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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1997
REGISTRATION NOS. 333-_____
811-8282
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [_]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. [_]
REGISTRATION STATEMENT UNDER [x]
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 10
(CHECK APPROPRIATE BOX OR BOXES)
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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
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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
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[ ] ON _____________ PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
[ ] ON _____________ PURSUANT TO PARAGRAPH (A)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
[ ] ON _____________ PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
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THIS AMENDMENT RELATES SOLELY TO THE REGISTRANT'S LOOMIS SAYLES CONVERTIBLE
BOND FUND AND LOOMIS SAYLES MORTGAGE SECURITIES FUND SERIES. INFORMATION
CONTAINED IN THIS REGISTRATION STATEMENT RELATING TO OTHER SERIES OF THE
REGISTRANT IS NEITHER AMENDED NOR SUPERSEDED BY THIS AMENDMENT.
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LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CONVERTIBLE BOND FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PRIVATE PLACEMENT MEMORANDUM
MAY 1, 1997
The Loomis Sayles Investment Trust (the "Trust") is a group of nine mutual
funds including the Loomis Sayles Convertible Bond Fund (the "Fund"). The other
series which are offered by the Trust and which are described in separate
prospectuses or private placement memoranda 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
Loomis Sayles Investment Grade Fixed Income Fund
Loomis Sayles Mortgage Securities 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 Private Placement Memorandum (the "Memorandum") 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 May 1, 1997, 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 Memorandum.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. 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 MEMORANDUM. 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.
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NO OFFERING LITERATURE OR ADVERTISING IN ANY FORM WHATSOEVER SHALL BE
EMPLOYED IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS MEMORANDUM AND SUCH
SUPPLEMENTARY INFORMATION PREPARED BY THE FUNDS AND PRECEDED OR ACCOMPANIED BY
THIS MEMORANDUM. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS OR
TO PROVIDE ANY INFORMATION WITH RESPECT TO THESE SECURITIES EXCEPT SUCH
INFORMATION AS IS CONTAINED IN THIS MEMORANDUM AND IN THE STATEMENT OF
ADDITIONAL INFORMATION. ANY SALES MADE HEREUNDER SHALL NOT UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN MATTERS
DISCUSSED HEREIN SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
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
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............................. 12
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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 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 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 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 a fractional vote
for each fractional share held) at shareholder meetings. Subject to the
restrictions described under "How to Redeem Shares," the shares are freely
transferable. 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 at least 65%
of its assets in convertible bonds with up to 35% invested in other securities.
These other securities may include other convertible securities, non-convertible
corporate debt, 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, common and preferred stock 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 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 that Loomis Sayles has determined are 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 the Fund acquires it
at least one major rating agency has rated the security in its top four major
rating categories (even if another such agency has issued a lower rating), or if
the security is unrated but Loomis Sayles determines it 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, 1996 in securities assigned to the various rating categories
by S&P and Moody's on a dollar-weighted basis were approximately as follows:
"BBB"/"Baa," 8.95%; "BB"/"Ba," 19.11%; "B"/"B," 42.7%; and below "B," 7.5%. The
percentage of the Fund's net assets invested during such fiscal year in unrated
debt securities as a group was approximately 21.3%, all of which were comparable
to securities rated below B.
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
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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.
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. 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. The Fund may also invest in other debt securities that pay a
rate of interest or dividends that is adjusted periodically by reference to some
specified index or market rate. Such securities are included within the
definition of fixed income securities as used in this Prospectus. Because
interest rates vary, it is impossible to predict the yield 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.
CONVERTIBLE SECURITIES
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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. The Fund may also invest in other
securities that provide an opportunity for equity participation such as
warrants. 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, 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 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 is not at the option of the holder, the Fund may be required to
convert
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the security into the underlying common stock even at times when the value of
the underlying common stock has declined substantially.
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.
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 comparable unrated securities.
