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Loomis Sayles Funds Ii

Filed: 4 Mar 19, 2:26pm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORMN-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number:811-06241

 

 

Loomis Sayles Funds II

(Exact name of Registrant as specified in charter)

 

 

888 Boylston Street, Suite 800 Boston, Massachusetts 02199-8197

(Address of principal executive offices) (Zip code)

 

 

Russell L. Kane, Esq.

Natixis Distribution, L.P.

888 Boylston Street, Suite 800

Boston, Massachusetts 02199-8197

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (617)449-2822

Date of fiscal year end: December 31

Date of reporting period: December 31, 2018

 

 

 


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Item 1. Reports to Stockholders.

The Registrant’s annual report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940 is as follows:


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LOGO

 

LOGO

 

Annual Report

December 31, 2018

Loomis Sayles High Income Fund

Loomis Sayles Investment Grade Bond Fund

 

 

Table of Contents

Portfolio Review  1 
Portfolio of Investments  12 
Financial Statements  39 
Notes to Financial Statements  52 

 

IMPORTANT NOTICE TO SHAREHOLDERS

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you wish to continue receiving paper copies of your shareholder reports after January 1, 2021, you can inform the Fund at any time by calling 1-800-225-5478. If you hold your account with a financial intermediary and you wish to continue receiving paper copies after January 1, 2021, you should call your financial intermediary directly. Paper copies are provided free of charge, and your election to receive reports in paper will apply to all funds held with the Natixis Funds complex. If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You currently may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically at www.icsdelivery.com/natixisfunds.


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LOOMIS SAYLES HIGH INCOME FUND

 

Managers Symbols
Matthew J. Eagan, CFA® Class A    NEFHX
Elaine M. Stokes Class C    NEHCX
Brian P. Kennedy Class N    LSHNX
Todd P. Vandam, CFA® Class Y    NEHYX
Loomis, Sayles & Company, L.P. 

 

 

Investment Goal

The Fund seeks high current income plus the opportunity for capital appreciation to produce a high total return.

 

 

Market Conditions

The broad market environment experienced a significant shift in the final three months of the year. While the markets had previously been riding a wave of optimism stemming from robust economic growth and rising corporate earnings, market sentiment turned sharply lower in the fourth quarter. Concerns about US trade policy and weaker economic conditions overseas sparked a downturn in global equities and other asset classes seen as having higher risk. US core personal consumption expenditures (PCE) inflation ticked below 2% in the fourth quarter, which marked a decrease from its mid-year high. While the US Federal Reserve (Fed) raised rates by a quarter point at its December meeting, slowing growth and commentary from Fed officials fueled expectations that the cycle of rate increases was nearing its conclusion.

US Treasuries performed well and finished as one of the few major asset categories to post a positive return. Government bonds were aided by weaker economic data and a “flight to quality” that benefited lower-risk investments. Long-term issues, which are less sensitive to Fed policy than shorter-term bonds, delivered the strongest returns.

Investment grade corporates underperformed Treasuries but strongly outpaced high yield issues. Although yield spreads over government bonds increased, higher-rated securities benefited from their above-average credit quality and greater sensitivity to the direction of Treasury yields.

High yield bonds performed poorly and lagged investment-grade issues by a sizable margin. A large portion of the selloff occurred in December amid the downturn in equities and the broader weakness in higher-risk assets. High yield was pressured by the combination of slower growth, falling oil prices and the evaporation of investors’ risk appetites.

Performance Results1

For the three months ended December 31, 2018, Class Y shares of the Loomis Sayles High Income Fund returned -4.49%. The Fund held up better than its benchmark, the Bloomberg Barclays U.S. Corporate High Yield Bond Index, which returned -4.53%.

 

1 

Effective November 1, 2018, the Board of Trustees approved a change in the fiscal year-end of the Fund from September 30 to December 31. The Fund performance provided in this section reflects the three-month fiscal period ended December 31, 2018.

 

1  |


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Explanation of Fund Performance

An overweight allocation to emerging market credit added to relative performance. High yield corporate credit positively impacted relative return as well aided both by our longer duration positioning versus the benchmark and selected names within the energy space.Non-US-dollar securities, specifically those denominated in Argentine peso, helped performance during the period. Exposure to securitized assets including asset-backed securities andnon-agency commercial mortgage-backed securities also contributed positively to relative return.

Convertible securities acted as a constraint on relative performance largely due to holdings in selected energy, consumernon-cyclical and communications names. An allocation to equities reduced the fund’s overall performance, led by a position in Whiting Petroleum.

Outlook

Driven by market volatility, Fed policy and a fragile geopolitical environment, our outlook is evolving. While the US economy has experienced positive growth and strong employment, business uncertainty is rising and the pace of growth is slowing at the periphery. Recent growth and strong employment have generated some wage pressures, but inflation still appears contained and the dramatic move in oil should remove some inflationary pressures. Fed policy has been under pressure and the move lower in interest rates has been dramatic. Markets are appearing to price in no further rate hikes, but instead, the possibility of a rate cut. We believe market volatility and lower growth expectations may cause the Fed to pause; we expect one more rate hike (at most) in 2019.

Despite the volatility, we do believe the US economy is strong and we are not in “the cycle is turning” camp. We believe a fair amount of slowing growth is due to the inventory cycle and see the potential for some pickup in growth in the second half. Given the move down in US interest rates, we remain cautious about taking on more interest rate risk at present levels. However, our forward-looking view is that rates will be lower for this cycle. Geopolitical and political risks are rising, and outcomes from trade negotiations, actual Fed policy and developments abroad could have meaningful impacts on forward yield curve moves.

As we enter 2019, our strategy is to maintain a higher quality bias within credit markets as a whole, given the aging of the credit cycle.1 We continue to favor sectors that are exhibiting credit improvement, such as banking, and those with defensive characteristics, such as telecommunications and cable. We see more opportunity with the recent selloff in oil and have been selectively adding. We are limiting our exposure to industries with more challenging business trends, such as retail and home construction.

We believe opportunities in the US high yield market have increased and long-term value in certain areas is more attractive: Spreads have widened over 200 basis points in the past three months to more than 500 basis points, while market yield hovers at or above 8%. Historically, this is a material move. The fundamentals appear healthy and new issuance has declined dramatically, helping give support to the market. We still do not anticipate a large increase in defaults and the maturity wall remains pushed out until 2022. However, growth concerns warrant some increase in default risk.

 

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LOOMIS SAYLES HIGH INCOME FUND

 

In both investment grade and high yield markets, liquidity has been choppy. We remain very focused on liquidity conditions and have been actively buying into select opportunities.

A key risk to our outlook is the health of the global economy and markets outside of the United States, particularly Europe and parts of Asia, which have already experienced slowing growth. China is likely the most important economy to watch, given its large contribution to global growth. A negative outcome from trade policy discussions has the potential to significantly weaken risk appetite and accelerate an economic slowdown. Conversely, an agreement on trade could lead to a meaningful market recovery. As we enter the new year, we continue to favor an allocation to selected higher quality US investment grade and below investment grade bonds with an emphasis on solid fundamentals, attractive yield and liquidity.

 

1 

A credit cycle is a cyclical pattern that follows credit availability and corporate health.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares3

December 31, 2008 through December 31, 2018

 

LOGO

 

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Average Annual Total Returns — December 31, 20183

 

       
   

3 Months

 

  

1 Year

 

  

5 Years

 

  

10 Years

 

  

Life of
Class N

 

  Expense Ratios4 
 Gross  Net 
   
Class Y (Inception 2/29/08)        
NAV  -4.49  -3.21  3.31  9.70    0.90  0.80
   
Class A (Inception 2/22/84)        
NAV  -4.54   -3.45   3.04   9.43      1.15   1.05 
With 4.25% Maximum Sales Charge  -8.63   -7.51   2.12   8.96       
   
Class C (Inception 3/2/98)        
NAV  -4.95   -4.41   2.25   8.59      1.90   1.80 
With CDSC1  -5.89   -5.33   2.25   8.59       
   
Class N (Inception 11/30/16)        
NAV  -4.47   -3.15         2.91   31.73   0.75 
  
Comparative Performance        
Bloomberg Barclays U.S. Corporate High-Yield Bond Index2  -4.53   -2.08   3.83   11.12   3.40         

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Class C shares performance assumes a 1% CDSC applied when you sell shares within one year of purchase.

 

2

The Bloomberg Barclays U.S. Corporate High-Yield Bond Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB /BB or below, excluding emerging market debt. The Bloomberg Barclays U.S. Corporate High-Yield Bond Index was created in 1986, with history backfilled to July 1, 1983, and rolls up into the Bloomberg Barclays U.S. Universal and Global High-Yield Indices.

 

3

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

4

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 1/31/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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LOOMIS SAYLES INVESTMENT GRADE BOND FUND

 

Managers    Symbols  
Matthew J. Eagan, CFA®    Class A  LIGRX
Brian P. Kennedy    Class C  LGBCX
Elaine M. Stokes    Class N  LGBNX
Loomis, Sayles & Company, L.P.    Class Y  LSIIX
    Admin Class  LIGAX

 

 

Investment Goal

The Fund seeks high total investment return through a combination of current income and capital appreciation.

 

 

Market Conditions

The broad market environment experienced a significant shift in the final three months of the year. While the markets had previously been riding a wave of optimism stemming from robust economic growth and rising corporate earnings, market sentiment turned sharply lower in the fourth quarter. Concerns about US trade policy and weaker economic conditions overseas sparked a downturn in global equities and other asset classes seen as having higher risk. US core personal consumption expenditures (PCE) inflation ticked below 2% in the fourth quarter, which marked a decrease from its mid-year high. While the US Federal Reserve (Fed) raised rates by a quarter point at its December meeting, slowing growth and commentary from Fed officials fueled expectations that the cycle of rate increases was nearing its conclusion.

US Treasuries performed well and finished as one of the few major asset categories to post a positive return. Government bonds were aided by weaker economic data and a “flight to quality” that benefited lower-risk investments. Long-term issues, which are less sensitive to Fed policy than shorter-term bonds, delivered the strongest returns.

Investment grade corporates underperformed Treasuries but strongly outpaced high yield issues. Although yield spreads over government bonds increased, higher-rated securities benefited from their above-average credit quality and greater sensitivity to the direction of Treasury yields.

High yield bonds performed poorly and lagged investment-grade issues by a sizable margin. A large portion of the selloff occurred in December amid the downturn in equities and the broader weakness in higher-risk assets. High yield was pressured by the combination of slower growth, falling oil prices and the evaporation of investors’ risk appetites.

Performance Results1 2

For the three months ended December 31, 2018, Class Y shares of the Loomis Sayles Investment Grade Bond Fund returned-0.59%. The Fund underperformed its benchmark, the Bloomberg Barclays U.S. Government/Credit Bond Index, which returned 1.46%.

 

1 

Effective November 1, 2018, the Board of Trustees approved a change in the fiscalyear-end of the Fund from September 30 to December 31. The Fund performance provided in this section reflects the three-month fiscal period ended December 31, 2018.

 

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Explanation of Fund Performance

Exposure tonon-US-dollar-denominated issues had a negative impact on relative return, with Mexican peso holdings as the worst performers for the period. An allocation to high yield corporate credit also detracted from relative performance, largely due to selected finance companies, banking and energy names.

An underweight allocation versus the benchmark in US Treasuries was a laggard for relative return as well. Though security selection within investment grade corporate credit was modestly helpful, this was outweighed by our shorter-than-benchmark duration positioning in the space.

Outlook

Driven by market volatility, Fed policy and a fragile geopolitical environment, our outlook is evolving. While the US economy has experienced positive growth and strong employment, business uncertainty is rising and the pace of growth is slowing at the periphery. Recent growth and strong employment have generated some wage pressures, but inflation still appears contained and the dramatic move in oil should remove some inflationary pressures. Fed policy has been under pressure and the move lower in interest rates has been dramatic. Markets are appearing to price in no further rate hikes, but instead, the possibility of a rate cut. We believe market volatility and lower growth expectations may cause the Fed to pause; we expect one more rate hike (at most) in 2019.

Despite the volatility, we do believe the US economy is strong and we are not in “the cycle is turning” camp. We believe a fair amount of slowing growth is due to the inventory cycle and see the potential for some pickup in growth in the second half. Given the move down in US interest rates, we remain cautious about taking on more interest rate risk at present levels. However, our forward-looking view is that rates will be lower for this cycle. Geopolitical and political risks are rising, and outcomes from trade negotiations, actual Fed policy and developments abroad could have meaningful impacts on forward yield curve moves.

As we enter 2019, our strategy is to maintain a higher quality bias within credit markets as a whole, given the aging of the credit cycle.1 We continue to favor sectors that are exhibiting credit improvement, such as banking, and those with defensive characteristics, such as telecommunications and cable. We see more opportunity with the recent selloff in oil and have been selectively adding. We are limiting our exposure to industries with more challenging business trends, such as retail and home construction.

We believe opportunities in the US high yield market have increased and long-term value in certain areas is more attractive: Spreads have widened over 200 basis points in the past three months to more than 500 basis points, while market yield hovers at or above 8%. Historically, this is a material move. The fundamentals appear healthy and new issuance has declined dramatically, helping give support to the market. We still do not anticipate a large increase in defaults and the maturity wall remains pushed out until 2022. However, growth concerns warrant some increase in default risk.

In both investment grade and high yield markets, liquidity has been choppy. We remain very focused on liquidity conditions and have been actively buying into select opportunities.

 

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LOOMIS SAYLES INVESTMENT GRADE BOND FUND

 

A key risk to our outlook is the health of the global economy and markets outside of the United States, particularly Europe and parts of Asia, which have already experienced slowing growth. China is likely the most important economy to watch, given its large contribution to global growth. A negative outcome from trade policy discussions has the potential to significantly weaken risk appetite and accelerate an economic slowdown. Conversely, an agreement on trade could lead to a meaningful market recovery. As we enter the new year, we continue to favor an allocation to selected higher quality US investment grade and below investment grade bonds with an emphasis on solid fundamentals, attractive yield and liquidity.

 

1 

A credit cycle is a cyclical pattern that follows credit availability and corporate health.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares4

December 31, 2008 through December 31, 2018

 

 

LOGO

 

 

7  |


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Average Annual Total Returns — December 31, 20184

 

       
   

3 Months

 

  

1 Year

 

  

5 Years

 

  

10 Years

 

  

Life of
Class N

 

  Expense Ratios5 
 

Gross

  

Net

 
   
Class Y (Inception 12/31/96)        
NAV  -0.59  -0.32  2.41  6.69    0.57  0.53
   
Class A (Inception 12/31/96)        
NAV  -0.66   -0.64   2.15   6.42      0.82   0.78 
With 4.25% Maximum Sales Charge  -4.90   -4.86   1.27   5.96       
   
Class C (Inception 9/12/03)        
NAV  -0.86   -1.37   1.39   5.63      1.57   1.53 
With CDSC2  -1.84   -2.34   1.39   5.63       
   
Class N (Inception 2/1/13)        
NAV  -0.58   -0.35   2.52      2.23   0.48   0.48 
   
Admin Class (Inception 2/1/10)1        
NAV  -0.63   -0.72   1.94   6.15      1.03   1.03 
  
Comparative Performance        
Bloomberg Barclays U.S. Government/Credit Bond Index3  1.46   -0.42   2.53   3.46   1.89         

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Prior to the inception of Admin Class shares (2/1/10), performance is that of Class A shares, restated to reflect the higher net expenses of Admin Class shares.

 

2

Performance for Class C shares assumes a 1% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

3

The Bloomberg Barclays U.S. Government/Credit Bond Index is the non-securitized component of the U.S. Aggregate Index and was the first macro index launched by Barclays Capital. The U.S. Government/Credit Bond Index includes Treasuries (i.e., public obligations of the U.S. Treasury that have remaining maturities of more than one year), government-related issues (i.e., agency, sovereign, supranational, and local authority debt), and corporates. The U.S. Government/Credit Bond Index was launched on January 1, 1979, with index history backfilled to 1973, and is a subset of the U.S. Aggregate Index.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 1/31/20. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 5 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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ADDITIONAL INFORMATION

 

The views expressed in this report reflect those of the portfolio managers as of the dates indicated. The managers’ views are subject to change at any time without notice based on changes in market or other conditions. References to specific securities or industries should not be regarded as investment advice. Because the Funds are actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned.

All investing involves risk, including the risk of loss. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

ADDITIONAL INDEX INFORMATION

This document may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis Affiliates”) and does not sponsor, endorse or participate in the provision of any Natixis Affiliates services, funds or other financial products.

The index information contained herein is derived from third parties and is provided on an “as is” basis. The user of this information assumes the entire risk of use of this information. Each of the third party entities involved in compiling, computing or creating index information disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to such information.

PROXY VOTING INFORMATION

A description of the Natixis Funds’ proxy voting policies and procedures is available without charge, upon request, by calling Natixis Funds at 800-225-5478; on the Natixis Funds’ website at im.natixis.com; and on the Securities and Exchange Commission’s (“SEC’s”) website at www.sec.gov. Information regarding how the funds voted proxies relating to portfolio securities the most recent 12-month period ended June 30 is available from the Natixis Funds’ website and the SEC’s website.

QUARTERLY PORTFOLIO SCHEDULES

The Natixis Funds file complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

 

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UNDERSTANDING FUND EXPENSES

As a mutual fund shareholder, you incur different costs: transaction costs, including sales charges (loads) on purchases and contingent deferred sales charges on redemptions, and ongoing costs, including management fees, distribution and/or service fees (12b-1 fees), and other fund expenses. Certain exemptions may apply. These costs are described in more detail in the Funds’ prospectuses. The following examples are intended to help you understand the ongoing costs of investing in the Funds and help you compare these with the ongoing costs of investing in other mutual funds.

The first line in the table of each class of Fund shares shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2018 through December 31, 2018. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example $8,600 account value divided by $1,000 = 8.6) and multiply the result by the number in the Expenses Paid During Period column as shown below for your class.

The second line in the table of each class of Fund shares provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs, such as sales charges. Therefore, the second line in the table of each fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. If transaction costs were included, total costs would be higher.

 

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LOOMIS SAYLES HIGH INCOME FUND BEGINNING
ACCOUNT VALUE
7/1/2018
  ENDING
ACCOUNT VALUE
12/31/2018
  EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018
 
Class A    
Actual  $1,000.00   $970.70   $5.22 
Hypothetical (5% return before expenses)  $1,000.00   $1,019.91   $5.35 
Class C    
Actual  $1,000.00   $967.00   $8.92 
Hypothetical (5% return before expenses)  $1,000.00   $1,016.13   $9.15 
Class N    
Actual  $1,000.00   $974.50   $3.73 
Hypothetical (5% return before expenses)  $1,000.00   $1,021.43   $3.82 
Class Y    
Actual  $1,000.00   $971.90   $3.98 
Hypothetical (5% return before expenses)  $1,000.00   $1,021.17   $4.08 

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.05%, 1.80%, 0.75% and 0.80% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

LOOMIS SAYLES INVESTMENT GRADE
BOND FUND
 BEGINNING
ACCOUNT VALUE
7/1/2018
  ENDING
ACCOUNT VALUE
12/31/2018
  EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018
 
Class A    
Actual  $1,000.00   $1,002.50   $3.94 
Hypothetical (5% return before expenses)  $1,000.00   $1,021.27   $3.97 
Class C    
Actual  $1,000.00   $998.00   $7.71 
Hypothetical (5% return before expenses)  $1,000.00   $1,017.49   $7.78 
Class N    
Actual  $1,000.00   $1,003.80   $2.42 
Hypothetical (5% return before expenses)  $1,000.00   $1,022.79   $2.45 
Class Y    
Actual  $1,000.00   $1,003.60   $2.68 
Hypothetical (5% return before expenses)  $1,000.00   $1,022.53   $2.70 
Admin Class    
Actual  $1,000.00   $1,001.10   $5.20 
Hypothetical (5% return before expenses)  $1,000.00   $1,020.01   $5.24 

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 0.78%, 1.53%, 0.48%, 0.53% and 1.03% for Class A, C, N, Y and Admin Class, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund

 

Principal
Amount
   Description  Value (†) 
 Bonds and Notes — 90.8% of Net Assets 
 Non-Convertible Bonds — 80.9% 
  ABS Home Equity — 1.2%

 

$82,604   Banc of America Alternative Loan Trust, Series2003-8, Class 1CB1, 5.500%, 10/25/2033  $84,287 
 87,146   Banc of America Funding Trust, Series2005-7, Class 3A1, 5.750%, 11/25/2035   91,858 
 61,178   Banc of America Funding Trust, Series2007-4, Class 5A1, 5.500%, 11/25/2034   60,352 
 751   Countrywide Home Loan Mortgage Pass Through Trust, Series 2005-HYB7, Class 2A, 4.383%, 11/20/2035(a)(b)(c)   574 
 185,855   DSLA Mortgage Loan Trust, Series2005-AR5, Class 2A1A,1-month LIBOR + 0.330%, 2.800%, 9/19/2045(d)   151,084 
 305,000   Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2015-DNA1, Class M3,1-month LIBOR + 3.300%, 5.806%, 10/25/2027(d)(e)   330,846 
 95,960 �� GMAC Mortgage Corp. Loan Trust, Series2005-AR4, Class 3A1, 4.268%, 7/19/2035(b)   93,128 
 150,000   Home Partners of America Trust, Series2016-2, Class E,
1-month LIBOR + 3.780%, 6.235%, 10/17/2033, 144A(d)
   150,396 
 155,000   Home Partners of America Trust, Series2016-2, Class F,
1-month LIBOR + 4.700%, 7.155%, 10/17/2033, 144A(d)
   155,000 
 214,901   MASTR Adjustable Rate Mortgages Trust, Series2005-2, Class 3A1, 3.987%, 3/25/2035(b)   209,792 
 223,825   MASTR Adjustable Rate Mortgages Trust, Series2005-2, Class 4A1, 3.546%, 3/25/2035(b)   202,249 
 100,000   RCO Mortgage LLC, Series2017-1, Class A2, 5.125%, 8/25/2022, 144A(b)   100,632 
    

 

 

 
     1,630,198 
    

 

 

 
  ABS Other — 0.3%

 

 186,325   AIM Aviation Finance Ltd., Series2015-1A, Class B1,
5.072%, 2/15/2040, 144A(b)
   186,165 
 233,759   Wave LLC, Series2017-1A, Class B, 5.682%, 11/15/2042, 144A   242,651 
    

 

 

 
     428,816 
    

 

 

 
  Aerospace & Defense — 1.5%

 

 638,000   Leonardo U.S. Holdings, Inc., 6.250%, 1/15/2040, 144A   595,171 
 383,000   Leonardo U.S. Holdings, Inc., 7.375%, 7/15/2039, 144A   402,150 
 200,000   TransDigm UK Holdings PLC, 6.875%, 5/15/2026, 144A   190,500 
 845,000   TransDigm, Inc., 6.500%, 7/15/2024   821,763 
    

 

 

 
     2,009,584 
    

 

 

 
  Airlines — 0.4%

 

 535,000   Latam Finance Ltd., 6.875%, 4/11/2024, 144A   526,846 
 23,236   Virgin Australia Pass Through Certificates, Series2013-1B,
6.000%, 4/23/2022, 144A
   23,558 
    

 

 

 
     550,404 
    

 

 

 

 

See accompanying notes to financial statements.

 

|  12


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Automotive — 1.6%

 

$195,000   Allison Transmission, Inc., 5.000%, 10/01/2024, 144A  $187,200 
 285,000   Dana Financing Luxembourg S.a.r.l., 5.750%, 4/15/2025, 144A   265,762 
 465,000   Delphi Technologies PLC, 5.000%, 10/01/2025, 144A   390,600 
 115,000   Goodyear Tire & Rubber Co. (The), 5.000%, 5/31/2026   103,500 
 880,000   IHO Verwaltungs GmbH, 5.250% PIK, 4.500% Cash, 9/15/2023, 144A(f)   805,200 
 420,000   Midas Intermediate Holdco II LLC/Midas Intermediate Holdco II Finance, Inc., 7.875%, 10/01/2022, 144A   382,200 
    

 

 

 
     2,134,462 
    

 

 

 
  Banking — 3.1%

 

 1,730,000   Ally Financial, Inc., 4.625%, 3/30/2025   1,675,937 
 485,000   Ally Financial, Inc., 5.750%, 11/20/2025   482,575 
 850,000   Barclays PLC, 5.200%, 5/12/2026(e)   814,795 
 425,000   Deutsche Bank AG, (fixed rate to 12/01/2027, variable rate thereafter), 4.875%, 12/01/2032   330,455 
 470,000   Intesa Sanpaolo SpA, 5.017%, 6/26/2024, 144A   426,235 
 495,000   Intesa Sanpaolo SpA, 5.710%, 1/15/2026, 144A   453,755 
    

 

 

 
     4,183,752 
    

 

 

 
  Brokerage — 0.4%

 

 535,000   Jefferies Finance LLC/JFINCo-Issuer Corp., 6.875%, 4/15/2022, 144A   520,288 
    

 

 

 
  Building Materials — 2.8%

 

 610,000   Beacon Roofing Supply, Inc., 4.875%, 11/01/2025, 144A   536,037 
 230,000   Cemex SAB de CV, 5.700%, 1/11/2025, 144A   220,515 
 350,000   Cemex SAB de CV, 7.750%, 4/16/2026, 144A   367,938 
 420,000   James Hardie International Finance Ltd., 4.750%, 1/15/2025, 144A   382,200 
 445,000   James Hardie International Finance Ltd., 5.000%, 1/15/2028, 144A   380,475 
 360,000   Jeld-Wen, Inc., 4.625%, 12/15/2025, 144A   315,000 
 160,000   Jeld-Wen, Inc., 4.875%, 12/15/2027, 144A   135,200 
 420,000   Summit Materials LLC / Summit Materials Finance Corp., 6.125%, 7/15/2023   415,800 
 1,120,000   U.S. Concrete, Inc., 6.375%, 6/01/2024   1,030,400 
    

 

 

 
     3,783,565 
    

 

 

 
  Cable Satellite — 6.9%

 

 795,000   Altice Financing S.A., 6.625%, 2/15/2023, 144A   763,200 
 475,000   CCO Holdings LLC/CCO Holdings Capital Corp., 5.125%, 2/15/2023   463,125 
 625,000   CCO Holdings LLC/CCO Holdings Capital Corp., 5.125%, 5/01/2023, 144A   607,813 
 865,000   CCO Holdings LLC/CCO Holdings Capital Corp., 5.750%, 2/15/2026, 144A   847,700 
 1,360,000   CSC Holdings LLC, 5.500%, 4/15/2027, 144A   1,264,800 
 355,000   Sirius XM Radio, Inc., 5.000%, 8/01/2027, 144A   324,381 
 800,000   Telenet Finance Luxembourg Notes S.a.r.l., 5.500%, 3/01/2028, 144A   725,208 
 1,485,000   Unitymedia GmbH, 6.125%, 1/15/2025, 144A   1,492,276 
 265,000   Virgin Media Finance PLC, 6.000%, 10/15/2024, 144A   254,533 
 375,000   Virgin Media Secured Finance PLC, 5.500%, 1/15/2025, 144A   369,614 
 2,570,000   Ziggo BV, 5.500%, 1/15/2027, 144A   2,300,150 
    

 

 

 
     9,412,800 
    

 

 

 

 

See accompanying notes to financial statements.

