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- 2402
John Hancock Sovereign Bond Fund
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Alfred P. Ouellette
Senior Attorney and Assistant Secretary
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4324
Date of fiscal year end: | May 31 |
Date of reporting period: | November 30, 2006 |
ITEM 1. REPORT TO SHAREHOLDERS.
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TABLE OF CONTENTS |
Your fund at a glance |
page 1 |
Managers’ report |
page 2 |
A look at performance |
page 6 |
Your expenses |
page 8 |
Fund’s investments |
page 1 0 |
Financial statements |
page 2 5 |
Notes to financial |
statements |
page 3 3 |
For more information |
page 4 4 |
CEO corner
To Our Shareholders,
The future has arrived at John Hancock Funds.
We have always been firm believers in the powerful role the Internet can play in providing fund information to our shareholders and prospective investors. Recently, we launched a redesigned, completely overhauled Web site that is more visually pleasing, easier to navigate and, most importantly, provides more fund information and learning tools without overwhelming the user.
Not long after we embarked on this major project, a study was released by the Investment Company Institute, the mutual fund industry’s main trade group, which found that an overwhelming majority of shareholders consider the Internet the “wave of the future” for accessing fund information.
Our new site sports fresher and faster ways to access account information. New innovations allow investors to view funds by risk level, track the performance of the John Hancock funds of their choice or sort funds by Morningstar, Inc.’s star ratings. Investors who own a John Hancock fund through a qualified retirement plan and don’t pay sales charges when making a purchase have the option of sorting by a “Load Waived” Morningstar Rating, thereby creating an apples-to-apples comparison with no-load funds that may also be available in their retirement plan.
The new site also has more educational tools and interactive modules to educate and assist investors with their financial goals, from college savings to retirement planning. A new “I want to…” feature allows investors to check performance, invest more money, update personal information or download prospectuses and forms quickly and easily.
In another of our ongoing efforts to provide our shareholders with top-notch service, we also redesigned our shareholder reports, as you may have noticed with this report. We hope the larger size, more colorful cover and redesigned presentation of the commentary and data tables will draw you in and make them easier to read.
After you’ve read your shareholder report, we encourage you to visit our new Web site — www.jhfunds.com — and take a tour. It’s easy, fast and fun and allows you to be in control of what you see and do. In short, it’s the wave of the future!
Sincerely,
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Keith F. Hartstein,
President and Chief Executive Officer
This commentary reflects the CEO’s views as of November 30, 2006. They are subject to change at any time.
Your fund at a glance
The Fund seeks a high level of current income consistent with prudent investment
risk by investing at least 80% of its assets in a diversified portfolio of bonds and other
debt securities, including corporate bonds and U.S. government and agency securities.
Over the last six months
► The bond market rallied as moderating economic activity and lower inflation led
to falling interest rates.
► Corporate bonds produced the best returns, while Treasury bonds lagged.
► The Fund benefited from favorable security selection among corporate bonds and
judicious adjustments to the maturity structure of the portfolio.
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Top 10 issuers | ||||
Federal National Mortgage Assn. | 15.7% | JPMorgan | 2.4% | |
Federal Home Loan Mortgage Corp. | 8.0% | Goldman Sachs Group, Inc. | 1.9% | |
U.S. Treasury | 4.8% | Merrill Lynch & Co., Inc. | 1.6% | |
Bank of America | 2.8% | Citigroup Inc. | 1.4% | |
Bear Stearns Cos., Inc. (The) | 2.5% | Countrywide Home Loans, Inc. | 1.3% | |
As a percentage of net assets on November 30, 2006.
1
Managers’ report
John Hancock
Bond Fund
The U.S. bond market enjoyed a solid rally during the six months ended November 30, 2006. The main catalyst for the bond market rally was evidence of slowing economic growth, including a downturn in the housing market, weaker consumer spending and tepid job growth. Lower inflation, largely the result of declining energy and commodity prices, also contributed favorably to bond market performance.
The moderating economic environment led the Federal Reserve to halt its program of short-term interest rate increases. After 17 rate hikes between June 2004 and June 2006, the Fed held rates steady during the last five months of the period.
As a result, interest rates, which had been rising steadily since bottoming in mid-2003, peaked in June and began a decline that lasted through the end of the six-month period, producing solid gains for bonds. Yields remained virtually equal across the maturity spectrum; as of November 30, 2006, the two-year Treasury note yield was 4.62%, while the 30-year Treasury bond yielded 4.56% .
Sector performance was fairly consistent, with every segment of the bond market posting similarly positive returns. Corporate bonds, including both investment grade and high yield, were the best
SCORECARD
INVESTMENT | PERIOD’S PERFORMANCE. . . AND WHAT’S BEHIND THE NUMBERS | |
Time Warner | ▲ | Improvements across all operating segments, especially its cable |
Entertainment | business | |
Nevada Power | ▲ | Electric utility in the fast-growing Las Vegas area gets credit-rating |
upgrade | ||
KN Capital Trust | ▼ | Bond issued by Kinder Morgan, which is being taken private in a |
management-led leveraged buyout |
2
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Portfolio Managers, MFC Global Investment Management (U.S.), LLC
Howard C. Greene, CFA, Barry H. Evans, CFA and Jeffrey N. Given, CFA
performers. Mortgage-backed securities performed in line with the broad bond market, while Treasury and government agency bonds lagged.
“The main catalyst for the bond
market rally was evidence of
slowing economic growth,
including a downturn in the
housing market, weaker
consumer spending and tepid
job growth.”
Fund performance
For the six months ended November 30, 2006, John Hancock Bond Fund’s Class A, Class B, Class C, Class I and Class R shares posted total returns of 5.87%, 5.51%, 5.50%, 6.10% and 5.57%, respectively, at net asset value. The Fund’s performance was slightly behind the 6.03% return of the Lehman Government/Credit Index but ahead of the 5.46% average return of Morningstar, Inc.’s intermediate-term bond category.1 Keep in mind that your net asset value return will differ from the Fund’s performance if you were not invested in the Fund for the entire period and did not reinvest all distributions. See pages six and seven for historical performance information.
Maturity structure boosted results
Fund performance benefited from further adjustments we made to the maturity structure of the portfolio. We continued to shift assets into intermediate-term bonds — those maturing in seven to 10 years — while reducing our exposure to shorter- and longer-term bonds. This positioning tends to perform best when short-term bond yields adjust to levels lower than long-term bond yields. Although this divergence did not occur during the period, the strategy still added value as intermediate-term bonds enjoyed strong returns.
Bond Fund
3
We also increased the portfolio’s sensitivity to interest rates during the summer, which helped the portfolio benefit to a greater extent from the bond market rally. In the wake of the rally, however, we scaled back our interest-rate sensitivity to a more neutral level.
Sector allocation: emphasis on mortgage-backed securities
We continued to increase the portfolio’s exposure to mortgage-backed securities, which remained the largest sector weighting in the portfolio. In particular, we added substantially to our positions in commercial mortgage-backed securities during a period of increased issuance, when yields were relatively high. With high credit ratings, intermediate maturities and attractive yields, commercial mortgage-backed securities provided a way to add yield in a defensive manner. To make room for the additional mortgage-backed securities, we reduced our position in Treasury and government agency bonds.
In the corporate bond portion of the portfolio, we trimmed our investment-grade holdings, while adding selectively to our high yield position as we found attractive individual securities. We remained leery of the accelerating trend toward leveraged buy-outs and other stockholder-friendly actions that lead to higher corporate debt levels. Consequently, we maintained our focus on bonds issued by utilities, banks and other finance-related bonds. These companies are generally reluctant to take on additional leverage because they need to protect the quality of their balance sheets as an ongoing requirement of their businesses.
SECTOR DISTRIBUTION2 | |
Government — U.S. | |
Agency | 33% |
Mortgage bonds | 24% |
Financials | 13% |
Consumer discretionary | 6% |
Utilities | 5% |
Government — U.S. | 5% |
Energy | 3% |
Industrials | 2% |
Materials | 2% |
Health care | 2% |
Consumer staples | 1% |
Telecommunication | |
services | 1% |
Security selection added value
The best individual performer in the portfolio was Provident Financing Trust 1, which is part of insurance firm UnumProvident. Although the struggling insurer has gradually improved its operating results, the main driver of its strong performance during the period was speculation about a potential buy-out of the company by a higher-rated entity.
Astoria Depositor Corporation, which also performed well during the period, represents a good example of our in-depth research capabilities. Astoria is a very small company that owns a single asset — a power plant in Queens, New York, that has contracted out its power supply to the New York grid. The
Bond Fund
4
bonds enjoyed a boost when the plant began operating in the spring, and it is now running at full capacity.
“We also increased the portfolio’s
sensitivity to interest rates
during the summer, which
helped the portfolio benefit to
a greater extent from the bond
market rally.”
We also benefited from our positions in GMAC and Ford Motor Credit, the financing arms of the two largest U.S. automakers. The sale of 51% of GMAC to a consortium of private equity firms provided some positive momentum to the beleaguered auto sector.
On the downside, the weakest performer in the portfolio was Nova Chemicals Ltd. The commodity chemicals maker reported disappointing results amid a weaker economy, increased competitive pressures and higher raw materials prices.
QUALITY | |
DISTRIBUTION2 | |
AAA | 58% |
AA | 3% |
A | 8% |
BBB | 14% |
BB | 8% |
B | 5% |
CCC | 1% |
Outlook
We expect the economy to continue to weaken as we move into 2007, although we do not foresee a recession. Corporate balance sheets remain strong, which should help credit quality hold up during the slowdown. We anticipate the Fed’s next move to be an interest rate cut, most likely in the first half of 2007.
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Given this environment, we intend to maintain our current positioning, which should ultimately benefit from a widening of the gap between short- and long-term bond yields. We also believe that the higher yields of corporate bonds will help them continue to outperform going forward. However, individual security selection will become increasingly important.
This commentary reflects the views of the portfolio managers through the end of the Fund’s period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
1 Figures from Morningstar, Inc. include reinvested dividends and do not take into account sales charges. Actual load-adjusted performance is lower.
2 As a percentage of net assets on November 30, 2006.
Bond Fund
5
A look at performance
For the periods ending November 30, 2006
Average annual returns | Cumulative total returns | SEC 30- | |||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | day yield | |||||||||
Inception | Since | Since as | of | ||||||||
Class | date | 1-year | 5-year | 10-year | inception | 6 months | 1-year | 5-year | 10-year | inception | 11-30-06 |
A | 11-9-73 | 1.09% | 4.22% | 5.39% | — | 1.13% | 1.09% | 22.95% | 69.02% | — | 4.71% |
B | 11-23-93 | 0.11 | 4.11 | 5.29 | — | 0.51 | 0.11 | 22.30 | 67.44 | — | 4.23 |
C | 10-1-98 | 4.11 | 4.45 | — | 4.43% | 4.50 | 4.11 | 24.29 | — | 42.43% | 4.23 |
I1 | 9-4-01 | 6.30 | 5.64 | — | 5.66 | 6.10 | 6.30 | 31.55 | — | 33.45 | 5.36 |
R1 | 8-5-03 | 4.96 | — | — | 4.72 | 5.57 | 4.96 | — | — | 16.54 | 4.56 |
Performance figures assume all distributions are reinvested. Returns with maximum sales charge reflect a sales charge on Class A shares of 4.5% and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The returns for Class C shares have been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. The Class B shares’ CDSC declines annually between years 1–6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charge is not applicable for Class I and Class R shares.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For performance data current to the most recent month-end, please call 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Fund’s performance results reflect any applicable expense reductions, without which the expenses would increase and results would have been less favorable.
1 For certain types of investors as described in the Fund’s Class I and Class R share prospectuses.
Bond Fund
6
Growth of $10,000
This chart shows what happened to a hypothetical $10,000 investment in Class A shares
for the period indicated. For comparison, we’ve shown the same investment in the
Lehman Brothers Government/Credit Bond Index.
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With maximum | ||||
Class | Period beginning | Without sales charge | sales charge | Index |
B1 | 11-30-96 | $16,744 | $16,744 | $18,290 |
C1 | 10-1-98 | 14,241 | 14,241 | 15,319 |
I 2 | 9-4-01 | 13,345 | 13,345 | 13,204 |
R 2 | 8-5-03 | 11,654 | 11,654 | 11,584 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B, Class C, Class I and Class R shares, respectively, as of November 30, 2006. The Class C shares investment with maximum sales charge has been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in the different classes and the fee structure of those classes.
Lehman Brothers Government/Credit Bond Index is an unmanaged index that measures the performance of U.S. government bonds, U.S. corporate bonds and Yankee bonds.
It is not possible to invest directly in an index. Index figures do not reflect sales charges which would have resulted in lower values if they did.
1 No contingent deferred sales charge applicable.
2 For certain types of investors as described in the Fund’s Class I and Class R share prospectuses.
Bond Fund
7
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable) and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on June 1, 2006, with the same investment held until November 30, 2006.
Account value | Ending value | Expenses paid during period | |
on 6-1-06 | on 11-30-06 | ended 11-30-061 | |
Class A | $1,000.00 | $1,058.70 | $5.47 |
Class B | 1,000.00 | 1,055.10 | 9.07 |
Class C | 1,000.00 | 1,055.00 | 9.07 |
Class I | 1,000.00 | 1,061.00 | 3.26 |
Class R | 1,000.00 | 1,055.70 | 8.46 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at November 30, 2006 by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSRS/0000928816-07-000068/bondfunx10x1.jpg)
Bond Fund
8
Hypothetical example for comparison purposes
This table allows you to compare your fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annual return before expenses (which is not your fund’s actual return). It assumes an account value of $1,000.00 on June 1, 2006, with the same investment held until November 30, 2006. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during period | |
on 6-1-06 | on 11-30-06 | ended 11-30-061 | |
Class A | $1,000.00 | $1,019.75 | $5.37 |
Class B | 1,000.00 | 1,016.24 | 8.90 |
Class C | 1,000.00 | 1,016.24 | 8.90 |
Class I | 1,000.00 | 1,021.91 | 3.20 |
Class R | 1,000.00 | 1,016.84 | 8.30 |
Remember, these examples do not include any transaction costs, such as sales charges; therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.06%, 1.76%, 1.76%, 0.63% and 1.64% for Class A, Class B, Class C, Class I and Class R, respectively, multiplied by the average account value over the period, multiplied by number of days in most recent fiscal half-year/365 or 366 (to reflect the one-half year period).
