
Exchange Fees none
Annual Operating Expenses After
Expense Reimbursement (as a
percentage of net assets):/1/
Management Fees/1/ 0%
12b-1 Fees none
Other Operating Expenses/1/ .65%
Total Operating Expenses/1/ .65%
Example
You would pay the following
expenses on a $1,000 investment
assuming a 5% annual return
(with or without a redemption at
the end of each time period):
One Year $7
Three Years $21
Five Years $36
Ten Years $81
______________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total operating expenses to the percentage of net assets shown above.
In the absence of the voluntary expense limitation, Management Fees, Other
Operating Expenses and Total Operating Expenses for the fiscal year ended
December 31, 1995 would have been .50%, 1.12% and 1.62%, respectively.
-3-
<PAGE>
PRIOR PERFORMANCE
(For a share of the Fund outstanding throughout the indicated periods)
The information presented below relates to periods prior to the
effectiveness of the Fund's registration statement under the Securities Act of
1933, as amended. The information presented below for the six months ended June
30, 1996 is unaudited. The information presented below for other periods is
included in financial statements of the Fund that have been audited by Coopers &
Lybrand L.L.P., independent accountants. The following information should be
read in conjunction with the financial statements and the notes thereto
contained in the Fund's 1996 Semiannual Report and 1995 Annual Report, which are
incorporated by reference in this Prospectus and the Statement of Additional
Information.
<TABLE>
<CAPTION>
Six Months June 1* through
Ended June 30, December 31,
1996 1995
--------------- ----------------
<S> <C> <C>
Net asset value, beginning of period....................................... $ 10.23 $ 10.00
Income from investment operations -
Net investment income...................................................... 0.26 0.26
Net realized and unrealized gain on investments............................ (0.20) 0.23
------- -------
Total from investment operations......................................... 0.06 0.49
------- -------
Less dividends from net investment income.................................. (0.26) (0.26)
------- -------
Net asset value, end of period............................................. $ 10.03 $ 10.23
Total return (%)........................................................... 0.20 4.9
Net assets, end of period (000)............................................ $10,136 $ 7,880
Ratio of operating expenses to average net assets (%)...................... 0.65** .76**
Ratio of net investment income to average net assets (%)................... 4.52** 5.30**
Portfolio turnover rate (%)................................................ 10.4 18.4
Without giving effect to the voluntary expense limitation:
The ratio of operating expenses to average net assets would have been (%).. 3.84** 1.62**
The net income per share would have been................................... $ 0.17 $ 0.22
</TABLE>
* Commencement of operations.
**Annualized.
Further information about the performance of the Fund is contained in the Fund's
semiannual and annual reports to shareholders, which may be obtained without
charge by writing or telephoning the Trust at the address and telephone number
stated on the cover of this Prospectus.
-4-
<PAGE>
THE TRUST
The Fund is a series of the Trust. The other series are the Loomis Sayles
Convertible Bond Fund, the Loomis Sayles Core Fixed Income Fund, the Loomis
Sayles Core Growth Fund, the Loomis Sayles Fixed Income Fund, the Loomis Sayles
High Yield Fixed Income Fund, the Loomis Sayles Intermediate Duration Fixed
Income Fund, the Loomis Sayles Investment Grade Fixed Income Fund and the Loomis
Sayles Mortgage Securities Fund. The Trust is a diversified open-end management
investment company which was organized as a Massachusetts business trust on
December 23, 1993. The Trust is authorized to issue an unlimited number of full
and fractional shares of beneficial interest in multiple series. Shares are
freely transferable and entitle shareholders to receive dividends as determined
by the Trust's board of trustees (the "Trustees") and to cast a vote for each
share held (with fractional votes for each fractional share held) at shareholder
meetings. The Trust does not generally hold shareholder meetings and will do so
only when required by law. Shareholders may call meetings to consider removal of
the Trustees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to achieve as high a level of current
income exempt from both federal income tax and California personal income tax as
is consistent with preservation of capital.
The Fund seeks to attain its objective by normally investing substantially
all of its assets in securities the income from which is, in the opinion of the
issuer's counsel at the time of issuance, exempt from both federal income tax
and California personal income tax ("California tax exempt securities"). It is a
fundamental policy of the Fund that, during periods of normal market conditions,
at least 80% of its net assets will be invested in California tax exempt
securities. Normally at least 80% of its assets will be invested in issues rated
A or better by Standard & Poors ("S&P") OR Moody's Investors Service, Inc.
("Moody's"). All issues will be rated at least BBB by S&P or Baa by Moody's (or,
if unrated, be of equivalent credit quality as determined by Loomis Sayles) at
the time of purchase. Bonds of BBB or Baa quality have some speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make principal and interest payments
than is the case with higher grade bonds. In the event that the credit rating of
a security held by the Fund falls below investment grade (or, in the case of
unrated securities, Loomis Sayles determines that the quality of such security
has deteriorated below investment grade), the Fund will not be obligated to
dispose of such security and may continue to hold such security, if, in the
opinion of Loomis Sayles, such investment is appropriate in the
circumstances.
The Fund may invest up to 20% of its net assets in high quality corporate
obligations, U.S. Government obligations and repurchase agreements. Income from
these investments may be subject to federal income tax and/or California
personal income tax.
Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders. Such restrictions
include: (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (3) a restriction prohibiting the
Fund from purchasing any illiquid security including a 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. For additional
investment restrictions, see the Statement of Additional Information.
Although authorized to invest in restricted securities, the Fund, as a
matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than 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 Trustees, that
the particular issue of Rule 144A securities is liquid.
The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders. All investment policies
other than those identified as "fundamental" may be changed by the Trustees
without a vote of the Fund's shareholders.
-5-
<PAGE>
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The net asset value of the Fund's shares will vary as a result of changes
in the value of securities in the Fund's portfolio. The following describes the
types of securities in which the Fund will principally invest and the risks
associated with them. Additional information about the Fund's investment
practices can be found in the Statement of Additional Information.
FIXED INCOME SECURITIES
- -----------------------
The Fund may invest in fixed income securities of any maturity. 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.
Because interest rates vary, it is impossible to predict the income of the Fund
for any particular period.
Fixed income securities are subject to credit and market risk. Credit risk
relates to the ability of the issuer to make payments of principal and interest.
Market risk relates to changes in a security's value as a result of changes in
interest rates generally. In general, the values of fixed income securities
increase when prevailing interest rates fall and decrease when interest rates
rise. Generally, the longer the maturity of a fixed income security, the greater
the fluctuations in its value because of market and credit risk.
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 will fluctuate as interest rates change. Thus, for
example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities,
representing interests in "pools" of mortgage loans secured by residential or
commercial real property. 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, slower than anticipated prepayments on the underlying mortgages can
extend the effective maturities of mortgage-backed securities, subjecting them
to a greater risk of decline in market value in response to rising interest
rates than traditional debt 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. Treasury securities. These investment instruments may
be highly volatile.
COMMERCIAL MORTGAGE-BACKED SECURITIES
- -------------------------------------
The Fund may invest in commercial mortgage-backed securities. Commercial
mortgage-backed securities are securities that represent an interest in, or are
secured by, mortgage loans secured by commercial property, such as industrial
and warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals, and senior living centers. The commercial mortgage-backed
securities market is newer and in terms of total
-6-
<PAGE>
outstanding principal amount of issues is relatively small compared to the total
size of the market for residential mortgage-backed securities.
Commercial mortgage-backed securities are generally structured similarly to
pass-through securities or to collateralized mortgage obligations, although
other structures are possible. They may pay fixed or adjustable rates of
interest. Commercial mortgage-backed securities have been issued in public or
private transactions by a variety of public and private issuers.
The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics. Commercial mortgage loans
generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties. Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial mortgage-backed
securities may relate only to a few properties or a single property. The risk
involved in single property financings is highly concentrated. In addition,
commercial properties, particularly industrial and warehouse properties, are
subject to environmental risks and the burdens and costs of compliance with
environmental laws and regulations. At the same time, commercial mortgage-backed
securities may have a lower prepayment risk than residential mortgage-backed
securities, because commercial mortgage loans generally prohibit or impose
penalties on prepayments of principal. In addition, commercial mortgage-backed
securities often are structured with some form of credit enhancement to protect
against potential losses on the underlying mortgage loans.
ZERO COUPON SECURITIES
- ----------------------
The Fund may invest in "zero coupon" fixed income securities. These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis. The Fund is required to distribute the income on zero coupon
securities to Fund shareholders as the income accrues, even though the Fund is
not receiving the income in cash on a current basis. Thus the Fund may be forced
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 is generally more volatile than that of non-zero
coupon fixed income securities of comparable quality and maturity.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis. This means that
the Fund will enter into a commitment to buy the security before the security
has been issued. The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment. The security
is typically delivered to the Fund 15 to 120 days later. No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued. 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. 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 time of delivery. If the
Fund has outstanding obligations to buy when-issued securities, it will maintain
liquid assets in a segregated account at its custodian bank in an amount
sufficient to satisfy these obligations.
CALIFORNIA FISCAL CONDITION
- ---------------------------
Because the Fund will invest primarily in California tax exempt securities,
its performance may be especially affected by factors pertaining to the
California economy and other factors specifically affecting the ability of
issuers of California tax exempt securities to meet their obligations. As a
result, the value of the Fund's shares may fluctuate more widely than the value
of shares of a portfolio investing in securities relating to a number of
different states. The ability of state, county, or local governments to meet
their obligations will depend primarily on the availability of tax and other
revenues to those governments and on their fiscal conditions generally. An
-7-
<PAGE>
expanded discussion of risks associated with California tax exempt securities is
contained in the Statement of Additional Information.
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's sole general
partner is indirectly owned by New England Investment Companies, L.P., a
publicly traded limited partnership whose sole general partner is indirectly
owned by Metropolitan Life Insurance Company.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.
The portfolio managers for the Fund are Kent P. Newmark and Robert K.
Payne. Mr. Newmark is a Vice President of Loomis Sayles and a Managing Partner
of its San Francisco office. Mr. Payne is a Vice President of Loomis Sayles. Mr.
Newmark has been with Loomis Sayles for 17 years and Mr. Payne for 11 years.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This fee is
paid at the annual rate of 0.50% of the Fund's average weekly net assets.
In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.
Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's annualized total operating expenses to .65% of average annual
net assets.
PORTFOLIO TRANSACTIONS
Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund. Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets. The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions. High portfolio turnover may
involve higher costs such as higher brokerage commissions and higher levels of
taxable gains. Portfolio turnover rates for the life of the Fund are set forth
above under the heading "Prior Performance." See "Dividends, Capital Gain
Distributions and Taxes" for information on the tax consequences of investing
in the Fund.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles. The minimum initial
investment in the Fund is $500,000. Subsequent investments must be at least
$50,000. The Trust reserves the right to waive these minimums in its sole
discretion.
Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund. Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's
-8-
<PAGE>
next determination of net asset value after such acceptance. All dividends and
subscription or other rights which are reflected in the market price of accepted
securities at the time of valuation become the property of the Fund and must be
delivered to the Fund upon receipt by the investor from the issuer. A gain or
loss for federal income tax purposes would be realized upon the exchange of any
securities tendered. A shareholder who wishes to purchase shares by exchanging
securities should obtain instructions by calling (617) 482-2450.
Loomis Sayles will not approve the acceptance of securities in exchange for
shares of the Fund unless (1) Loomis Sayles, in its sole discretion, believes
the securities are appropriate investments for the Fund; (2) the investor
represents and agrees that all securities offered to the Fund can be resold by
the Fund without restriction under the Securities Act of 1933, as amended, or
otherwise; and (3) the securities are eligible to be acquired under the Fund's
investment policies and restrictions. No investor owning 5% or more of the
Fund's shares may purchase additional Fund shares by the exchange of
securities.
Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction. After an account has been
established, you may send subsequent investments at any time.
The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate. Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust. Shares of the Fund are
sold without any sales charge. The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding. Net asset value is calculated weekly and as of the close of the New
York Stock Exchange (the "Exchange") on each day on which an order for purchase
or redemption of Fund shares is received and on which the Exchange is open for
unrestricted trading. Portfolio securities are valued at their market value as
more fully described in the Statement of Additional Information.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to the Trust.
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed. All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).
The redemption price will be the net asset value per share next determined
after the written redemption request and any necessary special documentation are
received by the Trust in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order.
Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
-9-
<PAGE>
OTHER INFORMATION
The Board of Trustees may, without shareholder approval, divide the Trust's
shares of beneficial interest into multiple series. The Trust is currently
divided into nine series, including the Fund, the other publicly-offered funds
listed on the cover of this Prospectus, and two other funds, Loomis Sayles
Convertible Bond Fund and Loomis Sayles Mortgage Securities Fund, shares of
which are not presently being publicly offered.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Fund pays its net investment income to shareholders as dividends
monthly. Any capital gain distributions are normally made annually in December,
but may, to the extent permitted by law, be made more frequently as deemed
advisable by the Trustees. The Fund distributes annually in December all of its
net capital gains realized from the sale of portfolio securities. The Trustees
may change the frequency with which the Fund declares or pays dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). As such, so long as the
Fund distributes substantially all its net investment income and net capital
gains to its shareholders, the Fund itself does not pay any federal income or
excise tax.
Fund dividends designated as "exempt-interest dividends" are not generally
subject to federal income tax or California personal income tax (to the extent
derived from California tax exempt securities). However, an investment in the
Fund may result in liability for federal alternative minimum tax for corporate
and individual shareholders.
It is anticipated that the Fund will be operated so that its dividends will
be exempt-interest dividends. However, as described under "Investment Objective
and Policies," certain investments of the Fund may produce taxable income.
Distributions of such income will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains (if any) will be taxable
to you as such, regardless of how long you have owned shares of the Fund. These
distributions will be taxable as described whether distributed in cash or
additional shares.
The Fund may at times purchase California tax exempt securities at a
discount from the price at which they were originally issued. For federal income
tax purposes, some or all of this market discount will be included in the Fund's
ordinary income and will be taxable to you as such when it is distributed to
you.
If you incur or continue indebtedness to purchase or carry shares of the
Fund, that portion of interest paid or accrued on such indebtedness that equals
the total interest paid or accrued on the indebtedness, multiplied by the
percentage of the Fund's total distributions (not including distributions from
net long-term capital gains) paid to you that are exempt-interest dividends, is
not deductible for federal income tax purposes. The Internal Revenue Service may
consider the purchase of shares to have been made with borrowed funds even
though such funds are not directly traceable to the purchase of shares.
Under the Code, if you sell a share of the Fund after holding it for six
months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the amount of any exempt-interest dividends that you
have received with respect to the share that is sold and will be treated as a
long-term capital loss to the extent of any capital gain dividend received with
respect to such share.
If you receive social security or railroad retirement benefits, you may be
taxed at the federal level on a portion of those benefits as a result of
receiving tax-exempt income (including exempt-interest dividends distributed by
the Fund). California personal income tax does not apply to social security or
railroad retirement benefits.
-10-
<PAGE>
The Fund is required to withhold 31% of any redemption proceeds and all
taxable income dividends and capital gain distributions it pays to you (1) if
you do not provide a correct, certified taxpayer identification number, (2) if
the Fund is notified that you have underreported income in the past, or (3) if
you fail to certify to the Fund that you are not subject to such
withholding.
In January of each year, the Trust will send you a statement showing the
tax status of dividends and distributions paid to you during the year.
The foregoing summarizes certain tax consequences of investing in the Fund.
Before investing, you should consult your own tax adviser for more information
concerning the federal, state and local tax consequences of investing in,
redeeming or exchanging Fund shares.
TRANSFER AND DIVIDEND INVESTMENT ADVISER
PAYING AGENT AND Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS One Financial Center
State Street Bank and Trust Company Boston, Massachusetts
Boston, Massachusetts 02102 02111
-11-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS ASSIGNED BY
STANDARD & POOR'S AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S
- -----------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C
The rating C is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
1
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
- -------------------------------
Aaa
Bonds that 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 edge."
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 that 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 are other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds that 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.
<PAGE>
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designed by the symbols Aa1, A1,
Baa1, Ba1 and B1, and those with the weakest investment attributes are
designated by the symbols Aa3, A3, Baa3, Ba3 and B3.
3
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES OF +
+THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CORE GROWTH FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PROSPECTUS
________________ ____, 1996
The Loomis Sayles Investment Trust (the "Trust") is a group of nine
mutual funds including the Loomis Sayles Core Growth Fund (the "Fund"). The
other series which are publicly offered by the Trust and are described in
separate prospectuses are:
Loomis Sayles California Tax-Free Income Fund
Loomis Sayles Core Fixed Income Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles High Yield Fixed Income Fund
Loomis Sayles Intermediate Duration Fixed Income Fund
Loomis Sayles Investment Grade Fixed Income Fund
Except for the California Tax-free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest. Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.
This Prospectus concisely describes the information that you should know
before investing in the Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated _________ ___, 1996 is
available free of charge; to obtain a free copy or to make any inquiries
about the Fund write to Loomis Sayles Investment Trust, One Financial Center,
Boston, Massachusetts 02111 or telephone (617) 482-2450. The Statement of
Additional Information, which contains more detailed information about the Fund,
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
TRANSFERRED OR RESOLD UNLESS SO REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE
SECURITIES ARE REDEEMABLE AS DESCRIBED IN THIS PROSPECTUS. IN CERTAIN CASES
INVESTORS MAY BE REDEEMED "IN KIND" AND RECEIVE PORTFOLIO SECURITIES HELD BY THE
FUND IN LIEU OF CASH UPON REDEMPTION. IN SUCH CASE, AN INVESTOR WILL INCUR
COSTS WHEN THE INVESTOR SELLS THE SECURITIES DISTRIBUTED.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF EXPENSES .........................................................-3-
PRIOR PERFORMANCE ...........................................................-4-
THE TRUST ...................................................................-5-
INVESTMENT OBJECTIVE AND POLICIES ...........................................-5-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS ...............................-5-
THE FUND'S INVESTMENT ADVISER ...............................................-6-
FUND EXPENSES ...............................................................-6-
PORTFOLIO TRANSACTIONS ......................................................-7-
HOW TO PURCHASE SHARES ......................................................-7-
HOW TO REDEEM SHARES ........................................................-8-
OTHER INFORMATION ...........................................................-8-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES .............................-8-
</TABLE>
-2-
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly. The information is based on annualized expenses for
the Fund's fiscal year ended December 31, 1995. The information below should
not be considered a representation of past or future expenses, as actual
expenses may be greater or less than those shown. Also, the assumed 5% annual
return in the example should not be considered a representation of investment
performance, as actual performance will depend upon the actual investment
results of securities held in the Fund's portfolio.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) none
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage of
offering price) none
Deferred Sales Load (as a percentage of original
purchase price or redemption
proceeds as applicable) none
Redemption Fees (as a percentage of amount
redeemed) none
Exchange Fees none
Annual Operating Expenses After
Expense Reimbursement (as a
percentage of net assets):/1/
Management Fees/1/ 0%
12b-1 Fees none
Other Operating expenses/1/ .65%
Total Operating expenses/1/ .65%
Example
You would pay the following
expenses on a $1,000 investment
assuming a 5% annual return
(with or without a redemption at
the end of each time period):
One Year $ 7
Three Years $21
Five Years $36
Ten Years $81
_____________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to
limit the Fund's total operating expenses to the percentage of net assets shown
above. In the absence of the voluntary expense limitation, Management Fees,
Other Operating Expenses and Total Operating Expenses for the fiscal year ended
December 31, 1995 would have been .50%, .93% and 1.43%, respectively.
-3-
<PAGE>
PRIOR PERFORMANCE
(For a share of the Fund outstanding throughout the indicated periods)
The information presented below relates to periods prior to the
effectiveness of the Fund's registration statement under the Securities Act of
1933, as amended. The information presented below for the six months ended June
30, 1996 is unaudited. The information presented below for other periods is
included in financial statements of the Fund that have been audited by Coopers &
Lybrand L.L.P., independent accountants. The following information should be
read in conjunction with the financial statements and the notes thereto
contained in the Fund's 1996 Semiannual Report and 1995 Annual Report, which are
incorporated by reference in this Prospectus and the Statement of Additional
Information.
<TABLE>
<CAPTION>
OCTOBER
SIX MONTHS 1* THROUGH
ENDED JUNE 30, DECEMBER 31,
1996 (UNAUDITED) 1995
---------------- -------------
<S> <C> <C>
Net asset value, beginning of period......................... $ 10.02 $ 10.00
Income from investment operations -
Net investment income....................................... 0.05 0.02
Net realized and unrealized gain on investments............. 0.44 0.02
Total from investment operations........................... 0.49 0.04
Less distributions -
Dividends from net investment income........................ 0.00 (0.02)
Net asset value, end of period............................... $ 10.51 $ 10.02
Total return (%)............................................. 4.90 0.4
Net assets, end of period (000).............................. $19,964 $ 7,609
Ratio of operating expenses to average net assets (%)........ 0.65** 0.65**
Ratio of net investment income to average net assets (%)..... 1.19** 1.36**
Portfolio turnover rate (%).................................. 33.5 22.4
Without giving effect to the voluntary expense limitations:
The ratio of operating expenses to average net assets
would have been (%).......................................... 0.94** 1.43**
The net income per share would have been..................... $ 0.04 $ 0.01
</TABLE>
* Commencement of operations.
**Annualized.
***For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for trades upon which
commissions are charged. This generally does not reflect mark-ups, mark-downs
or spreads on securities traded on a principal basis.
Further information about the performance of the Fund is contained in the
Fund's semiannual and annual reports to shareholders, which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.
-4-
<PAGE>
THE TRUST
The Fund is a series of the Trust. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993. The Trust is authorized to issue an unlimited number
of full and fractional shares of beneficial interest in multiple series. Shares
are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with fractional votes for each fractional share held) at
shareholder meetings. The Trust does not generally hold shareholder meetings and
will do so only when required by law. Shareholders may call meetings to consider
removal of the Trustees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital.
The Fund seeks to attain its objective by identifying and investing in the
common stock of companies that will report above average and better than
consensus earnings growth over several years. While this approach will often
lead to investing in "traditional" growth companies, it may also encompass
investments in such areas as revitalized industries, restructured companies and
cyclically sensitive companies at the early stages of an economic advance. In
addition to superior earnings prospects, the Fund looks for companies undergoing
qualitative improvement likely to result in an upgraded valuation. Although such
companies may present greater opportunity for capital appreciation, investors
should be aware that greater risk may be associated with investments in such
companies than with equity securities generally. The Fund may also invest in
securities issued or guaranteed by the U.S. Government, its authorities,
agencies or instrumentalities and certificates representing undivided interests
in the interest or principal of U.S. Treasury securities ("U.S. Government
securities"), when-issued securities, convertible securities and zero coupon
bonds.
Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders . Such restrictions
include: (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from purchasing a security (other than U.S.
Government Securities) if, as a result, more than 25% of the Fund's total assets
(taken at current value) would be invested in any one industry; (3) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a 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. For additional
investment restrictions, see the statement of Additional Information.
Although authorized to invest in restricted securities, the Fund, as a
matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than 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 Trustees, that
the particular issue of Rule 144A securities is liquid.
The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders. All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The net asset value of the Fund's shares will vary as a result of changes
in the value of securities in the Fund's portfolio. The following describes the
securities in which the Fund will principally invest and risks
-5-
<PAGE>
associated with them. Additional information about the Fund's investment
practices can be found in the Statement of Additional Information.
EQUITY SECURITIES
- -----------------
While offering greater potential for long-term growth, equity securities
are more volatile and more risky than some other forms of investment. The Fund's
investments may include securities traded "over-the-counter" as well as those
traded on a securities exchange. Some over-the-counter securities may be more
difficult to sell under some market conditions.
SMALL COMPANIES
- ---------------
The Fund may invest in the securities of companies with smaller
capitalization. Investments in companies with relatively small capitalization
may involve greater risk than is usually associated with more established
companies. These companies often have sales and earnings growth rates which
exceed those of companies with larger capitalization. Such growth rates may in
turn be reflected in more rapid share price appreciation. However, companies
with smaller capitalization often have limited product lines, markets or
financial resources and they may be dependent upon a relatively small management
group. The securities may have limited marketability and may be subject to more
abrupt or erratic movements in price than securities of companies with larger
capitalization or the market averages in general. The net asset value of funds
that invest in companies with small capitalization therefore may fluctuate more
widely than market averages.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis. This
means that the Fund will enter into a commitment to buy the security before the
security has been issued. The Fund's payment obligation and the interest rate on
the security are determined when the Fund enters into the commitment. The
security is typically delivered to the Fund 15 to 120 days later. No interest
accrues on the security between the time the Fund enters into the commitment and
the time the security is issued. 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. If the Fund has
outstanding obligations to buy when-issued securities, it will maintain liquid
assets in a segregated account at its custodian bank in an amount sufficient to
satisfy these obligations.
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's sole general
partner is indirectly owned by New England Investment Companies, L.P., a
publicly traded limited partnership whose sole general partner is indirectly
owned by Metropolitan Life Insurance Company.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.
The portfolio manager for the Fund is Quentin P. Faulkner. Mr. Faulkner is
a Vice President of Loomis Sayles and a Managing Partner of its Boston
Counseling Group office.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This fee is
paid at the annual rate of .50% of the Fund's average weekly net assets.
-6-
<PAGE>
In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.
Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's annualized total operating expenses to .65% of average annual
net assets.
PORTFOLIO TRANSACTIONS
Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund. Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets. The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions. High portfolio turnover may
involve higher costs such as higher brokerage commissions and higher levels of
taxable gains. Portfolio turnover rates for the life of the Fund are set forth
above under the heading "Prior Performance." See "Dividends, Capital Gain
Distributions and Taxes" for information on the tax consequences of investing in
the Fund.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles. The minimum initial
investment in the Fund is $2,500,000. Subsequent investments must be at least
$50,000. The Trust reserves the right to waive these minimums in its sole
discretion.
Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund. Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer. A gain or loss for federal income tax purposes would be realized upon
the exchange of any securities tendered. A shareholder who wishes to purchase
shares by exchanging securities should obtain instructions by calling (617) 482-
2450.
Loomis Sayles will not approve the acceptance of securities in exchange for
shares of the Fund unless (1) Loomis Sayles, in its sole discretion, believes
the securities are appropriate investments for the Fund; (2) the investor
represents and agrees that all securities offered to the Fund can be resold by
the Fund without restriction under the Securities Act of 1933, as amended, or
otherwise; and (3) the securities are eligible to be acquired under the Fund's
investment policies and restrictions. No investor owning 5% or more of the
Fund's shares may purchase additional Fund shares by the exchange of
securities.
Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction. After an account has been
established, you may send subsequent investments at any time.
The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate. Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust. Shares of the Fund are
sold without any sales charge. The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding. Net asset value is calculated weekly and as of the close of the New
York Stock Exchange (the "Exchange") on each day on which an order for purchase
or redemption of Fund shares is received and on which the Exchange is open
for
-7-
<PAGE>
unrestricted trading. Portfolio securities are valued at their market value as
more fully described in the Statement of Additional Information.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to the Trust.
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed. All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).
The redemption price will be the net asset value per share next determined
after the written redemption request and any necessary special documentation are
received by the Trust in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order.
Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
OTHER INFORMATION
The Board Of Trustees may, without shareholder approval, divide the Trust's
shares of beneficial interest into multiple series. The Trust is currently
divided into nine series, including the Fund, the other publicly-offered funds
listed on the cover of this Prospectus, and two other funds, Loomis Sayles
Convertible Bond Fund and Loomis Sayles Mortgage Securities Fund, shares of
which are not presently being publicly offered.
As of November 7, 1996, each of Brockton Hospital Pension Plan, Brockton
Health Corp. Endowment Plan and Jewish Federation Of Rhode Island may be deemed
to control the Fund because it possessed beneficial ownership, either directly
or indirectly, of more than 25% of the Fund's shares.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes. The Fund pays any net investment income to shareholders as
dividends annually. Any capital gain distributions are normally made annually in
December, but may, to the extent permitted by law, be made more frequently as
deemed advisable by the Trustees. The Fund distributes all of its net realized
capital gains after applying any capital loss carryovers. The Trustees may
change the frequency with which the Fund declares or pays dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash. Dividends and capital gain distributions will be taxed
as described below whether received in cash or in additional shares.
-8-
<PAGE>
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended. As such, so long as the Fund
distributes substantially all its net investment income and net realized capital
gains to its shareholders on a current basis, the Fund itself does not pay any
federal income or excise tax. The fund intends to make sufficient distributions
to be relieved of federal taxes.
Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares. Long-
term capital gain distributions are treated as long-term capital gains to you
whether distributed in cash or additional shares and regardless of how long you
have held your shares. However, any loss recognized by you on the taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain distribution you received with
respect to the shares.
A portion of any dividend from the Fund is expected to be eligible for the
dividends-received deduction for corporate shareholders.
The Trust will send you an annual statement showing the federal tax status
of dividends and distributions paid to you during the preceding year.
The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund you are not subject to such withholding.
The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund. Before investing, you should consult your own tax adviser
for more information concerning the federal, state and local tax consequences of
investing in, redeeming or exchanging Fund shares.
TRANSFER AND DIVIDEND INVESTMENT ADVISER
PAYING AGENT AND Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS One Financial Center
State Street Bank and Trust Company Boston, Massachusetts 02111
Boston, Massachusetts 02102
-9-
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES OF +
+THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES HIGH YIELD FIXED INCOME FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PROSPECTUS
_______ __, 1996
The Loomis Sayles Investment Trust (the "Trust") is a group of nine
mutual funds including the Loomis Sayles High Yield Fixed Income Fund (the
"Fund"). The other series which are publicly offered by the Trust and are
described in separate prospectuses are:
Loomis Sayles California Tax-Free Income Fund
Loomis Sayles Core Fixed Income Fund
Loomis Sayles Core Growth Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles Intermediate Duration Fixed Income Fund
Loomis Sayles Investment Grade Fixed Income Fund
Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest. Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P.("Loomis
Sayles") is the investment adviser of each of the funds.
This Prospectus concisely describes the information that you should know
before investing in the Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated _______ __, 1996 is
available free of charge; to obtain a free copy or to make any inquiries
about the Fund, write to Loomis Sayles Investment Trust, One Financial Center,
Boston, Massachusetts 02111 or telephone (617) 482-2450. The Statement of
Additional Information, which contains more detailed information about the Fund,
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE LOOMIS SAYLES HIGH YIELD FIXED INCOME FUND WILL NORMALLY INVEST AT
LEAST 65% OF ITS ASSETS IN LOWER RATED FIXED INCOME SECURITIES, COMMONLY KNOWN
AS "JUNK BONDS" AND MAY INVEST WITHOUT LIMIT IN SUCH SECURITIES. INVESTMENTS OF
THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND NON-PAYMENT OF
INTEREST. INVESTORS SHOULD ASSESS CAREFULLY THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE LOOMIS SAYLES HIGH YIELD FIXED INCOME FUND. SEE "MORE
INFORMATION ABOUT THE FUND'S INVESTMENTS; LOWER RATED FIXED INCOME
SECURITIES."
