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) | |
Salvatore Schiavone | |
Treasurer | |
601 Congress Street | |
Boston, Massachusetts 02210 | |
(Name and address of agent for service) | |
Registrant's telephone number, including area code: 617-663-4497 | |
Date of fiscal year end: | May 31 |
Date of reporting period: | May 31, 2012 |
ITEM 1. SCHEDULE OF INVESTMENTS
![](https://capedge.com/proxy/N-CSR/0000928816-12-001157/bondfundx1x1.jpg)
A look at performance
Total returns for the period ended May 31, 2012
SEC 30-day | SEC 30-day | ||||||||||
Average annual total returns (%) | Cumulative total returns (%) | yield (%) | yield (%) | ||||||||
with maximum sales charge | with maximum sales charge | subsidized | unsubsidized1 | ||||||||
as of | as of | ||||||||||
1-year | 5-year | 10-year | 1-year | 5-year | 10-year | 5-31-12 | 5-31-12 | ||||
Class A | 0.46 | 6.70 | 5.93 | 0.46 | 38.29 | 77.89 | 4.25 | 4.20 | |||
Class B | –0.52 | 6.63 | 5.82 | –0.52 | 37.88 | 76.11 | 3.75 | 3.70 | |||
Class C | 3.55 | 6.96 | 5.68 | 3.55 | 39.99 | 73.81 | 3.74 | 3.69 | |||
Class I2 | 5.70 | 8.17 | 6.88 | 5.70 | 48.09 | 94.51 | 4.85 | 4.80 | |||
Class R62,3 | 5.78 | 8.22 | 6.93 | 5.78 | 48.44 | 95.48 | 4.92 | 4.87 | |||
Performance figures assume all distributions are reinvested. Figures reflect maximum sales charges 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 7-15-04. The Class B shares’ CDSC declines annually between years 1 to 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 charges are not applicable for Class I and Class R6 shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 9-30-12 for Class A, Class B, Class C, Class I and Class R6 shares. Had the fee waivers and expense limitations not been in place gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R6* | ||||||
Net (%) | 1.00 | 1.70 | 1.70 | 0.60 | 0.54 | |||||
Gross (%) | 1.05 | 1.75 | 1.75 | 0.65 | 0.59 |
* Expenses have been estimated for the Class’s first full year of operations.
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 current to the most recent month-end performance data, 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 may pay on fund distributions or on the redemption of fund shares. The Fund’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
6 | Bond Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-12-001157/bondfundx3x1.jpg)
Without | With maximum | |||
Start date | sales charge | sales charge | Index | |
Class B4 | 5-31-02 | $17,611 | $17,611 | $17,711 |
Class C4 | 5-31-02 | 17,381 | 17,381 | 17,711 |
Class I2 | 5-31-02 | 19,451 | 19,451 | 17,711 |
Class R62 | 5-31-02 | 19,548 | 19,548 | 17,711 |
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.
The Class C shares investment with maximum sales charge has been adjusted to reflect the elimination of the front-end sales charge effective 7-15-04.
Class R2 shares were first offered on 3-1-12. Because the class has limited operating history, performance is not shown.
Barclays Capital Government/Credit Bond Index is an unmanaged index 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 or direct expenses, which would have resulted in lower values if they did.
1 Unsubsidized yield reflects what the yield would have been without the effect of reimbursements and waivers.
2 For certain types of investors as described in the Fund’s prospectuses.
3 The inception date for Class R6 shares is 9-1-11. The returns prior to this date are those of Class A shares that have been recalculated to apply the estimated gross fees and expenses of Class R6 shares.
4 No contingent deferred sales charge is applicable.
Annual report | Bond Fund | 7 |
Management’s discussion of
Fund performance
By John Hancock Asset Management a division of Manulife Asset Management (US) LLC
U.S. bonds posted solid gains for the 12 months ended May 31, 2012, as yields fell sharply. A trend toward risk aversion at the beginning and end of the reporting period, resulting primarily from slowing economic activity and worsening European sovereign debt problems, led to a strong rally in the Treasury bond sector as Treasury yields fell to historically low levels. In between, improving economic data and better news out of Europe helped corporate bonds and commercial mortgage-backed securities outperform. For the full 12-month period, Treasury bonds and higher-quality corporate securities generated the best returns, while high-yield corporate bonds and mortgage-backed securities lagged.
For the year ended May 31, 2012, John Hancock Bond Fund’s Class A shares posted a total return of 5.21%, excluding sales charges. By comparison, the Fund’s benchmark, the Barclays Capital Government/Credit Bond Index, returned 8.29% and the Morningstar, Inc. intermediate-term bond category, the Fund’s peer group produced an average return of 5.64%. The Fund’s underperformance of its benchmark index and Morningstar peer group average was driven largely by its allocations to various segments of the fixed-income market. In particular, an underweight position in Treasury securities and meaningful exposure to high-yield corporate bonds (which are not represented in the benchmark index) and commercial mortgage-backed securities weighed on performance. An emphasis on bonds issued by financial companies within the Fund’s corporate holdings also detracted from relative results as finance-related securities underperformed other segments of the corporate bond market. During the reporting period, we lowered the Fund’s risk profile by reducing its exposure to corporate bonds, although they continued to comprise the largest bond weighting in the portfolio. We modestly increased the Fund’s holdings of residential and commercial mortgage-backed securities, as well as Treasury bonds. The best individual performers in the Fund’s portfolio for the 12-month period were long-term Treasury bonds, which rallied sharply thanks to a significant decline in interest rates. Most notably, 30-year Treasury securities gained significant ground.
This commentary reflects the views of the portfolio managers through the end of the 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.
Past performance is no guarantee of future results
The major risk factors in this Fund’s performance are interest-rate and credit risk. When interest rates rise, bond prices usually fall. Generally, an increase in the Fund’s average maturity will make it more sensitive to interest-rate risk. Investments in higher-yielding, lower-rated securities involve additional risks as these securities include a higher risk of default and loss of principal. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk and their value may fluctuate in response to the market’s perception of issuer creditworthiness.
8 | Bond Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
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 the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on December 1, 2011 with the same investment held until May 31, 2012.
Account value | Ending value | Expenses paid during | |
on 12-1-11 | on 5-31-12 | period ended 5-31-121 | |
Class A | $1,000.00 | $1,052.10 | $5.23 |
Class B | 1,000.00 | 1,044.80 | 8.79 |
Class C | 1,000.00 | 1,045.50 | 8.80 |
Class I | 1,000.00 | 1,057.00 | 3.19 |
Class R6 | 1,000.00 | 1,057.80 | 2.93 |
For the class noted below, the example assumes an account value of $1,000.00 on March 1, 2012, with the same investment held until May 31, 2012.
Account value | Ending value | Expenses paid during | |
on 3-1-12 | on 5-31-12 | period ended 5-31-122 | |
Class R2 | $1,000.00 | $1,016.80 | $2.03 |
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 May 31, 2012, 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:
Annual report | Bond Fund | 9 |
Your expenses
![](https://capedge.com/proxy/N-CSR/0000928816-12-001157/bondfundx6x1.jpg)
Hypothetical example for comparison purposes
This table allows you to compare the 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% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on December 1, 2011, with the same investment held until May 31, 2012. 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 | |
on 12-1-11 | on 5-31-12 | period ended 5-31-123 | |
Class A | $1,000.00 | $1,019.90 | $5.15 |
Class B | 1,000.00 | 1,016.40 | 8.67 |
Class C | 1,000.00 | 1,016.40 | 8.67 |
Class I | 1,000.00 | 1,021.90 | 3.13 |
Class R2 | 1,000.00 | 1,021.00 | 4.04 |
Class R6 | 1,000.00 | 1,022.20 | 2.88 |
Remember, these examples do not include any transaction costs, 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 1.02%, 1.72%, 1.72%, 0.62% and 0.57% for Class A, Class B, Class C, Class I and Class R6 shares, respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
2 Expenses are equal to the Fund’s annualized expense ratio of 0.80% for Class R2 shares, multiplied by the average account value over the period, multiplied by 92/365 (to reflect the period).
3 Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
10 | Bond Fund | Annual report |
Portfolio summary
Portfolio Composition1 | ||||
Corporate Bonds | 43.5% | Capital Preferred Securities | 1.8% | |
U.S. Government Agency | 25.0% | Preferred Securities | 1.0% | |
Collateralized Mortgage Obligations | 11.5% | Term Loans | 0.4% | |
U.S. Government | 6.2% | Convertible Bonds | 0.2% | |
Asset Backed Securities | 5.3% | Municipal Bonds | 0.2% | |
U.S. Government Agency Collateralized | Foreign Government Obligations | 0.1% | ||
Mortgage Obligations | 2.6% | |||
Short-Term Investments & Other | 2.2% | |||
Quality Composition1,2 | ||||
U.S. Government Agency | 25.0% | BBB | 21.1% | |
U.S. Government | 6.2% | BB | 9.7% | |
U.S. Government Agency Collateralized | B | 9.8% | ||
Mortgage Obligations | 2.6% | |||
CCC & Below | 5.4% | |||
AAA | 4.6% | |||
Equity | 1.0% | |||
AA | 3.5% | |||
Short-Term Investments & Other | 2.2% | |||
A | 8.9% | |||
1 As a percentage of net assets on 5-31-12.
2 Ratings are from Moody’s Investors Service, Inc. If not available, we have used Standard & Poor’s Corporation ratings. In the absence of ratings from these agencies, we have used Fitch, Inc. ratings. “Not Rated” securities are those with no ratings available from these agencies. All ratings are as of 5-31-12 and do not reflect subsequent downgrades or upgrades, if any.
Annual report | Bond Fund | 11 |
Fund’s investments
As of 5-31-12
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Corporate Bonds 43.5% | $582,244,575 | ||||
(Cost $559,924,208) | |||||
Consumer Discretionary 5.4% | 71,964,174 | ||||
Auto Components 0.4% | |||||
Allison Transmission, Inc. (S) | 7.125 | 05-15-19 | 1,675,000 | 1,750,377 | |
Exide Technologies | 8.625 | 02-01-18 | 2,600,000 | 1,924,000 | |
Hyva Global BV (S) | 8.625 | 03-24-16 | 1,155,000 | 984,638 | |
Visteon Corp. | 6.750 | 04-15-19 | 1,115,000 | 1,110,819 | |
Automobiles 0.5% | |||||
Ford Motor Credit Company LLC | 5.000 | 05-15-18 | 1,925,000 | 2,103,915 | |
Hyundai Capital Services, Inc. (S) | 4.375 | 07-27-16 | 1,335,000 | 1,410,157 | |
Hyundai Capital Services, Inc. (S) | 6.000 | 05-05-15 | 1,715,000 | 1,875,292 | |
Kia Motors Corp. (S) | 3.625 | 06-14-16 | 1,315,000 | 1,355,410 | |
Food Products 0.1% | |||||
Simmons Foods, Inc. (S) | 10.500 | 11-01-17 | 1,160,000 | 1,087,500 | |
Hotels, Restaurants & Leisure 1.3% | |||||
Arcos Dorados Holdings, Inc. (BRL) (D)(S) | 10.250 | 07-13-16 | 2,275,000 | 1,192,856 | |
CCM Merger, Inc. (S) | 9.125 | 05-01-19 | 1,945,000 | 1,945,000 | |
Downstream Development Authority of the | |||||
Quapaw Tribe of Oklahoma (S) | 10.500 | 07-01-19 | 1,175,000 | 1,210,250 | |
Greektown Superholdings, Inc. | 13.000 | 07-01-15 | 1,965,000 | 2,141,850 | |
Jacobs Entertainment, Inc. | 9.750 | 06-15-14 | 2,585,000 | 2,578,538 | |
Little Traverse Bay Bands of Odawa Indians (S) | 9.000 | 08-31-20 | 1,315,000 | 1,196,650 | |
Marina District Finance Company, Inc. | 9.500 | 10-15-15 | 1,295,000 | 1,227,013 | |
MGM Resorts International (S) | 8.625 | 02-01-19 | 1,640,000 | 1,734,300 | |
Seminole Indian Tribe of Florida (S) | 6.535 | 10-01-20 | 2,260,000 | 2,265,243 | |
Seminole Indian Tribe of Florida (S) | 7.750 | 10-01-17 | 1,455,000 | 1,564,125 | |