Bond Fund
9
Fund’s investments
F I N A N C I A L S T A T E M E N T S
Securities owned by the Fund on 11-30-06 (unaudited)
This schedule is divided into five main categories: bonds, preferred stocks, tranche loans, U.S. government and agencies securities and short-term investments. Bonds, preferred stocks, tranche loans and U.S. government and agencies securities are further broken down by industry group. Short-term investments, which represent the Fund’s cash position, are listed last.
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Bonds 59.10% | $591,353,824 | |||||
(Cost $578,534,465) | ||||||
Airlines 0.34% | 3,444,240 | |||||
Continental Airlines, Inc., | ||||||
Pass Thru Ctf Ser 1999-1A (L) | 6.545% | 02-02-19 | A– | $976 | 1,000,073 | |
Pass Thru Ctf Ser 2000-2 Class B | 8.307 | 04-02-18 | BB– | 1,284 | 1,297,190 | |
Pass Thru Ctf Ser 2001-1 Class C | 7.033 | 06-15-11 | BB– | 1,151 | 1,146,977 | |
Asset Management & Custody Banks 0.47% | 4,711,097 | |||||
Rabobank Capital Fund II, | ||||||
Perpetual Bond (5.260% to | ||||||
12-31-13 then variable) (L)(S) | 5.260 | 12-29-49 | AA | 4,755 | 4,711,097 | |
Broadcasting & Cable TV 1.01% | 10,054,262 | |||||
Comcast Corp., | ||||||
Gtd Note | 5.900 | 03-15-16 | BBB+ | 1,860 | 1,894,377 | |
Cox Communications, Inc., | ||||||
Note (S) | 5.875 | 12-01-16 | BBB– | 1,875 | 1,882,712 | |
Shaw Communications, Inc., | ||||||
Sr Note (Canada) | 8.250 | 04-11-10 | BB+ | 1,790 | 1,895,162 | |
TCI Communications, Inc., | ||||||
Deb | 9.800 | 02-01-12 | BBB | 1,690 | 2,015,911 | |
XM Satellite Radio, Inc., | ||||||
Sr Note (L) | 9.750 | 05-01-14 | CCC | 2,390 | 2,366,100 | |
Casinos & Gaming 1.64% | 16,360,943 | |||||
Caesars Entertainment, Inc., | ||||||
Sr Note (L) | 7.000 | 04-15-13 | BBB– | 1,305 | 1,348,172 | |
Chukchansi Economic Development | ||||||
Authority, | ||||||
Sr Note (S) | 8.000 | 11-15-13 | BB– | 570 | 588,525 | |
Jacobs Entertainment, Inc., | ||||||
Gtd Sr Note | 9.750 | 06-15-14 | B– | 1,970 | 1,970,000 | |
Little Traverse Bay Bands of | ||||||
Odawa Indians, | ||||||
Sr Note (S) | 10.250 | 02-15-14 | B | 1,895 | 1,904,475 | |
Mashantucket West Pequot, | ||||||
Bond (S) | 5.912 | 09-01-21 | BBB– | 1,250 | 1,221,687 | |
Mohegan Tribal Gaming Authority, | ||||||
Sr Sub Note (L) | 7.125 | 08-15-14 | B+ | 1,050 | 1,057,875 |
See notes to financial statements
Bond Fund
10
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Casinos & Gaming (continued) | ||||||
MTR Gaming Group, Inc., | ||||||
Gtd Sr Note Ser B | 9.750% | 04-01-10 | B+ | $1,595 | $1,678,738 | |
Sr Sub Note (S) | 9.000 | 06-01-12 | B– | 420 | 428,400 | |
Pokagon Gaming Authority, | ||||||
Sr Note (S) | 10.375 | 06-15-14 | B | 690 | 748,650 | |
Seminole Tribe of Florida, | ||||||
Bond (S) | 6.535 | 10-01-20 | BBB– | 2,460 | 2,449,348 | |
Turning Stone Casino Resort | ||||||
Enterprise, | ||||||
Sr Note (S) | 9.125 | 09-15-14 | B+ | 2,085 | 2,131,913 | |
Waterford Gaming LLC, | ||||||
Sr Note (S) | 8.625 | 09-15-12 | BB– | 786 | 833,160 | |
Commodity Chemicals 0.24% | 2,366,400 | |||||
Lyondell Chemical Co., | ||||||
Gtd Sr Sub Note | 10.875 | 05-01-09 | B | 2,320 | 2,366,400 | |
Construction & Engineering 0.13% | 1,324,751 | |||||
Owens Corning, Inc., | ||||||
Sr Note (S) | 6.500 | 12-01-16 | BBB– | 1,285 | 1,324,751 | |
Consumer Finance 1.24% | 12,358,549 | |||||
American General Finance Corp., | ||||||
Med Term Note Ser I | 4.875 | 07-15-12 | A+ | 2,950 | 2,897,546 | |
GMAC LLC | ||||||
Note (L) | 6.750 | 12-01-14 | BB | 2,175 | 2,230,295 | |
Household Finance Corp., | ||||||
Note | 6.375 | 10-15-11 | A | 1,725 | 1,819,765 | |
HSBC Finance Capital Trust IX, | ||||||
Note (5.911% to 11-30-15 then | ||||||
variable) | 5.911 | 11-30-35 | BBB+ | 2,000 | 2,034,958 | |
HSBC Finance Corp., | ||||||
Sr Note | 6.750 | 05-15-11 | A | 3,165 | 3,375,985 | |
Department Stores 0.20% | 1,997,559 | |||||
J.C. Penney Corp., Inc., | ||||||
Deb | 8.125 | 04-01-27 | BBB– | 1,935 | 1,997,559 | |
Diversified Banks 1.85% | 18,492,629 | |||||
Banco Mercantil del Norte SA, | ||||||
Sub Note (Mexico) (S) | 6.862 | 10-13-21 | Baa2 | 1,605 | 1,653,463 | |
Bank of New York, | ||||||
Cap Security (S) | 7.780 | 12-01-26 | A– | 4,100 | 4,263,582 | |
Chuo Mitsui Trust & Banking | ||||||
Co., Ltd., | ||||||
Perpetual Sub Note (5.506% to | ||||||
04-15-15 then variable) | ||||||
(Japan) (S) | 5.506 | 12-15-49 | Baa2 | 2,530 | 2,455,254 | |
HBOS Plc, | ||||||
Perpetual Bond (6.413% to 10-1-35 | ||||||
then variable) (United Kingdom) (S) | 6.413 | 09-29-49 | A | 2,910 | 2,968,669 |
See notes to financial statements
Bond Fund
11
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Diversified Banks (continued) | ||||||
Lloyds TSB Group Plc, | ||||||
Bond (6.267% to 11-30-16 then | ||||||
variable) (United Kingdom) (S) | 6.267% | 11-14-16 | A | $2,800 | $2,838,623 | |
Royal Bank of Scotland Group Plc, | ||||||
Perpetual Bond (7.648% to | ||||||
09-30-31 then variable) | ||||||
(United Kingdom) | 7.648 | 08-29-49 | A | 3,570 | 4,313,038 | |
Diversified Chemicals 0.22% | 2,242,625 | |||||
Mosaic Co., (The), | ||||||
Sr Note | 7.375 | 12-01-14 | BB– | 1,100 | 1,117,875 | |
Sr Note | 7.625 | 12-01-16 | BB– | 1,100 | 1,124,750 | |
Diversified Commercial Services 0.20% | 1,993,305 | |||||
Crane Co., | ||||||
Bond | 6.550 | 11-15-36 | BBB | 1,970 | 1,993,305 | |
Diversified Financial Services 3.48% | 34,792,187 | |||||
American Express Co., | ||||||
Note | 6.800 | 09-01-66 | A3 | 2,125 | 2,291,018 | |
Capital One Capital III, | ||||||
Gtd Jr Sub Note | 7.686 | 08-15-36 | BBB– | 3,320 | 3,853,823 | |
CIT Group, Inc., | ||||||
Note | 5.850 | 09-15-16 | A | 4,735 | 4,870,629 | |
Ford Motor Credit Co., | ||||||
Sr Note (S) | 9.750 | 09-15-10 | B | 3,237 | 3,436,684 | |
Sr Note | 9.875 | 08-10-11 | B+ | 1,135 | 1,214,287 | |
JP Morgan Chase Capital XX, | ||||||
Jr Sub Note Ser T | 6.550 | 09-29-36 | A– | 2,880 | 3,039,880 | |
Nelnet, Inc., | ||||||
Note (7.400% to 09-01-11 then | ||||||
variable) | 7.400 | 09-29-36 | BBB– | 2,595 | 2,652,303 | |
Nissan Motor Acceptance Corp., | ||||||
Sr Note (S) | 5.625 | 03-14-11 | BBB+ | 2,625 | 2,650,741 | |
Siemens Financierings NV, | ||||||
Note (Netherlands) (L)(S) | 6.125 | 08-17-26 | AA– | 3,715 | 3,931,391 | |
St. George Funding Co., | ||||||
Perpetual Bond (8.485% to | ||||||
06-30-17 then variable) | ||||||
(Australia) (S) | 8.485 | 12-31-49 | Baa1 | 4,555 | 4,792,051 | |
Sun Trust Banks, Inc., | ||||||
Bond (6.100% to 12-15-36 then | ||||||
variable) (N) | 6.100 | 12-01-66 | A– | 2,040 | 2,059,380 | |
Diversified Metals & Mining 0.51% | 5,101,444 | |||||
Freeport-McMoRan Copper & | ||||||
Gold, Inc., | ||||||
Sr Note | 10.125 | 02-01-10 | B+ | 2,000 | 2,110,000 | |
Vale Overseas Ltd., | ||||||
Bond (Cayman Islands) | 6.875 | 11-21-36 | BBB | 1,785 | 1,827,181 | |
Vedanta Resources Plc, | ||||||
Sr Note (United Kingdom) (S) | 6.625 | 02-22-10 | BB | 1,185 | 1,164,263 |
See notes to financial statements
Bond Fund
12
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Electric Utilities 4.49% | $44,957,662 | |||||
Abu Dhabi National Energy Co., | �� | |||||
Bond (United Arab Emirates) (S) | 6.500% | 10-27-36 | A+ | $3,585 | 3,805,961 | |
AES Eastern Energy LP, | ||||||
Pass Thru Ctf Ser 1999-A | 9.000 | 01-02-17 | BB+ | 3,617 | 4,051,552 | |
Beaver Valley Funding Corp., | ||||||
Sec Lease Obligation Bond | 9.000 | 06-01-17 | BBB– | 3,919 | 4,452,415 | |
BVPS II Funding Corp., | ||||||
Collateralized Lease Bond | 8.890 | 06-01-17 | BB+ | 4,047 | 4,683,431 | |
Dominion Resources, Inc., | ||||||
Jr Sub Note (6.300% to 09-30-11 | ||||||
then variable) | 6.300 | 09-30-66 | BB+ | 2,325 | 2,364,153 | |
East Coast Power LLC, | ||||||
Sr Sec Note Ser B | 7.066 | 03-31-12 | BBB– | 3,062 | 3,181,383 | |
FPL Group Capital, Inc., | ||||||
Jr Sec Sub Note (6.350% to | ||||||
10-01-16 then variable) | 6.350 | 10-01-66 | BBB+ | 2,070 | 2,136,919 | |
HQI Transelect Chile SA, | ||||||
Sr Note (Chile) | 7.875 | 04-15-11 | A– | 2,655 | 2,840,000 | |
Indiantown Cogeneration LP, | ||||||
1st Mtg Note Ser A-9 | 9.260 | 12-15-10 | BB+ | 1,357 | 1,428,493 | |
IPALCO Enterprises, Inc., | ||||||
Sr Sec Note | 8.625 | 11-14-11 | BB– | 2,025 | 2,197,125 | |
Monterrey Power SA de CV, | ||||||
Sr Sec Bond (Mexico) (S) | 9.625 | 11-15-09 | BBB | 2,445 | 2,671,474 | |
PNPP II Funding Corp., | ||||||
Deb | 9.120 | 05-30-16 | BB+ | 208 | 237,434 | |
System Energy Resources, Inc., | ||||||
Sec Bond (S) | 5.129 | 01-15-14 | BBB | 3,117 | 3,061,725 | |
TransAlta Corp., | ||||||
Note (Canada) | 5.750 | 12-15-13 | BBB– | 2,640 | 2,668,800 | |
Waterford 3 Funding Corp., | ||||||
Sec Lease Obligation Bond | 8.090 | 01-02-17 | BBB– | 4,974 | 5,176,797 | |
Electrical Components & Equipment 0.33% | 3,339,197 | |||||
AMETEK, Inc., | ||||||
Sr Note | 7.200 | 07-15-08 | BBB | 2,425 | 2,476,097 | |
NXP BV/NXP Funding LLC, | ||||||
Sr Sec Bond (Netherlands) (S) | 7.875 | 10-15-14 | BB+ | 840 | 863,100 | |
Gas Utilities 0.31% | 3,133,132 | |||||
KN Capital Trust I, | ||||||
Cap Security | 8.560 | 04-15-27 | BB+ | 940 | 953,375 | |
Southern Union Co., | ||||||
Jr Sub Note (7.200% to 11-01-11 | ||||||
