UNITED STATES | |
SECURITIES AND EXCHANGE COMMISSION | |
Washington, D.C. 20549 | |
FORM N-CSR | |
CERTIFIED SHAREHOLDER REPORT OF REGISTERED | |
MANAGEMENT INVESTMENT COMPANIES | |
Investment Company Act file number 811-2402 | |
John Hancock Sovereign Bond Fund | |
(Exact name of registrant as specified in charter) | |
601 Congress Street, Boston, Massachusetts 02210 | |
(Address of principal executive offices) (Zip code) | |
Salvatore Schiavone | |
Treasurer | |
601 Congress Street | |
Boston, Massachusetts 02210 | |
(Name and address of agent for service) | |
Registrant's telephone number, including area code: 617-663-4497 | |
Date of fiscal year end: | May 31 |
Date of reporting period: | May 31, 2013 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSR/0000928816-13-001168/bondfundx1x1.jpg)
A look at performance
Total returns for the period ended May 31, 2013
SEC 30-day | SEC 30-day | ||||||||||
Average annual total returns (%) | Cumulative total returns (%) | yield (%) | yield (%) | ||||||||
with maximum sales charge | with maximum sales charge | subsidized | unsubsidized1 | ||||||||
as of | as of | ||||||||||
1-year | 5-year | 10-year | 1-year | 5-year | 10-year | 5-31-13 | 5-31-13 | ||||
Class A | 3.06 | 7.80 | 5.51 | 3.06 | 45.61 | 71.00 | 2.80 | 2.75 | |||
Class B | 2.18 | 7.74 | 5.41 | 2.18 | 45.19 | 69.33 | 2.23 | 2.18 | |||
Class C | 6.11 | 8.04 | 5.26 | 6.11 | 47.21 | 67.00 | 2.22 | 2.17 | |||
Class I2 | 8.27 | 9.25 | 6.45 | 8.27 | 55.65 | 86.85 | 3.29 | 3.24 | |||
Class R22,3 | 8.09 | 8.84 | 6.00 | 8.09 | 52.71 | 79.13 | 2.85 | 2.80 | |||
Class R62,3 | 8.42 | 9.33 | 6.51 | 8.42 | 56.20 | 87.84 | 3.36 | 3.31 | |||
Index† | 1.19 | 5.69 | 4.58 | 1.19 | 31.88 | 56.43 | — | — | |||
Performance figures assume all distributions have been 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 800-225-5291 or visit the fund’s website at 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.
† Index is the Barclays Government/Credit Bond Index.
See the following page for footnotes.
6 | Bond Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-13-001168/bondfundx3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class B4 | 5-31-03 | $16,933 | $16,933 | $15,643 |
Class C4 | 5-31-03 | 16,700 | 16,700 | 15,643 |
Class I2 | 5-31-03 | 18,685 | 18,685 | 15,643 |
Class R22 | 5-31-03 | 17,913 | 17,913 | 15,643 |
Class R62 | 5-31-03 | 18,784 | 18,784 | 15,643 |
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 expenses or sales charges, 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 shares and Class R2 shares were first offered 9-1-11 and 3-1-12, respectively. Returns prior to these dates are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class R2 and Class R6 shares, as applicable.
4 The contingent deferred sales charge is not applicable.
Annual report | Bond Fund | 7 |
Management’s discussion of
Fund performance
John Hancock Asset Management a division of Manulife Asset Management (US) LLC
Effective May 15, 2013, Barry Evans relinquished his role as portfolio manager on the fund, as he assumes a new leadership role as president of John Hancock Asset Management a division of Manulife Asset Management (North America) Limited. The fund continues to be managed by Howard Greene and Jeffrey Given.
Performance in fixed-income markets was mixed over the past year, with U.S. Treasuries and AAA-rated debt significantly underperforming more speculative sectors of the market. The Barclays U.S. Aggregate Bond Index, a broad measure of domestic bond-market performance, returned 0.91% for the 12-month period. Corporate bonds generally outperformed government debt, with high-yield bonds leading the market. Certain securitized sectors, including segments of the mortgage-backed securities market, also posted strong returns.
For the year ended May 31, 2013, John Hancock Bond Fund’s Class A shares posted a total return of 7.93%, excluding sales charges. By comparison, the fund’s benchmark, the Barclays Government/Credit Bond Index, returned 1.19%, and the fund’s peer group, the Morningstar, Inc. intermediate-term bond fund category, posted an average return of 3.48%.† Our decision to continue to avoid U.S. Treasuries in favor of high-yield bonds and certain mortgage-backed securities was the primary driver of the fund’s outperformance. U.S. Treasury yields had hit record lows in July 2012, and with the economy continuing to improve, we believed the risks of higher interest rates far outweighed the potential rewards. This turned out to be the right call for the fund: Interest rates have crept steadily higher in 2013, and Treasuries—whose prices are driven almost entirely by interest-rate movements—posted sizeable losses. Meanwhile, the high-yield market posted robust gains during the period amid strong demand, and our sizable position benefited performance. The fund’s allocation to nonagency residential mortgage-backed securities also performed well. When the housing market began to correct, this sector sold off dramatically. While we don’t necessarily believe these securities will return to par, the default and foreclosure rates affiliated with these securities have been declining, and the cash flow has been solid.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
† Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
8 | Bond Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
■ Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the fund’s actual ongoing operating expenses and is based on the fund’s actual return. It assumes an account value of $1,000.00 on December 1, 2012, with the same investment held until May 31, 2013.
Account value | Ending value | Expenses paid during | |
on 12-1-12 | on 5-31-13 | period ended 5-31-131 | |
Class A | $1,000.00 | $1,019.10 | $4.88 |
Class B | 1,000.00 | 1,015.60 | 8.39 |
Class C | 1,000.00 | 1,015.50 | 8.39 |
Class I | 1,000.00 | 1,021.00 | 2.97 |
Class R2 | 1,000.00 | 1,020.10 | 5.09 |
Class R6 | 1,000.00 | 1,021.40 | 2.62 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at May 31, 2013, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-13-001168/bondfundx5x1.jpg)
Annual report | Bond Fund | 9 |
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 December 1, 2012, with the same investment held until May 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Account value | Ending value | Expenses paid during | |
on 12-1-12 | on 5-31-13 | period ended 5-31-131 | |
Class A | $1,000.00 | $1,020.10 | $4.89 |
Class B | 1,000.00 | 1,016.60 | 8.40 |
Class C | 1,000.00 | 1,016.60 | 8.40 |
Class I | 1,000.00 | 1,022.00 | 2.97 |
Class R2 | 1,000.00 | 1,019.90 | 5.09 |
Class R6 | 1,000.00 | 1,022.30 | 2.62 |
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 prospectuses for details regarding transaction costs.
1 Expenses are equal to the fund’s annualized expense ratio of 0.97%, 1.67%, 1.67%, 0.59%, 1.01%, and 0.52% 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 182/365 (to reflect the one-half year period).
10 | Bond Fund | Annual report |
Portfolio summary
Portfolio Composition1 | ||||
Corporate Bonds | 47.0% | Capital Preferred Securities | 1.2% | |
Collateralized Mortgage Obligations | 16.7% | Term Loans | 0.6% | |
U.S. Government Agency | 16.4% | Foreign Government Obligations | 0.2% | |
U.S. Government | 7.6% | Municipal Bonds | 0.1% | |
Asset Backed Securities | 7.2% | Convertible Bonds | 0.1% | |
Preferred Securities | 1.2% | Short-Term Investments & Other | 1.7% | |
Quality Composition1,2 | ||||
U.S. Government Agency | 16.4% | BBB | 27.6% | |
U.S. Government | 7.6% | BB | 10.6% | |
U.S. Government Agency Collateralized | B | 9.6% | ||
Mortgage Obligations | 4.5% | |||
CCC & Below | 7.7% | |||
AAA | 3.4% | |||
Not Rated | 0.6% | |||
AA | 2.6% | |||
Equity | 1.2% | |||
A | 6.5% | |||
Short-Term Investments & Other | 1.7% | |||
1 As a percentage of net assets on 5-31-13.
2 Ratings are from Moody’s Investors Service, Inc. 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 Ratings, Inc. ratings. “Not Rated” securities are those with no ratings available from these agencies. All ratings are as of 5-31-13 and do not reflect subsequent downgrades or upgrades, if any.
Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if the creditor is unable or unwilling to make principal or interest payments. 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. The use of hedging and derivatives transactions could produce disproportionate gains or losses and may increase volatility and costs. For additional information on these and other risk considerations, please see the Fund’s prospectuses.