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 investment objective of the fund investing in lower rated
fixed income securities may be more dependent on Loomis Sayles's own credit
analysis than is the case with higher quality bonds. The market for lower rated
fixed income securities may be more severely affected than some other financial
markets by economic recession or substantial interest rate increases. The value
and liquidity of lower rated fixed income securities may be diminished by
adverse publicity and investor perceptions. Also, 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 market value.
In addition, the secondary market may be less liquid for lower rated fixed
income securities. This lack of liquidity at certain times may affect the
values of these securities and may make the 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 have to sell
securities at times when Loomis
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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 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 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.
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 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 20% of the
Fund's total assets.
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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 the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.
Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected 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.
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 Trustees supervise Loomis Sayles's conduct of the affairs of the Fund.
The portfolio manager for the Fund is Kathleen C. Gaffney, who is a Vice
President of Loomis Sayles.
Loomis Sayles acts as the transfer agent and dividend-paying agent for the
Fund.
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FUND EXPENSES
Under the terms of its advisory agreement with the Fund, Loomis Sayles is
entitled to an advisory fee at an annual rate of .50% of the Fund's average
monthly net assets. However, Loomis Sayles has voluntarily undertaken, for an
indefinite period, to waive its advisory fee and/or bear Fund expenses to the
extent necessary to ensure that the total expenses of the Fund do not exceed the
annual rate of .65% of the Fund's average net assets.. Loomis Sayles may modify
or terminate this arrangement at any time.
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. 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 subscription agreement (attached hereto as Exhibit A) and payment to
Loomis Sayles. Only clients of Loomis Sayles are eligible to invest in the
Fund. By completing the subscription agreement, each investor will appoint
Loomis Sayles as attorney in fact with authority to redeem the investor's shares
and have the proceeds therefrom remitted to the investor or his agent as soon as
practicable after the investor ceases to be a client of 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. In all cases Loomis Sayles reserves the right to reject any particular
investment. 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 of 1933, as amended (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.
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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.
Purchases of shares in the Fund are limited to persons who are "accredited
investors" as defined in Regulation D under the Securities Act and who have
completed and signed a subscription agreement in the form attached hereto as
Exhibit A. The Trust reserves the right to reject any purchase order for any
reason which the Trust in its sole discretion deems appropriate. Purchasers
must be acquiring shares for their own account and for investment purposes only.
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
The securities offered hereby have not been registered under the Securities
Act 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.
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 is received by the Trust in proper form.
The Trust usually requires additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Trust by calling (617) 482-2450 for details.
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 Fund 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.
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
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 under reported 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.
CUSTODIAN OF ASSETS INVESTMENT ADVISER
State Street Bank and Trust Company Loomis, Sayles & Company, L.P.
Boston, Massachusetts 02102 One Financial Center
Boston, Massachusetts 02111
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 predominantly
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.
A-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.
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 designated 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>
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES MORTGAGE SECURITIES FUND
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
PRIVATE PLACEMENT MEMORANDUM
MAY 1, 1997
The Loomis Sayles Investment Trust (the "Trust") is a group of nine mutual
funds including the Loomis Sayles Mortgage Securities Fund (the "Fund"). The
other series which are offered by the Trust and which are described in separate
prospectuses or private placement memoranda are:
Loomis Sayles California Tax-Free Income Fund
Loomis Sayles Convertible Bond 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
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 Private Placement Memorandum (the "Memorandum") 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 May 1, 1997 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
Memorandum.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. 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 AND MAY NOT BE TRANSFERRED OR RESOLD UNLESS SO
REGISTERED OR EXEMPT THEREFROM. HOWEVER, THE SECURITIES ARE REDEEMABLE AS
DESCRIBED IN THIS MEMORANDUM. 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>
NO OFFERING LITERATURE OR ADVERTISING IN ANY FORM WHATEVER SHALL BE EMPLOYED
IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS MEMORANDUM AND SUCH
SUPPLEMENTARY INFORMATION PREPARED BY THE FUND AND PRECEDED OR ACCOMPANIED BY
THIS MEMORANDUM. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS OR
TO PROVIDE ANY INFORMATION WITH RESPECT TO THESE SECURITIES EXCEPT SUCH
INFORMATION AS IS CONTAINED IN THIS MEMORANDUM AND IN THE STATEMENT OF
ADDITIONAL INFORMATION. ANY SALES MADE HEREUNDER SHALL NOT UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN MATTERS
DISCUSSED HEREIN SINCE THE DATE HEREOF.