then variable) | 7.200 | 11-01-66 | BB | 2,165 | 2,179,757 | |
Health Care Facilities 0.19% | 1,904,531 | |||||
Manor Care, Inc., | ||||||
Gtd Note | 6.250 | 05-01-13 | BBB | 1,870 | 1,904,531 |
See notes to financial statements
Bond Fund
13
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Health Care Services 0.35% | $3,493,642 | |||||
Alliance Imaging, Inc., | ||||||
Sr Sub Note (L) | 7.250% | 12-15-12 | B– | $1,820 | 1,692,600 | |
Nationwide Health Properties, Inc., | ||||||
Note | 6.500 | 07-15-11 | BBB– | 1,745 | 1,801,042 | |
Hotels, Resorts & Cruise Lines 0.16% | 1,583,064 | |||||
Hyatt Equities LLC, | ||||||
Note (S) | 6.875 | 06-15-07 | BBB | 1,575 | 1,583,064 | |
Industrial Conglomerates 0.53% | 5,337,213 | |||||
General Electric Co., | ||||||
Note | 5.000 | 02-01-13 | AAA | 5,340 | 5,337,213 | |
Industrial Machinery 0.49% | 4,885,877 | |||||
Kennametal, Inc., | ||||||
Sr Note | 7.200 | 06-15-12 | BBB | 2,415 | 2,574,801 | |
Trinity Industries, Inc., | ||||||
Pass Thru Ctf (S) | 7.755 | 02-15-09 | Ba1 | 2,266 | 2,311,076 | |
Integrated Oil & Gas 0.22% | 2,239,745 | |||||
Pemex Project Funding Master Trust, | ||||||
Gtd Note | 9.125 | 10-13-10 | BBB | 1,990 | 2,239,745 | |
Integrated Telecommunication Services 0.36% | 3,578,452 | |||||
Intelsat Subsidiary Holding Co., Ltd., | ||||||
Gtd Floating Rate Sr Note | ||||||
(Bermuda) (P) | 10.484 | 01-15-12 | B+ | 1,000 | 1,012,500 | |
Sprint Capital Corp., | ||||||
Gtd Sr Note | 6.875 | 11-15-28 | BBB+ | 2,465 | 2,565,952 | |
Investment Banking & Brokerage 1.29% | 12,907,953 | |||||
Bear Stearns Cos., Inc. (The), | ||||||
Sub Note | 5.550 | 01-22-17 | A | 1,825 | 1,842,719 | |
Goldman Sachs Group, Inc. (The), | ||||||
Sr Note | 5.750 | 10-01-16 | AA– | 1,725 | 1,777,600 | |
Sub Note | 6.450 | 05-01-36 | A+ | 2,745 | 2,944,674 | |
Merrill Lynch & Co., Inc., | ||||||
Sub Note | 6.050 | 05-16-16 | A | 2,500 | 2,625,610 | |
Mizuho Finance, | ||||||
Gtd Sub Bond (Cayman Islands) | 8.375 | 12-29-49 | A2 | 3,500 | 3,717,350 | |
Leisure Facilities 0.48% | 4,762,363 | |||||
AMC Entertainment, Inc., | ||||||
Gtd Sr Note | 9.624 | 08-15-10 | Ba3 | 1,440 | 1,486,800 | |
Sr Sub Note (L) | 9.500 | 02-01-11 | CCC+ | 1,450 | 1,453,625 | |
TDS Investor Corp., | ||||||
Sr Note (S) | 9.875 | 09-01-14 | B– | 1,845 | 1,821,938 | |
Life & Health Insurance 0.61% | 6,101,454 | |||||
AmerUs Group Co., | ||||||
Sr Note | 6.583 | 05-16-11 | Baa3 | 1,870 | 1,952,598 | |
Phoenix Cos., Inc. (The), | ||||||
Bond | 6.675 | 02-16-08 | BBB | 2,205 | 2,214,091 | |
Provident Financing Trust I, | ||||||
Gtd Cap Security (L) | 7.405 | 03-15-38 | B+ | 1,855 | 1,934,765 |
See notes to financial statements
Bond Fund
14
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | ||||
Issuer, description | rate | date | rating (A) | (000) | Value | ||
Marine 0.27% | $2,699,325 | ||||||
CMA CGM SA, | |||||||
Sr Note (France) (S) | 7.250% | 02-01-13 | BB+ | $2,790 | 2,699,325 | ||
Meat, Poultry & Fish 0.28% | 2,848,000 | ||||||
ASG Consolidated LLC, | |||||||
Sr Disc Note, (Zero to 11-01-08 | |||||||
then 11.500%) (L)(O) | Zero | 11-01-11 | B– | 3,200 | 2,848,000 | ||
Metal & Glass Containers 0.20% | 1,990,250 | ||||||
BWAY Corp., | |||||||
Gtd Sr Sub Note | 10.000 | 10-15-10 | B– | 1,900 | 1,990,250 | ||
Movies & Entertainment 0.32% | 3,161,959 | ||||||
Cinemark, Inc., | |||||||
Sr Disc Note | 9.750 | 03-15-14 | CCC+ | 920 | 754,400 | ||
Time Warner, Inc., | |||||||
Gtd Deb | 6.500 | 11-15-36 | BBB+ | 1,370 | 1,398,986 | ||
Note | 5.875 | 11-15-16 | BBB+ | 1,000 | 1,008,573 | ||
Multi-Line Insurance 1.42% | 14,183,444 | ||||||
Genworth Financial, Inc., | |||||||
Jr Sub Note (6.150% to 11-15-16 | |||||||
then variable) | 6.150 | 11-15-66 | BBB+ | 1,640 | 1,667,975 | ||
Horace Mann Educators Corp., | |||||||
Sr Note | 6.850 | 04-15-16 | BBB | 1,550 | 1,619,465 | ||
Liberty Mutual Group, | |||||||
Bond (S) | 7.500 | 08-15-36 | BBB | 3,235 | 3,653,085 | ||
Partnerre Finance, | |||||||
Gtd Note (6.440% to 12-1-16 then | |||||||
variable) | 6.440 | 12-01-66 | BBB+ | 2,045 | 2,078,080 | ||
Zurich Capital Trust I, | |||||||
Gtd Cap Security (S) | 8.376 | 06-01-37 | A– | 4,920 | 5,164,839 | ||
Multi-Media 0.55% | 5,537,550 | ||||||
News America Holdings, Inc., | |||||||
Gtd Sr Deb | 8.250 | 08-10-18 | BBB– | 2,625 | 3,145,162 | ||
Time Warner Entertainment Co., LP, | |||||||
Sr Deb | 8.375 | 03-15-23 | BBB+ | 1,990 | 2,392,388 | ||
Multi-Utilities 0.60% | 5,977,621 | ||||||
Dynegy-Roseton Danskamme, | |||||||
Gtd Pass Thru Ctf Ser B | 7.670 | 11-08-16 | B | 2,390 | 2,413,900 | ||
Salton Sea Funding Corp., | |||||||
Gtd Sr Sec Note Ser E | 8.300 | 05-30-11 | BB+ | 1,006 | 1,069,646 | ||
Sr Sec Bond Ser F | 7.475 | 11-30-18 | BB+ | 2,333 | 2,494,075 | ||
Office Services & Supplies 0.27% | 2,732,887 | ||||||
Xerox Corp., | |||||||
Sr Note (L) | 6.750 | 02-01-17 | BB+ | 2,570 | 2,732,887 | ||
Oil & Gas Drilling 0.13% | 1,337,148 | ||||||
Delek & Avner-Yam Tethys Ltd., | |||||||
Sr Sec Note (Israel) (S) | 5.326 | 08-01-13 | BBB– | 1,368 | 1,337,148 |
See notes to financial statements
Bond Fund
15
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Oil & Gas Exploration & Production 0.15% | $1,545,416 | |||||
Kerr-McGee Corp., | ||||||
Gtd Sec Note | 6.950% | 07-01-24 | BBB– | $1,405 | 1,545,416 | |
Oil & Gas Refining & Marketing 0.81% | 8,109,467 | |||||
Enterprise Products Operating LP, | ||||||
Gtd Sr Note Ser B | 6.375 | 02-01-13 | BB+ | 4,265 | 4,440,680 | |
Premcor Refining Group, Inc., (The), | ||||||
Sr Note | 9.500 | 02-01-13 | BBB– | 1,175 | 1,274,051 | |
Gtd Sr Note | 6.750 | 05-01-14 | BBB | 2,325 | 2,394,736 | |
Oil & Gas Storage & Transportation 1.07% | 10,688,472 | |||||
Energy Transfer Partners LP, | ||||||
Gtd Sr Note (L) | 5.950 | 02-01-15 | Baa3 | 2,790 | 2,851,160 | |
Sr Note | 6.625 | 10-15-36 | Baa3 | 1,440 | 1,526,747 | |
Magellan Midstream Partners LP, | ||||||
Note | 6.450 | 06-01-14 | BBB | 2,060 | 2,153,093 | |
Markwest Energy Partners LP, | ||||||
Sr Note (S) | 8.500 | 07-15-16 | B | 2,090 | 2,110,900 | |
ONEOK Partners LP, | ||||||
Note | 6.650 | 10-01-36 | BBB | 1,940 | 2,046,572 | |
Packaged Foods & Meats 0.11% | 1,146,068 | |||||
General Foods Corp., | ||||||
Deb | 7.000 | 06-15-11 | A– | 1,145 | 1,146,068 | |
Paper Packaging 0.33% | 3,342,749 | |||||
MDP Acquisitions Plc, | ||||||
Sr Note (Ireland) | 9.625 | 10-01-12 | B– | 1,825 | 1,929,937 | |
Stone Container Corp., | ||||||
Sr Note | 9.750 | 02-01-11 | CCC+ | 1,370 | 1,412,812 | |
Paper Products 0.41% | 4,062,063 | |||||
Plum Creek Timber Co., Inc., | ||||||
Gtd Note | 5.875 | 11-15-15 | BBB– | 1,910 | 1,909,263 | |
Verso Paper Holdings LLC, | ||||||
Sr Sec Note (S) | 9.125 | 08-01-14 | B+ | 2,070 | 2,152,800 | |
Property & Casualty Insurance 0.25% | 2,525,650 | |||||
Ohio Casualty Corp., | ||||||
Sr Note | 7.300 | 06-15-14 | BBB– | 2,330 | 2,525,650 | |
Real Estate Management & Development 0.68% | 6,839,524 | |||||
Health Care REIT, Inc., | ||||||
Sr Note | 6.200 | 06-01-16 | BBB– | 1,525 | 1,559,517 | |
Healthcare Realty Trust, Inc., | ||||||
Sr Note | 8.125 | 05-01-11 | BBB– | 2,215 | 2,431,173 | |
Shimao Property Holdings Ltd., | ||||||
Gtd Sr Note (Cayman Islands) (S) | 8.000 | 12-01-16 | BB+ | 1,675 | 1,687,563 | |
Socgen Real Estate Co., LLC, | ||||||
Perpetual Bond Ser A (7.640% to | ||||||
09-30-07 then variable) (S) | 7.640 | 12-29-49 | A | 1,140 | 1,161,271 |
See notes to financial statements
Bond Fund
16
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Regional Banks 1.23% | $12,328,406 | |||||
BankAmerica Institutional Bank, | ||||||
Gtd Cap Security Ser B (S) | 7.700% | 12-31-26 | A | $985 | 1,022,790 | |
Mainstreet Capital Trust I, | ||||||
Gtd Jr Sub Cap Security Ser B (G) | 8.900 | 12-01-27 | A3 | 2,380 | 2,537,939 | |
NB Capital Trust IV, | ||||||
Gtd Cap Security | 8.250 | 04-15-27 | A | 3,030 | 3,168,186 | |
State Street Institutional | ||||||
Capital Trust, | ||||||
Gtd Cap Security Ser A (S) | 7.940 | 12-30-26 | A | 1,180 | 1,227,949 | |
Wachovia Capital Trust II, | ||||||
Gtd Floating Rate Cap | ||||||
Security (P) | 5.874 | 01-15-27 | A– | 2,420 | 2,320,432 | |
Wells Fargo Capital X, | ||||||
Gtd Sub Note | 5.950 | 12-15-36 | A+ | 2,040 | 2,051,110 | |
Soft Drinks 0.14% | 1,390,250 | |||||
Panamerican Beverages, Inc., | ||||||
Sr Note (Panama) | 7.250 | 07-01-09 | BBB | 1,340 | 1,390,250 | |
Specialized Consumer Services 0.21% | 2,104,620 | |||||
Sovereign Capital Trust VI, | ||||||
Gtd Note | 7.908 | 06-13-36 | BB+ | 1,840 | 2,104,620 | |
Specialized Finance 1.58% | 15,805,089 | |||||
Astoria Depositor Corp., | ||||||
Pass Thru Ctf Ser B (G)(S) | 8.144 | 05-01-21 | BB | 3,640 | 4,063,842 | |
Bosphorous Financial Services, | ||||||
Sec Floating Rate Note (P)(S) | 7.174 | 02-15-12 | Baa2 | 2,660 | 2,696,583 | |
Drummond Co., Inc., | ||||||
Sr Note (L)(S) | 7.375 | 02-15-16 | BB– | 1,330 | 1,276,800 | |
ESI Tractebel Acquistion Corp., | ||||||
Gtd Sec Bond Ser B | 7.990 | 12-30-11 | BB | 3,700 | 3,825,952 | |
HRP Myrtle Beach Operations LLC, | ||||||
Sr Sec Note (10.120% to 04-01-09 | ||||||
then variable) (S) | 10.120 | 04-01-12 | B | 1,075 | 1,072,312 | |
