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LOOMIS SAYLES INVESTMENT TRUST
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
One Financial Center
Boston, Massachusetts 02111
(888) 226-9699
PROSPECTUS
April 1, 1999
The Loomis Sayles Investment Trust (the "Trust") is a group of eight mutual
funds including the Loomis Sayles Small Company 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 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 April 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.
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TABLE OF CONTENTS
SUMMARY OF EXPENSES............................................ -3-
THE TRUST...................................................... -4-
INVESTMENT OBJECTIVE AND POLICIES.............................. -4-
MORE INFORMATION ABOUT THE FUND'S INVESTMENTS.................. -4-
THE FUND'S INVESTMENT ADVISER.................................. -8-
FUND EXPENSES.................................................. -9-
PORTFOLIO TRANSACTIONS......................................... -9-
HOW TO PURCHASE SHARES......................................... -9-
HOW TO REDEEM SHARES...........................................-10-
OTHER INFORMATION..............................................-10-
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES................-11-
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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 0.75%
12b-1 Fees none
Other Operating Expenses (after expense
limitation) 0.15%
Total Fund Operating Expenses (after expense
limitation) 0.90%
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 $9
Three Years $29
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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 capital growth from investments
in common stocks or their equivalent.
The Fund seeks to attain its objective by investing primarily in equity
securities of small, rapidly growing companies that Loomis Sayles believes have
the potential for accelerating earnings growth and rising profit margins.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of companies with market capitalizations that fall
within the capitalization range of the Russell 2000 Index and may invest up to
35% of its total assets in larger companies. Loomis Sayles seeks companies that
have distinctive products, technologies, or services, dynamic earnings growth,
prospects for a high level of profitability, and outstanding management.
Current income is not a consideration in selecting the Fund's investments. The
Fund may invest any portion of its assets in securities of Canadian issuers and
up to 20% of its total assets in securities of issuers headquartered outside the
United States or Canada. The Fund may also engage in foreign currency hedging
transactions, options and futures transactions, securities lending, real estate
investment trusts ("REITS") and Rule 144A securities, 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 acting as an underwriter;
(2) a restriction prohibiting the Fund from purchasing a security (other than
securities issued or guaranteed by the U.S. Government or its authorities or
instrumentalities "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; (4) a restriction
prohibiting the Fund from investing in oil, gas or other mineral leases, rights
or royalty contracts or in real estate, commodities or commodity contracts; (5)
a restriction prohibiting the Fund from making loans except to the extent
permitted under the Investment Company Act of 1940 (the "1940 Act"); and (6) a
restriction prohibiting the Fund from issuing senior securities. For additional
investment restrictions, see the Statement of Additional Information.
For temporary defensive purposes, the Fund may invest any portion of its
assets in fixed income securities, cash and any other securities deemed
appropriate by Loomis Sayles. 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.
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Equity Securities
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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
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The Fund will generally invest in the securities of companies with smaller
capitalizations. Investments in companies with relatively small capitalizations
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
capitalizations or broader market averages. The net asset value of funds that
invest in companies with small capitalizations therefore may fluctuate more
widely than market averages.
Real Estate Investment Trusts
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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 securities of larger capitalization
companies.
When-Issued Securities
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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
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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.
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Foreign Securities
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The Fund may invest in securities principally traded in foreign markets
("foreign securities"). The Fund may invest any portion of its assets in
securities of Canadian issuers, but will not purchase a foreign security other
than those of Canadian issuers if, as a result, the Fund's total holdings of
such 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. 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.