Waterford Gaming LLC (S) | 8.625 | 09-15-14 | 751,274 | 432,324 | |
Household Durables 0.3% | |||||
American Standard Americas (S) | 10.750 | 01-15-16 | 820,000 | 639,600 | |
Corp. GEO SAB de CV (S) | 8.875 | 03-27-22 | 1,995,000 | 1,920,188 | |
DR Horton, Inc. | 4.750 | 05-15-17 | 1,550,000 | 1,565,500 | |
Internet & Catalog Retail 0.2% | |||||
Expedia, Inc. | 5.950 | 08-15-20 | 2,125,000 | 2,253,325 | |
Media 1.5% | |||||
AMC Entertainment, Inc. | 8.750 | 06-01-19 | 780,000 | 834,600 | |
Cablevision Systems Corp. | 8.625 | 09-15-17 | 610,000 | 666,425 |
12 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Media (continued) | |||||
CBS Corp. | 7.875 | 07-30-30 | 2,730,000 | $3,644,403 | |
CCO Holdings LLC | 8.125 | 04-30-20 | 590,000 | 649,000 | |
Cinemark USA, Inc. | 7.375 | 06-15-21 | 800,000 | 856,000 | |
Cinemark USA, Inc. | 8.625 | 06-15-19 | 750,000 | 815,625 | |
CSC Holdings, Inc. | 7.875 | 02-15-18 | 1,675,000 | 1,817,375 | |
Grupo Televisa SAB | 6.625 | 01-15-40 | 1,295,000 | 1,553,622 | |
News America, Inc. | 6.150 | 03-01-37 | 775,000 | 875,927 | |
News America, Inc. | 6.150 | 02-15-41 | 295,000 | 339,085 | |
News America, Inc. | 6.400 | 12-15-35 | 705,000 | 803,705 | |
Regal Cinemas Corp. | 8.625 | 07-15-19 | 465,000 | 505,688 | |
Regal Entertainment Group | 9.125 | 08-15-18 | 455,000 | 494,813 | |
Time Warner Cable, Inc. | 6.750 | 07-01-18 | 2,075,000 | 2,515,255 | |
UBM PLC (S) | 5.750 | 11-03-20 | 1,145,000 | 1,179,542 | |
XM Satellite Radio, Inc. (S) | 7.625 | 11-01-18 | 2,270,000 | 2,428,900 | |
Multiline Retail 0.2% | |||||
Macy’s Retail Holdings, Inc. | 7.875 | 08-15-36 | 2,083,000 | 2,241,331 | |
Specialty Retail 0.5% | |||||
AutoNation, Inc. | 5.500 | 02-01-20 | 1,985,000 | 1,999,888 | |
AutoNation, Inc. | 6.750 | 04-15-18 | 995,000 | 1,074,600 | |
Hillman Group, Inc. | 10.875 | 06-01-18 | 1,205,000 | 1,256,213 | |
Limited Brands, Inc. | 6.625 | 04-01-21 | 1,320,000 | 1,415,700 | |
Toys R Us Property Company II LLC | 8.500 | 12-01-17 | 570,000 | 586,388 | |
Textiles, Apparel & Luxury Goods 0.4% | |||||
Burlington Coat Factory Warehouse Corp. | 10.000 | 02-15-19 | 3,120,000 | 3,221,400 | |
Levi Strauss & Company (S) | 6.875 | 05-01-22 | 300,000 | 297,750 | |
Levi Strauss & Company | 7.625 | 05-15-20 | 2,315,000 | 2,422,069 | |
Consumer Staples 1.6% | 21,478,168 | ||||
Beverages 0.1% | |||||
Corp. Lindley SA (S) | 6.750 | 11-23-21 | 540,000 | 572,400 | |
Food & Staples Retailing 0.4% | |||||
Rite Aid Corp. (S) | 9.250 | 03-15-20 | 3,550,000 | 3,408,000 | |
Safeway, Inc. | 7.250 | 02-01-31 | 1,155,000 | 1,295,130 | |
Food Products 0.4% | |||||
B&G Foods, Inc. | 7.625 | 01-15-18 | 990,000 | 1,059,300 | |
Bunge, Ltd. Finance Corp. | 8.500 | 06-15-19 | 1,776,000 | 2,261,391 | |
Corp. Pesquera Inca SAC (S) | 9.000 | 02-10-17 | 1,355,000 | 1,436,300 | |
Del Monte Corp. | 7.625 | 02-15-19 | 1,100,000 | 1,067,000 | |
Household Products 0.4% | |||||
Reynolds Group Issuer, Inc. (S) | 9.000 | 04-15-19 | 1,890,000 | 1,814,400 | |
Reynolds Group Issuer, Inc. (S) | 9.875 | 08-15-19 | 1,750,000 | 1,745,625 | |
Yankee Candle Company, Inc. | 8.500 | 02-15-15 | 62,000 | 63,551 | |
YCC Holdings LLC, PIK | 10.250 | 02-15-16 | 1,920,000 | 1,924,800 | |
Personal Products 0.1% | |||||
Revlon Consumer Products Corp. | 9.750 | 11-15-15 | 1,635,000 | 1,753,538 |
See notes to financial statements | Annual report | Bond Fund | 13 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Tobacco 0.2% | |||||
Alliance One International, Inc. | 10.000 | 07-15-16 | 2,505,000 | $2,442,375 | |
Lorillard Tobacco Company | 6.875 | 05-01-20 | 535,000 | 634,358 | |
Energy 4.4% | 58,655,382 | ||||
Energy Equipment & Services 0.6% | |||||
Astoria Depositor Corp., Series B (S) | 8.144 | 05-01-21 | 3,790,000 | 3,297,300 | |
Offshore Group Investments, Ltd. (S) | 11.500 | 08-01-15 | 2,045,000 | 2,177,925 | |
Precision Drilling Corp. | 6.625 | 11-15-20 | 1,205,000 | 1,223,075 | |
Trinidad Drilling, Ltd. (S) | 7.875 | 01-15-19 | 1,045,000 | 1,097,250 | |
Weatherford International, Inc. | 6.800 | 06-15-37 | 570,000 | 647,479 | |
Gas Utilities 0.2% | |||||
DCP Midstream LLC (S) | 9.750 | 03-15-19 | 2,025,000 | 2,644,024 | |
Oil, Gas & Consumable Fuels 3.6% | |||||
Afren PLC (S) | 10.250 | 04-08-19 | 1,180,000 | 1,191,800 | |
Afren PLC (S) | 11.500 | 02-01-16 | 2,000,000 | 2,085,000 | |
Alpha Natural Resources, Inc. | 6.000 | 06-01-19 | 520,000 | 465,400 | |
Alpha Natural Resources, Inc. | 6.250 | 06-01-21 | 1,130,000 | 1,005,700 | |
Arch Coal, Inc. (S) | 7.000 | 06-15-19 | 675,000 | 578,813 | |
Arch Coal, Inc. (S) | 7.250 | 06-15-21 | 1,190,000 | 1,014,475 | |
BreitBurn Energy Partners LP (S) | 7.875 | 04-15-22 | 770,000 | 754,600 | |
DTEK Finance BV (S) | 9.500 | 04-28-15 | 840,000 | 789,600 | |
Energy Transfer Partners LP | 5.200 | 02-01-22 | 645,000 | 682,339 | |
Energy Transfer Partners LP | 9.700 | 03-15-19 | 2,050,000 | 2,659,570 | |
Enterprise Products Operating LLC (7.000% to | |||||
6-1-17, then 3 month LIBOR + 2.778%) | 7.000 | 06-01-67 | 2,735,000 | 2,721,325 | |
EV Energy Partners LP | 8.000 | 04-15-19 | 1,730,000 | 1,747,300 | |
Georgian Oil and Gas Corp. (S) | 6.875 | 05-16-17 | 1,855,000 | 1,790,075 | |
Kerr-McGee Corp. | 6.950 | 07-01-24 | 2,965,000 | 3,682,933 | |
Kinder Morgan Energy Partners LP | 7.750 | 03-15-32 | 840,000 | 1,054,564 | |
Linn Energy LLC (S) | 6.250 | 11-01-19 | 2,200,000 | 2,095,500 | |
Linn Energy LLC | 8.625 | 04-15-20 | 955,000 | 1,012,300 | |
Marathon Petroleum Corp. | 6.500 | 03-01-41 | 995,000 | 1,106,427 | |
MarkWest Energy Partners LP | 6.500 | 08-15-21 | 1,975,000 | 2,039,188 | |
McMoRan Exploration Company | 11.875 | 11-15-14 | 1,230,000 | 1,285,350 | |
Newfield Exploration Company | 5.750 | 01-30-22 | 1,140,000 | 1,199,850 | |
NuStar Logistics LP | 7.650 | 04-15-18 | 2,025,000 | 2,370,497 | |
Peabody Energy Corp. (S) | 6.250 | 11-15-21 | 1,490,000 | 1,486,275 | |
Petroleos Mexicanos (S) | 4.875 | 01-24-22 | 1,300,000 | 1,365,000 | |
Spectra Energy Capital LLC | 6.200 | 04-15-18 | 1,560,000 | 1,835,398 | |
Targa Resources Partners LP (S) | 6.375 | 08-01-22 | 1,200,000 | 1,194,000 | |
TransCanada Pipelines, Ltd. (6.350% to | |||||
5-15-17, then 3 month LIBOR + 2.210%) | 6.350 | 05-15-67 | 3,170,000 | 3,256,687 | |
Transportadora de Gas Internacional SA ESP (S) | 5.700 | 03-20-22 | 1,410,000 | 1,438,200 | |
Williams Partners LP | 7.250 | 02-01-17 | 3,045,000 | 3,660,163 | |
Financials 15.2% | 204,068,350 | ||||
Capital Markets 1.8% | |||||
Affinion Group Holdings, Inc. | 11.625 | 11-15-15 | 1,205,000 | 970,025 | |
Credit Suisse New York | 4.375 | 08-05-20 | 1,070,000 | 1,135,180 |
14 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Capital Markets (continued) | |||||
Jefferies Group, Inc. | 6.875 | 04-15-21 | 1,240,000 | $1,196,600 | |
Jefferies Group, Inc. | 8.500 | 07-15-19 | 665,000 | 704,900 | |
Macquarie Bank, Ltd. (S) | 6.625 | 04-07-21 | 1,055,000 | 1,060,826 | |
Macquarie Group, Ltd. (S) | 6.000 | 01-14-20 | 1,345,000 | 1,348,084 | |
Morgan Stanley | 5.550 | 04-27-17 | 3,870,000 | 3,786,892 | |
Morgan Stanley | 5.750 | 01-25-21 | 1,385,000 | 1,306,549 | |
Morgan Stanley | 7.300 | 05-13-19 | 2,270,000 | 2,354,635 | |
The Goldman Sachs Group, Inc. | 5.250 | 07-27-21 | 1,285,000 | 1,272,054 | |
The Goldman Sachs Group, Inc. | 5.750 | 01-24-22 | 1,305,000 | 1,339,854 | |
The Goldman Sachs Group, Inc. | 6.150 | 04-01-18 | 3,420,000 | 3,572,043 | |
The Goldman Sachs Group, Inc. | 6.750 | 10-01-37 | 4,550,000 | 4,485,909 | |
Commercial Banks 2.0% | |||||
Abbey National Treasury Services PLC | 4.000 | 04-27-16 | 1,810,000 | 1,763,307 | |
Banco de Credito del Peru (S) | 4.750 | 03-16-16 | 760,000 | 777,100 | |
Barclays Bank PLC | 5.140 | 10-14-20 | 1,260,000 | 1,207,457 | |
Barclays Bank PLC (S) | 6.050 | 12-04-17 | 1,185,000 | 1,189,274 | |
Barclays Bank PLC (S) | 10.179 | 06-12-21 | 1,235,000 | 1,446,091 | |
BPCE SA (12.500% to 9-30-19, then 3 month | |||||
LIBOR + 12.980%) (Q)(S) | 12.500 | 09-30-19 | 1,239,000 | 1,201,867 | |
First Horizon National Corp. | 5.375 | 12-15-15 | 1,715,000 | 1,820,944 | |
ICICI Bank, Ltd. (S) | 5.750 | 11-16-20 | 1,910,000 | 1,863,845 | |
Lloyds TSB Bank PLC | 6.375 | 01-21-21 | 2,190,000 | 2,363,748 | |
Nordea Bank AB (S) | 3.125 | 03-20-17 | 3,295,000 | 3,318,282 | |
Regions Financial Corp. | 7.750 | 11-10-14 | 1,825,000 | 1,984,688 | |
Santander Holdings USA, Inc. | 4.625 | 04-19-16 | 480,000 | 467,423 | |
Sberbank of Russia (S) | 6.125 | 02-07-22 | 600,000 | 614,634 | |
Svenska Handelsbanken AB | 2.875 | 04-04-17 | 2,585,000 | 2,620,314 | |
Synovus Financial Corp. | 7.875 | 02-15-19 | 960,000 | 1,005,600 | |
Wachovia Bank NA | 5.850 | 02-01-37 | 1,665,000 | 1,903,631 | |
Wachovia Corp. | 5.750 | 06-15-17 | 1,780,000 | 2,065,217 | |
Consumer Finance 0.8% | |||||
American Express Company | 7.000 | 03-19-18 | 515,000 | 634,095 | |
Capital One Financial Corp. | 6.150 | 09-01-16 | 2,855,000 | 3,197,994 | |
Discover Bank | 7.000 | 04-15-20 | 1,240,000 | 1,450,417 | |
Discover Financial Services (S) | 5.200 | 04-27-22 | 2,745,000 | 2,914,979 | |
Nelnet, Inc. (P) | 3.846 | 09-29-36 | 2,595,000 | 2,103,367 | |
Diversified Financial Services 3.7% | |||||
Ajecorp BV (S) | 6.500 | 05-14-22 | 1,470,000 | 1,471,526 | |
Alfa Bank OJSC (S) | 7.750 | 04-28-21 | 585,000 | 547,853 | |
Bank of America Corp. | 5.700 | 01-24-22 | 2,070,000 | 2,200,752 | |
Bank of America Corp. | 6.500 | 08-01-16 | 1,295,000 | 1,402,681 | |
Bank of America NA | 5.300 | 03-15-17 | 645,000 | 656,866 | |
Bank of America NA | 6.000 | 10-15-36 | 1,555,000 | 1,528,106 | |
Bank of Ceylon (S) | 6.875 | 05-03-17 | 1,325,000 | 1,260,159 | |
Citigroup, Inc. | 5.850 | 12-11-34 | 1,590,000 | 1,672,540 | |
Citigroup, Inc. | 6.125 | 11-21-17 | 3,295,000 | 3,566,205 |
See notes to financial statements | Annual report | Bond Fund | 15 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Diversified Financial Services (continued) | |||||
Cooperatieve Centrale Raiffeisen- | |||||
Boerenleenbank BA | 3.375 | 01-19-17 | 1,290,000 | $1,322,374 | |
Cooperatieve Centrale Raiffeisen- | |||||
Boerenleenbank BA (11.000% to 6-30-19, | |||||
then 3 month LIBOR + 10.868%) (Q)(S) | 11.000 | 06-30-19 | 3,204,000 | 3,996,990 | |
General Electric Capital Corp. (P) | 0.947 | 08-15-36 | 2,245,000 | 1,648,501 | |
General Electric Capital Corp. | 4.375 | 09-16-20 | 1,510,000 | 1,630,121 | |
General Electric Capital Corp. | 5.300 | 02-11-21 | 880,000 | 980,247 | |
General Electric Capital Corp. | 5.625 | 05-01-18 | 2,305,000 | 2,620,541 | |
General Electric Capital Corp. | 5.875 | 01-14-38 | 485,000 | 552,999 | |
General Electric Capital Corp. | 6.000 | 08-07-19 | 1,605,000 | 1,885,272 | |
Intercorp Retail Trust (S) | 8.875 | 11-14-18 | 750,000 | 795,000 | |
JPMorgan Chase & Company | 6.000 | 01-15-18 | 4,825,000 | 5,418,296 | |
JPMorgan Chase & Company (7.900% to | |||||
4-30-18, then 3 month LIBOR + 3.470%) (Q) | 7.900 | 04-30-18 | 2,240,000 | 2,429,190 | |
Merrill Lynch & Company, Inc. | 6.875 | 04-25-18 | 3,215,000 | 3,534,127 | |
Merrill Lynch & Company, Inc. | 7.750 | 05-14-38 | 980,000 | 1,116,737 | |
Nationstar Mortgage | 10.875 | 04-01-15 | 2,565,000 | 2,770,200 | |
Rivers Pittsburgh Borrower LP (S) | 9.500 | 06-15-19 | 780,000 | 787,800 | |
The Bear Stearns Companies LLC | 7.250 | 02-01-18 | 1,950,000 | 2,299,996 | |
USB Realty Corp. (Q)(S) | 1.614 | 12-22-49 | 2,900,000 | 2,198,113 | |
Insurance 3.2% | |||||
Aflac, Inc. | 8.500 | 05-15-19 | 1,780,000 | 2,355,408 | |
American International Group, Inc. | 3.800 | 03-22-17 | 1,160,000 | 1,177,661 | |
American International Group, Inc. | 8.250 | 08-15-18 | 1,165,000 | 1,401,429 | |
AXA SA (6.379% to 12-14-36, then 3 month | |||||
LIBOR + 2.256%) (Q)(S) | 6.379 | 12-14-36 | 1,170,000 | 900,900 | |
Chubb Corp. (6.375% until 4-15-17, then | |||||
3 month LIBOR + 2.250%) | 6.375 | 03-29-67 | 1,270,000 | 1,289,050 | |
CNA Financial Corp. | 6.500 | 08-15-16 | 1,190,000 | 1,344,823 | |
CNA Financial Corp. | 7.250 | 11-15-23 | 2,290,000 | 2,622,728 | |
CNO Financial Group, Inc. (S) | 9.000 | 01-15-18 | 1,625,000 | 1,722,500 | |
Glen Meadow Pass-Through Trust (6.505% to | |||||