Annual report | Bond Fund | 11 |
Fund’s investments
As of 5-31-13
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Corporate Bonds 47.0% | $917,347,180 | ||||
(Cost $870,566,140) | |||||
Consumer Discretionary 5.6% | 108,855,424 | ||||
Auto Components 0.2% | |||||
Allison Transmission, Inc. (S) | 7.125 | 05-15-19 | 1,925,000 | 2,069,375 | |
American Axle & Manufacturing, Inc. | 6.625 | 10-15-22 | 320,000 | 344,400 | |
Schaeffler Finance BV (S) | 4.750 | 05-15-21 | 650,000 | 638,625 | |
Automobiles 1.3% | |||||
Ford Motor Company | 4.750 | 01-15-43 | 2,395,000 | 2,233,953 | |
Ford Motor Company | 6.625 | 10-01-28 | 645,000 | 746,629 | |
Ford Motor Credit Company LLC | 5.000 | 05-15-18 | 2,890,000 | 3,186,121 | |
Ford Motor Credit Company LLC | 5.875 | 08-02-21 | 9,305,000 | 10,612,250 | |
Ford Motor Credit Company LLC | 8.000 | 12-15-16 | 2,885,000 | 3,464,219 | |
General Motors Financial Company, Inc. (S) | 3.250 | 05-15-18 | 630,000 | 624,488 | |
General Motors Financial Company, Inc. (S) | 4.250 | 05-15-23 | 785,000 | 765,375 | |
Hyundai Capital Services, Inc. (S) | 4.375 | 07-27-16 | 1,585,000 | 1,700,188 | |
Kia Motors Corp. (S) | 3.625 | 06-14-16 | 1,515,000 | 1,586,955 | |
Distributors 0.1% | |||||
Burlington Holdings LLC, PIK (S) | 9.000 | 02-15-18 | 1,020,000 | 1,036,575 | |
Hotels, Restaurants & Leisure 1.5% | |||||
Arcos Dorados Holdings, Inc. (S) | 10.250 | 07-13-16 | BRL 3,275,000 | 1,587,193 | |
CCM Merger, Inc. (S) | 9.125 | 05-01-19 | 2,495,000 | 2,732,025 | |
Downstream Development Authority of the | |||||
Quapaw Tribe of Oklahoma (S) | 10.500 | 07-01-19 | 1,655,000 | 1,837,050 | |
Greektown Superholdings, Inc. | 13.000 | 07-01-15 | 2,440,000 | 2,616,900 | |
Landry’s, Inc. (S) | 9.375 | 05-01-20 | 2,610,000 | 2,838,375 | |
Little Traverse Bay Bands of Odawa Indians (S) | 9.000 | 08-31-20 | 1,195,000 | 1,159,150 | |
Marina District Finance Company, Inc. | 9.500 | 10-15-15 | 1,775,000 | 1,859,313 | |
MGM Resorts International | 8.625 | 02-01-19 | 1,430,000 | 1,690,975 | |
RHP Hotel Properties LP (S) | 5.000 | 04-15-21 | 510,000 | 517,650 | |
Rivers Pittsburgh Borrower LP (S) | 9.500 | 06-15-19 | 830,000 | 913,000 | |
Seminole Indian Tribe of Florida (S) | 6.535 | 10-01-20 | 2,594,000 | 2,840,430 | |
Seminole Indian Tribe of Florida (S) | 7.750 | 10-01-17 | 1,555,000 | 1,659,963 | |
Station Casinos LLC (S) | 7.500 | 03-01-21 | 2,020,000 | 2,115,950 | |
Sugarhouse HSP Gaming Property Mezzanine | |||||
LP (S) | 6.375 | 06-01-21 | 980,000 | 984,900 | |
Waterford Gaming LLC (S) | 8.625 | 09-15-14 | 616,528 | 274,033 | |
Wok Acquisition Corp. (S) | 10.250 | 06-30-20 | 2,040,000 | 2,284,800 | |
Wynn Las Vegas LLC (S) | 4.250 | 05-30-23 | 2,345,000 | 2,280,513 |
12 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Household Durables 0.2% | |||||
American Standard Americas (S) | 10.750 | 01-15-16 | 820,000 | $856,900 | |
Arcelik AS (S) | 5.000 | 04-03-23 | 1,650,000 | 1,658,250 | |
Toll Brothers Finance Corp. | 4.375 | 04-15-23 | 770,000 | 777,700 | |
Internet & Catalog Retail 0.3% | |||||
Expedia, Inc. | 5.950 | 08-15-20 | 2,275,000 | 2,528,640 | |
QVC, Inc. (S) | 4.375 | 03-15-23 | 2,170,000 | 2,184,318 | |
QVC, Inc. | 5.125 | 07-02-22 | 1,420,000 | 1,519,217 | |
Media 0.9% | |||||
AMC Entertainment, Inc. | 8.750 | 06-01-19 | 880,000 | 965,800 | |
CBS Corp. | 7.875 | 07-30-30 | 3,305,000 | 4,373,500 | |
Cinemark USA, Inc. (S) | 4.875 | 06-01-23 | 1,780,000 | 1,773,325 | |
Cinemark USA, Inc. | 7.375 | 06-15-21 | 925,000 | 1,033,688 | |
Cinemark USA, Inc. | 8.625 | 06-15-19 | 870,000 | 976,140 | |
Cogeco Cable, Inc. (S) | 4.875 | 05-01-20 | 710,000 | 708,225 | |
CSC Holdings LLC | 7.875 | 02-15-18 | 1,675,000 | 1,968,125 | |
MDC Partners, Inc. (S) | 6.750 | 04-01-20 | 400,000 | 409,000 | |
News America, Inc. | 6.150 | 03-01-37 | 975,000 | 1,125,694 | |
News America, Inc. | 6.400 | 12-15-35 | 705,000 | 834,616 | |
Time Warner Cable, Inc. | 8.250 | 04-01-19 | 2,360,000 | 3,042,321 | |
Multiline Retail 0.1% | |||||
Macy’s Retail Holdings, Inc. | 7.875 | 08-15-36 | 2,333,000 | 2,683,141 | |
Specialty Retail 0.8% | |||||
AutoNation, Inc. | 5.500 | 02-01-20 | 2,185,000 | 2,381,650 | |
CST Brands, Inc. (S) | 5.000 | 05-01-23 | 970,000 | 979,700 | |
Hillman Group, Inc. | 10.875 | 06-01-18 | 2,205,000 | 2,436,525 | |
Jo-Ann Stores Holdings, Inc., PIK (S) | 9.750 | 10-15-19 | 2,915,000 | 3,100,831 | |
Limited Brands, Inc. | 6.625 | 04-01-21 | 3,585,000 | 4,095,863 | |
New Look Bondco I PLC (S) | 8.375 | 05-14-18 | 855,000 | 833,625 | |
Toys R Us Property Company II LLC | 8.500 | 12-01-17 | 655,000 | 693,481 | |
Toys R Us, Inc. | 10.375 | 08-15-17 | 1,235,000 | 1,349,238 | |
Textiles, Apparel & Luxury Goods 0.2% | |||||
Burlington Coat Factory Warehouse Corp. | 10.000 | 02-15-19 | 3,910,000 | 4,364,538 | |
Consumer Staples 2.5% | 48,150,479 | ||||
Beverages 0.2% | |||||
Ajecorp BV (S) | 6.500 | 05-14-22 | 2,145,000 | 2,316,600 | |
Michael Foods Holding, Inc., PIK (S) | 8.500 | 07-15-18 | 510,000 | 538,050 | |
Food & Staples Retailing 0.8% | |||||
Rite Aid Corp. | 9.250 | 03-15-20 | 3,850,000 | 4,345,688 | |
Safeway, Inc. | 4.750 | 12-01-21 | 925,000 | 981,972 | |
Safeway, Inc. | 5.000 | 08-15-19 | 5,820,000 | 6,422,062 | |
Safeway, Inc. | 7.250 | 02-01-31 | 1,315,000 | 1,511,581 | |
Tops Holding Corp. (S) | 8.875 | 12-15-17 | 960,000 | 1,056,000 | |
Tops Holding II Corp., PIK (S) | 8.750 | 06-15-18 | 1,725,000 | 1,737,938 | |
Food Products 0.7% | |||||
B&G Foods, Inc. (C) | 4.625 | 06-01-21 | 1,390,000 | 1,390,000 | |
Bunge, Ltd. Finance Corp. | 8.500 | 06-15-19 | 2,236,000 | 2,864,287 | |
ConAgra Foods, Inc. | 3.200 | 01-25-23 | 2,065,000 | 2,037,765 |
See notes to financial statements | Annual report | Bond Fund | 13 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Food Products (continued) | |||||
Corporacion Pesquera Inca SAC (S) | 9.000 | 02-10-17 | 2,205,000 | $2,320,763 | |
KazAgro National Management Holding JSC (S) | 4.625 | 05-24-23 | 1,385,000 | 1,321,108 | |
Simmons Foods, Inc. (S) | 10.500 | 11-01-17 | 3,495,000 | 3,739,650 | |
Household Products 0.3% | |||||
Harbinger Group, Inc. (S) | 7.875 | 07-15-19 | 2,555,000 | 2,721,075 | |
The Sun Products Corp. (S) | 7.750 | 03-15-21 | 1,890,000 | 1,908,900 | |
YCC Holdings LLC, PIK | 10.250 | 02-15-16 | 2,070,000 | 2,129,533 | |
Personal Products 0.1% | |||||
Revlon Consumer Products Corp. (S) | 5.750 | 02-15-21 | 2,000,000 | 2,035,000 | |
Tobacco 0.4% | |||||
Alliance One International, Inc. | 10.000 | 07-15-16 | 4,975,000 | 5,229,969 | |
Vector Group, Ltd. (S) | 7.750 | 02-15-21 | 1,445,000 | 1,542,538 | |
Energy 4.5% | 88,318,848 | ||||
Energy Equipment & Services 0.6% | |||||
Astoria Depositor Corp., Series B (S) | 8.144 | 05-01-21 | 3,790,000 | 3,903,700 | |
Exterran Partners LP (S) | 6.000 | 04-01-21 | 670,000 | 686,750 | |
Offshore Group Investment, Ltd. (S) | 7.125 | 04-01-23 | 1,690,000 | 1,744,925 | |
Precision Drilling Corp. | 6.625 | 11-15-20 | 1,405,000 | 1,503,350 | |
Rowan Companies, Inc. | 4.875 | 06-01-22 | 1,990,000 | 2,133,965 | |
Trinidad Drilling, Ltd. (S) | 7.875 | 01-15-19 | 1,180,000 | 1,268,500 | |
Gas Utilities 0.3% | |||||
DCP Midstream LLC (P)(S) | 5.850 | 05-21-43 | 2,710,000 | 2,716,775 | |
DCP Midstream LLC (S) | 9.750 | 03-15-19 | 2,675,000 | 3,531,265 | |
Oil, Gas & Consumable Fuels 3.6% | |||||
Afren PLC (S) | 10.250 | 04-08-19 | 1,260,000 | 1,482,188 | |
Afren PLC (S) | 11.500 | 02-01-16 | 1,200,000 | 1,410,120 | |
BreitBurn Energy Partners LP | 7.875�� | 04-15-22 | 1,250,000 | 1,356,250 | |