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
TRANSFERRED OR RESOLD UNLESS SO REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE
SECURITIES ARE REDEEMABLE AS DESCRIBED IN THIS PROSPECTUS. IN CERTAIN CASES
INVESTORS MAY BE REDEEMED "IN KIND" AND RECEIVE PORTFOLIO SECURITIES HELD BY THE
FUND IN LIEU OF CASH UPON REDEMPTION. IN SUCH CASE, AN INVESTOR WILL INCUR COSTS
WHEN THE INVESTOR SELLS THE SECURITIES DISTRIBUTED.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF EXPENSES........................................... -3-
PRIOR PERFORMANCE............................................. -4-
THE TRUST..................................................... -5-
INVESTMENT OBJECTIVE AND POLICIES............................. -5-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS................. -6-
THE FUND'S INVESTMENT ADVISER................................. -9-
FUND EXPENSES................................................. -10-
PORTFOLIO TRANSACTIONS........................................ -10-
HOW TO PURCHASE SHARES........................................ -10-
HOW TO REDEEM SHARES.......................................... -11-
OTHER INFORMATION............................................. -12-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............... -12-
</TABLE>
-2-
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly. The information is based on estimated annualized
expenses for the Fund's first fiscal year. The information below should not be
considered a representation of past or future expenses, as actual expenses may
be greater or less than those shown. Also, the assumed 5% annual return in the
example should not be considered a representation of investment performance, as
actual performance will depend upon the actual investment results of securities
held in the Fund's portfolio.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) none
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage of
offering price) none
Deferred Sales Load (as a percentage of original
purchase price or redemption
proceeds as applicable) none
Redemption Fees (as a percentage of amount
redeemed) none
Exchange Fees none
Annual Operating Expenses After
Expense reimbursement (as a
percentage of net assets):
Management Fees/1/ .60%
12b-1 fees none
Other Operating Expenses .15%
Total Operating expenses/1/ .75%
Example
You would pay the following
expenses on a $1,000 investment
assuming a 5% annual return
(with or without a redemption at
the end of each time period):
One Year $8
Three Years $24
______________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total operating expenses to the percentage of net assets shown
above. In the absence of the voluntary expense limitation, estimated Management
Fees, Other Operating Expenses and Total Operating Expenses for the Fund's first
fiscal year would have been .60%, 1.12% and 1.72%, respectively.
-3-
<PAGE>
PRIOR PERFORMANCE
(For a share of the Fund outstanding throughout the indicated periods)
The information presented below relates to periods prior to the
effectiveness of the Fund's registration statement under the Securities Act of
1933, as amended. The information presented below for the six months ended June
30, 1996 is unaudited. The following information should be read in conjunction
with the financial statements and the notes thereto contained in the Fund's 1996
Semiannual Report, which is incorporated by reference in this Prospectus and the
Statement of Additional Information.
<TABLE>
<CAPTION>
June 5* to
June 30,
1996 (unaudited)
----------------
<S> <C>
Net asset value, beginning of period......................... $10.00
Income from investment operations -
Net investment income....................................... 0.06
Net realized and unrealized gain on investments............. (0.03)
------
Total from investment operations........................... 0.03
Net asset value, end of period............................... $10.03
Total return (%)............................................. 0.30
Net assets, end of period (000).............................. $2,889
Ratio of operating expenses to average net assets (%)........ 0.75**
Ratio of net investment income to average net assets (%)..... 8.27**
Portfolio turnover rate (%).................................. 0
Without giving effect to the voluntary expense limitations:
The ratio of operating expenses to average net assets
would have been (%).......................................... 2.46**
The net income per share would have been..................... $ 0.04
</TABLE>
* Commencement of operations.
**Annualized.
Further information about the performance of the Fund is contained in
the Fund's semiannual report to shareholders, which may be obtained without
charge by writing or telephoning the Trust at the address and telephone number
stated on the cover of this Prospectus.
-4-
<PAGE>
THE TRUST
The Fund is a series of the Trust. The other series are the Loomis
Sayles California Tax-Free Income Fund, the Loomis Sayles Convertible Bond Fund,
the Loomis Sayles Core Fixed Income Fund, the Loomis Sayles Core Growth Fund,
the Loomis Sayles Fixed Income Fund, the Loomis Sayles Intermediate Duration
Fixed Income Fund, the Loomis Sayles Investment Grade Fixed Income Fund and the
Loomis Sayles Mortgage Securities Fund. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993. The Trust is authorized to issue an unlimited
number of full and fractional shares of beneficial interest in multiple series.
Shares are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with fractional votes for each fractional share held) at
shareholder meetings. The Trust does not generally hold shareholder meetings
and will do so only when required by law. Shareholders may call meetings to
consider removal of the Trustees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is high total investment return
through a combination of current income and capital appreciation.
The Fund seeks to attain its objective by normally investing
substantially all of its assets in a broad range of debt securities, although up
to 20% of its assets may be invested in preferred stocks and up to 10% in common
stocks. Debt securities may include corporate securities, securities issued
or guaranteed by the U.S. Government, its authorities, agencies or
instrumentalities and certificates representing undivided interests in the
interest or principal of U.S. Treasury securities ("U.S. Government
Securities"), zero coupon securities, collateralized mortgage securities,
convertible bonds and when-issued securities, which are described herein
(together with their related risks) under "more Information About the Fund's
Investments." The Fund may invest any portion of its assets in securities of
Canadian issuers, and a limited portion of its assets in securities of other
foreign issuers. See "more Information About the Fund's Investments; Foreign
Securities."
The Fund normally will invest at least 65% of its assets in fixed
income securities of below investment grade quality, which are securities rated
below BBB by Standard & Poor's ("S&P") or below Baa by Moody's Investors
Service, Inc. ("Moody's"), or unrated securities determined by Loomis Sayles
to be of comparable quality. The Fund may continue to hold securities that
are downgraded in quality subsequent to their purchase if, in the opinion of
Loomis Sayles, it would be advantageous to do so. See "More Information About
the Fund's Investments; Lower Rated Fixed Income Securities" below.
Some of the Fund's investment restrictions are "fundamental" and
cannot be changed without a majority vote of the Fund's shareholders. Such
restrictions include: (1) a restriction prohibiting the Fund from making
loans; (2) a restriction prohibiting the Fund from purchasing a security (other
than U.S. Government Securities) if, as a result, more than 25% of the Fund's
total assets (taken at current value) would be invested in any one industry; (3)
a restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a 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 security. For additional
investment restrictions, see the Statement of Additional Information.
Although authorized to invest in restricted securities, the Fund, as
a matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than Rule 144A securities. Rule 144A securities are
privately offered securities that can be resold only to certain qualified
institutional buyers. Rule 144A
-5-
<PAGE>
securities are treated as illiquid, unless Loomis Sayles has determined, under
guidelines established by the Trustees, that the particular issue of Rule 144A
securities is liquid.
The investment objective of the Fund is "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders. All investment
policies other than those that are identified as "fundamental" may be changed
by the Trustees without a vote of the Fund's shareholders.
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The net asset value of the Fund's shares will vary as a result of
changes in the value of securities in the Fund's portfolio. The following
describes the types of securities in which the Fund will principally invest and
the risks associated with them. Additional information about the Fund's
investment practices can be found in the Statement of Additional
Information.
FIXED INCOME SECURITIES
- -----------------------
The Fund may invest in fixed income securities of any maturity. 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 foreign and
domestic private issuers. Because interest rates vary, it is impossible to
predict the income of the Fund for any particular period.
Fixed income securities are subject to market and credit risk. Market
risk relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest. Generally, the longer the maturity of a fixed income security,
the greater the fluctuations in its value because of market and credit risk.
Lower Rated Fixed Income Securities
The Fund will normally invest at least 65% of its assets in securities
rated below investment grade ("lower rated fixed income securities"), including
securities in the lowest rating categories, and unrated securities determined by
Loomis Sayles to be of comparable quality. Lower rated fixed income securities
generally provide higher yields, but are subject to greater credit and market
risk than higher quality fixed income securities. Lower rated fixed income
securities are considered speculative with respect to the ability of the issuer
to meet principal and interest payments. Achievement of the Fund's investment
objective through investments in lower rated fixed income securities may be more
dependent on Loomis Sayles's credit analysis than is the case with higher
quality bonds. The market for lower rated fixed income securities may be more
severely affected than other financial markets by economic recession or
substantial interest rate increases. The value and liquidity of lower rated
fixed income securities may be diminished by adverse publicity and investor
perceptions. In addition, legislation that limits the tax benefits to issuers
or holders of taxable lower rated fixed income securities or that limits the
ability of certain categories of financial institutions to invest in these
securities may adversely affect their market value. The secondary market for
lower rated fixed income securities may be less liquid than the secondary market
for higher rated fixed income securities. This lack of liquidity at certain
times may affect the values of these securities and may make the valuation and
sale of these securities by the fund more difficult. Securities of below
investment grade quality are commonly referred to as "junk bonds." Certain
lower rated fixed income securities do not pay interest on a current basis.
However, the fund will accrue and distribute this interest on a current basis,
and may be required to sell securities at times when Loomis Sayles would not
otherwise deem it desirable to do so in order to generate cash for
distributions. Securities in the lowest rating categories may be in poor
-6-
<PAGE>
standing or in default. Investment grade fixed income securities (rated BBB by
S&P or Baa by Moody's) may share some of the characteristics of lower rated
fixed income securities described above.
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 will fluctuate as interest rates change.
Thus, for example, the value of an investment in U.S. Government Securities may
fall during times of rising interest rates. Yields on U.S. Government
Securities tend to be lower than those of other fixed income securities of
comparable maturities.
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities,
representing interests in "pools" of mortgage loans secured by residential or
commercial real property. 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.
See "Collateralized Mortgage obligations" below for additional information
regarding the risks associated with mortgage-backed 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. Treasury securities. These investment instruments
may be highly volatile.
ZERO COUPON SECURITIES
- ----------------------
The Fund may invest in "zero coupon" fixed income securities. These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis. The Fund is required to distribute the income on zero
coupon securities to Fund shareholders as the income accrues, even though the
Fund is not receiving the income in cash on a current basis. Thus the Fund may
be forced 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 is generally more
volatile than that of non-zero coupon fixed income securities of comparable
quality and maturity.
COLLATERALIZED MORTGAGE OBLIGATIONS
- -----------------------------------
The Fund may invest in collateralized mortgage obligations ("CMOs").
A CMO is a limited recourse security backed by a portfolio of mortgages or, more
typically, by mortgage-backed securities held under an indenture. CMOs may be
issued by instrumentalities of the U.S. Government or by non-governmental
entities. The issuer's obligation to make interest and principal payments is
derived from and 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 payments on the underlying collateral or a combination
thereof. CMOs of different classes or series are generally retired in sequence
as the underlying mortgage loans in the mortgage pool are repaid. In the event
of sufficient
-7-
<PAGE>
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, the early retirement of a particular class or series of CMOs held by
the Fund could involve the loss of any premium the Fund paid when it acquired
the investment and could result in the Fund's reinvesting the proceeds at a
lower interest rate than the interest rate paid by the retired CMO. Because of
the early retirement feature, CMOs may be more volatile than many other fixed
income investments. In addition, slower than anticipated prepayments on the
underlying mortgages can extend the effective maturities of CMOs, subjecting
them to a greater risk of decline in market value in response to rising interest
rates than traditional debt securities.
COMMERCIAL MORTGAGE-BACKED SECURITIES
- -------------------------------------
The Fund may invest in commercial mortgage-backed securities.
Commercial mortgage-backed securities are securities that represent an interest
in, or are secured by, mortgage loans secured by commercial property, such as
industrial and warehouse properties, office buildings, retail space and shopping
malls, multifamily properties and cooperative apartments, hotels and motels,
nursing homes, hospitals, and senior living centers. The commercial mortgage-
backed securities market is newer and in terms of total outstanding principal
amount of issues is relatively small compared to the total size of the market
for residential mortgage-backed securities.
Commercial mortgage-backed securities are generally structured
similarly to pass-through securities or to CMOs, although other structures are
possible. They may pay fixed or adjustable rates of interest. Commercial
mortgage-backed securities have been issued in public or private transactions by
a variety of public and private issuers.
The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics. Commercial mortgage
loans generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties. Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial mortgage-
backed securities may relate only to a few properties or a single property. The
risk involved in single property financings is highly concentrated. In
addition, commercial properties, particularly industrial and warehouse
properties, are subject to environmental risks and the burdens and costs of
compliance with environmental laws and regulations. At the same time,
commercial mortgage-backed securities may have a lower prepayment risk than
residential mortgage-backed securities, because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In
addition, commercial mortgage-backed securities often are structured with some
form of credit enhancement to protect against potential losses on the underlying
mortgage loans.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis. This
means that the Fund will enter into a commitment to buy the security before the
security has been issued. The Fund's payment obligation and the interest rate
on the security are determined when the Fund enters into the commitment. The
security is typically delivered to the Fund 15 to 120 days later. No interest
accrues on the security between the time the Fund enters into the commitment and
the time the security is issued. 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. 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
-8-
<PAGE>
securities, it will maintain liquid assets in a segregated account at its
custodian bank in an amount sufficient to satisfy these obligations.
FOREIGN SECURITIES
- ------------------
The Fund may invest in securities principally traded in foreign
markets ("foreign securities"). The Fund will not purchase a foreign security
if, as a result, the Fund's total holdings of foreign securities would exceed
50% of the Fund's total assets.
Foreign securities may present risks not associated with investments
in comparable securities of U.S. issuers. There may be less information
publicly available about a foreign corporate or governmental issuer than about
a U.S. issuer, and foreign issuers are not generally 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. In addition, the remedies of
the Fund may be extremely limited if a foreign issuer defaults on its
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
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement
procedures.
Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected favorably
or unfavorably by changes in currency exchange rates or exchange control
regulations. Changes in the value relative to the U.S. dollar of a foreign
currency in which the Fund's holdings are denominated will result in a change in
the U.S. dollar value of the Fund's assets and the Fund's income available for
distribution.
In addition, although part of the Fund's income may be received or
realized in foreign currencies, the Fund will be required to compute and
distribute its income in U.S. dollars. Therefore, if the value of a currency
relative to the U.S. dollar declines after the Fund's income has been earned in
that currency, translated into U.S. dollars and declared as a dividend, but
before payment of the dividend, the Fund could be required to liquidate
portfolio securities to pay the dividend. Similarly, if the value of a currency
relative to the U.S. dollar declines between the time the Fund accrues expenses
in U.S. dollars and the time such expenses are paid, the amount of such currency
required to be converted into U.S. dollars will be greater than the equivalent
amount in such currency of such expenses at the time they were incurred.
COMMON STOCKS
- -------------
The Fund may invest up to 10% of its total assets in common stocks,
usually as a result of warrants associated with debt instruments purchased by
the Fund, but also under certain circumstances to seek capital appreciation.
Common stocks, like other equity securities, offer greater potential for long-
term growth but are more risky than some other forms of investment.
-9-
<PAGE>
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's sole general
partner is indirectly owned by New England Investment Companies, L.P., a
publicly traded limited partnership whose sole general partner is indirectly
owned by Metropolitan Life Insurance Company.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.
The portfolio manager for the Fund since its inception has been Daniel
J. Fuss, who has been with Loomis Sayles since 1976 and is head of the Fixed
Income Management Group. Mr. Fuss is an Executive Vice President of Loomis
Sayles.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This
fee is paid at the annual rate of .60% of the Fund's average weekly net
assets.
In addition to the investment advisory fee, the Fund pays all expenses
not expressly assumed by Loomis Sayles, including taxes, brokerage commissions,
fees of the Fund's custodian, independent accountants and legal counsel and fees
of the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.
Loomis Sayles has voluntarily undertaken for an indefinite period to
waive its fees and, to the extent necessary, to bear other Fund expenses in
order to limit the Fund's annualized total operating expenses to .75% of average
annual net assets.
PORTFOLIO TRANSACTIONS
Loomis Sayles selects brokers and dealers to execute portfolio
transactions for the Fund. Portfolio turnover considerations will not limit
Loomis Sayles's investment discretion in managing the Fund's assets. Although
it is impossible to predict with certainty, it is expected that the Fund's
portfolio turnover rate for its first full fiscal year will not exceed 35%.
The Fund anticipates that its portfolio turnover rates will vary significantly
from time to time depending on the volatility of economic and market conditions.
High portfolio turnover may involve higher costs such as higher brokerage
commissions and higher levels of taxable gains. See "Dividends, Capital Gain
Distributions and Taxes" for information on the tax consequences of investing
in the Fund.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.
The minimum initial investment in the Fund is $3,000,000. Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.
Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to
-10-
<PAGE>
be exchanged are acceptable for purchase by the Fund. Securities accepted by
Loomis Sayles in exchange for Fund shares will be valued in the same manner as
the Fund's assets, as described below, as of the time of the Fund's next
determination of net asset value after such acceptance. All dividends and
subscription or other rights which are reflected in the market price of accepted
securities at the time of valuation become the property of the Fund and must be
delivered to the Fund upon receipt by the investor from the issuer. A gain or
loss for federal income tax purposes would be realized upon the exchange by an
investor that is subject to federal income taxation, depending upon the
investor's basis in the securities tendered. A shareholder who wishes to
purchase shares by exchanging securities should obtain instructions by calling
(617) 482-2450.
Loomis Sayles will not approve the acceptance of securities in
exchange for shares of the Fund unless (1) Loomis Sayles, in its sole
discretion, believes the securities are appropriate investments for the Fund;
(2) the investor represents and agrees that all securities offered to the Fund
can be resold by the Fund without restriction under the Securities Act or
otherwise; and (3) the securities are eligible to be acquired under the Fund's
investment policies and restrictions. No investor owning 5% or more of the
Fund's shares may purchase additional Fund shares by exchange of securities.
Upon acceptance of your order, the Trust opens an account for you,
applies the payment to the purchase of full and fractional Fund shares and
mails a statement of the account confirming the transaction. After an account
has been established, you may send subsequent investments at any time.
The Trust reserves the right to reject any purchase order for any
reason which the Trust in its sole discretion deems appropriate. Although the
Trust does not anticipate that it will do so, the Trust reserves the right to
suspend or change the terms of the offering of its shares.
The price you pay will be the per share net asset value next
calculated after a proper investment order is received by the Trust. Shares of
the Fund are sold without any sales charge. The net asset value of the Fund's
shares is calculated by dividing the Fund's net assets by the number of shares
outstanding. Net asset value is calculated at least weekly and as of the
close of the New York Stock Exchange (the "Exchange") on each day on which an
order for purchase or redemption of Fund shares is received and on which the
Exchange is open for unrestricted trading. Portfolio securities are valued at
their market value as more fully described in the Statement of Additional
Information.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to the Trust.
The written request must include the name of the Fund, your account
number, the exact name(s) in which your shares are registered, and the number of
shares or the dollar amount to be redeemed. All owners of the shares must sign
the written request in the exact names in which the shares are registered and
should indicate any special capacity in which they are signing (such as trustee
or custodian or on behalf of a partnership, corporation or other entity).
The redemption price will be the net asset value per share next
determined after the written redemption request and any necessary special
documentation are received by the Trust in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order. If
you purchased your shares by check and your check was deposited less than
fifteen days prior to the redemption request, the Trust may withhold
redemption proceeds until your check has cleared.
-11-
<PAGE>
Redemption proceeds may be made in money or in kind, or partly in
money and partly in kind, as determined by the Trust.
The Fund may suspend the right of redemption and may postpone payment
for more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
OTHER INFORMATION
The Board of Trustees may, without shareholder approval, divide the
Trust's shares of beneficial interest into multiple series. The Trust is
currently divided into nine series, including the Fund, the other
publicly-offered funds listed on the cover of this Prospectus, and two other
funds, Loomis Sayles Convertible Bond Fund and Loomis Sayles Mortgage Securities
Fund, shares of which are not presently being publicly offered.
As of November 7, 1996, Frederic C. Hamilton may be deemed to control
the Fund because he possessed, directly or indirectly, beneficial ownership of
more than 25% of the Fund's shares.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Because the Fund is designed primarily for tax-exempt investors such
as pension plans, endowments and foundations, the Fund is not managed with a
view to reducing taxes. The Fund pays any net investment income to shareholders
as dividends annually in December. The Fund also distributes all of its net
realized capital gains after applying any capital loss carryovers. Any capital
gain distributions are normally made annually in December, but may, to the
extent permitted by law, be made more frequently as deemed advisable by the
Trustees. The Trustees may change the frequency with which the Fund declares or
pays dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash. Dividends and capital gain distributions will be taxed
as described below whether received in cash or in additional shares.
The Fund intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended. As such, so long as the
Fund distributes substantially all its net investment income and net realized
capital gains to its shareholders on a current basis, the Fund itself does not
pay any federal income or excise tax. The Fund intends to make sufficient
distributions to be relieved of federal taxes.
Income dividends and short-term capital gain distributions are treated
as ordinary income to you whether distributed in cash or additional shares.
Long-term capital gain distributions are treated as long-term capital gains to
you whether distributed in cash or additional shares and regardless of how long
you have held your shares. However, any loss recognized by you on the taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain distribution you received with
respect to the shares.
The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.
In January of each year, the Trust will send you a statement showing
the federal tax status of dividends and distributions paid to you during the
preceding year.
-12-
<PAGE>
The foregoing summarizes certain U.S. federal income tax
consequences of investing in the Fund. Before investing, you should consult your
own tax adviser for more information concerning the federal, state and local tax
consequences of investing in, redeeming or exchanging Fund shares.
TRANSFER AND DIVIDEND INVESTMENT ADVISER
PAYING AGENT AND Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS One Financial Center
State Street Bank and Trust Company Boston, Massachusetts 02111
Boston, Massachusetts 02102
-13-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS ASSIGNED BY
STANDARD & POOR'S AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S
- -----------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C
The rating C is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" 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 that 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
edge." 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 that 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 are other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds that are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often, the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
<PAGE>
C
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designed by the symbols Aa1, A1,
Baa1, Ba1 and B1, and those with the weakest investment attributes are
designated by the symbols Aa3, A3, Baa3, Ba3 and B3.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES OF +
+THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CORE FIXED INCOME FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PROSPECTUS
______ __, 1996
The Loomis Sayles Investment Trust (the "Trust") is a group of nine
mutual funds including the Loomis Sayles Core Fixed Income Fund (the "Fund").
The other series which are publicly offered by the Trust and are described in
separate prospectuses are:
Loomis Sayles California Tax-Free Income Fund
Loomis Sayles Core Growth Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles High Yield Fixed Income Fund
Loomis Sayles Intermediate Duration Fixed Income Fund
Loomis Sayles Investment Grade Fixed Income Fund
Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest. Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.
This Prospectus concisely describes the information that you should know
before investing in the Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated ________, 1996 is
available free of charge; to obtain a free copy or to make any inquiries
about the Fund write to Loomis Sayles Investment Trust, One Financial Center,
Boston, Massachusetts 02111 or telephone (617) 482-2450. The Statement of
Additional Information, which contains more detailed information about the Fund,
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
TRANSFERRED OR RESOLD UNLESS SO REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE
SECURITIES ARE REDEEMABLE AS DESCRIBED IN THIS PROSPECTUS. IN CERTAIN CASES
INVESTORS MAY BE REDEEMED "IN KIND" AND RECEIVE PORTFOLIO SECURITIES HELD BY THE
FUND IN LIEU OF CASH UPON REDEMPTION. IN SUCH CASE, AN INVESTOR WILL INCUR COSTS
WHEN THE INVESTOR SELLS THE SECURITIES DISTRIBUTED.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF EXPENSES............................................ -3-
PRIOR PERFORMANCE.............................................. -4-
THE TRUST...................................................... -5-
INVESTMENT OBJECTIVE AND POLICIES.............................. -5-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS.................. -6-
THE FUND'S INVESTMENT ADVISER.................................. -9-
FUND EXPENSES.................................................. -9-
PORTFOLIO TRANSACTIONS......................................... -9-
HOW TO PURCHASE SHARES......................................... -9-
HOW TO REDEEM SHARES........................................... -10-
OTHER INFORMATION.............................................. -11-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES................ -11-
</TABLE>
-2-
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly. The information is based on estimated annualized
expenses for the Fund's first fiscal year. The information below should not be
considered a representation of past or future expenses, as actual expenses may
be greater or less than those shown. Also, the assumed 5% annual return in the
example should not be considered a representation of investment performance, as
actual performance will depend upon the actual investment results of securities
held in the Fund's portfolio.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) none
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage of
offering price) none
Deferred Sales Load (as a
percentage of original
purchase price or redemption
proceeds as applicable) none
Redemption Fees (as a percentage
of amount redeemed) none
Exchange Fees none
Annual Operating Expenses After
Expense Reimbursement (as a
percentage of net assets)/1/:
Management Fees .50%
12b-1 fees none
Other Operating Expenses .15%
Total Operating Expenses .65%
Example
You would pay the following
expenses on a $1,000 investment
assuming a 5% annual return
(with or without a redemption at
the end of each time period):
One Year $7
Three Years $21
______________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total operating expenses to the percentage of net assets shown
above. In the absence of the voluntary expense limitation, estimated Management
Fees, Other Operating Expenses and Total Operating Expenses for the Fund's first
fiscal year would have been .50%, .66% and 1.16%, respectively.
-3-
<PAGE>
PRIOR PERFORMANCE
(For a share of the Fund outstanding throughout the indicated periods)
The information presented below relates to periods prior to the
effectiveness of the Fund's registration statement under the Securities Act of
1933, as amended. The information presented below for the six months ended June
30, 1996 is unaudited. The following information should be read in conjunction
with the financial statements and the notes thereto contained in the Fund's 1996
Semiannual Report, which is incorporated by reference in this Prospectus and the
Statement of Additional Information.
<TABLE>
<CAPTION>
April 24* to
June 30,
1996 (Unaudited)
----------------
<S> <C>
Net asset value, beginning of period....................... $10.00
Income from investment operations -
Net investment income................................. 0.11
Net realized and unrealized gain on investments....... (0.05)
Total from investment operations..................... 0.06
Net asset value, end of period............................. $10.06
Total return (%)........................................... .58
Net assets, end of period (000)............................ $4,417
Ratio of operating expenses to average net assets (%)...... 0.65**
Ratio of net investment income to average net assets (%)... 5.77
Portfolio turnover rate (%)................................ 10.0
Without giving effect to the voluntary expense limitations:
The ratio of operating expenses to average net assets
would have been (%)........................................ 1.27**
The net income per share would have been................... $ 0.09
</TABLE>
* Commencement of operations.
**Annualized.
Further information about the performance of the Fund is contained in the
Fund's semiannual report to shareholders, which may be obtained without charge
by writing or telephoning the Trust at the address and telephone number stated
on the cover of this Prospectus.
-4-
<PAGE>
THE TRUST
The Fund is a series of the Trust. The other series are the Loomis Sayles
California Tax-Free Income Fund, the Loomis Sayles Convertible Bond Fund, the
Loomis Sayles Core Growth Fund, the Loomis Sayles Fixed Income Fund, the Loomis
Sayles High Yield Fixed Income Fund, the Loomis Sayles Intermediate Duration
Fixed Income Fund, the Loomis Sayles Investment Grade Fixed Income Fund and the
Loomis Sayles Mortgage Securities Fund. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993. The Trust is authorized to issue an unlimited number
of full and fractional shares of beneficial interest in multiple series. Shares
are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with fractional votes for each fractional share held) at
shareholder meetings. The Trust does not generally hold shareholder meetings
and will do so only when required by law. Shareholders may call meetings to
consider removal of the Trustees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is high total return through a combination
of current income and capital appreciation.
The Fund seeks to attain its objective by investing its assets primarily in
fixed income securities issued or guaranteed by the U.S. Government or its
agencies, certain types of mortgage-related and asset-backed securities, and
investment grade corporate and sovereign debt obligations. All securities will
be denominated in U.S. dollars.
U.S. Government Securities will include obligations issued or guaranteed by
the U.S. Government or its authorities, agencies or instrumentalities and
certificates representing undivided interests in the interest or principal of
U.S. Treasury Securities. U.S. Government Securities will be held for the
purpose of maintaining high average portfolio quality, providing sufficient
liquidity and controlling interest rate exposure.
The Fund normally will maintain a significant portion of its assets provide
a high level of current income. Corporate and sovereign debt securities will be
rated at least investment grade by both Standard & Poor's (BBB-) and Moody's
Investor Service, Inc. (Baa3), or if unrated, determined to be of comparable
quality by Loomis Sayles. In order to attain capital appreciation, the Fund
seeks to identify and select those corporate and sovereign debt obligations
undergoing credit improvement which is likely to result in a credit rating
upgrade. In the event, however, that the credit rating of a security held by the
Fund falls below investment grade (or, in the case of unrated securities, Loomis
Sayles determines that the quality of such security has deteriorated below
investment grade), the Fund will not be obligated to dispose of such security
and may continue to hold such security, if in the opinion of Loomis Sayles, such
investment is considered appropriate in the circumstances. Collateralized
mortgage obligations ("CMOs") will be limited to those with CMO market risk
ratings of V-1 to V-4 from Fitch Investors Service, L.P. ("Fitch"), or CMOs
unrated by Fitch determined by Loomis Sayles to be of comparable volatility.
Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders. Such restrictions
include: (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from purchasing a security (other than U.S.
Government Securities) if, as a result, more than 25% of the Fund's total assets
(taken at current value) would be invested in any one industry; (3) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a 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 security. For additional
investment restrictions, see the Statement of Additional Information.
-5-
<PAGE>
Although authorized to invest in restricted securities, the Fund, as a
matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than 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 Trustees, that
the particular issue of Rule 144A securities is liquid.
The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders. All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The net asset value of the Fund's shares will vary as a result of changes
in the value of securities in the Fund's portfolio. The following describes the
types of securities in which the Fund will principally invest and the risks
associated with them. Additional information about the Fund's investment
practices can be found in the Statement of Additional Information.
FIXED INCOME SECURITIES
- -----------------------
The Fund may invest in fixed income securities of any maturity. 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 foreign and
domestic private issuers. Because interest rates vary, it is impossible to
predict the income of the Fund for any particular period.
Fixed income securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase when
prevailing interest rates fall and decrease when interest rates rise. Credit
risk relates to the ability of the issuer to make payments of principal and
interest. Generally, the longer the maturity of a fixed income security, the
greater the fluctuations in its value because of market and credit risk.
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 will fluctuate as interest rates change. Thus, for
example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities
representing interests in "pools" of mortgage loans secured by residential or
commercial real property. 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
-6-
<PAGE>
income securities. See "Collateralized Mortgage obligations" below for
additional information regarding the risks associated with mortgage-backed
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. Treasury securities. These investment instruments may
be highly volatile.
ZERO COUPON SECURITIES
- ----------------------
The Fund may invest in "zero coupon" fixed income securities. These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis. The Fund is required to distribute the income on zero coupon
securities to Fund shareholders as the income accrues, even though the Fund is
not receiving the income in cash on a current basis. Thus the Fund may be forced
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 is generally more volatile than that of non-zero
coupon fixed income securities of comparable quality and maturity.
COLLATERALIZED MORTGAGE OBLIGATIONS
- -----------------------------------
The Fund may invest in collateralized mortgage obligations ("CMOs"). A CMO
is a limited recourse security backed by a portfolio of mortgages or, more
typically, by mortgage-backed securities held under an indenture. CMOs may be
issued by instrumentalities of the U.S. Government or by non-governmental
entities. The issuer's obligation to make interest and principal payments is
derived from and 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 payments on the underlying collateral or a combination
thereof. CMOs of different classes or series 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, the early retirement of a particular class or series
of CMOs held by the Fund could involve the loss of any premium the Fund paid
when it acquired the investment and could result in the Fund's reinvesting the
proceeds at a lower interest rate than the interest rate paid by the retired
CMO. Because of the early retirement feature, CMOs may be more volatile than
many other fixed income investments. in addition, slower than anticipated
prepayments on the underlying mortgages can extend the effective maturities of
CMOs, subjecting them to a greater risk of decline in market value in response
to rising interest rates than traditional debt securities. The Fund will invest
only in CMOs with Fitch ratings of V-4 or better, or in CMOs unrated by Fitch
that are determined by Loomis Sayles to be of comparable volatility. Even CMOs
with ratings reflecting the lowest market risk are likely to experience losses
in the event of adverse changes in market conditions.
COMMERCIAL MORTGAGE-BACKED SECURITIES
The Fund may invest in commercial mortgage-backed securities. Commercial
mortgage-backed securities are securities that represent an interest in, or are
secured by, mortgage loans secured by commercial property, such as industrial
and warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals, and senior living centers. The commercial mortgage-backed
securities market is newer and in terms of total outstanding principal amount of
issues is relatively small compared to the total size of the market for
residential mortgage-backed securities.