2-15-17, then 3 month LIBOR + 2.125%) (S) | 6.505 | 02-12-67 | 3,740,000 | 2,758,250 | |
Hartford Financial Services Group, Inc. | 5.125 | 04-15-22 | 1,925,000 | 1,962,915 | |
Hartford Financial Services Group, Inc. | 6.625 | 03-30-40 | 980,000 | 1,021,833 | |
Liberty Mutual Group, Inc. (S) | 4.950 | 05-01-22 | 819,000 | 817,699 | |
Liberty Mutual Group, Inc. (S) | 6.500 | 05-01-42 | 1,155,000 | 1,178,471 | |
Liberty Mutual Group, Inc. (S) | 7.800 | 03-15-37 | 2,785,000 | 2,715,375 | |
Lincoln National Corp. | 8.750 | 07-01-19 | 1,505,000 | 1,912,768 | |
Lincoln National Corp. (6.050% to 4-20-17, | |||||
then 3 month LIBOR + 2.040%) | 6.050 | 04-20-67 | 2,455,000 | 2,221,775 | |
Teachers Insurance & Annuity Association | |||||
of America (S) | 6.850 | 12-16-39 | 3,085,000 | 4,058,706 | |
The Hanover Insurance Group, Inc. | 6.375 | 06-15-21 | 635,000 | 699,792 | |
Unum Group | 7.125 | 09-30-16 | 1,585,000 | 1,819,398 | |
UnumProvident Finance Company PLC (S) | 6.850 | 11-15-15 | 2,395,000 | 2,686,380 | |
W.R. Berkley Corp. | 5.600 | 05-15-15 | 1,505,000 | 1,623,368 | |
Willis Group Holdings PLC | 5.750 | 03-15-21 | 1,595,000 | 1,766,183 | |
Willis North America, Inc. | 7.000 | 09-29-19 | 2,060,000 | 2,438,496 |
16 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Real Estate Investment Trusts 3.5% | |||||
Alexandria Real Estate Equities, Inc. | 4.600 | 04-01-22 | 965,000 | $993,566 | |
Boston Properties LP | 3.700 | 11-15-18 | 950,000 | 992,549 | |
Boston Properties LP | 3.850 | 02-01-23 | 825,000 | 829,521 | |
Brandywine Operating Partnership LP | 7.500 | 05-15-15 | 1,605,000 | 1,792,246 | |
CommonWealth REIT | 6.650 | 01-15-18 | 1,800,000 | 1,953,522 | |
DDR Corp. | 7.500 | 04-01-17 | 4,475,000 | 5,140,146 | |
Goodman Funding Pty, Ltd. (S) | 6.375 | 04-15-21 | 2,870,000 | 3,019,369 | |
Health Care REIT, Inc. | 4.950 | 01-15-21 | 945,000 | 1,001,336 | |
Health Care REIT, Inc. | 6.125 | 04-15-20 | 3,060,000 | 3,461,668 | |
Health Care REIT, Inc. | 6.200 | 06-01-16 | 1,835,000 | 2,032,941 | |
Healthcare Realty Trust, Inc. | 6.500 | 01-17-17 | 2,120,000 | 2,326,119 | |
Host Hotels & Resorts LP (S) | 5.250 | 03-15-22 | 2,120,000 | 2,117,350 | |
MPT Operating Partnership LP | 6.375 | 02-15-22 | 1,535,000 | 1,527,325 | |
MPT Operating Partnership LP | 6.875 | 05-01-21 | 1,025,000 | 1,055,750 | |
ProLogis LP | 4.500 | 08-15-17 | 295,000 | 310,147 | |
ProLogis LP | 6.250 | 03-15-17 | 2,355,000 | 2,647,211 | |
SL Green Realty Corp. | 7.750 | 03-15-20 | 980,000 | 1,133,332 | |
Ventas Realty LP | 4.000 | 04-30-19 | 1,650,000 | 1,691,567 | |
Ventas Realty LP | 4.750 | 06-01-21 | 3,325,000 | 3,477,551 | |
Vornado Realty LP | 4.250 | 04-01-15 | 2,825,000 | 2,970,030 | |
WEA Finance LLC (S) | 6.750 | 09-02-19 | 1,345,000 | 1,601,536 | |
Weyerhaeuser Company | 7.375 | 03-15-32 | 3,160,000 | 3,580,593 | |
Real Estate Management & Development 0.1% | |||||
General Shopping Investments, Ltd. | |||||
(12.000% to 3-20-17, then 5 Year USGG + | |||||
11.052%) (Q)(S) | 12.000 | 03-20-17 | 1,270,000 | 1,193,800 | |
Realogy Corp. (S) | 7.875 | 02-15-19 | 855,000 | 812,250 | |
Thrifts & Mortgage Finance 0.1% | |||||
Nationstar Mortgage LLC (S) | 9.625 | 05-01-19 | 1,125,000 | 1,170,000 | |
Health Care 1.2% | 15,824,308 | ||||
Health Care Equipment & Supplies 0.2% | |||||
Alere, Inc. | 7.875 | 02-01-16 | 1,595,000 | 1,606,963 | |
Alere, Inc. | 8.625 | 10-01-18 | 965,000 | 961,381 | |
Health Care Providers & Services 0.6% | |||||
BioScrip, Inc. | 10.250 | 10-01-15 | 1,160,000 | 1,255,700 | |
HCA, Inc. | 7.500 | 02-15-22 | 1,730,000 | 1,813,256 | |
Medco Health Solutions, Inc. | 7.125 | 03-15-18 | 2,225,000 | 2,760,157 | |
National Mentor Holdings, Inc. (S) | 12.500 | 02-15-18 | 2,105,000 | 2,062,900 | |
Pharmaceuticals 0.4% | |||||
Catalent Pharma Solutions, Inc., PIK (P) | 9.500 | 04-15-15 | 1,643,387 | 1,680,363 | |
Endo Pharmaceuticals Holdings, Inc. | 7.250 | 01-15-22 | 1,895,000 | 1,980,275 | |
Valeant Pharmaceuticals International, Inc. (S) | 6.750 | 10-01-17 | 385,000 | 385,000 | |
Valeant Pharmaceuticals International, Inc. (S) | 6.875 | 12-01-18 | 1,335,000 | 1,318,313 | |
Industrials 5.3% | 71,179,104 | ||||
Aerospace & Defense 0.9% | |||||
Bombardier, Inc. (S) | 7.750 | 03-15-20 | 1,015,000 | 1,113,963 | |
Ducommun, Inc. | 9.750 | 07-15-18 | 295,000 | 311,963 |
See notes to financial statements | Annual report | Bond Fund | 17 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Aerospace & Defense (continued) | |||||
Embraer Overseas, Ltd. | 6.375 | 01-15-20 | 1,485,000 | $1,633,500 | |
Huntington Ingalls Industries, Inc. | 7.125 | 03-15-21 | 1,790,000 | 1,857,125 | |
Kratos Defense & Security Solutions, Inc. | 10.000 | 06-01-17 | 1,055,000 | 1,118,300 | |
Textron Financial Corp. (6.000% to 2-15-17, | |||||
then 3 month LIBOR + 1.735%) (S) | 6.000 | 02-15-67 | 3,140,000 | 2,433,500 | |
Textron, Inc. | 5.600 | 12-01-17 | 1,945,000 | 2,146,136 | |
Textron, Inc. | 7.250 | 10-01-19 | 1,315,000 | 1,558,174 | |
Airlines 2.3% | |||||
America West Airlines 2000-1 Pass | |||||
Through Trust | 8.057 | 07-02-20 | 769,090 | 815,235 | |
American Airlines 2011-1 Class B Pass | |||||
Through Trust (S) | 7.000 | 01-31-18 | 2,901,707 | 2,872,690 | |
Continental Airlines 1997-4 Class A Pass | |||||
Through Trust | 6.900 | 01-02-18 | 1,416,381 | 1,513,828 | |
Continental Airlines 1998-1 Class A Pass | |||||
Through Trust | 6.648 | 09-15-17 | 677,066 | 718,570 | |
Continental Airlines 1999-1 Class A Pass | |||||
Through Trust | 6.545 | 02-02-19 | 522,503 | 560,384 | |
Continental Airlines 2000-2 Class B Pass | |||||
Through Trust | 8.307 | 04-02-18 | 444,925 | 452,177 | |
Continental Airlines 2007-1 Class A Pass | |||||
Through Trust | 5.983 | 04-19-22 | 2,225,285 | 2,414,435 | |
Continental Airlines 2010-1 Class A Pass | |||||
Through Trust | 4.750 | 01-12-21 | 652,191 | 683,170 | |
Continental Airlines 2012-1 Class B Pass | |||||
Through Trusts | 6.250 | 04-11-20 | 1,175,000 | 1,192,625 | |
Delta Air Lines 2002-1 Class G-1 Pass | |||||
Through Trust | 6.718 | 01-02-23 | 2,516,943 | 2,667,959 | |
Delta Air Lines 2007-1 Class A Pass | |||||
Through Trust | 6.821 | 08-10-22 | 3,430,131 | 3,721,692 | |
Delta Air Lines 2010-1 Class A Pass | |||||
Through Trust | 6.200 | 07-02-18 | 818,349 | 885,862 | |
Delta Air Lines 2011-1 Class A Pass | |||||
Through Trust | 5.300 | 04-15-19 | 1,540,662 | 1,633,102 | |
Northwest Airlines 2002-1 Class G-2 Pass | |||||
Through Trust | 6.264 | 11-20-21 | 670,283 | 697,094 | |
Northwest Airlines 2007-1 Class A Pass | |||||
Through Trust | 7.027 | 11-01-19 | 1,493,450 | 1,590,525 | |
U.S. Airways 2010-1 Class A Pass | |||||
Through Trust | 6.250 | 04-22-23 | 1,538,804 | 1,611,897 | |
U.S. Airways 2012-1 Class A Pass Through | |||||
Trust Series 2012-1A, Class PTT | 5.900 | 10-01-24 | 885,000 | 899,381 | |
UAL 2009-1 Pass Through Trust | 10.400 | 11-01-16 | 578,794 | 662,720 | |
UAL 2009-2A Pass Through Trust | 9.750 | 01-15-17 | 1,602,981 | 1,835,414 | |
United Air Lines 2007-1 Class C Pass | |||||
Through Trust (P) | 3.059 | 07-02-14 | 4,022,879 | 3,851,907 | |
Building Products 0.4% | |||||
Masco Corp. | 7.125 | 03-15-20 | 1,380,000 | 1,520,202 | |
Voto-Votorantim Overseas Trading | |||||
Operations NV (S) | 6.625 | 09-25-19 | 1,920,000 | 2,068,800 | |
Voto-Votorantim, Ltd. (S) | 6.750 | 04-05-21 | 1,940,000 | 2,085,500 |
18 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial Services & Supplies 0.3% | |||||
Garda World Security Corp. (S) | 9.750 | 03-15-17 | 410,000 | $435,625 | |
International Lease Finance Corp. (S) | 7.125 | 09-01-18 | 1,260,000 | 1,386,000 | |
Steelcase, Inc. | 6.375 | 02-15-21 | 2,285,000 | 2,437,606 | |
Construction & Engineering 0.1% | |||||
Tutor Perini Corp. | 7.625 | 11-01-18 | 1,430,000 | 1,426,425 | |
Electrical Equipment 0.1% | |||||
Coleman Cable, Inc. | 9.000 | 02-15-18 | 1,235,000 | 1,281,313 | |
Industrial Conglomerates 0.3% | |||||
Odebrecht Finance, Ltd. (S) | 6.000 | 04-05-23 | 1,825,000 | 1,884,313 | |
Odebrecht Finance, Ltd. (S) | 7.000 | 04-21-20 | 1,120,000 | 1,220,800 | |
Odebrecht Finance, Ltd. (Q)(S) | 7.500 | 09-14-15 | 970,000 | 982,125 | |
Marine 0.2% | |||||
Navios South American Logistics, Inc. | 9.250 | 04-15-19 | 2,305,000 | 2,120,600 | |
Road & Rail 0.5% | |||||
Avis Budget Car Rental LLC (S) | 8.250 | 01-15-19 | 625,000 | 646,875 | |
Penske Truck Leasing Company LP (S) | 3.750 | 05-11-17 | 2,315,000 | 2,339,715 | |
The Hertz Corp. (S) | 6.750 | 04-15-19 | 595,000 | 608,388 | |
The Hertz Corp. | 6.750 | 04-15-19 | 2,655,000 | 2,714,738 | |
Trading Companies & Distributors 0.2% | |||||
Air Lease Corp. (S) | 5.625 | 04-01-17 | 525,000 | 513,188 | |
Aircastle, Ltd. (S) | 6.750 | 04-15-17 | 795,000 | 787,050 | |
Aircastle, Ltd. (S) | 7.625 | 04-15-20 | 785,000 | 786,963 | |
HD Supply, Inc. (S) | 8.125 | 04-15-19 | 460,000 | 479,550 | |
Information Technology 0.3% | 3,719,365 | ||||
Computers & Peripherals 0.1% | |||||
Hewlett-Packard Company | 4.375 | 09-15-21 | 1,355,000 | 1,376,115 | |
IT Services 0.2% | |||||
Brightstar Corp. (S) | 9.500 | 12-01-16 | 2,275,000 | 2,343,250 | |
Materials 4.4% | 58,959,382 | ||||
Chemicals 1.1% | |||||
American Pacific Corp. | 9.000 | 02-01-15 | 1,090,000 | 1,084,550 | |
Braskem America Finance Company (S) | 7.125 | 07-22-41 | 1,545,000 | 1,510,238 | |
Braskem Finance, Ltd. (S) | 7.000 | 05-07-20 | 4,080,000 | 4,386,000 | |
CF Industries, Inc. | 6.875 | 05-01-18 | 880,000 | 1,047,200 | |
CF Industries, Inc. | 7.125 | 05-01-20 | 1,185,000 | 1,433,850 | |
Eastman Chemical Company | 3.600 | 08-15-22 | 1,425,000 | 1,421,587 | |
Incitec Pivot Finance LLC (S) | 6.000 | 12-10-19 | 1,370,000 | 1,514,482 | |
LyondellBasell Industries NV (S) | 5.000 | 04-15-19 | 1,185,000 | 1,205,738 | |
Polymer Group, Inc. | 7.750 | 02-01-19 | 465,000 | 483,600 | |
Construction Materials 0.3% | |||||
Building Materials Corp. of America (S) | 6.750 | 05-01-21 | 995,000 | 1,017,388 | |
Magnesita Finance, Ltd. (S) | 8.625 | 12-31-49 | 2,045,000 | 1,995,433 | |
Severstal Columbus LLC | 10.250 | 02-15-18 | 370,000 | 384,800 | |
Vulcan Materials Company | 7.500 | 06-15-21 | 530,000 | 572,400 |
See notes to financial statements | Annual report | Bond Fund | 19 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Containers & Packaging 0.6% | |||||
ARD Finance SA, PIK (S) | 11.125 | 06-01-18 | 1,335,000 | $1,254,900 | |
Pretium Packaging LLC | 11.500 | 04-01-16 | 650,000 | 661,375 | |
Tekni-Plex, Inc. (S) | 9.750 | 06-01-19 | 1,906,000 | 1,891,705 | |
Temple-Inland, Inc. | 6.625 | 01-15-18 | 3,335,000 | 4,004,124 | |
Metals & Mining 1.7% | |||||
Alcoa, Inc. | 5.400 | 04-15-21 | 1,630,000 | 1,681,997 | |
Allegheny Technologies, Inc. | 5.950 | 01-15-21 | 665,000 | 749,868 | |
Allegheny Technologies, Inc. | 9.375 | 06-01-19 | 1,300,000 | 1,667,423 | |
ArcelorMittal | 9.850 | 06-01-19 | 1,470,000 | 1,741,274 | |
Commercial Metals Company | 7.350 | 08-15-18 | 1,395,000 | 1,422,900 | |
FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 02-01-18 | 1,230,000 | 1,208,475 | |
FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 04-01-22 | 1,760,000 | 1,694,000 | |
FMG Resources August 2006 Pty, Ltd. (S) | 8.250 | 11-01-19 | 765,000 | 789,863 | |
JMC Steel Group (S) | 8.250 | 03-15-18 | 775,000 | 782,750 | |
Metinvest BV (S) | 8.750 | 02-14-18 | 1,755,000 | 1,548,788 | |
Mongolian Mining Corp. (S) | 8.875 | 03-29-17 | 2,400,000 | 2,328,000 | |
Rain CII Carbon LLC (S) | 8.000 | 12-01-18 | 2,350,000 | 2,455,750 | |
SunCoke Energy, Inc. | 7.625 | 08-01-19 | 1,125,000 | 1,113,750 | |
Taseko Mines, Ltd. | 7.750 | 04-15-19 | 495,000 | 470,250 | |
Teck Resources, Ltd. | 10.750 | 05-15-19 | 468,000 | 568,978 | |
Thompson Creek Metals Company, Inc. | 7.375 | 06-01-18 | 1,855,000 | 1,530,375 | |
Vale Overseas, Ltd. | 6.875 | 11-10-39 | 1,415,000 | 1,633,949 | |
Paper & Forest Products 0.7% | |||||
Georgia-Pacific LLC (S) | 5.400 | 11-01-20 | 2,405,000 | 2,763,504 | |
Georgia-Pacific LLC | 7.250 | 06-01-28 | 815,000 | 1,001,240 | |
International Paper Company | 9.375 | 05-15-19 | 1,700,000 | 2,276,120 | |
Westvaco Corp. | 7.950 | 02-15-31 | 3,200,000 | 3,660,758 | |