CNOOC Finance 2013, Ltd. | 3.000 | 05-09-23 | 1,625,000 | 1,545,367 | |
DCP Midstream Operating LP | 3.875 | 03-15-23 | 1,500,000 | 1,474,029 | |
Energy Transfer Partners LP | 5.200 | 02-01-22 | 915,000 | 1,009,130 | |
Energy Transfer Partners LP | 9.700 | 03-15-19 | 2,140,000 | 2,856,508 | |
Enterprise Products Operating LLC (7.000% to | |||||
6-1-17, then 3 month LIBOR + 2.778%) | 7.000 | 06-01-67 | 4,085,000 | 4,422,013 | |
EP Energy LLC | 7.750 | 09-01-22 | 1,145,000 | 1,276,675 | |
EV Energy Partners LP | 8.000 | 04-15-19 | 2,370,000 | 2,435,175 | |
Goodrich Petroleum Corp. | 8.875 | 03-15-19 | 1,143,000 | 1,174,433 | |
Halcon Resources Corp. | 8.875 | 05-15-21 | 880,000 | 895,400 | |
Hess Corp. | 8.125 | 02-15-19 | 4,211,000 | 5,425,014 | |
Kerr-McGee Corp. | 6.950 | 07-01-24 | 3,290,000 | 4,061,028 | |
Kinder Morgan Energy Partners LP | 7.750 | 03-15-32 | 1,090,000 | 1,425,693 | |
Linn Energy LLC (S) | 6.250 | 11-01-19 | 3,025,000 | 3,047,688 | |
Lukoil International Finance BV (S) | 3.416 | 04-24-18 | 4,655,000 | 4,655,000 | |
MarkWest Energy Partners LP | 6.500 | 08-15-21 | 1,414,000 | 1,530,655 | |
Midstates Petroleum Company, Inc. (S) | 9.250 | 06-01-21 | 3,160,000 | 3,160,000 | |
Newfield Exploration Company | 5.750 | 01-30-22 | 1,490,000 | 1,594,300 | |
NuStar Logistics LP | 8.150 | 04-15-18 | 1,446,000 | 1,639,081 | |
Pacific Rubiales Energy Corp. (S) | 5.125 | 03-28-23 | 1,920,000 | 1,934,400 |
14 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Oil, Gas & Consumable Fuels (continued) | |||||
Penn Virginia Corp. (S) | 8.500 | 05-01-20 | 1,330,000 | $1,330,000 | |
Petrobras Global Finance BV | 4.375 | 05-20-23 | 2,590,000 | 2,499,441 | |
Petroleos de Venezuela SA | 5.375 | 04-12-27 | 2,900,000 | 1,892,250 | |
Petroleos Mexicanos | 4.875 | 01-24-22 | 1,475,000 | 1,570,875 | |
Rex Energy Corp. (S) | 8.875 | 12-01-20 | 1,490,000 | 1,594,300 | |
Targa Resources Partners LP | 6.375 | 08-01-22 | 1,315,000 | 1,426,775 | |
TransCanada Pipelines, Ltd. (6.350% to | |||||
5-15-17, then 3 month LIBOR + 2.210%) | 6.350 | 05-15-67 | 3,910,000 | 4,187,340 | |
Williams Partners LP | 5.250 | 03-15-20 | 4,060,000 | 4,573,602 | |
WPX Energy, Inc. | 6.000 | 01-15-22 | 1,805,000 | 1,944,888 | |
Financials 16.1% | 314,665,850 | ||||
Capital Markets 2.7% | |||||
Jefferies Group, Inc. | 6.875 | 04-15-21 | 3,720,000 | 4,334,730 | |
Jefferies Group, Inc. | 8.500 | 07-15-19 | 1,965,000 | 2,485,725 | |
JPMorgan Chase & Company (5.150% to | |||||
5-1-23, then 3 month LIBOR + 3.250%) (Q) | 5.150 | 05-01-23 | 2,615,000 | 2,641,150 | |
Macquarie Bank, Ltd. (S) | 6.625 | 04-07-21 | 1,255,000 | 1,406,502 | |
Macquarie Group, Ltd. (S) | 6.000 | 01-14-20 | 1,495,000 | 1,634,318 | |
Morgan Stanley | 4.100 | 05-22-23 | 4,060,000 | 3,895,676 | |
Morgan Stanley | 5.500 | 01-26-20 | 3,210,000 | 3,623,682 | |
Morgan Stanley | 5.550 | 04-27-17 | 3,980,000 | 4,448,398 | |
Morgan Stanley | 5.750 | 01-25-21 | 3,130,000 | 3,571,083 | |
Morgan Stanley | 7.300 | 05-13-19 | 6,640,000 | 8,142,752 | |
The Goldman Sachs Group, Inc. | 5.250 | 07-27-21 | 7,400,000 | 8,254,397 | |
The Goldman Sachs Group, Inc. | 5.750 | 01-24-22 | 6,930,000 | 7,943,533 | |
Commercial Banks 2.3% | |||||
Abbey National Treasury Services PLC | 4.000 | 04-27-16 | 2,750,000 | 2,944,070 | |
Banco de Credito del Peru (S) | 4.250 | 04-01-23 | 1,052,000 | 1,030,960 | |
Barclays Bank PLC (S) | 10.179 | 06-12-21 | 1,395,000 | 1,855,043 | |
Fifth Third Bancorp (5.100% to 6-30-23, then | |||||
3 month LIBOR + 3.033%) (Q) | 5.100 | 06-30-23 | 2,940,000 | 2,932,650 | |
First Horizon National Corp. | 5.375 | 12-15-15 | 1,815,000 | 1,983,403 | |
HBOS PLC (S) | 6.000 | 11-01-33 | 3,110,000 | 3,028,331 | |
ICICI Bank, Ltd. (S) | 4.700 | 02-21-18 | 2,325,000 | 2,443,238 | |
ICICI Bank, Ltd. (S) | 5.750 | 11-16-20 | 2,410,000 | 2,616,067 | |
Nordea Bank AB (S) | 3.125 | 03-20-17 | 4,195,000 | 4,430,860 | |
PNC Financial Services Group, Inc. (4.850% to | |||||
6-1-23, then 3 month LIBOR + 3.040%) (Q) | 4.850 | 06-01-23 | 2,150,000 | 2,133,875 | |
Regions Financial Corp. | 7.750 | 11-10-14 | 394,000 | 428,546 | |
Royal Bank of Scotland Group PLC | 6.125 | 12-15-22 | 2,420,000 | 2,496,366 | |
Santander Holdings USA, Inc. | 4.625 | 04-19-16 | 555,000 | 593,867 | |
Sberbank of Russia (S) | 6.125 | 02-07-22 | 1,800,000 | 1,984,500 | |
Swedbank AB (S) | 2.125 | 09-29-17 | 2,660,000 | 2,696,070 | |
Synovus Financial Corp. | 7.875 | 02-15-19 | 1,075,000 | 1,217,438 | |
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 | 2,214,713 | |
Wachovia Bank NA | 5.850 | 02-01-37 | 1,915,000 | 2,261,793 | |
Wells Fargo & Company, Series K (7.980% to | |||||
3-15-18, then 3 month LIBOR + 3.770%) (Q) | 7.980 | 03-15-18 | 4,717,000 | 5,524,786 |
See notes to financial statements | Annual report | Bond Fund | 15 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Consumer Finance 0.6% | |||||
Capital One Financial Corp. | 4.750 | 07-15-21 | 3,250,000 | $3,631,638 | |
Discover Bank | 7.000 | 04-15-20 | 1,340,000 | 1,624,612 | |
Discover Financial Services | 5.200 | 04-27-22 | 2,795,000 | 3,081,004 | |
DTEK Finance PLC (S) | 7.875 | 04-04-18 | 2,860,000 | 2,838,550 | |
Diversified Financial Services 3.8% | |||||
Alfa Bank OJSC (S) | 7.750 | 04-28-21 | 695,000 | 772,145 | |
Banco Santander Brasil SA (S) | 8.000 | 03-18-16 | BRL 6,000,000 | 2,810,066 | |
Bank of America Corp. | 3.300 | 01-11-23 | 1,645,000 | 1,595,958 | |
Bank of America Corp. | 5.000 | 05-13-21 | 4,855,000 | 5,383,918 | |
Bank of America Corp. | 5.700 | 01-24-22 | 2,765,000 | 3,179,073 | |
Bank of America Corp. | 6.500 | 08-01-16 | 1,595,000 | 1,823,967 | |
Bank of America NA | 5.300 | 03-15-17 | 895,000 | 993,369 | |
Bank of Ceylon (S) | 6.875 | 05-03-17 | 1,425,000 | 1,480,219 | |
General Electric Capital Corp. (P) | 0.755 | 08-15-36 | 2,745,000 | 2,227,581 | |
General Electric Capital Corp. | 4.375 | 09-16-20 | 1,610,000 | 1,762,470 | |
General Electric Capital Corp. | 5.300 | 02-11-21 | 880,000 | 994,019 | |
General Electric Capital Corp. | 5.550 | 05-04-20 | 4,270,000 | 5,005,990 | |
General Electric Capital Corp. | 5.875 | 01-14-38 | 665,000 | 760,508 | |
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 | 4,387,500 | |
ING US, Inc. (P)(S) | 5.650 | 05-15-53 | 1,760,000 | 1,768,800 | |
Intercorp Retail Trust (S) | 8.875 | 11-14-18 | 750,000 | 845,625 | |
International Lease Finance Corp. (S) | 7.125 | 09-01-18 | 1,435,000 | 1,691,506 | |
iPayment, Inc. | 10.250 | 05-15-18 | 2,810,000 | 2,500,900 | |
JPMorgan Chase & Company | 4.625 | 05-10-21 | 5,965,000 | 6,573,221 | |
JPMorgan Chase & Company (7.900% to | |||||
4-30-18, then 3 month LIBOR + 3.470%) (Q) | 7.900 | 04-30-18 | 2,840,000 | 3,315,700 | |
Merrill Lynch & Company, Inc. | 6.875 | 04-25-18 | 4,365,000 | 5,203,512 | |
Merrill Lynch & Company, Inc. | 7.750 | 05-14-38 | 1,395,000 | 1,749,729 | |
Rabobank Nederland NV | 3.950 | 11-09-22 | 1,050,000 | 1,046,620 | |
Rabobank Nederland NV (11.000% to 6-30-19, | |||||
then 3 month LIBOR + 10.868%) (Q)(S) | 11.000 | 06-30-19 | 3,579,000 | 4,795,860 | |
SPL Logistics Escrow LLC (S) | 8.875 | 08-01-20 | 1,216,000 | 1,273,760 | |
Springleaf Finance Corp. (S) | 6.000 | 06-01-20 | 2,285,000 | 2,205,025 | |
The Bear Stearns Companies LLC | 7.250 | 02-01-18 | 1,950,000 | 2,384,577 | |
UBS AG | 7.625 | 08-17-22 | 2,555,000 | 2,916,614 | |
USB Realty Corp. (P)(Q)(S) | 1.424 | 01-15-17 | 2,900,000 | 2,588,250 | |
Insurance 3.2% | |||||
Aflac, Inc. | 8.500 | 05-15-19 | 2,405,000 | 3,204,035 | |
