LOOMIS SAYLES INVESTMENT TRUST
485BPOS, 1998-11-30
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<PAGE>
 
As filed with the Securities and Exchange Commission on November 30, 1998
                                                     Registration Nos. 333-22931
                                                                        811-8282

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549


                              ___________________


                                   FORM N-1A

 
                         REGISTRATION STATEMENT UNDER
                          THE SECURITIES ACT OF 1933       [X]
                          Pre-Effective Amendment No.      [_] 
                         Post-Effective Amendment No. 3    [X]

                         REGISTRATION STATEMENT UNDER
                      THE INVESTMENT COMPANY ACT OF 1940   [X]
                               Amendment No.  13           [X]
                       (Check appropriate box or boxes)

                             ____________________

                        LOOMIS SAYLES INVESTMENT TRUST
              (Exact name of registrant as specified in charter)

                    One Financial Center, Boston, MA  02111
                   (Address of principal executive offices)

      Registrant's Telephone Number, Including Area Code: (617) 482-2450

     Name and address
     of agent for service                Copy to
     --------------------                -------

     Sheila M. Barry, Esq.               John M. Loder, 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:

It is proposed that this filing will become effective (check appropriate box):

[_]  Immediately upon filing pursuant to paragraph (b)
 X   On December 30, 1998 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.

                             ____________________
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST
                 CROSS REFERENCE SHEET PURSUANT TO RULE 481(A)
                          ITEMS REQUIRED BY FORM N-1A

<TABLE>
<CAPTION>
PART A
<S>                          <C>                                            <C>
ITEM NO.                     REGISTRATION STATEMENT CAPTION                 CAPTION IN PROSPECTUSES
                                                                    
      1.                     Cover Page                                      Cover Page                      

      2.                     Synopsis                                        Summary of Expenses             

      3.                     Condensed Financial                             Financial Highlights            
                             Information                                                                     

      4.                     General Description of                          Cover Page; The                 
                             Registrant                                      Trust; Investment               
                                                                             Objective and                   
                                                                             Policies; and More              
                                                                             Information About the           
                                                                             Fund's Investments              

      5.                     Management of the Fund                          Cover Page; The                 
                                                                             Trust; The Fund's               
                                                                             Investment Adviser;             
                                                                             Fund Expenses; and              
                                                                             Portfolio Transactions          
      5A.                    Management's Discussion of                      Not applicable                  
                             Fund Performance                                                                

      6.                     Capital Stock and Other                         Cover Page; The                 
                             Securities                                      Trust; How to                   
                                                                             Redeem Shares; and              
                                                                             Dividends, Capital              
                                                                             Gain Distributions and          
                                                                             Taxes; and Other                
                                                                             Information                     

      7.                     Purchase of Securities Being                    How to Purchase                 
                             Offered                                         Shares                          

      8.                     Redemption or Repurchase                        How to Redeem                   
                                                                             Shares                  
</TABLE> 
<PAGE>
 
<TABLE> 
<S>                          <C>                                             <C>  
      9.                     Pending Legal                                   Not applicable
                             Proceedings                             
PART B                                     

ITEM NO.                     REGISTRATION STATEMENT CAPTION                  CAPTION IN STATEMENTS OF
                                                                             ADDITIONAL INFORMATION
                                                   
     10.                     Cover Page                                      Cover Page

     11.                     Table of Contents                               Table of Contents

     12.                     General Information and                         Not applicable
                             History                                  
               
     13.                     Investment Objectives                           Investment Objective, Policies
                             and Policies                                    and Restrictions

     14.                     Management of the Fund                          Management of the Trust

     15.                     Control Persons and                             Management of the Trust
                             Principal Holders of                                      
                             Securities                                                 

     16.                     Investment Advisory and                         Investment Advisory and
                             Other Services                                  Other Services

     17.                     Brokerage Allocation and                        Portfolio Transactions and 
                             Other Practices                                 Brokerage

     18.                     Capital Stock and Other                         How to Redeem Shares
                             Securities                                      (Prospectus); Redemptions;
                                                                             Dividends, Capital Gain
                                                                             Distributions and Taxes
                                                                             (Prospectus); Income
                                                                             Dividends, Capital Gain
                                                                             Distributions and Tax Status;
                                                                             and Description of the Trust

     19.                     Purchase, Redemption                            How to Purchase Shares
                             and Pricing of Securities                       (Prospectus); How to Redeem
                             Being Offered                                   Shares (Prospectus);
                                                                             Redemptions; and Net Asset
                                                                             Value
</TABLE> 
<PAGE>
 
<TABLE> 
<S>                           <C>                                          <C> 
     20.                      Tax Status                                   Dividends, Capital Gain
                                                                           Distributions and Taxes     
                                                                           (Prospectus); Income        
                                                                           Dividends, Capital Gain     
                                                                           Distributions and Tax Status 

     21.                      Underwriters                                 Not applicable

     22.                      Calculations of                              Calculation of Yield and
                              Performance Data                             Total
                                                                           Return; Performance
                                                                           Comparisons; and   
                                                                           Performance Data    

     23.                      Financial Statements                         Financial Statements
</TABLE>

PART C

The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
<PAGE>
 
Part C.                        OTHER INFORMATION
                               -----------------

Item 24.  Financial Statements and Exhibits
          ---------------------------------

          (a)  Financial statements:

               See the sections entitled "Financial Highlights" and "Prior
               Performance" in the Prospectus.

               See the section entitled "Financial Statements" in the Statements
               of Additional Information for each of the 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 Fund and Loomis Sayles Investment Grade
               Fixed Income Fund.

          (b)  Exhibits:
               1.   Agreement and Declaration of Trust.(4)

               2.   By-Laws.(4)

               3.   Not applicable.

               4.   Not applicable.

               5a.  Investment Advisory Agreement
                    between the Trust and Loomis Sayles California Tax-Free 
                    Income Fund. (1)

               5b.  Investment Advisory Agreement between the Trust and Loomis
                    Sayles Core Fixed Income Fund. (1)

               5c.  Investment Advisory Agreement between the Trust and the
                    Loomis Sayles Core Growth Fund.(1)

               5d.  Investment Advisory Agreement between the Trust and Loomis
                    Sayles Fixed Income Fund.(1)

               5e.  Investment Advisory Agreement between the Trust and Loomis
                    Sayles High Yield Fixed Income Fund.(1)

               5f.  Investment Advisory Agreement between the Trust and Loomis
                    Sayles Intermediate Duration Fund.

               5g.  Investment Advisory Agreement between the Trust and Loomis
                    Sayles Investment Grade Fixed Income Fund.(1)
<PAGE>
 
               6.   Not applicable.

               7.   Not applicable.

               8.   Form of Custodian Agreement.(4)

               9.   Form of Transfer Agency Agreement.(4)

               10.  Opinion of Counsel.(2)

               11.  Consent of Independent Accountants.

               12.  Not applicable.

               13.  Not applicable.

               14.  Not applicable.

               15.  Not applicable.

               16.  Schedule for Computation of Performance Information. (2)

               17a. Financial Data Schedule for the Loomis Sayles Investment 
                    Grade Fixed Income Fund.

               17b. Financial Data Schedule for the Loomis Sayles Fixed Income 
                    Fund.

               17c. Financial Data Schedule for the Loomis Sayles California 
                    Tax-Free Income Fund.

               17d. Financial Data Schedule for the Loomis Sayles Core Growth 
                    Fund.

               17e. Financial Data Schedule for the Loomis Sayles High Yield 
                    Fixed Income Fund.

               17f. Financial Data Schedule for the Loomis Sayles Core Fixed 
                    Income Fund.

               17g. Financial Data Schedule for the Loomis Sayles Intermediate 
                    Duration Fund.

               18.  Not applicable.

               19.  Powers of Attorney.(3)
<PAGE>
 
- -------------------------------------------------------------------------------

(1) Incorporated by reference to the similarly numbered Exhibit to Amendment No.
8 to the Trust's Registration Statement under the Investment Company Act of 1940
filed with the Commission on November 13, 1996.

(2) Incorporated by reference to the similarly numbered Exhibit to the Trust's
Registration Statement under the Securities Act of 1933 filed with the
Commission on March 7, 1997.

(3) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 1 to the Trust's Registration Statement under the
Securities Act of 1933 filed with the Commission on September 5, 1997.

(4) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 2 to the Trust's Registration Statement under the
Securities Act of 1933 filed with the Commission on April 21, 1998.

Item 25.  Persons Controlled by or Under Common Control with Registrant
          -------------------------------------------------------------

               Not applicable.

 
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 eighteen series of the Loomis Sayles Funds,
               six series of New England Funds Trust I, one series of New
               England Funds Trust II, one series of New England Funds Trust III
               and two series of New England Zenith Funds, all
<PAGE>
 
               of which are registered investment companies, and to other
               registered investment companies, organizations and individuals.

               The sole general partner of Loomis Sayles is Loomis, Sayles &
               Company, Inc., One Financial Center, Boston, Massachusetts 02111.

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
<PAGE>
 
               assist in communications with other shareholders as required by
               Section 16(c) of the Investment Company Act of 1940.

 
          (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.
<PAGE>

                        LOOMIS SAYLES INVESTMENT TRUST
 
                 LOOMIS SAYLES CALIFORNIA TAX-FREE INCOME FUND

                             ONE FINANCIAL CENTER
                         BOSTON, MASSACHUSETTS  02111
                                (888) 226-9699

                                  PROSPECTUS
                                JANUARY 1, 1999

     The Loomis Sayles Investment Trust (the "Trust") is a group of seven mutual
funds including the Loomis Sayles California Tax-Free Income Fund (the "Fund").
The other series, which are described in separate prospectuses, are:

                     Loomis Sayles Core Fixed Income Fund
                        Loomis Sayles Core Growth Fund
                        Loomis Sayles Fixed Income Fund
                  Loomis Sayles High Yield Fixed Income Fund
             Loomis Sayles Intermediate Duration Fixed Income Fund
               Loomis Sayles Investment Grade Fixed Income Fund

     Except for the Fund, the funds are designed specifically for tax-exempt
investors such as pension plans, endowments and foundations, although other
institutions and high net-worth individuals are eligible to invest.  Each of the
funds is separately managed and has its own investment objective and policies.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment adviser of
each of the funds.

     This Prospectus concisely describes the information that you should know
before investing in the Fund.  Please read it carefully and keep it for future
reference.  A Statement of Additional Information dated January 1, 1999 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 (888) 226-9699.  The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<S>                                                             <C> 
SUMMARY OF EXPENSES..........................................   -3-

FINANCIAL HIGHLIGHTS.........................................   -4-

PRIOR PERFORMANCE............................................   -5-

THE TRUST....................................................   -6-

INVESTMENT OBJECTIVE AND POLICIES............................   -6-

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS................   -7-

THE FUND'S INVESTMENT ADVISER................................   -9-

FUND EXPENSES................................................  -10-

PORTFOLIO TRANSACTIONS.......................................  -10-

HOW TO PURCHASE SHARES.......................................  -10-

HOW TO REDEEM SHARES.........................................  -11-

OTHER INFORMATION............................................  -11-

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES..............  -12-

APPENDIX A................................................... -A-1-
</TABLE> 


                                      -2-
<PAGE>
 
                              SUMMARY OF EXPENSES

     The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly.  The information is based on expenses for the Fund's
most recent fiscal year.  The information below should not be considered a
representation of past or future expenses, as actual expenses may be greater or
less than those shown.  Also, the assumed 5% annual return in the example should
not be considered a representation of investment performance, as actual
performance will depend upon the actual investment results of securities held in
the Fund's portfolio.

Shareholder Transaction Expenses:
 Maximum Sales Load Imposed on
  Purchases (as a percentage of offering price)             none
 Maximum Sales Load Imposed on
  Reinvested Dividends (as a percentage of
  offering price)                                           none
 Deferred Sales Load (as a percentage of original
  purchase price or redemption
  proceeds as applicable)                                   none
 Redemption Fees (as a percentage of amount
 redeemed)                                                  none
 Exchange Fees                                              none

Annual Fund Operating Expenses
(as a percentage of average net assets):
  Management Fees (after expense
  limitation)                                                .50%
  12b-1 Fees                                                none
  Other Operating Expenses (after expense
    limitation)/1/                                           .15%
Total Fund Operating Expenses (after expense
limitation)/1/                                               .65%
 
Example
 You would pay the following
  expenses on a $1,000 investment
  assuming a 5% annual return
  (with or without a redemption at
  the end of each time period):
 
  One Year                                                   $ 7  
  Three Years                                                $21       
  Five Years                                                 $36       
  Ten Years                                                  $81       

______________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total Fund operating expenses to the percentage of average net assets
shown above.  In the absence of the voluntary expense limitation,  Other
Operating Expenses and Total Fund Operating Expenses for the most recent fiscal
year would have been .83% and 1.33%, respectively.

                                      -3-
<PAGE>
 
                              FINANCIAL HIGHLIGHTS

     The financial highlights table that follows is for the periods after March
7, 1997.  The following information should be read in conjunction with the
financial highlights, financial statements, and notes thereto that have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon appears in the Fund's 1998 Annual Report, which is incorporated by
reference into this Prospectus and the Statement of Additional Information.


<TABLE>
<CAPTION>
                                                                +Nine Months Ended   March 7 ++ through
                                                               September 30, 1998     December 31, 1997
                                                               -------------------   ------------------
<S>                                                            <C>                   <C>
Net asset value, beginning period............................            $   10.41              $ 10.17

Income from investment operations -
  Net investment income......................................                 0.35                 0.31
  Net realized and unrealized gain (loss) on investments.                     0.19                 0.36
                                                                         ---------             --------
Total from investment operations.............................                 0.54                 0.67

Less distributions -
  Dividends from net investment income.......................                (0.36)               (0.40)
  Distributions from net realized capital gains..............                 0.00                (0.03)
                                                                         ---------             --------
  Total distributions........................................                (0.36)               (0.43)
                                                                         ---------             --------
Net asset value, end of period...............................            $   10.59              $ 10.41
                                                                         =========             ========

Total return (%).............................................                  5.3**                6.7**
Net assets, end of period (000)..............................            $  19,618              $16,822
Ratio of operating expenses to average net assets (%)........                 0.65*                0.65*
Ratio of net investment income to average net assets (%).....                 4.55*                4.58*
Portfolio turnover rate (%)..................................                   12**                 16**
Without giving effect to the voluntary expense limitations:
  The ratio of operating expenses to average net assets
  would have been (%)........................................                 1.33*                1.46*
The net investment income per share would have been..........            $    0.30              $  0.26
</TABLE>


+The Fund's year end fiscal year changed from September 30 to December 31.
++Date of effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended.
*Annualized.
**Not annualized.


Further information about the performance of the Fund is contained in the Fund's
semiannual and annual reports to shareholders, copies of which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.

                                      -4-
<PAGE>
 
                                PRIOR PERFORMANCE

     (FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT THE INDICATED PERIODS)


     The information presented below, for the periods indicated, relates to
periods prior to the effectiveness of the Fund's registration statement under
the Securities Act of 1933, as amended (the "1933 Act"). The following
information should be read in conjunction with the financial highlights,
financial statements, and notes thereto that have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon
appears in the Fund's 1998 Annual Report, which is incorporated by reference
into this Prospectus and the Statement of Additional Information. The Fund is
managed in a manner that is in all material respects similar to the manner in
which it was managed prior to the effectiveness of its registration statement
under the 1933 Act.

<TABLE>
<CAPTION>
                                                           January 1, 1997    Year Ended    June 1* through
                                                          through March 6,   December 31,     December 31,
                                                                1997             1996             1995
                                                          -----------------  -------------  ----------------
<S>                                                       <C>                <C>            <C>
Net asset value, beginning of period....................           $ 10.19        $ 10.23           $ 10.00
 
Income from investment operations -
Net investment income...................................              0.16           0.46              0.26
Net realized and unrealized gain (loss) on investments..             (0.11)         (0.04)             0.23
                                                                   -------        -------           -------
 Total from investment operations                                     0.05           0.42              0.49
                                                                   -------        -------           -------
 
Less distributions -
Dividends from net investment income....................             (0.07)         (0.45)            (0.26)
Distributions from net realized capital gains                         0.00          (0.01)             0.00
                                                                   -------        -------           -------
 Total distributions....................................             (0.07)         (0.46)            (0.26)
                                                                   -------        -------           -------
 
Net asset value, end of period..........................           $ 10.17        $ 10.19           $ 10.23
                                                                   =======        =======           =======
 
Total return (%)........................................               0.5***         4.1               4.9***
Net assets, end of period (000).........................           $14,821        $13,460           $ 7,880
Ratio of operating expenses to average net assets (%)...              0.65**         0.65              0.65**
Ratio of net investment income to
  average net assets (%)................................              4.83**         4.58              5.30**
Portfolio turnover rate (%)                                              8***          18                18***
Without giving effect to the  voluntary expense
    limitation:
   The ratio of operating expenses to
      average net assets would have been (%)............              1.15**         1.26              1.62**
   The net investment income per share would have
     been...............................................           $  0.14        $  0.40           $  0.22
</TABLE>

  * Commencement of operations.
 **Annualized.
***Not annualized.

                                      -5-
<PAGE>
 
                                   THE TRUST

     The Fund is a series of the Trust.  The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993.  The Trust is authorized to issue an unlimited
number of full and fractional shares of beneficial interest in multiple series.
Shares are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with a fractional vote for each fractional share held) at
shareholder meetings.  The Trust does not generally hold shareholder meetings
and will do so only when required by law.  Shareholders may call meetings to
consider removal of the Trustees.

                       INVESTMENT OBJECTIVE AND POLICIES

     The Fund's investment objective is to achieve as high a level of current
income exempt from both federal income tax and California personal income tax as
is consistent with preservation of capital.

     The Fund seeks to attain its objective by normally investing substantially
all of its assets in securities the income from which is, in the opinion of the
issuer's counsel at the time of issuance, exempt from both federal income tax
and California personal income tax ("California tax exempt securities").  It is
a fundamental policy of the Fund that, during periods of normal market
conditions, at least 80% of its net assets will be invested in California tax
exempt securities.  Normally at least 80% of its total assets will be invested
in issues rated A or better by Standard & Poors ("S&P") or Moody's Investors
Service, Inc. ("Moody's").  All issues will be rated at least BBB by S&P or Baa
by Moody's (or, if unrated, be of equivalent credit quality as determined by
Loomis Sayles) at the time of purchase.  Bonds of BBB or Baa quality have some
speculative characteristics.  Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of the issuers of
such bonds to make principal and interest payments than is the case with issuers
of higher grade bonds.  In the event that the credit rating of a security held
by the Fund falls below investment grade (or, in the case of unrated securities,
Loomis Sayles determines that the quality of such security has deteriorated
below investment grade), the Fund will not be obligated to dispose of such
security and may continue to hold such security, if, in the opinion of Loomis
Sayles, such investment is appropriate in the circumstances.

     The Fund may invest up to 20% of its net assets in high quality corporate
obligations, U.S. Government obligations and repurchase agreements. Income from
these investments may be subject to federal income tax and/or California
personal income tax.

     The Fund will not "concentrate" its investments.  That is, it will not
invest more than 25% of its total assets in any one industry.  Although tax-
exempt securities secured by the assets or revenues of governmental entities are
not considered part of any "industry," for this purpose tax-exempt securities
backed only by the assets and revenues of nongovernmental entities are deemed to
represent investments in the industries of such nongovernmental issuers.

     Notwithstanding the 25% industry limitation, it is possible that the Fund
may invest more than 25% of its total assets in a broader segment of the market
for tax-exempt securities, such as revenue obligations of hospitals and other
health care facilities, housing revenue obligations, or airport revenue
obligations. This would be the case only if Loomis Sayles determined that the
yields available from obligations in a particular segment of the market
justified the additional risks associated with such concentration. Economic,
business, political and other developments may have a general adverse effect on
all tax-exempt securities in a particular market segment. (Examples would
include proposed legislation or pending court decisions affecting the financing
of such projects and market factors affecting the demand for their services or
products.)

     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 if, as a result,
more than 25% of the Fund's total assets (taken at current value) would be
invested in any one industry;  (3) a restriction prohibiting the Fund from
borrowing money in excess of 10% of its total assets (taken at cost) or 5% of
its total assets (taken at current value), whichever is lower, and from
borrowing any money except as a temporary measure for extraordinary or emergency
purposes; and (4) a restriction prohibiting the Fund from purchasing any
illiquid security including a security that is not readily marketable if, as a
result, more than 15% of the Fund's net assets based on current value would then
be invested in such securities. For additional investment restrictions, see the
Statement of Additional Information.

                                      -6-
<PAGE>
 
     Although authorized to invest in restricted securities, the Fund, as a
matter of nonfundamental operating policy, currently does not intend to invest
in such securities, other than Rule 144A securities that are described below.

     The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders.  All investment policies
other than those identified as "fundamental" may be changed by the Trustees
without a vote of the Fund's shareholders.

                 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.

CALIFORNIA FISCAL CONDITION
- ---------------------------

     Because the Fund will invest primarily in California tax exempt securities,
its performance may be especially affected by factors pertaining to the
California economy and other factors specifically affecting the ability of
issuers of California tax exempt securities to meet their obligations.  As a
result, the value of the Fund's shares may fluctuate more widely than the value
of shares of a portfolio investing in securities relating to a number of
different states.  The ability of California state, county, or local governments
to meet their obligations will depend primarily on the availability of tax and
other revenues to those governments and on their fiscal conditions generally. An
expanded discussion of risks associated with California tax exempt securities is
contained 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.  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 income of the Fund for any particular period.

     Fixed income securities are subject to credit and market risk.  Credit risk
relates to the ability of the issuer to make payments of principal and interest.
Market risk relates to changes in a security's value as a result of changes in
interest rates generally.  In general, the values of fixed income securities
increase when prevailing interest rates fall and decrease when interest rates
rise.  Generally, the longer the maturity of a fixed income security, the
greater the fluctuations in its value because of market and credit risk.

U.S. GOVERNMENT SECURITIES
- --------------------------

     U.S. Government Securities have different kinds of government support.  For
example, some U.S. Government Securities, such as U.S. Treasury bonds, are
supported by the full faith and credit of the United States, whereas certain
other U.S. Government Securities issued or guaranteed by federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States.

     Although U.S. Government Securities generally do not involve the credit
risks associated with other types of fixed income securities, the market values
of U.S. Government Securities will fluctuate as interest rates change.  Thus,
for example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.

     Some U.S. Government Securities, such as Government National Mortgage
Association Certificates ("GNMA"), 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, 

                                      -7-
<PAGE>
 
through prepayment or otherwise, are passed through to the Fund and, if the
payment occurs in a period of falling interest rates, the Fund may not be able
to reinvest the payment at as favorable an interest rate. As a result of these
principal prepayment features, mortgage-backed securities are generally more
volatile investments than many other fixed income securities. In addition,
slower than anticipated prepayments on the underlying mortgages can extend the
effective maturities of mortgage-backed securities, subjecting them to a greater
risk of decline in market value in response to rising interest rates than
traditional debt securities.

     In addition to investing directly in U.S. Government Securities, the Fund
may purchase certificates of accrual or similar instruments ("strips")
evidencing undivided ownership interests in interest payments or principal
payments, or both, in U.S. Treasury securities.  These investment instruments
may be highly volatile.

COMMERCIAL MORTGAGE-BACKED SECURITIES
- -------------------------------------

     The Fund may invest in commercial mortgage-backed securities.  Commercial
mortgage-backed securities are securities that represent an interest in, or are
secured by, mortgage loans secured by commercial property, such as industrial
and warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals, and senior living centers.  The commercial mortgage-backed
securities market is newer and in terms of total outstanding principal amount of
issues is relatively small compared to the total size of the market for
residential mortgage-backed securities.

     Commercial mortgage-backed securities are generally structured similarly to
pass-through securities or to collateralized mortgage obligations although other
structures are possible.  They may pay fixed or adjustable rates of interest.
Commercial mortgage-backed securities have been issued in public or private
transactions by a variety of public and private issuers.

     The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics.  Commercial mortgage
loans generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties.  Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial mortgage-backed
securities may relate only to a few properties or a single property.  The risk
involved in single property financings is highly concentrated.  In addition,
commercial properties, particularly industrial and warehouse properties, are
subject to environmental risks and the burdens and costs of compliance with
environmental laws and regulations.  At the same time, commercial mortgage-
backed securities may have a lower prepayment risk than residential mortgage-
backed securities, because commercial mortgage loans generally prohibit or
impose penalties on prepayments of principal.  In addition, commercial mortgage-
backed securities often are structured with some form of credit enhancement to
protect against potential losses on the underlying mortgage loans.

ZERO COUPON SECURITIES
- ----------------------

     The Fund may invest in "zero coupon" fixed income securities.  These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis.  The Fund is required to distribute the income on zero
coupon securities to Fund shareholders as the income accrues, even though the
Fund is not receiving the income in cash on a current basis.  Thus the Fund may
be forced to sell other investments to obtain cash to make income distributions
at times when Loomis Sayles would not otherwise deem it advisable to do so.  The
market value of zero coupon securities is generally more volatile than that of
non-zero coupon fixed income securities of comparable quality and maturity.

WHEN-ISSUED SECURITIES
- ----------------------

     The Fund may purchase securities on a "when-issued" basis.  This means that
the Fund will enter into a commitment to buy the security before the security
has been issued.  The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment.  The security
is typically delivered to the Fund 15 to 120 days later.  No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued.  If the value of the security being purchased falls
between the time the Fund commits to buy it and the payment date, the Fund may
sustain a loss.  The risk of this loss is in addition to the Fund's risk of loss
on the securities actually in its portfolio at the time.  When the Fund buys a
security on a when-issued basis, it is subject 

                                      -8-
<PAGE>
 
to the risk that market rates of interest will increase before the time the
security is delivered, with the result that the yield on the security delivered
to the Fund may be lower than the yield available on other, comparable
securities at time of delivery. If the Fund has outstanding obligations to buy
when-issued securities, it will maintain liquid assets in a segregated account
at its custodian bank in an amount sufficient to satisfy these obligations.

RULE 144A SECURITIES
- --------------------

     The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.


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, as amended, 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.

YEAR 2000
- ---------

     Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000.  Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders.
Loomis Sayles has advised the Fund that it is reviewing all of its computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to foreclose any such negative impact.  In
addition, Loomis Sayles has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal.  As of the date of
this prospectus, the Fund and Loomis Sayles have no reason to believe that these
goals will not be achieved.  Similarly, the values of certain of the portfolio
securities held by the Fund may be adversely affected by the inability of the
securities' issuers or of third parties to process this type of information
properly.


                         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.  The general partner of Loomis
Sayles is a special purpose corporation that is an indirect wholly-owned
subsidiary of Nvest Companies, L.P. ("Nvest Companies").  Nvest Companies'
managing general partner, Nvest Corporation, is a direct wholly-owned subsidiary
of Metropolitan Life Insurance Company ("Met Life"), a mutual life insurance
company.  Nvest Companies' advising general partner, Nvest, L.P., is a publicly
traded company listed on the New York Stock Exchange.  Nvest Corporation is the
sole general partner of Nvest L.P.

     In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.

                                      -9-
<PAGE>
 
     The portfolio managers for the Fund since its inception have been Kent P.
Newmark and Robert K. Payne. Mr. Newmark is a Vice President and Director of
Loomis Sayles and a Vice President of the Trust.  Mr. Payne is a Vice President
of Loomis Sayles and the Trust.  Mr. Newmark has been with Loomis Sayles since
1976 and Mr. Payne has been with Loomis Sayles since 1982.



                                 FUND EXPENSES

     The Fund pays Loomis Sayles a monthly investment advisory fee.  This fee is
paid at the annual rate of 0.50% of the Fund's average daily net assets.

     In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.

     Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's total operating expenses to .65% of average annual net assets.

                            PORTFOLIO TRANSACTIONS

     Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund.  Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets.  The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions.  High portfolio turnover
may result in higher costs such as higher brokerage commissions and higher
levels of taxable gains.  Portfolio turnover rates for the life of the Fund are
set forth above under the headings "Financial Highlights" and "Prior
Performance."  See "Dividends, Capital Gain Distributions and Taxes" for
information on the tax consequences of investing in the Fund.

                            HOW TO PURCHASE SHARES

     You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.  The minimum initial
investment in the Fund is $500,000.  Subsequent investments must be at least
$50,000.  The Trust reserves the right to waive these minimums in its sole
discretion.

     Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash.  Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund.  Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer.  A gain or loss for federal income tax purposes would be realized upon
the exchange of any securities tendered.  A shareholder who wishes to purchase
shares by exchanging securities should obtain instructions by calling (888) 226-
9699.

     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 1933 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.

                                      -10-
<PAGE>
 
     The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate.  Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.

     The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust.  Shares of the Fund
are sold without any sales charge.  The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding.  Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading.  Portfolio securities are valued at their
market value as more fully described in the Statement of Additional Information.

                             HOW TO REDEEM SHARES

     You can redeem your shares by sending a written request to the Trust.

     The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed.  All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).

     The redemption price will be the net asset value per share next determined
after the written redemption request 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 (888) 226-9699 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 Trust may withhold redemption
proceeds until your check has cleared.

     Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.

     The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.

                               OTHER INFORMATION

     The Trustees may, without shareholder approval, divide the Trust's shares
of beneficial interest into multiple series.  The Trust is currently divided
into seven series, including the Fund and the other funds listed on the cover of
this Prospectus.

     The Fund's investment performance may from time to time be included in
advertisements about the Fund.

     The Fund's yield will be computed by dividing the Fund's net investment
income for a recent 30-day period by the maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period.

     Total return for the Fund is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the redemption
value of the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gain distributions).

     All data are based on the Fund's past investment results and do not predict
future performance.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's 

                                      -11-
<PAGE>
 
portfolio and the Fund's operating expenses. Investment performance also often
reflects the risks associated with the Fund's investment objectives and
policies. These factors should be considered when comparing the Fund's
investment results with those of other mutual funds and other investment
vehicles. Quotations of investment performance for any period when an expense
limitation was in effect will be greater than if the limitation had not been in
effect.

                DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

     The Fund pays its net investment income to shareholders as dividends
monthly.  Any capital gain distributions are normally made annually in December,
but may, to the extent permitted by law, be made more frequently as deemed
advisable by the Trustees.  The Fund distributes annually in December all of its
net capital gains realized from the sale of portfolio securities.  The Trustees
may change the frequency with which the Fund declares or pays dividends.

     Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash.

     The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended.  As such, so long as the Fund
distributes substantially all its net investment income and net capital gains to
its shareholders, the Fund itself does not pay any federal income or excise tax.
    
     Fund dividends designated as "exempt-interest dividends" are not generally
subject to federal income tax or California personal income tax (to the extent
derived from California tax exempt securities).  However, an investment in the
Fund may result in liability for federal alternative minimum tax for corporate
and individual shareholders, and in liability for California franchise or
corporation income tax for corporate shareholders subject to such tax. Of the
dividends paid by the Fund from net investment income for the fiscal period
ended September 30, 1998, 92% of such dividends constituted exempt-interest
dividends for regular federal income tax purposes.     

     It is anticipated that the Fund will be operated so that its dividends will
be exempt-interest dividends.  However, as described under "Investment Objective
and Policies," certain investments of the Fund may produce taxable income.
Distributions of such income will be taxable to you as ordinary income, except
that any distributions designated by the Fund as deriving from net gains on
securities held for more than one year will be taxable to you as such (generally
at a 20% rate for noncorporate shareholders), regardless of how long you have
owned shares of the Fund and regardless of whether distributed in cash or
additional shares.

     The Fund may at times purchase California tax exempt securities at a
discount from the price at which they were originally issued.  For federal
income tax purposes and California personal income tax purposes, some or all of
this market discount will be included in the Fund's ordinary income and will be
taxable to you as such when it is distributed to you.

     If you incur or continue indebtedness to purchase or carry shares of the
Fund, that portion of interest paid or accrued on such indebtedness that equals
the total interest paid or accrued on the indebtedness, multiplied by the
percentage of the Fund's total distributions (not including distributions from
net long-term capital gains) paid to you that are exempt-interest dividends, is
not deductible for federal income tax purposes.  The Internal Revenue Service
may consider the purchase of shares to have been made with borrowed funds even
though such funds are not directly traceable to the purchase of shares.

     A dividend or distribution made shortly after the purchase of shares of a
Fund by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above.  If a
shareholder held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale of such shares
during such six-month period would be a long-term capital loss to the extent of
such distribution.

     If you sell a share of the Fund after holding it for six months or less,
any loss on the sale or exchange of such share will be disallowed to the extent
of any exempt-interest dividends that you have received with respect to the
share that is sold.

                                      -12-
<PAGE>
 
     If you receive social security or railroad retirement benefits, you may be
taxed at the federal level on a portion of those benefits as a result of
receiving tax-exempt income (including exempt-interest dividends distributed by
the Fund).  California personal income tax does not apply to social security or
railroad retirement benefits.

     The Fund is required to withhold 31% of any redemption proceeds and all
taxable income dividends and capital gain distributions it pays to you (1) if
you do not provide a correct, certified taxpayer identification number, (2) if
the Fund is notified that you have 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
tax status of dividends and distributions paid to you during the preceding year.

     The foregoing summarizes certain tax consequences of investing in the Fund.
Before investing, you should consult your own tax adviser for more information
concerning the federal, foreign, state and local tax consequences of investing
in, redeeming or exchanging Fund shares.


TRANSFER AND DIVIDEND                         INVESTMENT ADVISER
PAYING AGENT AND                              Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS                           One Financial Center
State Street Bank and Trust Company           Boston, Massachusetts  02111
Boston, Massachusetts  02102
 

                                      -13-
<PAGE>
 
                                                                      APPENDIX A


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


STANDARD & POOR'S
- -----------------

                                      AAA

This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.

                                      AA

Bonds rated AA also qualify as high quality debt obligations.  Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.

                                       A

Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories.

                                      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.


                                       R

This symbol is attached to the ratings of instruments with significant noncredit
risks such as risks to principal or volatility of expected returns.


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
edged."  Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure.  While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

                                      AA

Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there are other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.

                                       A

Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations.  Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

                                      BAA

Bonds that are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured.  Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time.  Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

                                      BA

Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured.  Often, the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future.  Uncertainty of position characterizes
bonds in this class.

                                       B

Bonds which are rated B generally lack characteristics of the desirable
investment.  Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

                                      CAA

Bonds which are rated Caa are of poor standing.  Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

                                      CA

Bonds which are rated Ca represent obligations which are speculative in a high
degree.  Such issues are often in default or have other marked shortcomings.

                                       C

Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

                                      A-2
<PAGE>
 
Should no rating be assigned by Moody's, the reason may be one of the following:

       1.     An application for rating was not received or accepted.

       2.     The issue or issuer belongs to a group of securities that are not
              rated as a matter of policy.

       3.     There is lack of essential data pertaining to the issue or issuer.

       4.     The issue was privately placed in which case the rating is not
              published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

Note:  Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are 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 CORE FIXED INCOME FUND

                             ONE FINANCIAL CENTER
                         BOSTON, MASSACHUSETTS  02111
                                (888) 226-9699

                                  PROSPECTUS
                                JANUARY 1, 1999

     The Loomis Sayles Investment Trust (the "Trust") is a group of seven mutual
funds including the Loomis Sayles Core Fixed Income Fund (the "Fund"). The other
series, which are described in separate prospectuses, are:

                 Loomis Sayles California Tax-Free Income Fund
                        Loomis Sayles Core Growth Fund
                        Loomis Sayles Fixed Income Fund
                  Loomis Sayles High Yield Fixed Income Fund
             Loomis Sayles Intermediate Duration Fixed Income Fund
               Loomis Sayles Investment Grade Fixed Income Fund

     Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest.  Each of the funds is separately managed and has its own
investment objective and policies.  Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.

     This Prospectus concisely describes the information that you should know
before investing in the Fund.  Please read it carefully and keep it for future
reference.  A Statement of Additional Information dated January 1, 1999 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 (888) 226-9699.  The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<S>                                                              <C> 
SUMMARY OF EXPENSES.............................................  -3-

FINANCIAL HIGHLIGHTS............................................  -4-

PRIOR PERFORMANCE...............................................  -5-

THE TRUST.......................................................  -6-

INVESTMENT OBJECTIVE AND POLICIES...............................  -6-

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS...................  -7-

THE FUND'S INVESTMENT ADVISER................................... -10-

FUND EXPENSES................................................... -10-

PORTFOLIO TRANSACTIONS.......................................... -11-

HOW TO PURCHASE SHARES.......................................... -11-

HOW TO REDEEM SHARES............................................ -11-

OTHER INFORMATION............................................... -12-

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES................. -12-

APPENDIX A...................................................... -A1-
</TABLE> 

                                      -2-
<PAGE>
 
                              SUMMARY OF EXPENSES

     The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly.  The information is based on annualized expenses for the
Fund's most recent fiscal year.  The information below should not be considered
a representation of past or future expenses, as actual expenses may be greater
or less than those shown.  Also, the assumed 5% annual return in the example
should not be considered a representation of investment performance, as actual
performance will depend upon the actual investment results of securities held in
the Fund's portfolio.

Shareholder Transaction Expenses:
 Maximum Sales Load Imposed on
  Purchases (as a percentage of offering price)   none
 Maximum Sales Load Imposed on
  Reinvested Dividends (as a percentage of
  offering price)                                 none
 Deferred Sales Load (as a
  percentage of original
  purchase price or redemption
  proceeds as applicable)                         none
 Redemption Fees (as a percentage
  of amount redeemed)                             none
 Exchange Fees                                    none

Annual Fund Operating Expenses
(as a percentage of average net assets)
  Management Fees:                                .50%
  12b-1 Fees                                      none
  Other Operating Expenses (after expense
  limitation)/1/:                                 .15%
  Total Fund Operating Expenses (after
   expense limitation)/1/:                        .65%
 
Example
 You would pay the following
 expenses on a $1,000 investment
 assuming a 5% annual return
 (with or without a redemption at
 the end of each time period):
 
 One Year                                        $  7                     
 Three Years                                     $ 21                     
 Five Years                                      $ 36                      
  Ten Years                                      $ 81

____________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total Fund operating expenses to the percentage of average net assets
shown above.  In the absence of the voluntary expense limitation,  Other
Operating Expenses and Total Fund Operating Expenses for the most recent fiscal
year would have been .77% and 1.27%, respectively.

                                      -3-
<PAGE>
 
                             FINANCIAL HIGHLIGHTS

 
     The financial highlights table that follows is for the periods after March
7, 1997.  The following information should be read in conjunction with the
financial highlights, financial statements, and notes thereto that have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon appears in the Fund's 1998 Annual Report, which is incorporated by
reference into this Prospectus and the Statement of Additional Information.

<TABLE>
<CAPTION>
                                                                +Nine Months Ended   March 7 ++ through
                                                               September 30, 1998     December 31, 1997
                                                               -------------------   -------------------
<S>                                                            <C>                   <C>
Net asset value, beginning period............................        $  10.66              $ 10.15     
                                                                                                       
Income from investment operations -                                                                    
  Net investment income......................................            0.50                 0.27     
  Net realized and unrealized gain (loss) on investments.                0.33                 0.66     
                                                                     --------              -------     
Total from investment operations.............................            0.83                 0.93     
                                                                                                       
Less distributions -                                                                                   
  Dividends from net investment income.......................            0.00                (0.39)     
  Distributions from net realized capital gains..............           (0.00)#              (0.03)     
                                                                     --------              -------     
  Total distributions........................................           (0.00)               (0.42)     
                                                                     --------              -------     
Net asset value, end of period...............................        $  11.49              $ 10.66     
                                                                     ========              =======     
                                                                                                       
Total return (%).............................................            7.8**                9.1**     
Net assets, end of period (000)..............................        $ 19,341              $16,110     
Ratio of operating expenses to average net assets (%)........            0.65*                0.65*     
Ratio of net investment income to average net assets (%).....            6.08*                6.30*     
Portfolio turnover rate (%)..................................              45**                 34**     
Without giving effect to the voluntary expense limitations:                                            
  The ratio of operating expenses to average net assets                                                
  would have been (%)........................................            1.27*                1.76*     
The net investment income per share would have been..........        $   0.45              $  0.22      
</TABLE>

+ The Fund's fiscal year end has changed to September 30 from December 31.
++ Date of effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended.
* Annualized.
** Not annualized.
# Amount is less than $0.01 per share
Further information about the performance of the Fund is contained in the Fund's
semiannual and annual reports to shareholders, copies of which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.

                                      -4-
<PAGE>
 
                               PRIOR PERFORMANCE

    (FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT THE INDICATED PERIODS)

     The information presented below, for the periods indicated, relates to
periods prior to the effectiveness of the Fund's registration statement under
the Securities Act of 1933, as amended (the "1933 Act").  The following
information should be read in conjunction with the financial highlights,
financial statements, and notes thereto that have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon
appears in the Fund's 1998 Annual Report, which is incorporated by reference
into this Prospectus and the Statement of Additional Information.  The Fund is
managed in a manner that is in all material respects similar to the manner in
which it was managed prior to the effectiveness of its registration statement
under the 1933 Act.

<TABLE>
<CAPTION>
                                                                  January 1, 1997      April 24* through
                                                               through March 6, 1997   December 31, 1996
                                                               ----------------------  ------------------
<S>                                                            <C>                     <C>
 
Net asset value, beginning of period.........................          $ 10.14                $ 10.00   
Income from investment operations -                                                                     
   Net investment income.....................................             0.12                   0.40   
   Net realized and unrealized gain (loss) on investments....            (0.11)                  0.13   
                                                                       -------                -------   
     Total from investment operations........................             0.01                   0.53   
                                                                                                        
Less dividends from net investment income....................             0.00                  (0.39)   
                                                                       -------                -------   
                                                                                                        
Net asset value, end of period...............................          $ 10.15                $ 10.14   
                                                                       =======                =======   
                                                                                                        
Total return (%).............................................             0.1***                 5.3***   
Net assets, end of period (000)..............................          $ 6,280                $ 6,271   
Ratio of operating expenses to average net assets (%)........             0.65**                 0.65**   
Ratio of net investment income to average net assets (%).....             6.62**                 6.21**   
Portfolio turnover rate (%)..................................               33***                  34***   
Without giving effect to the voluntary expense limitations:                                             
  The ratio of operating expenses to average net assets                                                 
    would have been (%)......................................             2.12**                 1.46**   
  The net investment income per share would have been........          $  0.09                $  0.35    
</TABLE>

* Commencement of operations.
** Annualized.
*** Not annualized.

                                      -5-
<PAGE>
 
                                   THE TRUST

     The Fund is a series of the Trust. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993. The Trust is authorized to issue an unlimited number
of full and fractional shares of beneficial interest in multiple series. Shares
are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with a fractional vote for each fractional share held) at
shareholder meetings. The Trust does not generally hold shareholder meetings and
will do so only when required by law. Shareholders may call meetings to consider
removal of the Trustees.

                       INVESTMENT OBJECTIVE AND POLICIES

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

     The Fund seeks to attain its objective by investing primarily in fixed
income securities issued or guaranteed by the U.S. Government or its agencies,
certain types of mortgage-related and asset-backed securities, including
interest-only and principal-only ("IOs" and "POs") classes of mortgage-backed
securities, investment grade corporate, sovereign debt obligations and real
estate investment trusts ("REITs"), which are described herein (together with
their related risks) under "More Information About the Fund's Investments".
Under normal market conditions, the Fund will invest at least 65% of its total
assets in fixed income securities. All securities will be denominated in U.S.
dollars.

     U.S. Government Securities include obligations issued or guaranteed by the
U.S. Government or its authorities, agencies or instrumentalities and
certificates representing undivided interests in the interest or principal of
U.S. Treasury Securities.  U.S. Government Securities will be held for the
purpose of maintaining high average portfolio quality, providing sufficient
liquidity and controlling interest rate exposure.

     The Fund normally will maintain a significant portion of its Market Value
in investment grade corporate bonds and mortgage-related securities in order to
provide a high level of current income. In order to attain capital appreciation,
the Fund seeks to identify and select those corporate and sovereign debt
obligations undergoing credit improvement which is likely to result in a credit
rating upgrade. The Fund may invest in corporate and sovereign debt securities
that are rated at least investment grade by both Standard & Poor's (BBB-) and
Moody's Investor Service, Inc. (Baa3), or if unrated, determined to be of
comparable quality by Loomis Sayles. In the event, however, that the credit
rating of a security held by the Fund falls below investment grade (or, in the
case of unrated securities, Loomis Sayles determines that the quality of such
security has deteriorated below investment grade), the Fund will not be
obligated to dispose of such security and may continue to hold such security, if
in the opinion of Loomis Sayles, such investment is considered appropriate in
the circumstances. Collateralized mortgage obligations ("CMOs") will be limited
to those with CMO market risk ratings of V-1 to V-4 from Fitch Investors
Service, L.P. ("Fitch"), or CMOs unrated by Fitch that are determined by Loomis
Sayles to be of comparable volatility.

     Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders.  Such restrictions
include:  (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from purchasing a security (other than U.S.
Government Securities) if, as a result, more than 25% of the Fund's total assets
(taken at current value) would be invested in any one industry; (3) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a security that is not
readily marketable if, as a result, more than 15% of the Fund's net assets based
on current value would then be invested in such security.  For additional
investment restrictions, see the Statement of Additional Information.

     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 that are described below.

                                      -6-
<PAGE>
 
     The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders.  All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.

                 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 other than for
purposes of determining compliance with the Fund's investment policy of
investing, under normal market conditions, at least 65% of its total assets in
fixed income securities. Because interest rates vary, it is impossible to
predict the income of the Fund for any particular period.

     Fixed income securities are subject to market and credit risk.  Market risk
relates to changes in a security's value as a result of changes in interest
rates generally.  In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest.  Generally, the longer the maturity of a fixed income security,
the greater the fluctuations in its value because of market and credit risk.

U.S. GOVERNMENT SECURITIES
- --------------------------

     U.S. Government Securities have different kinds of government support.  For
example, some U.S. Government Securities, such as U.S. Treasury bonds, are
supported by the full faith and credit of the United States, whereas certain
other U.S. Government Securities issued or guaranteed by federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States.

     Although U.S. Government Securities generally do not involve the credit
risks associated with other types of fixed income securities, the market values
of U.S. Government Securities will fluctuate as interest rates change. Thus, for
example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.

     Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities representing
interests in "pools" of mortgage loans secured by residential or commercial real
property.  Interest and principal payments on the mortgages underlying mortgage-
backed U.S. Government Securities are passed through to the holders of the
security.  If the Fund purchases mortgage-backed securities at a discount or a
premium, the Fund will recognize a gain or loss when the payments of principal,
through prepayment or otherwise, are passed through to the Fund and, if the
payment occurs in a period of falling interest rates, the Fund may not be able
to reinvest the payment at as favorable an interest rate.  As a result of these
principal prepayment features, mortgage-backed securities are generally more
volatile investments than many other fixed income 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.

                                      -7-
<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.

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.  A faster than
anticipated rate of prepayments will generally result in losses on CMOs
representing interests in the interest payments on the underlying portfolio of
mortgage-backed securities.  As with other mortgage-backed securities, the early
retirement of a particular class or series of CMOs held by the Fund could
involve the loss of any premium the Fund paid when it acquired the investment
and could result in the Fund's reinvesting the proceeds at a lower interest rate
than the interest rate paid by the retired CMO.  Because of the early retirement
feature, CMOs may be more volatile than many other fixed income investments.  In
addition, slower than anticipated prepayments on the underlying mortgages can
extend the effective maturities of CMOs, subjecting them to a greater risk of
decline in market value in response to rising interest rates than traditional
debt securities. The Fund will invest only in CMOs with Fitch ratings of V-4 or
better, or in CMOs unrated by Fitch that are determined by Loomis Sayles to be
of comparable volatility.  Even CMOs with ratings reflecting the lowest market
risk are likely to experience losses in the event of adverse changes in market
conditions.

COMMERCIAL MORTGAGE-BACKED SECURITIES
- -------------------------------------

     The Fund may invest in commercial mortgage-backed securities.  Commercial
mortgage-backed securities are securities that represent an interest in, or are
secured by, mortgage loans secured by commercial property, such as industrial
and warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals, and senior living centers.  The commercial mortgage-backed
securities market is newer and in terms of total outstanding principal amount of
issues is relatively small compared to the total size of the market for
residential mortgage-backed securities.

     Commercial mortgage-backed securities are generally structured similarly to
pass-through securities or to CMOs, although other structures are possible.
They may pay fixed or adjustable rates of interest.  Commercial mortgage-backed
securities have been issued in public or private transactions by a variety of
public and private issuers.

     The commercial mortgage loans that underlie commercial mortgage-backed
securities have certain distinct risk characteristics.  Commercial mortgage
loans generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single-family residential properties.  Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity.  Assets underlying commercial mortgage-
backed securities may relate only to a few properties or a single property.  The
risk involved in single property financings is highly concentrated.  In
addition, commercial properties, particularly industrial 

                                      -8-
<PAGE>
 
and warehouse properties, are subject to environmental risks and the burdens and
costs of compliance with environmental laws and regulations.

STRIPPED MORTGAGE-BACKED SECURITIES
- -----------------------------------

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

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

REAL ESTATE INVESTMENT TRUSTS
- -----------------------------

     The Fund may invest in REITs. REITs involve certain unique risks in
addition to those risks associated with investing in the real estate industry in
general (such as possible declines in the value of real estate, lack of
availability of mortgage funds or extended vacancies of property). Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, risks of default by borrowers and self-
liquidation. REITs are also subject to the possibilities of failing to qualify
for tax-free pass-though of income under the Code, and failing to maintain their
exemptions from registration under the 1940 Act.

     Investment in REITs involves risk similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger securities.

RULE 144A SECURITIES
- --------------------

     The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.

WHEN-ISSUED SECURITIES
- ----------------------

     The Fund may purchase securities on a "when-issued" basis.  This means that
the Fund will enter into a commitment to buy the security before the security
has been issued.  The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment.  The security
is typically delivered to the Fund 15 to 120 days later.  No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued.  If the value of the security being purchased falls
between the time the Fund commits to buy it and the payment date, the Fund may
sustain a loss.  The risk of this loss is in addition to the Fund's risk of loss
on the securities actually held in its portfolio at the time.  When the Fund
buys a security on a when-issued basis, it is subject to the risk that market
rates of interest will increase before the time the security is delivered, with
the result that the yield on the security delivered to the Fund may be lower
than the yield available on other comparable securities at the time of delivery.
If the Fund has outstanding obligations to buy when-issued securities, it will
maintain liquid assets in a segregated account at its custodian bank in an
amount sufficient to satisfy these obligations.

FOREIGN SECURITIES
- ------------------

                                      -9-
<PAGE>
 
   The Fund may invest in dollar-denominated securities of issuers organized or
headquartered outside the United States ("foreign securities").  The Fund will
not purchase a foreign security (for purposes of this limitation securities of
Canadian issuers  publicly traded in the United States will not be treated as
foreign securities) if, as a result, the Fund's total holdings of foreign
securities would exceed 20% of the Fund's total assets.  The Fund's portfolio
securities will principally trade on U.S. exchanges or will be purchased and
sold in U.S. markets.

   Foreign securities may present risks not associated with investments in
comparable securities of U.S. issuers.  There may be less information publicly
available about a foreign corporate or governmental issuer than about a U.S.
issuer, and foreign issuers are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to those in the
United States.  The securities of some foreign issuers are less liquid and at
times more volatile than securities of comparable U.S. issuers.  Foreign
brokerage commissions and securities custody costs are often higher than in the
United States.  With respect to certain foreign countries, there is a
possibility of governmental expropriation of assets, confiscatory taxation,
political or financial instability and diplomatic developments that could affect
the value of investments in those countries.  The Fund's receipt of interest on
foreign government securities may depend on the availability of tax or other
revenues to satisfy the issuer's obligations.  The remedies of the Fund may be
extremely limited if a foreign issuer defaults on its obligations.  In addition,
the operations and results of foreign issuers and domestic issuers with
operations abroad may be affected by currency exchange rate fluctuations or
exchange control regulations.

   The Fund's investments in foreign securities may include investments in
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.

YEAR 2000
- ---------

   Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000.  Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders.
Loomis Sayles has advised the Fund that it is reviewing all of its computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to foreclose any such negative impact.  In
addition, Loomis Sayles has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal.  As of the date of
this prospectus, the Fund and Loomis Sayles have no reason to believe that these
goals will not be achieved.  Similarly, the values of certain of the portfolio
                             -------------------------------------------------
securities held by the Fund may be adversely affected by the inability of the
- -----------------------------------------------------------------------------
securities' issuers or of third parties to process this type of information
- ---------------------------------------------------------------------------
properly.
- ---------


                         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.  The general partner of Loomis Sayles is a
special purpose corporation that is an indirect wholly-owned subsidiary of Nvest
Companies, L.P. ("Nvest Companies").  Nvest Companies' managing general partner,
Nvest Corporation, is a direct wholly-owned subsidiary of Metropolitan Life
Insurance Company ("Met Life"), a mutual life insurance company.  Nvest
Companies' advising general partner, Nvest, L.P., is a publicly traded company
listed on the New York Stock Exchange.  Nvest Corporation is the sole general
partner of Nvest L.P.

