0001193125-19-062225.txt : 20190304 0001193125-19-062225.hdr.sgml : 20190304 20190304142606 ACCESSION NUMBER: 0001193125-19-062225 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20181231 FILED AS OF DATE: 20190304 DATE AS OF CHANGE: 20190304 EFFECTIVENESS DATE: 20190304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOOMIS SAYLES FUNDS II CENTRAL INDEX KEY: 0000872649 IRS NUMBER: 043113285 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06241 FILM NUMBER: 19653147 BUSINESS ADDRESS: STREET 1: 888 BOYLSTON STREET STREET 2: 8TH FLOOR CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 617-449-2810 MAIL ADDRESS: STREET 1: 888 BOYLSTON STREET STREET 2: 8TH FLOOR CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: LOOMIS SAYLES FUNDS I DATE OF NAME CHANGE: 20031119 FORMER COMPANY: FORMER CONFORMED NAME: LOOMIS SAYLES FUNDS DATE OF NAME CHANGE: 20031015 FORMER COMPANY: FORMER CONFORMED NAME: LOOMIS SAYLES FUNDS II DATE OF NAME CHANGE: 20030718 0000872649 S000006700 Loomis Sayles High Income Fund C000018231 Class A NEFHX C000018233 Class C NEHCX C000069253 Class Y NEHYX C000175112 Class N LSHNX 0000872649 S000006701 Loomis Sayles Investment Grade Bond Fund C000018234 Class A LIGRX C000018236 Class C LGBCX C000018238 Class Y LSIIX C000082998 Admin Class LIGAX C000125485 Class N LGBNX N-CSR 1 d701926dncsr.htm LOOMIS SAYLES FUNDS II Loomis Sayles Funds II
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-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 Rule 30e-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 and non-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, consumer non-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

 

3  |


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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 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.

 

5  |


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Explanation of Fund Performance

Exposure to non-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  |


Table of Contents

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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Table of Contents

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.

 

9  |


Table of Contents

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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Table of Contents
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).

 

11  |


Table of Contents

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, Series 2003-8, Class 1CB1, 5.500%, 10/25/2033    $ 84,287  
  87,146      Banc of America Funding Trust, Series 2005-7, Class 3A1, 5.750%, 11/25/2035      91,858  
  61,178      Banc of America Funding Trust, Series 2007-4, 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, Series 2005-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, Series 2005-AR4, Class 3A1, 4.268%, 7/19/2035(b)      93,128  
  150,000      Home Partners of America Trust, Series 2016-2, Class E,
1-month LIBOR + 3.780%, 6.235%, 10/17/2033, 144A(d)
     150,396  
  155,000      Home Partners of America Trust, Series 2016-2, Class F,
1-month LIBOR + 4.700%, 7.155%, 10/17/2033, 144A(d)
     155,000  
  214,901      MASTR Adjustable Rate Mortgages Trust, Series 2005-2, Class 3A1, 3.987%, 3/25/2035(b)      209,792  
  223,825      MASTR Adjustable Rate Mortgages Trust, Series 2005-2, Class 4A1, 3.546%, 3/25/2035(b)      202,249  
  100,000      RCO Mortgage LLC, Series 2017-1, Class A2, 5.125%, 8/25/2022, 144A(b)      100,632  
     

 

 

 
        1,630,198  
     

 

 

 
   ABS Other — 0.3%

 

  186,325      AIM Aviation Finance Ltd., Series 2015-1A, Class B1,
5.072%, 2/15/2040, 144A(b)
     186,165  
  233,759      Wave LLC, Series 2017-1A, 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, Series 2013-1B,
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/JFIN Co-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 Finance Co-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, Series 2014-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, Series 2014-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, Series 2014-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, Series 2012-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  
     

 

 

 
   Total Non-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., Series 2017-1, 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.