Telecommunication Services 2.6% | 34,406,177 | ||||
Diversified Telecommunication Services 2.1% | |||||
American Tower Corp. | 4.700 | 03-15-22 | 1,935,000 | 2,010,231 | |
CenturyLink, Inc. | 5.800 | 03-15-22 | 2,340,000 | 2,310,591 | |
CenturyLink, Inc. | 6.450 | 06-15-21 | 1,355,000 | 1,404,635 | |
CenturyLink, Inc. | 7.600 | 09-15-39 | 1,295,000 | 1,235,295 | |
Crown Castle Towers LLC (S) | 4.883 | 08-15-20 | 3,075,000 | 3,372,971 | |
Crown Castle Towers LLC (S) | 6.113 | 01-15-20 | 2,390,000 | 2,794,539 | |
GTP Acquisition Partners I LLC (S) | 4.347 | 06-15-16 | 3,050,000 | 3,195,052 | |
GTP Acquisition Partners I LLC (S) | 7.628 | 06-15-16 | 1,345,000 | 1,401,743 | |
GTP Towers Issuer LLC (S) | 8.112 | 02-15-15 | 3,740,000 | 3,936,271 | |
Oi SA (BRL) (D)(S) | 9.750 | 09-15-16 | 3,440,000 | 1,807,968 | |
PAETEC Holding Corp. | 9.875 | 12-01-18 | 1,619,000 | 1,776,853 | |
Telecom Italia Capital SA | 7.200 | 07-18-36 | 1,490,000 | 1,273,950 | |
West Corp. | 11.000 | 10-15-16 | 1,780,000 | 1,875,675 | |
Wireless Telecommunication Services 0.5% | |||||
Digicel, Ltd. (S) | 7.000 | 02-15-20 | 580,000 | 561,150 | |
Nextel Communications, Inc. | 7.375 | 08-01-15 | 2,000,000 | 1,955,000 | |
NII Capital Corp. | 8.875 | 12-15-19 | 1,655,000 | 1,530,875 | |
SBA Tower Trust (S) | 5.101 | 04-17-17 | 1,790,000 | 1,963,378 |
20 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Utilities 3.1% | $41,990,165 | ||||
Electric Utilities 1.5% | |||||
Beaver Valley II Funding | 9.000 | 06-01-17 | 2,111,000 | 2,189,001 | |
BVPS II Funding Corp. | 8.890 | 06-01-17 | 1,562,000 | 1,732,269 | |
Commonwealth Edison Company | 5.800 | 03-15-18 | 1,955,000 | 2,368,848 | |
Israel Electric Corp., Ltd. (S) | 7.250 | 01-15-19 | 2,595,000 | 2,660,586 | |
NV Energy, Inc. | 6.250 | 11-15-20 | 1,055,000 | 1,158,611 | |
PNM Resources, Inc. | 9.250 | 05-15-15 | 3,255,000 | 3,767,663 | |
PNPP II Funding Corp. | 9.120 | 05-30-16 | 602,000 | 643,971 | |
PPL Capital Funding, Inc. (6.700% to 3-30-17, | |||||
then 3 month LIBOR + 2.665%) (P) | 6.700 | 03-30-67 | 2,210,000 | 2,193,425 | |
Southern California Edison Company | |||||
(6.250% to 2-1-22, then 3 month | |||||
LIBOR + 4.199%) (Q) | 6.250 | 02-01-22 | 1,290,000 | 1,357,661 | |
W3A Funding Corp. | 8.090 | 01-02-17 | 1,350,870 | 1,353,275 | |
Independent Power Producers & Energy Traders 0.9% | |||||
Allegheny Energy Supply Company LLC (S) | 5.750 | 10-15-19 | 2,026,000 | 2,206,902 | |
DPL, Inc. (S) | 7.250 | 10-15-21 | 2,650,000 | 2,881,875 | |
Exelon Generation Company LLC | 6.250 | 10-01-39 | 880,000 | 1,050,724 | |
Ipalco Enterprises, Inc. | 5.000 | 05-01-18 | 2,320,000 | 2,285,200 | |
NRG Energy, Inc. | 7.625 | 01-15-18 | 1,835,000 | 1,830,413 | |
NRG Energy, Inc. | 8.250 | 09-01-20 | 1,775,000 | 1,748,375 | |
Multi-Utilities 0.5% | |||||
CMS Energy Corp. | 5.050 | 03-15-22 | 1,935,000 | 2,010,742 | |
Integrys Energy Group, Inc. (6.110% to | |||||
12-1-16, then 3 month LIBOR + 2.120%) | 6.110 | 12-01-66 | 3,325,000 | 3,325,000 | |
Wisconsin Energy Corp. (6.250% to 5-15-17, | |||||
then 3 month LIBOR + 2.113%) | 6.250 | 05-15-67 | 1,860,000 | 1,906,500 | |
Water Utilities 0.2% | |||||
Cia de Saneamento Basico do Estado de Sao | |||||
Paulo (S) | 6.250 | 12-16-20 | 1,215,000 | 1,278,788 | |
Midwest Generation LLC, Series B | 8.560 | 01-02-16 | 1,475,797 | 1,357,734 | |
Salton Sea Funding Corp., Series F | 7.475 | 11-30-18 | 654,698 | 682,602 | |
U.S. Government & Agency Obligations 31.2% | $416,893,692 | ||||
(Cost $406,790,054) | |||||
U.S. Government 6.2% | 82,781,047 | ||||
U.S. Treasury | |||||
Bond | 3.125 | 02-15-42 | 30,265,000 | 33,225,280 | |
Note | 0.875 | 12-31-16 | 3,310,000 | 3,350,081 | |
Note | 0.875 | 01-31-17 | 5,370,000 | 5,433,769 | |
Note | 1.750 | 05-15-22 | 35,210,000 | 35,793,148 | |
Strip, PO | 2.911 | 11-15-30 | 7,940,000 | 4,978,769 | |
U.S. Government Agency 25.0% | 334,112,645 | ||||
Federal Home Loan Mortgage Corp. | |||||
30 Yr Pass Thru | 1.750 | 05-30-19 | 7,160,000 | 7,341,341 | |
30 Yr Pass Thru | 3.500 | 05-01-42 | 16,250,000 | 17,086,131 | |
30 Yr Pass Thru | 4.000 | 09-01-40 | 10,859,636 | 11,522,307 | |
30 Yr Pass Thru | 4.000 | 04-01-42 | 19,419,147 | 20,707,296 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 5,685,144 | 6,152,591 | |
30 Yr Pass Thru | 5.000 | 07-01-41 | 14,184,375 | 15,350,653 |
See notes to financial statements | Annual report | Bond Fund | 21 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government Agency (continued) | |||||
Federal Home Loan Mortgage Corp. | |||||
30 Yr Pass Thru | 6.500 | 06-01-37 | 125,849 | $141,158 | |
30 Yr Pass Thru | 6.500 | 10-01-37 | 341,146 | 382,432 | |
30 Yr Pass Thru | 6.500 | 11-01-37 | 748,151 | 837,758 | |
30 Yr Pass Thru | 6.500 | 12-01-37 | 320,510 | 358,899 | |
30 Yr Pass Thru | 6.500 | 02-01-38 | 162,255 | 181,689 | |
30 Yr Pass Thru | 6.500 | 09-01-39 | 6,847,908 | 7,668,097 | |
Federal National Mortgage Association | |||||
15 Yr Pass Thru | 3.000 | 02-01-27 | 5,983,098 | 6,269,899 | |
30 Yr Pass Thru | 3.500 | 06-01-42 | 7,620,000 | 8,029,643 | |
30 Yr Pass Thru | 4.000 | 10-01-40 | 7,687,515 | 8,282,142 | |
30 Yr Pass Thru | 4.000 | 11-01-40 | 3,626,678 | 3,901,533 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 10,673,777 | 11,546,089 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 8,629,588 | 9,334,838 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 20,163,601 | 21,723,250 | |
30 Yr Pass Thru | 4.000 | 10-01-41 | 5,325,843 | 5,741,124 | |
30 Yr Pass Thru | 4.000 | 11-01-41 | 5,321,155 | 5,669,556 | |
30 Yr Pass Thru | 4.500 | 06-01-41 | 26,235,006 | 28,535,163 | |
30 Yr Pass Thru | 4.500 | 07-01-41 | 9,952,526 | 10,825,114 | |
30 Yr Pass Thru | 5.000 | 11-01-33 | 1,784,829 | 1,935,069 | |
30 Yr Pass Thru | 5.000 | 10-01-34 | 1,939,422 | 2,102,978 | |
30 Yr Pass Thru | 5.000 | 09-01-40 | 14,369,595 | 15,599,375 | |
30 Yr Pass Thru | 5.000 | 09-01-40 | 14,224,956 | 15,442,358 | |
30 Yr Pass Thru | 5.000 | 02-01-41 | 8,673,930 | 9,437,948 | |
30 Yr Pass Thru | 5.000 | 03-01-41 | 10,219,584 | 11,119,746 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 10,816,251 | 11,768,969 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 3,802,555 | 4,227,803 | |
30 Yr Pass Thru | 5.500 | 05-01-35 | 9,745,085 | 10,688,780 | |
30 Yr Pass Thru | 5.500 | 01-01-39 | 7,884,268 | 8,620,663 | |
30 Yr Pass Thru | 6.000 | 05-01-37 | 6,183,894 | 6,820,042 | |
30 Yr Pass Thru | 6.000 | 07-01-38 | 8,701,743 | 9,648,573 | |
30 Yr Pass Thru | 6.500 | 01-01-39 | 12,146,781 | 13,660,937 | |
30 Yr Pass Thru | 6.500 | 03-01-39 | 611,119 | 688,635 | |
30 Yr Pass Thru | 6.500 | 06-01-39 | 4,228,372 | 4,762,066 | |
Foreign Government Obligations 0.1% | $1,814,400 | ||||
(Cost $2,476,645) | |||||
Argentina 0.1% | 1,814,400 | ||||
City of Buenos Aires (S) | 9.950 | 03-01-17 | 2,520,000 | 1,814,400 | |
Convertible Bonds 0.2% | $2,654,678 | ||||
(Cost $1,207,911) | |||||
Consumer Discretionary 0.0% | 629,978 | ||||
Media 0.0% | |||||
XM Satellite Radio, Inc. (S) | 7.000 | 12-01-14 | 486,000 | 629,978 | |
Industrials 0.2% | 2,024,700 | ||||
Airlines 0.2% | |||||
US Airways Group, Inc. | 7.250 | 05-15-14 | 680,000 | 2,024,700 | |
Municipal Bonds 0.2% | $2,547,854 | ||||
(Cost $2,211,795) | |||||
State of California | 7.600 | 11-01-40 | 1,080,000 | 1,417,360 | |
State of Illinois | 5.100 | 06-01-33 | 1,195,000 | 1,130,494 |
22 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Term Loans (M) 0.4% | $5,473,314 | ||||
(Cost $5,460,277) | |||||
Consumer Discretionary 0.3% | 3,782,381 | ||||
Hotels, Restaurants & Leisure 0.3% | |||||
CCM Merger, Inc. | 6.000 | 03-01-17 | 756,878 | 749,309 | |
Kalispel Tribal Economic Authority | 7.500 | 02-24-17 | 2,414,716 | 2,366,422 | |
Landry’s, Inc. | 6.500 | 04-24-18 | 670,000 | 666,650 | |
Financials 0.1% | 1,690,933 | ||||
Real Estate Investment Trusts 0.1% | |||||
iStar Financial, Inc. | 7.000 | 06-30-14 | 880,000 | 877,433 | |
Real Estate Management & Development 0.0% | |||||
Realogy Corp. | 13.500 | 10-15-17 | 800,000 | 813,500 | |
Capital Preferred Securities 1.8% | $24,581,833 | ||||
(Cost $25,844,644) | |||||
Financials 1.8% | 24,581,833 | ||||
Capital Markets 0.5% | |||||
State Street Capital Trust III (P)(Q) | 5.464 | 01-29-49 | 3,425,000 | 3,437,810 | |
State Street Capital Trust IV (P) | 1.474 | 06-15-37 | 4,005,000 | 2,920,638 | |
Commercial Banks 1.0% | |||||
Allfirst Preferred Capital Trust | 1.967 | 07-15-29 | 1,305,000 | 981,943 | |
Fifth Third Capital Trust IV (6.500% to 4-15-17, | |||||
then 3 month LIBOR + 1.368%) | 6.500 | 04-15-37 | 3,600,000 | 3,528,000 | |
Lloyds TSB Group PLC (6.413% to 10-1-35, | |||||
then 3 month LIBOR + 1.496%) (Q)(S) | 6.413 | 10-01-35 | 2,410,000 | 1,361,650 | |
PNC Financial Services Group, Inc. (6.750% to | |||||
8-1-21, then 3 month LIBOR + 3.678%) (Q) | 6.750 | 08-01-21 | 900,000 | 931,545 | |
PNC Preferred Funding Trust III (8.700% to | |||||
3-15-13, then 3 month LIBOR + 5.226%) (Q)(S) | 8.700 | 03-15-13 | 3,630,000 | 3,709,787 | |
Regions Financing Trust II (6.625% to 5-15-27, | |||||
then 3 month LIBOR + 1.290%) | 6.625 | 05-15-47 | 1,245,000 | 1,156,294 | |
Sovereign Capital Trust VI | 7.908 | 06-13-36 | 1,840,000 | 1,741,315 | |
Insurance 0.3% | |||||
Aon Corp. | 8.205 | 01-01-27 | 1,380,000 | 1,651,751 | |
MetLife Capital Trust X (S) | 9.250 | 04-08-38 | 1,450,000 | 1,725,500 | |
ZFS Finance USA Trust II (6.450% to 6-15-16, | |||||
then 3 month LIBOR + 2.000%) (S) | 6.450 | 12-15-65 | 1,480,000 | 1,435,600 | |
Collateralized Mortgage Obligations 14.1% | $189,246,911 | ||||
(Cost $181,999,214) | |||||
Commercial & Residential 11.5% | 154,369,789 | ||||
American Home Mortgage Assets | |||||
Series 2006-6, Class A1A (P) | 0.429 | 12-25-46 | 2,088,272 | 930,523 | |
Series 2006-6, Class XP IO | 2.136 | 12-25-46 | 21,298,598 | 1,358,831 | |
American Tower Trust | |||||
Series 2007-1A, Class C (S) | 5.615 | 04-15-37 | 3,075,000 | 3,233,990 | |
Series 2007-1A, Class D (S) | 5.957 | 04-15-37 | 3,175,000 | 3,326,657 |
See notes to financial statements | Annual report | Bond Fund | 23 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
Banc of America Commercial Mortgage, Inc. | |||||
Series 2006-2, Class AM (P) | 5.954 | 05-10-45 | 2,380,000 | $2,530,523 | |
Series 2006-4, Class AM | 5.675 | 07-10-46 | 4,130,000 | 4,273,712 | |
Series 2006-3, Class A4 (P) | 5.889 | 07-10-44 | 3,785,000 | 4,250,536 | |
Bear Stearns Alt-A Trust | |||||
Series 2004-12, Class 1A1 (P) | 0.589 | 01-25-35 | 2,867,996 | 2,503,764 | |
Bear Stearns Commercial Mortgage | |||||
Securities, Inc. | |||||
Series 2006-PW14, Class D (S) | 5.412 | 12-11-38 | 2,480,000 | 833,717 | |
Citigroup Commercial Mortgage Trust | |||||
Series 2006-C4, Class A3 (P) | 5.730 | 03-15-49 | 4,125,000 | 4,661,778 | |
Citigroup/Deutsche Bank Commercial | |||||
Mortgage Trust | |||||
Series 2005-CD1, Class C (P) | 5.213 | 07-15-44 | 1,230,000 | 1,019,617 | |
Commercial Mortgage Pass Through Certificates | |||||
Series 2007-C9, Class A4 (P) | 6.006 | 12-10-49 | 5,995,000 | 6,896,804 | |
Series 2012-LC4, Class B (P) | 4.934 | 12-10-44 | 1,780,000 | 1,849,545 | |
Series 2012-LC4, Class C (P) | 5.649 | 12-10-44 | 1,385,000 | 1,318,740 | |
Extended Stay America Trust | |||||
Series 2010-ESHA, Class B (S) | 4.221 | 11-05-27 | 2,670,000 | 2,707,263 | |
Fontainebleau Resorts LLC | |||||
Series 2012-FBLU, Class C (S) | 4.270 | 05-05-27 | 1,555,000 | 1,576,195 | |
Series 2012-FBLU, Class D (S) | 5.007 | 05-05-27 | 2,300,000 | 2,365,440 | |
GMAC Mortgage Loan Trust | |||||
Series 2004-AR2, Class 3A (P) | 3.191 | 08-19-34 | 3,164,730 | 2,983,410 | |
Greenwich Capital Commercial Funding Corp. | |||||
Series 2006-GG7, Class AM (P) | 5.874 | 07-10-38 | 3,325,000 | 3,408,185 | |
Series 2007-GG9, Class C (P) | 5.554 | 03-10-39 | 1,810,000 | 388,028 | |
GSR Mortgage Loan Trust | |||||
Series 2005-AR6, Class 3A1 (P) | 2.613 | 09-25-35 | 2,699,861 | 2,470,524 | |
Series 2004-9, Class B1 (P) | 3.183 | 08-25-34 | 1,623,007 | 680,215 | |
Series 2006-AR1, Class 3A1 (P) | 4.998 | 01-25-36 | 2,998,597 | 2,485,903 | |
Harborview Mortgage Loan Trust | |||||