   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.

                                      -10-
<PAGE>
 
   The portfolio manager for the Fund since its inception has been William F.
Camp. Mr. Camp is a Vice President of Loomis Sayles and joined the firm in 1995.
Previously, Mr. Camp worked as a portfolio manager in the pension department of
Kmart Corporation.

                                 FUND EXPENSES

   The Fund pays Loomis Sayles a monthly investment advisory fee.  This fee is
paid at the annual rate of .50% of the Fund's average daily net assets.

   In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.

   Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's annualized total operating expenses to .65% of average annual
net assets.


                            PORTFOLIO TRANSACTIONS

   Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund.  Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets.  The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions.  High portfolio turnover
may result in higher costs such as higher brokerage commissions and higher
levels of taxable gains.  Portfolio turnover rates for the life of the Fund are
set forth above under the headings "Financial Highlights" and "Prior
Performance."  See "Dividends, Capital Gain Distributions and Taxes" for
information on the tax consequences of investing in the Fund.

                            HOW TO PURCHASE SHARES

   You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.

   The minimum initial investment in the Fund is $1 million. Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.

   Shares of the Fund may be purchased by exchange of (i) cash, (ii) securities
on deposit with a custodian acceptable to Loomis Sayles or (iii) a combination
of such securities and cash.  Purchase of shares of the Fund in exchange for
securities is subject in each case to the determination by Loomis Sayles that
the securities to be exchanged are acceptable for purchase by the Fund.
Securities accepted by Loomis Sayles in exchange for Fund shares will be valued
in the same manner as the Fund's assets, as described below, as of the time of
the Fund's next determination of net asset value after such acceptance.  All
dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer.  A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered.  A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (888) 226-9699.

   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 1933 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.

                                      -11-
<PAGE>
 
   Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction.  After an account has been
established, you may send subsequent investments at any time.

   The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate.  Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.

   The price you pay will be the per share net asset value next calculated after
a proper investment order is received by the Trust.  Shares of the Fund are sold
without any sales charge.  The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding.  The Fund intends to calculate net asset value daily and as of the
close of the New York Stock Exchange (the "Exchange") on each day on which an
order for purchase or redemption of Fund shares is received and on which the
Exchange is open for unrestricted trading.  Portfolio securities are valued at
their market value as more fully described in the Statement of Additional
Information.


                             HOW TO REDEEM SHARES

   You can redeem your shares by sending a written request to the Trust.

   The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed.  All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).

   The redemption price will be the net asset value per share next determined
after the written redemption request 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 (888) 226-9699 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 Trust may withhold redemption proceeds
until your check has cleared.

   Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.

   The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.

                               OTHER INFORMATION

   The Trustees may, without shareholder approval, divide the Trust's shares of
beneficial interest into multiple series. The Trust is currently divided into
seven series, including the Fund and the other funds listed on the cover of this
Prospectus.

   As of October 31, 1998, Asbestos Workers Local #84 Pension Plan may be deemed
to control the Fund because it possessed beneficial ownership, directly or
indirectly, of more than 25% of the Fund's shares.

   The Fund's investment performance may from time to time be included in
advertisements about the Fund.

                                      -12-
<PAGE>
 
   The Fund's yield will be computed by dividing the Fund's net investment
income for a recent 30-day period by the maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period.

   Total return for the Fund is measured by comparing the value of an investment
in the Fund at the beginning of the relevant period to the redemption value of
the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gain distributions).

   All data are based on the Fund's past investment results and do not predict
future performance.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio
and the Fund's operating expenses.  Investment performance also often reflects
the risks associated with the Fund's investment objectives and policies.  These
factors should be considered when comparing the Fund's investment results with
those of other mutual funds and other investment vehicles.  Quotations of
investment performance for any period when an expense limitation was in effect
will be greater than if the limitation had not been in effect.

                DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

   Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes.  The Fund pays any net investment income to shareholders as
dividends annually.  The Fund also distributes all of its net realized capital
gains after applying any capital loss carryovers.  Any capital gain
distributions are normally made annually in December, but may, to the extent
permitted by law, be made more frequently as deemed advisable by the Trustees.
The Trustees may change the frequency with which the Fund declares or pays
dividends.

   Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash.  Dividends and capital gain distributions will be taxed
as described below whether received in cash or in additional shares.

   The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended.  As such, so long as the Fund
distributes all its net investment income and net realized capital gains to its
shareholders on a current basis, the Fund itself does not pay any federal income
or excise tax.  The Fund intends to make sufficient distributions to be relieved
of federal taxes.

   Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares.
Distributions designated by the Fund as deriving from net gains on securities
held for more than one year will be taxable as such (generally at a 20% rate for
noncorporate shareholders) whether distributed in cash or additional shares and
regardless of how long you have held your shares.

   A dividend or distribution made shortly after the purchase of shares of a
Fund by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above.  If a
shareholder held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale of such shares
during such six-month period would be a long-term capital loss to the extent of
such distribution.

   The Fund is required to withhold 31% of redemption proceeds, income dividends
and capital gain distributions it pays to you (1) if you do not provide a
correct, certified taxpayer identification number, (2) if the Fund is notified
that you have underreported income in the past, or (3) if you fail to certify to
the Fund that you are not subject to such withholding.

   In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.

                                      -13-
<PAGE>
 
   The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund.  Before investing, you should consult your own tax
adviser for more information concerning the federal, foreign, state and local
tax consequences of investing in, redeeming or exchanging Fund shares.


TRANSFER AND DIVIDEND                        INVESTMENT ADVISER
PAYING AGENT AND                             Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS                          One Financial Center
State Street Bank and Trust Company          Boston, Massachusetts  02111
Boston, Massachusetts  02102

                                      -14-
<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 than obligations in higher rated
categories.

                                      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.


                                       r

This symbol is attached to the ratings of instruments with significant noncredit
risks such as risks to principal or volatility of expected returns.


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
edged." Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

                                       Aa

Bonds 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 CORE GROWTH FUND

                             ONE FINANCIAL CENTER
                         BOSTON, MASSACHUSETTS  02111
                                (888) 226-9699

                                  PROSPECTUS
                                JANUARY 1, 1999

     The Loomis Sayles Investment Trust (the "Trust") is a group of seven mutual
funds including the Loomis Sayles Core Growth Fund (the "Fund").  The other
series, which are described in separate prospectuses, are:

                 Loomis Sayles California Tax-Free Income Fund
                     Loomis Sayles Core Fixed Income Fund
                        Loomis Sayles Fixed Income Fund
                  Loomis Sayles High Yield Fixed Income Fund
             Loomis Sayles Intermediate Duration Fixed Income Fund
               Loomis Sayles Investment Grade Fixed Income Fund

     Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest.  Each of the funds is separately managed and has its own
investment objective and policies.  Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.

     This Prospectus concisely describes the information that you should know
before investing in the Fund.  Please read it carefully and keep it for future
reference.  A Statement of Additional Information dated January 1, 1999 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 (888) 226-9699.  The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<S>                                                                  <C> 
SUMMARY OF EXPENSES.................................................  -3-
                                                                        
FINANCIAL HIGHLIGHTS................................................  -4-
                                                                        
PRIOR PERFORMANCE...................................................  -5-
                                                                        
THE TRUST...........................................................  -6-
                                                                        
INVESTMENT OBJECTIVE AND POLICIES...................................  -6-
                                                                        
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS.......................  -6-
                                                                        
THE FUND'S INVESTMENT ADVISER.......................................  -8-
                                                                        
FUND EXPENSES.......................................................  -8-
                                 
PORTFOLIO TRANSACTIONS..............................................  -8-
                                                                        
HOW TO PURCHASE SHARES..............................................  -9-
                                                                        
HOW TO REDEEM SHARES................................................  -9-

OTHER INFORMATION................................................... -10- 
                                                                         
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES..................... -10- 
</TABLE> 

                                      -2-
<PAGE>
 
                              SUMMARY OF EXPENSES

     The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly.  The information is based on expenses for the Fund's
most recent fiscal year.  The information below should not be considered a
representation of past or future expenses, as actual expenses may be greater or
less than those shown.  Also, the assumed 5% annual return in the example should
not be considered a representation of investment performance, as actual
performance will depend upon the actual investment results of securities held in
the Fund's portfolio.


          Shareholder Transaction Expenses:
            Maximum Sales Load Imposed on                         
             Purchases (as a percentage of offering price)            none     
            Maximum Sales Load Imposed on                                      
             Reinvested Dividends (as a percentage of                          
             offering price)                                          none     
            Deferred Sales Load (as a percentage of original                   
             purchase price or redemption                                      
             proceeds as applicable)                                  none     
            Redemption Fees (as a percentage of amount                         
            redeemed)                                                 none     
            Exchange Fees                                             none     
                                                                               
          Annual Fund Operating Expenses                                       
          (as a percentage of average net assets):                             
            Management Fees (after expense                                     
             limitation)                                              .50%     
             12b-1 Fees                                               none     
             Other Operating Expenses/1/                              .15%      
             Total Fund Operating Expenses (after expense                      
              limitation)/1/                                          .65%     
                                                                               
          Example                                                              
           You would pay the following                                         
            expenses on a $1,000 investment                                    
            assuming a 5% annual return                                        
            (with or without a redemption at                                   
            the end of each time period):                                      
                                                                               
            One Year                                                  $ 7      
            Three Years                                               $ 21     
            Five Years                                                $ 36     
            Ten Years                                                 $ 81      

          ________________________
          /1/ Loomis Sayles has voluntarily undertaken for an indefinite period
          to limit the Fund's total Fund operating expenses to the percentage of
          average net assets shown above. In the absence of the voluntary
          expense limitation, Other Operating Expenses and Total Fund Operating
          Expenses for the most recent fiscal year would have been 0.53% and
          1.03%, respectively.

                                      -3-
<PAGE>
 
                             FINANCIAL HIGHLIGHTS

     The financial highlights table that follows is for periods after  March 7,
1997.  The following information should be read in conjunction with the
financial highlights, financial statements, and notes thereto that have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon appears in the Fund's 1998 Annual Report, which is incorporated by
reference into this Prospectus and the Statement of Additional Information.

<TABLE>
<CAPTION>
                                                                      +Nine Months Ended       March 7 ++ through
                                                                      September 30, 1998       December 31, 1997
                                                                      ------------------       -----------------
<S>                                                                   <C>                      <C>
Net asset value, beginning period............................               $ 12.26                  $ 12.27  
                                                                                                              
Income from investment operations -                                                                           
  Net investment income......................................                  0.10                     0.07  
  Net realized and unrealized gain (loss) on investments.....                  1.23                     0.92  
                                                                            -------                  -------  
Total from investment operations.............................                  1.33                     0.99  
                                                                                                              
Less distributions -                                                                                          
  Dividends from net investment income.......................                  0.00                    (0.10) 
  Distributions from net realized capital gains..............                  0.00                    (0.90) 
                                                                            -------                  -------  
  Total distributions........................................                  0.00                    (1.00) 
                                                                            -------                  -------  
Net asset value, end of period...............................               $ 13.59                  $ 12.26  
                                                                            =======                  =======  
                                                                                                              
Total return (%).............................................                  10.9**                    8.2**  
Net assets, end of period (000)..............................               $20,910                  $38,544  
Ratio of operating expenses to average net assets (%)........                  0.65*                    0.65*  
Ratio of net investment income to average net assets (%).....                  0.74*                    0.81*  
Portfolio turnover rate (%)..................................                    96**                     91**   
Without giving effect to the voluntary expense limitations:                                                   
  The ratio of operating expenses to average net assets                                                       
  would have been (%)........................................                  1.03*                    0.90*  
The net investment income per share would have been..........               $  0.05                   $ 0.05    
</TABLE>

+The Fund's fiscal year end has changed to September 30 from December 31.
++Date of effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended.
*Annualized.
**Not annualized.


Further information about the performance of the Fund is contained in the Fund's
semiannual and annual reports to shareholders, copies of which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.

                                      -4-
<PAGE>
 
                               PRIOR PERFORMANCE

    (FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT THE INDICATED PERIODS)

     The information presented below, for the periods indicated, relates to
periods prior to the effectiveness of the Fund's registration statement under
the Securities Act of 1933, as amended (the "1933 Act"). The following
information should be read in conjunction with the financial highlights,
financial statements, and notes thereto that have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon
appears in the Fund's 1998 Annual Report, which is incorporated by reference
into this Prospectus and the Statement of Additional Information. The Fund is
managed in a manner that is in all material respects similar to the manner in
which it was managed prior to the effectiveness of its registration statement
under the 1933 Act.

<TABLE>    
<CAPTION>
                                                                                                          October 1*
                                                                      January 1, 1997     Year Ended        through       
                                                                      through March 6,    December 31,    December 31,
                                                                            1997             1996            1995
                                                                            ----             ----         -----------
<S>                                                                   <C>                 <C>             <C>
Net asset value, beginning period............................             $  11.48          $ 10.02         $ 10.00

Income from investment operations -
  Net investment income......................................                 0.03             0.10            0.02     
  Net realized and unrealized gain (loss) on investments.....                 0.76             1.47            0.02     
                                                                          --------          -------         -------     
Total from investment operations.............................                 0.79             1.57            0.04     
                                                                          --------          -------         -------     
                                                                                                                        
Less distributions -                                                                                                    
  Dividends from net investment income.......................                 0.00            (0.11)          (0.02)    
                                                                                                                        
Net asset value, end of period...............................             $  12.27            11.48           10.02     
                                                                          ========          =======         =======     
                                                                                                                        
Total return (%).............................................                  6.9***          15.6             0.4***      
Net assets, end of period (000)..............................             $ 25,885          $21,906         $ 7,609     
Ratio of operating expenses to average net assets (%)........                 0.65**           0.65            0.65**     
Ratio of net investment income to average net assets (%).....                 1.21**           1.10            1.36**     
Portfolio turnover rate (%)..................................                   17***            97              22***      
Without giving effect to the voluntary expense limitations:                                                             
  The ratio of operating expenses to average net assets                                                                 
  would have been (%)........................................                 0.83**           0.89            1.43**     
The net investment income per share would have been..........             $   0.02          $  0.08         $  0.01      
</TABLE>     
                                        
  * Commencement of operations.
 ** Annualized.
*** Not annualized.

                                      -5-
<PAGE>
 
                                   THE TRUST

   The Fund is a series of the Trust.  The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993.  The Trust is authorized to issue an unlimited
number of full and fractional shares of beneficial interest in multiple series.
Shares are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with a fractional vote for each fractional share held) at
shareholder meetings.  The Trust does not generally hold shareholder meetings
and will do so only when required by law.  Shareholders may call meetings to
consider removal of the Trustees.

                       INVESTMENT OBJECTIVE AND POLICIES

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

   The Fund seeks to attain its objective by identifying, and investing in the
common stock of, companies that will report above average and better than
consensus earnings growth over several years.  Under normal market conditions,
the Fund will invest at least 65% of its total assets in common stocks and other
equity securities.  While this approach will often lead to investing in
"traditional" growth companies, it may also encompass investments in such areas
as revitalized industries, restructured companies and cyclically sensitive
companies at the early stages of an economic advance.  In addition to superior
earnings prospects, the Fund looks for companies undergoing qualitative
improvement likely to result in an upgraded valuation.  Although such companies
may present greater opportunity for capital appreciation, investors should be
aware that greater risk may be associated with investments in such companies
than with equity securities generally.  The Fund may also invest in securities
issued or guaranteed by the U.S. Government, its authorities, agencies or
instrumentalities and certificates representing undivided interests in the
interest or principal of U.S. Treasury securities (collectively, "U.S.
Government Securities"), when-issued securities, convertible securities, zero
coupon bonds, and real estate investment trusts ("REITs"), which are described
herein (together with their related risks) under "More Information About the
Fund's Investments."

   Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders.  Such restrictions
include:  (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from purchasing a security (other than U.S.
Government Securities) if, as a result, more than 25% of the Fund's total assets
(taken at current value) would be invested in any one industry;  (3) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a security that is not
readily marketable if, as a result, more than 15% of the Fund's net assets based
on current value would then be invested in such securities.  For additional
investment restrictions, see the Statement of Additional Information.

   Although authorized to invest in restricted securities, the Fund, as a matter
of nonfundamental operating policy, currently does not intend to invest in such
securities, other than Rule 144A securities that are described below.

   The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders.  All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.


                 MORE INFORMATION ABOUT THE FUND'S INVESTMENTS

   The net asset value of the Fund's shares will vary as a result of changes in
the value of securities in the Fund's portfolio.  The following describes the
securities in which the Fund will principally invest and the risks associated
with them.  Additional information about the Fund's investment practices can be
found in the Statement of Additional Information.

                                      -6-
<PAGE>
 
EQUITY SECURITIES
- -----------------

   While offering greater potential for long-term growth, equity securities are
more volatile and more risky than some other forms of investment.  The Fund's
investments may include securities traded "over-the-counter" as well as those
traded on a securities exchange.  Some over-the-counter securities may be more
difficult to sell under some market conditions.

SMALL COMPANIES
- ---------------

   The Fund may invest in the securities of companies with smaller
capitalization.  Investments in companies with relatively small capitalization
may involve greater risk than is usually associated with more established
companies. These companies often have sales and earnings growth rates which
exceed those of companies with larger capitalization.  Such growth rates may in
turn be reflected in more rapid share price appreciation.  However, companies
with smaller capitalization often have limited product lines, markets or
financial resources and they may be dependent upon a relatively small management
group.  The securities may have limited marketability and may be subject to more
abrupt or erratic movements in price than securities of companies with larger
capitalization or the market averages in general.  The net asset value of funds
that invest in companies with small capitalization therefore may fluctuate more
widely than market averages.

REAL ESTATE INVESTMENT TRUSTS
- -----------------------------

   The Fund may invest in REITs.  REITs involve certain unique risks in addition
to those risks associated with investing in the real estate industry in general
(such as possible declines in the value of real estate, lack of availability of
mortgage funds or extended vacancies of property).  Equity REITs may be affected
by changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, are subject to heavy cash
flow dependency, risks of default by borrowers and self-liquidation.  REITs are
also subject to the possibilities of failing to qualify for tax-free pass-though
of income under the Internal Revenue code of 1986, as amended (the "Code"), and
failing to maintain their exemptions from registration under the Investment
Company Act of 1940.

   Investment in REITs involves risk similar to those associated with investing
in small capitalization companies. REITs may have limited financial resources,
may trade less frequently and in a limited volume and may be subject to more
abrupt or erratic price movements than larger securities.

WHEN-ISSUED SECURITIES
- ----------------------

   The Fund may purchase securities on a "when-issued" basis.  This means that
the Fund will enter into a commitment to buy the security before the security
has been issued.  The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment.  The security
is typically delivered to the Fund 15 to 120 days later.  No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued.  If the value of the security being purchased falls
between the time a Fund commits to buy it and the payment date, the Fund may
sustain a loss.  The risk of this loss is in addition to the Fund's risk of loss
on the securities actually in its portfolio at the time.  If the Fund has
outstanding obligations to buy when-issued securities, it will maintain liquid
assets in a segregated account at its custodian bank in an amount sufficient to
satisfy these obligations.

RULE 144A SECURITIES
- --------------------

   The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.

                                      -7-
<PAGE>
 
YEAR 2000
- ---------

   Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000.  Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders.
Loomis Sayles has advised the Fund that it is reviewing all of its computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to foreclose any such negative impact.  In
addition, Loomis Sayles has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal.  As of the date of
this prospectus, the Fund and Loomis Sayles have no reason to believe that these
goals will not be achieved.  Similarly, the values of certain of the portfolio
securities held by the Fund may be adversely affected by the inability of the
securities' issuers or of third parties to process this type of information
properly.


                         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.

   The general partner of Loomis Sayles is a special purpose corporation that is
an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York  Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

   In addition to selecting and reviewing the Fund's investments, Loomis Sayles
provides executive and other personnel for the management of the Fund.  The
Board of Trustees supervises Loomis Sayles's conduct of the affairs of the Fund.

   The portfolio manager for the Fund since inception has been Quentin P.
Faulkner.  Mr. Faulkner is a Vice President of Loomis Sayles and joined Loomis
Sayles in 1970.

                                 FUND EXPENSES

   The Fund pays Loomis Sayles a monthly investment advisory fee.  This fee is
paid at the annual rate of .50% of the Fund's average daily net assets.

   In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.

   Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's total operating expenses to .65% of average annual net assets.

                            PORTFOLIO TRANSACTIONS

   Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund.  Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets.  The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions.  High portfolio turnover
may result in higher costs such as higher brokerage commissions and higher
levels of taxable gains.  Portfolio turnover rates for the life of the Fund are
set forth above 

                                      -8-
<PAGE>
 
under the headings "Financial Highlights" and "Prior Performance." See
"Dividends, Capital Gain Distributions and Taxes" for information on the tax
consequences of investing in the Fund.

                            HOW TO PURCHASE SHARES

   You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.  The minimum initial
investment in the Fund is $2,500,000.  Subsequent investments must be at least
$50,000.  The Trust reserves the right to waive these minimums in its sole
discretion.

   Shares of the Fund may be purchased by exchange of (i) cash, (ii) securities
on deposit with a custodian acceptable to Loomis Sayles or (iii) a combination
of such securities and cash.  Purchase of shares of the Fund in exchange for
securities is subject in each case to the determination by Loomis Sayles that
the securities to be exchanged are acceptable for purchase by the Fund.
Securities accepted by Loomis Sayles in exchange for Fund shares will be valued
in the same manner as the Fund's assets, as described below, as of the time of
the Fund's next determination of net asset value after such acceptance.  All
dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer.  A gain or loss for federal income tax purposes would be realized upon
the exchange of any securities tendered.  A shareholder who wishes to purchase
shares by exchanging securities should obtain instructions by calling (888) 226-
9699.

   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 1933 Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions.  No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by the exchange of securities.

   Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction.  After an account has been
established, you may send subsequent investments at any time.

   The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate.  Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.

   The price you pay will be the per share net asset value next calculated after
a proper investment order is received by the Trust.  Shares of the Fund are sold
without any sales charge.  The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding.  Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading. Portfolio securities are valued at their
market value as more fully described in the Statement of Additional Information.

                             HOW TO REDEEM SHARES

   You can redeem your shares by sending a written request to the Trust.

   The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed.  All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).

   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 (888) 226-9699 for details.

                                      -9-
<PAGE>
 
   Proceeds resulting from a written redemption request will normally be mailed
to you within seven days after receipt of your request in good order.  If you
purchased your shares by check and your check was deposited less than fifteen
days prior to the redemption request, the Trust may withhold redemption proceeds
until your check has cleared.

   Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.

   The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.

                               OTHER INFORMATION

   The Board of Trustees may, without shareholder approval, divide the Trust's
shares of beneficial interest into multiple series.  The Trust is currently
divided into seven series, including the Fund and the other funds listed on the
cover of this Prospectus.

    As of October 31, 1998, Brockton Health Corp Endowment and Brockton Hospital
Pension fund may each be deemed to control the Fund because each possessed
beneficial ownership, either directly or indirectly, of more than 25% of the
Fund's shares.

   The Fund's investment performance may from time to time be included in
advertisements about the Fund.

   Total return for the Fund is measured by comparing the value of an investment
in the Fund at the beginning of the relevant period to the redemption value of
the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gain distributions).

   All data are based on the Fund's past investment results and do not predict
future performance.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio
and the Fund's operating expenses.  Investment performance also often reflects
the risks associated with the Fund's investment objectives and policies.  These
factors should be considered when comparing the Fund's investment results with
those of other mutual funds and other investment vehicles.  Quotations of
investment performance for any period when an expense limitation was in effect
will be greater than if the limitation had not been in effect.

                DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

   Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes.  The Fund pays any net investment income to shareholders as
dividends annually.  Any capital gain distributions are normally made annually
in December, but may, to the extent permitted by law, be made more frequently as
deemed advisable by the Trustees.  The Fund distributes all of its net realized
capital gains after applying any capital loss carryovers.  The Trustees may
change the frequency with which the Fund declares or pays dividends.

   Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash.  Dividends and capital gain distributions will be taxed
as described below whether received in cash or in additional shares.

   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.
Distributions designated by the Fund as deriving from net gains on securities

                                      -10-
<PAGE>
 
held for more than one year will be taxable as such (generally at a 20% rate for
noncorporate shareholders) whether distributed in cash or additional shares and
regardless of how long you have held your shares.
 
   A dividend or distribution made shortly after the purchase of shares of a
Fund by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above.  If a
shareholder held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale of such shares
during such six-month period would be a long-term capital loss to the extent of
such distribution.

   A portion of any dividend from the Fund is expected to be eligible for the
dividends-received deduction for corporate shareholders.

   The Trust will send you an annual statement showing the federal tax status of
dividends and distributions paid to you during the preceding year.

   The Fund is required to withhold 31% of redemption proceeds, income dividends
and capital gain distributions it pays to you (1) if you do not provide a
correct, certified taxpayer identification number, (2) if the Fund is notified
that you have underreported income in the past, or (3) if you fail to certify to
the Fund that you are not subject to such withholding.

   The foregoing discussion relates solely to U.S. federal income tax law.  Non-
U.S. investors should consult their tax advisers concerning the tax consequences
of ownership of shares of the Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty.)  The Internal Revenue Service recently revised
its regulations affecting the application to foreign investors of the back-up
withholding tax rules described above.  The new regulations will generally be
effective for payments made on or after January 1, 1999 (although transition
rules will apply.)
 
   In some circumstances, the new rules will increase the certification and
filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax and for reduced withholding tax
rates under income tax treaties.  Foreign investors in each Fund should consult
their advisors with respect to the potential application of these new
regulations.



TRANSFER AND DIVIDEND                        INVESTMENT ADVISER
PAYING AGENT AND                             Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS                          One Financial Center
State Street Bank and Trust Company          Boston, Massachusetts  02111
Boston, Massachusetts 02102

                                      -11-
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST
                        
                        LOOMIS SAYLES FIXED INCOME FUND
                        
                             ONE FINANCIAL CENTER
                         BOSTON, MASSACHUSETTS  02111
                                (888) 226-9699
                         
                                  PROSPECTUS
                                JANUARY 1, 1999

     The Loomis Sayles Investment Trust (the "Trust") is a group of seven mutual
funds including the Loomis Sayles Fixed Income Fund (the "Fund").  The other
series, which are described in separate prospectuses, are:

                 Loomis Sayles California Tax-Free Income Fund
                      Loomis Sayles Core Fixed Income Fund
                         Loomis Sayles Core Growth Fund
                   Loomis Sayles High Yield Fixed Income Fund
             Loomis Sayles Intermediate Duration Fixed Income Fund
                Loomis Sayles Investment Grade Fixed Income Fund

     Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest.  Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.

     This Prospectus concisely describes the information that you should know
before investing in the Fund.  Please read it carefully and keep it for future
reference.  A Statement of Additional Information dated January 1, 1999 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 (888) 226-9699.  The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
 
                               TABLE OF CONTENTS


SUMMARY OF EXPENSES................................................... -3-

FINANCIAL HIGHLIGHTS.................................................. -4-

PRIOR PERFORMANCE..................................................... -5-

THE TRUST............................................................. -6-

INVESTMENT OBJECTIVE AND POLICIES..................................... -6-

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS......................... -7-

THE FUND'S INVESTMENT ADVISER........................................ -11-

FUND EXPENSES........................................................ -12-

PORTFOLIO TRANSACTIONS............................................... -12-

HOW TO PURCHASE SHARES............................................... -12-

HOW TO REDEEM SHARES................................................. -13-

OTHER INFORMATION.................................................... -14-

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES...................... -14-

APPENDIX A........................................................... -A1-

                                      -2-
<PAGE>
 
                              SUMMARY OF EXPENSES

     The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly.  The information is based on expenses for the Fund's
most recent fiscal year.  The information below should not be considered a
representation of past or future expenses, as actual expenses may be greater or
less than those shown.  Also, the assumed 5% annual return in the example should
not be considered a representation of investment performance, as actual
performance will depend upon the actual investment results of securities held in
the Fund's portfolio.


Shareholder Transaction Expenses:
 Maximum Sales Load Imposed on
  Purchases (as a percentage of offering price)               none
 Maximum Sales Load Imposed on
  Reinvested Dividends (as a percentage of
  offering price)                                             none
 Deferred Sales Load (as a percentage of
  original purchase price or redemption
  proceeds, as applicable)                                    none
 Redemption Fees (as a percentage of
  amount redeemed)                                            none
 Exchange Fees                                                none

Annual Fund Operating Expenses
(as a percentage of average net assets):
 Management Fees (after expense limitation)/1/                .50%
  12b-1 Fees                                                  none
  Other Operating Expenses (after expense limitation)/1/      .15%
Total Fund Operating Expenses  (after expense 
  limitation)/1/                                              .65%
 
Example
 You would pay the following
  expenses on a $1,000 investment
  assuming a 5% annual return
  (with or without a redemption at
  the end of each time period):
 
  One Year                                                     $7
  Three Years                                                  $21
  Five Years                                                   $36
  Ten Years                                                    $81


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

/1/  Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total Fund operating expenses to the percentage of average net assets
shown above. In the absence of the voluntary expense limitation, Other Operating
Expenses and Total Fund Operating Expenses for the most recent fiscal year would
have been 0.18% and 0.68%, respectively.

                                      -3-
<PAGE>
 
                             FINANCIAL HIGHLIGHTS

     The financial highlights table that follows is for the periods after March
7, 1997. The following information should be read in conjunction with the
financial highlights, financial statements, and notes thereto that have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon appears in the Fund's 1998 Annual Report, which is incorporated by
reference into this Prospectus and the Statement of Additional Information.

<TABLE>
<CAPTION>
                                                                +Nine Months Ended   March 7 ++ through
                                                               September 30, 1998     December 31, 1997
                                                               -------------------   -------------------
- --------------------------------------------------------------------------------------------------------
<S>                                                            <C>                   <C>
Net asset value, beginning period............................        $  12.59              $  12.26
- --------------------------------------------------------------------------------------------------------
Income from investment operations -
  Net investment income......................................            0.57                  0.53
  Net realized and unrealized gain (loss) on investments.               (0.62)                 0.90
                                                                        ------                 ----
Total from investment operations.............................           (0.05)                 1.43
- --------------------------------------------------------------------------------------------------------
Less distributions -
  Dividends from net investment income.......................            0.00                 (0.75)
  Distributions from net realized capital gains..............           (0.07)                (0.35)
                                                                        -------               ------
  Total distributions........................................           (0.07)                (1.10)
                                                                        -------               ------
Net asset value, end of period...............................         $ 12.47              $  12.59
                                                                      =========            =========
- --------------------------------------------------------------------------------------------------------
Total return (%).............................................            (0.4)**               11.7**
Net assets, end of period (000)..............................       $ 248,329              $173,048
Ratio of operating expenses to average net assets (%)........            0.65*                 0.65*
Ratio of net investment income to average net assets (%).....            7.37*                 7.31*
Portfolio turnover rate (%)..................................              31**                  38**
Without giving effect to the voluntary expense limitations:
  The ratio of operating expenses to average net assets
  would have been (%)........................................            0.68*                 0.71*
The net investment income per share would have been..........         $  0.57              $   0.53
- --------------------------------------------------------------------------------------------------------
</TABLE>


+The Fund's fiscal year end has changed to September 30 from December 31.
++Date of effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended.
*Annualized.
**Not annualized.

 

     Further information about the performance of the Fund is contained in the
Fund's semiannual and annual reports to shareholders, copies of which may be
obtained without charge by writing or telephoning the Trust at the address and
telephone number stated on the cover of this Prospectus.

                                      -4-
<PAGE>
 
                               PRIOR PERFORMANCE

     (FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT THE INDICATED PERIODS)


     The information presented below, for the periods indicated, relates to
periods prior to the effectiveness of the Fund's registration statement under
the Securities Act of 1933, as amended (the "1933 Act"). The following
information should be read in conjunction with the financial highlights,
financial statements, and notes thereto that have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon
appears in the Fund's 1998 Annual Report, which is incorporated by reference
into this Prospectus and the Statement of Additional Information. The Fund is
managed in a manner that is in all material respects similar to the manner in
which it was managed prior to the effectiveness of its registration statement
under the 1933 Act.

<TABLE>
<CAPTION> 
 
                                                                January 17*
                                                              January 1, 1997    Year Ended       through
                                                             through March 6,   December 31,   December 31,
                                                                   1997             1996           1995
                                                             -----------------  -------------  -------------
<S>                                                          <C>                <C>            <C>
 
Net asset value, beginning of period.......................        $ 12.08         $ 12.08        $  10.00
 
Income from investment operations -
   Net investment income...................................           0.19            0.91            0.53
   Net realized and unrealized gain (loss) on investments..          (0.01)           0.27            2.21
                                                                     -------         -------        --------
     Total from investment operations......................           0.18            1.18            2.74
                                                                     -------         -------        --------
 
Less distributions -
   Dividends from net investment income....................           0.00           (0.90)          (0.52)
   Distributions from net realized capital gains...........           0.00           (0.28)          (0.14)
                                                                     -------
     Total distributions...................................           0.00           (1.18)          (0.66)
                                                                     -------
Net asset value, end of period.............................        $ 12.26         $ 12.08        $  12.08
                                                                     =======         =======         ========
 
Total return (%)...........................................            1.5***          9.8            27.4***
Net assets, end of period (000)............................       $ 97,132        $ 91,746        $ 58,332
Ratio of operating expenses to average net assets (%)......           0.65**          0.62            0.75**
Ratio of net investment income to
   average net assets (%)..................................           9.00**          7.97            8.15**
Portfolio turnover rate (%)................................              2***           90              76***
Without giving effect to the  voluntary expense
    limitation:
    The ratio of operating expenses to
      average net assets would have been (%)...............           0.65**          0.62            0.83**
    The net investment income per share would have been....         $ 0.19        $   0.91        $   0.52
 
  * Commencement of operations.
 ** Annualized.
*** Not annualized.
 </TABLE>

                                      -5-
<PAGE>
 
                                  THE TRUST

     The Fund is a series of the Trust.  The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993.  The Trust is authorized to issue an unlimited
number of full and fractional shares of beneficial interest in multiple series.
Shares are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with a fractional vote for each fractional share held) at
shareholder meetings.  The Trust does not generally hold shareholder meetings
and will do so only when required by law.  Shareholders may call meetings to
consider removal of the Trustees.

                       INVESTMENT OBJECTIVE AND POLICIES

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

     The Fund seeks to attain its objective by normally investing substantially
all of its assets in a broad range of debt securities, although up to 20% of its
total assets may be invested in preferred stocks.  These debt securities may
include corporate securities, securities issued or guaranteed by the U.S.
Government, its authorities, agencies or instrumentalities or certificates
representing undivided interests in the interest or principal of U. S. Treasury
securities ("U.S. Government Securities"), zero coupon securities,
collateralized mortgage securities, including interest-only and principal-only
("IOs" and "POs") classes of stripped mortgage-backed securities, convertible
bonds, real estate investment trusts ("REITs") and when-issued securities, which
are described herein (together with their related risks) under "More Information
About the Fund's Investments."  Under normal market conditions, the Fund will
invest at least 65% of its total assets in fixed income securities.  The Fund
may invest any portion of its assets in securities of Canadian issuers, and a
limited portion of its assets in securities of other foreign issuers.  See "More
Information About the Fund's Investments; Foreign Securities."

     The Fund may invest up to 35% of its total assets in securities of below
investment grade quality, which are securities rated below BBB by Standard &
Poor's ("S&P") and below Baa by Moody's Investors Service, Inc. ("Moody's"), and
in unrated securities determined by Loomis Sayles to be of comparable quality.
Securities of below investment grade quality are commonly referred to as "junk
bonds."  See "More Information About the Fund's Investments; Lower Rated Fixed
Income Securities."  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 1998 fiscal period
ended September 30, 1998 in securities assigned to the various rating categories
by S&P and Moody's on a dollar-weighted basis were approximately as follows:
"AAA"/ "Aaa," _________%; "AA"/"Aa," _________%; "A"/"A," _________%;
"BBB"/"Baa," _________%; "BB"/"Ba," _________%; "B"/"B," _________%; and below
"B," _________%.  The percentage of the Fund's net assets invested during such
fiscal year in unrated debt securities as a group was approximately _________%.
The percentages of the Fund's net assets invested during such fiscal period in
such unrated securities (categorized by comparable rating category) were
approximately as follows: "AAA"/"Aaa," _________%; "AA"/"Aa," _________%;
"A"/"A," _________%; "BBB"/"Baa," _________%; "BB"/"Ba," _________%; "B"/"B,"
_________%; and 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 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 

                                      -6-
<PAGE>
 
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 that are described below.

     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 other than for
purposes of determining compliance with the Fund's investment policy of
investing, under normal market conditions, at least 65% of its total assets in
fixed income securities.  Because interest rates vary, it is impossible to
predict the income of the Fund for any particular period.

     Fixed income securities are subject to market and credit risk.  Market risk
relates to changes in a security's value as a result of changes in interest
rates generally.  In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest.  Generally, the longer the maturity of a fixed income security,
the greater the fluctuations in its value because of market and credit risk.

U.S. GOVERNMENT SECURITIES
- --------------------------

     U.S. Government Securities have different kinds of government support.  For
example, some U.S. Government Securities, such as U.S. Treasury bonds, are
supported by the full faith and credit of the United States, whereas certain
other U.S. Government Securities issued or guaranteed by federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States.

     Although U.S. Government Securities generally do not involve the credit
risks associated with other types of fixed income securities, the market values
of U.S. Government Securities will fluctuate as interest rates change.  Thus,
for example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.

     Some U.S. Government Securities, such as Government National Mortgage
Association Certificates ("GNMA"), 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-

                                      -7-
<PAGE>
 
backed securities at a discount or a premium, the Fund will recognize a gain or
loss when the payments of principal, through prepayment or otherwise, are passed
through to the Fund and, if the payment occurs in a period of falling interest
rates, the Fund may not be able to reinvest the payment at as favorable an
interest rate. As a result of these principal prepayment features, mortgage-
backed securities are generally more volatile investments than many other fixed
income securities. See "Collateralized Mortgage Obligations" below for
additional information regarding the risks associated with mortgage-backed
securities.

     In addition to investing directly in U.S. Government Securities, the Fund
may purchase certificates of accrual or similar instruments ("strips")
evidencing undivided ownership interests in interest payments or principal
payments, or both, in U.S. Treasury securities.  These investment instruments
may be highly volatile.

ZERO COUPON SECURITIES
- ----------------------

     The Fund may invest in "zero coupon" fixed income securities.  These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis.  The Fund is required to distribute the income on zero
coupon securities to Fund shareholders as the income accrues, even though the
Fund is not receiving the income in cash on a current basis.  Thus the Fund may
be forced to sell other investments to obtain cash to make income distributions
at times when Loomis Sayles would not otherwise deem it advisable to do so.  The
market value of zero coupon securities is generally more volatile than that of
non-zero coupon fixed income securities of comparable quality and maturity.

MORTGAGE-BACKED SECURITIES
- --------------------------

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

COLLATERALIZED MORTGAGE OBLIGATIONS
- -----------------------------------

     The Fund may invest in collateralized mortgage obligations ("CMOs").  A CMO
is a limited recourse security backed by a portfolio of mortgages or, more
typically, by mortgage-backed securities held under an indenture.  CMOs may be
issued by instrumentalities of the U.S. Government or by non-governmental
entities.  The issuer's obligation to make interest and principal payments is
derived from and secured by the underlying portfolio of mortgages or mortgage-
backed securities.  CMOs are issued with a number of classes or series which
have different maturities and which may represent interests in some or all of
the interest or principal payments on the underlying collateral or a combination
thereof.  CMOs of different classes or series are generally retired in sequence
as the underlying mortgage loans in the mortgage pool are repaid.  In the event
of sufficient early prepayments on such mortgages, the class or series of CMOs
first to mature generally will be retired prior to its maturity.  As with other
mortgage-backed securities, the early retirement of a particular class or series
of CMOs held by the Fund could involve the loss of any premium the Fund paid
when it acquired the investment and could result in the Fund's reinvesting the
proceeds at a lower interest rate than the interest rate paid by the retired
CMO.  Because of the early retirement feature, CMOs may be more volatile than
many other fixed income investments.  In addition, slower than anticipated
prepayments on the underlying mortgages 

                                      -8-
<PAGE>
 
can extend the effective maturities of CMOs, subjecting them to a greater risk
of decline in market value in response to rising interest rates than traditional
debt securities.

ASSET-BACKED SECURITIES
- -----------------------
 
     The Fund may invest in asset-backed securities.  Through the use of trusts
and special purpose corporations, automobile and credit card receivables are
securitized in pass-through structures similar to mortgage pass-through
structures or in a pass-through structure similar to the CMO structure.
Generally, the issuers of asset-backed bonds, notes or pass-through certificates
are special  purpose entities and do not have any significant assets other than
the receivables securing such obligations.  In general, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans.
Instruments backed by pools of receivables are similar to mortgage-backed
securities in that they are subject to unscheduled prepayments of principal
prior to maturity.  When the obligations are prepaid, the Fund will ordinarily
reinvest the prepaid amounts in securities the yields of which reflect interest
rates prevailing at the time. Therefore, the Fund's ability to maintain a
portfolio that includes high-yielding asset-backed securities will be adversely
affected to the extent that prepayments of principal must be reinvested in
securities that have lower yields than the prepaid obligations.  Moreover,
prepayments of securities purchased at a premium could result in a realized
loss.

STRIPPED MORTGAGE-BACKED SECURITIES
- -----------------------------------

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

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

CONVERTIBLE SECURITIES
- ----------------------

     Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities at a stated price or rate.  Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation.  Because convertible securities can be
converted into equity securities, their value will normally vary in some
proportion with those of the underlying equity securities.  Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security.  Due to the conversion
feature, convertible securities generally yield less than nonconvertible
securities of similar credit quality and maturity. The Fund's investments in
convertible securities may at times include securities that have a mandatory
conversion feature, pursuant to which the securities convert automatically into
common stock at a specified date and conversion ratio, or that are convertible
at the option of the issuer.  Because conversion of such securities is not at
the option of the holder, the Fund may be required to convert the security into
the underlying common stock even at times when the value of the underlying
common stock has declined substantially.

REAL ESTATE INVESTMENT TRUSTS
- -----------------------------

     The Fund may invest in REITs.  REITs involve certain unique risks in
addition to those risks associated with investing in the real estate industry in
general (such as possible declines in the value of real estate, lack of
availability 

                                      -9-
<PAGE>
 
of mortgage funds or extended vacancies of property). Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified, are subject to
heavy cash flow dependency, risks of default by borrowers and self-liquidation.
REITs are also subject to the possibilities of failing to qualify for tax-free
pass-though of income under the Code, and failing to maintain their exemptions
from registration under the 1940 Act.

     Investment in REITs involves risk similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger securities.

WHEN-ISSUED SECURITIES
- ----------------------

     The Fund may purchase securities on a "when-issued" basis.  This means that
the Fund will enter into a commitment to buy the security before the security
has been issued.  The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment.  The security
is typically delivered to the Fund 15 to 120 days later.  No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued.  If the value of the security being purchased falls
between the time the Fund commits to buy it and the payment date, the Fund may
sustain a loss.  The risk of this loss is in addition to the Fund's risk of loss
on the securities actually held in its portfolio at the time.  When the Fund
buys a security on a when-issued basis, it is subject to the risk that market
rates of interest will increase before the time the security is delivered, with
the result that the yield on the security delivered to the Fund may be lower
than the yield available on other, comparable securities at the time of
delivery.  If the Fund has outstanding obligations to buy when-issued
securities, it will maintain liquid assets in a segregated account at its
custodian bank in an amount sufficient to satisfy these obligations.

RULE 144A SECURITIES
- --------------------

     The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.


LOWER RATED FIXED INCOME SECURITIES
- -----------------------------------

     The Fund may invest a portion of its assets in securities rated below
investment grade ("lower rated fixed income securities"), including securities
in the lowest rating categories, and unrated securities determined by Loomis
Sayles to be of comparable quality.  Lower rated fixed income securities
generally provide higher yields, but are subject to greater credit and market
risk than higher quality fixed income securities.  Lower rated fixed income
securities are considered speculative with respect to the ability of the issuer
to meet principal and interest payments.  Achievement of the Fund's investment
objective through investments in lower rated fixed income securities may be more
dependent on Loomis Sayles's credit analysis than is the case with higher
quality bonds.  The market for lower rated fixed income securities may be more
severely affected than other financial markets by economic recession or
substantial interest rate increases.  The value and liquidity of lower rated
fixed income securities may be diminished by adverse publicity and investor
perceptions.  In addition, legislation that limits the tax benefits to issuers
or holders of taxable lower rated fixed income securities or that limits the
ability of certain categories of financial institutions to invest in these
securities may adversely affect their market value.  The secondary market for
lower rated fixed income securities may be less liquid than the secondary market
for higher rated fixed income securities.  This lack of liquidity at certain
times may affect the values of these securities and may make the valuation and
sale of these securities by the Fund more difficult. Certain lower rated fixed
income securities do not pay interest on a current basis.  However, the Fund
will accrue and distribute this interest on a current basis, and may be required
to sell securities at times when Loomis Sayles would not otherwise deem it
advisable to do so in order to generate cash for distributions.  Securities of
below investment grade quality are commonly referred to as "junk bonds."
Securities in the lowest rating categories may be in poor standing or in
default. 

                                      -10-
<PAGE>
 
Investment grade fixed income securities may share some of the characteristics
of lower rated fixed income securities described above.

FOREIGN SECURITIES
- ------------------

     The Fund may invest in securities of issuers organized or headquartered
outside the United States ("foreign securities").  The Fund will not purchase a
foreign security (for purposes of this limitation securities of Canadian issuers
publicly traded in the United States will not be treated as foreign securities)
if, as a result, the Fund's total holdings of foreign securities would exceed
20% of the Fund's total assets.

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

     The Fund's investments in foreign securities may include investments in
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.

     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 and foreign withholding taxes.  Changes in the value relative to the
U.S. dollar of a foreign currency in which the Fund's holdings are denominated
will result in a change in the U.S. dollar value of the Fund's assets and the
Fund's income available for distribution.

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

YEAR 2000
- ---------

     Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000.  Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders.
Loomis Sayles has advised the Fund that it is reviewing all of its computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to foreclose any such negative impact.  In
addition, Loomis Sayles has been advised by the Fund's custodian that it is also
in the process 

                                      -11-
<PAGE>
 
of reviewing its systems with the same goal. As of the date of this prospectus,
the Fund and Loomis Sayles have no reason to believe that these goals will not
be achieved. Similarly, the values of certain of the portfolio securities held
by the Fund may be adversely affected by the inability of the securities'
issuers or of third parties to process this type of information properly.



                         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.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

     In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.

     The portfolio manager for the Fund since its inception has been Daniel J.
Fuss, who has been with Loomis Sayles since 1976 and is head of the Fixed Income
Management Group.  Mr. Fuss is an Executive Vice President and Director of
Loomis Sayles.

                                 FUND EXPENSES

     The Fund pays Loomis Sayles a monthly investment advisory fee.  This fee is
paid at the annual rate of 0.50% of the Fund's average daily net assets.

     In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.

     Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's total operating expenses to .65% of average annual net assets.



                             PORTFOLIO TRANSACTIONS

     Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund.  Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets.  The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions.  High portfolio turnover
may result in higher costs such as higher brokerage commissions and higher
levels of taxable gains.  Portfolio turnover rates for the life of the Fund are
set forth above under the headings "Financial Highlights" and "Prior
Performance."  See "Dividends, Capital Gain Distributions and Taxes" for
information on the tax consequences of investing in the Fund.

                                      -12-
<PAGE>
 
                             HOW TO PURCHASE SHARES

     You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.

     The minimum initial investment in the Fund is $3,000,000.  Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.

     Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash.  Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund.  Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer.  A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered.  A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (888) 226-9699.

     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 1933 Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by the exchange of securities.

     Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction.  After an account has been
established, you may send subsequent investments at any time.

     The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate.  Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.

     The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust.  Shares of the Fund
are sold without any sales charge.  The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding.  Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading.  Portfolio securities are valued at their
market value as more fully described in the Statement of Additional Information.

                              HOW TO REDEEM SHARES

     You can redeem your shares by sending a written request to the Trust.

     The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed.  All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).

                                      -13-
<PAGE>
 
     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 (888) 226-9699 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 Trust may withhold redemption
proceeds until your check has cleared.

     Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.

     The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.

                               OTHER INFORMATION

     The Trustees may, without shareholder approval, divide the Trust's shares
of beneficial interest into multiple series.  The Trust is currently divided
into seven series, including the Fund and the other funds listed on the cover of
this Prospectus.

     The Fund's investment performance may from time to time be included in
advertisements about the Fund.

     The Fund's yield will be computed by dividing the Fund's net investment
income for a recent 30-day period by the maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period.

     Total return for the Fund is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the redemption
value of the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gain distributions).

     All data are based on the Fund's past investment results and do not predict
future performance.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio
and the Fund's operating expenses.  Investment performance also often reflects
the risks associated with the Fund's investment objectives and policies.  These
factors should be considered when comparing the Fund's investment results with
those of other mutual funds and other investment vehicles.  Quotations of
investment performance for any period when an expense limitation was in effect
will be greater than if the limitation had not been in effect.


                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.

                                      -14-
<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 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.
Distributions designated by the Fund as deriving from net gains on securities
held for more than one year will be taxable as such (generally at a 20% rate for
noncorporate shareholders) whether distributed in cash or additional shares and
regardless of how long you have held your shares.  However, any loss recognized
by you on the taxable disposition of shares held for six months or less will be
treated as a long-term capital loss to the extent of any capital gain
distribution you received with respect to the shares.

     A dividend or distribution made shortly after the purchase of shares of a
Fund by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above.  If a
shareholder held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale of such shares
during such six-month period would be a long-term capital loss to the extent of
such distribution.

     The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.

     In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.

     The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund.  Before investing, you should consult your own tax
adviser for more information concerning the federal, foreign, state and local
tax consequences of investing in, redeeming or exchanging Fund shares.



TRANSFER AND DIVIDEND                        INVESTMENT ADVISER
PAYING AGENT AND                             Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS                          One Financial Center
State Street Bank and Trust Company          Boston, Massachusetts  02111
Boston, Massachusetts 02102

                                      -15-
<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 than obligations in higher rated
categories.

                                      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.

                                       R

This symbol is attached to the ratings of instruments with significant noncredit
risks such as risks to principal or volatility of expected returns.

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
edged."  Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure.  While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

                                       AA

Bonds 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-23


<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 HIGH YIELD FIXED INCOME FUND

                             ONE FINANCIAL CENTER
                         BOSTON, MASSACHUSETTS  02111
                                (888) 226-9699

                                  PROSPECTUS
                                JANUARY 1, 1999

     The Loomis Sayles Investment Trust (the "Trust") is a group of seven mutual
funds including the Loomis Sayles High Yield Fixed Income Fund (the "Fund"). The
other series, which are described in separate prospectuses, are:

                 Loomis Sayles California Tax-Free Income Fund
                     Loomis Sayles Core Fixed Income Fund
                        Loomis Sayles Core Growth Fund
                        Loomis Sayles Fixed Income Fund
             Loomis Sayles Intermediate Duration Fixed Income Fund
               Loomis Sayles Investment Grade Fixed Income Fund

     Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest.  Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.

     This Prospectus concisely describes the information that you should know
before investing in the Fund.  Please read it carefully and keep it for future
reference.  A Statement of Additional Information dated January 1, 1999 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(888) 226-9699.  The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

     THE LOOMIS SAYLES HIGH YIELD FIXED INCOME FUND WILL NORMALLY INVEST AT
LEAST 65% OF ITS ASSETS IN LOWER RATED FIXED INCOME SECURITIES, COMMONLY KNOWN
AS "JUNK BONDS" AND MAY INVEST WITHOUT LIMIT IN SUCH SECURITIES.  INVESTMENTS OF
THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND NON-PAYMENT OF
INTEREST.  INVESTORS SHOULD ASSESS CAREFULLY THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE LOOMIS SAYLES HIGH YIELD FIXED INCOME FUND.  SEE "MORE
INFORMATION ABOUT THE FUND'S INVESTMENTS; LOWER RATED FIXED INCOME SECURITIES."
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<S>                                                             <C>
SUMMARY OF EXPENSES...........................................  -3-

FINANCIAL HIGHLIGHTS..........................................  -4-

PRIOR PERFORMANCE.............................................  -5-

THE TRUST.....................................................  -6-

INVESTMENT OBJECTIVE AND POLICIES.............................  -6-

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS.................  -7-

THE FUND'S INVESTMENT ADVISER................................. -12-

FUND EXPENSES................................................. -12-

PORTFOLIO TRANSACTIONS........................................ -12-

HOW TO PURCHASE SHARES........................................ -12-

HOW TO REDEEM SHARES.......................................... -13-

OTHER INFORMATION............................................. -14-

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............... -14-

APPENDIX...................................................... A-1-
</TABLE> 

                                      -2-
<PAGE>
 
                              SUMMARY OF EXPENSES

     The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly.  The information is based on expenses for the Fund's
most recent fiscal year.  The information below should not be considered a
representation of past or future expenses, as actual expenses may be greater or
less than those shown.  Also, the assumed 5% annual return in the example should
not be considered a representation of investment performance, as actual
performance will depend upon the actual investment results of securities held in
the Fund's portfolio.