-2-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE TRUST......................................... 4
INVESTMENT OBJECTIVE AND POLICIES................. 4
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
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES... 8
</TABLE>
-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 Intermediate Duration Fixed Income Fund and the Loomis Sayles
Investment Grade Fixed Income 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 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
a fractional vote for each fractional share held) at shareholder meetings.
Subject to the restrictions described under "How to Redeem Shares," the shares
are freely transferable. 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, consistent
with prudent investment risk, 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 high quality debt securities. It is a fundamental policy
of the Fund that, during periods of normal market conditions, at least 65% of
its net assets will be invested in mortgage securities. All issues will be
rated at least BBB by Standard & Poor's or Baa by Moody's Investors Service,
Inc. (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. 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 will seek to identify under-valued securities and sectors through
quantitative and fundamental analysis.
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 if more than 15% of the Fund's total
assets 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.
-4-
<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 although
under normal conditions it expects to maintain a duration within 2 years, more
or less, of the Salomon Brothers mortgage index duration. Duration is the
weighted average maturity of the present value of every interest and principal
payment on a fixed income security. Fixed income securities pay a specified
rate of interest. Because interest rates vary, it is impossible to predict the
yield 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 a fund that holds 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.
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 instruments may be highly
volatile.
MORTGAGE SECURITIES
- -------------------
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.
-5-
<PAGE>
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 the time of delivery. If
a 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 general partner
is indirectly owned by New England Investment Companies, L.P. ("NEIC") 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
Trustees supervise Loomis Sayles's conduct of the affairs of the Fund.
The portfolio manager for the Fund is William J. Driscoll who has 11 years
experience working with mortgage securities. Mr. Driscoll is a Vice President
with Loomis Sayles and has been with Loomis Sayles since June 1994. He is a
former Vice President at Merrill Lynch and Drexel Burnham and served as a
mortgage specialist at Salomon Brothers.
Loomis Sayles acts as the transfer agent and dividend-paying agent for the
Fund.
FUND EXPENSES
Under the terms of its advisory agreement with the Fund, Loomis Sayles is
entitled to an advisory fee at an annual rate of .40% of the Fund's average
monthly net assets. However, Loomis Sayles has voluntarily undertaken, for an
indefinite period, to waive its advisory fee and/or bear Fund expenses to the
extent necessary to ensure that the total expenses of the Fund do not exceed the
annual rate of .55% of the Fund's average net assets.. Loomis Sayles may modify
or terminate this arrangement at any time.
-6-
<PAGE>
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. 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 subscription agreement (attached hereto as Exhibit A) and payment to
Loomis Sayles. Only clients of Loomis Sayles are eligible to invest in the
Fund. By completing the subscription agreement, each investor will appoint
Loomis Sayles as attorney in fact with full authority to redeem the investor's
shares and have the proceeds therefrom remitted to the investor or his agent as
soon as practicable after the investor ceases to be a client of 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. In all
cases Loomis Sayles reserves the right to reject any particular investment.
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 of 1933, as amended (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.
Purchases of shares in the Fund are limited to persons who are "accredited
investors" as defined in Regulation D under the Securities Act and who have
completed and signed a subscription agreement in the form attached hereto as
Exhibit A. The Trust reserves the right to reject any purchase order for any
reason which the Trust in its sole discretion deems appropriate. Purchasers
must be acquiring shares for their own account and
-7-
<PAGE>
for investment purposes only. 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
The securities offered hereby have not been registered under the Securities
Act and may not be transferred or resold unless so registered or exempt
therefrom. However, the securities are redeemable.