American International Group, Inc. | 8.250 | 08-15-18 | 1,365,000 | 1,736,021 | |
Aon PLC | 4.250 | 12-12-42 | 1,580,000 | 1,482,196 | |
AXA SA | 8.600 | 12-15-30 | 1,695,000 | 2,189,148 | |
CNA Financial Corp. | 5.875 | 08-15-20 | 1,690,000 | 1,981,816 | |
CNA Financial Corp. | 7.250 | 11-15-23 | 3,415,000 | 4,297,812 | |
CNO Financial Group, Inc. (S) | 6.375 | 10-01-20 | 820,000 | 888,675 | |
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 | 4,507,556 | |
Hartford Financial Services Group, Inc. | 5.500 | 03-30-20 | 1,045,000 | 1,216,118 | |
Hartford Financial Services Group, Inc. | 6.000 | 01-15-19 | 474,000 | 559,032 |
16 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Insurance (continued) | |||||
Liberty Mutual Group, Inc. (S) | 5.000 | 06-01-21 | 4,540,000 | $4,947,924 | |
Liberty Mutual Group, Inc. (S) | 7.800 | 03-15-37 | 3,235,000 | 3,865,825 | |
Lincoln National Corp. | 8.750 | 07-01-19 | 1,955,000 | 2,605,763 | |
Lincoln National Corp. (6.050% to 4-20-17, | |||||
then 3 month LIBOR + 2.040%) | 6.050 | 04-20-67 | 2,275,000 | 2,320,500 | |
Lincoln National Corp. (7.000% to 5-17-16, | |||||
then 3 month LIBOR + 2.358%) | 7.000 | 05-17-66 | 915,000 | 951,600 | |
MetLife, Inc. | 6.400 | 12-15-36 | 1,940,000 | 2,192,200 | |
Nippon Life Insurance Company (P)(S) | 5.000 | 10-18-42 | 1,795,000 | 1,839,843 | |
Onex USI Aquisition Corp. (S) | 7.750 | 01-15-21 | 2,265,000 | 2,327,288 | |
Pacific LifeCorp. (S) | 6.000 | 02-10-20 | 1,190,000 | 1,347,535 | |
Prudential Financial, Inc. (P) | 5.200 | 03-15-44 | 760,000 | 771,400 | |
Prudential Financial, Inc. (5.875% to 9-15-22, | |||||
then 3 month LIBOR + 4.175%) | 5.875 | 09-15-42 | 2,555,000 | 2,762,594 | |
Teachers Insurance & Annuity Association of | |||||
America (S) | 6.850 | 12-16-39 | 3,225,000 | 4,253,988 | |
The Chubb Corp. (6.375% until 4-15-17, then | |||||
3 month LIBOR + 2.250%) | 6.375 | 03-29-67 | 2,475,000 | 2,784,375 | |
The Hanover Insurance Group, Inc. | 6.375 | 06-15-21 | 735,000 | 838,085 | |
Unum Group | 7.125 | 09-30-16 | 1,785,000 | 2,071,139 | |
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 | 2,526,720 | |
WR Berkley Corp. | 5.375 | 09-15-20 | 1,605,000 | 1,786,861 | |
Real Estate Investment Trusts 3.0% | |||||
Boston Properties LP | 3.700 | 11-15-18 | 1,075,000 | 1,169,294 | |
Brandywine Operating Partnership LP | 7.500 | 05-15-15 | 1,755,000 | 1,959,842 | |
Corrections Corp. of America (S) | 4.625 | 05-01-23 | 2,235,000 | 2,268,525 | |
DDR Corp. | 4.625 | 07-15-22 | 535,000 | 572,476 | |
DDR Corp. | 7.500 | 04-01-17 | 4,850,000 | 5,764,007 | |
DDR Corp. | 7.875 | 09-01-20 | 715,000 | 911,294 | |
Goodman Funding Pty, Ltd. (S) | 6.375 | 04-15-21 | 3,120,000 | 3,572,169 | |
Health Care REIT, Inc. | 4.950 | 01-15-21 | 1,095,000 | 1,210,182 | |
Health Care REIT, Inc. | 6.125 | 04-15-20 | 4,995,000 | 5,874,610 | |
Healthcare Realty Trust, Inc. | 6.500 | 01-17-17 | 2,120,000 | 2,416,312 | |
Highwoods Realty LP | 5.850 | 03-15-17 | 4,325,000 | 4,824,490 | |
Host Hotels & Resorts LP | 3.750 | 10-15-23 | 1,085,000 | 1,062,919 | |
Host Hotels & Resorts LP | 5.250 | 03-15-22 | 2,420,000 | 2,656,700 | |
MPT Operating Partnership LP | 6.375 | 02-15-22 | 1,685,000 | 1,845,075 | |
MPT Operating Partnership LP | 6.875 | 05-01-21 | 1,025,000 | 1,132,625 | |
ProLogis International Funding II (S) | 4.875 | 02-15-20 | 1,055,000 | 1,076,318 | |
ProLogis LP | 4.500 | 08-15-17 | 295,000 | 321,565 | |
ProLogis LP | 6.250 | 03-15-17 | 2,505,000 | 2,860,174 | |
SL Green Realty Corp. | 7.750 | 03-15-20 | 1,812,000 | 2,218,872 | |
Ventas Realty LP | 2.700 | 04-01-20 | 1,495,000 | 1,424,583 | |
Ventas Realty LP | 4.000 | 04-30-19 | 1,985,000 | 2,146,728 | |
Ventas Realty LP | 4.750 | 06-01-21 | 4,815,000 | 5,267,586 | |
WEA Finance LLC (S) | 6.750 | 09-02-19 | 1,520,000 | 1,866,639 | |
Weyerhaeuser Company | 7.375 | 03-15-32 | 3,410,000 | 4,520,282 |
See notes to financial statements | Annual report | Bond Fund | 17 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Real Estate Management & Development 0.2% | |||||
CBRE Services, Inc. | 5.000 | 03-15-23 | 930,000 | $927,675 | |
General Shopping Investments, Ltd. | |||||
(12.000% to 3-20-17, then 5 Year USGG + | |||||
11.052%) (Q)(S) | 12.000 | 03-20-17 | 1,270,000 | 1,193,800 | |
NANA Development Corp. (S) | 9.500 | 03-15-19 | 1,785,000 | 1,834,088 | |
Thrifts & Mortgage Finance 0.3% | |||||
Nationstar Mortgage LLC (S) | 7.875 | 10-01-20 | 2,050,000 | 2,244,750 | |
Nationstar Mortgage LLC (S) | 9.625 | 05-01-19 | 1,755,000 | 2,007,375 | |
Nationstar Mortgage LLC | 10.875 | 04-01-15 | 2,690,000 | 2,848,038 | |
Health Care 1.3% | 25,753,104 | ||||
Health Care Equipment & Supplies 0.4% | |||||
Alere, Inc. (S) | 6.500 | 06-15-20 | 860,000 | 864,300 | |
Alere, Inc. (S) | 7.250 | 07-01-18 | 2,250,000 | 2,441,250 | |
Alere, Inc. | 8.625 | 10-01-18 | 1,385,000 | 1,499,263 | |
DJO Finance LLC | 9.875 | 04-15-18 | 460,000 | 504,850 | |
MModal, Inc. (S) | 10.750 | 08-15-20 | 3,245,000 | 2,758,250 | |
Health Care Providers & Services 0.6% | |||||
BioScrip, Inc. | 10.250 | 10-01-15 | 1,260,000 | 1,323,000 | |
Catalent Pharma Solutions, Inc. (S) | 7.875 | 10-15-18 | 745,000 | 756,175 | |
HCA, Inc. | 7.500 | 02-15-22 | 1,855,000 | 2,161,075 | |
Medco Health Solutions, Inc. | 7.125 | 03-15-18 | 2,445,000 | 3,007,140 | |
National Mentor Holdings, Inc. (S) | 12.500 | 02-15-18 | 3,385,000 | 3,681,188 | |
Pharmaceuticals 0.3% | |||||
Endo Health Solutions, Inc. | 7.250 | 01-15-22 | 2,295,000 | 2,472,863 | |
Mylan, Inc. (S) | 7.875 | 07-15-20 | 3,685,000 | 4,283,750 | |
Industrials 6.2% | 121,423,212 | ||||
Aerospace & Defense 0.9% | |||||
Bombardier, Inc. (S) | 7.750 | 03-15-20 | 1,190,000 | 1,392,300 | |
Ducommun, Inc. | 9.750 | 07-15-18 | 295,000 | 327,450 | |
Embraer Overseas, Ltd. | 6.375 | 01-15-20 | 1,585,000 | 1,824,335 | |
Huntington Ingalls Industries, Inc. | 7.125 | 03-15-21 | 2,090,000 | 2,293,775 | |
Kratos Defense & Security Solutions, Inc. | 10.000 | 06-01-17 | 3,000,000 | 3,270,000 | |
Textron Financial Corp. (6.000% to 2-15-17, | |||||
then 3 month LIBOR + 1.735%) (S) | 6.000 | 02-15-67 | 4,770,000 | 4,364,550 | |
Textron, Inc. | 5.600 | 12-01-17 | 2,195,000 | 2,451,771 | |
Textron, Inc. | 7.250 | 10-01-19 | 1,440,000 | 1,751,268 | |
Airlines 2.2% | |||||
Air Canada 2013-1 Class A Pass Through | |||||
Trust (S) | 4.125 | 05-15-25 | 815,000 | 834,356 | |
Air Canada 2013-1 Class B Pass Through | |||||
Trust (S) | 5.375 | 05-15-21 | 580,000 | 600,300 | |
America West Airlines 2000-1 Pass | |||||
Through Trust | 8.057 | 07-02-20 | 662,004 | 741,444 | |
American Airlines 2011-1 Class B Pass Through | |||||
Trust (S) | 7.000 | 01-31-18 | 4,785,132 | 5,096,166 | |
Continental Airlines 1997-4 Class A Pass | |||||
Through Trust | 6.900 | 01-02-18 | 1,996,667 | 2,176,367 |
18 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Airlines (continued) | |||||
Continental Airlines 1998-1 Class A Pass | |||||
Through Trust | 6.648 | 09-15-17 | 534,985 | $581,155 | |
Continental Airlines 1999-1 Class A Pass | |||||
Through Trust | 6.545 | 02-02-19 | 953,928 | 1,070,784 | |
Continental Airlines 2000-2 Class B Pass | |||||
Through Trust | 8.307 | 04-02-18 | 305,434 | 326,814 | |
Continental Airlines 2007-1 Class A Pass | |||||
Through Trust | 5.983 | 04-19-22 | 2,324,702 | 2,638,537 | |
Continental Airlines 2010-1 Class A Pass | |||||
Through Trust | 4.750 | 01-12-21 | 752,401 | 825,760 | |
Continental Airlines 2012-1 Class B Pass | |||||
Through Trust | 6.250 | 04-11-20 | 1,325,000 | 1,421,063 | |