Shareholder Transaction Expenses:
 Maximum Sales Load Imposed on
 Purchases (as a percentage of offering price)                 none
 Maximum Sales Load Imposed on
 Reinvested Dividends (as a percentage of
  offering price)                                              none
 Deferred Sales Load (as a percentage of original
  purchase price or redemption
  proceeds as applicable)                                      none
 Redemption Fees (as a percentage of amount
  redeemed)                                                    none
 Exchange Fees                                                 none

Annual Fund Operating Expenses
(as a percentage of average net assets):
  Management Fees (after expense
   limitation)                                                  .60%
  12b-1 Fees                                                   none
  Other Operating Expenses (after expense
   limitation)/1/                                               .15%
  Total Fund Operating Expenses (after expense
   limitation)/1/                                               .75%
 
Example
 You would pay the following
 expenses on a $1,000 investment
 assuming a 5% annual return
 (with or without a redemption at
 the end of each time period):
 
  One Year                                                    $   8
  Three Years                                                 $  24
  Five Years                                                  $  42
  Ten Years                                                   $  93

______________________________
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total Fund operating expenses to the percentage of average net assets
shown above.  In the absence of the voluntary expense limitation, Other
Operating Expenses and Total Fund Operating Expenses for the most recent fiscal
year would have been 0.52% and 1.12%, respectively.

                                      -3-
<PAGE>
 
                             FINANCIAL HIGHLIGHTS

     The financial highlights table that follows is for periods after March 7,
1997.  The following information should be read in conjunction with the
financial highlights, financial statements, and notes thereto that have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon appears in the Fund's 1998 Annual Report, which is incorporated by
reference into this Prospectus and the Statement of Additional Information.

<TABLE>
<CAPTION>
                                                                +Nine Months Ended     March 7 ++ through
                                                                 September 30, 1998    December 31, 1997
                                                                 ------------------    -----------------
<S>                                                             <C>                    <C>
Net asset value, beginning period............................   $        10.04         $     10.09

Income from investment operations -
  Net investment income......................................             0.77                0.62
  Net realized and unrealized gain (loss) on investments.                (2.31)               0.35
                                                                --------------         ----------- 
Total from investment operations.............................            (1.54)               0.97

Less distributions -
  Dividends from net investment income.......................             0.00               (0.71)
  Distributions from net realized capital gains..............            (0.09)              (0.31)
                                                                --------------         -----------  
  Total distributions........................................            (0.09)              (1.02)
                                                                --------------         -----------          
Net asset value, end of period...............................   $         8.41         $     10.04
                                                                ==============         ===========

Total return (%).............................................            (15.5)**              9.6**
Net assets, end of period (000)..............................   $       28,742         $    28,872
Ratio of operating expenses to average net assets (%)........             0.75*               0.75*
Ratio of net investment income to average net assets (%).....            10.69*               8.77*
Portfolio turnover rate (%)..................................               39**                64**
Without giving effect to the voluntary expense limitations:
  The ratio of operating expenses to average net assets
  would have been (%)........................................             1.12*               1.15*
The net investment income per share would have been..........   $         0.74         $      0.60
</TABLE>

+The Fund's fiscal year end has changed to September 30 from December 31.
++Date of effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended.
*Annualized.
**Not annualized.

Further information about the performance of the Fund is contained in the Fund's
semiannual and annual reports to shareholders, copies of which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.

                                      -4-
<PAGE>
 
                               PRIOR PERFORMANCE

    (FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT THE INDICATED PERIODS)

 
  The information presented below, for the periods indicated, relates to periods
prior to the effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended (the "1933 Act").  The following information
should be read in conjunction with the financial highlights, financial
statements, and notes thereto that have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon appears in the Fund's 1998
Annual Report, which is incorporated by reference into this Prospectus and the
Statement of Additional Information.  The Fund is managed in a manner that is in
all material respects similar to the manner in which it was managed prior to the
effectiveness of its registration statement under the 1933 Act.
<TABLE>
<CAPTION>
 
                                                               January 1,      June 5* through
                                                               1997 through    December 31,
                                                               March 6, 1997   1996
                                                               --------------  ----------------
<S>                                                            <C>             <C>
Net asset value, beginning of period.........................      $   10.16           $ 10.00
 
Income from investment operations -
   Net investment income.....................................           0.08              0.56
   Net realized and unrealized gain (loss) on investments....          (0.15)             0.21
                                                                   ---------           -------
     Total from investment operations........................          (0.07)             0.77
 
Less distributions -
   Dividends from net investment income......................           0.00             (0.56)
   Distributions from net realized capital gains.............           0.00             (0.05)
                                                                   ---------           -------
     Total distributions.....................................           0.00             (0.61)
                                                                   ---------           -------
 
Net asset value, end of period...............................      $   10.09           $ 10.16
                                                                   =========           =======
 
Total return (%).............................................           (0.7)***           7.7***
Net assets, end of period (000)..............................      $  12,904           $ 3,100
Ratio of operating expenses to average net assets (%)........           0.75**            0.75**
Ratio of net investment income to average net assets (%).....           8.84**            9.42**
Portfolio turnover rate (%)..................................             49***              9***
Without giving effect to the voluntary expense limitations:
   The ratio of operating expenses to average net assets
      would have been (%)....................................           1.48**            2.73**
   The net investment income per share would have been ......      $    0.07           $  0.44
</TABLE>

* Commencement of operations.
**Annualized.
***Not annualized.

                                      -5-
<PAGE>
 
                                   THE TRUST

     The Fund is a series of the Trust. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993. The Trust is authorized to issue an unlimited number
of full and fractional shares of beneficial interest in multiple series. Shares
are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with a fractional vote for each fractional share held) at
shareholder meetings. The Trust does not generally hold shareholder meetings and
will do so only when required by law. Shareholders may call meetings to consider
removal of the Trustees.

                       INVESTMENT OBJECTIVE AND POLICIES

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

     The Fund seeks to attain its objective by normally investing substantially
all of its assets in a broad range of debt securities, although up to 20% of its
total assets may be invested in preferred stocks and up to 10% in common stocks.
Debt securities may include corporate securities, securities issued or
guaranteed by the U.S. Government, its authorities, agencies or
instrumentalities and certificates representing undivided interests in the
interest or principal of U.S. Treasury securities ("U.S. Government
Securities"), zero coupon securities, collateralized mortgage securities,
including interest-only and principal-only ("IOs" and POs") classes of mortgage-
backed securities, convertible bonds, real estate investment trusts ("REITs")
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 total assets in fixed
income securities that are of below investment grade quality at the time of
purchase, which are securities rated below BBB by Standard & Poor's ("S&P") or
below Baa by Moody's Investors Service, Inc. ("Moody's"), or unrated securities
determined by Loomis Sayles to be of comparable quality.  Securities of below
investment grade are commonly referred to as "junk 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.
See "More Information About the Fund's Investments; Lower Rated Fixed Income
Securities" below.

     The percentages of the Fund's net assets invested during the fiscal period
ended September 30, 1998 in securities assigned to the various rating categories
by S&P and Moody's on a dollar-weighted basis were approximately as follows:
"AAA"/"Aaa," ___________%; "AA"/"Aa," ___________%; "A"/"A,"___________%;
"BBB"/"Baa,"___________%; "BB"/"Ba,"___________%; "B"/"B," ___________%; and
below "B" ___________%.  The percentage of the Fund's net assets invested during
such fiscal year in unrated debt securities as a group was approximately
___________%.  The percentages of the Fund's net assets invested during such
fiscal year in such unrated securities (categorized by comparable rating
category) were approximately as follows:  "AAA"/"Aaa," ___________%; "AA"/"Aa,"
___________%; "A"/"A," ___________%; "BBB"/"Baa," ___________%; "BB"/"Ba,"
___________%; "B"/"B," ___________%; and 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 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 that are described below.

                                      -6-
<PAGE>
 
     The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders.  All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.

                 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 other than for
purposes of determining compliance with the Fund's investment policy of
investing, under normal market conditions, at least 65% of its total assets in
fixed income securities of below investment grade quality. Because interest
rates vary, it is impossible to predict the income of the Fund for any
particular period.

     Fixed income securities are subject to market and credit risk.  Market risk
relates to changes in a security's value as a result of changes in interest
rates generally.  In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest. Generally, the longer the maturity of a fixed income security, the
greater the fluctuations in its value because of market and credit risk.

LOWER RATED FIXED INCOME SECURITIES
- -----------------------------------

     The Fund will normally invest at least 65% of its total assets in
securities rated below investment grade ("lower rated fixed income securities"),
including securities in the lowest rating categories, and unrated securities
determined by Loomis Sayles to be of comparable quality. Lower rated fixed
income securities generally provide higher yields, but are subject to greater
credit and market risk than higher quality fixed income securities. Lower rated
fixed income securities are considered speculative with respect to the ability
of the issuer to meet principal and interest payments. Achievement of the Fund's
investment objective through investments in lower rated fixed income securities
may be more dependent on Loomis Sayles's credit analysis than is the case with
higher quality bonds. The market for lower rated fixed income securities may be
more severely affected than other financial markets by economic recession or
substantial interest rate increases. The value and liquidity of lower rated
fixed income securities may be diminished by adverse publicity and investor
perceptions. In addition, legislation that limits the tax benefits to issuers or
holders of taxable lower rated fixed income securities or that limits the
ability of certain categories of financial institutions to invest in these
securities may adversely affect their market value. The secondary market for
lower rated fixed income securities may be less liquid than the secondary market
for higher rated fixed income securities. This lack of liquidity at certain
times may affect the values of these securities and may make the valuation and
sale of these securities by the Fund more difficult. Securities of below
investment grade quality are commonly referred to as "junk bonds." Certain lower
rated fixed income securities do not pay interest on a current basis. However,
the Fund will accrue and distribute this interest on a current basis, and may be
required to sell securities at times when Loomis Sayles would not otherwise deem
it desirable to do so in order to generate cash for distributions. Securities in
the lowest rating categories may be in poor 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.

                                      -7-
<PAGE>
 
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 ("GNMA"), are known as "mortgage-backed" securities,
representing interests in "pools" of mortgage loans secured by residential or
commercial real property.  Interest and principal payments on the mortgages
underlying mortgage-backed U.S. Government Securities are passed through to the
holders of the security.  If the Fund purchases mortgage-backed securities at a
discount or a premium, the Fund will recognize a gain or loss when the payments
of principal, through prepayment or otherwise, are passed through to the Fund
and, if the payment occurs in a period of falling interest rates, the Fund may
not be able to reinvest the payment at as favorable an interest rate.  As a
result of these principal prepayment features, mortgage-backed securities are
generally more volatile investments than many other fixed income securities.
See "Collateralized Mortgage Obligations" below for additional information
regarding the risks associated with mortgage-backed securities.

   In addition to investing directly in U.S. Government Securities, the Fund may
purchase certificates of accrual or similar instruments ("strips") evidencing
undivided ownership interests in interest payments or principal payments, or
both, in U.S. Treasury securities.  These investment instruments may be highly
volatile.

ZERO COUPON SECURITIES
- ----------------------

   The Fund may invest in "zero coupon" fixed income securities.  These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis.  The Fund is required to distribute the income on zero
coupon securities to Fund shareholders as the income accrues, even though the
Fund is not receiving the income in cash on a current basis.  Thus the Fund may
be forced to sell other investments to obtain cash to make income distributions
at times when Loomis Sayles would not otherwise deem it advisable to do so.  The
market value of zero coupon securities is generally more volatile than that of
non-zero coupon fixed income securities of comparable quality and maturity.

MORTGAGE-BACKED SECURITIES
- --------------------------

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

                                      -8-
<PAGE>
 
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.  A faster then
anticipated rate of prepayments will generally result in losses on CMOs
representing interests in the interest payments on the underlying portfolio of
mortgage-backed securities.  As with other mortgage-backed securities, the early
retirement of a particular class or series of CMOs held by the Fund could
involve the loss of any premium the Fund paid when it acquired the investment
and could result in the Fund's reinvesting the proceeds at a lower interest rate
than the interest rate paid by the retired CMO. Because of the early retirement
feature, CMOs may be more volatile than many other fixed income investments.  In
addition, slower than anticipated prepayments on the underlying mortgages can
extend the effective maturities of CMOs, subjecting them to a greater risk of
decline in market value in response to rising interest rates than traditional
debt securities.

ASSET-BACKED SECURITIES
- -----------------------
 
   The Fund may invest in asset-backed securities.  Through the use of trusts
and special purpose corporations, automobile and credit card receivables are
securitized in pass-through structures similar to mortgage pass-through
structures or in a pass-through structure similar to the CMO structure.
Generally, the issuers of asset-backed bonds, notes or pass-through certificates
are special  purpose entities and do not have any significant assets other than
the receivables securing such obligations.  In general, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans.
Instruments backed by pools of receivables are similar to mortgage-backed
securities in that they are subject to unscheduled prepayments of principal
prior to maturity.  When the obligations are prepaid, the Fund will ordinarily
reinvest the prepaid amounts in securities the yields of which reflect interest
rates prevailing at the time.  Therefore, the Fund's ability to maintain a
portfolio that includes high-yielding asset-backed securities will be adversely
affected to the extent that prepayments of principal must be reinvested in
securities that have lower yields than the prepaid obligations.  Moreover,
prepayments of securities purchased at a premium could result in a realized
loss.

STRIPPED MORTGAGE-BACKED SECURITIES
- -----------------------------------

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

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

REAL ESTATE INVESTMENT TRUSTS
- -----------------------------

   The Fund may invest in REITs.  REITs involve certain unique risks in addition
to those risks associated with investing in the real estate industry in general
(such as possible declines in the value of real estate, lack of availability of
mortgage funds or extended vacancies of property).  Equity REITs may be affected
by changes in the value of the underlying property owned by 

                                      -9-
<PAGE>
 
the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, risks of default by borrowers and self-
liquidation. REITs are also subject to the possibilities of failing to qualify
for tax-free pass-though of income under the Internal Revenue Code of 1986, as
amended (the "Code"), and failing to maintain their exemptions from registration
under the Investment Company Act of 1940.

   Investment in REITs involves risk similar to those associated with investing
in small capitalization companies.  REITs may have limited financial resources,
may trade less frequently and in a limited volume and may be subject to more
abrupt or erratic price movements than larger securities.


RULE 144A SECURITIES
- --------------------

   The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.

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 50% of the
Fund's total assets.

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

   The Fund's investments in foreign securities may include investments in
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.

                                      -10-
<PAGE>
 
   Since most foreign securities are denominated in foreign currencies or traded
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected favorably
or unfavorably by changes in currency exchange rates, exchange control
regulations, or foreign withholding.  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.


CONVERTIBLE SECURITIES
- ----------------------

   Convertible securities include corporate bonds, notes or preferred stocks of
U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities at a stated price or rate.  Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation.  Because convertible securities can be
converted into equity securities, their value will normally vary in some
proportion with those of the underlying equity securities. Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. Due to the conversion
feature, convertible securities generally yield less than nonconvertible fixed
income securities of similar credit quality and maturity. The Fund's investment
in convertible securities may at times include securities that have a mandatory
conversion feature, pursuant to which the securities convert automatically into
common stock at a specified date and 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.

COMMON STOCKS
- -------------

   The Fund may invest up to 10% of its total assets in common stocks, usually
as a result of warrants associated with debt instruments purchased by the Fund,
but also under certain circumstances to seek capital appreciation.  Common
stocks, like other equity securities, offer greater potential for long-term
growth but are more risky than some other forms of investment.

YEAR 2000
- ---------

   Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000.  Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders.
Loomis Sayles has advised the Fund that it is reviewing all of its computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to foreclose any such negative impact.  In
addition, Loomis Sayles has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal. As of the date of
this prospectus, the Fund and Loomis Sayles have no reason to believe that these
goals will not be achieved. Similarly, the values of certain of the portfolio
securities held by the Fund may be adversely affected by the inability of the
securities' issuers or of third parties to process this type of information
properly.

                                      -11-
<PAGE>
 
                         THE FUND'S INVESTMENT ADVISER

   The Fund's investment adviser is Loomis Sayles, One Financial Center, Boston,
Massachusetts 02111.  Founded in 1926, Loomis Sayles is one of the country's
oldest and largest investment firms.

   The general partner of Loomis Sayles is a special purpose corporation that is
an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York  Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

   In addition to selecting and reviewing the Fund's investments, Loomis Sayles
provides executive and other personnel for the management of the Fund.  The
Board of Trustees supervises Loomis Sayles's conduct of the affairs of the Fund.

   The portfolio manager for the Fund since its inception has been Daniel J.
Fuss, who has been with Loomis Sayles since 1976 and is head of the Fixed Income
Management Group.  Mr. Fuss is an Executive Vice President and Director of
Loomis Sayles.

                                 FUND EXPENSES

   The Fund pays Loomis Sayles a monthly investment advisory fee.  This fee is
paid at the annual rate of .60% of the Fund's average daily net assets.

   In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.

   Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's annualized total operating expenses to .75% of average annual
net assets.

                            PORTFOLIO TRANSACTIONS

     Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund.  Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets.   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 result in higher costs such as higher brokerage commissions and higher
levels of taxable gains.  Portfolio turnover rates for the life of the Fund are
set forth above under the headings "Financial Highlights" and "Prior
Performance."  See "Dividends, Capital Gain Distributions and Taxes" for
information on the tax consequences of investing in the Fund.



                            HOW TO PURCHASE SHARES

     You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.

     The minimum initial investment in the Fund is $3,000,000.  Subsequent
investments must be at least $50,000.  The Trust reserves the right to waive
these minimums in its sole discretion.

                                      -12-
<PAGE>
 
     Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash.  Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged are acceptable for purchase by the
Fund.  Securities accepted by Loomis Sayles in exchange for Fund shares will be
valued in the same manner as the Fund's assets, as described below, as of the
time of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer.  A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered.  A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (888) 226-9699.

     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 1933 Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions.  No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by exchange of securities.

     Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction.  After an account has been
established, you may send subsequent investments at any time.

     The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate.  Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.

     The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust.  Shares of the Fund
are sold without any sales charge.  The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding.  Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading.  Portfolio securities are valued at their
market value as more fully described in the Statement of Additional Information.

                             HOW TO REDEEM SHARES

     You can redeem your shares by sending a written request to the Trust.

     The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed.  All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).

     The redemption price will be the net asset value per share next determined
after the written redemption request 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 (888) 226-9699 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 Trust may withhold redemption
proceeds until your check has cleared.

     Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.

                                      -13-
<PAGE>
 
     The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.

                               OTHER INFORMATION

     The Trustees may, without shareholder approval, divide the Trust's shares
of beneficial interest into multiple series.  The Trust is currently divided
into seven series, including the Fund and the other funds listed on the cover of
this Prospectus.

     As of October 31, 1998, each of Trustees of Clark University and Blue Cross
Blue Shield of Massachusetts, Inc. Retirement Trust may be deemed to control the
Fund because each possessed, directly or indirectly, beneficial ownership of
more than 25% of the Fund's shares.

     The Fund's investment performance may from time to time be included in
advertisements about the Fund.

     The Fund's yield will be computed by dividing the Fund's net investment
income for a recent 30-day period by the maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period.

     Total return for the Fund is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the redemption
value of the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gain distributions).

     All data are based on the Fund's past investment results and do not predict
future performance.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio
and the Fund's operating expenses.  Investment performance also often reflects
the risks associated with the Fund's investment objectives and policies.  These
factors should be considered when comparing the Fund's investment results with
those of other mutual funds and other investment vehicles.  Quotations of
investment performance for any period when an expense limitation was in effect
will be greater than if the limitation had not been in effect.

                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
Code.  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.

                                      -14-
<PAGE>
 
     Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares.
Distributions designated by the Fund as deriving from net gains on securities
held for more than one year will be taxable as such (generally at a 20% rate for
noncorporate shareholders) whether distributed in cash or additional shares and
regardless of how long you have held your shares.

     A dividend or distribution made shortly after the purchase of shares of a
Fund by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above.  If a
shareholder held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale of such shares
during such six-month period would be a long-term capital loss to the extent of
such distribution.

     The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.

     In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.

     The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund.  Before investing, you should consult your own tax
adviser for more information concerning the federal, foreign, state and local
tax consequences of investing in, redeeming or exchanging Fund shares.



TRANSFER AND DIVIDEND                        INVESTMENT ADVISER
PAYING AGENT AND                             Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS                          One Financial Center
State Street Bank and Trust Company          Boston, Massachusetts  02111
Boston, Massachusetts  02102

                                      -15-
<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 than obligations in higher rated
categories.

                                      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.

                                       R

This symbol is attached to the ratings of instruments with significant noncredit
risks such as risks to principal or volatility of expected returns.

                                      A-1
<PAGE>
 
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

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
edged."  Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure.  While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

                                      AA

Bonds 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

                                      A-2
<PAGE>
 
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 INTERMEDIATE DURATION FIXED INCOME FUND

                             ONE FINANCIAL CENTER
                         BOSTON, MASSACHUSETTS  02111
                                (888) 226-9699

                                  PROSPECTUS
                                JANUARY 1, 1999

     The Loomis Sayles Investment Trust (the "Trust") is a group of seven
mutual funds including the Loomis Sayles Intermediate Duration Fixed Income Fund
(the "Fund").  The other series, which are described in separate prospectuses,
are:

                 Loomis Sayles California Tax-Free Income Fund
                     Loomis Sayles Core Fixed Income Fund
                        Loomis Sayles Core Growth Fund
                        Loomis Sayles Fixed Income Fund
                  Loomis Sayles High Yield Fixed Income Fund
               Loomis Sayles Investment Grade Fixed Income Fund

     Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest.  Each of the funds is separately managed and has its own
investment objective and policies.  Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.

     This Prospectus concisely describes the information that you should know
before investing in the Fund.  Please read it carefully and keep it for future
reference.  A Statement of Additional Information dated January 1, 1999 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 (888) 226-9699.  The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<S>                                                              <C> 
SUMMARY OF EXPENSES.............................................  -3-

FINANCIAL HIGHLIGHTS............................................  -4-

THE TRUST.......................................................  -5-

INVESTMENT OBJECTIVE AND POLICIES...............................  -5-

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS...................  -6-

THE FUND'S INVESTMENT ADVISER................................... -10-

FUND EXPENSES................................................... -11-

PORTFOLIO TRANSACTIONS.......................................... -11-

HOW TO PURCHASE SHARES.......................................... -11-

HOW TO REDEEM SHARES............................................ -12-

OTHER INFORMATION............................................... -12-

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES................. -13-

APPENDIX A......................................................  A-1

APPENDIX B......................................................  B-1
</TABLE> 

                                      -2-
<PAGE>
 
                              SUMMARY OF EXPENSES

     The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly.  The information is based on estimated expenses for the
Fund's first full fiscal year.  The information below should not be considered a
representation of past or future expenses, as actual expenses may be greater or
less than those shown.  Also, the assumed 5% annual return in the example should
not be considered a representation of investment performance, as actual
performance will depend upon the actual investment results of securities held in
the Fund's portfolio.

Shareholder Transaction Expenses:
 Maximum Sales Load Imposed on
  Purchases (as a percentage of
  offering price)                            none
 Maximum Sales Load Imposed on
  Reinvested Dividends (as a percentage
  of offering price)                         none
 Deferred Sales Load (as a percentage
  of original purchase price or redemption
  proceeds as applicable)                    none
 Redemption Fees (as a percentage of
  amount redeemed)                           none
 Exchange Fees                               none

Annual Fund Operating Expenses
(as a percentage of average net assets):
  Management Fees (after
   expense limitation)                       .40%
  12b-1 Fees                                 none
Other Operating Expenses (after
   expense limitation) /1/                   .15%
  Total Operating Expenses (after
   expense limitation) /1/                   .55%
 
Example
You would pay the following
 expenses on a $1,000 investment
 assuming a 5% annual return
 (with or without a redemption at
 the end of each time period):

 One Year                                    $ 6
 Three Years                                 $18

______________________________
    
/1/ Loomis Sayles has voluntarily undertaken for an indefinite period to limit
the Fund's total operating expenses to the percentage of average net assets
shown above. In the absence of the voluntary expense limitation, Other Operating
Expenses and Total Operating Expenses for the Fund's first fiscal period ended
September 30, 1998, would have been .93% and 1.33%, respectively.     

                                      -3-
<PAGE>
 
                             FINANCIAL HIGHLIGHTS

     The following information should be read in conjunction with the financial
highlights, financial statements, and notes thereto that have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon
appears in the Fund's 1998 Annual Report, which is incorporated by reference
into this Prospectus and the Statement of Additional Information.

<TABLE>
<CAPTION>
                                                                      January 28+ through
                                                                      September 30, 1998
                                                                      --------------------
<S>                                                                   <C>
Net asset value, beginning period.................................          $ 10.00

Income from investment operations -
  Net investment income...........................................             0.41
  Net realized and unrealized gain (loss) on investments..........            (0.22)
   Total from investment operations...............................             0.19
 

Less distributions -
  Dividends from net investment income............................            (0.32)
  Distributions from net realized capital gains...................             0.00
                                                                            -------
  Total distributions.............................................            (0.32)
                                                                            -------
Net asset value, end of period....................................          $  9.87
                                                                            =======

Total return (%)..................................................              1.9**
Net assets, end of period (000)...................................          $11,054
Ratio of operating expenses to average net assets (%).............             0.55*
Ratio of net investment income to average net assets (%)..........             6.05*
Portfolio turnover rate (%).......................................               74**
Without giving effect to the voluntary expense limitations:
  The ratio of operating expenses to average net assets
  would have been (%).............................................             1.33*
   The net investment income per share would have been............          $  0.35
</TABLE>

*Annualized.
**Not annualized.
+Commencement of Operations.

Further information about the performance of the Fund is contained in the Fund's
semiannual and annual reports to shareholders, copies of which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number stated on the cover of this Prospectus.

                                      -4-
<PAGE>
 
                                   THE TRUST

  The Fund is a series of the Trust. The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993.  The Trust is authorized to issue an unlimited
number of full and fractional shares of beneficial interest in multiple series.
Shares are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with a fractional vote for each fractional share held) at
shareholder meetings.  The Trust does not generally hold shareholder meetings
and will do so only when required by law.  Shareholders may call meetings to
consider removal of the Trustees.

                       INVESTMENT OBJECTIVE AND POLICIES

  The Fund's investment objective is above-average total return through a
combination of current income and capital appreciation.  Although the Fund may
invest in fixed income securities of any maturity, the weighted average duration
of the Fund's portfolio will generally remain within a band of 2 to 5 years.
The concept of duration is described more fully below.

  The Fund will seek to achieve its objective by investing in a diversified
portfolio of debt securities that may include corporate securities, securities
issued or guaranteed by the U.S. Government, its authorities, agencies or
instrumentalities and certificates representing undivided interests in the
interest or principal of U.S. Treasury securities ("U.S. Government
Securities"), "Yankee" securities (U.S. dollar-denominated debt issued by non-
U.S. entities), convertible securities, certain types of mortgage-related and
asset-backed securities, including interest-only and principal-only ("IOs" and
"POs") classes of mortgage-backed securities, and real estate investment trusts
("REITs"), which are described herein (together with their related risks) under
"More Information About the Fund's Investments."  Under normal market
conditions, the Fund will invest at least 65% of its total assets in fixed
income securities that have a duration of 2 to 5 years at the time of purchase.
Collateralized mortgage obligations ("CMOs") will be limited to those with CMO
market risk ratings of V-1 to V-4 from Fitch Investors Service, L.P. ("Fitch"),
or CMOs unrated by Fitch that Loomis Sayles has determined to be of comparable
volatility.  All securities will be denominated in U.S. dollars.

  The Fund will purchase only securities rated at least Baa3 by Moody's
Investors Service, Inc. ("Moody's") or at least BBB- by Standard & Poor's
("S&P"), or, if unrated, determined to be of comparable quality by Loomis
Sayles. Some or all of these securities may be "split-rated securities," i.e.,
securities that have received an investment grade rating from one of the
nationally recognized rating organizations but that have also received a lower
rating from the other nationally recognized rating organization.  Split-rated
securities may be subject to some of the risks described below under "Lower
Rated Fixed Income Securities."  In the event that the credit rating of a
security held by the Fund falls below investment grade (or, in the case of an
unrated security, Loomis Sayles determines that the quality of such security has
deteriorated below investment grade), the Fund will not be obligated to dispose
of such security and may continue to hold such security if, in the opinion of
Loomis Sayles, such investment is appropriate in the circumstances.

  Some of the Fund's investment restrictions are "fundamental" and cannot be
changed without a majority vote of the Fund's shareholders.  Such restrictions
include:  (1) a restriction prohibiting the Fund from making loans; (2) a
restriction prohibiting the Fund from purchasing a security (other than U.S.
Government Securities) if, as a result, more than 25% of the Fund's total assets
(taken at current value) would be invested in any one industry; (3) a
restriction prohibiting the Fund from borrowing money in excess of 10% of its
total assets (taken at cost) or 5% of its total assets (taken at current value),
whichever is lower, and from borrowing any money except as a temporary measure
for extraordinary or emergency purposes; and (4) a restriction prohibiting the
Fund from purchasing any illiquid security including a security that is not
readily marketable if, as a result, more than 15% of the Fund's net assets based
on current value would then be invested in such security.  For additional
investment restrictions, see the Statement of Additional Information.

  Although authorized to invest in restricted securities, the Fund, as a matter
of nonfundamental operating policy, currently does not intend to invest in such
securities, other than Rule 144A securities that are described below.

                                      -5-
<PAGE>
 
  The investment objective of the Fund is "fundamental" and cannot be changed
without a majority vote of the Fund's shareholders.  All investment policies
other than those that are identified as "fundamental" may be changed by the
Trustees without a vote of the Fund's shareholders.

  Duration is a measure of the expected life of a fixed income security that was
developed as a more precise alternative to the concept of "term to maturity."
Most debt obligations provide interest payments in addition to a final payment
at maturity.  Some debt obligations also have call provisions.  Depending on the
relative magnitude of these payments, the market values of debt obligations may
respond differently to changes in the level and structure of interest rates.
Traditionally, a debt security's "term to maturity" has been used as a proxy for
the sensitivity of the security's price to changes in interest rates.  However,
term to maturity measures only the time until a debt security provides its final
payment, taking no account of the pattern of the security's payments prior to
maturity.  Duration is a measure of the expected life of a fixed income security
on a present value basis.  Duration takes the length of the time intervals
between the present time and the time that the interest and principal payments
are scheduled or, in the case of a callable bond, expected to be received, and
weights them by the present values of the cash to be received at each future
point in time.  For any fixed income security with interest payments occurring
prior to the payment of principal, duration is always less than maturity.   As a
general rule, a 1% increase or decrease in interest rates will result in
approximately a 1% decrease or increase, respectively, in the value of a
security for each year of duration.  For example, a 1% increase in interest
rates will result in approximately a 5% decrease in the value of a security
having a five-year duration.  There are some situations, however, where the
standard duration calculation does not properly reflect the interest rate
exposure of a security.  Also, in some cases, duration cannot be calculated with
certainty because certain assumptions (including assumptions relating to
prepayment rates in the case of mortgage-backed and asset-backed securities)
have to be factored into the calculation.

                 MORE INFORMATION ABOUT THE FUND'S INVESTMENTS

  The net asset value of the Fund's shares will vary as a result of changes in
the value of securities in the Fund's portfolio.  The following describes the
types of securities in which the Fund will principally invest and the risks
associated with them.  Additional information about the Fund's investment
practices can be found in the Statement of Additional Information.

FIXED INCOME SECURITIES
- -----------------------

  The Fund may invest in fixed income securities of any maturity although the
weighted average duration of its investments will generally remain within a band
of 2 to 5 years.  Fixed income securities pay a specified rate of interest or
dividends.  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 other than for purposes of determining compliance with the
Fund's investment policy of investing, under normal market conditions, at least
65% of its total assets in fixed income securities with a duration of 2 to 5
years. Because interest rates vary, it is impossible to predict the income of
the Fund for any particular period.

  Fixed income securities are subject to market and credit risk.  Market risk
relates to changes in a security's value as a result of changes in interest
rates generally.  In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest.  Generally, the longer the maturity of a fixed income security,
the greater the fluctuations in its value because of market and credit risk.

U.S. GOVERNMENT SECURITIES
- --------------------------

  U.S. Government Securities have different kinds of government support.  For
example, some U.S. Government Securities, such as U.S. Treasury bonds, are
supported by the full faith and credit of the United States, whereas certain
other U.S. Government Securities issued or guaranteed by federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States.

                                      -6-
<PAGE>
 
  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 ("GNMA"), 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 may purchase split-rated securities, which may be subject to some of
the risks associated with securities of below investment grade quality ("lower
rated fixed income securities"), also known as "junk bonds".  Lower rated fixed
income securities generally provide higher yields, but are subject to greater
credit and market risk than higher quality fixed income securities.  Lower rated
fixed income securities are considered speculative with respect to the ability
of the issuer to meet principal and interest payments.  Achievement of the
Fund's investment objective through investments in lower rated fixed income
securities may be more dependent on Loomis Sayles's credit analysis than is the
case with higher quality bonds.  The market for lower rated fixed income
securities may be more severely affected than other financial markets by
economic recession or substantial interest rate increases.  The value and
liquidity of lower rated fixed income securities may be diminished by adverse
publicity and investor perceptions.  In addition, legislation that limits the
tax benefits to issuers or holders of taxable lower rated fixed income
securities or that limits the ability of certain categories of financial
institutions to invest in these securities may adversely affect their market
value.  The secondary market for lower rated fixed income securities may be less
liquid than the secondary market for higher rated fixed income securities.  This
lack of liquidity at certain times may affect the values of these securities and
may make the valuation and sale of these securities by the Fund more difficult.
Certain lower-rated fixed income securities do not pay interest on a current
basis.  However, the Fund will accrue and distribute this interest on a current
basis, and may be required to sell securities at times when Loomis Sayles would
not otherwise deem it desirable to do so in order to generate cash for
distributions. Securities in the lowest rating categories may be in poor
standing or in default.  Investment grade fixed income securities rated Baa by
Moody's or BBB by S&P 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.

MORTGAGE-BACKED SECURITIES
- --------------------------

  The Fund may invest in mortgage-backed securities, such as GNMA or Fannie Mae
certificates, which differ from traditional debt securities.  Among the major
differences are that interest and principal payments are made more frequently,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans 

                                      -7-
<PAGE>
 
generally may be prepaid at any time. As a result, if the Fund purchases these
assets at a premium, a faster-than-expected prepayment rate will increase yield
to maturity. If the Fund purchases mortgage-backed securities at a discount,
faster-than-expected prepayments will increase, and slower-than-expected
prepayments will reduce, yield to maturity. Prepayments, and resulting amounts
available for reinvestment by the Fund, are likely to be greater during a period
of declining interest rates and, as a result, are likely to be reinvested at
lower interest rates. Accelerated prepayments on securities purchased at a
premium may result in loss of principal if the premium has not been fully
amortized at the time of prepayment. Although these securities will decrease in
value as a result of increases in interest rates generally, they are likely to
appreciate less than other fixed-income securities when interest rates decline
because of the risk of prepayments.

COLLATERALIZED MORTGAGE OBLIGATIONS
- -----------------------------------

  The Fund may invest in CMOs.  A CMO is a limited recourse security backed by a
portfolio of mortgages or, more typically, by mortgage-backed securities held
under an indenture.  CMOs may be issued either by instrumentalities of the U.S.
Government or by non-governmental entities.  The issuer's obligation to make
interest and principal payments is derived from and secured by the underlying
portfolio of mortgages or mortgage-backed securities.  CMOs are issued with a
number of classes or series which have different maturities and which may
represent interests in some or all of the interest or principal payments on the
underlying collateral or a combination thereof.  CMOs of different classes or
series are generally retired in sequence as the underlying mortgage loans in the
mortgage pool are repaid.  In the event of sufficient early prepayments on such
mortgages, the class or series of CMOs first to mature generally will be retired
prior to its maturity.  As with other mortgage-backed securities, the early
retirement of a particular class or series of CMOs held by the Fund could
involve the loss of any premium the Fund paid when it acquired the investment
and could result in the Fund's reinvesting the proceeds at a lower interest rate
than the interest rate paid by the retired CMO. Because of the early retirement
feature, CMOs may be more volatile than many other fixed income investments.
The Fund will invest only in CMOs with Fitch ratings of V-4 or better, or those
CMOs unrated by Fitch that Loomis Sayles has determined to be of comparable
volatility.  Even CMOs with ratings reflecting the lowest market risk are likely
to experience losses in the event of adverse changes in market conditions.  The
duration of CMOs and other mortgage-related securities is often difficult to
determine because the underlying mortgages may be subject to early repayment.
Thus, the determination of duration will  be dependent on the adviser's
assumptions regarding the likelihood and incidence of prepayment and, to the
extent that such assumptions prove to be incorrect, the duration of the Fund's
portfolio, and thus its relative exposure to fluctuation of interest rates, may
be significantly different than intended and may increase the overall risk of
the Fund's portfolio.

STRIPPED MORTGAGE-BACKED SECURITIES
- -----------------------------------

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

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

ASSET-BACKED SECURITIES
- -----------------------
 
  The Fund may invest in asset-backed securities.  Through the use of trusts and
special purpose corporations, automobile and credit card receivables are
securitized in pass-through structures similar to mortgage pass-through
structures or in a pass-through structure similar to the CMO structure.
Generally, the issuers of asset-backed bonds, notes or pass-through certificates
are special  purpose entities and do not have any significant assets other than
the receivables securing such obligations.  In general, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans.
Instruments backed by pools of receivables are similar to mortgage-backed
securities in that they 

                                      -8-
<PAGE>
 
are subject to unscheduled prepayments of principal prior to maturity. When the
obligations are prepaid, the Fund will ordinarily reinvest the prepaid amounts
in securities the yields of which reflect interest rates prevailing at the time.
Therefore, the Fund's ability to maintain a portfolio that includes high-
yielding asset-backed securities will be adversely affected to the extent that
prepayments of principal must be reinvested in securities that have lower yields
than the prepaid obligations. Moreover, prepayments of securities purchased at a
premium could result in a realized loss.

REAL ESTATE INVESTMENT TRUSTS
- -----------------------------

  The Fund may invest in REITs.  REITs involve certain unique risks in addition
to those risks associated with investing in the real estate industry in general
(such as possible declines in the value of real estate, lack of availability of
mortgage funds or extended vacancies of property).  Equity REITs may be affected
by changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, are subject to heavy cash
flow dependency, risks of default by borrowers and self-liquidation.  REITs are
also subject to the possibilities of failing to qualify for tax-free pass-though
of income under the Internal Revenue code of 1986, as amended (the "Code"), and
failing to maintain their exemptions from registration under the Investment
Company Act of 1940.

  Investment in REITs involves risk similar to those associated with investing
in small capitalization companies. REITs may have limited financial resources,
may trade less frequently and in a limited volume and may be subject to more
abrupt or erratic price movements than larger securities.

WHEN-ISSUED SECURITIES
- ----------------------

  The Fund may purchase securities on a "when-issued" basis.  This means that
the Fund will enter into a commitment to buy the security before the security
has been issued.  The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment.  The security
is typically delivered to the Fund 15 to 120 days later.  No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued.  If the value of the security being purchased falls
between the time the Fund commits to buy it and the payment date, the Fund may
sustain a loss.  The risk of this loss is in addition to the Fund's risk of loss
on the securities actually held in its portfolio at the time.  When the Fund
buys a security on a when-issued basis, it is subject to the risk that market
rates of interest will increase before the time the security is delivered, with
the result that the yield on the security delivered to the Fund may be lower
than the yield available on other, comparable securities at the time of
delivery.  If the Fund has outstanding obligations to buy when-issued
securities, it will maintain liquid assets in a segregated account at its
custodian bank in an amount sufficient to satisfy these obligations.

RULE 144A SECURITIES
- --------------------

  The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.

FOREIGN SECURITIES
- ------------------

  The Fund may invest in dollar-denominated securities of issuers organized or
headquartered outside the United States ("foreign securities").  The Fund will
not purchase a foreign security (for purposes of this limitation securities of
Canadian issuers publicly traded in the United States will not be treated as
foreign securities) if, as a result, the Fund's total holdings of foreign
securities would exceed 20% of the Fund's total assets.

  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 

                                      -9-
<PAGE>
 
availability of tax or other revenues to satisfy the issuer's obligations. The
remedies of the Fund may be extremely limited if a foreign issuer defaults on
its obligations. In addition, the operations and results of foreign issuers and
domestic issuers with operations abroad may be affected favorably or unfavorably
by changes in currency exchange rates or exchange control regulations.

  The Fund's investments in foreign securities may include investments in
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.

  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, exchange control
regulations or foreign withholding taxes.  Changes in the value relative to the
U.S. dollar of a foreign currency in which the Fund's holdings are denominated
or foreign withholding taxes 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.

YEAR 2000
- ---------

  Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000.  Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders.
Loomis Sayles has advised the Fund that it is reviewing all of its computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to foreclose any such negative impact.  In
addition, Loomis Sayles has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal.  As of the date of
this prospectus, the Fund and Loomis Sayles have no reason to believe that these
goals will not be achieved.  Similarly, the values of certain of the portfolio
securities held by the Fund may be adversely affected by the inability of the
securities' issuers or of third parties to process this type of information
properly.


                         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.

  The general partner of Loomis Sayles is a special purpose corporation that is
an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

                                      -10-
<PAGE>
 
  In addition to selecting and reviewing the Fund's investments, Loomis Sayles
provides executive and other personnel for the management of the Fund.  The
Board of Trustees supervises Loomis Sayles's conduct of the affairs of the Fund.

  The portfolio manager for the Fund is Anthony J. Wilkins.  Mr. Wilkins joined
Loomis Sayles in 1990 and is a Director and Vice President of the firm.

                                 FUND EXPENSES

  The Fund pays Loomis Sayles a monthly investment advisory fee.  This fee is
paid at the annual rate of .40% of the Fund's average weekly net assets.

  In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.

  Loomis Sayles has voluntarily undertaken for an indefinite period to waive its
fees and, to the extent necessary, to bear other Fund expenses in order to limit
the Fund's annualized total operating expenses to .55% of average annual net
assets.

                            PORTFOLIO TRANSACTIONS

  Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund.  Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets.  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 result in higher costs such as higher brokerage commissions and higher
levels of taxable gains.  See "Dividends, Capital Gains Distributions and Taxes"
for information on the tax consequences of investing in the Fund.

                            HOW TO PURCHASE SHARES

  You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.

  The minimum initial investment in the Fund is $2,000,000.  Subsequent
investments must be at least $50,000.  The Trust reserves the right to waive
these minimums in its sole discretion.

  Shares of the Fund may be purchased by exchange of (i) cash, (ii) securities
on deposit with a custodian acceptable to Loomis Sayles or (iii) a combination
of such securities and cash.  Purchase of shares of the Fund in exchange for
securities is subject in each case to the determination by Loomis Sayles that
the securities to be exchanged are acceptable for purchase by the Fund.
Securities accepted by Loomis Sayles in exchange for Fund shares will be valued
in the same manner as the Fund's assets as described below as of the time of the
Fund's next determination of net asset value after such acceptance.  All
dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer.  A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered.  A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (888) 226-9699.

  Loomis Sayles will not approve the acceptance of securities in exchange for
shares of the Fund unless (1) Loomis Sayles, in its sole discretion, believes
the securities are appropriate investments for the Fund; (2) the investor
represents and agrees that all securities offered to the Fund can be resold by
the Fund without restriction under the Securities Act of 1933, as amended, or
otherwise; and (3) the securities are eligible to be acquired under the Fund's
investment policies and restrictions.  No investor owning 5% or more of the
Fund's shares may purchase additional Fund shares by the exchange of securities.

                                      -11-
<PAGE>
 
  Upon acceptance of your order, the Trust opens an account for you, applies the
payment to the purchase of full and fractional Fund shares and mails a statement
of the account confirming the transaction.  After an account has been
established, you may send subsequent investments at any time.

  The Trust reserves the right to reject any purchase order for any reason which
the Trust in its sole discretion deems appropriate.  Although the Trust does not
anticipate that it will do so, the Trust reserves the right to suspend or change
the terms of the offering of its shares.

  The price you pay will be the per share net asset value next calculated after
a proper investment order is received by the Trust.  Shares of the Fund are sold
without any sales charge.  The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding.  Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading.  Portfolio securities are valued at their
market value as more fully described in the Statement of Additional Information.

                             HOW TO REDEEM SHARES

  You can redeem your shares by sending a written request to the Trust.

  The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed.  All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).

  The redemption price will be the net asset value per share next determined
after the written redemption request 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 (888) 226-9699 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 Trust may withhold redemption proceeds
until your check has cleared.

  Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.

  The Fund may suspend the right of redemption and may postpone payment for more
than seven days when the Exchange is closed for other than weekends or holidays,
or if permitted by the rules of the SEC when trading on the Exchange is
restricted or during an emergency which makes it impracticable for the Fund to
dispose of its securities or to determine fairly the value of its net assets, or
during any other period permitted by the SEC for the protection of investors.

                               OTHER INFORMATION

  The Board of Trustees may, without shareholder approval, divide the Trust's
shares of beneficial interest into multiple series.  The Trust is currently
divided into seven series, including the Fund and the other funds listed on the
cover of this Prospectus.

  As of October 31, 1998, Trustees of Clark University may be deemed to control
the Fund because it possessed beneficial ownership, either directly or
indirectly, of more than 25% of the Fund's shares.

  The Fund's investment performance may from time to time be included in
advertisements about the Fund.

  The Fund's yield will be computed by dividing the Fund's net investment income
for a recent 30-day period by the maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period.

                                      -12-
<PAGE>
 
  Total return for the Fund is measured by comparing the value of an investment
in the Fund at the beginning of the relevant period to the redemption value of
the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gain distributions).

  All data are based on the Fund's past investment results and do not predict
future performance.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio
and the Fund's operating expenses.  Investment performance also often reflects
the risks associated with the Fund's investment objectives and policies.  These
factors should be considered when comparing the Fund's investment results with
those of other mutual funds and other investment vehicles.  Quotations of
investment performance for any period when an expense limitation was in effect
will be greater than if the limitation had not been in effect.

                DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

  Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes.  The Fund pays any net investment income to shareholders as
dividends monthly.  The Fund also distributes all of its net realized capital
gains after applying any capital loss carryovers.  Any capital gain
distributions are normally made annually in December, but may, to the extent
permitted by law, be made more frequently as deemed advisable by the Trustees.
The Trustees may change the frequency with which the Fund declares or pays
dividends.

  Your dividends and capital gain distributions will automatically be reinvested
in additional shares of the Fund on the payment date unless you have elected to
receive cash.  Dividends and capital gain distributions will be taxed as
described below whether received in cash or in additional shares.

  The Fund intends to qualify as a "regulated investment company" under the
Code.  As such, so long as the Fund distributes all its net investment income
and net realized capital gains to its shareholders on a current basis, the Fund
itself does not pay any federal income or excise tax.  The Fund intends to make
sufficient distributions to be relieved of federal taxes.

  Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares.
Distributions designated by the Fund as deriving from net gains on securities
held for more than one year will be taxable as such (generally at a 20% rate for
noncorporate shareholders) whether distributed in cash or additional shares and
regardless of how long you have held your shares.

  A dividend or distribution made shortly after the purchase of shares of a Fund
by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above.  If a
shareholder held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale of such shares
during such six-month period would be a long-term capital loss to the extent of
such distribution.

  The Fund is required to withhold 31% of redemption proceeds, income dividends
and capital gain distributions it pays to you (1) if you do not provide a
correct, certified taxpayer identification number, (2) if the Fund is notified
that you have underreported income in the past, or (3) if you fail to certify to
the Fund that you are not subject to such withholding.

  In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.

  The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund.  Before investing, you should consult your own tax
adviser for more information concerning the federal, foreign, state and local
tax consequences of investing in, redeeming or exchanging Fund shares.

TRANSFER AGENT AND DIVIDEND                 INVESTMENT ADVISER
PAYING AGENT AND                            Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS                         One Financial Center
State Street Bank and Trust Company         Boston, Massachusetts 02111
Boston, Massachusetts 02102

                                      -13-
<PAGE>
 
                                                                      APPENDIX A

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


                               STANDARD & POOR'S
                               -----------------

                                      AAA

 This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.

                                       AA

 Bonds rated AA also qualify as high quality debt obligations.  Capacity to pay
 interest and repay principal is very strong, and in the majority of instances
               they differ from AAA issues only in small degree.

                                       A

   Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
     circumstances and economic conditions than obligations in higher rated
                                  categories.

                                      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.


                                       R

This symbol is attached to the ratings of instruments with significant noncredit
risks such as risks to principal or volatility of expected returns.

                                      A-1
<PAGE>
 
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.

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
edged."  Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure.  While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

                                       AA

Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there are other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.

                                       A

Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations.  Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

                                      BAA

Bonds that are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured.  Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time.  Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

                                       BA

Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often, the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future.  Uncertainty of position characterizes
bonds in this class.

                                       B

Bonds which are rated B generally lack characteristics of the desirable
investment.  Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

                                      CAA

Bonds which are rated Caa are of poor standing.  Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

                                       CA

Bonds which are rated Ca represent obligations which are speculative in a high
degree.  Such issues are often in default or have other marked shortcomings.

                                       C

                                      A-2
<PAGE>
 
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>
 
                                                                      APPENDIX B
                                DESCRIPTION OF
                              FITCH CMO V-RATINGS

A Fitch CMO market risk rating is an opinion as to the relative sensitivity of a
security's price and cash flows to changes in interest rates and, where
relevant, other market conditions.  INVESTORS SHOULD UNDERSTAND THAT SECURITIES
WITH RATINGS REFLECTING EVEN THE LOWEST MARKET RISK ARE LIKELY TO EXPERIENCE
LOSSES IN THE EVENT OF ADVERSE CHANGES IN MARKET CONDITIONS.  Fitch's market
risk ratings are based on information provided to Fitch by sources deemed to be
reliable, however, Fitch does not verify the accuracy of this underlying
information.  These ratings do not constitute recommendations to purchase, sell
or hold any securities, as they do not comment on the adequacy of market prices
or the suitability of any security for any investor.

<TABLE>
<CAPTION>

V-Rating               Representative Distribution                          Description
- --------               ---------------------------                          -----------
<S>                    <C>                                                  <C>
V-1                    PAC classes with wide prepayment                     Market Risk:  Low
                       collars, short duration floaters and               
V-2                    short duration sequential.                           Securities rated V-1 and V-2 perform
                                                                            consistently across a range of interest rate
                                                                            scenarios.  These securities exhibit interest rate
                                                                            risk comparable to short duration treasuries (1-5
                                                                            years).
                                                    
                                                    
                                                    
V-3                    Medium duration Floater, Short                       Market Risk:  Moderate
                       duration TAC, Short duration PAC                   
V-4                    II, Long duration PAC I.                             Securities rated V-3 and V-4 have relatively
                                                                            consistent performance across a range of interest
                                                                            rate scenarios.  These securities experience
                                                                            interest rate risk comparable to long duration
                                                                            treasuries (10-30 years).
                                                    
                                                    
                                                    
V-5                    PAC classes with narrow collars,                     Market Risk:  Moderate to High
                       support classes, accrual bonds and                 
V-6                    short duration IO's and PO's, Z                      Securities rated V-5, V-6 and V-7 experience
                       bond's.                                              significant variations in performance across a
V-7                                                                         range of interest rate scenarios.  These securities
                                                                            have substantial excess interest rate risk and in
                                                                            many instances exhibit negative convexity.  Z
                                                                            bond's with durations comparable to treasury
                                                                            zero-coupon issues also fall in this range.
</TABLE> 
                                                    
                                      B-1
                                                    
<PAGE>
 
<TABLE> 
<S>                    <C>                                                  <C> 
V-8                    Leveraged inverse floaters, long                     Market Risk:  High to Speculative
                       duration IO's and PO's, super PO's,                
V-9                    jump Zs.                                             Securities rated V-8, V-9 and V-10 experience
                                                                            sharp, severe variations in performance across a
V-10                                                                        range of interest rate scenarios.  These securities
                                                                            exhibit risk characteristics such as extreme
                                                                            negative convexity, significant sensitivity to the
                                                                            direction of interest rate movements, and highly
                                                                            leveraged sensitivity to interest rate indices.
</TABLE>

                                      B-2
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST
               LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND
                             ONE FINANCIAL CENTER
                         BOSTON, MASSACHUSETTS  02111
                                (888) 226-9699

                                   PROSPECTUS
                                JANUARY 1, 1999

     The Loomis Sayles Investment Trust (the "Trust") is a group of seven mutual
funds including the Loomis Sayles Investment Grade Fixed Income Fund (the
"Fund").  The other series, which are described in separate prospectuses, are:

                 Loomis Sayles California Tax-Free Income Fund
                      Loomis Sayles Core Fixed Income Fund
                         Loomis Sayles Core Growth Fund
                        Loomis Sayles Fixed Income Fund
                   Loomis Sayles High Yield Fixed Income Fund
             Loomis Sayles Intermediate Duration Fixed Income Fund

     Except for the California Tax-Free Income Fund, the funds are designed
specifically for tax-exempt investors such as pension plans, endowments and
foundations, although other institutions and high net-worth individuals are
eligible to invest.  Each of the funds is separately managed and has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each of the funds.

