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: | November 30, 2012 |
ITEM 1. REPORTS TO STOCKHOLDERS.
A look at performance
Total returns for the period ended November 30, 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 | 6-months | 1-year | 5-year | 10-year | 11-30-12 | 11-30-12 | ||
Class A | 7.34 | 7.27 | 6.21 | 1.13 | 7.34 | 42.05 | 82.70 | 3.42 | 3.37 | |
Class B | 6.60 | 7.21 | 6.11 | 0.54 | 6.60 | 41.65 | 80.96 | 2.88 | 2.83 | |
Class C | 10.60 | 7.52 | 5.96 | 4.47 | 10.60 | 43.67 | 78.48 | 2.87 | 2.82 | |
Class i2 | 12.81 | 8.73 | 7.16 | 6.04 | 12.81 | 51.95 | 99.71 | 3.93 | 3.88 | |
Class r22,3 | 12.54 | 8.28 | 6.70 | 5.95 | 12.54 | 48.86 | 91.26 | 3.77 | 3.72 | |
Class r62,3 | 12.97 | 8.80 | 7.22 | 6.15 | 12.97 | 52.44 | 100.80 | 4.01 | 3.96 | |
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 to Class I, Class R2 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 9-30-13 for Class A, Class B, Class C, Class I, Class R2 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 R2* | Class R6 | |
Net (%) | 1.01 | 1.71 | 1.71 | 0.61 | 1.04 | 0.54 |
Gross (%) | 1.06 | 1.76 | 1.76 | 0.66 | 1.09 | 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.
See the following page for footnotes.
Semiannual report | Bond Fund | 5 |
Without | With maximum | |||
Start date | sales charge | sales charge | Index | |
Class B4 | 11-30-02 | $18,096 | $18,096 | $17,164 |
Class C4 | 11-30-02 | 17,848 | 17,848 | 17,164 |
Class I2 | 11-30-02 | 19,971 | 19,971 | 17,164 |
Class R22 | 11-30-02 | 19,126 | 19,126 | 17,164 |
Class R6 2 | 11-30-02 | 20,080 | 20,080 | 17,164 |
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.
Barclays 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.
Footnotes related to performance pages
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 Class R6 and Class R2 shares were first offered on 9-1-11 and 3-1-12, respectively. The returns prior to these dates are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class R6 shares and the estimated gross fees and expenses of Class R2 shares.
4 No contingent deferred sales charge is applicable.
6 | Bond Fund | Semiannual 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 June 1, 2012 with the same investment held until November 30, 2012.
Account value | Ending value | Expenses paid during | |
on 6-1-12 | on 11-30-12 | period ended 11-30-121 | |
Class A | $1,000.00 | $1,059.10 | $5.06 |
Class B | 1,000.00 | 1,055.40 | 8.66 |
Class C | 1,000.00 | 1,054.70 | 8.65 |
Class I | 1,000.00 | 1,060.40 | 3.15 |
Class R2 | 1,000.00 | 1,059.50 | 4.03 |
Class R6 | 1,000.00 | 1,061.50 | 2.74 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at November 30, 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:
Semiannual report | Bond Fund | 7 |
Your expenses
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 June 1, 2012, with the same investment held until November 30, 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 6-1-12 | on 11-30-12 | period ended 11-30-121 | |
Class A | $1,000.00 | $1,020.20 | $4.96 |
Class B | 1,000.00 | 1,016.60 | 8.49 |
Class C | 1,000.00 | 1,016.60 | 8.49 |
Class I | 1,000.00 | 1,022.00 | 3.09 |
Class R2 | 1,000.00 | 1,021.20 | 3.95 |
Class R6 | 1,000.00 | 1,022.40 | 2.69 |
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 0.98%, 1.68%, 1.68%, 0.61%, 0.78% and 0.53% for Class A, Class B, Class C, Class I, Class R2 and Class R6 shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
8 | Bond Fund | Semiannual report |
Portfolio summary
Portfolio Composition1 | ||||
Corporate Bonds | 44.4% | Preferred Securities | 1.2% | |
U.S. Government Agency | 20.4% | Term Loans | 0.5% | |
Collateralized Mortgage Obligations | 17.0% | Municipal Bonds | 0.2% | |
U.S. Government | 6.4% | Foreign Government Obligations | 0.1% | |
Asset Backed Securities | 6.3% | Convertible Bonds | 0.1% | |
Capital Preferred Securities | 1.3% | Short-Term Investments & Other | 2.1% | |
Quality Composition1,2 | ||||
U.S. Government Agency | 20.4% | BBB | 23.3% | |
U.S. Government | 6.4% | BB | 10.7% | |
U.S. Government Agency | B | 10.0% | ||
Collateralized Mortgage Obligations | 5.0% | |||
CCC & Below | 6.0% | |||
AAA | 4.9% | |||
Not Rated | 0.1% | |||
AA | 2.6% | |||
Preferred Securities | 1.2% | |||
A | 7.3% | |||
Short-Term Investments & Other | 2.1% | |||
1 As a percentage of net assets on 11-30-12.
2 Ratings are from Moody’s Investors Service. If not available, we have used ratings from Standard & Poor’s Ratings Services. 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 firms. All ratings are as of 11-30-12 and do not reflect subsequent downgrades or upgrades, if any.
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.
Semiannual report | Bond Fund | 9 |
Fund’s investments
As of 11-30-12 (unaudited)
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Corporate Bonds 44.4% | $742,795,438 | ||||
(Cost $693,400,961) | |||||
Consumer Discretionary 5.8% | 97,183,700 | ||||
Auto Components 0.5% | |||||
Allison Transmission, Inc. (S) | 7.125 | 05-15-19 | 1,925,000 | 2,050,125 | |
American Axle & Manufacturing, Inc. | 6.625 | 10-15-22 | 320,000 | 324,800 | |
Exide Technologies | 8.625 | 02-01-18 | 1,655,000 | 1,340,550 | |
Hyva Global BV (S) | 8.625 | 03-24-16 | 1,355,000 | 1,300,800 | |
Visteon Corp. | 6.750 | 04-15-19 | 2,975,000 | 3,138,625 | |
Automobiles 1.0% | |||||
Ford Motor Credit Company LLC | 5.000 | 05-15-18 | 6,170,000 | 6,763,406 | |
Ford Motor Credit Company LLC | 5.875 | 08-02-21 | 1,100,000 | 1,259,674 | |
Ford Motor Credit Company LLC | 8.000 | 12-15-16 | 2,435,000 | 2,935,522 | |
Hyundai Capital Services, Inc. (S) | 4.375 | 07-27-16 | 1,460,000 | 1,578,156 | |
Hyundai Capital Services, Inc. (S) | 6.000 | 05-05-15 | 1,965,000 | 2,165,475 | |
Kia Motors Corp. (S) | 3.625 | 06-14-16 | 1,515,000 | 1,604,329 | |
Hotels, Restaurants & Leisure 1.3% | |||||
Arcos Dorados Holdings, Inc. (BRL) (D)(S) | 10.250 | 07-13-16 | 2,275,000 | 1,146,124 | |
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 | 1,675,000 | 1,825,750 | |
Greektown Superholdings, Inc. | 13.000 | 07-01-15 | 2,440,000 | 2,610,800 | |
Landry’s, Inc. (S) | 9.375 | 05-01-20 | 1,355,000 | 1,436,300 | |
Little Traverse Bay Bands of Odawa Indians (S) | 9.000 | 08-31-20 | 1,315,000 | 1,249,250 | |
Marina District Finance Company, Inc. | 9.500 | 10-15-15 | 1,775,000 | 1,717,313 | |
MGM Resorts International (S) | 6.750 | 10-01-20 | 1,510,000 | 1,521,325 | |
MGM Resorts International (S) | 8.625 | 02-01-19 | 1,930,000 | 2,113,350 | |
Seminole Indian Tribe of Florida (S) | 6.535 | 10-01-20 | 2,260,000 | 2,434,879 | |
Seminole Indian Tribe of Florida (S) | 7.750 | 10-01-17 | 1,455,000 | 1,585,950 | |
Waterford Gaming LLC (S) | 8.625 | 09-15-14 | 685,168 | 377,414 | |
Wok Acquisition Corp. (S) | 10.250 | 06-30-20 | 1,540,000 | 1,620,850 | |
Household Durables 0.3% | |||||
American Standard Americas (S) | 10.750 | 01-15-16 | 820,000 | 792,325 | |
Corporacion GEO SAB de CV (S) | 8.875 | 03-27-22 | 2,395,000 | 2,514,750 | |
DR Horton, Inc. | 4.750 | 05-15-17 | 1,700,000 | 1,808,375 |
10 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Internet & Catalog Retail 0.3% | |||||
Amazon.com, Inc. | 2.500 | 11-29-22 | 1,970,000 | $1,955,154 | |
Expedia, Inc. | 5.950 | 08-15-20 | 2,275,000 | 2,481,804 | |
QVC, Inc. (S) | 5.125 | 07-02-22 | 480,000 | 508,246 | |
Media 1.2% | |||||
AMC Entertainment, Inc. | 8.750 | 06-01-19 | 880,000 | 968,000 | |
Cablevision Systems Corp. | 8.625 | 09-15-17 | 610,000 | 699,975 | |
CBS Corp. | 7.875 | 07-30-30 | 2,780,000 | 3,878,856 | |
CCO Holdings LLC | 8.125 | 04-30-20 | 590,000 | 663,750 | |
Cinemark USA, Inc. | 7.375 | 06-15-21 | 925,000 | 1,012,875 | |
Cinemark USA, Inc. | 8.625 | 06-15-19 | 870,000 | 961,350 | |
CSC Holdings LLC | 7.875 | 02-15-18 | 1,675,000 | 1,926,250 | |
Grupo Televisa SAB | 6.625 | 01-15-40 | 460,000 | 594,566 | |
News America, Inc. | 6.150 | 03-01-37 | 775,000 | 946,242 | |
News America, Inc. | 6.150 | 02-15-41 | 295,000 | 370,416 | |
News America, Inc. | 6.400 | 12-15-35 | 705,000 | 880,103 | |
Regal Cinemas Corp. | 8.625 | 07-15-19 | 465,000 | 510,338 | |
Regal Entertainment Group | 9.125 | 08-15-18 | 455,000 | 503,913 | |
Time Warner Cable, Inc. | 6.750 | 07-01-18 | 2,475,000 | 3,098,168 | |
XM Satellite Radio, Inc. (S) | 7.625 | 11-01-18 | 2,455,000 | 2,712,775 | |
Multiline Retail 0.1% | |||||
Macy’s Retail Holdings, Inc. | 7.875 | 08-15-36 | 2,083,000 | 2,305,583 | |
Specialty Retail 0.7% | |||||
AutoNation, Inc. | 5.500 | 02-01-20 | 1,985,000 | 2,123,950 | |
AutoNation, Inc. | 6.750 | 04-15-18 | 995,000 | 1,125,594 | |
Hillman Group, Inc. | 10.875 | 06-01-18 | 1,205,000 | 1,296,881 | |
Jo-Ann Stores Holdings, Inc., PIK (S) | 9.750 | 10-15-19 | 1,895,000 | 1,852,363 | |
Limited Brands, Inc. | 6.625 | 04-01-21 | 2,885,000 | 3,306,931 | |
Petco Holdings Inc., PIK (S) | 8.500 | 10-15-17 | 715,000 | 731,088 | |
Toys R Us Property Company II LLC | 8.500 | 12-01-17 | 570,000 | 608,475 | |
Toys R Us, Inc. | 10.375 | 08-15-17 | 1,235,000 | 1,264,331 | |
Textiles, Apparel & Luxury Goods 0.4% | |||||
Burlington Coat Factory Warehouse Corp. | 10.000 | 02-15-19 | 3,120,000 | 3,416,400 | |
Levi Strauss & Company | 6.875 | 05-01-22 | 300,000 | 314,625 | |
Levi Strauss & Company | 7.625 | 05-15-20 | 2,765,000 | 3,003,481 | |
Consumer Staples 1.8% | 30,089,852 | ||||
Beverages 0.2% | |||||
Ajecorp BV (S) | 6.500 | 05-14-22 | 2,145,000 | 2,316,600 | |
Corporacion Lindley SA (S) | 6.750 | 11-23-21 | 540,000 | 623,700 | |
Food & Staples Retailing 0.5% | |||||
Rite Aid Corp. | 9.250 | 03-15-20 | 3,550,000 | 3,621,000 | |
Safeway, Inc. | 5.000 | 08-15-19 | 3,370,000 | 3,613,873 | |
Safeway, Inc. | 7.250 | 02-01-31 | 1,255,000 | 1,382,150 | |
Food Products 0.4% | |||||
Bunge, Ltd. Finance Corp. | 8.500 | 06-15-19 | 2,136,000 | 2,765,120 | |
Corporacion Pesquera Inca SAC (S) | 9.000 | 02-10-17 | 1,530,000 | 1,637,100 | |
Simmons Foods, Inc. (S) | 10.500 | 11-01-17 | 2,880,000 | 2,512,800 |
See notes to financial statements | Semiannual report | Bond Fund | 11 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Household Products 0.4% | |||||
Reynolds Group Issuer, Inc. | 9.000 | 04-15-19 | 2,090,000 | $2,152,700 | |
Reynolds Group Issuer, Inc. | 9.875 | 08-15-19 | 1,750,000 | 1,855,000 | |
Yankee Candle Company, Inc. | 8.500 | 02-15-15 | 62,000 | 62,465 | |
YCC Holdings LLC, PIK | 10.250 | 02-15-16 | 1,920,000 | 1,987,200 | |
Personal Products 0.1% | |||||
Revlon Consumer Products Corp. | 9.750 | 11-15-15 | 1,635,000 | 1,720,838 | |
Tobacco 0.2% | |||||
Alliance One International, Inc. | 10.000 | 07-15-16 | 3,705,000 | 3,839,306 | |
Energy 3.9% | 65,469,088 | ||||
Energy Equipment & Services 0.5% | |||||
Astoria Depositor Corp., Series B (S) | 8.144 | 05-01-21 | 3,790,000 | 3,600,500 | |