Foreign Currency Hedging Transactions
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The Fund may engage in foreign currency exchange transactions, in connection
with the purchase and sale of foreign securities, to protect the value of
specific portfolio positions or in anticipation of changes in relative values of
currencies in which current or future Fund portfolio holdings are denominated or
quoted. For example, to protect against a change in the foreign currency
exchange rate between the date on which a Fund contracts to purchase or sell a
security and the settlement date for the purchase or sale, or to "lock in" the
equivalent of a dividend or interest payment in another currency, a Fund might
purchase or sell a foreign currency on a spot (that is, cash) basis at the
prevailing spot rate. If conditions warrant, the Funds may also enter into
private contracts to purchase or sell foreign currencies at a future date
("forward contracts"). The Funds might also purchase exchange-listed and over-
the- counter call and put options on foreign currencies. Over-the-counter
currency options are generally less liquid than
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exchange-listed options, and will be treated as illiquid assets. The Fund may
not be able to dispose of over-the-counter options readily.
Foreign currency transactions involve costs and may result in losses.
Options and Futures Transactions
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The Fund may buy, sell or write options on securities, securities indexes,
currencies or futures contracts. The Fund may also buy and sell futures
contracts on securities, securities indexes or currencies. The Fund may engage
in these transactions either for the purpose of enhancing investment return, or
to hedge against changes in the value of other assets that the Fund owns or
intends to acquire. Options and futures fall into the broad category of
financial instruments known as "derivatives" and involve special risks. Use of
options or futures for other than hedging purposes may be considered a
speculative activity, involving greater risks than are involved in hedging.
Options can generally be classified as either "call" or "put" options. There
are two parties to a typical options transaction: the "writer" and the "buyer."
A call option gives the buyer the right to buy a security or other asset (such
as an amount of currency or a futures contract) from, and a put option gives the
buyer the right to sell a security or other asset to, the option writer at a
specified price, on or before a specified date. The buyer of an option pays a
premium when purchasing the option, which reduces the return on the underlying
security or other asset if the option is exercised, and results in a loss if the
option expires unexercised. The writer of an option receives a premium from
writing an option, which may increase its return if the option expires or is
closed out at a profit. If a Fund as the writer of an option is unable to close
out an unexpired option, it must continue to hold the underlying security or
other asset until the option expires, to "cover" its obligation under the
option.
A futures contract creates an obligation by the seller to deliver and the
buyer to take delivery of the type of instrument or cash at the time and in the
amount specified in the contract. Although many futures contracts call for the
delivery (or acceptance) of the specified instrument, futures are usually closed
out before the settlement date through the purchase (or sale) of a comparable
contract. If the price of the sale of the futures contract by a Fund exceeds (or
is less than) the price of the offsetting purchase, the Fund will realize a gain
(or loss). The value of options purchased or written by a Fund and futures
contracts held by a Fund may fluctuate based on a variety of market and economic
factors. In some cases, the fluctuations may offset (or be offset by) changes in
the value of securities held in a Fund's portfolio. All transactions in options
and futures involve the possible risk of loss to a Fund of all or a significant
part of the value of its investment. In some cases, the risk of loss may exceed
the amount of the Fund's investment. When a Fund writes a call option or sells a
futures contract without holding the underlying securities, currencies or
futures contracts, its potential loss is unlimited. A Fund will be required,
however, to set aside with its custodian bank liquid assets in amounts
sufficient at all times to satisfy its obligations under options and futures
contracts.
The successful use of options and futures will usually depend on Loomis
Sayles' ability to forecast stock market, currency or other financial market
movements correctly. A Fund's ability to hedge against adverse changes in the
value of securities held in its portfolio through options and futures also
depends on the degree of correlation between the changes in the value of futures
or options positions and changes in the values of the portfolio securities. The
successful use of futures and exchange traded options also depends on the
availability of a liquid secondary market to enable a Fund to close its
positions on a timely basis. There can be no assurance that such a market will
exist at any particular time. In the case of options that are not traded on an
exchange ("over-the-counter" options), a Fund is at risk that the other party to
the transaction will default on its obligations, or will not permit the Fund to
terminate the transaction before its scheduled maturity. As a result of these
characteristics, each Fund will treat most over-the-counter options (and the
assets it segregates to cover its obligations thereunder) as illiquid.