 

23  |


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, Series 2017-3, Class A3, 1.740%, 9/15/2021    $ 20,706,221  
  10,515,000      AmeriCredit Automobile Receivables Trust, Series 2018-3, Class D, 4.040%, 11/18/2024      10,645,240  
  6,317,885      BMW Vehicle Owner Trust, Series 2016-A, Class A3, 1.160%, 11/25/2020      6,276,831  
  3,650,000      CarMax Auto Owner Trust, Series 2018-3, Class D, 3.910%, 1/15/2025      3,660,478  
  22,010,000      Credit Acceptance Auto Loan Trust, Series 2018-2A, Class A, 3.470%, 5/17/2027, 144A      21,968,885  
  6,555,000      Drive Auto Receivables Trust, Series 2018-5, Class D, 4.300%, 4/15/2026      6,639,626  
  3,122,000      Ford Credit Auto Owner Trust, Series 2017-B, Class A3, 1.690%, 11/15/2021      3,083,523  
  6,770,000      Ford Credit Auto Owner Trust, Series 2018-A, Class A3, 3.030%, 11/15/2022      6,773,149  
  6,697,430      Honda Auto Receivables Owner Trust, Series 2016-4, Class A3, 1.210%, 12/18/2020      6,637,116  
  2,103,000      Honda Auto Receivables Owner Trust, Series 2017-2, Class A3, 1.680%, 8/16/2021      2,081,255  
  28,000,000      Honda Auto Receivables Owner Trust, Series 2018-4, Class A3, 3.160%, 1/17/2023      28,133,025  
  25,503,002      Nissan Auto Receivables Owner Trust, Series 2016-C, Class A3, 1.180%, 1/15/2021      25,263,710  
  26,135,000      Nissan Auto Receivables Owner Trust, Series 2018-C, Class A3, 3.220%, 6/15/2023      26,323,091  
  12,632,000      Toyota Auto Receivables Owner Trust, Series 2017-B, Class A3, 1.760%, 7/15/2021      12,515,467  
  15,720,000      Toyota Auto Receivables Owner Trust, Series 2017-D, Class A3, 1.930%, 1/18/2022      15,500,980  
  27,000,000      Toyota Auto Receivables Owner Trust, Series 2018-A, Class A3, 2.350%, 5/16/2022(a)      26,740,395  
  4,500,000      Toyota Auto Receivables Owner Trust, Series 2018-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, Series 2017-1, Class A, 1.930%, 9/15/2022      14,386,811  
  10,434,000      American Express Credit Account Master Trust, Series 2017-6, Class A, 2.040%, 5/15/2023      10,273,110  
  3,000,000      American Express Credit Account Master Trust, Series 2018-1, Class A, 2.670%, 10/17/2022      2,988,322  
  9,770,000      BA Credit Card Trust, Series 2017-A2, Class A2, 1.840%, 1/17/2023      9,595,101  
  28,630,000      BA Credit Card Trust, Series 2018-A2, Class A2, 3.000%, 9/15/2023(a)      28,710,900  
  24,885,000      Capital One Multi-Asset Execution Trust, Series 2015-A2, Class A2, 2.080%, 3/15/2023      24,586,096  
  9,480,000      Capital One Multi-Asset Execution Trust, Series 2016-A3, Class A3, 1.340%, 4/15/2022      9,407,015  
  6,170,000      Capital One Multi-Asset Execution Trust, Series 2017-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, Series 2012-A4, Class A4, 1.580%, 8/15/2021    $ 17,555,904  
  7,915,000      Chase Issuance Trust, Series 2015-A4, Class A4, 1.840%, 4/15/2022      7,796,723  
  31,257,000      Chase Issuance Trust, Sries 2016-A5, Class A5, 1.270%, 7/15/2021      30,983,017  
  22,714,000      Citibank Credit Card Issuance Trust, Series 2014-A6, Class A6, 2.150%, 7/15/2021      22,620,471  
  13,575,000      Citibank Credit Card Issuance Trust, Series 2016-A1, Class A1, 1.750%, 11/19/2021      13,430,952  
  10,366,000      Citibank Credit Card Issuance Trust, Series 2017-A3, Class A3, 1.920%, 4/07/2022      10,233,786  
  13,235,000      Citibank Credit Card Issuance Trust, Series 2017-A8, Class A8, 1.860%, 8/08/2022      13,019,325  
  35,306,000      Discover Card Execution Note Trust, Series 2016-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, Series 2018-RN3, Class A1, 3.672%, 3/28/2033, 144A(b)      1,533,133  
  3,147,076      Bayview Opportunity Master Fund Trust, Series 2018-RN8, Class A1, 4.066%, 9/28/2033, 144A(b)      3,150,318  
  1,432,827      CAM Mortgage Trust, Series 2018-1, Class A1, 3.960%, 12/01/2065, 144A(b)      1,442,430  
  1,394,900      Gosforth Funding PLC, Series 2018-1A, Class A1,
3-month LIBOR + 0.450%, 3.139%, 8/25/2060, 144A(c)
     1,389,078  
  2,481,000      Holmes Master Issuer PLC, Series 2018-1A, 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, Series 2017-CH2, Class A1,
4.000%, 12/25/2047, 144A(b)
     3,659,613  
  5,626,273      Sequoia Mortgage Trust, Series 2018-CH1, Class A1,
4.000%, 2/25/2048, 144A(b)
     5,679,462  
  2,099,979      Towd Point Mortgage Trust, Series 2016-1, 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, Series 2005-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., Series 2013-1A, Class 1A, 4.625%, 10/15/2043, 144A(d)(e)(f)      46,675,325  
  13,595,000     