Offshore Group Investments, Ltd. | 11.500 | 08-01-15 | 921,000 | 1,013,100 | |
Precision Drilling Corp. | 6.625 | 11-15-20 | 1,405,000 | 1,482,275 | |
Trinidad Drilling, Ltd. (S) | 7.875 | 01-15-19 | 1,045,000 | 1,105,088 | |
Weatherford International, Inc. | 6.800 | 06-15-37 | 735,000 | 795,669 | |
Gas Utilities 0.2% | |||||
DCP Midstream LLC (S) | 9.750 | 03-15-19 | 2,175,000 | 2,846,618 | |
Oil, Gas & Consumable Fuels 3.2% | |||||
Afren PLC (S) | 10.250 | 04-08-19 | 1,260,000 | 1,464,750 | |
Afren PLC (S) | 11.500 | 02-01-16 | 2,400,000 | 2,784,000 | |
Alpha Natural Resources, Inc. | 6.000 | 06-01-19 | 520,000 | 462,800 | |
Alpha Natural Resources, Inc. | 6.250 | 06-01-21 | 1,330,000 | 1,170,400 | |
Arch Coal, Inc. | 7.000 | 06-15-19 | 940,000 | 843,650 | |
Arch Coal, Inc. | 7.250 | 06-15-21 | 1,980,000 | 1,772,100 | |
BreitBurn Energy Partners LP (S) | 7.875 | 04-15-22 | 1,250,000 | 1,284,375 | |
DTEK Finance BV (S) | 9.500 | 04-28-15 | 840,000 | 836,850 | |
Energy Transfer Partners LP | 5.200 | 02-01-22 | 645,000 | 724,807 | |
Energy Transfer Partners LP | 9.700 | 03-15-19 | 2,140,000 | 2,882,342 | |
Enterprise Products Operating LLC (7.000% to | |||||
6-1-17, then 3 month LIBOR + 2.778%) | 7.000 | 06-01-67 | 2,935,000 | 3,140,450 | |
EP Energy LLC | 7.750 | 09-01-22 | 1,145,000 | 1,187,938 | |
EV Energy Partners LP | 8.000 | 04-15-19 | 2,245,000 | 2,357,250 | |
Georgian Oil and Gas Corp. (S) | 6.875 | 05-16-17 | 2,055,000 | 2,133,090 | |
Halcon Resources Corp. (S) | 8.875 | 05-15-21 | 480,000 | 496,800 | |
Kerr-McGee Corp. | 6.950 | 07-01-24 | 3,190,000 | 4,118,121 | |
Kinder Morgan Energy Partners LP | 7.750 | 03-15-32 | 965,000 | 1,306,309 | |
Linn Energy LLC (S) | 6.250 | 11-01-19 | 3,025,000 | 3,036,344 | |
Linn Energy LLC | 8.625 | 04-15-20 | 955,000 | 1,043,338 | |
MarkWest Energy Partners LP | 6.500 | 08-15-21 | 2,175,000 | 2,365,313 | |
Newfield Exploration Company | 5.750 | 01-30-22 | 1,140,000 | 1,239,750 | |
NuStar Logistics LP | 7.900 | 04-15-18 | 1,446,000 | 1,646,914 | |
Petroleos Mexicanos | 4.875 | 01-24-22 | 1,300,000 | 1,469,000 | |
Regency Energy Partners LP | 5.500 | 04-15-23 | 1,485,000 | 1,559,250 | |
Spectra Energy Capital LLC | 6.200 | 04-15-18 | 1,560,000 | 1,902,292 | |
Targa Resources Partners LP (S) | 6.375 | 08-01-22 | 1,200,000 | 1,302,000 | |
TransCanada Pipelines, Ltd. (6.350% to | |||||
5-15-17, then 3 month LIBOR + 2.210%) | 6.350 | 05-15-67 | 3,345,000 | 3,594,614 |
12 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Oil, Gas & Consumable Fuels (continued) | |||||
W&T Offshore, Inc. (S) | 8.500 | 06-15-19 | 625,000 | $656,250 | |
Williams Partners LP | 7.250 | 02-01-17 | 3,210,000 | 3,913,391 | |
WPX Energy, Inc. | 6.000 | 01-15-22 | 1,805,000 | 1,931,350 | |
Financials 15.7% | 262,950,660 | ||||
Capital Markets 1.8% | |||||
Jefferies Group, Inc. | 6.875 | 04-15-21 | 1,440,000 | 1,594,800 | |
Jefferies Group, Inc. | 8.500 | 07-15-19 | 665,000 | 779,713 | |
Macquarie Bank, Ltd. (S) | 6.625 | 04-07-21 | 1,055,000 | 1,160,055 | |
Macquarie Group, Ltd. (S) | 6.000 | 01-14-20 | 1,495,000 | 1,622,477 | |
Morgan Stanley | 4.875 | 11-01-22 | 860,000 | 894,847 | |
Morgan Stanley | 5.550 | 04-27-17 | 4,495,000 | 4,971,672 | |
Morgan Stanley | 5.750 | 01-25-21 | 1,585,000 | 1,809,560 | |
Morgan Stanley | 6.375 | 07-24-42 | 2,455,000 | 2,870,099 | |
Morgan Stanley | 7.300 | 05-13-19 | 2,395,000 | 2,905,379 | |
The Goldman Sachs Group, Inc. | 5.250 | 07-27-21 | 1,410,000 | 1,611,159 | |
The Goldman Sachs Group, Inc. | 5.750 | 01-24-22 | 1,530,000 | 1,814,761 | |
The Goldman Sachs Group, Inc. | 6.150 | 04-01-18 | 3,570,000 | 4,169,296 | |
The Goldman Sachs Group, Inc. | 6.750 | 10-01-37 | 3,210,000 | 3,565,588 | |
Commercial Banks 2.7% | |||||
Abbey National Treasury Services PLC | 4.000 | 04-27-16 | 3,510,000 | 3,712,190 | |
Banco de Credito del Peru (S) | 4.750 | 03-16-16 | 960,000 | 1,022,400 | |
Barclays Bank PLC (S) | 6.050 | 12-04-17 | 3,490,000 | 3,823,068 | |
Barclays Bank PLC (S) | 10.179 | 06-12-21 | 1,395,000 | 1,871,225 | |
BPCE SA (12.500% to 9-30-19, then 3 month | |||||
LIBOR + 12.980%) (Q)(S) | 12.500 | 09-30-19 | 1,239,000 | 1,421,406 | |
First Horizon National Corp. | 5.375 | 12-15-15 | 1,815,000 | 1,982,666 | |
HBOS PLC (S) | 6.000 | 11-01-33 | 2,810,000 | 2,535,997 | |
ICICI Bank, Ltd. (S) | 4.700 | 02-21-18 | 2,325,000 | 2,431,348 | |
ICICI Bank, Ltd. (S) | 5.750 | 11-16-20 | 2,160,000 | 2,336,269 | |
Nordea Bank AB (S) | 3.125 | 03-20-17 | 3,845,000 | 4,094,129 | |
Regions Financial Corp. | 7.750 | 11-10-14 | 2,025,000 | 2,232,563 | |
Royal Bank of Scotland Group PLC | 2.550 | 09-18-15 | 1,915,000 | 1,959,401 | |
Santander Holdings USA, Inc. | 4.625 | 04-19-16 | 480,000 | 509,929 | |
Sberbank of Russia (S) | 6.125 | 02-07-22 | 1,200,000 | 1,342,776 | |
Svenska Handelsbanken AB | 2.875 | 04-04-17 | 2,585,000 | 2,739,270 | |
Swedbank AB (S) | 2.125 | 09-29-17 | 2,560,000 | 2,597,248 | |
Synovus Financial Corp. | 7.875 | 02-15-19 | 960,000 | 1,056,000 | |
The Royal Bank of Scotland Group PLC | 6.125 | 12-15-22 | 925,000 | 947,515 | |
VTB Bank OJSC (9.500% to 12-6-22, then | |||||
10 Year U.S. Treasury + 8.067%) (Q)(S) | 9.500 | 12-06-22 | 2,065,000 | 2,123,178 | |
Wachovia Bank NA | 5.850 | 02-01-37 | 1,865,000 | 2,370,993 | |
Wachovia Corp. | 5.750 | 06-15-17 | 1,930,000 | 2,293,531 | |
Consumer Finance 0.6% | |||||
American Express Company | 7.000 | 03-19-18 | 515,000 | 657,944 | |
Capital One Financial Corp. | 6.150 | 09-01-16 | 2,980,000 | 3,428,159 | |
Discover Bank | 7.000 | 04-15-20 | 1,340,000 | 1,679,927 | |
Discover Financial Services | 5.200 | 04-27-22 | 2,795,000 | 3,137,776 | |
Nelnet, Inc. (P) | 3.737 | 09-29-36 | 2,595,000 | 2,030,588 |
See notes to financial statements | Semiannual report | Bond Fund | 13 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Diversified Financial Services 3.5% | |||||
Alfa Bank OJSC (S) | 7.750 | 04-28-21 | 695,000 | $761,025 | |
Bank of America Corp. | 6.500 | 08-01-16 | 1,595,000 | 1,852,382 | |
Bank of America NA | 5.300 | 03-15-17 | 895,000 | 1,000,352 | |
Bank of America NA | 6.000 | 10-15-36 | 1,555,000 | 1,892,943 | |
Bank of Ceylon (S) | 6.875 | 05-03-17 | 1,425,000 | 1,524,750 | |
Citigroup, Inc. | 5.850 | 12-11-34 | 564,000 | 679,105 | |
General Electric Capital Corp. (P) | 0.790 | 08-15-36 | 2,745,000 | 2,115,635 | |
General Electric Capital Corp. | 4.375 | 09-16-20 | 1,610,000 | 1,804,533 | |
General Electric Capital Corp. | 5.300 | 02-11-21 | 880,000 | 1,018,531 | |
General Electric Capital Corp. | 5.625 | 05-01-18 | 2,330,000 | 2,775,410 | |
General Electric Capital Corp. | 5.875 | 01-14-38 | 665,000 | 804,642 | |
General Electric Capital Corp. | 6.000 | 08-07-19 | 1,755,000 | 2,145,228 | |
General Electric Capital Corp. (7.125% until | |||||
6-15-22, then 3 month LIBOR + 5.296%) (Q) | 7.125 | 06-15-22 | 3,750,000 | 4,223,813 | |
Intercorp Retail Trust (S) | 8.875 | 11-14-18 | 750,000 | 847,500 | |
International Lease Finance Corp. (S) | 7.125 | 09-01-18 | 1,260,000 | 1,458,450 | |
iPayment, Inc. | 10.250 | 05-15-18 | 2,120,000 | 1,764,900 | |
JPMorgan Chase & Company | 6.000 | 01-15-18 | 4,315,000 | 5,147,666 | |
JPMorgan Chase & Company (7.900% to | |||||
4-30-18, then 3 month LIBOR + 3.470%) (Q) | 7.900 | 04-30-18 | 2,840,000 | 3,208,348 | |
Merrill Lynch & Company, Inc. | 6.875 | 04-25-18 | 3,415,000 | 4,106,852 | |
Merrill Lynch & Company, Inc. | 7.750 | 05-14-38 | 1,395,000 | 1,821,164 | |
Moody’s Corp. | 4.500 | 09-01-22 | 1,455,000 | 1,555,087 | |
Rabobank Nederland NV (11.000% to 6-30-19, | |||||
then 3 month LIBOR + 10.868%) (Q)(S) | 11.000 | 06-30-19 | 3,479,000 | 4,715,785 | |
Rabobank NV | 3.950 | 11-09-22 | 1,050,000 | 1,063,248 | |
Rivers Pittsburgh Borrower LP (S) | 9.500 | 06-15-19 | 780,000 | 836,550 | |
SPL Logistics Escrow LLC (S) | 8.875 | 08-01-20 | 1,151,000 | 1,231,570 | |
The Bear Stearns Companies LLC | 7.250 | 02-01-18 | 1,950,000 | 2,431,931 | |
UBS AG | 7.625 | 08-17-22 | 2,420,000 | 2,656,030 | |
USB Realty Corp. (P)(Q)(S) | 1.487 | 12-22-49 | 2,900,000 | 2,494,290 | |
Insurance 3.5% | |||||
Aflac, Inc. | 8.500 | 05-15-19 | 2,305,000 | 3,145,456 | |
American International Group, Inc. | 3.800 | 03-22-17 | 1,160,000 | 1,249,117 | |
American International Group, Inc. | 8.250 | 08-15-18 | 1,265,000 | 1,645,011 | |
Aon Corp. | 8.205 | 01-01-27 | 1,580,000 | 1,997,477 | |
AXA SA | 8.600 | 12-15-30 | 1,395,000 | 1,733,594 | |
CNA Financial Corp. | 6.500 | 08-15-16 | 1,190,000 | 1,376,616 | |
CNA Financial Corp. | 7.250 | 11-15-23 | 2,465,000 | 3,061,190 | |
CNO Financial Group, Inc. (S) | 6.375 | 10-01-20 | 820,000 | 856,900 | |
Glen Meadow Pass-Through Trust (6.505% to | |||||
2-15-17, then 3 month LIBOR + 2.125%) (S) | 6.505 | 02-12-67 | 4,665,000 | 4,175,175 | |
Hartford Financial Services Group, Inc. | 5.500 | 03-30-20 | 1,045,000 | 1,196,575 | |
Hartford Financial Services Group, Inc. | 6.000 | 01-15-19 | 1,018,000 | 1,183,258 | |
Hartford Financial Services Group, Inc. | 6.625 | 03-30-40 | 1,105,000 | 1,375,851 | |
Liberty Mutual Group, Inc. (S) | 6.500 | 05-01-42 | 1,510,000 | 1,668,740 | |
Liberty Mutual Group, Inc. (S) | 7.800 | 03-15-37 | 3,235,000 | 3,590,850 | |
Lincoln National Corp. | 8.750 | 07-01-19 | 1,955,000 | 2,592,627 |
14 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Insurance 3.5% | |||||
Lincoln National Corp. (6.050% to 4-20-17, | |||||
then 3 month LIBOR + 2.040%) | 6.050 | 04-20-67 | 2,175,000 | $2,142,375 | |
Nippon Life Insurance Company (P)(S) | 5.000 | 10-18-42 | 1,795,000 | 1,868,457 | |
Prudential Financial, Inc. (5.875% to 9-15-22, | |||||
then 3 month LIBOR + 4.175%) | 5.875 | 09-15-42 | 2,430,000 | 2,484,675 | |
Teachers Insurance & Annuity Association | |||||
of America (S) | 6.850 | 12-16-39 | 2,600,000 | 3,588,829 | |
The Chubb Corp. (6.375% until 4-15-17, then | |||||
3 month LIBOR + 2.250%) | 6.375 | 03-29-67 | 3,205,000 | 3,417,331 | |
The Hanover Insurance Group, Inc. | 6.375 | 06-15-21 | 735,000 | 831,921 | |
Unum Group | 7.125 | 09-30-16 | 1,785,000 | 2,111,187 | |
UnumProvident Finance Company PLC (S) | 6.850 | 11-15-15 | 2,395,000 | 2,683,562 | |
W.R. Berkley Corp. | 5.600 | 05-15-15 | 1,630,000 | 1,771,165 | |
White Mountains Re Group, Ltd. (7.506% to | |||||
6-30-17, then 3 month LIBOR + 3.200%) (Q)(S) | 7.506 | 06-30-17 | 2,375,000 | 2,447,248 | |
Willis Group Holdings PLC | 5.750 | 03-15-21 | 2,045,000 | 2,331,104 | |
Willis North America, Inc. | 7.000 | 09-29-19 | 2,310,000 | 2,770,706 | |
Real Estate Investment Trusts 3.0% | |||||
Boston Properties LP | 3.700 | 11-15-18 | 1,075,000 | 1,166,393 | |
Brandywine Operating Partnership LP | 7.500 | 05-15-15 | 1,755,000 | 1,977,392 | |
CubeSmart LP | 4.800 | 07-15-22 | 1,510,000 | 1,657,187 | |
DDR Corp. | 4.625 | 07-15-22 | 915,000 | 995,337 | |