Delta Air Lines 2002-1 Class G-1 Pass | |||||
Through Trust | 6.718 | 01-02-23 | 3,389,704 | 3,762,571 | |
Delta Air Lines 2007-1 Class A Pass | |||||
Through Trust | 6.821 | 08-10-22 | 4,606,643 | 5,372,728 | |
Delta Air Lines 2010-1 Class A Pass | |||||
Through Trust | 6.200 | 07-02-18 | 832,716 | 932,642 | |
Delta Air Lines 2011-1 Class A Pass | |||||
Through Trust | 5.300 | 04-15-19 | 1,515,083 | 1,693,105 | |
Northwest Airlines 2002-1 Class G-2 Pass | |||||
Through Trust | 6.264 | 11-20-21 | 718,456 | 766,306 | |
Northwest Airlines 2007-1 Class A Pass | |||||
Through Trust | 7.027 | 11-01-19 | 1,733,601 | 1,941,633 | |
UAL 2007-1 Class C Pass Through Trust (P) | 2.758 | 07-02-14 | 3,661,723 | 3,634,260 | |
UAL 2009-1 Pass Through Trust | 10.400 | 11-01-16 | 498,530 | 579,391 | |
UAL 2009-2A Pass Through Trust | 9.750 | 01-15-17 | 1,525,603 | 1,762,072 | |
US Airways 2010-1 Class A Pass Through Trust | 6.250 | 04-22-23 | 1,615,489 | 1,809,348 | |
US Airways 2012-1 Class A Pass Through Trust | 5.900 | 10-01-24 | 983,225 | 1,098,754 | |
US Airways 2012-2 Class A Pass Through Trust | 4.625 | 06-03-25 | 2,875,000 | 2,954,063 | |
Building Products 0.6% | |||||
Masco Corp. | 7.125 | 03-15-20 | 1,555,000 | 1,821,637 | |
Owens Corning | 4.200 | 12-15-22 | 3,010,000 | 3,098,467 | |
Ply Gem Industries, Inc. | 9.375 | 04-15-17 | 455,000 | 495,950 | |
Voto-Votorantim Overseas Trading Operations | |||||
NV (S) | 6.625 | 09-25-19 | 2,145,000 | 2,445,300 | |
Voto-Votorantim, Ltd. (S) | 6.750 | 04-05-21 | 2,440,000 | 2,781,600 | |
Commercial Services & Supplies 0.5% | |||||
Ahern Rentals, Inc. (S) | 9.500 | 06-15-18 | 1,380,000 | 1,380,000 | |
Casella Waste Systems, Inc. | 7.750 | 02-15-19 | 2,335,000 | 2,241,600 | |
Garda World Security Corp. (S) | 9.750 | 03-15-17 | 535,000 | 573,788 | |
Iron Mountain, Inc. | 5.750 | 08-15-24 | 2,330,000 | 2,359,125 | |
Safway Group Holding LLC (S) | 7.000 | 05-15-18 | 1,075,000 | 1,080,375 | |
Steelcase, Inc. | 6.375 | 02-15-21 | 2,525,000 | 2,749,839 | |
Construction & Engineering 0.3% | |||||
Aeropuertos Dominicanos Siglo XXI SA (S) | 9.250 | 11-13-19 | 2,325,000 | 2,499,375 | |
Empresas ICA SAB de CV (S) | 8.375 | 07-24-17 | 650,000 | 552,500 | |
Tutor Perini Corp. | 7.625 | 11-01-18 | 3,045,000 | 3,212,475 | |
Electrical Equipment 0.1% | |||||
Coleman Cable, Inc. | 9.000 | 02-15-18 | 1,460,000 | 1,573,150 |
See notes to financial statements | Annual report | Bond Fund | 19 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Industrial Conglomerates 0.5% | |||||
General Electric Company | 4.125 | 10-09-42 | 1,215,000 | $1,162,688 | |
KOC Holding AS (S) | 3.500 | 04-24-20 | 2,385,000 | 2,270,520 | |
Odebrecht Finance, Ltd. (S) | 7.125 | 06-26-42 | 2,725,000 | 2,915,750 | |
Odebrecht Finance, Ltd. (Q)(S) | 7.500 | 09-14-15 | 970,000 | 1,025,290 | |
Odebrecht Finance, Ltd. (S) | 8.250 | 04-25-18 | BRL 2,850,000 | 1,370,576 | |
Tenedora Nemak SA de CV (S) | 5.500 | 02-28-23 | 1,380,000 | 1,407,600 | |
Marine 0.2% | |||||
Navios South American Logistics, Inc. (S) | 9.250 | 04-15-19 | 1,405,000 | 1,527,938 | |
Navios South American Logistics, Inc. | 9.250 | 04-15-19 | 2,505,000 | 2,724,188 | |
Road & Rail 0.5% | |||||
Penske Truck Leasing Company LP (S) | 2.875 | 07-17-18 | 3,040,000 | 3,133,085 | |
Penske Truck Leasing Company LP (S) | 3.750 | 05-11-17 | 2,515,000 | 2,684,793 | |
The Hertz Corp. | 6.750 | 04-15-19 | 1,600,000 | 1,738,000 | |
The Kenan Advantage Group, Inc. (S) | 8.375 | 12-15-18 | 2,335,000 | 2,498,450 | |
Trading Companies & Distributors 0.4% | |||||
Air Lease Corp. | 4.500 | 01-15-16 | 535,000 | 548,375 | |
Air Lease Corp. | 6.125 | 04-01-17 | 1,200,000 | 1,293,000 | |
Aircastle, Ltd. | 6.250 | 12-01-19 | 1,360,000 | 1,472,200 | |
Aircastle, Ltd. | 6.750 | 04-15-17 | 795,000 | 874,500 | |
Aircastle, Ltd. | 7.625 | 04-15-20 | 885,000 | 1,015,538 | |
Glencore Funding LLC (S) | 4.125 | 05-30-23 | 2,625,000 | 2,600,472 | |
Information Technology 0.5% | 10,374,901 | ||||
IT Services 0.3% | |||||
Brightstar Corp. (S) | 9.500 | 12-01-16 | 2,975,000 | 3,235,313 | |
Global Generations Merger Sub, Inc. (S) | 11.000 | 12-15-20 | 1,875,000 | 2,156,250 | |
Software 0.2% | |||||
Aspect Software, Inc. | 10.625 | 05-15-17 | 3,170,000 | 3,304,725 | |
First Data Corp. (S) | 11.750 | 08-15-21 | 1,735,000 | 1,678,613 | |
Materials 4.4% | 84,809,663 | ||||
Chemicals 1.1% | |||||
Braskem Finance, Ltd. (S) | 7.000 | 05-07-20 | 3,050,000 | 3,416,000 | |
CF Industries, Inc. | 7.125 | 05-01-20 | 3,500,000 | 4,347,179 | |
EuroChem Mineral & Chemical Company | |||||
OJSC (S) | 5.125 | 12-12-17 | 1,095,000 | 1,108,961 | |
Incitec Pivot Finance LLC (S) | 6.000 | 12-10-19 | 1,920,000 | 2,237,760 | |
LyondellBasell Industries NV | 5.000 | 04-15-19 | 7,070,000 | 7,987,530 | |
Nufarm Australia, Ltd. (S) | 6.375 | 10-15-19 | 1,005,000 | 1,030,125 | |
Polymer Group, Inc. | 7.750 | 02-01-19 | 540,000 | 581,850 | |
Rain CII Carbon LLC (S) | 8.250 | 01-15-21 | 1,225,000 | 1,310,750 | |
Construction Materials 0.4% | |||||
American Gilsonite Company (S) | 11.500 | 09-01-17 | 2,785,000 | 2,986,913 | |
Magnesita Finance, Ltd. (Q)(S) | 8.625 | 04-05-17 | 2,220,000 | 2,399,447 | |
Severstal Columbus LLC | 10.250 | 02-15-18 | 490,000 | 524,300 | |
Vulcan Materials Company | 7.500 | 06-15-21 | 630,000 | 743,400 |
20 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Containers & Packaging 0.5% | |||||
ARD Finance SA, PIK (S) | 11.125 | 06-01-18 | 1,620,384 | $1,774,320 | |
Consolidated Container Company LLC (S) | 10.125 | 07-15-20 | 2,011,000 | 2,267,403 | |
Pretium Packaging LLC | 11.500 | 04-01-16 | 780,000 | 842,400 | |
Rock-Tenn Company | 4.000 | 03-01-23 | 3,280,000 | 3,313,289 | |
Tekni-Plex, Inc. (S) | 9.750 | 06-01-19 | 1,625,000 | 1,820,000 | |
Metals & Mining 1.8% | |||||
Allegheny Technologies, Inc. | 5.950 | 01-15-21 | 965,000 | 1,061,393 | |
Allegheny Technologies, Inc. | 9.375 | 06-01-19 | 5,025,000 | 6,338,289 | |
ArcelorMittal | 10.350 | 06-01-19 | 1,695,000 | 2,097,563 | |
Barrick Gold Corp. (S) | 4.100 | 05-01-23 | 2,335,000 | 2,223,020 | |
Commercial Metals Company | 7.350 | 08-15-18 | 1,570,000 | 1,766,250 | |
Edgen Murray Corp. (S) | 8.750 | 11-01-20 | 1,810,000 | 1,886,925 | |
Evraz Group SA (S) | 6.500 | 04-22-20 | 3,000,000 | 2,913,750 | |
Gerdau Trade, Inc. (S) | 4.750 | 04-15-23 | 1,550,000 | 1,522,650 | |
JMC Steel Group (S) | 8.250 | 03-15-18 | 1,025,000 | 1,037,813 | |
Metinvest BV (S) | 8.750 | 02-14-18 | 2,330,000 | 2,330,000 | |
OJSC Novolipetsk Steel (S) | 4.450 | 02-19-18 | 1,050,000 | 1,031,625 | |
Rain CII Carbon LLC (S) | 8.000 | 12-01-18 | 2,070,000 | 2,194,200 | |
SunCoke Energy, Inc. | 7.625 | 08-01-19 | 1,606,000 | 1,718,420 | |
Thompson Creek Metals Company, Inc. | 7.375 | 06-01-18 | 2,005,000 | 1,814,525 | |
Vedanta Resources PLC (S) | 7.125 | 05-31-23 | 2,050,000 | 2,047,222 | |
Walter Energy, Inc. (S) | 9.875 | 12-15-20 | 1,820,000 | 1,942,850 | |
Paper & Forest Products 0.6% | |||||
Georgia-Pacific LLC (S) | 5.400 | 11-01-20 | 2,680,000 | 3,107,873 | |
Georgia-Pacific LLC | 7.250 | 06-01-28 | 900,000 | 1,157,268 | |
International Paper Company | 9.375 | 05-15-19 | 1,950,000 | 2,645,263 | |
Neenah Paper, Inc. (S) | 5.250 | 05-15-21 | 980,000 | 984,900 | |
Westvaco Corp. | 7.950 | 02-15-31 | 3,515,000 | 4,296,237 | |
Telecommunication Services 3.0% | 59,389,125 | ||||
Diversified Telecommunication Services 2.0% | |||||
American Tower Corp. | 4.700 | 03-15-22 | 2,210,000 | 2,350,202 | |
CenturyLink, Inc. | 5.625 | 04-01-20 | 950,000 | 982,063 | |