 

13  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Chemicals — 1.6%

 

$1,510,000   Hercules LLC, 6.500%, 6/30/2029  $1,506,225 
 420,000   Hexion, Inc., 6.625%, 4/15/2020   334,950 
 70,000   Hexion, Inc., 10.375%, 2/01/2022, 144A   55,825 
 245,000   SASOL Financing USA LLC, 5.875%, 3/27/2024   244,483 
    

 

 

 
     2,141,483 
    

 

 

 
  Construction Machinery — 1.0%

 

 615,000   United Rentals North America, Inc., 4.625%, 10/15/2025   548,887 
 15,000   United Rentals North America, Inc., 5.500%, 5/15/2027   13,913 
 800,000   United Rentals North America, Inc., 5.750%, 11/15/2024   770,000 
    

 

 

 
     1,332,800 
    

 

 

 
  Consumer Cyclical Services — 0.2%

 

 350,000   ServiceMaster Co. LLC (The), 7.450%, 8/15/2027   357,000 
    

 

 

 
  Consumer Products — 0.5%

 

 790,000   Coty, Inc., 6.500%, 4/15/2026, 144A   679,400 
    

 

 

 
  Electric — 1.7%

 

 125,000   AES Corp. (The), 5.125%, 9/01/2027   120,000 
 479,000   AES Corp. (The), 5.500%, 4/15/2025   476,533 
 150,000   AES Corp. (The), 6.000%, 5/15/2026   152,250 
 1,502,000   Enel SpA, (fixed rate to 9/24/2023, variable rate thereafter),
8.750%, 9/24/2073, 144A
   1,532,040 
    

 

 

 
     2,280,823 
    

 

 

 
  Environmental — 0.1%

 

 100,000   GFL Environmental, Inc., 5.625%, 5/01/2022, 144A   92,250 
    

 

 

 
  Finance Companies — 4.6%

 

 120,000   CIT Group, Inc., 4.125%, 3/09/2021   118,200 
 120,000   iStar, Inc., 4.625%, 9/15/2020   117,000 
 395,000   iStar, Inc., 5.250%, 9/15/2022   369,285 
 800,000   iStar, Inc., 6.500%, 7/01/2021   792,000 
 720,000   Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp., 5.250%, 10/01/2025, 144A   642,600 
 255,000   Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp., 5.875%, 8/01/2021, 144A   254,363 
 820,000   Navient Corp., 6.500%, 6/15/2022   764,650 
 315,000   Provident Funding Associates LP/PFG Finance Corp., 6.375%, 6/15/2025, 144A   283,500 
 1,305,000   Quicken Loans, Inc., 5.250%, 1/15/2028, 144A   1,154,925 
 710,000   Quicken Loans, Inc., 5.750%, 5/01/2025, 144A   663,850 
 185,000   Springleaf Finance Corp., 6.875%, 3/15/2025   165,575 
 700,000   Springleaf Finance Corp., 7.125%, 3/15/2026   624,750 
 405,000   Unifin Financiera SAB de CV SOFOM ENR, 7.250%, 9/27/2023, 144A   373,681 
    

 

 

 
     6,324,379 
    

 

 

 
  Financial Other — 0.8%

 

 180,000   Icahn Enterprises LP/Icahn Enterprises Finance Corp., 5.875%, 2/01/2022   176,400 
 105,000   Icahn Enterprises LP/Icahn Enterprises Finance Corp., 6.250%, 2/01/2022   103,688 

 

See accompanying notes to financial statements.

 

|  14


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Financial Other — continued

 

$465,000   Nationstar Mortgage Holdings, Inc., 8.125%, 7/15/2023, 144A  $453,375 
 330,000   Nationstar Mortgage Holdings, Inc., 9.125%, 7/15/2026, 144A   320,925 
    

 

 

 
     1,054,388 
    

 

 

 
  Food & Beverage — 2.4%

 

 405,000   BRF GmbH, 4.350%, 9/29/2026, 144A   349,495 
 210,000   BRF S.A., 4.750%, 5/22/2024, 144A   192,937 
 520,000   Cosan Luxembourg S.A., 7.000%, 1/20/2027, 144A   524,098 
 330,000   JBS USA LUX S.A./JBS USA Finance, Inc., 5.750%, 6/15/2025, 144A   315,150 
 385,000   Marfrig Holdings Europe BV, Class B, 8.000%, 6/08/2023, 144A   385,385 
 280,000   Pilgrim’s Pride Corp., 5.750%, 3/15/2025, 144A   262,500 
 540,000   Pilgrim’s Pride Corp., 5.875%, 9/30/2027, 144A   490,050 
 830,000   Post Holdings, Inc., 5.750%, 3/01/2027, 144A   778,125 
    

 

 

 
     3,297,740 
    

 

 

 
  Gaming — 0.5%

 

 175,000   Boyd Gaming Corp., 6.375%, 4/01/2026   169,313 
 210,000   MGM Growth Properties Operating Partnership LP / MGP FinanceCo-Issuer, Inc., 4.500%, 1/15/2028   183,750 
 380,000   MGM Resorts International, 7.750%, 3/15/2022   404,225 
    

 

 

 
     757,288 
    

 

 

 
  Government Owned – No Guarantee — 1.0%

 

 400,000   Petrobras Global Finance BV, 5.625%, 5/20/2043   335,204 
 515,000   Petrobras Global Finance BV, 5.750%, 2/01/2029   476,375 
 710,000   YPF S.A., 6.950%, 7/21/2027, 144A   578,650 
    

 

 

 
     1,390,229 
    

 

 

 
  Healthcare — 4.6%

 

 170,000   HCA, Inc., 7.050%, 12/01/2027   177,225 
 655,000   HCA, Inc., 7.500%, 12/15/2023   700,850 
 145,000   HCA, Inc., 7.500%, 11/06/2033   152,250 
 590,000   HCA, Inc., 7.690%, 6/15/2025   628,350 
 480,000   HCA, Inc., 8.360%, 4/15/2024   528,000 
 820,000   HCA, Inc., MTN, 7.580%, 9/15/2025   869,200 
 515,000   HCA, Inc., MTN, 7.750%, 7/15/2036   534,313 
 275,000   Hologic, Inc., 4.375%, 10/15/2025, 144A   255,750 
 315,000   Hologic, Inc., 4.625%, 2/01/2028, 144A   283,500 
 200,000   IQVIA, Inc., 5.000%, 10/15/2026, 144A   191,000 
 800,000   Polaris Intermediate Corp., 8.500% PIK, 8.500% Cash, 12/01/2022, 144A(f)   729,696 
 390,000   Tenet Healthcare Corp., 5.125%, 5/01/2025   363,675 
 830,000   Tenet Healthcare Corp., 7.500%, 1/01/2022, 144A   842,450 
    

 

 

 
     6,256,259 
    

 

 

 
  Home Construction — 1.8%

 

 1,200,000   Corporacion GEO SAB de CV, 8.875%, 3/27/2022(a)(c)(g)(h)   12 
 750,000   K. Hovnanian Enterprises, Inc., 5.000%, 11/01/2021   600,000 
 800,000   Lennar Corp., 4.750%, 5/30/2025   750,000 
 1,130,000   PulteGroup, Inc., 5.500%, 3/01/2026   1,087,625 
    

 

 

 
     2,437,637 
    

 

 

 

 

See accompanying notes to financial statements.

 

15  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Independent Energy — 11.6%

 

$460,000   Aker BP ASA, 5.875%, 3/31/2025, 144A  $458,850 
 202,000   Ascent Resources Utica Holdings LLC/ARU Finance Corp.,
10.000%, 4/01/2022, 144A
   206,606 
 685,000   Baytex Energy Corp., 5.625%, 6/01/2024, 144A   592,525 
 570,000   Bruin E&P Partners LLC, 8.875%, 8/01/2023, 144A   507,300 
 90,000   California Resources Corp., 5.500%, 9/15/2021   64,646 
 41,000   California Resources Corp., 6.000%, 11/15/2024   25,010 
 2,530,000   California Resources Corp., 8.000%, 12/15/2022, 144A   1,714,075 
 140,000   Callon Petroleum Co., 6.125%, 10/01/2024   130,200 
 795,000   CNX Resources Corp., 5.875%, 4/15/2022   763,200 
 635,000   Denbury Resources, Inc., 7.500%, 2/15/2024, 144A   511,175 
 205,000   Denbury Resources, Inc., 9.250%, 3/31/2022, 144A   189,112 
 690,000   Eclipse Resources Corp., 8.875%, 7/15/2023   591,675 
 375,000   Gulfport Energy Corp., 6.000%, 10/15/2024   331,875 
 595,000   Gulfport Energy Corp., 6.375%, 5/15/2025   526,575 
 365,000   Gulfport Energy Corp., 6.375%, 1/15/2026   315,725 
 622,000   Halcon Resources Corp., 6.750%, 2/15/2025   454,060 
 605,000   Matador Resources Co., 5.875%, 9/15/2026   556,600 
 1,250,000   MEG Energy Corp., 6.500%, 1/15/2025, 144A   1,268,750 
 585,000   MEG Energy Corp., 7.000%, 3/31/2024, 144A   558,675 
 185,000   Newfield Exploration Co., 5.625%, 7/01/2024   187,313 
 592,000   Oasis Petroleum, Inc., 6.875%, 3/15/2022   557,960 
 210,000   PDC Energy, Inc., 5.750%, 5/15/2026   186,900 
 205,000   PDC Energy, Inc., 6.125%, 9/15/2024   189,625 
 870,000   Range Resources Corp., 4.875%, 5/15/2025   713,400 
 330,000   Sanchez Energy Corp., 6.125%, 1/15/2023   59,400 
 755,000   Sanchez Energy Corp., 7.250%, 2/15/2023, 144A   615,325 
 685,000   Seven Generations Energy Ltd., 5.375%, 9/30/2025, 144A   613,075 
 175,000   Seven Generations Energy Ltd., 6.875%, 6/30/2023, 144A   172,375 
 920,000   SM Energy Co., 5.000%, 1/15/2024   800,400 
 27,000   SM Energy Co., 6.125%, 11/15/2022   25,515 
 45,000   SM Energy Co., 6.625%, 1/15/2027   39,825 
 190,000   SM Energy Co., 6.750%, 9/15/2026   170,050 
 264,000   Southwestern Energy Co., 6.200%, 1/23/2025   235,950 
 405,000   Whiting Petroleum Corp., 5.750%, 3/15/2021   384,750 
 50,000   Whiting Petroleum Corp., 6.250%, 4/01/2023   45,565 
 1,215,000   Whiting Petroleum Corp., 6.625%, 1/15/2026   1,041,862 
    

 

 

 
     15,805,924 
    

 

 

 
  Integrated Energy — 0.1%

 

 200,000   Geopark Ltd., 6.500%, 9/21/2024, 144A   185,758 
    

 

 

 
  Life Insurance — 0.2%

 

 340,000   CNO Financial Group, Inc., 5.250%, 5/30/2025   323,850 
    

 

 

 
  Local Authorities — 0.3%

 

 325,000   Provincia de Buenos Aires, 6.500%, 2/15/2023, 144A   261,427 
 270,000   Provincia de Buenos Aires, 7.875%, 6/15/2027, 144A   194,402 
    

 

 

 
     455,829 
    

 

 

 

 

See accompanying notes to financial statements.

 

|  16


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Lodging — 0.9%

 

$150,000   Hilton Domestic Operating Co., Inc., 4.250%, 9/01/2024  $141,750 
 755,000   Hilton Worldwide Finance LLC/Hilton Worldwide Finance Corp., 4.625%, 4/01/2025   715,362 
 365,000   Marriott Ownership Resorts, Inc., 6.500%, 9/15/2026, 144A   352,225 
    

 

 

 
     1,209,337 
    

 

 

 
  Media Entertainment — 3.6%

 

 735,000   AMC Networks, Inc., 4.750%, 8/01/2025   667,012 
 1,155,000   Clear Channel Worldwide Holdings, Inc., Series B, 6.500%, 11/15/2022   1,155,000 
 1,305,000   Clear Channel Worldwide Holdings, Inc., Series B, 7.625%, 3/15/2020   1,272,375 
 1,115,000   iHeartCommunications, Inc., 9.000%, 12/15/2019(g)   747,050 
 395,000   Meredith Corp., 6.875%, 2/01/2026, 144A   386,113 
 740,000   Netflix, Inc., 4.875%, 4/15/2028   675,250 
    

 

 

 
     4,902,800 
    

 

 

 
  Metals & Mining — 2.1%

 

 190,000   Commercial Metals Co., 4.875%, 5/15/2023   179,550 
 400,000   First Quantum Minerals Ltd., 6.500%, 3/01/2024, 144A   332,000 
 955,000   First Quantum Minerals Ltd., 7.000%, 2/15/2021, 144A   916,800 
 670,000   First Quantum Minerals Ltd., 7.250%, 5/15/2022, 144A   621,425 
 840,000   FMG Resources (August 2006) Pty Ltd., 4.750%, 5/15/2022, 144A   798,000 
    

 

 

 
     2,847,775 
    

 

 

 
  Midstream — 4.3%

 

 205,000   EnLink Midstream Partners LP, 5.450%, 6/01/2047   165,789 
 360,000   EnLink Midstream Partners LP, 5.600%, 4/01/2044   295,737 
 1,265,000   Hess Infrastructure Partners LP/Hess Infrastructure Partners Finance Corp., 5.625%, 2/15/2026, 144A   1,223,887 
 570,000   NGL Energy Partners LP/NGL Energy Finance Corp., 5.125%, 7/15/2019   567,520 
 200,000   NGL Energy Partners LP/NGL Energy Finance Corp., 6.125%, 3/01/2025   172,000 
 405,000   NGL Energy Partners LP/NGL Energy Finance Corp., 7.500%, 11/01/2023   388,800 
 165,000   NGPL PipeCo LLC, 4.375%, 8/15/2022, 144A   160,463 
 700,000   NGPL PipeCo LLC, 4.875%, 8/15/2027, 144A   659,750 
 385,000   SemGroup Corp./Rose Rock Finance Corp., 5.625%, 7/15/2022   362,863 
 935,000   Summit Midstream Holdings LLC/Summit Midstream Finance Corp., 5.500%, 8/15/2022   888,250 
 95,000   Targa Resources Partners LP/Targa Resources Partners Finance Corp., 4.250%, 11/15/2023   87,994 
 640,000   Targa Resources Partners LP/Targa Resources Partners Finance Corp., 5.250%, 5/01/2023   627,200 
 305,000   Transportadora de Gas del Sur S.A., 6.750%, 5/02/2025, 144A   277,767 
    

 

 

 
     5,878,020 
    

 

 

 
  Non-Agency Commercial Mortgage-Backed Securities — 1.5%

 

 100,000   CG-CCRE Commercial Mortgage Trust, Series2014-FL2, Class COL1,
1-month LIBOR + 3.500%, 5.955%, 11/15/2031, 144A(d)(h)(i)
   96,832 
 225,000   CG-CCRE Commercial Mortgage Trust, Series2014-FL2, Class COL2,
1-month LIBOR + 4.500%, 6.955%, 11/15/2031, 144A(d)(h)(i)
   214,498 

 

See accompanying notes to financial statements.

 

17  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Non-Agency Commercial Mortgage-Backed Securities — continued

 

$1,020,000   Credit Suisse Mortgage Trust, Series2014-USA, Class E, 4.373%, 9/15/2037, 144A  $912,767 
 59,087   GS Mortgage Securities Trust, Series 2007-GG10, Class AM, 5.780%, 8/10/2045(b)   59,852 
 18,277   JPMorgan Chase Commercial Mortgage Securities Trust, Series 2007-LDPX, Class AM, 5.464%, 1/15/2049(b)   18,288 
 380,000   Starwood Retail Property Trust, Series 2014-STAR, Class D,
1-month LIBOR + 3.250%, 5.705%, 11/15/2027, 144A(d)(h)(i)
   323,001 
 420,000   Starwood Retail Property Trust, Series 2014-STAR, Class E,
1-month LIBOR + 4.150%, 6.605%, 11/15/2027, 144A(d)
   316,421 
 125,000   WFRBS Commercial Mortgage Trust, Series2012-C7, Class E, 4.821%, 6/15/2045, 144A(b)   104,073 
    

 

 

 
     2,045,732 
    

 

 

 
  Oil Field Services — 1.8%

 

 430,000   Ensco PLC, 5.750%, 10/01/2044   240,318 
 490,000   McDermott Technology Americas, Inc./McDermott Technology U.S., Inc., 10.625%, 5/01/2024, 144A   413,437 
 160,000   Noble Holding International Ltd., 5.250%, 3/15/2042   92,800 
 160,000   Noble Holding International Ltd., 6.050%, 3/01/2041   98,400 
 420,000   Noble Holding International Ltd., 7.750%, 1/15/2024   318,150 
 530,000   Noble Holding International Ltd., 7.875%, 2/01/2026, 144A   451,825 
 405,000   Shelf Drilling Holdings Ltd., 8.250%, 2/15/2025, 144A   346,275 
 175,000   Transocean Guardian Ltd., 5.875%, 1/15/2024, 144A   167,563 
 224,000   Transocean Proteus Ltd., 6.250%, 12/01/2024, 144A   214,480 
 175,000   Transocean, Inc., 7.500%, 1/15/2026, 144A   153,563 
    

 

 

 
     2,496,811 
    

 

 

 
  Packaging — 1.2%

 

 200,000   ARD Finance S.A., 7.875% PIK, 7.125% Cash, 9/15/2023(f)   179,500 
 395,000   Ardagh Packaging Finance PLC/Ardagh MP Holdings USA, Inc., 4.625%, 5/15/2023, 144A   377,225 
 1,165,000   Ardagh Packaging Finance PLC/Ardagh MP Holdings USA, Inc., 7.250%, 5/15/2024, 144A   1,162,087 
    

 

 

 
     1,718,812 
    

 

 

 
  Paper — 0.3%

 

 440,000   Klabin Finance S.A., 4.875%, 9/19/2027, 144A   399,300 
    

 

 

 
  Pharmaceuticals — 2.0%

 

 265,000   Bausch Health Cos., Inc., 5.500%, 3/01/2023, 144A   242,475 
 66,000   Bausch Health Cos., Inc., 5.625%, 12/01/2021, 144A   65,010 
 1,350,000   Bausch Health Cos., Inc., 5.875%, 5/15/2023, 144A   1,248,750 
 280,000   Catalent Pharma Solutions, Inc., 4.875%, 1/15/2026, 144A   265,300 
 975,000   Teva Pharmaceutical Finance Co. BV, 2.950%, 12/18/2022   862,251 
    

 

 

 
     2,683,786 
    

 

 

 
  Property & Casualty Insurance — 0.7%

 

 1,110,000   Ardonagh Midco 3 PLC, 8.625%, 7/15/2023, 144A   940,103 
    

 

 

 

 

See accompanying notes to financial statements.

 

|  18


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Refining — 0.4%

 

$635,000   Parkland Fuel Corp., 6.000%, 4/01/2026, 144A  $595,313 
    

 

 

 
  Restaurants — 0.6%

 

 890,000   1011778 B.C. ULC/New Red Finance, Inc., 5.000%, 10/15/2025, 144A   818,800 
    

 

 

 
  Retailers — 2.3%

 

 830,000   Asbury Automotive Group, Inc., 6.000%, 12/15/2024   794,725 
 820,000   Group 1 Automotive, Inc., 5.000%, 6/01/2022   776,950 
 505,000   JC Penney Corp., Inc., 5.875%, 7/01/2023, 144A   406,525 
 475,000   L Brands, Inc., 6.750%, 7/01/2036   387,125 
 180,000   L Brands, Inc., 6.875%, 11/01/2035   150,336 
 665,000   Party City Holdings, Inc., 6.625%, 8/01/2026, 144A   605,150 
    

 

 

 
     3,120,811 
    

 

 

 
  Supermarkets — 0.7%

 

 335,000   Albertson’s Cos. LLC/Safeway, Inc./New Albertson’s, Inc./Albertson’s LLC, 5.750%, 3/15/2025   293,125 
 935,000   New Albertsons LP, Series C, MTN, 6.625%, 6/01/2028   691,900 
    

 

 

 
     985,025 
    

 

 

 
  Technology — 2.7%

 

 416,000   Blackboard, Inc., 9.750%, 10/15/2021, 144A   282,880 
 170,000   Camelot Finance S.A., 7.875%, 10/15/2024, 144A   164,050 
 60,000   CommScope Technologies LLC, 6.000%, 6/15/2025, 144A   54,600 
 1,205,000   Dell International LLC/EMC Corp., 6.020%, 6/15/2026, 144A   1,210,449 
 420,000   First Data Corp., 5.375%, 8/15/2023, 144A   412,650 
 190,000   Open Text Corp., 5.875%, 6/01/2026, 144A   186,200 
 275,000   Sabre GLBL, Inc., 5.250%, 11/15/2023, 144A   271,562 
 435,000   Veritas U.S., Inc./Veritas Bermuda Ltd., 10.500%, 2/01/2024, 144A   284,925 
 900,000   Western Digital Corp., 4.750%, 2/15/2026   780,750 
    

 

 

 
     3,648,066 
    

 

 

 
  Transportation Services — 0.2%

 

 275,000   APL Ltd., 8.000%, 1/15/2024(h)(i)   244,626 
    

 

 

 
  Wireless — 3.1%

 

 865,000   Nokia Oyj, 4.375%, 6/12/2027   804,450 
 786,000   Sprint Capital Corp., 6.875%, 11/15/2028   742,770 
 650,000   Sprint Corp., 7.250%, 9/15/2021   665,275 
 920,000   Sprint Corp., 7.875%, 9/15/2023   944,150 
 315,000   T-Mobile USA, Inc., 4.500%, 2/01/2026   289,012 
 895,000   T-Mobile USA, Inc., 4.750%, 2/01/2028   809,975 
    

 

 

 
     4,255,632 
    

 

 

 
  Wirelines — 1.3%

 

 130,000   Cincinnati Bell Telephone Co. LLC, 6.300%, 12/01/2028   107,479 
 1,060,000   Frontier Communications Corp., 8.500%, 4/01/2026, 144A   927,500 
 405,000   Frontier Communications Corp., 9.000%, 8/15/2031   216,675 
 120,000   Telecom Italia Capital S.A., 7.200%, 7/18/2036   114,600 

 

See accompanying notes to financial statements.

 

19  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Wirelines — continued

 

$505,000   Windstream Services LLC/Windstream Finance Corp., 10.500%, 6/30/2024, 144A  $383,800 
    

 

 

 
     1,750,054 
    

 

 

 
  TotalNon-Convertible Bonds
(Identified Cost $118,115,267)
   110,367,709 
    

 

 

 
    
 Convertible Bonds — 9.9% 
  Automotive — 0.3%

 

 390,000   Meritor, Inc., 3.250%, 10/15/2037   340,517 
    

 

 

 
  Cable Satellite — 1.2%

 

 1,515,000   DISH Network Corp., 2.375%, 3/15/2024   1,206,192 
 580,000   DISH Network Corp., 3.375%, 8/15/2026   468,359 
    

 

 

 
     1,674,551 
    

 

 

 
  Consumer Cyclical Services — 0.5%

 

 755,000   Macquarie Infrastructure Corp., 2.000%, 10/01/2023   653,300 
    

 

 

 
  Diversified Operations — 0.1%

 

 160,000   RWT Holdings, Inc., 5.625%, 11/15/2019   160,701 
    

 

 

 
  Healthcare — 0.5%

 

 190,000   Evolent Health, Inc., 2.000%, 12/01/2021   210,686 
 125,000   Insulet Corp., 1.375%, 11/15/2024, 144A   132,752 
 275,000   Wright Medical Group, Inc., 1.625%, 6/15/2023, 144A   280,044 
    

 

 

 
     623,482 
    

 

 

 
  Independent Energy — 1.1%

 

 840,000   Chesapeake Energy Corp., 5.500%, 9/15/2026   676,084 
 825,000   PDC Energy, Inc., 1.125%, 9/15/2021   731,156 
 170,000   Whiting Petroleum Corp., 1.250%, 4/01/2020   160,721 
    

 

 

 
     1,567,961 
    

 

 

 
  Industrial Other — 0.2%

 

 340,000   Tutor Perini Corp., 2.875%, 6/15/2021   312,953 
    

 

 

 
  Leisure — 0.1%

 

 185,000   Rovi Corp., 0.500%, 3/01/2020   173,458 
    

 

 

 
  Midstream — 0.0%

 

 60,000   SM Energy Co., 1.500%, 7/01/2021   55,771 
    

 

 

 
  Oil Field Services — 0.5%

 

 860,000   Nabors Industries, Inc., 0.750%, 1/15/2024   531,248 
 225,000   Oil States International, Inc., 1.500%, 2/15/2023, 144A   184,414 
    

 

 

 
     715,662 
    

 

 

 
  Pharmaceuticals — 2.6%

 

 1,530,000   BioMarin Pharmaceutical, Inc., 0.599%, 8/01/2024   1,521,430 
 265,000   Dermira, Inc., 3.000%, 5/15/2022   204,426 
 475,000   Flexion Therapeutics, Inc., 3.375%, 5/01/2024   390,583 
 745,000   Intercept Pharmaceuticals, Inc., 3.250%, 7/01/2023   686,425 
 660,000   Ionis Pharmaceuticals, Inc., 1.000%, 11/15/2021   706,268 
    

 

 

 
     3,509,132 
    

 

 

 

 

See accompanying notes to financial statements.