The options and futures markets of foreign countries are small compared to
those of the United States and consequently are characterized in most cases by
less liquidity than are the U.S. markets. In addition, foreign markets may be
subject to less detailed reporting requirements and regulatory controls than
U.S. markets. Furthermore, investments in options in foreign markets are
subject to many of the same risks as other foreign investments. See "Foreign
Securities" above.
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Repurchase Agreements
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The Fund may invest in repurchase agreements. In repurchase agreements, a
Fund buys securities from a seller, usually a bank or brokerage firm, with the
understanding that the seller will repurchase the securities at a higher price
at a later date. Such transactions afford an opportunity for a Fund to earn a
return on available cash at minimal market risk, although the Fund may be
subject to various delays and risks of loss if the seller is unable to meet its
obligations to repurchase.
Securities Lending
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The Fund may lend its portfolio securities to broker-dealers or other parties
under contracts calling for the deposit by the borrower with the Fund's
custodian of cash collateral equal to at least the market value of the
securities loaned, marked to market on a daily basis. The Fund will continue to
benefit from interest or dividends on the securities loaned and will also
receive interest through investment of the cash collateral in short-term liquid
investments. No loans will be made if, as a result, the aggregate amount of such
loans outstanding at any time would exceed 33 1/3% of the Fund's total assets
(taken at current value). Any voting rights, or rights to consent, relating to
securities loaned pass to the borrower. However, if a material event affecting
the investment occurs, such loans will be called so that the securities may be
voted by the Fund. The Fund pays various fees in connection with such loans,
including shipping fees and reasonable custodial or placement fees.
Securities loans must be fully collateralized at all times, but involve some
credit risk to the Fund if the borrower defaults on its obligation and the Fund
is delayed or prevented from recovering the collateral.
Year 2000
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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.
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Christopher R. Ely,Philip C. Fine and David L. Smith, Vice Presidents of
Loomis Sayles, have served as the portfolio managers, of the Small Company
Growth Fund since its commencement of operations.
FUND EXPENSES
The Fund pays Loomis Sayles a monthly investment advisory fee. This fee is
paid at the annual rate of 0.75% 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 the annual rate of 0.90% of
average daily 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. Although it is not possible to predict
the portfolio turnover rate with certainty, Loomis Sayles does not expect the
Fund's portfolio turnover rate to exceed 200% for its initial fiscal year.
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 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.
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Upon acceptance of your order, the Trust opens an account for you, applies
the payment to the purchase of full and fractional Fund shares and mails a
statement of the account confirming the transaction. After an account has been
established, you may send subsequent investments at any time.
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 eight 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.
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).
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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
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 the
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).
-11-
<PAGE>
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
s:\lsit\prosp&sa\1999\smcpgrpr.wpd
-12-
<PAGE>
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
April 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 Small Company Growth Fund, a series of Loomis Sayles Investment Trust,
dated April 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-
FOREIGN CURRENCY TRANSACTIONS............................................. -6-
OPTIONS................................................................... -7-
MANAGEMENT OF THE TRUST................................................... -9-
INVESTMENT ADVISORY AND OTHER SERVICES....................................-11-
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................-13-
DESCRIPTION OF THE TRUST..................................................-14-
HOW TO BUY SHARES.........................................................-16-
NET ASSET VALUE...........................................................-16-
REDEMPTIONS...............................................................-17-
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS...............-18-
CALCULATION OF TOTAL RETURN...............................................-20-
PERFORMANCE COMPARISONS...................................................-21-
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 Small Company
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 except to the extent permitted under the "1940 Act." (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.
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
-4-
<PAGE>
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).
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.