DDR Corp. | 7.500 | 04-01-17 | 4,475,000 | 5,384,427 | |
DDR Corp. | 7.875 | 09-01-20 | 715,000 | 921,701 | |
Goodman Funding Pty, Ltd. (S) | 6.375 | 04-15-21 | 3,120,000 | 3,531,587 | |
Health Care REIT, Inc. | 4.950 | 01-15-21 | 945,000 | 1,043,387 | |
Health Care REIT, Inc. | 6.125 | 04-15-20 | 3,160,000 | 3,724,111 | |
Health Care REIT, Inc. | 6.200 | 06-01-16 | 1,835,000 | 2,099,607 | |
Healthcare Realty Trust, Inc. | 6.500 | 01-17-17 | 2,120,000 | 2,440,016 | |
Host Hotels & Resorts LP | 5.250 | 03-15-22 | 2,270,000 | 2,491,325 | |
MPT Operating Partnership LP | 6.375 | 02-15-22 | 1,535,000 | 1,604,075 | |
MPT Operating Partnership LP | 6.875 | 05-01-21 | 1,025,000 | 1,112,125 | |
Post Apartment Homes LP | 3.375 | 12-01-22 | 1,280,000 | 1,292,608 | |
ProLogis International Funding II (S) | 4.875 | 02-15-20 | 1,055,000 | 1,074,157 | |
ProLogis LP | 4.500 | 08-15-17 | 295,000 | 320,181 | |
ProLogis LP | 6.250 | 03-15-17 | 2,355,000 | 2,715,407 | |
SL Green Realty Corp. | 7.750 | 03-15-20 | 980,000 | 1,184,773 | |
Ventas Realty LP | 4.000 | 04-30-19 | 1,860,000 | 2,000,729 | |
Ventas Realty LP | 4.750 | 06-01-21 | 3,525,000 | 3,913,762 | |
Vornado Realty LP | 4.250 | 04-01-15 | 2,075,000 | 2,193,769 | |
WEA Finance LLC (S) | 6.750 | 09-02-19 | 1,345,000 | 1,664,037 | |
Weyerhaeuser Company | 7.375 | 03-15-32 | 3,310,000 | 4,224,977 | |
Real Estate Management & Development 0.2% | |||||
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 | 1,104,900 | |
Jones Lang Lasalle, Inc. | 4.400 | 11-15-22 | 775,000 | 789,345 | |
Realogy Corp. (S) | 7.875 | 02-15-19 | 855,000 | 906,300 |
See notes to financial statements | Semiannual report | Bond Fund | 15 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Thrifts & Mortgage Finance 0.4% | |||||
Nationstar Mortgage LLC (S) | 7.875 | 10-01-20 | 1,375,000 | $1,424,844 | |
Nationstar Mortgage LLC (S) | 9.625 | 05-01-19 | 1,695,000 | 1,883,588 | |
Nationstar Mortgage LLC | 10.875 | 04-01-15 | 2,565,000 | 2,766,994 | |
Health Care 1.4% | 24,136,852 | ||||
Health Care Equipment & Supplies 0.3% | |||||
Alere, Inc. (S) | 7.250 | 07-01-18 | 2,150,000 | 2,155,375 | |
Alere, Inc. | 7.875 | 02-01-16 | 1,795,000 | 1,882,955 | |
Alere, Inc. | 8.625 | 10-01-18 | 1,100,000 | 1,116,500 | |
DJO Finance LLC (S) | 9.875 | 04-15-18 | 460,000 | 461,150 | |
Health Care Providers & Services 0.6% | |||||
BioScrip, Inc. | 10.250 | 10-01-15 | 1,260,000 | 1,348,200 | |
Catalent Pharma Solutions, Inc. (S) | 7.875 | 10-15-18 | 745,000 | 752,450 | |
Community Health Systems, Inc. | 7.125 | 07-15-20 | 745,000 | 787,838 | |
HCA, Inc. | 7.500 | 02-15-22 | 1,855,000 | 2,110,063 | |
Medco Health Solutions, Inc. | 7.125 | 03-15-18 | 2,375,000 | 2,980,601 | |
National Mentor Holdings, Inc. (S) | 12.500 | 02-15-18 | 2,255,000 | 2,311,375 | |
Pharmaceuticals 0.5% | |||||
AbbVie, Inc. (S) | 2.900 | 11-06-22 | 2,560,000 | 2,611,884 | |
Catalent Pharma Solutions, Inc. | 9.500 | 04-15-15 | 771,532 | 789,856 | |
Endo Health Solutions, Inc. | 7.250 | 01-15-22 | 2,295,000 | 2,449,913 | |
Valeant Pharmaceuticals International (S) | 6.875 | 12-01-18 | 1,335,000 | 1,443,469 | |
Watson Pharmaceuticals, Inc. | 3.250 | 10-01-22 | 910,000 | 935,223 | |
Industrials 5.9% | 97,929,411 | ||||
Aerospace & Defense 0.9% | |||||
Bombardier, Inc. (S) | 7.750 | 03-15-20 | 1,190,000 | 1,335,775 | |
Ducommun, Inc. | 9.750 | 07-15-18 | 295,000 | 313,438 | |
Embraer Overseas, Ltd. | 6.375 | 01-15-20 | 1,585,000 | 1,830,675 | |
Huntington Ingalls Industries, Inc. | 7.125 | 03-15-21 | 1,940,000 | 2,097,625 | |
Kratos Defense & Security Solutions, Inc. | 10.000 | 06-01-17 | 1,965,000 | 2,141,850 | |
Textron Financial Corp. (6.000% to 2-15-17, | |||||
then 3 month LIBOR + 1.735%) (S) | 6.000 | 02-15-67 | 4,195,000 | 3,650,262 | |
Textron, Inc. | 5.600 | 12-01-17 | 1,945,000 | 2,148,466 | |
Textron, Inc. | 7.250 | 10-01-19 | 1,440,000 | 1,774,346 | |
Airlines 2.1% | |||||
America West Airlines 2000-1 Pass | |||||
Through Trust | 8.057 | 07-02-20 | 703,432 | 754,431 | |
American Airlines 2011-1 Class B Pass | |||||
Through Trust (S) | 7.000 | 01-31-18 | 5,000,739 | 5,150,761 | |
Continental Airlines 1997-4 Class A Pass | |||||
Through Trust | 6.900 | 01-02-18 | 1,550,730 | 1,674,788 | |
Continental Airlines 1998-1 Class A Pass | |||||
Through Trust | 6.648 | 09-15-17 | 677,066 | 721,075 | |
Continental Airlines 1999-1 Class A Pass | |||||
Through Trust | 6.545 | 02-02-19 | 512,180 | 565,959 | |
Continental Airlines 2000-2 Class B Pass | |||||
Through Trust | 8.307 | 04-02-18 | 371,516 | 395,665 | |
Continental Airlines 2007-1 Class A Pass | |||||
Through Trust | 5.983 | 04-19-22 | 2,370,668 | 2,649,222 |
16 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Airlines (continued) | |||||
Continental Airlines 2010-1 Class A Pass | |||||
Through Trust | 4.750 | 01-12-21 | 634,639 | $690,170 | |
Continental Airlines 2012-1 Class B Pass | |||||
Through Trust | 6.250 | 04-11-20 | 1,175,000 | 1,245,500 | |
Delta Air Lines 2002-1 Class G-1 Pass | |||||
Through Trust | 6.718 | 01-02-23 | 3,541,481 | 3,895,629 | |
Delta Air Lines 2007-1 Class A Pass | |||||
Through Trust | 6.821 | 08-10-22 | 3,544,926 | 3,972,090 | |
Delta Air Lines 2010-1 Class A Pass | |||||
Through Trust | 6.200 | 07-02-18 | 881,873 | 978,879 | |
Delta Air Lines 2011-1 Class A Pass | |||||
Through Trust | 5.300 | 04-15-19 | 1,630,984 | 1,785,927 | |
Northwest Airlines 2002-1 Class G-2 Pass | |||||
Through Trust | 6.264 | 11-20-21 | 632,521 | 670,472 | |
Northwest Airlines 2007-1 Class A Pass | |||||
Through Trust | 7.027 | 11-01-19 | 1,455,864 | 1,603,197 | |
UAL 2009-1 Pass Through Trust | 10.400 | 11-01-16 | 505,432 | 579,478 | |
UAL 2009-2A Pass Through Trust | 9.750 | 01-15-17 | 1,710,278 | 1,971,096 | |
United Air Lines 2007-1 Class C Pass | |||||
Through Trust (P) | 2.984 | 07-02-14 | 3,835,870 | 3,759,152 | |
US Airways 2010-1 Class A Pass Through Trust | 6.250 | 04-22-23 | 1,485,704 | 1,597,131 | |
US Airways 2012-1 Class A Pass Through Trust | 5.900 | 10-01-24 | 885,000 | 964,650 | |
Building Products 0.6% | |||||
Masco Corp. | 7.125 | 03-15-20 | 1,380,000 | 1,616,960 | |
Owens Corning | 4.200 | 12-15-22 | 2,290,000 | 2,319,910 | |
Ply Gem Industries, Inc. (S) | 9.375 | 04-15-17 | 455,000 | 480,025 | |
Voto-Votorantim Overseas Trading | |||||
Operations NV (S) | 6.625 | 09-25-19 | 2,070,000 | 2,406,375 | |
Voto-Votorantim, Ltd. (S) | 6.750 | 04-05-21 | 2,440,000 | 2,845,650 | |
Commercial Services & Supplies 0.4% | |||||
Casella Waste Systems, Inc. (S) | 7.750 | 02-15-19 | 2,335,000 | 2,247,438 | |
Garda World Security Corp. (S) | 9.750 | 03-15-17 | 535,000 | 563,088 | |
Iron Mountain, Inc. | 5.750 | 08-15-24 | 1,655,000 | 1,650,863 | |
Steelcase, Inc. | 6.375 | 02-15-21 | 2,385,000 | 2,562,852 | |
Construction & Engineering 0.3% | |||||
Aeropuertos Dominicanos Siglo XXI SA (S) | 9.250 | 11-13-19 | 1,825,000 | 1,868,800 | |
Empresas ICA SAB de CV (S) | 8.375 | 07-24-17 | 650,000 | 685,750 | |
Tutor Perini Corp. | 7.625 | 11-01-18 | 1,930,000 | 1,983,075 | |
Electrical Equipment 0.1% | |||||
Coleman Cable, Inc. | 9.000 | 02-15-18 | 1,460,000 | 1,556,725 | |
Industrial Conglomerates 0.4% | |||||
General Electric Company | 4.125 | 10-09-42 | 1,215,000 | 1,264,225 | |
Odebrecht Finance, Ltd. (S) | 6.000 | 04-05-23 | 1,533,000 | 1,762,950 | |
Odebrecht Finance, Ltd. (S) | 7.125 | 06-26-42 | 2,725,000 | 3,154,188 | |
Odebrecht Finance, Ltd. (Q)(S) | 7.500 | 09-14-15 | 970,000 | 1,042,750 | |
Marine 0.2% | |||||
Navios South American Logistics, Inc. | 9.250 | 04-15-19 | 2,405,000 | 2,296,775 | |
Professional Services 0.1% | |||||
Dun & Bradstreet Corp. | 3.250 | 12-01-17 | 1,330,000 | 1,339,852 |
See notes to financial statements | Semiannual report | Bond Fund | 17 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Road & Rail 0.4% | |||||
Avis Budget Car Rental LLC | 8.250 | 01-15-19 | 700,000 | $774,375 | |
Penske Truck Leasing Company LP (S) | 3.750 | 05-11-17 | 2,315,000 | 2,373,174 | |
The Hertz Corp. (S) | 6.750 | 04-15-19 | 595,000 | 642,600 | |
The Hertz Corp. | 6.750 | 04-15-19 | 2,780,000 | 3,002,400 | |
Trading Companies & Distributors 0.4% | |||||
Air Lease Corp. (S) | 4.500 | 01-15-16 | 535,000 | 539,013 | |
Air Lease Corp. | 5.625 | 04-01-17 | 525,000 | 548,625 | |
Aircastle, Ltd. (S) | 6.250 | 12-01-19 | 1,360,000 | 1,387,200 | |
Aircastle, Ltd. | 6.750 | 04-15-17 | 795,000 | 840,713 | |
Aircastle, Ltd. | 7.625 | 04-15-20 | 885,000 | 962,438 | |
H&E Equipment Services, Inc. (S) | 7.000 | 09-01-22 | 1,110,000 | 1,171,050 | |
HD Supply, Inc. (S) | 8.125 | 04-15-19 | 995,000 | 1,121,863 | |
Information Technology 0.4% | 7,232,343 | ||||
Computers & Peripherals 0.0% | |||||
Hewlett-Packard Company | 4.375 | 09-15-21 | 764,000 | 721,729 | |
IT Services 0.4% | |||||
Brightstar Corp. (S) | 9.500 | 12-01-16 | 2,725,000 | 2,888,500 | |
Computer Sciences Corp. | 4.450 | 09-15-22 | 1,240,000 | 1,258,020 | |
Lender Processing Services, Inc. | 5.750 | 04-15-23 | 2,265,000 | 2,364,094 | |
Materials 3.9% | 64,669,489 | ||||
Chemicals 0.8% | |||||
Braskem Finance, Ltd. (S) | 7.000 | 05-07-20 | 3,050,000 | 3,438,875 | |
CF Industries, Inc. | 7.125 | 05-01-20 | 3,500,000 | 4,421,421 | |
Incitec Pivot Finance LLC (S) | 6.000 | 12-10-19 | 1,645,000 | 1,848,111 | |
LyondellBasell Industries NV | 5.000 | 04-15-19 | 1,185,000 | 1,316,831 | |
Nufarm Australia, Ltd. (S) | 6.375 | 10-15-19 | 1,005,000 | 1,040,175 | |
Polymer Group, Inc. | 7.750 | 02-01-19 | 465,000 | 497,550 | |
Construction Materials 0.4% | |||||
American Gilsonite Company (S) | 11.500 | 09-01-17 | 1,655,000 | 1,712,925 | |
Building Materials Corp. of America (S) | 6.750 | 05-01-21 | 1,130,000 | 1,237,350 | |
Cemex Finance LLC (S) | 9.375 | 10-12-22 | 925,000 | 996,688 | |
Magnesita Finance, Ltd. (Q)(S) | 8.625 | 04-05-17 | 2,045,000 | 2,111,020 | |
Severstal Columbus LLC | 10.250 | 02-15-18 | 370,000 | 385,725 | |
Vulcan Materials Company | 7.500 | 06-15-21 | 530,000 | 598,900 | |
Containers & Packaging 0.6% | |||||
ARD Finance SA, PIK (S) | 11.125 | 06-01-18 | 1,535,000 | 1,596,400 | |
Consolidated Container Company LLC (S) | 10.125 | 07-15-20 | 1,790,000 | 1,906,350 | |
Pretium Packaging LLC | 11.500 | 04-01-16 | 650,000 | 671,125 | |
Tekni-Plex, Inc. (S) | 9.750 | 06-01-19 | 1,906,000 | 2,058,480 | |
Temple-Inland, Inc. | 6.625 | 01-15-18 | 3,460,000 | 4,187,275 | |
Metals & Mining 1.4% | |||||
Allegheny Technologies, Inc. | 5.950 | 01-15-21 | 665,000 | 741,071 | |
Allegheny Technologies, Inc. | 9.375 | 06-01-19 | 1,450,000 | 1,856,573 | |
ArcelorMittal | 10.350 | 06-01-19 | 1,695,000 | 2,004,914 | |
Commercial Metals Company | 7.350 | 08-15-18 | 1,570,000 | 1,691,675 | |
Edgen Murray Corp. (S) | 8.750 | 11-01-20 | 1,810,000 | 1,810,000 | |
FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 02-01-18 | 1,355,000 | 1,334,675 |