UCAR Finance, Inc., | ||||||
Gtd Sr Note (L) | 10.250 | 02-15-12 | B– | 2,720 | 2,869,600 | |
Specialized REIT’s 0.07% | 660,563 | |||||
Idearc, Inc., | ||||||
Sr Note (S) | 8.000 | 11-15-16 | B+ | 650 | 660,563 | |
Specialty Chemicals 0.16% | 1,576,350 | |||||
Nova Chemicals Ltd., | ||||||
Note (Canada) | 7.875 | 09-15-25 | BB+ | 1,695 | 1,576,350 | |
Steel 0.60% | 6,011,295 | |||||
Metallurg Holdings, Inc., | ||||||
Sr Sec Note (G)(S) | 10.500 | 10-01-10 | B– | 2,460 | 2,496,900 | |
Reliance Steel & Aluminum Co., | ||||||
Gtd Note (S) | 6.850 | 11-15-36 | BBB– | 2,220 | 2,245,457 | |
WCI Steel Acquisition, Inc., | ||||||
Sr Sec Note (G) | 8.000 | 05-01-16 | B+ | 1,285 | 1,268,938 |
See notes to financial statements
Bond Fund
17
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Thrifts & Mortgage Finance 24.14% | $241,539,210 | |||||
Banc of America Commercial | ||||||
Mortgage, Inc., | ||||||
Mtg Pass Thru Ctf Ser 2005-4 | ||||||
Class A5A | 4.933% | 07-10-45 | AAA | $1,595 | 1,573,966 | |
Mtg Pass Thru Ctf Ser 2005-6 | ||||||
Class A4 (P) | 5.354 | 09-10-47 | AAA | 3,490 | 3,519,850 | |
Mtg Pass Thru Ctf Ser 2006-2 | ||||||
Class A3 (P) | 5.902 | 05-10-45 | AAA | 9,335 | 9,685,366 | |
Mtg Pass Thru Ctf Ser 2006-3 | ||||||
Class A4 | 5.889 | 07-10-44 | AAA | 5,260 | 5,550,581 | |
Mtg Pass Thru Ctf Ser 2006-5 | ||||||
Class A4 | 5.414 | 09-10-47 | AAA | 5,890 | 6,010,932 | |
Banc of America Funding Corp., | ||||||
Mtg Pass Thru Ctf Ser 2006-B | ||||||
Class 6A1 (P) | 5.889 | 03-20-36 | AAA | 4,116 | 4,163,925 | |
Mtg Pass Thru Ctf Ser 2006-D | ||||||
Class 6B1 (P) | 5.971 | 05-20-36 | AA+ | 2,119 | 2,130,478 | |
Bank of America Commercial | ||||||
Mortgage, Inc., | ||||||
Mtg Pass Thru Ctf Ser 2006-4 | ||||||
Class A3A | 5.600 | 08-10-13 | AAA | 4,845 | 4,983,795 | |
Bear Stearns Alt-A Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-3 | ||||||
Class B2 (P) | 5.321 | 04-25-35 | AA+ | 1,261 | 1,251,794 | |
Mtg Pass Thru Ctf Ser 2006-1 | ||||||
Class 23A1 (P) | 5.637 | 02-25-36 | AAA | 4,361 | 4,382,864 | |
Mtg Pass Thru Ctf Ser 2006-3 | ||||||
Class 34A1 (P) | 6.191 | 05-25-36 | AAA | 4,485 | 4,560,608 | |
Bear Stearns Commercial Mortgage | ||||||
Securities, Inc., | ||||||
Mtg Pass Thru Ctf Ser 2002-T0P8 | ||||||
Class A2 | 4.830 | 08-15-38 | AAA | 5,960 | 5,897,149 | |
Mtg Pass Thru Ctf Ser 2003-T10 | ||||||
Class A2 | 4.740 | 03-13-40 | AAA | 5,190 | 5,103,867 | |
Mtg Pass Thru Ctf Ser 2005-T20 | ||||||
Class A4A (P) | 5.303 | 10-12-42 | Aaa | 1,640 | 1,653,055 | |
Chaseflex Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-2 | ||||||
Class 4A1 | 5.000 | 05-25-20 | AAA | 3,734 | 3,670,644 | |
Citigroup Commercial | ||||||
Mortgage Trust, | ||||||
Mtg Pass Thru Ctf Ser 2006-C4 | ||||||
Class A3 (P) | 5.911 | 03-15-49 | Aaa | 3,950 | 4,140,868 | |
Citigroup/Deutsche Bank | ||||||
Commercial Mortgage Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-CD1 | ||||||
Class A4 (P) | 5.400 | 07-15-44 | AAA | 2,470 | 2,500,771 | |
Mtg Pass Thru Ctf Ser 2005-CD1 | ||||||
Class C (P) | 5.400 | 07-15-44 | AA | 1,030 | 1,033,508 |
See notes to financial statements
Bond Fund
18
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Thrifts & Mortgage Finance (continued) | ||||||
Citigroup Mortgage Loan | ||||||
Trust, Inc., | ||||||
Mtg Pass Thru Ctf Ser 2005-5 | ||||||
Class 2A3 | 5.000% | 08-25-35 | AAA | $2,363 | $2,328,905 | |
Mtg Pass Thru Ctf Ser 2005-10 | ||||||
Class 1A5A (P) | 5.877 | 12-25-35 | AAA | 3,517 | 3,552,256 | |
Commercial Mortgage, | ||||||
Mtg Pass Thru Ctf Ser 2006-C7 | ||||||
Class A3 | 5.900 | 06-10-46 | AAA | 3,775 | 3,915,547 | |
ContiMortgage Home Equity | ||||||
Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 1995-2 | ||||||
Class A-5 | 8.100 | 08-15-25 | AAA | 523 | 540,030 | |
Countrywide Alternative | ||||||
Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 2004-24CB | ||||||
Class 1A1 | 6.000 | 11-25-34 | AAA | 3,370 | 3,383,624 | |
Mtg Pass Thru Ctf Ser 2005-6 | ||||||
Class 2A1 | 5.500 | 04-25-35 | Aaa | 2,055 | 2,018,776 | |
Mtg Pass Thru Ctf Ser 2005-J1 | ||||||
Class 3A1 | 6.500 | 08-25-32 | AAA | 2,090 | 2,115,209 | |
Mtg Pass Thru Ctf Ser 2006-11CB | ||||||
Class 3A1 | 6.500 | 05-25-36 | Aaa | 5,359 | 5,422,957 | |
Crown Castle Towers LLC, | ||||||
Mtg Pass Thru Ctf Ser 2006-1A | ||||||
Class E (S) | 6.065 | 11-15-36 | Baa3 | 2,900 | 2,922,972 | |
Mtg Pass Thru Ctf Ser 2006-1A | ||||||
Class F | 6.650 | 11-15-36 | Ba1 | 3,655 | 3,683,481 | |
CS First Boston Mortgage | ||||||
Securities Corp., | ||||||
Mtg Pass Thru Ctf Ser 2003-CPN1 | ||||||
Class A2 | 4.597 | 03-15-35 | AAA | 7,665 | 7,482,067 | |
DB Master Finance LLC, | ||||||
Mtg Pass Thru Ctf Ser 2006-1 | ||||||
Class A2 (S) | 5.779 | 06-20-31 | AAA | 3,840 | 3,921,757 | |
Mtg Pass Thru Ctf Ser 2006-1 | ||||||
Class M1 (S) | 8.285 | 06-20-31 | BB | 855 | 878,062 | |
First Horizon Alternative | ||||||
Mortgage Securities, | ||||||
Mtg Pass Thru Ctf Ser 2004-AA5 | ||||||
Class B1 (P) | 5.223 | 12-25-34 | AA | 1,408 | 1,396,123 | |
Mtg Pass Thru Ctf Ser 2006-AA2 | ||||||
Class B1 (G)(P) | 6.224 | 05-25-36 | AA | 1,329 | 1,351,392 | |
Global Signal Trust, | ||||||
Sub Bond Ser 2004-2A Class D (S) | 5.093 | 12-15-14 | Baa2 | 1,925 | 1,914,703 | |
Sub Bond Ser 2006-1 Class E (S) | 6.495 | 02-15-36 | Baa3 | 1,850 | 1,889,937 | |
GMAC Commercial Mortgage | ||||||
Securities, Inc., | ||||||
Mtg Pass Thru Ctf Ser 2002-C1 | ||||||
Class A1 | 5.785 | 11-15-39 | AAA | 3,304 | 3,344,920 |
See notes to financial statements
Bond Fund
19
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Thrifts & Mortgage Finance | (continued) | |||||
GMAC Mortgage Corporation | ||||||
Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 2006-AR1 | ||||||
Class 2A1 (P) | 5.648% | 04-19-36 | AAA | $2,915 | $2,933,266 | |
Greenwich Capital Commercial | ||||||
Funding Corp., | ||||||
Mtg Pass Thru Ctf Ser 2005-GG5 | ||||||
Class A2 | 5.117 | 04-10-37 | AAA | 4,650 | 4,671,050 | |
Mtg Pass Thru Ctf Ser 2006-GG7 | ||||||
Class A4 (P) | 6.110 | 07-10-38 | AAA | 5,030 | 5,348,786 | |
GS Mortgage Securities Corp. II, | ||||||
Mtg Pass Thru Ctf Ser 2006-GG8 | ||||||
Class A2 | 5.479 | 11-10-39 | Aaa | 6,025 | 6,136,996 | |
GSR Mortgage Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 2004-9 | ||||||
Class B1 (G)(P) | 4.590 | 08-25-34 | AA | 2,535 | 2,506,217 | |
Mtg Pass Thru Ctf Ser 2006-AR1 | ||||||
Class 3A1 (P) | 5.406 | 01-25-36 | AAA | 6,103 | 6,092,117 | |
Indymac Index Mortgage | ||||||
Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 2004-AR13 | ||||||
Class B1 | 5.296 | 01-25-35 | AA | 1,651 | 1,646,677 | |
Mtg Pass Thru Ctf Ser 2005-AR5 | ||||||
Class B1 (P) | 5.388 | 05-25-35 | AA | 1,956 | 1,931,531 | |
Mtg Pass Thru Ctf Ser 2006-AR19 | ||||||
Class 1B1 (P) | 6.447 | 08-25-36 | AA | 1,786 | 1,834,682 | |
JP Morgan Chase Commercial | ||||||
Mortgage Security Corp., | ||||||
Mtg Pass Thru Ctf Ser 2005-LDP3 | ||||||
Class A4B | 4.996 | 08-15-42 | AAA | 3,995 | 3,950,076 | |
Mtg Pass Thru Ctf Ser 2005-LDP4 | ||||||
Class B | 5.129 | 10-15-42 | Aa2 | 2,126 | 2,108,758 | |
Mtg Pass Thru Ctf Ser 2006-LDP7 | ||||||
Class A4 (P) | 6.066 | 04-15-45 | AAA | 3,345 | 3,549,089 | |
JP Morgan Mortgage Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-S2 | ||||||
Class 2A16 | 6.500 | 09-25-35 | AAA | 3,248 | 3,362,026 | |
Mtg Pass Thru Ctf Ser 2005-S3 | ||||||
Class 2A2 | 5.500 | 01-25-21 | AAA | 4,363 | 4,357,814 | |
LB-UBS Commercial Mortgage Trust, | ||||||
Mtg Pass Thru Ctf Ser 2006-C4 | ||||||
Class A4 (P) | 6.098 | 06-15-38 | AAA | 3,950 | 4,196,360 | |
Master Adjustable Rate | ||||||
Mortgages Trust, | ||||||
Mtg Pass Thru Ctf Ser 2006-2 | ||||||
Class 4A1 (P) | 4.990 | 02-25-36 | AAA | 4,732 | 4,705,560 | |
Merrill Lynch Mortgage Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-CKI1 | ||||||
Class A6 (P) | 5.417 | 11-12-37 | AAA | 3,685 | 3,733,821 |
See notes to financial statements
Bond Fund
20
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Thrifts & Mortgage Finance (continued) | ||||||
Merrill Lynch/Countrywide | ||||||
Commercial Mortgage Trust, | ||||||
Mtg Pass Thru Ctf Ser 2006-2 | ||||||
Class A4 (P) | 6.105% | 06-12-46 | AAA | $5,535 | $5,874,876 | |
Mtg Pass Thru Ctf Ser 2006-3 | ||||||
Class A4 | 5.414 | 07-12-46 | Aaa | 3,880 | 3,955,774 | |
Morgan Stanley Capital I, | ||||||
Mtg Pass Thru Ctf Ser 2005-HQ7 | ||||||
Class A4 (L)(P) | 5.374 | 11-14-42 | AAA | 3,065 | 3,098,288 | |
Mtg Pass Thru Ctf Ser 2005-IQ10 | ||||||
Class A4A | 5.230 | 09-15-42 | AAA | 4,520 | 4,550,375 | |
Mtg Pass Thru Ctf Ser 2006-T23 | ||||||
Class A4 | 5.983 | 08-12-41 | AAA | 3,085 | 3,262,247 | |
Nomura Asset Acceptance Corp., | ||||||
Mtg Pass Thru Ctf Ser 2006-AF1 | ||||||
Class CB1 | 6.540 | 06-25-36 | AA | 1,614 | 1,665,237 | |
Mtg Pass Thru Ctf Ser 2006-AF2 | ||||||
Class 4A | 6.738 | 08-25-36 | AAA | 3,869 | 3,971,555 | |
Provident Funding Mortgage | ||||||
Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-1 | ||||||
Class B1 (P) | 4.360 | 05-25-35 | AA | 1,615 | 1,582,426 | |
Renaissance Home Equity | ||||||
Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-2 | ||||||