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 is received by the Trust in proper form.
The Trust usually requires additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Trust by calling (617) 482-2450 for details.
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.
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 quarterly. 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. The Fund also distributes all of its
net capital gains realized from the sale of portfolio securities.
-8-
<PAGE>
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 capital gains to
its shareholders, 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 although any loss recognized on shares held for six months
or less will be treated as a long-term capital loss to the extent of any capital
gain dividend received with respect to the shares.
The Fund is required to withhold 31% of redemption proceeds, taxable income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number or fails to certify
to the Fund that the shareholder is not subject to such withholding or (2) if
the Fund is notified that the shareholder is subject to such withholding
because, for example, the shareholder has underreported income in the past.
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.
CUSTODIAN OF ASSETS INVESTMENT ADVISER
State Street Bank and Trust Company Loomis, Sayles & Company, L.P.
Boston, Massachusetts 02102 One Financial Center
Boston, Massachusetts 02111
-9-
<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 predominantly
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.
A-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.
A-2
<PAGE>
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.
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 designated 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>
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES CONVERTIBLE BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Private Placement Memorandum
(the "Memorandum") of Loomis Sayles Convertible Bond Fund, a series of Loomis
Sayles Investment Trust, dated May 1, 1997 and should be read in conjunction
therewith. A copy of the Memorandum may be obtained from Loomis Sayles
Investment Trust, One Financial Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............................ 2
MANAGEMENT OF THE TRUST..................................................... 7
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
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of the Convertible Bond Fund (the
"Fund"), a series of Loomis Sayles Investment Trust (the "Trust"), are
summarized in the Memorandum under "Investment Objectives and Policies" and
"More Information About the Fund's Investments." The investment policies of the
Fund set forth in the Memorandum 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 Memorandum 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
Memorandum, 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,
futures, 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.
-2-
<PAGE>
*(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. The Fund's use of reverse repurchase
agreements, "dollar roll" arrangements and other similar transactions
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.)
*(8) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries).
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' investment
discretion in managing the Fund's assets. The portfolio turnover rate of the
Fund for the period from July 1, 1996, the date the Fund commenced operations,
to December 31, 1996 was 34.8%. 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
-4-
<PAGE>
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 Memorandum, 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 Memorandum, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting that Fund's investment criteria. The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
Convertible Securities
- ----------------------
Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities at a stated price or rate. The Fund
may also invest in other securities that provide an opportunity for equity
participation such as warrants. 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 investment in convertible securities may at
times include securities that have a mandatory
-5-
<PAGE>
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 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
-6-
<PAGE>
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.
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.
MANAGEMENT OF THE TRUST
The trustee 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) -- Treasurer. Vice President-Finance and Administration
---------
and Director, Loomis Sayles.
TIMOTHY J. HUNT (65) -- 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, Chairman, Director and Chief Executive
Officer, Loomis Sayles.
WILLIAM F. CAMP (35) -- Vice President. 1533 North Woodward, Bloomfield Hills,
--------------
Michigan. Vice President, Loomis Sayles. Formerly, Portfolio Manager,
Kmart Corporation.
-7-
<PAGE>
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 (35) -- 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 (55) -- Vice President. Vice President and Director, Loomis
--------------
Sayles.
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer, Executive
--------------
Vice President 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.