Horizon Aircraft Finance I Ltd., Series 2018-1, Class A,

4.458%, 12/15/2038, 144A

     13,857,744  
  8,720,000      Kestrel Aircraft Funding Ltd., Series 2018-1A, Class A,
4.250%, 12/15/2038, 144A(d)
     8,473,387  
  13,610,000      Mariner Finance Issuance Trust, Series 2018-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., Series 2017-1, Class A, 3.967%, 8/15/2042, 144A    $ 17,662,602  
  1,190,000      SLM Private Credit Student Loan Trust, Series 2003-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, Series 2003-C, Class A4,
28-day ARS, 4.870%, 9/15/2032(c)(d)
     1,216,569  
  6,720,000      SoFi Consumer Loan Program Trust, Series 2018-4, Class C, 4.170%, 11/26/2027, 144A      6,821,144  
  10,403,392      Trinity Rail Leasing LLC, Series 2010-1A, 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, Series 2018-EA, Class A2,
4.000%, 12/15/2059, 144A
     7,061,395  
  1,033,000      SLM Private Credit Student Loan Trust, Series 2003-A, Class A3,
28-day ARS, 4.750%, 6/15/2032(c)(d)
     1,032,794  
  780,000      SLM Private Credit Student Loan Trust, Series 2003-A, Class A4,
28-day ARS, 4.770%, 6/15/2032(c)(d)
     777,806  
  1,454,000      SLM Private Credit Student Loan Trust, Series 2003-B, Class A3,
28-day ARS, 4.750%, 3/15/2033(c)(d)
     1,453,709  
  995,000      SLM Private Credit Student Loan Trust, Series 2003-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, Series 2018-1, Class A,
4.810%, 11/15/2048, 144A
     7,360,188  
  3,595,000      Adams Outdoor Advertising LP, Series 2018-1, Class B,
5.653%, 11/15/2048, 144A
     3,702,129  
  27,481,500      Coinstar Funding LLC, Series 2017-1A, Class A2, 5.216%, 4/25/2047, 144A      27,784,910  
  4,962,500      Five Guys Funding LLC, Series 2017-1A, Class A2, 4.600%, 7/25/2047, 144A      5,060,840  
  13,595,000      Taco Bell Funding LLC, Series 2018-1A, Class A2I,
4.318%, 11/25/2048, 144A
     13,762,762  
  3,700,000      Wingstop Funding LLC, Series 2018-1, 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, Series 2013-1, Class B, 5.375%, 11/15/2022, 144A      3,246,465  
  1,868,814      American Airlines Pass Through Certificates, Series 2016-3, Class B, 3.750%, 4/15/2027      1,793,846  
  697,843      American Airlines Pass Through Certificates, Series 2017-2, 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, Series 2012-1, Class B, 6.250%, 10/11/2021    $ 1,376,495  
  213,322      Continental Airlines Pass Through Trust, Series 1999-1, Class A, 6.545%, 8/02/2020      213,863  
  324,173      Continental Airlines Pass Through Trust, Series 2001-1, Class A-1, 6.703%, 12/15/2022      338,174  
  1,119,507      Delta Air Lines Pass Through Trust, Series 2007-1, Class A, 6.821%, 2/10/2024(d)      1,202,015  
  5,973,407      Delta Air Lines Pass Through Trust, Series 2007-1, Class B, 8.021%, 2/10/2024      6,499,665  
  9,346,973      Delta Air Lines Pass Through Trust, Series 2009-1, Class A, 7.750%, 6/17/2021      9,662,339  
  14,605,319      UAL Pass Through Trust, Series 2007-1, Class A, 6.636%, 1/02/2024      15,188,071  
  726,269      Virgin Australia Pass Through Certificates, Series 2013-1A, 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,
Series 2014-C20, Class A2, 2.872%, 7/15/2047
     4,441,348  
  760,407      Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C14, Class A2, 2.916%, 2/15/2047      759,255  
  3,456,000      Morgan Stanley Capital I Trust, Series 2011-C2, Class E,
5.485%, 6/15/2044, 144A(b)
     3,315,007  
  2,125,000      WFRBS Commercial Mortgage Trust, Series 2011-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  
     