18 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Metals & Mining (continued) | |||||
FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 04-01-22 | 1,920,000 | $1,872,000 | |
FMG Resources August 2006 Pty, Ltd. (S) | 8.250 | 11-01-19 | 865,000 | 884,463 | |
JMC Steel Group (S) | 8.250 | 03-15-18 | 900,000 | 927,000 | |
Metinvest BV (S) | 8.750 | 02-14-18 | 2,055,000 | 1,954,305 | |
Rain CII Carbon LLC (S) | 8.000 | 12-01-18 | 2,070,000 | 2,064,825 | |
SunCoke Energy, Inc. | 7.625 | 08-01-19 | 1,125,000 | 1,158,750 | |
Thompson Creek Metals Company, Inc. | 7.375 | 06-01-18 | 1,855,000 | 1,423,713 | |
Vale Overseas, Ltd. | 6.875 | 11-10-39 | 1,120,000 | 1,414,364 | |
Walter Energy, Inc. (S) | 9.875 | 12-15-20 | 1,820,000 | 1,892,800 | |
Paper & Forest Products 0.7% | |||||
Boise Cascade LLC (S) | 6.375 | 11-01-20 | 400,000 | 406,000 | |
Georgia-Pacific LLC (S) | 5.400 | 11-01-20 | 2,505,000 | 3,000,076 | |
Georgia-Pacific LLC | 7.250 | 06-01-28 | 900,000 | 1,191,420 | |
International Paper Company | 9.375 | 05-15-19 | 1,875,000 | 2,596,457 | |
Westvaco Corp. | 7.950 | 02-15-31 | 3,365,000 | 4,419,207 | |
Telecommunication Services 2.7% | 45,191,291 | ||||
Diversified Telecommunication Services 2.1% | |||||
American Tower Corp. | 4.700 | 03-15-22 | 2,110,000 | 2,329,067 | |
CenturyLink, Inc. | 5.800 | 03-15-22 | 2,465,000 | 2,603,005 | |
CenturyLink, Inc. | 6.450 | 06-15-21 | 1,880,000 | 2,065,159 | |
CenturyLink, Inc. | 7.600 | 09-15-39 | 1,645,000 | 1,701,624 | |
Cincinnati Bell, Inc. | 8.750 | 03-15-18 | 1,545,000 | 1,560,450 | |
Crown Castle Towers LLC (S) | 4.883 | 08-15-20 | 3,275,000 | 3,730,641 | |
Crown Castle Towers LLC (S) | 6.113 | 01-15-20 | 2,390,000 | 2,905,850 | |
GTP Acquisition Partners I LLC (S) | 4.347 | 06-15-16 | 3,965,000 | 4,212,341 | |
GTP Acquisition Partners I LLC (S) | 7.628 | 06-15-16 | 3,625,000 | 3,761,191 | |
GTP Towers Issuer LLC (S) | 8.112 | 02-15-15 | 3,740,000 | 3,907,608 | |
Oi SA (BRL) (D)(S) | 9.750 | 09-15-16 | 3,440,000 | 1,696,013 | |
PAETEC Holding Corp. | 9.875 | 12-01-18 | 1,619,000 | 1,825,423 | |
Telecom Italia Capital SA | 7.200 | 07-18-36 | 1,490,000 | 1,512,350 | |
West Corp. | 11.000 | 10-15-16 | 1,780,000 | 1,860,100 | |
Wireless Telecommunication Services 0.6% | |||||
Clearwire Communications LLC (S) | 12.000 | 12-01-15 | 1,805,000 | 1,904,275 | |
Digicel Group, Ltd. (S) | 8.250 | 09-30-20 | 1,175,000 | 1,248,438 | |
Digicel, Ltd. (S) | 7.000 | 02-15-20 | 580,000 | 613,350 | |
SBA Tower Trust (S) | 2.933 | 12-15-17 | 2,120,000 | 2,214,336 | |
SBA Tower Trust (S) | 5.101 | 04-17-17 | 1,790,000 | 2,026,733 | |
Verizon New York, Inc. | 7.000 | 12-01-33 | 1,450,000 | 1,513,337 | |
Utilities 2.9% | 47,942,752 | ||||
Electric Utilities 1.5% | |||||
Beaver Valley II Funding | 9.000 | 06-01-17 | 1,344,000 | 1,372,076 | |
BVPS II Funding Corp. | 8.890 | 06-01-17 | 1,451,000 | 1,601,719 | |
Commonwealth Edison Company | 5.800 | 03-15-18 | 2,155,000 | 2,622,486 | |
DPL, Inc. | 7.250 | 10-15-21 | 2,725,000 | 2,874,875 | |
Ipalco Enterprises, Inc. | 5.000 | 05-01-18 | 2,765,000 | 2,847,950 | |
Israel Electric Corp., Ltd. (S) | 7.250 | 01-15-19 | 2,595,000 | 2,749,343 | |
PNM Resources, Inc. | 9.250 | 05-15-15 | 3,255,000 | 3,726,975 |
See notes to financial statements | Semiannual report | Bond Fund | 19 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Electric Utilities 1.5% | |||||
PNPP II Funding Corp. | 9.120 | 05-30-16 | 524,000 | $538,599 | |
PPL Capital Funding, Inc. (6.700% to 3-30-17, | |||||
then 3 month LIBOR + 2.665%) | 6.700 | 03-30-67 | 2,210,000 | 2,337,517 | |
Southern California Edison Company | |||||
(6.250% to 2-1-22, then 3 month LIBOR + | |||||
4.199%) (Q) | 6.250 | 02-01-22 | 1,710,000 | 1,861,421 | |
W3A Funding Corp. | 8.090 | 01-02-17 | 1,350,870 | 1,384,439 | |
Independent Power Producers & Energy Traders 0.7% | |||||
Allegheny Energy Supply Company LLC (S) | 5.750 | 10-15-19 | 4,681,000 | 5,119,273 | |
Exelon Generation Company LLC (S) | 5.600 | 06-15-42 | 1,100,000 | 1,182,742 | |
Exelon Generation Company LLC | 6.250 | 10-01-39 | 880,000 | 1,019,257 | |
NRG Energy, Inc. | 7.625 | 01-15-18 | 2,235,000 | 2,469,675 | |
NRG Energy, Inc. | 8.250 | 09-01-20 | 1,775,000 | 1,970,250 | |
Multi-Utilities 0.6% | |||||
CMS Energy Corp. | 5.050 | 03-15-22 | 1,935,000 | 2,147,078 | |
GDF Suez (S) | 2.875 | 10-10-22 | 1,855,000 | 1,860,331 | |
Integrys Energy Group, Inc. (6.110% to | |||||
12-1-16, then 3 month LIBOR + 2.120%) | 6.110 | 12-01-66 | 3,915,000 | 4,130,325 | |
Wisconsin Energy Corp. (6.250% to 5-15-17, | |||||
then 3 month LIBOR + 2.113%) | 6.250 | 05-15-67 | 2,010,000 | 2,170,800 | |
Water Utilities 0.1% | |||||
Cia de Saneamento Basico do Estado de Sao | |||||
Paulo (S) | 6.250 | 12-16-20 | 1,215,000 | 1,312,200 | |
Salton Sea Funding Corp., Series F | 7.475 | 11-30-18 | 654,698 | 643,421 | |
U.S. Government & Agency Obligations 26.8% | $448,912,464 | ||||
(Cost $438,524,892) | |||||
U.S. Government 6.4% | 107,087,494 | ||||
U.S. Treasury | |||||
Bond | 2.750 | 08-15-42 | 32,740,000 | 32,387,030 | |
Note | 1.000 | 06-30-19 | 39,365,000 | 39,478,775 | |
Note | 1.625 | 11-15-22 | 30,246,000 | 30,269,622 | |
Strip, PO | 2.911 | 11-15-30 | 7,940,000 | 4,952,067 | |
U.S. Government Agency 20.4% | 341,824,970 | ||||
Federal Home Loan Mortgage Corp. | |||||
30 Yr Pass Thru | 1.750 | 05-30-19 | 7,160,000 | 7,453,710 | |
30 Yr Pass Thru | 3.000 | 08-01-42 | 4,606,040 | 4,830,407 | |
30 Yr Pass Thru | 3.500 | 05-01-42 | 12,476,956 | 13,395,425 | |
30 Yr Pass Thru | 3.500 | 06-01-42 | 13,737,197 | 14,752,729 | |
30 Yr Pass Thru | 4.500 | 11-01-39 | 13,199,722 | 14,101,186 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 5,282,555 | 5,714,445 | |
30 Yr Pass Thru | 6.500 | 06-01-37 | 124,862 | 139,637 | |
30 Yr Pass Thru | 6.500 | 10-01-37 | 283,756 | 317,154 | |
30 Yr Pass Thru | 6.500 | 11-01-37 | 620,301 | 693,310 | |
30 Yr Pass Thru | 6.500 | 12-01-37 | 281,639 | 314,611 | |
30 Yr Pass Thru | 6.500 | 02-01-38 | 139,869 | 156,244 | |
30 Yr Pass Thru | 6.500 | 09-01-39 | 5,217,101 | 5,827,885 | |
Federal National Mortgage Association | |||||
30 Yr Pass Thru | 3.000 | 09-01-42 | 16,031,039 | 16,870,799 | |
30 Yr Pass Thru | 3.000 | 10-01-42 | 18,530,825 | 19,501,532 | |
30 Yr Pass Thru | 3.500 | 06-01-42 | 12,736,132 | 13,690,844 | |
30 Yr Pass Thru | 3.500 | 08-01-42 | 12,896,540 | 13,863,276 |
20 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government Agency (continued) | |||||
Federal National Mortgage Association | |||||
30 Yr Pass Thru | 4.000 | 11-01-40 | 3,247,505 | $3,522,385 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 28,441,249 | 31,339,532 | |
30 Yr Pass Thru | 4.000 | 10-01-41 | 4,984,211 | 5,465,278 | |
30 Yr Pass Thru | 4.500 | 02-01-41 | 21,223,035 | 22,869,478 | |
30 Yr Pass Thru | 4.500 | 06-01-41 | 22,441,017 | 24,553,628 | |
30 Yr Pass Thru | 4.500 | 07-01-41 | 9,292,912 | 10,167,753 | |
30 Yr Pass Thru | 5.000 | 11-01-33 | 1,409,957 | 1,534,871 | |
30 Yr Pass Thru | 5.000 | 10-01-34 | 1,522,433 | 1,657,311 | |
30 Yr Pass Thru | 5.000 | 09-01-40 | 26,228,001 | 28,969,015 | |
30 Yr Pass Thru | 5.000 | 02-01-41 | 8,523,813 | 9,292,289 | |
30 Yr Pass Thru | 5.000 | 03-01-41 | 9,855,637 | 10,744,184 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 18,996,729 | 20,841,942 | |
30 Yr Pass Thru | 5.500 | 05-01-35 | 7,372,805 | 8,118,247 | |
30 Yr Pass Thru | 5.500 | 01-01-39 | 6,727,546 | 7,327,858 | |
30 Yr Pass Thru | 6.000 | 05-01-37 | 878,679 | 969,127 | |
30 Yr Pass Thru | 6.000 | 07-01-38 | 6,987,073 | 7,736,870 | |
30 Yr Pass Thru | 6.500 | 01-01-39 | 9,620,746 | 10,788,420 | |
30 Yr Pass Thru | 6.500 | 03-01-39 | 514,859 | 577,669 | |
30 Yr Pass Thru | 6.500 | 06-01-39 | 3,321,722 | 3,725,919 | |
Foreign Government Obligations 0.1% | $2,104,200 | ||||
(Cost $2,480,123) | |||||
Argentina 0.1% | 2,104,200 | ||||
City of Buenos Aires (S) | 9.950 | 03-01-17 | 2,520,000 | 2,104,200 | |
Convertible Bonds 0.1% | $1,881,510 | ||||
(Cost $902,911) | |||||
Consumer Discretionary 0.0% | 799,166 | ||||
Media 0.0% | |||||
XM Satellite Radio, Inc. (S) | 7.000 | 12-01-14 | 486,000 | 799,166 | |
Industrials 0.1% | 1,082,344 | ||||
Airlines 0.1% | |||||
US Airways Group, Inc. | 7.250 | 05-15-14 | 375,000 | 1,082,344 | |
Municipal Bonds 0.2% | $3,041,765 | ||||
(Cost $2,515,585) | |||||
State of California | 7.600 | 11-01-40 | 770,000 | 1,134,279 | |
State of Illinois | 5.100 | 06-01-33 | 1,880,000 | 1,907,486 | |
Term Loans (M) 0.5% | $9,053,601 | ||||
(Cost $8,970,337) | |||||
Consumer Discretionary 0.2% | 3,702,807 | ||||
Hotels, Restaurants & Leisure 0.2% | |||||
CCM Merger, Inc. | 6.000 | 03-01-17 | 720,358 | 720,808 | |
Kalispel Tribal Economic Authority | 7.500 | 02-25-17 | 2,344,517 | 2,309,349 | |
Landry’s, Inc. | 6.500 | 04-24-18 | 666,650 | 672,650 |
See notes to financial statements | Semiannual report | Bond Fund | 21 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Financials 0.1% | $1,788,981 | ||||
Capital Markets 0.1% | |||||
Walter Investment Management Corp. (T) | TBD | 11-28-17 | 1,100,000 | 1,100,693 | |
Real Estate Investment Trusts 0.0% | |||||
iStar Financial, Inc. | 5.750 | 09-28-17 | 688,502 | 688,288 | |
Industrials 0.1% | 1,606,000 | ||||
Airlines 0.1% | |||||
Delta Air Lines, Inc. | 5.250 | 10-18-18 | 1,600,000 | 1,606,000 | |
Materials 0.1% | 1,453,625 | ||||
Metals & Mining 0.1% | |||||
FMG Finance PTY, Ltd. | 5.250 | 10-18-17 | 1,450,000 | 1,453,625 | |
Telecommunication Services 0.0% | 502,188 | ||||
Wireless Telecommunication Services 0.0% | |||||
Cricket Communications, Inc. | 4.750 | 10-10-19 | 500,000 | 502,188 | |
Capital Preferred Securities 1.3% | $21,510,006 | ||||
(Cost $21,267,027) | |||||
Financials 1.3% | 21,510,006 | ||||
Capital Markets 0.2% | |||||
State Street Capital Trust IV (P) | 1.389 | 06-15-37 | 4,005,000 | 3,093,871 | |
Commercial Banks 0.9% | |||||
Allfirst Preferred Capital Trust (P) | 1.840 | 07-15-29 | 1,305,000 | 1,012,783 | |
Fifth Third Capital Trust IV (6.500% to 4-15-17, | |||||
then 3 month LIBOR + 1.368%) | 6.500 | 04-15-37 | 3,750,000 | 3,759,375 | |
Lloyds Banking Group PLC (6.413% to | |||||
10-1-35, then 3 month LIBOR + 1.496%) (Q)(S) | 6.413 | 10-01-35 | 2,410,000 | 1,994,275 | |
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 | 1,012,176 | |
PNC Preferred Funding Trust III (8.700% to | |||||
3-15-13, then 3 month LIBOR + 5.226%) (Q)(S) | 8.700 | 03-15-13 | 3,730,000 | 3,765,510 | |
Regions Financing Trust II (6.625% to 5-15-27, | |||||
then 3 month LIBOR + 1.290%) | 6.625 | 05-15-47 | 1,245,000 | 1,243,216 | |
Sovereign Capital Trust VI | 7.908 | 06-13-36 | 1,840,000 | 1,913,600 | |
Insurance 0.2% | |||||
MetLife Capital Trust X (9.250% to 4-8-38, | |||||
then 3 month LIBOR + 5.540%) (Q)(S) | 9.250 | 04-08-38 | 1,550,000 | 2,139,000 | |