Class AF3 | 4.499 | 08-25-35 | AAA | 2,080 | 2,054,376 | |
Mtg Pass Thru Ctf Ser 2005-2 | ||||||
Class AF4 | 4.934 | 08-25-35 | AAA | 2,365 | 2,338,471 | |
Residential Accredit Loans, Inc., | ||||||
Mtg Pass Thru Ctf Ser 2005-QA12 | ||||||
Class NB5 (P) | 5.994 | 12-25-35 | AAA | 3,032 | 3,092,410 | |
Residential Asset | ||||||
Securitization Trust, | ||||||
Mtg Pass Thru Ctf Ser 2006-A7CB | ||||||
Class 2A1 | 6.500 | 07-25-36 | AAA | 4,889 | 4,955,611 | |
SBA CMBS Trust, | ||||||
Sub Bond Ser 2005-1A Class B (S) | 5.565 | 11-15-35 | Aa2 | 1,770 | 1,792,895 | |
Sub Bond Ser 2005-1A Class D (S) | 6.219 | 11-15-35 | Baa2 | 850 | 869,582 | |
Sub Bond Ser 2005-1A Class E (S) | 6.706 | 11-15-35 | Baa3 | 795 | 817,898 | |
Sub Bond Ser 2006-1A Class H (S) | 7.389 | 11-15-36 | Ba3 | 1,035 | 1,047,574 | |
Sub Bond Ser 2006-1A Class J (S) | 7.825 | 11-15-36 | B1 | 850 | 860,160 | |
Sovereign Capital Trust I, | ||||||
Gtd Cap Security | 9.000 | 04-01-27 | BB | 3,840 | 4,006,913 | |
Washington Mutual Alternative | ||||||
Loan Trust, | ||||||
Mtg Pass Thru Ctf Ser 2005-6 | ||||||
Class 1CB | 6.500 | 08-25-35 | AAA | 2,331 | 2,358,878 | |
Wells Fargo Mortgage Backed | ||||||
Securities Trust, | ||||||
Mtg Pass Thru Ctf Ser 2004-7 | ||||||
Class 2A2 | 5.000 | 07-25-19 | AAA | 2,476 | 2,442,099 |
See notes to financial statements
Bond Fund
21
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Tobacco 0.16% | $1,560,239 | |||||
Reynolds American, Inc., | ||||||
Sr Sec Note (S) | 7.250% | 06-01-13 | BB | $1,490 | 1,560,239 | |
Wireless Telecommunication Service 1.62% | 16,185,933 | |||||
America Movil SA de CV, | ||||||
Sr Note (Mexico) | 5.750 | 01-15-15 | BBB | 1,860 | 1,857,485 | |
AT&T Wireless Services , Inc., | ||||||
Sr Note | 8.125 | 05-01-12 | A | 1,430 | 1,625,452 | |
Citizens Communications Co., | ||||||
Sr Note | 6.250 | 01-15-13 | BB+ | 1,805 | 1,766,644 | |
Crown Castle Towers LLC, | ||||||
Sub Bond Ser 2005-1A Class A | 4.643 | 06-15-35 | Aaa | 2,050 | 2,021,656 | |
Sub Bond Ser 2005-1A Class D | 5.612 | 06-15-35 | Baa2 | 2,525 | 2,526,094 | |
Embarq Corp., | ||||||
Sr Note | 7.082 | 06-01-16 | BBB– | 2,405 | 2,490,902 | |
Nextel Partners, Inc., | ||||||
Sr Note | 8.125 | 07-01-11 | BB– | 2,540 | 2,641,600 | |
Rogers Wireless, Inc., | ||||||
Sr Sub Note (Canada) | 8.000 | 12-15-12 | B+ | 1,185 | 1,256,100 | |
Credit | ||||||
Issuer, description | rating (A) | Shares | Value | |||
Preferred stocks 0.27% | $2,746,525 | |||||
(Cost $2,706,000) | ||||||
Agricultural Products 0.19% | 1,906,845 | |||||
Ocean Spray Cranberries, Inc., | ||||||
6.25%, Ser A (S) | BB+ | 23,000 | 1,906,845 | |||
Reinsurance 0.08% | 839,680 | |||||
Aspen Insurance Holdings, Ltd., | ||||||
7.401% (Bermuda) | BBB– | 32,800 | 839,680 | |||
Credit | Par value | |||||
Issuer, description, maturity date | rating (A) | (000) | Value | |||
Tranche loans 0.15% | $1,500,000 | |||||
(Cost $1,500,000) | ||||||
Diversified Metals & Mining 0.15% | 1,500,000 | |||||
Thompson Creek Metals Co., | ||||||
Tranche A (First Lien Note), | ||||||
9.380%, 11-01-12 (B) | B– | $1,500 | 1,500,000 | |||
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
U.S. government and agencies securities 38.16% | $381,814,293 | |||||
(Cost $379,083,998) | ||||||
Government U.S. 4.80% | 48,022,940 | |||||
United States Treasury, | ||||||
Bond (L) | 6.875% | 08-15-25 | AAA | $14,190 | 18,062,323 | |
Bond (L) | 4.500 | 02-15-36 | AAA | 5,735 | 5,678,097 |
See notes to financial statements
Bond Fund
22
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Government U.S. (continued) | ||||||
United States Treasury, (continued) | ||||||
Note (L) | 4.625% | 11-15-16 | AAA | $15,825 | $16,032,703 | |
Note (L) | 4.250 | 11-15-13 | AAA | 8,345 | 8,249,817 | |
Government U.S. Agency 33.36% | 333,791,353 | |||||
Federal Home Loan Mortgage Corp., | ||||||
20 Yr Pass Thru Ctf | 11.250 | 01-01-16 | AAA | 51 | 52,995 | |
30 Yr Adj Rate Pass Thru Ctf (P) | 5.280 | 12-01-35 | AAA | 8,852 | 8,717,327 | |
30 Yr Adj Rate Pass Thru Ctf (P) | 5.161 | 11-01-35 | AAA | 9,252 | 9,069,923 | |
30 Yr Pass Thru Ctf | 6.000 | 01-01-36 | AAA | 21,601 | 21,842,439 | |
30 Yr Pass Thru Ctf | 5.000 | 07-01-35 | AAA | 10,044 | 9,819,305 | |
30 Yr Pass Thru Ctf | 5.000 | 09-01-35 | AAA | 1,176 | 1,149,353 | |
CMO REMIC 2489-PE | 6.000 | 08-15-32 | AAA | 2,785 | 2,840,247 | |
CMO REMIC 2640-WA | 3.500 | 03-15-33 | AAA | 1,251 | 1,203,505 | |
CMO REMIC 3153-NE | 5.500 | 05-15-34 | AAA | 5,160 | 5,171,850 | |
CMO REMIC 3154-PM | 5.500 | 05-15-34 | AAA | 4,435 | 4,421,022 | |
CMO REMIC 3184-PD | 5.500 | 07-15-34 | AAA | 15,145 | 15,238,496 | |
Federal National Mortgage Assn., | ||||||
15 Yr Pass Thru Ctf | 9.000 | 06-01-10 | AAA | 434 | 470,198 | |
15 Yr Pass Thru Ctf | 7.500 | 02-01-08 | AAA | 33 | 32,814 | |
15 Yr Pass Thru Ctf | 7.000 | 09-01-10 | AAA | 113 | 115,602 | |
15 Yr Pass Thru Ctf | 7.000 | 04-01-17 | AAA | 574 | 591,204 | |
15 Yr Pass Thru Ctf | 7.000 | 06-01-17 | AAA | 148 | 152,323 | |
15 Yr Pass Thru Ctf | 5.500 | 11-01-20 | AAA | 1,529 | 1,537,418 | |
15 Yr Pass Thru Ctf | 5.500 | 12-01-20 | AAA | 10,536 | 10,596,799 | |
15 Yr Pass Thru Ctf | 5.000 | 05-01-18 | AAA | 6,962 | 6,914,518 | |
15 Yr Pass Thru Ctf | 5.000 | 08-01-19 | AAA | 9,095 | 9,011,558 | |
15 Yr Pass Thru Ctf | 5.000 | 10-01-19 | AAA | 7,098 | 7,041,927 | |
30 Yr Pass Thru Ctf | 6.850 | 07-01-36 | AAA | 19,283 | 19,677,162 | |
30 Yr Pass Thru Ctf | 6.500 | 07-01-36 | AAA | 18,991 | 19,378,829 | |
30 Yr Pass Thru Ctf | 6.000 | 09-01-35 | AAA | 4,277 | 4,323,846 | |
30 Yr Pass Thru Ctf | 6.000 | 10-01-35 | AAA | 467 | 471,727 | |
30 Yr Pass Thru Ctf | 6.000 | 04-01-36 | AAA | 3,406 | 3,443,264 | |
30 Yr Pass Thru Ctf | 6.000 | 05-01-36 | AAA | 14,441 | 14,597,998 | |
30 Yr Pass Thru Ctf | 6.000 | 08-01-36 | AAA | 40,855 | 41,299,561 | |
30 Yr Pass Thru Ctf | 6.000 | 09-01-36 | AAA | 10,960 | 11,079,391 | |
30 Yr Pass Thru Ctf | 5.500 | 05-01-35 | AAA | 29,797 | 29,753,054 | |
30 Yr Pass Thru Ctf | 5.500 | 01-01-36 | AAA | 3,739 | 3,725,023 | |
30 Yr Pass Thru Ctf | 5.500 | 01-01-36 | AAA | 10,221 | 10,188,836 | |
30 Yr Pass Thru Ctf | 5.500 | 02-01-36 | AAA | 16,090 | 16,039,841 | |
30 Yr Pass Thru Ctf | 5.000 | 08-01-35 | AAA | 2,400 | 2,345,100 | |
30 Yr Pass Thru Ctf | 5.000 | 03-01-36 | AAA | 5,391 | 5,267,121 | |
CMO REMIC 2003-33-AC | 4.250 | 03-25-33 | AAA | 1,012 | 977,932 | |
CMO REMIC 2003-49-JE | 3.000 | 04-25-33 | AAA | 2,819 | 2,549,303 | |
CMO REMIC 2003-58-AD | 3.250 | 07-25-33 | AAA | 2,773 | 2,568,227 | |
CMO REMIC 2003-63-PE | 3.500 | 07-25-33 | AAA | 2,319 | 2,135,258 | |
CMO REMIC 2006-57-PD | 5.500 | 01-25-35 | AAA | 5,985 | 5,980,246 | |
CMO REMIC 2006-64-PC | 5.500 | 10-25-34 | AAA | 4,520 | 4,516,358 | |
CMO REMIC 2006-65-HE | 5.500 | 02-25-35 | AAA | 6,475 | 6,476,742 | |
CMO REMIC 2006-67-PD | 5.500 | 12-25-34 | AAA | 4,875 | 4,879,513 | |
Financing Corp., | ||||||
Bond | 10.350 | 08-03-18 | Aaa | 3,545 | 5,250,43 |
See notes to financial statements
Bond Fund
23
F I N A N C I A L S T A T E M E N T S
Interest | Maturity | Credit | Par value | |||
Issuer, description | rate | date | rating (A) | (000) | Value | |
Government U.S. Agency (continued) | ||||||
Government National | ||||||
Mortgage Assn., | ||||||
30 Yr Pass Thru Ctf | 10.500% | 01-15-16 | AAA | $24 | $26,399 | |
30 Yr Pass Thru Ctf | 10.000 | 06-15-20 | AAA | 28 | 31,437 | |
30 Yr Pass Thru Ctf | 10.000 | 11-15-20 | AAA | 11 | 12,635 | |
30 Yr Pass Thru Ctf | 9.500 | 03-15-20 | AAA | 37 | 40,110 | |
30 Yr Pass Thru Ctf | 9.500 | 06-15-20 | AAA | 9 | 9,652 | |
30 Yr Pass Thru Ctf | 9.500 | 01-15-21 | AAA | 45 | 49,369 | |
30 Yr Pass Thru Ctf | 9.500 | 05-15-21 | AAA | 21 | 23,158 | |
CMO Remic 2003-42-XA | 3.750 | 05-16-33 | AAA | 723 | 682,999 | |
Interest | Par value | |||||
Issuer, description, maturity date | rate | (000) | Value | |||
Short-term investments 1.76% | $17,573,000 | |||||
(Cost $17,573,000) | ||||||
Joint Repurchase Agreement 1.76% | 17,573,000 | |||||
Investment in a joint repurchase agreement transaction with | ||||||
UBS AG — Dated 11-30-06, due 12-1-06 (Secured by U.S. Treasury | ||||||
Inflation Indexed Bonds 2.000%, due 1-15-26 and 3.625%, due | ||||||
4-15-28 and U.S. Treasury Inflation Indexed Notes 0.875%, | ||||||
due 4-15-10, 1.875%, due 7-15-15, 2.000%, due 7-15-14, | ||||||
3.375%, due 1-15-07, 3.375%, due 1-15-12, and 4.250%, | ||||||
due 1-15-10). Maturity value: $17,575,577 | 5.280% | $17,573 | 17,573,000 | |||
Total investments (Cost $979,397,463) 99.44% | $994,987,642 | |||||
Other assets and liabilities, net 0.56% | $5,647,892 | |||||
Total net assets 100.00% | $1,000,635,534 |
(A) Credit ratings are unaudited and are rated by Moody’s Investors Service where Standard & Poor’s ratings are not available unless indicated otherwise.
(B) This security is fair valued in good faith under procedures established by the Board of Trustees. These securities amounted to $1,500,000 or 0.15% of the Fund’s net assets as of November 30, 2006.
(G) Security rated internally by John Hancock Advisers, LLC.
(L) All or a portion of this security is on loan as of November 30, 2006.