     This Prospectus concisely describes the information that you should know
before investing in the Fund.  Please read it carefully and keep it for future
reference.  A Statement of Additional Information dated January 1, 1999 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 (888) 226-9699.  The Statement of Additional
Information, which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
 
<PAGE>
 
                               TABLE OF CONTENTS


SUMMARY OF EXPENSES.................................................... -3-

FINANCIAL HIGHLIGHTS................................................... -4-

PRIOR PERFORMANCE...................................................... -5-

THE TRUST.............................................................. -6-

INVESTMENT OBJECTIVE AND POLICIES...................................... -6-

MORE INFORMATION ABOUT THE FUND'S INVESTMENTS.......................... -7-

THE FUND'S INVESTMENT ADVISER..........................................-12-

FUND EXPENSES..........................................................-12-

PORTFOLIO TRANSACTIONS.................................................-12-

HOW TO PURCHASE SHARES.................................................-12-

HOW TO REDEEM SHARES...................................................-13-

OTHER INFORMATION......................................................-14-

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES........................-14-

APPENDIX..............................................................-A-1-

                                      -2-
<PAGE>
 
                              SUMMARY OF EXPENSES

     The following information is provided to assist you in understanding the
various costs and expenses that, as an investor in the Fund, you will bear
directly or indirectly.  The information is based on expenses for the Fund's
most recent fiscal year.  The information below should not be considered a
representation of past or future expenses, as actual expenses may be greater or
less than those shown.  Also, the assumed 5% annual return in the example should
not be considered a representation of investment performance, as actual
performance will depend upon the actual investment results of securities held in
the Fund's portfolio.

Shareholder Transaction Expenses:
 Maximum Sales Load Imposed on
  Purchases (as a percentage of offering price)        none
 Maximum Sales Load Imposed on
  Reinvested Dividends (as a percentage of
  offering price)                                      none
 Deferred Sales Load (as a percentage of original
  purchase price or redemption
  proceeds, as applicable)                             none
 Redemption Fees (as a percentage of amount redeemed)  none
 Exchange Fees                                         none

Annual Fund Operating Expenses
(as a percentage of average net assets)
  Management Fees (after expense limitation)           .40%
  12b-1 Fees                                           none
  Other Operating Expenses/1/                          .15%
Total Fund Operating Expenses (after
expense limitation)/1/                                 .55%
 
Example
 You would pay the following
  expenses on a $1,000 investment
  assuming a 5% annual return
  (with or without a redemption at
  the end of each time period):
 
  One Year                                             $6  
  Three Years                                          $18 
  Five Years                                           $31 
  Ten Years                                            $69 
- ----------------------------------
          /1/ Loomis Sayles has voluntarily undertaken for an indefinite period
to limit the Fund's total Fund operating expenses to the percentage of average
net assets shown above. In the absence of the voluntary expense limitation,
Other Operating Expenses and Total Fund Operating Expenses for the most recent
fiscal year would have been 0.25% and 0.65%, respectively.

                                      -3-
<PAGE>
 
                              FINANCIAL HIGHLIGHTS


     The financial highlights table that follows is for periods after March 7,
1997.  The following information should be read in conjunction with the
financial highlights, financial statements, and notes thereto that have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon appears in the Fund's 1998 Annual Report, which is incorporated by
reference into this Prospectus and the Statement of Additional Information.

<TABLE>
<CAPTION>
                                                                +Nine Months Ended   March 7 ++ through
                                                               September 30, 1998     December 31, 1997
                                                               -------------------   -------------------
<S>                                                            <C>                   <C>
Net asset value, beginning period............................             $  12.06              $ 11.72

Income from investment operations -
  Net investment income......................................                 0.61                 0.67
  Net realized and unrealized gain (loss) on investments.                    (0.60)                0.48
                                                                          --------              -------
Total from investment operations.............................                 0.01                 1.15

Less distributions -
  Dividends from net investment income.......................                 0.63               (0.67)
  Distributions from net realized capital gains..............                (0.02)               (0.14)
                                                                          --------              -------
  Total distributions........................................                (0.65)               (0.81)
                                                                          --------              -------
Net asset value, end of period...............................             $  11.42              $ 12.06
                                                                          ========              =======

Total return (%).............................................                 (0.0)**              10.1**
Net assets, end of period (000)..............................             $119,084              $82,964
Ratio of operating expenses to average net assets (%)........                 0.55*                0.55*
Ratio of net investment income to average net assets (%).....                 6.85*                6.91*
Portfolio turnover rate (%)..................................                   31**                 39**
Without giving effect to the voluntary expense limitations:
  The ratio of operating expenses to average net assets
  would have been (%)........................................                 0.65*                0.70*
The net investment income per share would have been..........             $   0.60              $  0.66
</TABLE>


+The Fund's fiscal year end has changed to September 30 from December 31.
++Date of effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended.
*Annualized.
**Not annualized.



  Further information about the performance of the Fund is contained in the
Fund's semiannual and annual reports to shareholders, copies of which may be
obtained without charge by writing or telephoning the Trust at the address and
telephone number stated on the cover of this Prospectus.

                                      -4-
<PAGE>
 
                               PRIOR PERFORMANCE

     (FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT THE INDICATED PERIODS)
                                        
  The information presented below, for the periods indicated, relates to periods
prior to the effectiveness of the Fund's registration statement under the
Securities Act of 1933, as amended (the "1933 Act").  The following information
should be read in conjunction with the financial highlights, financial
statements, and notes thereto that have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon appears in the Fund's 1998
Annual Report, which is incorporated by reference into this Prospectus and the
Statement of Additional Information.  The Fund is managed in a manner that is in
all material respects similar to the manner in which it was managed prior to the
effectiveness of its registration statement under the 1933 Act.

<TABLE>
<CAPTION>
 
 
                                                   January 1, 1997    Year Ended     Year Ended    July 1* through
                                                  through March 6,   December 31,   December 31,     December 31,
                                                        1997             1996           1995             1994
                                                       ------            -----          -----            -----
<S>                                               <C>                <C>            <C>            <C>
 
Net asset value,
   beginning of period..........................       $ 11.81        $ 11.56        $  9.57         $   10.00
                                                   
Income from investment operations -                
  Net investment income.........................          0.15           0.80           0.75              0.41
  Net realized and unrealized gain (loss)          
   on investments...............................         (0.10)          0.40           2.05             (0.43)
                                                       -------        -------        -------         ---------
     Total from investment operations...........          0.05           1.20           2.80             (0.02)
                                                   
Less distributions -                               
 Dividends from net investment income...........         (0.14)         (0.79)         (0.76)            (0.41)
 Distributions from net realized                   
     capital gains..............................          0.00          (0.16)         (0.05)             0.00
                                                       -------        -------        -------         ---------
    Total distributions.........................         (0.14)         (0.95)         (0.81)            (0.41)
                                                       -------        -------        -------         ---------
Net asset value, end of period..................       $ 11.72        $ 11.81        $ 11.56         $    9.57
                                                       =======        =======        =======         =========
                                                   
Total return (%)................................           0.4***        10.9           30.3              (0.3)***
Net assets, end of period (000).................       $52,315        $51,752        $21,816         $   4,649
Ratio of operating expenses to                     
   average net assets (%).......................          0.55**         0.55           0.55              0.55**
Ratio of net investment income to                  
  average net assets (%)........................          7.30**         7.27           7.61              8.18**
Portfolio turnover rate (%).....................            21***          74             22               112***
Without giving effect to the                       
  voluntary expense limitations:                   
    The ratio of operating expenses to average     
       net assets  would have been (%)..........          0.62**         0.70             0.94            1.55**
The net investment income per share                
       would have been..........................       $  0.15        $  0.78         $   0.71       $    0.36
</TABLE>

 *  Commencement of operations.
** Annualized.
***Not annualized.

                                      -5-
<PAGE>
 
                                   THE TRUST

     The Fund is a series of the Trust.  The Trust is a diversified open-end
management investment company which was organized as a Massachusetts business
trust on December 23, 1993.  The Trust is authorized to issue an unlimited
number of full and fractional shares of beneficial interest in multiple series.
Shares are freely transferable and entitle shareholders to receive dividends as
determined by the Trust's board of trustees (the "Trustees") and to cast a vote
for each share held (with a fractional vote for each fractional share held) at
shareholder meetings.  The Trust does not generally hold shareholder meetings
and will do so only when required by law.  Shareholders may call meetings to
consider removal of the Trustees.

                       INVESTMENT OBJECTIVE AND POLICIES

     The Fund's investment objective is above-average total investment return
through a combination of current income and capital appreciation.

     The Fund seeks to achieve its objective by investing in a diversified
portfolio of debt securities, although up to 20% of its total assets may be
invested in preferred stocks.  Under normal market conditions, the Fund will
invest at least 65% of its total assets in fixed income securities that are of
investment grade quality at the time of purchase.  Debt securities may include
corporate securities, securities issued or guaranteed by the U.S. Government,
its authorities, agencies or instrumentalities, or certificates representing
undivided interests in the interest or principal of U.S. Treasury securities
("U.S. Government Securities"), zero coupon securities, collateralized mortgage
securities,  including interest-only and principal-only ("IOs" and "POs")
classes of mortgage-backed securities,  when-issued securities and real estate
investment trusts ("REITs"), which are described herein (together with their
related risks) under "More Information About the Fund's Investments."  The Fund
will normally invest at least 90% of its total  assets in investment grade
securities.  Investment grade securities include those rated BBB and above by
Standard & Poor's ("S&P") or Baa and above by Moody's Investors Service, Inc.
("Moody's") or unrated securities that Loomis Sayles has determined to be of
comparable quality.  The Fund may continue to hold securities that are
downgraded in quality subsequent to their purchase if, in the opinion of Loomis
Sayles, it would be advantageous to do so.  The Fund may invest a portion of its
assets in securities of Canadian issuers, and a limited portion of its assets in
securities of other foreign issuers.  See "More Information About the Fund's
Investments; Foreign Securities."

     The percentages of the Fund's net assets invested during the fiscal year
ended December 31, 1997 in securities assigned to the various rating categories
by S&P and Moody's on a dollar-weighted basis were approximately as follows:
"AAA"/"Aaa," _____________%; "AA"/"Aa," ____________%; "A"/"A," ____________%;
"BBB"/"Baa," ____________%; "BB"/"Ba," ___________%; "B"/"B," ____________%; and
below "B," ____________%.  The percentage of the Fund's net assets invested
during such fiscal year in unrated debt securities as a group was approximately
____________%.  The percentages of the Fund's net assets invested during such
fiscal year in such unrated securities (categorized by comparable rating
category) were approximately as follows:  "AAA"/"Aaa," ____________%; "AA"/"Aa,"
____________%; "A"/"A," ____________%; "BBB"/"Baa," ___________%; "BB"/"Ba,"
____________%; "B"/"B," ____________%; and 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 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 that are described below.

                                      -6-
<PAGE>
 
     The investment objective of the Fund is " fundamental" and cannot be
changed without a majority vote of the Fund's shareholders.  All investment
policies other than those that are identified as "fundamental" may be changed by
the Trustees without a vote of the Fund's shareholders.

                 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 other than for
purposes of determining compliance with the Fund's investment policy of
investing, under normal market conditions, at least 65% of its total assets in
investment grade fixed income securities.  Because interest rates vary, it is
impossible to predict the income of the Fund for any particular period.

     Fixed income securities are subject to market and credit risk.  Market risk
relates to changes in a security's value as a result of changes in interest
rates generally.  In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of principal
and interest.  Generally, the longer the maturity of a fixed income security,
the greater the fluctuations in its value because of market and credit risk.

U.S. GOVERNMENT SECURITIES
- --------------------------

     U.S. Government Securities have different kinds of government support.  For
example, some U.S. Government Securities, such as U.S. Treasury bonds, are
supported by the full faith and credit of the United States, whereas certain
other U.S. Government Securities issued or guaranteed by federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States.

     Although U.S. Government Securities generally do not involve the credit
risks associated with other types of fixed income securities, the market values
of U.S. Government Securities will fluctuate as interest rates change.  Thus,
for example, the value of an investment in U.S. Government Securities may fall
during times of rising interest rates. Yields on U.S. Government Securities tend
to be lower than those of other fixed income securities of comparable
maturities.

     Some U.S. Government Securities, such as Government National Mortgage
Association Certificates ("GNMA"), 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.

                                      -7-
<PAGE>
 
     In addition to investing directly in U.S. Government Securities, the Fund
may purchase certificates of accrual or similar instruments ("strips")
evidencing undivided ownership interests in interest payments or principal
payments, or both, in U.S. Treasury securities.  These investment instruments
may be highly volatile.

ZERO COUPON SECURITIES
- ----------------------

     The Fund may invest in "zero coupon" fixed income securities.  These
securities accrue interest at a specified rate, but do not pay interest in cash
on a current basis.  The Fund is required to distribute the income on zero
coupon securities to Fund shareholders as the income accrues, even though the
Fund is not receiving the income in cash on a current basis.  Thus the Fund may
be forced to sell other investments to obtain cash to make income distributions
at times when Loomis Sayles would not otherwise deem it advisable to do so.  The
market value of zero coupon securities is generally more volatile than that of
non-zero coupon fixed income securities of comparable quality and maturity.

MORTGAGE-BACKED SECURITIES
- --------------------------

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

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.  A faster than anticipated rate of prepayments will generally result in
losses on CMO's representing interests in the interest payments on the
underlying portfolio of mortgage-backed securities. Because of the early
retirement feature, CMOs may be more volatile than many other fixed income
investments.  In addition, slower than anticipated prepayments on the underlying
mortgages can extend the effective maturities of CMOs, subjecting them to a
greater risk of decline in market value in response to rising interest rates
than traditional debt securities.

ASSET-BACKED SECURITIES
- -----------------------
 
     The Fund may invest in asset-backed securities.  Through the use of trusts
and special purpose corporations, automobile and credit card receivables are
securitized in pass-through structures similar to mortgage pass-through
structures or in a pass-through structure similar to the CMO structure.
Generally, the issuers of asset-backed bonds, 

                                      -8-
<PAGE>
 
notes or pass-through certificates are special purpose entities and do not have
any significant assets other than the receivables securing such obligations. In
general, the collateral supporting asset-backed securities is of shorter
maturity than mortgage loans. Instruments backed by pools of receivables are
similar to mortgage-backed securities in that they are subject to unscheduled
prepayments of principal prior to maturity. When the obligations are prepaid,
the Fund will ordinarily reinvest the prepaid amounts in securities the yields
of which reflect interest rates prevailing at the time. Therefore, the Fund's
ability to maintain a portfolio that includes high-yielding asset-backed
securities will be adversely affected to the extent that prepayments of
principal must be reinvested in securities that have lower yields than the
prepaid obligations. Moreover, prepayments of securities purchased at a premium
could result in a realized loss.



STRIPPED MORTGAGE-BACKED SECURITIES
- -----------------------------------

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

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

REAL ESTATE INVESTMENT TRUSTS
- -----------------------------

     The Fund may invest in REITs. REITs involve certain unique risks in
addition to those risks associated with investing in the real estate industry in
general (such as possible declines in the value of real estate, lack of
availability of mortgage funds or extended vacancies of property).  Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, risks of default by borrowers and self-
liquidation.  REITs are also subject to the possibilities of failing to qualify
for tax-free pass-though of income under the Internal Revenue code of 1986, as
amended (the "Code"), and failing to maintain their exemptions from registration
under the Investment Company Act of 1940.

     Investment in REITs involves risk similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger securities.


WHEN-ISSUED SECURITIES
- ----------------------

     The Fund may purchase securities on a "when-issued" basis.  This means that
the Fund will enter into a commitment to buy the security before the security
has been issued.  The Fund's payment obligation and the interest rate on the
security are determined when the Fund enters into the commitment.  The security
is typically delivered to the Fund 15 to 120 days later.  No interest accrues on
the security between the time the Fund enters into the commitment and the time
the security is issued.  If the value of the security being purchased falls
between the time the Fund commits to buy it and the payment date, the Fund may
sustain a loss.  The risk of this loss is in addition to the Fund's risk of loss
on the securities actually held in its portfolio at the time.  When the Fund
buys a security on a when-issued basis, it is subject to the risk that market
rates of interest will increase before the time the security is delivered, with
the result that the yield on the security delivered to the Fund may be lower
than the yield available on other, comparable securities at 

                                      -9-
<PAGE>
 
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.

CONVERTIBLE SECURITIES
- ----------------------

     Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities at a stated price or rate.  Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation.  Because convertible securities can be
converted into equity securities, their value will normally vary in some
proportion with those of the underlying equity securities.  Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. Due to the conversion
feature, convertible securities generally yield less than nonconvertible fixed
income securities of similar credit quality and maturity. The Fund's investment
in convertible securities may at times include securities that have a mandatory
conversion feature, pursuant to which the securities convert automatically into
common stock at a specified date and 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.

FOREIGN SECURITIES
- ------------------

     The Fund may invest in securities of issuers organized or headquartered
outside the United States ("foreign securities").  The Fund will not purchase a
foreign security (for purposes of this limitation securities of Canadian issuers
publicly traded in the United States will not be treated as foreign securities)
if, as a result, the Fund's total holdings of foreign securities would exceed
20% of the Fund's total assets.

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

     The Fund's investments in foreign securities may include investments in
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement procedures.

     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, exchange control
regulations or foreign withholding taxes.  Changes in the value relative to the
U.S. dollar of a foreign currency in which the Fund's holdings are denominated
will result in a change in the U.S. dollar value of the Fund's assets and the
Fund's income available for distribution.

     In addition, although part of the Fund's income may be received or realized
in foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars.  Therefore, if the value of a currency relative to the
U.S. 

                                      -10-
<PAGE>
 
dollar declines after the Fund's income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
the dividend, the Fund could be required to liquidate portfolio securities to
pay the dividend.  Similarly, if the value of a currency relative to the U.S.
dollar declines between the time the Fund accrues expenses in U.S. dollars and
the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars will be greater than the equivalent amount in such
currency of such expenses at the time they were incurred.

LOWER RATED FIXED INCOME SECURITIES
- -----------------------------------

     The Fund may invest a portion of its assets in securities rated below
investment grade ("lower rated fixed income securities"), including securities
in the lowest rating categories, and unrated securities determined by Loomis
Sayles to be of comparable quality.  Lower rated fixed income securities
generally provide higher yields, but are subject to greater credit and market
risk than higher quality fixed income securities.  Lower rated fixed income
securities are considered speculative with respect to the ability of the issuer
to meet principal and interest payments.  Achievement of the Fund's investment
objective through investments in lower rated fixed income securities may be more
dependent on Loomis Sayles's credit analysis than is the case with higher
quality bonds.  The market for lower rated fixed income securities may be more
severely affected than other financial markets by economic recession or
substantial interest rate increases.  The value and liquidity of lower rated
fixed income securities may be diminished by adverse publicity and investor
perceptions.  In addition, legislation that limits the tax benefits to issuers
or holders of taxable lower rated fixed income securities or that limits the
ability of certain categories of financial institutions to invest in these
securities may adversely affect their market value.  The secondary market for
lower rated fixed income securities may be less liquid than the secondary market
for higher rated fixed income securities.  This lack of liquidity at certain
times may affect the values of these securities and may make the valuation and
sale of these securities by the Fund more difficult. Certain lower rated fixed
income securities do not pay interest on a current basis.  However, the Fund
will accrue and distribute this interest on a current basis, and may be required
to sell securities at times when Loomis Sayles would not otherwise deem it
advisable to do so in order to generate cash for distributions.  Securities of
below investment grade quality are commonly referred to as "junk bonds."
Securities in the lowest rating categories may be in poor standing or in
default. Investment grade fixed income securities may share some of the
characteristics of lower rated fixed income securities described above.

RULE 144A SECURITIES
- --------------------

     The Fund may invest in Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A securities is liquid.

YEAR 2000
- ---------

     Many computer software systems in use today cannot properly process date-
related information from and after January 1, 2000.  Should any of the computer
systems employed by the Fund's major service providers fail to process this type
of information properly, that could have a negative impact on the Fund's
operations and the services that are provided to the Fund's shareholders.
Loomis Sayles has advised the Fund that it is reviewing all of its computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to foreclose any such negative impact.  In
addition, Loomis Sayles has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal.  As of the date of
this prospectus, the Fund and Loomis Sayles have no reason to believe that these
goals will not be achieved.  Similarly, the values of certain of the portfolio
securities held by the Fund may be adversely affected by the inability of the
securities' issuers or of third parties to process this type of information
properly.

                                      -11-
<PAGE>
 
                         THE FUND'S INVESTMENT ADVISER

     The Fund's investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111.  Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York  Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

     In addition to selecting and reviewing the Fund's investments, Loomis
Sayles provides executive and other personnel for the management of the Fund.
The Board of Trustees supervises Loomis Sayles's conduct of the affairs of the
Fund.

     The portfolio manager for the Fund since its inception has been Daniel J.
Fuss, who has been with Loomis Sayles since 1976 and is head of the Fixed Income
Management Group.  Mr. Fuss is an Executive Vice President and Director of
Loomis Sayles.

                                 FUND EXPENSES

     The Fund pays Loomis Sayles a monthly investment advisory fee.  This fee is
paid at the annual rate of 0.40% of the Fund's average daily net assets.

     In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by Loomis Sayles, including taxes, brokerage commissions, fees
of the Fund's custodian, independent accountants and legal counsel and fees of
the Trustees who are not directors, officers or employees of Loomis Sayles or
its affiliated companies.

     Loomis Sayles has voluntarily undertaken for an indefinite period to waive
its fees and, to the extent necessary, to bear other Fund expenses in order to
limit the Fund's total operating expenses to .55% of average annual net assets.


                             PORTFOLIO TRANSACTIONS

     Loomis Sayles selects brokers and dealers to execute portfolio transactions
for the Fund.  Portfolio turnover considerations will not limit Loomis Sayles's
investment discretion in managing the Fund's assets.  The Fund anticipates that
its portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions.  High portfolio turnover
may result in higher costs such as higher brokerage commissions and higher
levels of taxable gains.  Portfolio turnover rates for the life of the Fund are
set forth above under the headings "Financial Highlights" and "Prior
Performance."  See "Dividends, Capital Gain Distributions and Taxes" for
information on the tax consequences of investing in the Fund.

                             HOW TO PURCHASE SHARES

     You may make an initial purchase of shares of the Fund by submitting a
completed application form and payment to Loomis Sayles.

     The minimum initial investment in the Fund is $3,000,000.  Subsequent
investments must be at least $50,000. The Trust reserves the right to waive
these minimums in its sole discretion.

     Shares of the Fund may be purchased by exchange of (i) cash, (ii)
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash.  Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by Loomis
Sayles that the securities to be exchanged 

                                      -12-
<PAGE>
 
are acceptable for purchase by the Fund. Securities accepted by Loomis Sayles in
exchange for Fund shares will be valued in the same manner as the Fund's assets,
as described below, as of the time of the Fund's next determination of net asset
value after such acceptance. All dividends and subscription or other rights
which are reflected in the market price of accepted securities at the time of
valuation become the property of the Fund and must be delivered to the Fund upon
receipt by the investor from the issuer. A gain or loss for federal income tax
purposes would be realized upon the exchange by an investor that is subject to
federal income taxation, depending upon the investor's basis in the securities
tendered. A shareholder who wishes to purchase shares by exchanging securities
should obtain instructions by calling (888) 226-9699.

     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 1933 Act or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by the exchange of securities.

     Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction.  After an account has been
established, you may send subsequent investments at any time.

     The Trust reserves the right to reject any purchase order for any reason
which the Trust in its sole discretion deems appropriate.  Although the Trust
does not anticipate that it will do so, the Trust reserves the right to suspend
or change the terms of the offering of its shares.

     The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust.  Shares of the Fund
are sold without any sales charge.  The net asset value of the Fund's shares is
calculated by dividing the Fund's net assets by the number of shares
outstanding.  Net asset value is calculated at least weekly and as of the close
of the New York Stock Exchange (the "Exchange") on each day on which an order
for purchase or redemption of Fund shares is received and on which the Exchange
is open for unrestricted trading.  Portfolio securities are valued at their
market value as more fully described in the Statement of Additional Information.


                              HOW TO REDEEM SHARES

     You can redeem your shares by sending a written request to the Trust.

     The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, and the number of shares
or the dollar amount to be redeemed.  All owners of the shares must sign the
written request in the exact names in which the shares are registered and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity).

     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 (888) 226-9699 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 Trust may withhold redemption
proceeds until your check has cleared.

     Redemption proceeds may be made in money or in kind, or partly in money and
partly in kind, as determined by the Trust.

                                      -13-
<PAGE>
 
     The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of investors.


                               OTHER INFORMATION

     The Trustees may, without shareholder approval, divide the Trust's shares
of beneficial interest into multiple series.  The Trust is currently divided
into seven series, including the Fund and the other funds listed on the cover of
this Prospectus.

     The Fund's investment performance may from time to time be included in
advertisements about the Fund.

     The Fund's yield will be computed by dividing the Fund's net investment
income for a recent 30-day period by the maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period.

     Total return for the Fund is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the redemption
value of the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gain distributions).

     All data are based on the Fund's past investment results and do not predict
future performance.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio
and the Fund's operating expenses.  Investment performance also often reflects
the risks associated with the Fund's investment objectives and policies.  These
factors should be considered when comparing the Fund's investment results with
those of other mutual funds and other investment vehicles.  Quotations of
investment performance for any period when an expense limitation was in effect
will be greater than if the limitation had not been in effect.


                DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

     Because the Fund is designed primarily for tax-exempt investors such as
pension plans, endowments and foundations, the Fund is not managed with a view
to reducing taxes.  The Fund pays any net investment income to shareholders as
monthly dividends.  The Fund also distributes all of its net realized capital
gains after applying any capital loss carryovers.  Any capital gain
distributions are normally made annually in December, but may, to the extent
permitted by law, be made more frequently as deemed advisable by the Trustees.
The Trustees may change the frequency with which the Fund declares or pays
dividends.

     Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the Fund on the payment date unless you have
elected to receive cash.  Dividends and capital gain distributions will be taxed
as described below whether received in cash or additional shares.

     The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended.   As such, so long as the Fund
distributes substantially all its net investment income and net realized capital
gains to its shareholders on a current basis, the Fund itself does not pay any
federal income or excise tax.  The Fund intends to make sufficient distributions
to be relieved of federal taxes.

     Income dividends and short-term capital gain distributions are treated as
ordinary income to you whether distributed in cash or additional shares.
Distributions designated by the Fund as deriving from net gains on securities

                                      -14-
<PAGE>
 
held for more than one year will be taxable as such (generally at a 20% rate for
noncorporate shareholders) whether distributed in cash or additional shares and
regardless of how long you have held your shares.

     A dividend or distribution made shortly after the purchase of shares of a
Fund by a shareholder, although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above.  If a
shareholder held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale of such shares
during such six-month period would be a long-term capital loss to the extent of
such distribution.

      The Fund is required to withhold 31% of redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.

     In January of each year, the Trust will send you a statement showing the
federal tax status of dividends and distributions paid to you during the
preceding year.

     The foregoing summarizes certain U.S. federal income tax consequences of
investing in the Fund.  Before investing, you should consult your own tax
adviser for more information concerning the federal, foreign, state and local
tax consequences of investing in, redeeming or exchanging Fund shares.


TRANSFER AND DIVIDEND                   INVESTMENT ADVISER
PAYING AGENT AND                        Loomis, Sayles & Company, L.P.
CUSTODIAN OF ASSETS                     One Financial Center
State Street Bank and Trust Company     Boston, Massachusetts  02111
Boston, Massachusetts 02102

                                      -15-
<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 than obligations in higher rated
categories.

                                      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.


                                       R

This symbol is attached to the ratings of instruments with significant noncredit
risks such as risks to principal or volatility of expected returns.


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
edged."  Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure.  While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

                                       AA

Bonds 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 CALIFORNIA TAX-FREE INCOME FUND

                      STATEMENT OF ADDITIONAL INFORMATION

                                January 1, 1999



This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles California Tax-Free Income Fund, a series of Loomis Sayles Investment
Trust, dated January 1, 1999, and should be read in conjunction therewith. A
copy of the Prospectus may be obtained from Loomis Sayles Investment Trust, One
Financial Center, Boston, Massachusetts 02111.
<PAGE>
 
                               TABLE OF CONTENTS



<TABLE>
<S>                                                                     <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS........................ -3-

MANAGEMENT OF THE TRUST................................................ -9-

INVESTMENT ADVISORY AND OTHER SERVICES................................. -12-

PORTFOLIO TRANSACTIONS AND BROKERAGE................................... -14-

DESCRIPTION OF THE TRUST............................................... -15-

HOW TO BUY SHARES...................................................... -18-

NET ASSET VALUE........................................................ -18-

REDEMPTIONS............................................................ -19-

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS............ -19-

FINANCIAL STATEMENTS................................................... -22-

CALCULATION OF YIELD AND TOTAL RETURN.................................. -23-

PERFORMANCE COMPARISONS................................................ -23-

PERFORMANCE DATA....................................................... -27-

APPENDIX A
     PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION.................... -A1-

APPENDIX B
     ADVERTISING AND PROMOTIONAL LITERATURE............................ -B1-
</TABLE> 

                                      -2-
<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The investment objective and policies of the Loomis Sayles California Tax-
Free Income Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments."  The investment
policies of the Fund set forth in the Prospectus and in this Statement of
Additional Information may be changed by Loomis, Sayles & Company, L.P. ("Loomis
Sayles"), the Fund's investment adviser, subject to review and approval by the
Trust's board of trustees (the "Trustees"), without shareholder approval except
that the investment objective of the Fund as set forth in the Prospectus and any
Fund policy explicitly identified as "fundamental" may not be changed without
the approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).

     In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

     The Fund will not:

     *(1) Act as underwriter, except to the extent that, in connection with the
          disposition of portfolio securities, it may be deemed to be an
          underwriter under certain federal securities laws.

     *(2) Invest in oil, gas or other mineral leases, rights or royalty
          contracts or in real estate, commodities or commodity contracts. (This
          restriction does not prevent the Fund from investing in issuers that
          invest or deal in the foregoing types of assets or from purchasing
          securities that are secured by real estate.)

     *(3) Make loans. (For purposes of this investment restriction, neither (i)
          entering into repurchase agreements nor (ii) purchasing bonds,
          debentures, commercial paper, corporate notes and similar evidences of
          indebtedness, which are a part of an issue to the public, is
          considered the making of a loan.)

     *(4) Change its classification pursuant to Section 5(b) of the Investment
          Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
          to "non-diversified" management investment company.

     *(5) Purchase any security if, as a result, more than 25% of the Fund's
          total assets (taken at current value) would be invested in any one
          industry (for purposes of this restriction, governmental issuers of
          tax-exempt securities are not considered part of any industry).

     *(6) Borrow money in excess of 10% of its total assets (taken at cost) or
          5% of its total assets (taken at current value), whichever is lower,
          nor borrow any money except as

                                      -3-
<PAGE>
 
          a temporary measure for extraordinary or emergency purposes; however,
          the Fund's use of reverse repurchase agreements and "dollar roll"
          arrangements shall not constitute borrowing by the Fund for purposes
          of this restriction.

     *(7) Purchase any illiquid security, including any security that is not
          readily marketable, if, as a result, more than 15% of the Fund's net
          assets (based on current value) would then be invested in such
          securities.
     
     *(8) Issue senior securities other than any borrowing permitted by
          restriction (6) above. (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 collateral
          arrangements with respect to options, futures contracts and options on
          futures contracts and with respect to initial and variation margin;
          and the purchase or sale of or entry into options, forward contracts,
          futures contracts, options on futures contracts, swap contracts or any
          other derivative investments to the extent that Loomis Sayles
          determines that the Fund is not required to treat such investments as
          senior securities pursuant to the pronouncements of the Securities and
          Exchange Commission (the "SEC") or its staff.)

     The Fund intends, based on the views of the staff of the SEC, to restrict
its  investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (7) above.

     Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.

Portfolio Turnover
- ------------------

     Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets.  The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions.  High portfolio turnover rates
may result in higher costs such as higher brokerage commissions and higher
levels of taxable gain.  See "Portfolio Transactions and Brokerage" for a
description of Loomis Sayles's brokerage practices and "Income Dividends,
Capital Gain Distributions and Tax Status" for more information about the tax
consequences of investing in the Fund.

When-Issued Securities
- ----------------------

     As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date.  Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later.  When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the 

                                      -4-
<PAGE>
 
custodian and to maintain in that account liquid assets in an amount equal to or
greater than, on a daily basis, the amount of the Fund's when-issued or delayed-
delivery commitments. The Fund will make commitments to purchase on a when-
issued or delayed-delivery basis only securities meeting the Fund's investment
criteria. The Fund may take delivery of these securities or, if it is deemed
advisable as a matter of investment strategy, the Fund may sell these securities
before the settlement date. When the time comes to pay for when-issued or
delayed-delivery securities, the Fund will meet its obligations from then
available cash flow or the sale of securities, or from the sale of the when-
issued or delayed-delivery securities themselves (which may have a value greater
or less than the Fund's payment obligation).

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 U.S. 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 U.S.
          -----------------------------                                 
Treasury issued in maturities that vary between one and forty years, with
interest normally payable every six months. They are backed by the full faith
and credit of the U.S. Government.

     .    "Ginnie Maes" - Debt securities issued by a mortgage banker or other
          -------------                                                       
mortgagee which represent interests in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or guaranteed
by the Veterans Administration.  The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer of
these certificates on the underlying mortgages.  An assistant attorney general
of the United States has rendered an opinion that the guarantee by GNMA is a
general obligation of the United States backed by its full faith and credit.
Mortgages included in single-family or multi-family residential mortgage pools
backing an issue of Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the registered holders
of Ginnie Maes (such as the Fund) each month.  Unscheduled prepayments may be
made by homeowners, or as a result of a default.  Prepayments are passed through
to the registered holder of Ginnie Maes along with regular monthly payments of
principal and interest.

                                      -5-
<PAGE>
 
     .    "Fannie Maes" - Fannie Mae 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 Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae but are not backed by the full faith and credit of the
U.S. Government.

     .    "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC")
          --------------                                                       
is a corporate instrumentality of the U.S. Government.  Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the U.S. Government.

     As described in the Prospectus, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed income securities.  Like other fixed income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

Zero Coupon Bonds
- -----------------

     Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations.  Such bonds are
issued and traded at discounts from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer.  The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality.  In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund must distribute each year at least 90% of its net
investment income, including the original issue discount accrued on zero coupon
bonds.  Because 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.

California Tax-Exempt Securities
- --------------------------------

     In addition to general economic pressures, certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could

                                      -6-
<PAGE>
 
adversely affect the State of California's ability to raise revenues to meet its
financial obligations. The following information is only a brief summary, is not
a complete description and is based on information drawn from official
statements and prospectuses relating to securities offerings of the State of
California that have come to the attention of the Trust and were available
before the date of this Statement of Additional Information. The Trust has not
independently verified the accuracy and completeness of the information
contained in those statements and prospectuses.

     As used below, "California Tax-Exempt Securities" includes issues secured
by a direct payment obligation of the State and obligations of other issuers
that rely in whole or in part on State revenues to pay their obligations.
Property tax revenues and part of the State's General Fund surplus are
distributed to counties, cities and their various taxing entities; whether and
to what extent a portion of the State's General Fund will be so distributed in
the future is unclear.

     OVERVIEW.  After suffering through a severe recession, since the start of
     --------                                                                 
1994 California's economy has been on a steady recovery. The recession seriously
affected State tax revenues and caused an increase in expenditures for health
and welfare programs.  As a result, from the late 1980s until 1992-93, the State
experienced recurring budget deficits.  During this period, expenditures
exceeded revenues in four out of six years up to 1992-93, and the State
accumulated a budget deficit of about $2.8 billion at its peak at June 30, 1993.
A further consequence of the large budget imbalances was to significantly reduce
the State's available cash resources and require it to use a series of external
borrowings to meet its cash needs.

     The State's financial condition improved markedly during the 1995-96; 1997-
98, and 1998-99 fiscal years, through a combination of higher than expected
revenues and a slowdown in spending. The State's cash position also improved,
and no external borrowings occurred over the end of those three fiscal years.
The substantially greater tax revenues that the State received were spent
largely on schools (as mandated by State law), and the accumulated budget
deficit was finally eliminated. The State Department of Finance estimates that
the State's budget reserve was $639.8 million as of June 30, 1997, and 1.782
billion at June 30, 1998. The 1998-99 Budget Act, projects that the budget
reserve at June 30, 1999 will be 1,255 billion.

     Because of the deterioration in the State's financial condition, the
State's credit ratings have been reduced.  Since October 1992, three major
nationally recognized statistical rating organizations have lowered the State's
general obligation bond rating from the highest rating of "AAA" to "A+" by
Standard and Poor's, "A1" by Moody's Investors Service, Inc., and "AA-" by Fitch
Investors Service, Inc.  In October 1997, Fitch Investors Service, Inc. upgraded
the State's general obligation bond rating from "A+" to "AA-", and in October 
1998, Moody's Investors Service, Inc. upgraded the State's general obligation 
bond rating from "A1" to "AAB".

     State Appropriations Limit.  Subject to certain exceptions, the State is
     --------------------------                                              
subject to an annual appropriations limit imposed by its Constitution on
"proceeds of taxes."  Various expenditures, including but not limited to debt
service on certain bonds and appropriations for qualified capital outlay
projects, are not included in the appropriations limit.

                                      -7-
<PAGE>
 
Issues Affecting Local Governments and Special Districts
- --------------------------------------------------------

     Proposition 13.  Certain California Tax-Exempt Securities may be
     --------------                                                  
obligations of issuers that rely in whole or in part on ad valorem real property
taxes for revenue.  In 1978, California voters approved Proposition 13, which
limits ad valorem real property taxes and restricts the ability of taxing
entities to increase property tax and other revenues.  With certain exceptions,
the maximum ad valorem real property tax is limited to 1% of the value of real
property.  The value of real property may be adjusted annually for inflation at
a rate not exceeding 2% per year, or reduced to reflect declining value, and may
also be adjusted when there is a change in ownership or new construction with
respect to the property.  Constitutional challenges to Proposition 13 to date
have been unsuccessful.

     The State, in response to the significant reduction in local property tax
revenues as a result of the passage of Proposition 13, enacted legislation to
provide local government with increased expenditures from the General Fund.
This post-Proposition 13 fiscal relief has ended.

     Proposition 62.  This initiative placed further restrictions on the ability
     --------------                                                             
of local governments to raise taxes and allocate approved tax revenues. Although
some of the California Courts of Appeal held that parts of Proposition 62 were
unconstitutional, the California Supreme Court has upheld Proposition 62's
requirement that special taxes be approved by a two-thirds vote of the voters
voting in an election on the issue. This decision may invalidate other taxes
that have been imposed by local governments in California and make it more
difficult for local governments to raise taxes.

     Proposition 218.  Passed in November 1996, this initiative places
     ---------------                                                  
additional limitations on the ability of California local governments to impose
or raise various taxes, assessments, charges and fees by requiring voter
approval of such items.  General taxes and many assessments and fees that were
passed without public approval after 1994 and before November 6, 1996 must be
approved by voters to continue in effect.  In addition, Proposition 218
clarified the right of local voters to reduce taxes, fees, assessments or
charges.  Proposition 218 does not affect the State's ability to levy or collect
taxes.

     Propositions 98 and 111.  These initiatives changed the State
     -----------------------                                      
appropriations limit and State funding of public education below the university
level by guaranteeing K-14 schools a minimum share of General Fund revenues.
The initiatives also require that the State establish a prudent reserve fund for
public education.

     Appropriations Limit.  Local governmental entities are also subject to
     --------------------                                                  
annual appropriations limits.  If a local government's revenues in any year
exceed the limit, the excess must be returned to the public through a revision
of tax rates or fee schedules over the following two years.

     Conclusion.  The effect of these Constitutional and statutory changes and
     ----------                                                               
of budget developments on the ability of California issuers to pay interest and
principal on their obligations remains unclear, and may depend upon whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds being generally less affected).  There is no assurance that 

                                      -8-
<PAGE>
 
any California issuer will make full or timely payments of principal or interest
or remain solvent. For example, in December 1994, Orange County filed for
bankruptcy.

Additional Issues.
- ----------------- 

     Mortgages and Deeds of Trust.  The Fund may invest in issues that are
     ----------------------------                                         
secured in whole or in part by mortgages or deeds of trust on real property.
California law limits the remedies of a creditor secured by a mortgage or a deed
of trust, which may result in delays in the flow of revenues to, and debt
service paid by, an issuer.

     Lease Financings.  Some local governments and districts finance certain
     ----------------                                                       
activities through lease arrangements.  It is uncertain whether such lease
financings are debt that requires voter approval.

     Seismic Risk.  It is impossible to predict the time, location or magnitude
     ------------                                                              
of a major earthquake or its effect on the California economy.  In January 1994
a major earthquake struck Los Angeles, causing significant damage to structures
and facilities in a four-county area.  The possibility exists that another such
earthquake could create a major dislocation of the California economy.

Rule 144A Securities
- --------------------

     The Fund may purchase Rule 144A securities.  These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a particular
issue of Rule 144A securities is liquid.  Under the guidelines, Loomis Sayles
considers such factors as:  (1) the frequency of trades and quotes for a
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of
marketplace trades therefor.

                            MANAGEMENT OF THE TRUST

     The trustee and officers of the Trust and their principal occupations
during the past five years are as follows:

TIMOTHY J. HUNT (____) -- Trustee.  26 Dennett Road, Marblehead, Massachusetts.
                          -------                                               
     Retired. Formerly, Vice President and Director of Fixed Income Research,
     Loomis Sayles.

DANIEL J. FUSS (____) -- President.  Executive Vice President and Director,
                         ---------                                         
     Loomis Sayles.

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

                                      -9-
<PAGE>
 
SHEILA M. BARRY (53) -- Secretary and Compliance Officer.  Assistant General
                        --------------------------------                    
     Counsel and   Vice President, Loomis Sayles.  Formerly, Senior Counsel and
     Vice President, New England Funds, L.P.

ROBERT J. BLANDING (____) -- Executive Vice President.  465 First Street West,
                             ------------------------                         
     Sonoma, California.  President, Chairman, Director and Chief Executive
     Officer, Loomis Sayles.

WILLIAM F. CAMP (______) -- Vice President.  1533 North Woodward, Bloomfield
                            --------------                                  
     Hills, Michigan. Vice President, Loomis Sayles.  Formerly, Portfolio
     Manager, Kmart Corporation.

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

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

JEFFREY L. MEADE (_____) -- Vice President.  Chief Operating Officer, Executive
                            --------------                                     
     Vice President and Director, Loomis Sayles.

KENT P. NEWMARK (______) __ Vice President.  555 California Street, San
                            --------------                             
     Francisco, California.   Vice President and Director, Loomis Sayles.

ROBERT K.  PAYNE (____) -- Vice President.  555 California Street, San
                           --------------                             
     Francisco, California. Vice President, Loomis Sayles.

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

MARI J. SUGAHARA (______) -- Vice President.  Vice President, Loomis Sayles.
                             ---------------                                

FREDERICK E. SWEENEY, JR. (______) -- Vice President.  Vice President, Loomis
                                      ---------------                        
     Sayles. Formerly, served as an Investment Consultant at Meketa Investment
     Group and prior to that served as Vice President of New England Investment
     Associates.

     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.

                                      -10-
<PAGE>
 
                              COMPENSATION TABLE
    for the 1998 fiscal period (January 1, 1998 through September 30, 1998)


<TABLE>
- -------------------------------------------------------------------------------------------
<S>                <C>            <C>                <C>             <C> 
    (1)                (2)            (3)                (4)               (5) 

Name of Person,     Aggregate       Pension or         Estimated     Total Compensation
   Position        Compensation     Retirement          Annual       from Trust and Fund
                    from Trust       Benefits        Benefits Upon     Complex Paid to
                                  Accrued as Part      Retirement         Trustee
                                  of Fund Expenses

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

Timothy J. Hunt,    $______         $_______           $______           $_________
Trustee
</TABLE>

     As of the date hereof, the Trustee and officers as a group owned less than
1% of the outstanding shares of the Fund.

     The following table sets forth the name, address and percentage ownership
of each holder of 5% or more of the Fund's outstanding voting securities as of
October 31, 1998.

<TABLE>
<CAPTION>
Shareholder                   Address                            Percentage of Shares Held
- -----------                   -------                            -------------------------
<S>                           <C>                                <C> 
First American                400 First American Center                      11%
Trust Company, Paul M.        Nashville, TN 37237-0402                      
Davis for Peter Davis                                                       
                                                                            
Phillipa Scott Trust          16133 Ventura Boulevard                         9%
                              Encino, CA 91436                              
                                                                            
Koeppel Family Trust          1445 Cabellero Road                             8%
                              Arcadia, CA 91006                             
                                                                            
Joseph E. & Ellen Mueth       225 S. Lake Avenue                              7%
TTEEs, Mueth Family Trust     Pasadena, CA 91101                            
                                                                            
Camille Basha & Connie        1015 San Marino Avenue                          7%
Vitale JTTE                   San Marino, CA  91108
</TABLE> 

                                      -11-
<PAGE>
 
<TABLE> 
<S>                           <C>                                <C> 
Judith Ann Kenyon, Trustee    1755 Warwick Avenue                6%
Trust Dated 2/23/89           San Marino, CA 91108                            
                                                                              
Connie Vitale & Camille       1015 San Marino Avenue             5%
Basha JTTE                    San Marino, CA 91108

                                                                            
James M. Cubbon               1416 Via Margarita                 5%
                              Palos Verdes Estates, CA                      
                              90274                                         
</TABLE> 
 

                    INVESTMENT ADVISORY AND OTHER SERVICES

     Advisory Agreement.  Loomis Sayles serves as investment adviser to the Fund
     ------------------                                                         
under an advisory agreement with the Trust dated August 30, 1996. Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees. Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, facilities and equipment, services of executive
and other personnel of the Fund and certain administrative services. For these
services, the advisory agreement provides that the Fund shall pay Loomis Sayles
a monthly investment advisory fee at the annual rate of .50% of the Fund's
average weekly net assets.

     Under the advisory agreement, if the total ordinary business expenses of
the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or the Trust are
qualified for sale, Loomis Sayles shall pay such excess.

     As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.

     During the 1996 and the 1997 fiscal years and the 1998 fiscal period
(January 1, 1998, through September 30, 1998), Loomis Sayles received the
following amounts of investment advisory fees from the Fund (before voluntary
fee reductions and expense assumptions) and waived and reimbursed the following
amounts of fees for the Fund:
 
<TABLE>
<CAPTION>
  Period       Advisory Fees            Fee Waivers/Reimbursements
  ------       -------------            --------------------------
  <S>          <C>                      <C>
  1996            $52,945                    $ 64,804
  1997            $77,450                    $117,260
  1998            $66,039                    $ 90,006
</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

                                      -12-
<PAGE>
 
a majority of the Trustees who are not "interested persons" of the Trust or
Loomis Sayles, as that term is defined in the 1940 Act, cast in person at a
meeting called for the purpose of voting on such approval. Any amendment to the
advisory agreement must be approved by vote of a majority of the outstanding
voting securities of the Fund and by vote of a majority of the Trustees who are
not interested persons, cast in person at a meeting called for the purpose of
voting on such approval.

     The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. In addition,
the agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.

     The advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

     Loomis Sayles acts as investment adviser to the eighteen series of the
Loomis Sayles Funds, each a series of a registered open-end diversified
management investment company. Loomis Sayles acts as investment adviser or sub-
adviser to New England Star Advisers Funds, New England Value Fund, New England
Balanced Fund and New England Strategic Income Fund, which are series of New
England Funds Trust I, a registered open-end management investment company, New
England High Income Fund, a series of New England Funds Trust II, a registered
open-end management investment company, New England Equity Income Fund, a series
of New England Funds Trust III, a registered open-end management investment
company and to the Loomis Sayles 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 other investment
companies and numerous other corporate and fiduciary clients.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies"). Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company. Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange. Nvest Corporation is the sole general partner of Nvest L.P.

     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

                                      -13-
<PAGE>
 
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 Trustee that the desirability of retaining Loomis
Sayles as investment adviser for the Fund outweighs the disadvantages, if any,
which might result from these practices.

     Custodial Arrangements.  State Street Bank and Trust Company ("State
     ----------------------                                              
Street"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund. Upon instruction, State Street receives and
delivers cash and securities of the Fund in connection with Fund transactions
and collects all dividends and other distributions made with respect to Fund
portfolio securities. State Street also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.

    
     Independent Accountants.  The Fund's independent accountants are
     -----------------------                                         
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts.
PricewaterhouseCoopers LLP, conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation. The information under the caption "Financial
Highlights" included in the Prospectus has been so included, and the financial
statements incorporated by reference herein from the Fund's 1998 Annual Report
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.    

                     PORTFOLIO TRANSACTIONS AND BROKERAGE

     In placing orders for the purchase and sale of portfolio securities for the
Fund, Loomis Sayles always seeks the best price and execution. Transactions 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.

                                      -14-
<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 and 1997 fiscal years and the
1998 fiscal period (January 1, 1998 through September 30, 1998), (1) the
aggregate dollar amounts of brokerage commissions paid on portfolio transactions
during such periods, (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 periods:

<TABLE>
<CAPTION>  

              (1)           (2)            (3)
           Aggregate                    Commissions
           Brokerage      Directed      On Directed
           Commissions   Transactions   Transactions
 Period        ($)           ($)             ($)
 ------   ------------   ------------  -------------
<S>       <C>             <C>             <C> 
  1996         $ 0            $ 0            $ 0
  1997         $ 0            $ 0            $ 0
  1998         $              $              $
</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 

                                      -15-
<PAGE>
 
Massachusetts by an Agreement and Declaration of Trust (the "Declaration of
Trust") dated December 23, 1993.

     The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.

     The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the expenses
with respect to the Fund and with a share of the general expenses of the Trust.
Any general expenses of the Trust that are not readily identifiable as belonging
to a particular series of the Trust are allocated by or under the direction of
the Trustees in such manner as the Trustees determine to be fair and equitable.
While the expenses of the Trust are allocated to the separate books of account
of the Fund, certain expenses may be legally chargeable against the assets of
all series.

     The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate. While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular means of distribution (or costs of related services) to be borne by
the shareholders who purchase through that means of distribution. The Trustees
may also, without shareholder approval, establish one or more additional
separate portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "fund").

     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.

Voting Rights
- -------------

     As summarized in the Prospectus, 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 

                                      -16-
<PAGE>
 
the Declaration of Trust) in the election of Trustees and the termination of the
Trust and on other matters submitted to the vote of shareholders.

     The Declaration of Trust provides that on any matter submitted to a vote of
all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote, in which case, a
separate vote of that series or sub-series shall also be required to decide the
question. Also, a separate vote for each series or sub-series shall be held
whenever required by the 1940 Act or any rule thereunder. Rule 18f-2 under the
1940 Act provides in effect that a class shall be deemed to be affected by a
matter unless it is clear that the interests of each class in the matter are
substantially identical or that the matter does not affect any interest of such
class. On matters exclusively affecting an individual series, only shareholders
of that series are entitled to vote. Consistent with the current position of the
SEC, shareholders of all series vote together, irrespective of series, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory agreement relating to that
series. Voting rights are not cumulative.

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

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

     Except as set forth above, the Trustees shall continue to hold office and
may appoint successor Trustees.

     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.

                                      -17-
<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 Prospectus under "How to
Purchase Shares."

                                NET ASSET VALUE

     The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made at least 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,
Martin Luther King, Jr. 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

                                      -18-
<PAGE>
 
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.

                                  REDEMPTIONS

     The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."

     The redemption price will be the net asset value per share next determined
     --------------------------------------------------------------------------
after the redemption request and any necessary special documentation are
- ------------------------------------------------------------------------
received by the Trust in proper form.  Proceeds resulting from a written
- -------------------------------------                                   
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.

     The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.

     A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."


          INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

     As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of the Fund to pay its shareholders, as monthly
dividends, substantially all net income and to distribute annually all net
realized capital gains, if any, after offsetting any capital loss carryovers.

     Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of regular trading on the Exchange on the record date for each
dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to the Trust.
In order for a change to be in effect for any dividend or distribution, it must
be received by the Trust on or before the record date for such dividend or
distribution.