 

|  20


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Principal
Amount
   Description  Value (†) 
  Railroads — 0.3%

 

$385,000   Greenbrier Cos., Inc. (The), 2.875%, 2/01/2024  $378,318 
    

 

 

 
  REITs – Diversified — 0.3%

 

 435,000   iStar, Inc., 3.125%, 9/15/2022   391,952 
    

 

 

 
  Technology — 2.0%

 

 570,000   Avaya Holdings Corp., 2.250%, 6/15/2023, 144A   486,295 
 865,000   Finisar Corp., 0.500%, 12/15/2036   821,075 
 625,000   Nuance Communications, Inc., 1.000%, 12/15/2035   537,406 
 315,000   Nuance Communications, Inc., 1.250%, 4/01/2025   276,173 
 245,000   Palo Alto Networks, Inc., 0.750%, 7/01/2023, 144A   242,302 
 140,000   Verint Systems, Inc., 1.500%, 6/01/2021   135,434 
 305,000   Western Digital Corp., 1.500%, 2/01/2024, 144A   247,173 
    

 

 

 
     2,745,858 
    

 

 

 
  Wirelines — 0.2%

 

 275,000   GCI Liberty, Inc., 1.750%, 9/30/2046, 144A   268,427 
    

 

 

 
  Total Convertible Bonds
(Identified Cost $14,909,751)
   13,572,043 
    

 

 

 
    
  Total Bonds and Notes
(Identified Cost $133,025,018)
   123,939,752 
    

 

 

 
    
 Loan Participations — 0.3% 
  ABS Other — 0.3%

 

 425,733   Harbour Aircraft Investments Ltd., Series2017-1, Class C,
8.000%, 11/15/2037(a)
(Identified Cost $424,760)
   425,679 
    

 

 

 
    
 Senior Loans — 1.8% 
  Retailers — 0.4%

 

 212,000   J.C. Penney Corp., Inc., 2016 Term Loan B, 6/23/2023(j)   180,200 
 461,941   J.C. Penney Corp., Inc., 2016 Term Loan B,3-month LIBOR + 4.250%, 6.956%, 6/23/2023(d)   392,650 
    

 

 

 
  Total Retailers
(Identified Cost $607,345)
   572,850 
    

 

 

 
  Supermarkets — 0.6%

 

 422,927   Albertsons LLC, USD 2017 Term Loan B5, 12/21/2022(j)   405,244 
 429,000   Albertsons LLC, Term Loan B7,1-month LIBOR + 3.000%, 5.522%, 11/17/2025(d)   405,941 
    

 

 

 
     811,185 
    

 

 

 
  Transportation Services — 0.8%

 

 1,037,012   Uber Technologies, 2018 Term Loan,1-month LIBOR + 4.000%, 6.387%, 4/04/2025(d)   1,008,494 
    

 

 

 
  Total Senior Loans
(Identified Cost $2,479,828)
   2,392,529 
    

 

 

 

 

See accompanying notes to financial statements.

 

21  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Shares

   Description  Value (†) 
 Preferred Stocks — 1.5% 
  Food & Beverage — 1.1%

 

 14,765   Bunge Ltd., 4.875%  $1,433,853 
    

 

 

 
  Midstream — 0.4%

 

 988   Chesapeake Energy Corp., 5.750%   509,662 
 20   Chesapeake Energy Corp., 5.750%, 144A   10,317 
 137   Chesapeake Energy Corp., 5.750%(a)   58,567 
    

 

 

 
     578,546 
    

 

 

 
  Total Preferred Stocks
(Identified Cost $2,234,677)
   2,012,399 
    

 

 

 
    
 Other Investments — 0.6% 
  Aircraft ABS — 0.6%

 

 100   ECAF I Blocker Ltd.(a)(c)(h)(k)
(Identified Cost $1,000,000)
   865,625 
    

 

 

 
    
Principal
Amount
          
 Short-Term Investments — 20.6% 
$28,093,324   Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $28,095,666 on 1/02/2019 collateralized by $23,255,000 U.S. Treasury Bond, 4.375% due 5/15/2041 valued at $28,661,206 including accrued interest (Note 2 of Notes to Financial Statements) (Identified Cost $28,093,324)   28,093,324 
    

 

 

 
    
  Total Investments — 115.6%
(Identified Cost $167,257,607)
   157,729,308 
  Other assets less liabilities — (15.6)%   (21,251,074
    

 

 

 
  Net Assets — 100.0%  $136,478,234 
    

 

 

 
    
 (†)   See Note 2 of Notes to Financial Statements.  
 (a)   Level 3 security. Value has been determined using significant unobservable inputs. See Note 3 of Notes to Financial Statements.

 

 (b)   Variable rate security. The interest rate adjusts periodically based on; (i) changes in current interest rates and/or prepayments on underlying pools of assets, if applicable, (ii) reference to a base lending rate plus or minus a margin, and/or (iii) reference to a base lending rate adjusted by a multiplier and/or subject to certain floors or caps. Rate as of December 31, 2018 is disclosed.

 

 (c)   Fair valued by the Fund’s adviser. At December 31, 2018, the value of these securities amounted to $866,211 or 0.6% of net assets. See Note 2 of Notes to Financial Statements.

 

 (d)   Variable rate security. Rate as of December 31, 2018 is disclosed.

 

 (e)   Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.

 

 (f)   Payment-in-kind security for which the issuer has the option at each interest payment date of making interest payments in cash or additional principal. For the period ended December 31, 2018, interest payments were made in cash.

 

 

See accompanying notes to financial statements.

 

|  22


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

    
 (g)   The issuer is in default with respect to interest and/or principal payments. Income is not being accrued.

 

 (h)   Illiquid security. (Unaudited)

 

 (i)   Securities classified as fair valued pursuant to the Fund’s pricing policies and procedures. At December 31, 2018, the value of these securities amounted to $878,957 or 0.6% of net assets. See Note 2 of Notes to Financial Statements.

 

 (j)   Position is unsettled. Contract rate was not determined at December 31, 2018 and does not take effect until settlement date. Maturity date is not finalized until settlement date.

 

 (k)   Securities subject to restriction on resale. At December 31, 2018, the restricted securities held by the Fund are as follows:

 

    
  Acquisition
Date
 Acquisition
Cost
  Value  % of
Net Assets
 
ECAF I Blocker Ltd. December 20, 2016 $1,000,000  $865,625   0.6% 
    
 144A   All or a portion of these securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2018, the value of Rule 144A holdings amounted to $60,625,842 or 44.4% of net assets.

 

 ABS   Asset-Backed Securities  
       LIBOR   London Interbank Offered Rate  
 MTN   Medium Term Note  
 PIK   Payment-in-Kind  
 REITs   Real Estate Investment Trusts  
    
 GBP   British Pound  
 ZAR   South African Rand  

At December 31, 2018, the Fund had the following open forward foreign currency contracts:

 

Counterparty Delivery
Date
  Currency
Bought/
Sold (B/S)
  Units
of
Currency
  In Exchange for
  Notional
Value
  Unrealized
Appreciation
(Depreciation)
 

HSBC Bank USA

  2/04/2019   GBP   B   340,000  $447,077  $434,051  $(13,026

HSBC Bank USA

  2/04/2019   GBP   S   340,000   436,304   434,051   2,253 

Bank of America N.A

  2/04/2019   ZAR   B   25,220,000   1,719,116   1,746,214   27,098 

Bank of America N.A

  2/04/2019   ZAR   S   25,220,000   1,685,795   1,746,214   (60,419
       

 

 

 

Total

 

 $(44,094
 

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles High Income Fund – (continued)

 

Industry Summary at December 31, 2018

 

Independent Energy

   12.7

Cable Satellite

   8.1 

Healthcare

   5.1 

Midstream

   4.7 

Technology

   4.7 

Finance Companies

   4.6 

Pharmaceuticals

   4.6 

Media Entertainment

   3.6 

Food & Beverage

   3.5 

Wireless

   3.1 

Banking

   3.1 

Building Materials

   2.8 

Retailers

   2.7 

Oil Field Services

   2.3 

Metals & Mining

   2.1 

Other Investments, less than 2% each

   27.3 

Short-Term Investments

   20.6 
  

 

 

 

Total Investments

   115.6 

Other assets less liabilities (including forward foreign currency contracts)

   (15.6
  

 

 

 

Net Assets

   100.0
  

 

 

 

 

See accompanying notes to financial statements.

 

|  24


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund

 

Principal
Amount (‡)
   Description  Value (†) 
 Bonds and Notes — 83.3% of Net Assets 
 Non-Convertible Bonds — 81.6% 
  ABS Car Loan — 4.3%

 

$20,902,000   Ally Auto Receivables Trust, Series2017-3, Class A3, 1.740%, 9/15/2021  $20,706,221 
 10,515,000   AmeriCredit Automobile Receivables Trust, Series2018-3, Class D, 4.040%, 11/18/2024   10,645,240 
 6,317,885   BMW Vehicle Owner Trust, Series2016-A, Class A3, 1.160%, 11/25/2020   6,276,831 
 3,650,000   CarMax Auto Owner Trust, Series2018-3, Class D, 3.910%, 1/15/2025   3,660,478 
 22,010,000   Credit Acceptance Auto Loan Trust, Series2018-2A, Class A, 3.470%, 5/17/2027, 144A   21,968,885 
 6,555,000   Drive Auto Receivables Trust, Series2018-5, Class D, 4.300%, 4/15/2026   6,639,626 
 3,122,000   Ford Credit Auto Owner Trust, Series2017-B, Class A3, 1.690%, 11/15/2021   3,083,523 
 6,770,000   Ford Credit Auto Owner Trust, Series2018-A, Class A3, 3.030%, 11/15/2022   6,773,149 
 6,697,430   Honda Auto Receivables Owner Trust, Series2016-4, Class A3, 1.210%, 12/18/2020   6,637,116 
 2,103,000   Honda Auto Receivables Owner Trust, Series2017-2, Class A3, 1.680%, 8/16/2021   2,081,255 
 28,000,000   Honda Auto Receivables Owner Trust, Series2018-4, Class A3, 3.160%, 1/17/2023   28,133,025 
 25,503,002   Nissan Auto Receivables Owner Trust, Series2016-C, Class A3, 1.180%, 1/15/2021   25,263,710 
 26,135,000   Nissan Auto Receivables Owner Trust, Series2018-C, Class A3, 3.220%, 6/15/2023   26,323,091 
 12,632,000   Toyota Auto Receivables Owner Trust, Series2017-B, Class A3, 1.760%, 7/15/2021   12,515,467 
 15,720,000   Toyota Auto Receivables Owner Trust, Series2017-D, Class A3, 1.930%, 1/18/2022   15,500,980 
 27,000,000   Toyota Auto Receivables Owner Trust, Series2018-A, Class A3, 2.350%, 5/16/2022(a)   26,740,395 
 4,500,000   Toyota Auto Receivables Owner Trust, Series2018-C, Class A2A, 2.770%, 8/16/2021   4,489,051 
    

 

 

 
     227,438,043 
    

 

 

 
  ABS Credit Card — 4.8%

 

 14,559,000   American Express Credit Account Master Trust, Series2017-1, Class A, 1.930%, 9/15/2022   14,386,811 
 10,434,000   American Express Credit Account Master Trust, Series2017-6, Class A, 2.040%, 5/15/2023   10,273,110 
 3,000,000   American Express Credit Account Master Trust, Series2018-1, Class A, 2.670%, 10/17/2022   2,988,322 
 9,770,000   BA Credit Card Trust, Series2017-A2, Class A2, 1.840%, 1/17/2023   9,595,101 
 28,630,000   BA Credit Card Trust, Series2018-A2, Class A2, 3.000%, 9/15/2023(a)   28,710,900 
 24,885,000   Capital One Multi-Asset Execution Trust, Series2015-A2, Class A2, 2.080%, 3/15/2023   24,586,096 
 9,480,000   Capital One Multi-Asset Execution Trust, Series2016-A3, Class A3, 1.340%, 4/15/2022   9,407,015 
 6,170,000   Capital One Multi-Asset Execution Trust, Series2017-A4, Class A4, 1.990%, 7/17/2023   6,074,210 

 

See accompanying notes to financial statements.

 

25  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  ABS Credit Card — continued

 

$17,700,000   Chase Issuance Trust, Series2012-A4, Class A4, 1.580%, 8/15/2021  $17,555,904 
 7,915,000   Chase Issuance Trust, Series2015-A4, Class A4, 1.840%, 4/15/2022   7,796,723 
 31,257,000   Chase Issuance Trust, Sries2016-A5, Class A5, 1.270%, 7/15/2021   30,983,017 
 22,714,000   Citibank Credit Card Issuance Trust, Series2014-A6, Class A6, 2.150%, 7/15/2021   22,620,471 
 13,575,000   Citibank Credit Card Issuance Trust, Series2016-A1, Class A1, 1.750%, 11/19/2021   13,430,952 
 10,366,000   Citibank Credit Card Issuance Trust, Series2017-A3, Class A3, 1.920%, 4/07/2022   10,233,786 
 13,235,000   Citibank Credit Card Issuance Trust, Series2017-A8, Class A8, 1.860%, 8/08/2022   13,019,325 
 35,306,000   Discover Card Execution Note Trust, Series2016-A4, Class A4, 1.390%, 3/15/2022   34,916,487 
    

 

 

 
     256,578,230 
    

 

 

 
  ABS Home Equity — 0.7%

 

 1,534,525   Bayview Opportunity Master Fund Trust, Series2018-RN3, Class A1, 3.672%, 3/28/2033, 144A(b)   1,533,133 
 3,147,076   Bayview Opportunity Master Fund Trust, Series2018-RN8, Class A1, 4.066%, 9/28/2033, 144A(b)   3,150,318 
 1,432,827   CAM Mortgage Trust, Series2018-1, Class A1, 3.960%, 12/01/2065, 144A(b)   1,442,430 
 1,394,900   Gosforth Funding PLC, Series2018-1A, Class A1,
3-month LIBOR + 0.450%, 3.139%, 8/25/2060, 144A(c)
   1,389,078 
 2,481,000   Holmes Master Issuer PLC, Series2018-1A, Class A2,
3-month LIBOR + 0.360%, 2.796%, 10/15/2054, 144A(c)
   2,473,413 
 9,990,147   Progress Residential Trust, Series 2016-SFR2, Class A,
1-month LIBOR + 1.400%, 3.855%, 1/17/2034, 144A(c)
   10,001,739 
 3,620,982   Sequoia Mortgage Trust, Series2017-CH2, Class A1,
4.000%, 12/25/2047, 144A(b)
   3,659,613 
 5,626,273   Sequoia Mortgage Trust, Series2018-CH1, Class A1,
4.000%, 2/25/2048, 144A(b)
   5,679,462 
 2,099,979   Towd Point Mortgage Trust, Series2016-1, Class A1B,
2.750%, 2/25/2055, 144A(b)
   2,071,048 
 1,944,991   Vericrest Opportunity Loan Trust, Series 2018-NPL8, Class A1A, 4.213%, 10/26/2048, 144A(b)   1,941,279 
 2,743,862   Wells Fargo Mortgage Backed Securities Trust, Series2005-AR2, Class 3A1, 3.994%, 3/25/2035(b)   2,790,072 
    

 

 

 
     36,131,585 
    

 

 

 
  ABS Other — 2.3%

 

 47,218,336   FAN Engine Securitization Ltd., Series2013-1A, Class 1A, 4.625%, 10/15/2043, 144A(d)(e)(f)   46,675,325 
 13,595,000   

Horizon Aircraft Finance I Ltd., Series2018-1, Class A,

4.458%, 12/15/2038, 144A

   13,857,744 
 8,720,000   Kestrel Aircraft Funding Ltd., Series2018-1A, Class A,
4.250%, 12/15/2038, 144A(d)
   8,473,387 
 13,610,000   Mariner Finance Issuance Trust, Series2018-AA, Class A, 4.200%, 11/20/2030, 144A   13,759,916 

 

See accompanying notes to financial statements.

 

|  26


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  ABS Other — continued

 

$17,507,911   S-Jets Ltd., Series2017-1, Class A, 3.967%, 8/15/2042, 144A  $17,662,602 
 1,190,000   SLM Private Credit Student Loan Trust, Series2003-C, Class A3,
28-day ARS, 4.330%, 9/15/2032(c)(d)
   1,186,653 
 1,220,000   SLM Private Credit Student Loan Trust, Series2003-C, Class A4,
28-day ARS, 4.870%, 9/15/2032(c)(d)
   1,216,569 
 6,720,000   SoFi Consumer Loan Program Trust, Series2018-4, Class C, 4.170%, 11/26/2027, 144A   6,821,144 
 10,403,392   Trinity Rail Leasing LLC, Series2010-1A, Class A, 5.194%, 10/16/2040, 144A   11,066,392 
    

 

 

 
     120,719,732 
    

 

 

 
  ABS Student Loan — 0.2%

 

 6,910,000   Navient Student Loan Trust, Series2018-EA, Class A2,
4.000%, 12/15/2059, 144A
   7,061,395 
 1,033,000   SLM Private Credit Student Loan Trust, Series2003-A, Class A3,
28-day ARS, 4.750%, 6/15/2032(c)(d)
   1,032,794 
 780,000   SLM Private Credit Student Loan Trust, Series2003-A, Class A4,
28-day ARS, 4.770%, 6/15/2032(c)(d)
   777,806 
 1,454,000   SLM Private Credit Student Loan Trust, Series2003-B, Class A3,
28-day ARS, 4.750%, 3/15/2033(c)(d)
   1,453,709 
 995,000   SLM Private Credit Student Loan Trust, Series2003-B, Class A4,
28-day ARS, 4.810%, 3/15/2033(c)(d)
   994,801 
    

 

 

 
     11,320,505 
    

 

 

 
  ABS Whole Business — 1.2%

 

 7,156,452   Adams Outdoor Advertising LP, Series2018-1, Class A,
4.810%, 11/15/2048, 144A
   7,360,188 
 3,595,000   Adams Outdoor Advertising LP, Series2018-1, Class B,
5.653%, 11/15/2048, 144A
   3,702,129 
 27,481,500   Coinstar Funding LLC, Series2017-1A, Class A2, 5.216%, 4/25/2047, 144A   27,784,910 
 4,962,500   Five Guys Funding LLC, Series2017-1A, Class A2, 4.600%, 7/25/2047, 144A   5,060,840 
 13,595,000   Taco Bell Funding LLC, Series2018-1A, Class A2I,
4.318%, 11/25/2048, 144A
   13,762,762 
 3,700,000   Wingstop Funding LLC, Series2018-1, Class A2, 4.970%, 12/05/2048, 144A   3,783,805 
    

 

 

 
     61,454,634 
    

 

 

 
  Aerospace & Defense — 1.7%

 

 6,195,000   Embraer Netherlands Finance BV, 5.400%, 2/01/2027   6,396,399 
 550,000   Leonardo U.S. Holdings, Inc., 6.250%, 1/15/2040, 144A   513,079 
 650,000   Leonardo U.S. Holdings, Inc., 7.375%, 7/15/2039   682,500 
 78,795,000   Textron, Inc., 5.950%, 9/21/2021   83,124,733 
    

 

 

 
     90,716,711 
    

 

 

 
  Airlines — 0.8%

 

 3,211,778   Air Canada Pass Through Trust, Series2013-1, Class B, 5.375%, 11/15/2022, 144A   3,246,465 
 1,868,814   American Airlines Pass Through Certificates, Series2016-3, Class B, 3.750%, 4/15/2027   1,793,846 
 697,843   American Airlines Pass Through Certificates, Series2017-2, Class B, 3.700%, 4/15/2027   674,978 

 

See accompanying notes to financial statements.

 

27  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Airlines — continued

 

$1,356,446   Continental Airlines Pass Through Certificates, Series2012-1, Class B, 6.250%, 10/11/2021  $1,376,495 
 213,322   Continental Airlines Pass Through Trust, Series1999-1, Class A, 6.545%, 8/02/2020   213,863 
 324,173   Continental Airlines Pass Through Trust, Series2001-1,Class A-1, 6.703%, 12/15/2022   338,174 
 1,119,507   Delta Air Lines Pass Through Trust, Series2007-1, Class A, 6.821%, 2/10/2024(d)   1,202,015 
 5,973,407   Delta Air Lines Pass Through Trust, Series2007-1, Class B, 8.021%, 2/10/2024   6,499,665 
 9,346,973   Delta Air Lines Pass Through Trust, Series2009-1, Class A, 7.750%, 6/17/2021   9,662,339 
 14,605,319   UAL Pass Through Trust, Series2007-1, Class A, 6.636%, 1/02/2024   15,188,071 
 726,269   Virgin Australia Pass Through Certificates, Series2013-1A, 5.000%, 4/23/2025, 144A   736,139 
    

 

 

 
     40,932,050 
    

 

 

 
  Automotive — 1.5%

 

 23,581,000   Cummins, Inc., 5.650%, 3/01/2098   25,022,978 
 5,274,000   Cummins, Inc., 6.750%, 2/15/2027   6,154,116 
 255,000   Ford Motor Co., 6.625%, 2/15/2028   254,100 
 240,000   Ford Motor Co., 7.500%, 8/01/2026   259,673 
 14,000,000   Toyota Motor Credit Corp., 1.950%, 4/17/2020   13,826,122 
 26,263,000   Toyota Motor Credit Corp., GMTN, 1.900%, 4/08/2021   25,746,871 
 10,000,000   Toyota Motor Credit Corp., MTN, 2.150%, 3/12/2020   9,884,183 
    

 

 

 
     81,148,043 
    

 

 

 
  Banking — 8.6%

 

 38,233,000   Ally Financial, Inc., 4.625%, 3/30/2025   37,038,219 
 1,468,000   Ally Financial, Inc., 8.000%, 11/01/2031   1,625,810 
 22,839,000   Bank of America Corp., 6.110%, 1/29/2037   25,100,901 
 49,304,000   Bank of America Corp., (fixed rate to 12/20/2027, variable rate thereafter), 3.419%, 12/20/2028   46,057,307 
 100,000   Bank of America Corp., MTN, 4.250%, 10/22/2026   97,260 
 25,627,000   Bank of America Corp., Series L, MTN, 4.183%, 11/25/2027   24,631,801 
 22,500,000   BNP Paribas S.A., (fixed rate to 3/01/2028, variable rate thereafter), 4.375%, 3/01/2033, 144A   21,062,319 
 460,000   Capital One Financial Corp., 4.200%, 10/29/2025   442,577 
 17,000,000   Citigroup, Inc., 3.500%, 5/15/2023   16,689,659 
 1,660,000   Citigroup, Inc., 4.500%, 1/14/2022   1,696,079 
 7,155,000   Credit Agricole S.A., (fixed rate to 1/10/2028, variable rate thereafter), 4.000%, 1/10/2033, 144A   6,536,379 
 22,154,000   Deutsche Bank AG, (fixed rate to 12/01/2027, variable rate thereafter), 4.875%, 12/01/2032   17,225,621 
 6,645,000   Goldman Sachs Group, Inc. (The), GMTN, 5.375%, 3/15/2020   6,793,587 
 70,245,000   JPMorgan Chase & Co., 4.125%, 12/15/2026   68,536,684 
 100,000   Keybank NA, 6.950%, 2/01/2028   118,538 
 4,228,000   Lloyds Banking Group PLC, 4.344%, 1/09/2048   3,336,366 
 5,973,000   Lloyds Banking Group PLC, 4.582%, 12/10/2025   5,654,655 

 

See accompanying notes to financial statements.