-8-
<PAGE>
COMPENSATION TABLE
for the year ended December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(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 Retirement Fund Complex
Part Paid to Trustee
of Fund
Expenses
- -----------------------------------------------------------------------------------
Timothy J. $625 $ 0 $ 0 $625
Hunt, 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 March 27, 1997, Rohm and Haas Pension Plan might be deemed to
control the Fund because it possessed beneficial ownership, either directly or
indirectly, of more than 25% of the Fund's shares. 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 March 27, 1997:
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares Held
- ---------------------------- --------------------------- ------------
<S> <C> <C>
Rohm and Haas Pension Plan 100 Independence Mall West 68%
Philadelphia, PA 19106-2399
- ----------------------------------------------------------------------
The Community Investment 55 East Fifth Street 13%
Group 600 Norwest Center
Saint Paul, Minnesota 55101
- ----------------------------------------------------------------------
F.R. Bigelow Foundation 55 East Fifth Street 19%
600 Norwest Center
Saint Paul, Minnesota 55101
- ----------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
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. Loomis Sayles has voluntarily agreed, for
an indefinite period, to charge no advisory fee. Loomis Sayles may modify or
terminate this arrangement at any time, subject to prior notice to shareholders.
As described in the Memorandum, 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 1996 fiscal period (July 1, 1996 to December 31, 1996),
Loomis Sayles earned the following amount of investment advisory fees from the
Fund and waived the following amount of fees for the Fund:
Period Advisory Fees Fee Waivers
------ ------------- -----------
1996 $13,171.31 $13,171.31
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.
-10-
<PAGE>
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.
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.
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 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.
-11-
<PAGE>
Loomis Sayles acts as the transfer agent and dividend-paying agent for
the Fund. Loomis Sayles currently receives no additional compensation for such
services.
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 each 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.
-12-
<PAGE>
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 1996 fiscal period (July 1,
1996 through December 31, 1996) (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 periods 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>
1996 $ 0 $ 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
-13-
<PAGE>
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.
Voting Rights
- -------------
As summarized in the Memorandum, shareholders are entitled to one vote
for each full share held (with a fractional vote 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.
-14-
<PAGE>
The Declaration of Trust provides that on any matter submitted to a
vote of all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote, in which case a
separate vote of that series or sub-series shall also be required to decide the
question. Also, a separate vote 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.
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.
-15-
<PAGE>
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 Memorandum 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
-16-
<PAGE>
generally recognized by institutional traders. Other securities for which
current market quotations are not 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 Memorandum 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 Memorandum 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 investment 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 a Fund during October, November or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which 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 Memorandum 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 same 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.
FINANCIAL STATEMENTS
The financial statements and related notes of the Fund and the "Report
of Independent Accountants" included in the Fund's 1996 Annual Report are
incorporated herein by reference to such Annual Report. Copies of such Annual
Report are available without charge upon request by writing Loomis Sayles, One
Financial Center, Boston, Massachusetts 02111 or telephoning (617) 482-2450.
-19-
<PAGE>
LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES MORTGAGE SECURITIES FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Private Placement Memorandum (the
"Memorandum") of Loomis Sayles Mortgage Securities Fund, a series of Loomis
Sayles Investment Trust, dated May 1, 1997 and should be read in conjunction
therewith. A copy of the Memorandum may be obtained from Loomis Sayles
Investment Trust, One Financial Center, Boston, Massachusetts 02111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS.............. 2
MANAGEMENT OF THE TRUST....................................... 6
INVESTMENT ADVISORY AND OTHER SERVICES........................ 8
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................... 11
DESCRIPTION OF THE TRUST...................................... 12
HOW TO BUY SHARES............................................. 15
NET ASSET VALUE............................................... 15
REDEMPTIONS................................................... 15
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND
TAX STATUS.................................................. 16
FINANCIAL STATEMENTS.......................................... 18
</TABLE>
-1-
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of the Mortgage Securities Fund (the
"Fund"), a series of Loomis Sayles Investment Trust (the "Trust"), are
summarized in the Private Placement Memorandum (the "Memorandum") under
"Investment Objectives and Policies" and "More Information About the Fund's
Investments." The investment policies of the Fund set forth in the Memorandum
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 Memorandum 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
Memorandum, 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,
futures, 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.