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 | 1,576,200 | |
Collateralized Mortgage Obligations 17.0% | $284,269,661 | ||||
(Cost $262,850,350) | |||||
Commercial & Residential 12.0% | 200,956,975 | ||||
American Home Mortgage Assets LLC | |||||
Series 2006-6, Class A1A (P) | 0.398 | 12-25-46 | 2,013,489 | 1,249,924 | |
Series 2006-6, Class XP IO | 2.172 | 12-25-46 | 26,267,891 | 2,420,681 | |
American Tower Trust | |||||
Series 2007-1A, Class C (S) | 5.615 | 04-15-37 | 3,075,000 | 3,156,014 | |
Series 2007-1A, Class D (S) | 5.957 | 04-15-37 | 3,725,000 | 3,823,344 |
22 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
Americold LLC Trust | |||||
Series 2010-ARTA, Class D (S) | 7.443 | 01-14-29 | 3,200,000 | $3,915,187 | |
Banc of America Commercial Mortgage Trust, Inc. | |||||
Series 2006-2, Class AM (P) | 5.951 | 05-10-45 | 4,815,000 | 5,373,189 | |
Series 2006-4, Class AM | 5.675 | 07-10-46 | 5,675,000 | 6,367,202 | |
Series 2006-3, Class A4 (P) | 5.889 | 07-10-44 | 3,935,000 | 4,517,372 | |
Bear Stearns Alt-A Trust | |||||
Series 2004-12, Class 1A1 (P) | 0.908 | 01-25-35 | 3,491,075 | 3,335,771 | |
Bear Stearns Asset Backed Securities Trust | |||||
Series 2004-AC5, Class A1 | 5.250 | 10-25-34 | 2,046,869 | 2,114,766 | |
Citigroup Commercial Mortgage Trust | |||||
Series 2006-C4, Class A3 (P) | 5.921 | 03-15-49 | 4,400,000 | 5,051,200 | |
Citigroup/Deutsche Bank Commercial | |||||
Mortgage Trust | |||||
Series 2005-CD1, Class C (P) | 5.393 | 07-15-44 | 1,230,000 | 1,155,740 | |
Commercial Mortgage Pass Through Certificates | |||||
Series 2007-C9, Class A4 (P) | 5.994 | 12-10-49 | 6,345,000 | 7,577,408 | |
Series 2012-CR2, Class XA IO | 2.137 | 08-15-45 | 20,087,231 | 2,572,994 | |
Series 2012-LC4, Class B (P) | 4.934 | 12-10-44 | 1,955,000 | 2,185,915 | |
Series 2012-LC4, Class C (P) | 5.824 | 12-10-44 | 1,485,000 | 1,655,643 | |
Extended Stay America Trust | |||||
Series 2010-ESHA, Class B (S) | 4.221 | 11-05-27 | 2,795,000 | 2,802,725 | |
Fontainebleau Miami Beach Trust | |||||
Series 2012-FBLU, Class C (S) | 4.270 | 05-05-27 | 1,555,000 | 1,624,495 | |
Series 2012-FBLU, Class D (S) | 5.007 | 05-05-27 | 2,300,000 | 2,429,743 | |
GMAC Mortgage Corp. Loan Trust | |||||
Series 2004-AR2, Class 3A (P) | 3.563 | 08-19-34 | 2,940,027 | 2,808,123 | |
Greenwich Capital Commercial Funding Corp. | |||||
Series 2006-GG7, Class AM (P) | 6.064 | 07-10-38 | 3,325,000 | 3,701,177 | |
GSR Mortgage Loan Trust | |||||
Series 2005-AR6, Class 3A1 (P) | 2.614 | 09-25-35 | 2,652,936 | 2,600,450 | |
Series 2004-9, Class B1 (P) | 3.273 | 08-25-34 | 1,615,429 | 680,651 | |
Series 2006-AR1, Class 3A1 (P) | 3.889 | 01-25-36 | 2,861,305 | 2,614,629 | |
Harborview Mortgage Loan Trust | |||||
Series 2004-11, Class X1 IO | 2.034 | 01-19-35 | 17,076,180 | 1,291,881 | |
Series 2005-11, Class X IO | 2.023 | 08-19-45 | 10,688,574 | 452,127 | |
Series 2005-8, Class 1X IO | 2.172 | 09-19-35 | 14,776,800 | 976,664 | |
Series 2007-3, Class ES IO | 0.350 | 05-19-47 | 67,157,993 | 476,822 | |
Series 2007-4, Class ES IO | 0.350 | 07-19-47 | 78,729,422 | 558,979 | |
Series 2007-6, Class ES IO (S) | 0.342 | 08-19-37 | 56,480,817 | 401,014 | |
IndyMac Index Mortgage Loan Trust | |||||
Series 2005-AR18, Class 1X IO | 1.988 | 10-25-36 | 26,817,739 | 1,978,881 | |
Series 2005-AR18, Class 2X IO | 1.636 | 10-25-36 | 43,693,522 | 2,354,207 | |
JPMorgan Chase Commercial Mortgage | |||||
Securities Corp. | |||||
Series 2005-LDP5, Class AM (P) | 5.410 | 12-15-44 | 5,740,000 | 6,337,058 | |
Series 2006-LDP7, Class AM (P) | 6.065 | 04-15-45 | 4,245,000 | 4,802,695 | |
Series 2007-CB18, Class A4 | 5.440 | 06-12-47 | 5,650,000 | 6,523,524 | |
Series 2012-HSBC Class XA IO (S) | 1.582 | 07-05-32 | 19,100,000 | 2,245,167 | |
Series 2005-LDP3, Class A4B (P) | 4.996 | 08-15-42 | 4,185,000 | 4,539,591 | |
LB-UBS Commercial Mortgage Trust | |||||
Series 2006-C6, Class AM | 5.413 | 09-15-39 | 5,524,000 | 6,199,812 | |
Series 2007-C1, Class AM | 5.455 | 02-15-40 | 4,185,000 | 4,651,979 | |
Series 2006-C4, Class A4 (P) | 6.063 | 06-15-38 | 4,165,000 | 4,808,001 | |
Series 2007-C2, Class A3 | 5.430 | 02-15-40 | 5,660,000 | 6,528,878 |
See notes to financial statements | Semiannual report | Bond Fund | 23 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
Merrill Lynch Mortgage Investors Trust | |||||
Series 2006-3, Class 2A1 (P) | 2.694 | 10-25-36 | 2,646,895 | $2,640,982 | |
Series 2007-3, Class M1 (P) | 3.416 | 09-25-37 | 1,050,230 | 535,994 | |
Series 2007-3, Class M2 (P) | 3.416 | 09-25-37 | 349,249 | 46,062 | |
Series 2007-3, Class M3 (P) | 3.416 | 09-25-37 | 235,004 | 7,809 | |
Merrill Lynch/Countrywide Commercial | |||||
Mortgage Trust | |||||
Series 2006-2, Class A4 (P) | 6.096 | 06-12-46 | 5,220,000 | 6,038,282 | |
Morgan Stanley Capital I | |||||
Series 2006-HQ10, Class AM | 5.360 | 11-12-41 | 3,200,000 | 3,550,733 | |
Series 2006-HQ8, Class AM (P) | 5.647 | 03-12-44 | 4,900,000 | 5,393,621 | |
Series 2007-IQ13, Class A4 | 5.364 | 03-15-44 | 5,575,000 | 6,437,776 | |
Motel 6 Trust | |||||
Series 2012-MTL6, Class D (S) | 3.781 | 10-05-25 | 5,845,000 | 5,864,020 | |
Residential Accredit Loans, Inc. | |||||
Series 2005-QO4, Class XIO IO | 2.421 | 12-25-45 | 25,305,227 | 1,543,619 | |
Springleaf Mortgage Loan Trust | |||||
Series 2012-2A, Class A (P) (S) | 2.220 | 10-25-57 | 2,565,703 | 2,591,360 | |
Series 2012-3A, Class M1 (P) (S) | 2.660 | 12-25-59 | 1,520,000 | 1,521,715 | |
Structured Asset Securities Corp. | |||||
Series 2003-6A, Class B1 (P) | 2.958 | 03-25-33 | 1,562,099 | 833,022 | |
Thornburg Mortgage Securities Trust | |||||
Series 2004-1, Class II2A (P) | 1.908 | 03-25-44 | 3,287,214 | 3,223,761 | |
UBS Commercial Mortgage Trust | |||||
Series 2012-C1, Class B | 4.822 | 05-10-45 | 2,220,000 | 2,443,281 | |
Series 2012-C1, Class C (P) (S) | 5.720 | 05-10-45 | 1,480,000 | 1,630,287 | |
UBS-Barclays Commercial Mortgage Trust | |||||
Series 2012-C2, Class XA IO (S) | 1.987 | 05-10-63 | 26,283,232 | 2,794,670 | |
WaMu Mortgage Pass Through Certificates | |||||
Series 2005-AR1, Class X IO | 1.460 | 01-25-45 | 36,663,501 | 1,773,678 | |
Series 2005-AR13, Class X IO | 1.453 | 10-25-45 | 120,528,153 | 6,322,738 | |
Series 2005-AR2, Class X IO | 1.550 | 01-25-45 | 55,640,502 | 3,140,623 | |
Series 2005-AR6, Class X IO | 1.597 | 04-25-45 | 31,197,109 | 1,849,542 | |
Series 2005-AR8, Class X IO | 1.583 | 07-25-45 | 48,648,401 | 3,100,956 | |
Wells Fargo Commercial Mortgage Trust | |||||
Series 2012-C9 XA IO (S) | 2.451 | 11-15-45 | 30,152,693 | 4,366,080 | |
Wells Fargo Mortgage Backed Securities Trust | |||||
Series 2005-AR5, Class 1A1 (P) | 2.616 | 04-25-35 | 2,511,987 | 2,444,741 | |
U.S. Government Agency 5.0% | 83,312,686 | ||||
Federal Home Loan Mortgage Corp. | |||||
Series 290, Class IO | 3.500 | 11-01-32 | 10,115,707 | 2,035,786 | |
Series 3581, Class IO | 6.000 | 10-15-39 | 1,737,868 | 275,846 | |
Series 3623, Class LI IO | 4.500 | 01-15-25 | 1,534,318 | 120,533 | |
Series 3630, Class BI IO | 4.000 | 05-15-27 | 774,580 | 18,761 | |
Series 3794, Class PI IO | 4.500 | 02-15-38 | 2,864,788 | 298,472 | |
Series 3908, Class PA | 4.000 | 06-15-39 | 3,150,800 | 3,378,269 | |
Series 4060, Class HC | 3.000 | 03-15-41 | 6,447,907 | 6,747,232 | |
Series 4065, Class QA | 3.000 | 08-15-41 | 4,542,123 | 4,747,931 | |
Series 4068, Class AP | 3.500 | 06-15-40 | 6,796,404 | 7,243,859 | |
Series 4077, Class IK IO | 5.000 | 07-15-42 | 5,881,940 | 1,681,547 | |
Series K017, Class X1 IO | 1.605 | 12-25-21 | 15,008,957 | 1,513,098 | |
Series K018, Class X1 IO | 1.612 | 01-25-22 | 20,037,569 | 2,036,558 | |
Series K021, Class X1 IO | 1.515 | 06-25-22 | 4,711,000 | 530,591 | |
Series K022, Class X1 IO | 1.309 | 07-25-22 | 36,750,000 | 3,578,237 | |
Series K708, Class X1 IO | 1.644 | 01-25-19 | 30,814,921 | 2,464,547 |
24 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government Agency (continued) | |||||
Federal Home Loan Mortgage Corp. | |||||
Series K709, Class X1 IO | 1.678 | 03-25-19 | 17,450,735 | $1,437,766 | |
Series K710, Class X1 IO | 1.915 | 05-25-19 | 14,108,575 | 1,366,698 | |
Series K711, Class X1 IO | 1.712 | 07-25-19 | 49,990,000 | 4,745,146 | |
Federal National Mortgage Association | |||||
Series 2009-109, Class IW IO | 4.500 | 04-25-38 | 2,390,070 | 192,604 | |
Series 2009-47, Class EI IO | 5.000 | 08-25-19 | 2,290,015 | 200,452 | |
Series 2009-50, Class GI IO | 5.000 | 05-25-39 | 4,284,341 | 466,526 | |
Series 2009-78, Class IB IO | 5.000 | 06-25-39 | 5,675,383 | 569,159 | |
Series 2010-14, Class AI IO | 4.000 | 08-25-27 | 2,241,255 | 55,633 | |
Series 2010-36, Class BI IO | 4.000 | 03-25-28 | 2,334,911 | 69,549 | |
Series 2011-146, Class MA | 3.500 | 08-25-41 | 5,476,370 | 5,909,365 | |
Series 2012-110, Class MA | 3.000 | 07-25-41 | 7,551,855 | 8,106,614 | |
Series 2012-118, Class IB IO | 3.500 | 11-25-42 | 8,680,420 | 2,284,718 | |
Series 2012-137, Class WI IO | 3.500 | 11-01-42 | 12,830,000 | 2,582,038 | |
Series 2012-19, Class JA | 3.500 | 03-25-41 | 8,821,122 | 9,542,946 | |
Series 2012-67, Class KG | 3.500 | 02-25-41 | 2,079,912 | 2,288,124 | |
Series 398, Class C3 IO | 4.500 | 05-25-39 | 2,667,701 | 200,078 | |
Series 401, Class C2 IO | 4.500 | 06-25-39 | 1,868,766 | 140,157 | |
Series 402, Class 3 IO | 4.000 | 11-25-39 | 2,862,855 | 284,449 | |
Series 402, Class 4 IO | 4.000 | 10-25-39 | 4,737,556 | 560,645 | |
Series 402, Class 7 IO | 4.500 | 11-25-39 | 4,351,861 | 500,464 | |
Series 407, Class 15 IO | 5.000 | 01-25-40 | 4,643,888 | 696,329 | |
Series 407, Class 16 IO | 5.000 | 01-25-40 | 955,401 | 107,688 | |
Series 407, Class 17 IO | 5.000 | 01-25-40 | 899,160 | 107,360 | |
Series 407, Class 21 IO | 5.000 | 01-25-39 | 3,328,012 | 332,801 | |
Series 407, Class 7 IO | 5.000 | 03-25-41 | 3,385,689 | 572,916 | |
Series 407, Class 8 IO | 5.000 | 03-25-41 | 1,651,533 | 249,534 | |
Series 407, Class C6 IO | 5.500 | 01-25-40 | 9,353,775 | 1,713,931 | |
Government National Mortgage Association | |||||
Series 2010-78, Class AI IO | 4.500 | 04-20-39 | 4,330,757 | 234,548 | |
Series 2012-114, Class IO | 1.025 | 01-16-53 | 11,660,814 | 1,123,181 | |
Asset Backed Securities 6.3% | $104,997,552 | ||||
(Cost $100,392,546) | |||||
ACE Securities Corp. | |||||
Series 2006-ASP5, Class A2B (P) | 0.338 | 10-25-36 | 2,087,365 | 947,941 | |
Series 2006-ASP5, Class A2C (P) | 0.388 | 10-25-36 | 1,751,795 | 801,052 | |
Series 2006-ASP5, Class A2D (P) | 0.468 | 10-25-36 | 3,360,432 | 1,553,528 | |
Aegis Asset Backed Securities Trust | |||||
Series 2004-3, Class A1 (P) | 0.568 | 09-25-34 | 1,668,839 | 1,569,111 | |
Series 2005-4, Class M1 (P) | 0.658 | 10-25-35 | 4,810,000 | 3,482,695 | |
Ameriquest Mortgage Securities, Inc. | |||||
Series 2005-R1, Class M1 (P) | 0.658 | 03-25-35 | 2,325,000 | 2,286,942 | |