 

|  28


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Banking — continued

 

$872,000   Lloyds Banking Group PLC, 5.300%, 12/01/2045  $793,732 
 1,845,000   Morgan Stanley, 4.350%, 9/08/2026   1,792,979 
 5,900,000   Morgan Stanley, 5.750%, 1/25/2021   6,151,639 
 20,695,000   Morgan Stanley, MTN, 4.100%, 5/22/2023   20,724,891 
 38,206,000   Morgan Stanley, Series F, GMTN, 5.625%, 9/23/2019   38,771,405 
 8,638,000   National City Corp., 6.875%, 5/15/2019   8,756,542 
 23,975,000   Royal Bank of Scotland Group PLC, 6.000%, 12/19/2023   24,265,172 
 14,750,000   Royal Bank of Scotland Group PLC, 6.100%, 6/10/2023   14,982,941 
 15,160,000   Santander Holdings USA, Inc., 4.450%, 12/03/2021   15,422,657 
 20,295,000   Societe Generale S.A., 4.250%, 4/14/2025, 144A   19,459,861 
 21,340,000   Standard Chartered PLC,
3-month LIBOR + 1.150%, 3.558%, 1/20/2023, 144A(c)
   21,056,818 
 5,900,000   Standard Chartered PLC, (fixed rate to 1/20/2022, variable rate thereafter), 4.247%, 1/20/2023, 144A   5,836,221 
    

 

 

 
     460,658,620 
    

 

 

 
  Brokerage — 1.5%

 

 50,270,000   Jefferies Group LLC, 5.125%, 1/20/2023   51,399,523 
 19,498,000   Jefferies Group LLC, 6.250%, 1/15/2036   19,550,565 
 8,760,000   Jefferies Group LLC, 6.450%, 6/08/2027   9,159,715 
    

 

 

 
     80,109,803 
    

 

 

 
  Building Materials — 0.7%

 

 1,610,000   Masco Corp., 6.500%, 8/15/2032   1,779,774 
 3,110,000   Masco Corp., 7.125%, 3/15/2020   3,248,783 
 2,667,000   Masco Corp., 7.750%, 8/01/2029   3,178,263 
 23,975,000   Owens Corning, 7.000%, 12/01/2036   26,515,428 
    

 

 

 
     34,722,248 
    

 

 

 
  Cable Satellite — 0.8%

 

 10,320,000   Cox Communications, Inc., 4.500%, 6/30/2043, 144A   8,702,819 
 5,820,000   Cox Communications, Inc., 4.700%, 12/15/2042, 144A   5,124,323 
 13,630,000   Time Warner Cable LLC, 4.125%, 2/15/2021   13,685,830 
 8,990,000   Time Warner Cable LLC, 4.500%, 9/15/2042   7,227,091 
 8,975,000   Time Warner Cable LLC, 5.500%, 9/01/2041   8,178,766 
    

 

 

 
     42,918,829 
    

 

 

 
  Chemicals — 1.7%

 

 27,205,000   CF Industries, Inc., 4.500%, 12/01/2026, 144A   26,587,865 
 15,145,000   DowDuPont, Inc., 3.766%, 11/15/2020   15,290,198 
 50,500,000   INVISTA Finance LLC, 4.250%, 10/15/2019, 144A   50,125,988 
    

 

 

 
     92,004,051 
    

 

 

��
  Construction Machinery — 1.2%

 

 17,058,000   Caterpillar Financial Services Corp., 1.931%, 10/01/2021   16,517,412 
 12,000,000   Caterpillar, Inc., 3.900%, 5/27/2021   12,217,188 
 10,400,000   John Deere Capital Corp., 2.550%, 1/08/2021   10,306,027 
 11,005,000   John Deere Capital Corp., MTN, 2.350%, 1/08/2021   10,854,135 

 

See accompanying notes to financial statements.

 

29  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Construction Machinery — continued

 

$6,105,000   John Deere Capital Corp., MTN, 3.900%, 7/12/2021  $6,221,134 
 6,787,000   Toro Co. (The), 6.625%, 5/01/2037(e)(f)   7,899,018 
    

 

 

 
     64,014,914 
    

 

 

 
  Consumer Cyclical Services — 0.5%

 

 29,995,000   Expedia Group, Inc., 3.800%, 2/15/2028   27,200,481 
    

 

 

 
  Consumer Products — 0.7%

 

 7,458,000   Hasbro, Inc., 6.600%, 7/15/2028   8,524,031 
 27,515,000   Unilever Capital Corp., 3.000%, 3/07/2022   27,303,410 
    

 

 

 
     35,827,441 
    

 

 

 
  Diversified Manufacturing — 0.3%

 

 5,305,000   General Electric Co., Series A, MTN,3-month LIBOR + 0.300%, 2.736%, 5/13/2024(c)   4,350,100 
 13,160,000   Votorantim Cimentos S.A., 7.250%, 4/05/2041, 144A   13,456,100 
    

 

 

 
     17,806,200 
    

 

 

 
  Electric — 1.5%

 

 22,667,100   Alta Wind Holdings LLC, 7.000%, 6/30/2035, 144A   24,605,325 
 30,430,000   EDP Finance BV, 4.125%, 1/15/2020, 144A   30,461,647 
 13,025,000   Enel Finance International NV, 6.000%, 10/07/2039, 144A   12,912,086 
 9,007,000   Enel Finance International NV, 6.800%, 9/15/2037, 144A   9,667,152 
    

 

 

 
     77,646,210 
    

 

 

 
  Finance Companies — 2.0%

 

 12,430,000   Aircastle Ltd., 4.125%, 5/01/2024   11,729,592 
 20,595,000   Aircastle Ltd., 4.400%, 9/25/2023   20,255,650 
 8,160,000   Aircastle Ltd., 5.000%, 4/01/2023   8,192,065 
 6,700,000   Antares Holdings LP, 6.000%, 8/15/2023, 144A   6,623,241 
 18,830,000   International Lease Finance Corp., 4.625%, 4/15/2021   19,009,531 
 8,565,000   Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp., 5.250%, 3/15/2022, 144A   8,329,462 
 18,000,000   Navient LLC, 5.500%, 1/25/2023   15,750,000 
 15,116,000   Navient LLC, Series A, MTN, 5.625%, 8/01/2033   9,976,560 
 7,805,000   Quicken Loans, Inc., 5.250%, 1/15/2028, 144A   6,907,425 
    

 

 

 
     106,773,526 
    

 

 

 
  Food & Beverage — 2.1%

 

 13,523,000   Anheuser-Busch InBev Finance, Inc., 2.650%, 2/01/2021   13,298,465 
 13,750,000   General Mills, Inc., 2.600%, 10/12/2022   13,246,384 
 26,965,000   Grupo Bimbo SAB de CV, 4.700%, 11/10/2047, 144A   24,256,635 
 8,595,000   JBS USA LUX S.A./JBS USA Finance, Inc., 5.750%, 6/15/2025, 144A   8,208,225 
 9,535,000   PepsiCo, Inc., 1.700%, 10/06/2021   9,222,203 
 45,980,000   PepsiCo, Inc., 2.000%, 4/15/2021   45,064,141 
    

 

 

 
     113,296,053 
    

 

 

 
  Government Guaranteed — 1.0%

 

 55,000,000   Kreditanstalt fuer Wiederaufbau, 1.500%, 4/20/2020   54,215,640 
    

 

 

 

 

See accompanying notes to financial statements.

 

|  30


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Government Owned – No Guarantee — 0.5%

 

$11,555,000   Petrobras Global Finance BV, 5.625%, 5/20/2043  $9,683,206 
 20,480,000   Petrobras Global Finance BV, 5.750%, 2/01/2029   18,944,000 
    

 

 

 
     28,627,206 
    

 

 

 
  Government Sponsored — 1.7%

 

 50,000,000   CPPIB Capital, Inc., 2.375%, 1/29/2021, 144A   49,720,874 
 40,000,000   Kommunalbanken, MTN, 1.625%, 2/10/2021   39,148,080 
    

 

 

 
     88,868,954 
    

 

 

 
  Health Insurance — 1.4%

 

 27,570,000   Anthem, Inc., 2.500%, 11/21/2020   27,191,313 
 650,000   Centene Corp., 6.125%, 2/15/2024   665,438 
 27,390,000   Cigna Corp., 3.200%, 9/17/2020, 144A   27,277,422 
 19,420,000   Cigna Corp., 4.375%, 10/15/2028, 144A   19,528,381 
 1,261,000   Cigna Holding Co., 7.875%, 5/15/2027   1,553,690 
    

 

 

 
     76,216,244 
    

 

 

 
  Healthcare — 2.0%

 

 27,455,000   Abbott Laboratories, 2.900%, 11/30/2021   27,216,486 
 7,692,000   Boston Scientific Corp., 6.000%, 1/15/2020   7,886,333 
 13,765,000   CVS Health Corp., 4.100%, 3/25/2025   13,627,657 
 16,985,000   HCA, Inc., 4.500%, 2/15/2027   16,050,825 
 24,240,000   HCA, Inc., 5.250%, 4/15/2025   24,118,800 
 6,175,000   HCA, Inc., 5.375%, 9/01/2026   6,005,188 
 4,806,000   HCA, Inc., 7.050%, 12/01/2027   5,010,255 
 1,592,000   HCA, Inc., 7.500%, 11/06/2033   1,671,600 
 1,295,000   HCA, Inc., 7.690%, 6/15/2025   1,379,175 
 2,480,000   HCA, Inc., MTN, 7.580%, 9/15/2025   2,628,800 
 3,068,000   HCA, Inc., MTN, 7.750%, 7/15/2036   3,183,050 
    

 

 

 
     108,778,169 
    

 

 

 
  Independent Energy — 2.3%

 

 12,417,000   Anadarko Petroleum Corp., 5.550%, 3/15/2026   13,004,806 
 27,980,000   Continental Resources, Inc., 3.800%, 6/01/2024   26,487,808 
 8,255,000   Continental Resources, Inc., 4.375%, 1/15/2028   7,765,988 
 10,950,000   Diamondback Energy, Inc., 4.750%, 11/01/2024, 144A   10,566,750 
 9,787,000   EQT Corp., 8.125%, 6/01/2019   9,953,069 
 9,695,000   Hess Corp., 4.300%, 4/01/2027   8,883,855 
 21,000,000   Newfield Exploration Co., 5.625%, 7/01/2024   21,262,500 
 26,185,000   Seven Generations Energy Ltd., 5.375%, 9/30/2025, 144A   23,435,575 
 60,000   Whiting Petroleum Corp., 6.250%, 4/01/2023   54,678 
    

 

 

 
     121,415,029 
    

 

 

 
  Integrated Energy — 2.4%

 

 55,470,000   Chevron Corp., 2.100%, 5/16/2021   54,399,210 
 20,430,000   Exxon Mobil Corp., 2.222%, 3/01/2021   20,135,845 
 52,303,000   Shell International Finance BV, 1.875%, 5/10/2021   50,942,449 
    

 

 

 
     125,477,504 
    

 

 

 

 

See accompanying notes to financial statements.

 

31  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Life Insurance — 2.0%

 

$1,475,000   American International Group, Inc., 4.875%, 6/01/2022  $1,530,352 
 15,000,000   Global Atlantic Fin Co., 8.625%, 4/15/2021, 144A   16,544,337 
 5,895,000   Metropolitan Life Global Funding I,3-month LIBOR + 0.230%, 2.638%, 1/08/2021, 144A(c)   5,823,451 
 9,063,000   Mutual of Omaha Insurance Co., 6.800%, 6/15/2036, 144A   11,281,899 
 26,914,000   National Life Insurance Co., 10.500%, 9/15/2039, 144A(e)(f)   42,742,667 
 6,440,000   NLV Financial Corp., 7.500%, 8/15/2033, 144A(e)(f)   8,040,938 
 2,872,000   Penn Mutual Life Insurance Co. (The), 6.650%, 6/15/2034, 144A   3,386,336 
 14,489,000   Penn Mutual Life Insurance Co. (The), 7.625%, 6/15/2040, 144A   19,054,255 
    

 

 

 
     108,404,235 
    

 

 

 
  Lodging — 0.5%

 

 26,131,000   Choice Hotels International, Inc., 5.700%, 8/28/2020   26,588,292 
    

 

 

 
  Media Entertainment — 0.1%

 

 4,482,000   21st Century Fox America, Inc., 8.150%, 10/17/2036   6,423,369 
    

 

 

 
  Metals & Mining — 3.0%

 

 1,689,997   1839688 Alberta ULC, 14.000% PIK, 14.000% Cash, 2/13/2020(d)(e)(g)(h)(i)   845 
 34,334,000   Anglo American Capital PLC, 4.500%, 3/15/2028, 144A   31,920,200 
 8,785,000   Anglo American Capital PLC, 4.750%, 4/10/2027, 144A   8,413,644 
 430,000   ArcelorMittal, 5.500%, 3/01/2021   442,250 
 47,920,000   ArcelorMittal, 6.750%, 3/01/2041   50,604,571 
 19,365,000   ArcelorMittal, 7.000%, 10/15/2039   20,402,969 
 7,688,000   Glencore Funding LLC, 3.875%, 10/27/2027, 144A   6,927,964 
 37,257,000   Glencore Funding LLC, 4.000%, 3/27/2027, 144A   33,940,301 
 3,200,000   United States Steel Corp., 6.650%, 6/01/2037   2,408,000 
 4,893,000   Worthington Industries, Inc., 6.500%, 4/15/2020   5,056,661 
    

 

 

 
     160,117,405 
    

 

 

 
  Midstream — 3.0%

 

 14,040,000   Andeavor Logistics LP/Tesoro Logistics Finance Corp., 4.250%, 12/01/2027   13,253,832 
 650,000   DCP Midstream Operating LP, 6.450%, 11/03/2036, 144A   630,500 
 7,000,000   Energy Transfer Operating LP, 4.950%, 6/15/2028   6,848,893 
 340,000   EnLink Midstream Partners LP, 5.050%, 4/01/2045   265,631 
 30,850,000   EnLink Midstream Partners LP, 5.450%, 6/01/2047   24,949,189 
 1,845,000   EnLink Midstream Partners LP, 5.600%, 4/01/2044   1,515,655 
 26,650,000   EQM Midstream Partners LP, Series 10Y, 5.500%, 7/15/2028   26,100,997 
 3,328,000   Florida Gas Transmission Co. LLC, 7.900%, 5/15/2019, 144A   3,377,999 
 14,300,000   IFM U.S. Colonial Pipeline 2 LLC, 6.450%, 5/01/2021, 144A   14,932,372 
 14,660,000   Kinder Morgan Energy Partners LP, 3.500%, 9/01/2023   14,240,304 
 3,105,000   Kinder Morgan Energy Partners LP, 5.300%, 9/15/2020   3,188,949 
 7,461,000   Kinder Morgan Energy Partners LP, 5.800%, 3/01/2021   7,787,316 
 85,000   NGPL PipeCo LLC, 7.768%, 12/15/2037, 144A   96,900 
 1,404,000   Panhandle Eastern Pipe Line Co. LP, 8.125%, 6/01/2019   1,430,568 
 225,000   Plains All American Pipeline LP / PAA Finance Corp., 2.850%, 1/31/2023   212,092 
 37,150,000   Sunoco Logistics Partners Operations LP, 4.000%, 10/01/2027   34,027,324 
 8,405,000   Williams Cos., Inc., 3.350%, 8/15/2022   8,225,329 
    

 

 

 
     161,083,850 
    

 

 

 

 

See accompanying notes to financial statements.

 

|  32


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Mortgage Related — 0.0%

 

$15,532   FHLMC, 5.000%, 12/01/2031  $16,301 
 1,952   FNMA, 6.000%, 7/01/2029   2,127 
    

 

 

 
     18,428 
    

 

 

 
  Non-Agency Commercial Mortgage-Backed Securities — 0.5%

 

 10,402,518   Commercial Mortgage Pass Through Certificates, Series 2014-LC15, Class A2, 2.840%, 4/10/2047   10,390,738 
 6,532,669   Commercial Mortgage Pass Through Certificates, Series 2014-UBS4, Class A2, 2.963%, 8/10/2047   6,521,868 
 4,453,948   JP Morgan Chase Commercial Mortgage Securities Trust,
Series2014-C20, Class A2, 2.872%, 7/15/2047
   4,441,348 
 760,407   Morgan Stanley Bank of America Merrill Lynch Trust, Series2014-C14, Class A2, 2.916%, 2/15/2047   759,255 
 3,456,000   Morgan Stanley Capital I Trust, Series2011-C2, Class E,
5.485%, 6/15/2044, 144A(b)
   3,315,007 
 2,125,000   WFRBS Commercial Mortgage Trust, Series2011-C3, Class D, 5.683%, 3/15/2044, 144A(b)   1,930,554 
    

 

 

 
     27,358,770 
    

 

 

 
  Paper — 1.4%

 

 6,400,000   International Paper Co., 8.700%, 6/15/2038   8,514,103 
 4,600,000   WestRock MWV LLC, 7.550%, 3/01/2047(e)(f)   5,617,986 
 4,273,000   WestRock MWV LLC, 8.200%, 1/15/2030   5,424,959 
 26,007,000   Weyerhaeuser Co., 6.875%, 12/15/2033   30,970,713 
 7,374,000   Weyerhaeuser Co., 7.375%, 10/01/2019   7,576,979 
 13,539,000   Weyerhaeuser Co., 7.375%, 3/15/2032   16,555,984 
    

 

 

 
     74,660,724 
    

 

 

 
  Pharmaceuticals — 1.4%

 

 27,550,000   Gilead Science, Inc., 2.550%, 9/01/2020   27,327,189 
 27,080,000   GlaxoSmithKline Capital PLC, 3.125%, 5/14/2021   27,114,122 
 11,625,000   Teva Pharmaceutical Finance Netherlands III BV, 2.800%, 7/21/2023   10,011,979 
 8,000,000   Teva Pharmaceutical Finance Netherlands III BV, 3.150%, 10/01/2026   6,105,717 
 5,500,000   Teva Pharmaceutical Finance Netherlands III BV, 6.000%, 4/15/2024   5,297,674 
    

 

 

 
     75,856,681 
    

 

 

 
  Property & Casualty Insurance — 0.1%

 

 2,740,000   Fidelity National Financial, Inc., 5.500%, 9/01/2022   2,898,380 
    

 

 

 
  Railroads — 0.2%

 

 9,787,000   Canadian Pacific Railway Co., 7.250%, 5/15/2019   9,925,393 
    

 

 

 
  REITs – Health Care — 0.1%

 

 5,972,000   Welltower, Inc., 6.500%, 3/15/2041   6,974,392 
    

 

 

 
  REITs – Single Tenant — 0.2%

 

 8,690,000   Realty Income Corp., 5.750%, 1/15/2021   9,041,464 
    

 

 

 
  Retailers — 1.3%

 

 1,255,000   Group 1 Automotive, Inc., 5.000%, 6/01/2022   1,189,113 
 8,064,000   Marks & Spencer PLC, 7.125%, 12/01/2037, 144A   8,540,159 

 

See accompanying notes to financial statements.

 

33  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Retailers — continued

 

$3,755,000   PVH Corp., 7.750%, 11/15/2023  $4,149,275 
 53,830,000   Walmart, Inc., 3.125%, 6/23/2021   54,212,484 
    

 

 

 
     68,091,031 
    

 

 

 
  Supermarkets — 0.0%

 

 325,000   Koninklijke Ahold Delhaize NV, 5.700%, 10/01/2040   351,645 
    

 

 

 
  Supranational — 1.4%

 

 55,000,000   European Investment Bank, 1.625%, 12/15/2020   53,966,217 
 20,000,000   International Bank for Reconstruction & Development, Series GDIF, 2.750%, 7/23/2021   20,081,340 
    

 

 

 
     74,047,557 
    

 

 

 
  Technology — 7.0%

 

 54,860,000   Apple, Inc., 2.850%, 5/06/2021   54,927,055 
 27,985,000   Avnet, Inc., 4.625%, 4/15/2026   27,342,087 
 22,415,000   Broadcom Corp. / Broadcom Cayman Finance Ltd., 3.000%, 1/15/2022   21,556,582 
 27,558,000   Cisco Systems, Inc., 1.850%, 9/20/2021   26,796,254 
 22,066,000   Cisco Systems, Inc., 2.200%, 2/28/2021   21,773,609 
 5,937,000   Cisco Systems, Inc., 2.450%, 6/15/2020   5,905,493 
 25,760,000   Dell International LLC/EMC Corp., 6.020%, 6/15/2026, 144A   25,876,480 
 13,560,000   Equifax, Inc., 3.600%, 8/15/2021   13,539,871 
 11,200,000   Intel Corp., 3.300%, 10/01/2021   11,318,605 
 27,875,000   International Business Machines Corp., 2.250%, 2/19/2021   27,313,370 
 7,440,000   Jabil, Inc., 4.700%, 9/15/2022   7,365,600 
 16,735,000   KLA-Tencor Corp., 5.650%, 11/01/2034   17,059,853 
 56,595,000   Microsoft Corp., 1.550%, 8/08/2021(a)   54,980,164 
 51,515,000   Oracle Corp., 1.900%, 9/15/2021   49,980,238 
 5,000,000   Oracle Corp., 2.800%, 7/08/2021   4,975,754 
    

 

 

 
     370,711,015 
    

 

 

 
  Treasuries — 7.0%

 

 391,985,000   Iceland Government International Bond, 7.250%, 10/26/2022, (ISK)   3,219,443 
 1,195,394,000   Iceland Government International Bond, 8.750%, 2/26/2019, (ISK)   9,315,733 
 210,910,000   U.S. Treasury Bond, 3.000%, 8/15/2048   209,913,121 
 150,000,000   U.S. Treasury Note, 1.250%, 6/30/2019   149,062,500 
    

 

 

 
     371,510,797 
    

 

 

 
  Wireless — 0.5%

 

 28,200,000   America Movil SAB de CV, 8.460%, 12/18/2036, (MXN)   1,140,814 
 22,660,000   Crown Castle International Corp., 3.650%, 9/01/2027   21,006,740 
 6,615,000   Crown Castle International Corp., 4.000%, 3/01/2027   6,442,780 
    

 

 

 
     28,590,334 
    

 

 

 
  Wirelines — 1.5%

 

 61,415,000   AT&T, Inc., 4.300%, 2/15/2030   58,036,298 
 2,936,000   BellSouth Telecommunications LLC, 5.850%, 11/15/2045   2,884,150 
 3,990,000   CenturyLink, Inc., Series G, 6.875%, 1/15/2028   3,511,200 

 

See accompanying notes to financial statements.

 

|  34


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Principal
Amount (‡)
   Description  Value (†) 
  Wirelines — continued

 

$11,700,000   Qwest Corp., 6.875%, 9/15/2033  $10,452,113 
 5,000,000   Qwest Corp., 7.250%, 9/15/2025   5,147,912 
    

 

 

 
     80,031,673 
    

 

 

 
  TotalNon-Convertible Bonds
(Identified Cost $4,237,296,553)
   4,345,702,090 
    

 

 

 
    
 Convertible Bonds — 1.4% 
  Cable Satellite — 0.2%

 

 9,050,000   DISH Network Corp., 2.375%, 3/15/2024   7,205,303 
 6,190,000   DISH Network Corp., 3.375%, 8/15/2026   4,998,524 
    

 

 

 
     12,203,827 
    

 

 

 
  Independent Energy — 0.1%

 

 8,905,000   Chesapeake Energy Corp., 5.500%, 9/15/2026   7,167,296 
    

 

 

 
  Industrial Other — 0.1%

 

 4,635,000   Tutor Perini Corp., 2.875%, 6/15/2021   4,266,281 
    

 

 

 
  Oil Field Services — 0.3%

 

 22,120,000   Nabors Industries, Inc., 0.750%, 1/15/2024   13,664,188 
    

 

 

 
  Pharmaceuticals — 0.1%

 

 7,895,000   BioMarin Pharmaceutical, Inc., 0.599%, 8/01/2024   7,850,780 
    

 

 

 
  Railroads — 0.1%

 

 5,165,000   Greenbrier Cos., Inc. (The), 2.875%, 2/01/2024   5,075,356 
    

 

 

 
  REITs – Diversified — 0.3%

 

 14,630,000   iStar, Inc., 3.125%, 9/15/2022   13,182,215 
    

 

 

 
  Technology — 0.2%

 

 11,409,000   Finisar Corp., 0.500%, 12/15/2036   10,829,651 
    

 

 

 
  Total Convertible Bonds
(Identified Cost $81,913,052)
   74,239,594 
    

 

 

 
    
 Municipals — 0.3% 
  Illinois — 0.2%

 

 9,150,000   State of Illinois, 5.100%, 6/01/2033   8,723,885 
    

 

 

 
  Michigan — 0.0%

 

 1,660,000   Michigan Tobacco Settlement Finance Authority Taxable Turbo, Series A, 7.309%, 6/01/2034   1,620,226 
    

 

 

 
  Virginia — 0.1%

 

 7,705,000   Virginia Tobacco Settlement Financing Corp., SeriesA-1, 6.706%, 6/01/2046   7,270,977 
    

 

 

 
  Total Municipals
(Identified Cost $16,431,045)
   17,615,088 
    

 

 

 
    
  Total Bonds and Notes
(Identified Cost $4,335,640,650)
   4,437,556,772 
    

 

 

 

 

See accompanying notes to financial statements.

 

35  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

    
Shares
   Description  Value (†) 
 Preferred Stocks — 0.3% 
  Food & Beverage — 0.2%

 

 128,227   Bunge Ltd., 4.875%  $12,452,329 
    

 

 

 
  Independent Energy — 0.1%

 

 43,031   Chesapeake Energy Corp., 5.000%   2,232,448 
    

 

 

 
  Total Preferred Stocks
(Identified Cost $16,894,208)
   14,684,777 
    

 

 

 
    
Principal
Amount (‡)
          
 Short-Term Investments — 15.3% 
$164,580,277   Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $164,593,992 on 1/02/2019 collateralized by $94,160,000 U.S. Treasury Bond, 2.750% due 11/15/2042 valued at $90,064,793; $75,675,000 U.S. Treasury Bond, 3.125% due 2/15/2043 valued at $77,810,776 including accrued interest (Note 2 of Notes to Financial Statements)   164,580,277 
 325,000,000   U.S. Treasury Bills, 2.157% - 2.277%, 1/03/2019(j)(k)   324,979,688 
 180,000,000   U.S. Treasury Bills, 2.160% - 2.200%, 4/25/2019(j)(k)   178,640,469 
 150,000,000   U.S. Treasury Bills, 2.261%, 1/17/2019(j)   149,857,188 
    

 

 

 
  Total Short-Term Investments
(Identified Cost $818,140,356)
   818,057,622 
    

 

 

 
    
  Total Investments — 98.9%
(Identified Cost $5,170,675,214)
   5,270,299,171 
  Other assets less liabilities — 1.1%   57,969,568 
    

 

 

 
  Net Assets — 100.0%  $5,328,268,739 
    

 

 

 
    
 (‡)   Principal Amount stated in U.S. dollars unless otherwise noted.  
 (†)   See Note 2 of Notes to Financial Statements.  
 (a)   Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.