-2-
<PAGE>
*(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. The Fund's use of reverse repurchase
agreements, "dollar roll" arrangements and other similar transactions
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 Funds
are not required to treat such investments as senior securities
pursuant to the pronouncements of the Securities and Exchange
Commission (the "SEC") or its staff.)
*(8) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry (in the utilities
category, gas, electric, water and telephone companies will be
considered as being in separate industries). Tax-exempt securities
issued by governments or political subdivisions of governments are not
subject to this restriction, since such issuers are not members of any
industry.
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 portfolio turnover rates of the
Fund for 1996 and the period from August 1, 1995, the date the Fund commenced
operations, to December 31, 1995 were 152.2% and 133.2%, 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.
-3-
<PAGE>
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.
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
-4-
<PAGE>
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 Memorandum, 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 Memorandum, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments. The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting that Fund's investment criteria. The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
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
-5-
<PAGE>
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 Investment Company Act of 1940 (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.
MANAGEMENT OF THE TRUST
The trustee 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) -- Treasurer. Vice President-Finance and Administration
---------
and Director, Loomis Sayles.
-6-
<PAGE>
TIMOTHY J. HUNT (65) -- 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, Chairman, Director and Chief Executive
Officer, 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 (35) -- 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 (55) -- Vice President. Vice President and Director, Loomis
--------------
Sayles.
JEFFREY L. MEADE (46) -- Vice President. Chief Operating Officer, Executive
--------------
Vice President 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 year ended December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(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 Retirement Fund Complex
Part Paid to Trustee
of Fund
Expenses
- ------------------------------------------------------------------------------------
Timothy J. $1,439 $ 0 $ 0 $1,439
Hunt, 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 March 27, 1997, the Massachusetts Teachers' and Employees'
Retirement System Trust might be deemed to control the Fund because it possessed
beneficial ownership, either directly or indirectly, of more than 25% of the
Fund's shares. 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 March 27, 1997:
<TABLE>
<CAPTION>
Percentage of
Shareholder Address Shares Held
- ------------------------------------- -------------------------- ------------
<S> <C> <C>
Massachusetts Teachers' and One Ashburton Place 89%
Employees' Retirement System Trust 12th Floor
Boston, MA 02108
Rohm and Haas Pension Plan 100 Independence Mall West 11%
Philadelphia, PA 19106
</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
-8-
<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 .40% of the Fund's average weekly net assets. As described in
the Prospectus, Loomis Sayles has voluntarily undertaken for an indefinite
period to limit the Fund's total operating expenses. Loomis Sayles may modify
or terminate this arrangement at any time subject to prior notice to
shareholders.
During the 1995 fiscal period (August 31, 1995 to December 31, 1995)
and the 1996 fiscal year, Loomis Sayles earned the following amounts of
investment advisory fees from the Fund and waived the following amounts of fees
for the Fund:
<TABLE>
<CAPTION>
Period Advisory Fees Fee Waivers
- ------------- ------------- ------------
<S> <C> <C>
1995 $ 75,514.80 $ 75,514.80
1996 $282,591.23 $282,591.23
</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.
-9-
<PAGE>
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.
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 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.
Loomis Sayles acts as the transfer agent and dividend-paying agent for
the Fund. Loomis Sayles currently receives no additional compensation for such
services.
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 each Fund on a daily basis.
-10-
<PAGE>
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 the Fund. Receipt of services or products other
than research from brokers is not a factor in the selection of brokers.
-11-
<PAGE>
The following table sets forth for the 1995 fiscal period (August 1,
1995 through December 31, 1995) and the 1996 fiscal year (1) the aggregate
dollar amount of brokerage commissions paid on portfolio transactions during the
period, (2) the dollar amounts of transactions on which commissions were paid
during such periods that were directed to brokers providing research services
("directed transactions") and (3) the dollar amounts of commissions paid on
directed transactions during such period:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) (2) (3)
Aggregate Commissions
Brokerage Directed On Directed
Commissions Transactions Transactions
Period ($) ($) ($)
- -------- ----------- ------------ ------------
1996 $ 0 $ 0 $0
1995 $ 0 $ 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 any fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of that fund are entitled to
share pro rata in the net assets of that fund available for distribution to
shareholders. The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares
and all income, earnings, profits, losses and proceeds therefrom, subject only
to the rights of creditors, are allocated to, and constitute the underlying
assets of, the Fund. The underlying assets are segregated and are charged with
the expenses with respect to that fund and with a share of the general expenses
of the Trust. Any general expenses of the Trust that are not readily
identifiable as belonging to a particular 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.