 

 

 
   Total Non-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., Series A-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.

 

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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 an open-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 maximum front-end sales charge of 4.25%. Class C shares do not pay a front-end sales charge, pay higher Rule 12b-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 a front-end sales charge, a CDSC or Rule 12b-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 a front-end sales charge or a CDSC, but do pay a Rule 12b-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 borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (such as the Rule 12b-1 fees applicable to Class A, Class C and Admin Class), and transfer agent fees are borne collectively for Class A,

 

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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 Rule 12b-1 Plan. Shares of each class would receive their pro 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 of closed-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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Notes to Financial Statements (continued)

 

December 31, 2018

 

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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December 31, 2018

 

trade date. Dividend income (including income reinvested) and foreign withholding tax, if applicable, is recorded on ex-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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December 31, 2018

 

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 traded over-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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December 31, 2018

 

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 net mark-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 Regulation S-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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Notes to Financial Statements (continued)

 

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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December 31, 2018

 

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 on ex-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/or non-income producing securities, deferred trustees’ fees, distribution re-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/ or non-income producing securities, deferred Trustees’ fees, forward foreign currency contract mark-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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Notes to Financial Statements (continued)

 

December 31, 2018

 

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 in per-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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December 31, 2018

 

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 currency mark-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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December 31, 2018

 

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 are tri-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 for non-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 by non-U.S. Governments and non-U.S. corporate debt. In the event that the

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

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 (Subtopic 310-20): 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 Other Non-Convertible Bonds(a)

            106,299,874              106,299,874  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Non-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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Notes to Financial Statements (continued)

 

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 Other Non-Convertible Bonds(a)

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

 

 

   

 

 

    

 

 

   

 

 

 

Total Non-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 be non-hedge transactions for the purpose of these disclosures.

The volume of forward foreign currency contract activity, as a percentage of net assets, based on gross month-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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Table of Contents

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 net mark-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 of over-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 are marked-to-market and when collateral moves. The ISDA agreements include tri-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 on over-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 at pre-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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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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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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Pursuant to Rule 12b-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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c.  Administrative Fees.  Natixis Advisors, L.P. (“Natixis Advisors”) provides certain administrative services for the Funds and contracts with State Street Bank to serve as sub-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 its pro 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 its pro 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 as sub-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 in sub-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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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 current per-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, the sub-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 of sub-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 for sub-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 a pro 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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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 allocated pro 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 a pro 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 (including sub-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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Prior to April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts and Loomis Sayles Funds Trusts, entered into a 364-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 a non-discretionary

 

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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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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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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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Table of Contents

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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Table of Contents

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 Form 1099-DIV. This percentage is noted below:

 

Fund

  

Qualifying
Percentage

 

High Income Fund

     2.41

Investment Grade Bond Fund

     3.87

 

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Table of Contents

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)

 

|  88


Table of Contents

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)

 

|  90


Table of Contents

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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Table of Contents

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 Financial Center

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.

 

|  92


Table of Contents

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.

 

93  |


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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.

 

|  94


Table of Contents

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     Tax fees1     All other fees  
    10/1/18-12/31/18     10/1/18- 12/31/18     10/1/18-12/31/18     10/1/18-12/31/18  

Loomis Sayles High Income Fund and Loomis Sayles Investment Grade Bond Fund

  $ 77,526     $ 0     $ 8,104     $ 0  

1. Tax fees consist of:

2018 – Review of Registrant’s tax returns and tax consulting services.