 

 (b)   Variable rate security. The interest rate adjusts periodically based on; (i) changes in current interest rates and/or prepayments on underlying pools of assets, if applicable, (ii) reference to a base lending rate plus or minus a margin, and/or (iii) reference to a base lending rate adjusted by a multiplier and/or subject to certain floors or caps. Rate as of December 31, 2018 is disclosed.

 

 (c)   Variable rate security. Rate as of December 31, 2018 is disclosed.

 

 (d)   Level 3 security. Value has been determined using significant unobservable inputs. See Note 3 of Notes to Financial Statements.

 

 (e)   Illiquid security. (Unaudited)

 

 (f)   Securities classified as fair valued pursuant to the Fund’s pricing policies and procedures. At December 31, 2018, the value of these securities amounted to $110,975,934 or 2.1% of net assets. See Note 2 of Notes to Financial Statements.

 

 (g)   The issuer is in default with respect to interest and/or principal payments. Income is not being accrued.

 

 

See accompanying notes to financial statements.

 

|  36


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

    
 (h)   Payment-in-kind security for which the issuer has the option at each interest payment date of making interest payments in cash or additional principal. No payments were made during the period.

 

 (i)   Fair valued by the Fund’s adviser. At December 31, 2018, the value of this security amounted to $845 or less than 0.1% of net assets. See Note 2 of Notes to Financial Statements.

 

 (j)   Interest rate represents discount rate at time of purchase; not a coupon rate.

 

 (k)   The Fund’s investment in U.S. Government/Agency securities is comprised of various lots with differing discount rates. These separate investments, which have the same maturity date, have been aggregated for the purpose of presentation in the Portfolio of Investments.

 

  
 144A   All or a portion of these securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2018, the value of Rule 144A holdings amounted to $933,863,476 or 17.5% of net assets.

 

 ABS   Asset-Backed Securities  
 ARS   Auction Rate Security  
 FHLMC   Federal Home Loan Mortgage Corp.  
 FNMA   Federal National Mortgage Association  
 GMTN   Global Medium Term Note  
 LIBOR   London Interbank Offered Rate  
 MTN   Medium Term Note  
 PIK   Payment-in-Kind  
 REITs   Real Estate Investment Trusts�� 
 SLM   Sallie Mae  
    
 ISK   Icelandic Krona  
 MXN   Mexican Peso  

At December 31, 2018, the Fund had the following open forward foreign currency contracts:

 

Counterparty Delivery
Date
  Currency
Bought/
Sold (B/S)
  Units
of
Currency
  In Exchange for
  Notional
Value
  Unrealized
Appreciation
(Depreciation)
 

BNP Paribas S.A.

  2/14/2019   MXN   B   563,000,000  $27,859,312  $28,464,557  $605,245 

BNP Paribas S.A.

  2/14/2019   MXN   S   563,000,000   27,188,611   28,464,557   (1,275,946
       

 

 

 

Total

 

 $(670,701
 

 

 

 

 

See accompanying notes to financial statements.

 

37  |


Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Investment Grade Bond Fund – (continued)

 

Industry Summary at December 31, 2018

 

Banking

   8.6

Technology

   7.2 

Treasuries

   7.0 

ABS Credit Card

   4.8 

ABS Car Loan

   4.3 

Midstream

   3.0 

Metals & Mining

   3.0 

Independent Energy

   2.5 

Integrated Energy

   2.4 

Food & Beverage

   2.3 

ABS Other

   2.3 

Healthcare

   2.0 

Life Insurance

   2.0 

Finance Companies

   2.0 

Other Investments, less than 2% each

   30.2 

Short-Term Investments

   15.3 
  

 

 

 

Total Investments

   98.9 

Other assets less liabilities (including forward foreign currency contracts)

   1.1 
  

 

 

 

Net Assets

   100.0
  

 

 

 

 

See accompanying notes to financial statements.

 

|  38


Table of Contents

Statements of Assets and Liabilities

 

December 31, 2018

 

   High Income
Fund
  Investment
Grade Bond
Fund
 

ASSETS

 

Investments at cost

  $139,164,283  $5,006,094,937 

Repurchase agreement(s) at cost

   28,093,324   164,580,277 

Net unrealized appreciation (depreciation)

   (9,528,299  99,623,957 
  

 

 

  

 

 

 

Investments at value

   157,729,308   5,270,299,171 

Cash

      8,042,993 

Due from brokers (Note 2)

      650,000 

Foreign currency at value (identified cost $0 and $392,424, respectively)

      390,690 

Receivable for Fund shares sold

   1,804,078   26,936,605 

Receivable for securities sold

   1,204,444   8,189,938 

Interest receivable

   2,056,733   42,866,676 

Unrealized appreciation on forward foreign currency contracts (Note 2)

   29,351   605,245 

Tax reclaims receivable

   147    

Receivable from distributor (Note 6d)

   3,486    

Prepaid expenses (Note 8)

   92   3,272 
  

 

 

  

 

 

 

TOTAL ASSETS

   162,827,639   5,357,984,590 
  

 

 

  

 

 

 

LIABILITIES

 

Payable for securities purchased

   669,943   3,065,646 

Payable for Fund shares redeemed

   24,638,197   22,224,798 

Unrealized depreciation on forward foreign currency contracts (Note 2)

   73,445   1,275,946 

Payable to custodian bank (Note 9)

   574,563    

Management fees payable (Note 6)

   89,292   1,638,811 

Deferred Trustees’ fees (Note 6)

   165,660   810,708 

Administrative fees payable (Note 6)

   5,564   190,246 

Payable to distributor (Note 6d)

      43,332 

Other accounts payable and accrued expenses

   132,741   466,364 
  

 

 

  

 

 

 

TOTAL LIABILITIES

   26,349,405   29,715,851 
  

 

 

  

 

 

 

NET ASSETS

  $136,478,234  $5,328,268,739 
  

 

 

  

 

 

 

NET ASSETS CONSIST OF:

 

Paid-in capital

  $151,345,089  $5,261,146,622 

Accumulated earnings (loss)

   (14,866,855  67,122,117 
  

 

 

  

 

 

 

NET ASSETS

  $136,478,234  $5,328,268,739 
  

 

 

  

 

 

 

 

See accompanying notes to financial statements.

 

39  |


Table of Contents

Statements of Assets and Liabilities (continued)

 

December 31, 2018

 

   High Income
Fund
   Investment
Grade Bond
Fund
 

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:

 

Class A shares:

 

Net assets

  $23,124,984   $721,110,403 
  

 

 

   

 

 

 

Shares of beneficial interest

   5,793,694    66,927,244 
  

 

 

   

 

 

 

Net asset value and redemption price per share

  $3.99   $10.77 
  

 

 

   

 

 

 

Offering price per share (100/95.75 of net asset value) (Note 1)

  $4.17   $11.25 
  

 

 

   

 

 

 

Class C shares:(redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1)

    

Net assets

  $5,351,267   $366,067,920 
  

 

 

   

 

 

 

Shares of beneficial interest

   1,336,216    34,361,115 
  

 

 

   

 

 

 

Net asset value and offering price per share

  $4.00   $10.65 
  

 

 

   

 

 

 

Class N shares:

 

Net assets

  $10,416,683   $1,216,689,786 
  

 

 

   

 

 

 

Shares of beneficial interest

   2,613,650    112,915,763 
  

 

 

   

 

 

 

Net asset value, offering and redemption price per share

  $3.99   $10.78 
  

 

 

   

 

 

 

Class Y shares:

 

Net assets

  $97,585,300   $2,912,536,511 
  

 

 

   

 

 

 

Shares of beneficial interest

   24,516,967    270,139,856 
  

 

 

   

 

 

 

Net asset value, offering and redemption price per share

  $3.98   $10.78 
  

 

 

   

 

 

 

Admin Class shares:

 

Net assets

  $   $111,864,119 
  

 

 

   

 

 

 

Shares of beneficial interest

       10,408,996 
  

 

 

   

 

 

 

Net asset value, offering and redemption price per share

  $   $10.75 
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

|  40


Table of Contents

Statements of Operations

 

 

  High Income Fund  Investment Grade Bond Fund 
  Period Ended
December 31,
2018(a)
  Year Ended
September 30,
2018
  Period Ended
December 31,
2018(a)
  Year Ended
September 30,
2018
 

INVESTMENT INCOME

 

Interest

 $2,504,410  $9,812,890  $52,387,566  $208,583,162 

Dividends

  71,928   215,042   769,241   3,275,378 

Less net foreign taxes withheld

     (1,444      
 

 

 

  

 

 

  

 

 

  

 

 

 
  2,576,338   10,026,488   53,156,807   211,858,540 
 

 

 

  

 

 

  

 

 

  

 

 

 

Expenses

 

Management fees (Note 6)

  249,773   1,042,957   5,487,700   24,064,905 

Service and distribution fees (Note 6)

  30,233   163,550   1,591,374   7,990,970 

Administrative fees (Note 6)

  18,014   76,503   599,847   2,648,877 

Trustees’ fees and expenses

  3,364   33,532   24,555   233,306 

Transfer agent fees and expenses (Notes 6 and 7)

  51,169   205,041   930,158   4,648,637 

Audit and tax services fees

  44,550   52,781   51,181   63,525 

Custodian fees and expenses

  6,775   24,257   60,655   267,227 

Legal fees

  514   3,583   15,762   122,938 

Registration fees

  32,319   77,187   107,118   258,232 

Shareholder reporting expenses

  14,382   44,024   180,955   714,099 

Miscellaneous expenses (Notes 6 and 8)

  1,352   17,988   74,456   159,795 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total expenses

  452,445   1,741,403   9,123,761   41,172,511 

Less waiver and/or expense reimbursement (Note 6)

  (90,480  (190,287  (417,839  (1,270,386
 

 

 

  

 

 

  

 

 

  

 

 

 

Net expenses

  361,965   1,551,116   8,705,922   39,902,125 
 

 

 

  

 

 

  

 

 

  

 

 

 

Net investment income

  2,214,373   8,475,372   44,450,885   171,956,415 
 

 

 

  

 

 

  

 

 

  

 

 

 

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS

    

Net realized gain (loss) on:

 

Investments

  (6,566,560  1,405,486   (228,344,316  (64,668,766

Forward foreign currency contracts (Note 2d)

  219,012   (165,859      

Foreign currency transactions (Note 2c)

  (40,168  (34,283  (115,605  (4,121,375

Net change in unrealized appreciation (depreciation) on:

    

Investments

  (3,397,911  (7,071,893  151,497,842   (88,563,612

Forward foreign currency contracts (Note 2d)

  (128,778  84,684   (670,701   

Foreign currency translations (Note 2c)

  43,143   (42,550  (154,049  193,101 
 

 

 

  

 

 

  

 

 

  

 

 

 

Net realized and unrealized loss on investments, forward foreign currency contracts and foreign currency transactions

  (9,871,262  (5,824,415  (77,786,829  (157,160,652
 

 

 

  

 

 

  

 

 

  

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

 $(7,656,889 $2,650,957  $(33,335,944 $14,795,763 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

(a)

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

41  |


Table of Contents

Statements of Changes in Net Assets

 

  High Income Fund  Investment Grade Bond Fund 
  Period Ended
December 31,
2018(a)
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Period Ended
December 31,
2018(a)
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
 

FROM OPERATIONS:

 

Net investment income

 $2,214,373  $8,475,372  $8,976,856  $44,450,885  $171,956,415  $205,406,044 

Net realized gain (loss) on investments, forward foreign currency contracts and foreign currency transactions

  (6,387,716  1,205,344   838,850   (228,459,921  (68,790,141  116,825,138 

Net change in unrealized appreciation (depreciation) on investments, forward foreign currency contracts and foreign currency translations

  (3,483,546  (7,029,759  3,999,707   150,673,092   (88,370,511  (91,129,640
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net increase (decrease) in net assets resulting from operations

  (7,656,889  2,650,957   13,815,413   (33,335,944  14,795,763   231,101,542 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

FROM DISTRIBUTIONS TO SHAREHOLDERS:

      

Class A

  (410,882  (1,227,019  (1,577,362)(b)   (9,439,602  (26,935,957  (60,689,574)(b) 

Class C

  (81,814  (311,547  (453,429)(b)   (4,075,458  (15,654,049  (48,818,614)(b) 

Class N

  (178,711  (259,688  (41)(b)   (16,768,000  (41,987,053  (22,304,558)(b) 

Class Y

  (2,141,392  (5,752,686  (6,175,066)(b)   (39,150,105  (111,284,265  (262,616,392)(b) 

Admin Class

           (1,369,684  (778,851  (1,844,361)(b) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total distributions

  (2,812,799  (7,550,940  (8,205,898  (70,802,849  (196,640,175  (396,273,499
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 12)

  (23,511,576  (3,848,432  (2,678,063  (126,167,759  (534,159,760  (345,835,758
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net increase (decrease) in net assets

  (33,981,264  (8,748,415  2,931,452   (230,306,552  (716,004,172  (511,007,715

NET ASSETS

 

Beginning of the year

  170,459,498   179,207,913   176,276,461   5,558,575,291   6,274,579,463   6,785,587,178 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

End of the year

 $136,478,234  $170,459,498  $179,207,913  $5,328,268,739  $5,558,575,291  $6,274,579,463 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(a)

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(b)

See Note 2g of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  42


Table of Contents

Financial Highlights

 

For a share outstanding throughout each period.

 

  High Income Fund—Class A 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $4.25  $4.37  $4.23  $3.99  $4.49  $4.59 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.05   0.20   0.22   0.20   0.19   0.21 

Net realized and unrealized gain (loss)

  (0.24  (0.14  0.12   0.21   (0.39  0.17 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.19  0.06   0.34   0.41   (0.20  0.38 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.06  (0.18  (0.20  (0.16  (0.19  (0.22

Net realized capital gains

  (0.01        (0.01  (0.11  (0.26
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.07  (0.18  (0.20  (0.17  (0.30  (0.48
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $3.99  $4.25  $4.37  $4.23  $3.99  $4.49 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return(b)

  (4.54)%(c)(d)   1.41%(c)   8.17%(c)   10.66%(c)   (4.78)%(c)   8.42

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $23,125  $26,175  $34,039  $34,820  $37,870  $42,630 

Net expenses

  1.05%(e)(f)   1.05%(e)   1.09%(e)(g)   1.10%(e)   1.11%(e)(h)   1.14

Gross expenses

  1.27%(f)   1.16  1.15  1.14  1.13  1.14

Net investment income

  5.13%(f)   4.73  5.03  5.16  4.41  4.57

Portfolio turnover rate

  17  55  46  38  69  59

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

Periods less than one year are not annualized.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Computed on an annualized basis for periods less than one year.

(g)

Effective July 1, 2017, the expense limit decreased to 1.05%.

(h)

Effective July 1, 2015, the expense limit decreased to 1.10%.

 

See accompanying notes to financial statements.

 

43  |


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  High Income Fund—Class C 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $4.27  $4.38  $4.24  $4.00  $4.50  $4.61 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.05   0.17   0.18   0.18   0.16   0.18 

Net realized and unrealized gain (loss)

  (0.26  (0.13  0.12   0.20   (0.39  0.16 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.21  0.04   0.30   0.38   (0.23  0.34 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.05  (0.15  (0.16  (0.13  (0.16  (0.19

Net realized capital gains

  (0.01        (0.01  (0.11  (0.26
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.06  (0.15  (0.16  (0.14  (0.27  (0.45
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $4.00  $4.27  $4.38  $4.24  $4.00  $4.50 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return(b)

  (4.95)%(c)(d)   0.86%(c)   7.33%(c)   9.81%(c)   (5.48)%(c)   7.60

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $5,351  $6,248  $11,227  $12,288  $12,609  $14,555 

Net expenses

  1.80%(e)(f)   1.80%(e)   1.84%(e)(g)   1.85%(e)   1.86%(e)(h)   1.89

Gross expenses

  2.02%(f)   1.91  1.90  1.89  1.88  1.89

Net investment income

  4.38%(f)   3.99  4.29  4.43  3.68  3.84

Portfolio turnover rate

  17  55  46  38  69  59

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

Periods less than one year are not annualized.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Computed on an annualized basis for periods less than one year.

(g)

Effective July 1, 2017, the expense limit decreased to 1.80%.

(h)

Effective July 1, 2015, the expense limit decreased to 1.85%.

 

See accompanying notes to financial statements.

 

|  44


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  High Income Fund—Class N 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Period Ended
September 30,
2017**
 

Net asset value, beginning of the period

 $4.25  $4.36  $4.16 
 

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

   

Net investment income(a)

  0.06   0.20   0.19 

Net realized and unrealized gain (loss)

  (0.25  (0.12  0.18 
 

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.19  0.08   0.37 
 

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

   

Net investment income

  (0.06  (0.19  (0.17

Net realized capital gains

  (0.01      
 

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.07  (0.19  (0.17
 

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $3.99  $4.25  $4.36 
 

 

 

  

 

 

  

 

 

 

Total return(b)

  (4.47)%(c)   1.96  8.99%(c) 

RATIOS TO AVERAGE NET ASSETS:

   

Net assets, end of the period (000’s)

 $10,417  $10,338  $1 

Net expenses(d)

  0.75%(e)   0.75  0.75%(e)(f) 

Gross expenses

  0.89%(e)   0.79  31.73%(e) 

Net investment income

  5.45%(e)   4.65  5.19%(e) 

Portfolio turnover rate

  17  55  46%(g) 

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

**

From commencement of Class operations on November 30, 2016 through September 30, 2017.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Computed on an annualized basis for periods less than one year.

(f)

Effective July 1, 2017, the expense limit decreased to 0.75%.

(g)

Represents the Fund’s portfolio turnover rate for the year ended September 30, 2017.

 

See accompanying notes to financial statements.

 

45  |


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  High Income Fund—Class Y 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $4.24  $4.36  $4.22  $3.98  $4.48  $4.59 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.06   0.21   0.23   0.21   0.20   0.22 

Net realized and unrealized gain (loss)

  (0.25  (0.14  0.12   0.21   (0.39  0.16 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.19  0.07   0.35   0.42   (0.19  0.38 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.06  (0.19  (0.21  (0.17  (0.20  (0.23

Net realized capital gains

  (0.01        (0.01  (0.11  (0.26
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.07  (0.19  (0.21  (0.18  (0.31  (0.49
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $3.98  $4.24  $4.36  $4.22  $3.98  $4.48 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return

  (4.49)%(b)(c)   1.68%(b)   8.47%(b)   10.98%(b)   (4.54)%(b)   8.72

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $97,585  $127,699  $133,940  $129,169  $116,837  $125,185 

Net expenses

  0.80%(d)(e)   0.80%(d)   0.84%(d)(f)   0.85%(d)   0.86%(d)(g)   0.89

Gross expenses

  1.02%(e)   0.91  0.90  0.89  0.88  0.89

Net investment income

  5.39%(e)   4.98  5.28  5.43  4.67  4.83

Portfolio turnover rate

  17  55  46  38  69  59

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Computed on an annualized basis for periods less than one year.

(f)

Effective July 1, 2017, the expense limit decreased to 0.80%.

(g)

Effective July 1, 2015, the expense limit decreased to 0.85%.

 

See accompanying notes to financial statements.

 

|  46


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  Investment Grade Bond Fund—Class A 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $10.98  $11.30  $11.59  $11.10  $12.11  $12.22 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.08   0.30   0.36   0.39   0.40   0.46 

Net realized and unrealized gain (loss)

  (0.16  (0.28  0.05   0.48   (0.95  0.26 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.08  0.02   0.41   0.87   (0.55  0.72 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.08  (0.21  (0.26  (0.23  (0.34  (0.51

Net realized capital gains

  (0.05  (0.13  (0.44  (0.15  (0.12  (0.32
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.13  (0.34  (0.70  (0.38  (0.46  (0.83
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $10.77  $10.98  $11.30  $11.59  $11.10  $12.11 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return(b)

  (0.66)%(c)(d)   0.19%(c)   3.88  8.06  (4.72)%   6.04

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $721,110  $777,391  $902,955  $1,130,260  $1,628,216  $1,932,847 

Net expenses

  0.78%(e)(f)   0.80%(e)(g)   0.82%(h)   0.85  0.83  0.83

Gross expenses

  0.82%(f)   0.82  0.82  0.85  0.83  0.83

Net investment income

  3.09%(f)   2.73  3.23  3.49  3.38  3.75

Portfolio turnover rate

  39%(i)   3  10  11  23  19

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

Periods less than one year are not annualized.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Computed on an annualized basis for periods less than one year.

(g)

Effective July 1, 2018, the expense limit decreased to 0.78%.

(h)

Effective July 1, 2017, the expense limit decreased to 0.80%.

(i)

The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

47  |


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  Investment Grade Bond Fund—Class C 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $10.86  $11.19  $11.48  $11.00  $12.00  $12.11 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.06   0.22   0.27   0.30   0.31   0.36 

Net realized and unrealized gain (loss)

  (0.16  (0.28  0.06   0.47   (0.94  0.27 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.10  (0.06  0.33   0.77   (0.63  0.63 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.06  (0.14  (0.18  (0.14  (0.25  (0.42

Net realized capital gains

  (0.05  (0.13  (0.44  (0.15  (0.12  (0.32
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.11  (0.27  (0.62  (0.29  (0.37  (0.74
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $10.65  $10.86  $11.19  $11.48  $11.00  $12.00 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return(b)

  (0.86)%(c)(d)   (0.53)%(d)   3.12  7.18  (5.40)%   5.29

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $366,068  $412,788  $689,798  $1,001,522  $1,219,687  $1,524,806 

Net expenses

  1.53%(e)(f)   1.55%(e)(g)   1.57%(h)   1.60  1.58  1.58

Gross expenses

  1.57%(f)   1.57  1.57  1.60  1.58  1.58

Net investment income

  2.34%(f)   1.96  2.49  2.74  2.63  3.00

Portfolio turnover rate

  39%(i)   3  10  11  23  19

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(c)

Periods less than one year are not annualized.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Computed on an annualized basis for periods less than one year.

(g)

Effective July 1, 2018, the expense limit decreased to 1.53%.

(h)

Effective July 1, 2017, the expense limit decreased to 1.55%.

(i)

The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

|  48


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  Investment Grade Bond Fund—Class N 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $10.98  $11.30  $11.58  $11.11  $12.11  $12.22 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.09   0.34   0.39   0.43   0.44   0.50 

Net realized and unrealized gain (loss)

  (0.15  (0.28  0.07   0.47   (0.93  0.26 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.06  0.06   0.46   0.90   (0.49  0.76 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.09  (0.25  (0.30  (0.28  (0.39  (0.55

Net realized capital gains

  (0.05  (0.13  (0.44  (0.15  (0.12  (0.32
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.14  (0.38  (0.74  (0.43  (0.51  (0.87
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $10.78  $10.98  $11.30  $11.58  $11.11  $12.11 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return

  (0.58)%(b)   0.50  4.34  8.31  (4.28)%   6.41

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $1,216,690  $1,251,189  $1,203,169  $47,343  $21,851  $6,101 

Net expenses

  0.48%(c)   0.47%(d)   0.48%(e)   0.47  0.47  0.47%(f) 

Gross expenses

  0.48%(c)   0.47  0.48  0.47  0.47  0.47%(f) 

Net investment income

  3.40%(c)   3.05  3.51  3.88  3.78  4.07

Portfolio turnover rate

  39%(g)   3  10  11  23  19

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Periods less than one year are not annualized.

(c)

Computed on an annualized basis for periods less than one year.

(d)

Effective July 1, 2018, the expense limit decreased to 0.48%.

(e)

Effective July 1, 2017, the expense limit increased to 0.50%.

(f)

Includes fee/expense recovery of less than 0.01%.

(g)

The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

49  |


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  Investment Grade Bond Fund—Class Y 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $10.99  $11.31  $11.59  $11.11  $12.12  $12.23 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.09   0.33   0.39   0.42   0.43   0.49 

Net realized and unrealized gain (loss)

  (0.16  (0.28  0.06   0.47   (0.95  0.26 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.07  0.05   0.45   0.89   (0.52  0.75 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.09  (0.24  (0.29  (0.26  (0.37  (0.54

Net realized capital gains

  (0.05  (0.13  (0.44  (0.15  (0.12  (0.32
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.14  (0.37  (0.73  (0.41  (0.49  (0.86
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $10.78  $10.99  $11.31  $11.59  $11.11  $12.12 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return

  (0.59)%(b)(c)   0.43%(c)   4.24  8.25  (4.47)%   6.30

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $2,912,537  $3,001,906  $3,453,137  $4,571,167  $6,081,536  $6,911,938 

Net expenses

  0.53%(d)(e)   0.55%(d)(f)   0.57%(g)   0.60  0.58  0.59

Gross expenses

  0.57%(e)   0.57  0.57  0.60  0.58  0.59

Net investment income

  3.35%(e)   2.98  3.48  3.74  3.63  3.99

Portfolio turnover rate

  39%(h)   3  10  11  23  19

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Periods less than one year are not annualized.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Computed on an annualized basis for periods less than one year.

(f)

Effective July 1, 2018, the expense limit decreased to 0.53%.

(g)

Effective July 1, 2017, the expense limit decreased to 0.55%.