Commercial mortgage-backed securities are generally structured similarly to
pass-through securities or to CMOs, although other structures are possible. They
may pay fixed or adjustable rates of interest. Commercial mortgage-backed
securities have been issued in public or private transactions by a variety of
public and private issuers.
-7-
<PAGE>
The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics. Commercial mortgage loans
generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties. Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial mortgage-backed
securities may relate only to a few properties or a single property. The risk
involved in single property financings is highly concentrated. In addition,
commercial properties, particularly industrial and warehouse properties, are
subject to environmental risks and the burdens and costs of compliance with
environmental laws and regulations. At the same time, commercial mortgage-backed
securities may have a lower prepayment risk than residential mortgage-backed
securities, because commercial mortgage loans generally prohibit or impose
penalties on prepayments of principal. In addition, commercial mortgage-backed
securities often are structured with some form of credit enhancement to protect
against potential losses on the underlying mortgage loans.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis. This means that
the Fund will enter into a commitment to buy the security before the 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 issued. 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 held in its portfolio at the time. When the Fund buys a
security on a when-issued basis, it is subject to the risk that market rates of
interest will increase before the time the security is delivered, with the
result that the yield on the security delivered to the Fund may be lower than
the yield available on other comparable securities at the time of delivery. If
the Fund has outstanding obligations to buy when-issued securities, it will
maintain liquid assets in a segregated account at its custodian bank in an
amount sufficient to satisfy these obligations.
FOREIGN SECURITIES
- ------------------
The Fund may invest in dollar-denominated securities of issuers organized
or headquartered outside the United States ("foreign securities"). The Fund will
not purchase a foreign security (for purposes of this limitation securities of
Canadian issuers publicly traded in the United States will not be treated as
foreign securities) if, as a result, the Fund's total holdings of foreign
securities would exceed 20% of the Fund's total assets. The Fund's portfolio
securities will principally trade on U.S. exchanges or will be purchased and
sold in U.S. markets.
Foreign securities may present risks not associated with investments in
comparable securities of U.S. issuers. There may be less information publicly
available about a foreign corporate or governmental issuer than about a U.S.
issuer, and foreign issuers are not generally 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 remedies of the Fund may be extremely
limited if a foreign issuer defaults on its obligations. In addition, the
operations and results of foreign issuers and domestic issuers with operations
abroad may be affected by currency exchange rate fluctuations or exchange
control regulations.
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
-8-
<PAGE>
addition to 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.
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's sole general
partner is indirectly owned by New England Investment Companies, L.P., a
publicly traded limited partnership whose sole general partner is indirectly
owned by Metropolitan Life Insurance Company.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.
The portfolio manager for the Fund will be William F. Camp. Mr. Camp is a
Vice President of Loomis Sayles and joined the firm in 1995. Previously, Mr.
Camp worked as a portfolio manager in the pension department of Kmart
Corporation.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This fee is
paid at the annual rate of .50% of the Fund's average weekly net assets.
In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.
Loomis Sayles has voluntarily undertaken for an indefinite period to
waive its fees and, to the extent necessary, to bear other Fund expenses in
order to limit the Fund's annualized total operating expenses to .65% of
average annual net assets.
PORTFOLIO TRANSACTIONS
Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund. Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets. Although it is impossible
to predict with certainty, it is expected that the Fund's portfolio turnover
rate for its first full fiscal year will not exceed 75%. The Fund anticipates
that its portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions. High portfolio
turnover may involve higher costs such as higher brokerage commissions and
higher levels of taxable gains. See "Dividends, Capital Gain Distributions and
Taxes" for information on the tax consequences of investing in the Fund.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by submitting
a completed application form and payment to Loomis Sayles.
The minimum initial investment in the Fund is $1 million. Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.
-9-
<PAGE>
Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund. Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer. A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered. A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (617) 482-2450.
Loomis Sayles will not approve the acceptance of securities in exchange for
shares of the Fund unless (1) Loomis Sayles, in its sole discretion, believes
the securities are appropriate investments for the Fund; (2) the investor
represents and agrees that all securities offered to the Fund can be resold by
the Fund without restriction under the Securities Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by the exchange of securities.
Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction. After an account has been
established, you may send subsequent investments at any time.
The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate. Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust. Shares of the Fund are
sold without any sales charge. The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding. The Fund intends to calculate net asset value daily and as of the
close of the New York Stock Exchange (the "Exchange") on each day on which an
order for purchase or redemption of Fund shares is received and on which the
Exchange is open for unrestricted trading. Portfolio securities are valued at
their market value as more fully described in the Statement of Additional
Information.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to the Trust.
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed. All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).
The redemption price will be the net asset value per share next determined
after the written redemption request and any necessary special documentation are
received by the Trust in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order. If
you purchased your shares by check and your check was deposited less than
fifteen days prior to the redemption request, the Trust may withhold redemption
proceeds until your check has cleared.
-10-
<PAGE>
Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
OTHER INFORMATION
The Board of Trustees may, without shareholder approval, divide the Trust's
shares of beneficial interest into multiple series. The Trust is currently
divided into nine series, including the fund, the other publicly-offered funds
listed on the cover of this Prospectus, and two other funds, Loomis Sayles
Convertible Bond Fund and Loomis Sayles Mortgage Securities Fund, shares of
which are not presently being publicly offered.
As of November 7, 1996, Asbestos Workers Local #84 Pension Plan may be
deemed to control the Fund because it possessed beneficial ownership, directly
or indirectly, of more than 25% of the Fund's shares.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes. The Fund pays any net investment income to shareholders as
dividends annually. The Fund also distributes all of its net realized capital
gains after applying any capital loss carryovers. Any capital gain distributions
are normally made annually in December, but may, to the extent permitted by law,
be made more frequently as deemed advisable by the Trustees. The Trustees may
change the frequency with which the Fund declares or pays dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash. Dividends and capital gain distributions will be taxed
as described below whether received in cash or in additional shares.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended. As such, so long as the Fund
distributes all its net investment income and net realized capital gains to its
shareholders on a current basis, the Fund itself does not pay any federal income
or excise tax. The Fund intends to make sufficient distributions to be relieved
of federal taxes.
Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares. Long-
term capital gain distributions are treated as long-term capital gains to you
whether distributed in cash or additional shares and regardless of how long you
have held your shares. However, any loss recognized by you on the taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain distribution you received with
respect to the shares.
The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.
In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.
-11-
<PAGE>
The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund. Before investing, you should consult your own tax adviser
for more information concerning the federal, state and local tax consequences of
investing in, redeeming or exchanging Fund shares.
TRANSFER AND DIVIDEND INVESTMENT ADVISER
PAYING AGENT AND Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS One Financial Center
State Street Bank And Trust Company Boston, Massachusetts 02111
Boston, Massachusetts 02102
-12-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS ASSIGNED
BY STANDARD & POOR'S AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S
- -----------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
C
The rating C is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" 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 that 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 edge."
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 that 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 are other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A
Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds that 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.
A-2
<PAGE>
C
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that
are not rated as a matter of policy.
3. There is lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed in which case the rating
is not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designed by the symbols Aa1, A1,
Baa1, Ba1 and B1, and those with the weakest investment attributes are
designated by the symbols Aa3, A3, Baa3, Ba3 and B3.
A-3
<PAGE>
APPENDIX B
DESCRIPTION OF
FITCH CMO V-RATINGS
A Fitch CMO market risk rating is an opinion as to the relative sensitivity of a
security's price and cash flows to changes in interest rates and, where
relevant, other market conditions. INVESTORS SHOULD UNDERSTAND THAT SECURITIES
WITH RATINGS REFLECTING EVEN THE LOWEST MARKET RISK ARE LIKELY TO EXPERIENCE
LOSSES IN THE EVENT OF ADVERSE CHANGES IN MARKET CONDITIONS. Fitch's market risk
ratings are based on information provided to Fitch by sources deemed to be
reliable, however, Fitch does not verify the accuracy of this underlying
information. These ratings do not constitute recommendations to purchase, sell
or hold any securities, as they do not comment on the adequacy of market prices
or the suitability of any security for any investor.
<TABLE>
<CAPTION>
V-Rating Representative Distribution Description
- -------- --------------------------- -----------
<S> <C> <C>
V-1 PAC classes with wide prepayment Market Risk: Low
collars, short duration floaters and
V-2 short duration sequential. Securities rated V-1 and V-2 perform
consistently across a range of interest rate
scenarios. These securities exhibit interest
rate risk comparable to short duration
treasuries (1-5 years).
V-3 Medium duration Floater, Short Market Risk: Moderate
duration TAC, Short duration PAC II,
V-4 Long duration PAC I. Securities rated V-3 and V-4 have relatively
consistent performance across a range of
interest rate scenarios. These securities
experience interest rate risk comparable to
long duration treasuries (10-30 years).
V-5 PAC classes with narrow collars, Market Risk: Moderate to High
support classes, accrual bonds and
V-6 short duration IO's and PO's, Z Securities rated V-5, V-6 and V-7 experienc
bond's. significant variations in performance
V-7 across a range of interest rate scenarios.
These securities have substantial excess
interest rate risk and in many instances
exhibit negative convexity. Z bond's with
durations comparable to treasury
zero-coupon issues also fall in this range.
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C> <C>
V-8 Leveraged inverse floaters, long Market Risk: High to Speculative
duration IO's and PO's, super PO's,
V-9 jump Zs. Securities rated V-8, V-9 and V-10 experience
sharp, severe variations in performance
V-10 across a range of interest rate scenarios.
These securities exhibit risk characteristics
such as extreme negative convexity,
significant sensitivity to the direction of
interest rate movements, and highly leveraged
sensitivity to interest rate indices.
</TABLE>
B-2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS PROSPECTUS SHALL NOT TO CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SECURITIES OF +
+THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PROSPECTUS
_______ __, 1996
The Loomis Sayles Investment Trust (the "Trust") is a group of nine mutual
funds including the Loomis Sayles Intermediate Duration Fixed Income Fund (the
"Fund"). The other series which are publicly offered by the Trust and are
described in separate prospectuses are:
Loomis Sayles California Tax-Free Income Fund
Loomis Sayles Core Fixed Income Fund
Loomis Sayles Core Growth Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles High Yield Fixed Income Fund
Loomis Sayles Investment Grade Fixed Income Fund
Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest. Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.
This Prospectus concisely describes the information that you should know
before investing in the Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated ____ __, 1996, is
available free of charge; to obtain a free copy or to make any inquiries about
the Fund write to Loomis Sayles Investment Trust, One Financial Center, Boston,
Massachusetts 02111 or telephone (617) 482-2450. The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
TRANSFERRED OR RESOLD UNLESS SO REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE
SECURITIES ARE REDEEMABLE AS DESCRIBED IN THIS PROSPECTUS. IN CERTAIN CASES
INVESTORS MAY BE REDEEMED "IN KIND" AND RECEIVE PORTFOLIO SECURITIES HELD BY THE
FUND IN LIEU OF CASH UPON REDEMPTION. IN SUCH CASE, AN INVESTOR WILL INCUR
COSTS WHEN THE INVESTOR SELLS THE SECURITIES DISTRIBUTED.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF EXPENSES...................................................... -3-
THE TRUST................................................................ -4-
INVESTMENT OBJECTIVE AND POLICIES........................................ -4-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS............................ -5-
THE FUND'S INVESTMENT ADVISER............................................ -8-
FUND EXPENSES............................................................ -8-
PORTFOLIO TRANSACTIONS................................................... -8-
HOW TO PURCHASE SHARES................................................... -9-
HOW TO REDEEM SHARES..................................................... -9-
OTHER INFORMATION........................................................-10-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES..........................-10-
</TABLE>
-2-
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly. The information is based on estimated annualized
expenses for the Fund's first fiscal year. The information below should not be
considered a representation of past or future expenses, as actual expenses may
be greater or less than those shown. Also, the assumed 5% annual return in the
example should not be considered a representation of investment performance, as
actual performance will depend upon the actual investment results of securities
held in the Fund's portfolio.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) none
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) none
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds as applicable) none
Redemption Fees (as a percentage of
amount redeemed) none
Exchange Fees none
Annual Operating Expenses After
Expense Reimbursement (as a
percentage of net assets)/1/:
Management Fees .40%
12b-1 Fees none
Other Operating Expenses .15%
Total Operating Expenses .55%
Example
You would pay the following
expenses on a $1,000 investment
assuming a 5% annual return
(with or without a redemption at
the end of each time period):
One Year $ 6
Three Years $18
______________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total operating expenses to the percentage of net assets shown
above. In the absence of the voluntary expense limitation, estimated Management
Fees, Other Operating Expenses and Total Operating Expenses for the Fund's
first fiscal year would have been 40%,.72% and 1.12%, respectively.
-3-
<PAGE>
THE TRUST
The Fund is a series of the Trust. The other series are the Loomis Sayles
California Tax-Free Income Fund, the Loomis Sayles Convertible Bond Fund, the
Loomis Sayles Core Fixed Income Fund, the Loomis Sayles Core Growth Fund, the
Loomis Sayles Fixed Income Fund, the Loomis Sayles High Yield Fixed Income Fund,
the Loomis Sayles Investment Grade Fixed Income Fund and the Loomis Sayles
Mortgage Securities Fund. The Trust is a diversified open-end management
investment company which was organized as a Massachusetts business trust on
December 23, 1993. The Trust is authorized to issue an unlimited number of full
and fractional shares of beneficial interest in multiple series. Shares are
freely transferable and entitle shareholders to receive dividends as determined
by the Trust's board of trustees (the "Trustees") and to cast a vote for each
share held (with fractional votes for each fractional share held) at shareholder
meetings. The Trust does not generally hold shareholder meetings and will do
so only when required by law. Shareholders may call meetings to consider removal
of the Trustees.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is above-average total return through a
combination of current income and capital appreciation. Although the Fund may
invest in fixed income securities of any maturity, the weighted average duration
of the Fund's portfolio will generally remain within a band of 2 to 5 years.
The concept of duration is described more fully below.
The Fund will seek to achieve its objective by investing in a diversified
portfolio of debt securities that may include corporate securities,
securities issued or guaranteed by the U.S. Government, its authorities,
agencies or instrumentalities and certificates representing undivided interests
in the interest or principal of U.S. Treasury securities ("U.S. Government
Securities"), "Yankee" securities (U.S. dollar-denominated debt issued by non-
U.S. entities), convertible securities and certain types of mortgage-related and
asset-backed securities. Collateralized mortgage obligations ("CMOs") will be
limited to those with CMO market risk ratings of V-1 to V-4 from Fitch Investors
Service, L.P. ("Fitch"), or CMOs unrated by Fitch that Loomis Sayles has
determined to be of comparable volatility. All securities will be denominated
in U.S. dollars.
The Fund will purchase only securities rated at least Baa3 by Moody's or at
least BBB- by Standard & Poor's, or, if unrated, determined to be of comparable
quality by Loomis Sayles. Some or all of these securities may be "split-rated
securities, " i.e., securities that have received an investment grade rating
from one of the nationally recognized rating organizations but have also
received a lower rating from the other nationally recognized rating
organization. Split-rated securities may be subject to some of the risks
described below under "Lower Rated Fixed Income Securities." In the event that
the credit rating of a security held by the Fund falls below investment grade
(or, in the case of an unrated security, Loomis Sayles determines that the
quality of such security has deteriorated below investment grade), the Fund will
not be obligated to dispose of such security and may continue to hold such
security if, in the opinion of Loomis Sayles, such investment is appropriate in
the circumstances.
Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders. Such restrictions
include: (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from purchasing a security (other than U.S.
Government Securities) if, as a result, more than 25% of the Fund's total assets
(taken at current value) would be invested in any one industry; (3) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a 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 security. For additional
investment restrictions, see the Statement of Additional Information.
Although authorized to invest in restricted securities, the Fund, as a
matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than 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 Trustees, that
the particular issue of Rule 144A securities is liquid.
-4-
<PAGE>
The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders. All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.
Duration was developed as a more precise alternative to the concept of
"term to maturity". Most debt obligations provide interest payments in addition
to a final payment at maturity. Some obligations also have call provisions.
Depending on the relative magnitude of these payments, the market values of debt
obligations may respond differently to changes in the level and structure of
interest rates. Traditionally, a debt security's "term to maturity" has been
used as a proxy for the sensitivity of the security's price to changes in
interest rates. However, the term to maturity measures only the time until a
debt security provides its final payment, taking no account of the pattern of
the security's payments prior to maturity. Duration is a measure of the expected
life of a fixed income security on a present value basis. Duration takes the
length of the time intervals between the present time and the time that the
interest and principal payments are scheduled or, in the case of a callable
bond, expected to be received, and weights them by the present values of the
cash to be received at each future point in time. For any fixed income security
with interest payments occurring prior to the payment of principal, duration is
always less than maturity. In some cases, duration cannot be calculated with
certainty because certain assumptions have to be factored into the
calculation.
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The net asset value of the Fund's shares will vary as a result of changes
in the value of securities in the Fund's portfolio. The following describes the
types of securities in which the Fund will principally invest and the risks
associated with them. Additional information about the Fund's investment
practices can be found in the Statement of Additional Information.
FIXED INCOME SECURITIES
- -----------------------
The Fund may invest in fixed income securities of any maturity although the
weighted average duration of its investments will generally remain within a band
of 2 to 5 years. 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 foreign and domestic private issuers. Because interest
rates vary, it is impossible to predict the income of the Fund for any
particular period.
Fixed income securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest. Generally, the longer the maturity of a fixed income security,
the greater the fluctuations in its value because of market and credit
risk.
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 will fluctuate as interest rates change. Thus,
for example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities
representing interests in "pools" of mortgage loans secured by residential or
commercial real property. 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
-5-
<PAGE>
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. See "Collateralized Mortgage obligations" below for
additional information regarding the risks associated with mortgage-backed
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. Treasury securities. These investment instruments
may be highly volatile.
LOWER RATED FIXED INCOME SECURITIES
- -----------------------------------
The Fund may purchase split-rated securities, which may be subject to some
of the risks associated with securities of below investment grade quality
("lower rated fixed income securities"), also known as "junk bonds". Lower
rated fixed income securities generally provide higher yields, but are subject
to greater credit and market risk than higher quality fixed income securities.
Lower rated fixed income securities are considered speculative with respect to
the ability of the issuer to meet principal and interest payments. Achievement
of the Fund's investment objective through investments in lower rated fixed
income securities may be more dependent on Loomis Sayles's credit analysis
than is the case with higher quality bonds. The market for lower rated fixed
income securities may be more severely affected than other financial markets
by economic recession or substantial interest rate increases. The value and
liquidity of lower rated fixed income securities may be diminished by adverse
publicity and investor perceptions. In addition, legislation that limits the
tax benefits to issuers or holders of taxable lower rated fixed income
securities or that limits the ability of certain categories of financial
institutions to invest in these securities may adversely affect their market
value. The secondary market for lower rated fixed income securities may be
less liquid than the secondary market for higher rated fixed income
securities. This lack of liquidity at certain times may affect the values of
these securities and may make the valuation and sale of these securities by the
Fund more difficult. Certain lower-rated fixed income securities do not pay
interest on a current basis. However, the Fund will accrue and distribute this
interest on a current basis, and may be required to sell securities at times
when Loomis Sayles would not otherwise deem it desirable to do so in order to
generate cash for distributions. Securities in the lowest rating categories may
be in poor standing or in default. Investment grade fixed income securities
(rated Baa by Moody's Investors Service, Inc. or BBB by Standard and Poor's)
may share some of the characteristics of lower rated fixed income securities
described above.
ZERO COUPON SECURITIES
- ----------------------
The Fund may invest in "zero coupon" fixed income securities. These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis. The Fund is required to distribute the income on zero
coupon securities to Fund shareholders as the income accrues, even though the
Fund is not receiving the income in cash on a current basis. Thus the Fund may
be forced 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 is generally more
volatile than that of non-zero coupon fixed income securities of comparable
quality and maturity.
COLLATERALIZED MORTGAGE OBLIGATIONS
- -----------------------------------
The Fund may invest in CMOs. A CMO is a limited recourse security backed by
a portfolio of mortgages or, more typically, by mortgage-backed securities held
under an indenture. CMOs may be issued either by instrumentalities of the U.S.
Government or by non-governmental entities. The issuer's obligation to make
interest and principal payments is derived from and 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 payments on the
underlying collateral or a combination thereof. CMOs of different classes or
series 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, the early
retirement of a particular class or series of CMOs held by the Fund could
involve the loss of any premium the Fund paid when it acquired the investment
and could result in the Fund's reinvesting the proceeds at a lower interest rate
than the interest rate paid by the retired CMO. Because of the early retirement
feature, CMOs may be more volatile than many other fixed income investments.
The Fund will invest only in CMOs with Fitch ratings of V-4 or better, or those
CMOs unrated by Fitch that Loomis Sayles has determined to be of comparable
volatility. Even CMOs with ratings reflecting the lowest market risk are likely
to experience losses in the event
-6-
<PAGE>
of adverse changes in market conditions. The duration of CMOs and other
mortgage-related securities is often difficult to determine because the
underlying mortgages may be subject to early repayment. Thus, the determination
of duration will be dependent on the adviser's assumptions regarding the
likelihood and incidence of prepayment and, to the extent that such assumptions
prove to be incorrect, the duration of the Fund's portfolio, and thus its
relative exposure to fluctuation of interest rates, may be significantly
different than intended and may increase the overall risk of the Fund's
portfolio.
COMMERCIAL MORTGAGE-BACKED SECURITIES
- -------------------------------------
The Fund may invest in commercial mortgage-backed securities. Commercial
mortgage-backed securities are securities that represent an interest in, or are
secured by, mortgage loans secured by commercial property, such as industrial
and warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals, and senior living centers. The commercial mortgage-backed
securities market is newer and in terms of total outstanding principal amount of
issues is relatively small compared to the total size of the market for
residential mortgage-backed securities.
Commercial mortgage-backed securities are generally structured similarly to
pass-through securities or to CMOs, although other structures are possible.
They may pay fixed or adjustable rates of interest. Commercial mortgage-backed
securities have been issued in public or private transactions by a variety of
public and private issuers.
The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics. Commercial mortgage
loans generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties. Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial mortgage-
backed securities may relate only to a few properties or a single property. The
risk involved in single property financings is highly concentrated. In
addition, commercial properties, particularly industrial and warehouse
properties, are subject to environmental risks and the burdens and costs of
compliance with environmental laws and regulations. At the same time,
commercial mortgage-backed securities may have a lower prepayment risk than
residential mortgage-backed securities, because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In
addition, commercial mortgage-backed securities often are structured with some
form of credit enhancement to protect against potential losses on the underlying
mortgage loans.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis. This means that
the Fund will enter into a commitment to buy the security before the security
has been issued. The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment. The security
is typically delivered to the Fund 15 to 120 days later. No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued. 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 held in its portfolio at the time. When the Fund
buys a security on a when-issued basis, it is subject to the risk that market
rates of interest will increase before the time the security is delivered, with
the result that the yield on the security delivered to the Fund may be lower
than the yield available on other, comparable securities at the time of
delivery. If the Fund has outstanding obligations to buy when-issued securities,
it will maintain liquid assets in a segregated account at its custodian bank in
an amount sufficient to satisfy these obligations.
FOREIGN SECURITIES
- ------------------
The Fund may invest in dollar-denominated securities of issuers organized
or headquartered outside the United States ("foreign securities"). The Fund
will not purchase a foreign security (for purposes of this limitation securities
of Canadian issuers publicly traded in the United States will not be treated as
foreign securities) if, as a result, the Fund's total holdings of foreign
securities would exceed 20% of the Fund's total assets.
-7-
<PAGE>
Foreign securities may present risks not associated with investments in
comparable securities of U.S. issuers. There may be less information publicly
available about a foreign corporate or governmental issuer than about a U.S.
issuer, and foreign issuers are not generally 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 remedies of the Fund may be
extremely limited if a foreign issuer defaults on its obligations. In
addition, the operations and results of foreign issuers and domestic issuers
with operations abroad may be affected favorably or unfavorably by changes in
currency exchange rates or exchange control regulations.
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
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.
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's sole general
partner is indirectly owned by New England Investment Companies, L.P., a
publicly traded limited partnership whose sole general partner is indirectly
owned by Metropolitan Life Insurance Company.
In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.
The portfolio manager for the Fund will be Anthony J. Wilkins. Mr. Wilkins
joined Loomis Sayles in 1990 and is a Director and Vice President of the firm.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This fee is
Paid at the annual rate of .40% of the Fund's average weekly net assets.
In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.
Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's annualized total operating expenses to .55% of average annual
net assets.
PORTFOLIO TRANSACTIONS
Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund. Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets. Although it is impossible
to predict with certainty, it is expected that the Fund's portfolio turnover
rate for its first full fiscal year will not exceed 100%. The Fund anticipates
that its portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions. High portfolio
turnover may involve higher costs such as higher brokerage
-8-
<PAGE>
commissions and higher levels of taxable gains. See "Dividends, Capital Gains
Distributions and Taxes" for information on the tax consequences of investing in
the Fund.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.
The minimum initial investment in the Fund is $2,000,000. Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.
Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund. Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets as described below as of the time
of the Fund's next determination of net asset value after such acceptance. All
dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer. A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered. A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (617) 482-2450.
Loomis Sayles will not approve the acceptance of securities in exchange for
shares of the Fund unless (1) Loomis Sayles, in its sole discretion, believes
the securities are appropriate investments for the Fund; (2) the investor
represents and agrees that all securities offered to the Fund can be resold by
the Fund without restriction under the Securities Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by the exchange of securities.
Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction. After an account has been
established, you may send subsequent investments at any time.
The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate. Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust. Shares of the Fund are
sold without any sales charge. The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding. Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading. Portfolio securities are valued at their
market value as more fully described in the Statement of Additional
Information.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to the Trust.
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed. All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).
-9-
<PAGE>
The redemption price will be the net asset value per share next determined
after the written redemption request and any necessary special documentation are
received by the Trust in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order. If
you purchased your shares by check and your check was deposited less than
fifteen days prior to the redemption request, the Trust may withhold redemption
proceeds until your check has cleared.
Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.
OTHER INFORMATION
The Board of Trustees may, without shareholder approval, divide the Trust's
shares of beneficial interest into multiple series. The Trust is currently
divided into nine series, including the Fund, the other publicly-offered funds
listed on the cover of this Prospectus, and two other funds, Loomis Sayles
Convertible Bond Fund and Loomis Sayles Mortgage Securities Fund, shares of
which are not presently being publicly offered.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes. The Fund pays any net investment income to shareholders as
dividends monthly. The Fund also distributes all of its net realized capital
gains after applying any capital loss carryovers. Any capital gain
distributions are normally made annually in December, but may, to the extent
permitted by law, be made more frequently as deemed advisable by the Trustees.
The Trustees may change the frequency with which the Fund declares or pays
dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash. Dividends and capital gain distributions will be taxed
as described below whether received in cash or in additional shares.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended. As such, so long as the Fund
distributes all its net investment income and net realized capital gains to its
shareholders on a current basis, the Fund itself does not pay any federal income
or excise tax. The Fund intends to make sufficient distributions to be relieved
of federal taxes.
Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares. Long-
term capital gain distributions are treated as long-term capital gains to you
whether distributed in cash or additional shares and regardless of how long you
have held your shares. However, any loss recognized by you on the taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain distribution you received with
respect to the shares.
The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.
In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.
-10-
<PAGE>
The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund. Before investing, you should consult your own tax
adviser for more information concerning the federal, state and local tax
consequences of investing in, redeeming or exchanging Fund shares.
TRANSFER AND DIVIDEND INVESTMENT ADVISER
PAYING AGENT AND Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS One Financial Center
State Street Bank and Trust Company Boston, Massachusetts 02111
Boston, Massachusetts 02102
-11-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS ASSIGNED
BY STANDARD & POOR'S AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S
- -----------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C
The rating C is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" 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 that 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
edge." 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 that 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 are other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds that 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.
A-2
<PAGE>
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designed by the symbols Aa1, A1,
Baa1, Ba1 and B1, and those with the weakest investment attributes are
designated by the symbols Aa3, A3, Baa3, Ba3 and B3.
A-3
<PAGE>
APPENDIX B
DESCRIPTION OF
FITCH CMO V-RATINGS
A Fitch CMO market risk rating is an opinion as to the relative sensitivity of a
security's price and cash flows to changes in interest rates and, where
relevant, other market conditions. INVESTORS SHOULD UNDERSTAND THAT SECURITIES
WITH RATINGS REFLECTING EVEN THE LOWEST MARKET RISK ARE LIKELY TO EXPERIENCE
LOSSES IN THE EVENT OF ADVERSE CHANGES IN MARKET CONDITIONS. Fitch's market
risk ratings are based on information provided to Fitch by sources deemed to be
reliable, however, Fitch does not verify the accuracy of this underlying
information. These ratings do not constitute recommendations to purchase, sell
or hold any securities, as they do not comment on the adequacy of market prices
or the suitability of any security for any investor.
<TABLE>
<CAPTION>
V-Rating Representative Distribution Description
- -------- --------------------------- -----------
<S> <C> <C>
V-1 PAC classes with wide prepayment Market Risk: Low
collars, short duration floaters and
V-2 short duration sequential. Securities rated V-1 and V-2 perform
consistently across a range of interest rate
scenarios. These securities exhibit interest rate
risk comparable to short duration treasuries (1-
5 years).
V-3 Medium duration Floater, Short Market Risk: Moderate
duration TAC, Short duration PAC
V-4 II, Long duration PAC I. Securities rated V-3 and V-4 have relatively
consistent performance across a range of
interest rate scenarios. These securities
experience interest rate risk comparable to long
duration treasuries (10-30 years).
V-5 PAC classes with narrow collars, Market Risk: Moderate to High
support classes, accrual bonds and
V-6 short duration IO's and PO's, Z Securities rated V-5, V-6 and V-7 experience
bond's. significant variations in performance across a
V-7 range of interest rate scenarios. These
securities have substantial excess interest rate
risk and in many instances exhibit negative
convexity. Z bond's with durations comparable
to treasury zero-coupon issues also fall in this
range.
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C> <C>
V-8 Leveraged inverse floaters, long Market Risk: High to Speculative
duration IO's and PO's, super PO's,
V-9 jump Zs. Securities rated V-8, V-9 and V-10 experience
sharp, severe variations in performance across
V-10 a range of interest rate scenarios. These
securities exhibit risk characteristics such as
extreme negative convexity, significant
sensitivity to the direction of interest rate
movements, and highly leveraged sensitivity to
interest rate indices.
</TABLE>
B-2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN+
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF SECURITIES OF THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
________ __, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Investment Grade Fixed Income Fund, a series of Loomis Sayles Investment
Trust, dated ________ __, 1996, and should be read in conjunction therewith. A
copy of the Prospectus may be obtained from Loomis Sayles Investment Trust, One
Financial Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS..............................2
MANAGEMENT OF THE TRUST......................................................7
INVESTMENT ADVISORY AND OTHER SERVICES.......................................9
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................11
DESCRIPTION OF THE TRUST....................................................13
HOW TO BUY SHARES...........................................................15
NET ASSET VALUE.............................................................15
REDEMPTIONS.................................................................16
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS.................17
FINANCIAL STATEMENTS........................................................18
CALCULATION OF YIELD AND TOTAL RETURN.......................................19
PERFORMANCE COMPARISONS.....................................................19
PERFORMANCE DATA............................................................22
APPENDIX A --PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION................A-1
APPENDIX B --ADVERTISING AND PROMOTIONAL LITERATURE........................B-1
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles Investment Grade
Fixed Income Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments." The investment
policies of the Fund set forth in the Prospectus and in this Statement of
Additional Information may be changed by Loomis, Sayles & Company, L.P. ("Loomis
Sayles"), the Fund's investment adviser, subject to review and approval by the
Trust's board of trustees (the "Trustees"), without shareholder approval except
that the investment objective of the Fund as set forth in the Prospectus and any
Fund policy explicitly identified as "fundamental" may not be changed without
the approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).
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) 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.
*(2) 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 investing in issuers that
invest or deal in the foregoing types of assets or from purchasing
securities that are secured by real estate.)