Series 2005-R3, Class M2 (P) | 0.678 | 05-25-35 | 2,840,000 | 2,427,856 | |
Argent Securities, Inc. | |||||
Series 2006-M2, Class A2C (P) | 0.358 | 09-25-36 | 9,079,796 | 3,242,014 | |
Asset Backed Funding Certificates | |||||
Series 2005-AQ1, Class A4 | 5.010 | 06-25-35 | 1,721,754 | 1,744,486 | |
Series 2005-HE1, Class M1 (P) | 0.628 | 03-25-35 | 1,652,918 | 1,477,388 | |
Asset Backed Securities Corp. Home Equity | |||||
Series 2006-HE1, Class A3 (P) | 0.408 | 01-25-36 | 3,292,517 | 2,940,030 | |
Bayview Financial Acquisition Trust | |||||
Series 2006-A, Class 2A3 (P) | 0.559 | 02-28-41 | 1,244,088 | 1,227,772 | |
Bravo Mortgage Asset Trust | |||||
Series 2006-1A, Class A2 (P) (S) | 0.448 | 07-25-36 | 4,433,194 | 3,884,985 |
See notes to financial statements | Semiannual report | Bond Fund | 25 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Carrington Mortgage Loan Trust | |||||
Series 2005-OPT2, Class M2 (P) | 0.658 | 05-25-35 | 1,753,031 | $1,674,533 | |
Series 2006-NC4, Class A5 (P) | 0.268 | 10-25-36 | 462,050 | 337,360 | |
Citicorp Residential Mortgage Securities, Inc. | |||||
Series 2007-2, Class A6 | 6.265 | 06-25-37 | 2,119,961 | 2,101,644 | |
Citigroup Mortgage Loan Trust | |||||
Series 2006-WFH3, Class A3 (P) | 0.358 | 10-25-36 | 2,161,880 | 2,122,154 | |
Contimortgage Home Equity Loan Trust | |||||
Series 1995-2, Class A5 | 8.100 | 08-15-25 | 159,535 | 158,282 | |
Countrywide Asset-Backed Certificates | |||||
Series 2004-10, Class AF5B | 5.110 | 02-25-35 | 3,140,910 | 3,128,045 | |
Series 2006-3, Class 2A2 (P) | 0.388 | 06-25-36 | 1,963,817 | 1,894,795 | |
Credit-Based Asset Servicing and | |||||
Securitization LLC | |||||
Series 2005-CB2, Class M1 (P) | 0.648 | 04-25-36 | 3,685,929 | 3,462,963 | |
CSMC Trust | |||||
Series 2006-CF2, Class M1 (P) (S) | 0.678 | 05-25-36 | 3,245,000 | 2,989,031 | |
Dominos Pizza Master Issuer LLC | |||||
Series 2012-1A, Class A2 (S) | 5.216 | 01-25-42 | 5,729,806 | 6,440,921 | |
Encore Credit Receivables Trust | |||||
Series 2005-2, Class M2 (P) | 0.668 | 11-25-35 | 3,350,000 | 2,870,515 | |
Fremont Home Loan Trust | |||||
Series 2005-1, Class M3 (P) | 0.973 | 06-25-35 | 1,300,000 | 1,199,790 | |
Home Equity Asset Trust | |||||
Series 2003-1, Class M1 (P) | 1.708 | 06-25-33 | 1,741,296 | 1,571,706 | |
Series 2005-5, Class M1 (P) | 0.688 | 11-25-35 | 2,035,000 | 1,950,784 | |
Series 2005-6, Class M1 (P) | 0.678 | 12-25-35 | 1,810,000 | 1,769,751 | |
Leaf II Receivables Funding LLC | |||||
Series 2011-1, Class A (S) | 1.700 | 12-20-18 | 505,164 | 501,123 | |
Mastr Asset Backed Securities Trust | |||||
Series 2006-HE4, Class A2 (P) | 0.318 | 11-25-36 | 9,543,908 | 3,839,066 | |
Series 2007-HE2, Class A2 (P) | 0.908 | 08-25-37 | 2,283,846 | 2,167,596 | |
Merrill Lynch Mortgage Investors, Inc. | |||||
Series 2005-WMC1, Class M1 (P) | 0.958 | 09-25-35 | 1,025,201 | 904,812 | |
Morgan Stanley ABS Capital I | |||||
Series 2006-HE4, Class A3 (P) | 0.358 | 06-25-36 | 3,176,550 | 2,067,038 | |
New Century Home Equity Loan Trust | |||||
Series 2005-1, Class M1 (P) | 0.658 | 03-25-35 | 1,495,000 | 1,347,197 | |
Series 2005-3, Class M1 (P) | 0.688 | 07-25-35 | 1,265,000 | 1,240,087 | |
Novastar Home Equity Loan | |||||
Series 2004-4, Class M3 (P) | 1.288 | 03-25-35 | 2,720,000 | 2,621,639 | |
Park Place Securities, Inc. | |||||
Series 2004-WHQ2, Class M2 (P) | 0.838 | 02-25-35 | 4,175,000 | 4,115,648 | |
Series 2005-WCH1, Class M2 (P) | 0.728 | 01-25-36 | 6,594,136 | 6,457,215 | |
People’s Choice Home Loan Securities Trust | |||||
Series 2005-1, Class M3 (P) | 1.078 | 01-25-35 | 2,315,000 | 2,264,246 | |
RAMP Trust | |||||
Series 2005-RS3, Class M1 (P) | 0.628 | 03-25-35 | 1,755,000 | 1,563,812 | |
Renaissance Home Equity Loan Trust | |||||
Series 2005-2, Class AF3 | 4.499 | 08-25-35 | 739,084 | 739,820 | |
Series 2005-2, Class AF4 | 4.934 | 08-25-35 | 2,680,000 | 2,414,597 | |
Sonic Capital LLC | |||||
Series 2011-1A, Class A2 (S) | 5.438 | 05-20-41 | 2,454,350 | 2,757,038 |
26 | Bond Fund | Semiannual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Soundview Home Loan Trust | |||||
Series 2005-OPT2 (P) | 0.468 | 12-25-35 | 3,969,329 | $3,806,817 | |
Series 2006-OPT2, Class A3 (P) | 0.388 | 05-25-36 | 1,462,813 | 1,230,820 | |
Westgate Resorts LLC | |||||
Series 2012-2A, Class A (S) | 3.000 | 01-20-25 | 3,682,495 | 3,700,907 | |
Shares | Value | ||||
Preferred Securities 1.2% | $20,641,844 | ||||
(Cost $20,288,220) | |||||
Consumer Discretionary 0.1% | 1,284,768 | ||||
Hotels, Restaurants & Leisure 0.1% | |||||
Greektown Superholdings, Inc., Series A (I) | 17,280 | 1,284,768 | |||
Consumer Staples 0.1% | 2,115,750 | ||||
Food & Staples Retailing 0.1% | |||||
Ocean Spray Cranberries, Inc., Series A | |||||
6.250% (S) | 23,250 | 2,115,750 | |||
Financials 0.9% | 14,437,892 | ||||
Commercial Banks 0.4% | |||||
PNC Financial Services Group, Inc. (6.135% to | |||||
5-1-22, then 3 month LIBOR + 4.067%) | 96,775 | 2,638,087 | |||
Regions Financial Corp., 6.375% | 102,790 | 2,546,108 | |||
U.S. Bancorp (6.000% to 4-15-17, then | |||||
3 month LIBOR + 4.861%) | 77,150 | 2,127,797 | |||
Consumer Finance 0.2% | |||||
Ally Financial, Inc., 7.300% | 48,470 | 1,197,209 | |||
Discover Financial Services, 6.500% | 60,000 | 1,510,800 | |||
Diversified Financial Services 0.3% | |||||
Bank of America Corp., Series MER, 8.625% | 89,220 | 2,270,649 | |||
Citigroup Capital XIII (7.875% to 10-30-15, | |||||
then 3 month LIBOR + 6.370%) | 16,000 | 448,000 | |||
GMAC Capital Trust I (8.125% to 2-15-16, | |||||
then 3 month LIBOR + 5.785%) | 65,230 | 1,699,242 | |||
Industrials 0.1% | $2,615,134 | ||||
Aerospace & Defense 0.1% | |||||
United Technologies Corp., 7.500% | 31,265 | 1,710,821 | |||
Airlines 0.0% | |||||
Continental Airlines Finance Trust II, 6.000% | 27,300 | 904,313 | |||
Utilities 0.0% | $188,300 | ||||
Electric Utilities 0.0% | |||||
PPL Corp., 8.750% | 3,500 | 188,300 |
See notes to financial statements | Semiannual report | Bond Fund | 27 |
Shares | Value | ||||
Common Stocks 0.0% | $47,091 | ||||
(Cost $97,862) | |||||
Consumer Discretionary 0.0% | 47,091 | ||||
Greektown Superholdings, Inc. (I) | 885 | 47,091 | |||
Par value^ | Value | ||||
Short-Term Investments 1.7% | $28,197,000 | ||||
(Cost $28,197,000) | |||||
Repurchase Agreement 1.7% | 28,197,000 | ||||
Repurchase Agreement with State Street Corp. dated 11-30-12 at | |||||
0.01% to be repurchased at $28,197,023 on 12-3-12, collateralized | |||||
by $27,535,000 U.S. Treasury Note, 1.500% due 6-30-16 (valued at | |||||
$28,765,099, including interest) | 28,197,000 | 28,197,000 | |||
Total investments (Cost $1,579,887,814)† 99.6% | $1,667,452,132 | ||||
Other assets and liabilities, net 0.4% | $5,979,711 | ||||
Total net assets 100.0% | $1,673,431,843 | ||||
^ 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 Paid In Kind
PO Principal-Only Security — (Principal Tranche of Stripped Security). Rate shown is the annualized yield on date of purchase.
TBD To be determined
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 as maturity date 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. Rule 144A securities amounted to $333,948,184 or 20.0% of the Fund’s net assets as of 11-30-12.
(T) This position represents an unsettled loan commitment at period end. Certain details associated with this purchase are not known prior to the settlement date, including coupon rate.
† At 11-30-12, the aggregate cost of investment securities for federal income tax purposes was $1,582,775,139. Net unrealized appreciation aggregated $84,676,993, of which $103,302,100 related to appreciated investment securities and $18,625,107 related to depreciated investment securities.
28 | Bond Fund | Semiannual 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 11-30-12 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
Investments, at value (Cost $1,579,887,814) | $1,667,452,132 |
Cash | 670 |
Receivable for investments sold | 2,205,297 |
Receivable for fund shares sold | 10,604,179 |
Dividends and interest receivable | 16,017,969 |
Other receivables and prepaid expenses | 209,483 |
Total assets | 1,696,489,730 |
Liabilities | |
Payable for investments purchased | 13,204,263 |
Payable for delayed delivery securities purchased | 5,742,479 |
Payable for fund shares repurchased | 2,737,822 |
Distributions payable | 705,965 |
Payable to affiliates | |
Accounting and legal services fees | 71,053 |
Transfer agent fees | 225,166 |
Distribution and service fees | 125,406 |
Trustees’ fees | 63,189 |
Other liabilities and accrued expenses | 182,544 |
Total liabilities | 23,057,887 |
Net assets | |
Paid-in capital | $1,584,609,423 |
Accumulated distributions in excess of net investment income | (1,684,487) |
Accumulated net realized gain (loss) on investments and foreign | |
currency transactions | 2,946,220 |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 87,560,687 |
Net assets | $1,673,431,843 |
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 ($1,267,866,037 ÷ 77,159,516 shares) | $16.43 |
Class B ($44,079,648 ÷ 2,682,788 shares)1 | $16.43 |
Class C ($157,943,042 ÷ 9,611,595 shares)1 | $16.43 |
Class I ($200,727,031 ÷ 12,215,067 shares) | $16.43 |
Class R2 ($108,986 ÷ 6,632 shares) | $16.43 |
Class R6 ($2,707,099 ÷ 164,634 shares) | $16.44 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95.5%)2 | $17.20 |
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.
See notes to financial statements | Semiannual 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 operations For the six-month period ended 11-30-12
(unaudited)
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 | $36,840,166 |
Dividends | 551,952 |
Securities lending | 5,553 |
Total investment income | 37,397,671 |
Expenses | |
Investment management fees | 3,544,606 |
Distribution and service fees | 2,607,486 |
Accounting and legal services fees | 171,240 |
Transfer agent fees | 1,299,755 |
Trustees’ fees | 37,290 |
State registration fees | 63,297 |
Printing and postage | 57,775 |
Professional fees | 52,814 |
Custodian fees | 96,603 |
Registration and filing fees | 50,277 |
Other | 8,218 |
Total expenses | 7,989,361 |
Less expense reductions | (372,955) |
Net expenses | 7,616,406 |
Net investment income | 29,781,265 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 5,529,110 |
Investments in affiliated issuers | 438 |
Foreign currency transactions | (6,042) |
5,523,506 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 48,506,713 |
Translation of assets and liabilities in foreign currencies | 2,339 |
48,509,052 | |
Net realized and unrealized gain | 54,032,558 |
Increase in net assets from operations | $83,813,823 |
30 | Bond Fund | Semiannual 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
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.