Aggregate fees billed to the Registrant for non-audit services during 2018 were $8,104, respectively.

Fees billed by the Principal Accountant for services rendered to the Adviser and Control Affiliates.

The following table sets forth the fees billed by the Registrant’s principal accountant for non-audit services rendered to Loomis, Sayles & Company, L.P. (“Loomis Sayles”) and entities controlling, controlled by or under common control with Loomis Sayles. Registrant (“Control Affiliates”) that provide ongoing services to the Registrant, for engagements that related directly to the operations and financial reporting of the Registrant for the last two fiscal years.

 

     Audit-related fees      Tax fees      All other fees  
     10/1/18-12/31/18      10/1/18-12/31/18      10/1/18-12/31/18  

Control Affiliates

   $ 0      $ 0      $ 0  

The following table sets forth the aggregate fees billed by the Registrant’s principal accountant for non-audit services rendered to Loomis Sayles. and Control Affiliates that provide ongoing services to the Registrant, for the last two fiscal years, including the fees disclosed in the table above.

 

     Aggregate
Non-Audit Fees
 
     10/1/18-12/31/18  

Control Affiliates

   $ 51,815  

None of the services described above were approved pursuant to (c)(7)(i)(C) of Regulation S-X.


Table of Contents

Audit Committee Pre Approval Policies.

Annually, the Registrant’s Audit Committee reviews the audit, audit-related, tax and other non-audit services together with the projected fees, for services proposed to be rendered to the Trust and/or other entities for which pre-approval is required during the upcoming year. Any subsequent revisions to already pre-approved services or fees (including fee increases) and requests for pre-approval of new services would be presented for consideration quarterly as needed.

If, in the opinion of management, a proposed engagement by the Registrant’s independent accountants needs to commence before the next regularly scheduled Audit Committee meeting, any member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement, but only for engagements to provide audit, audit related and tax services. This approval is subject to review of the full Audit Committee at its next quarterly meeting. All other engagements require the approval of all the members of the Audit Committee.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Schedule of Investments.

Included as part of the Report to Shareholders filed as Item 1 herewith.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Securities Holders.

There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.

Item 11. Controls and Procedures.

The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.

There were no changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.


Table of Contents

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

Not applicable.

Item 13. Exhibits.

 

(a) (1)   Code of Ethics required by Item 2 hereof, filed herewith as Exhibit (a)(1).
(a) (2)  

Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule

30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)), filed herewith as Exhibits (a)(2)(1) and (a)(2)(2), respectively.

(a) (3)   Not applicable.
(b)   Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are filed herewith as Exhibit (b).
 


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Loomis Sayles Funds II
By:   /s/ David L. Giunta
Name:   David L. Giunta
Title:   President and Chief Executive Officer
Date:   February 21, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By:   /s/ David L. Giunta
Name:   David L. Giunta
Title:   President and Chief Executive Officer
Date:   February 21, 2019

 

By:   /s/ Michael C. Kardok
Name:   Michael C. Kardok
Title:   Treasurer
Date:   February 21, 2019
EX-99.CODEETH 2 d701926dex99codeeth.htm CODE OF ETHICS Code of Ethics

Exhibit (a)(1)

NATIXIS FUNDS TRUST I

NATIXIS FUNDS TRUST II

NATIXIS FUNDS TRUST IV

LOOMIS SAYLES FUNDS I

LOOMIS SAYLES FUNDS II

GATEWAY TRUST

NATIXIS ETF TRUST

CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS

 

I.

Covered Persons/Purpose of the Code

This Code of Ethics (this “Code”) pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 has been adopted by the registered investment companies (each a “Fund” and, collectively, the “Funds”) listed on Exhibit A and applies to each Fund’s Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer (the “Covered Persons,” all covered persons are set forth in Exhibit B) for the purpose of promoting:

 

   

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

   

Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (the “SEC”) and in other public communications made by the registrant

 

   

Compliance with applicable governmental laws, rules and regulations;

 

   

The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code of violations of the Code; and

 

   

Accountability for adherence to the Code.

Each Covered Person should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to conflicts of interest.


II.