CenturyLink, Inc. | 5.800 | 03-15-22 | 2,915,000 | 2,980,588 | |
CenturyLink, Inc. | 6.450 | 06-15-21 | 1,880,000 | 2,016,300 | |
CenturyLink, Inc. | 7.600 | 09-15-39 | 1,645,000 | 1,645,000 | |
Crown Castle Towers LLC (S) | 4.883 | 08-15-20 | 3,275,000 | 3,641,944 | |
Crown Castle Towers LLC (S) | 6.113 | 01-15-20 | 2,390,000 | 2,829,206 | |
GTP Acquisition Partners I LLC (S) | 4.704 | 05-15-18 | 3,440,000 | 3,436,643 | |
GTP Acquisition Partners I LLC (S) | 7.628 | 06-15-16 | 3,625,000 | 3,974,156 | |
Intelsat Luxembourg SA (S) | 7.750 | 06-01-21 | 1,935,000 | 2,034,169 | |
Oi SA (S) | 9.750 | 09-15-16 | BRL 3,440,000 | 1,654,309 | |
PAETEC Holding Corp. | 9.875 | 12-01-18 | 2,119,000 | 2,410,363 | |
Telecom Italia Capital SA | 6.999 | 06-04-18 | 2,130,000 | 2,473,424 | |
Telecom Italia Capital SA | 7.200 | 07-18-36 | 1,790,000 | 1,856,264 | |
Telefonica Emisiones SAU | 6.421 | 06-20-16 | 4,620,000 | 5,169,082 | |
Wind Acquisition Finance SA (S) | 6.500 | 04-30-20 | 615,000 | 631,913 |
See notes to financial statements | Annual report | Bond Fund | 21 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Wireless Telecommunication Services 1.0% | |||||
Clearwire Communications LLC (S) | 12.000 | 12-01-15 | 1,805,000 | $1,929,184 | |
Digicel Group, Ltd. (S) | 8.250 | 09-30-20 | 2,455,000 | 2,614,575 | |
Digicel, Ltd. (S) | 7.000 | 02-15-20 | 580,000 | 601,750 | |
MetroPCS Wireless, Inc. (S) | 6.250 | 04-01-21 | 1,200,000 | 1,257,000 | |
Millicom International Cellular SA (S) | 4.750 | 05-22-20 | 1,485,000 | 1,453,163 | |
SBA Tower Trust (S) | 2.933 | 12-15-17 | 2,220,000 | 2,265,965 | |
SBA Tower Trust (S) | 3.598 | 04-15-18 | 2,545,000 | 2,549,802 | |
SBA Tower Trust (S) | 5.101 | 04-17-17 | 2,090,000 | 2,306,108 | |
Softbank Corp. (S) | 4.500 | 04-15-20 | 2,800,000 | 2,843,691 | |
Verizon New York, Inc. | 7.000 | 12-01-33 | 1,450,000 | 1,482,261 | |
Utilities 2.9% | 55,606,574 | ||||
Electric Utilities 1.7% | |||||
Beaver Valley II Funding Corp. | 9.000 | 06-01-17 | 1,344,000 | 1,373,043 | |
BVPS II Funding Corp. | 8.890 | 06-01-17 | 1,308,000 | 1,409,612 | |
Commonwealth Edison Company | 5.800 | 03-15-18 | 1,765,000 | 2,089,617 | |
DPL, Inc. | 7.250 | 10-15-21 | 2,975,000 | 3,213,000 | |
Electricite de France SA (5.250% to 1-29-23, | |||||
then 10 Year Swap Rate + 3.709%) (Q)(S) | 5.250 | 01-29-23 | 1,330,000 | 1,334,988 | |
FirstEnergy Corp. | 4.250 | 03-15-23 | 3,910,000 | 3,860,159 | |
Ipalco Enterprises, Inc. | 5.000 | 05-01-18 | 3,015,000 | 3,241,125 | |
Israel Electric Corp., Ltd. (S) | 7.250 | 01-15-19 | 2,720,000 | 3,072,779 | |
NextEra Energy Capital Holdings, Inc. (6.650% | |||||
to 6-15-17, then 3 month LIBOR + 2.125%) | 6.650 | 06-15-67 | 1,355,000 | 1,456,625 | |
PNM Resources, Inc. | 9.250 | 05-15-15 | 3,860,000 | 4,381,100 | |
PNPP II Funding Corp. | 9.120 | 05-30-16 | 544,000 | 564,680 | |
PPL Capital Funding, Inc. (6.700% to 3-30-17, | |||||
then 3 month LIBOR + 2.665%) | 6.700 | 03-30-67 | 2,860,000 | 3,045,900 | |
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 | 1,915,200 | |
W3A Funding Corp. | 8.090 | 01-02-17 | 1,206,010 | 1,231,561 | |
Gas Utilities 0.0% | |||||
LBC Tank Terminals Holding Netherlands BV (S) | 6.875 | 05-15-23 | 755,000 | 784,256 | |
Independent Power Producers & Energy Traders 0.6% | |||||
AES Corp. | 4.875 | 05-15-23 | 555,000 | 545,288 | |
Dynegy, Inc. (S) | 5.875 | 06-01-23 | 1,175,000 | 1,157,375 | |
Exelon Generation Company LLC | 4.250 | 06-15-22 | 2,805,000 | 2,909,147 | |
Exelon Generation Company LLC | 5.600 | 06-15-42 | 1,100,000 | 1,166,041 | |
NRG Energy, Inc. | 7.625 | 01-15-18 | 2,460,000 | 2,773,650 | |
NRG Energy, Inc. | 8.250 | 09-01-20 | 1,910,000 | 2,141,588 | |
Multi-Utilities 0.6% | |||||
CMS Energy Corp. | 5.050 | 03-15-22 | 4,439,000 | 5,019,022 | |
Integrys Energy Group, Inc. (6.110% to | |||||
12-1-16, then 3 month LIBOR + 2.120%) | 6.110 | 12-01-66 | 3,915,000 | 4,151,858 | |
Wisconsin Energy Corp. (6.250% to 5-15-17, | |||||
then 3 month LIBOR + 2.113%) | 6.250 | 05-15-67 | 2,010,000 | 2,183,363 | |
Water Utilities 0.0% | |||||
Salton Sea Funding Corp., Series F | 7.475 | 11-30-18 | 561,139 | 585,597 |
22 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government & Agency Obligations 24.0% | $469,743,046 | ||||
(Cost $471,879,704) | |||||
U.S. Government 7.6% | 148,979,643 | ||||
U.S. Treasury | |||||
Bond | 3.125 | 02-15-43 | 57,065,000 | 55,424,381 | |
Note | 1.750 | 05-15-23 | 43,902,000 | 42,372,279 | |
Note | 2.625 | 08-15-20 | 43,510,000 | 46,633,887 | |
Strip, PO | 2.704 | 11-15-30 | 7,940,000 | 4,549,096 | |
U.S. Government Agency 16.4% | 320,763,403 | ||||
Federal Home Loan Mortgage Corp. | |||||
30 Yr Pass Thru | 3.500 | 05-01-42 | 11,986,954 | 12,424,758 | |
30 Yr Pass Thru | 3.500 | 06-01-42 | 13,128,585 | 13,608,086 | |
30 Yr Pass Thru | 4.500 | 11-01-39 | 10,249,724 | 10,870,842 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 4,705,785 | 5,040,869 | |
30 Yr Pass Thru | 6.500 | 06-01-37 | 89,625 | 100,261 | |
30 Yr Pass Thru | 6.500 | 10-01-37 | 213,343 | 238,262 | |
30 Yr Pass Thru | 6.500 | 11-01-37 | 454,480 | 507,564 | |
30 Yr Pass Thru | 6.500 | 12-01-37 | 212,982 | 237,859 | |
30 Yr Pass Thru | 6.500 | 02-01-38 | 117,910 | 131,609 | |
30 Yr Pass Thru | 6.500 | 09-01-39 | 3,774,687 | 4,213,219 | |
Federal National Mortgage Association | |||||
15 Yr Pass Thru | 3.500 | 02-01-26 | 1,521,054 | 1,600,759 | |
15 Yr Pass Thru | 3.500 | 03-01-26 | 12,883,943 | 13,559,074 | |
15 Yr Pass Thru | 4.000 | 12-01-24 | 8,205,043 | 8,814,972 | |
30 Yr Pass Thru | 3.000 | 09-01-27 | 9,871,302 | 10,289,967 | |
30 Yr Pass Thru | 3.000 | 10-01-42 | 8,398,776 | 8,464,566 | |
30 Yr Pass Thru | 3.000 | 12-01-42 | 4,383,971 | 4,418,997 | |
30 Yr Pass Thru | 3.000 | 01-01-43 | 15,799,911 | 15,923,677 | |
30 Yr Pass Thru | 3.000 | 01-01-43 | 524,440 | 528,548 | |
30 Yr Pass Thru | 3.000 | 02-01-43 | 236,959 | 238,815 | |
30 Yr Pass Thru | 3.500 | 06-01-42 | 7,364,159 | 7,646,356 | |
30 Yr Pass Thru | 3.500 | 08-01-42 | 12,328,653 | 12,803,019 | |
30 Yr Pass Thru | 4.000 | 11-01-40 | 2,914,100 | 3,103,175 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 9,399,621 | 10,103,492 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 16,007,135 | 17,125,760 | |
30 Yr Pass Thru | 4.000 | 10-01-41 | 4,476,388 | 4,792,009 | |
30 Yr Pass Thru | 4.500 | 02-01-41 | 17,653,161 | 18,864,058 | |
30 Yr Pass Thru | 4.500 | 06-01-41 | 18,673,741 | 20,234,750 | |
30 Yr Pass Thru | 4.500 | 07-01-41 | 8,159,656 | 8,841,753 | |
30 Yr Pass Thru | 5.000 | 11-01-33 | 1,088,632 | 1,178,912 | |
30 Yr Pass Thru | 5.000 | 10-01-34 | 1,155,422 | 1,251,241 | |
30 Yr Pass Thru | 5.000 | 09-01-40 | 11,243,016 | 12,115,668 | |
30 Yr Pass Thru | 5.000 | 09-01-40 | 12,107,314 | 13,425,403 | |
30 Yr Pass Thru | 5.000 | 02-01-41 | 8,035,979 | 9,006,260 | |
30 Yr Pass Thru | 5.000 | 03-01-41 | 9,187,309 | 10,256,411 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 3,133,624 | 3,491,421 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 14,063,010 | 15,242,435 | |
30 Yr Pass Thru | 5.500 | 05-01-35 | 5,553,559 | 6,083,345 | |
30 Yr Pass Thru | 5.500 | 04-01-36 | 1,451,549 | 1,575,959 | |
30 Yr Pass Thru | 5.500 | 05-01-36 | 6,303,506 | 6,851,648 | |
30 Yr Pass Thru | 5.500 | 01-01-39 | 5,222,597 | 5,662,056 | |
30 Yr Pass Thru | 6.000 | 02-01-37 | 1,513,861 | 1,660,512 | |
30 Yr Pass Thru | 6.000 | 05-01-37 | 632,743 | 689,292 | |
30 Yr Pass Thru | 6.000 | 07-01-38 | 5,621,363 | 6,171,188 | |
30 Yr Pass Thru | 6.500 | 01-01-39 | 7,266,165 | 8,111,712 | |