*(3) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds,
debentures, commercial paper, corporate notes and similar evidences of
indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
*(4) Change its classification pursuant to Section 5(b) of the Investment
Company Act of 1940 (the "1940 Act") from a "diversified" to "non-
diversified" management investment company.
*(5) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries.)
-2-
<PAGE>
*(6) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower,
nor borrow any money except as a temporary measure for extraordinary
or emergency purposes; however, the Fund's use of reverse repurchase
agreements and "dollar roll" arrangements shall not constitute
borrowing by the Fund for purposes of this restriction.
*(7) 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.
*(8) Issue senior securities. (For the purposes of this restriction none of
the following is deemed to be a senior security: any pledge, mortgage,
hypothecation or other encumbrance of assets; any borrowing permitted
by restriction (6) 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
or entry into options, forward contracts, futures contracts, options
on futures contracts, swap contracts or any other derivative
investments to the extent that Loomis Sayles determines that the Fund
is not required to treat such investments as senior securities
pursuant to the pronouncements of the Securities and Exchange
Commission (the "SEC") or its staff.)
Although the Fund has no current intention of investing in repurchase
agreements, the Fund intends, based on the views of the staff of the SEC, to
restrict its investments, if any, in repurchase agreements maturing in more than
seven days, together with other investments in illiquid securities, to the
percentage permitted by restriction (7) above.
Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.
Portfolio Turnover
- ------------------
Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets. The portfolio turnover rate of the
Fund for the period from July 1, 1994, the date the Fund commenced operations,
to December 31, 1994 and for the period from January 1, 1995 to December 31,
1995 was 112% and 21.6%, respectively. The Fund anticipates that its portfolio
turnover rates will vary significantly from time to time depending on the
volatility of economic and market conditions. High portfolio turnover rates
involve higher costs such as higher brokerage commissions and higher levels of
taxable gain. See "Portfolio Transactions and Brokerage" for a description of
Loomis Sayles's brokerage practices and "Income Dividends, Capital Gain
Distributions and Tax Status" for more information about the tax consequences of
investing in the Fund.
-3-
<PAGE>
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 - Direct obligations of the United States Treasury
-------------------
which 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 - Direct obligations of the United
-----------------------------
States Treasury 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.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-----------
mortgagee which represent interests 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
-4-
<PAGE>
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, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, 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
- ----------------------
As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria. The Fund may take delivery of
these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
Convertible Securities
- ----------------------
Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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. Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. 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
-5-
<PAGE>
and conversion ratio, or that are convertible at the option of the issuer.
Because 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.
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 obligations
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at discounts 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 do 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 (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 an
investor 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
- ---------------------
The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash . Although 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 and (b) inability to enforce rights and the
expenses involved in attempted enforcement.
-6-
<PAGE>
Rule 144A Securities
- --------------------
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a 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
marketplace trades therefor.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
DANIEL J. FUSS (63)-- President. Executive Vice President and Director, Loomis
---------
Sayles.
MARK W. HOLLAND (47)-- Secretary and Treasurer. Vice President-Finance and
-----------------------
Administration, Loomis Sayles.
TIMOTHY J. HUNT (64) -- Trustee. 4 Dennett Road, Marblehead, Massachusetts.
-------
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
ROBERT J. BLANDING (49) -- Executive Vice President. 465 First Street West,
------------------------
Sonoma, California. President and Chairman, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Formerly, Portfolio Manager,
Kmart Corporation.
WILLIAM J. DRISCOLL (37) -- Vice President. Vice President, Loomis Sayles.
--------------
Formerly, Vice President, Merrill Lynch.
QUENTIN P. FAULKNER (58) -- Vice President. Vice President, Loomis Sayles.
--------------
KATHLEEN C. GAFFNEY (34) -- Vice President. Vice President, Loomis Sayles.
--------------
-7-
<PAGE>
ROBERT K. PAYNE (54) -- Vice President. 555 California Street, San Francisco,
--------------
California. Vice President, Loomis Sayles.
ANTHONY J. WILKINS (54) -- Vice President. Vice President, Loomis Sayles.
--------------
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer and Director,
--------------
Loomis Sayles.
JOHN F. YEAGER (33) -- Vice President. Vice President, Loomis Sayles; formerly
--------------
Vice President-Marketing, INVESCO Funds Group and Assistant Comptroller,
INVESCO Capital Management.
SHEILA M. BARRY (51) -- Secretary. Assistant General Counsel and Vice
---------
President, Loomis Sayles. Formerly, Senior Counsel and Vice President, New
England Funds, L.P.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.
The Trust pays no compensation to its officers listed above who are
interested persons of the Trust. Each Trustee who is not affiliated with Loomis
Sayles is compensated at the rate of $10,000 per annum. No Trustee received
compensation from any other investment company which is advised by Loomis Sayles
or its affiliates or which holds itself out to investors as being related to the
Trust.
Compensation Table
for the year ended December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
from Trust Benefits Benefits Upon from Trust and
Accrued as Part Retirement Fund
of Fund Complex Paid to
Expenses Trustee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Timothy J. Hunt, $ 0 $ 0 $ 0 $ 0
Trustee
</TABLE>
As of the date hereof, the Trustees and officers as a group owned less
than 1% of the outstanding shares of the Fund.
As of November 7, 1996, each of Peabody Essex Museum and Wichita State
University Endowment Association might be deemed to control the Fund because it
owned of record more than 25% of the Fund's shares. As a result, it may not be
possible for matters subject to a vote of a majority of the outstanding voting
securities of the Fund to be approved without the affirmative vote
-8-
<PAGE>
of such shareholders. The following table sets forth the name, address and
percentage ownership of each holder of 5% or more of the Fund's outstanding
securities as of November 7, 1996.
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares Held
----------- ------- -----------
<S> <C> <C>
Peabody Essex Museum East India Square 36.07
Salem, MA 01970
Wichita State University 1845 Fairmount 27.08
Endowment Association Wichita, KS 67260
The Charles H. Hood Foundation 95 Berkeley St., Rm 201 8.35
Boston, MA 01970
York College of Pennsylvania York, PA 17405 20.87
Hahn, Loeser & Larks HR10 Plan P.O. Box 94777 5.15
Cleveland, OH 44101
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the
------------------
Fund under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, 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 at the annual rate of .40% of the Fund's
average weekly net assets.
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.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
During the 1994 fiscal period (July 1, 1994 to December 31, 1994 ) and the
1995 fiscal year, Loomis Sayles received the following amounts of investment
advisory fees from the Fund and bore the following amounts of fee waivers and
expense assumptions for the Fund:
-9-
<PAGE>
<TABLE>
<CAPTION>
Fee Waivers and
Period Advisory Fees Expense Assumptions
------ ------------- -------------------
<S> <C> <C>
1994 $ 9,331 $23,021
1995 $39,508 $38,911
</TABLE>
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 Trustees 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 or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the Trustees who are not
interested persons, cast in person at a meeting called for the purpose of voting
on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. 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" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.
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 to the eleven series of the Loomis
Sayles Funds, each a series of a registered open-end diversified management
investment company. Loomis Sayles acts as investment adviser or sub-adviser to
New England Star Advisers Fund, New England Value Fund, New England Capital
Growth Fund, New England Balanced Fund and New England Strategic Income Fund,
which are series of New England Funds Trust I, a registered open-end management
investment company, one series of New England Funds Trust III, a registered
open-end management investment company and to the Avanti Growth Series, the
Balanced Series and the Small Cap Series of New England Zenith Funds, which is
also a registered open-end management investment company. Loomis Sayles also
provides investment advice to numerous other corporate and fiduciary
clients.
-10-
<PAGE>
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of NEIC Holdings, Inc., a wholly-owned
subsidiary of New England Investment Companies, L.P. ("NEIC"). NEIC's sole
general partner is New England Investment Companies, Inc., which is a wholly-
owned subsidiary of Met Life New England Holdings, Inc., a wholly-owned
subsidiary of Metropolitan Life Insurance Company.
Trustees and officers of the Trust who hold positions with Loomis Sayles
are listed under "Management of the Trust" in this Statement of Additional
Information. Certain officers and Trustees 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 which the
Fund purchases or sells. In other cases, however, it is believed that these
practices may benefit the Fund. It is the opinion of the Trustees that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these
practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street 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 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 also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are
-----------------------
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand 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.
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 are
carried out through broker-dealers who make the primary market for 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.
-11-
<PAGE>
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid for a transaction.
However, the Fund will only pay commissions that Loomis Sayles believes to be
competitive with generally prevailing rates. Loomis Sayles will use its best
efforts to obtain information as to the general level of commission rates being
charged by the brokerage community from time to time and will evaluate the
overall reasonableness of brokerage commissions paid on transactions by
reference to such data. In making such evaluation, all factors affecting
liquidity and execution of the order, as well as the amount of the capital
commitment by the broker in connection with the order, are taken into account.
The Fund will not pay a broker a commission at a higher rate than otherwise
available for the same transaction in recognition of the value of research
services provided by the broker or in recognition of the value of any other
services provided by the broker which do not contribute to the best price and
execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and 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's 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.
The following table sets forth for the 1994 fiscal period (July 1, 1994 to
December 31, 1994) and the 1995 fiscal year (1) the aggregate dollar amount of
brokerage commissions paid on portfolio transactions during the period, (2) the
dollar amount of transactions on which commissions were paid during such period
that were directed to brokers providing research services ("directed
transactions") and (3) the dollar amount of commissions paid on directed
transactions during such period:
<TABLE>
<CAPTION>
(1) (2) (3)
Aggregate Commissions
Brokerage Directed on Directed
Commissions Transactions Transactions
Period ($) ($) ($)
-------- ----------- ------------ ------------
<S> <C> <C> <C>
1994 $ 297 $ 0 $0
1995 $2,516 $ 0 $0
</TABLE>
-12-
<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 The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the expenses
with respect to the Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust that are not readily identifiable as belonging
to a particular series of the Trust 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 series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate. While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular means of distribution (or costs of related services) to be borne by
the shareholders who purchase through that means of distribution. 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").
-13-
<PAGE>
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders. As
a matter of policy, however, the Trustees will not terminate the Trust or the
Fund without submitting the matter to a vote of the shareholders of the Trust or
the Fund, respectively.
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) in 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 for each series or sub-series 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 exclusively affecting an individual series, only shareholders
of that series are entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of series, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series. Voting rights are not cumulative.
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
-14-
<PAGE>
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.
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, (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value) and (iii) to issue shares of the Trust
in one or more series, and to subdivide any series of shares into various
classes of shares with such dividend preferences and other rights as the
Trustees may designate.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund . However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the Trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or Trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
HOW TO BUY SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."
NET ASSET VALUE
-15-
<PAGE>
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 weekly and as of the close of regular trading on the
New York Stock Exchange (the "Exchange") on any day on which an order for
purchase or redemption of the Fund's shares is received and on which the
Exchange is open for unrestricted trading. During the twelve months following
the date of this Statement of Additional Information, the Exchange is expected
to be closed on the following weekdays: Memorial Day as observed, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day, New Year's Day, Presidents' Day
and Good Friday. 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 among
securities that are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities 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 will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "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 the Trust in proper form. Proceeds resulting from a written
- ----------------------------------------
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.
-16-
<PAGE>
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes," it is the policy of the Fund to pay its shareholders monthly, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by 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 Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.
As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, 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 derived with respect to its
business of investing in such stock, securities or currencies; (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute each year at least
90% of its dividend, interest and certain other income; and (iv) at the end of
each fiscal quarter hold at least 50% of the value of its total assets in cash,
cash items, U.S. government securities, securities of other regulated investment
companies, and other securities that represent, with respect to each issuer, no
more than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and no more than 25% of the value of its total
assets 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 or
businesses. To the extent the Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income paid
to its shareholders in the form of dividends or capital gain distributions.
A nondeductible excise tax will be imposed at the rate of 4% 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%
-17-
<PAGE>
of its capital gain net income realized during the one-year period ending on
October 31 (or December 31, if the Fund is permitted to so elect and so elects)
plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Dividends and
distributions declared by the Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.
Dividends and distributions on Fund shares received shortly after their
purchase, although economically a return of capital, are subject to federal
income taxes as described herein and in the Prospectus to the extent the
dividends and distributions do not exceed the Fund's current and accumulated
earnings and profits.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions. If
shares have been held for more than one year, gain or loss realized will
generally be long-term capital gain or loss, and will otherwise be short-term
capital gain or loss. 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, all or a portion of any loss will be
disallowed on the taxable disposition of Fund shares if the shareholder acquires
other shares of the Fund within 30 days before or after the disposition.
The Fund's transactions in foreign currency-denominated debt securities may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and the regulations thereunder 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, respectively.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
FINANCIAL STATEMENTS
The financial statements of the Fund included in its 1996 Semiannual Report
and 1995 Annual Report are incorporated herein by reference to such Semiannual
Report and Annual
-18-
<PAGE>
Report. Copies of such Semiannual Report and Annual Report are available without
charge upon request by writing Loomis Sayles, One Financial Center, Boston,
Massachusetts 02111 or telephoning (617) 482-2450.
CALCULATION OF YIELD AND TOTAL RETURN
Yield. The Fund's yield will be computed by dividing the Fund's net
-----
investment income for a recent 30-day period by the maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Fund's yield will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses of the Trust allocated to the Fund. These factors, and
possible differences in the methods used in calculating yield, should be
considered when comparing the Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objective and policies of the
Fund.
At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary. An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.
Total Return. Total Return with respect to the Fund is a measure of the
------------
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last 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
-19-
<PAGE>
Yield and Total Return. 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 Micropal, Inc. as having similar investment objectives, (ii) the rating
assigned to the Fund by Morningstar, Inc. based on the Fund's risk-adjusted
performance relative to other mutual funds in its broad investment class, and/or
(iii) the ranking of performance figures relative to such figures for mutual
funds in its general investment category as determined by CDA/Weisenberger's
Management Results.
Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated by
Lipper, generally reflecting changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of performance
periods, including year-to-date, 1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly.
The rankings are based upon performance calculated by 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. Micropal rankings cover a
variety of performance periods, including year-to-date, 1-year, 5-year and 10-
year performance. Micropal classifies mutual funds by investment objective and
asset category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings
and is distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-
year and 10-year. Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of sales charges
or fees.
-20-
<PAGE>
Performance information may also be used to compare the performance of
the Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a
market value-weighted and unmanaged index of 30 large industrial stocks traded
on the New York Stock Exchange.
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed
rate debt issues of the U.S. government or its agencies rated investment grade
or higher with at least one year maturity and an outstanding par value of at
least $100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government
Bond Index is composed of all publicly issued, nonconvertible, domestic debt of
the U.S. government or any of its agencies, quasi-federal corporations, or
corporate debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal
Bond Index is computed from the prices of approximately 21,000 bonds consisting
of roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from 20
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index consists of all
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.
Merrill Lynch Government/Corporate Index. The Merrill Lynch
Government/ Corporate Index is a composite of approximately 4,900 U.S.
government and corporate debt
-21-
<PAGE>
issues with at least $25 million outstanding, greater than one year maturity,
and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
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 the nine
countries whose securities are most actively traded. 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 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
-22-
<PAGE>
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.
PERFORMANCE DATA
The manner in which total return and yield of the Fund will be calculated
for public use is described above. The following table summarizes the
calculation of total return for the Fund (i) for the one-year period ended June
30, 1996 and (ii) since the commencement of operations and the yield for the
Fund.
PERFORMANCE DATA*
<TABLE>
<CAPTION>
Average
Annual
Total
Average Return
Annual from the
Total Return Commencement
for the of Operations**
Current SEC Yield One-Year Period ended through
at 6/30/96 6/30/96 6/30/96
<S> <C> <C>
7.94% 10.61% 14.34%
</TABLE>
*Performance would have been lower if a portion of the management fee had not
been waived by Loomis Sayles. In the absence of this limitation, actual yield
and total return would have been 7.64% (yield), and 10.61% and 14.23% for the
one-year period and the period since commencement of operations,
respectively.
**Inception date of the Fund is July 1, 1994.
-23-
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates Financial Research Corp.
Adam Smith's Money World Financial Services Week
America On Line Financial World
Anchorage Daily News Fitch Insights
Atlanta Constitution Forbes
Atlanta Journal Fort Worth Star-Telegram
Arizona Republic Fortune
Austin American Statesman Fox Network and Affiliates
Baltimore Sun Fund Action
Bank Investment Marketing Fund Decoder
Barron's Global Finance
Bergen County Record (NJ) (the) Guarantor
Bloomberg Business News Hartford Courant
Bond Buyer Houston Chronicle
Boston Business Journal INC
Boston Globe Indianapolis Star
Boston Herald Individual Investor
Broker World Institutional Investor
Business Radio Network International Herald Tribune
Business Week Internet
CBS and Affiliates Investment Advisor
CDA Investment Technologies Investment Company Institute
CFO Investment Dealers Digest
Changing Times Investment Profiles
Chicago Sun Times Investment Vision
Chicago Tribune Investor's Daily
Christian Science Monitor IRA Reporter
Christian Science Monitor News Service Journal of Commerce
Cincinnati Enquirer Kansas City Star
Cincinnati Post KCMO (Kansas City)
CNBC KOA-AM (Denver)
CNN LA Times
Columbus Dispatch Leckey, Andrew (syndicated column)
Compuserve Life Association News
Dallas Morning News Lifetime Channel
Dallas Times-Herald Miami Herald
Denver Post Milwaukee Sentinel
Des Moines Register Money Magazine
Detroit Free Press Money Maker
Donoghues Money Fund Report Money Management Letter
Dorfman, Dan (syndicated column) Morningstar
Dow Jones News Service Mutual Fund Market News
Economist Mutual Funds Magazine
FACS of the Week National Public Radio
Fee Adviser National Underwriter
Financial News Network Nbc And Affiliates
Financial Planning New England Business
Financial Planning on Wall Street New England Cable News
A-1
<PAGE>
New Orleans Times-Picayune Wall Street Letter
New York Daily News Wall Street Week
New York Times Washington Post
Newark Star Ledger WBZ
Newsday WBZ-TV
Newsweek WCVB-TV
Nightly Business Report WEEI
Orange County Register WHDH
Orlando Sentinel Worcester Telegram
Palm Beach Post World Wide Web
Pension World Worth Magazine
Pensions And Investments WRKO
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News And World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
A-2
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:
Loomis Sayles Investment Trust's participation in wrap fee and no
transaction fee programs
Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
Specific and general investment philosophies, strategies, processes and
techniques
Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
Industry conferences at which Loomis Sayles participates
Current capitalization, levels of profitability and other financial
information
Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
Current and historical statistics relating to:
-total dollar amount of assets managed
-loomis sayles assets managed in total and by Fund
-the growth of assets
-asset types managed
References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:
Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as a 401(k) or
retirement plan funding vehicle produced by industry authorities, research
organizations and publications.
B-1
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE +
+AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY+
+SALE OF SECURITIES OF THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES FIXED INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
_______________ ____, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Fixed Income Fund, a series of Loomis Sayles Investment Trust, dated
_______________ ___, 1996, and should be read in conjunction therewith. A copy
of the Prospectus may be obtained from Loomis Sayles Investment Trust, One
Financial Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS ..................2
MANAGEMENT OF THE TRUST...........................................6
INVESTMENT ADVISORY AND OTHER SERVICES............................9
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................12
DESCRIPTION OF THE TRUST.........................................13
HOW TO BUY SHARES................................................16
NET ASSET VALUE..................................................16
REDEMPTIONS......................................................16
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS......17
FINANCIAL STATEMENTS.............................................19
CALCULATION OF YIELD AND TOTAL RETURN............................19
PERFORMANCE COMPARISONS..........................................20
PERFORMANCE DATA.................................................23
APPENDIX A --
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION.............A-1
APPENDIX B --
ADVERTISING AND PROMOTIONAL LITERATURE.....................B-1
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles Fixed Income
Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the "Trust"), are
summarized in the Prospectus under "Investment Objective and Policies" and "More
Information About the Fund's Investments." The investment policies of the Fund
set forth in the Prospectus and in this Statement of Additional Information may
be changed by Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the Fund's
investment adviser, subject to review and approval by the Trust's board of
trustees (the "Trustees"), without shareholder approval except that the
investment objective of the Fund as set forth in the Prospectus and any Fund
policy explicitly identified as "fundamental" may not be changed without the
approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).
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) 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.
*(2) 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 investing in issuers that
invest or deal in the foregoing types of assets or from purchasing
securities that are secured by real estate.)
*(3) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds,
debentures, commercial paper, corporate notes and similar evidences of
indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
*(4) Change its classification pursuant to Section 5(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
to "non-diversified" management investment company.
*(5) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries.)
-2-
<PAGE>
*(6) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower,
nor borrow any money except as a temporary measure for extraordinary
or emergency purposes; however, the Fund's use of reverse repurchase
agreements and "Dollar roll" arrangements shall not constitute
borrowing by the Fund for purposes of this restriction.
*(7) 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.
*(8) Issue senior securities. (For the purposes of this restriction none of
the following is deemed to be a senior security: any pledge, mortgage,
hypothecation or other encumbrance of assets; any borrowing permitted
by restriction (6) 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
or entry into options, forward contracts, futures contracts, options
on futures contracts, swap contracts or any other derivative
investments to the extent that Loomis Sayles determines that the Fund
is not required to treat such investments as senior securities
pursuant to the pronouncements of the Securities and Exchange
Commission (the "SEC") or its staff.)
Although the Fund has no current intention of investing in repurchase
agreements, the Fund intends, based on the views of the staff of the SEC, to
restrict its investments, if any, in repurchase agreements maturing in more than
seven days, together with other investments in illiquid securities, to the
percentage permitted by restriction (7) above.
Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.
Portfolio Turnover
- ------------------
Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets. The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions. High portfolio turnover rates
involve higher costs such as higher brokerage commissions and higher levels of
taxable gain. See "Portfolio Transactions and Brokerage" for a description of
Loomis Sayles's brokerage practices and "Income Dividends, Capital Gain
Distributions and Tax Status" for more information about the tax consequences of
investment in the Fund.
-3-
<PAGE>
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 - Direct obligations of the United States Treasury
-------------------
which 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 - Direct obligations of the United
-----------------------------
States Treasury 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.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-------------
mortgagee which represents 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
-4-
<PAGE>
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, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, 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
- ----------------------
As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria. The Fund may take delivery of
these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
Zero Coupon Bonds
- -----------------
Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at discounts 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 do 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 (the "Code"), the
Fund must distribute each year at least 90% of its net
-5-
<PAGE>
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
- ---------------------
The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash . Although 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 and (b) inability to enforce rights and the expenses
involved in attempted enforcement.
Rule 144A Securities
- --------------------
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a 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
marketplace trades therefor.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
DANIEL J. FUSS (63) -- President. Executive Vice President and Director, Loomis
---------
Sayles.
-6-
<PAGE>
MARK W. HOLLAND (47) -- Secretary and Treasurer. Vice President-Finance and
-----------------------
Administration, Loomis Sayles.
TIMOTHY J. HUNT (64) -- Trustee. 4 Dennett Road, Marblehead, Massachusetts.
-------
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
ROBERT J. BLANDING (49) -- Executive Vice President. 465 First Street West,
------------------------
Sonoma, California. President and Chairman, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Formerly, Portfolio Manager,
Kmart Corporation.
WILLIAM J. DRISCOLL (37) -- Vice President. Vice President, Loomis Sayles.
--------------
Formerly, Vice President, Merrill Lynch.
QUENTIN P. FAULKNER (58) -- Vice President. Vice President, Loomis Sayles.
--------------
KATHLEEN C. GAFFNEY (34) -- Vice President. Vice President, Loomis Sayles.
--------------
ROBERT K. PAYNE (54) -- Vice President. 555 California Street, San Francisco,
--------------
California. Vice President, Loomis Sayles.
ANTHONY J. WILKINS (54) -- Vice President. Vice President, Loomis Sayles.
--------------
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer and Director,
--------------
Loomis Sayles.
JOHN F. YEAGER (33) -- Vice President. Vice President, Loomis Sayles; formerly
--------------
Vice President - Marketing, INVESCO Funds Group and Assistant Comptroller,
INVESCO Capital Management.
SHEILA M. BARRY (51) -- Secretary. Assistant General Counsel and Vice
---------
President, Loomis Sayles. Formerly, Senior Counsel and Vice President, New
England Funds, L.P.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.
The Trust pays no compensation to its officers listed above who are
interested persons of the Trust. Each Trustee who is not affiliated with Loomis
Sayles is compensated at the rate of $10,000 per annum. No Trustee received
compensation from any other investment company which is advised by Loomis Sayles
or its affiliates or which holds itself out to investors as being related to the
Trust.
-7-
<PAGE>
COMPENSATION TABLE
for the period ended December 31, 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Compensation
Position Compensation Retirement Annual from Trust and
and Trust Benefits Benefits Fund Complex
Accrued as Part of Upon Paid to Trustee
Fund Expenses Retirement
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TIMOTHY J. HUNT, $0 $0 $0 $0
TRUSTEE
</TABLE>
As of the date hereof, the Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund.
As of November 7, 1996, Exeter Reassurance Company, Ltd., a Bermuda
corporation, may be deemed to control the Fund because it owned of record more
than 25% of the Fund's shares. As a result, it may not be possible for matters
subject to a vote of the majority of the outstanding voting securities of the
Fund to be approved without the affirmative vote of such shareholder. The
following table sets forth the name, address and percentage ownership of each
holder of 5% or more of the fund's outstanding securities as of November 7,
1996:
-8-
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares Held
----------- ------- -----------
<S> <C> <C>
City of Manchester Contributory 1838 Elm Street 7.43
Retirement System Manchester, NH 03104
Painters D.C. 35 Pension Fund 25 Colgate Road 14.30
Roslindale, MA 02131-1105
Marine Biological Laboratory Water Street 5.22
Woods Hole, MA 02543
New Hampshire Charitable 37 Pleasant Street 7.10
Foundation Concord, NH 03301-4005
Insurance Services Office, Inc. 7 World Trade Center 10.31
New York, NY 10048
Exeter Reassurance Company, Ltd. Victoria Hall 26.32
Victoria Street
Hamilton HMHX
Bermuda
Retirement Plan of the 99 Park Avenue-Suite 300
United Jewish Appeal, Inc. New York, NY 10016 6.21
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the
------------------
Fund under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its
-9-
<PAGE>
own expense, all necessary office space, office supplies, 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 at the
annual rate of .50% of the Fund's average weekly net assets.
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.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
During the 1995 fiscal period (January 17, 1995 to December 31, 1995),
Loomis Sayles received the following amount of investment advisory fees from the
Fund and bore the following amount of fee waivers and expense assumptions for
the Fund:
<TABLE>
<CAPTION>
Fee Waivers and
Period Advisory Fees Expense Assumptions
------ ------------- --------------------
<S> <C> <C>
1995 $176,759 $22,746
</TABLE>
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 Trustees 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 or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the Trustees who are not
interested persons, cast in person at a meeting called for the purpose of voting
on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. 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" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by
-10-
<PAGE>
a majority of the Trustees who are not interested persons of the Trust or Loomis
Sayles, cast in person at a meeting called for the purpose of voting on such
approval.
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 to the eleven series of the Loomis
Sayles Funds, each a series of a registered open-end diversified management
investment company. Loomis Sayles acts as investment adviser or sub-adviser to
New England Star Advisers Fund, New England Value Fund, New England Capital
Growth Fund, New England Balanced Fund and New England Strategic Income Fund,
which are series of New England Funds Trust I, a registered open-end management
investment company, one series of New England Funds Trust III, a registered
open-end management investment company AND to the Avanti Growth Series, the
Balanced Series and the Small Cap Series of New England Zenith Funds, which is
also a registered open-end management investment company. Loomis Sayles also
provides investment advice to numerous other corporate and fiduciary
clients.
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of NEIC Holdings, Inc., a wholly-owned
subsidiary of New England Investment Companies, L.P. ("NEIC"). NEIC'S sole
general partner is New England Investment Companies, Inc., which is a wholly-
owned subsidiary of Met Life New England Holdings, Inc., a wholly-owned
subsidiary of Metropolitan Life Insurance Company.
Trustees and officers of the Trust who hold positions with Loomis Sayles
are listed under "Management of the Trust" in this Statement of Additional
Information. Certain officers and Trustees 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 which the
Fund purchases or sells. In other cases, however, it is believed that these
practices may benefit the Fund. It is the opinion of the Trustees that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these
practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the
-11-
<PAGE>
registered owner of securities held in book entry form belonging to the Fund.
Upon instruction, State Street 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 also
maintains certain accounts and records of the Fund and calculates the total net
asset value, total net income and net asset value per share of the Fund on a
daily basis.
Independent Accountants. The Fund's independent accountants are Coopers &
-----------------------
Lybrand, L.L.P. ("Coopers & Lybrand"), One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand 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.
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 are
carried out through broker-dealers who make the primary market for securities
unless, in the judgment of Loomis Sayles, a more favorable price can be obtained
by carrying out such transactions through other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid for a transaction.
However, the Fund will only pay commissions that Loomis Sayles believes to be
competitive with generally prevailing rates. Loomis Sayles will use its best
efforts to obtain information as to the general level of commission rates being
charged by the brokerage community from time to time and will evaluate the
overall reasonableness of brokerage commissions paid on transactions by
reference to such data. In making such evaluation, all factors affecting
liquidity and execution of the order, as well as the amount of the capital
commitment by the broker in connection with the order, are taken into account.
The Fund will not pay a broker a commission at a higher rate than otherwise
available for the same transaction in recognition of the value of research
services provided by the broker or in recognition of the value of any other
services provided by the broker which do not contribute to the best price and
execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers
-12-
<PAGE>
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's 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.
The following table sets forth for the 1995 fiscal period (January 17, 1995
to December 31, 1995) (1) the aggregate dollar amount of brokerage commissions
paid on portfolio transactions during the period, (2) the dollar amount of
transactions on which commissions were paid during such period that were
directed to brokers providing research services ("directed transactions") and
(3) the dollar amount of commissions paid on directed transactions during such
period:
<TABLE>
<CAPTION>
(1) (2) (3)
Aggregate Commissions
Brokerage Directed on Directed
Commissions Transactions Transactions
Period ($) ($) ($)
------ ----------- ------------ -------------
<S> <C> <C> <C>
1995 $5,819.62 $0 $0
</TABLE>
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 The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration OF Trust") dated December 23, 1993.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the expenses
with respect to the Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust that are not readily identifiable
-13-
<PAGE>
as belonging to a particular series of the Trust 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 series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate. While the Trustees
have no current intention to subdivide any series of shares into classes, THIS
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular means of distribution (or costs of related services) to be borne by
the shareholders who purchase through that means of distribution. The Trustees
may also, without shareholder approval, establish one or more additional
separate portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "fund").
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders. As
a matter of policy, however, the Trustees will not terminate the Trust or the
Fund without submitting the matter to a vote of the shareholders of the Trust or
the Fund, respectively.
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) in 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 for each series or sub-series 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 exclusively affecting an individual series, only shareholders
of that series are entitled
-14-
<PAGE>
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. Voting rights are not
cumulative.
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.
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, (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value) and (iii) to issue shares of the Trust
in one or more series, and to subdivide any series of shares into various
classes of shares with such dividend preferences and other rights as the
Trustees may designate.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund . However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder
-15-
<PAGE>
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the Fund itself would be unable to meet its
obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or Trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
HOW TO BUY SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."
NET ASSET VALUE
The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made weekly and as of the close of regular trading on the
New York Stock Exchange (the "Exchange") on any day on which an order for
purchase or redemption of the Fund's shares is received and on which the
Exchange is open for unrestricted trading. During the twelve months following
the date of this Statement of Additional Information, the Exchange is expected
to be closed on the following weekdays: Memorial Day as observed, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day , New Year's Day, Presidents'
Day and Good Friday. 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 among
securities that are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities 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
-16-
<PAGE>
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 will be valued at their fair value as determined in good faith or in
accordance with procedures approved by the Trustees.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "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 the Trust in proper form. Proceeds resulting from a written
- ----------------------------------------
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of the Fund to pay its shareholders, as annual
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by 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 Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.