Covered Persons Should Handle Ethically Actual and Apparent Conflicts of Interest

Overview. A “conflict of interest” occurs when a Covered Person’s private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Person’s, or a member of the Covered Person’s family or household, receives improper personal benefits as a result of the Covered Person’s position with the Fund.

Certain conflicts of interest arise out of the relationships between Covered Persons and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (including the regulations thereunder, the “1940 Act”) and the Investment Advisers Act of 1940 (including the regulations thereunder, the “Investment Advisers Act”). For example, Covered Persons may not engage in certain transactions with the Fund because of their status as “affiliated persons” of the Fund. The Funds and their investment advisers; subadvisers; distributors and administrators (each a “Service Provider” and, collectively, the “Service Providers”) compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. See also Section V of this code.

Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Funds and their Service Providers of which the Covered Persons are also officers or employees. As a result, this Code recognizes that the Covered Persons will, in the normal course of their duties (whether for the Funds or for a Service Provider, or for each), be involved in establishing policies and implementing decisions that will have different effects on the Service Providers and the Funds. The participation of the Covered Persons in such activities is inherent in the contractual relationships between the Funds and their Service Providers and is consistent with the performance by the Covered Persons of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the 1940 Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds’ Boards of Trustees (“Boards”) that the Covered Persons may also be officers or employees of one or more other investment companies covered by this or other codes and that such service, by itself, does not give rise to a conflict of interest.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not the subject of provisions of the 1940 Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Persons should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Person should not be placed improperly before the interest of a Fund.

 

-2-


Each Covered Person must not:

 

   

use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Person would benefit personally to the detriment of the Fund;

 

   

cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Person rather than the benefit the Fund; or

 

   

retaliate against any other Covered Person or any employee of the Funds or their Service Providers for reports of potential violations that are made in good faith.

There are some conflict of interest situations that should always be approved by the Chief Legal Officer (“CLO”) of the Fund (or, with respect to activities of the CLO if he/she is a Covered Person, by the President ). These conflict of interest situations are listed below:

 

   

service on the board of directors or governing board of a publicly traded entity;

 

   

acceptance of any investment opportunity, gift, gratuity or other thing of more than nominal value from any person or entity that does business, or desires to do business, with the Fund. This restriction shall not apply to (i) gifts from a single giver so long as their aggregate annual value does not exceed the equivalent of $100 or (ii) attending business meals, business related conferences, sporting events and other entertainment events at the expense of a giver, so long as the expense is reasonable;

 

   

any ownership interest in, or any consulting relationship with, any entities doing business with a Fund, other than a Service Provider or an affiliate of a Service Provider. This restriction shall not apply to or otherwise limit the ownership of publicly traded securities so long as the Covered Person’s ownership does not exceed more than 2% of the outstanding securities of the relevant class; and

 

   

a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Person’s employment with a Service Provider or its affiliate. This restriction shall not apply to or otherwise limit (i) the ownership of publicly traded securities so long as the Covered Person’s ownership does not exceed more than 2% of the particular class of security outstanding or (ii) the receipt by the Service Provider of research or other benefits in exchange for “soft dollars”.

 

-3-


III.

Disclosure and Compliance

 

   

Each Covered Person should familiarize himself with the disclosure requirements generally applicable to a Fund;

 

   

Each Covered Person should not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the Fund, including to the Fund’s Board and auditors, and to governmental regulators and self-regulatory organizations;

 

   

Each Covered Person should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and

 

   

It is the responsibility of each Covered Person to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

 

IV.

Reporting and Accountability

Each Covered Person must:

 

   

upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Person), affirm in writing to the Funds that he/she has received, read, and understands the Code;

 

   

annually thereafter affirm to the Funds that he/she has complied with the requirements of the Code; and

 

   

notify the CLO of the Funds promptly if he/she knows of any violation of this Code (with respect to violations by the CLO if he/she is a Covered Person, the Covered Person shall report to the President). Failure to do so is itself a violation of this Code.

The CLO of a Fund is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers other than those this Code states can be granted by the CLO, sought by the CLO or Covered Person will be considered by the relevant Fund’s Audit Committee (the “Committee”).

The Funds will follow these procedures in investigating and enforcing this Code:

 

   

the CLO will take all appropriate action to investigate any potential violations reported, which may include the use of internal or external counsel, accountants or other personnel;

 

-4-


   

if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action;

 

   

any matter that the CLO believes is a violation will be reported to the Committee;

 

   

if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Person;

 

   

the Committee will be authorized to grant waivers, as it deems appropriate; and

 

   

any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

 

V.

Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or the Funds’ Service Providers govern or purport to govern the behavior or activities of the Covered Persons who are subject to this Code, they are superseded by this Code to the extent that they conflict with the provisions of this Code. The Funds and their Service Providers’ codes of ethics under Rule 17j-1 under the 1940 Act and the Service Providers’ more detailed compliance policies and procedures are separate requirements applying to the Covered Persons and others, and are not part of this Code.

 

VI.

Amendments

Any amendments to this Code with respect to a Fund, other than administrative amendments to Exhibits A and B, must be approved or ratified by a majority vote of the Fund’s Board, including a majority of independent trustees.

 

VII.

Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone except as permitted by the Board.

 

-5-


VIII.

Internal Use

The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion.

 

-6-


Exhibit A

Registered Investment Companies

Natixis Funds Trust I

Natixis Funds Trust II

Natixis Funds Trust IV

Natixis ETF Trust

Loomis Sayles Funds I

Loomis Sayles Funds II

Gateway Trust

 

-7-


Exhibit B

Persons Covered by this Code of Ethics

 

Trust

 

Principal Executive Officer

 

Principal Financial Officer

 

Principal Accounting Officer

Natixis Funds Trust I   David Giunta, Trustee, President and Chief Executive Officer   Michael Kardok, Treasurer   Michael Kardok, Treasurer
Natixis Funds Trust II   David Giunta, Trustee, President and Chief Executive Officer   Michael Kardok, Treasurer   Michael Kardok, Treasurer
Natixis Funds Trust IV   David Giunta, Trustee, President and Chief Executive Officer   Michael Kardok, Treasurer   Michael Kardok, Treasurer
Loomis Sayles Funds I   Kevin Charleston, Trustee, President and Chief Executive Officer   Michael Kardok, Treasurer   Michael Kardok, Treasurer
Loomis Sayles Funds II   David Giunta, Trustee, Chief Executive Officer and President   Michael Kardok, Treasurer   Michael Kardok, Treasurer
Gateway Trust   David Giunta, Trustee, President and Chief Executive Officer   Michael Kardok, Treasurer   Michael Kardok, Treasurer
Natixis ETF Trust   David Giunta, Trustee, President and Chief Executive Officer   Michael Kardok, Treasurer   Michael Kardok, Treasurer

 

-8-

EX-99.CERT 3 d701926dex99cert.htm SECTION 302 CERTIFICATIONS Section 302 Certifications

Exhibit (a)(2)(1)

Loomis Sayles Funds II

Exhibit to SEC Form N-CSR

Section 302 Certification

I, David L. Giunta, certify that:

 

  1.

I have reviewed this report on Form N-CSR of Loomis Sayles Funds II;

 

  2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

  4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5.

The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and


  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 21, 2019

 

/s/ David L. Giunta

David L. Giunta
Chief Executive Officer and President


Exhibit (a)(2)(2)

Loomis Sayles Funds II

Exhibit to SEC Form N-CSR

Section 302 Certification

I, Michael C. Kardok, certify that:

 

  1.

I have reviewed this report on Form N-CSR of Loomis Sayles Funds II;

 

  2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

  4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5.

The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and


  b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 21, 2019

 

/s/ Michael C. Kardok

Michael C. Kardok
Treasurer
EX-99.906CERT 4 d701926dex99906cert.htm SECTION 906 CERTIFICATIONS Section 906 Certifications

Exhibit (b)

Loomis Sayles Funds II

Section 906 Certification

In connection with the report on Form N-CSR for the period ended December 31, 2018 for the Registrant (the “Report”), the undersigned each hereby certifies to the best of his knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

By:     By:
Chief Executive Officer and President     Treasurer
Loomis Sayles Funds II     Loomis Sayles Funds II

/s/ David L. Giunta

   

/s/ Michael C. Kardok

David L. Giunta     Michael C. Kardok
Date: February 21, 2019     Date: February 21, 2019

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Loomis Sayles Funds II, and will be retained by the Loomis Sayles Funds II and furnished to the Securities and Exchange Commission or its staff upon request.

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