(h)

The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

|  50


Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

  Investment Grade Bond Fund—Admin Class 
  Period Ended
December 31,
2018*
  Year Ended
September 30,
2018
  Year Ended
September 30,
2017
  Year Ended
September 30,
2016
  Year Ended
September 30,
2015
  Year Ended
September 30,
2014
 

Net asset value, beginning of the period

 $10.95  $11.28  $11.56  $11.08  $12.09  $12.20 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

      

Net investment income(a)

  0.08   0.28   0.34   0.37   0.37   0.43 

Net realized and unrealized gain (loss)

  (0.15  (0.28  0.06   0.47   (0.95  0.26 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total from Investment Operations

  (0.07  0.00(b)   0.40   0.84   (0.58  0.69 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LESS DISTRIBUTIONS FROM:

      

Net investment income

  (0.08  (0.20  (0.24  (0.21  (0.31  (0.48

Net realized capital gains

  (0.05  (0.13  (0.44  (0.15  (0.12  (0.32
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Distributions

  (0.13  (0.33  (0.68  (0.36  (0.43  (0.80
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net asset value, end of the period

 $10.75  $10.95  $11.28  $11.56  $11.08  $12.09 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total return

  (0.63)%(c)(d)   (0.07)%(d)   3.76%(d)   7.73  (4.95)%   5.79

RATIOS TO AVERAGE NET ASSETS:

      

Net assets, end of the period (000’s)

 $111,864  $115,301  $25,521  $35,294  $37,355  $25,585 

Net expenses

  1.03%(e)(f)   1.02%(e)(g)(h)   1.02%(e)(i)(j)   1.07%(k)   1.08  1.09

Gross expenses

  1.07%(f)   1.05%(g)   1.03%(i)   1.07%(k)   1.08  1.09

Net investment income

  2.85%(f)   2.56  3.03  3.27  3.14  3.49

Portfolio turnover rate

  39%(l)   3  10  11  23  19

 

*

For the three month period ended December 31, 2018. See Note 1 of Notes to Financial Statements.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

Periods less than one year are not annualized.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Computed on an annualized basis for periods less than one year.

(g)

Includes refund of prior year service fee of 0.02%. See Note 5b of Notes to Financial Statements.

(h)

Effective July 1, 2018, the expense limit decreased to 1.03%.

(i)

Includes refund of prior year service fee of 0.05%.

(j)

Effective July 1, 2017, the expense limit increased to 1.05%.

(k)

Includes refund of prior year service fee of 0.03%.

(l)

The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

51  |


Table of Contents

Notes to Financial Statements

 

December 31, 2018

 

1.  Organization.  Loomis Sayles Funds II (the “Trust”) is organized as a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as anopen-end management investment company. The Declaration of Trust permits the Board of Trustees to authorize the issuance of an unlimited number of shares of the Trust in multiple series. The financial statements for certain funds of the Trust are presented in separate reports. The following funds (individually, a “Fund” and collectively, the “Funds”) are included in this report:

Loomis Sayles High Income Fund (the “High Income Fund”)

Loomis Sayles Investment Grade Bond Fund (the “Investment Grade Bond Fund”)

Each Fund is a diversified investment company.

On October 5, 2018, the Board of Trustees approved a change to the fiscal year end of the Funds from September 30 to December 31. Accordingly, the Funds’ financial statements and related notes include information as of and for the three month period ended December 31, 2018, and the years ended September 30, 2018, and September 30, 2017, where applicable.

Each Fund offers Class A, Class C, Class N and Class Y shares. In addition, Investment Grade Bond Fund also offers Admin Class shares. High Income Fund began offering Class N shares effective November 30, 2016.

Class A shares are sold with a maximumfront-end sales charge of 4.25%. Class C shares do not pay afront-end sales charge, pay higher Rule12b-1 fees than Class A shares for ten years (at which point they automatically convert to Class A shares) and may be subject to a contingent deferred sales charge (“CDSC”) of 1.00% if those shares are redeemed within one year of acquisition, except for reinvested distributions. Class N and Class Y shares do not pay afront-end sales charge, a CDSC or Rule12b-1 fees. Class N shares are offered with an initial minimum investment of $1,000,000. Class Y shares are offered with an initial minimum investment of $100,000. Certain categories of investors are exempted from the minimum investment amounts for Class N and Class Y as outlined in the relevant Funds’ prospectus. Admin Class shares do not pay afront-end sales charge or a CDSC, but do pay a Rule12b-1 fee. Admin Class shares are offered exclusively through intermediaries.

Most expenses can be directly attributed to a Fund. Expenses which cannot be directly attributed to a Fund are generally apportioned based on the relative net assets of each of the funds in Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and Gateway Trust (“Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (“Loomis Sayles Funds Trusts”), and Natixis ETF Trust. Expenses of a Fund are bornepro rata by the holders of each class of shares, except that each class bears expenses unique to that class (such as the Rule12b-1 fees applicable to Class A, Class C and Admin Class), and transfer agent fees are borne collectively for Class A,

 

|  52


Table of Contents

Notes to Financial Statements (continued)

 

December 31, 2018

 

Class C, Class Y, and Admin Class and individually for Class N. In addition, each class votes as a class only with respect to its own Rule12b-1 Plan. Shares of each class would receive theirpro rata share of the net assets of the Fund if the Fund were liquidated. The Trustees approve separate distributions from net investment income on each class of shares.

2.  Significant Accounting Policies.  The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds’ financial statements follow the accounting and reporting guidelines provided for investment companies and are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Management has evaluated the events and transactions subsequent to year-end through the date the financial statements were issued and has determined that there were no material events that would require disclosure in the Funds’ financial statements.

a.  Valuation.  Fund securities and other investments are valued at market value based on market quotations obtained or determined by independent pricing services recommended by the adviser and approved by the Board of Trustees. Fund securities and other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the adviser pursuant to procedures approved by the Board of Trustees, as described below. Market value is determined as follows:

Debt securities and unlisted preferred equity securities are valued based on evaluated bids furnished to the Fund by an independent pricing service or bid prices obtained from broker-dealers. Senior loans are valued at bid prices supplied by an independent pricing service, if available. Listed equity securities (including shares ofclosed-end investment companies and exchange-traded funds) are valued at the last sale price quoted on the exchange where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an independent pricing service. Securities traded on the NASDAQ Global Select Market, NASDAQ Global Market and NASDAQ Capital Market are valued at the NASDAQ Official Closing Price (“NOCP”), or if lacking an NOCP, at the most recent bid quotations on the applicable NASDAQ Market. Unlisted equity securities (except unlisted preferred equity securities) are valued at the last sale price quoted in the market where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an independent pricing service. If there is no last sale price or closing bid quotation available, unlisted equity securities will be valued using evaluated bids furnished by an independent pricing service, if available. In some foreign markets, an official close price and a last sale price may be available from the foreign exchange

 

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or market. In those cases, the official close price is used. Broker-dealer bid prices may be used to value debt and unlisted equity securities and senior loans where an independent pricing service is unable to price a security or where an independent pricing service does not provide a reliable price for the security. Forward foreign currency contracts are valued utilizing interpolated rates determined based on information provided by an independent pricing service. Futures contracts are valued at the most recent settlement price on the exchange on which the adviser believes that, over time, they are traded most extensively.

Fund securities and other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the adviser pursuant to procedures approved by the Board of Trustees. The Funds may also value securities and other investments at fair value in other circumstances such as when extraordinary events occur after the close of a foreign market but prior to the close of the New York Stock Exchange. This may include situations relating to a single issuer (such as a declaration of bankruptcy or a delisting of the issuer’s security from the primary market on which it has traded) as well as events affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets). When fair valuing its securities or other investments, the Funds may, among other things, use modeling tools or other processes that may take into account factors such as securities or other market activity and/or significant events that occur after the close of the foreign market and before the time the Fund’s net asset value (“NAV”) is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine a Fund’s NAV may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in adjustments to the prices of securities held by the Fund.

Illiquid securities for which market quotations are readily available and have been evaluated by the adviser are considered and classified as fair valued securities pursuant to the Funds’ pricing policies and procedures.

As of December 31, 2018, securities held by the Funds were fair valued as follows:

 

Fund

 

Securities
classified as

fair valued

  

Percentage of
Net Assets

  

Securities fair
valued by the
Fund’s adviser

  

Percentage of

Net Assets

 

High Income Fund

 $878,957   0.6 $866,211   0.6

Investment Grade Bond Fund

  110,975,934   2.1  845   less than 0.1

b.  Investment Transactions and Related Investment Income.  Investment transactions are accounted for on a trade date plus one day basis for daily NAV calculation. However, for financial reporting purposes, investment transactions are reported on

 

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trade date. Dividend income (including income reinvested) and foreign withholding tax, if applicable, is recorded onex-dividend date, or in the case of certain foreign securities, as soon as a Fund is notified, and interest income is recorded on an accrual basis. Interest income is increased by the accretion of discount and decreased by the amortization of premium, if applicable. Distributions received from investments in securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments or as a realized gain, respectively. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. Investment income,non-class specific expenses and realized and unrealized gains and losses are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund.

c.  Foreign Currency Translation.  The books and records of the Funds are maintained in U.S. dollars. The values of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars on the respective dates of such transactions.

Net realized foreign exchange gains or losses arise from sales of foreign currency, changes in exchange rates between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investment securities, as of the end of the fiscal period, resulting from changes in exchange rates. Net realized foreign exchange gains or losses and the net change in unrealized foreign exchange gains or losses are disclosed in the Statements of Operations. For federal income tax purposes, net realized foreign exchange gains or losses are characterized as ordinary income and may, if the Funds have net losses, reduce the amount of income available to be distributed by the Funds.

The values of investment securities are presented at the foreign exchange rates prevailing at the end of the period for financial reporting purposes. Net realized and unrealized gains or losses on investments reported in the Statements of Operations reflect gains or losses resulting from changes in exchange rates and fluctuations which arise due to changes in market prices of investment securities. For federal income tax purposes, a portion of the net realized gain or loss on investments arising from changes in exchange rates, which is reflected in the Statements of Operations, may be characterized as ordinary income and may, if the Funds have net losses, reduce the amount of income available to be distributed by the Funds.

 

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The Funds may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts’ terms.

d.  Forward Foreign Currency Contracts.  The Funds may enter into forward foreign currency contracts, including forward foreign cross currency contracts to acquire exposure to foreign currencies or to hedge the Funds’ investments against currency fluctuation. A contract can also be used to offset a previous contract. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Funds’ Statements of Assets and Liabilities. The U.S. dollar value of the currencies a Fund has committed to buy or sell represents the aggregate exposure to each currency a Fund has acquired or hedged through currency contracts outstanding at period end. Gains or losses are recorded for financial statement purposes as unrealized until settlement date. Contracts are tradedover-the-counter directly with a counterparty. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Certain contracts may require the movement of cash and/or securities as collateral for the Funds’ or counterparty’s net obligations under the contracts.

e.  Futures Contracts.  The Funds may enter into futures contracts. Futures contracts are agreements between two parties to buy and sell a particular instrument or index for a specified price on a specified future date.

When a Fund enters into a futures contract, it is required to deposit with (or for the benefit of) its broker an amount of cash or short-term high-quality securities as “initial margin.” As the value of the contract changes, the value of the futures contract position increases or declines. Subsequent payments, known as “variation margin,” are made or received by a Fund, depending on the price fluctuations in the fair value of the contract and the value of cash or securities on deposit with the broker. The aggregate principal amounts of the contracts are not recorded in the financial statements. Fluctuations in the value of the contracts are recorded in the Statements of Assets and Liabilities as an asset (liability) and in the Statements of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses). Realized gain or loss on a futures position is equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, minus brokerage commissions. When a Fund enters into a futures contract certain risks may arise, such as illiquidity in the futures market, which may limit a Fund’s ability to close out a futures contract prior to settlement date, and unanticipated movements in the value of securities or interest rates.

Futures contracts are exchange-traded. Exchange-traded futures contracts are standardized and are settled through a clearing house with fulfillment supported by the credit of the exchange. Therefore, counterparty credit risks to the Funds are reduced;

 

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however, in the event that a counterparty enters into bankruptcy, a Fund’s claim against initial/variation margin on deposit with the counterparty may be subject to terms of a final settlement in bankruptcy court.

No futures contracts were held by the Funds during the period ended December 31, 2018.

f.  When-Issued and Delayed Delivery Transactions.  The Funds may enter into when-issued or delayed delivery transactions. When-issued refers to transactions made conditionally because a security, although authorized, has not been issued. Delayed delivery refers to transactions for which delivery or payment will occur at a later date, beyond the normal settlement period. The price of when-issued and delayed delivery securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The security and the obligation to pay for it are recorded by the Funds at the time the commitment is entered into. The value of the security may vary with market fluctuations during the time before the Funds take delivery of the security. No interest accrues to the Funds until the transaction settles.

Delayed delivery transactions include those designated as To Be Announced (“TBAs”) in the Portfolios of Investments. For TBAs, the actual security that will be delivered to fulfill the transaction is not designated at the time of the trade. The security is “to be announced” 48 hours prior to the established trade settlement date. Certain transactions require the Funds or counterparty to post cash and/or securities as collateral for the netmark-to-market exposure to the other party. The Funds cover their net obligations under outstanding delayed delivery commitments by segregating or earmarking cash or securities at the custodian.

Purchases of when-issued or delayed delivery securities may have a similar effect on the Funds’ NAV as if the Funds’ had created a degree of leverage in the portfolio. Risks may arise upon entering into such transactions from the potential inability of counterparties to meet their obligations under the transactions. Additionally, losses may arise due to changes in the value of the underlying securities.

There were no when-issued or delayed delivery securities held by the Funds as of December 31, 2018.

g.  New Disclosure Requirements.  In accordance with new reporting requirements pursuant to RegulationS-X of the Securities and Exchange Commission, presentation of certain amounts on the Statements of Changes in Net Assets for the year ended September 30, 2017 have been conformed to the new disclosure requirements. Where the prior disclosure of Distributions to Shareholders separately stated distributions from net investment income and from net realized capital gains for each share class of the Fund, they are now combined into a single line item for each respective share class. In addition, disclosure of Undistributed Net Investment Income and Distributions in Excess of Net Investment Income, where applicable, has been removed from the Statements of Changes in Net Assets.

 

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December 31, 2018

 

The following is a summary of the previously disclosed amounts, as reported at September 30, 2017:

 

High Income Fund    

FROM DISTRIBUTIONS TO SHAREHOLDERS:

  

Net investment income

  

Class A

  $(1,577,362

Class C

   (453,429

Class N

   (41

Class Y

   (6,175,066
  

 

 

 

Total distributions

  $(8,205,898
  

 

 

 

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

  $(357,359
  

 

 

 

 

Investment Grade Bond Fund    

FROM DISTRIBUTIONS TO SHAREHOLDERS:

  

Net investment income

  

Class A

  $(22,698,039

Class C

   (13,586,835

Class N

   (19,578,968

Class Y

   (95,925,578

Admin Class

   (642,265

Net realized capital gains

  

Class A

   (37,991,535

Class C

   (35,231,779

Class N

   (2,725,590

Class Y

   (166,690,814

Admin Class

   (1,202,096
  

 

 

 

Total distributions

  $(396,273,499
  

 

 

 

UNDISTRIBUTED NET INVESTMENT INCOME

  $60,682,395 
  

 

 

 

h.  Federal and Foreign Income Taxes.  The Trust treats each Fund as a separate entity for federal income tax purposes. Each Fund intends to meet the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute to its shareholders substantially all of its net investment income and any net realized capital gains at least annually. Management has performed an analysis of each Fund’s tax positions for the open tax years as of December 31, 2018 and has concluded that no provisions for income tax are required. The Funds’ federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Management is not aware of any events that are reasonably possible to occur in the next twelve months that would result in the amounts of any unrecognized tax benefits significantly increasing or decreasing for the Funds. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws and accounting regulations and interpretations thereof.

 

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A Fund may be subject to foreign withholding taxes on investment income and taxes on capital gains on investments that are accrued and paid based upon the Fund’s understanding of the tax rules and regulations that exist in the countries in which the Fund invests. Foreign withholding taxes on dividend and interest income are reflected on the Statements of Operations as a reduction of investment income, net of amounts eligible to be reclaimed. Dividends and interest receivable on the Statements of Assets and Liabilities are net of foreign withholding taxes. Foreign withholding taxes where reclaims have been or will be filed are reflected on the Statements of Assets and Liabilities as tax reclaims receivable. Capital gains taxes paid are included in net realized gain (loss) on investments in the Statements of Operations. Accrued but unpaid capital gains taxes are reflected as foreign taxes payable on the Statements of Assets and Liabilities, if applicable, and reduce unrealized gains on investments. In the event that realized gains on investments are subsequently offset by realized losses, taxes paid on realized gains may be returned to a Fund. Such amounts, if applicable, are reflected as foreign tax rebates receivable on the Statements of Assets and Liabilities and are recorded as a realized gain when received.

i.  Dividends and Distributions to Shareholders.  Dividends and distributions are recorded onex-dividend date. The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. Permanent differences are primarily due to differing treatments for book and tax purposes of items such as contingent payment debt instruments, convertible bonds, defaulted and/ornon-income producing securities, deferred trustees’ fees, distributionre-designations, taxable over-distribution, foreign currency gains and losses, net operating losses, passive foreign investment company adjustments, paydown gains and losses and premium amortization. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital accounts. Temporary differences between book and tax distributable earnings are primarily due to contingent payment debt instruments, convertible bonds, defaulted and/ ornon-income producing securities, deferred Trustees’ fees, forward foreign currency contractmark-to-market, passive foreign investment company adjustments, premium amortization and wash sales. Amounts of income and capital gain available to be distributed on a tax basis are determined annually, and at other times during the Funds’ fiscal year as may be necessary to avoid knowingly declaring and paying a return of capital distribution. Distributions from net investment income and net realized short-term capital gains are reported as distributed from ordinary income for tax purposes.

 

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The tax characterization of distributions is determined on an annual basis. The tax character of distributions paid to shareholders during the period ended December 31, 2018 and years ended September 30, 2018 and September 30, 2017 were as follows:

 

   December 31, 2018
Distributions Paid From:
 

Fund

  

Ordinary
Income

   

Long-Term
Capital Gains

   

Total

 

High Income Fund

  $2,342,939   $469,860   $2,812,799 

Investment Grade Bond Fund

   44,211,096    26,591,753    70,802,849 

 

   September 30, 2018

Distributions Paid From:
 

Fund

  

Ordinary
Income

   

Long-Term
Capital Gains

   

Total

 

High Income Fund

  $7,550,940   $   $7,550,940 

Investment Grade Bond Fund

   126,989,994    69,650,181    196,640,175 

 

   September 30, 2017

Distributions Paid From:
 

Fund

  

Ordinary
Income

   

Long-Term
Capital Gains

   

Total

 

High Income Fund

  $8,205,898   $   $8,205,898 

Investment Grade Bond Fund

   158,093,971    238,179,528    396,273,499 

For the year ended September 30, 2017, differences between these amounts and amounts disclosed in Note 2g of the Notes to Financial Statements are primarily attributable to different book and tax treatment for short-term capital gains.

Distributions paid to shareholders from net investment income and net realized capital gains, based on accounting principles generally accepted in the United States of America, are consolidated and reported on the Statements of Changes in Net Assets as Distributions to Shareholders. Distributions paid to shareholders from net investment income and net realized capital gains expressed inper-share amounts, based on accounting principles generally accepted in the United States of America, are separately stated and reported within the Financial Highlights.

 

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As of December 31, 2018, the components of distributable earnings on a tax basis were as follows:

 

   

High Income
Fund

  

Investment
Grade
Bond Fund

 

Capital loss carryforward:

   

Short-term:

   

No expiration date

  $(783,495 $ 

Long-term:

   

No expiration date

   (3,978,362   
  

 

 

  

 

 

 

Total capital loss carryforward

   (4,761,857   
  

 

 

  

 

 

 

Late-year ordinary and post-October capital loss deferrals*

      (27,749,537
  

 

 

  

 

 

 

Unrealized appreciation (depreciation)

   (9,837,473  96,481,542 
  

 

 

  

 

 

 

Total accumulated earnings (losses)

  $(14,599,330 $68,732,005 
  

 

 

  

 

 

 

 

*

Under current tax law, capital losses, foreign currency losses, and losses on passive foreign investment companies and contingent payment debt instruments after October 31 or December 31, as applicable, may be deferred and treated as occurring on the first day of the following taxable year.

As of December 31, 2018, the cost of investments (including derivatives, if applicable) and unrealized appreciation (depreciation) on a federal tax basis were as follows:

 

   

High Income
Fund

  

Investment
Grade
Bond Fund

 

Federal tax cost

  $167,566,764  $5,176,047,253 
  

 

 

  

 

 

 

Gross tax appreciation

  $1,668,098  $137,444,896 

Gross tax depreciation

   (11,505,554  (43,192,978
  

 

 

  

 

 

 

Net tax appreciation (depreciation)

  $(9,837,456 $94,251,918 
  

 

 

  

 

 

 

Differences between these amounts and those reported in the components of distributable earnings are primarily attributable to foreign currencymark-to-market.

j.  Loan Participations.  Each Fund may invest in loans to corporate, governmental or other borrowers. The Funds’ investments in loans may be in the form of participations in loans or assignments of all or a portion of loans. A loan is often administered by a bank or other financial institution that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, (i) a Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the party from whom the Fund has

 

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purchased the participation and only upon receipt by that party of payments from the borrower and (ii) a Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement or to vote on matters arising under the loan agreement. Thus, a Fund may be subject to credit risk both of the party from whom it purchased the loan participation and the borrower and the Fund may have minimal control over the terms of any loan modification. When a Fund purchases assignments from lenders, it acquires direct rights against the borrower on the loan. Loan agreements and participations outstanding at the end of the period, if any, are listed in each applicable Fund’s Schedule of Investments.

k.  Repurchase Agreements.  Each Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, under which each Fund acquires securities as collateral and agrees to resell the securities at an agreed upon time and at an agreed upon price. It is each Fund’s policy that the market value of the collateral for repurchase agreements be at least equal to 102% of the repurchase price, including interest. Certain repurchase agreements aretri-party arrangements whereby the collateral is held in a segregated account for the benefit of the Fund and on behalf of the counterparty. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty, including possible delays or restrictions upon a Fund’s ability to dispose of the underlying securities. As of December 31, 2018, each Fund had investments in repurchase agreements for which the value of the related collateral exceeded the value of the repurchase agreement. The gross value of repurchase agreements is included in the Statements of Assets and Liabilities for financial reporting purposes.

l.  Due from Brokers.  Transactions and positions in certain forward foreign currency contracts are maintained and cleared by registered U.S. broker/dealers pursuant to customer agreements between the Fund and the various broker/dealers. The due from broker balance in the Statements of Assets and Liabilities for Investment Grade Bond Fund represents cash pledged as collateral for forward foreign currency contracts. In certain circumstances the Fund’s use of cash held at brokers is restricted by regulation or broker mandated limits.

m.  Securities Lending.  The Funds have entered into an agreement with State Street Bank and Trust Company (“State Street Bank”), as agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized with cash or securities in an amount equal to at least 105% or 102% of the market value (including accrued interest) of the loaned international or domestic securities, respectively, when the loan is initiated. Thereafter, the value of the collateral must remain at least 102% of the market value (including accrued interest) of loaned securities for U.S. equities and U.S. corporate debt; at least 105% of the market value (including accrued interest) of loaned securities fornon-U.S. equities; and at least 100% of the market value (including accrued interest) of loaned securities for U.S. Government securities, sovereign debt issued bynon-U.S. Governments andnon-U.S. corporate debt. In the event that the

 

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market value of the collateral falls below the required percentages described above, the borrower will deliver additional collateral on the next business day. As with other extensions of credit, the Funds may bear the risk of loss with respect to the investment of the collateral. The Funds invest cash collateral in short-term investments, a portion of the income from which is remitted to the borrowers and the remainder allocated between the Funds and State Street Bank as lending agent.

For the period ended December 31, 2018, neither Fund had loaned securities under this agreement.

n.  Indemnifications.  Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.

o.  New Accounting Pronouncement.  In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

3.  Fair Value Measurements.  In accordance with accounting standards related to fair value measurements and disclosures, the Funds have categorized the inputs utilized in determining the value of each Fund’s assets or liabilities. These inputs are summarized in the three broad levels listed below:

 

  

Level 1 – quoted prices in active markets for identical assets or liabilities;

 

  

Level 2 – prices determined using other significant inputs that are observable either directly, or indirectly through corroboration with observable market data (which could include quoted prices for similar assets or liabilities, interest rates, credit risk, etc.); and

 

  

Level 3 – prices determined using significant unobservable inputs when quoted prices or observable inputs are unavailable such as when there is little or no market activity for an asset or liability (unobservable inputs reflect each Fund’s own assumptions in determining the fair value of assets or liabilities and would be based on the best information available).

 

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December 31, 2018

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The Funds’ pricing policies and procedures are recommended by the adviser and approved by the Board of Trustees. Debt securities are valued based on evaluated bids furnished to the Funds by an independent pricing service. Broker-dealer bid prices may be used if an independent pricing service either is unable to price a security or does not provide a reliable price for a security. Broker-dealer bid prices for which the Funds do not have knowledge of the inputs used by the broker-dealer are categorized in Level 3. All security prices, including those obtained from an independent pricing service and broker-dealer bid prices, are reviewed on a daily basis by the adviser, subject to oversight by Fund management and the Board of Trustees. If the adviser, in good faith, believes that the price provided by an independent pricing service is unreliable, broker-dealer bid prices may be used until the price provided by the independent pricing service is considered to be reliable. Reliability of all security prices, including those obtained from an independent pricing service and broker-dealer bid prices, is tested in a variety of ways, including comparison to recent transaction prices and daily fluctuations, amongst other validation procedures in place. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Funds’ adviser pursuant to procedures approved by the Board of Trustees. Fair valued securities may be categorized in Level 3.