-12-
<PAGE>
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 any 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 Memorandum, shareholders are entitled to one vote
for each full share held (with a fractional vote 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.
-13-
<PAGE>
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.
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
-14-
<PAGE>
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 Memorandum 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.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Memorandum 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
-15-
<PAGE>
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 Memorandum under "Dividends, Capital Gain
Distributions and Taxes" it is the policy of the Fund to pay its shareholders
quarterly, as dividends, substantially all of the Fund's net investment 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
-16-
<PAGE>
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 a Fund during October, November or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which 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 Memorandum 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 of 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 same 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.
-17-
<PAGE>
FINANCIAL STATEMENTS
The financial statements and related notes of the Fund and the "Report
of Independent Accountants" included in the Fund's 1996 Annual Report are
incorporated herein by reference to such Annual Report. Copies of such Annual
Report are available without charge upon request by writing Loomis Sayles, One
Financial Center, Boston, Massachusetts 02111 or telephoning (617) 482-2450.
-18-
<PAGE>
Part C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements:
See the section entitled "Financial Statements" in the Statements of
Additional Information for each of the Loomis Sayles Convertible Bond
and Loomis Sayles Mortgage Securities Funds.
(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 -- incorporated by reference to Amendment
No. 8 to the Registration Statement filed on November 13, 1996.
5b. Investment Advisory Agreement between the Trust and Loomis Sayles
dated as of August 30, 1996 for the Loomis Sayles Fixed Income
Fund -- incorporated by reference to Amendment No. 8 to the
Registration Statement filed on November 13, 1996.
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 -- incorporated by reference to Amendment No. 8
to the Registration Statement filed on November 13, 1996.
5d. Investment Advisory Agreement between the Trust and Loomis Sayles
dated as of August 30, 1996 for the Loomis Sayles Mortgage
Securities Fund -- incorporated by reference to Amendment No. 8
to the Registration Statement filed on November 13, 1996.
<PAGE>
5e. Investment Advisory Agreement between the Trust and Loomis Sayles
dated as of August 30, 1996 for the Loomis Sayles Core Growth
Fund -- incorporated by reference to Amendment No. 8 to the
Registration Statement filed on November 13, 1996.
5f. Investment Advisory Agreement between the Trust and Loomis Sayles
dated as of August 30, 1996 for the Loomis Sayles Convertible
Bond Fund --incorporated by reference to Amendment No. 8 to the
Registration Statement filed on November 13, 1996.
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 -- incorporated by reference to Amendment No. 8
to the Registration Statement filed on November 13, 1996.
5h. Investment Advisory Agreement between the Trust and Loomis Sayles
dated as of August 30, 1996 for the Loomis Sayles Core Fixed
Income Fund -- incorporated by reference to Amendment No. 8 to
the Registration Statement filed on November 13, 1996.
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 -- incorporated by reference to
Amendment No. 8 to the Registration Statement filed on November
13, 1996.
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. Form of Transfer Agency Agreement between the Trust and State
Street -- to be filed by amendment.
10. Opinion of Ropes & Gray -- incorporated by reference to Amendment
No. 9 to the Registration Statement.
11. Consent of Independent Accountants -- filed herewith.
12. Not applicable.
-2-
<PAGE>
13. Not applicable.
14. Not applicable.
15. Not applicable.
16. Schedule for Computation of Performance Information -- Not
applicable.