(N) This security having an aggregate value of $2,059,380 or 0.21% of the Fund’s net assets, has been purchased on a when-issued basis. The purchase price and the interest rate of such securities are fixed at trade date, although the Fund does not earn any interest on such securities until settlement date. The Fund has instructed its custodian bank to segregate assets with a current value at least equal to the amount of its when issued commitments. Accordingly, the market value of $2,096,926 of Federal National Mortgage Association, 5.500%, 5-1-35 has been segregated to cover the when-issued commitments.
(O) Cash interest will be paid on this obligation at the stated rate beginning on the stated date.
(P) Represents rate in effect on November 30, 2006.
(S) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $121,610,528 or 12.15% of the Fund’s net assets as of November 30, 2006.
Parenthetical disclosure of a foreign country in the security description represents country of a foreign issuer; however, security is U.S. dollar-denominated.
The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund.
See notes to financial statements
Bond Fund
24
Financial statements
F I N A N C I A L S T A T E M E N T S
Statement of assets and liabilities 11-30-06 (unaudited)
This Statement of Assets and Liabilities is the Fund’s balance sheet. It shows the value
of what the Fund owns, is due and owes. You’ll also find the net asset value and the
maximum offering price per share.
Assets | |
Investments at value (cost $979,397,463) including $67,345,223 of securities loaned | $994,987,642 |
Cash | 16,600 |
Receivable for investments sold | 9,171,739 |
Receivable for shares sold | 280,219 |
Interest receivable | 9,340,265 |
Receivable from affiliates | 466 |
Other assets | 126,041 |
Total assets | 1,013,922,972 |
Liabilities | |
Payable for investments purchased | 10,878,724 |
Payable for shares repurchased | 1,117,076 |
Dividends payable | 137,300 |
Payable to affiliates | |
Management fees | 409,244 |
Distribution and service fees | 70,038 |
Other | 290,331 |
Other payables and accrued expenses | 384,725 |
Total liabilities | 13,287,438 |
Net assets | |
Capital paid-in | 1,020,596,260 |
Accumulated net realized loss on investments and financial futures contracts | (34,689,857) |
Net unrealized appreciation of investments and financial futures contracts | 15,590,179 |
Distributions in excess of net investment income | (861,048) |
Net assets | $1,000,635,534 |
Net asset value per share | |
Based on net asset values and shares outstanding — the Fund has an | |
unlimited number of shares authorized with no par value | |
Class A ($898,498,940 ÷ 60,028,940 shares) | $14.97 |
Class B ($73,895,381 ÷ 4,937,203 shares) | $14.97 |
Class C ($23,254,676 ÷ 1,553,660 shares) | $14.97 |
Class I ($4,214,695 ÷ 281,636 shares) | $14.97 |
Class R ($771,842 ÷ 51,570 shares) | $14.97 |
Maximum offering price per share | |
Class A1 ($14.97 ÷ 95.5%) | $15.68 |
1 On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced.
See notes to financial statements
Bond Fund
25
F I N A N C I A L S T A T E M E N T S
Statement of operations For the period ended 11-30-06 (unaudited).1
This Statement of Operations summarizes the Fund’s investment income earned
and expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Investment income | |
Interest | $30,513,116 |
Dividends | 115,033 |
Securities lending | 72,949 |
Total investment income | 30,701,098 |
Expenses | |
Investment management fees (Note 2) | 2,507,675 |
Distribution and service fees (Note 2) | 1,864,126 |
Class A, B and C transfer agent fees (Note 2) | 898,318 |
Class I transfer agent fees (Note 2) | 1,039 |
Class R transfer agent fees (Note 2) | 2,654 |
Accounting and legal services fees (Note 2) | 71,218 |
Compliance fees | 14,719 |
Custodian fees | 110,690 |
Printing fees | 71,981 |
Trustees’ fees | 40,274 |
Blue sky fees | 39,674 |
Professional fees | 33,026 |
Interest | 6,598 |
Securities lending fees | 2,806 |
Miscellaneous | 28,186 |
Total expenses | 5,692,984 |
Less expense reductions (Note 2) | (14,129) |
Net expenses | 5,678,855 |
Net investment income | 25,022,243 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments | (12,036,902) |
Financial futures contracts | 789,275 |
Change in net unrealized appreciation (depreciation) of | |
Investments | 42,677,913 |
Financial futures contracts | 12,416 |
Net realized and unrealized gain | 31,442,702 |
Increase in net assets from operations | $56,464,945 |
1 Semiannual period from 6-1-06 through 11-30-06. |
See notes to financial statements
Bond Fund
26
F I N A N C I A L S T A T E M E N T S
Statement of changes in net assets
These Statements of Changes in Net Assets show how the value of the Fund’s net assets
has changed during the last two periods. The difference reflects earnings less expenses,
any investment gains and losses, distributions, if any, paid to shareholders and the net of
Fund share transactions.
Year | Period | |
ended | ended | |
5-31-06 | 11-30-061 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $49,345,936 | $25,022,243 |
Net realized loss | (4,753,353) | (11,247,627) |
Change in net unrealized appreciation (depreciation) | (49,716,305) | 42,690,329 |
Increase (decrease) in net assets resulting from operations | (5,123,722) | 56,464,945 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (46,118,272) | (23,164,273) |
Class B | (4,473,822) | (1,806,176) |
Class C | (1,070,734) | (531,779) |
Class I | (306,121) | (116,166) |
Class R | (18,727) | (18,050) |
From capital paid-in | ||
Class A | (482,923) | — |
Class B | (46,686) | — |
Class C | (12,857) | — |
Class I | (2,928) | — |
Class R | (409) | — |
(52,533,479) | (25,636,444) | |
From Fund share transactions | (100,388,082) | (46,593,208) |
Net assets | ||
Beginning of period | 1,174,445,524 | 1,016,400,241 |
End of period2 | $1,016,400,241 | $1,000,635,534 |
1 Semiannual period from 6-1-06 through 11-30-06. Unaudited.
2 Includes distributions in excess of net investment of $246,847 and $861,048, respectively.
See notes to financial statements
Bond Fund
27
F I N A N C I A L S T A T E M E N T S
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed
since the end of the previous period.
CLASS A SHARES | ||||||
Period ended | 5-31-021,2 | 5-31-03 | 5-31-04 | 5-31-05 | 5-31-06 | 11-30-063 |
Per share operating performance | ||||||
Net asset value, beginning of period | $14.69 | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 |
Net investment income4 | 0.82 | 0.72 | 0.70 | 0.67 | 0.68 | 0.37 |
Net realized and unrealized | ||||||
gain (loss) on investments | 0.06 | 1.02 | (0.65) | 0.38 | (0.74) | 0.47 |
Total from investment operations | 0.88 | 1.74 | 0.05 | 1.05 | (0.06) | 0.84 |
Less distributions | ||||||
From net investment income | (0.86) | (0.76) | (0.76) | (0.73) | (0.72) | (0.38) |
From capital paid-in | — | — | — | — | (0.01) | — |
(0.86) | (0.76) | (0.76) | (0.73) | (0.73) | (0.38) | |
Net asset value, end of period | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 | $14.97 |
Total return5 (%) | 6.10 | 12.26 | 0.31 | 7.116 | (0.45)6 | 5.877 |
Ratios and supplemental data | ||||||
Net assets, end of period | ||||||
(in millions) | $1,144 | $1,192 | $1,047 | $1,012 | $899 | $898 |
Ratio of net expenses to average | ||||||
net assets (%) | 1.11 | 1.12 | 1.09 | 1.05 | 1.07 | 1.068 |
Ratio of gross expenses to average | ||||||
net assets (%) | 1.11 | 1.12 | 1.09 | 1.069 | 1.089 | 1.068 |
Ratio of net investment income | ||||||
to average net assets (%) | 5.51 | 4.84 | 4.55 | 4.41 | 4.56 | 5.068 |
Portfolio turnover (%) | 189 | 273 | 241 | 139 | 135 | 597 |
See notes to financial statements
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28
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS B SHARES | ||||||
Period ended | 5-31-021,2 | 5-31-03 | 5-31-04 | 5-31-05 | 5-31-06 | 11-30-063 |
Per share operating performance | ||||||
Net asset value, beginning of period | $14.69 | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 |
Net investment income4 | 0.72 | 0.62 | 0.59 | 0.57 | 0.58 | 0.32 |
Net realized and unrealized | ||||||
gain (loss) on investments | 0.06 | 1.02 | (0.65) | 0.37 | (0.74) | 0.46 |
Total from investment operations | 0.78 | 1.64 | (0.06) | 0.94 | (0.16) | 0.78 |
Less distributions | ||||||
From net investment income | (0.76) | (0.66) | (0.65) | (0.62) | (0.62) | (0.32) |
From capital paid-in | — | — | — | — | (0.01) | — |
(0.76) | (0.66) | (0.65) | (0.62) | (0.63) | (0.32) | |
Net asset value, end of period | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 | 14.97 |
Total return5 (%) | 5.37 | 11.48 | (0.39) | 6.37 6 | (1.14)6 | 5.517 |
Ratios and supplemental data | ||||||
Net assets, end of period | ||||||
(in millions) | $236 | $233 | $164 | $128 | $87 | $74 |
Ratio of net expenses to average | ||||||
net assets (%) | 1.81 | 1.82 | 1.79 | 1.75 | 1.77 | 1.768 |
Ratio of gross expenses to average | ||||||
net assets (%) | 1.81 | 1.82 | 1.79 | 1.769 | 1.789 | 1.768 |
Ratio of net investment income | ||||||
to average net assets (%) | 4.81 | 4.15 | 3.84 | 3.70 | 3.84 | 4.378 |
Portfolio turnover (%) | 189 | 273 | 241 | 139 | 135 | 597 |
See notes to financial statements
Bond Fund
29
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS C SHARES | ||||||
Period ended | 5-31-021,2 | 5-31-03 | 5-31-04 | 5-31-05 | 5-31-06 | 11-30-063 |
Per share operating performance | ||||||
Net asset value, beginning of period | $14.69 | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 |
Net investment income4 | 0.72 | 0.62 | 0.59 | 0.57 | 0.58 | 0.32 |
Net realized and unrealized | ||||||
gain (loss) on investments | 0.06 | 1.02 | (0.64) | 0.37 | (0.74) | 0.46 |
Total from investment operations | 0.78 | 1.64 | (0.05) | 0.94 | (0.16) | 0.78 |
Less distributions | ||||||
From net investment income | (0.76) | (0.66) | (0.66) | (0.62) | (0.62) | (0.32) |
From capital paid-in | — | — | — | — | (0.01) | — |
(0.76) | (0.66) | (0.66) | (0.62) | (0.63) | (0.32) | |
Net asset value, end of period | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 | $14.97 |
Total return5 (%) | 5.36 | 11.48 | (0.39) | 6.37 6 | (1.14)6 | 5.507 |
Ratios and supplemental data | ||||||
Net assets, end of period | ||||||
(in millions) | $44 | $45 | $32 | $28 | $24 | $23 |
Ratio of net expenses to average | ||||||
net assets (%) | 1.81 | 1.82 | 1.79 | 1.75 | 1.77 | 1.768 |
Ratio of gross expenses to average | ||||||
net assets (%) | 1.81 | 1.82 | 1.79 | 1.76 9 | 1.789 | 1.768 |
Ratio of net investment income | ||||||
to average net assets (%) | 4.81 | 4.15 | 3.84 | 3.71 | 3.86 | 4.368 |
Portfolio turnover (%) | 189 | 273 | 241 | 139 | 135 | 597 |
See notes to financial statements
Bond Fund
30
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS I SHARES | ||||||
Period ended | 5-31-021,2,10 | 5-31-03 | 5-31-04 | 5-31-05 | 5-31-06 | 11-30-063 |
Per share operating performance | ||||||
Net asset value, beginning of period | $14.96 | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 |
Net investment income4 | 0.66 | 0.78 | 0.76 | 0.73 | 0.75 | 0.40 |
Net realized and unrealized | ||||||
gain (loss) on investments | (0.21) | 1.02 | (0.64) | 0.38 | (0.74) | 0.47 |
Total from investment operations | 0.45 | 1.80 | 0.12 | 1.11 | 0.01 | 0.87 |
Less distributions | ||||||
From net investment income | (0.70) | (0.82) | (0.83) | (0.79) | (0.79) | (0.41) |
From capital paid-in | — | — | — | — | (0.01) | — |
(0.70) | (0.82) | (0.83) | (0.79) | (0.80) | (0.41) | |
Net asset value, end of period | $14.71 | $15.69 | $14.98 | $15.30 | $14.51 | $14.97 |
Total return5 (%) | 3.04 7 | 12.71 | 0.78 | 7.55 | (0.01) | 6.107 |
Ratios and supplemental data | ||||||
Net assets, end of period | ||||||
(in millions) | —11 | $9 | $5 | $5 | $5 | $4 |
Ratio of net expenses to average | ||||||
net assets (%) | 0.688 | 0.72 | 0.63 | 0.65 | 0.64 | 0.638 |
Ratio of net investment income | ||||||
to average net assets (%) | 5.948 | 5.23 | 4.98 | 4.82 | 4.99 | 5.498 |
Portfolio turnover (%) | 1897 | 273 | 241 | 139 | 135 | 597 |
See notes to financial statements
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31
F I N A N C I A L S T A T E M E N T S
Financial highlights
CLASS R SHARES | ||||
Period ended | 5-31-0410 | 5-31-05 | 5-31-06 | 11-30-063 |
Per share operating performance | ||||
Net asset value, beginning of period | $14.93 | $14.98 | $15.30 | $14.51 |
Net investment income4 | 0.54 | 0.67 | 0.59 | 0.33 |
Net realized and unrealized | ||||
gain (loss) on investments | 0.10 | 0.36 | (0.75) | 0.47 |
Total from investment operations | 0.64 | 1.03 | (0.16) | 0.80 |
Less distributions | ||||
From net investment income | (0.59) | (0.71) | (0.62) | (0.34) |
From capital paid-in | — | — | (0.01) | — |
(0.59) | (0.71) | (0.63) | (0.34) | |
Net asset value, end of period | $14.98 | $15.30 | $14.51 | $14.97 |
Total return5 (%) | 4.30 7 | 7.02 | (1.09) | 5.577 |
Ratios and supplemental data | ||||
Net assets, end of period | ||||
(in millions) | —11 | —11 | $1 | $1 |
Ratio of net expenses to average | ||||
net assets (%) | 1.388 | 1.12 | 1.76 | 1.648 |
Ratio of net investment income | ||||
to average net assets (%) | 4.408 | 4.44 | 3.95 | 4.488 |
Portfolio turnover (%) | 2417 | 139 | 135 | 597 |
1 Audited by previous auditor.
2 As required, effective June 1, 2001 the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, relating to the amortization of premiums and accretion of discounts on debt securities. The effect of this change on per share amounts for the year ended May 31, 2002, was to decrease net investment income per share by $0.04, increase (decrease) net realized and unrealized gains (losses) per share by $0.04 and, had the Fund not made these changes to amortization and accretion, the annualized ratio of net investment income to average net assets would have been 5.81%, 5.11%, 5.09% and 6.24% for Class A, Class B, Class C and Class I shares, respectively. Per share ratios and supplemental data for periods prior to June 1, 2001 have not been restated to reflect this change in presentation.