-17-
<PAGE>
As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, 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 derived with respect to its
business of investing in such stock, securities or currencies; (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute each year at least
90% of its dividend, interest and certain other income; and (iv) at the end of
each fiscal quarter hold at least 50% of the value of its total assets in cash,
cash items, U.S. government securities, securities of other regulated investment
companies, and other securities that represent, with respect to each issuer, no
more than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and no more than 25% of the value of its total
assets 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 or
businesses. To the extent the Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income paid
to its shareholders in the form of dividends or capital gain distributions.
A nondeductible excise tax will be imposed at the rate of 4% on the excess,
if any, of the Fund's "required distribution" over its actual distributions in
any calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Dividends and distributions on Fund shares received shortly after their
purchase, although economically a return of capital, are subject to federal
income taxes as described herein and in the Prospectus to the extent the
dividends and distributions do not exceed the Fund's current and accumulated
earnings and profits.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions. If
shares have been held for more than one year, gain or loss realized will
generally be long-term capital gain or loss, and will otherwise be short-term
capital gain or loss. 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
-18-
<PAGE>
to the extent of any long-term capital gain distributions received by the
shareholder. Furthermore, all or a portion of any loss will be disallowed on the
taxable disposition of Fund shares if the shareholder acquires other shares of
the Fund within 30 days before or after the disposition.
The Fund's transactions in foreign currency-denominated debt securities may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and the regulations thereunder 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, respectively.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
FINANCIAL STATEMENTS
The financial statements of the Fund included in its 1996 Semiannual Report
and 1995 Annual Report are incorporated herein by reference to such 1996
Semiannual Report and 1995 Annual Report. Copies of such 1996 Semiannual Report
and 1995 Annual Report are available without charge upon request by writing
Loomis Sayles, One Financial Center, Boston, Massachusetts 02111 or telephoning
(617) 482-2450.
CALCULATION OF YIELD AND TOTAL RETURN
Yield. The Fund's yield will be computed by dividing the Fund's net
-----
investment income for a recent 30-day period by the maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Fund's yield will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses of the Trust allocated to the Fund. These factors, and
possible differences in the methods used in calculating yield, should be
considered when comparing the Fund's yield to yields published for other
investment companies and other
-19-
<PAGE>
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 objective and policies of the Fund.
At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary. An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.
Total Return. Total Return with respect to the Fund is a measure of the
------------
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last 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 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 Micropal, Inc.
as having similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.
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
-20-
<PAGE>
variety of performance periods, including year-to-date, 1-year, 5-year, and 10-
year performance. Lipper classifies mutual funds by investment objective and
asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
--------------
rankings are based upon performance calculated by 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. Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings and is
-------------------------------------
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year. Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain). Weisenberger
rankings do not reflect deduction of sales charges or fees.
Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
--------------------
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a
----------------------------
market value-weighted and unmanaged index of 30 large industrial stocks traded
on the New York Stock Exchange.
-21-
<PAGE>
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
------------------------------------------------
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed rate
------------------------------------------
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government Bond
--------------------------------------
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal
-------------------------------------
Bond Index is computed from the prices of approximately 21,000 bonds consisting
of roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from 20
----------------
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index consists of
-------------------------
all stocks contained in the MSCI-EAFE Index, other than stocks from Japan.
Merrill Lynch Government/Corporate Index. The Merrill Lynch Government/
-----------------------------------------
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index includes
-------------------------------
over 750 issues and represents public debt greater than $10 million (original
issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
------------------
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
-22-
<PAGE>
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 the nine
countries whose securities are most actively traded. 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 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.
PERFORMANCE DATA
The manner in which total return and yield of the Fund will be calculated
for public use is described above. The following table summarizes the
calculation of total return for the Fund (i) for the one-year period ended June
30, 1996 and (ii) since the commencement of operations and the yield for the
Fund.
-23-
<PAGE>
PERFORMANCE DATA
<TABLE>
<CAPTION>
Average
Average Annual
Annual Total
Total Return Return
Current Sec Yield for the from the Commencement
AT 6/30/96 One-Year Period ended of Operations* Through
6/30/96 6/30/96
<S> <C> <C>
8.24% 10.15% 17.17%
</TABLE>
*Inception date of the Fund is January 17, 1995.
-24-
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
<TABLE>
<S> <C>
ABC and affiliates Financial Research Corp.
Adam Smith's Money World Financial Services Week
America On Line Financial World
Anchorage Daily News Fitch Insights
Atlanta Constitution Forbes
Atlanta Journal Fort Worth Star-telegram
Arizona Republic Fortune
Austin American Statesman Fox Network And Affiliates
Baltimore Sun Fund Action
Bank Investment Marketing Fund Decoder
Barron's Global Finance
Bergen County Record (NJ) (the) Guarantor
Bloomberg Business News Hartford Courant
Bond Buyer Houston Chronicle
Boston Business Journal INC
Boston Globe Indianapolis Star
Boston Herald Individual Investor
Broker World Institutional Investor
Business Radio Network International Herald Tribune
Business Week Internet
CBS and affiliates Investment Advisor
CDA Investment Technologies Investment Company Institute
CFO Investment Dealers Digest
Changing Times Investment Profiles
Chicago Sun Times Investment Vision
Chicago Tribune Investor's Daily
Christian Science Monitor Ira Reporter
Christian Science Monitor News Service Journal of Commerce
Cincinnati Enquirer Kansas City Star
Cincinnati Post KCMO (Kansas City)
CNBC KOA-AM (Denver)
CNN LA Times
Columbus Dispatch Leckey, Andrew (Syndicated Column)
Compuserve Life Association News
Dallas Morning News Lifetime Channel
Dallas Times-herald Miami Herald
Denver Post Milwaukee Sentinel
Des Moines Register Money Magazine
Detroit Free Press Money Maker
Donoghues Money Fund Report Money Management Letter
Dorfman, Dan (syndicated column) Morningstar
Dow Jones News Service Mutual Fund Market News
Economist Mutual Funds Magazine
FACS of the Week National Public Radio
Fee Adviser National Underwriter
Financial News Network NBC and affiliates
Financial Planning New England Business
Financial Planning on Wall Street New England Cable News
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
New Orleans Times-picayune Wall Street Letter
New York Daily News Wall Street Week
New York Times Washington Post
Newark Star Ledger WBZ
Newsday WBZ-TV
Newsweek WCVB-TV
Nightly Business Report WEEI
Orange County Register WHDH
Orlando Sentinel Worcester Telegram
Palm Beach Post World Wide Web
Pension World Worth Magazine
Pensions and Investments WRKO
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (Syndicated Column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (Syndicated Column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (Syndicated Column)
Toledo Blade
UP
US News And World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
</TABLE>
A-2
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:
. Loomis Sayles investment trust's participation in wrap fee and no
transaction fee programs
. Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
. Specific and general investment philosophies, strategies, processes and
techniques
. Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
. Industry conferences at which Loomis Sayles participates
. Current capitalization, levels of profitability and other financial
information
. Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
. The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
. Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
. Current and historical statistics relating to:
-total dollar amount of assets managed
-Loomis Sayles assets managed in total and by fund
-the growth of assets
-asset types managed
References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:
. Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom loomis sayles may or may not have
a relationship.
. Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the fund as a 401(k) or
retirement plan funding vehicle produced by industry authorities, research
organizations and publications.
B-1
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN+
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY +
+SALE OF SECURITIES OF THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
_______________ ____, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles California Tax-Free Income Fund , a series of Loomis Sayles Investment
Trust, dated ________ ___, 1996, and should be read in conjunction therewith. A
copy of the Prospectus may be obtained from Loomis Sayles Investment Trust,
One Financial Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS................ 1
MANAGEMENT OF THE TRUST........................................ 8
INVESTMENT ADVISORY AND OTHER SERVICES......................... 10
PORTFOLIO TRANSACTIONS AND BROKERAGE........................... 12
DESCRIPTION OF THE TRUST....................................... 13
HOW TO BUY SHARES............................................. 16
NET ASSET VALUE................................................ 16
REDEMPTIONS.................................................... 17
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS.... 17
FINANCIAL STATEMENTS........................................... 20
CALCULATION OF YIELD AND TOTAL RETURN.......................... 20
PERFORMANCE COMPARISONS........................................ 21
PERFORMANCE DATA............................................... 24
APPENDIX A --
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION............A-1
APPENDIX B --
ADVERTISING AND PROMOTIONAL LITERATURE....................B-1
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles California Tax-
Free Income Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments." The
investment policies of the Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by Loomis, Sayles & Company,
L.P. ("Loomis Sayles"), the Fund's investment adviser, subject to review and
approval by the Trust's board of trustees (the "Trustees"), without
shareholder approval except that the investment objective of the Fund as set
forth in the Prospectus and any Fund policy explicitly identified as
"fundamental" may not be changed without the approval of the holders of a
majority of the outstanding shares of the Fund (which means the lesser of (i)
67% of the shares of the Fund represented at a meeting at which at least 50% of
the outstanding shares are represented or (ii) more than 50% of the outstanding
shares).
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) 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.
*(2) 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 investing in issuers that
invest or deal in the foregoing types of assets or from purchasing
securities that are secured by real estate.)
*(3) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds,
debentures, commercial paper, corporate and similar evidences of
indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
(4) Change its classification pursuant to Section 5(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
to "non-diversified" management investment company.
*(5) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower,
nor borrow any money except as a temporary measure for extraordinary
or emergency purposes; however, the Fund's use of reverse repurchase
agreements and "dollar
-2-
<PAGE>
roll" arrangements shall not constitute borrowing by the Fund for
purposes of this restriction.
*(6) 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.
*(7) Issue senior securities. (For the purposes of this restriction none of
the following is deemed to be a senior security: any pledge, mortgage,
hypothecation or other encumbrance of assets; any borrowing permitted
by restriction (5) 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
or entry into options, forward contracts, futures contracts, options
on futures contracts, swap contracts or any other derivative
investments to the extent that Loomis Sayles determines that the Fund
is not required to treat such investments as senior securities
pursuant to the pronouncements of the Securities and Exchange
Commission (the "SEC") or its staff.)
The Fund intends, based on the views of the staff of the SEC, to restrict
its investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (6) above.
Portfolio Turnover
- ------------------
Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets. The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions. High portfolio turnover rates
involve higher costs such as higher brokerage commissions and higher levels of
taxable gain. See "Portfolio Transactions and Brokerage" for a description of
Loomis Sayles's brokerage practices and "Income Dividends, Capital Gain
Distributions and Tax Status" for more information about the tax consequences of
investing in the Fund.
When-Issued Securities
- ----------------------
As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the 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
-3-
<PAGE>
when-issued or delayed-delivery basis only securities meeting the 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).
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 - Direct obligations of the United States Treasury
-------------------
which 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 - Direct obligations of the United
-----------------------------
States Treasury 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.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-------------
mortgagee which represent interests 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
-4-
<PAGE>
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, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, 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.
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 obligations
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at discounts 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 do 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 (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 an
investor 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.
-5-
<PAGE>
Repurchase Agreements
- ---------------------
The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash . Although 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 and (b) inability to enforce rights and the expenses
involved in attempted enforcement.
California Tax-Exempt Securities
- --------------------------------
In addition to general economic pressures, certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could adversely affect the
State of California's ability to raise revenues to meet its financial
obligations. The following information is only a brief summary, is not a
complete description and is based on information drawn from official statements
and prospectuses relating to securities offerings of the State of California
that have come to the attention of the Trust and were available before the date
of this Statement of Additional Information. The Trust has not independently
verified the accuracy and completeness of the information contained in those
statements and prospectuses.
As used below, "California Tax-Exempt Securities" includes issues secured
by a direct payment obligation of the State and obligations of other issuers
that rely in whole or in part on State revenues to pay their obligations.
Property tax revenues and part of the State's General Fund surplus are
distributed to counties, cities and their various taxing entities; whether and
to what extent a portion of the State's General Fund will be so distributed in
the future is unclear.
Overview. After suffering through a severe recession, since the start of
--------
1994 California's economy has been on a steady recovery. Employment has grown by
over 500,000 in 1994 and 1995, and the pre-recession employment level is
expected to be matched in 1996. The strongest growth has been in export-related
industries, business services, electronics, entertainment, and tourism, which
has offset the recession-related losses which were heaviest in aerospace and
defense-related industries, finance, and insurance.
-6-
<PAGE>
The recession seriously affected State tax revenues and caused an increase
in expenditures for health and welfare programs. As a result, from the late
1980's until 1992-93, the State experienced recurring budget deficits. During
this period, expenditures exceeded revenues in four out of six years, and the
State accumulated a budget deficit of about $2.8 billion at its peak at June 30,
1993. A further consequence of the large budget imbalances was to significantly
reduce the State's available cash resources and require it to use a series of
external borrowings to meet its cash needs. Due to the improved California
economy, however, the State's finances have also improved. The 1995-96 fiscal
year budget act projected that, after repaying the last of the budget deficit
carried over from prior fiscal years, there would be a positive balance of $28
million in the budget reserve at June 30, 1996. In May 1996, the State
Department of Finance updated the projections for the 1995-96 fiscal year, and
estimated that there would be a small deficit of about $70 million in the budget
reserve at June 30, 1996. The 1996-97 budget act appropriated a budget reserve
of $305 million at June 30, 1997. This budget reserve assumed savings of about
$660 million in the State's health and welfare costs based on changes to federal
law, including welfare reform. The federal welfare reform legislation passed in
August 1996 is projected to provide only about $360 million of the assumed $660
million in savings, however, subject to further adjustment based on how the
State implements changes to its welfare system.
Because of the deterioration in the State's financial condition, the
State's credit ratings have been reduced. Since October 1992, three major
nationally recognized statistical rating organizations have lowered the State's
general obligation bond rating from the highest rating of "AAA" to "A+" by
Standard and Poor's, "A1" by Moody's Investors Service, Inc., and "A+" by Fitch
Investors Service, Inc.
State Appropriations Limit. Subject to certain exceptions, the State is
--------------------------
subject to an annual appropriations limit imposed by its Constitution on
"proceeds of taxes." Various expenditures, including but not limited to debt
service on certain bonds and appropriations for qualified capital outlay
projects, are not included in the appropriations limit.
Issues Affecting Local Governments and Special Districts
- --------------------------------------------------------
Proposition 13. Certain California Tax-Exempt Securities may be
--------------
obligations of issuers that rely in whole or in part on ad valorem real property
taxes for revenue. In 1978, California voters approved Proposition 13, which
limits ad valorem real property taxes and restricts the ability of taxing
entities to increase property tax and other revenues. With certain exceptions,
the maximum ad valorem real property tax is limited to 1% of the value of real
property. The value of real property may be adjusted annually for inflation at
a rate not exceeding 2% per year, or reduced to reflect declining value, and may
also be adjusted when there is a change in ownership or new construction with
respect to the property. Constitutional challenges to Proposition 13 to date
have been unsuccessful.
The State, in response to the significant reduction in local property tax
revenues as a result of the passage of Proposition 13, enacted legislation to
provide local government with increased expenditures from the General Fund.
This post-Proposition 13 fiscal relief has ended.
Proposition 62. This initiative placed further restrictions on the ability
--------------
of local governments to raise taxes and allocate approved tax revenues. Although
some of the California Courts of Appeal held that parts of Proposition 62 were
unconstitutional, the California Supreme Court recently upheld Proposition 62's
requirement that special taxes be approved by a two-thirds vote of the voters
voting in an election on the issue. This decision
-7-
<PAGE>
may invalidate other taxes that have been imposed by local governments in
California and make it more difficult for local governments to raise taxes.
Propositions 98 and 111. These initiatives changed the State
-----------------------
appropriations limit and State funding of public education below the university
level by guaranteeing K-14 schools a minimum share of General Fund revenues.
The initiatives also require that the State establish a prudent reserve fund for
public education.
Appropriations Limit. Local governmental entities are also subject to
--------------------
annual appropriations limits. If a local government's revenues in any year
exceed the limit, the excess must be returned to the public through a revision
of tax rates or fee schedules over the following two years.
Conclusion. The effect of these Constitutional and statutory changes and
----------
of budget developments on the ability of California issuers to pay interest and
principal on their obligations remains unclear, and may depend upon whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent. For example, in December 1994, Orange County filed for
bankruptcy.
Additional Issues.
- -----------------
Mortgages and Deeds of Trust. The Fund may invest in issues that are
----------------------------
secured in whole or in part by mortgages or deeds of trust on real property.
California law limits the remedies of a creditor secured by a mortgage or a deed
of trust, which may result in delays in the flow of revenues to, and debt
service paid by, an issuer.
Lease Financings. Some local governments and districts finance certain
----------------
activities through lease arrangements. It is uncertain whether such lease
financings are debt that requires voter approval.
Seismic Risk. It is impossible to predict the time, location or magnitude
------------
of a major earthquake or its effect on the California economy. In January 1994
a major earthquake struck Los Angeles, causing significant damage to structures
and facilities in a four-county area. The possibility exists that another such
earthquake could create a major dislocation of the California economy.
-8-
<PAGE>
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
DANIEL J. FUSS (63) -- President . Executive Vice President and Director,
---------
Loomis Sayles.
MARK W. HOLLAND (47) -- Secretary and Treasurer . Vice President-Finance
--------- -------
and Administration, Loomis Sayles.
TIMOTHY J. HUNT (64) -- Trustee. 4 Dennett Road, Marblehead, Massachusetts.
-------
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
ROBERT J. BLANDING (49) -- Executive Vice President. 465 First Street West,
------------------------
Sonoma, California. President and Chairman, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Formerly, Portfolio Manager,
Kmart Corporation.
WILLIAM J. DRISCOLL (37) -- Vice President. Vice President, Loomis Sayles.
--------------
Formerly, Vice President, Merrill Lynch.
QUENTIN P. FAULKNER (58) -- Vice President. Vice President, Loomis Sayles.
--------------
KATHLEEN C. GAFFNEY (34) -- Vice President. Vice President, Loomis Sayles.
--------------
ROBERT K. PAYNE (54) -- Vice President. 555 California Street, San Francisco,
--------------
California. Vice President, Loomis Sayles.
ANTHONY J. WILKINS (54) -- Vice President. Vice President, Loomis Sayles.
--------------
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer and Director,
--------------
Loomis Sayles.
JOHN F. YEAGER (33) -- Vice President. Vice President, Loomis Sayles; formerly
--------------
Vice President-Marketing, INVESCO Funds Group and Assistant Comptroller,
INVESCO Capital Management.
SHEILA M. BARRY (51) -- Secretary. Assistant General Counsel and Vice
---------
President, Loomis Sayles. Formerly, Senior Counsel and Vice President, New
England Funds, L.P.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.
The Trust pays no compensation to its officers listed above who are
interested persons of the Trust. Each Trustee who is not affiliated with Loomis
Sayles is compensated at
-9-
<PAGE>
the rate of $10,000 per annum. No Trustee will receive compensation from any
other investment company which is advised by Loomis Sayles or its affiliates or
which holds itself out to investors as being related to the Trust.
COMPENSATION TABLE
for the period ended December 31, 1995
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Benefits Annual Benefits Compensation
from Trust Accrued as Part of Upon Retirement From Trust and
Fund Expenses Fund Complex
Paid to Trustee
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Timothy J. Hunt, $ 0 $ 0 $ 0 $ 0
Trustee
</TABLE>
As of the date hereof, the Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund.
The following table sets forth the name, address and percentage ownership
of each holder of 5% or more of the Fund's outstanding voting securities as of
November 7, 1996:
<TABLE>
<CAPTION>
Shareholder Address Percentage of Shares Held
- ----------- ------- -------------------------
<S> <C> <C>
Connie B. Vitale and 1015 San Marino Avenue 6.59%
Camille A. Basha Jt. Tenants San Marino, CA 91108
Joseph E. & Ellen Mueth 225 S. Lake Avenue 8.06%
Family Trust Pasadena, CA 91101
Camille A. Basha and 1015 San Marino Avenue 8.49%
Connie B. Vitale Jt. Tenants San Marino, CA 91108
Davis Family Trust 400 First American Center 6.16%
Nashville, TN 73237-0402
Davis Trust 400 First American Center 11.33%
Nashville, TN 37237-0402
Phillipa Scott Trust II 16133 Ventura Boulevard 5.41%
Encino, CA 91436
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Shareholder Address Percentage of Shares Held
- ----------- ------- -------------------------
<S> <C> <C>
Judith Ann Kenyon 1755 Warwick Avenue 7.29%
San Marino, CA 91108
Koeppel Family Trust 1445 Caballero Road 9.58%
Arcadia, CA 91006
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the Fund
------------------
under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, 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 at the annual rate of .50% of the Fund's
average weekly net assets.
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.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
During the 1995 fiscal period (June 1, 1995 to December 31, 1995), Loomis
Sayles received the following amount of investment advisory fees from the Fund
and bore the following amount of fee waivers and expense assumptions for the
Fund:
<TABLE>
<CAPTION>
Fee Waivers and
Period Advisory Fees Expense
------ ------------- ---------
ASSUMPTIONS
<S> <C> <C>
1995 $19,742 $28,897
</TABLE>
-11-
<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 Trustees 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 or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the Trustees who are not
interested persons, cast in person at a meeting called for the purpose of voting
on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. 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" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.
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 to the eleven series of the Loomis
Sayles Funds, each a series of a registered open-end diversified management
investment company. Loomis Sayles acts as investment adviser or sub-adviser to
New England Star Advisers Funds, New England Value Fund, New England Capital
Growth Fund, New England Balanced Fund and New England Strategic Income Fund,
which are series of New England Funds Trust I, a registered open-end management
investment company, one series of New England Funds Trust III, a registered
open-end management investment company and to the Avanti Growth Series, the
Balanced Series and the Small Cap Series of New England Zenith Funds, which is
also a registered open-end management investment company. Loomis Sayles also
provides investment advice to numerous other corporate and fiduciary
clients.
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of NEIC Holdings, Inc., a wholly-owned
subsidiary of New England Investment Companies, L.P. ("NEIC"). NEIC'S sole
general partner is New England Investment Companies, Inc., which is a wholly-
owned subsidiary of Met Life New England Holdings, Inc., a wholly-owned
subsidiary of Metropolitan Life Insurance Company.
Trustees and officers of the Trust who hold positions with Loomis Sayles
are listed under "Management of the Trust" in this Statement of Additional
Information. Certain
-12-
<PAGE>
officers and Trustees 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 which the Fund purchases or
sells. In other cases, however, it is believed that these practices may benefit
the Fund. It is the opinion of the Trustees that the desirability of retaining
Loomis Sayles as investment adviser for the Fund outweighs the disadvantages, if
any, which might result from these practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street "), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street 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 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 also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are Coopers
-----------------------
& Lybrand L.L.P. ("Coopers & Lybrand"), One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand 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.
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 are
carried out through broker-dealers who make the primary market for securities
unless, in the judgment of Loomis Sayles, a more favorable price can be obtained
by carrying out such transactions through other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid for a
transaction. However, the Fund will only pay commissions that Loomis Sayles
believes to be competitive with generally prevailing rates. Loomis Sayles will
use its best efforts to obtain
-13-
<PAGE>
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Fund will not
pay a broker a commission at a higher rate than otherwise available for the same
transaction in recognition of the value of research services provided by the
broker or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and 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's 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.
The following table sets forth for the 1995 fiscal period (June 1, 1995 TO
December 31, 1995) (1) the aggregate dollar amount of brokerage commissions paid
on portfolio transactions during the period, (2) the dollar amount of
transactions on which commissions were paid during such period that were
directed to brokers providing research services ("directed transactions") and
(3) the dollar amount of commissions paid on directed transactions during such
period:
<TABLE>
<CAPTION>
(1) (2) (3)
Aggregate Commissions
Brokerage Directed On Directed
Commissions Transactions Transactions
Period ($) ($) ($)
------ ----------- ------------ ------------
<S> <C> <C> <C>
1995 $9,512.50 $ 0 $ 0
</TABLE>
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 The Commonwealth of Massachusetts by an Agreement and Declaration
of Trust (the "Declaration of Trust") dated December 23, 1993.
-14-
<PAGE>
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the expenses
with respect to the Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust that are not readily identifiable as belonging
to a particular series of the Trust 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 series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate. While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular means of distribution (or costs of related services) to be borne by
the shareholders who purchase through that means of distribution. The Trustees
may also, without shareholder approval, establish one or more additional
separate portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "fund").
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders. As
a matter of policy, however, the Trustees will not terminate the Trust or the
Fund without submitting the matter to a vote of the shareholders of the Trust or
the Fund, respectively.
-15-
<PAGE>
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) in 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 for each series or sub-series 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 exclusively affecting an individual series, only shareholders
of that series are entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of series, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series. Voting rights are not cumulative.
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.
-16-
<PAGE>
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, (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value) and (iii) to issue shares of the Trust
in one or more series, and to subdivide any series of shares into various
classes of shares with such dividend preferences and other rights as the
Trustees may designate.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund . However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the TRUSTEES and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or Trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
HOW TO BUY SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."
NET ASSET VALUE
The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest
cent. Such determination is made weekly and as of the close of regular trading
on the New York Stock Exchange (the "Exchange") on any day on which an order
for purchase or redemption of the Fund's shares is received and on which the
Exchange is open for unrestricted trading. During the twelve months following
the date of this Statement of Additional Information, the Exchange is expected
to be closed on the
-17-
<PAGE>
following weekdays: Memorial Day as observed, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, New Year's Day, Presidents' Day and Good
Friday. 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 among
securities that are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "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 the Trust in proper form. Proceeds resulting from a written
- -------------------------------------
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of the Fund to pay its shareholders, as monthly
dividends, substantially all net 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 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
-18-
<PAGE>
election may be made at any time by submitting a written request directly to the
Trust. In order for a change to be in effect for any dividend or distribution,
it must be received by the Trust on or before the record date for such dividend
or distribution.
As required by federal law, information concerning the federal tax status
of distributions from the fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, 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 derived with respect to its
business of investing in such stock, securities or currencies, (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute at least 90% of its
dividend, interest and certain other taxable income each year; and (iv) at the
end of each fiscal quarter maintain at least 50% of the value of its total
assets in cash, government securities, securities of other regulated investment
companies, and other securities of issuers which represent, with respect to each
issuer, no more than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and with no more than 25% of its
assets invested in the securities (other than those of the U.S. government or
other regulated investment companies) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades and businesses. To the extent it qualifies for treatment as a
regulated investment company, the Fund will not be subject to federal income tax
on income paid to its shareholders in the form of dividends or capital gain
distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
the Fund's "required distribution" over its actual distributions in any calendar
year. Generally, the "required distribution" is 98% of the Fund's ordinary
income for the calendar year plus 98% of its capital gain net income recognized
during the one-year period ending on October 31 (or December 31, if the Fund so
elects) plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by the Fund during October, November or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which declared.
The Code permits a regulated investment company that invests at least 50%
of its assets in bonds the interest on which is excludable from federal gross
income to pass through to its investors, tax-free, its net interest income. The
policy of the Fund is to pay each year as dividends all of the Fund's tax-exempt
interest income net of certain deductions. An exempt-interest dividend is any
dividend or part thereof derived from tax-exempt interest and designated as an
exempt-interest dividend in a written notice mailed to shareholders after the
close of the Fund's taxable year, but the aggregate of such dividends may not
exceed the
-19-
<PAGE>
net tax-exempt interest received by the Fund during the taxable year. The
percentage of the dividends paid for any taxable year that qualifies as federal
exempt-interest dividends will be the same for all shareholders receiving
dividends during such year, regardless of the period for which the shares were
held.
Exempt-interest dividends may be treated by shareholders as items of
interest excludable from their gross income under Section 103(a) of the Code.
However, each such shareholder is advised to consult his or her tax adviser with
respect to whether exempt-interest dividends would retain the exclusion under
Section 103(a) if such shareholder were treated as a "substantial user" or a
"related person" to such user under Section 147(a) with respect to facilities
financed through any of the tax-exempt obligations held by the Fund.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the total assets of the Fund consists of obligations the interest on
which is exempt from California personal income taxation if held by an
individual, then the Fund will be qualified to pay dividends that are exempt
from California personal income tax. The Fund intends to qualify to pay such
dividends. For California personal income tax purposes, distributions derived
from other investments and distributions from any net realized capital gains
will be taxable, whether paid in cash or reinvested in additional shares.
Interest derived from California tax-exempt securities is not subject to
the California alternative minimum tax. For California personal income tax
purposes, the entire amount of interest on any indebtedness incurred to purchase
or carry shares of the Fund will not be deductible.
Distributions from investment income and capital gains, including dividends
derived from interest paid on California tax-exempt securities, will be subject
to California franchise tax and California corporate income tax.
Shareholders of the Fund will be subject to federal income taxes on taxable
distributions made by the Fund whether received in cash or additional shares of
the Fund. Distributions by the Fund of any net taxable income and short-term
capital gains, if any, will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains, if any, will be taxable to
shareholders as long-term capital gains, without regard to how long a
shareholder has held shares of the Fund.
Taxable dividends and distributions on Fund shares received shortly after
their purchase, although in effect a return of capital, are subject to federal
income taxes.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
If shares have been held for more than one year, gain or loss realized will be
long-term capital gain or loss, provided the shareholder holds the shares as a
capital asset. If a shareholder sells Fund shares held for six months or less
at a loss, the loss will be disallowed to the extent of any exempt-interest
-20-
<PAGE>
dividends received by the shareholder. Furthermore, no loss will be allowed on
the sale of Fund shares to the extent the shareholder acquired other shares of
the Fund within 30 days prior to the sale of the loss shares or 30 days after
such sale.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code, regulations and applicable provisions of California tax
law currently in effect. For the complete provisions, reference should be made
to the pertinent Code sections, regulations and applicable provisions of
California tax law. These authorities are subject to change by legislative or
administrative action.
Dividends and distributions also may be subject to other state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
FINANCIAL STATEMENTS
The financial statements of the Fund included in its 1996 Semiannual Report
and 1995 Annual Report are incorporated herein by reference to such Semiannual
Report and Annual Report. Copies of such Semiannual Report and Annual Report are
available without charge upon written request by writing to Loomis Sayles, One
Financial Center, Boston, Massachusetts 02111 or telephoning (617)
482-2450.
CALCULATION OF YIELD AND TOTAL RETURN
Yield. The Fund's yield will be computed by dividing the Fund's net
-----
investment income for a recent 30-day period by the maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Fund's yield will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses of the Trust allocated to the Fund. These factors, and
possible differences in the methods used in calculating yield, should be
considered when comparing the Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objective 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
-21-
<PAGE>
exclusion of the consideration of the value of shares of the Fund may result in
the investor's misunderstanding the total return he or she may derive from the
Fund.
Total Return. Total Return with respect to the Fund is a measure of the
------------
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last 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 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 Micropal, Inc.
as having similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.
Lipper Analytical Services, Inc. distributes mutual fund rankings monthly.
--------------------------------
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect deduction of any sales
charges. Lipper rankings cover a variety of performance periods, including year-
to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual funds
by investment objective and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
--------------
rankings are based upon performance calculated by 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. Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
-22-
<PAGE>
Morningstar, Inc. distributes mutual fund ratings twice a month. The
-----------------
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings and is
-------------------------------------
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year. Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain). Weisenberger
rankings do not reflect deduction of sales charges or fees.
Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
--------------------
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a market
----------------------------
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
------------------------------------------------
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
Lehman Brothers 1-3 Year Government Index. The Index contains 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.
-23-
<PAGE>
Lehman Brothers Government Bond Index. The Lehman Brothers Government Bond
--------------------------------------
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond
-------------------------------------
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from 20
----------------
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index consists of all
-------------------------
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.
Merrill Lynch Government/Corporate Index. The Merrill Lynch Government/
-----------------------------------------
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index
-------------------------------
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
------------------
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
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 the nine
countries whose securities are most actively traded. 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.