     As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.

                                      -19-
<PAGE>
 
     The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify and to qualify for the
special tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things, (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies, (ii) distribute at least 90% of the sum of its taxable
net investment income, its tax-exempt income and the excess, if any, of net
short term capital gains over its net long-term capital losses for such year;
and (iii) at the end of each fiscal quarter hold at least 50% of the value of
its total assets in cash, government securities, securities of other regulated
investment companies, and other securities of issuers which represent, with
respect to each issuer, no more than 5% of the value of the Fund's total assets
and 10% of the outstanding voting securities of such issuer, and 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 which the Fund controls and which are engaged in the same,
similar or related trades and businesses. To the extent it qualifies for
treatment as a regulated investment company, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions.

     An excise tax at the rate of 4% will be imposed on the excess, if any, of
the Fund's "required distribution" over its 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 elect and so elects) plus undistributed amounts from prior years. The Fund
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by the Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.

     The Code permits a regulated investment company that at the close of each
quarter of its taxable year has at least 50% of the value of its total assets
invested in obligations the interest on which is excludable from federal gross
income to pass through to its investors, tax-free, its net tax-exempt interest
income. The policy of the Fund is to pay each year as dividends all of the
Fund's tax-exempt interest income net of certain deductions. An exempt-interest
dividend is any dividend or part thereof derived from tax-exempt interest and
designated as an exempt-interest dividend in a written notice mailed to
shareholders after the close of the Fund's taxable year, but the aggregate of
such dividends may not exceed the net tax-exempt interest received by the Fund
during the taxable year. The percentage of the dividends paid for any taxable
year that qualifies as federal exempt-interest dividends will be the same for
all shareholders receiving dividends during such year, regardless of the period
for which the shares were held.

     Exempt-interest dividends may be treated by shareholders as items of
interest excludable from their gross income under Section 103(a) of the Code but
may be taxable for federal alternative minimum tax purposes and for state and
local tax purposes. Each shareholder is advised to consult his or her tax
adviser with respect to whether exempt-interest dividends would retain the
exclusion under Section 103(a) if such shareholder were treated as a
"substantial user" or a "related person"

                                      -20-
<PAGE>
 
to such user under Section 147(a) with respect to facilities financed through
any of the tax-exempt obligations held by the Fund.

     If, at the close of each quarter of its taxable year, at least 50% of the
value of the total assets of the Fund consists of obligations the interest on
which is exempt from California personal income taxation if held by an
individual, then the Fund will be qualified to pay dividends that are exempt
from California personal income tax.  The Fund intends to qualify to pay such
dividends.  For California personal income tax purposes, distributions derived
from other investments and distributions from any net realized capital gains
will be taxable, whether paid in cash or reinvested in additional shares.

     Interest derived from California tax-exempt securities is not subject to
the California alternative minimum tax.  For California personal income tax
purposes, the entire amount of interest on any indebtedness incurred to purchase
or carry shares of the Fund will not be deductible.

     Distributions from investment income and capital gains, including dividends
derived from interest paid on California tax-exempt securities, will be subject
to California franchise tax and California corporate income tax.

     Shareholders of the Fund will be subject to federal income taxes on taxable
distributions made by the Fund whether received in cash or additional shares of
the Fund.  Distributions by the Fund of net taxable income and short-term
capital gains, if any, will be taxable to shareholders as ordinary income.
Distributions designated by the Fund as deriving from securities held for more
than one year, if any, will be taxable to shareholders as long-term capital
gains (generally at a 20% rate for noncorporate shareholders) without regard to
how long a shareholder has held shares of the Fund.

     Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.

     Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
If shares have been held for more than one year, gain or loss realized will be
long-term capital gain or loss, provided the shareholder holds the shares as a
capital asset.  In general, any long term gains realized upon a taxable
disposition of shares will be subject to a maximum tax rate of 20% for
noncorporate shareholders. If a shareholder sells Fund shares held for six
months or less at a loss, the loss will be disallowed to the extent of any
exempt-interest dividends received by the shareholder with respect to the shares
and will be treated as long-term capital loss to the extent of any long-term
capital gain distributions received with respect to the shares.  Furthermore,
all or a portion of any loss will be disallowed on

                                      -21-
<PAGE>
 
the taxable disposition of Fund shares if the shareholder acquires other shares
of the Fund within 30 days before or after the disposition.

     The Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received.  In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

     If the Fund engages in hedging transactions, including hedging transactions
in options, future contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, mark-to
market, straddle, wash sale, and short sale rules), the effect of which may be
to accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.

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

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

     The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules described in the Prospectus.  The new regulations will generally be
effective for payments made on or after January 1, 1999 (although transition
rules will apply). In some circumstances, the new rules will increase the
certification and filing requirements imposed on foreign investors in order to
qualify for exemption from the 31% back-up withholding tax and for reduced
withholding tax rates under income tax treaties. Foreign investors in the Fund
should consult their tax advisors with respect to the potential application of
these new regulations.


                             FINANCIAL STATEMENTS

     The Report of Independent Accountants, financial highlights and financial
statements of the Fund included in its 1998 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 (888) 226-9699.

                                      -22-
<PAGE>
 
     The financial highlights included in the Prospectus under the headings
"Financial Highlights" and "Prior Performance" and incorporated by reference
into this Statement of Additional Information and the financial statements and
financial highlights contained in the Fund's 1998 Annual Report and incorporated
by reference into this Statement of Additional Information have both been
audited by PricewaterhouseCoopers LLP, independent accountants, and have been so
included and incorporated by reference in reliance upon the report of said firm,
which report is given upon their authority as experts in auditing and
accounting.

 
                     CALCULATION OF YIELD AND TOTAL RETURN
    
     Yield.  The Fund's yield will be computed by dividing the Fund's net
     -----                                                               
investment income per share by the maximum offering price per share on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The Fund's yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Trust allocated to the Fund. These factors, and possible differences in the
methods used in calculating yield, should be considered when comparing the
Fund's yield to yields published for other investment companies and other
investment vehicles. Yield should also be considered relative to changes in the
value of the Fund's shares and to the relative risks associated with the
investment objective and policies of the Fund.     

     At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.

     Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary.  An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.

     Total Return.  Total return with respect to the Fund is a measure of the
     ------------                                                            
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash.  The formula for total return used
herein includes four steps:  (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.

                                      -23-
<PAGE>
 
                            PERFORMANCE COMPARISONS

     The Fund may from time to time include the yield and/or total return of its
shares in advertisements or information furnished to present or prospective
shareholders.  The Fund may from time to time include in advertisements or
information furnished to present or prospective shareholders (i) the ranking of
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, Inc. or Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.

     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
     --------------------------------                                           
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends.  They do not reflect deduction of any sales
charges.  Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance.  Lipper classifies mutual
funds by investment objective and asset category.

     MICROPAL, INC. distributes mutual fund rankings weekly and monthly.  The
     --------------                                                          
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends.  If deemed appropriate by the user, performance can also
reflect deductions for sales charges.  Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance.  Micropal classifies mutual funds by investment objective and asset
category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a month.  The
     -----------------                                                    
ratings are divided into five groups:  highest, above average, neutral, below
average and lowest.  They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc.  Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance.  The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.

     CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
     -------------------------------------                                      
distributed monthly.  The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year.  Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain).  Weisenberger
rankings do not reflect deduction of sales charges or fees.

                                      -24-
<PAGE>
 
     Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

     CONSUMER PRICE INDEX.  The Consumer Price Index, published by the U.S.
     --------------------                                                  
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

     DOW JONES INDUSTRIAL AVERAGE.  The Dow Jones Industrial Average is a market
     ----------------------------                                               
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.

     LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.  The Lehman Brothers
     ------------------------------------------------                     
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
 
     LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX.  The Index contains fixed rate
     ------------------------------------------                               
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

     LEHMAN BROTHERS GOVERNMENT BOND INDEX.  The Lehman Brothers Government Bond
     --------------------------------------                                     
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.

     LEHMAN BROTHERS MUNICIPAL BOND INDEX.  The Lehman Brothers Municipal Bond
     -------------------------------------                                    
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.

     MSCI-EAFE INDEX.  The MSCI-EAFE Index contains over 1000 stocks from 20
     ----------------                                                       
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.

     MSCI-EAFE EX-JAPAN INDEX.  The MSCI-EAFE ex-Japan Index consists of all
     -------------------------                                              
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

     MERRILL LYNCH GOVERNMENT/CORPORATE INDEX.  The Merrill Lynch Government/
     -----------------------------------------                               
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.

                                      -25-
<PAGE>
 
     MERRILL LYNCH HIGH YIELD INDEX.  The Merrill Lynch High Yield Index
     -------------------------------                                    
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).

     RUSSELL 2000 INDEX.  The Russell 2000 Index is comprised of the 2000
     ------------------                                                  
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.

     SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX.  The Salomon Brothers World
     --------------------------------------------                             
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded.  The index generally
excludes floating- or variable-rate bonds, securities aimed principally at non-
institutional investors (such as U.S. Savings Bonds) and private-placement type
securities.

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

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

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

     From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A.  In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund.  References to or reprints of such articles
may be used in the Fund's promotional literature.  References to articles
regarding personnel of the Loomis Sayles who have portfolio management
responsibility may also be used in the Fund's promotional literature.  For
additional information about the Fund's advertising and promotional literature,
see Appendix B.

                                      -26-
<PAGE>
 
                               PERFORMANCE DATA
                                        
     The manner in which yield and total return of the Fund will be calculated
for public use is described above.  The following table summarizes the
calculation of the Fund's yield at September 30, 1998 and the Fund's total
return (i) for the one-year period ended December 31, 1997 and (ii) for the
period from the Fund's commencement of operations to September 30, 1998.

                               Performance Data*
<TABLE>
<CAPTION> 
     <S>                  <C>                     <C>                        <C>                                          
                                                                            
                                                                            
                                                                                     Average            
                               Average                   Average                     Annual             
                               Annual                    Annual                      Total             
                             Total Return             Total Return                   Return             
                                for the                  for the              from the Commencement    
     Current SEC Yield    One-Year Period ended   Three-Year Period ended    of Operations** through   
        at 9/30/98              9/30/98                  9/30/98                    9/30/98              
        ----------              -------                  -------                    ------- 
                                                                            
           4.15%                 7.31%                    6.60%                      6.51%                
</TABLE>

*Performance would have been lower if the management fee had not been waived and
certain other expenses had not been reimbursed by Loomis Sayles. In the absence
of the expense limitation, actual yield and total return would have been 3.24%
(yield), and 6.65%, 5.97% and 5.88% for the one-year period ended September 30,
1998 and for the period from the Fund's commencement of operations to September
30, 1998, respectively.

**Inception date of the Fund is June 1, 1995.

                                      -27-
<PAGE>
 
                                                                      APPENDIX A
                 PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

ABC and affiliates                        Fitch Insights                     
Adam Smith's Money World                  Forbes                             
America On Line                           Fort Worth Star-Telegram           
Anchorage Daily News                      Fortune                            
Atlanta Constitution                      Fox Network and affiliates         
Atlanta Journal                           Fund Action                        
Arizona Republic                          Fund Decoder                       
Austin American Statesman                 Global Finance                     
Baltimore Sun                             (the) Guarantor                    
Bank Investment Marketing                 Hartford Courant                   
Barron's                                  Houston Chronicle                  
Bergen County Record (NJ)                 INC                                
Bloomberg Business News                   Indianapolis Star                  
Bond Buyer                                Individual Investor                
Boston Business Journal                   Institutional Investor             
Boston Globe                              International Herald Tribune       
Boston Herald                             Internet                           
Broker World                              Investment Advisor                 
Business Radio Network                    Investment Company Institute       
Business Week                             Investment Dealers Digest          
CBS and affiliates                        Investment Profiles                
CDA Investment Technologies               Investment Vision                  
CFO                                       Investor's Daily                   
Changing Times                            IRA Reporter                       
Chicago Sun Times                         Journal of Commerce                
Chicago Tribune                           Kansas City Star                   
Christian Science Monitor                 KCMO (Kansas City)                 
Christian Science Monitor News Service    KOA-AM (Denver)                    
Cincinnati Enquirer                       LA Times                           
Cincinnati Post                           Leckey, Andrew (syndicatecol column)
CNBC                                      Life Association News              
CNN                                       Lifetime Channel                    
Columbus Dispatch                         Miami Herald                        
CompuServe                                Milwaukee Sentinel                  
Dallas Morning News                       Money Magazine                      
Dallas Times-Herald                       Money Maker                         
Denver Post                               Money Management Letter             
Des Moines Register                       Morningstar                         
Detroit Free Press                        Mutual Fund Market News             
Donoghues Money Fund Report               Mutual Funds Magazine               
Dorfman, Dan (syndicated column)          National Public Radio               
Dow Jones News Service                    National Underwriter                
Economist                                 NBC and affiliates                  
FACS of the Week                          New England Business                
Fee Adviser                               New England Cable News              
Financial News Network                    New Orleans Times-Picayune          
Financial Planning                        New York Daily News                 
Financial Planning on Wall Street         New York Times                      
Financial Research Corp.                  Newark Star Ledger                  
Financial Services Week                   Newsday                             
Financial World                           Newsweek                            
                                                        
                                      A-1

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

                                      A-2

                                      -29-
<PAGE>
 
                                                                  APPENDIX B
                    ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:

 .    Loomis Sayles Investment Trust's participation in wrap fee and no
     transaction fee programs

 .    Loomis Sayles Investment Trust and Loomis, Sayles & Company, L.P. Website
      
 .    Characteristics of Loomis Sayles including the number and locations of its
     offices, its investment practices and clients

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

 .    Specific and general sources of information, economic models, forecasts
     and data services utilized, consulted or considered in the course of
     providing advisory or other services

 .    Industry conferences, electronically transmitted programs relating to the
     investment industry and the like at which Loomis Sayles participates

 .    Current capitalization, levels of profitability and other financial
     information

 .    Identification of portfolio managers, researchers, economists, principals
     and other staff members and employees

 .    The specific credentials of the above individuals, including but not
     limited to, previous employment, current and past positions, titles and
     duties performed, industry experience, educational background and degrees,
     awards and honors

 .    Specific identification of, and general reference to, current individual,
     corporate and institutional clients, including pension and profit sharing
     plans

 .    Current and historical statistics relating to:

     -total dollar amount of assets managed
     -Loomis Sayles assets managed in total and by Fund
     -the growth of assets
     -asset types managed

     References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund.  The information may include, but is not limited to:

 .    Specific and general references to industry statistics regarding 401(k)
     and retirement plans including historical information and industry trends
     and forecasts regarding the growth of assets, numbers or plans, funding
     vehicles, participants, sponsors and other demographic data relating to
     plans, participants and sponsors, third party and other administrators,
     benefits consultants and firms with whom Loomis Sayles may or may not have
     a relationship.

 .    Specific and general reference to comparative ratings, rankings and other
     forms of evaluation as well as statistics regarding the Fund as a 401(k) or
     retirement plan funding vehicle produced by industry authorities, research
     organizations and publications.

                                      B-1
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST

                     LOOMIS SAYLES CORE FIXED INCOME FUND

                      STATEMENT OF ADDITIONAL INFORMATION

                                January 1, 1999



This Statement of Additional Information is not a prospectus.  This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Core Fixed Income Fund, a series of Loomis Sayles Investment Trust, dated
January 1, 1999, and should be read in conjunction therewith.  A copy of the
Prospectus may be obtained from Loomis Sayles Investment Trust, One Financial
Center, Boston, Massachusetts 02111.
<PAGE>
 
                               TABLE OF CONTENTS


INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS............................  -3-

MANAGEMENT OF THE TRUST....................................................  -9-

INVESTMENT ADVISORY AND OTHER SERVICES..................................... -12-

PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... -14-

DESCRIPTION OF THE TRUST................................................... -15-

HOW TO BUY SHARES.......................................................... -18-

NET ASSET VALUE............................................................ -18-

REDEMPTIONS................................................................ -19-

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS................ -19-

FINANCIAL STATEMENTS....................................................... -22-

CALCULATION OF YIELD AND TOTAL RETURN...................................... -22-

     PERFORMANCE COMPARISONS............................................... -23-

PERFORMANCE DATA........................................................... -26-

APPENDIX A
    PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION.........................  A-1

APPENDIX B
     ADVERTISING AND PROMOTIONAL LITERATURE................................  B-1

                                      -2-
<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The investment objective and policies of the Loomis Sayles Core Fixed
Income Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments." The investment
policies of the Fund set forth in the Prospectus and in this Statement of
Additional Information may be changed by Loomis, Sayles & Company, L.P. ("Loomis
Sayles"), the Fund's investment adviser, subject to review and approval by the
Trust's board of trustees (the "Trustees"), without shareholder approval except
that the investment objective of the Fund as set forth in the Prospectus and any
Fund policy explicitly identified as "fundamental" may not be changed without
the approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).

     In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

     The Fund will not:

     *(1)  Act as underwriter, except to the extent that, in connection with the
           disposition of portfolio securities, it may be deemed to be an
           underwriter under certain federal securities laws.

     *(2)  Invest in oil, gas or other mineral leases, rights or royalty
           contracts or in real estate, commodities or commodity contracts.
           (This restriction does not prevent the Fund from investing in issuers
           that invest or deal in the foregoing types of assets or from
           purchasing securities that are secured by real estate.)

     *(3)  Make loans. (For purposes of this investment restriction, neither (i)
           entering into repurchase agreements nor (ii) purchasing bonds,
           debentures, commercial paper, corporate notes and similar evidences
           of indebtedness, which are a part of an issue to the public, is
           considered the making of a loan.)

     *(4)  Change its classification pursuant to Section 5(b) of the Investment
           Company Act of 1940, as amended (the "1940 Act"), from a
           "diversified" to a "non-diversified" management investment company.

     *(5)  Purchase any security (other than U.S. Government Securities) if, as
           a result, more than 25% of the Fund's total assets (taken at current
           value) would be invested in any one industry (in the utilities
           category, gas, electric, water and telephone companies will be
           considered as being in separate industries.)

                                      -3-
<PAGE>
 
     *(6)  Borrow money in excess of 10% of its total assets (taken at cost) or
           5% of its total assets (taken at current value), whichever is lower,
           nor borrow any money except as a temporary measure for extraordinary
           or emergency purposes; however, the Fund's use of reverse repurchase
           agreements and "dollar roll" arrangements shall not constitute
           borrowing by the Fund for purposes of this restriction.

     *(7)  Purchase any illiquid security, including any security that is not
           readily marketable, if, as a result, more than 15% of the Fund's net
           assets (based on current value) would then be invested in such
           securities.

     *(8)  Issue senior securities other than any borrowing permitted by
           restriction (6) above. (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
           collateral arrangements with respect to options, futures contracts
           and options on futures contracts and with respect to initial and
           variation margin; and the purchase or sale of or entry into options,
           forward contracts, futures contracts, options on futures contracts,
           swap contracts or any other derivative investments to the extent that
           Loomis Sayles determines that the Fund is not required to treat such
           investments as senior securities pursuant to the pronouncements of
           the Securities and Exchange Commission (the "SEC") or its staff.)

     The Fund intends, based on the views of the staff of the SEC, to restrict
its investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (7) above.

     Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.

Portfolio Turnover
- ------------------

     Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets.  The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions.  High portfolio turnover rates
may result in 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.

                                      -4-
<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 U.S. 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 U.S.
          -----------------------------                                 
Treasury issued in maturities that vary between one and forty years, with
interest normally payable every six months. They are backed by the full faith
and credit of the U.S. Government.

     .    "Ginnie Maes" - Debt securities issued by a mortgage banker or other
          -------------                                                       
mortgagee which represent interests in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or guaranteed
by the Veterans Administration.  The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer of
these certificates on the underlying mortgages.  An assistant attorney general
of the United States has rendered an opinion that the guarantee by GNMA is a
general obligation of the United States backed by its full faith and credit.
Mortgages included in single family or multi-family residential mortgage pools
backing an issue of Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the registered holders
of Ginnie Maes (such as the Fund) each month.  Unscheduled prepayments may be
made by homeowners, or as a result of a default.  Prepayments are passed through
to the registered holder of Ginnie Maes along with regular monthly payments of
principal and interest.

     .    "Fannie Maes" - Fannie Mae 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 Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae 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. 

                                      -5-
<PAGE>
 
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but Freddie Macs are not backed by the full faith and credit of the
U.S. Government.

     As described in the Prospectus, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed income securities.  Like other fixed income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

When-Issued Securities
- ----------------------

     As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date.  Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later.  When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments.  The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria.  The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date.  When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

Convertible Securities
- ----------------------

     Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities at a stated price or rate.  Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation.  Because convertible securities can be
converted into equity securities, their value will normally vary in some
proportion with those of the underlying equity securities.  Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security.  Due to the conversion
feature, convertible securities generally yield less than nonconvertible fixed
income securities of similar credit quality and maturity.  The Fund's investment
in convertible securities may at times include securities that have a mandatory
conversion feature, pursuant to which the securities convert automatically into
common stock at a specified date and 

                                      -6-
<PAGE>
 
conversion ratio, or that are convertible at the option of the issuer. Because
conversion is not at the option of the holder, the Fund may be required to
convert the security into the underlying common stock even at times when the
value of the underlying common stock has declined substantially.

Zero Coupon Bonds
- -----------------

     Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations.  Such bonds are
issued and traded at discounts from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer.  The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality.  In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund must distribute each year at least 90% of its net
investment income, including the original issue discount accrued on zero coupon
bonds.  Because an investor investing in zero coupon bonds will not on a current
basis receive cash payments from the issuer in respect of accrued original issue
discount, the Fund may have to distribute cash obtained from other sources in
order to satisfy the 90% distribution requirement under the Code.  Such cash
might be obtained from selling other portfolio holdings of the Fund.  In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell such securities at such time.

Repurchase Agreements
- ---------------------

     The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase).  The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security.  Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash.  Although the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U.S. Government, the
obligation of the seller is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the underlying security.  In such
event, the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market.  However, the Fund may
be subject to various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto and (b) inability to enforce rights and the
expenses involved in attempted enforcement.

                                      -7-
<PAGE>
 
Lower Rated Fixed Income Securities
- -----------------------------------

     The Fund will purchase securities rated at least BBB- by Standard & Poor's
("S&P") and Baa3 by Moody's Investors Service, Inc. ("Moody's"), or if unrated,
determined to be of comparable quality by Loomis Sayles.  In the event that the
credit rating of a security held by the Fund falls below investment grade (or,
in the case of unrated securities, Loomis Sayles determines that the quality of
such security has deteriorated below investment grade), the Fund will not be
obligated to dispose of such security and may continue to hold such security if,
in the opinion of Loomis Sayles, such investment is appropriate in the
circumstances.  Securities rated below investment grade ("lower rated fixed
income securities") generally provide higher yields, but are subject to greater
credit and market risk than higher quality fixed income securities.  Lower rated
fixed income securities are considered speculative with respect to the ability
of the issuer to meet principal and interest payments.  Achievement of the
Fund's investment objective through investment in lower rated fixed income
securities may be more dependent on Loomis Sayles's credit analysis than is the
case with higher quality bonds.  The market for lower rated fixed income
securities may be more severely affected than other financial markets by
economic recession or substantial interest rate increases.  The value and
liquidity of lower rated fixed income securities may be diminished by adverse
publicity and investor perceptions. The secondary market for lower rated fixed
income securities may be less liquid than the secondary market for higher rated
fixed income securities.  This lack of liquidity at certain times may affect the
values of these securities and may make the valuation and sale of these
securities by the Fund more difficult.  Certain lower-rated fixed income
securities do not pay interest on a current basis.  However, the Fund will
accrue and distribute this interest on a current basis, and may be required to
sell securities at times when Loomis Sayles would not otherwise deem it
advisable to do so to generate cash for distributions.  Securities of below
investment grade quality are commonly referred to as "junk bonds."  Securities
in the lowest rating categories may be in poor standing or in default.
Investment grade fixed income securities rated BBB by S&P or Baa by Moody's may
share some of the characteristics described above.

Rule 144A Securities
- --------------------

     The Fund may purchase Rule 144A securities.  These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a particular
issue of Rule 144A securities is liquid.  Under the guidelines, Loomis Sayles
considers such factors as:  (1) the frequency of trades and quotes for a
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of
marketplace trades therefor.

                                      -8-
<PAGE>
 
                            MANAGEMENT OF THE TRUST

     The trustee and officers of the Trust and their principal occupations
during the past five years are as follows:

TIMOTHY J. HUNT (____) -- Trustee.  26 Dennett Road, Marblehead, Massachusetts.
                          -------                                               
     Retired. Formerly, Vice President and Director of Fixed Income Research,
     Loomis Sayles.

DANIEL J. FUSS (______) -- President.  Executive Vice President and Director,
                           ---------                                         
     Loomis Sayles.

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

SHEILA M. BARRY (53) -- Secretary and Compliance Officer.  Assistant General
                        --------------------------------                    
     Counsel and   Vice President, Loomis Sayles.  Formerly, Senior Counsel and
     Vice President, New England Funds, L.P.

ROBERT J. BLANDING (______) -- Executive Vice President.  465 First Street West,
                               ------------------------                         
     Sonoma, California.  President, Chairman, Director and Chief Executive
     Officer, Loomis Sayles.

WILLIAM F. CAMP (______) -- Vice President.  1533 North Woodward, Bloomfield
                            --------------                                  
     Hills, Michigan. Vice President, Loomis Sayles.  Formerly, Portfolio
     Manager, Kmart Corporation.

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

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

JEFFREY L. MEADE (______) -- Vice President.  Chief Operating Officer, Executive
                             --------------                                     
     Vice President and Director, Loomis Sayles.

KENT P. NEWMARK (______) -- Vice President.  555 California Street, San
                            --------------                             
     Francisco, California.   Vice President and Director, Loomis Sayles.

ROBERT K.  PAYNE (______) -- Vice President.  555 California Street, San
                             --------------                             
     Francisco, California. Vice President, Loomis Sayles.

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

MARI J. SUGAHARA (______) -- Vice President.  Vice President, Loomis Sayles.
                             ---------------                                

FREDERICK E. SWEENEY, JR. (______) --Vice President.  Vice President, Loomis
                                     ---------------                        
     Sayles. Formerly, served as an Investment Consultant at Meketa Investment
     Group and prior to that served as Vice President of New England Investment
     Associates.

                                      -9-
<PAGE>
 
     Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed. Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.

     The Trust pays no compensation to its officers listed above who are
interested persons of the Trust.  Each Trustee who is not affiliated with Loomis
Sayles will be compensated at the rate of $10,000 per annum.  No Trustee
received compensation from any other investment company which is advised by
Loomis Sayles or its affiliates or which holds itself out to investors as being
related to the Trust.


                              COMPENSATION TABLE
   for the 1998 fiscal period (January 1, 1998, through September 30, 1998)

<TABLE>
- ------------------------------------------------------------------------------------------------ 
   (1)                (2)            (3)                (4)                   (5)
<S>               <C>            <C>                 <C>                <C> 
Name of Person,    Aggregate       Pension or         Estimated         Total Compensation
  Position        Compensation     Retirement           Annual          from Trust and Fund
                   from Trust       Benefits         Benefits Upon        Complex Paid to
                                 Accrued as Part       Retirement            Trustee
                                 of Fund Expenses
- ------------------------------------------------------------------------------------------------ 

Timothy J. Hunt,  $__________        $______            $______            $__________
Trustee
</TABLE> 

     As of the date hereof, the Trustee and officers as a group owned less than
1% of the outstanding shares of the Fund.

                                      -10-
<PAGE>
 
     As of October 31, 1998, Asbestos Workers Local #84 Pension Plan may be
deemed to control the Fund because it owned of record more than 25% of the
Fund's shares. As a result, it may not be possible for matters subject to a vote
of the outstanding voting securities of the Fund to be approved without the
affirmative vote of such shareholder, and such shareholder may be able to
approve such matters without the approval of any other shareholder.  The
following table sets forth the name, address and percentage ownership of each
holder of more than 5% of the Fund's outstanding securities as of October 31,
1998:

<TABLE>
<CAPTION>
                                                                             Percentage of
Shareholder                                Address                           Shares Held
- -----------                                -------                           -----------
<S>                                        <C>                               <C>
Asbestos Workers Local #84 Pension         36 East Warner Road               31%
Plan                                       Akron, OH 44319
 
Crane Plastics Employee Retirement Plan    P.O. Box 1047                     18%
                                           Columbus, OH 43216
 
Sheet Metal Workers Local Union            2075 West Big Beaver              11%        
No. 292 Annuity Fund                       #520                                         
                                           Troy, MI  48084                                

Southeastern Michigan                      25180 Lahser Road                  9%
Chapter, NECA                              P.O. Box 385
                                           Southfield, MI 48037
 
Hospitalers Committee of Detroit           Commandery No. 1                   9%
                                           500 Temple Ave.
                                           Detroit, MI 48201

Ironworkers Local #340                     519 East Columbia                  7%  
 Supplementary Retirement Plan             Battle Creek, MI 49015                   

Sign, Pictorial & Display Union            30700 Telegraph Road               7%
Local #591 AFL-CIO Display Group           Suite 2400
Supplemental Pension Fund                  Bingham Farms, MI 48025
</TABLE>

                    INVESTMENT ADVISORY AND OTHER SERVICES

     Advisory Agreement.  Loomis Sayles serves as investment adviser to the Fund
     ------------------                                                         
under an advisory agreement with the Trust dated August 30, 1996.  Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees.  Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, facilities and equipment, services of executive
and other 

                                      -11-
<PAGE>
 
personnel of the Fund and certain administrative services. For these services,
the advisory agreement provides that the Fund shall pay Loomis Sayles a monthly
investment advisory fee at the annual rate of .50% of the Fund's average weekly
net assets.

     Under the advisory agreement, if the total ordinary business expenses of
the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or the Trust are
qualified for sale, Loomis Sayles shall pay such excess.

     As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses.  These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.

     During the 1996 fiscal period (April 24, 1996 through December 31, 1996)
the 1997 fiscal year and the 1998 fiscal period (January 1, 1998, through
September 30, 1998),  Loomis Sayles received the following amounts of investment
advisory fees from the Fund (before voluntary fee reductions and expense
assumptions) and waived and reimbursed the following amount of fees for the
Fund:

<TABLE>
<CAPTION>
          Period        Advisory Fees        Fee Waivers/Reimbursements
          ------        -------------        --------------------------
          <S>           <C>                  <C>
          1996          $18,961              $ 30,882
          1997          $44,126              $102,202
          1998          $69,281              $ 85,691
</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

                                      -12-
<PAGE>
 
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 eighteen 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
Balanced Fund and New England Strategic Income Fund, which are series of New
England Funds Trust I, a registered open-end management investment company, New
England High Income Fund, a series of New England Funds Trust II, a registered
open-end management investment company, New England Equity Income Funds, a
series of New England Funds Trust III, a registered open-end management
investment company and the Loomis Sayles 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
other investment companies and numerous other corporate and fiduciary clients.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange. Nvest Corporation is the sole general partner of Nvest L.P.

     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 Trustee that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.

     Custodial Arrangements.  State Street Bank and Trust Company ("State
     ----------------------                                              
Street"), Boston, Massachusetts 02102, is the Trust's custodian.  As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund.  Upon instruction, State Street receives 

                                      -13-
<PAGE>
 
and delivers cash and securities of the Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. State Street also maintains certain
accounts and records of the Fund and calculates the total net asset value, total
net income and net asset value per share of the Fund on a daily basis.
    
     Independent Accountants.  The Fund's independent accountants are
     -----------------------                                         
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts 
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Fund's federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation.  The Information under the caption "Financial 
Highlights" included in the Prospectus has been so included, and the financial 
statements Incorporated by reference herein from the Fund's 1998 Annual Report
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.     

                     PORTFOLIO TRANSACTIONS AND BROKERAGE

     In placing orders for the purchase and sale of portfolio securities for the
Fund, Loomis Sayles always seeks the best price and execution.  Transactions 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. 

                                      -14-
<PAGE>
 
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 (April 24, 1996
through December 31, 1996), the 1997 fiscal year and the 1998 fiscal period
(January 1, 1998 through September 30, 1998), (1) the aggregate dollar amount of
brokerage commissions paid on portfolio transactions during such period, (2) the
dollar amount of transactions on which commissions were paid during such period
that were directed to brokers providing research services ("directed
transactions") and (3) the dollar amount of commissions paid on directed
transactions during such period:

<TABLE>    
<CAPTION>
                  (1)                 (2)                  (3)
                Aggregate                              Commissions
                Brokerage            Directed          on Directed
Period         Commissions ($)     Transactions ($)    Transactions ($)
- ------         ---------------     ----------------    ----------------
<S>            <C>                 <C>                 <C>
1996                 $0                  $0                  $0
1997                 $0                  $0                  $0
1998                 $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 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

                                      -15-
<PAGE>
 
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.

Voting Rights
- -------------

     As summarized in the Prospectus, 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.

                                      -16-
<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 conduct 

                                      -17-
<PAGE>
 
of his office. The By-Laws of the Trust provide for indemnification by the Trust
of the Trustees and officers of the Trust except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or Trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.

                               HOW TO BUY SHARES

     The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."

                                NET ASSET VALUE

     The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
The Fund intends to make such determination at least 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,   Martin Luther King, Jr. Day,  Presidents' Day and Good Friday.
Long-term debt securities are valued by a pricing service, which determines
valuations of normal institutional-size trading units of long-term debt
securities.  Such valuations are determined using methods based on market
transactions for comparable securities and on various relationships among
securities that are generally recognized by institutional traders.  Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.

     Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities not traded on a
U.S. exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value.  If events materially affecting the value of the Fund's
portfolio securities occur during such period, then these securities will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.

                                      -18-
<PAGE>
 
                                  REDEMPTIONS

     The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."

     The redemption price will be the net asset value per share next determined
     --------------------------------------------------------------------------
after the redemption request and any necessary special documentation are
- ------------------------------------------------------------------------
received by the Trust in proper form.  Proceeds resulting from a written
- ------------------------------------                                    
redemption request will normally be mailed to you within seven days after
receipt of your request in good order.  In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.

     The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders.  If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.

     A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss.  See "Income Dividends, Capital Gain Distributions and Tax Status."

          INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

     As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes," it is the policy of the Fund to pay its shareholders annually, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by any capital loss carryovers.

     Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of regular trading on the Exchange on the record date for each
dividend or distribution.  Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash.  The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.

     As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.

     The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code.  In order so to qualify and to qualify for the
special tax treatment accorded regulated 

                                      -19-
<PAGE>
 
investment companies and their shareholders, the Fund must, among other things:
(i) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies; (ii) distribute each year at
least 90% of the sum of its taxable net investment income, its tax-exempt income
and the excess, if any, of net short-term capital gains over net long-term
capital losses for such year; and (iii) 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 distributions in any
calendar year.  Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years.  The Fund intends to make distributions sufficient to avoid
imposition of the excise tax.  Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

     Distribution by the Fund of net income and short-term capital gains, if
any, will be taxable to shareholders as ordinary income. Distributions
designated by a Fund as deriving from net gains on securities held for more than
one year will be taxable to shareholders as long-term capital gains (generally
at a 20% rate for noncorporate shareholders), without regard to how long a
shareholder has held shares of the Fund.

     Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.

     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 

                                      -20-
<PAGE>
 
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. In general, any
long term gains realized upon a taxable disposition of shares will be subject to
a maximum tax rate of 20% (for noncorporate shareholders). However, if a
shareholder sells Fund shares at a loss within six months after purchasing the
shares, the loss will be treated as a long-term capital loss to the extent of
any long-term capital gain distributions received by the shareholder.
Furthermore, all or a portion of any loss will be disallowed on the taxable
disposition of Fund shares if the shareholder acquires other shares of the Fund
within 30 days before or after the disposition.

     The Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received.  In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

     If the Fund engages in hedging transactions, including hedging transactions
in options, future contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, mark-to
market straddle, wash sale, and short sale rules), the effect of which may be to
accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.

     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 foreign, state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, foreign, state or local taxes.

     The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty.)  The Internal Revenue Service
recently revised its regulations affecting the application to foreign investors
of the back-up withholding tax rules described above.  The new regulations will
generally be effective for payments made on or after January 1, 1999 (although
transition rules will apply).

     In some circumstances, the new rules will increase the certification and
filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding 

                                      -21-
<PAGE>
 
tax and for reduced withholding tax rates under income tax treaties. Foreign
investors in the Fund should consult their advisors with respect to the
potential application of these new regulations.

 
                             FINANCIAL STATEMENTS

     The Report of Independent Accountants, financial highlights and financial
statements of the Fund included in its 1998 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 (888) 226-9699.

     The financial highlights included in the Prospectus under the headings
"Financial Highlights" and "Prior Performance" and incorporated by reference
into this Statement of Additional Information and the financial statements and
financial highlights contained in the Fund's 1998 Annual Report and incorporated
by reference into this Statement of Additional Information have both been
audited by PricewaterhouseCoopers LLP, independent accountants, and have been so
included and incorporated by reference in reliance upon the report of said firm,
which report is given upon their authority as experts in auditing and
accounting.

                     CALCULATION OF YIELD AND TOTAL RETURN
    
     Yield.  The Fund's yield will be computed by dividing the Fund's net
     -----                                                               
investment income per share by the maximum offering price per share on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The Fund's yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Trust allocated to the Fund. These factors, and possible differences in the
methods used in calculating yield, should be considered when comparing the
Fund's yield to yields published for other investment companies and other
investment vehicles. Yield should also be considered relative to changes in the
value of the Fund's shares and to the relative risks associated with the
investment objective and policies of the Fund.     

     At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.

     Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary.  An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.

                                      -22-
<PAGE>
 
     Total Return.  Total return with respect to the Fund is a measure of the
     ------------                                                            
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash.  The formula for total return used
herein includes four steps:  (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.


                            PERFORMANCE COMPARISONS

     The Fund may from time to time include the yield and/or total return of its
shares in advertisements or information furnished to present or prospective
shareholders.  The Fund may from time to time include in advertisements or
information furnished to present or prospective shareholders (i) the ranking of
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, Inc. or Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.

     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
     --------------------------------                                           
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends.  They do not reflect deduction of any sales
charges.  Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance.  Lipper classifies mutual
funds by investment objective and asset category.

     MICROPAL, INC. distributes mutual fund rankings weekly and monthly.  The
     --------------                                                          
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends.  If deemed appropriate by the user, performance can also
reflect deductions for sales charges.  Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance.  Micropal classifies mutual funds by investment objective and asset
category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a month.  The
     -----------------                                                    
ratings are divided into five groups:  highest, above average, neutral, below
average and lowest.  They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc.  Morningstar ratings cover a variety of performance periods,
including 3-year, 5-

                                      -23-
<PAGE>
 
year, 10-year and overall performance. The performance factor for the overall
rating is a weighted-average return performance (if available) reflecting
deduction of expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the fund. The ratings are
derived from a purely quantitative system that does not utilize the subjective
criteria customarily employed by rating agencies such as Standard & Poor's and
Moody's Investor Service, Inc.

     CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
     -------------------------------------                                      
distributed monthly.  The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year.  Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain).  Weisenberger
rankings do not reflect deduction of sales charges or fees.

     Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

     CONSUMER PRICE INDEX.  The Consumer Price Index, published by the U.S.
     --------------------                                                  
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

     DOW JONES INDUSTRIAL AVERAGE.  The Dow Jones Industrial Average is a market
     ----------------------------                                               
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.

     LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.  The Lehman Brothers
     ------------------------------------------------                     
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
 
     LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX.  The Index contains fixed rate
     ------------------------------------------                               
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

     LEHMAN BROTHERS GOVERNMENT BOND INDEX.  The Lehman Brothers Government Bond
     --------------------------------------                                     
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.

     LEHMAN BROTHERS MUNICIPAL BOND INDEX.  The Lehman Brothers Municipal Bond
     -------------------------------------                                    
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.

     MSCI-EAFE INDEX.  The MSCI-EAFE Index contains over 1000 stocks from 20
     ----------------                                                       
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.

                                      -24-
<PAGE>
 
     MSCI-EAFE EX-JAPAN INDEX.  The MSCI-EAFE ex-Japan Index consists of all
     -------------------------                                              
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

     MERRILL LYNCH GOVERNMENT/CORPORATE INDEX.  The Merrill Lynch Government/
     -----------------------------------------                               
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.

     MERRILL LYNCH HIGH YIELD INDEX.  The Merrill Lynch High Yield Index
     -------------------------------                                    
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).

     RUSSELL 2000 INDEX.  The Russell 2000 Index is comprised of the 2000
     ------------------                                                  
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.

     SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX.  The Salomon Brothers World
     --------------------------------------------                             
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded.  The index generally
excludes floating- or variable-rate bonds, securities aimed principally at non-
institutional investors (such as U.S. Savings Bonds) and private-placement type
securities.

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

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

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

     From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A.  In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund.  References to or reprints of such articles
may be used in the Fund's promotional literature.  References to articles
regarding personnel of Loomis Sayles who have portfolio management
responsibility may also be used in the 

                                      -25-
<PAGE>
 
Fund's promotional literature. For additional information about the Fund's
advertising and promotional literature, see Appendix B.


                               PERFORMANCE DATA

     The manner in which yield and total return of the Fund will be calculated
for public use is described above.  The following table summarizes the
calculation of the Fund's yield at September 30, 1998 and the Fund's total
return (i) for the year ended September 30, 1998 and (ii) for the period from
the Fund's commencement of operations to September 30, 1998.

                               Performance Data*

<TABLE>
<CAPTION> 
                                                     Average Annual
                              Average Annual          Total Return
                               Total Return             from the
                                  for the            Commencement of
        Current SEC Yield     One-Year Period     Operations** through
            at 9/30/98         Ended 9/30/98            9/30/98
        -----------------     ---------------     --------------------
        <S>                   <C>                 <C>
              5.40%               11.10%                  9.23%
</TABLE> 

* Performance would have been lower if the management fee had not been waived
and certain other expenses had not been reimbursed by Loomis Sayles. In the
absence of the expense limitation, actual yield and total return would have been
8.44% (yield), and 4.55% and 10.35% for the one-year period ended September 30,
1998 and for the period from the Fund's commencement of operations to September
30, 1998, respectively.

** Inception date of the Fund is April 24, 1996.

                                      -26-
<PAGE>
 
                                                                      APPENDIX A

                PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

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


                                      A-1
<PAGE>
 
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times

                                      A-2
<PAGE>
 
                                                                      APPENDIX B

                    ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:

 .    Loomis Sayles Investment Trust's participation in wrap fee and no
     transaction fee programs

 .    Loomis Sayles Investment Trust and Loomis, Sayles & Company, L.P. Website

 .    Characteristics of Loomis Sayles including the number and locations of its
     offices, its investment practices and clients

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

 .    Specific and general sources of information, economic models, forecasts and
     data services utilized, consulted or considered in the course of providing
     advisory or other services

 .    Industry conferences, electronically transmitted programs relating to the
     investment industry and the like at which Loomis Sayles participates

 .    Current capitalization, levels of profitability and other financial
     information

 .    Identification of portfolio managers, researchers, economists, principals
     and other staff members and employees

 .    The specific credentials of the above individuals, including but not
     limited to, previous employment, current and past positions, titles and
     duties performed, industry experience, educational background and degrees,
     awards and honors

 .    Specific identification of, and general reference to, current individual,
     corporate and institutional clients, including pension and profit sharing
     plans

 .    Current and historical statistics relating to:

     -total dollar amount of assets managed
     -Loomis Sayles assets managed in total and by Fund
     -the growth of assets
     -asset types managed

     References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund.  The information may include, but is not limited to:

 .    Specific and general references to industry statistics regarding 401(k) and
     retirement plans including historical information and industry trends and
     forecasts regarding the growth of assets, numbers or plans, funding
     vehicles, participants, sponsors and other demographic data relating to
     plans, participants and sponsors, third party and other administrators,
     benefits consultants and firms with whom Loomis Sayles may or may not have
     a relationship.

 .    Specific and general reference to comparative ratings, rankings and other
     forms of evaluation as well as statistics regarding the Fund as a 401(k) or
     retirement plan funding vehicle produced by industry authorities, research
     organizations and publications.

                                      B-1
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST

                        LOOMIS SAYLES CORE GROWTH FUND

                      STATEMENT OF ADDITIONAL INFORMATION

                                January 1, 1999











This Statement of Additional Information is not a prospectus.  This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Core Growth Fund, a series of Loomis Sayles Investment Trust, dated
January 1, 1999, and should be read in conjunction therewith.  A copy of the
Prospectus may be obtained from Loomis Sayles Investment Trust, One Financial
Center, Boston, Massachusetts 02111.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<S>                                                                        <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS...........................  -3-

MANAGEMENT OF THE TRUST...................................................  -8-

INVESTMENT ADVISORY AND OTHER SERVICES.................................... -10-

PORTFOLIO TRANSACTIONS AND BROKERAGE...................................... -13-

DESCRIPTION OF THE TRUST.................................................. -14-

HOW TO BUY SHARES......................................................... -17-

NET ASSET VALUE........................................................... -17-

REDEMPTIONS............................................................... -18-

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS............... -18-

FINANCIAL STATEMENTS...................................................... -21-

CALCULATION OF TOTAL RETURN............................................... -21-

PERFORMANCE COMPARISONS................................................... -21-

PERFORMANCE DATA.......................................................... -24-

APPENDIX A
    PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION........................ -A1-

APPENDIX B
    ADVERTISING AND PROMOTIONAL LITERATURE................................ -B1-
</TABLE> 

                                      -2-
<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The investment objective and policies of the Loomis Sayles Core Growth Fund
(the "Fund"), a series of Loomis Sayles Investment Trust (the "Trust"), are
summarized in the Prospectus under "Investment Objective and Policies" and "More
Information About the Fund's Investments."  The investment policies of the Fund
set forth in the Prospectus and in this Statement of Additional Information may
be changed by Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the Fund's
investment adviser, subject to review and approval by the Trust's board of
trustees (the "Trustees"), without shareholder approval except that the
investment objective of the Fund as set forth in the Prospectus and any Fund
policy explicitly identified as "fundamental" may not be changed without the
approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).

     In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

     The Fund will not:

     *(1)  Act as underwriter, except to the extent that, in connection with the
           disposition of portfolio securities, it may be deemed to be an
           underwriter under certain federal securities laws.

     *(2)  Invest in oil, gas or other mineral leases, rights or royalty
           contracts or in real estate, commodities or commodity contracts.
           (This restriction does not prevent the Fund from investing in issuers
           that invest or deal in the foregoing types of assets or from
           purchasing securities that are secured by real estate.)

     *(3)  Make loans. (For purposes of this investment restriction, neither (i)
           entering into repurchase agreements nor (ii) purchasing bonds,
           debentures, commercial paper, corporate notes and similar evidences
           of indebtedness, which are a part of an issue to the public, is
           considered the making of a loan.)

     *(4)  Change its classification pursuant to Section 5(b) of the Investment
           Company Act of 1940, as amended (the "1940 Act"), from a
           "diversified" to "non-diversified" management investment company.

     *(5)  Purchase any security (other than U.S. Government Securities) if, as
           a result, more than 25% of the Fund's total assets (taken at current
           value) would be invested in any one industry (in the utilities
           category, gas, electric, water and telephone companies will be
           considered as being in separate industries.)

                                      -3-
<PAGE>
 
     *(6)  Borrow money in excess of 10% of its total assets (taken at cost) or
           5% of its total assets (taken at current value), whichever is lower,
           nor borrow any money except as a temporary measure for extraordinary
           or emergency purposes; however, the Fund's use of reverse repurchase
           agreements and "dollar roll" arrangements shall not constitute
           borrowing by the Fund for purposes of this restriction.

     *(7)  Purchase any illiquid security, including any security that is not
           readily marketable, if, as a result, more than 15% of the Fund's net
           assets (based on current value) would then be invested in such
           securities.

     *(8)  Issue senior securities other than any borrowing permitted by
           restriction (6) above. (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
           collateral arrangements with respect to options, futures contracts
           and options on futures contracts and with respect to initial and
           variation margin; and the purchase or sale of or entry into options,
           forward contracts, futures contracts, options on futures contracts,
           swap contracts or any other derivative investments to the extent that
           Loomis Sayles determines that the Fund is not required to treat such
           investments as senior securities pursuant to the pronouncements of
           the Securities and Exchange Commission (the "SEC") or its staff.)

     The Fund intends, based on the views of the staff of the SEC, to restrict
its investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (7) above.

     Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.

Portfolio Turnover
- ------------------

     Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets.  The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions.  High portfolio turnover rates
may result in 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.

                                      -4-
<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 U.S. 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 U.S.
          -----------------------------                                 
Treasury issued in maturities that vary between one and forty years, with
interest normally payable every six months. They are backed by the full faith
and credit of the U.S. Government.

     .    "Ginnie Maes" - Debt securities issued by a mortgage banker or other
          -------------                                                       
mortgagee which represent interests in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or guaranteed
by the Veterans Administration.  The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer of
these certificates on the underlying mortgages.  An assistant attorney general
of the United States has rendered an opinion that the guarantee by GNMA is a
general obligation of the United States backed by its full faith and credit.
Mortgages included in single-family or multi-family residential mortgage pools
backing an issue of Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the registered holders
of Ginnie Maes (such as the Fund) each month.  Unscheduled prepayments may be
made by homeowners, or as a result of a default.  Prepayments are passed through
to the registered holder of Ginnie Maes along with regular monthly payments of
principal and interest.

     .    "Fannie Maes" - Fannie Mae 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 Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae 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. 

                                      -5-
<PAGE>
 
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but Freddie Macs are not backed by the full faith and credit of the
U.S. Government.

     As described in the Prospectus, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed income securities.  Like other fixed income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

When-Issued Securities
- ----------------------

     As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date.  Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later.  When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments.  The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria.  The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date.  When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

Convertible Securities
- ----------------------

     Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities at a stated price or rate.  Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation.  Because convertible securities can be
converted into equity securities, their value will normally vary in some
proportion with those of the underlying equity securities.  Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security.  Due to the conversion
feature, convertible securities generally yield less than nonconvertible fixed
income securities of similar credit quality and maturity.  The Fund's investment
in convertible securities may at times include securities that have a mandatory
conversion feature, pursuant to which the securities convert automatically into
common stock at a specified date and 

                                      -6-
<PAGE>
 
conversion ratio, or that are convertible at the option of the issuer. Because
conversion is not at the option of the holder, the Fund may be required to
convert the security into the underlying common stock even at times when the
value of the underlying common stock has declined substantially.

Zero Coupon Bonds
- -----------------

     Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations.  Such bonds are
issued and traded at discounts from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer.  The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality.  In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended  (the "Code"), the Fund must distribute each year at least 90% of its
net investment income, including the original issue discount accrued on zero
coupon bonds.  Because  an investor investing in zero coupon bonds will not on a
current basis receive cash payments from the issuer in respect of accrued
original issue discount, the Fund may have to distribute cash obtained from
other sources in order to satisfy the 90% distribution requirement under the
Code.  Such cash might be obtained from selling other portfolio holdings of the
Fund.  In some circumstances, such sales might be necessary in order to satisfy
cash distribution requirements even though investment considerations might
otherwise make it undesirable for the Fund to sell such securities at such time.

Repurchase Agreements
- ---------------------

     The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase).  The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security.  Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash.  Although the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U.S. Government, the
obligation of the seller is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the underlying security.  In such
event, the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market.  However, the Fund may
be subject to various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto and (b) inability to enforce rights and the
expenses involved in attempted enforcement.

                                      -7-
<PAGE>
 
Rule 144A Securities
- --------------------

     The Fund may purchase Rule 144A securities.  These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a particular
issue of Rule 144A securities is liquid.  Under the guidelines, Loomis Sayles
considers such factors as: (1) the frequency of trades and quotes for a
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of
marketplace trades therefor.

                            MANAGEMENT OF THE TRUST

     The trustee and officers of the Trust and their principal occupations
during the past five years are as follows:

TIMOTHY J. HUNT (_____) -- Trustee.  26 Dennett Road, Marblehead, Massachusetts.
                           -------
     Retired. Formerly, Vice President and Director of Fixed Income Research,
     Loomis Sayles.

DANIEL J. FUSS (_____) -- President.  Executive Vice President and Director,
                          ---------                                         
Loomis Sayles.

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

SHEILA M. BARRY (53) -- Secretary and Compliance Officer.  Assistant General
                        --------------------------------                    
     Counsel and   Vice President, Loomis Sayles.  Formerly, Senior Counsel and
     Vice President, New England Funds, L.P.

ROBERT J. BLANDING (_____) -- Executive Vice President.  465 First Street West,
                              ------------------------                         
     Sonoma, California.  President, Chairman, Director and Chief Executive
     Officer, Loomis Sayles.

WILLIAM F. CAMP (_____) -- Vice President.  1533 North Woodward, Bloomfield
                           --------------                                  
     Hills, Michigan. Vice President, Loomis Sayles.  Formerly, Portfolio
     Manager, Kmart Corporation.