The following is a summary of the inputs used to value the Funds’ investments as of December 31, 2018, at value:

High Income Fund

Asset Valuation Inputs

 

Description

  

Level 1

   

Level 2

   

Level 3

  

Total

 

Bonds and Notes

       

Non-Convertible Bonds

       

ABS Home Equity

  $  —   $1,629,624   $574(b)  $1,630,198 

Home Construction

       2,437,625    12(b)   2,437,637 

All OtherNon-Convertible Bonds(a)

       106,299,874       106,299,874 
  

 

 

   

 

 

   

 

 

  

 

 

 

TotalNon-Convertible Bonds

       110,367,123    586   110,367,709 
  

 

 

   

 

 

   

 

 

  

 

 

 

Convertible Bonds(a)

       13,572,043       13,572,043 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total Bonds and Notes

       123,939,166    586   123,939,752 
  

 

 

   

 

 

   

 

 

  

 

 

 

 

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December 31, 2018

 

High Income Fund (continued)

Asset Valuation Inputs (continued)

 

Description

  

Level 1

   

Level 2

   

Level 3

  

Total

 

Loan Participations(a)

  $   $   $425,679(c)  $425,679 

Senior Loans(a)

       2,392,529       2,392,529 

Preferred Stocks

       

Food & Beverage

       1,433,853       1,433,853 

Midstream

       519,979    58,567(c)   578,546 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total Preferred Stocks

       1,953,832    58,567   2,012,399 
  

 

 

   

 

 

   

 

 

  

 

 

 

Other Investments(a)

           865,625(d)   865,625 

Short-Term Investments

       28,093,324       28,093,324 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total Investments

       156,378,851    1,350,457   157,729,308 
  

 

 

   

 

 

   

 

 

  

 

 

 

Forward Foreign Currency Contracts (unrealized appreciation)

       29,351       29,351 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $  —   $156,408,202   $1,350,457  $157,758,659 
  

 

 

   

 

 

   

 

 

  

 

 

 

Liability Valuation Inputs

 

Description

  

Level 1

   

Level 2

  

Level 3

   

Total

 

Forward Foreign Currency Contracts (unrealized depreciation)

  $  —   $      (73,445 $          —   $      (73,445
  

 

 

   

 

 

  

 

 

   

 

 

 

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

(b)

Fair valued by the Fund’s adviser.

(c)

Valued using broker-dealer bid prices.

(d)

Fair valued by the Fund’s adviser using broker-dealer bid prices for which the inputs are unobservable to the Fund.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Investment Grade Bond Fund

Asset Valuation Inputs

 

Description

  

Level 1

  

Level 2

   

Level 3

  

Total

 

Bonds and Notes

      

Non-Convertible Bonds

      

ABS Other

  $  —  $63,167,798   $57,551,934(b)  $120,719,732 

ABS Student Loan

      7,061,395    4,259,110(b)   11,320,505 

Airlines

      39,730,035    1,202,015(b)   40,932,050 

Metals & Mining

      160,116,560    845(c)   160,117,405 

All OtherNon-Convertible Bonds(a)

      4,012,612,398       4,012,612,398 
  

 

 

  

 

 

   

 

 

  

 

 

 

TotalNon-Convertible Bonds

      4,282,688,186    63,013,904   4,345,702,090 
  

 

 

  

 

 

   

 

 

  

 

 

 

Convertible Bonds(a)

      74,239,594       74,239,594 

Municipals(a)

      17,615,088       17,615,088 
  

 

 

  

 

 

   

 

 

  

 

 

 

Total Bonds and Notes

      4,374,542,868    63,013,904   4,437,556,772 
  

 

 

  

 

 

   

 

 

  

 

 

 

Preferred Stocks(a)

      14,684,777       14,684,777 

Short-Term Investments

      818,057,622       818,057,622 
  

 

 

  

 

 

   

 

 

  

 

 

 

Total Investments

      5,207,285,267    63,013,904   5,270,299,171 
  

 

 

  

 

 

   

 

 

  

 

 

 

Forward Foreign Currency Contracts (unrealized appreciation)

      605,245       605,245 
  

 

 

  

 

 

   

 

 

  

 

 

 

Total

  $  —  $5,207,890,512   $63,013,904  $5,270,904,416 
  

 

 

  

 

 

   

 

 

  

 

 

 

Liability Valuation Inputs

 

Description

  

Level 1

  

Level 2

  

Level 3

  

Total

 

Forward Foreign Currency Contracts (unrealized depreciation)

  $  —  $    (1,275,946 $            —  $    (1,275,946
  

 

 

  

 

 

  

 

 

  

 

 

 

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

(b)

Valued using broker-dealer bid prices.

(c)

Fair valued by the Fund’s adviser.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value as of September 30, 2017 and/or December 31, 2018:

High Income Fund

Asset Valuation Inputs

 

Investments in Securities

 

Balance as of
September 30,
2018

  

Accrued
Discounts
(Premiums)

  

Realized
Gain
(Loss)

  

Change in
Unrealized
Appreciation
(Depreciation)

  

Purchases

 

Bonds and Notes

     

Non-Convertible Bonds

     

ABS Home Equity

 $683  $  $1  $(102 $ 

Home Construction

  12   7,509      (7,509   

Loan Participations

     

ABS Other

  437,015   9   13   (5,674   

Other Investments

     

Aircraft ABS

  896,883      (8  (31,250   

Preferred Stocks

     

Convertible Preferred Stocks

     

Midstream

           (23,472   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $1,334,593  $7,518  $6  $(68,007 $      — 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investments in Securities

 

Sales

  

Transfers
into Level 3

  

Transfers
out of
Level 3

  

Balance as of
December 31,
2018

  

Change in
Unrealized
Appreciation
(Depreciation)
from
Investments
Still Held at
December 31,
2018

 

Bonds and Notes

     

Non-Convertible Bonds

     

ABS Home Equity

 $(8 $  $  $574  $(116

Home Construction

           12   (7,509

Loan Participations

     

ABS Other

  (5,684        425,679   871 

Other Investments

     

Aircraft ABS

           865,625   (31,250

Preferred Stocks

     

Convertible Preferred Stocks

     

Midstream

     82,039      58,567   (23,472
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $(5,692 $82,039  $  —  $1,350,457  $(61,476
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

A preferred stock valued at $82,039 was transferred from Level 2 to Level 3 during the period ended December 31, 2018. At September 30, 2018, this security was valued on the basis of evaluated bids furnished to the Fund by an independent pricing service in accordance with the Fund’s valuation policies. At December 31, 2018, this security was valued using broker-dealer bid prices based on inputs unobservable to the Fund as an independent pricing service did not provide a reliable price for the security.

All transfers are recognized as of the beginning of the reporting period.

Investment Grade Bond Fund

Asset Valuation Inputs

 

Investments in Securities

 

Balance as of
September 30,
2018

  

Accrued
Discounts
(Premiums)

  

Realized
Gain
(Loss)

  

Change in
Unrealized
Appreciation
(Depreciation)

  

Purchases

 

Bonds and Notes

     

Non-Convertible Bonds

     

ABS Other

 $50,772,266  $  $61,038  $(13,558 $11,026,794 

ABS Student Loan

        601   5,832   4,535,676 

Airlines

  7,789,254   1,156      (26,010   

Metals & Mining

  845   3,730      (3,730   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $58,562,365  $4,886  $61,639  $(37,466 $15,562,470 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investments in Securities

 

Sales

  

Transfers
into Level 3

  

Transfers
out of
Level 3

  

Balance as of
December 31,
2018

  

Change in
Unrealized
Appreciation
(Depreciation)
from
Investments
Still Held at
December 31,
2018

 

Bonds and Notes

     

Non-Convertible Bonds

     

ABS Other

 $(4,294,606 $  $  $57,551,934  $(606

ABS Student Loan

  (282,999        4,259,110   5,832 

Airlines

        (6,562,385  1,202,015   (26,010

Metals & Mining

           845   (3,730
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $(4,577,605 $  —  $(6,562,385 $63,013,904  $(24,514
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

A debt security valued at $6,562,385 was transferred from Level 3 to Level 2 during the period ended December 31, 2018. At September 30, 2018, this security was valued using

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

broker-dealer bid prices based on inputs unobservable to the Fund as an independent pricing service did not provide a reliable price for the security. At December 31, 2018, this security was valued on the basis of evaluated bids furnished to the Fund by an independent pricing service in accordance with the Fund’s valuation policies.

All transfers are recognized as of the beginning of the reporting period.

4.  Derivatives.  Derivative instruments are defined as financial instruments whose value and performance are based on the value and performance of an underlying asset, reference rate or index. Derivative instruments that the Funds used during the period include forward foreign currency contracts.

The Funds are subject to the risk that changes in foreign currency exchange rates will have an unfavorable effect on the value of Fund assets denominated in foreign currencies. The Funds may enter into forward foreign currency contracts for hedging purposes to protect the value of the Funds’ holdings of foreign securities. The Funds may also use forward foreign currency contracts to gain exposure to foreign currencies, regardless of whether securities denominated in such currencies are held in the Funds. During the period ended December 31, 2018, the Funds engaged in forward foreign currency transactions for hedging purposes.

The following is a summary of derivative instruments for High Income Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Assets

  

Unrealized
appreciation on
forward foreign
currency contracts

 

Over-the-counter asset derivatives Foreign exchange contracts

  $29,351 

Liabilities

  

Unrealized
depreciation on
forward foreign
currency contracts

 

Over-the-counter liability derivatives Foreign exchange contracts

  $(73,445

Transactions in derivative instruments for High Income Fund during the period ended December 31, 2018, as reflected within the Statements of Operations, were as follows:

 

Net Realized Gain (Loss) on:

  

Forward foreign
currency contracts

 

Foreign exchange contracts

  $219,012 

Net Change in Unrealized
Appreciation (Depreciation) on:

  

Forward foreign
currency contracts

 

Foreign exchange contracts

  $(128,778

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

The following is a summary of derivative instruments for Investment Grade Bond Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Assets

 

Unrealized
appreciation on
forward foreign
currency contracts

 

Over-the-counter asset derivatives
Foreign exchange contracts

 $605,245 

Liabilities

 

Unrealized
depreciation on
forward foreign
currency contracts

 

Over-the-counter liability derivatives
Foreign exchange contracts

 $(1,275,946

Transactions in derivative instruments for Investment Grade Bond Fund during the period ended December 31, 2018, as reflected within the Statements of Operations, were as follows:

 

Net Change in Unrealized
Appreciation (Depreciation) on:

 

Forward foreign
currency contracts

 

Foreign exchange contracts

 $(670,701

As the Funds value their derivatives at fair value and recognize changes in fair value through the Statements of Operations, they do not qualify for hedge accounting under authoritative guidance for derivative instruments. The Funds’ investments in derivatives may represent an economic hedge; however, they are considered to benon-hedge transactions for the purpose of these disclosures.

The volume of forward foreign currency contract activity, as a percentage of net assets, based on grossmonth-end notional amounts outstanding during the period, including long and short positions at absolute value, was as follows for the period ended December 31, 2018:

 

High Income Fund

  

Forwards

 

Average Notional Amount Outstanding

   3.52

Highest Notional Amount Outstanding

   5.33

Lowest Notional Amount Outstanding

   2.72

Notional Amount Outstanding as of December 31, 2018

   3.20

Investment Grade Bond Fund

  

Forwards

 

Average Notional Amount Outstanding

   0.39

Highest Notional Amount Outstanding

   1.07

Lowest Notional Amount Outstanding

   0.00

Notional Amount Outstanding as of December 31, 2018

   1.07

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Notional amounts outstanding at the end of the prior period, if applicable, are included in the average notional amount outstanding.

Unrealized gain and/or loss on open forwards is recorded in the Statements of Assets and Liabilities. The aggregate notional values of forward contracts are not recorded in the Statements of Assets and Liabilities, and therefore are not included in the Funds’ net assets.

Over-the-counter derivatives, including forward foreign currency contracts, are entered into pursuant to International Swaps and Derivatives Association, Inc. (“ISDA”) agreements negotiated between the Funds and their counterparties. ISDA agreements typically contain, among other things, terms for the posting of collateral and master netting provisions in the event of a default or other termination event. Collateral is posted by a Fund or the counterparty to the extent of the netmark-to-market exposure to the other party of all open contracts under the agreement, subject to minimum transfer requirements. Master netting provisions allow the Funds and the counterparty, in the event of a default or other termination event, to offset amounts owed by each related to derivative contracts, including any posted collateral, to one net amount payable by either the Funds or the counterparty. The Funds’ ISDA agreements typically contain provisions that allow a counterparty to terminate open contracts early if the NAV of a Fund declines beyond a certain threshold. For financial reporting purposes, the Funds do not offset derivative assets and liabilities, and any related collateral received or pledged, on the Statements of Assets and Liabilities.

As of December 31, 2018, gross amounts ofover-the-counter derivative assets and liabilities not offset in the Statements of Assets and Liabilities and the related net amounts after taking into account master netting arrangements, by counterparty, are as follows:

High Income Fund

 

Counterparty

  

Gross Amounts
of Assets

  

Offset
Amount

  

Net Asset
Balance

  

Collateral
(Received)/
Pledged

   

Net
Amount

 

Bank of America N.A

  $27,098  $(27,098 $  $   $ 

HSBC Bank USA

   2,253   (2,253          
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 
  $29,351  $(29,351 $  $   $ 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Counterparty

  

Gross Amounts
of Liabilities

  

Offset
Amount

  

Net Liability
Balance

  

Collateral
(Received)/
Pledged

   

Net
Amount

 

Bank of America N.A

  $(60,419 $27,098  $(33,321 $   $(33,321

HSBC Bank USA

   (13,026  2,253   (10,773      (10,773
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 
  $(73,445 $29,351  $(44,094 $  —   $(44,094
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

 

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Table of Contents

Notes to Financial Statements (continued)

 

December 31, 2018

 

Investment Grade Bond Fund

 

Counterparty

  

Gross Amounts
of Assets

  

Offset
Amount

  

Net Asset
Balance

  

Collateral
(Received)/
Pledged

   

Net
Amount

 

BNP Paribas S.A.

  $605,245  $(605,245 $  $   $ 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Counterparty

  

Gross Amounts
of Liabilities

  

Offset
Amount

  

Net Liability
Balance

  

Collateral
(Received)/
Pledged

   

Net
Amount

 

BNP Paribas S.A.

  $(1,275,946 $605,245  $(670,701 $650,000   $(20,701
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

The actual collateral received or pledged, if any, may exceed the amounts shown in the table due to overcollateralization. Timing differences may exist between when contracts under the ISDA agreements aremarked-to-market and when collateral moves. The ISDA agreements includetri-party control agreements under which collateral is held for the benefit of the secured party at a third party custodian, State Street Bank.

Counterparty risk is managed based on policies and procedures established by each Fund’s adviser. Such policies and procedures may include, but are not limited to, minimum counterparty credit rating requirements, monitoring of counterparty credit default swap spreads and posting of collateral. A Fund’s risk of loss from counterparty credit risk onover-the-counter derivatives is generally limited to the Fund’s aggregated unrealized gains and the amount of any collateral pledged to the counterparty, which may be offset by any collateral posted to the Fund by the counterparty. ISDA master agreements can help to manage counterparty risk by specifying collateral posting arrangements atpre-arranged exposure levels. Under these ISDA agreements, collateral is routinely transferred if the total net exposure in respect of certain transactions, net of existing collateral already in place, exceeds a specified amount (typically $250,000, depending on the counterparty). With exchange-traded derivatives, there is minimal counterparty credit risk to the Fund because the exchange’s clearing house, as counterparty to these instruments, stands between the buyer and the seller of the contract. Credit risk still exists in exchange-traded derivatives with respect to initial and variation margin that is held in a broker’s customer accounts. While brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro rata basis across all of the broker’s customers, potentially resulting in losses to the Fund. Based on balances reflected on each Fund’s Statement of Assets and Liabilities, the following table shows (i) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the Fund would incur if parties (including OTC derivative

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

counterparties and brokers holding margin for exchange-traded derivatives) to the relevant financial instruments failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the Fund, and (ii) the amount of loss that the Fund would incur after taking into account master netting provisions pursuant to ISDA agreements, as of December 31, 2018:

 

Fund

  

Maximum Amount
of Loss - Gross

   

Maximum Amount
of Loss - Net

 

High Income Fund

  $29,351   $  — 

Investment Grade Bond Fund

   1,255,245     

5.  Purchases and Sales of Securities.  For the period ended December 31, 2018, purchases and sales of securities (excluding short-term investments and including paydowns) were as follows:

 

  U.S. Government/
Agency Securities
  Other Securities 

Fund

 

Purchases

  

Sales

  

Purchases

  

Sales

 

High Income Fund

 $  $6,733,642  $26,199,855  $45,804,019 

Investment Grade Bond Fund

  194,863,447   401   2,649,875,425   1,462,052,369 

6.  Management Fees and Other Transactions with Affiliates.

a.  Management Fees.  Loomis, Sayles & Company, L.P. (“Loomis Sayles”) serves as investment adviser to each Fund. Loomis Sayles is a limited partnership whose sole general partner, Loomis, Sayles & Company, Inc., is indirectly owned by Natixis Investment Managers, L.P. (“Natixis”), which is part of Natixis Investment Managers, an international asset management group based in Paris, France.

Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund’s average daily net assets:

 

   Percentage of Average
Daily Net Assets
 

Fund

  

First

$15 billion

  

Over

$15 billion

 

High Income Fund

   0.60  0.60

Investment Grade Bond Fund

   0.40  0.38

Loomis Sayles has given binding undertakings to the Funds to waive management fees and/or reimburse certain expenses to limit the Funds’ operating expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, taxes, organizational and extraordinary expenses such as litigation and indemnification

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

expenses. These undertakings are in effect until April 30, 2020, may be terminated before then only with the consent of the Funds’ Board of Trustees, and are reevaluated on an annual basis. Management fees payable, as reflected on the Statements of Assets and Liabilities, is net of waivers and/or expense reimbursements, if any, pursuant to these undertakings. Waivers/reimbursements that exceed management fees payable are reflected on the Statements of Assets and Liabilities as receivable from investment adviser.

For the period ended December 31, 2018 the expense limits as a percentage of average daily net assets under the expense limitation agreements were as follows:

 

   Expense Limit as a Percentage of
Average Daily Net Assets
 

Fund

  

Class A

  

Class C

  

Class N

  

Class Y

  

Admin Class

 

High Income Fund

   1.05  1.80  0.75  0.80   

Investment Grade Bond Fund

   0.78  1.53  0.48  0.53  1.03

Loomis Sayles shall be permitted to recover expenses borne under the expense limitation agreements (whether through waiver of management fees or otherwise) on a class by class basis in later periods to the extent the annual operating expenses of a class fall below a class’ expense limits, provided, however, that a class is not obligated to pay such waived/reimbursed fees or expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed.

For the period ended December 31, 2018, the management fees and waivers of management fees for each Fund were as follows:

 

Fund

  

Gross
Management
Fees

   

Contractual
Waivers of
Management
Fees
1

   

Net
Management
Fees

   Percentage of
Average
Daily Net Assets
 
  

Gross

  

Net

 

High Income Fund

  $249,773   $90,030   $159,743    0.60  0.38

Investment Grade Bond Fund

   5,487,700    404,301    5,083,399    0.40  0.37

 

1

Waiver/expense reimbursements are subject to possible recovery until December 31, 2019.

No expenses were recovered for either Fund during the period ended December 31, 2018 under the terms of the expense limitation agreements.

b.  Service and Distribution Fees.  Natixis Distribution, L.P. (“Natixis Distribution), which is a wholly-owned subsidiary of Natixis, has entered into a distribution agreement with the Trust. Pursuant to this agreement, Natixis Distribution serves as principal underwriter of the Funds of the Trust.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Pursuant to Rule12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to each Fund’s Class A shares (the “Class A Plans”), a Distribution and Service Plan relating to each Fund’s Class C shares (the “Class C Plans”), and Investment Grade Bond Fund has adopted a Distribution Plan relating to its Admin Class shares (the “Admin Class Plan”).

Under the Class A Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund’s Class A shares, as reimbursement for expenses incurred by Natixis Distribution in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts.

Under the Class C Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund’s Class C shares, as compensation for services provided by Natixis Distribution in providing personal services to investors in Class C shares and/or the maintenance of shareholder accounts.

Also under the Class C Plans, each Fund pays Natixis Distribution a monthly distribution fee at an annual rate of 0.75% of the average daily net assets attributable to the Fund’s Class C shares, as compensation for services provided by Natixis Distribution in connection with the marketing or sale of Class C shares.

Under the Admin Class Plan, Investment Grade Bond Fund pays Natixis Distribution a monthly distribution fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund’s Admin Class shares, as compensation for services provided by Natixis Distribution in connection with the marketing or sale of Admin Class shares or for payments made by Natixis Distribution to securities dealers or other financial intermediaries as commissions, asset-based sales charges or other compensation with respect to the sale of Admin Class shares, or for providing personal services to investors and/or the maintenance of shareholder accounts.

In addition, the Admin Class shares of Investment Grade Bond Fund may pay Natixis Distribution an administrative service fee, at an annual rate not to exceed 0.25% of the average daily net assets attributable to Admin Class shares. These fees are subsequently paid to securities dealers or financial intermediaries for providing personal services and/or account maintenance for their customers who hold such shares.

For the period ended December 31, 2018, the service and distribution fees for each Fund were as follows:

 

   Service Fees   Distribution Fees 

Fund

  

Class A

   

Class C

   

Admin Class

   

Class C

   

Admin Class

 

High Income Fund

  $15,693   $3,635   $   $10,905   $ 

Investment Grade Bond Fund

   474,671    243,519    71,313    730,558    71,313 

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

c.  Administrative Fees.  Natixis Advisors, L.P. (“Natixis Advisors”) provides certain administrative services for the Funds and contracts with State Street Bank to serve assub-administrator. Natixis Advisors is a wholly-owned subsidiary of Natixis. Pursuant to an agreement among Natixis Funds Trusts, Loomis Sayles Funds Trusts, Natixis ETF Trust and Natixis Advisors, each Fund pays Natixis Advisors monthly itspro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0275% of the next $30 billion and 0.0225% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which is reevaluated on an annual basis.

Prior to July 1, 2018, each Fund paid Natixis Advisors monthly itspro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0350% of the next $30 billion and 0.0325% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which was reevaluated on an annual basis.

Effective October 1, 2018, State Street Bank agreed to reduce the fees it receives from Natixis Advisors for serving assub-administrator to the Funds. Also, effective October 1, 2018, Natixis Advisors agreed to voluntarily waive fees paid by the Funds in an amount equal to the reduction insub-administrative fees discussed above. The waiver is in effect through June 30, 2019, at which time it will be reevaluated as part of the annual review of the administrative fee contract, as noted above.

For the period ended December 31, 2018, the administrative fees for each Fund were as follows:

 

Fund

  

Gross
Administrative
Fees

   

Waiver of
Administrative
Fees

   

Net
Administrative
Fees

 

High Income Fund

  $18,014   $411   $17,603 

Investment Grade Bond Fund

   599,847    13,538    586,309 

d.  Sub-Transfer Agent Fees.  Natixis Distribution has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Funds and has agreed to compensate the intermediaries for providing those services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. These services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly at the Funds’ transfer agent. Accordingly, the Funds have

 

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December 31, 2018

 

agreed to reimburse Natixis Distribution for all or a portion of the servicing fees paid to these intermediaries. The reimbursement amounts(sub-transfer agent fees) paid to Natixis Distribution are subject to a currentper-account equivalent fee limit approved by the Funds’ Board of Trustees, which is based on fees for similar services paid to the Funds’ transfer agent and other service providers. Class N shares do not bear such expenses.

For the period ended December 31, 2018, thesub-transfer agent fees (which are reflected in transfer agent fees and expenses in the Statements of Operations) for each Fund were as follows:

 

Fund

  

Sub-Transfer
Agent Fees

 

High Income Fund

  $45,682 

Investment Grade Bond Fund

   883,867 

As of December 31, 2018, Natixis Distribution owes the High Income Fund $3,486 for overpayments ofsub-transfer agent fees (which are reflected in the Statement of Assets and Liabilities as receivable from distributor).

As of December 31, 2018, Investment Grade Bond Fund owes Natixis Distribution $43,332 forsub-transfer agent fees (which are reflected in the Statements of Assets and Liabilities as payable to distributor).

Sub-transfer agent fees attributable to Class A, Class C, Class Y and Admin Class are allocated on apro rata basis to each class based on the relative net assets of each class to the total net assets of those classes.

e.  Commissions.  Commissions (including CDSCs) on Fund shares retained by Natixis Distribution during the period ended December 31, 2018 were as follows:

 

Fund

  

Commissions

 

Investment Grade Bond Fund

  $6,509 

f.  Trustees Fees and Expenses.  The Trust does not pay any compensation directly to its officers or Trustees who are directors, officers or employees of Natixis Advisors, Natixis Distribution, Natixis or their affiliates. The Chairperson of the Board of Trustees receives a retainer fee at the annual rate of $340,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that he attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $170,000. Each Independent Trustee also receives a meeting attendance fee of $10,000 for each meeting of the Board of Trustees that he or she attends in person and $5,000 for each meeting of the Board of Trustees that he or she attends telephonically. In addition, the chairperson of the Contract Review Committee and the chairperson of the Audit Committee each receive an additional retainer fee at the annual rate of $20,000. The chairperson of the Governance

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Committee receives an additional retainer fee at the annual rate of $12,000. Each Contract Review Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. Each Audit Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. These fees are allocated among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust based on a formula that takes into account, among other factors, the relative net assets of each fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings.