Series 2004-11, Class X1 IO | 2.010 | 01-19-35 | 18,003,574 | 1,353,869 | |
Series 2005-11, Class X IO | 2.002 | 08-19-45 | 11,180,683 | 546,747 | |
Series 2005-8, Class 1X IO | 2.140 | 09-19-35 | 16,741,053 | 796,293 | |
Series 2007-3, Class ES IO | 0.350 | 05-19-47 | 72,263,931 | 451,650 | |
Series 2007-4, Class ES IO | 0.350 | 07-19-47 | 88,148,522 | 550,928 | |
Series 2007-6, Class ES IO (S) | 0.342 | 08-19-37 | 60,841,141 | 380,257 | |
IndyMac Index Mortgage Loan Trust | |||||
Series 2005-AR18, Class 1X IO | 2.056 | 10-25-36 | 28,142,981 | 1,813,534 | |
Series 2005-AR18, Class 2X IO | 1.722 | 10-25-36 | 45,607,082 | 2,133,955 | |
JPMorgan Chase Commercial Mortgage | |||||
Securities Corp. | |||||
Series 2005-PDP5, Class AM (P) | 5.240 | 12-15-44 | 5,515,000 | 5,947,977 | |
Series 2006-LDP7, Class AM (P) | 5.870 | 04-15-45 | 3,795,000 | 4,006,309 | |
Series 2007-CB18, Class A4 | 5.440 | 06-12-47 | 5,650,000 | 6,271,794 | |
Series 2005-LDP3, Class A4B (P) | 4.996 | 08-15-42 | 3,985,000 | 4,198,943 | |
LB-UBS Commercial Mortgage Trust | |||||
Series 2006-C6, Class AM | 5.413 | 09-15-39 | 5,015,000 | 5,290,790 | |
Series 2007-C1, Class AM | 5.455 | 02-15-40 | 3,835,000 | 3,882,608 | |
Series 2006-C4, Class A4 (P) | 5.870 | 06-15-38 | 4,165,000 | 4,703,880 | |
Series 2007-C2, Class A3 | 5.430 | 02-15-40 | 5,660,000 | 6,196,189 | |
Merrill Lynch Mortgage Trust | |||||
Series 2006-2, Class A4 (P) | 5.899 | 06-12-46 | 4,985,000 | 5,612,427 |
24 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
MLCC Mortgage Investors, Inc. | |||||
Series 2006-3, Class 2A1 (P) | 2.532 | 10-25-36 | 2,826,539 | $2,570,025 | |
Series 2007-3, Class M1 (P) | 5.141 | 09-25-37 | 1,056,892 | 543,068 | |
Series 2007-3, Class M2 (P) | 5.141 | 09-25-37 | 395,223 | 37,343 | |
Series 2007-3, Class M3 (P) | 5.141 | 09-25-37 | 249,240 | 11,813 | |
Morgan Stanley Capital I | |||||
Series 2006-HQ10, Class AM | 5.360 | 11-12-41 | 3,200,000 | 3,322,438 | |
Series 2007-IQ13, Class A4 | 5.364 | 03-15-44 | 5,325,000 | 5,925,575 | |
Series 2008-HQ8, Class AM (P) | 5.468 | 03-12-44 | 4,900,000 | 5,158,372 | |
Residential Accredit Loans, Inc. | |||||
Series 2005-QO4, Class X IO | 2.406 | 12-25-45 | 27,257,911 | 1,471,927 | |
Structured Asset Securities Corp. | |||||
Series 2003-6A, Class B1 (P) | 2.905 | 03-25-33 | 1,752,152 | 1,061,067 | |
Thornburg Mortgage Securities Trust | |||||
Series 2004-1, Class II2A (P) | 1.890 | 03-25-44 | 3,098,894 | 2,878,743 | |
UBS Commercial Mortgage Trust | |||||
Series 2012-C1, Class B | 4.822 | 05-10-45 | 2,020,000 | 2,095,251 | |
Series 2012-C1, Class C (S) | 5.720 | 05-10-45 | 1,480,000 | 1,451,180 | |
WaMu Mortgage Pass Through Certificates | |||||
Series 2005-AR1, Class X IO | 1.436 | 01-25-45 | 39,469,425 | 1,924,833 | |
Series 2005-AR13, Class X IO | 1.425 | 10-25-45 | 104,522,310 | 5,082,251 | |
Series 2005-AR19, Class B1 (P) | 0.939 | 12-25-45 | 2,198,010 | 316,903 | |
Series 2005-AR2, Class X IO | 1.559 | 01-25-45 | 58,781,995 | 3,172,611 | |
Series 2005-AR6, Class X IO | Zero | 04-25-45 | 33,536,620 | 1,746,409 | |
Series 2005-AR8, Class X IO | 0.844 | 07-25-45 | 28,117,862 | 1,353,636 | |
Wells Fargo Mortgage Backed Securities Trust | |||||
Series 2005-AR5, Class 1A1 (P) | 2.591 | 04-25-35 | 2,267,977 | 2,054,234 | |
U.S. Government Agency 2.6% | 34,877,182 | ||||
Federal Home Loan Mortgage Corp. | |||||
Series 3581, Class IO | 6.000 | 10-15-39 | 2,081,096 | 291,226 | |
Series 3623, Class LI IO | 4.500 | 01-15-25 | 1,870,582 | 138,066 | |
Series 3630, Class BI IO | 4.000 | 05-15-27 | 1,162,452 | 49,403 | |
Series 3794, Class PI IO | 4.500 | 02-15-38 | 3,229,510 | 354,453 | |
Series K017, Class X1 IO | 1.460 | 12-25-21 | 10,020,896 | 1,032,754 | |
Series K018, Class X1 IO | 1.615 | 01-25-22 | 18,880,000 | 1,968,297 | |
Series K708, Class X1 IO | 1.513 | 01-25-19 | 29,555,000 | 2,417,747 | |
Federal National Mortgage Association | |||||
Series 20011-146, Class MA | 3.500 | 08-25-41 | 5,794,346 | 6,033,273 | |
Series 2009-109, Class IW IO | 4.500 | 04-25-38 | 3,026,404 | 268,668 | |
Series 2009-47, Class EI IO | 5.000 | 08-25-19 | 2,728,038 | 249,588 | |
Series 2009-50, Class GI IO | 5.000 | 05-25-39 | 5,406,168 | 595,418 | |
Series 2009-78, Class IB IO | 5.000 | 06-25-39 | 7,196,048 | 772,601 | |
Series 2010-14, Class AI IO | 4.000 | 08-25-27 | 3,353,849 | 159,748 | |
Series 2010-36, Class BI IO | 4.000 | 03-25-28 | 3,424,708 | 180,027 | |
Series 2012-19, Class JA | 3.500 | 03-25-41 | 9,099,853 | 9,504,806 | |
Series 3908, Class PA | 4.000 | 06-15-39 | 3,400,402 | 3,683,579 | |
Series 398, Class C3 IO | 4.500 | 05-25-39 | 3,855,860 | 427,082 | |
Series 401, Class C2 IO | 4.500 | 06-25-39 | 2,592,673 | 281,646 | |
Series 402, Class 3 IO | 4.000 | 11-25-39 | 3,526,791 | 424,033 | |
Series 402, Class 4 IO | 4.000 | 10-25-39 | 6,029,296 | 657,109 | |
Series 402, Class 7 IO | 4.500 | 11-25-39 | 5,395,595 | 649,568 | |
Series 407, Class 15 IO | 5.000 | 01-25-40 | 5,346,639 | 850,084 | |
Series 407, Class 16 IO | 5.000 | 01-25-40 | 1,208,217 | 157,746 | |
Series 407, Class 17 IO | 5.000 | 01-25-40 | 1,087,808 | 162,103 | |
Series 407, Class 21 IO | 5.000 | 01-25-39 | 4,284,082 | 498,998 | |
Series 407, Class 7 IO | 5.000 | 03-25-41 | 3,751,458 | 658,871 |
See notes to financial statements | Annual report | Bond Fund | 25 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government Agency (continued) | |||||
Federal National Mortgage Association | |||||
Series 407, Class 8 IO | 5.000 | 03-25-41 | 1,784,599 | $275,389 | |
Series 407, Class C6 IO | 5.500 | 01-25-40 | 9,757,144 | 1,687,975 | |
Government National Mortgage Association | |||||
Series 2010-78, Class AI IO | 4.500 | 04-20-39 | 5,435,496 | 446,924 | |
Asset Backed Securities 5.3% | $70,361,808 | ||||
(Cost $70,432,667) | |||||
Aegis Asset Backed Securities Trust | |||||
Series 2004-3, Class A1 (P) | 0.599 | 09-25-34 | 1,452,784 | 1,313,382 | |
Ameriquest Mortgage Securities, Inc. | |||||
Series 2005-R1, Class M1 (P) | 0.689 | 03-25-35 | 2,175,000 | 2,025,143 | |
Argent Securities, Inc. (P) | 0.389 | 09-25-36 | 7,186,501 | 2,147,715 | |
Asset Backed Funding Certificates | |||||
Series 2005-HE1, Class M1 (P) | 0.659 | 03-25-35 | 1,652,918 | 1,291,623 | |
Asset Backed Securities Corp. Home Equity (P) | 0.439 | 01-25-36 | 3,302,356 | 2,682,210 | |
Bayview Financial Acquisition Trust | |||||
Series 2006-A, Class 2A3 (P) | 0.589 | 02-28-41 | 1,350,879 | 1,180,601 | |
Bravo Mortgage Asset Trust (P)(S) | |||||
Series 2006-1A, Class A2 | 0.479 | 07-25-36 | 2,345,305 | 1,894,587 | |
Carrington Mortgage Loan Trust | |||||
Series 2005-OPT2, Class M2 (P) | 0.689 | 05-25-35 | 1,725,000 | 1,556,907 | |
Series 2006-NC4, Class A5 (P) | 0.299 | 10-25-36 | 518,297 | 334,553 | |
Citigroup Mortgage Loan Trust (P) | |||||
Series 2006-WFH3, Class A3 | 0.389 | 10-25-36 | 2,323,382 | 2,194,734 | |
ContiMortgage Home Equity Loan Trust | |||||
Series 1995-2, Class A–5 | 8.100 | 08-15-25 | 165,308 | 163,593 | |
Countrywide Asset-Backed Certificates | |||||
Series 2006-3, Class 2A2 (P) | 0.419 | 06-25-36 | 2,218,443 | 1,829,396 | |
Credit-Based Asset Servicing and | |||||
Securitization LLC | |||||
Series 2005-CB2, Class M1 (P) | 0.679 | 04-25-36 | 3,029,402 | 2,687,525 | |
Dominos Pizza Master Issuer LLC | |||||
Series 2012-1A, Class A2 (S) | 5.216 | 01-25-42 | 5,349,863 | 5,573,496 | |
Fremont Home Loan Trust | |||||
Series 2005-1, Class M3 (P) | 0.749 | 06-25-35 | 1,300,000 | 1,155,595 | |
FUEL Trust | |||||
Series 2011-1 (S) | 4.207 | 04-15-16 | 2,965,000 | 3,104,177 | |
Home Equity Asset Trust | |||||
Series 2005-5, Class M1 (P) | 0.719 | 11-25-35 | 2,035,000 | 1,740,845 | |
Series 2007-3, Class 2A2 (P) | 0.419 | 08-25-37 | 8,050,000 | 6,073,371 | |
Leaf Capital Funding SPE A LLC | |||||
Series 2010-A, Class C (P)(S) | 7.239 | 12-15-20 | 2,283,827 | 2,283,827 | |
Series 2010-A, Class D (P)(S) | 10.239 | 12-15-20 | 1,709,954 | 1,709,954 | |
Series 2010-A, Class E1 (P)(S) | 14.739 | 12-15-20 | 1,981,179 | 1,981,179 | |
Leaf II Receivables Funding LLC | |||||
Series 2011-1, Class A (S) | 1.700 | 12-20-18 | 1,025,759 | 1,010,885 | |
Master Asset Backed Securities Trust | |||||
Series 2007-HE2, Class A2 (P) | 0.939 | 08-25-37 | 2,033,569 | 1,805,960 | |
Merrill Lynch Mortgage Investors, Inc. | |||||
Series 2005-HE2, Class A2C (P) | 0.609 | 09-25-36 | 2,615,000 | 2,312,209 | |
Series 2005-WMC1, Class M1 (P) | 0.989 | 09-25-35 | 1,025,201 | 981,227 |
26 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Asset Backed Securities (continued) | |||||
New Century Home Equity Loan Trust | |||||
Series 2005-1, Class M1 (P) | 0.689 | 03-25-35 | 1,495,000 | $1,079,966 | |
Series 2005-3, Class M1 (P) | 0.719 | 07-25-35 | 1,265,000 | 1,179,969 | |
Novastar Home Equity Loan | |||||
Series 2004-4, Class M3 (P) | 1.319 | 03-25-35 | 2,720,000 | 2,590,329 | |
Park Place Securities, Inc. | |||||
Series 2004-WHQ2, Class M2 (P) | 0.869 | 02-25-35 | 3,650,000 | 3,151,556 | |
Series 2005-WCH1, Class M2 (P) | 0.759 | 01-25-36 | 3,475,111 | 3,226,995 | |
People’s Choice Home Loan Securities Trust | |||||
Series 2005-1, Class M3 | 0.819 | 01-25-35 | 2,315,000 | 2,036,017 | |
Renaissance Home Equity Loan Trust | |||||
Series 2005-2, Class AF3 | 4.499 | 08-25-35 | 342,484 | 327,930 | |
Series 2005-2, Class AF4 | 4.934 | 08-25-35 | 2,365,000 | 1,840,547 | |
Sonic Capital LLC | |||||
Series 2011-1A, Class A2 (S) | 5.438 | 05-20-41 | 2,492,900 | 2,606,242 | |
Soundview Home Equity Loan Trust | 0.419 | 05-25-36 | 1,606,815 | 1,287,563 | |
Shares | Value | ||||
Preferred Securities 1.0% | $13,319,376 | ||||
(Cost $13,682,216) | |||||
Consumer Discretionary 0.1% | 1,278,720 | ||||
Hotels, Restaurants & Leisure 0.1% | |||||
Greektown Superholdings, Inc., Series A (I) | 17,280 | 1,278,720 | |||
Consumer Staples 0.2% | 2,088,868 | ||||
Food & Staples Retailing 0.2% | |||||
Ocean Spray Cranberries, Inc., Series A, | |||||
6.250% (S) | 23,250 | 2,088,868 | |||
Financials 0.7% | 9,768,388 | ||||
Commercial Banks 0.3% | |||||
PNC Financial Services Group, Inc. (6.125% to | |||||
5-1-22, then 3 month LIBOR + 4.067%) (Q) | 96,775 | 2,487,118 | |||
U.S. Bancorp (6.000% to 4-15-17, then | |||||
3 month LIBOR + 4.861%) | 77,150 | 2,001,271 | |||
Consumer Finance 0.1% | |||||
Ally Financial, Inc., 7.300% | 48,470 | 1,106,085 | |||
Diversified Financial Services 0.3% | |||||
Bank of America Corp., Series MER, 8.625% | 89,220 | 2,255,482 | |||
Citigroup Capital XIII (7.875% to 10-30-15, | |||||
then 3 month LIBOR + 6.370%), 10-30-15 | 16,000 | 423,360 | |||
GMAC Capital Trust I (8.125% to 2-15-16, | |||||
then 3 month LIBOR + 5.785%), 2-15-16 | 65,230 | 1,495,072 | |||
Utilities 0.0% | 183,400 | ||||
Electric Utilities 0.0% | |||||
PPL Corp., 8.750% | 3,500 | 183,400 |
See notes to financial statements | Annual report | Bond Fund | 27 |
Shares | Value | ||||
Common Stocks 0.0% | $46,657 | ||||
(Cost $97,862) | |||||
Consumer Discretionary 0.0% | 46,657 | ||||
Greektown Superholdings, Inc. (I) | 885 | 46,657 | |||
Short-Term Investments 3.2% | $42,450,000 | ||||
(Cost $42,450,000) | |||||
Repurchase Agreement 0.0% | 450,000 | ||||
Repurchase Agreement with State Street Corp. dated 5-31-12 at | |||||
0.01% to be repurchased at $450,000 on 6-1-12, collateralized | |||||
by $455,000 U.S. Treasury Note, 1.000% due 7-15-13 (valued | |||||
at $460,622, including interest) | 450,000 | 450,000 | |||
Maturity | |||||
Yield*(%) | date | Par value^ | Value | ||
U.S. Government & Agency Obligations 3.2% | $42,000,000 | ||||
Federal Home Loan Discount Notes | 0.010 | 06-01-12 | 42,000,000 | 42,000,000 | |
Total investments (Cost $1,312,577,493)† 101.0% | $1,351,635,098 | ||||
Other assets and liabilities, net (1.0%) | ($13,428,169) | ||||
Total net assets 100.0% | $1,338,206,929 | ||||
^ The percentage shown for each investment category is the total value of that category as a percentage of the net assets applicable of the Fund. All par values are denominated in U.S. Dollars unless otherwise indicated.
Currency abbreviations |
BRL Brazilian Real |
Notes to Schedule of Investments
IO Interest Only Security — (Interest Tranche of Stripped Mortgage Pool). Rate shown is the annualized yield at the end of the period.