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

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

JEFFREY L. MEADE (_____) -- Vice President.  Chief Operating Officer, Executive
                            --------------                                     
     Vice President and Director, Loomis Sayles.

KENT P. NEWMARK (_____) -- Vice President.  555 California Street, San
                           --------------                             
     Francisco, California.   Vice President and Director, Loomis Sayles.

                                      -8-
<PAGE>
 
ROBERT K.  PAYNE (_____) -- Vice President.  555 California Street, San
                            --------------                             
     Francisco, California. Vice President, Loomis Sayles.

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

MARI J. SUGAHARA (_____) -- Vice President.  Vice President, Loomis Sayles.
                            ---------------                                

FREDERICK E. SWEENEY, JR. (_____) --Vice President.  Vice President, Loomis
                                    ---------------                        
     Sayles. Formerly, served as an Investment Consultant at Meketa Investment
     Group and prior to that served as Vice President of New England Investment
     Associates.


     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.

<TABLE> 
<CAPTION> 
                                    COMPENSATION TABLE
           for the 1998 fiscal period (January 1, 1998, through September 30, 1998)

- --------------------------------------------------------------------------------------------
         (1)               (2)             (3)                 (4)              (5)
   Name of Person,      Aggregate       Pension or         Estimated           Total
     Position         Compensation      Retirement           Annual         Compensation
                       from Trust        Benefits           Benefits       from Trust and
                                     Accrued as Part of       Upon          Fund Complex
                                        Fund Expenses      Retirement      Paid to Trustee
- --------------------------------------------------------------------------------------------
<S>                   <C>            <C>                   <C>             <C> 
  Timothy J. Hunt,       $______           $______           $______            $______
      Trustee
</TABLE>
                                        
     As of the date hereof, the Trustee and officers as a group owned less than
1% of the outstanding shares of the Fund.

     As of October 31, 1998, Brockton Health Corp. Endowment and Brockton
Hospital Pension Trust may be deemed to control the Fund because each owned of
record more than 25% of the Fund's shares. As a result, it may not be possible
for matters subject to a vote of a majority of the outstanding voting securities
of the Fund to be approved without the affirmative vote of such

                                      -9-
<PAGE>
 
shareholders, and it may be possible for such matters to be approved by such
shareholders without the affirmative vote of any other shareholder.

The following table sets forth the name, address and percentage ownership of
each holder of 5% or more of the Fund's outstanding securities as of October 31,
1998.

<TABLE>
<CAPTION>
Shareholder                           Address               Percentage of Shares Held
- -----------                           -------               -------------------------
<S>                           <C>                           <C>
Brockton Health Corp.         680 Centre Street                        47%
Endowment                     Brockton, MA  02402-3395
 
Brockton Hospital             680 Centre Street                        25%
Pension Trust                 Brockton, MA  02402-3395
 
Jewish Federation of          130 Sessions Street                      24%
Rhode Island                  Providence, RI  02906
</TABLE>

                    INVESTMENT ADVISORY AND OTHER SERVICES

     Advisory Agreement.  Loomis Sayles serves as investment adviser to the Fund
     ------------------                                                         
under an advisory agreement with the Trust dated August 30, 1996.  Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees.  Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, facilities and equipment, services of executive
and other personnel of the Fund and certain administrative services.  For these
services, the advisory agreement provides that the Fund shall pay Loomis Sayles
a monthly investment advisory fee at the annual rate of .50% of the Fund's
average weekly net assets.

     Under the advisory agreement, if the total ordinary business expenses of
the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or the Trust are
qualified for sale, Loomis Sayles shall pay such excess.

     As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders. <PAGE>
                                      -10-
<PAGE>
 
     During the 1996 and the 1997 fiscal years and the 1998 fiscal period
(January 1, 1998, through September 30, 1998), Loomis Sayles received the
following amounts of investment advisory fees from the Fund (before voluntary
fee reductions and expense assumptions) and waived and reimbursed the following
amounts of fees for the Fund:

<TABLE>
<CAPTION>
Period         Advisory Fees       Fee Waivers/Reimbursements
- ------         -------------       -------------------------- 
<S>            <C>                 <C>
1996           $ 90,223                     $42,419
1997           $162,506                     $78,709
1998           $102,595                     $77,607
</TABLE>

     The advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Trustees or by vote of a
majority of the outstanding voting securities of the Fund and (ii) by vote of a
majority of the Trustees who are not "interested persons" of the Trust or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the advisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the Trustees who are not
interested persons, cast in person at a meeting called for the purpose of voting
on such approval.

     The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act.  In addition,
the agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.

     The advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

     Loomis Sayles acts as investment adviser to the eighteen 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
Balanced Fund and New England Strategic Income Fund, which are series of 

                                      -11-
<PAGE>
 
New England Funds Trust I, a registered open-end management investment company,
New England High Income Fund, a series of New England Funds Trust II, a
registered open-end management investment company, New England Equity Income
Fund, a series of New England Funds Trust III, a registered open-end management
investment company and to the Loomis Sayles 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
other investment companies and numerous other corporate and fiduciary clients.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

     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 Trustee that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.

     Custodial Arrangements. State Street Bank and Trust Company ("State
     ----------------------                                              
Street"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund. Upon instruction, State Street receives and
delivers cash and securities of the Fund in connection with Fund transactions
and collects all dividends and other distributions made with respect to Fund
portfolio securities. State Street also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
    
     Independent Accountants.  The Fund's independent accountants are
     -----------------------                                         
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts.
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation. The information under the caption "Financial
Highlights" included in the Prospectus has been so included, and the financial
statements incorporated by reference herein from the Fund's 1998 Annual Report
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.    


<PAGE>
 
                     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.

     The following table sets forth for the 1996 and 1997 fiscal years and the
1998 fiscal period (January 1,1998, through September 30, 1998), (1) the
aggregate dollar amounts of brokerage commissions paid on portfolio transactions
during such periods, (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 periods:

                                      -13-
<PAGE>
 
<TABLE>
<CAPTION> 
                        (1)                 (2)                 (3)
                     Aggregate                              Commissions
                     Brokerage            Directed          On Directed
       Period       Commissions ($)     Transactions ($)    Transactions ($)
       ------       ---------------     ----------------    ----------------
       <S>          <C>                 <C>                 <C>
        1996            $53,021              $0                   $0
        1997            $74,893              $0                   $0
        1998            $______              $__                  $__
</TABLE>


                           DESCRIPTION OF THE TRUST

     The Trust, registered with the SEC as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.

     The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.

     The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund.  The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable.  While the expenses of the Trust are allocated to the separate
books of account of the Fund, certain expenses may be legally chargeable against
the assets of all series.

     The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate.  While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory 

                                      -14-
<PAGE>
 
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.

Voting Rights
- -------------

     As summarized in the Prospectus, 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.

     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

                                      -15-
<PAGE>
 
called for that purpose, which meeting shall be held upon the written request of
the holders of not less than 10% of the outstanding shares.

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

     Except as set forth above, the Trustees shall continue to hold office and
may appoint successor Trustees.

     No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
(i) to change the Trust's name or to cure technical problems in the Declaration
of Trust, (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value) and (iii) to issue shares of the Trust
in one or more series, and to subdivide any series of shares into various
classes of shares with such dividend preferences and other rights as the
Trustees may designate.

Shareholder and Trustee Liability
- ---------------------------------

     Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote since it is
limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.

     The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the Trustees and officers of the Trust except with respect to any matter as to
which any such person 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.

                                      -16-
<PAGE>
 
                               HOW TO BUY SHARES

     The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."

                                NET ASSET VALUE

     The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made at least 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,
Martin Luther King, Jr. Day, Presidents' Day and Good Friday.  Equity securities
listed on an established securities exchange or on the NASDAQ National Market
System are normally valued at their last sale price on the exchange where
primarily traded or, if there is no reported sale during the day, and in the
case of over the counter securities not so listed, at the last bid price.  Long-
term debt securities are valued by a pricing service, which determines
valuations of normal institutional-size trading units of long-term debt
securities.  Such valuations are determined using methods based on market
transactions for comparable securities and on various relationships among
securities that are generally recognized by institutional traders.  Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Trustees.

     Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities not traded on a
U.S. exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of the Fund's
portfolio securities occur during such period, then these securities will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.

                                  REDEMPTIONS

     The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."

     The redemption price will be the net asset value per share next determined
     --------------------------------------------------------------------------
after the redemption request and any necessary special documentation are
- ------------------------------------------------------------------------
received by the Trust in proper 
- -------------------------------                                    

                                      -17-
<PAGE>
 
form. Proceeds resulting from a written redemption request will normally be
- ----
mailed to you within seven days after receipt of your request in good order. In
those cases where you have recently purchased your shares by check and your
check was received less than fifteen days prior to the redemption request, the
Fund may withhold redemption proceeds until your check has cleared.

     The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders. If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.

     A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."

          INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

     As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes," it is the policy of the Fund to pay its shareholders annually, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by any capital loss carryovers.

     Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of regular trading on the Exchange on the record date for each
dividend or distribution.  Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash.  The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.

     As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.

     The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify and to qualify for the
special tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things: (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies; (ii) distribute each year at least 90% of the sum of
its taxable net investment income, its tax-exempt income and the excess, if any,
of net short-term capital gains over net long-term capital losses for such year;
and (iii) 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

                                      -18-
<PAGE>
 
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 distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

     Distribution by the Fund of net income and short-term capital gains, if
any, will be taxable to shareholders as ordinary income. Distributions
designated by a Fund as deriving from net gains on securities held for more than
one year will be taxable to shareholders as long-term capital gains (generally
at a 20% rate for noncorporate shareholders), without regard to how long a
shareholder has held shares of the Fund.

     Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.

     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.  In general, any long term gains realized upon a taxable
disposition of shares will be subject to a maximum tax rate of either 20% (for
noncorporate shareholders). However, if a shareholder sells Fund shares at a
loss within six months after purchasing the shares, the loss will be treated as
a long-term capital loss to the extent of any long-term capital gain
distributions received by the shareholder.  Furthermore, all or a portion of any
loss 

                                      -19-
<PAGE>
 
will be disallowed on the taxable disposition of Fund shares if the shareholder
acquires other shares of the Fund within 30 days before or after the
disposition.

     The Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received.  In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

     If the Fund engages in hedging transactions, including hedging transactions
in options, future contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, mark-to
market straddle, wash sale, and short sale rules), the effect of which may be to
accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.

     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 foreign, state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, foreign, state or local taxes.

     The foregoing discussion relates solely to U.S. federal income tax law. 
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

     The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules described above.  The new regulations will generally be effective for
payments made on or after January 1, 1999 (although transition rules will
apply).  In some circumstances, the new rules will increase the certification
and filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax and for reduced withholding tax
rates under income tax treaties.  Foreign investors in the Fund should consult
their tax advisors with respect to the potential application of these new
regulations.

                                      -20-
<PAGE>
 
                             FINANCIAL STATEMENTS

     The Report of Independent Accountants, financial highlights and financial
statements of the Fund included in its 1998 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 (888) 226-9699.

     The financial highlights included in the Prospectus under the headings
"Financial Highlights" and "Prior Performance" and incorporated by reference
into this Statement of Additional Information and the financial statements and
financial highlights contained in the Fund's 1998 Annual Report and incorporated
by reference into this Statement of Additional Information have both been
audited by PricewaterhouseCoopers LLP, independent accountants, and have been so
included and incorporated by reference in reliance upon the report of said firm,
which report is given upon their authority as experts in auditing and
accounting.

                          CALCULATION OF TOTAL RETURN

     Total Return.  Total Return with respect to the Fund is a measure of the
     ------------                                                            
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash.  The formula for total return used
herein includes four steps:  (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.

                            PERFORMANCE COMPARISONS

     The Fund may from time to time include the total return of its shares in
advertisements or information furnished to present or prospective shareholders.
The Fund may from time to time include in advertisements or information
furnished to present or prospective shareholders (i) the ranking of performance
figures relative to such figures for groups of mutual funds categorized by
Lipper Analytical Services, Inc. or Micropal, Inc. as having similar investment
objectives, (ii) the rating assigned to the Fund by Morningstar, Inc. based on
the Fund's risk-adjusted performance relative to other mutual funds in its broad
investment class, and/or (iii) the ranking of performance figures relative to
such figures for mutual funds in its general investment category as determined
by CDA/Weisenberger's Management Results.

     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
     --------------------------------                                           
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends.  They do not reflect deduction 

                                      -21-
<PAGE>
 
of any sales charges. Lipper rankings cover a variety of performance periods,
including year-to-date, 1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset category.

     MICROPAL, INC. distributes mutual fund rankings weekly and monthly.  The
     --------------                                                          
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends.  If deemed appropriate by the user, performance can also
reflect deductions for sales charges.  Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance.  Micropal classifies mutual funds by investment objective and asset
category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a month.  The
     -----------------                                                    
ratings are divided into five groups:  highest, above average, neutral, below
average and lowest.  They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc.  Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance.  The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.

     CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
     -------------------------------------                                      
distributed monthly.  The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year.  Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain).  Weisenberger
rankings do not reflect deduction of sales charges or fees.

     Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

     CONSUMER PRICE INDEX.  The Consumer Price Index, published by the U.S.
     --------------------                                                  
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

     DOW JONES INDUSTRIAL AVERAGE.  The Dow Jones Industrial Average is a market
     ----------------------------                                               
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.

     LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.  The Lehman Brothers
     ------------------------------------------------                     
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-

                                      -22-
<PAGE>
 
convertible, investment-grade corporate debt securities and U.S. dollar-
denominated, SEC-registered non-convertible debt issued by foreign governmental
entities or international agencies used as a general measure of the performance
of fixed-income securities.
 
     LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX.  The Index contains fixed rate
     ------------------------------------------                               
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

     LEHMAN BROTHERS GOVERNMENT BOND INDEX.  The Lehman Brothers Government Bond
     --------------------------------------                                     
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.

     LEHMAN BROTHERS MUNICIPAL BOND INDEX.  The Lehman Brothers Municipal Bond
     -------------------------------------                                    
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.

     MSCI-EAFE INDEX.  The MSCI-EAFE Index contains over 1000 stocks from 20
     ----------------                                                       
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.

     MSCI-EAFE EX-JAPAN INDEX.  The MSCI-EAFE ex-Japan Index consists of all
     -------------------------                                              
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

     MERRILL LYNCH GOVERNMENT/CORPORATE INDEX.  The Merrill Lynch Government/
     -----------------------------------------                               
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.

     MERRILL LYNCH HIGH YIELD INDEX.  The Merrill Lynch High Yield Index
     -------------------------------                                    
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).

     RUSSELL 2000 INDEX.  The Russell 2000 Index is comprised of the 2000
     ------------------                                                  
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.

     SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX.  The Salomon Brothers World
     --------------------------------------------                             
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded.  The index generally
excludes floating- or variable-rate bonds, securities aimed principally at non-
institutional investors (such as U.S. Savings Bonds) and private-placement type
securities.

                                      -23-
<PAGE>
 
     STANDARD & POOR'S/BARRA GROWTH INDEX.  The Standard & Poor's/Barra Growth
     -------------------------------------                                    
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the highest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.

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

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

     From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A. In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund. References to or reprints of such articles
may be used in the Fund's promotional literature. References to articles
regarding personnel of Loomis Sayles who have portfolio management
responsibility may also be used in the Fund's promotional literature. For
additional information about the Fund's advertising and promotional literature,
see Appendix B.

                               PERFORMANCE DATA

     The manner in which total return of the Fund will be calculated for public
use is described above. The following table summarizes the calculation of total
return (i) for the one-year period ended September 30, 1998 (ii) for the three-
year period ended September 30, 1998 and (iii) for the period from the Fund's
commencement of operations to September 30, 1998.

                                      -24-
<PAGE>
 
                               Performance Data*

<TABLE>    
<CAPTION>
                    Average Annual              Average Annual               Average Annual
                     Total Return                Total Return                 Total Return
                        for the                     for the               from  the Commencement
                One-Year Period ended        Three-Year Period ended      of Operations** through
                       9/30/98                    9/30/98                        9/30/98
                       -------                    -------                        ------- 
                <S>                          <C>                          <C>  
                         6.43%                      14.18%                      14.18%
</TABLE>     

*Performance would have been lower if the management fee had not been waived by
Loomis Sayles. In the absence of the expense limitation, actual total return
would have been 6.09% and 13.93% for the one-year period ended September 30,
1998, for the three-year period ended September 30, 1998 and for the period from
the Fund's commencement of operations to September 30, 1998, respectively.

**Inception date of the Fund is October 1, 1995.

                                      -25-
<PAGE>
 
                                                                      APPENDIX A

                PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

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

                                      A-1



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

                                      A-2


<PAGE>
 
                                                                      APPENDIX B

                    ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:

 .    Loomis Sayles Investment Trust's participation in wrap fee and no
     transaction fee programs

 .    Loomis Sayles Investment Trust and Loomis, Sayles & Company, L.P. Website

 .    Characteristics of Loomis Sayles including the number and locations of its
     offices, its investment practices and clients

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

 .    Specific and general sources of information, economic models, forecasts and
     data services utilized, consulted or considered in the course of providing
     advisory or other services

 .    Industry conferences, electronically transmitted programs relating to the
     investment industry and the like at which Loomis Sayles participates

 .    Current capitalization, levels of profitability and other financial
     information

 .    Identification of portfolio managers, researchers, economists, principals
     and other staff members and employees

 .    The specific credentials of the above individuals, including but not
     limited to, previous employment, current and past positions, titles and
     duties performed, industry experience, educational background and degrees,
     awards and honors

 .    Specific identification of, and general reference to, current individual,
     corporate and institutional clients, including pension and profit sharing
     plans

 .    Current and historical statistics relating to:

     -total dollar amount of assets managed
     -Loomis Sayles assets managed in total and by Fund
     -the growth of assets
     -asset types managed

     References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund. The information may include, but is not limited to:

 .    Specific and general references to industry statistics regarding 401(k) and
     retirement plans including historical information and industry trends and
     forecasts regarding the growth of assets, numbers or plans, funding
     vehicles, participants, sponsors and other demographic data relating to
     plans, participants and sponsors, third party and other administrators,
     benefits consultants and firms with whom Loomis Sayles may or may not have
     a relationship.

                                      B-1
<PAGE>
 
 .    Specific and general reference to comparative ratings, rankings and other
     forms of evaluation as well as statistics regarding the Fund as a 401(k) or
     retirement plan funding vehicle produced by industry authorities, research
     organizations and publications.

                                      B-2
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST

                        LOOMIS SAYLES FIXED INCOME FUND

                      STATEMENT OF ADDITIONAL INFORMATION

                                January 1, 1999





This Statement of Additional Information is not a prospectus.  This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Fixed Income Fund, a series of Loomis Sayles Investment Trust, dated
January 1, 1999, and should be read in conjunction therewith.  A copy of the
Prospectus may be obtained from Loomis Sayles Investment Trust, One Financial
Center, Boston, Massachusetts 02111.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<S>                                                                                                  <C> 
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS....................................................  -3-

MANAGEMENT OF THE TRUST............................................................................  -8-

INVESTMENT ADVISORY AND OTHER SERVICES............................................................. -10-

PORTFOLIO TRANSACTIONS AND BROKERAGE............................................................... -13-

DESCRIPTION OF THE TRUST........................................................................... -14-

HOW TO BUY SHARES.................................................................................. -17-

NET ASSET VALUE.................................................................................... -17-

REDEMPTIONS........................................................................................ -18-

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS........................................ -18-

FINANCIAL STATEMENTS............................................................................... -21-

CALCULATION OF YIELD AND TOTAL RETURN.............................................................. -21-

PERFORMANCE COMPARISONS............................................................................ -22-

PERFORMANCE DATA................................................................................... -25-

APPENDIX A

     PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION................................................ -A1-

APPENDIX B

     ADVERTISING AND PROMOTIONAL LITERATURE........................................................ -B1-
</TABLE> 

                                      -2-
<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The investment objective and policies of the Loomis Sayles Fixed Income
Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the "Trust"), are
summarized in the Prospectus under "Investment Objective and Policies" and "More
Information About the Fund's Investments."  The investment policies of the Fund
set forth in the Prospectus and in this Statement of Additional Information may
be changed by Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the Fund's
investment adviser, subject to review and approval by the Trust's board of
trustees (the "Trustees"), without shareholder approval except that the
investment objective of the Fund as set forth in the Prospectus and any Fund
policy explicitly identified as "fundamental" may not be changed without the
approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).

     In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

     The Fund will not:

     *(1) Act as underwriter, except to the extent that, in connection with the
          disposition of portfolio securities, it may be deemed to be an
          underwriter under certain federal securities laws.

     *(2) Invest in oil, gas or other mineral leases, rights or royalty
          contracts or in real estate, commodities or commodity contracts. (This
          restriction does not prevent the Fund from investing in issuers that
          invest or deal in the foregoing types of assets or from purchasing
          securities that are secured by real estate.)

     *(3) Make loans. (For purposes of this investment restriction, neither (i)
          entering into repurchase agreements nor (ii) purchasing bonds,
          debentures, commercial paper, corporate notes and similar evidences of
          indebtedness, which are a part of an issue to the public, is
          considered the making of a loan.)

     *(4) Change its classification pursuant to Section 5(b) of the Investment
          Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
          to "non-diversified" management investment company.

     *(5) Purchase any security (other than U.S. Government Securities) if, as a
          result, more than 25% of the Fund's total assets (taken at current
          value) would be invested in any one industry (in the utilities
          category, gas, electric, water and telephone companies will be
          considered as being in separate industries.)

                                      -3-
<PAGE>
 
     *(6) Borrow money in excess of 10% of its total assets (taken at cost) or
          5% of its total assets (taken at current value), whichever is lower,
          nor borrow any money except as a temporary measure for extraordinary
          or emergency purposes; however, the Fund's use of reverse repurchase
          agreements and "dollar roll" arrangements shall not constitute
          borrowing by the Fund for purposes of this restriction.

     *(7) Purchase any illiquid security, including any security that is not
          readily marketable, if, as a result, more than 15% of the Fund's net
          assets (based on current value) would then be invested in such
          securities.

     *(8) Issue senior securities other than any borrowing permitted by
          restriction (6) above. (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 collateral
          arrangements with respect to options, futures contracts and options on
          futures contracts and with respect to initial and variation margin;
          and the purchase or sale of or entry into options, forward contracts,
          futures contracts, options on futures contracts, swap contracts or any
          other derivative investments to the extent that Loomis Sayles
          determines that the Fund is not required to treat such investments as
          senior securities pursuant to the pronouncements of the Securities and
          Exchange Commission (the "SEC") or its staff.)

     The Fund intends, based on the views of the staff of the SEC, to restrict
its investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (7) above.

     Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.

Portfolio Turnover
- ------------------

     Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets.  The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions.  High portfolio turnover rates
may result in 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, 

                                      -4-
<PAGE>
 
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 U.S. 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 U.S.
          -----------------------------                                 
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" - Fannie Mae 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 Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae 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.

                                      -5-
<PAGE>
 
     As described in the Prospectus, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed income securities.  Like other fixed income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

When-Issued Securities
- ----------------------

     As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date.  Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later.  When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments.  The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria.  The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date.  When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

Zero Coupon Bonds
- -----------------

     Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations.  Such bonds are
issued and traded at discounts from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer.  The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality.  In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund must distribute each year at least 90% of its net
investment income, including the original issue discount accrued on zero coupon
bonds.  Because a fund investing in zero coupon bonds will not on a current
basis receive cash payments from the issuer in respect of accrued original issue
discount, the Fund may have to distribute cash obtained from other sources in
order to satisfy the 90% distribution requirement under the Code.  Such cash
might be obtained from selling other portfolio holdings of the Fund.  In some

                                      -6-
<PAGE>
 
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell such securities at such time.

Repurchase Agreements
- ---------------------

     The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase).  The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security.  Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash.  Although the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U.S. Government, the
obligation of the seller is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the underlying security.  In such
event, the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market.  However, the Fund may
be subject to various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto and (b) inability to enforce rights and the
expenses involved in attempted enforcement.

Rule 144A Securities
- --------------------

     The Fund may purchase Rule 144A securities.  These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a particular
issue of Rule 144A securities is liquid.  Under the guidelines, Loomis Sayles
considers such factors as:  (1) the frequency of trades and quotes for a
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of
marketplace trades therefor.

                                      -7-
<PAGE>
 
                            MANAGEMENT OF THE TRUST

     The trustee and officers of the Trust and their principal occupations
during the past five years are as follows:

TIMOTHY J. HUNT (_____)  -- Trustee.  26 Dennett Road, Marblehead, 
                            -------                               
       Massachusetts. Retired. Formerly, Vice President and Director of Fixed
     Income Research, Loomis Sayles.

DANIEL J. FUSS (_____) -- President.  Executive Vice President and Director,
                          ---------                                         
Loomis Sayles.

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

SHEILA M. BARRY (53) -- Secretary and Compliance Officer.  Assistant General
                        --------------------------------                    
     Counsel and   Vice President, Loomis Sayles.  Formerly, Senior Counsel and
     Vice President, New England Funds, L.P.

ROBERT J.  BLANDING (_____) -- Executive Vice President.  465 First Street West,
                               ------------------------                         
     Sonoma, California.  President, Chairman, Director and Chief Executive
     Officer, Loomis Sayles.

WILLIAM F. CAMP (_____) -- Vice President.  1533 North Woodward, Bloomfield
                           --------------                                  
     Hills, Michigan. Vice President, Loomis Sayles.  Formerly, Portfolio
     Manager, Kmart Corporation.

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

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

JEFFREY L. MEADE (_____) -- Vice President.  Chief Operating Officer, Executive
                            --------------                                     
     Vice President and Director, Loomis Sayles.

KENT P. NEWMARK (_______) -- Vice President.  555 California Street, San
                             --------------                             
     Francisco, California.   Vice President, Loomis Sayles.

ROBERT K.  PAYNE (_____) -- Vice President.  555 California Street, San
                            --------------                             
     Francisco, California. Vice President, Loomis Sayles.

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

MARI J. SUGAHARA (_____) -- Vice President.  Vice President, Loomis Sayles
                            ---------------                               

                                      -8-
<PAGE>
 
FREDERICK E. SWEENEY, JR. (_____) --Vice President.  Vice President, Loomis
                                    ---------------                        
Sayles.
     Formerly, served as an Investment Consultant at Meketa Investment Group and
prior to   that served as Vice President of New England Investment Associates.

     Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed.  Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.

     The Trust pays no compensation to its officers listed above who are
interested persons of the Trust.  Each Trustee who is not affiliated with Loomis
Sayles is compensated at the rate of $10,000 per annum.  No Trustee received
compensation from any other investment company which is advised by Loomis Sayles
or its affiliates or which holds itself out to investors as being related to the
Trust.

                              COMPENSATION TABLE
    for the 1998 fiscal period (January 1, 1998 through September 30, 1998)

<TABLE>
- ----------------------------------------------------------------------------------------------------
<S>                <C>            <C>                   <C>               <C>
       (1)             (2)                (3)               (4)                 (5)
 
 Name of Person,    Aggregate         Pension or          Estimated       Total Compensation
    Position       Compensation   Retirement Benefits      Annual          from Trust and  
                    and Trust     Accrued as Part of    Benefits Upon       Fund Complex
                                     Fund Expenses       Retirement        Paid to Trustee  
                                                                         
- ---------------------------------------------------------------------------------------------------- 
</TABLE>


Timothy J. Hunt,   $_____________ $____            $____     $___________
Trustee

     As of the date hereof, the Trustee and officers as a group owned less than
1% of the outstanding shares of the Fund.

                                      -9-
<PAGE>
 
     The following table sets forth the name, address and percentage ownership
of each holder of 5% or more of the Fund's outstanding securities as of October
31, 1998:

<TABLE>
<CAPTION>
                                                                                Percentage of
     Shareholder                         Address                                Shares Held
     -----------                         -------                                -----------
     <S>                                 <C>                                    <C>
     Marsh & McLennan Companies          1166 Avenue of the Americas                14 %
      Defined Benefit Plan               New York, NY 10036-2774
      Remainder Unitrust A
  
     Boehringer Ingelheim Corporation    900 Ridgebury Road                         11%
                                         Ridgefield, CT 06887
 
     Painters & Allied Trades            25 Colgate Road                            10%
       District Council #35              Roslindale, MA 02131-1105
       Pension Fund
 
     New Hampshire Charitable            37 Pleasant Street                          9%
      Foundation                         Concord, NH  03301-4005
</TABLE>


                    INVESTMENT ADVISORY AND OTHER SERVICES

     Advisory Agreement.  Loomis Sayles serves as investment adviser to the Fund
     ------------------                                                         
under an advisory agreement with the Trust dated August 30, 1996.  Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees.  Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, facilities and equipment, services of executive
and other personnel of the Fund and certain administrative services.  For these
services, the advisory agreement provides that the Fund shall pay Loomis Sayles
a monthly investment advisory fee at the annual rate of .50% of the Fund's
average weekly net assets.

     Under the advisory agreement, if the total ordinary business expenses of
the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or the Trust are
qualified for sale, Loomis Sayles shall pay such excess.

     As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses.  These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.

     During the 1996 and 1997 fiscal years and the 1998 fiscal period (January
1, 1998, through September 30, 1998), Loomis Sayles received the following
amounts of investment advisory fees 

                                      -10-
<PAGE>
 
from the Fund (before voluntary fee reductions and expense assumptions) and
waived and reimbursed the following amounts of fees for the Fund:


        Period           Advisory Fees       Fee Waivers/Reimbursements
        ------           -------------       --------------------------

 
        1996             $493,582            $     0
        1997             $574,496            $60,854
        1998             $774,225            $51,944
 

     The advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Trustees or by vote of a
majority of the outstanding voting securities of the Fund and (ii) by vote of a
majority of the Trustees who are not "interested persons" of the Trust or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval.  Any amendment to the
advisory agreement must be approved by vote of a majority of the outstanding
voting securities of the Fund and by vote of a majority of the Trustees who are
not interested persons, cast in person at a meeting called for the purpose of
voting on such approval.

     The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act.  In addition,
the agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.

     The advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

     Loomis Sayles acts as investment adviser to the eighteen 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
Balanced Fund and New England Strategic Income Fund, which are series of New
England Funds Trust I, a registered open-end management investment company, New
England High Income Fund, a series of New England Funds Trust II, a registered
open-end management investment company, New England Equity Income Fund, a series
of New England Funds Trust III, a registered open-end management investment
company and to the Loomis Sayles Balanced Series and the Small Cap Series of New
England Zenith Funds, which is also a registered open-end 

                                      -11-
<PAGE>
 
management investment company. Loomis Sayles also provides investment advice to
other investment companies and numerous other corporate and fiduciary clients.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

     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 Trustee that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.

     Custodial Arrangements.  State Street Bank and Trust Company ("State
     ----------------------                                              
Street"), Boston, Massachusetts 02102, is the Trust's custodian.  As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund.  Upon instruction, State Street receives and
delivers cash and securities of the Fund in connection with Fund transactions
and collects all dividends and other distributions made with respect to Fund
portfolio securities.  State Street also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.

    
     Independent Accountants.  The Fund's independent accountants are
     -----------------------                                         
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts.
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation. The information under the caption "Financial
Highlights" included in the Prospectus has been so included, and the financial
statements incorporated by reference herein from the Fund's 1998 Annual Report
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.    

                     PORTFOLIO TRANSACTIONS AND BROKERAGE

     In placing orders for the purchase and sale of portfolio securities for the
Fund, Loomis Sayles always seeks the best price and execution.  Transactions are
carried out through broker-dealers who 

                                      -12-
<PAGE>
 
make the primary market for securities unless, in the judgment of Loomis Sayles,
a more favorable price can be obtained by carrying out such transactions through
other brokers or dealers.

     Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
the best price and execution for the transaction.  This does not necessarily
mean that the lowest available brokerage commission will be paid for a
transaction.  However, the Fund will only pay commissions that Loomis Sayles
believes to be competitive with generally prevailing rates. Loomis Sayles will
use its best efforts to obtain information as to the general level of commission
rates being charged by the brokerage community from time to time and will
evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data.  In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account.  The Fund will not pay a broker a commission at a higher rate than
otherwise available for the same transaction in recognition of the value of
research services provided by the broker or in recognition of the value of any
other services provided by the broker which do not contribute to the best price
and execution of the transaction.

     Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction.  These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists.  Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Loomis Sayles's expenses.  Such services may be
used by Loomis Sayles in servicing other client accounts and in some cases may
not be used with respect to the Fund. Receipt of services or products other than
research from brokers is not a factor in the selection of brokers.

     The following table sets forth for the 1996 and 1997 fiscal years and the
1998 fiscal period (January 1, 1998, through September 30, 1998) (1) the
aggregate dollar amounts of brokerage commissions paid on portfolio transactions
during such periods, (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 periods:

                                      -13-
<PAGE>
 
                    (1)            (2)              (3)
                 Aggregate                      Commissions
                 Brokerage        Directed      on Directed
                Commissions     Transactions    Transactions 
     Period         ($)              ($)             ($)
     -------    -------------   --------------  --------------
1996            $ 7,014            $ 0            $ 0

1997            $11,749            $ 0            $ 0

1998            $______            $ _            $ _


                           DESCRIPTION OF THE TRUST

     The Trust, registered with the SEC as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.

     The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series.  Each share of
the Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund.  The shares of the Fund do not have any
preemptive rights.  Upon termination of the Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of the Fund are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders.  The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.

     The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund.  The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable.  While the expenses of the Trust are allocated to the separate
books of account of the Fund, certain expenses may be legally chargeable against
the assets of all series.

     The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate.  While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is 

                                      -14-
<PAGE>
 
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.

Voting Rights
- -------------

     As summarized in the Prospectus, 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.

     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

                                      -15-
<PAGE>
 
Trust's custodian or by a vote of the holders of two-thirds of the outstanding
shares at a meeting duly called for that purpose, which meeting shall be held
upon the written request of the holders of not less than 10% of the outstanding
shares.

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

     Except as set forth above, the Trustees shall continue to hold office and
may appoint successor Trustees.

     No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
(i) to change the Trust's name or to cure technical problems in the Declaration
of Trust, (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value) and (iii) to issue shares of the Trust
in one or more series, and to subdivide any series of shares into various
classes of shares with such dividend preferences and other rights as the
Trustees may designate.

Shareholder and Trustee Liability
- ---------------------------------

     Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund.  However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees.  The Declaration of Trust provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund.  Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.

     The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law.  However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.  The By-Laws of the Trust provide for indemnification by the Trust
of the trustees and officers of the Trust except with respect to any matter as
to which any such person 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.

                                      -16-
<PAGE>
 
                               HOW TO BUY SHARES

     The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."

                                NET ASSET VALUE

     The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made at least 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,
Martin Luther King, Jr. Day, Presidents' Day and Good Friday.  Long-term debt
securities are valued by a pricing service, which determines valuations of
normal institutional-size trading units of long-term debt securities.  Such
valuations are determined using methods based on market transactions for
comparable securities and on various relationships among securities that are
generally recognized by institutional traders.  Other securities for which
current market quotations are not readily available (including restricted
securities, if any) and all other assets are taken at fair value as determined
in good faith by the Trustees, although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.

     Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities not traded on a
U.S. exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value.  If events materially affecting the value of the Fund's
portfolio securities occur during such period, then these securities will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.

                                  REDEMPTIONS

     The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."

     The redemption price will be the net asset value per share next determined
     --------------------------------------------------------------------------
after the redemption request and any necessary special documentation are
- ------------------------------------------------------------------------
received by the Trust in proper form.  Proceeds resulting from a written
- ------------------------------------                                    
redemption request will normally be mailed to you within seven days after
receipt of your request in good order.  In those cases where you have recently

                                      -17-
<PAGE>
 
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.

     The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders.  If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.

     A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss.  See "Income Dividends, Capital Gain Distributions and Tax Status."

          INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

     As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of the Fund to pay its shareholders, as annual
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by any capital loss carryovers.

     Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of regular trading on the Exchange on the record date for each
dividend or distribution.  Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash.  The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.

     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 and to qualify for the
special tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things: (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies; (ii) distribute each year at least 90% of the sum of
its taxable net investment income, its tax-exempt income and the excess, if any,
of its net short-term capital gains over net long-term capital losses; and (iii)
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

                                      -18-
<PAGE>
 
voting securities of such issuer, and no more than 25% of the value of its total
assets in the securities (other than those of the U.S. Government or other
regulated investment companies) of any one issuer or of two or more issuers that
the Fund controls and that are engaged in the same, similar or related trades or
businesses. To the extent the Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income paid
to its shareholders in the form of dividends or capital gain distributions.

     A nondeductible excise tax will be imposed at the rate of 4% on the excess,
if any, of the Fund's "required distribution" over its actual distributions in
any calendar year.  Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years.  The Fund intends to make distributions sufficient to avoid
imposition of the excise tax.  Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

     Distribution by the Fund of net income and short-term capital gains, if
any, will be taxable to shareholders as ordinary income. Distributions
designated by a Fund as deriving from net gains on securities held for more than
one year will be taxable to shareholders as long-term capital gains (generally
at a 20% rate for noncorporate shareholders), without regard to how long a
shareholder has held shares of the Fund.

     Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.

     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.  In general, any long term gains realized upon a taxable
disposition of shares will be subject to a maximum tax rate of 20% (for
noncorporate shareholders) depending on the shareholder's holding period in the
Fund shares.  However, if a shareholder sells Fund shares at a loss within six
months after purchasing the shares, the loss will be treated as a long-term
capital loss to the extent of any long-term capital gain distributions received
by the shareholder. Furthermore, all or a portion of any loss will be disallowed
on the taxable disposition of Fund shares if the shareholder acquires other
shares of the Fund within 30 days before or after the disposition.

                                      -19-
<PAGE>
 
     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 Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received.  In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

     If the Fund engages in hedging transactions, including hedging transactions
in options, future contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, mark-to
market straddle, wash sale, and short sale rules), the effect of which may be to
accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.

     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 foreign, state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, foreign, state or local taxes.

     The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

     The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules described above.  The new regulations will generally be effective for
payments made on or after January 1, 1999 (although transition rules will
apply).  In some circumstances, the new rules will increase the certification
and filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax and for reduced withholding tax
rates under income tax treaties.  Foreign investors in the Fund should consult
their tax advisors with respect to the potential application of these new
regulations.

                                      -20-
<PAGE>
 
                             FINANCIAL STATEMENTS

     The Report of Independent Accountants, financial highlights and financial
statements of the Fund included in its 1998 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 (888) 226-9699.

     The financial highlights included in the Prospectus under the headings
"Financial Highlights" and "Prior Performance" and incorporated by reference
into this Statement of Additional Information and the financial statements and
financial highlights contained in the Fund's 1998 Annual Report and incorporated
by reference into this Statement of Additional Information have both been
audited by PricewaterhouseCoopers LLP, independent accountants, and have been so
included and incorporated by reference in reliance upon the report of said firm,
which report is given upon their authority as experts in auditing and
accounting.


                     CALCULATION OF YIELD AND TOTAL RETURN
    
     Yield.  The Fund's yield will be computed by dividing the Fund's net
     -----                                                               
investment income per share by the maximum offering price per share on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The Fund's yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Trust allocated to the Fund. These factors, and possible differences in the
methods used in calculating yield, should be considered when comparing the
Fund's yield to yields published for other investment companies and other
investment vehicles. Yield should also be considered relative to changes in the
value of the Fund's shares and to the relative risks associated with the
investment objective and policies of the Fund.     

     At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.

     Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary.  An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.

     Total Return.  Total return with respect to the Fund is a measure of the
     ------------                                                            
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains

                                      -21-
<PAGE>
 
distributions are reinvested immediately, rather than paid to the investor in
cash. The formula for total return used herein includes four steps: (1) adding
to the total number of shares purchased through a hypothetical $1,000 investment
in the Fund all additional shares which would have been purchased if all
dividends and distributions paid or distributed during the period had been
immediately reinvested; (2) calculating the value of the hypothetical initial
investment of $1,000 as of the end of the period by multiplying the total number
of shares owned at the end of the period by the net asset value per share on the
last trading day of the period; (3) assuming redemption at the end of the
period; and (4) dividing the resulting account value by the initial $1,000
investment.

                            PERFORMANCE COMPARISONS

     The Fund may from time to time include the yield and/or total return of its
shares in advertisements or information furnished to present or prospective
shareholders.  The Fund may from time to time include in advertisements or
information furnished to present or prospective shareholders (i) the ranking of
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, Inc. or Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.

     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
     --------------------------------                                           
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends.  They do not reflect deduction of any sales
charges.  Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance.  Lipper classifies mutual
funds by investment objective and asset category.

     MICROPAL, INC. distributes mutual fund rankings weekly and monthly.  The
     --------------                                                          
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends.  If deemed appropriate by the user, performance can also
reflect deductions for sales charges.  Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a month.  The
     -----------------                                                    
ratings are divided into five groups:  highest, above average, neutral, below
average and lowest.  They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc.  Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance.  The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges.  Performance is
adjusted using quantitative techniques to reflect the risk profile of

                                      -22-
<PAGE>
 
the fund. The ratings are derived from a purely quantitative system that does
not utilize the subjective criteria customarily employed by rating agencies such
as Standard & Poor's and Moody's Investor Service, Inc.

     CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
     -------------------------------------                                      
distributed monthly.  The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year.  Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain).  Weisenberger
rankings do not reflect deduction of sales charges or fees.

     Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

     CONSUMER PRICE INDEX.  The Consumer Price Index, published by the U.S.
     --------------------                                                  
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

     DOW JONES INDUSTRIAL AVERAGE.  The Dow Jones Industrial Average is a market
     ----------------------------                                               
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.

     LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.  The Lehman Brothers
     ------------------------------------------------                     
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
 
     LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX.  The Index contains fixed rate
     ------------------------------------------                               
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

     LEHMAN BROTHERS GOVERNMENT BOND INDEX.  The Lehman Brothers Government Bond
     --------------------------------------                                     
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.

     LEHMAN BROTHERS MUNICIPAL BOND INDEX.  The Lehman Brothers Municipal Bond
     -------------------------------------                                    
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.

                                      -23-
<PAGE>
 
     MSCI-EAFE INDEX.  The MSCI-EAFE Index contains over 1000 stocks from 20
     ----------------                                                       
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.

     MSCI-EAFE EX-JAPAN INDEX.  The MSCI-EAFE ex-Japan Index consists of all
     -------------------------                                              
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

     MERRILL LYNCH GOVERNMENT/CORPORATE INDEX.  The Merrill Lynch Government/
     -----------------------------------------                               
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.

     MERRILL LYNCH HIGH YIELD INDEX.  The Merrill Lynch High Yield Index
     -------------------------------                                    
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).

     RUSSELL 2000 INDEX.  The Russell 2000 Index is comprised of the 2000
     ------------------                                                  
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.

     SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX.  The Salomon Brothers World
     --------------------------------------------                             
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded.  The index generally
excludes floating- or variable-rate bonds, securities aimed principally at non-
institutional investors (such as U.S. Savings Bonds) and private-placement type
securities.

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

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

     STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX (THE "S&P 500").  The S&P
     ------------------------------------------------------------------         
500 is a market value-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43.  The
S&P 500 is composed almost entirely of common stocks of companies listed on the
New York Stock Exchange, although the common stocks of a few companies listed on
the American Stock Exchange or traded over-the-counter are included.  The 500
companies represented include 400 industrial, 60 transportation and 40 financial
services concerns.  The S&P 500 represents about 80% of the market value of

                                      -24-
<PAGE>
 
all issues traded on the New York Stock Exchange. The S&P 500 is the most common
index for the overall U.S. stock market.

     From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A. In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund. References to or reprints of such articles
may be used in the Fund's promotional literature. References to articles
regarding personnel of Loomis Sayles who have portfolio management
responsibility may also be used in the Fund's promotional literature. For
additional information about the Fund's advertising and promotional literature,
see Appendix B.

                               PERFORMANCE DATA

     The manner in which yield and total return of the Fund will be calculated
for public use is described above.  The following table summarizes the
calculation of the Fund's yield at September 30, 1998 and the Fund's total
return (i) for the one-year period ended September 30, 1998 and (ii) for the
period from the Fund's commencement of operations to September 30, 1998.

                               Performance Data*

<TABLE> 
<CAPTION> 
                                                                                             Average                
                                Average                     Average                           Annual                
                                Annual                      Annual                            Total                 
                            Total Return                 Total Return                         Return                
                                for the                      for the                  from the Commencement         
     Current SEC Yield    One-Year Period ended       Three-Year Period ended         of Operations** through       
       at 9/30/98               9/30/98                     9/30/90                           9/30/98               
       ----------               -------                     -------                           -------               
      <S>                  <C>                         <C>                             <C>  
          8.43%                    0.58%                      9.28%                            13.12%                 
</TABLE> 

*Performance would have been lower if the management fee had not been waived and
certain other expenses had not been reimbursed by Loomis Sayles. In the absence
of the expense limitation, actual yield and total return for the one year period
ended September 30, 1998, for the three year period ended September 30, 1998 and
the period from the Fund's commencement of operations to September 30, 1998
would have been 8.34% (yield), 0.56%, 9.25% and 13.09%, respectively.
**Inception date of the Fund is January 17, 1995.

                                      -25-
<PAGE>
 
                                                                      APPENDIX A

                 PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

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

                                      A-1


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

                                      A-2


<PAGE>
 
                                                                     APPENDIX B

                    ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:

 .    Loomis Sayles Investment Trust's participation in wrap fee and no
     transaction fee programs

 .    Loomis Sayles Investment Trust and Loomis, Sayles & Company, L.P. Website

 .    Characteristics of Loomis Sayles including the number and locations of its
     offices, its investment practices and clients

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

 .    Specific and general sources of information, economic models, forecasts
     and data services utilized, consulted or considered in the course of
     providing advisory or other services

 .    Industry conferences, electronically transmitted programs relating to the
     investment industry and the like at which Loomis Sayles participates

 .    Current capitalization, levels of profitability and other financial
     information

 .    Identification of portfolio managers, researchers, economists, principals
     and other staff members and employees

 .    The specific credentials of the above individuals, including but not
     limited to, previous employment, current and past positions, titles and
     duties performed, industry experience, educational background and degrees,
     awards and honors

 .    Specific identification of, and general reference to, current individual,
     corporate and institutional clients, including pension and profit sharing
     plans

 .    Current and historical statistics relating to:
     -total dollar amount of assets managed
     -Loomis Sayles assets managed in total and by Fund
     -the growth of assets
     -asset types managed

     References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund.  The information may include, but is not limited to:

 .    Specific and general references to industry statistics regarding 401(k)
     and retirement plans including historical information and industry trends
     and forecasts regarding the growth of assets, numbers or plans, funding
     vehicles, participants, sponsors and other demographic data relating to
     plans, participants and sponsors, third party and other administrators,
     benefits consultants and firms with whom Loomis Sayles may or may not have
     a relationship.

                                      B-1


<PAGE>
 
 .    Specific and general reference to comparative ratings, rankings and other
     forms of evaluation as well as statistics regarding the Fund as a 401(k) or
     retirement plan funding vehicle produced by industry authorities, research
     organizations and publications.

                                      B-2
                                    
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST

                  LOOMIS SAYLES HIGH YIELD FIXED INCOME FUND

                      STATEMENT OF ADDITIONAL INFORMATION

                                January 1, 1999



This Statement of Additional Information is not a prospectus.  This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles High Yield Fixed Income Fund, a series of Loomis Sayles Investment Trust,
dated January 1, 1999, and should be read in conjunction therewith.  A copy of
the Prospectus may be obtained from Loomis Sayles Investment Trust, One
Financial Center, Boston, Massachusetts 02111.
<PAGE>
 
                               TABLE OF CONTENTS

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS...........................   -3-

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-

FINANCIAL STATEMENTS......................................................  -20-

CALCULATION OF YIELD AND TOTAL RETURN.....................................  -20-

PERFORMANCE COMPARISONS...................................................  -21-

PERFORMANCE DATA..........................................................  -24-

APPENDIX A PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION................. -A-1-

APPENDIX B ADVERTISING AND PROMOTIONAL LITERATURE.......................... B-1-

                                      -2-
<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The investment objective and policies of the Loomis Sayles High Yield Fixed
Income Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments."  The investment
policies of the Fund set forth in the Prospectus and in this Statement of
Additional Information may be changed by Loomis, Sayles & Company, L.P. ("Loomis
Sayles"), the Fund's investment adviser, subject to review and approval by the
Trust's board of trustees (the "Trustees"), without shareholder approval except
that the investment objective of the Fund as set forth in the Prospectus and any
Fund policy explicitly identified as "fundamental" may not be changed without
the approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).

     In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

     The Fund will not:

     *(1) Act as underwriter, except to the extent that, in connection with the
          disposition of portfolio securities, it may be deemed to be an
          underwriter under certain federal securities laws.

     *(2) Invest in oil, gas or other mineral leases, rights or royalty
          contracts or in real estate, commodities or commodity contracts. (This
          restriction does not prevent the Fund from investing in issuers that
          invest or deal in the foregoing types of assets or from purchasing
          securities that are secured by real estate.)

     *(3) Make loans. (For purposes of this investment restriction, neither (i)
          entering into repurchase agreements nor (ii) purchasing bonds,
          debentures, commercial paper, corporate notes and similar evidences of
          indebtedness, which are a part of an issue to the public, is
          considered the making of a loan.)

     *(4) Change its classification pursuant to Section 5(b) of the Investment
          Company Act of 1940, as amended (the "1940 Act"), from a "diversified"
          to "non-diversified" management investment company.

     *(5) Purchase any security (other than U.S. Government Securities) if, as a
          result, more than 25% of the Fund's total assets (taken at current
          value) would be invested in any one industry (in the utilities
          category, gas, electric, water and telephone companies will be
          considered as being in separate industries.)

                                      -3-
<PAGE>
 
     *(6) Borrow money in excess of 10% of its total assets (taken at cost) or
          5% of its total assets (taken at current value), whichever is lower,
          nor borrow any money except as a temporary measure for extraordinary
          or emergency purposes; however, the Fund's use of reverse repurchase
          agreements and "dollar roll" arrangements shall not constitute
          borrowing by the Fund for purposes of this restriction.

     *(7) Purchase any illiquid security, including any security that is not
          readily marketable, if, as a result, more than 15% of the Fund's net
          assets (based on current value) would then be invested in such
          securities.

     *(8) Issue senior securities other than any borrowing permitted by
          restriction (6) above. (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 collateral
          arrangements with respect to options, futures contracts and options on
          futures contracts and with respect to initial and variation margin;
          and the purchase or sale of or entry into options, forward contracts,
          futures contracts, options on futures contracts, swap contracts or any
          other derivative investments to the extent that Loomis Sayles
          determines that the Fund is not required to treat such investments as
          senior securities pursuant to the pronouncements of the Securities and
          Exchange Commission (the "SEC") or its staff.)

     The Fund intends, based on the views of the staff of the SEC, to restrict
its investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (7) above.

     Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.

Portfolio Turnover
- ------------------

     Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets.  The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions.  High portfolio turnover rates
may result in 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.

                                      -4-
<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 U.S. 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 U.S.
          -----------------------------                                 
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" - Fannie Mae 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 Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae 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.

                                      -5-
<PAGE>
 
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but Freddie Macs are not backed by the full faith and credit of the
U.S. Government.

     As described in the Prospectus, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed income securities.  Like other fixed income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

When-Issued Securities
- ----------------------

     As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date.  Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later.  When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments.  The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria.  The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date.  When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

Zero Coupon Bonds
- -----------------

     Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations.  Such bonds are
issued and traded at discounts from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer.  The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality.  In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund must distribute each year at least 90% of its net
investment income, including the original issue discount accrued on zero coupon
bonds.  Because a fund investing in zero coupon bonds will not on a current
basis receive cash 

                                      -6-
<PAGE>
 
payments from the issuer in respect of accrued original issue discount, the fund
may have to distribute cash obtained from other sources in order to satisfy the
90% distribution requirement under the Code. Such cash might be obtained from
selling other portfolio holdings of the Fund. In some circumstances, such sales
might be necessary in order to satisfy cash distribution requirements even
though investment considerations might otherwise make it undesirable for the
Fund to sell such securities at such time.

Repurchase Agreements
- ---------------------

     The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase).  The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security.  Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash.  Although the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U.S. Government, the
obligation of the seller is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the underlying security.  In such
event, the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market.  However, the Fund may
be subject to various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto and (b) inability to enforce rights and the
expenses involved in attempted enforcement.

Rule 144A Securities
- --------------------

     The Fund may purchase Rule 144A securities.  These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a particular
issue of Rule 144A securities is liquid.  Under the guidelines, Loomis Sayles
considers such factors as:  (1) the frequency of trades and quotes for a
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of
marketplace trades therefor.

                            MANAGEMENT OF THE TRUST

     The trustee and officers of the Trust and their principal occupations
during the past five years are as follows:

TIMOTHY J. HUNT (_____) -- Trustee.  26 Dennett Road, Marblehead, Massachusetts.
                           -------        
     Retired. Formerly, Vice President and Director of Fixed Income Research,
     Loomis Sayles.