3 Semiannual period from 6-1-06 through 11-30-06. Unaudited.
4 Based on the average of the shares outstanding.
5 Assumes dividend reinvestment and does not reflect the effect of sales charges.
6 Total return would have been lower had certain expenses not been reduced during the period shown.
7 Not annualized.
8 Annualized.
9 Does not take into effect expense reductions during the period shown.
10 Class I and Class R shares began operations on 9-4-01 and 8-5-03, respectively.
11 Less than $500,000.
See notes to financial statements
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32
Notes to financial statements (unaudited)
Note 1
Accounting policies
John Hancock Bond Fund (the “Fund”) is a diversified series of John Hancock Sovereign Bond Fund, an open-end management investment company registered under the Investment Company Act of 1940 (the “1940 Act”), as amended. The investment objective of the Fund is to generate a high level of current income, consistent with prudent investment risk.
The Trustees have authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B, Class C, Class I and Class R shares. The shares of each class represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission and the Internal Revenue Service. Shareholders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that distribution plan. Class B shares will convert to Class A shares eight years after purchase.
Significant accounting policies of the Fund
are as follows:
Valuation of investments
Securities in the Fund’s portfolio are valued on the basis of market quotations, valuations provided by independent pricing services or at fair value as determined in good faith in accordance with procedures approved by the Trustees. Short-term debt investments which have a remaining maturity of 60 days or less may be valued at amortized cost, which approximates market value.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund, along with other registered investment companies having a management contract with John Hancock Advisers, LLC (the “Adviser”), a wholly owned subsidiary of John Hancock Financial Services, Inc., a subsidiary of Manulife Financial Corporation (“MFC”), may participate in a joint repurchase agreement transaction. Aggregate cash balances are invested in one or more large repurchase agreements, whose underlying securities are obligations of the U.S. government and/or its agencies. The Fund’s custodian bank receives delivery of the underlying securities for the joint account on the Fund’s behalf. The Adviser is responsible for ensuring that the agreement is fully collateralized at all times.
Investment transactions
Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Net realized gains and losses on sales of investments are determined on the identified cost basis. Some securities may be purchased on a “when-issued” or “forward commitment” basis, which means that the securities will be delivered to the Fund at a future date, usually beyond the customary settlement date.
Discount and premium on securities
The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the appropriate net asset value of the respective classes. Distribution
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33
and service fees, if any, and transfer agent fees for Class I and Class R shares are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rate(s) applicable to each class.
Expenses
The majority of expenses are directly identifiable to an individual fund. Expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative sizes of the funds.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into a syndicated line of credit agreement with various banks. This agreement enables the Fund to participate, with other funds managed by the Adviser, in an unsecured line of credit with banks, which permits borrowings of up to $150 million, collectively. Interest is charged to each fund based on its borrowing. In addition, a commitment fee is charged to each fund based on the average daily unused portion of the line of credit, and is allocated among the participating funds. The Fund had no borrowing activity under the line of credit during the period ended November 30, 2006.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund negotiated lender fees. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of delay of the loaned securities in recovery or even loss of rights in the collateral, should the borrower of the securities fail financially. At November 30, 2006, the Fund loaned securities having a market value of $67,345,223 collateralized by securities in the amount of $69,433,952. Securities lending expenses are paid by the Fund to the Adviser.
Financial futures contracts
The Fund may buy and sell financial futures contracts. Buying futures tends to increase the Fund’s exposure to the underlying instrument. Selling futures tends to decrease the Fund’s exposure to the underlying instrument or hedge other Fund’s instruments. At the time the Fund enters into a financial futures contract, it is required to deposit with its custodian a specified amount of cash or U.S. government securities, known as “initial margin,” equal to a certain percentage of the value of the financial futures contract being traded. Each day, the futures contract is valued at the official settlement price of the board of trade or U.S. commodities exchange on which it trades. Subsequent payments to and from the broker, known as “variation margin,” are made on a daily basis as the market price of the financial futures contract fluctuates. Daily variation margin adjustments arising from this “mark to market” are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of entering into financial futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contracts may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out financial futures positions because of position limits or limits on daily price fluctuation imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the Fund’s gains and/or losses can be affected as a result of financial futures contracts.
The Fund had no open financial futures contracts on November 30, 2006.
Federal income taxes
The Fund qualifies as a “regulated investment company” by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required. For federal income tax
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34
purposes, the Fund has $13,569,442 of a capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, no capital gain distributions will be made. The loss carryforward expires as follows: May 31, 2009 — $13,027,799, May 31, 2010 — $35,777 and May 31, 2014 — $505,866.
New accounting pronouncements
In June 2006, Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the “Interpretation”) was issued, and is effective for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. The Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return, and requires certain expanded disclosures. Management is currently evaluating the application of the Interpretation to the Fund, and has not at this time quantified the impact, if any, resulting from the adoption of the Interpretation on the Fund’s financial statements.
In September 2006, FASB Standard No. 157, Fair Value Measurements (“FAS 157”) was issued, and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishing a framework for measuring fair value and expands disclosure about fair value measurements. Management is currently evaluating the application of FAS 157 to the Fund, and its impact, if any, resulting from the adoption of FAS 157 on the Fund’s financial statements.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend date or, in the case of some foreign securities, on the date thereafter when the Fund identifies the dividend. Interest income on investment securities is recorded on the accrual basis. The Fund may place a debt obligation on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of interest has become doubtful. Foreign income may be subject to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. The Fund’s net investment income is declared daily as dividends to shareholders of record as of the close of business on the preceding day, and distributed monthly. During the year ended May 31, 2006, the tax character of distributions paid was as follows: ordinary income $51,987,676 and capital paid-in $545,803. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with accounting principles generally accepted in the United States of America, incorporates estimates made by management in determining the reported amount of assets, liabilities, revenues and expenses of the Fund. Actual results could differ from these estimates.
Note 2
Management fee and transactions with
affiliates and others
The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a monthly management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.50% of the first $1,500,000,000 of the Fund’s average daily net asset value, (b) 0.45% of the next $500,000,000, (c) 0.40% of the next $500,000,000 and (d) 0.35% of the Fund’s average daily net asset value in excess of $2,500,000,000.
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35
Effective December 31, 2005, the investment management teams of the Adviser were reorganized into Sovereign Asset Management LLC (“Sovereign”), a wholly owned indirect subsidiary of John Hancock Life Insurance Company (“JHLICO”), a subsidiary of MFC. The Adviser remains the principal advisor on the Fund and Sovereign acts as subadviser under the supervision of the Adviser. The restructuring did not have an impact on the Fund, which continues to be managed using the same investment philosophy and process. The Fund is not responsible for payment of the subadvisory fees.
Effective October 1, 2006, Sovereign changed its name to MFC Global Investment Management (U.S.), LLC.
The Fund has a Distribution Agreement with John Hancock Funds, LLC (“JH Funds”), a wholly owned subsidiary of the Adviser. The Fund has adopted Distribution Plans with respect to Class A, Class B, Class C and Class R, pursuant to Rule 12b-1 under the 1940 Act, as amended, to reimburse JH Funds for the services it provides as distributor of shares of the Fund. Accordingly, the Fund makes monthly payments to JH Funds at an annual rate not to exceed 0.30%, 1.00%, 1.00% and 0.50% of average daily net asset value of Class A, Class B, Class C and Class R, respectively. A maximum of 0.25% of such payments may be service fees, as defined by the Conduct Rules of the National Association of Securities Dealers. Under the Conduct Rules, curtailment of a portion of the Fund’s 12b-1 payments could occur under certain circumstances.
In addition, under a Service Plan for Class R shares, the Fund pays up to 0.25% of Class R average daily net asset value for certain other services.
Expenses under the agreements described above for the period ended November 30, 2006 were as follows:
Distribution and | |
Share class | service fees |
Class A | $1,340,780 |
Class B | 402,800 |
Class C | 118,584 |
Class R | 1,962 |
Total | $1,864,126 |
Class A shares are assessed up-front sales charges. During the period ended November 30, 2006, JH Funds received net up-front sales charges of $140,733 with regard to sales of Class A shares. Of this amount, $14,981 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $67,475 was paid as sales commissions to unrelated broker-dealers and $58,277 was paid as sales commissions to sales personnel of Signator Investors, Inc. (“Signator Investors”), a related broker-dealer. The Adviser’s indirect parent, JHLICO, is the indirect sole shareholder of Signator Investors.
Class B shares that are redeemed within six years of purchase are subject to a contingent deferred sales charge (“CDSC”) at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a CDSC at a rate of 1.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from the CDSCs are paid to JH Funds and are used, in whole or in part, to defray its expenses for providing distribution-related services to the Fund in connection with the sale of Class B and Class C shares. During the period ended November 30, 2006, CDSCs received by JH Funds amounted to $90,269 for Class B shares and $396 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (‘Signature Services”), an indirect subsidiary of JHLICO. For Class A, Class B and Class C shares, the Fund pays a monthly transfer
Bond Fund
36
agent fee at an annual rate of 0.015% of each class’s average daily net asset value, plus a fee based on the number of shareholder accounts and reimbursement for certain out-of-pocket expenses, aggregated and allocated to each class on the basis of its relative net asset value. For Class I shares, the Fund pays a monthly transfer agent fee at an annual rate of 0.05% of Class I average daily net asset value. For Class R shares, the Fund pays a monthly transfer agent fee at an annual rate of 0.05% of Class R average daily net asset value, plus a fee based on the number of shareholder accounts and reimbursement for certain out-of-pocket expenses. Signature Services agreed to voluntarily reduce the Fund’s asset-based portion of the transfer agent fee for Class A, Class B, Class C and Class R shares if the total transfer agent fee exceeded the median transfer agency fee for comparable mutual funds by greater than 0.05% . Accordingly, the transfer agent expense for C lass A, Class B, Class C and Class R shares was reduced by $14,129 during the period ended November 30, 2006. Signature Services terminated this reimbursement agreement June 30, 2006.
The Fund has an agreement with the Adviser and affiliates to perform necessary tax, accounting and legal services for the Fund. The compensation for the period amounted to $71,218. The Fund also reimbursed JHLICO for certain compliance costs, included in the Fund’s Statement of Operations.
The Adviser and other subsidiaries of JHLICO owned 6,698 Class R shares of beneficial interest of the Fund on November 30, 2006.
Mr. James R. Boyle is Chairman of the Adviser, as well as affiliated Trustee of the Fund, and is compensated by the Adviser and/or its affiliates. The compensation of unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect to defer, for tax purposes, their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments into other John Hancock funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund’s deferred compensation liability are recorded on the Fund’s books as an other asset.
The deferred compensation liability and the related other asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund.
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37
Note 3
Fund share transactions
This listing illustrates the number of Fund shares sold, reinvested and repurchased during the last two periods, along with the corresponding dollar value.
Year ended 5-31-06 | Period ended 11-30-061 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 3,238,500 | $48,427,917 | 1,626,259 | $23,872,881 |
Distributions reinvested | 2,606,528 | 38,922,163 | 1,305,318 | 19,194,301 |
Repurchased | (10,053,324) | (150,082,572) | (4,873,857) | (71,429,165) |
Net decrease | (4,208,296) | ($62,732,492) | (1,942,280) | ($28,361,983) |
Class B shares | ||||
Sold | 445,025 | $6,675,996 | 163,323 | $2,398,178 |
Distributions reinvested | 223,855 | 3,345,898 | 89,853 | 1,320,536 |
Repurchased | (3,032,284) | (45,239,747) | (1,305,705) | (19,153,473) |
Net decrease | (2,363,404) | ($35,217,853) | (1,052,529) | ($15,434,759) |
Class C shares | ||||
Sold | 216,577 | $3,229,583 | 128,160 | $1,883,881 |
Distributions reinvested | 55,130 | 823,338 | 27,113 | 398,658 |
Repurchased | (483,725) | (7,223,363) | (251,816) | (3,705,122) |
Net decrease | (212,018) | ($3,170,442) | (96,543) | ($1,422,583) |
Class I shares | ||||
Sold | 150,674 | $2,256,458 | 66,648 | $986,125 |
Distributions reinvested | 18,683 | 278,345 | 6,797 | 99,662 |
Repurchased | (151,523) | (2,256,531) | (168,432) | (2,448,654) |
Net increase (decrease) | 17,834 | $278,272 | (94,987) | ($1,362,867) |
Class R shares | ||||
Sold | 50,922 | $757,098 | 18,680 | $274,673 |
Distributions reinvested | 791 | 11,695 | 1,045 | 15,369 |
Repurchased | (21,056) | (314,360) | (20,429) | (301,058) |
Net increase (decrease) | 30,657 | $454,433 | (704) | ($11,016) |
Net decrease | (6,735,227) | ($100,388,082) | (3,187,043) | ($46,593,208) |
1 Semiannual period from 6-1-06 through 11-30-06. Unaudited.
Note 4
Investment transactions
Purchases and proceeds from sales or maturities of securities, other than short-term securities and obligations of the U.S. government, during the period ended November 30, 2006, aggregated $402,399,757 and $379,193,338, respectively.