-5-
<PAGE>
FOREIGN CURRENCY TRANSACTIONS
- -----------------------------
The Fund may invest in securities of foreign issuers and may enter into
forward foreign currency exchange contracts, or buy or sell options on foreign
currencies, in order to protect against uncertainty in the level of future
foreign exchange rates. Since investment in securities of foreign issuers will
usually involve currencies of foreign countries, and since a Fund may
temporarily hold funds in bank deposits in foreign currencies during the course
of investment programs, the value of the assets of a Fund as measured in U.S.
dollars may be affected by changes in currency exchange rates and exchange
control regulations, and a Fund may incur costs in connection with conversion
between various currencies.
A Fund may enter into forward contracts under two circumstances. First,
when a Fund enters into a contract for the purchase or sale of a security
denominated or traded in a market in which settlement is made in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency involved in the underlying
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date on which the
investment is purchased or sold and the date on which payment is made or
received.
Second, when Loomis Sayles believes that the currency of a particular
country may suffer a substantial decline against another currency, it may enter
into a forward contract to sell, for a fixed amount of another currency, the
amount of the first currency approximating the value of some or all of the
Fund's portfolio investments denominated in the first currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in a currency will change as a consequence of market movements in the
value of those investments between the date the forward contract is entered into
and the date it matures.
The Fund generally will not enter into forward contracts with a term of
greater than one year.
Options on foreign currencies are similar to forward contracts, except that
one party to the option (the holder) is not contractually bound to buy or sell
the specified currency. Instead, the holder has discretion whether to "exercise"
the option and thereby require the other party to buy or sell the currency on
the terms specified in the option. Options transactions involve transaction
costs and, like forward contract transactions, involve the risk that the other
party may default on its obligations (if the options are not traded on an
established exchange) and the risk that expected movements in the relative value
of currencies may not occur, resulting in an imperfect hedge or a loss to the
Fund.
The Fund's ability to engage in transactions in currency forward contracts
and options may be limited by tax considerations.
-6-
<PAGE>
The Fund, in conjunction with its transactions in forward contracts,
options and futures, will maintain in a segregated account with its custodian
cash or certain liquid assets with a value, marked to market on a daily basis,
sufficient to satisfy the Fund's outstanding obligations under such contracts,
options and futures.
OPTIONS
- --------
As described in the Prospectus, the Fund, may for hedging purposes or to
enhance investment return, purchase and sell call and put options.
An option entitles the holder to receive (in the case of a call option) or
to sell (in the case of a put option) a particular security at a specified
exercise price. An "American style" option allows exercise of the option at any
time during the term of the option. A "European style" option allows an option
to be exercised only at the end of its term. Options may be traded on or off an
established securities exchange. If the holder of an option wishes to terminate
its position, it may seek to effect a closing sale transaction by selling an
option identical to the option previously purchased. The effect of the purchase
is that the previous option position will be canceled. A Fund will realize a
profit from closing out an option if the price received for selling the
offsetting position is more than the premium paid to purchase the option; the
Fund will realize a loss from closing out an option transaction if the price
received for selling the offsetting option is less than the premium paid to
purchase the option. The use of options involves risks. One risk arises because
of the imperfect correlation between movements in the price of options and
movements in the price of the securities that are the subject of the hedge. The
Fund's hedging strategies will not be fully effective if such imperfect
correlation occurs. Price movement correlation may be distorted by illiquidity
in the options markets and the participation of speculators in such markets. If
an insufficient number of contracts are traded, commercial users may not deal in
options because they do not want to assume the risk that they may not be able to
close out their positions within a reasonable amount of time. In such instances,
options market prices may be driven by different forces than those driving the
market in the underlying securities, and price spreads between these markets may
widen. The participation of speculators in the market enhances its liquidity.
Nonetheless, the trading activities of speculators in the options markets may
create temporary price distortions unrelated to the market in the underlying
securities.
An exchange-traded option may be closed out only on an exchange which
generally provides a liquid secondary market for an option of the same series.