17a. Financial Data Schedule for the Loomis Sayles Investment Grade
Fixed Income Fund -- Not applicable.
17b. Financial Data Schedule for the Loomis Sayles Fixed Income
Fund -- Not applicable.
17c. Financial Data Schedule for the Loomis Sayles California Tax-Free
Income Fund -- Not applicable.
17d. Financial Data Schedule for the Loomis Sayles Core Growth Fund --
Not applicable.
17e. Financial Data Schedule for the Loomis Sayles High Yield Fixed
Income Fund -- Not applicable.
17f. Financial Data Schedule for the Loomis Sayles Core Fixed Income
Fund -- Not applicable.
18. Not applicable.
19. Powers of Attorney -- filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
(1) (2)
-3-
<PAGE>
Number of Record Holders
Title of Series (as of April 21, 1997)
--------------- ----------------------
Loomis Sayles California Tax-Free Income Fund 26
Loomis Sayles Convertible Bond Fund 4
Loomis Sayles Core Fixed Income Fund 4
Loomis Sayles Core Growth Fund 6
Loomis Sayles Fixed Income Fund 17
Loomis Sayles High Yield Fixed Income Fund 3
Loomis Sayles Intermediate Duration Fixed Income Fund 1
Loomis Sayles Investment Grade Fixed Income Fund 10
Loomis Sayles Mortgage Securities Fund 3
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 seventeen series of the Loomis Sayles Funds,
seven series of New England Funds Trust I, one series of New England
Funds Trust II, 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) The Registrant undertakes, if requested to do so by the holders of
at least 10% of the Registrant's outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the
question of removal of a trustee or trustees and to assist in
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
-5-
<PAGE>
(c) 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 provisions
of the Registrant's Agreement and Declaration of Trust and By-
laws, 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 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>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment No. 10 to its 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 the 25th day of April,
1997.
LOOMIS SAYLES INVESTMENT TRUST
By: DANIEL J. FUSS*
---------------------------------------
Daniel J. Fuss
President
*By: SHEILA M. BARRY
------------------------------------
Sheila M. Barry
Attorney in fact pursuant to
power of attorney filed herewith
-8-
<PAGE>
LOOMIS SAYLES INVESTMENT TRUST
Index to Exhibits
Exhibit No. Description
- ---------- -----------
11 Consent of Independent Accountants
19 Power of Attorney
-9-
<PAGE>
COMMENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Loomis Sayles Investment Trust:
We consent to the incorporation by reference in Amendment No. 10 to the
Registration Statement of Loomis Sayles Investment Trust on Form N-1A of our
reports dated February 27, 1997, on our audits of the financial statements and
the financial highlights of Loomis Sayles Convertible Bond Fund and Loomis
Sayles Mortgage Securities Fund, which reports are included in the Annual
Reports to Shareholders for the period or year ended December 31, 1996,
respectively, which are incorporated by reference in the Amendment to the
Registration Statement. We also consent to the references to our Firm under the
caption "Independent Accountants" in the Statements of Additional Information.
/s/ Coopers & Lybrand L.L.P.
------------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 25, 1997
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned hereby constitutes Mark W. Holland, Sheila M. Barry and
Margaret W. Chambers and each of them singly, his true and lawful attorneys,
with full power to them and each of them to sign for him, in his name and in the
capacity indicated below, any and all registration statements of Loomis Sayles
Investment Trust, a Massachusetts business trust, under the Securities Act of
1933 or the Investment Act of 1940, and generally to do all things in his name
and in his behalf to enable Loomis Sayles Investment Trust to comply with the
provisions of the Securities Act of 1933, the Investment Company Act of 1940,
and all requirements and regulations of the Securities and Exchange Commission,
hereby ratifying and confirming his signature as it may be signed by his said
attorneys to any and all registration statements and amendments thereto.
Witness my hand this 25th day of April 1997.
DANIEL J. FUSS
---------------------
Daniel J. Fuss
President