-24-
<PAGE>
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 the 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.
PERFORMANCE DATA
The manner in which total return and yield of the Fund will be calculated
for public use is described above. The following table summarizes the
calculation of total return for the Fund (i) for the one-year period
ended June 30, 1996 and (ii) since the commencement of operations and the yield
for the Fund.
PERFORMANCE DATA*
<TABLE>
<CAPTION>
Average
Average Annual
Annual Total
Total Return Return
for the from the Commencement
Current SEC Yield One-Year Period ended of Operations** through
at 6/30/96 6/30/96 6/30/96
---------- ------- -------
<S> <C> <C>
4.68% 5.89% 5.13%
</TABLE>
*Performance would have been lower if the management fee and certain other
expenses had not been waived by Loomis Sayles. In the absence of this
limitation, actual yield and total return would have been 3.74% (yield), and
4.52% and 2.60% for the one-year period and the period since commencement of
operations, respectively.
**Inception date of the Fund is June 1, 1995.
-25-
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
<TABLE>
<S> <C>
ABC and affiliates Fitch Insights
Adam Smith's Money World Forbes
America On Line Fort Worth Star-Telegram
Anchorage Daily News Fortune
Atlanta Constitution Fox Network and affiliates
Atlanta Journal Fund Action
Arizona Republic Fund Decoder
Austin American Statesman Global Finance
Baltimore Sun (the) Guarantor
Bank Investment Marketing Hartford Courant
Barron's Houston Chronicle
Bergen County Record (NJ) INC
Bloomberg Business News Indianapolis Star
Bond Buyer Individual Investor
Boston Business Journal Institutional Investor
Boston Globe International Herald Tribune
Boston Herald Internet
Broker World Investment Advisor
Business Radio Network Investment Company Institute
Business Week Investment Dealers Digest
CBS and affiliates Investment Profiles
CDA Investment Technologies Investment Vision
CFO Investor's Daily
Changing Times IRA Reporter
Chicago Sun Times Journal of Commerce
Chicago Tribune Kansas City Star
Christian Science Monitor KCMO (Kansas City)
Christian Science Monitor News Service KOA-AM (Denver)
Cincinnati Enquirer LA Times
Cincinnati Post Leckey, Andrew (syndicated column)
CNBC Life Association News
CNN Lifetime Channel
Columbus Dispatch Miami Herald
CompuServe Milwaukee Sentinel
Dallas Morning News Money Magazine
Dallas Times-Herald Money Maker
Denver Post Money Management Letter
Des Moines Register Morningstar
Detroit Free Press Mutual Fund Market News
Donoghues Money Fund Report Mutual Funds Magazine
Dorfman, Dan (syndicated column) National Public Radio
Dow Jones News Service National Underwriter
Economist NBC and affiliates
FACS of the Week New England Business
Fee Adviser New England Cable News
Financial News Network New Orleans Times-Picayune
Financial Planning New York Daily News
Financial Planning on Wall Street New York Times
Financial Research Corp. Newark Star Ledger
Financial Services Week Newsday
Financial World Newsweek
</TABLE>
A-1
<PAGE>
Nightly Business Report World Wide Web
Orange County Register Worth Magazine
Orlando Sentinel WRKO
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
A-2
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:
. Loomis Sayles Investment Trust's participation in wrap fee and no
transaction fee programs
. Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
. Specific and general investment philosophies, strategies, processes and
techniques
. Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services
. Industry conferences at which Loomis Sayles participates
. Current capitalization, levels of profitability and other financial
information
. Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
. The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
. Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
. Current and historical statistics relating to:
-total dollar amount of assets managed
-Loomis Sayles assets managed in total and by Fund
-the growth of assets
-asset types managed
References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:
. Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information and industry trends and
forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
. Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as a 401(k) or
retirement plan funding vehicle produced by industry authorities, research
organizations and publications.
B-1
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN+
+OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF SECURITIES OF THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CORE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
____________ __, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Core Growth Fund, a series of Loomis Sayles Investment Trust, dated
_________ __, 1996, and should be read in conjunction therewith. A copy of the
Prospectus may be obtained from Loomis Sayles Investment Trust, One Financial
Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS................... 2
MANAGEMENT OF THE TRUST........................................... 7
INVESTMENT ADVISORY AND OTHER SERVICES............................ 9
PORTFOLIO TRANSACTIONS AND BROKERAGE............................. 11
DESCRIPTION OF THE TRUST......................................... 13
HOW TO BUY SHARES................................................ 16
NET ASSET VALUE.................................................. 16
REDEMPTIONS...................................................... 16
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS...... 17
FINANCIAL STATEMENTS............................................. 19
CALCULATION OF TOTAL RETURN...................................... 19
PERFORMANCE COMPARISONS.......................................... 20
PERFORMANCE DATA................................................. 23
APPENDIX A --
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION............ A-1
APPENDIX B --
ADVERTISING AND PROMOTIONAL LITERATURE.................... B-1
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles Core Growth Fund
(the "Fund") a series of Loomis Sayles Investment Trust (the "Trust"), are
summarized in the Prospectus under "Investment Objective and Policies" and
"More Information About the Fund's Investments." The investment policies of
the Fund set forth in the Prospectus and in this Statement of Additional
Information may be changed by Loomis, Sayles & Company, L.P. ("Loomis Sayles"),
the Fund's investment adviser, subject to review and approval by the Trust's
board of trustees (the "Trustees"), without shareholder approval except that
the investment objective of the Fund as set forth in the Prospectus and any
Fund policy explicitly identified as "Fundamental" may not be changed without
the approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).
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) 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.
*(2) 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 investing in issuers that
invest or deal in the foregoing types of assets or from purchasing
securities that are secured by real estate.)
*(3) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds,
debentures, commercial paper, corporate notes and similar evidences of
indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
*(4) Change its classification pursuant to Section 5(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
to "non-diversified" management investment company.
*(5) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries.)
-2-
<PAGE>
*(6) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower,
nor borrow any money except as a temporary measure for extraordinary
or emergency purposes; however, the Fund's use of reverse repurchase
agreements and "dollar roll" arrangements shall not constitute
borrowing by the Fund for purposes of this restriction.
*(7) 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.
*(8) Issue senior securities. (For the purposes of this restriction none of
the following is deemed to be a senior security: any pledge, mortgage,
hypothecation or other encumbrance of assets; any borrowing permitted
by restriction (6) 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
or entry into options, forward contracts, futures contracts, options
on futures contracts, swap contracts or any other derivative
investments to the extent that Loomis Sayles determines that the Fund
is not required to treat such investments as senior securities
pursuant to the pronouncements of the Securities and Exchange
Commission (the "SEC") or its staff.)
Although the Fund has no current intention of investing in repurchase
agreements, the Fund intends, based on the views of the staff of the SEC, to
restrict its investments, if any, in repurchase agreements maturing in more than
seven days, together with other investments in illiquid securities, to the
percentage permitted by restriction (7) above.
Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.
Portfolio Turnover
- ------------------
Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets. The Fund anticipates
that its portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions. High portfolio
turnover rates involve higher costs such as higher brokerage commissions and
higher levels of taxable gain. See "Portfolio Transactions and Brokerage" for
a description of Loomis Sayles's brokerage practices and "Income Dividends,
Capital Gain Distributions and Tax Status" for more information about the tax
consequences of investing in the Fund.
-3-
<PAGE>
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 - Direct obligations of the United States Treasury
-------------------
which 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 - Direct obligations of the United
-----------------------------
States Treasury 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.
.
"Ginnie Maes" - Debt securities issued by a mortgage banker or other
-------------
mortgagee which represent interests 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
-4-
<PAGE>
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, U.S. Government Securities Generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, 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
- ----------------------
As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid
assets in an amount equal to or greater than, on a daily basis, the amount of
the Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria. The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
Convertible Securities
- ----------------------
Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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. Convertible
securities usually provide a higher yield than the underlying equity Security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. 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
-5-
<PAGE>
and conversion ratio, or that are convertible at the option of the issuer.
Because 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.
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 obligations
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at discounts 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 do 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 (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 an
investor 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
- ---------------------
The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash . Although 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 and (b) inability to enforce rights and the
expenses involved in attempted enforcement.
-6-
<PAGE>
Rule 144A Securities
- --------------------
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a 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
marketplace trades therefor.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
DANIEL J. FUSS (63) -- President. Executive Vice President and Director,
---------
Loomis Sayles.
MARK W. HOLLAND (47) -- Secretary and Treasurer. Vice President-Finance
-----------------------
and Administration, Loomis Sayles.
TIMOTHY J. HUNT (64) -- Trustee. 4 Dennett Road, Marblehead, Massachusetts.
-------
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
ROBERT J. BLANDING (49) -- Executive Vice President. 465 First Street West,
------------------------
Sonoma, California. President and Chairman, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Formerly, Portfolio Manager,
Kmart Corporation.
WILLIAM J. DRISCOLL (37) -- Vice President. Vice President, Loomis Sayles.
--------------
Formerly, Vice President, Merrill Lynch.
QUENTIN P. FAULKNER (58) -- Vice President. Vice President, Loomis Sayles.
--------------
KATHLEEN C. GAFFNEY (34) -- Vice President. Vice President, Loomis Sayles.
--------------
ROBERT K. PAYNE (54) -- Vice President. 555 California Street, San Francisco,
--------------
California. Vice President, Loomis Sayles.
ANTHONY J. WILKINS (54) -- Vice President. Vice President, Loomis Sayles.
--------------
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer and Director,
--------------
Loomis Sayles.
JOHN F. YEAGER (33) -- Vice President. Vice President, Loomis Sayles; formerly
--------------
Vice President-Marketing, INVESCO Funds Group and Assistant Comptroller,
INVESCO Capital Management.
SHEILA M. BARRY (51) -- Secretary. Assistant General Counsel and Vice President,
---------
Loomis Sayles. Formerly, Senior Counsel and Vice President, New England
Funds, L.P.
-7-
<PAGE>
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.
The Trust pays no compensation to its officers listed above who are
interested persons of the Trust. Each Trustee who is not affiliated with Loomis
Sayles is compensated at the rate of $10,000 per annum. No Trustee received
compensation from any other investment company which is advised by Loomis Sayles
or its affiliates or which holds itself out to investors as being related to the
Trust.
Compensation Table
for the period ended December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
from Trust Benefits Benefits Upon From Trust and
Accrued as Part Retirement Fund Complex
of Fund Expenses Paid to Trustee
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Timothy J. Hunt, $ 0 $ 0 $ 0 $ 0
Trustee
</TABLE>
As of the date hereof, the Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund.
As of November 7, 1996, each of Jewish Federation of Rhode Island, Brockton
Hospital Pension Trust and Brockton Health Corp. Endowment Plan may be deemed to
control the Fund because it owned of record more than 25% of the Fund's shares.
As a result, it may not be possible for matters subject to a vote of a majority
of the outstanding voting securities of the Fund to be approved without the
affirmative vote of such shareholders, and it may be possible for such matters
to be approved by such shareholders without the affirmative vote of any other
shareholder. The following table sets forth the name, address and percentage
ownership of each holder of 5% or more of the Fund's outstanding securities as
of November 7, 1996:
-8-
<PAGE>
<TABLE>
<CAPTION>
Shareholder Address Percentage of Shares Held
- ----------- ------- -------------------------
<S> <C> <C>
Jewish Federation of 130 Sessions Street 26.76
Rhode Island Providence, RI 02902
Brockton Hospital 680 Centre Street 28.97
Pension Trust Brockton, MA 02402-3395
Brockton Health Corp. 680 Centre Street 39.81
Endowment Plan Brockton, MA 02402-3395
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the Fund
------------------
under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, 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 at the annual rate of .50% of the fund's
average weekly net assets.
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.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
-9-
<PAGE>
During the 1995 fiscal period (October 1, 1995 to December 31, 1995),
Loomis Sayles received the following amount of investment advisory fees from the
Fund and bore the following amounts of fee Waivers and expense Assumptions for
the Fund:
<TABLE>
<CAPTION>
FEE WAIVERS
PERIOD Advisory Fees and
------ -------------- EXPENSE ASSUMPTIONS
<S> <C> <C>
1995 $6,994 $10,955
</TABLE>
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 Trustees 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 or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the Trustees who are not
interested persons, cast in person at a meeting called for the purpose of voting
on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. 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" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.
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 to the eleven series of the Loomis
Sayles Funds, each A series of a registered open-end diversified management
investment company. Loomis Sayles acts as investment adviser or sub-adviser to
New England Star Advisers Fund, New England Value Fund, New England Capital
Growth Fund, New England Balanced Fund and New England Strategic Income Fund,
which are series of New England Funds Trust I, a registered open-end management
investment company, one series of New England Funds Trust III, a registered
open-end management investment company and to the Avanti Growth Series, the
Balanced Series and the Small Cap Series of New England Zenith Funds, which is
also a registered
-10-
<PAGE>
open-end management investment company. Loomies Sayles also provides
investments advice to numerous other corporate and fiduciary clients.
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of NEIC Holdings, Inc., a wholly-owned
subsidiary of New England Investment Companies L.P. ("NEIC"). NEIC'S sole
general partner is New England Investment Companies, Inc., which is a wholly-
owned subsidiary of Met Life New England Holdings, Inc., a wholly-owned
subsidiary of Metropolitan Life Insurance Company.
Trustees and officers of the Trust who hold positions with Loomis Sayles
are listed under "Management of the Trust" in this Statement of Additional
Information. [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 which the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
Trustees that the desirability of retaining Loomis Sayles as investment adviser
for the Fund outweighs the disadvantages, if any, which might result from these
practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street 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 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 also maintains certain accounts and records
of the fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are Coopers &
-----------------------
Lybrand L.L.P. ("Coopers & Lybrand"), One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand 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.
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 are
carried out through broker-dealers who
-11-
<PAGE>
make the primary market for securities unless, in the judgment of Loomis Sayles,
a more favorable price can be obtained by carrying out such transactions through
other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid for a transaction.
However, the Fund will only pay commissions that Loomis Sayles believes to be
competitive with generally prevailing rates. Loomis Sayles will use its best
efforts to obtain information as to the general level of commission rates being
charged by the brokerage community from time to time and will evaluate the
overall reasonableness of brokerage commissions paid on transactions by
reference to such data. In making such evaluation, all factors affecting
liquidity and execution of the order, as well as the amount of the capital
commitment by the broker in connection with the order, are taken into account.
The Fund will not pay a broker a commission at a higher rate than otherwise
available for the same transaction in recognition of the value of research
services provided by the broker or in recognition of the value of any other
services provided by the broker which do not contribute to the best price and
execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and 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's 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.
The following table sets forth for the 1995 fiscal period (October 1, 1995
to December 31, 1995) (1) the aggregate dollar amount of brokerage commissions
paid on portfolio transactions during the period, (2) the dollar amount of
transactions on which commissions were paid during such period that were
directed to brokers providing research services ("directed transactions") and
(3) the dollar amount of commissions paid on directed transactions during such
period:
-12-
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3)
Aggregate Commissions
Brokerage Directed On Directed
Period Commissions ($) Transactions ($) Transactions ($)
------ ------------ ------------ ------------
<S> <C> <C> <C>
1995 $7,158 $0 $0
</TABLE>
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 The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the expenses
with respect to the Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust that are not readily identifiable as belonging
to a particular series of the Trust 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 series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate. While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular
-13-
<PAGE>
means of distribution (or costs of related services) to be borne by the
shareholders who purchase through that means of distribution. The Trustees may
also, without shareholder approval, establish one or more additional separate
portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "Fund").
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders. As
a matter of policy, however, the Trustees will not terminate the Trust or the
Fund without submitting the matter to a vote of the shareholders of the Trust or
the Fund, respectively.
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) in 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 for each series or sub-series 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 exclusively affecting an individual series, only shareholders
of that series are entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of series, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series. Voting rights are not cumulative.
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
-14-
<PAGE>
duly called for that purpose, which meeting shall be held upon the written
requuest of the shareholders 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.
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, (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value) and (iii) to issue shares of the Trust
in one or more series, and to subdivide any series of shares into various
classes of shares with such dividend preferences and other rights as the
Trustees may designate.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund . However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the Trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or Trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
-15-
<PAGE>
HOW TO BUY SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How
to Purchase Shares."
NET ASSET VALUE
The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made weekly and as of the close of regular trading on the
New York Stock Exchange (the "Exchange") on any day on which an order for
purchase or redemption of the Fund's shares is received and on which the
Exchange is open for unrestricted trading. During the twelve months following
the date of this Statement of Additional Information, the Exchange is expected
to be closed on the following weekdays: Memorial Day as observed, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day , New Year's Day, Presidents'
Day and Good Friday. Equity securities listed on an established securities
exchange or on the NASDAQ National Market System are normally valued at their
last sale price on the exchange where primarily traded or, if there is no
reported sale during the day, and in the case of over the counter securities not
so listed, at the last bid price. Long-term debt securities are valued by a
pricing service, which determines valuations of normal institutional-size
trading units of long-term debt securities. Such valuations are determined using
methods based on market transactions for comparable securities and on various
relationships among securities that are generally recognized by institutional
traders. Other securities for which current market quotations are not readily
available (including restricted securities, if any) and all other assets are
taken at fair value as determined in good faith by the Trustees, although the
actual calculations may be made by persons acting pursuant to the direction of
the Trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities 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 will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "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 the Trust in proper form. Proceeds resulting from a written
- ------------------------------------
redemption request will normally be mailed to you within
-16-
<PAGE>
seven days after receipt of your request in good order. In those cases
where you have recently purchased your shares by check and your check was
received less than fifteen days prior to the redemption request, the Fund may
withhold redemption proceeds until your check has cleared.
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes," it is the policy of the Fund to pay its shareholders annually, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by 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 Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.
As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, 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 derived with respect to its
business of investing in such stock, securities or currencies; (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute each year at least
90% of its dividend, interest and certain other income; and (iv) at the end of
each fiscal quarter hold at least 50% of the value of its total assets in cash,
cash items, U.S. government securities, securities of other regulated investment
companies, and other securities that represent, with respect to each issuer, no
more than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and with no more than 25% of the value of its
total
-17-
<PAGE>
assets 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 or
businesses. To the extent the Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income paid
to its shareholders in the form of dividends or capital gain distributions.
A nondeductible excise tax will be imposed at the rate of 4% on the excess,
if any, of the Fund's "required distribution" over its actual distributions in
any calendar year. Generally, the "Required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Dividends and distributions on Fund shares received shortly after their
purchase, although economically a return of capital, are subject to federal
income taxes as described herein and in the Prospectus to the extent the
dividends and distributions do not exceed the Fund's current and accumulated
earnings and profits.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions. If
shares have been held for more than one year, gain or loss realized will
generally be long-term capital gain or loss, and will otherwise be short-term
capital gain or loss. 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, all or a portion of any loss will be
disallowed on the taxable disposition of Fund shares if the shareholder acquires
other shares of the Fund within 30 days before or after the disposition.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and the regulations thereunder 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, respectively.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.Non-
U.S. investors should consult their tax advisers concerning the tax consequences
of ownership of shares of the Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
-18-
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Fund included in its 1996 Semiannual Report
and 1995 Annual Report are incorporated herein by reference to such 1996
Semiannual Report and 1995 Annual Report. Copies of such 1996 Semiannual Report
and 1995 Annual Report are available without charge upon request by writing
Loomis Sayles, One Financial Center, Boston, Massachusetts 02111 or telephoning
(617) 482-2450.
CALCULATION OF TOTAL RETURN
Total Return. Total Return with respect to the Fund is a measure of the
------------
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.
-19-
<PAGE>
PERFORMANCE COMPARISONS
Total Return. The Fund may from time to time include the 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 Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.
Lipper Analytical Services, Inc. distributes mutual fund rankings monthly.
--------------------------------
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends. they do not reflect deduction of any sales
charges. Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual
funds by investment objective and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
------------------------------------------------------------------
rankings are based upon performance calculated by 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. Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
-----------------
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings and is
-------------------------------------
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year. Mutual funds are ranked in general categories (e.g., international bond,
international equity,
-20-
<PAGE>
municipal bond, and maximum capital gain). Weisenberger rankings do not reflect
deduction of sales charges or fees.
Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
--------------------
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a
----------------------------
market value-weighted and unmanaged index of 30 large industrial stocks traded
on the New York Stock Exchange.
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
------------------------------------------------
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed
------------------------------------------
rate debt issues of the U.S. government or its agencies rated investment grade
or higher with at least one year maturity and an outstanding par value of at
least $100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government
--------------------------------------
Bond Index is composed of all publicly issued, nonconvertible, domestic debt of
the U.S. government or any of its agencies, quasi-federal corporations, or
corporate debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal
-------------------------------------
Bond Index is computed from the prices of approximately 21,000 bonds consisting
of roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from
----------------
20 different countries with Japan (approximately 50%), United Kingdom, France
and Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index consists of
-------------------------
all stocks contained in the MSCI-EAFE Index, other than stocks from Japan.
-21-
<PAGE>
Merrill Lynch Government/Corporate Index. The Merrill Lynch Government/
-----------------------------------------
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index
-------------------------------
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
------------------
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
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 the nine
countries whose securities are most actively traded. 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 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
-22-
<PAGE>
literature. References to articles regarding personnel of Loomis Sayles who have
portfolio management responsibility may also be used in the Funds promotional
literature. For additional information about the Fund's advertising and
promotional literature, see Appendix B.
PERFORMANCE DATA
The manner in which total return of the Fund will be calculated for public use
is described above. The following table summarizes the calculation of total
return for the Fund since the commencement of operations.
PERFORMANCE DATA*
Average
Annual
Total
Return
from the Commencement
of Operations** through
6/30/96
5.33%
*Performance would have been lower if the management fee and certain other
expenses had not been waived by Loomis Sayles. In the absence of this
limitation, actual total return would have been 5.15% for the period since
commencement of operations.
**Inception date of the Fund is October 1, 1995.
-23-
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CDA Investment Technologies
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money Magazine
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
A-1
<PAGE>
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO
A-2
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:
. Loomis Sayles Investment Trust's participation in wrap fee and no
transaction fee programs
. Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
. Specific and general investment philosophies, strategies, processes and
techniques
. Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
. Industry conferences at which Loomis Sayles participates
. Current capitalization, level of profitabilitry and other financial
information
. Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
. The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
. Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
. Current and historical statistics relating to:
-total dollar amount of assets managed
-Loomis Sayles assets managed in total and by Fund
-the growth of assets
-asset types managed
References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:
. Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
. Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as a 401(k) or
retirement plan funding vehicle produced by industry authorities, research
organizations and publications.
B-1
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS STATEMENT OR ADDITIONAL INFORMATION SHALL NOT CONSTITUTE +
+AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY+
+SALE OF SECURITIES OF THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES HIGH YIELD FIXED INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
_____ __, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles High Yield Fixed Income Fund, a series of Loomis Sayles Investment Trust,
dated _____ __, 1996, and should be read in conjunction therewith. A copy of the
Prospectus may be obtained from Loomis Sayles Investment Trust, One Financial
Center, Boston, Massachusetts 02111.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS.............. -2-
MANAGEMENT OF THE TRUST...................................... -7-
INVESTMENT ADVISORY AND OTHER SERVICES....................... -8-
PORTFOLIO TRANSACTIONS AND BROKERAGE......................... -10-
DESCRIPTION OF THE TRUST..................................... -11-
HOW TO BUY SHARES............................................ -14-
NET ASSET VALUE.............................................. -14-
REDEMPTIONS.................................................. -15-
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS.. -15-
CALCULATION OF YIELD AND TOTAL RETURN........................ -17-
PERFORMANCE COMPARISONS...................................... -18-
APPENDIX A --
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION........... A-1
APPENDIX B --
ADVERTISING AND PROMOTIONAL LITERATURE................... B-1
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles High Yield Fixed
Income Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments." The investment
policies of the Fund set forth in the Prospectus and in this Statement of
Additional Information may be changed by Loomis, Sayles & Company, L.P. ("Loomis
Sayles"), the Fund's investment adviser, subject to review and approval by the
Trust's board of trustees (the "Trustees"), without shareholder approval except
that the investment objective of the Fund as set forth in the Prospectus and any
Fund policy explicitly identified as "fundamental" may not be changed without
the approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at Least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).
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) 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.
*(2) 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 investing in issuers that
invest or deal in the foregoing types of assets or from purchasing
securities that are secured by real estate.)
*(3) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds,
debentures, commercial paper, corporate notes and similar evidences of
indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
*(4) Change its classification pursuant to Section 5(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
to "non-diversified" management investment company.
*(5) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries.)
-2-
<PAGE>
*(6) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower,
nor borrow any money except as a temporary measure for extraordinary
or emergency purposes; however, the Fund's use of reverse repurchase
agreements and "dollar roll" arrangements shall not constitute
borrowing by the Fund for purposes of this restriction.
*(7) 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.
*(8) Issue senior securities. (For the purposes of this restriction none of
the following is deemed to be a senior security: any pledge, mortgage,
hypothecation or other encumbrance of assets; any borrowing permitted
by restriction (6) 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
or entry into options, forward contracts, futures contracts, options
on futures contracts, swap contracts or any other derivative
investments to the extent that Loomis Sayles determines that the Fund
is not required to treat such investments as senior securities
pursuant to the pronouncements of the Securities and Exchange
Commission (the "SEC") or its staff.)
Although the Fund has no current intention of investing in repurchase
agreements, the Fund intends, based on the views of the staff of the SEC, to
restrict its investments, if any, in repurchase agreements maturing in more than
seven days, together with other investments in illiquid securities, to the
percentage permitted by restriction (7) above.
Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.
Portfolio Turnover
- ------------------
Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets. Although it is impossible to predict
with certainty, it is expected that the annual portfolio turnover rate for the
first full fiscal year of the Fund will not exceed 40%. The Fund anticipates
that its portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions. High portfolio
turnover rates involve higher costs such as higher brokerage commissions and
higher levels of taxable gain. See "Portfolio Transactions and Brokerage" for a
description of Loomis Sayles's brokerage practices and "Income Dividends,
Capital Gain Distributions and Tax Status" for more information about the tax
consequences of investing in the Fund.
-3-
<PAGE>
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 - Direct obligations of the United States Treasury
-------------------
which 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 - Direct obligations of the United
-----------------------------
States Treasury 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.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
------------
mortgagee which represents 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
-4-
<PAGE>
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, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, 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
- ----------------------
As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria. The Fund may take delivery of
these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the FUND'S payment
obligation).
Convertible Securities
- ----------------------
Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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. Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. 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
-5-
<PAGE>
conversion ratio, or that are convertible at the option of the issuer. Because
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.
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 obligations
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at discounts 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 do 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 (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
- ---------------------
The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash . Although 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 and (b) inability to enforce rights and the expenses
involved in attempted enforcement.
-6-
<PAGE>
Rule 144A Securities
- --------------------
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a 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
marketplace trades therefor.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
DANIEL J. FUSS (63) -- President. Executive Vice President and Director,
---------
Loomis Sayles.
MARK W. HOLLAND (47) -- Secretary and Treasurer. Vice President-Finance and
-----------------------
Administration, Loomis Sayles.
TIMOTHY J. HUNT (64) -- Trustee. 4 Dennett Road, Marblehead, Massachusetts.
-------
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
ROBERT J. BLANDING (49) -- Executive Vice President. 465 First Street West,
------------------------
Sonoma, California. President and Chairman, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Formerly, Portfolio Manager,
Kmart Corporation.
WILLIAM J. DRISCOLL (37) -- Vice President. Vice President, Loomis Sayles.
--------------
Formerly, Vice President, Merrill Lynch.
QUENTIN P. FAULKNER (58) -- Vice President. Vice President, Loomis Sayles.
--------------
KATHLEEN C. GAFFNEY (34) -- Vice President. Vice President, Loomis Sayles.
--------------
-7-
<PAGE>
ROBERT K. PAYNE (54) -- Vice President. 555 California Street, San Francisco,
--------------
California. Vice President, Loomis Sayles.
ANTHONY J. WILKINS (54) -- Vice President. Vice President, Loomis Sayles.
--------------
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer and Director,
--------------
Loomis Sayles.
JOHN F. YEAGER (33) -- Vice President. Vice President, Loomis Sayles; formerly
--------------
Vice President-Marketing, INVESCO Funds Group and Assistant Comptroller, INVESCO
Capital Management.
SHEILA M. BARRY (51) -- Secretary. Assistant General Counsel and Vice President,
---------
Loomis Sayles. Formerly, Senior Counsel and Vice President, New England Funds,
L.P.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.
The Trust pays no compensation to its officers listed above who are
interested persons of the Trust. Each Trustee who is not affiliated with Loomis
Sayles is compensated at the rate of $10,000 per annum. No Trustee received
compensation from any other investment company which is advised by Loomis Sayles
or its affiliates or which holds itself out to investors as being related to the
Trust.
As of the date hereof, the Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund.
As of November 7, 1996, Frederic C. Hamilton may be deemed to control
the Fund because he owned of record more than 25% of the Fund's shares. As a
result, it may not be possible for matters subject to a vote of the outstanding
voting securities of the Fund to be approved without the affirmative vote of
such shareholder, and such shareholder may be able to approve such matters
without the approval of any other shareholder. The following table sets forth
the name, address and percentage ownership of each holder of 5% or more of the
Fund's outstanding securities as of November 7, 1996:
<TABLE>
Shareholder Address Percentage of Securities Held
- ----------- ------- -----------------------------
<S> <C> <C>
Frederic C. Hamilton 100.00
</TABLE>
As of December 31, 1995, the Fund had not yet commenced operations.
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the Fund
------------------
under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, 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 at the annual rate of .60% of the Fund's
average weekly net assets.
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.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
-8-
<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 Trustees 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 or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the Trustees who are not
interested persons, cast in person at a meeting called for the purpose of voting
on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. 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" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.
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 to the eleven series of the Loomis
Sayles Funds, each a series of a registered open-end diversified management
investment company. Loomis Sayles acts as investment adviser or sub-adviser to
New England Star Advisers Fund, New England Value Fund, New England Capital
Growth Fund, New England Balanced Fund and New England Strategic Income Fund,
which are series of New England Funds Trust I, a registered open-end management
investment company, one series of New England Funds Trust III, a registered
open-end management investment company and the Avanti Growth Series, the
Balanced Series and the Small Cap Series of New England Zenith Funds, which is
also a registered open-end management investment company. Loomis Sayles also
provides investment advice to numerous other corporate and fiduciary
clients.
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of NEIC Holdings, Inc., a wholly-owned
subsidiary of New England Investment Companies, L.P. ("NEIC"). NEIC's sole
general partner is New England Investment Companies, Inc., which is a wholly-
owned subsidiary of Met Life New England Holdings, Inc., a wholly-owned
subsidiary of Metropolitan Life Insurance Company.
Trustees and officers of the trust who hold positions with Loomis Sayles
are listed under "Management of the Trust" in this Statement of Additional
Information. Certain officers and
-9-
<PAGE>
Trustees 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 which the Fund purchases or sells. In
other cases, however, it is believed that these practices may benefit the Fund.
It is the opinion of the Trustees that the desirability of retaining Loomis
Sayles as investment adviser for the Fund outweighs the disadvantages, if any,
which might result from these practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street "), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street 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 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 also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are Coopers
-----------------------
& Lybrand L.L.P. ("Coopers & Lybrand"), One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand 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.
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 are
carried out through broker-dealers who make the primary market for securities
unless, in the judgment of Loomis Sayles, a more favorable price can be obtained
by carrying out such transactions through other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid for a transaction.
However, the Fund will only pay commissions that Loomis Sayles believes 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
-10-
<PAGE>
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Fund will not
pay a broker a commission at a higher rate than otherwise available for the same
transaction in recognition of the value of research services provided by the
broker or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and 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's 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.