If a liquid secondary market for an exchange-traded option does not exist, it
might not be possible to effect a closing transaction with respect to a
particular option, with the result that the Fund would have to exercise the
option in order to accomplish the desired hedge. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing
-7-
<PAGE>
Corporation or other clearing organization may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The successful use of options depends in part on the ability of Loomis
Sayles to forecast correctly the direction and extent of interest rate, stock
price or currency value movements within a given time frame. To the extent
interest rates, stock prices or currency values move in a direction opposite to
that anticipated, the Fund may realize a loss on the hedging transaction that is
not fully or partially offset by an increase in the value of portfolio
securities. In addition, whether or not interest rates or the relevant stock
price or relevant currency values move during the period that the Fund holds
options positions, the Fund will pay the cost of taking those positions (i.e.,
brokerage costs). As a result of these factors, the Fund's total return for such
period may be less than if it had not engaged in the hedging transaction.
An over-the-counter option (an option not traded on an established
exchange) may be closed out only with the other party to the original option
transaction. While the Fund will seek to enter into over-the-counter options
only with dealers who agree to or are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that the Fund will
be able to liquidate an over-the-counter option at a favorable price at any time
prior to its expiration. Accordingly, the Fund might have to exercise an over-
the-counter option it holds in order to achieve the intended hedge. Over-the-
counter options are not subject to the protections afforded purchasers of listed
options by the Options Clearing Corporation or other clearing organization.
The staff of the SEC has taken the position that over-the-counter options
should be treated as illiquid securities for purposes of each Fund's investment
restriction prohibiting it from investing more than 15% of its net assets in
illiquid securities. The Funds intend to comply with this position.
Income earned by a Fund from its hedging activities will be treated as
capital gain and, if not offset by net recognized capital losses incurred by the
Fund, will be distributed to shareholders in taxable distributions. Although
gain from options transactions may hedge against a decline in the value of a
Fund's portfolio securities, that gain, to the extent not offset by losses, will
be distributed in light of certain tax considerations and will constitute a
distribution of that portion of the value preserved against decline.
-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 (67) -- Trustee. 26 Dennett Road, Marblehead,
-------
Massachusetts.
Retired. Formerly, Vice President and Director of Fixed Income Research,
Loomis Sayles.
DANIEL J. FUSS (65) -- President. Executive Vice President and Director, Loomis
Sayles.
MARK W. HOLLAND (49) -- 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 (51) -- Executive Vice President. 465 First Street West,
Sonoma, California. President, Chairman, Director and Chief Executive Officer,
Loomis Sayles.
WILLIAM F. CAMP (37) -- Vice President. 1533 North Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles. Formerly, Portfolio Manager, Kmart
corporation.
CHRISTOPHER R. ELY (43) -- Vice President. Vice President, Loomis Sayles;
formerly Senior Vice President and portfolio manager, Keystone Investment
Management Company, Inc.
QUENTIN P. FAULKNER (60) -- Vice President. Vice President, Loomis Sayles.
PHILIP C. FINE (49) -- Vice President. Vice President, Loomis Sayles; formerly
Vice President and portfolio manager, Keystone Investment Management Company,
Inc.
KATHLEEN C. GAFFNEY (37) -- Vice President. Vice President, Loomis Sayles.
JEFFREY L. MEADE (48) -- Vice President. Chief Operating Officer, Executive
Vice President and Director, Loomis Sayles.
KENT P. NEWMARK (60) -- Vice President. 555 California Street, San Francisco,
California. Vice President, Loomis Sayles.
ROBERT K. PAYNE (56) -- Vice President. 555 California Street, San Francisco,
California. Vice President, Loomis Sayles.
-9-
<PAGE>
DAVID L. SMITH (39) -- Vice President. Vice President, Loomis Sayles; formerly
Vice President and portfolio manager, Keystone Investment Management Company,
Inc.
MARI J. SUGAHARA (34) -- Vice President. Vice President, Loomis Sayles.
FREDERICK E. SWEENEY, JR. (37) -- Vice President. Vice President, Loomis
Sayles. Formerly, Investment Consultant at Meketa Investment Group and Vice
President of New England Investment Associates.