                                      -7-
<PAGE>
 
DANIEL J. FUSS (_____) -- President.  Executive Vice President and Director,
                          ---------                                         
Loomis Sayles.

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

SHEILA M. BARRY (53) -- Secretary and Compliance Officer.  Assistant General
                        --------------------------------                    
     Counsel and   Vice President, Loomis Sayles.  Formerly, Senior Counsel and
     Vice President, New England Funds, L.P.

ROBERT J.  BLANDING (_____) -- Executive Vice President.  465 First Street West,
                               ------------------------                         
     Sonoma, California.  President, Chairman, Director and Chief Executive
     Officer, Loomis Sayles.

WILLIAM F. CAMP (_____) -- Vice President.  1533 North Woodward, Bloomfield
                           --------------                                  
     Hills, Michigan. Vice President, Loomis Sayles.  Formerly, Portfolio
     Manager, Kmart Corporation.

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

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

JEFFREY L. MEADE (_____) -- Vice President.  Chief Operating Officer, Executive
                            --------------                                     
     Vice President and Director, Loomis Sayles.

KENT P. NEWMARK  (_____) -- Vice President.  555 California Street, San
                            --------------                             
Francisco, California.
     Vice President and Director, Loomis Sayles.

ROBERT K.  PAYNE (_____) -- Vice President.  555 California Street, San
                            --------------                             
     Francisco, California. Vice President, Loomis Sayles.

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

MARI J. SUGAHARA (_____) -- Vice President.  Vice President, Loomis Sayles
                            ---------------                               

FREDERICK E. SWEENEY, JR. (_____) --Vice President.  Vice President, Loomis
                                    ---------------                        
     Sayles. Formerly, served as an Investment Consultant at Meketa Investment
     Group and prior to that served as Vice President of New England Investment
     Associates.

     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 

                                      -8-
<PAGE>
 
advised by Loomis Sayles or its affiliates or which holds itself out to
investors as being related to the Trust.

                              COMPENSATION TABLE
    for the 1998 fiscal period (January 1, 1998, through September 30, 1998)

<TABLE> 
- -----------------------------------------------------------------------------------------------
<S>                <C>            <C>                <C>             <C>
  (1)                 (2)            (3)                (4)                (5)
 
Name of Person,    Aggregate      Pension or         Estimated       Total Compensation
Position           Compensation   Retirement         Annual          from Trust and Fund
                   from Trust     Benefits           Benefits Upon   Complex Paid to
                                  Accrued as Part    Retirement      Trustee
                                  of Fund Expenses
- -----------------------------------------------------------------------------------------------------
</TABLE>



Timothy J. Hunt,    $_____          $_____               $_____           $_____
Trustee

     As of the date hereof, the Trustee and officers as a group owned less than
1% of the outstanding shares of the Fund.

     As of October 31, 1998, each of Trustees of Clark University and Blue Cross
Blue Shield of Massachusetts, Inc. Retirement Trust may be deemed to control the
Fund because each owned of record more than 25% of the Fund's shares.  As a
result, it may not be possible for matters subject to a vote of the outstanding
voting securities of the Fund to be approved without the affirmative vote of
such shareholder, and such shareholder may be able to approve such matters
without the approval of any other shareholder. The following table sets forth
the name, address and percentage ownership of each holder of 5% or more of the
Fund's outstanding securities as of October 31, 1998:
 
                                                       Percentage of
Shareholder                           Address         Securities Held
- -----------                           -------         ----------------

Trustees of Clark University    950 Main Street          44%
                                Worcester, MA  01610
 
Blue Cross Blue Shield of       100 Summer Street        36%
Massachusetts, Inc.             Boston, MA  02110
Retirement Income Trust

                                      -9-
<PAGE>
 
Energen Corporation Retirement      210 Sixth Ave. N.                12%
Income Plan                         Birmingham, AL 35203

Worcester Polytechnic Institute     100 Institute Road                8%   
                                    Worcester, MA 01609

                     INVESTMENT ADVISORY AND OTHER SERVICES

     Advisory Agreement.  Loomis Sayles serves as investment adviser to the Fund
     ------------------                                                         
under an advisory agreement with the Trust dated August 30, 1996.  Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees.  Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, facilities and equipment, services of executive
and other personnel of the Fund and certain administrative services.  For these
services, the advisory agreement provides that the Fund shall pay Loomis Sayles
a monthly investment advisory fee at the annual rate of .60% of the Fund's
average weekly net assets.

     Under the advisory agreement, if the total ordinary business expenses of
the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or the Trust are
qualified for sale, Loomis Sayles shall pay such excess.

     As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses.  These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.

     During the 1996 fiscal period (June 5, 1996 through December 31, 1996), the
1997 fiscal year and the 1998 fiscal period (January 1, 1998, through September
30, 1998), Loomis Sayles received the following amount of investment advisory
fees from the Fund (before voluntary fee reductions and expense assumptions) and
waived and reimbursed the following amount of fees for the Fund:

Period         Advisory Fees       Fee Waivers/Reimbursements
- ------         -------------       --------------------------
 
1996             $ 10,218                     $33,770
1997             $125,297                     $88,172
1998             $147,356                     $91,510
 

                                      -10-
<PAGE>
 
     The advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Trustees or by vote of a
majority of the outstanding voting securities of the Fund and (ii) by vote of a
majority of the Trustees who are not "interested persons" of the Trust or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval.  Any amendment to the
advisory agreement must be approved by vote of a majority of the outstanding
voting securities of the Fund and by vote of a majority of the Trustees who are
not interested persons, cast in person at a meeting called for the purpose of
voting on such approval.

     The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act.  In addition,
the agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.

     The advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

     Loomis Sayles acts as investment adviser to the eighteen 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
Balanced Fund and  New England Strategic Income Fund, which are series of New
England Funds Trust I, a registered open-end management investment company, New
England High Income Fund, a series of New England Funds Trust II, a registered
open-end management investment company, New England Equity Income Fund, a
series of New England Funds Trust III, a registered open-end management
investment company and the Loomis Sayles 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
other investment companies and numerous other corporate and fiduciary clients.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

                                      -11-
<PAGE>
 
     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 Trustee that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.

     Custodial Arrangements.  State Street Bank and Trust Company ("State
     ----------------------                                              
Street"), Boston, Massachusetts 02102, is the Trust's custodian.  As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund.  Upon instruction, State Street receives and
delivers cash and securities of the Fund in connection with Fund transactions
and collects all dividends and other distributions made with respect to Fund
portfolio securities.  State Street also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
    
     Independent Accountants.  The Fund's independent accountants are
     -----------------------                                         
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts. 
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation. The information under the caption "Financial 
Highlights" included in the Prospectus has been so included, and the financial 
statements incorporated by reference herein from the Fund's 1998 Annual Report 
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers 
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.    

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

     In placing orders for the purchase and sale of portfolio securities for the
Fund, Loomis Sayles always seeks the best price and execution.  Transactions 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 

                                      -12-
<PAGE>
 
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Fund will not
pay a broker a commission at a higher rate than otherwise available for the same
transaction in recognition of the value of research services provided by the
broker or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.

     Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction.  These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists.  Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Loomis Sayles's expenses.  Such services may be
used by Loomis Sayles in servicing other client accounts and in some cases may
not be used with respect to the Fund. Receipt of services on 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 (June 5, 1996
through December 31, 1996), the 1997 fiscal year and the 1998 fiscal period
(January 1, 1998, through September 30, 1998), (1) the aggregate dollar amount
of brokerage commissions paid on portfolio transactions during such period, (2)
the dollar amount of transactions on which commissions were paid during such
period that were directed to brokers providing research services ("directed
transactions") and (3) the dollar amount of commissions paid on directed
transactions during such period:

                    (1)                                     (3)
                 Aggregate              (2)             Commissions
                 Brokerage           Directed           on Directed
Period          Commissions($)     Transactions($)     Transactions($)
- ------          --------------     ---------------     ----------------
 
  1996             $  636               $ 0                 $0
  1997             $6,412               $ 0                 $0
  1998             $_____               $____               $____
 
                            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.

                                      -13-
<PAGE>
 
     The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series.  Each share of
the Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund.  The shares of the Fund do not have any
preemptive rights.  Upon termination of the Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of the Fund are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders.  The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.

     The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund.  The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable.  While the expenses of the Trust are allocated to the separate
books of account of the Fund, certain expenses may be legally chargeable against
the assets of all series.

     The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes of shares with such dividend
preferences and other rights as the Trustees may designate.  While the Trustees
have no current intention to subdivide any series of shares into classes, this
flexibility is intended to allow them to provide for an equitable allocation of
the impact of any future regulatory requirements which might affect various
classes of shareholders differently, or to permit shares of a series to be
distributed through more than one distribution channel, with the costs of the
particular means of distribution (or costs of related services) to be borne by
the shareholders who purchase through that means of distribution.  The Trustees
may also, without shareholder approval, establish one or more additional
separate portfolios for investments in the Trust or merge two or more existing
portfolios.  Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "fund").

     The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively.  The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders.

Voting Rights
- -------------

     As summarized in the Prospectus, 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 Prospectus under "How to
Purchase Shares."

                                NET ASSET VALUE

     The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made at least 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,
Martin Luther King, Jr. Day,  Presidents' Day and Good Friday.  Equity
securities listed on an established securities exchange or on the NASDAQ
National Market System are normally valued at their last sale price on the
exchange where primarily traded or, if there is no reported sale during the day,
and in the case of over the counter securities not so listed, at the last bid
price.  Long-term debt securities are valued by a pricing service, which
determines valuations of normal 

                                      -16-
<PAGE>
 
institutional-size trading units of long-term debt securities. Such valuations
are determined using methods based on market transactions for comparable
securities and on various relationships among securities that are generally
recognized by institutional traders. Other securities for which current market
quotations are not readily available (including restricted securities, if any)
and all other assets are taken at fair value as determined in good faith by the
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Trustees.

     Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities not traded on a
U.S. exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the Exchange, which
events will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of the Fund's portfolio securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith or in accordance with procedures approved by
the Trustees.

                                  REDEMPTIONS

     The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."

     The redemption price will be the net asset value per share next determined
     --------------------------------------------------------------------------
after the redemption request and any necessary special documentation are
- ------------------------------------------------------------------------
received by the Trust in proper form.  Proceeds resulting from a written
- ------------------------------------                                    
redemption request will normally be mailed to you within seven days after
receipt of your request in good order.  In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.

     The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders.  If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.

     A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss.  See "Income Dividends, Capital Gain Distributions and Tax Status."

          INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

     As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of the Fund to pay its shareholders annually, as
dividends, substantially all of the Fund's 

                                      -17-
<PAGE>
 
net income and to distribute to its shareholders annually substantially all net
realized capital gains, if any, after offset by any capital loss carryovers.

     Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of regular trading on the Exchange on the record date for each
dividend or distribution.  Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash.  The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.

     As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.

     The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code.  In order so to qualify and to qualify for the
special tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things:  (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies; (ii) distribute each year at least 90% of the sum of
its taxable net investment income, its tax-exempt income and the excess, if any,
of net short-term capital gains over its net long-term capital losses for such
year; and (iii) 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 distributions in any
calendar year.  Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years.  The Fund intends to make distributions sufficient to avoid
imposition of the excise tax.  Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

                                      -18-
<PAGE>
 
     Distribution by the Fund of net income and short-term capital gains, if
any, will be taxable to shareholders as ordinary income. Distributions
designated by a Fund as deriving from net gains on securities held for more than
one year will be taxable to shareholders as long-term capital gains (generally
at a 20% rate for noncorporate shareholders), without regard to how long a
shareholder has held shares of the Fund.

     Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.

     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.  In general, any long term gains realized upon a taxable
disposition of shares will be subject to a maximum tax rate of 20% (for
noncorporate shareholders). However, if a shareholder sells Fund shares at a
loss within six months after purchasing the shares, the loss will be treated as
a long-term capital loss to the extent of any long-term capital gain
distributions received by the shareholder.  Furthermore, all or a portion of any
loss will be disallowed on the taxable disposition of Fund shares if the
shareholder acquires other shares of the Fund within 30 days before or after the
disposition.

     The Fund's transactions in foreign currency-denominated debt securities may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.

     The Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received.  In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

     If the Fund engages in hedging transactions, including hedging transactions
in options, future contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, mark-to
market straddle, wash sale, and short sale rules), the effect of which may be to
accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.

                                      -19-
<PAGE>
 
     The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and the regulations thereunder currently in effect.  For
the complete provisions, reference should be made to the pertinent Code sections
and regulations.  The Code and regulations are subject to change by legislative
or administrative action, respectively.

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

     The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

     The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules described above.  The new regulations will generally be effective for
payments made on or after January 1, 1999 (although transition rules will
apply).  In some circumstances, the new rules will increase the certification
and filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax and for reduced withholding tax
rates under income tax treaties.  Foreign investors in the Fund should consult
their tax advisors with respect to the potential application of these new
regulations.


                             FINANCIAL STATEMENTS

     The Report of Independent Accountants, financial highlights and financial
statements of the Fund included in its 1998 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 (888) 226-9699.

     The financial highlights included in the Prospectus under the headings
"Financial Highlights" and "Prior Performance" and incorporated by reference
into this Statement of Additional Information and the financial statements and
financial highlights contained in the Fund's 1998 Annual Report and incorporated
by reference into this Statement of Additional Information have both been
audited by PricewaterhouseCoopers LLP, independent accountants, and have been so
included and incorporated by reference in reliance upon the report of said firm,
which report is given upon their authority as experts in auditing and
accounting.

                     CALCULATION OF YIELD AND TOTAL RETURN
    
     Yield.  The Fund's yield will be computed by dividing the Fund's net
     -----                                                               
investment income per share by the maximum offering price per share     

                                      -20-
<PAGE>

    
on the last trading day of that period. Net investment income will reflect
amortization of any market value premium or discount of fixed income securities
(except for obligations backed by mortgages or other assets) and may include
recognition of a pro rata portion of the stated dividend rate of dividend paying
portfolio securities. The Fund's yield will vary from time to time depending
upon market conditions, the composition of the Fund's portfolio and operating
expenses of the Trust allocated to the Fund. These factors, and possible
differences in the methods used in calculating yield, should be considered when
comparing the Fund's yield to yields published for other investment companies
and other investment vehicles. Yield should also be considered relative to
changes in the value of the Fund's shares and to the relative risks associated
with the investment objective and policies of the Fund.     

     At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.

     Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary.  An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.

     Total Return.  Total Return with respect to the Fund is a measure of the
     ------------                                                            
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash.  The formula for total return used
herein includes four steps:  (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.

                            PERFORMANCE COMPARISONS

     The Fund may from time to time include the yield and/or total return of its
shares in advertisements or information furnished to present or prospective
shareholders.  The Fund may from time to time include in advertisements or
information furnished to present or prospective shareholders (i) the ranking of
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, Inc. or Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.

                                      -21-
<PAGE>
 
     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
     --------------------------------                                           
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends.  They do not reflect deduction of any sales
charges.  Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance.  Lipper classifies mutual
funds by investment objective and asset category.

     MICROPAL, INC. distributes mutual fund rankings weekly and monthly.  The
     --------------                                                          
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends.  If deemed appropriate by the user, performance can also
reflect deductions for sales charges.  Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance.  Micropal classifies mutual funds by investment objective and asset
category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a month.  The
     -----------------                                                    
ratings are divided into five groups:  highest, above average, neutral, below
average and lowest.  They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc.  Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance.  The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.

     CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
     -------------------------------------                                      
distributed monthly.  The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year.  Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain).  Weisenberger
rankings do not reflect deduction of sales charges or fees.

     Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

     CONSUMER PRICE INDEX.  The Consumer Price Index, published by the U.S.
     --------------------                                                  
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

     DOW JONES INDUSTRIAL AVERAGE.  The Dow Jones Industrial Average is a market
     ----------------------------                                               
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.

                                      -22-
<PAGE>
 
     LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.  The Lehman Brothers
     ------------------------------------------------                     
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
 
     LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX.  The Index contains fixed rate
     ------------------------------------------                               
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

     LEHMAN BROTHERS GOVERNMENT BOND INDEX.  The Lehman Brothers Government Bond
     --------------------------------------                                     
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.

     LEHMAN BROTHERS MUNICIPAL BOND INDEX.  The Lehman Brothers Municipal Bond
     -------------------------------------                                    
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.

     MSCI-EAFE INDEX.  The MSCI-EAFE Index contains over 1000 stocks from 20
     ----------------                                                       
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.

     MSCI-EAFE EX-JAPAN INDEX.  The MSCI-EAFE ex-Japan Index consists of all
     -------------------------                                              
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

     MERRILL LYNCH GOVERNMENT/CORPORATE INDEX.  The Merrill Lynch Government/
     -----------------------------------------                               
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.

     MERRILL LYNCH HIGH YIELD INDEX.  The Merrill Lynch High Yield Index
     -------------------------------                                    
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).

     RUSSELL 2000 INDEX.  The Russell 2000 Index is comprised of the 2000
     ------------------                                                  
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.

     SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX.  The Salomon Brothers World
     --------------------------------------------                             
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded.  The index generally
excludes floating- or variable-rate bonds, securities aimed principally at non-
institutional investors (such as U.S. Savings Bonds) and private-placement type
securities.

                                      -23-
<PAGE>
 
     STANDARD & POOR'S/BARRA GROWTH INDEX.  The Standard & Poor's/Barra Growth
     -------------------------------------                                    
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the highest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.

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

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

     From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A.  In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund.  References to or reprints of such articles
may be used in the Fund's promotional literature.  References to articles
regarding personnel of Loomis Sayles who have portfolio management
responsibility may also be used in the Fund's promotional literature.  For
additional information about the Fund's advertising and promotional literature,
see Appendix B.


                               PERFORMANCE DATA

     The manner in which yield and total return of the Fund will be calculated
for public use is described above.  The following table summarizes the
calculation of the Fund's yield at September 30, 1998 and the Fund's total
return Ii) for the one-year period ended September 30, 1998 and (ii) for the
period from the Fund's commencement of operations to September 30, 1998.

                                      -24-
<PAGE>
 
                               Performance Data*

 

                                                      Average Annual
                               Average Annual          Total Return
                                Total Return              from the
                               for the One-Year        Commencement of
   Current SEC Yield             Period Ended        Operations** through
     at 9/30/98                    9/30/98                9/30/98
     ----------                    -------                -------
 
          13.76%                   (18.40)%                 (0.44)%


* Performance would have been lower if the management fee had not been waived
and certain other expenses had not been reimbursed by Loomis Sayles. In the
absence of the expense limitation, actual yield and total return would have been
12.94% (yield), and (18.78)% and 1.24% for the one-year period ended September
30, 1998 and for the period from the Fund's commencement of operations to
September 30, 1998, respectively.

** Inception date of the Fund is June 5, 1996.

                                      -25-
<PAGE>
 
                                                                      APPENDIX A
                PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

ABC and affiliates                           Financial Planning on Wall Street
Adam Smith's Money World                     Financial Research Corp.         
America On Line                              Financial Services Week          
Anchorage Daily News                         Financial World                  
Atlanta Constitution                         Fitch Insights                   
Atlanta Journal                              Forbes                           
Arizona Republic                             Fort Worth Star-Telegram         
Austin American Statesman                    Fortune                          
Baltimore Sun                                Fox Network and affiliates       
Bank Investment Marketing                    Fund Action                      
Barron's                                     Fund Decoder                     
Bergen County Record (NJ)                    Global Finance                   
Bloomberg Business News                      (the) Guarantor                  
Bond Buyer                                   Hartford Courant                 
Boston Business Journal                      Houston Chronicle                
Boston Globe                                 INC                              
Boston Herald                                Indianapolis Star                
Broker World                                 Individual Investor              
Business Radio Network                       Institutional Investor           
Business Week                                International Herald Tribune     
CBS and affiliates                           Internet                         
CDA Investment Technologies                  Investment Advisor               
CFO                                          Investment Company Institute     
Changing Times                               Investment Dealers Digest        
Chicago Sun Times                            Investment Profiles              
Chicago Tribune                              Investment Vision                
Christian Science Monitor                    Investor's Daily                 
Christian Science Monitor News Service       IRA Reporter                     
Cincinnati Enquirer                          Journal of Commerce              
Cincinnati Post                              Kansas City Star                 
CNBC                                         KCMO (Kansas City)               
CNN                                          KOA-AM (Denver)                  
Columbus Dispatch                            LA Times                         
CompuServe                                   Leckey, Andrew (syndicated column)
Dallas Morning News                          Life Association News            
Dallas Times-Herald                          Lifetime Channel                 
Denver Post                                  Miami Herald                     
Des Moines Register                          Milwaukee Sentinel               
Detroit Free Press                           Money Magazine                   
Donoghues Money Fund Report                  Money Maker                      
Dorfman, Dan (syndicated column)             Money Management Letter          
Dow Jones News Service                       Morningstar                      
Economist                                    Mutual Fund Market News          
FACS of the Week                             Mutual Funds Magazine            
Fee Adviser                                  National Public Radio            
Financial News Network                       National Underwriter             
Financial Planning                           NBC and affiliates               
                                             
                                      A-1
<PAGE>
 
New England Business                            USA Today     
New England Cable News                          USA TV Network     
New Orleans Times-Picayune                      Value Line         
New York Daily News                             Wall Street Journal
New York Times                                  Wall Street Letter 
Newark Star Ledger                              Wall Street Week   
Newsday                                         Washington Post    
Newsweek                                        WBZ                
Nightly Business Report                         WBZ-TV             
Orange County Register                          WCVB-TV            
Orlando Sentinel                                WEEI               
Palm Beach Post                                 WHDH               
Pension World                                   Worcester Telegram 
Pensions and Investments                        World Wide Web     
Personal Investor                               Worth Magazine     
Philadelphia Inquirer                           WRKO                
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
                    
                                      A-2
<PAGE>
 
                                                                      APPENDIX B
                    ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:

     .    Loomis Sayles Investment Trust's participation in wrap fee and no
          transaction fee programs

     .    Loomis Sayles Investment Trust and Loomis, Sayles & Company, L.P.
          Website

     .    Characteristics of Loomis Sayles including the number and locations of
          its offices, its investment practices and clients

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

     .    Specific and general sources of information, economic models,
          forecasts and data services utilized, consulted or considered in the
          course of providing advisory or other services

     .    Industry conferences, electronically transmitted programs relating to
          the investment industry and the like at which Loomis Sayles
          participates

     .    Current capitalization, levels of profitability and other financial
          information

     .    Identification of portfolio managers, researchers, economists,
          principals and other staff members and employees

     .    The specific credentials of the above individuals, including but not
          limited to, previous employment, current and past positions, titles
          and duties performed, industry experience, educational background and
          degrees, awards and honors

     .    Specific identification of, and general reference to, current
          individual, corporate and institutional clients, including pension and
          profit sharing plans

     .    Current and historical statistics relating to:

          -total dollar amount of assets managed
          -Loomis Sayles assets managed in total and by Fund
          -the growth of assets
          -asset types managed

          References may be included in Loomis Sayles Investment Trust's
advertising and promotional literature about 401(k) and retirement plans, if
any, that offer the Fund. The information may include, but is not limited to:

     .    Specific and general references to industry statistics regarding
          401(k) and retirement plans including historical information and
          industry trends and forecasts regarding the growth of assets, numbers
          or plans, funding vehicles, participants, sponsors and other
          demographic data relating to plans, participants and sponsors, third
          party and other administrators, benefits consultants and firms with
          whom Loomis Sayles may or may not have a relationship.

                                      B-1
<PAGE>
 
     .    Specific and general reference to comparative ratings, rankings and
          other forms of evaluation as well as statistics regarding the Fund as
          a 401(k) or retirement plan funding vehicle produced by industry
          authorities, research organizations and publications.

                                      B-2
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST

             LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND

                      STATEMENT OF ADDITIONAL INFORMATION

                                January 1, 1999



This Statement of Additional Information is not a prospectus.  This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Intermediate Duration Fixed Income Fund, a series of Loomis Sayles
Investment Trust, dated January 1, 1999 and should be read in conjunction
therewith.  A copy of the Prospectus may be obtained from Loomis Sayles
Investment Trust, One Financial Center, Boston, Massachusetts 02111.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>     
<S>                                                                         <C> 
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS............................  -3-

MANAGEMENT OF THE TRUST....................................................  -8-

INVESTMENT ADVISORY AND OTHER SERVICES..................................... -10-

PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... -12-

DESCRIPTION OF THE TRUST................................................... -13-

HOW TO BUY SHARES.......................................................... -16-

NET ASSET VALUE............................................................ -16-

REDEMPTIONS................................................................ -17-

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS................ -17-

FINANCIAL STATEMENTS....................................................... -20-

CALCULATION OF YIELD AND TOTAL RETURN...................................... -20-

PERFORMANCE COMPARISONS.................................................... -20-

PERFORMANCE DATA........................................................... -24-

APPENDIX A
     PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION........................ A-1

APPENDIX B
     ADVERTISING AND PROMOTIONAL LITERATURE................................ B-1
</TABLE>      
 
                                      -2-

<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The investment objective and policies of the Loomis Sayles Intermediate
Duration Fixed Income Fund (the "Fund"), a series of Loomis Sayles Investment
Trust (the "Trust"), are summarized in the Prospectus under "Investment
Objective and Policies" and "More Information About the Fund's Investments."
The investment policies of the Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by Loomis Sayles & Company,
L.P. ("Loomis Sayles"), the Fund's investment adviser, subject to review and
approval by the Trust's board of trustees (the "Trustees"), without shareholder
approval except that the investment objective of the Fund as set forth in the
Prospectus and any Fund policy explicitly identified as "fundamental" may not be
changed without the approval of the holders of a majority of the outstanding
shares of the Fund (which means the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which at least 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares).

     In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

     The Fund will not:

     *(1)  Act as underwriter, except to the extent that, in connection with the
           disposition of portfolio securities, it may be deemed to be an
           underwriter under certain federal securities laws.

     *(2)  Invest in oil, gas or other mineral leases, rights or royalty
           contracts or in real estate, commodities or commodity contracts.
           (This restriction does not prevent the Fund from investing in issuers
           that invest or deal in the foregoing types of assets or from
           purchasing securities that are secured by real estate.)

     *(3)  Make loans. (For purposes of this investment restriction, neither (i)
           entering into repurchase agreements nor (ii) purchasing bonds,
           debentures, commercial paper, corporate notes and similar evidences
           of indebtedness, which are a part of an issue to the public, is
           considered the making of a loan.)

     *(4)  Change its classification pursuant to Section 5(b) of the Investment
           Company Act of 1940, as amended (the "1940 Act"), from a
           "diversified" to "non-diversified" management investment company.

     *(5)  Purchase any security (other than U.S. 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.)

                                      -3-
<PAGE>
 
     *(6)  Borrow money in excess of 10% of its total assets (taken at cost) or
           5% of its total assets (taken at current value), whichever is lower,
           nor borrow any money except as a temporary measure for extraordinary
           or emergency purposes; however, the Fund's use of reverse repurchase
           agreements and "dollar roll" arrangements shall not constitute
           borrowing by the Fund for purposes of this restriction.

     *(7)  Purchase any illiquid security, including any security that is not
           readily marketable, if, as a result, more than 15% of the Fund's net
           assets (based on current value) would then be invested in such
           securities.

     *(8)  Issue senior securities other than any borrowing permitted by
           restriction (6) above. (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
           collateral arrangements with respect to options, futures contracts
           and options on futures contracts and with respect to initial and
           variation margin; and the purchase or sale of or entry into options,
           forward contracts, futures contracts, options on futures contracts,
           swap contracts or any other derivative investments to the extent that
           Loomis Sayles determines that the Fund is not required to treat such
           investments as senior securities pursuant to the pronouncements of
           the Securities and Exchange Commission (the "SEC") or its staff.)

     The Fund intends, based on the views of the staff of the SEC, to restrict
its investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (7) above.

     Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.

Portfolio Turnover
- ------------------

     Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets.  Although it is impossible to predict
with certainty, it is expected that the annual portfolio turnover rate for the
first full fiscal year of the Fund will not exceed 100%.  The Fund anticipates
that its portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions.  High portfolio
turnover rates involve higher costs such as higher brokerage commissions and
higher levels of taxable gain.  See "Portfolio Transactions and Brokerage" for a
description of Loomis Sayles's brokerage practices and "Income Dividends,
Capital Gain Distributions and Tax Status" for more information about the tax
consequences of investing in the Fund.

                                      -4-
<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 U.S. 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 U.S.
          -----------------------------                                 
Treasury issued in maturities that vary between one and forty years, with
interest normally payable every six months. They are backed by the full faith
and credit of the U.S. Government.

     .    "Ginnie Maes" - Debt securities issued by a mortgage banker or other
          -------------                                                       
mortgagee which represent interests in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or guaranteed
by the Veterans Administration.  The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer of
these certificates on the underlying mortgages.  An assistant attorney general
of the United States has rendered an opinion that the guarantee by GNMA is a
general obligation of the United States backed by its full faith and credit.
Mortgages included in single family or multi-family residential mortgage pools
backing an issue of Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the registered holders
of Ginnie Maes (such as the Fund) each month.  Unscheduled prepayments may be
made by homeowners, or as a result of a default.  Prepayments are passed through
to the registered holder of Ginnie Maes along with regular monthly payments of
principal and interest.

     .    "Fannie Maes" - Fannie Mae 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 Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae 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. 

                                      -5-
<PAGE>
 
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but Freddie Macs are not backed by the full faith and credit of the
U.S. Government.

     As described in the Prospectus, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed income securities.  Like other fixed income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

When-Issued Securities
- ----------------------

     As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date.  Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later.  When the Fund purchases securities in this manner (i.e. on
a when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments.  The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria.  The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date.  When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

Convertible Securities
- ----------------------

     Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities at a stated price or rate.  Convertible
securities also include other securities, such as warrants, that provide an
opportunity for equity participation.  Because convertible securities can be
converted into equity securities, their value will normally vary in some
proportion with those of the underlying equity securities.  Convertible
securities usually provide a higher yield than the underlying equity security,
however, so that when the price of the underlying equity security falls, the
decline in the price of the convertible security may sometimes be less
substantial than that of the underlying equity security. Due to the conversion
feature, convertible securities generally yield less than nonconvertible fixed
income securities of similar credit quality and maturity.  The Fund's investment
in convertible securities may at times include securities that have a mandatory
conversion feature, pursuant to which the securities convert automatically into
common stock at a specified date and 

                                      -6-
<PAGE>
 
conversion ratio, or that are convertible at the option of the issuer. Because
conversion is not at the option of the holder, the Fund may be required to
convert the security into the underlying common stock even at times when the
value of the underlying common stock has declined substantially.

Zero Coupon Bonds
- -----------------

     Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations.  Such bonds are
issued and traded at discounts from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer.  The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality.  In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund must distribute each year at least 90% of its net
investment income, including the original issue discount accrued on zero coupon
bonds.  Because a fund investing in zero coupon bonds will not on a current
basis receive cash payments from the issuer in respect of accrued original issue
discount, the fund may have to distribute cash obtained from other sources in
order to satisfy the 90% distribution requirement under the Code.  Such cash
might be obtained from selling other portfolio holdings of the Fund.  In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell such securities at such time.

Repurchase Agreements
- ---------------------

     The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase).  The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security.  Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash.  Although the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U.S. Government, the
obligation of the seller is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the underlying security.  In such
event, the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market.  However, the Fund may
be subject to various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto and (b) inability to enforce rights and the
expenses involved in attempted enforcement.

                                      -7-
<PAGE>
 
Rule 144A Securities
- --------------------

     The Fund may purchase Rule 144A securities.  These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a particular
issue of Rule 144A securities is liquid.  Under the guidelines, Loomis Sayles
considers such factors as:  (1) the frequency of trades and quotes for a
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of
marketplace trades therefor.

                            MANAGEMENT OF THE TRUST

     The trustee and officers of the Trust and their principal occupations
during the past five years are as follows:

TIMOTHY J. HUNT (_____) -- Trustee.  26 Dennett Road, Marblehead, Massachusetts.
                           -------   
     Retired. Formerly, Vice President and Director of Fixed Income Research,
     Loomis Sayles.

DANIEL J. FUSS (_____) -- President.  Executive Vice President and Director,
                          ---------                                         
     Loomis Sayles.

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

SHEILA M. BARRY (53) -- Secretary and Compliance Officer.  Assistant General
                        --------------------------------                    
     Counsel and   Vice President, Loomis Sayles.  Formerly, Senior Counsel and
     Vice President, New England Funds, L.P.

ROBERT J.  BLANDING (_____) -- Executive Vice President.  465 First Street West,
                               ------------------------                         
     Sonoma, California.  President, Chairman, Director and Chief Executive
     Officer, Loomis Sayles.

WILLIAM F. CAMP (_____) -- Vice President.  1533 North Woodward, Bloomfield
                           --------------                                  
     Hills, Michigan.  Vice President, Loomis Sayles.  Formerly, Portfolio
     Manager, Kmart Corporation.

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

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

JEFFREY L. MEADE (_____) -- Vice President.  Chief Operating Officer, Executive
                            --------------                                     
     Vice President and Director, Loomis Sayles.

                                      -8-
<PAGE>
 
KENT P. NEWMARK (_____) -- Vice President. 555 California Street, San Francisco,
                           --------------                                       
     California. Vice President and Director, Loomis Sayles.

ROBERT K.  PAYNE (_____) -- Vice President.  555 California Street, San
                            --------------                             
     Francisco, California. Vice President, Loomis Sayles.

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

MARI J. SUGAHARA (_____) -- Vice President.  Vice President, Loomis Sayles.
                            ---------------                                

FREDERICK E. SWEENEY, JR. (_____) --Vice President.  Vice President, Loomis
                                    ---------------                        
     Sayles. Formerly, served as an Investment Consultant at Meketa Investment
     Group and prior to that served as Vice President of New England Investment
     Associates.

     Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different from the positions listed.  Except as
indicated above, the address of each officer of the Trust affiliated with Loomis
Sayles is One Financial Center, Boston, Massachusetts 02111.

     The Trust pays no compensation to its officers listed above who are
interested persons of the Trust.  Each Trustee who is not affiliated with Loomis
Sayles will be compensated at the rate of $10,000 per annum.  No Trustee
received compensation from any other investment company which is advised by
Loomis Sayles or its affiliates or which holds itself out to investors as being
related to the Trust.

                               COMPENSATION TABLE
    for the 1998 fiscal period (January 1, 1998, through September 30, 1998)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------- 
     (1)                 (2)            (3)              (4)               (5)

Name of Person,      Aggregate       Pension or       Estimated      Total Compensation
   Position         Compensation     Retirement         Annual       from Trust and Fund
                     from Trust       Benefits        Benefits         Complex Paid
                                     Accrued as         Upon            to Trustee
                                    Part of Fund      Retirement 
                                     Expenses                    
- ----------------------------------------------------------------------------------------- 
<S>                 <C>             <C>               <C>            <C>  
Timothy J. Hunt,    $________         $_____          $______        $_________
Trustee
</TABLE> 

     As of the date hereof, the Trustee and officers as a group owned less than
1% of the outstanding shares of the Fund.

                                      -9-
<PAGE>
 
     As of October 31, 1998, Trustees of Clark University may be deemed to
control the Fund because it owned of record more than 25% of the Fund's shares.
As a result, it may not be possible for matters subject to a vote of a majority
of the outstanding voting securities of the Fund to be approved without the
affirmative vote of such shareholders, and it may be possible for such matters
to be approved by such shareholders without the affirmative vote of any other
shareholder.  The following table sets forth the name, address and percentage
ownership of each holder of 5% or more of the Fund's outstanding securities as
of October 31, 1998:

     Shareholder                    Address            Percentage of Shares Held
     -----------                    -------            -------------------------

  Trustees of Clark University    950 Main Street                100%
                                  Worcester, MA 01610


                    INVESTMENT ADVISORY AND OTHER SERVICES

     Advisory Agreement.  Loomis Sayles serves as investment adviser to the Fund
     ------------------                                                         
under an advisory agreement with the Trust dated August 30, 1996.  Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees.  Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, facilities and equipment, services of executive
and other personnel of the Fund and certain administrative services.  For these
services, the advisory agreement provides that the Fund shall pay Loomis Sayles
a monthly investment advisory fee at the annual rate of .40% of the Fund's
average weekly net assets.

     Under the advisory agreement, if the total ordinary business expenses of
the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or the Trust are
qualified for sale, Loomis Sayles shall pay such excess.

     As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses.  These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.

     During the 1998 fiscal period (January 1, 1998 through September 30, 1998),
Loomis Sayles received $29,959 in investment advisory fees from the
Fund (before voluntary fee reductions and expense assumptions) and waived and
reimbursed $58,465 for the Fund.

     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 

                                      -10-
<PAGE>
 
approval. Any amendment to the advisory agreement must be approved by vote of a
majority of the outstanding voting securities of the Fund and by vote of a
majority of the Trustees who are not interested persons, cast in person at a
meeting called for the purpose of voting on such approval.

     The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act.  In addition,
the agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" or "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the Fund and by a majority of the
Trustees who are not interested persons of the Trust or Loomis Sayles, cast in
person at a meeting called for the purpose of voting on such approval.

     The advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

     Loomis Sayles acts as investment adviser to the eighteen 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
Balanced Fund and New England Strategic Income Fund, which are series of New
England Funds Trust I, a  registered open-end management investment company, New
England High Income Fund, a series of New England Funds Trust II, a registered
open-end management investment company, New England Equity Income Fund, a series
of New England Funds Trust III, a registered open-end management investment
company and the Loomis Sayles 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 other investment
companies and numerous other corporate and fiduciary clients.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange.  Nvest Corporation is the sole general partner of Nvest L.P.

     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 

                                      -11-
<PAGE>
 
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 Trustee that the desirability of retaining Loomis
Sayles as investment adviser for the Fund outweighs the disadvantages, if any,
which might result from these practices.

     Custodial Arrangements.  State Street Bank and Trust Company ("State
     ----------------------                                              
Street"), Boston, Massachusetts 02102, is the Trust's custodian.  As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund.  Upon instruction, State Street receives and
delivers cash and securities of the Fund in connection with Fund transactions
and collects all dividends and other distributions made with respect to Fund
portfolio securities.  State Street also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.
    
     Independent Accountants.  The Fund's independent accountants are
     -----------------------                                         
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts.
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation. The information under the caption "Financial
Highlights" included in the Prospectus has been so included, and the financial
statements incorporated by reference herein from the Fund's 1998 Annual Report
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.    

                     PORTFOLIO TRANSACTIONS AND BROKERAGE

     In placing orders for the purchase and sale of portfolio securities for the
Fund, Loomis Sayles always seeks the best price and execution.  Transactions 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 

                                      -12-
<PAGE>
 
of any other services provided by the broker which do not contribute to the best
price and execution of the transaction.

     Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide the best price and
execution for a transaction.  These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists.  Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Loomis Sayles's expenses.  Such services may be
used by Loomis Sayles in servicing other client accounts and in some cases may
not be used with respect to the Fund. Receipt of services or products other than
research from brokers is not a factor in the selection of brokers.

     During the 1998 fiscal period (January 1, 1998, through September 30,
1998), the Fund paid (1) $_____________________ in aggregate brokerage
commissions for portfolio transactions, (2) $__________________________ for
transactions of which commissions were paid that were directed to brokers
providing research services and (3) $____________________ of commissions on
directed transactions.


                           DESCRIPTION OF THE TRUST

     The Trust, registered with the SEC as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.

     The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series.  Each share of
the Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund.  The shares of the Fund do not have any
preemptive rights.  Upon termination of the Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of the Fund are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders.  The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.

     The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund.  The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust are allocated by or under the
direction of the Trustees in such manner as the Trustees 

                                      -13-
<PAGE>
 
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.

Voting Rights
- -------------

     As summarized in the Prospectus, 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.

                                      -14-
<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 conduct

                                      -15-
<PAGE>
 
of his office. The By-Laws of the Trust provide for indemnification by the Trust
of the Trustees and officers of the Trust except with respect to any matter as
to which any such person not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or Trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.

                               HOW TO BUY SHARES

     The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."

                                NET ASSET VALUE

     The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made at least 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,
Martin Luther King, Jr. Day, Presidents' Day and Good Friday.  Long-term debt
securities are valued by a pricing service, which determines valuations of
normal institutional-size trading units of long-term debt securities.  Such
valuations are determined using methods based on market transactions for
comparable securities and on various relationships among securities that are
generally recognized by institutional traders.  Other securities for which
current market quotations are not readily available (including restricted
securities, if any) and all other assets are taken at fair value as determined
in good faith by the Trustees, although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.

     Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities not traded on a
U.S. exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value.  If events materially affecting the value of the Fund's
portfolio securities occur during such period, then these securities will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.

                                      -16-
<PAGE>
 
                                  REDEMPTIONS

     The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."

     The redemption price will be the net asset value per share next determined
     --------------------------------------------------------------------------
after the redemption request and any necessary special documentation are
- ------------------------------------------------------------------------
received by the Trust in proper form.  Proceeds resulting from a written
- ------------------------------------                                    
redemption request will normally be mailed to you within seven days after
receipt of your request in good order.  In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.

     The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders.  If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.

     A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss.  See "Income Dividends, Capital Gain Distributions and Tax Status."

          INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

     As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes," it is the policy of the Fund to pay its shareholders monthly, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by any capital loss carryovers.

     Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of regular trading on the Exchange on the record date for each
dividend or distribution.  Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash.  The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.

     As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.

     The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code.  In order so to qualify and to qualify for the
special tax treatment accorded

                                      -17-
<PAGE>
 
regulated investment companies and their shareholders, the Fund must, among
other things: (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from the sale
of securities or foreign currencies, or other income derived with respect to its
business of investing in such stock, securities or currencies; (ii) distribute
each year at least 90% of the sum of its taxable net investment income, its tax-
exempt income and the excess, if any, of net short-term capital gains over net
long-term capital losses for such year; and (iii) 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 distributions in any
calendar year.  Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect and so elects) plus undistributed amounts from
prior years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax.  Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

     Distribution by the Fund of net income and short-term capital gains, if
any, will be taxable to shareholders as ordinary income. Distributions
designated by a Fund as deriving from net gains on securities held for more than
one year will be taxable to shareholders as long-term capital gains (generally
at a 20% rate for noncorporate shareholders), without regard to how long a
shareholder has held shares of the Fund.

     Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.

                                      -18-
<PAGE>
 
     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.  In general, any long term gains realized upon a taxable
disposition of shares will be subject to a maximum tax rate of 20% (for
noncorporate shareholders). However, if a shareholder sells Fund shares at a
loss within six months after purchasing the shares, the loss will be treated as
a long-term capital loss to the extent of any long-term capital gain
distributions received by the shareholder.  Furthermore, all or a portion of any
loss will be disallowed on the taxable disposition of Fund shares if the
shareholder acquires other shares of the Fund within 30 days before or after the
disposition.

     The Fund's transactions in foreign currency-denominated debt securities may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.

     The Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received.  In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

     If the Fund engages in hedging transactions, including hedging transactions
in options, future contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, mark-to
market straddle, wash sale, and short sale rules), the effect of which may be to
accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.

     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 foreign, state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, foreign, state or local taxes.

     The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

                                      -19-
<PAGE>
 
     The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules described above.  The new regulations will generally be effective for
payments made on or after January 1, 1999 (although transition rules will
apply).  In some circumstances, the new rules will increase the certification
and filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax and for reduced withholding tax
rates under income tax treaties.  Foreign investors in the Fund should consult
their tax advisors with respect to the potential application of these new
regulations.
    
     The Report of Independent Accountants, financial highlights and financial 
statements of the Fund included in its 1998 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 (888) 226-9699.     
    
     The financial highlights included in the Prospectus under the headings
"Financial Highlights" and "Prior Performance" and incorporated by reference
into this Statement of Additional Information and the financial statements and
financial highlights contained in the Fund's 1998 Annual Report and incorporated
by reference in this Statement of Additional Information have both been audited
by PricewaterhouseCoopers LLP, independent accountants, and have been so
included and incorporated by reference in reliance upon the report of said firm,
which report is given upon their authority as experts in auditing and
accounting.     

                     CALCULATION OF YIELD AND TOTAL RETURN
    
     Yield.  The Fund's yield will be computed by dividing the Fund's net
     -----                                                               
investment income per share by the maximum offering price per share on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The Fund's yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Trust allocated to the Fund. These factors, and possible differences in the
methods used in calculating yield, should be considered when comparing the
Fund's yield to yields published for other investment companies and other
investment vehicles. Yield should also be considered relative to changes in the
value of the Fund's shares and to the relative risks associated with the
investment objective and policies of the Fund.     

     At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.

     Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary.  An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.

     Total Return.  Total return with respect to the Fund is a measure of the
     ------------                                                            
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash.  The formula for total return used
herein includes four steps:  (i) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.

                                      -20-
<PAGE>
 
                            PERFORMANCE COMPARISONS

     The Fund may from time to time include the yield and/or total return of its
shares in advertisements or information furnished to present or prospective
shareholders.  The Fund may from time to time include in advertisements or
information furnished to present or prospective shareholders (i) the ranking of
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, Inc. or Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.

     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
     --------------------------------                                           
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends.  They do not reflect deduction of any sales
charges.  Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance.  Lipper classifies mutual
funds by investment objective and asset category.

     MICROPAL, INC. distributes mutual fund rankings weekly and monthly.  The
     --------------                                                          
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends.  If deemed appropriate by the user, performance can also
reflect deductions for sales charges.  Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance.  Micropal classifies mutual funds by investment objective and asset
category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a month.  The
     -----------------                                                    
ratings are divided into five groups:  highest, above average, neutral, below
average and lowest.  They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc.  Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance.  The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.

     CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
     -------------------------------------                                      
distributed monthly.  The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year.  Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain).  Weisenberger
rankings do not reflect deduction of sales charges or fees.

                                      -21-
<PAGE>
 
     Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

     CONSUMER PRICE INDEX.  The Consumer Price Index, published by the U.S.
     --------------------                                                  
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

     DOW JONES INDUSTRIAL AVERAGE.  The Dow Jones Industrial Average is a market
     ----------------------------                                               
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.

     LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.  The Lehman Brothers
     ------------------------------------------------                     
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a
general measure of the performance of fixed-income securities.
 
     LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX.  The Index contains fixed rate
     ------------------------------------------                               
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

     LEHMAN BROTHERS GOVERNMENT BOND INDEX.  The Lehman Brothers Government Bond
     --------------------------------------                                     
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.

     LEHMAN BROTHERS MUNICIPAL BOND INDEX.  The Lehman Brothers Municipal Bond
     -------------------------------------                                    
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.

     MSCI-EAFE INDEX.  The MSCI-EAFE Index contains over 1000 stocks from 20
     ----------------                                                       
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.

     MSCI-EAFE EX-JAPAN INDEX.  The MSCI-EAFE ex-Japan Index consists of all
     -------------------------                                              
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

     MERRILL LYNCH GOVERNMENT/CORPORATE INDEX.  The Merrill Lynch Government/
     -----------------------------------------                               
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.

                                      -22-
<PAGE>
 
     MERRILL LYNCH HIGH YIELD INDEX.  The Merrill Lynch High Yield Index
     -------------------------------                                    
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).

     RUSSELL 2000 INDEX.  The Russell 2000 Index is comprised of the 2000
     ------------------                                                  
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.

     SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX.  The Salomon Brothers World
     --------------------------------------------                             
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded.  The index generally
excludes floating- or variable-rate bonds, securities aimed principally at non-
institutional investors (such as U.S. Savings Bonds) and private-placement type
securities.

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

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

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

     From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A.  In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund.  References to or reprints of such articles
may be used in the Fund's promotional literature.  References to articles
regarding personnel of Loomis Sayles who have portfolio management
responsibility may also be used in the Fund's promotional literature.  For
additional information about the Fund's advertising and promotional literature,
see Appendix B.

                                      -23-
<PAGE>

     
                               PERFORMANCE DATA

     The manner in which yield and total return of the Fund will be calculated 
for public use is described above. The following table summarizes the 
calculation of the Fund's yield at September 30, 1998 and the Fund's total 
return and for the period from the Fund's commencement of operations to 
September 30, 1998.

                               Performance Data*

 
                                                               Average Annual
                                                                Total Return
                                                                  from the
                                                              Commencement of
      Current SEC Yield                                    Operations** through
          at 9/30/98                                              9/30/98
          ----------                                              -------

            6.32%                                                  1.91%


* Performance would have been lower if the management fee had not been waived 
and certain other expenses had not been reimbursed by Loomis Sayles. In the 
absence of the expense limitation, actual yield and total return would have 
been 4.77% (yield) and 1.39% for the period from the Fund's commencement of 
operations to September 30, 1998, respectively.

** Inception date of the Fund is      

                                     -24-

<PAGE>
 
                                                                     APPENDIX A
                PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

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

                                      A-1
<PAGE>
 
New Orleans Times-Picayune               Wall Street Letter    
New York Daily News                      Wall Street Week     
New York Times                           Washington Post      
Newark Star Ledger                       WBZ                  
Newsday                                  WBZ-TV               
Newsweek                                 WCVB-TV              
Nightly Business Report                  WEEI                 
Orange County Register                   WHDH                 
Orlando Sentinel                         Worcester Telegram   
Palm Beach Post                          World Wide Web       
Pension World                            Worth Magazine       
Pensions and Investments                 WRKO                  
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal

                                      A-2
<PAGE>
 
                                                                      APPENDIX B
                     ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:

 .    Loomis Sayles Investment Trust's participation in wrap fee and no
     transaction fee programs

 .    Loomis Sayles Investment Trust and Loomis, Sayles & Company, L.P. Website

 .    Characteristics of Loomis Sayles including the number and locations of its
     offices, its investment practices and clients

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

 .    Specific and general sources of information, economic models, forecasts
     and data services utilized, consulted or considered in the course of
     providing advisory or other services

 .    Industry conferences, electronically transmitted programs relating to the
     investment industry and the like at which Loomis Sayles participates

 .    Current capitalization, levels of profitability and other financial
     information

 .    Identification of portfolio managers, researchers, economists, principals
     and other staff members and employees

 .    The specific credentials of the above individuals, including but not
     limited to, previous employment, current and past positions, titles and
     duties performed, industry experience, educational background and degrees,
     awards and honors

 .    Specific identification of, and general reference to, current individual,
     corporate and institutional clients, including pension and profit sharing
     plans

 .    Current and historical statistics relating to:

     -total dollar amount of assets managed
     -Loomis Sayles assets managed in total and by Fund
     -the growth of assets
     -asset types managed

     References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund.  The information may include, but is not limited to:

 .    Specific and general references to industry statistics regarding 401(k)
     and retirement plans including historical information and industry trends
     and forecasts regarding the growth of assets, numbers or plans, funding
     vehicles, participants, sponsors and other demographic data relating to
     plans, participants and sponsors, third party and other administrators,
     benefits consultants and firms with whom Loomis Sayles may or may not have
     a relationship.

                                      B-1
<PAGE>
 
 .    Specific and general reference to comparative ratings, rankings and other
     forms of evaluation as well as statistics regarding the Fund as a 401(k) or
     retirement plan funding vehicle produced by industry authorities, research
     organizations and publications.

                                      B-2

<PAGE>
 
               LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND

                      STATEMENT OF ADDITIONAL INFORMATION

                                January 1, 1999



This Statement of Additional Information is not a prospectus.  This Statement of
Additional Information relates to the Prospectus (the "Prospectus") of Loomis
Sayles Investment Grade Fixed Income Fund, a series of Loomis Sayles Investment
Trust, dated January 1, 1999, and should be read in conjunction therewith.  A
copy of the Prospectus may be obtained from Loomis Sayles Investment Trust, One
Financial Center, Boston, Massachusetts 02111.
<PAGE>
 
                               TABLE OF CONTENTS

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS........................  -3-

MANAGEMENT OF THE TRUST................................................  -8-

INVESTMENT ADVISORY AND OTHER SERVICES................................. -10-

PORTFOLIO TRANSACTIONS AND BROKERAGE................................... -13-

DESCRIPTION OF THE TRUST............................................... -14-

HOW TO BUY SHARES...................................................... -17-

NET ASSET VALUE........................................................ -17-

REDEMPTIONS ........................................................... -18-

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS............ -18-

FINANCIAL STATEMENTS................................................... -21-

CALCULATION OF YIELD AND TOTAL RETURN.................................. -21-

PERFORMANCE COMPARISONS................................................ -22-

PERFORMANCE DATA....................................................... -25-

APPENDIX A PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION.............. -A1-

APPENDIX B ADVERTISING AND PROMOTIONAL LITERATURE...................... -B1-

                                      -2-
<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The investment objective and policies of the Loomis Sayles Investment Grade
Fixed Income Fund (the "Fund"), a series of Loomis Sayles Investment Trust (the
"Trust"), are summarized in the Prospectus under "Investment Objective and
Policies" and "More Information About the Fund's Investments."  The investment
policies of the Fund set forth in the Prospectus and in this Statement of
Additional Information may be changed by Loomis, Sayles & Company, L.P. ("Loomis
Sayles"), the Fund's investment adviser, subject to review and approval by the
Trust's board of trustees (the "Trustees"), without shareholder approval except
that the investment objective of the Fund as set forth in the Prospectus and any
Fund policy explicitly identified as "fundamental" may not be changed without
the approval of the holders of a majority of the outstanding shares of the Fund
(which means the lesser of (i) 67% of the shares of the Fund represented at a
meeting at which at least 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares).