LIBOR London Interbank Offered Rate
PIK Payment-in-kind
PO Principal-Only Security — (Principal Tranche of Stripped Security). Rate shown is the annualized yield on date of purchase.
USGG U.S. Generic Government Index
(D) Par value of foreign bonds is expressed in local currency as shown parenthetically in security description.
(I) Non-income producing security.
(M) Term loans are variable rate obligations. The coupon rate shown represents the rate at period end.
(P) Variable rate obligation. The coupon rate shown represents the rate at period end.
(Q) Perpetual bonds have no stated maturity date. Date shown is next call date.
(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.
* Yield represents either the annualized yield at the date of purchase or the stated coupon rate.
† At 5-31-12, the aggregate cost of investment securities for federal income tax purposes was $1,314,607,848. Net unrealized appreciation aggregated $37,027,250, of which $67,038,710 related to appreciated investment securities and $30,011,460 related to depreciated investment securities.
28 | Bond Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 5-31-12
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 $1,312,577,493) | $1,351,635,098 |
Cash | 20,486 |
Receivable for investments sold | 3,955,423 |
Receivable for delayed delivery securities sold | 901,783 |
Receivable for fund shares sold | 7,204,208 |
Dividends and interest receivable | 13,392,247 |
Other receivables and prepaid expenses | 200,717 |
Total assets | 1,377,309,962 |
Liabilities | |
Payable for investments purchased | 10,113,561 |
Payable for delayed delivery securities purchased | 25,814,541 |
Payable for fund shares repurchased | 1,904,133 |
Distributions payable | 714,081 |
Payable to affiliates | |
Accounting and legal services fees | 31,921 |
Transfer agent fees | 213,993 |
Distribution and service fees | 96,397 |
Trustees’ fees | 66,772 |
Other liabilities and accrued expenses | 147,634 |
Total liabilities | 39,103,033 |
Net assets | |
Paid-in capital | $1,300,558,904 |
Undistributed net investment income | 1,173,676 |
Accumulated net realized gain (loss) on investments, futures contracts and | |
foreign currency transactions | (2,577,286) |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | 39,051,635 |
Net assets | $1,338,206,929 |
See notes to financial statements | Annual report | Bond Fund | 29 |
F I N A N C I A L S T A T E M E N T S
Statement of assets and liabilities (continued)
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 ($1,060,588,074 ÷ 66,853,378 shares) | $15.86 |
Class B ($36,694,153 ÷ 2,313,218 shares)1 | $15.86 |
Class C ($116,062,889 ÷ 7,315,537 shares)1 | $15.87 |
Class I ($122,780,602 ÷ 7,738,912 shares) | $15.87 |
Class R2 ($100,422 ÷ 6,329 shares) | $15.87 |
Class R6 ($1,980,789 ÷ 124,775 shares) | $15.87 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95.5%)2 | $16.61 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
30 | Bond Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 5-31-12
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 | $65,383,021 |
Dividends | 659,702 |
Securities lending | 2,506 |
Less foreign taxes withheld | (15,682) |
Total investment income | 66,029,547 |
Expenses | |
Investment management fees | 5,651,987 |
Distribution and service fees | 4,125,225 |
Accounting and legal services fees | 240,455 |
Transfer agent fees | 2,292,866 |
Trustees’ fees | 78,761 |
State registration fees | 102,773 |
Printing and postage | 124,601 |
Professional fees | 110,184 |
Custodian fees | 155,747 |
Registration and filing fees | 67,608 |
Other | 36,424 |
Total expenses | 12,986,631 |
Less expense reductions | (540,550) |
Net expenses | 12,446,081 |
Net investment income | 53,583,466 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 13,785,950 |
Investments in affiliated issuers | (538) |
Capital gain distributions received from affiliated underlying funds | 42 |
Futures contracts | 266,557 |
Foreign currency transactions | 479,677 |
14,531,688 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | (6,151,939) |
Investments in affiliated issuers | 99 |
Futures contracts | 55,308 |
Translation of assets and liabilities in foreign currencies | 41,442 |
(6,055,090) | |
Net realized and unrealized gain | 8,476,598 |
Increase in net assets from operations | $62,060,064 |
See notes to financial statements | Annual report | Bond Fund | 31 |
F I N A N C I A L S T A T E M E N T S
Statements 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 | Year | |
ended | ended | |
5-31-12 | 5-31-11 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $53,583,466 | $52,425,624 |
Net realized gain | 14,531,688 | 13,852,969 |
Change in net unrealized appreciation (depreciation) | (6,055,090) | 44,909,856 |
Increase in net assets resulting from operations | 62,060,064 | 111,188,449 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (48,082,010) | (48,723,911) |
Class B | (1,350,772) | (1,335,131) |
Class C | (3,924,487) | (2,798,851) |
Class I | (4,407,508) | (3,056,347) |
Class R2 | (1,228) | — |
Class R6 | (15,017) | — |
From net realized gain | ||
Class A | (839,265) | — |
Class B | (27,704) | — |
Class C | (81,124) | — |
Class I | (65,359) | — |
Class R6 | (87) | — |
Total distributions | (58,794,561) | (55,914,240) |
From Fund share transactions | 250,252,179 | 114,659,284 |
Total increase | 253,517,682 | 169,933,493 |
Net assets | ||
Beginning of year | 1,084,689,247 | 914,755,754 |
End of year | $1,338,206,929 | $1,084,689,247 |
Undistributed net investment income | $1,173,676 | $1,074,470 |
32 | Bond Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 | 5-31-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.86 | $15.00 | $12.96 | $14.31 | $14.75 |
Net investment income1 | 0.72 | 0.81 | 0.97 | 0.87 | 0.81 |
Net realized and unrealized gain (loss) on investments | 0.08 | 0.92 | 2.05 | (1.34) | (0.43) |
Total from investment operations | 0.80 | 1.73 | 3.02 | (0.47) | 0.38 |
Less distributions | |||||
From net investment income | (0.79) | (0.87) | (0.98) | (0.88) | (0.82) |
From net realized gain | (0.01) | — | — | — | — |
Total distributions | (0.80) | (0.87) | (0.98) | (0.88) | (0.82) |
Net asset value, end of period | $15.86 | $15.86 | $15.00 | $12.96 | $14.31 |
Total return (%)2 | 5.213 | 11.78 | 23.833 | (3.02) | 2.57 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1,061 | $912 | $819 | $686 | $824 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.06 | 1.05 | 1.08 | 1.164 | 1.05 |
Expenses net of fee waivers and credits | 1.02 | 1.05 | 1.07 | 1.164 | 1.05 |
Net investment income | 4.63 | 5.24 | 6.71 | 6.71 | 5.54 |
Portfolio turnover (%) | 76 | 73 | 88 | 90 | 90 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS B SHARES Period ended | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 | 5-31-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.86 | $15.00 | $12.95 | $14.31 | $14.75 |
Net investment income1 | 0.61 | 0.70 | 0.86 | 0.77 | 0.71 |
Net realized and unrealized gain (loss) on investments | 0.08 | 0.92 | 2.07 | (1.34) | (0.43) |
Total from investment operations | 0.69 | 1.62 | 2.93 | (0.57) | 0.28 |
Less distributions | |||||
From net investment income | (0.68) | (0.76) | (0.88) | (0.79) | (0.72) |
From net realized gain | (0.01) | — | — | — | — |
Total distributions | (0.69) | (0.76) | (0.88) | (0.79) | (0.72) |
Net asset value, end of period | $15.86 | $15.86 | $15.00 | $12.95 | $14.31 |
Total return (%)2 | 4.483 | 11.00 | 23.053 | (3.77) | 1.863 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $37 | $28 | $25 | $28 | $42 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.76 | 1.75 | 1.78 | 1.864 | 1.76 |
Expenses net of fee waivers and credits | 1.72 | 1.75 | 1.77 | 1.864 | 1.75 |
Net investment income | 3.92 | 4.53 | 6.01 | 5.96 | 4.82 |
Portfolio turnover (%) | 76 | 73 | 88 | 90 | 90 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Annual report | Bond Fund | 33 |
CLASS C SHARES Period ended | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 | 5-31-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.86 | $15.00 | $12.96 | $14.31 | $14.75 |
Net investment income1 | 0.61 | 0.70 | 0.86 | 0.78 | 0.71 |
Net realized and unrealized gain (loss) on investments | 0.09 | 0.92 | 2.06 | (1.34) | (0.43) |
Total from investment operations | 0.70 | 1.62 | 2.92 | (0.56) | 0.28 |
Less distributions | |||||
From net investment income | (0.68) | (0.76) | (0.88) | (0.79) | (0.72) |
From net realized gain | (0.01) | — | — | — | — |
Total distributions | (0.69) | (0.76) | (0.88) | (0.79) | (0.72) |
Net asset value, end of period | $15.87 | $15.86 | $15.00 | $12.96 | $14.31 |
Total return (%)2 | 4.553 | 11.00 | 22.983 | (3.70) | 1.86 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $116 | $71 | $40 | $26 | $29 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.77 | 1.75 | 1.78 | 1.864 | 1.75 |
Expenses net of fee waivers and credits | 1.72 | 1.75 | 1.77 | 1.864 | 1.75 |
Net investment income | 3.91 | 4.50 | 5.98 | 6.02 | 4.86 |
Portfolio turnover (%) | 76 | 73 | 88 | 90 | 90 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS I SHARES Period ended | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 | 5-31-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.86 | $14.99 | $12.96 | $14.31 | $14.74 |
Net investment income1 | 0.78 | 0.88 | 1.03 | 0.93 | 0.88 |
Net realized and unrealized gain (loss) on investments | 0.09 | 0.92 | 2.05 | (1.35) | (0.43) |
Total from investment operations | 0.87 | 1.80 | 3.08 | (0.42) | 0.45 |
Less distributions | |||||
From net investment income | (0.85) | (0.93) | (1.05) | (0.93) | (0.88) |
From net realized gain | (0.01) | — | — | — | — |
Total distributions | (0.86) | (0.93) | (1.05) | (0.93) | (0.88) |
Net asset value, end of period | $15.87 | $15.86 | $14.99 | $12.96 | $14.31 |
Total return (%) | 5.702 | 12.33 | 24.31 | (2.60) | 3.01 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $123 | $74 | $30 | $19 | $22 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.67 | 0.62 | 0.63 | 0.703 | 0.62 |
Expenses net of fee waivers and credits | 0.62 | 0.62 | 0.63 | 0.703 | 0.62 |
Net investment income | 4.99 | 5.64 | 7.13 | 7.22 | 6.08 |
Portfolio turnover (%) | 76 | 73 | 88 | 90 | 90 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
34 | Bond Fund | Annual report | See notes to financial statements |
CLASS R2 SHARES Period ended | 5-31-121 | ||||
Per share operating performance | |||||
Net asset value, beginning of period | $15.80 | ||||
Net investment income2 | 0.17 | ||||
Net realized and unrealized gain on investments | 0.09 | ||||
Total from investment operations | 0.26 | ||||
Less distributions | |||||
From net investment income | (0.19) | ||||
Net asset value, end of period | $15.87 | ||||
Total return (%)3 | 1.684 | ||||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | ||||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.866 | ||||
Expenses net of fee waivers and credits | 0.806 | ||||
Net investment income | 4.286 | ||||
Portfolio turnover (%) | 767 |
1 Period from 3-1-12 (inception date) to 5-31-12.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the period shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
CLASS R6 SHARES Period ended | 5-31-121 | ||||
Per share operating performance | |||||
Net asset value, beginning of period | $15.55 | ||||
Net investment income2 | 0.57 | ||||
Net realized and unrealized gain on investments | 0.40 | ||||
Total from investment operations | 0.97 | ||||
Less distributions | |||||
From net investment income | (0.64) | ||||
From net realized gain | (0.01) | ||||
Total distributions | (0.65) | ||||
Net asset value, end of period | $15.87 | ||||
Total return (%)3 | 6.384 | ||||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | ||||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.635 | ||||
Expenses net of fee waivers and credits | 0.575 | ||||
Net investment income | 5.045 | ||||
Portfolio turnover (%) | 766 |
1 Period from 9-1-11 (inception date) to 5-31-12.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the period shown.