Six months | ||
ended | Year | |
11-30-12 | ended | |
(Unaudited) | 5-31-12 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $29,781,265 | $53,583,466 |
Net realized gain | 5,523,506 | 14,531,688 |
Change in net unrealized appreciation (depreciation) | 48,509,052 | (6,055,090) |
Increase in net assets resulting from operations | 83,813,823 | 62,060,064 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (25,514,752) | (48,082,010) |
Class B | (766,420) | (1,350,772) |
Class C | (2,482,927) | (3,924,487) |
Class I | (3,821,010) | (4,407,508) |
Class R2 | (2,457) | (1,228) |
Class R6 | (51,862) | (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 | (32,639,428) | (58,794,561) |
From Fund share transactions | 284,050,519 | 250,252,179 |
Total increase | 335,224,914 | 253,517,682 |
Net assets | ||
Beginning of period | 1,338,206,929 | 1,084,689,247 |
End of period | $1,673,431,843 | $1,338,206,929 |
Undistributed (accumulated distributions in excess of) net | ||
investment income | ($1,684,487) | $1,173,676 |
See notes to financial statements | Semiannual report | Bond Fund | 31 |
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 | 11-30-121 | 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 | $15.86 | $15.00 | $12.96 | $14.31 | $14.75 |
Net investment income2 | 0.33 | 0.72 | 0.81 | 0.97 | 0.87 | 0.81 |
Net realized and unrealized gain (loss) | ||||||
on investments | 0.60 | 0.08 | 0.92 | 2.05 | (1.34) | (0.43) |
Total from investment operations | 0.93 | 0.80 | 1.73 | 3.02 | (0.47) | 0.38 |
Less distributions | ||||||
From net investment income | (0.36) | (0.79) | (0.87) | (0.98) | (0.88) | (0.82) |
From net realized gain | — | (0.01) | — | — | — | — |
Total distributions | (0.36) | (0.80) | (0.87) | (0.98) | (0.88) | (0.82) |
Net asset value, end of period | $16.43 | $15.86 | $15.86 | $15.00 | $12.96 | $14.31 |
Total return (%)3,4 | 5.915 | 5.21 | 11.78 | 23.83 | (3.02) | 2.57 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $1,268 | $1,061 | $912 | $819 | $686 | $824 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.036 | 1.06 | 1.05 | 1.08 | 1.167 | 1.05 |
Expenses net of fee waivers and credits | 0.986 | 1.02 | 1.05 | 1.07 | 1.167 | 1.05 |
Net investment income | 4.046 | 4.63 | 5.24 | 6.71 | 6.71 | 5.54 |
Portfolio turnover (%) | 34 | 76 | 73 | 88 | 90 | 90 |
1 Six months ended 11-30-12. Unaudited
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
32 | Bond Fund | Semiannual report | See notes to financial statements |
CLASS B SHARES Period ended | 11-30-121 | 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 | $15.86 | $15.00 | $12.95 | $14.31 | $14.75 |
Net investment income2 | 0.27 | 0.61 | 0.70 | 0.86 | 0.77 | 0.71 |
Net realized and unrealized gain (loss) | ||||||
on investments | 0.60 | 0.08 | 0.92 | 2.07 | (1.34) | (0.43) |
Total from investment operations | 0.87 | 0.69 | 1.62 | 2.93 | (0.57) | 0.28 |
Less distributions | ||||||
From net investment income | (0.30) | (0.68) | (0.76) | (0.88) | (0.79) | (0.72) |
From net realized gain | — | (0.01) | — | — | — | — |
Total distributions | (0.30) | (0.69) | (0.76) | (0.88) | (0.79) | (0.72) |
Net asset value, end of period | $16.43 | $15.86 | $15.86 | $15.00 | $12.95 | $14.31 |
Total return (%)3,4 | 5.545 | 4.48 | 11.00 | 23.05 | (3.77) | 1.86 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $44 | $37 | $28 | $25 | $28 | $42 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.736 | 1.76 | 1.75 | 1.78 | 1.867 | 1.76 |
Expenses net of fee waivers and credits | 1.686 | 1.72 | 1.75 | 1.77 | 1.867 | 1.75 |
Net investment income | 3.346 | 3.92 | 4.53 | 6.01 | 5.96 | 4.82 |
Portfolio turnover (%) | 34 | 76 | 73 | 88 | 90 | 90 |
1 Six months ended 11-30-12. Unaudited
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS C SHARES Period ended | 11-30-121 | 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 | $15.87 | $15.86 | $15.00 | $12.96 | $14.31 | $14.75 |
Net investment income2 | 0.27 | 0.61 | 0.70 | 0.86 | 0.78 | 0.71 |
Net realized and unrealized gain (loss) | ||||||
on investments | 0.59 | 0.09 | 0.92 | 2.06 | (1.34) | (0.43) |
Total from investment operations | 0.86 | 0.70 | 1.62 | 2.92 | (0.56) | 0.28 |
Less distributions | ||||||
From net investment income | (0.30) | (0.68) | (0.76) | (0.88) | (0.79) | (0.72) |
From net realized gain | — | (0.01) | — | — | — | — |
Total distributions | (0.30) | (0.69) | (0.76) | (0.88) | (0.79) | (0.72) |
Net asset value, end of period | $16.43 | $15.87 | $15.86 | $15.00 | $12.96 | $14.31 |
Total return (%)3,4 | 5.475 | 4.55 | 11.00 | 22.98 | (3.70) | 1.86 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $158 | $116 | $71 | $40 | $26 | $29 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.736 | 1.77 | 1.75 | 1.78 | 1.867 | 1.75 |
Expenses net of fee waivers and credits | 1.686 | 1.72 | 1.75 | 1.77 | 1.867 | 1.75 |
Net investment income | 3.336 | 3.91 | 4.50 | 5.98 | 6.02 | 4.86 |
Portfolio turnover (%) | 34 | 76 | 73 | 88 | 90 | 90 |
1 Six months ended 11-30-12. Unaudited
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Semiannual report | Bond Fund | 33 |
CLASS I SHARES Period ended | 11-30-121 | 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 | $15.87 | $15.86 | $14.99 | $12.96 | $14.31 | $14.74 |
Net investment income2 | 0.36 | 0.78 | 0.88 | 1.03 | 0.93 | 0.88 |
Net realized and unrealized gain (loss) | ||||||
on investments | 0.59 | 0.09 | 0.92 | 2.05 | (1.35) | (0.43) |
Total from investment operations | 0.95 | 0.87 | 1.80 | 3.08 | (0.42) | 0.45 |
Less distributions | ||||||
From net investment income | (0.39) | (0.85) | (0.93) | (1.05) | (0.93) | (0.88) |
From net realized gain | — | (0.01) | — | — | — | — |
Total distributions | (0.39) | (0.86) | (0.93) | (1.05) | (0.93) | (0.88) |
Net asset value, end of period | $16.43 | $15.87 | $15.86 | $14.99 | $12.96 | $14.31 |
Total return (%)3 | 6.044 | 5.70 | 12.33 | 24.31 | (2.60) | 3.01 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $201 | $123 | $74 | $30 | $19 | $22 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 0.665 | 0.67 | 0.62 | 0.63 | 0.706 | 0.62 |
Expenses net of fee waivers and credits | 0.615 | 0.62 | 0.62 | 0.63 | 0.706 | 0.62 |
Net investment income | 4.405 | 4.99 | 5.64 | 7.13 | 7.22 | 6.08 |
Portfolio turnover (%) | 34 | 76 | 73 | 88 | 90 | 90 |
1 Six months ended 11-30-12. Unaudited
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
4 Not annualized.
5 Annualized.
6 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS R2 SHARES Period ended | 11-30-121 | 5-31-122 | ||||
Per share operating performance | ||||||
Net asset value, beginning of period | $15.87 | $15.80 | ||||
Net investment income3 | 0.34 | 0.17 | ||||
Net realized and unrealized gain on investments | 0.60 | 0.09 | ||||
Total from investment operations | 0.94 | 0.26 | ||||
Less distributions | ||||||
From net investment income | (0.38) | (0.19) | ||||
Net asset value, end of period | $16.43 | $15.87 | ||||
Total return (%)4 | 5.955 | 1.685 | ||||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | —6 | —6 | ||||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 0.837 | 0.867 | ||||
Expenses net of fee waivers and credits | 0.787 | 0.807 | ||||
Net investment income | 4.257 | 4.287 | ||||
Portfolio turnover (%) | 34 | 768 | ||||
1 Six months ended 11-30-12. Unaudited
2 The inception date for Class R2 shares is 3-1-12.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
8 Portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
34 | Bond Fund | Semiannual report | See notes to financial statements |
CLASS R6 SHARES Period ended | 11-30-121 | 5-31-122 | ||||
Per share operating performance | ||||||
Net asset value, beginning of period | $15.87 | $15.55 | ||||
Net investment income3 | 0.37 | 0.57 | ||||
Net realized and unrealized gain on investments | 0.60 | 0.40 | ||||
Total from investment operations | 0.97 | 0.97 | ||||
Less distributions | ||||||
From net investment income | (0.40) | (0.64) | ||||
From net realized gain | — | (0.01) | ||||
Total distributions | (0.40) | (0.65) | ||||
Net asset value, end of period | $16.44 | $15.87 | ||||
Total return (%)4 | 6.155 | 6.385 | ||||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $3 | $2 | ||||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 0.586 | 0.636 | ||||
Expenses net of fee waivers and credits | 0.536 | 0.576 | ||||
Net investment income | 4.526 | 5.046 | ||||
Portfolio turnover (%) | 34 | 767 | ||||
1 Six months ended 11-30-12. Unaudited
2 The inception date for Class R6 shares is 9-1-11.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
7 Portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
See notes to financial statements | Semiannual report | Bond Fund | 35 |
Notes to financial statements
(unaudited)
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.
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. 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 the securities are valued using the last quoted bid or evaluated price. 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. 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 reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted.
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.
36 | Bond Fund | Semiannual report |
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 or trends, 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. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the Fund’s investments as of November 30, 2012, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
INVESTMENTS IN SECURITIES | VALUE AT 11-30-12 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS |
Corporate Bonds | $742,795,438 | — | $740,063,874 | $2,731,564 |
U.S. Government & Agency | ||||
Obligations | 448,912,464 | — | 448,912,464 | — |
Foreign Government | ||||
Obligations | 2,104,200 | — | 2,104,200 | — |
Convertible Bonds | 1,881,510 | — | 1,881,510 | — |
Municipal Bonds | 3,041,765 | — | 3,041,765 | — |
Term Loans | 9,053,601 | — | 9,053,601 | — |
Capital Preferred Securities | 21,510,006 | — | 21,510,006 | — |
Collateralized Mortgage | ||||
Obligations | 284,269,661 | — | 280,797,060 | 3,472,601 |
Asset Backed Securities | 104,997,552 | — | 104,997,552 | — |
Preferred Securities | 20,641,844 | $16,337,013 | 3,020,063 | 1,284,768 |
Common Stocks | 47,091 | — | — | 47,091 |
Short-Term Investments | 28,197,000 | — | 28,197,000 | — |
Total Investments in | ||||
Securities | $1,667,452,132 | $16,337,013 | $1,643,579,095 | $7,536,024 |
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 or in a schedule to the Portfolio of Investments (Sale Commitments Outstanding). 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.
Semiannual report | Bond Fund | 37 |
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. Foreign taxes are provided for based on the Fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
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 John Hancock Collateral Investment Trust (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 and through securities lending provider indemnification, 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 or possible loss of rights in the collateral should the borrower fail financially. 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. Commitment fees for the six months ended November 30, 2012 were $1,594. For the six months ended November 30, 2012, the Fund had no borrowings under the line of credit.
38 | Bond Fund | Semiannual report |
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, are calculated daily for each class, based on the net asset value of the class and the applicable specific expense rates.
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.
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 annually.
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.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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 pronouncement. 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 certain other financial instruments.
Note 3 — Guarantees and indemnifications
Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust including the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service
Semiannual report | Bond Fund | 39 |
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 4 — 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).
Management fee. The Fund has an investment management contract with the Adviser under which 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. 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 $288,708, $10,306, $33,447, $39,934, $27 and $533 for Class A, Class B, Class C, Class I, Class R2 and Class R6 shares, respectively, for the six months ended November 30, 2012. These fee waivers and/ or expense reimbursements expire on September 30, 2013, 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.
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 indemnification expenses and other 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, 2013, 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. For the six months ended November 30, 2012, there were no reductions related to this agreement.
The investment management fees, including the impact of the waivers and reimbursements described above, incurred for the six months ended November 30, 2012 were equivalent to a net annual effective rate of 0.425% 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 six months ended November 30, 2012 amounted to an annual rate of 0.02% of the Fund’s average daily net assets.
40 | Bond Fund | Semiannual report |
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.
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 $2,505,297 for the six months ended November 30, 2012. Of this amount, $14,444 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $2,385,877 was paid as sales commissions to broker-dealers and $104,976 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 six months ended November 30, 2012, CDSCs received by the Distributor amounted to $32,886 and $1,945 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.
Semiannual report | Bond Fund | 41 |
Class level expenses. Class level expenses for the six months ended November 30, 2012 were:
DISTRIBUTION AND | TRANSFER | |||
CLASS | SERVICE FEES | AGENT FEES | ||
Class A | $1,731,289 | $1,054,633 | ||
Class B | 205,976 | 37,660 | ||
Class C | 670,088 | 122,313 | ||
Class I | — | 84,855 | ||
Class R2 | 133 | 14 | ||
Class R6 | — | 280 | ||
Total | $2,607,486 | $1,299,755 |
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. Under the John Hancock Group of Funds Deferred Compensation Plan (the Plan) which was terminated in November 2012, these Trustees could have elected, for tax purposes, to defer receipt of this compensation. Any deferred amounts were invested in various John Hancock funds. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of assets and liabilities. Plan assets will be liquidated in accordance with the Plan documents.
Note 5 — Fund share transactions
Transactions in Fund shares for the six months ended November 30, 2012 and for the year ended May 31, 2012 were as follows:
Six months ended 11-30-12 | Year ended 5-31-12 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 13,920,805 | $226,010,134 | 17,261,878 | $270,183,160 |
Distributions reinvested | 1,406,977 | 22,866,134 | 2,714,480 | 42,442,158 |
Repurchased | (5,021,644) | (81,371,480) | (10,598,190) | (165,690,756) |
Net increase | 10,306,138 | $167,504,788 | 9,378,168 | $146,934,562 |
Class B shares | ||||
Sold | 571,969 | $9,229,522 | 1,035,630 | $16,188,306 |
Distributions reinvested | 35,954 | 584,261 | 62,614 | 979,149 |
Repurchased | (238,353) | (3,859,671) | (537,186) | (8,411,212) |
Net increase | 369,570 | $5,954,112 | 561,058 | $8,756,243 |
Class C shares | ||||
Sold | 2,917,528 | $47,364,372 | 3,942,885 | $61,652,552 |
Distributions reinvested | 124,646 | 2,026,538 | 182,225 | 2,851,353 |
Repurchased | (746,116) | (12,066,889) | (1,311,450) | (20,495,947) |
Net increase | 2,296,058 | $37,324,021 | 2,813,660 | $44,007,958 |
Class I shares | ||||
Sold | 5,478,262 | $88,825,007 | 6,362,267 | $99,471,488 |
Distributions reinvested | 176,441 | 2,871,667 | 183,139 | 2,868,620 |
Repurchased | (1,178,548) | (19,089,555) | (3,458,701) | (53,859,614) |
Net increase | 4,476,155 | $72,607,119 | 3,086,705 | $48,480,494 |
Class R2 shares1 | ||||
Sold | 299 | $4,818 | 6,329 | $100,000 |
Distributions reinvested | 4 | 71 | — | — |
Net increase | 303 | $4,889 | 6,329 | $100,000 |
42 | Bond Fund | Semiannual report |
Six months ended 11-30-12 | Year ended 5-31-12 | |||
Shares | Amount | Shares | Amount | |
Class R6 shares2 | ||||
Sold | 52,385 | $856,548 | 131,747 | $2,083,958 |
Distributions reinvested | 3,031 | 49,307 | 689 | 10,926 |
Repurchased | (15,557) | (250,265) | (7,661) | (121,962) |
Net increase | 39,859 | $655,590 | 124,775 | $1,972,922 |
Net increase | 17,488,083 | $284,050,519 | 15,970,695 | $250,252,179 |
1 The inception date for Class R2 shares is 3-1-12.
2 The inception date for Class R6 shares is 9-1-11.
Affiliates of the Fund owned 95% and 4% of shares of beneficial interest of Class R2 and Class R6, respectively, on November 30, 2012.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities and U.S. Treasury obligations, aggregated $555,374,203 and $298,068,574, respectively, for the six months ended November 30, 2012. Purchases and sales of U.S. Treasury obligations aggregated $219,760,673 and $193,983,236, respectively, for the six months ended November 30, 2012.