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 The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of
the Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of the Fund are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders. The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the expenses
with respect to the Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust that are not readily identifiable as belonging
to a particular series of the Trust 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
-11-
<PAGE>
separate books of account of the Fund, certain expenses may be legally
chargeable against the assets of all series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate. While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular means of distribution (or costs of related services) to be borne by
the shareholders who purchase through that means of distribution. The Trustees
may also, without shareholder approval, establish one or more additional
separate portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "fund").
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders. As
a matter of policy, however, the Trustees will not terminate the Trust or the
Fund without submitting the matter to a vote of the shareholders of the Trust or
the Fund, respectively.
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) in 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 for each series or sub-series 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 exclusively affecting an individual series, only shareholders
of that series are entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of series, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as
-12-
<PAGE>
certain changes in investment policies of that series or the approval of the
investment advisory agreement relating to that series. Voting rights are not
cumulative.
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.
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, (ii) to establish, change or eliminate the par value of
any shares (currently all shares have no par value) and (iii) to issue shares of
the Trust in one or more series, and to subdivide any series of shares into
various classes of shares with such dividend preferences and other rights as the
Trustees may designate.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund . However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
-13-
<PAGE>
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the Trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or Trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
HOW TO BUY SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."
NET ASSET VALUE
The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made weekly and as of the close of regular trading on the
New York Stock Exchange (the "Exchange") on any day on which an order for
purchase or redemption of the Fund's shares is received and on which the
Exchange is open for unrestricted trading. During the twelve months following
the date of this Statement of Additional Information, the Exchange is expected
to be closed on the following weekdays: Memorial Day as observed, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day , New Year's Day, Presidents'
Day and Good Friday. 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 among
securities that are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities 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 will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.
-14-
<PAGE>
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "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 the Trust in proper form. Proceeds resulting from a written
- ------------------------------------
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of the Fund to pay its shareholders annually, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by 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 Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.
As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, the Fund must, among
other things: (i) derive at least 90%
-15-
<PAGE>
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 derived with respect to its business of investing in such stock,
securities or currencies; (ii) derive less than 30% of its gross income from
gains from the sale or other disposition of securities held for less than three
months; (iii) distribute each year at least 90% of its dividend, interest and
certain other income; and (iv) at the end of each fiscal quarter hold at least
50% of the value of its total assets in cash, cash items, U.S. government
securities, securities of other regulated investment companies, and other
securities that represent, with respect to each issuer, no more than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and no more than 25% of the value of its total assets 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 or
businesses. To the extent the Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income paid
to its shareholders in the form of dividends or capital gain distributions.
A nondeductible excise tax will be imposed at the rate of 4% on the excess,
if any, of the Fund's "required distribution" over its actual distributions in
any calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Dividends and distributions on Fund shares received shortly after their
purchase, although economically a return of capital, are subject to federal
income taxes as described herein and in the Prospectus to the extent the
dividends and distributions do not exceed the Fund's current and accumulated
earnings and profits.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions. If
shares have been held for more than one year, gain or loss realized will
generally be long-term capital gain or loss, and will otherwise be short-term
capital gain or loss. 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, all or a portion of any loss will be
disallowed on the taxable disposition of Fund shares if the shareholder acquires
other shares of the Fund within 30 days before or after the disposition.
The Fund's transactions in foreign currency-denominated debt securities may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.
-16-
<PAGE>
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and the regulations thereunder 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, respectively.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
CALCULATION OF YIELD AND TOTAL RETURN
Yield. The Fund's yield will be computed by dividing the Fund's net
-----
investment income for a recent 30-day period by the maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Fund's yield will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses of the Trust allocated to the Fund. These factors, and
possible differences in the methods used in calculating yield, should be
considered when comparing the Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objective and policies of the
Fund.
At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary. An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.
Total Return. Total Return with respect to the Fund is a measure of the
------------
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during
-17-
<PAGE>
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 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 Micropal, Inc.
as having similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.
Lipper Analytical Services, Inc. distributes mutual fund rankings monthly.
--------------------------------
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect deduction of any sales
charges. Lipper rankings cover a variety of performance periods, including year-
to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual funds
by investment objective and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
--------------
rankings are based upon performance calculated by 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. Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
-----------------
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely
-18-
<PAGE>
quantitative system that does not utilize the subjective criteria customarily
employed by rating agencies such as Standard & Poor's and Moody's Investor
Service, Inc.
-19-
<PAGE>
CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
-------------------------------------
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year. Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain). Weisenberger
rankings do not reflect deduction of sales charges or fees.
Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
--------------------
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a market
----------------------------
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.
Lehman Brothers Government/corporate Bond Index. The Lehman Brothers
------------------------------------------------
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed rate
------------------------------------------
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government Bond
--------------------------------------
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond
-------------------------------------
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE INDEX. The MSCI-EAFE Index contains over 1000 stocks from 20
----------------
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
-20-
<PAGE>
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 Government/Corporate Index. The Merrill Lynch Government/
-----------------------------------------
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index
-------------------------------
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
------------------
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
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 the nine
countries whose securities are most actively traded. 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 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
-21-
<PAGE>
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.
-22-
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates Financial Research Corp.
Adam Smith's Money World Financial Services Week
America On Line Financial World
Anchorage Daily News Fitch Insights
Atlanta Constitution Forbes
Atlanta Journal Fort Worth Star-Telegram
Arizona Republic Fortune
Austin American Statesman Fox Network and affiliates
Baltimore Sun Fund Action
Bank Investment Marketing Fund Decoder
Barron's Global Finance
Bergen County Record (NJ) (the) Guarantor
Bloomberg Business News Hartford Courant
Bond Buyer Houston Chronicle
Boston Business Journal INC
Boston Globe Indianapolis Star
Boston Herald Individual Investor
Broker World Institutional Investor
Business Radio Network International Herald Tribune
Business Week Internet
CBS and affiliates Investment Advisor
CDA Investment Technologies Investment Company Institute
CFO Investment Dealers Digest
Changing Times Investment Profiles
Chicago Sun Times Investment Vision
Chicago Tribune Investor's Daily
Christian Science Monitor IRA Reporter
Christian Science Monitor News Service Journal of Commerce
Cincinnati Enquirer Kansas City Star
Cincinnati Post KCMO (Kansas City)
CNBC KOA-AM (Denver)
CNN LA Times
Columbus Dispatch Leckey, Andrew (syndicated column)
CompuServe Life Association News
Dallas Morning News Lifetime Channel
Dallas Times-Herald Miami Herald
Denver Post Milwaukee Sentinel
Des Moines Register Money Magazine
Detroit Free Press Money Maker
Donoghues Money Fund Report Money Management Letter
Dorfman, Dan (syndicated column) Morningstar
Dow Jones News Service Mutual Fund Market News
Economist Mutual Funds Magazine
FACS of the Week National Public Radio
Fee Adviser National Underwriter
Financial News Network NBC and affiliates
Financial Planning New England Business
Financial Planning on Wall Street New England Cable News
A-1
<PAGE>
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
A-2
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:
Loomis Sayles Investment Trust's participation in wrap fee and no
transaction fee programs
Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
Specific and general investment philosophies, strategies, processes and
techniques
Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
Industry conferences at which Loomis Sayles participates
Current capitalization, levels of profitability and other financial
information
Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
Current and historical statistics relating to:
-total dollar amount of assets managed
-Loomis Sayles assets managed in total and by Fund
-the growth of assets
-asset types managed
References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:
Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as a 401(k) or
retirement plan funding vehicle produced by industry authorities, research
organizations and publications.
B-1
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS STATEMENT OF ADDITIONAL SHALL NOT CONSTITUTE AN OFFER TO +
+SELL OR THE SOLICITATION OF AN TO OFFER BUY NOR SHALL THERE BE ANY SALE OF +
+SECURITIES OF THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CORE FIXED INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
_______________ ____, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Core Fixed Income Fund, a series of Loomis Sayles Investment Trust,
dated _______________ ____, 1996, and should be read in conjunction therewith.
A copy of the Prospectus may be obtained from Loomis Sayles Investment Trust,
One Financial Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS................................ -2-
MANAGEMENT OF THE TRUST........................................................ -8-
INVESTMENT ADVISORY AND OTHER SERVICES......................................... -9-
PORTFOLIO TRANSACTIONS AND BROKERAGE...........................................-11-
DESCRIPTION OF THE TRUST.......................................................-12-
HOW TO BUY SHARES..............................................................-14-
NET ASSET VALUE................................................................-14-
REDEMPTIONS....................................................................-15-
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS....................-16-
CALCULATION OF YIELD AND TOTAL RETURN..........................................-17-
PERFORMANCE COMPARISONS........................................................-18-
APPENDIX A --
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION............................A-1
APPENDIX B --
ADVERTISING AND PROMOTIONAL LITERATURE....................................B-1
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles Core Fixed
Income Fund (the "Fund"), A series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments." The
investment policies of the Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by Loomis, Sayles & Company,
L.P. ("Loomis Sayles"), the Fund's investment adviser, subject to review and
approval by the Trust's board of trustees (the "Trustees"), without
shareholder approval except that the investment objective of the Fund as set
forth in the Prospectus and any Fund policy explicitly identified as
"fundamental" may not be changed without the approval of the holders of a
majority of the outstanding shares of the Fund (which means the lesser of (i)
67% of the shares of the Fund represented at a meeting at which at least 50% of
the outstanding shares are represented or (ii) more than 50% of the outstanding
shares).
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) 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.
*(2) 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 investing in issuers that
invest or deal in the foregoing types of assets or from purchasing
securities that are secured by real estate.)
*(3) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds,
debentures, commercial paper, corporate notes and similar evidences of
indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
*(4) Change its classification pursuant to Section 5(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
to a "non-diversified" management investment company.
*(5) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries.)
-2-
<PAGE>
*(6) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower,
nor borrow any money except as a temporary measure for extraordinary
or emergency purposes; however, the Fund's use of reverse repurchase
agreements and "dollar roll" arrangements shall not constitute
borrowing by the Fund for purposes of this restriction.
*(7) 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.
*(8) Issue senior securities. (For the purposes of this restriction none of
the following is deemed to be a senior security: any pledge, mortgage,
hypothecation or other encumbrance of assets; any borrowing permitted
by restriction (6) 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
or entry into options, forward contracts, futures contracts, options
on futures contracts, swap contracts or any other derivative
investments to the extent that Loomis Sayles determines that the Fund
is not required to treat such investments as senior securities
pursuant to the pronouncements of the Securities and Exchange
Commission (the "SEC") or its staff.)
Although the Fund has no current intention of investing in repurchase
agreements, the Fund intends, based on the views of the staff of the SEC, to
restrict its investments, if any, in repurchase agreements maturing in more than
seven days, together with other investments in illiquid securities, to the
percentage permitted by restriction (7) above.
Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.
Portfolio Turnover
- ------------------
Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets. The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions. High portfolio turnover rates
involve higher costs such as higher brokerage commissions and higher levels of
taxable gain. See "Portfolio Transactions and Brokerage" for a description of
Loomis Sayles's brokerage practices and "Income Dividends, Capital Gain
Distributions and Tax Status" for more information about the tax consequences of
investing in the Fund.
-3-
<PAGE>
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 - Direct obligations of the United States Treasury
-------------------
which 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 - Direct obligations of the United
-----------------------------
States Treasury 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.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-------------
mortgagee which represent interests 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
-4-
<PAGE>
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, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, 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
- ----------------------
As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid
assets in an amount equal to or greater than, on a daily basis, the amount of
the Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria. The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
Convertible Securities
- ----------------------
Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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. Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. 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
-5-
<PAGE>
and conversion ratio, or that are convertible at the option of the issuer.
Because 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.
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 obligations
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at discounts 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 do 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 (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 an
investor 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
- ---------------------
The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash. Although 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 and (b) inability to enforce rights and the
expenses involved in attempted enforcement.
-6-
<PAGE>
Lower Rated Fixed Income Securities
- -----------------------------------
The Fund will purchase securities rated at least BBB- by Standard &
Poor's ("S&P") and Baa3 by Moody's Investors Service, Inc. ("Moody's"), or
if unrated, determined to be of comparable quality by Loomis Sayles. In the
event that the credit rating of a security held by the Fund falls below
investment grade (or, in the case of unrated securities, Loomis Sayles
determines that the quality of such security has deteriorated below investment
grade), the Fund will not be obligated to dispose of such security and may
continue to hold such security if, in the opinion of Loomis Sayles, such
investment is appropriate in the circumstances. Securities rated below
investment grade ("lower rated fixed income securities") generally provide
higher yields, but are subject to greater credit and market risk than higher
quality fixed income securities. Lower rated fixed income securities are
considered speculative with respect to the ability of the issuer to meet
principal and interest payments. Achievement of the Fund's investment objective
through investment in lower rated fixed income securities may be more
dependent on Loomis Sayles's credit analysis than is the case with higher
quality bonds. The market for lower rated fixed income securities may be more
severely affected than other financial markets by economic recession or
substantial interest rate increases. The value and liquidity of lower rated
fixed income securities may be diminished by adverse publicity and investor
perceptions. In addition, legislation that limits the tax benefits to issuers
or holders of lower rated fixed income securities or that limits the ability of
certain categories of financial institutions to invest in these securities may
adversely affect their market value. The secondary market for lower rated
fixed income securities may be less liquid than the secondary market for
higher rated fixed income securities. This lack of liquidity at certain times
may affect the values of these securities and may make the valuation and sale of
these securities by the Fund more difficult. Certain lower-rated fixed income
securities do not pay interest on a current basis. However, the Fund will accrue
and distribute this interest on a current basis, and may be required to sell
securities at times when Loomis Sayles would not otherwise deem it advisable to
do so to generate cash for distributions. Securities of below investment grade
quality are commonly referred to as "junk bonds." Securities in the lowest
rating categories may be in poor standing or in default. Investment grade fixed
income securities rated BBB by S&P or Baa by Moody's may share some of the
characteristics described above.
Rule 144A Securities
- --------------------
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a 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
marketplace trades therefor.
-7-
<PAGE>
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
DANIEL J. FUSS (63) -- President. Executive Vice President and Director,
---------
Loomis Sayles.
MARK W. HOLLAND (47) -- Secretary and Treasurer. Vice President-Finance and
-----------------------
Administration, Loomis Sayles.
TIMOTHY J. HUNT (64) -- Trustee. 4 Dennett Road, Marblehead, Massachusetts.
-------
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
ROBERT J. BLANDING (49) -- Executive Vice President. 465 First Street West,
-------------------------
Sonoma, California. President and Chairman, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Portfolio Manager, Kmart
Corporation.
WILLIAM J. DRISCOLL (37) -- Vice President. Vice President, Loomis Sayles;
--------------
formerly, Vice President, Merrill Lynch.
QUENTIN P. FAULKNER (58) -- Vice President. Vice President, Loomis Sayles.
--------------
KATHLEEN C. GAFFNEY (34) -- Vice President. Vice President, Loomis Sayles.
--------------
ROBERT K. PAYNE (54) -- Vice President. 555 California Street, San Francisco,
--------------
California. Vice President, Loomis Sayles.
ANTHONY J. WILKINS (54) -- Vice President. Vice President, Loomis Sayles.
--------------
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer and Director,
--------------
Loomis Sayles.
JOHN F. YEAGER (33) -- Vice President. Vice President, Loomis Sayles; formerly
--------------
Vice President-Marketing, INVESCO Funds Group and Assistant Comptroller,
INVESCO Capital Management.
SHEILA M. BARRY (51) -- Secretary. Assistant General Counsel and Vice
---------
President, Loomis Sayles. Formerly, Senior Counsel and Vice President, New
England Funds, L.P.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with
Loomis Sayles is One Financial Center, Boston, Massachusetts 02111.
The Trust pays no compensation to its officers listed above who are
interested persons of the Trust. Each Trustee who is not affiliated with
Loomis Sayles will be compensated at the rate of $10,000 per annum. No Trustee
will receive compensation from any other investment
-8-
<PAGE>
company which is advised by Loomis Sayles or its affiliates or which holds
itself out to investors as being related to the Trust.
As of the date hereof, the Trustees and officers as a group owned less
than 1% of the outstanding shares of the Fund.
As of November 7, 1996, Asbestos Workers Local #84 Pension Plan may be
deemed to control the Fund because it owned of record more than 25% of the
Fund's shares. As a result, it may not be possible for matters subject to a vote
of the outstanding voting securities of the Fund to be approved without the
affirmative vote of such shareholder, and such shareholder may be able to
approve such matters without the approval of any other shareholders. The
following table sets forth the name, address and percentage ownership of each
holder of more than 5% of the Fund's outstanding securities as of November 7,
1996:
<TABLE>
Stockholder Address Percentage of Shares Held
- ----------- ------- -------------------------
<S> <C> <C>
Southern Michigan Chapter, NECA 22.97
Asbestos Workers Local #84
Pension Plan 77.03
</TABLE>
As of December 31, 1995, the Fund had not yet commenced operations.
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the Fund
------------------
under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, 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 at the annual rate of .50% of the Fund's
average weekly net assets.
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.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
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 Trustees 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 or
Loomis Sayles, as that term is defined in the 1940 Act, cast in person at a
meeting called for the purpose of voting on such approval. Any amendment to the
advisory agreement must be approved by vote of a majority of the outstanding
voting securities of the Fund and by vote of a majority of the Trustees who
are not interested persons, cast in person at a meeting called for the purpose
of voting on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles
upon ninety days' written notice to the Trust, and it terminates automatically
in the event of its assignment, as that term is defined in the 1940 Act. 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" or "Sayles" in the
-9-
<PAGE>
name of the Trust or the Fund, unless the continuance of the agreement after
such change of name is approved by a majority of the outstanding voting
securities of the Fund and by a majority of the Trustees who are not interested
persons of the Trust or Loomis Sayles, cast in person at a meeting called for
the purpose of voting on such approval.
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 to the eleven series of the Loomis
Sayles Funds, each a series of a registered open-end diversified management
investment company. Loomis Sayles acts as investment adviser or sub-adviser to
New England Star Advisers Fund, New England Value Fund, New England Capital
Growth Fund, New England Balanced Fund and New England Strategic Income Fund,
which are series of New England Funds Trust I, a registered open-end management
investment company, one series of New England Funds Trust III, a registered
open-end management investment company and the Avanti Growth Series, the
Balanced Series and the Small Cap Series of New England Zenith Funds, which is
also a registered open-end management investment company. Loomis Sayles also
provides investment advice to numerous other corporate and fiduciary
clients.
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of NEIC Holdings, Inc., a wholly-owned
subsidiary of New England Investment Companies, L.P. ("NEIC"). NEIC's sole
general partner is New England Investment Companies, Inc., which is a wholly-
owned subsidiary of Met Life New England Holdings, Inc., a wholly-owned
subsidiary of Metropolitan Life Insurance Company.
Trustees and officers of the Trust who hold positions with Loomis Sayles
are listed under "Management of the Trust" in this Statement of Additional
Information. Certain officers and Trustees 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 which the
Fund purchases or sells. In other cases, however, it is believed that these
practices may benefit the Fund. It is the opinion of the Trustees that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these
practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street"), Boston, Massachusetts 02102, is the Trust's custodian. As such,
State Street 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
-10-
<PAGE>
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 also maintains certain
accounts and records of the fund and calculates the total net asset value, total
net income and net asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are Coopers
-----------------------
& Lybrand L.L.P. ("Coopers & Lybrand"), One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand 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.
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 are
carried out through broker-dealers who make the primary market for securities
unless, in the judgment of Loomis Sayles, a more favorable price can be obtained
by carrying out such transactions through other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid for a
transaction. However, the Fund will only pay commissions that Loomis Sayles
believes to be competitive with generally prevailing rates. Loomis Sayles will
use its best efforts to obtain information as to the general level of commission
rates being charged by the brokerage community from time to time and will
evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account. The Fund will not pay a broker a commission at a higher rate than
otherwise available for the same transaction in recognition of the value of
research services provided by the broker or in recognition of the value of any
other services provided by the broker which do not contribute to the best price
and execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and 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's 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
-11-
<PAGE>
the Fund. Receipt of services or products other than research from brokers is
not a factor in the selection of brokers.
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 The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of
the Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of the Fund are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders. The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust 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 series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate. While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular means of distribution (or costs of related services) to be borne by
the shareholders who purchase through that means of distribution. 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").
-12-
<PAGE>
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders.
As a matter of policy, however, the Trustees will not terminate the Trust or the
Fund without submitting the matter to a vote of the shareholders of the Trust or
the Fund, respectively.
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) in 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 for each series or sub-series 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 exclusively affecting an individual series, only shareholders
of that series are entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of series, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series. Voting rights are not cumulative.
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
-13-
<PAGE>
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.
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, (ii) to establish, change or eliminate the par value of
any shares (currently all shares have no par value) and (iii) to issue shares of
the Trust in one or more series, and to subdivide any series of shares into
various classes of shares with such dividend preferences and other rights as the
Trustees may designate.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund . However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust
of the Trustees and officers of the Trust except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No
officer or Trustee may be indemnified against any liability to the Trust or the
Trust's shareholders to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
HOW TO BUY SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."
NET ASSET VALUE
-14-
<PAGE>
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.
The Fund intends to make such determination weekly and as of the close of
regular trading on the New York Stock Exchange (the "Exchange") on any day on
which an order for purchase or redemption of the Fund's shares is received and
on which the Exchange is open for unrestricted trading. During the twelve
months following the date of this Statement of Additional Information, the
Exchange is expected to be closed on the following weekdays: Memorial Day as
observed, Independence Day, Labor Day, Thanksgiving Day, Christmas Day , New
Year's Day, Presidents' Day and Good Friday. 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 among securities that are generally
recognized by institutional traders. Other securities for which current market
quotations are not readily available (including restricted securities, if any)
and all other assets are taken at fair value as determined in good faith by the
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities 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 will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "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 the Trust in proper form. Proceeds resulting from a written
- ------------------------------------
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.
-15-
<PAGE>
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain
Distributions and Taxes," it is the policy of the Fund to pay its shareholders
annually, as dividends, substantially all of the Fund's net income and to
distribute to its shareholders annually substantially all net realized capital
gains, if any, after offset by 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 Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.
As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, 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 derived with respect to its
business of investing in such stock, securities or currencies; (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute each year at least
90% of its dividend, interest and certain other income; and (iv) at the end of
each fiscal quarter hold at least 50% of the value of its total assets in cash,
cash items, U.S. government securities, securities of other regulated investment
companies, and other securities that represent, with respect to each issuer, no
more than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and no more than 25% of the value
of its total assets 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 or businesses. To the extent the Fund qualifies for treatment as
a regulated investment company, it will not be subject to federal income tax on
income paid to its shareholders in the form of dividends or capital gain
distributions.
A nondeductible excise tax will be imposed at the rate of 4% 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%
-16-
<PAGE>
of its capital gain net income realized during the one-year period ending on
October 31 (or December 31, if the Fund is permitted to so elect and so elects)
plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Dividends and
distributions declared by the Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.
Dividends and distributions on Fund shares received shortly after their
purchase, although economically a return of capital, are subject to federal
income taxes as described herein and in the Prospectus to the extent the
dividends and distributions do not exceed the Fund's current and accumulated
earnings and profits.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
If shares have been held for more than one year, gain or loss realized will
generally be long-term capital gain or loss, and will otherwise be short-term
capital gain or loss. 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, all or a portion of any loss will be
disallowed on the taxable disposition of Fund shares if the shareholder acquires
other shares of the Fund within 30 days before or after the disposition.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and the regulations thereunder 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, respectively.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
CALCULATION OF YIELD AND TOTAL RETURN
Yield. The Fund's yield 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
-17-
<PAGE>
securities. The Fund's yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Trust allocated to the Fund. These factors, and possible differences in the
methods used in calculating yield, should be considered when comparing the
Fund's yield to yields published for other investment companies and other
investment vehicles. Yield should also be considered relative to changes in the
value of the Fund's shares and to the relative risks associated with the
investment objective and policies of the Fund.
At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary. An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.
Total Return. Total Return with respect to the Fund is a measure of the
------------
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last 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 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 Micropal, Inc.
as having similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.
Lipper Analytical Services, Inc. distributes mutual fund rankings monthly.
--------------------------------
The rankings are based on total return performance calculated by Lipper,
generally reflecting
-18-
<PAGE>
changes in net asset value adjusted for reinvestment of capital gains and income
dividends. They do not reflect deduction of any sales charges. Lipper rankings
cover a variety of performance periods, including year-to-date, 1-year, 5-year,
and 10-year performance. Lipper classifies mutual funds by investment objective
and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
--------------
rankings are based upon performance calculated by 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. Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
-----------------
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings and is
-------------------------------------
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year. Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain). Weisenberger
rankings do not reflect deduction of sales charges or fees.
Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
--------------------
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a market
----------------------------
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.
-19-
<PAGE>
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
------------------------------------------------
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed rate
------------------------------------------
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government Bond
--------------------------------------
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond
-------------------------------------
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from 20
----------------
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index consists of all
-------------------------
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.
Merrill Lynch Government/Corporate Index. The Merrill Lynch Government/
-----------------------------------------
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index
-------------------------------
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
------------------
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
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 the nine
countries whose
-20-
<PAGE>
securities are most actively traded. 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 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.
-21-
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
<TABLE>
<S> <C>
ABC and affiliates Financial Research Corp.
Adam Smith's Money World Financial Services Week
America On Line Financial World
Anchorage Daily News Fitch Insights
Atlanta Constitution Forbes
Atlanta Journal Fort Worth Star-Telegram
Arizona Republic Fortune
Austin American Statesman Fox Network and affiliates
Baltimore Sun Fund Action
Bank Investment Marketing Fund Decoder
Barron's Global Finance
Bergen County Record (NJ) (the) Guarantor
Bloomberg Business News Hartford Courant
Bond Buyer Houston Chronicle
Boston Business Journal INC
Boston Globe Indianapolis Star
Boston Herald Individual Investor
Broker World Institutional Investor
Business Radio Network International Herald Tribune
Business Week Internet
CBS and affiliates Investment Advisor
CDA Investment Technologies Investment Company Institute
CFO Investment Dealers Digest
Changing Times Investment Profiles
Chicago Sun Times Investment Vision
Chicago Tribune Investor's Daily
Christian Science Monitor IRA Reporter
Christian Science Monitor News Service Journal of Commerce
Cincinnati Enquirer Kansas City Star
Cincinnati Post KCMO (Kansas City)
CNBC KOA-AM (Denver)
CNN LA Times
Columbus Dispatch Leckey, Andrew (syndicated column)
CompuServe Life Association News
Dallas Morning News Lifetime Channel
Dallas Times-Herald Miami Herald
Denver Post Milwaukee Sentinel
Des Moines Register Money Magazine
Detroit Free Press Money Maker
Donoghues Money Fund Report Money Management Letter
Dorfman, Dan (syndicated column) Morningstar
Dow Jones News Service Mutual Fund Market News
Economist Mutual Funds Magazine
FACS of the Week National Public Radio
Fee Adviser National Underwriter
Financial News Network NBC and affiliates
Financial Planning New England Business
Financial Planning on Wall Street New England Cable News
</TABLE>
A-1
<PAGE>
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
A-2
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:
. Loomis Sayles Investment Trust's participation in wrap fee and no
transaction fee programs
. Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
. Specific and general investment philosophies, strategies, processes and
techniques
. Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
. Industry conferences at which Loomis Sayles participates
. Current capitalization, levels of profitability and other financial
information
. Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
. The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
. Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
Current and historical statistics relating to:
-total dollar amount of assets managed
-Loomis Sayles assets managed in total and by Fund
-the growth of assets
-asset types managed
References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:
. Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
. Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as a 401(k) or
retirement plan funding vehicle produced by industry authorities, research
organizations and publications.
B-1
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN PERTAINING TO THE FUND IS SUBJECT TO COMPLETION +
+OR AMENDMENT. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN+
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF SECURITIES OF THE FUND IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
________ __, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Intermediate Duration Fixed Income Fund, a series of Loomis Sayles
Investment Trust, dated ______ __, 1996, and should be read in conjunction
therewith. A copy of the Prospectus may be obtained from Loomis Sayles
Investment Trust, One Financial Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS...................... -2-
MANAGEMENT OF THE TRUST.............................................. -7-
INVESTMENT ADVISORY AND OTHER SERVICES............................... -8-
PORTFOLIO TRANSACTIONS AND BROKERAGE................................. -10-
DESCRIPTION OF THE TRUST............................................. -11-
HOW TO BUY SHARES.................................................... -14-
NET ASSET VALUE...................................................... -14-
REDEMPTIONS.......................................................... -14-
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS.......... -15-
CALCULATION OF YIELD AND TOTAL RETURN................................ -17-
PERFORMANCE COMPARISONS.............................................. -17-
APPENDIX A --
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION.................. A-1
APPENDIX B --
ADVERTISING AND PROMOTIONAL LITERATURE.......................... B-1
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of the Loomis Sayles Intermediate
Duration Fixed Income Fund (the "Fund"), a series of Loomis Sayles Investment
Trust (the "Trust"), are summarized in the Prospectus under "Investment
Objective and Policies" and "More Information About the Fund's Investments."
The investment policies of the Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by Loomis Sayles & Company,
L.P. ("Loomis Sayles"), the Fund's investment adviser, subject to review and
approval by the Trust's board of trustees (the "Trustees"), without shareholder
approval except that the investment objective of the Fund as set forth in the
Prospectus and any Fund policy explicitly identified as "fundamental" may not be
changed without the approval of the holders of a majority of the outstanding
shares of the Fund (which means the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which at least 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares).
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) 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.
*(2) 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 investing in issuers
that invest or deal in the foregoing types of assets or from
purchasing securities that are secured by real estate.)
*(3) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds,
debentures, commercial paper, corporate notes and similar evidences
of indebtedness, which are a part of an issue to the public, is
considered the making of a loan.)
*(4) Change its classification pursuant to Section 5(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), from a
"diversified" to "non-diversified" management investment company.
*(5) Purchase any security (other than U.S. Governmnet Securities) if, as
a result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries.)
-2-
<PAGE>
*(6) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower,
nor borrow any money except as a temporary measure for extraordinary
or emergency purposes; however, the Fund's use of reverse repurchase
agreements and "dollar roll" arrangements shall not constitute
borrowing by the Fund for purposes of this restriction.
*(7) 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.
*(8) Issue senior securities. (For the purposes of this restriction none
of the following is deemed to be a senior security: any pledge,
mortgage, hypothecation or other encumbrance of assets; any borrowing
permitted by restriction (6) 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 or entry into options, forward contracts, futures
contracts, options on futures contracts, swap contracts or any other
derivative investments to the extent that Loomis Sayles determines
that the Fund is not required to treat such investments as senior
securities pursuant to the pronouncements of the Securities and
Exchange Commission (the "SEC") or its staff.)
Although the Fund has no current intention of investing in repurchase
agreements, the Fund intends, based on the views of the staff of the SEC, to
restrict its investments, if any, in repurchase agreements maturing in more than
seven days, together with other investments in illiquid securities, to the
percentage permitted by restriction (7) above.
Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.
Portfolio Turnover
- ------------------
Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets. Although it is impossible to predict
with certainty, it is expected that the annual portfolio turnover rate for the
first full fiscal year of the Fund will not exceed 100%. The Fund anticipates
that its portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions. High portfolio
turnover rates involve higher costs such as higher brokerage commissions and
higher levels of taxable gain. See "Portfolio Transactions and Brokerage" for a
description of Loomis Sayles's brokerage practices and "Income Dividends,
Capital Gain Distributions and Tax Status" for more information about the tax
consequences of investing in the Fund.
-3-
<PAGE>
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 - Direct obligations of the United States Treasury
-------------------
which 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 - Direct obligations of the United
-----------------------------
States Treasury 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.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-----------
mortgagee which represent interests 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
-4-
<PAGE>
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, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, 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
- ----------------------
As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria. The Fund may take delivery of
these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
Convertible Securities
- ----------------------
Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities 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. Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. 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
-5-
<PAGE>
and conversion ratio, or that are convertible at the option of the issuer.
Because 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.
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 obligations
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at discounts 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 do 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 (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
- ---------------------
The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash. Although 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 and (b) inability to enforce rights and the expenses
involved in attempted enforcement.