ANTHONY J. WILKINS (56) -- Vice President. Vice President and Director, Loomis
Sayles.
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 Annual from Trust and Fund
from Trust Benefits Benefits Upon Complex Paid to
Accrued as Part Retirement Trustee
of Fund Expenses
- --------------------------------------------------------------------------------------------------------
Timothy J. Hunt, $10,000 $0 $0 $10,000
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>
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement. Loomis Sayles serves as investment adviser to the Fund
------------------
under an advisory agreement with the Trust dated March 26, 1999. 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 0.75% of the Fund's
average weekly net assets.
Under the advisory agreement, if the total ordinary business expenses of
the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or the Trust are
qualified for sale, Loomis Sayles shall pay such excess.
As described in the Prospectus, Loomis Sayles has voluntarily undertaken
for an indefinite period to limit the Fund's total operating expenses. These
arrangements may be modified or terminated by Loomis Sayles at any time, subject
to prior notice to shareholders.
The advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Trustees or by vote of a
majority of the outstanding voting securities of the Fund and (ii) by vote of a
majority of the Trustees who are not "interested persons" of the Trust or Loomis
Sayles, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the
advisory agreement must be approved by vote of a majority of the outstanding
voting securities of the Fund and by vote of a majority of the Trustees who are
not interested persons, cast in person at a meeting called for the purpose of
voting on such approval.
The advisory agreement may be terminated without penalty by vote of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice to Loomis Sayles, or by Loomis Sayles upon
ninety days' written notice to the Trust, and it terminates automatically in the
event of its assignment, as that term is defined in the 1940 Act. In addition,
the agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" or "Sayles" in the 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.
-11-
<PAGE>
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 Star Small Cap Fund, New
England Value Fund, New England Balanced Fund, New England International Equity
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 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
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<PAGE>
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.
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
-13-
<PAGE>
not be used with respect to the Fund. Receipt of services or products other
than research from brokers is not a factor in the selection of brokers.
DESCRIPTION OF THE TRUST
The Trust, registered with the SEC as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust (the "Declaration of Trust") dated December 23, 1993.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of
the Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of the Fund are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders. The Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets are segregated and are charged with the
expenses with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. While the expenses of the Trust are allocated to the separate
books of account of the Fund, certain expenses may be legally chargeable against
the assets of all series.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to issue shares of the Trust in one or more series, and to subdivide
any series of shares into various classes 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").
-14-
<PAGE>
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust or the Fund,
respectively. The Declaration of Trust further provides that the Trustees may
also terminate the Trust or the Fund upon written notice to the shareholders.
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 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
-15-
<PAGE>
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.
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."
-16-
<PAGE>
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 may 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
-17-
<PAGE>
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 Internal Revenue Code of 1986, as amended (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 securities, securities of other regulated investment companies,
and other securities that represent,
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<PAGE>
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 the Fund as deriving from net gains on securities held for more
than one year will be taxable to shareholders as long-term capital gains
(generally at a 20% rate for noncorporate shareholders), without regard to how
long a shareholder has held shares of the Fund.
Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses.
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.
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<PAGE>
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.
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
-20-
<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 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
-21-
<PAGE>
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.
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.
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.
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.
-22-
<PAGE>
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"). The S&P
------------------------------------------------------------------
500 is a market value-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on the
New York Stock Exchange, although the common stocks of a few companies listed on
the American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40 financial
services concerns. The S&P 500 represents about 80% of the market value of all
issues traded on the New York Stock Exchange. The S&P 500 is the most common
index for the overall U.S. stock market.
From time to time, articles about the Fund regarding performance, rankings
and other characteristics of the Fund may appear in publications including, but
not limited to, the publications included in Appendix A. In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including the Fund. References to or reprints of such articles
may be used in the Fund's promotional literature. References to articles
regarding personnel of 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.
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<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CDA Investment Technologies
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money Magazine
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
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New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO
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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.
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. 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.
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