4 Not annualized.
5 Annualized.
6 Portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
See notes to financial statements | Annual report | Bond Fund | 35 |
Notes to financial statements
Note 1 — Organization
John Hancock Bond Fund (the Fund) is a series of John Hancock Sovereign Bond Fund (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek a high level of current income consistent with prudent investment risk.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class R2 shares are available only to certain retirement plans. Class R6 shares are available only to certain retirement plans, institutions and other investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase. Certain Class I shares may be exchanged for Class R6 shares within one year after the commencement of operations of Class R6 shares.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
36 | Bond Fund | Annual report |
The following is a summary of the values by input classification of the Fund’s investments as of May 31, 2012, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
INVESTMENTS IN SECURITIES | VALUE AT 5-31-12 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS |
Corporate Bonds | $582,244,575 | — | $579,421,801 | $2,822,774 |
U.S. Government & Agency | ||||
Obligations | 416,893,692 | — | 416,893,692 | — |
Foreign Government | ||||
Obligations | 1,814,400 | — | 1,814,400 | — |
Convertible Bonds | 2,654,678 | — | 2,654,678 | — |
Municipal Bonds | 2,547,854 | — | 2,547,854 | — |
Term Loans | 5,473,314 | — | 5,473,314 | — |
Capital Preferred Securities | 24,581,833 | — | 24,581,833 | — |
Collateralized Mortgage | ||||
Obligations | 189,246,911 | — | 187,864,076 | 1,382,835 |
Asset Backed Securities | 70,361,808 | — | 64,386,848 | 5,974,960 |
Preferred Securities | 13,319,376 | $7,950,517 | 4,090,139 | 1,278,720 |
Common Stocks | 46,657 | — | — | 46,657 |
Short-Term Investments | 42,450,000 | — | 42,450,000 | — |
Total investments in | ||||
Securities | $1,351,635,098 | $7,950,517 | $1,332,178,635 | $11,505,946 |
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. During the year ended May 31, 2012, there were no significant transfers into or out of Level 1 or Level 2.
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value. Transfers into or out of Level 3 represent the beginning value of any security or instrument where a change in the level has occurred from the beginning to the end of the period.
COLLATERALIZED | ||||||
MORTGAGE | ASSET BACKED | PREFERRED | ||||
CORPORATE BONDS | OBLIGATIONS | SECURITIES | SECURITIES | COMMON STOCKS | TOTALS | |
Balance as of | ||||||
5-31-11 | $2,202,254 | $9,807,309 | $5,865,818 | — | — | $17,875,381 |
Realized gain (loss) | 16,307 | — | — | — | — | $16,307 |
Change in unrealized | ||||||
appreciation | ||||||
(depreciation) | 95,069 | 258,439 | — | ($260,410) | ($32,170) | $60,928 |
Purchases | 1,270,000 | 6,513 | 8,142,696 | — | — | $9,419,209 |
Sales | (760,856) | (440,816) | (5,444,279) | — | — | ($6,645,951) |
Transfer into Level 3 | — | 1,008,198 | — | 1,539,130 | 78,827 | $2,626,155 |
Transfer out of | ||||||
Level 3 | — | (9,256,808) | (2,589,275) | — | — | ($11,846,083) |
Balance as of | ||||||
5-31-12 | $2,822,774 | $1,382,835 | $5,974,960 | $1,278,720 | $46,657 | $11,505,946 |
Change in unrealized | ||||||
at year end* | $85,993 | $258,439 | — | ($260,410) | ($32,170) | $51,852 |
*Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at year end. This balance is included in the change in unrealized appreciation (depreciation) on the Statement of operations.
Annual report | Bond Fund | 37 |
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments by the Fund in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their respective net asset values each business day. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, taking into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost. Other portfolio securities and assets, where market quotations are not readily available, are valued at fair value, as determined in good faith by the Fund’s Pricing Committee, following procedures established by the Board of Trustees.
Repurchase agreements. The Fund may enter into repurchase agreements. When the Fund enters into a repurchase agreement, it receives collateral which is held in a segregated account by the Fund’s custodian. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline.
When-issued/delayed delivery securities. The Fund may purchase or sell debt securities on a when-issued or delayed-delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction, with delivery or payment to occur at a later date beyond the normal settlement period. TBA securities resulting from these transactions are included in the Portfolio of Investments. At the time that the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the security is reflected in the Fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time that the Fund enters into this type of transaction, the Fund is required to have sufficient cash and/or liquid securities to cover its commitments.
Certain risks may arise upon entering into when-issued or delayed-delivery securities transactions, including the potential inability of counterparties to meet the terms of their contracts, and the issuer’s failure to issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date.
Security transactions and related investment income. Investment security 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. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income is recorded when the Fund becomes aware of the dividends. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
38 | Bond Fund | Annual report |
Securities lending. The Fund may lend its securities to earn additional income. It receives cash collateral from the borrower in an amount not less than the market value of the loaned securities. The Fund will invest its collateral in JHCIT, an affiliate of the Fund, which has a floating net asset value (NAV) and invests in short term investments as part of the securities lending program, and as a result, the Fund will receive the benefit of any gains and bear any losses generated by JHCIT. Although risk of the loss of the securities lent is mitigated by holding the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities or if collateral investments decline in value. The Fund may receive compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Net income received from JHCIT is a component of securities lending income as recorded on the Statement of operations.
Stripped securities. Stripped mortgage-backed securities are financial instruments structured to separate principal and interest cash flows so that one class receives only principal payments from the underlying mortgage assets (PO or principal only), while the other class receives the interest cash flows (IO or interest only). Both PO and IO investments represent an interest in the cash flows of an underlying stripped mortgage-backed security. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recover its initial investment in an IO security. The market value of these securities can be extremely volatile in response to changes in interest rates. In addition, these securities present additional credit risk such that the Fund may not receive all or part of its principal or interest payments because the borrower or issuer has defaulted on its obligation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $100 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. For the year ended May 31, 2012, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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 net assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Annual report | Bond Fund | 39 |
Federal income taxes. The Fund intends to continue to qualify 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.
Net capital losses of $4,391,964, that are the result of security transactions occurring after October 31, 2011, are treated as occurring on June 1, 2012, the first day of the Fund’s next taxable year.
As of May 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are distributed at least annually. The tax character of distributions for the years ended May 31, 2012 and May 31, 2011 was as follows:
MAY 31, 2012 | MAY 31, 2011 | |||
Ordinary Income | $57,781,022 | $55,914,240 | ||
Long-Term Capital Gain | $1,013,539 | — |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of May 31, 2012, the components of distributable earnings on a tax basis included $5,827,587 of undistributed ordinary income.
Such distributions and distributable earnings, 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. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to foreign currency transactions, distributions payable and amortization and accretion on debt securities.
New accounting pronouncements. In May 2011, Accounting Standards Update 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued and is effective during interim and annual periods beginning after December 15, 2011. ASU 2011-04 may result in additional disclosure for transfers between levels as well as expanded disclosure for securities categorized as Level 3 under the fair value hierarchy.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. ASU 2011-11 may result in additional disclosure relating to the presentation of derivatives and other financial instruments.
40 | Bond Fund | Annual report |
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
Futures. A futures contract is a contractual agreement to buy or sell a particular commodity, currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in hedged security values and/or interest rates and potential losses in excess of the amounts recognized on the Statement of assets and liabilities.
Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures collateral receivable/payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the year ended May 31, 2012, the Fund used futures contracts to manage duration of the portfolio. During the year ended May 31, 2012, the Fund held futures contracts with USD notional values ranging up to $47.1 million, as measured at each quarter end.There were no open futures contracts as of May 31, 2012.
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract, the risk that currency movements will not occur thereby reducing the Fund’s total return, and the potential for losses in excess of the amounts recognized on the Statement of assets and liabilities.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. Realized gains or losses, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, are recorded upon delivery or receipt of the currency or settlement with the counterparty.
During the year ended May 31, 2012, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates. During the year ended May 31, 2012, the Fund held forward foreign currency contracts with USD notional values ranging up to $8.7 million, as measured at each quarter end. There were no open forward foreign currency contracts as of May 31, 2012.
Annual report | Bond Fund | 41 |
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended May 31, 2012:
STATEMENT OF | FOREIGN | |||
OPERATIONS | FUTURES | CURRENCY | ||
RISK | LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
Foreign exchange | Net realized loss on | — | ($22,397) | ($22,397) |
contracts | ||||
Interest rate | Net realized gain on | $266,557 | — | 266,557 |
contracts | ||||
Total | $266,557 | ($22,397) | $244,160 |
* Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended May 31, 2012:
TRANSLATION | ||||
STATEMENT OF | OF ASSETS | |||
OPERATIONS | FUTURES | IN FOREIGN | ||
RISK | LOCATION | CONTRACTS | CURRENCIES* | TOTAL |
Foreign exchange | Change in | — | $48,712 | $48,712 |
contracts | unrealized | |||
appreciation | ||||
(depreciation) | ||||
Interest rate | Change in | $55,308 | — | 55,308 |
contracts | unrealized | |||
appreciation | ||||
(depreciation) | ||||
Total | $55,308 | $48,712 | $104,020 |
* Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in this caption on the Statement of operations.