Purchases and proceeds from sales or maturities of obligations of U.S. government aggregated $179,091,336 and $271,593,090, respectively, during the period ended November 30, 2006.
The cost of investments owned on November 30, 2006, including short-term investments, for federal income tax purposes, was $981,109,417. Gross unrealized appreciation and depreciation of investments aggregated $19,296,230 and $5,418,005, respectively, resulting in net unrealized appreciation of $13,878,225. The difference between book basis and tax basis net unrealized depreciation of investments is attributable primarily to the tax deferral of losses on certain sales of securities and amortization of premiums and accretion of discounts on debt securities.
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38
Board Consideration of and
Continuation of Investment Advisory
Agreement and Subadvisory
Agreement: John Hancock Bond Fund
The Investment Company Act of 1940 (the “1940 Act”), requires the Board of Trustees (the “Board”) of John Hancock Sovereign Bond Fund (the “Trust”), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), annually to review and consider the continuation of: (i) the investment advisory agreement (the “Advisory Agreement”) with John Hancock Advisers, LLC (the “Adviser”) and (ii) the investment subadvisory agreement (the “Subadvisory Agreement”) with MFC Global Investment Management (U.S.), LLC (the “Subadviser”) for the John Hancock Bond Fund (the “Fund”). The Advisory Agreement and the Subadvisory Agreement are collectively referred to as the “Advisory Agreements.”
At meetings held on May 1–2 and June 5–6, 2006,1 the Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and Subadviser and the continuation of the Advisory Agreements. During such meetings, the Board’s Contracts/ Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel.
In evaluating the Advisory Agreements, the Board, including the Contracts/Operations Committee and the Independent Trustees, reviewed a broad range of information requested for this purpose by the Independent Trustees, including: (i) the investment performance of the Fund relative to a category of relevant funds (the “Category”) and a peer group of comparable funds (the “Peer Group”) each selected by Morningstar Inc. (“Morningstar”), an independent provider of investment company data, for a range of periods ended December 31, 2005, (ii) advisory and other fees incurred by, and the expense ratios of, the Fund relative to a Category and a Peer Group, (iii) the advisory fees of comparable portfolios of other clients of the Adviser and the Subadviser, (iv) the Adviser’s financial results and condition, including its and certain of its affiliates’ profitability from services performed for the Fund, ( v) breakpoints in the Fund’s and the Peer Group’s fees, and information about economies of scale, (vi) the Adviser’s and Subadviser’s record of compliance with applicable laws and regulations, with the Fund’s investment policies and restrictions, and with the applicable Code of Ethics, and the structure and responsibilities of the Adviser’s and Subadviser’s compliance department, (vii) the background and experience of senior management and investment professionals, and (viii) the nature, cost and character of advisory and non-investment management services provided by the Adviser and its affiliates and by the Subadviser.
The Board’s review and conclusions were based on a comprehensive consideration of all information presented to the Board and not the result of any single controlling factor. It was based on performance and other information as of December 31, 2005; facts may have changed between that date and the date of this shareholders report. The key factors considered by the Board and the conclusions reached are described below.
Nature, extent and quality of services
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory, and supervisory personnel. The Board further considered the compliance programs and compliance records of the Adviser and Subadviser. In addition, the Board took into account the administrative services provided to the Fund by the Adviser and its affiliates.
Based on the above factors, together with those referenced below, the Board concluded that, within the context of its full deliberations, the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser and Subadviser were sufficient to support renewal of the Advisory Agreements.
Fund performance
The Board considered the performance results for the Fund over various time periods
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ended December 31, 2005. The Board also considered these results in comparison to the performance of the Category, as well as the Fund’s Peer Group and benchmark index. Morningstar determined the Category and the Peer Group for the Fund. The Board reviewed with a representative of Morningstar the methodology used by Morningstar to select the funds in the Category and the Peer Group.
The Board noted that the Fund’s performance during the periods under review was generally competitive with the performance of the Peer Group and Category medians, and its benchmark index, the Lehman Brothers Aggregate Bond Index. The Board noted that the Fund’s performance during the one-, five- and 10-year periods was lower than the performance of its benchmark index, but was higher than the performance of the Peer Group and Category medians. The Board viewed favorably that the performance of the Fund for the three-year period was higher than the median of its Category and Peer Group, and its benchmark index.
Investment advisory fee and subadvisory fee
rates and expenses
The Board reviewed and considered the contractual investment advisory fee rate payable by the Fund to the Adviser for investment advisory services (the “Advisory Agreement Rate”). The Board received and considered information comparing the Advisory Agreement Rate with the advisory fees for the Peer Group and Category. The Board noted that the Advisory Agreement Rate was equal to the median of the Peer Group and was not appreciably higher than the Category median.
The Board received and considered expense information regarding the Fund’s various components, including advisory fees, distribution and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also received and considered expense information regarding the Fund’s total operating expense ratio (“Gross Expense Ratio”) and total operating expense ratio after taking the fee waiver arrangement applicable to the Advisory Agreement Rate into account (“Net Expense Ratio”). The Board received and considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of the Peer Group and Category medians. The Board noted that the Fund’s Gross and Net Expense Ratios were higher than t he median of its Peer Group and Category.
The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Fund’s overall performance and expenses supported the re-approval of the Advisory Agreements.
The Board also received information about the investment subadvisory fee rate (the “Subadvisory Agreement Rate”) payable by the Adviser to the Subadviser for investment subadvisory services. The Board concluded that the Subadvisory Agreement Rate was fair and equitable, based on its consideration of the factors described here.
Profitability
The Board received and considered a detailed profitability analysis of the Adviser based on the Advisory Agreements, as well as on other relationships between the Fund and the Adviser and its affiliates, including the Subadviser. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits reported by the Adviser were not unreasonable.
Economies of scale
The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Fund’s ability to appropriately benefit from economies of scale under the Fund’s fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual Funds, but rather are incurred across a variety of products and services.
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To the extent the Board and the Adviser were able to identify actual or potential economies of scale from Fund-specific or allocated expenses, in order to ensure that any such economies continue to be reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the Advisory Agreement Rate.
Information about services to other clients
The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate and the Subadvisory Agreement Rate were not unreasonable, taking into account fee rates offered to others by the Adviser and Subadviser, respectively, after giving effect to differences in services.
Other benefits to the Adviser
The Board received information regarding potential “fall-out” or ancillary benefits received by the Adviser and its affiliates as a result of the Adviser’s relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser with the Fund and benefits potentially derived from an increase in the business of the Adviser as a result of its relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates).
The Board also considered the effectiveness of the Adviser’s, Subadviser’s and Fund’s policies and procedures for complying with the requirements of the federal securities laws, including those relating to best execution of portfolio transactions and brokerage allocation.
Other factors and broader review
As discussed above, the Board reviewed detailed materials received from the Adviser and Subadviser as part of the annual re-approval process. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year.
In this regard, the Board reviews reports of the Adviser and Subadviser at least quarterly, which include, among other things, fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year.
After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreements.
1 The Board previously considered information about the Subadvisory Agreement at the September and December 2005 Board meetings in connection with the Adviser’s reorganization.
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For more information
The Fund’s proxy voting policies, procedures and records are available without charge, upon request:
By phone | On the Fund’s Web site | On the SEC’s Web site |
1-800-225-5291 | www.jhfunds.com/proxy | www.sec.gov |
Trustees | Francis V. Knox, Jr. | Custodian |
Ronald R. Dion, Chairman | Chief Compliance Officer | The Bank of New York |
James R. Boyle† | Gordon M. Shone | One Wall Street |
James F. Carlin | Treasurer | New York, NY 10286 |
Richard P. Chapman, Jr.* | John G. Vrysen | |
William H. Cunningham | Chief Financial Officer | Transfer agent |
Charles L. Ladner* | John Hancock Signature | |
Dr. John A. Moore* | Investment adviser | Services, Inc. |
Patti McGill Peterson* | John Hancock Advisers, LLC | 1 John Hancock Way, |
Steven R. Pruchansky | 601 Congress Street | Suite 1000 |
*Members of the Audit Committee | Boston, MA 02210-2805 | Boston, MA 02217-1000 |
†Non-Independent Trustee | Subadviser | Legal counsel |
MFC Global Investment | Kirkpatrick & Lockhart | |
Officers | Management (U.S.), LLC | Preston Gates Ellis LLP |
Keith F. Hartstein | 101 Huntington Avenue | 1 Lincoln Street |
President and | Boston, MA 02199 | Boston, MA 02110-2950 |
Chief Executive Officer | ||
Thomas M. Kinzler | Principal distributor | |
Secretary and | John Hancock Funds, LLC | |
Chief Legal Officer | 601 Congress Street | |
Boston, MA 02210-2805 | ||
The Fund’s investment objective, risks, charges and expenses are included in the prospectus and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Funds at 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com. Please read the prospectus carefully before investing or sending money.
How to contact us | ||
Internet | www.jhfunds.com | |
Regular mail: | Express mail: | |
John Hancock | John Hancock | |
Signature Services, Inc. | Signature Services, Inc. | |
1 John Hancock Way, Suite 1000 | Mutual Fund Image Operations | |
Boston, MA 02217-1000 | 380 Stuart Street | |
Boston, MA 02116 | ||
Phone | Customer service representatives | 1-800-225-5291 |
24-hour automated information | 1-800-338-8080 | |
TDD line | 1-800-554-6713 |
A listing of month-end portfolio holdings is available on our Web site, www.jhfunds.com. A more detailed portfolio holdings summary is available on a quarterly basis 60 days after the fiscal quarter on our Web site or upon request by calling 1-800-225-5291, or on the Securities and Exchange Commission’s Web site, www.sec.gov.
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J O H N H A N C O C K F A M I L Y O F F U N D S
EQUITY | INTERNATIONAL |
Balanced Fund | Greater China Opportunities Fund |
Classic Value Fund | International Classic Value Fund |
Classic Value Fund II | International Core Fund |
Core Equity Fund | International Fund |
Focused Equity Fund | International Growth Fund |
Growth Fund | |
Growth Opportunities Fund | INCOME |
Growth Trends Fund | Bond Fund |
Intrinsic Value Fund | Government Income Fund |
Large Cap Equity Fund | High Yield Fund |
Large Cap Select Fund | Investment Grade Bond Fund |
Mid Cap Equity Fund | Strategic Income Fund |
Mid Cap Growth Fund | |
Multi Cap Growth Fund | TAX-FREE INCOME |
Small Cap Equity Fund | California Tax-Free Income Fund |
Small Cap Fund | High Yield Municipal Bond Fund |
Small Cap Intrinsic Value Fund | Massachusetts Tax-Free Income Fund |
Sovereign Investors Fund | New York Tax-Free Income Fund |
U.S. Core Fund | Tax-Free Bond Fund |
U.S. Global Leaders Growth Fund | |
Value Opportunities Fund | MONEY MARKET |
Money Market Fund | |
ASSET ALLOCATION & LIFESTYLE | U.S. Government Cash Reserve |
Allocation Core Portfolio | |
Allocation Growth + Value Portfolio | CLOSED-END |
Lifestyle Aggressive Portfolio | Bank & Thrift Opportunity |
Lifestyle Balanced Portfolio | Financial Trends |
Lifestyle Conservative Portfolio | Income Securities |
Lifestyle Growth Portfolio | Investors Trust |
Lifestyle Moderate Portfolio | Patriot Global Dividend |
Patriot Preferred Dividend | |
SECTOR | Patriot Premium Dividend I |
Financial Industries Fund | Patriot Premium Dividend II |
Health Sciences Fund | Patriot Select Dividend |
Real Estate Fund | Preferred Income |
Regional Bank Fund | Preferred Income II |
Technology Fund | Preferred Income III |
Technology Leaders Fund | Tax-Advantaged Dividend |
For more complete information on any John Hancock Fund and an Open-End fund prospectus, which includes charges and expenses, call your financial professional, or John Hancock Funds at 1-800-225-5291 for Open-End fund information and 1-800-852-0218 for Closed-End fund information. Please read the Open-End fund prospectus carefully before investing or sending money.
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1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds. com
Now available: electronic delivery
www.jhfunds. com/edelivery
This report is for the information of the shareholders of John Hancock Bond Fund.
210SA 11/06
1/07
ITEM 2. CODE OF ETHICS.
As of the end of the period, November 30, 2006, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Senior Financial Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
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 COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to previously disclosed John Hancock Funds - Administration Committee Charter and John Hancock Funds – Governance Committee Charter.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-
year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Governance Committee Charter”.
(c)(2) Contact person at the registrant.
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.
John Hancock Sovereign Bond Fund
By: /s/ Keith F. Hartstein
-------------------------------------
Keith F. Hartstein
President and Chief Executive Officer
Date: January 26, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Keith F. Hartstein
-------------------------------------
Keith F. Hartstein
President and Chief Executive Officer
Date: January 26, 2007
By: /s/ John G. Vrysen
-------------------------------------
John G. Vrysen
Chief Financial Officer
Date: January 26, 2007