Semiannual report | Bond Fund | 43 |
Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreement
The Board of Trustees (the Board, the members of which are referred to as Trustees) of John Hancock Bond Fund (the Fund), a series of John Hancock Sovereign Bond Fund (the Trust), met in-person on May 6–8 and June 3–5, 2012 to consider the approval of the Fund’s investment advisory agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Adviser), the Fund’s investment adviser. The Board also considered the approval of the investment subadvisory agreement (the Subadvisory Agreement) among the Adviser, Manulife Asset Management (US) LLC (the Subadviser) and the Trust on behalf of the Fund. The Advisory Agreement and the Subadvisory Agreement are referred to as the Agreements.
Activities and composition of the Board
On June 3–5, 2012, the Board consisted of nine individuals, seven of whom were Independent Trustees. Independent Trustees are generally those individuals who are not employed by or have any significant business or professional relationship with the Adviser or the Subadviser. The Trustees are responsible for the oversight of operations of the Fund and perform various duties required of directors of investment companies by the Investment Company Act of 1940, as amended (the 1940 Act). The Independent Trustees have independent legal counsel to assist them in connection with their duties. The Board has appointed an Independent Trustee as Chairman. On June 3–5, 2012, the Board had four standing committees that were composed entirely of Independent Trustees: the Audit Committee; the Compliance Committee; the Nominating, Governance and Administration Committee; and the Contracts & Operations Committee. Additionally, on June 3–5, 2012, Investment Performance Committee A was a standing committee of the Board composed of Independent Trustees and one Trustee who is affiliated with the Adviser. Investment Performance Committee A was responsible for overseeing and monitoring matters relating to the investment performance of the Fund. The Board also designated an Independent Trustee as Vice Chairman to serve in the absence of the Chairman. The Board also designates working groups or ad hoc committees as it deems appropriate.
The approval process
Under the 1940 Act, the Board is required to consider the continuation of the Agreements each year. Throughout the year, the Board, acting directly and through its committees, regularly reviews and assesses the quality of the services that the Fund receives under these Agreements. The Board reviews reports of the Adviser at least quarterly, which include Fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. The Board considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by the Adviser and Subadviser to the Fund and its shareholders.
Prior to the May 6–8, 2012 meeting, the Board requested and received materials specifically relating to the Agreements. The materials provided in connection with the May meeting included information compiled and prepared by Lipper, a Thomson Reuters company (Lipper), on Fund fees and expenses, and the investment performance of the Fund. This Fund information is assembled in a format that permits comparison with similar information from a Category and a subset of the Category referred to as the Expense Group, each as determined by Lipper, and with the Fund’s benchmark index. The Category includes all funds that invest similarly to the way the Fund invests. The Expense Group represents funds of similar size, excluding passively managed funds and funds-of-funds. The Fund’s benchmark index is an unmanaged index of securities that is provided as a basis for comparison with the Fund’s performance. Other material provided for the Fund review included (a) information on the profitability of the Agreements to the Adviser and a discussion of any additional benefits to the Adviser or Subadviser or their affiliates that result from being the Adviser or Subadviser to the Fund; (b) a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients, such as
44 | Bond Fund | Semiannual report |
institutional clients and other investment companies, having similar investment mandates, as well as the performance of those other clients and a comparison of the services provided to those other clients and the services provided to the Fund; (c) the impact of economies of scale; (d) a summary of aggregate amounts paid by the Fund to the Adviser; and (e) sales and redemption data regarding the Fund’s shares.
At an in-person meeting held on May 6–8, 2012, the Board reviewed materials relevant to its consideration of the Agreements. As a result of the discussions that occurred during the May 6–8, 2012 meeting, the Board asked the Adviser for additional information on certain matters. The Adviser provided the additional information and the Board also considered this information as part of its consideration of the Agreements.
At an in-person meeting held on June 3–5, 2012, the Board, including the Independent Trustees, formally considered the continuation of the Advisory Agreement and the Subadvisory Agreement, each for an additional one-year term. The Board considered what it believed were key relevant factors that are described under separate headings presented below.
The Board also considered other matters important to the approval process, such as payments made to and by the Adviser or its affiliates relating to the distribution of Fund shares and other services. The Board reviewed services related to the valuation and pricing of Fund portfolio holdings. Other important matters considered by the Board were the direct and indirect benefits to the Adviser, the Subadviser and their affiliates from their relationship with the Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review.
Nature, extent and quality of services
The Board reviewed the nature, extent and quality of services provided by the Adviser and the Subadviser, including the investment advisory services and the resulting performance of the Fund.
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. It considered the background and experience of senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Subadviser responsible for the daily investment activities of the Fund, including, among other things, portfolio trading capabilities, use of technology, commitment to compliance and approach to training and retaining portfolio managers and other research, advisory and management personnel.
The Board considered the Subadviser’s history and experience providing investment services to the Fund. The Board considered the Adviser’s investment manager analytical capabilities, market and economic knowledge and execution of its Subadviser oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulations, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadviser’s compliance departments.
In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Fund by the Adviser under a separate agreement. The Board noted that the Adviser and its affiliates provide the Fund with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. The Board reviewed the structure and duties of the Adviser’s administration, accounting,
Semiannual report | Bond Fund | 45 |
legal and compliance departments and its affiliate’s transfer agency operations and considered the Adviser’s and its affiliates’ policies and procedures for assuring compliance with applicable laws and regulations.
The Board also received information about the nature, extent and quality of services provided by and fee rates charged by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board reviewed a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients having similar investment mandates, the services provided to those other clients as compared to the services provided to the Fund, the performance of those other clients as compared to the performance by the Fund and other factors relating to those other clients. The Board considered the significant differences between the Adviser’s and Subadviser’s services to the Fund and the services they provide to other clients. For other clients that are not mutual funds, the differences in services relate to the greater share purchase and redemption activity in a mutual fund, the generally higher turnover of mutual fund portfolio holdings, the more burdensome regulatory and legal obligations of mutual funds and the higher marketing costs for mutual funds. When compared to all clients including mutual funds, the Adviser has greater oversight and supervisory responsibility for the Fund and undertakes greater entrepreneurial risk as the sponsor of the Fund.
Fund performance
The Board was provided with reports, independently prepared by Lipper, which included a comprehensive analysis of the Fund’s performance. The Board also examined materials discussing Fund performance and the Fund’s investment objective, strategies and outlook. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by the Adviser, which analyzed various factors that may affect the Lipper rankings. The Board reviewed information regarding the investment performance of the Fund as compared to its Lipper Category as well as its benchmark index (see chart below). The Board was provided with a description of the methodology used by Lipper to select the funds in the Category. The Board also considered updated performance information provided by the Adviser at its May and June 2012 meetings. The Board regularly reviews the performance of the Fund throughout the year and attaches more importance to performance over relatively longer periods of time, typically three to five years.
Set forth below is the performance of the Fund over certain time periods ended December 31, 2011 and that of its Category average and benchmark index over the same periods:
1 YEAR | 3 YEAR | 5 YEAR | 10 YEAR | |
Bond Fund Class A Shares | 4.86% | 14.97% | 7.02% | 6.13% |
Corporate Debt BBB-Rated | 7.23% | 11.77% | 6.28% | 6.18% |
Category Average: | ||||
Barclay US Gvt/Cr TR Index | 8.74% | 6.60% | 6.55% | 5.85% |
The Board noted that the Fund’s performance compared favorably to the Category’s average and the benchmark index’s performance for all periods shown, except for the one-year period over which the Fund underperformed its Category’s average performance and its benchmark index.
Expenses and fees
The Board, including the Independent Trustees, reviewed the Fund’s contractual advisory fee rate payable by the Fund to the Adviser as compared with the other funds in its Expense Group. The Board also received information about the investment subadvisory fee rate payable by the Adviser to the Subadviser for investment subadvisory services. The Board considered the services provided and the fees charged by the Adviser and the Subadviser to other clients with similar investment mandates, including other registered investment companies, institutional investors and separate accounts.
46 | Bond Fund | Semiannual report |
In addition, the Board considered the cost of the services provided to the Fund by the Adviser. The Board received and considered expense information regarding the Fund’s various components, including advisory fees, distribution fees and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, administration fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Expense Group median. The Board also considered expense information regarding the Fund’s total operating expense ratio (Gross Expense Ratio) and, if different, the Fund’s total operating expense ratio after taking into account any fee waiver or expense waiver agreement by the Adviser (Net Expense Ratio). The Board considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of the Expense Group median.
The Board noted that the Fund’s advisory fee ratio was the same as the Expense Group median advisory fee ratio. The Board noted the following information about the Fund’s Gross and Net Expense Ratios for Class A shares contained in the Fund’s 2011 financial statements in relation with the Fund’s Expense Group median provided by Lipper in April 2012:
FUND — CLASS A SHARES | EXPENSE GROUP MEDIAN | |
Advisory Fee Ratio | 0.49% | 0.49% |
Gross Expense Ratio | 1.06% | 1.03% |
Net Expense Ratio | 1.02% | 0.95% |
The Board viewed favorably the Adviser’s (and its affiliates’) agreement to waive a portion of their fees and to reimburse certain expenses in order to reduce the Fund’s Gross Expense Ratio by 0.05% for Class A shares (and for other classes), excluding certain expenses such as taxes, brokerage commissions, interest, litigation and extraordinary expenses, until September 30, 2013. The Board favorably considered the impact of this agreement towards lowering the Fund’s Gross Expense Ratio.
The Board received and reviewed statements relating to the Adviser’s financial condition and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by the Adviser for services under the Advisory Agreement, as well as from other relationships between the Fund and the Adviser and its affiliates. The Board reviewed the Adviser’s profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2011 compared to available aggregate profitability data provided for the year ended December 31, 2010. The Board reviewed the Adviser’s profitability with respect to other fund complexes managed by the Adviser and/or its affiliates. The Board reviewed the Adviser’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products.
The Board also considered a comparison of the Adviser’s profitability to that of a limited number of other investment advisers whose profitability information is publicly available. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Adviser, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is limited.
The Board considered limited profitability information with respect to the Subadviser, which is affiliated with the Adviser. In addition, as noted above, the Board considered basic assumptions and methodology for allocating expenses in the Subadviser’s profitability analysis.
Semiannual report | Bond Fund | 47 |
Economies of scale
The Board, including the Independent Trustees, considered the extent to which economies of scale might be realized as the assets of the Fund increase. Possible changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale (e.g., through the use of breakpoints in the advisory fee at higher asset levels) are periodically discussed. The Board also considered the Adviser’s overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the Fund.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the contractual advisory fee rate.
Other benefits to the Adviser and the Subadviser
The Board understands that the Adviser, the Subadviser or their affiliates may derive other ancillary benefits from their relationship with the Fund, both tangible and intangible, such as their ability to leverage investment professionals who manage other portfolios, an increase in their profile in the investment advisory community and the engagement of their affiliates and/or significant shareholders as service providers to the Fund, including for administrative, transfer agency and distribution services. The Board believes that certain of these benefits are difficult to quantify. The Board also was informed that the Subadviser may use third-party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts.
Board determination
The Board unanimously approved the continuation of the Advisory Agreement and the Subadvisory Agreement each for an additional one-year term. Based upon its evaluation of relevant factors in their totality, the Board was satisfied that the terms of the Agreements, including the advisory and subadvisory fee rates, were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or any group of factors as all-important or controlling, but considered all factors together. Different Trustees may have attributed different weights to the various factors considered. The Independent Trustees were also assisted by independent legal counsel in making this determination. The Trustees’ conclusions may be based in part on their consideration of these arrangements in prior years and on their ongoing regular review of Fund performance and operations throughout the year.
48 | Bond Fund | Semiannual report |
Special Shareholder Meeting
On November 15, 2012, a Special Meeting of the Shareholders of John Hancock Sovereign Bond Fund and its series, John Hancock Bond Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Sovereign Bond Fund.
TOTAL VOTES | TOTAL VOTES WITHHELD | |
FOR THE NOMINEE | FROM THE NOMINEE | |
Independent Trustees | ||
Charles L. Bardelis | 62,245,932.49 | 778,528.38 |
Peter S. Burgess | 62,251,920.48 | 772,540.39 |
William H. Cunningham | 62,297,276.73 | 727,184.14 |
Grace K. Fey | 62,293,128.98 | 731,331.89 |
Theron S. Hoffman | 62,270,368.45 | 754,092.42 |
Deborah C. Jackson | 62,337,824.55 | 686,636.32 |
Hassell H. McClellan | 62,259,746.33 | 764,714.54 |
James M. Oates | 62,303,404.74 | 721,056.13 |
Steven R. Pruchansky | 62,224,401.49 | 800,059.38 |
Gregory A. Russo | 62,362,297.56 | 662,163.31 |
Non-Independent Trustees | ||
James R. Boyle | 62,394,689.60 | 629,771.27 |
Craig Bromley | 62,397,524.61 | 626,936.26 |
Warren A. Thomson | 62,410,474.58 | 613,986.29 |
Semiannual report | Bond Fund | 49 |
More information
Trustees | Investment adviser |
James M. Oates, Chairman | John Hancock Advisers, LLC |
Charles L. Bardelis* | |
James R. Boyle† | Subadviser |
Craig Bromley† | John Hancock Asset Management a division of |
Peter S. Burgess* | Manulife Asset Management (US) LLC |
William H. Cunningham | |
Grace K. Fey | Principal distributor |
Theron S. Hoffman* | John Hancock Funds, LLC |
Deborah C. Jackson | |
Hassell H. McClellan | Custodian |
Steven R. Pruchansky, Vice Chairman | State Street Bank and Trust Company |
Gregory A. Russo | |
Warren A. Thomson† | Transfer agent |
John Hancock Signature Services, Inc. | |
Officers | |
Hugh McHaffie | Legal counsel |
President | K&L Gates LLP |
Andrew G. Arnott | |
Executive Vice President | |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | |
Francis V. Knox, Jr. | |
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 |
50 | Bond Fund | Semiannual report |
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
21SA 11/12 | |
This report is for the information of the shareholders of John Hancock Bond Fund. | 1/13 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(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.
Not applicable.
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) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) 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/ Hugh McHaffie |
------------------------------- | |
Hugh McHaffie | |
President | |
Date: | January 22, 2013 |
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/ Hugh McHaffie |
------------------------------- | |
Hugh McHaffie | |
President | |
Date: | January 22, 2013 |
By: | /s/ Charles A. Rizzo |
-------------------------------- | |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | January 22, 2013 |