Note 4 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
42 | Bond Fund | Annual report |
Management fee. The Fund has an investment management contract with the Adviser. Effective July 1, 2011, under the investment management contract, the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.500% of the first $500,000,000 of the Fund’s average daily net assets, (b) 0.475% of the next $500,000,000, (c) 0.450% of the next $500,000,000, (d) 0.450% of the next $500,000,000, (e) 0.400% of the next $500,000,000 and (f) 0.350% of the Fund’s average daily net assets in excess of $2,500,000,000. Prior to July 1, 2011, under the investment management contract, the Fund paid a daily 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 assets, (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 assets in excess of $2,500,000,000. The Adviser has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Adviser. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive a portion of its management fee and/or reimburse or pay operating expenses of the Fund in order to reduce the total annual Fund operating expenses for Class A, Class B, Class C, Class I, Class R2 and Class R6 shares by 0.05% of the Fund’s average daily net assets. Accordingly, these expense reductions amounted to $540,531 for the year ended May 31, 2012. These fee waivers and/or expense reimbursements expire on September 30, 2012, unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at the time. This waiver was extended to September 30, 2013.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for Class R6 shares of the Fund. This agreement excludes certain expenses such as taxes, brokerage commissions, interest expense, litigation and extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or expense reimbursements were such that these expenses would not exceed 0.57% for Class R6 shares. The fee waivers and/or expense reimbursements will continue in effect until September 30, 2012 unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at the time. This waiver was extended to September 30, 2013. For the year ended May 31, 2012 the expense reduction amounted to $19.
The investment management fees, including the impact of the waivers and reimbursements described above, incurred for the year ended May 31, 2012 were equivalent to a net annual effective rate of 0.437% of the Fund’s average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended May 31, 2012 amounted to an annual rate of 0.02% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B, Class C and Class R2 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. In addition, under a service plan for Class R2 shares, the Fund pays for certain other services. The Fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Fund’s shares.
Annual report | Bond Fund | 43 |
CLASS | 12b-1 FEE | SERVICE FEE | ||||
Class A | 0.30% | — | ||||
Class B | 1.00% | — | ||||
Class C | 1.00% | — | ||||
Class R2 | 0.25% | 0.25% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $1,874,975 for the year ended May 31, 2012. Of this amount, $226,182 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $1,447,829 was paid as sales commissions to broker-dealers and $200,964 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Adviser.
Class B and Class C shares are subject to contingent deferred sales charges (CDSCs). Class B shares that are redeemed within six years of purchase are subject to CDSCs, 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 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended May 31, 2012, CDSCs received by the Distributor amounted to $57,706 and $27,743 for Class B and Class C shares, respectively.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the year ended May 31, 2012 were:
DISTRIBUTION AND | TRANSFER | |||||
CLASS | SERVICE FEES | AGENT FEES | ||||
Class A | $2,889,903 | $1,955,492 | ||||
Class B | 315,697 | 64,172 | ||||
Class C | 919,563 | 187,427 | ||||
Class I | — | 85,676 | ||||
Class R2 | 62 | 8 | ||||
Class R6 | — | 91 | ||||
Total | $4,125,225 | $2,292,866 |
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within
44 | Bond Fund | Annual report |
Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of assets and liabilities.
Note 6 — Fund share transactions
Transactions in Fund shares for the years ended May 31, 2012 and May 31, 2011 were as follows:
Year ended 5-31-12 | Year ended 5-31-11 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 17,261,878 | $270,183,160 | 9,889,295 | $153,458,680 |
Distributions reinvested | 2,714,480 | 42,442,158 | 2,588,938 | 40,333,248 |
Repurchased | (10,598,190) | (165,690,756) | (9,620,544) | (149,583,699) |
Net increase | 9,378,168 | $146,934,562 | 2,857,689 | $44,208,229 |
Class B shares | ||||
Sold | 1,035,630 | $16,188,306 | 697,978 | $10,825,552 |
Distributions reinvested | 62,614 | 979,149 | 59,738 | 930,072 |
Repurchased | (537,186) | (8,411,212) | (667,963) | (10,357,462) |
Net increase | 561,058 | $8,756,243 | 89,753 | $1,398,162 |
Class C shares | ||||
Sold | 3,942,885 | $61,652,552 | 2,603,193 | $40,414,359 |
Distributions reinvested | 182,225 | 2,851,353 | 103,551 | 1,615,160 |
Repurchased | (1,311,450) | (20,495,947) | (889,822) | (13,842,555) |
Net increase | 2,813,660 | $44,007,958 | 1,816,922 | $28,186,964 |
Class I shares | ||||
Sold | 6,362,267 | $99,471,488 | 4,029,728 | $62,449,472 |
Distributions reinvested | 183,139 | 2,868,620 | 132,047 | 2,060,159 |
Repurchased | (3,458,701) | (53,859,614) | (1,531,779) | (23,643,702) |
Net increase | 3,086,705 | $48,480,494 | 2,629,996 | $40,865,929 |
Class R2 shares1 | ||||
Sold | 6,329 | $100,000 | — | — |
Net increase | 6,329 | $100,000 | — | — |
Class R6 shares2 | ||||
Sold | 131,747 | $2,083,958 | — | — |
Distributions reinvested | 689 | 10,926 | — | — |
Repurchased | (7,661) | (121,962) | — | — |
Net increase | 124,775 | $1,972,922 | — | — |
Net increase | 15,970,695 | $250,252,179 | 7,394,360 | $114,659,284 |
1 Period from 3-1-12 (inception date) to 5-31-12.
2 Period from 9-1-11 (inception date) to 5-31-12.
Affiliates of the Fund owned 100% and 5% of shares of beneficial interest of Class R2 and Class R6, respectively, on May 31, 2012.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities and U.S. Treasury obligations, aggregated $763,103,786 and $511,060,964, respectively, for the year ended May 31, 2012. Purchases and sales of U.S. Treasury obligations aggregated $383,187,372 and $363,665,571, respectively, for the year ended May 31, 2012.
Annual report | Bond Fund | 45 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Sovereign Bond Fund and
Shareholders of John Hancock Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock Bond Fund (the “Fund”) at May 31, 2012, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 2012 by correspondence with the custodian, agent banks and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 23, 2012
46 | Bond Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended May 31, 2012.
The Fund paid $1,013,539 in capital gain dividends.
Eligible shareholders will be mailed a 2012 Form 1099-DIV in early 2013. This will reflect the tax character of all distributions paid in calendar year 2012.
Annual report | Bond Fund | 47 |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Steven R. Pruchansky, Born: 1944 | 1994 | 49 |
Chairman (since January 2011); Chairman and Chief Executive Officer, Greenscapes of Southwest | ||
Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); | ||
Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real | ||
estate) (since 2000); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty | ||
Trust (until 1994); President, Maxwell Building Corp. (until 1991). | ||
William H. Cunningham, Born: 1944 | 1987 | 49 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 49 |
President, Cambridge College, Cambridge, Massachusetts (since May 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–May 2011); Board of Directors of Eastern Bank | ||
Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); | ||
Board of Directors of American Student Assistance Corp. (1996–2009); Board of Directors of Boston | ||
Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (2007–2011). | ||
Stanley Martin,2 Born: 1947 | 2008 | 49 |
Director, The St. Joe Company (real estate development company) (since May 2012); Senior Vice | ||
President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); Executive Vice | ||
President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive Vice President, | ||
Republic New York Corporation & Republic National Bank of New York (1998–2000); Partner, KPMG | ||
LLP (1971–1998). | ||
Dr. John A. Moore,2 Born: 1939 | 2005 | 49 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(1989–2001); Senior Scientist, Sciences International (health research) (2000–2003); Former Assistant | ||
Administrator & Deputy Administrator, Environmental Protection Agency (1983–1989); Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). |
48 | Bond Fund | Annual report |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Patti McGill Peterson,2 Born: 1943 | 2005 | 49 |
Presidential Advisor for Global Initiatives, American Council on Education (since 2011); Chairperson | ||
of the Board of the Trust (during 2009 and 2010); Principal, PMP Globalinc (consulting) (2007–2011); | ||
Senior Associate, Institute for Higher Education Policy (2007–2011); Executive Director, CIES | ||
(international education agency) (until 2007); Vice President, Institute of International Education (until | ||
2007); Former President Wells College, St. Lawrence University and the Association of Colleges and | ||
Universities of the State of New York. Director of the following: Mutual Fund Directors Forum (since | ||
2011); Niagara Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); | ||
ONBANK (until 1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison | ||
(since 2007); Ford Foundation, International Fellowships Program (until 2007); UNCF, International | ||
Development Partnerships (until 2005); Roth Endowment (since 2002); Council for International | ||
Educational Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 49 |
Director and Audit Committee Chairman (since May 2012) and Member of Finance and Audit | ||
Committees of NCH Healthcare System, Inc. (since 2011) (holding company for multi-entity health care | ||
system); Director and Member of Finance Committee of The Moorings, Inc. (nonprofit continuing care | ||
community) (since May 2012); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002– | ||
2006); Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester | ||
County, New York, Chamber of Commerce (1985–1995); Director, Treasurer and Chairman of Audit | ||
and Finance Committees, Putnam Hospital Center (1990–2000); Director and Chairman of Fundraising | ||
Campaign, United Way of Westchester and Putnam Counties, New York (1990–1997). | ||
Non-Independent Trustees3 | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Hugh McHaffie, Born: 1959 | 2010 | 49 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Variable Insurance Trust and John Hancock Funds II (since 2009); Trustee, | ||
John Hancock retail funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, | ||
John Hancock Investment Management Services, LLC and John Hancock Funds, LLC (since 2010). | ||
John G. Vrysen, Born: 1955 | 2009 | 49 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock | ||
Funds II and John Hancock Variable Insurance Trust (since 2007); Chief Operating Officer, John Hancock | ||
retail funds (until 2009); Trustee, John Hancock retail funds (since 2009). |
Annual report | Bond Fund | 49 |
Principal officers who are not Trustees | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Keith F. Hartstein, Born: 1956 | 2005 |
President and Chief Executive Officer | |
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | |
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | |
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | |
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | |
Force Marketing Committee (since 2003). | |
Andrew G. Arnott, Born: 1971 | 2009 |
Senior Vice President and Chief Operating Officer | |
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | |
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | |
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | |
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | |
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock | |
Variable Insurance Trust (since 2006); Senior Vice President, Product Management and Development, | |
John Hancock Funds, LLC (until 2009). | |
Thomas M. Kinzler, Born: 1955 | 2006 |
Secretary and Chief Legal Officer | |
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | |
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | |
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | |
Funds II and John Hancock Variable Insurance Trust (since 2006). | |
Francis V. Knox, Jr., Born: 1947 | 2005 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Variable Insurance Trust, John Hancock Advisers, | |
LLC and John Hancock Investment Management Services, LLC (since 2005); Vice President and Chief | |
Compliance Officer, John Hancock Asset Management a division of Manulife Asset Management (US) | |
LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Variable Insurance Trust | |
(since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, | |
Goldman Sachs (2005–2007). |
50 | Bond Fund | Annual report |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock closed-end funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Variable Insurance Trust (since 2010) and | |
(2007–2009); Assistant Treasurer, John Hancock retail funds (2007–2009); Assistant Treasurer, Fidelity | |
Group of Funds (2005–2007); Vice President, Fidelity Management Research Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
Annual report | Bond Fund | 51 |
More information
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Advisers, LLC |
William H. Cunningham | |
Deborah C. Jackson | Subadviser |
Stanley Martin* | John Hancock Asset Management a division of |
Hugh McHaffie† | Manulife Asset Management (US) LLC |
Dr. John A. Moore,* Vice Chairman | |
Patti McGill Peterson* | Principal distributor |
Gregory A. Russo | John Hancock Funds, LLC |
John G. Vrysen† | |
Custodian | |
Officers | State Street Bank and Trust Company |
Keith F. Hartstein | |
President and Chief Executive Officer | Transfer agent |
John Hancock Signature Services, Inc. | |
Andrew G. Arnott | |
Senior Vice President and Chief Operating Officer | Legal counsel |
K&L Gates LLP | |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | Independent registered |
public accounting firm | |
Francis V. Knox, Jr. | PricewaterhouseCoopers LLP |
Chief Compliance Officer | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
52 | Bond Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-12-001157/bondfundx49x1.jpg)
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. | 21A 5/12 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 7/12 |
ITEM 2. CODE OF ETHICS.
As of the end of the year, May 31, 2012, 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 “Covered Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Effective July 25, 2012, Gregory A. Russo is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
Prior to July 25, 2012, Stanley Martin was the audit committee financial expert and was “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to the following for the fiscal years ended May 31, 2012 and 2011. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | May 31, 2012 | May 31, 2011 | |||
John Hancock Bond Fund | $ | 43,795 | $ | 36,477 | |
(b) Audit-Related Services
Audit-related fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser ("control affiliates") that provides ongoing services to the registrant. The nature of the services provided was affiliated service provider internal controls reviews. Amounts billed to the registrant were as follows:
Fund | May 31, 2012 | May 31, 2011 | |||
John Hancock Bond Fund | $ | 784 | $ | 347 | |
Amounts billed to control affiliates were $96,255 and $91,670 for the fiscal years ended May 31, 2012 and 2011, respectively.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to the following for the fiscal years ended May 31, 2012 and 2011. The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | May 31, 2012 | May 31, 2011 | |||
John Hancock Bond Fund | $ | 2,857 | $ | 2,721 | |
(d) All Other Fees
Other fees billed for professional services rendered by the principal accountant to the registrant or to the control affiliates for the fiscal years ended May 31, 2012 and 2011 amounted to the following:
Fund | May 31, 2012 | May 31, 2011 | |||
John Hancock Bond Fund | $ | 200 | $ | 182 | |
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust’s Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the “Auditor”) relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust’s Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per year/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per year/per fund are subject to specific pre-approval by the Audit Committee.
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees, Tax Fees and All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f) According to the registrant’s principal accountant for the fiscal year ended May 31, 2012, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and rendered to the registrant's control affiliates for the fiscal years ended May 31, 2012 and 2011 amounted to the following:
Trust | May 31, 2012 | May 31, 2011 | |||
John Hancock Sovereign Bond Fund | $ | 3,334,303 | $ | 1,911,865 | |
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. Effective July 25, 2012, the members of the audit committee are as follows:
Gregory A. Russo - Chairman
Dr. John A. Moore
Steven R. Pruchansky
Prior to July 25, 2012, the members of the audit committee were as follows:
Stanley Martin - Chairman
Dr. John A. Moore
Patti McGill Peterson
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) 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.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Nominating, Governance and Administration 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 Covered 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)(1) 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 – Nominating, Governance and Administration 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: | July 23, 2012 |
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: | July 23, 2012 |
By: | /s/ Charles A. Rizzo |
-------------------------------- | |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | July 23, 2012 |