30 Yr Pass Thru | 6.500 | 03-01-39 | 407,047 | 454,941 | |
30 Yr Pass Thru | 6.500 | 06-01-39 | 2,507,944 | 2,807,923 |
See notes to financial statements | Annual report | Bond Fund | 23 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Foreign Government Obligations 0.2% | $2,921,600 | ||||
(Cost $3,185,423) | |||||
Argentina 0.2% | 2,921,600 | ||||
City of Buenos Aires (S) | 9.950 | 03-01-17 | 3,320,000 | 2,921,600 | |
Convertible Bonds 0.1% | $1,150,025 | ||||
(Cost $702,974) | |||||
Consumer Discretionary 0.1% | 1,150,025 | ||||
Media 0.1% | |||||
XM Satellite Radio, Inc. (S) | 7.000 | 12-01-14 | 586,000 | 1,150,025 | |
Municipal Bonds 0.1% | $1,894,382 | ||||
(Cost $1,740,106) | |||||
State of Illinois, GO | 5.100 | 06-01-33 | 1,880,000 | 1,894,382 | |
Term Loans (M) 0.6% | $12,248,405 | ||||
(Cost $12,079,104) | |||||
Consumer Discretionary 0.2% | 3,689,852 | ||||
Auto Components 0.0% | |||||
Tower Automotive Holdings USA LLC | 5.750 | 04-16-20 | 475,000 | 480,334 | |
Hotels, Restaurants & Leisure 0.2% | |||||
CCM Merger, Inc. | 5.000 | 03-01-17 | 690,341 | 695,519 | |
Kalispel Tribal Economic Authority | 7.500 | 02-24-17 | 2,266,331 | 2,260,666 | |
Multiline Retail 0.0% | |||||
JC Penney Corp., Inc. | 6.000 | 04-30-18 | 250,000 | 253,333 | |
Financials 0.1% | 2,603,545 | ||||
Capital Markets 0.1% | |||||
Walter Investment Management Corp. | 5.750 | 11-28-17 | 1,951,234 | 1,972,698 | |
Real Estate Investment Trusts 0.0% | |||||
iStar Financial, Inc. | 4.500 | 09-28-17 | 623,059 | 630,847 | |
Industrials 0.1% | 2,606,218 | ||||
Aerospace & Defense 0.0% | |||||
WP CPP Holdings LLC | 4.750 | 12-27-19 | 997,500 | 1,006,228 | |
Airlines 0.1% | |||||
Delta Air Lines, Inc. | 4.000 | 10-18-18 | 1,596,000 | 1,599,990 | |
Materials 0.1% | 1,448,962 | ||||
Metals & Mining 0.1% | |||||
Fortescue Metals Group Finance PTY, Ltd. | 5.250 | 10-18-17 | 1,442,750 | 1,448,962 | |
Telecommunication Services 0.0% | 500,994 | ||||
Wireless Telecommunication Services 0.0% | |||||
Cricket Communications, Inc. | 4.750 | 10-10-19 | 498,750 | 500,994 | |
Utilities 0.1% | 1,398,834 | ||||
Electric Utilities 0.1% | |||||
La Frontera Generation LLC | 4.500 | 09-30-20 | 1,400,000 | 1,398,834 |
24 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Capital Preferred Securities 1.2% | $22,641,888 | ||||
(Cost $21,423,829) | |||||
Financials 1.2% | 22,641,888 | ||||
Capital Markets 0.2% | |||||
State Street Capital Trust IV (P) | 1.280 | 06-15-37 | 4,580,000 | 3,858,650 | |
Commercial Banks 0.5% | |||||
Allfirst Preferred Capital Trust (P) | 1.777 | 07-15-29 | 1,305,000 | 1,070,100 | |
Fifth Third Capital Trust IV (6.500% to 4-15-17 | |||||
then 3 month LIBOR + 1.368%) | 6.500 | 04-15-37 | 5,175,000 | 5,187,938 | |
PNC Financial Services Group, Inc. (6.750% to | |||||
8-1-21, then 3 month LIBOR + 3.678%) (Q) | 6.750 | 08-01-21 | 1,200,000 | 1,375,500 | |
Sovereign Capital Trust VI | 7.908 | 06-13-36 | 1,840,000 | 1,941,200 | |
Insurance 0.5% | |||||
MetLife Capital Trust IV (7.875% to 12-15-37 | |||||
then 3 month LIBOR + 3.960%) (S) | 7.875 | 12-15-67 | 960,000 | 1,212,000 | |
MetLife Capital Trust X (9.250% to 4-8-33, | |||||
then 3 month LIBOR + 5.540%) (S) | 9.250 | 04-08-38 | 2,050,000 | 2,900,750 | |
ZFS Finance USA Trust II (6.450% to 6-15-16, | |||||
then 3 month LIBOR + 2.000%) (S) | 6.450 | 12-15-65 | 2,800,000 | 3,052,000 | |
ZFS Finance USA Trust V (6.500% to 5-9-17, | |||||
then 3 month LIBOR + 2.285%) (S) | 6.500 | 05-09-37 | 1,875,000 | 2,043,750 | |
Collateralized Mortgage Obligations 16.7% | $327,103,272 | ||||
(Cost $310,398,618) | |||||
Commercial & Residential 12.2% | 238,240,097 | ||||
American Home Mortgage Assets LLC | |||||
Series 2006-6, Class A1A (P) | 0.383 | 12-25-46 | 1,938,117 | 1,354,781 | |
Series 2006-6, Class XP IO | 1.941 | 12-25-46 | 23,394,319 | 1,871,007 | |
American Home Mortgage Investment Trust | |||||
Series 2005-1, Class 1A1 (P) | 0.413 | 06-25-45 | 4,463,916 | 4,115,592 | |
Americold 2010 LLC Trust | |||||
Series 2010-ARTA, Class D (S) | 7.443 | 01-14-29 | 3,200,000 | 3,706,256 | |
Banc of America Commercial Mortgage Trust, Inc. | |||||
Series 2006-2, Class AM (P) | 5.764 | 05-10-45 | 4,815,000 | 5,338,135 | |
Series 2006-4, Class AM | 5.675 | 07-10-46 | 5,675,000 | 6,351,176 | |
Series 2006-3, Class A4 (P) | 5.889 | 07-10-44 | 3,935,000 | 4,403,348 | |
Bear Stearns Alt-A Trust | |||||
Series 2004-12, Class 1A1 (P) | 0.893 | 01-25-35 | 3,462,352 | 3,420,901 | |
Series 2005-5, Class 1A4 (P) | 0.753 | 07-25-35 | 3,377,136 | 3,204,572 | |
Bear Stearns Asset Backed Securities Trust | |||||
Series 2004-AC5, Class A1 | 5.250 | 10-25-34 | 2,597,607 | 2,705,768 | |
Citigroup Commercial Mortgage Trust | |||||
Series 2006-C4, Class A3 (P) | 5.743 | 03-15-49 | 4,400,000 | 4,889,641 | |
Citigroup/Deutsche Bank Commercial | |||||
Mortgage Trust | |||||
Series 2005-CD1, Class C (P) | 5.219 | 07-15-44 | 1,230,000 | 1,259,658 | |
Commercial Mortgage Pass Through Certificates | |||||
Series 2007-C9, Class A4 (P) | 5.800 | 12-10-49 | 6,345,000 | 7,349,045 | |
Series 2012-CR2, Class XA IO | 1.960 | 08-15-45 | 19,941,416 | 2,461,110 | |
Series 2012-CR5, Class XA IO | 1.944 | 12-10-45 | 28,376,083 | 3,378,967 | |
Series 2012-LC4, Class B (P) | 4.934 | 12-10-44 | 1,955,000 | 2,166,592 | |
Series 2012-LC4, Class C (P) | 5.648 | 12-10-44 | 4,110,000 | 4,685,684 |
See notes to financial statements | Annual report | Bond Fund | 25 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
Extended Stay America Trust | |||||
Series 2013-ESFL, Class DFL (P)(S) | 3.334 | 12-05-31 | 1,515,000 | $1,547,609 | |
Series 2013-ESHM, Class M (S) | 7.625 | 12-05-19 | 2,900,000 | 3,018,973 | |
Fontainebleau Miami Beach Trust | |||||
Series 2012-FBLU, Class C (S) | 4.270 | 05-05-27 | 1,555,000 | 1,611,289 | |
Series 2012-FBLU, Class D (S) | 5.007 | 05-05-27 | 2,300,000 | 2,372,894 | |
GMAC Mortgage Corp. Loan Trust | |||||
Series 2004-AR2, Class 3A (P) | 3.551 | 08-19-34 | 2,741,657 | 2,692,852 | |
Greenwich Capital Commercial Funding Corp. | |||||
Series 2006-GG7, Class AM (P) | 5.860 | 07-10-38 | 3,325,000 | 3,693,018 | |
GS Mortgage Securities Corp. II | |||||
Series 2013-KYO, Class D (P)(S) | 2.798 | 11-08-29 | 3,685,000 | 3,731,162 | |
GSR Mortgage Loan Trust | |||||
Series 2005-AR6, Class 3A1 (P) | 2.654 | 09-25-35 | 4,573,590 | 4,553,466 | |
Series 2004-9, Class B1 (P) | 3.191 | 08-25-34 | 1,605,793 | 872,278 | |
Series 2006-AR1, Class 3A1 (P) | 2.992 | 01-25-36 | 2,564,762 | 2,261,097 | |
HarborView Mortgage Loan Trust | |||||
Series 2004-11, Class X1 IO | 2.050 | 01-19-35 | 16,194,114 | 1,223,739 | |
Series 2005-8, Class 1X IO | 2.199 | 09-19-35 | 12,871,847 | 1,031,009 | |
Series 2005-9, Class 2A1C (P) | 0.648 | 06-20-35 | 5,344,083 | 5,057,116 | |
Series 2005-11, Class X IO | 2.059 | 08-19-45 | 10,073,507 | 541,922 | |
Series 2007-3, Class ES IO | 0.350 | 05-19-47 | 62,622,586 | 438,358 | |
Series 2007-4, Class ES IO | 0.350 | 07-19-47 | 70,475,853 | 493,331 | |
Series 2007-6, Class ES IO (S) | 0.342 | 08-19-37 | 52,477,458 | 367,342 | |
IndyMac Index Mortgage Loan Trust | |||||
Series 2005-AR18, Class 1X IO | 1.983 | 10-25-36 | 25,814,066 | 2,038,279 | |
Series 2005-AR18, Class 2X IO | 1.626 | 10-25-36 | 40,708,848 | 1,979,806 | |
JPMorgan Chase Commercial Mortgage Securities Corp. | |||||
Series 2005-LDP5, Class AM (P) | 5.243 | 12-15-44 | 5,840,000 | 6,359,380 | |
Series 2006-LDP7, Class AM (P) | 5.861 | 04-15-45 | 4,245,000 | 4,722,541 | |