     In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of the Fund (and
those marked with an asterisk are fundamental policies of the Fund):

     The Fund will not:

     *(1) Act as underwriter, except to the extent that, in connection with the
          disposition of portfolio securities, it may be deemed to be an
          underwriter under certain federal securities laws.

     *(2) Invest in oil, gas or other mineral leases, rights or royalty
          contracts or in real estate, commodities or commodity contracts. (This
          restriction does not prevent the Fund from investing in issuers that
          invest or deal in the foregoing types of assets or from purchasing
          securities that are secured by real estate.)

     *(3) Make loans.  (For purposes of this investment restriction, neither (i)
          entering into repurchase agreements nor (ii) purchasing bonds,
          debentures, commercial paper, corporate notes and similar evidences of
          indebtedness, which are a part of an issue to the public, is
          considered the making of a loan. )

     *(4) Change its classification pursuant to Section 5(b) of the Investment
          Company Act of 1940 (the "1940 Act") from a "diversified" to "non-
          diversified" management investment company.

     *(5) Purchase any security (other than U.S. Government Securities) if, as a
          result, more than 25% of the Fund's total assets (taken at current
          value) would be invested in any

                                      -3-
<PAGE>
 
          one industry (in the utilities category, gas, electric, water and
          telephone companies will be considered as being in separate
          industries.)

     *(6) Borrow money in excess of 10% of its total assets (taken at cost) or
          5% of its total assets (taken at current value), whichever is lower,
          nor borrow any money except as a temporary measure for extraordinary
          or emergency purposes; however, the Fund's use of reverse repurchase
          agreements and "dollar roll" arrangements shall not constitute
          borrowing by the Fund for purposes of this restriction.

     *(7) Purchase any illiquid security, including any security that is not
          readily marketable, if, as a result, more than 15% of the Fund's net
          assets (based on current value) would then be invested in such
          securities.

     *(8) Issue senior securities other than any borrowing permitted by
          restriction (6) above. (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 collateral
          arrangements with respect to options, futures contracts and options on
          futures contracts and with respect to initial and variation margin;
          and the purchase or sale of or entry into options, forward contracts,
          futures contracts, options on futures contracts, swap contracts or any
          other derivative investments to the extent that Loomis Sayles
          determines that the Fund is not required to treat such investments as
          senior securities pursuant to the pronouncements of the Securities and
          Exchange Commission (the "SEC") or its staff.)

     The Fund intends, based on the views of the staff of the SEC, to restrict
its investments, if any, in repurchase agreements maturing in more than seven
days, together with other investments in illiquid securities, to the percentage
permitted by restriction (7) above.

     Although authorized to invest in restricted securities, the Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except Rule 144A securities.

Portfolio Turnover
- ------------------

     Portfolio turnover considerations will not limit Loomis Sayles's investment
discretion in managing the Fund's assets.  The Fund anticipates that its
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions.  High portfolio turnover rates
may result in 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.

                                      -4-
<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 U.S. 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 U.S.
          -----------------------------                                 
Treasury issued in maturities that vary between one and forty years, with
interest normally payable every six months. They are backed by the full faith
and credit of the U.S. Government.

     .    "Ginnie Maes" - Debt securities issued by a mortgage banker or other
          -------------                                                       
mortgagee which represent interests in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or guaranteed
by the Veterans Administration.  The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer of
these certificates on the underlying mortgages.  An assistant attorney general
of the United States has rendered an opinion that the guarantee by GNMA is a
general obligation of the United States backed by its full faith and credit.
Mortgages included in single family or multi-family residential mortgage pools
backing an issue of Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the registered holders
of Ginnie Maes (such as the Fund) each month.  Unscheduled prepayments may be
made by homeowners, or as a result of a default.  Prepayments are passed through
to the registered holder of Ginnie Maes along with regular monthly payments of
principal and interest.

     .    "Fannie Maes" - Fannie Mae 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 Fannie Mae that are guaranteed as to timely payment of principal and
interest by Fannie Mae but are not backed by the full faith and credit of the
U.S. Government.

                                      -5-
<PAGE>
 
     .    "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC")
          --------------                                                       
is a corporate instrumentality of the U.S. Government.  Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the U.S. Government.

     As described in the Prospectus, U.S. Government Securities generally do not
involve the credit risks associated with investments in other types of fixed
income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed income securities.  Like other fixed income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.

When-Issued Securities
- ----------------------

     As described in the Prospectus, the Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date.  Such agreements might be entered into, for
example, when the Fund anticipates a decline in interest rates and is able to
obtain a more advantageous yield by committing currently to purchase securities
to be issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account liquid assets
in an amount equal to or greater than, on a daily basis, the amount of the
Fund's when-issued or delayed-delivery commitments.  The Fund will make
commitments to purchase on a when-issued or delayed-delivery basis only
securities meeting the Fund's investment criteria.  The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of investment
strategy, the Fund may sell these securities before the settlement date. When
the time comes to pay for when-issued or delayed-delivery securities, the Fund
will meet its obligations from then available cash flow or the sale of
securities, or from the sale of the when-issued or delayed-delivery securities
themselves (which may have a value greater or less than the Fund's payment
obligation).

Zero Coupon Bonds
- -----------------

     Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligations
or for an initial period after the issuance of the obligations.  Such bonds are
issued and traded at discounts from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer.  The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates

                                      -6-
<PAGE>
 
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 of 1986, as
amended (the "Code"), the Fund must distribute each year at least 90% of its net
investment income, including the original issue discount accrued on zero coupon
bonds. Because an investor investing in zero coupon bonds will not on a current
basis receive cash payments from the issuer in respect of accrued original issue
discount, the Fund may have to distribute cash obtained from other sources in
order to satisfy the 90% distribution requirement under the Code. Such cash
might be obtained from selling other portfolio holdings of the Fund. In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell such securities at such time.

Repurchase Agreements
- ---------------------

     The Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed-upon price and date (usually seven days or
less from the date of original purchase).  The resale price is in excess of the
purchase price and reflects an agreed-upon market rate unrelated to the coupon
rate on the purchased security.  Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash.  Although the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U.S. Government, the
obligation of the seller is not guaranteed by the U.S. Government and there is a
risk that the seller may fail to repurchase the underlying security.  In such
event, the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market.  However, the Fund may
be subject to various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto and (b) inability to enforce rights and the
expenses involved in attempted enforcement.

Rule 144A Securities
- --------------------

     The Fund may purchase Rule 144A securities.  These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless Loomis Sayles has
determined, under guidelines established by the Trustees, that a  particular
issue of Rule 144A securities is liquid.  Under the guidelines, Loomis Sayles
considers such factors as:  (1) the frequency of trades and quotes for a
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of
marketplace trades therefor.

                                      -7-
<PAGE>
 
                            MANAGEMENT OF THE TRUST

     The trustee and officers of the Trust and their principal occupations
during the past five years are as follows:

TIMOTHY J. HUNT (_____) -- Trustee.  26 Dennett Road, Marblehead, Massachusetts.
                           -------                  
     Retired. Formerly, Vice President and Director of Fixed Income Research,
     Loomis Sayles.

DANIEL J. FUSS (_____)  -- President.  Executive Vice President and Director,
                           ---------                                         
     Loomis Sayles.

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

SHEILA M. BARRY (53) -- Secretary and Compliance Officer.  Assistant General
                        --------------------------------                    
     Counsel and Vice President, Loomis Sayles. Formerly, Senior Counsel and
     Vice President, New England Funds, L.P.

ROBERT J.  BLANDING (_____)  -- Executive Vice President.  465 First Street
                                ------------------------                   
     West, Sonoma, California.  President, Chairman, Director and Chief
     Executive Officer, Loomis Sayles.

WILLIAM F. CAMP (_____)  -- Vice President.  1533 North Woodward, Bloomfield
                            --------------                                  
     Hills, Michigan. Vice President, Loomis Sayles. Formerly, Portfolio
     Manager, Kmart Corporation.

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

KATHLEEN C. GAFFNEY (_____) -- Vice President.  Vice President, Loomis Sayles.
                               --------------                                 
 
JEFFREY L. MEADE (______) -- Vice President. Chief Operating Officer, Executive
     Vice President and Director, Loomis Sayles.

KENT P. NEWMARK (_____) -- Vice President. 555 California Street, San Francisco,
     California Vice President and Director, Loomis Sayles.

ROBERT K. PAYNE (_____) -- Vice President. 555 California Street, San Francisco,
 California. Vice President, Loomis Sayles.
 
ANTHONY J. WILKINS (_____)  -- Vice President. Vice President and Director,
     Loomis Sayles.
 
MARI J. SUGAHARA (_____)  -- Vice President.  Vice President, Loomis Sayles

                                      -8-
<PAGE>
 
FREDERICK E. SWEENEY, JR.  (_____)  --Vice President.  Vice President, Loomis
                                      ---------------                        
     Sayles.

     Formerly, served as an Investment Consultant at Meketa Investment Group and
     prior to that served as Vice President of New England Investment
     Associates.

     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.

<TABLE>
<CAPTION> 
                              COMPENSATION TABLE
   for the 1998 fiscal period (January 1, 1998, through September 30, 1998)

- -----------------------------------------------------------------------------------------------
     (1)              (2)            (3)                  (4)                   (5)            
Name of Person,    Aggregate      Pension or           Estimated         Total Compensation    
  Position        Compensation    Retirement             Annual          from Trust and Fund   
                   from Trust      Benefits            Benefits Upon   Complex Paid to Trustee 
                                  Accrued as Part       Retirement                              
                                  of Fund Expenses
- -----------------------------------------------------------------------------------------------
<S>               <C>             <C>                  <C>             <C>                     
Timothy J. Hunt,    $________       $______             $______            $________
Trustee
</TABLE> 

     As of the date hereof, the Trustee and officers as a group owned less than
1% of the outstanding shares of the Fund.

                                      -9-
<PAGE>
 
     The following table sets forth the name, address and percentage ownership
of each holder of 5% or more of the Fund's outstanding securities as of October
31, 1998.

<TABLE>
<CAPTION>
                                Percentage of
Shareholder                        Address                 Shares Held
- --------------------------  ----------------------  --------------------------
<S>                         <C>                     <C>
Peabody Essex Museum        East India Square                 15%
                            Salem, MA  01970
 
Wichita State University    1845 Fairmount
Endowment Association       Wichita, KS 67260                 10%
 
Local 522 Pension Fund      139-16 91st Avenue                 9%
                            Jamaica, NY  11435
 
Jupiter & Co.               P.O. Box 9130, FPG 90              9%
                            Boston, MA  02117-9130

Boston & Company            P.O. Box 3198                      8% 
University of MA Foundation Pittsburgh, PA 15230-3198               

Braintree Contributory      71 Cleveland Avenue                8%
Retirement System           Braintree, MA 02184
 
FMB Trust Company           P.O. Box 1596                      7%
                            Baltimore, MD 21203-1596
</TABLE>

                    INVESTMENT ADVISORY AND OTHER SERVICES

     Advisory Agreement.  Loomis Sayles serves as investment adviser to the Fund
     ------------------                                                         
under an advisory agreement with the Trust dated August 30, 1996.  Under the
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the Fund and generally administers its affairs, subject to supervision
by the Trustees.  Loomis Sayles furnishes, at its own expense, all necessary
office space, office supplies, facilities and equipment, services of executive
and other personnel of the Fund and certain administrative services.  For these
services, the advisory agreement provides that the Fund shall pay Loomis Sayles
a monthly investment advisory fee at the annual rate of .40% of the Fund's
average weekly net assets.

     Under the advisory agreement, if the total ordinary business expenses of
the Fund or the

                                      -10-
<PAGE>
 
Trust as a whole for any fiscal year exceed the lowest applicable limitation
(based on percentage of average net assets or income) prescribed by any state in
which the shares of the Fund or the Trust are qualified for sale, Loomis Sayles
shall pay such excess.

     As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses.  These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.

     During the 1996 and 1997 fiscal years and the 1998 fiscal period (January
1, 1998, through September 30, 1998), Loomis Sayles received the following
amounts of investment advisory fees from the Fund (before voluntary fee
reductions and expense assumptions) and waived and reimbursed the following
amounts of fees for the Fund:

          <TABLE>
          <CAPTION>
          Period         Advisory Fees  Fee Waivers/Reimbursements
          -------------  -------------  --------------------------
          <S>            <C>            <C>
          1996           $124,447            $47,712
          1997           $244,179            $85,697
          1998           $301,187            $77,026
          </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

                                      -11-
<PAGE>
 
faith, gross negligence or reckless disregard of its obligations and duties.

     Loomis Sayles acts as investment adviser to the eighteen 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
Balanced Fund and New England Strategic Income Fund, which are series of New
England Funds Trust I,  a registered open-end management investment company, New
England High Income Fund, a series of New England Funds Trust II, a registered
open-end investment management company, New England Equity Income Fund, a series
of New England Funds Trust III, a registered open-end management investment
company and to the Loomis Sayles 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 other investment
companies and numerous other corporate and fiduciary clients.

     The general partner of Loomis Sayles is a special purpose corporation that
is an indirect wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest
Companies").  Nvest Companies' managing general partner, Nvest Corporation, is a
direct wholly-owned subsidiary of Metropolitan Life Insurance Company ("Met
Life"), a mutual life insurance company.  Nvest Companies' advising general
partner, Nvest, L.P., is a publicly traded company listed on the New York Stock
Exchange. Nvest Corporation is the sole general partner of Nvest L.P.

     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 Trustee that the
desirability of retaining Loomis Sayles as investment adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.

     Custodial Arrangements.  State Street Bank and Trust Company ("State
     ----------------------                                              
Street"), Boston, Massachusetts 02102, is the Trust's custodian.  As such, State
Street holds in safekeeping certificated securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund.  Upon instruction, State Street receives and
delivers cash and securities of the Fund in connection with Fund transactions
and collects all dividends and other distributions made with respect to Fund
portfolio securities.  State Street also maintains certain accounts and records
of the Fund and calculates the total net asset value, total net income and net
asset value per share of the Fund on a daily basis.

                                      -12-
<PAGE>
     
     Independent Accountants.  The Fund's independent accountants are
     -----------------------                                         
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts.
PricewaterhouseCoopers LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Funds as to matters of accounting and federal
and state income taxation. The information under the caption "Financial 
Highlights" included in the Prospectus has been so included, and the financial 
statements incorporated by reference herein from the Fund's 1998 Annual Report 
have been so incorporated, in reliance on the reports of PricewaterhouseCoopers 
LLP, independent accountants, given on the authority of said firm as experts in 
auditing and accounting.     

                     PORTFOLIO TRANSACTIONS AND BROKERAGE

     In placing orders for the purchase and sale of portfolio securities for the
Fund, Loomis Sayles always seeks the best price and execution.  Transactions 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.

                                      -13-
<PAGE>
 
     The following table sets forth for the 1996 and 1997 fiscal years and the
1998 fiscal period (January 1, 1998, through September 30, 1998), (1) the
aggregate dollar amounts of brokerage commissions paid on portfolio transactions
during such periods, (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 periods:

<TABLE>
<CAPTION>
                    (1)           (2)            (3)
                    Aggregate                    Commissions
                    Brokerage     Directed       on Directed
                    Commissions   Transactions   Transactions
Period              ($)           ($)            ($)
- ------------------  -----------   ------------   ------------
<S>                 <C>           <C>            <C> 
1996                     $1,240        $   0           $  0
1997                     $1,192        $   0           $  0
1998                     $_____        $_____          $____
</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 dividends and
distributions from the Fund.  The shares of the Fund do not have any preemptive
rights.  Upon termination of the Fund, whether pursuant to liquidation of the
Trust or otherwise, shareholders of the Fund are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders.  The
Declaration of Trust also permits the Trustees to charge shareholders directly
for custodial, transfer agency and servicing expenses.

     The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund.  The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable.  While the expenses of the Trust are allocated to the separate
books of account of the Fund, certain expenses may be legally chargeable against
the assets of all

                                      -14-
<PAGE>
 
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.

Voting Rights
- -------------

     As summarized in the Prospectus, 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.

                                      -15-
<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 

                                      -16-
<PAGE>
 
against any liability to which the Trustee would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The By-Laws of the Trust provide
for indemnification by the Trust of the Trustees and officers of the Trust
except with respect to any matter as to which any such person did not act in
good faith in the reasonable belief that such action was in or not opposed to
the best interests of the Trust. No officer or Trustee may be indemnified
against any liability to the Trust or the Trust's shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office.

                               HOW TO BUY SHARES

     The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are summarized in the Prospectus under "How to
Purchase Shares."

                                NET ASSET VALUE

     The net asset value of the shares of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares of the Fund outstanding and rounding to the nearest cent.
Such determination is made at least 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,
Martin Luther King, Jr. Day, Presidents' Day and Good Friday.  Long-term debt
securities are valued by a pricing service, which determines valuations of
normal institutional-size trading units of long-term debt securities.  Such
valuations are determined using methods based on market transactions for
comparable securities and on various relationships among securities that are
generally recognized by institutional traders.  Other securities for which
current market quotations are not readily available (including restricted
securities, if any) and all other assets are taken at fair value as determined
in good faith by the Trustees, although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.

     Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of regular trading on the Exchange.
Occasionally, events affecting the value of foreign securities not traded on a
U.S. exchange may occur between the completion of substantial trading of such
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value.  If events materially affecting the value of the Fund's
portfolio securities occur during such period, then these securities will be
valued at their fair value as determined in good faith or in accordance with
procedures approved by the Trustees.

                                      -17-
<PAGE>
 
                                  REDEMPTIONS

     The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."

     The redemption price will be the net asset value per share next determined
     --------------------------------------------------------------------------
after the redemption request and any necessary special documentation are
- ------------------------------------------------------------------------
received by the Trust in proper form.  Proceeds resulting from a written
- ------------------------------------                                    
redemption request will normally be mailed to you within seven days after
receipt of your request in good order.  In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.

     The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trustees
determine it to be advisable in the interest of the remaining shareholders.  If
portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities.

     A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss.  See "Income Dividends, Capital Gain Distributions and Tax Status."

          INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

     As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes," it is the policy of the Fund to pay its shareholders monthly, as
dividends, substantially all of the Fund's net income and to distribute to its
shareholders annually substantially all net realized capital gains, if any,
after offset by any capital loss carryovers.

     Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of regular trading on the Exchange on the record date for each
dividend or distribution.  Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash.  The election
may be made at any time by submitting a written request directly to the Trust.
In order for an election to be in effect for any dividend or distribution, it
must be received by the Trust on or before the record date for such dividend or
distribution.

     As required by federal law, information concerning the federal tax status
of distributions from the Fund will be furnished to each shareholder for each
calendar year on or before January 31 of the succeeding year.

                                      -18-
<PAGE>
 
     The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code.  In order so to qualify and to qualify for the
special tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things: (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies;  (ii) distribute each year at least 90% of the sum of
its taxable net investment income, its tax-exempt income and the excess, if any,
of net short-term capital gains over its net long-term capital losses for such
year; and (iii) 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 distributions in any
calendar year.  Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
realized during the one-year period ending on October 31 (or December 31, if the
Fund is permitted to so elect  and so elects) plus undistributed amounts from
prior years.  The Fund intends to make distributions sufficient to avoid
imposition of the excise tax.  Dividends and distributions declared by the Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

     Distribution by the Fund of net income and short-term capital gains, if
any, will be taxable to shareholders as ordinary income. Distributions
designated by a Fund as deriving from net gains on securities held for more than
one year will be taxable to shareholders as long-term capital gains (generally
at a 20% rate for noncorporate shareholders), without regard to how long a
shareholder has held shares of the Fund.

     Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value 

                                      -19-
<PAGE>
 
also reflects unrealized losses.

     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.  In general, any long term gains realized upon a taxable
disposition of shares will be subject to a maximum tax rate of 20% (for
noncorporate shareholders). However, if a shareholder sells Fund shares at a
loss within six months after purchasing the shares, the loss will be treated as
a long-term capital loss to the extent of any long-term capital gain
distributions received by the shareholder.  Furthermore,  all or a portion of
any loss will be disallowed on the taxable disposition of Fund shares if the
shareholder acquires other shares of the Fund within 30 days before or after the
disposition.

     The Fund's transactions in foreign currency-denominated debt securities may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.
 
     The Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received.  In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as dividends
to its shareholders all of its income and gains and therefore to eliminate any
tax liability at the Fund level.

     If the Fund engages in hedging transactions, including hedging transactions
in options, future contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale, market-to-
market, straddle, wash sale, and short sale rules), the effect of which may be
to accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner to believed to be in the best interests of the Fund.

     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 foreign, state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.

                                      -20-
<PAGE>
 
     The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

     The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules described above.  The new regulations will generally be effective for
payments made on or after January 1, 1999 (although transition rules will
apply).  In some circumstances, the new rules will increase the certification
and filing requirements imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax and for reduced withholding tax
rates under income tax treaties.  Foreign investors in the Fund should consult
their tax advisors with respect to the potential application of these new
regulations.

                             FINANCIAL STATEMENTS

     The Report of Independent Accountants, financial highlights and financial
statements of the Fund included in its 1998 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 (888) 226-9699.

     The financial highlights included in the Prospectus under the headings
"Financial Highlights" and "Prior Performance" and incorporated by reference
into this Statement of Additional Information and the financial statements and
financial highlights contained in the Fund's 1998 Annual Report and incorporated
by reference into this Statement of Additional Information have both been
audited by PricewaterhouseCoopers LLP, independent accountants, and have been so
included and incorporated by reference in reliance upon the report of said firm,
which report is given upon their authority as experts in auditing and
accounting.


                     CALCULATION OF YIELD AND TOTAL RETURN

    
     Yield.  The Fund's yield will be computed by dividing the Fund's net
     -----                                                               
investment income per share by the maximum offering price per share on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The Fund's yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Trust allocated to the Fund. These factors, and possible differences in the
methods used in calculating yield, should be considered when comparing the
Fund's yield to     

                                      -21-
<PAGE>
 
yields published for other investment companies and other investment vehicles.
Yield should also be considered relative to changes in the value of the Fund's
shares and to the relative risks associated with the investment objective and
policies of the Fund.

     At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.

     Investors in the Fund are specifically advised that the net asset value per
share of the Fund may vary, just as yields for the Fund may vary.  An investor's
focus on yield to the exclusion of the consideration of the value of shares of
the Fund may result in the investor's misunderstanding the total return he or
she may derive from the Fund.

     Total Return.  Total return with respect to the Fund is a measure of the
     ------------                                                            
change in value of an investment in the Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash.  The formula for total return used
herein includes four steps:  (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.

                            PERFORMANCE COMPARISONS

     The Fund may from time to time include the yield and/or total return of its
shares in advertisements or information furnished to present or prospective
shareholders.  The Fund may from time to time include in advertisements or
information furnished to present or prospective shareholders (i) the ranking of
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services, Inc. or Micropal, Inc. as having
similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.

     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly.
     --------------------------------                                           
The rankings are based on total return performance calculated by Lipper,
generally reflecting changes in net asset value adjusted for reinvestment of
capital gains and income dividends.  They do not reflect deduction of any sales
charges.  Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance.  Lipper classifies mutual
funds by investment objective and asset category.

                                      -22-
<PAGE>
 
     MICROPAL, INC. distributes mutual fund rankings weekly and monthly.  The
     --------------                                                          
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends.  If deemed appropriate by the user, performance can also
reflect deductions for sales charges.  Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance.  Micropal classifies mutual funds by investment objective and asset
category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a month.  The
     -----------------                                                    
ratings are divided into five groups:  highest, above average, neutral, below
average and lowest.  They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc.  Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance.  The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investor Service, Inc.

     CDA/WEISENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is
     -------------------------------------                                      
distributed monthly.  The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-
year.  Mutual funds are ranked in general categories (e.g., international bond,
international equity, municipal bond, and maximum capital gain).  Weisenberger
rankings do not reflect deduction of sales charges or fees.

     Performance information may also be used to compare the performance of the
Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.

     CONSUMER PRICE INDEX.  The Consumer Price Index, published by the U.S.
     --------------------                                                  
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.

     DOW JONES INDUSTRIAL AVERAGE.  The Dow Jones Industrial Average is a market
     ----------------------------                                               
value-weighted and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.

     LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.  The Lehman Brothers
     ------------------------------------------------                     
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible, investment-grade corporate debt
securities and U.S. dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international agencies used as a

                                      -23-
<PAGE>
 
general measure of the performance of fixed-income securities.
 
     LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX.  The Index contains fixed rate
     ------------------------------------------                               
debt issues of the U.S. government or its agencies rated investment grade or
higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.

     LEHMAN BROTHERS GOVERNMENT BOND INDEX.  The Lehman Brothers Government Bond
     --------------------------------------                                     
Index is composed of all publicly issued, nonconvertible, domestic debt of the
U.S. government or any of its agencies, quasi-federal corporations, or corporate
debt guaranteed by the U.S. government.

     LEHMAN BROTHERS MUNICIPAL BOND INDEX.  The Lehman Brothers Municipal Bond
     -------------------------------------                                    
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.

     MSCI-EAFE INDEX.  The MSCI-EAFE Index contains over 1000 stocks from 20
     ----------------                                                       
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.

     MSCI-EAFE EX-JAPAN INDEX.  The MSCI-EAFE ex-Japan Index consists of all
     -------------------------                                              
stocks contained in the MSCI-EAFE Index, other than stocks from Japan.

     MERRILL LYNCH GOVERNMENT/CORPORATE INDEX.  The Merrill Lynch Government/
     -----------------------------------------                               
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.

     MERRILL LYNCH HIGH YIELD INDEX.  The Merrill Lynch High Yield Index
     -------------------------------                                    
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).

     RUSSELL 2000 INDEX.  The Russell 2000 Index is comprised of the 2000
     ------------------                                                  
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.

     SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX.  The Salomon Brothers World
     --------------------------------------------                             
Government Bond Index includes a broad range of institutionally-traded fixed-
rate government securities issued by the national governments of the nine
countries whose securities are most actively traded.  The index generally
excludes floating- or variable-rate bonds, securities aimed principally at non-
institutional investors (such as U.S. Savings Bonds) and private-placement type
securities.

     STANDARD & POOR'S/BARRA GROWTH INDEX.  The Standard & Poor's/Barra Growth
     -------------------------------------                                    
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the 

                                      -24-
<PAGE>
 
securities with the highest price-to-book ratios that represent approximately
half of the market capitalization of the S&P 500.

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

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

     From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A.  In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund.  References to or reprints of such articles
may be used in the Fund's promotional literature.  References to articles
regarding personnel of Loomis Sayles who have portfolio management
responsibility may also be used in the Fund's promotional literature.  For
additional information about the Fund's advertising and promotional literature,
see Appendix B.


                               PERFORMANCE DATA

     The manner in which yield and total return of the Fund will be calculated
for public use is described above.  The following table summarizes the
calculation of the Fund's yield at September 30, 1998 and the Fund's total
return (i) for the one-year period ended September 30, 1998 (ii) for the three-
year period ended September 30, 1998 and (iii) for the period from the
commencement of operations to September 30, 1998.

                                      -25-
<PAGE>
 
<TABLE> 
<CAPTION> 
                                        Performance Data*

                                    Average             Average               Average       
                                    Annual               Annual              Annual Total   
                                 Total Return         Total Return              Return      
                                    for the              for the               from the     
                                One-Year Period     Three-Year Period      Commencement of  
          Current SEC Yield         ended                 ended           Operations-through
             at 9/30/98            9/30/98                9/30/98              9/30/98
             ----------            -------                -------              -------  
          <S>                   <C>                 <C>                   <C> 
               7.68%                 1.53%                   9.09%              11.57%
</TABLE>

*Performance would have been lower if a portion of the management fee had not
been waived by Loomis Sayles. In the absence of the expense limitation, actual
yield and total return would have been 7.47% (yield), and 1.42%, 8.96% and
11.36% for the one-year period ended September 30, 1998, the three-year period
ended September 30, 1998 and for the period from the Fund's commencement of
operations to September 30, 1998, respectively.

**Inception date of the Fund is July 1, 1994.

                                      -26-
<PAGE>
 
                                                                      APPENDIX A
                 PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

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

                                      A-1
<PAGE>
 
New Orleans Times-Picayune                            Wall Street Letter       
New York Daily News                                   Wall Street Week         
New York Times                                        Washington Post          
Newark Star Ledger                                    WBZ                      
Newsday                                               WBZ-TV                   
Newsweek                                              WCVB-TV                  
Nightly Business Report                               WEEI                     
Orange County Register                                WHDH                     
Orlando Sentinel                                      Worcester Telegram       
Palm Beach Post                                       World Wide Web           
Pension World                                         Worth Magazine           
Pensions and Investments                              WRKO                     
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal

                                      A-2
         
<PAGE>
 
                                                                   APPENDIX B
                    ADVERTISING AND PROMOTIONAL LITERATURE

Loomis Sayles Investment Trust advertising and promotional material may include,
but is not limited to, discussions of the following information:

 .    Loomis Sayles Investment Trust's participation in wrap fee and no
     transaction fee programs

 .    Loomis Sayles Investment Trust and Loomis, Sayles & Company, L.P. Website

 .    Characteristics of Loomis Sayles including the number and locations of its
     offices, its investment practices and clients

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

 .    Specific and general sources of information, economic models, forecasts
     and data services utilized, consulted or considered in the course of
     providing advisory or other services

 .    Industry conferences, electronically transmitted programs relating to the
     investment industry and the like at which Loomis Sayles participates

 .    Current capitalization, levels of profitability and other financial
     information

 .    Identification of portfolio managers, researchers, economists, principals
     and other staff members and employees

 .    The specific credentials of the above individuals, including but not
     limited to, previous employment, current and past positions, titles and
     duties performed, industry experience, educational background and degrees,
     awards and honors

 .    Specific identification of, and general reference to, current individual,
     corporate and institutional clients, including pension and profit sharing
     plans

 .    Current and historical statistics relating to:

     -total dollar amount of assets managed
     -Loomis Sayles assets managed in total and by Fund
     -the growth of assets
     -asset types managed

     References may be included in Loomis Sayles Investment Trust's advertising
and promotional literature about 401(k) and retirement plans, if any, that offer
the Fund.  The information may include, but is not limited to:

 .    Specific and general references to industry statistics regarding 401(k)
     and retirement plans including historical information and industry trends
     and forecasts regarding the growth of assets, numbers or plans, funding
     vehicles, participants, sponsors and other demographic data relating to
     plans, participants and sponsors, third party and other administrators,
     benefits consultants and firms with whom Loomis Sayles may or may not have
     a relationship.

                                      B-1
<PAGE>
 
 .    Specific and general reference to comparative ratings, rankings and other
     forms of evaluation as well as statistics regarding the Fund as a 401(k) or
     retirement plan funding vehicle produced by industry authorities, research
     organizations and publications.

                                      B-2
<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.
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, in The Commonwealth of Massachusetts, on
the 30th day of November, 1998.

                                        LOOMIS SAYLES INVESTMENT TRUST


                                        By:  /s/ DANIEL J. FUSS*
                                           --------------------------------
                                             Daniel J. Fuss
                                             President

                                        *By: /s/ MARK W. HOLLAND 
                                           --------------------------------
                                             Mark W. Holland
                                             Attorney-in-fact

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                  TITLE                         DATE       
<S>                        <C>                           <C>              
                                                                          
/s/ DANIEL J. FUSS*        President                     November 30, 1998
- ----------------------                                                    
Daniel J. Fuss             (principal executive                           
                           officer)                                       
                                                                          
/s/ MARK W. HOLLAND        Treasurer                     November 30, 1998
- ----------------------                                                    
Mark W. Holland            (principal financial                           
                           and accounting officer)                        
                                                                          
/s/ TIMOTHY J. HUNT*       Trustee                       November 30, 1998
- ----------------------                                                     
Timothy J. Hunt                             
</TABLE>                                                     
                                            
*By: /s/ MARK W. HOLLAND
     ------------------
     Mark W. Holland
     Attorney-in-fact
<PAGE>
 
                        LOOMIS SAYLES INVESTMENT TRUST
                                                             
                                                             
                              Index to Exhibits 
                                                              
Exhibit No.    Description
- ----------     -----------

5f             Investment Advisory Agreement between the Trust and Loomis Sayles
               Intermediate Duration Fund

11             Consent of Independent Accountants

17a            Financial Data Schedule for the Loomis Sayles Investment Grade
               Fixed Income Fund

17b            Financial Data Schedule for the Loomis Sayles Fixed Income Fund

17c            Financial Data Schedule for the Loomis Sayles California Tax-Free
               Income Fund

17d            Financial Data Schedule for the Loomis Sayles Core Growth Fund

17e            Financial Data Schedule for the Loomis Sayles High Yield Fixed
               Income Fund

17f            Financial Data Schedule for the Loomis Sayles Core Fixed Income
               Fund

17g            Financial Data Schedule for Loomis Sayles Intermediate Duration
               Fund

<PAGE>
 
                                                            Exhibit 5(f)



                                 ADVISORY AGREEMENT
                                 ------------------

     AGREEMENT made this 30th day of August, 1996 by and between Loomis Sayles
Investment Trust, a Massachusetts business trust (the "Trust"), with respect to
its Loomis Sayles Intermediate Duration Fixed Income Fund series (the "Series"),
and Loomis, Sayles & Company, L.P., a Delaware limited partnership (the
"Adviser").

                                  WITNESSETH:



     WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;


     NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:


     1.   The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision and control of the Board
of Trustees of the Trust.  The Adviser hereby accepts such employment and
agrees, at its own expense, to render the services and to assume the obligations
herein set forth, for the compensation herein provided.  The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.

     2.   In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:



          (a) obtain and evaluate such economic, statistical and financial data
     and information and undertake such additional investment research as it
     shall believe necessary or advisable for the management of the investment
     and reinvestment of the assets belonging to the Series in accordance with
     the Series' investment objective and policies;


          (b) take such steps as are necessary to implement the investment
     policies of the Series by purchase and sale of securities, including the
     placing of orders for such purchase and sale; and


          (c) regularly report to the Board of Trustees with respect to the
     implementation of the investment policies of the Series.
<PAGE>
 
     3.   All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.


     4.   In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:

          (a)  office space in such place or places as may be agreed upon from
     time to time, and all necessary office supplies, facilities and equipment;

          (b)  necessary executive and other personnel for managing the affairs
     of the Series (exclusive of those related to and to be performed under
     contract for custodial, transfer, dividend and plan agency services by the
     entity or entities, if any, selected to perform such services and exclusive
     of any managerial functions described in section 5); and

          (c)  compensation, if any, of Trustees of the Trust who are directors,
     officers or employees of the Adviser or any affiliated person (other than a
     registered investment company) of the Adviser.

     5.   Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:

          (a)  any of the costs of printing and mailing the items referred to in
     sub-section (n) of this section 5;

          (b)  any of the costs of preparing, printing and distributing sales
     literature;

          (c)  compensation of Trustees of the Trust who are not directors,
     officers or employees of the Adviser or of any affiliated person (other
     than a registered investment company) of the Adviser;

          (d)  registration, filing and other fees in connection with
     requirements of regulatory authorities;

          (e)  the charges and expenses of the custodian appointed by the Trust
     for custodial, paying agent, transfer agent and plan agent services;

          (f)  charges and expenses of independent accountants retained by the
     Trust;


                                      -2-
<PAGE>
 
          (g)  charges and expenses of any transfer agents and registrars
     appointed by the Trust;

          (h)  brokers' commissions and issue and transfer taxes chargeable to
     the Trust in connection with securities transactions to which the Trust is
     a party;

          (i)  taxes and fees payable by the Trust to Federal, State or other
     governmental agencies;

          (j)  any cost of certificates representing shares of the Series;

          (k)  legal fees and expenses in connection with the affairs of the
     Trust including registering and qualifying its shares with Federal and
     State regulatory authorities;

          (l)  expenses of meetings of shareholders and Trustees of the Trust;
     and

          (m)  interest, including interest on borrowings by the Trust;

          (n)  the cost of services, including services of counsel, required in
     connection with the preparation of the Trust's registration statements and
     prospectuses, including amendments and revisions thereto, annual,
     semiannual and other periodic reports of the Trust, and notices and proxy
     solicitation material furnished to shareholders of the Trust or regulatory
     authorities; and

          (o)  the Trust's expenses of bookkeeping, accounting, auditing and
     financial reporting, including related clerical expenses.

     6.   The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.

     7.   As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual rate of .4% or such lesser rate as the Adviser may
agree to from time to time.  Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Board of Trustees of the Trust may from time to time determine and specify in
writing to the Adviser.  The Adviser hereby acknowledges that the Trust's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.

     8.   If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser

                                      -3-
<PAGE>
 
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to such limitations. Should the applicable
state limitation provisions fail to specify how the average net assets of the
Trust or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Trust or the
Series, as the case may be.

     9.   It is understood that any of the shareholders, Trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Partnership Agreement of the Adviser, respectively, or by specific
provisions of applicable law.

     10.  This Agreement shall become effective as of the date of its execution,
and

          (a)  unless otherwise terminated, this Agreement shall continue in
     effect for two years from the date of execution, and from year to year
     thereafter so long as such continuance is specifically approved at least
     annually (i) by the Board of Trustees of the Trust or by vote of a majority
     of the outstanding voting securities of the Series, and (ii) by vote of a
     majority of the Trustees of the Trust who are not interested persons of the
     Trust or the Adviser, cast in person at a meeting called for the purpose of
     voting on such approval;

          (b)  this Agreement may at any time be terminated on sixty days'
     written notice to the Adviser either by vote of the Board of Trustees of
     the Trust or by vote of a majority of the outstanding voting securities of
     the Series;

          (c)  this Agreement shall automatically terminate in the event of its
     assignment;

          (d)  this Agreement may be terminated by the Adviser on ninety days'
     written notice to the Trust;

          (e)  if the Adviser requires the Trust or the Series to change its
     name so as to eliminate all references to the words "Loomis" or "Sayles,"
     then this Agreement shall automatically terminate at the time of such
     change unless the continuance of this Agreement after such change shall
     have been specifically approved by vote of a majority of the outstanding
     voting securities of the Series and by vote of a majority of the Trustees
     of the Trust who are not interested persons of the Trust or the Adviser,
     cast in person at a meeting called for the purpose of voting on such
     approval.

                                      -4-
<PAGE>
 
     Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.

     11.  This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.

     12.  For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act.  References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.

     13.  In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.

                                      -5-
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.


                              LOOMIS SAYLES INVESTMENT TRUST,
                                    on behalf of its


                              LOOMIS SAYLES INTERMEDIATE DURATION 
                              FIXED INCOME FUND series


                              By: /s/ Daniel J. Fuss      
                                 ----------------------------------
                                 Daniel J. Fuss
                                 President

                              LOOMIS, SAYLES & COMPANY, L.P.


                              By:  LOOMIS, SAYLES & COMPANY,
                                   INC., its general partner


                              By: /s/ Mark. W. Holland 
                                 ----------------------------------
                                 Mark W. Holland
                                 Vice President



     A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's Loomis Sayles Intermediate Duration Fixed Income Fund series on behalf
of the Trust by officers of the Trust as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any of
the Trustees, officers or shareholders individually but are binding only upon
the assets and property belonging to the Series.

                                      -6-

<PAGE>
 
                      CONSENT OF INDEPENDENT ACCOUNTANTS


To the Trustees of Loomis Sayles Investment Trust:

     We hereby consent to the following with respect of Post-Effective Amendment
No. 3 to the Registration Statement on Form N-1A (File No. 333-22931) and
Amendment No. 13 to the Registration Statement under the Investment Company Act
of 1940, as amended, on Form N-1A (File No. 811-8282), of Loomis Sayles
Investment Trust (consisting of Loomis Sayles 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 and Loomis Sayles Investment
Grade Fixed Income Fund (each a "Fund"):
    
     1.   The incorporation by reference in the Prospectus and Statement of
          Additional Information of each of the Loomis Sayles California Tax-
          Free Income Fund, Loomis Sayles Core 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 and Loomis Sayles Investment Grade Fixed Income Fund of
          our report dated November 18, 1998 accompanying the Annual Report for
          each such Fund for the nine month period ended September 30, 1998;
          and    
    
     2.   The reference to our firm under the heading "Financial Highlights" and
          "Prior Performance" in the Prospectus of each of the 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 and Loomis Sayles
          Investment Grade Fixed Income Fund, and Financial Highlights of the
          Loomis Sayles Intermediate Duration Fixed Income Fund; and     

    
     3.   The reference to our firm under the heading "Independent Accountants"
          in the Statement of Additional Information of each of the Fund.     
    
     



Boston, Massachusetts                              PricewaterhouseCoopers LLP
November 30, 1998

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
   <NUMBER> 06
   <NAME> LSIT CORE FIXED INCOME FUND
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          SEP-30-1998
<PERIOD-START>                             JAN-01-1998
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<INVESTMENTS-AT-VALUE>                      19,046,076
<RECEIVABLES>                                  278,701
<ASSETS-OTHER>                                   6,162
<OTHER-ITEMS-ASSETS>                            48,310
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<PAYABLE-FOR-SECURITIES>                             0
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<OTHER-ITEMS-LIABILITIES>                       38,496
<TOTAL-LIABILITIES>                             38,496
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<SHARES-COMMON-STOCK>                        1,683,156
<SHARES-COMMON-PRIOR>                        1,511,557
<ACCUMULATED-NII-CURRENT>                      838,191
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                        183,884
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                       722,373
<NET-ASSETS>                                19,340,756
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                              932,499
<OTHER-INCOME>                                       0
<EXPENSES-NET>                                 (90095)
<NET-INVESTMENT-INCOME>                        842,404
<REALIZED-GAINS-CURRENT>                       180,769
<APPREC-INCREASE-CURRENT>                      376,200
<NET-CHANGE-FROM-OPS>                        1,399,373
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                            0
<DISTRIBUTIONS-OF-GAINS>                         (811)
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<SHARES-REINVESTED>                                 73
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<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                       (287)
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<PER-SHARE-NAV-BEGIN>                            10.66
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<PER-SHARE-GAIN-APPREC>                            .33
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<PER-SHARE-DISTRIBUTIONS>                            0
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<EXPENSE-RATIO>                                    .65
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>

<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
   <NUMBER> 09
   <NAME> LSIT INTERMEDIATE DURATION FIXED INCOME FUND
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   OTHER
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<PERIOD-START>                             JAN-28-1998
<PERIOD-END>                               SEP-30-1998
<INVESTMENTS-AT-COST>                       11,021,836
<INVESTMENTS-AT-VALUE>                      10,817,373
<RECEIVABLES>                                  182,582
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                            90,008
<TOTAL-ASSETS>                              11,089,963
<PAYABLE-FOR-SECURITIES>                             0
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<OTHER-ITEMS-LIABILITIES>                       36,306
<TOTAL-LIABILITIES>                             36,306
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                    11,205,240
<SHARES-COMMON-STOCK>                        1,120,455
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<REALIZED-GAINS-CURRENT>                      (44,716)
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<GROSS-EXPENSE>                                 99,829
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<PER-SHARE-NAV-BEGIN>                            10.00
<PER-SHARE-NII>                                    .41
<PER-SHARE-GAIN-APPREC>                          (.22)
<PER-SHARE-DIVIDEND>                             (.32)
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<PER-SHARE-NAV-END>                               9.87
<EXPENSE-RATIO>                                    .55
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<TABLE> <S> <C>

<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
   <NUMBER> 05
   <NAME> LSIT CORE GROWTH FUND
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          SEP-30-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               SEP-30-1998
<INVESTMENTS-AT-COST>                       19,289,271   
<INVESTMENTS-AT-VALUE>                      21,205,424 
<RECEIVABLES>                                  155,548
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                            12,847
<TOTAL-ASSETS>                              21,373,819
<PAYABLE-FOR-SECURITIES>                       428,578
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<OTHER-ITEMS-LIABILITIES>                       35,469
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<PAID-IN-CAPITAL-COMMON>                    12,840,857
<SHARES-COMMON-STOCK>                        1,538,347
<SHARES-COMMON-PRIOR>                        3,143,589
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<ACCUMULATED-NET-GAINS>                      6,000,470
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                     1,916,141
<NET-ASSETS>                                20,909,772
<DIVIDEND-INCOME>                              209,405
<INTEREST-INCOME>                               76,421
<OTHER-INCOME>                                       0
<EXPENSES-NET>                               (133,507)
<NET-INVESTMENT-INCOME>                        152,319
<REALIZED-GAINS-CURRENT>                     6,023,380
<APPREC-INCREASE-CURRENT>                  (1,620,971)
<NET-CHANGE-FROM-OPS>                        4,554,728
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                            0
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<NUMBER-OF-SHARES-SOLD>                        146,126
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<NET-CHANGE-IN-ASSETS>                    (17,633,795)
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                    (22,925)
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<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                211,114
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<PER-SHARE-NAV-BEGIN>                            12.26
<PER-SHARE-NII>                                    .10
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<TABLE> <S> <C>

<PAGE>

<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
   <NUMBER> 07
   <NAME> LSIT HIGH YIELD FIXED INCOME FUND
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          SEP-30-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               SEP-30-1998
<INVESTMENTS-AT-COST>                       37,585,421
<INVESTMENTS-AT-VALUE>                      27,926,988
<RECEIVABLES>                                  905,051
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                            17,713
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<PAYABLE-FOR-SECURITIES>                             0
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<PAID-IN-CAPITAL-COMMON>                    34,967,994
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<OVERDISTRIBUTION-GAINS>                             0
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<DIVIDEND-INCOME>                              152,250
<INTEREST-INCOME>                            2,651,467 
<OTHER-INCOME>                                       0
<EXPENSES-NET>                               (183,825)
<NET-INVESTMENT-INCOME>                      2,619,892
<REALIZED-GAINS-CURRENT>                       813,298
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<DISTRIBUTIONS-OF-INCOME>                            0
<DISTRIBUTIONS-OF-GAINS>                     (281,055)
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<ACCUMULATED-NII-PRIOR>                            704
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<OVERDISTRIB-NII-PRIOR>                              0
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<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                275,335
<AVERAGE-NET-ASSETS>                        32,772,495
<PER-SHARE-NAV-BEGIN>                            10.04
<PER-SHARE-NII>                                    .77
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<PER-SHARE-DISTRIBUTIONS>                        (.09)
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</TABLE>

<TABLE> <S> <C>

<PAGE>

<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
   <NUMBER> 02
   <NAME> LSIT FIXED INCOME FUND
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          SEP-30-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               SEP-30-1998
<INVESTMENTS-AT-COST>                      260,121,137
<INVESTMENTS-AT-VALUE>                     244,502,292
<RECEIVABLES>                                5,799,359
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                            23,092
<TOTAL-ASSETS>                             250,324,743
<PAYABLE-FOR-SECURITIES>                     1,741,013
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                      255,132
<TOTAL-LIABILITIES>                          1,996,145
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                   247,703,228
<SHARES-COMMON-STOCK>                       19,912,166
<SHARES-COMMON-PRIOR>                       13,740,601
<ACCUMULATED-NII-CURRENT>                   11,377,041
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                      4,867,991
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                  (15,619,662)
<NET-ASSETS>                               248,328,598
<DIVIDEND-INCOME>                              176,009
<INTEREST-INCOME>                           12,241,287    
<OTHER-INCOME>                                       0
<EXPENSES-NET>                             (1,006,358)
<NET-INVESTMENT-INCOME>                     11,410,938 
<REALIZED-GAINS-CURRENT>                     4,856,929
<APPREC-INCREASE-CURRENT>                 (20,391,296)
<NET-CHANGE-FROM-OPS>                      (4,123,429)
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                            0
<DISTRIBUTIONS-OF-GAINS>                   (1,288,514)
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                      6,829,377
<NUMBER-OF-SHARES-REDEEMED>                  (755,557)
<SHARES-REINVESTED>                             97,745 
<NET-CHANGE-IN-ASSETS>                      75,280,522
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                    1,273,994
<OVERDISTRIB-NII-PRIOR>                        (8,315)        
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                          774,225
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                              1,058,302
<AVERAGE-NET-ASSETS>                       206,998,473
<PER-SHARE-NAV-BEGIN>                            12.59
<PER-SHARE-NII>                                    .57
<PER-SHARE-GAIN-APPREC>                          (.62)
<PER-SHARE-DIVIDEND>                                 0
<PER-SHARE-DISTRIBUTIONS>                        (.07)
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                              12.47
<EXPENSE-RATIO>                                    .65
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>

<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
   <NUMBER> 01
   <NAME> LSIT CORE GRADE FIXED INCOME FUND
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          SEP-30-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               SEP-30-1998
<INVESTMENTS-AT-COST>                      122,039,060
<INVESTMENTS-AT-VALUE>                     117,453,346
<RECEIVABLES>                                4,011,023
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                            23,503
<TOTAL-ASSETS>                             121,487,872
<PAYABLE-FOR-SECURITIES>                     2,318,126
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                       85,758
<TOTAL-LIABILITIES>                          2,403,884
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                   122,305,398
<SHARES-COMMON-STOCK>                       10,430,242
<SHARES-COMMON-PRIOR>                        6,879,092
<ACCUMULATED-NII-CURRENT>                      158,069
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                      1,205,817
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                   (4,585,296)
<NET-ASSETS>                               119,083,988  
<DIVIDEND-INCOME>                               69,187
<INTEREST-INCOME>                            5,504,375
<OTHER-INCOME>                                       0
<EXPENSES-NET>                               (414,118)
<NET-INVESTMENT-INCOME>                      5,159,444
<REALIZED-GAINS-CURRENT>                     1,166,768
<APPREC-INCREASE-CURRENT>                  (6,968,292)
<NET-CHANGE-FROM-OPS>                        (642,080)
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                  (5,325,638)
<DISTRIBUTIONS-OF-GAINS>                     (164,584)
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                      3,216,464
<NUMBER-OF-SHARES-REDEEMED>                   (41,234)
<SHARES-REINVESTED>                            375,920
<NET-CHANGE-IN-ASSETS>                      36,120,040
<ACCUMULATED-NII-PRIOR>                        166,580
<ACCUMULATED-GAINS-PRIOR>                      361,316
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                          301,182
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                491,144
<AVERAGE-NET-ASSETS>                       100,668,216
<PER-SHARE-NAV-BEGIN>                            12.06
<PER-SHARE-NII>                                    .61
<PER-SHARE-GAIN-APPREC>                          (.60)
<PER-SHARE-DIVIDEND>                             (.63)
<PER-SHARE-DISTRIBUTIONS>                        (.02)
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                              11.42
<EXPENSE-RATIO>                                    .55
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        


</TABLE>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 6
<CIK> 0000917469
<NAME> LOOMIS SAYLES INVESTMENT TRUST
<SERIES>
   <NUMBER> 03
   <NAME> LSIT CORE FIXED INCOME FUND
<MULTIPLIER> 1
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          SEP-30-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               SEP-30-1998
<INVESTMENTS-AT-COST>                       18,786,578
<INVESTMENTS-AT-VALUE>                      19,647,584
<RECEIVABLES>                                  304,242
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                            16,235
<TOTAL-ASSETS>                              19,968,061
<PAYABLE-FOR-SECURITIES>                       313,649
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                       36,295
<TOTAL-LIABILITIES>                            349,944
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                    18,759,855
<SHARES-COMMON-STOCK>                        1,852,362
<SHARES-COMMON-PRIOR>                        1,615,222
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                              0
<OVERDISTRIBUTION-GAINS>                       (2,744)
<ACCUM-APPREC-OR-DEPREC>                       861,006
<NET-ASSETS>                                19,618,117
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                              686,636
<OTHER-INCOME>                                       0
<EXPENSES-NET>                                (85,855)
<NET-INVESTMENT-INCOME>                        600,781
<REALIZED-GAINS-CURRENT>                        10,232
<APPREC-INCREASE-CURRENT>                      320,052
<NET-CHANGE-FROM-OPS>                          931,065
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                    (610,963)
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                        266,053
<NUMBER-OF-SHARES-REDEEMED>                   (39,014)
<SHARES-REINVESTED>                             10,101
<NET-CHANGE-IN-ASSETS>                       2,796,334
<ACCUMULATED-NII-PRIOR>                          6,408
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                    (12,369)
<GROSS-ADVISORY-FEES>                           66,039
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                175,861
<AVERAGE-NET-ASSETS>                        17,659,729
<PER-SHARE-NAV-BEGIN>                            10.41
<PER-SHARE-NII>                                    .35
<PER-SHARE-GAIN-APPREC>                            .19
<PER-SHARE-DIVIDEND>                             (.36)
<PER-SHARE-DISTRIBUTIONS>                            0
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                              10.59
<EXPENSE-RATIO>                                    .65
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>


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