Effective January 1, 2019, the Chairperson of the Board will receive a retainer fee at the annual rate of $360,000, each Independent Trustee (other than the Chairperson) will receive, in the aggregate, a retainer fee at the annual rate of $190,000, and the chairperson of the Governance Committee will receive an additional retainer fee at the annual rate of $15,000. All other Trustee fees will remain unchanged.

A deferred compensation plan (the “Plan”) is available to the Trustees on a voluntary basis. Deferred amounts remain in the Funds until distributed in accordance with the provisions of the Plan. The value of a participating Trustee’s deferral account is based on theoretical investments of deferred amounts, on the normal payment dates, in certain funds of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust as designated by the participating Trustees. Changes in the value of participants’ deferral accounts are allocatedpro rata among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, and are normally reflected as Trustees’ fees and expenses in the Statements of Operations. The portions of the accrued obligations allocated to the Funds under the Plan are reflected as Deferred Trustees’ fees in the Statements of Assets and Liabilities.

For the period ended December 31, 2018, net depreciation in the value of participants’ deferral accounts has been reclassified as Miscellaneous expenses on the Statements of Operations, as follows:

 

Fund

  

Amount

 

High Income Fund

  $7,511 

Investment Grade Bond Fund

   26,238 

Certain officers and employees of Natixis Advisors and Loomis Sayles are also officers and/or Trustees of the Trust.

g.  Affiliated Ownership.  As of December 31, 2018, Loomis Sayles Employees’ Profit Sharing Retirement Plan held shares of the Investment Grade Bond Fund representing 0.11% of the Fund’s net assets.

Investment activities of affiliated shareholders could have material impacts on the Fund.

 

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h.  Reimbursement of Transfer Agent Fees and Expenses.  Natixis Advisors has given a binding contractual undertaking to the High Income Fund to reimburse any and all transfer agency expenses for the Funds’ Class N shares. This undertaking is in effect through January 31, 2019 and is not subject to recovery under the expense limitation agreement described above.

For the period ended December 31, 2018, Natixis Advisors reimbursed the Fund for transfer agency expenses as follows:

 

   Reimbursement of
Transfer Agency
Expenses
 

Fund

  

Class N

 

High Income Fund

  $39 

7.  Class-Specific Transfer Agent Fees and Expenses.  Transfer agent fees and expenses attributable to Class A, Class C, Class Y and Admin Class are allocated on apro rata basis to each class based on the relative net assets of each class to the total net assets of those classes. Transfer agent fees and expenses attributable to Class N are allocated to Class N.

For the period ended December 31, 2018, the Funds incurred the following class-specific transfer agent fees and expenses (includingsub-transfer agent fees, where applicable):

 

   Transfer Agent Fees and Expenses 

Fund

  

Class A

   

Class C

   

Class N

   

Class Y

   

Admin Class

 

High Income Fund

  $8,220   $1,904   $39   $41,006   $ 

Investment Grade Bond Fund

   166,648    85,491    822    652,152    25,045 

8.  Line of Credit.  Effective April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, entered into a $400,000,000 committed unsecured line of credit provided by State Street Bank. Any one Fund may borrow up to $350,000,000 under the line of credit agreement (as long as all borrowings by all Funds in the aggregate do not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest is charged to the Funds based upon the terms set forth in the agreement. In addition, a commitment fee of 0.15% per annum, payable at the end of each calendar quarter, is accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit. The Funds paid an arrangement fee, an upfront fee, and other fees in connection with the new line of credit agreement, which are being amortized over a period of 364 days and are reflected as miscellaneous expenses on the Statements of Operations. The unamortized balance is reflected as prepaid expenses on the Statements of Assets and Liabilities.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Prior to April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts and Loomis Sayles Funds Trusts, entered into a364-day, $400,000,000 syndicated, committed, unsecured line of credit with Citibank, N.A. to be used for temporary or emergency purposes only. Any one Fund was able borrow up to the full $400,000,000 under the line of credit (as long as all borrowings by all Funds in the aggregate did not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest was charged to the Funds at a rate equal to the greater of the eurodollar or the federal funds rate plus 1.00%. In addition, a commitment fee of 0.15% per annum, payable on the last business day of each month, was accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit.

For the period ended December 31, 2018, neither Fund had borrowings under this agreement.

9.  Payable to Custodian Bank.  The Funds’ custodian bank, State Street Bank, provides overdraft protection to the Funds in the event of a cash shortfall. Cash overdrafts bear interest at a rate per annum equal to the Federal Funds rate plus 2.00%. At December 31, 2018, the High Income Fund had a payable of $574,563 to the custodian bank for an inadvertent overdraft due to a security sale transaction not settling as expected.

10.  Concentration of Risk.  Each Fund’s investments in foreign securities are subject to foreign currency fluctuations, higher volatility than U.S. securities, varying degrees of regulation and limited liquidity. Greater political, economic, credit and information risks are also associated with foreign securities.

11.  Concentration of Ownership.  From time to time, a Fund may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of such accounts could have material impacts on the Funds. As of December 31, 2018, based on management’s evaluation of the shareholder account base, the Funds had accounts representing controlling ownership of more than 5% of the Fund’s total outstanding shares. The number of such accounts, based on accounts that represent more than 5% of an individual class of shares, and the aggregate percentage of net assets represented by such holdings were as follows:

 

Fund

  

Number of 5%
Account Holders

   

Percentage of
Ownership

 

High Income Fund

   1    7.64

Investment Grade Bond Fund

   1    19.53

Omnibus shareholder accounts for which Natixis Advisors understands that the intermediary has discretion over the underlying shareholder accounts or investment models where a shareholder account may be invested for anon-discretionary

 

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December 31, 2018

 

customer are included in the table above. For other omnibus accounts, the Fund does not have information on the individual shareholder accounts underlying the omnibus accounts; therefore, there could be other 5% shareholders in addition to those disclosed in the table above.

12.  Capital Shares.  Each Fund may issue an unlimited number of shares of beneficial interest, without par value. Transactions in capital shares were as follows:

 

   

Period Ended

December 31, 2018(a)

 

 

  

Year Ended

September 30, 2018

 

 

High Income Fund

   Shares   Amount   Shares   Amount 
Class A

 

Issued from the sale of shares

   318,942  $1,321,333   1,898,245  $8,166,854 

Issued in connection with the reinvestment of distributions

   84,926   349,137   243,140   1,040,786 

Redeemed

   (764,361  (3,151,340  (3,771,177  (16,210,208
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (360,493 $(1,480,870  (1,629,792 $(7,002,568
  

 

 

  

 

 

  

 

 

  

 

 

 
Class C

 

Issued from the sale of shares

   42,068  $171,916   122,450  $527,966 

Issued in connection with the reinvestment of distributions

   16,483   68,043   61,116   262,711 

Redeemed

   (186,823  (777,538  (1,279,539  (5,486,771
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (128,272 $(537,579  (1,095,973 $(4,696,094
  

 

 

  

 

 

  

 

 

  

 

 

 
Class N

 

Issued from the sale of shares

   169,687  $691,887   2,698,050  $11,518,120 

Issued in connection with the reinvestment of distributions

   43,495   178,710   61,394   259,688 

Redeemed

   (33,788  (139,949  (325,438  (1,383,775
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   179,394  $730,648   2,434,006  $10,394,033 
  

 

 

  

 

 

  

 

 

  

 

 

 
Class Y

 

Issued from the sale of shares

   2,504,282  $10,312,064   9,865,696  $42,237,402 

Issued in connection with the reinvestment of distributions

   433,237   1,776,880   1,120,509   4,782,844 

Redeemed

   (8,528,009  (34,312,719  (11,587,593  (49,564,049
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (5,590,490 $(22,223,775  (601,388 $(2,543,803
  

 

 

  

 

 

  

 

 

  

 

 

 

Increase (decrease) from capital share transactions

   (5,899,861 $(23,511,576  (893,147 $(3,848,432
  

 

 

  

 

 

  

 

 

  

 

 

 

 

(a)

For the period October 1, 2018 through December 31, 2018.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

12.  Capital Shares (continued).

 

   
Year Ended
September 30, 2017(b)

 

High Income Fund

   Shares   Amount 
Class A   

Issued from the sale of shares

   2,869,491  $12,272,049 

Issued in connection with the reinvestment of distributions

   306,554   1,311,455 

Redeemed

   (3,623,241  (15,504,179
  

 

 

  

 

 

 

Net change

   (447,196 $(1,920,675
  

 

 

  

 

 

 
Class C   

Issued from the sale of shares

   471,847  $2,010,717 

Issued in connection with the reinvestment of distributions

   88,277   378,228 

Redeemed

   (897,288  (3,849,291
  

 

 

  

 

 

 

Net change

   (337,164 $(1,460,346
  

 

 

  

 

 

 
Class N   

Issued from the sale of shares

   240  $1,001 

Issued in connection with the reinvestment of distributions

   10   41 

Redeemed

       
  

 

 

  

 

 

 

Net change

   250  $1,042 
  

 

 

  

 

 

 
Class Y   

Issued from the sale of shares

   9,715,068  $41,499,158 

Issued in connection with the reinvestment of distributions

   1,184,729   5,054,088 

Redeemed

   (10,799,917  (45,851,330
  

 

 

  

 

 

 

Net change

   99,880  $701,916 
  

 

 

  

 

 

 

Increase (decrease) from capital share transactions

   (684,230 $(2,678,063
  

 

 

  

 

 

 

 

(b)

From commencement of operations on November 30, 2016 through September 30, 2017 for Class N shares.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

12.  Capital Shares (continued).

 

   

Period Ended

December 31, 2018(a)

 

 

  

Year Ended

September 30, 2018

 

 

Investment Grade Bond Fund

   Shares   Amount   Shares   Amount 
Class A

 

Issued from the sale of shares

   6,491,737  $70,239,572   26,350,729  $290,166,021 

Issued in connection with the reinvestment of distributions

   692,485   7,466,489   1,939,385   21,405,938 

Redeemed

   (11,048,598  (119,531,449  (37,379,900  (411,498,034
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (3,864,376 $(41,825,388  (9,089,786 $(99,926,075
  

 

 

  

 

 

  

 

 

  

 

 

 
Class C

 

Issued from the sale of shares

   945,273  $10,091,858   2,011,124  $22,000,351 

Issued in connection with the reinvestment of distributions

   284,418   3,032,080   1,080,461   11,807,321 

Redeemed

   (4,883,774  (52,357,128  (26,695,866  (290,792,159
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (3,654,083 $(39,233,190  (23,604,281 $(256,984,487
  

 

 

  

 

 

  

 

 

  

 

 

 
Class N

 

Issued from the sale of shares

   7,202,004  $78,146,326   47,337,549  $520,862,751 

Issued in connection with the reinvestment of distributions

   1,542,978   16,637,378   3,799,061   41,897,623 

Redeemed

   (9,753,310  (105,566,599  (43,651,422  (478,691,782
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (1,008,328 $(10,782,895  7,485,188  $84,068,592 
  

 

 

  

 

 

  

 

 

  

 

 

 
Class Y

 

Issued from the sale of shares

   26,286,587  $284,802,649   83,609,222  $923,226,055 

Issued in connection with the reinvestment of distributions

   3,150,471   33,984,081   8,916,183   98,436,771 

Redeemed

   (32,471,159  (351,840,854  (124,671,025  (1,373,103,002
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (3,034,101 $(33,054,124  (32,145,620 $(351,440,176
  

 

 

  

 

 

  

 

 

  

 

 

 
Admin Class

 

Issued from the sale of shares

   286,732  $3,102,815   9,244,822  $100,929,159 

Issued in connection with the reinvestment of distributions

   117,845   1,266,981   37,178   408,621 

Redeemed

   (521,944  (5,641,958  (1,018,175  (11,215,394
  

 

 

  

 

 

  

 

 

  

 

 

 

Net change

   (117,367 $(1,272,162  8,263,825  $90,122,386 
  

 

 

  

 

 

  

 

 

  

 

 

 

Increase (decrease) from capital share transactions

   (11,678,255 $(126,167,759  (49,090,674 $(534,159,760
  

 

 

  

 

 

  

 

 

  

 

 

 

 

(a)

For the period October 1, 2018 through December 31, 2018.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

12.  Capital Shares (continued).

 

   

Year Ended

September 30, 2017

 

 

Investment Grade Bond Fund

   Shares   Amount 
Class A   

Issued from the sale of shares

   19,528,126  $217,152,190 

Issued in connection with the reinvestment of distributions

   4,610,265   50,116,925 

Redeemed

   (41,811,856  (466,635,041
  

 

 

  

 

 

 

Net change

   (17,673,465 $(199,365,926
  

 

 

  

 

 

 
Class C   

Issued from the sale of shares

   3,086,119  $33,663,672 

Issued in connection with the reinvestment of distributions

   3,067,848   32,931,990 

Redeemed

   (31,785,356  (350,114,834
  

 

 

  

 

 

 

Net change

   (25,631,389 $(283,519,172
  

 

 

  

 

 

 
Class N   

Issued from the sale of shares

   113,062,434  $1,236,685,568 

Issued in connection with the reinvestment of distributions

   2,009,435   22,234,080 

Redeemed

   (12,720,056  (141,192,418
  

 

 

  

 

 

 

Net change

   102,351,813  $1,117,727,230 
  

 

 

  

 

 

 
Class Y   

Issued from the sale of shares

   96,437,874  $1,075,867,439 

Issued in connection with the reinvestment of distributions

   21,650,224   235,495,402 

Redeemed

   (207,134,566  (2,283,144,056
  

 

 

  

 

 

 

Net change

   (89,046,468 $(971,781,215
  

 

 

  

 

 

 
Admin Class   

Issued from the sale of shares

   658,125  $7,267,683 

Issued in connection with the reinvestment of distributions

   74,152   803,727 

Redeemed

   (1,522,308  (16,968,085
  

 

 

  

 

 

 

Net change

   (790,031 $(8,896,675
  

 

 

  

 

 

 

Increase (decrease) from capital share transactions

   (30,789,540 $(345,835,758
  

 

 

  

 

 

 

 

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Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees of Loomis Sayles Funds II and Shareholders of Loomis Sayles High Income Fund and Loomis Sayles Investment Grade Bond Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Loomis Sayles High Income Fund and Loomis Sayles Investment Grade Bond Fund (two of the funds constituting Loomis Sayles Funds II, hereafter collectively referred to as the “Funds”) as of December 31, 2018, the related statements of operations for the period October 1, 2018 through December 31, 2018 and the year ended September 30, 2018, the statements of changes in net assets for the period October 1, 2018 through December 31, 2018 and each of the two years in the period ended September 30, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2018, the results of each of their operations for the period October 1, 2018 through December 31, 2018 and the year ended September 30, 2018, the changes in each of their net assets for the period October 1, 2018 through December 31, 2018 and each of the two years in the period ended September 30, 2018 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

 

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Report of Independent Registered Public Accounting Firm

 

financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 21, 2019

We have served as the auditor of one or more of the investment companies in the Natixis Investment Company Complex since at least 1995. We have not been able to determine the specific year we began serving as auditor.

 

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2018 U.S. Tax Distribution Information to Shareholders (Unaudited)

 

Corporate Dividends Received Deduction.  For the fiscal year ended December 31, 2018, a percentage of dividends distributed by the Funds listed below qualify for the dividends received deduction for corporate shareholders. This percentage is as follows:

 

Fund

  

Qualifying
Percentage

 

High Income Fund

   10.41

Investment Grade Bond Fund

   0.09

Capital Gains Distributions.  Pursuant to Internal Revenue Section 852(b), the following Funds paid distributions, which have been designated as capital gains distributions for the fiscal year ended December 31, 2018.

 

Fund

  

Amount

 

High Income Fund

  $469,860 

Investment Grade Bond Fund

   26,591,753 

Qualified Dividend Income.  For the fiscal year ended December 31, 2018, a percentage of the ordinary income dividends paid by the Fund are considered qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If the Fund paid a distribution during calendar year 2018, complete information will be reported in conjunction with Form1099-DIV. This percentage is noted below:

 

Fund

  

Qualifying
Percentage

 

High Income Fund

   2.41

Investment Grade Bond Fund

   3.87

 

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Trustee and Officer Information

 

The tables below provide certain information regarding the trustees and officers of Loomis Sayles Funds II (the “Trust”). Unless otherwise indicated, the address of all persons below is 888 Boylston Street, Suite 800, Boston, MA 02199-8197. The Funds’ Statement of Additional Information includes additional information about the trustees of the Trust and is available by calling Natixis Funds at 800-225-5478.

 

Name and Year of

Birth

 

Position(s) Held

with the Trust,

Length of Time

Served and Term

of  Office1

 

Principal

Occupation(s)

During Past

5 Years

 

Number of

Portfolios in

Fund Complex
Overseen2

and Other

Directorships Held

During Past

5 Years

 

Experience,

Qualifications,

Attributes, Skills

for Board

Membership

INDEPENDENT TRUSTEES   

Kenneth A. Drucker

(1945)

 

Chairperson of the Board of Trustees since January 2017

Trustee since 2008

Ex Officio member of Audit Committee, Contract Review Committee and Governance Committee

 Retired 

52

None

 Significant experience on the Board and on the boards of other business organizations (including at investment companies); executive experience (including as treasurer of an aerospace, automotive, and metal manufacturing corporation)

Edmond J. English

(1953)

 

Trustee since 2013

Audit Committee Member and Governance Committee Member

 Executive Chairman; formerly, Chief Executive Officer of Bob’s Discount Furniture (retail) 

52

Director, Burlington Stores, Inc. (retail)

 Significant experience on the Board and significant experience on the boards of other business organizations (including retail companies and a bank); executive experience (including at a retail company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

 

Position(s) Held

with the Trust,

Length of Time

Served and Term

of  Office1

 

Principal

Occupation(s)

During Past

5 Years

 

Number of

Portfolios in

Fund Complex
Overseen2

and Other

Directorships Held

During Past

5 Years

 

Experience,

Qualifications,

Attributes, Skills

for Board

Membership

 

INDEPENDENT TRUSTEES

continued

   

Richard A. Goglia

(1951)

 

Trustee since 2015

Audit Committee Member

 Retired; formerly Vice President and Treasurer of Raytheon Company (defense) 

52

None

 Experience on the Board and executive experience (including his role as vice president and treasurer of a defense company and experience at a financial services company)

Wendell J. Knox

(1948)

 

Trustee since 2009

Contract Review Committee

Member

and Governance Committee Member

 Director of Abt Associates Inc. (research and consulting) 

52

Director, The Hanover Insurance Group (property and casualty insurance); formerly, Director, Eastern Bank (bank)

 Significant experience on the Board and on the boards of other business organizations (including at a bank and at a property and casualty insurance firm); executive experience (including roles as president and chief executive officer of a research and consulting company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

 

Position(s) Held

with the Trust,

Length of Time

Served and Term

of  Office1

 

Principal

Occupation(s)

During Past

5 Years

 

Number of

Portfolios in

Fund Complex
Overseen2

and Other

Directorships Held

During Past

5 Years

 

Experience,

Qualifications,

Attributes, Skills

for Board

Membership

 

INDEPENDENT TRUSTEES

continued

   

Martin T. Meehan

(1956)

 

Trustee since 2012

Audit Committee Member

 President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell 

52

None

 Significant experience on the Board and on the boards of other business organizations; experience as President of the University of Massachusetts; government experience (including as a member of the U.S. House of Representatives); academic experience

Maureen B. Mitchell

(1951)

 

Trustee since 2017

Contract Review Committee Member

 Retired; formerly President, Global Sales and Marketing, GE Asset Management, Inc. (financial services) 

52

Director, Sterling Bancorp (Bank)

 Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including role as president of global sales and marketing at a financial services company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

 

Position(s) Held

with the Trust,

Length of Time

Served and Term

of  Office1

 

Principal

Occupation(s)

During Past

5 Years

 

Number of

Portfolios in

Fund Complex
Overseen2

and Other

Directorships Held

During Past

5 Years

 

Experience,

Qualifications,

Attributes, Skills

for Board

Membership

 

INDEPENDENT TRUSTEES

continued

   

James P. Palermo

(1955)

 

Trustee since 2016

Contract Review Committee Member

 Founding Partner, Breton Capital Management, LLC (private equity); Partner, STEP Partners, LLC (private equity); formerly, Chief Executive Officer of Global Client Management of The Bank of New York Mellon Corporation 

52

Director, FutureFuel Corp. (Chemicals and Biofuels)

 Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including roles as chief executive officer of client management and asset servicing for a banking and financial services company)

Erik R. Sirri

(1958)

 

Trustee since 2009

Chairperson of the Audit Committee

 Professor of Finance at Babson College 

52

None

 Significant experience on the Board; experience as Director of the Division of Trading and Markets at the Securities and Exchange Commission; academic experience; training as an economist

 

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Trustee and Officer Information

 

Name and Year of

Birth

 

Position(s) Held

with the Trust,

Length of Time

Served and Term

of  Office1

 

Principal

Occupation(s)

During Past

5 Years

 

Number of

Portfolios in

Fund Complex
Overseen2

and Other

Directorships Held

During Past

5 Years

 

Experience,

Qualifications,

Attributes, Skills

for Board

Membership

 

INDEPENDENT TRUSTEES

continued

   

Peter J. Smail

(1952)

 

Trustee since 2009

Chairperson of the Contract Review Committee

and Governance Committee Member

 Retired 

52

None

 Significant experience on the Board; mutual fund industry and executive experience (including roles as president and chief executive officer for an investment adviser)

Cynthia L. Walker

(1956)

 

Trustee since 2005

Chairperson of the Governance Committee and Audit Committee Member

 Deputy Dean for Finance and Administration, Yale University School of Medicine 

52

None

 Significant experience on the Board; executive experience in a variety of academic organizations (including roles as dean for finance and administration)
INTERESTED TRUSTEES   

Kevin P. Charleston3

(1965)

One FinancialCenter

Boston, MA 02111

 Trustee since 2015 President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P. 

52

None

 Experience on the Board; continuing service as President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.

 

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Trustee and Officer Information

 

Name and Year of

Birth

 

Position(s) Held

with the Trust,

Length of Time

Served and Term

of  Office1

 

Principal

Occupation(s)

During Past

5 Years

 

Number of

Portfolios in

Fund Complex
Overseen2

and Other

Directorships Held

During Past

5 Years

 

Experience,

Qualifications,

Attributes, Skills

for Board

Membership

 

INTERESTED TRUSTEES

continued

   
David L. Giunta4 (1965) 

Trustee since 2011

President of Loomis Sayles Funds II since 2008; Chief Executive Officer of Loomis Sayles Funds II since 2015

 President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation 

52

None

 Significant experience on the Board; experience as President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation

 

1 

Each trustee serves until retirement, resignation or removal from the Board. The current retirement age is 75. The position of Chairperson of the Board is appointed for a three-year term.

 

2 

The trustees of the Trust serve as trustees of a fund complex that includes all series of the Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis ETF Trust (collectively, the “Fund Complex”).

 

3 

Mr. Charleston is deemed an “interested person” of the Trust because he holds the following positions with an affiliated person of the Trust: President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.

 

4 

Mr. Giunta is deemed an “interested person” of the Trust because he holds the following positions with an affiliated person of the Trust: President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation.

 

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Trustee and Officer Information

 

Name and Year of Birth

 

Position(s) Held

with the Trust

 

Term of Office1 and

Length of Time Served

 

Principal Occupation(s)

During Past 5 Years2

OFFICERS OF THE TRUST  

Daniel J. Fuss

(1933)

One Financial Center

Boston, MA 02111

 Executive Vice President of Loomis Sayles Funds I and Loomis Sayles Funds II Since 2003 Vice Chairman and Director, Loomis, Sayles & Company, L.P.

Russell L. Kane

(1969)

 Secretary, Clerk and Chief Legal Officer Since 2016 Executive Vice President, General Counsel, Secretary and Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Michael C. Kardok

(1959)

 Treasurer, Principal Financial and Accounting Officer Since 2004 Senior Vice President, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Kirk D. Johnson

(1981)

 Chief Compliance Officer, Assistant Secretary and Anti-Money Laundering Officer Since 2018 Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Vice President and Counsel, Natixis Investment Managers, L.P.

 

1 

Each officer of the Trust serves for an indefinite term in accordance with the Trust’s current by-laws until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified.

 

2 

Each person listed above, except as noted, holds the same position(s) with the Fund Complex. Previous positions during the past five years with Natixis Distribution, L.P., Natixis Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from an officer’s current position with such entity.

 

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Item 2. Code of Ethics.

The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer and persons performing similar functions. There have been no amendments or waivers of the Registrant’s code of ethics during the period.

Item 3. Audit Committee Financial Expert.

The Board of Trustees of the Registrant has established an audit committee. Mr. Edmond J. English, Mr. Richard A. Goglia, Mr. Martin T. Meehan, Mr. Erik R. Sirri and Ms. Cynthia L. Walker are members of the audit committee and have been designated as “audit committee financial experts” by the Board of Trustees. Each of these individuals is also an Independent Trustee of the Registrant.

Item 4. Principal Accountant Fees and Services.

Fees billed by the Principal Accountant for services rendered to the Registrant.

The table below sets forth fees billed by the principal accountant, PricewaterhouseCoopers LLP, for the past two fiscal years for professional services rendered in connection with a) the audit of the Registrant’s annual financial statements and services provided in connection with regulatory filings; b) audit-related services (including services that are reasonably related to the performance of the audit of the Registrant’s financial statements and but not reported under “Audit Fees”); c) tax compliance, tax advice and tax planning and d) all other fees billed for professional services rendered by the principal accountant to the Registrant, other than the services reported as a part of (a) through (c) of this Item.

 

  Audit fees  Audit-related fees