-6-
<PAGE>
Rule 144A Securities
- --------------------
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a 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
marketplace trades therefor.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
DANIEL J. FUSS (63) -- President. Executive Vice President and Director,
---------
Loomis Sayles.
MARK W. HOLLAND (47) -- Secretary and Treasurer. Vice President-Finance and
-----------------------
Administration, Loomis Sayles.
TIMOTHY J. HUNT (64) -- Trustee. 4 Dennett Road, Marblehead, Massachusetts.
-------
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
ROBERT J. BLANDING (49) -- Executive Vice President. 465 First Street West,
------------------------
Sonoma, California. President and Chairman, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Portfolio Manager, Kmart
Corporation.
WILLIAM J. DRISCOLL (37) -- Vice President. Vice President, Loomis Sayles.
--------------
Formerly, Vice President, Merrill Lynch.
QUENTIN P. FAULKNER (58) -- Vice President. Vice President, Loomis Sayles.
--------------
KATHLEEN C. GAFFNEY (34) -- Vice President. Vice President, Loomis Sayles.
--------------
ROBERT K. PAYNE (54) -- Vice President. 555 California Street, San
--------------
Francisco, California. Vice President, Loomis Sayles.
ANTHONY J. WILKINS (54) -- Vice President. Vice President, Loomis Sayles.
--------------
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer and Director,
--------------
Loomis Sayles.
JOHN F. YEAGER (33) -- Vice President. Vice President, Loomis Sayles; formerly
--------------
Vice President-Marketing, INVESCO Funds Group and Assistant Comptroller,
INVESCO Capital Management.
SHEILA M. BARRY (51) -- Secretary. Assistant General Counsel and Vice President,
---------
Loomis Sayles. Formerly, Senior Counsel and Vice President, New England
Funds, L.P.
-7-
<PAGE>
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.
The Trust pays no compensation to its officers listed above who are
interested persons of the Trust. Each Trustee who is not affiliated with Loomis
Sayles will be compensated at the rate of $10,000 per annum. No Trustee will
receive compensation from any other investment company which is advised by
Loomis Sayles or its affiliates or which holds itself out to investors as being
related to the Trust.
As of the date hereof, the Trustees and officers as a group owned less
than 1% of the outstanding shares of the Fund.
As of December 31, 1995, the Fund had not yet commenced operations.
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the Fund
------------------
under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, 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 at the annual rate of .40% of the Fund's
average weekly net assets.
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.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
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 Trustees 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 or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the
-8-
<PAGE>
outstanding voting securities of the Fund and by vote of a majority of the
Trustees who are not interested persons, cast in person at a meeting called for
the purpose of voting on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. 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" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.
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 to the eleven series of the Loomis
Sayles Funds, each a series of a registered open-end diversified management
investment company. Loomis Sayles acts as investment adviser or sub-adviser to
New England Star Advisers Fund, New England Value Fund, New England Capital
Growth Fund, New England Balanced Fund and New England Strategic Income Fund,
which are series of New England Funds Trust I, a registered open-end management
investment company, one series of New England Funds Trust III, a registered
open-end management investment company and the Avanti Growth Series, the
Balanced Series and the Small Cap Series of New England Zenith Funds, which is
also a registered open-end management investment company. Loomis Sayles also
provides investment advice to numerous other corporate and fiduciary
clients.
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of NEIC Holdings, Inc., a wholly-owned
subsidiary of New England Investment Companies, L.P. ("NEIC"). NEIC's sole
general partner is New England Investment Companies, Inc., which is a wholly-
owned subsidiary of Met Life New England Holdings, Inc., a wholly-owned
subsidiary of Metropolitan Life Insurance Company.
Trustees and officers of the Trust who hold positions with Loomis Sayles
are listed under "Management of the Trust" in this Statement of Additional
Information. 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
-9-
<PAGE>
paragraph could have a detrimental effect on the price or amount of the
securities which the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
Trustees that the desirability of retaining Loomis Sayles as investment adviser
for the Fund outweighs the disadvantages, if any, which might result from these
practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street "), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street 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 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 also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are Coopers
-----------------------
& Lybrand L.L.P. ("Coopers & Lybrand"), One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand 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.
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 are
carried out through broker-dealers who make the primary market for securities
unless, in the judgment of Loomis Sayles, a more favorable price can be obtained
by carrying out such transactions through other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid for a transaction.
However, the Fund will only pay commissions that Loomis Sayles believes 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
-10-
<PAGE>
of any other services provided by the broker which do not contribute to the best
price and execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and 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's 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.
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 The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of
the Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of the Fund are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders. The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust 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 series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes
-11-
<PAGE>
of shares with such dividend preferences and other rights as the Trustees may
designate. While the Trustees have no current intention to subdivide any series
of shares into classes, this flexibility is intended to allow them to provide
for an equitable allocation of the impact of any future regulatory requirements
which might affect various classes of shareholders differently, or to permit
shares of a series to be distributed through more than one distribution channel,
with the costs of the particular means of distribution (or costs of related
services) to be borne by the shareholders who purchase through that means of
distribution. The Trustees may also, without shareholder approval, establish one
or more additional separate portfolios for investments in the Trust or merge two
or more existing portfolios. Shareholders' investments in such an additional or
merged portfolio would be evidenced by a separate series of shares (i.e., a new
"fund").
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders. As
a matter of policy, however, the Trustees will not terminate the Trust or the
Fund without submitting the matter to a vote of the shareholders of the Trust or
the Fund, respectively.
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) in 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 for each series or sub-series 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 exclusively affecting an individual series, only shareholders
of that series are entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of series, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series. Voting rights are not cumulative.
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
-12-
<PAGE>
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.
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, (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value) and (iii) to issue shares of the Trust
in one or more series, and to subdivide any series of shares into various
classes of shares with such dividend preferences and other rights as the
Trustees may designate.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund . However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
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 not act in good faith in the reasonable belief that such
action was in or not opposed to the best interests of the
-13-
<PAGE>
Trust. No officer or Trustee may be indemnified against any liability to the
Trust or the Trust's shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her
office.
-14-
<PAGE>
HOW TO BUY SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."
NET ASSET VALUE
The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made weekly and as of the close of regular trading on the
New York Stock Exchange (the "Exchange") on any day on which an order for
purchase or redemption of the Fund's shares is received and on which the
Exchange is open for unrestricted trading. During the twelve months following
the date of this Statement of Additional Information, the Exchange is expected
to be closed on the following weekdays: Memorial Day as observed, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day , New Year's Day, Presidents'
Day and Good Friday. 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 among
securities that are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities 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 will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "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 the Trust in proper form. Proceeds resulting from a written
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. In those cases where you have
recently
-15-
<PAGE>
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes," it is the policy of the Fund to pay its shareholders monthly, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by 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 Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.
As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, 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 derived with respect to its
business of investing in such stock, securities or currencies; (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute each year at least
90% of its dividend, interest and certain other income; and (iv) at the end of
each fiscal quarter hold at least 50% of the value of its total assets in cash,
cash items, U.S. government securities, securities of other regulated investment
companies, and other securities that represent, with respect to each issuer, no
more than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and no more
-16-
<PAGE>
than 25% of the value of its total assets 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 or businesses. To the extent the Fund qualifies
for treatment as a regulated investment company, it will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions.
A nondeductible excise tax will be imposed at the rate of 4% on the excess,
if any, of the Fund's "required distribution" over its actual distributions in
any calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Dividends and distributions on Fund shares received shortly after their
purchase, although economically a return of capital, are subject to federal
income taxes as described herein and in the Prospectus to the extent the
dividends and distributions do not exceed the Fund's current and accumulated
earnings and profits.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions. If
shares have been held for more than one year, gain or loss realized will
generally be long-term capital gain or loss, and will otherwise be short-term
capital gain or loss. 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, all or a portion of any loss will be
disallowed on the taxable disposition of Fund shares if the shareholder acquires
other shares of the Fund within 30 days before or after the disposition.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and the regulations thereunder 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, respectively.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares
-17-
<PAGE>
of the Fund, including the possibility that distributions may be subject to a
30% United States withholding tax (or a reduced rate of withholding provided by
treaty).
CALCULATION OF YIELD AND TOTAL RETURN
Yield. The Fund's yield will be computed by dividing the Fund's net
-----
investment income for a recent 30-day period by the maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Fund's yield will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses of the Trust allocated to the Fund. These factors, and
possible differences in the methods used in calculating yield, should be
considered when comparing the Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objective and policies of the
Fund.
At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary. An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.
Total Return. Total Return with respect to the Fund is a measure of the
------------
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last 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 the yield
and/or total return of its shares in advertisements or information furnished to
present or prospective
-18-
<PAGE>
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 Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.
Lipper Analytical Services, Inc. distributes mutual fund rankings monthly.
--------------------------------
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect deduction of any sales
charges. Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual
funds by investment objective and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
--------------
rankings are based upon performance calculated by 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. Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
-----------------
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings and is
-------------------------------------
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year. Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain). Weisenberger
rankings do not reflect deduction of sales charges or fees.
-19-
<PAGE>
Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
--------------------
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a market
----------------------------
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
------------------------------------------------
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed rate
------------------------------------------
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government Bond
--------------------------------------
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond
-------------------------------------
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from 20
----------------
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index. The MSCI-EAFE ex-Japan Index consists of all
-------------------------
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.
Merrill Lynch Government/Corporate Index. The Merrill Lynch Government/
-----------------------------------------
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt
-20-
<PAGE>
issues with at least $25 million outstanding, greater than one year maturity,
and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index
-------------------------------
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
------------------
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
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 the nine
countries whose securities are most actively traded. 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 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
-21-
<PAGE>
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.
-22-
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
<TABLE>
<S> <C>
ABC and affiliates Financial Research Corp.
Adam Smith's Money World Financial Services Week
America On Line Financial World
Anchorage Daily News Fitch Insights
Atlanta Constitution Forbes
Atlanta Journal Fort Worth Star-Telegram
Arizona Republic Fortune
Austin American Statesman Fox Network and affiliates
Baltimore Sun Fund Action
Bank Investment Marketing Fund Decoder
Barron's Global Finance
Bergen County Record (NJ) (the) Guarantor
Bloomberg Business News Hartford Courant
Bond Buyer Houston Chronicle
Boston Business Journal INC
Boston Globe Indianapolis Star
Boston Herald Individual Investor
Broker World Institutional Investor
Business Radio Network International Herald Tribune
Business Week Internet
CBS and affiliates Investment Advisor
CDA Investment Technologies Investment Company Institute
CFO Investment Dealers Digest
Changing Times Investment Profiles
Chicago Sun Times Investment Vision
Chicago Tribune Investor's Daily
Christian Science Monitor IRA Reporter
Christian Science Monitor News Service Journal of Commerce
Cincinnati Enquirer Kansas City Star
Cincinnati Post KCMO (Kansas City)
CNBC KOA-AM (Denver)
CNN LA Times
Columbus Dispatch Leckey, Andrew (syndicated column)
Dallas Morning News Lifetime Channel
Dallas Times-Herald Miami Herald
Denver Post Milwaukee Sentinel
Des Moines Register Money Magazine
Detroit Free Press Money Maker
Donoghues Money Fund Report Money Management Letter
Dorfman, Dan (syndicated column) Morningstar
Dow Jones News Service Mutual Fund Market News
Economist Mutual Funds Magazine
FACS of the Week National Public Radio
Fee Adviser National Underwriter
Financial News Network NBC and affiliates
Financial Planning New England Business
Financial Planning on Wall Street New England Cable News
</TABLE>
A-1
<PAGE>
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
A-2
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:
. Loomis Sayles Investment Trust's participation in wrap fee and no
transaction fee programs
. Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
. Specific and general investment philosophies, strategies, processes and
techniques
. Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
. Industry conferences at which Loomis Sayles participates
. Current capitalization, levels of profitability and other financial
information
. Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
. The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
. Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
. Current and historical statistics relating to:
-total dollar amount of assets managed
-Loomis Sayles assets managed in total and by Fund
-the growth of assets
-asset types managed
References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:
. Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
. Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as a 401(k) or
retirement plan funding vehicle produced by industry authorities, research
organizations and publications.
B-1
<PAGE>
Part C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements:
See the section entitled "Prior Performance" in the Prospectus.
See the section entitled "Financial Statements" in the Statements of
Additional Information for each of the Loomis Sayles Fixed Income
Fund, Loomis Sayles Investment Grade Fixed Income Fund, Loomis
Sayles California Tax-Free Income Fund, Loomis Sayles Core Growth
Fund and Loomis Sayles Mortgage Securities Fund.
(b) Exhibits:
1. Agreement and Declaration of Trust of Loomis Sayles Investment
Trust (the "Trust") dated December 23, 1993 -- incorporated by
reference to the initial registration statement on Form N-1A
(File No. 811-8282), filed on January 11, 1994 (the
"Registration Statement").
2. By-Laws of the Trust -- incorporated by reference to the
Registration Statement.
3. Not applicable.
4. Not applicable.
5a. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles
Investment Grade Fixed Income Fund -- filed herewith.
5b. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles Fixed
Income Fund -- filed herewith.
5c. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles
California Tax-Free Income Fund -- filed herewith.
5d. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles
Mortgage Securities Fund -- filed herewith.
<PAGE>
5e. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles Core
Growth Fund -- filed herewith.
5f. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles
Convertible Bond Fund -- filed herewith.
5g. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles
High Yield Fixed Income Fund -- filed herewith.
5h. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles Core
Fixed Income Fund -- filed herewith.
5i. Investment Advisory Agreement between the Trust and Loomis
Sayles dated as of August 30, 1996 for the Loomis Sayles
Intermediate Duration Fixed Income Fund -- filed herewith.
6. Not applicable.
7. Not applicable.
8. Form of Custodian Agreement between the Trust and State Street
Bank and Trust Company ("State Street") -- incorporated by
reference to the Registration Statement.
9. Not applicable.
10. Not applicable.
11. Consent of Coopers & Lybrand L.L.P. -- filed herewith.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Not applicable.
16. Schedule for Computation of Performance Information -- to be
filed by amendment.
-2-
<PAGE>
17a. Financial Data Schedule for the Loomis Sayles Investment Grade
Fixed Income Fund -- filed herewith.
17b. Financial Data Schedule for the Loomis Sayles Fixed Income
Fund --filed herewith.
17c. Financial Data Schedule for the Loomis Sayles California
Tax-Free Income Fund -- filed herewith.
17d. Financial Data Schedule for the Loomis Sayles Core Growth
Fund --filed herewith.
17e. Financial Data Schedule for the Loomis Sayles High Yield Fixed
Income Fund -- filed herewith.
17f. Financial Data Schedule for the Loomis Sayles Core Fixed Income
Fund -- filed herewith.
18. Not applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
(1) (2)
-3-
<PAGE>
<TABLE>
<CAPTION>
Number of Record Holders
Title of Series (as of October 7, 1996)
--------------- -----------------------
<S> <C>
California Tax-Free Income Fund 26
Convertible Bond Fund 4
Core Fixed Income Fund 3
Core Growth Fund 7
Fixed Income Fund 17
High Yield Fixed Income Fund 2
Intermediate Duration Fixed Income Fund 1
Investment Grade Fixed Income Fund 7
Mortgage Securities Fund 4
</TABLE>
Item 27. Indemnification
---------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto) and Article 4 of the Registrant's By-Laws (Exhibit
2 hereto) provide for indemnification of its trustees and officers.
The effect of these provisions is to provide indemnification for each
of the Registrant's trustees and officers against liabilities and
counsel fees reasonably incurred in connection with the defense of any
legal proceeding in which such trustee or officer may be involved by
reason of being or having been a trustee or officer, except with
respect to any matter as to which such trustee or officer shall have
been adjudicated not to have acted in good faith and in the reasonable
belief that such trustee's or officer's action was in the best
interest of the Registrant, and except that no trustee or officer
shall be indemnified against any liability to the Registrant or its
shareholders to which such trustee or officer otherwise would be
subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
trustee's or officer's office.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Loomis Sayles, the investment adviser of the Registrant, provides
investment advice to eleven series of the Loomis Sayles Funds, five
series of New England Funds Trust I, one series of New England Funds
Trust III and three series of New England Zenith Funds, all of which
are registered investment companies, and to other organizations and
individuals.
The sole general partner of Loomis Sayles is Loomis Sayles & Company,
Inc., One Financial Center, Boston, Massachusetts 02111.
-4-
<PAGE>
Item 29. Principal Underwriters
----------------------
Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The following companies maintain possession of the documents required
by the specified rules:
(a) Registrant
Rule 31a-1(b)(4), (9), (10), (11)
Rule 31a-2(a)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)
(c) Loomis, Sayles & Company, L.P.
One Financial Center
Boston, MA 02111
Rule 31a-1(f)
Rule 31a-2(e)
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
(b) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid
-5-
<PAGE>
by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
-6-
<PAGE>
* * * * * * * * * * *
NOTICE
A copy of the Agreement and Declaration of Trust of Loomis Sayles
Investment Trust (the "Trust") is on file with the Secretary of The Commonwealth
of Massachusetts and the Clerk of the City of Boston and notice is hereby given
that this instrument has been executed on behalf of the Trust by an officer of
the Trust as an officer and not individually and the obligations of or arising
out of this instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property of
the Trust.
-7-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, in
The Commonwealth of Massachusetts on this 12th day of November, 1996.
LOOMIS SAYLES INVESTMENT TRUST
By:DANIEL J. FUSS
--------------------------------------
Daniel J. Fuss
President
-8-
<PAGE>
LOOMIS SAYLES INVESTMENT TRUST
Index to Exhibits
Exhibit No. Description
- ---------- -----------
99.B5a Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles Investment Grade Fixed Income Fund.
99.B5b Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles Fixed Income Fund.
99.B5c Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles California Tax-Free Income Fund.
99.B5d Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles Mortgage Securities Fund.
99.B5e Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles Core Growth Fund.
99.B5f Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles Convertible Bond Fund.
99.B5g Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles High Yield Fixed Income Fund.
99.B5h Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles Core Fixed Income Fund.
99.B5i Investment Advisory Agreement between the Trust and Loomis
Sayles for the Loomis Sayles Intermediate Duration Fixed Income
Fund.
99.B11 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule for the Loomis Sayles Investment Grade
Fixed Income Fund.
27.2 Financial Data Schedule for the Loomis Sayles Fixed Income Fund.
27.3 Financial Data Schedule for the Loomis Sayles California Tax-Free
Income Fund.
27.4 Financial Data Schedule for the Loomis Sayles Core Growth Fund.
27.5 Financial Data Schedule for the Loomis Sayles High Yield Fixed
Income Fund.
27.6 Financial Data Schedule for the Loomis Sayles Core Fixed Income
Fund.
-9-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Investment Grade Fixed Income Fund series (the "Series"), and
Loomis, Sayles & Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .4% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES INVESTMENT GRADE FIXED
INCOME FUND series
By: DANIEL J. FUSS
--------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
--------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Investment Grade Fixed Income Fund series on behalf of the
Trust by officers of the Trust as officers and not individually and that the
obligations of or arising out of this Agreement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Fixed Income Fund series (the "Series"), and Loomis, Sayles &
Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .6% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES FIXED INCOME FUND series
By: DANIEL J. FUSS
--------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
---------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Fixed Income Fund series on behalf of the Trust by
officers of the Trust as officers and not individually and that the obligations
of or arising out of this Agreement are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon the assets and
property belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles California Tax-Free Income Fund series (the "Series"), and
Loomis, Sayles & Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .5% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES CALIFORNIA TAX-FREE
INCOME FUND series
By: DANIEL J. FUSS
--------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
--------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles California Tax-Free Income Fund series on behalf of the
Trust by officers of the Trust as officers and not individually and that the
obligations of or arising out of this Agreement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Mortgage Securities Fund series (the "Series"), and Loomis,
Sayles & Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .4% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its name
so as to eliminate all references to the words "Loomis" or "Sayles," then
this Agreement shall automatically terminate at the time of such change
unless the continuance of this Agreement after such change shall have been
specifically approved by vote of a majority of the outstanding voting
securities of the Series and by vote of a majority of the Trustees of the
Trust who are not interested persons of the Trust or the Adviser, cast in
person at a meeting called for the purpose of voting on such approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES MORTGAGE SECURITIES FUND series
By: DANIEL J. FUSS
---------------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
---------------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Mortgage Securities Fund series on behalf of the Trust by
officers of the Trust as officers and not individually and that the obligations
of or arising out of this Agreement are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon the assets and
property belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Core Growth Fund series (the "Series"), and Loomis, Sayles &
Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .5% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES CORE GROWTH FUND series
By: DANIEL J. FUSS
--------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
--------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Core Growth Fund series on behalf of the Trust by officers
of the Trust as officers and not individually and that the obligations of or
arising out of this Agreement are not binding upon any of the Trustees, officers
or shareholders individually but are binding only upon the assets and property
belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Convertible Bond Fund series (the "Series"), and Loomis,
Sayles & Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .5% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES CONVERTIBLE
BOND FUND series
By: DANIEL J. FUSS
---------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
---------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Convertible Bond Fund series on behalf of the Trust by
officers of the Trust as officers and not individually and that the obligations
of or arising out of this Agreement are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon the assets and
property belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles High Yield Fixed Income Fund series (the "Series"), and
Loomis, Sayles & Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .6% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES HIGH YIELD FIXED INCOME
FUND series
By: DANIEL J. FUSS
--------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
---------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles High Yield Fixed Income Fund series on behalf of the Trust
by officers of the Trust as officers and not individually and that the
obligations of or arising out of this Agreement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Core Fixed Income Fund series (the "Series"), and Loomis,
Sayles & Company, L.P., a Delaware limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .5% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES CORE FIXED
INCOME FUND series
By: DANIEL J. FUSS
--------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
--------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Core Fixed Income Fund series on behalf of the Trust by
officers of the Trust as officers and not individually and that the obligations
of or arising out of this Agreement are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon the assets and
property belonging to the Series.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Intermediate Duration Fixed Income Fund series (the "Series"),
and Loomis, Sayles & Company, L.P., a Delaware limited partnership (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust. The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial data
and information and undertake such additional investment research as it
shall believe necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities, if any, selected to perform such services and exclusive
of any managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are directors,
officers or employees of the Adviser or any affiliated person (other than a
registered investment company) of the Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 5;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser or of any affiliated person (other
than a registered investment company) of the Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
-2-
<PAGE>
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(i) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of the
Trust including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and Trustees of the Trust;
and
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Trust, and notices and proxy
solicitation material furnished to shareholders of the Trust or regulatory
authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .4% or such lesser rate as the Adviser may
agree to from time to time. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser. The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
-3-
<PAGE>
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.
9. It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days'
written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change its
name so as to eliminate all references to the words "Loomis" or "Sayles,"
then this Agreement shall automatically terminate at the time of such
change unless the continuance of this Agreement after such change shall
have been specifically approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust or the Adviser,
cast in person at a meeting called for the purpose of voting on such
approval.
-4-
<PAGE>
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LOOMIS SAYLES INVESTMENT TRUST,
on behalf of its
LOOMIS SAYLES INTERMEDIATE DURATION
FIXED INCOME FUND series
By: DANIEL J. FUSS
-------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: MARK W. HOLLAND
-------------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Intermediate Duration Fixed Income Fund series on behalf
of the Trust by officers of the Trust as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any of
the Trustees, officers or shareholders individually but are binding only upon
the assets and property belonging to the Series.
-6-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Loomis Sayles Investment Trust:
We hereby consent to the following with respect to Amendment No. 8 to the
Registration Statement under the Investment Company Act of 1940, as amended,
on Form N-1A (File No. 811-8282), of Loomis Sayles Investment Trust (consisting
of Loomis Sayles Investment Grade Fixed Income Fund, Loomis Sayles Convertible
Bond Fund, Loomis Sayles Mortgage Securities Fund, Loomis Sayles Fixed Income
Fund, Loomis Sayles California Tax-Free Income Fund, Loomis Sayles Core Growth
Fund, Loomis Sayles High Yield Fixed Income Fund, Loomis Sayles Core Fixed
Income Fund and Loomis Sayles Intermediate Duration Fixed Income Fund (each a
"Fund")):
1. The incorporation by reference in the Prospectus and Statement of
Additional Information of each of the Loomis Sayles California Tax-
Free Income Fund, Loomis Sayles Core Growth Fund, Loomis Sayles Fixed
Income Fund and Loomis Sayles Investment Grade Fixed Income Fund of
our report dated February 12, 1996 accompanying the Annual Report
for each such Fund for the year ended December 31, 1995;
2. The reference to our firm under the heading "Prior Performance" in the
Prospectus of each of the Loomis Sayles California Tax-Free Income
Fund, Loomis Sayles Core Growth Fund, Loomis Sayles Fixed Income Fund
and Loomis Sayles Investment Grade Fixed Income Fund; and
3. The reference to our firm under the heading "Independent Accountants"
in the Prospectus and Statement of Additional Information of each of
the Funds.
COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 8, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
<NUMBER> 01
<NAME> LIST INVESTMENT GRADE FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 30,677,189
<INVESTMENTS-AT-VALUE> 30,915,876
<RECEIVABLES> 1,376,344
<ASSETS-OTHER> 77,291
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,369,511
<PAYABLE-FOR-SECURITIES> 712,462
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,720
<TOTAL-LIABILITIES> 757,182
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,810,929
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 66,187
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 496,526
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 238,687
<NET-ASSETS> 31,612,329
<DIVIDEND-INCOME> 57,487
<INTEREST-INCOME> 978,705
<OTHER-INCOME> 0
<EXPENSES-NET> 73,966
<NET-INVESTMENT-INCOME> 962,226
<REALIZED-GAINS-CURRENT> 509,458
<APPREC-INCREASE-CURRENT> (1,225,417)
<NET-CHANGE-FROM-OPS> 246,267
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 876,202
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,019,388
<NUMBER-OF-SHARES-REDEEMED> 103,746
<SHARES-REINVESTED> 510,792
<NET-CHANGE-IN-ASSETS> 9,796,499
<ACCUMULATED-NII-PRIOR> 751,240
<ACCUMULATED-GAINS-PRIOR> 60,669
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 53,793
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73,966
<AVERAGE-NET-ASSETS> 26,970,379
<PER-SHARE-NAV-BEGIN> 11.560
<PER-SHARE-NII> .450
<PER-SHARE-GAIN-APPREC> (.310)
<PER-SHARE-DIVIDEND> (.420)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.280
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
<NUMBER> 02
<NAME> LIST FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 107,803,314
<INVESTMENTS-AT-VALUE> 107,861,946
<RECEIVABLES> 4,986,954
<ASSETS-OTHER> 412
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112,849,312
<PAYABLE-FOR-SECURITIES> 949,950
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 163,719
<TOTAL-LIABILITIES> 1,113,669
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107,246,008
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,477,403
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 951,081
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 61,151
<NET-ASSETS> 111,735,643
<DIVIDEND-INCOME> 196,465
<INTEREST-INCOME> 3,515,694
<OTHER-INCOME> 0
<EXPENSES-NET> 271,425
<NET-INVESTMENT-INCOME> 3,440,734
<REALIZED-GAINS-CURRENT> 653,934
<APPREC-INCREASE-CURRENT> (3,777,291)
<NET-CHANGE-FROM-OPS> 317,377
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,707,090
<NUMBER-OF-SHARES-REDEEMED> 620,635
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 53,403,832
<ACCUMULATED-NII-PRIOR> 2,401,978
<ACCUMULATED-GAINS-PRIOR> 965,493
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 217,763
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 271,425
<AVERAGE-NET-ASSETS> 87,344,387
<PER-SHARE-NAV-BEGIN> 12.080
<PER-SHARE-NII> .370
<PER-SHARE-GAIN-APPREC> (.390)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.060
<EXPENSE-RATIO> .620
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
<NUMBER> 03
<NAME> LSIT CALIFORNIA TAX FREE INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 10,001,894
<INVESTMENTS-AT-VALUE> 9,996,292
<RECEIVABLES> 163,577
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,159,869
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,542
<TOTAL-LIABILITIES> 23,542
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,133,603
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 97
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,229
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,602)
<NET-ASSETS> 10,136,327
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 236,293
<OTHER-INCOME> 0
<EXPENSES-NET> 29,663
<NET-INVESTMENT-INCOME> 206,630
<REALIZED-GAINS-CURRENT> 6,054
<APPREC-INCREASE-CURRENT> (186,120)
<NET-CHANGE-FROM-OPS> 26,564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 206,955
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,471,090
<NUMBER-OF-SHARES-REDEEMED> 80,000
<SHARES-REINVESTED> 45,805
<NET-CHANGE-IN-ASSETS> 2,256,504
<ACCUMULATED-NII-PRIOR> 178,634
<ACCUMULATED-GAINS-PRIOR> 2,175
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22,950
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29,663
<AVERAGE-NET-ASSETS> 9,152,227
<PER-SHARE-NAV-BEGIN> 10.230
<PER-SHARE-NII> .260
<PER-SHARE-GAIN-APPREC> (.200)
<PER-SHARE-DIVIDEND> (.260)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.030
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
<NUMBER> 05
<NAME> LSIT CORE GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 18,969,299
<INVESTMENTS-AT-VALUE> 19,976,488
<RECEIVABLES> 22,448
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,998,936
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,911
<TOTAL-LIABILITIES> 34,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,150,597
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 98,191
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (291,951)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,007,188
<NET-ASSETS> 19,964,025
<DIVIDEND-INCOME> 125,465
<INTEREST-INCOME> 22,670
<OTHER-INCOME> 0
<EXPENSES-NET> 52,274
<NET-INVESTMENT-INCOME> 95,861
<REALIZED-GAINS-CURRENT> (143,892)
<APPREC-INCREASE-CURRENT> 827,669
<NET-CHANGE-FROM-OPS> 779,638
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,575,426
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,355,064
<ACCUMULATED-NII-PRIOR> 19,087
<ACCUMULATED-GAINS-PRIOR> 148,059
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40,211
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52,274
<AVERAGE-NET-ASSETS> 16,128,696
<PER-SHARE-NAV-BEGIN> 10.020
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .440
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.510
<EXPENSE-RATIO> .650
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
<NUMBER> 07
<NAME> LSIT HIGH YIELD FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 2,866,543
<INVESTMENTS-AT-VALUE> 2,858,981
<RECEIVABLES> 82,108
<ASSETS-OTHER> 54
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,941,143
<PAYABLE-FOR-SECURITIES> 39,932
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,438
<TOTAL-LIABILITIES> 53,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,879,350
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 15,985
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (7,562)
<NET-ASSETS> 2,887,773
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,434
<OTHER-INCOME> 0
<EXPENSES-NET> 1,449
<NET-INVESTMENT-INCOME> 15,985
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (7,562)
<NET-CHANGE-FROM-OPS> 8,423
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,879,350
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,887,773
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,449
<AVERAGE-NET-ASSETS> 2,713,183
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> .060
<PER-SHARE-GAIN-APPREC> (0.030)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.030
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
<NUMBER> 06
<NAME> LSIT CORE FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 4,340,682
<INVESTMENTS-AT-VALUE> 4,322,555
<RECEIVABLES> 292,686
<ASSETS-OTHER> 3,941
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,619,182
<PAYABLE-FOR-SECURITIES> 182,902
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,807
<TOTAL-LIABILITIES> 201,709
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,392,784
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 46,224
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,408)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (18,127)
<NET-ASSETS> 4,417,473
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 51,430
<OTHER-INCOME> 0
<EXPENSES-NET> 5,206
<NET-INVESTMENT-INCOME> 46,224
<REALIZED-GAINS-CURRENT> (3,408)
<APPREC-INCREASE-CURRENT> (18,127)
<NET-CHANGE-FROM-OPS> 24,689
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,392,784
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,417,473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,004
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,206
<AVERAGE-NET-ASSETS> 4,363,028
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> .110
<PER-SHARE-GAIN-APPREC> (0.050)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.060
<EXPENSE-RATIO> 0.650
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