Series 2006-LDP9, Class AM | 5.372 | 05-15-47 | 6,725,000 | 7,268,790 | |
Series 2007-CB18, Class A4 | 5.440 | 06-12-47 | 5,850,000 | 6,580,917 | |
Series 2007-LD12, Class AM (P) | 6.001 | 02-15-51 | 5,600,000 | 6,348,636 | |
Series 2007-LDPX Class AM (P) | 5.464 | 01-15-49 | 6,175,000 | 6,566,736 | |
Series 2012-HSBC Class XA IO (S) | 1.431 | 07-05-32�� | 20,100,000 | 2,234,437 | |
Series 2012-PHH, Class D (P)(S) | 3.467 | 10-15-25 | 1,575,000 | 1,598,074 | |
Series 2013-JWRZ, Class D (P)(S) | 3.184 | 04-15-30 | 3,095,000 | 3,156,174 | |
LB–UBS Commercial Mortgage Trust | |||||
Series 2006-C6, Class AM | 5.413 | 09-15-39 | 6,124,000 | 6,858,096 | |
Merrill Lynch Mortgage Investors Trust | |||||
Series 2007-3, Class M1 (P) | 3.393 | 09-25-37 | 1,039,471 | 522,896 | |
Series 2007-3, Class M2 (P) | 3.393 | 09-25-37 | 346,800 | 34,892 | |
Series 2007-3, Class M3 (P) | 3.393 | 09-25-37 | 117,172 | 3,592 | |
Morgan Stanley Bank of America Merrill | |||||
Lynch Trust | |||||
Series 2013-C7, Class C (P) | 4.189 | 02-15-46 | 1,410,000 | 1,429,988 | |
Morgan Stanley Capital I Trust | |||||
Series 2006-HQ10, Class AM | 5.360 | 11-12-41 | 3,500,000 | 3,871,599 | |
Series 2006-HQ8, Class AM (P) | 5.465 | 03-12-44 | 5,300,000 | 5,835,592 | |
Series 2007-IQ13, Class A4 | 5.364 | 03-15-44 | 5,575,000 | 6,276,775 | |
MortgageIT Trust | |||||
Series 2005-2, Class 1A2 (P) | 0.523 | 05-25-35 | 3,347,647 | 3,229,141 | |
Motel 6 Trust | |||||
Series 2012-MTL6, Class D (S) | 3.781 | 10-05-25 | 5,845,000 | 5,790,197 |
26 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
Residential Accredit Loans, Inc. | |||||
Series 2005-QO4, Class XIO IO | 2.444 | 12-25-45 | 26,723,680 | $1,417,536 | |
Springleaf Mortgage Loan Trust | |||||
Series 2012-2A, Class A (P)(S) | 2.220 | 10-25-57 | 2,382,829 | 2,466,461 | |
Series 2012-3A, Class M1 (P)(S) | 2.660 | 12-25-59 | 1,520,000 | 1,542,125 | |
Structured Asset Securities Corp. | |||||
Series 2003-6A, Class B1 (P) | 2.618 | 03-25-33 | 1,468,316 | 1,049,656 | |
Thornburg Mortgage Securities Trust | |||||
Series 2004-1, Class II2A (P) | 1.793 | 03-25-44 | 3,414,643 | 3,446,389 | |
UBS Commercial Mortgage Trust | |||||
Series 2012-C1, Class B | 4.822 | 05-10-45 | 2,220,000 | 2,386,191 | |
Series 2012-C1, Class C (P)(S) | 5.535 | 05-10-45 | 1,580,000 | 1,749,166 | |
UBS-Barclays Commercial Mortgage Trust | |||||
Series 2012-C2, Class XA IO (S) | 1.813 | 05-10-63 | 27,772,933 | 2,810,093 | |
Wachovia Bank Commercial Mortgage Trust | |||||
Series 2007-C31, Class AM (P) | 5.591 | 04-15-47 | 1,810,000 | 1,998,716 | |
WaMu Mortgage Pass Through Certificates | |||||
Series 2005-AR1, Class X IO | 1.502 | 01-25-45 | 34,740,430 | 1,809,483 | |
Series 2005-AR13, Class X IO | 1.487 | 10-25-45 | 112,809,881 | 6,358,506 | |
Series 2005-AR19, Class A1A2 (P) | 0.483 | 12-25-45 | 4,949,543 | 4,616,568 | |
Series 2005-AR2, Class 2A1B (P) | 0.563 | 01-25-45 | 1,952,928 | 1,775,016 | |
Series 2005-AR2, Class 2A3 (P) | 0.543 | 01-25-45 | 2,761,248 | 2,556,364 | |
Series 2005-AR2, Class X IO | 1.620 | 01-25-45 | 51,754,551 | 2,727,242 | |
Series 2005-AR6, Class X IO | 1.633 | 04-25-45 | 33,548,659 | 2,200,742 | |
Series 2005-AR8, Class 2AB2 (P) | 0.613 | 07-25-45 | 4,893,046 | 4,565,946 | |
Series 2005-AR8, Class X IO | 1.625 | 07-25-45 | 45,763,649 | 2,798,461 | |
Wells Fargo Commercial Mortgage Trust | |||||
Series 2013-BTC, Class E (P)(S) | 3.550 | 04-16-35 | 2,850,000 | 2,433,014 | |
Wells Fargo Mortgage Backed Securities Trust | |||||
Series 2005-AR5, Class 1A1 (P) | 2.669 | 04-25-35 | 2,438,084 | 2,424,920 | |
WF-RBS Commercial Mortgage Trust | |||||
Series 2012-C9, Class XA IO (S) | 2.275 | 11-15-45 | 30,532,432 | 4,231,276 | |
U.S. Government Agency 4.5% | 88,863,175 | ||||
Federal Home Loan Mortgage Corp. | |||||
Series 290, Class IO | 3.500 | 11-15-32 | 11,764,717 | 2,341,884 | |
Series 3581, Class IO | 6.000 | 10-15-39 | 1,363,259 | 185,151 | |
Series 3623, Class LI IO | 4.500 | 01-15-25 | 1,214,847 | 90,730 | |
Series 3630, Class BI IO | 4.000 | 05-15-27 | 460,474 | 15,951 | |
Series 3794, Class PI IO | 4.500 | 02-15-38 | 2,525,534 | 262,291 | |
Series 3908, Class PA | 4.000 | 06-15-39 | 2,911,468 | 3,079,090 | |
Series 4060, Class HC | 3.000 | 03-15-41 | 6,169,576 | 6,496,570 | |
Series 4065, Class QA | 3.000 | 08-15-41 | 4,355,374 | 4,542,067 | |
Series 4068, Class AP | 3.500 | 06-15-40 | 6,575,982 | 6,957,520 | |
Series 4077, Class IK IO | 5.000 | 07-15-42 | 5,547,071 | 1,332,755 | |
Series 4136, Class IH IO | 3.500 | 09-15-27 | 18,309,092 | 2,840,795 | |
Series K017, Class X1 IO | 1.452 | 12-25-21 | 14,924,906 | 1,434,209 | |
Series K018, Class X1 IO | 1.462 | 01-25-22 | 19,926,401 | 1,926,624 | |
Series K021, Class X1 IO | 1.514 | 06-25-22 | 4,698,912 | 506,289 | |
Series K022, Class X1 IO | 1.308 | 07-25-22 | 36,644,066 | 3,437,726 | |
Series K708, Class X1 IO | 1.512 | 01-25-19 | 30,748,870 | 2,300,846 | |
Series K709, Class X1 IO | 1.545 | 03-25-19 | 17,390,002 | 1,343,778 | |
Series K710, Class X1 IO | 1.784 | 05-25-19 | 14,079,665 | 1,280,743 | |
Series K711, Class X1 IO | 1.711 | 07-25-19 | 49,908,345 | 4,431,711 |
See notes to financial statements | Annual report | Bond Fund | 27 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government Agency (continued) | |||||
Federal National Mortgage Association | |||||
Series 2009-47, Class EI IO | 5.000 | 08-25-19 | 1,876,831 | $158,281 | |
Series 2009-50, Class GI IO | 5.000 | 05-25-39 | 3,259,364 | 362,485 | |
Series 2009-78, Class IB IO | 5.000 | 06-25-39 | 4,271,317 | 407,238 | |
Series 2009-109, Class IW IO | 4.500 | 04-25-38 | 1,808,980 | 140,982 | |
Series 2010-14, Class AI IO | 4.000 | 08-25-27 | 1,245,164 | 43,016 | |
Series 2010-36, Class BI IO | 4.000 | 03-25-28 | 1,323,084 | 57,161 | |
Series 2011-146, Class MA | 3.500 | 08-25-41 | 5,136,286 | 5,477,951 | |
Series 2012-19, Class JA | 3.500 | 03-25-41 | 8,479,698 | 9,143,447 | |
Series 2012-67, Class KG | 3.500 | 02-25-41 | 2,014,471 | 2,203,199 | |
Series 2012-110, Class MA | 3.000 | 07-25-41 | 7,362,009 | 7,834,724 | |
Series 2012-118, Class IB IO | 3.500 | 11-25-42 | 8,548,316 | 1,963,813 | |
Series 2012-137, Class QI IO | 3.000 | 12-25-27 | 17,690,881 | 2,523,404 | |
Series 2012-137, Class WI IO | 3.500 | 12-25-32 | 12,591,313 | 2,497,182 | |
Series 398, Class C3 IO | 4.500 | 05-25-39 | 1,537,815 | 181,334 | |
Series 401, Class C2 IO | 4.500 | 06-25-39 | 1,319,525 | 168,219 | |
Series 402, Class 3 IO | 4.000 | 11-25-39 | 2,198,546 | 318,055 | |
Series 402, Class 4 IO | 4.000 | 10-25-39 | 3,513,782 | 353,768 | |
Series 402, Class 7 IO | 4.500 | 11-25-39 | 3,406,350 | 378,642 | |
Series 407, Class 7 IO | 5.000 | 03-25-41 | 3,007,728 | 473,100 | |
Series 407, Class 8 IO | 5.000 | 03-25-41 | 1,482,564 | 209,527 | |
Series 407, Class 15 IO | 5.000 | 01-25-40 | 3,912,015 | 476,505 | |
Series 407, Class 16 IO | 5.000 | 01-25-40 | 717,573 | 81,090 | |
Series 407, Class 17 IO | 5.000 | 01-25-40 | 718,012 | 90,314 | |
Series 407, Class 21 IO | 5.000 | 01-25-39 | 2,406,707 | 280,568 | |
Series 407, Class C6 IO | 5.500 | 01-25-40 | 8,024,889 | 1,390,536 | |
Government National Mortgage Association | |||||
Series 2010-78, Class AI IO | 4.500 | 04-20-39 | 3,030,110 | 168,296 | |
Series 2012-114, Class IO | 1.028 | 01-16-53 | 11,556,306 | 1,114,814 | |
Series 2013-42, Class IA IO | 3.500 | 03-20-43 | 16,746,256 | 2,327,296 | |
Series 2013-42, Class YI IO | 3.500 | 03-20-43 | 23,257,905 | 3,231,498 | |
Asset Backed Securities 7.2% | $140,534,016 | ||||
(Cost $131,625,965) | |||||
ACE Securities Corp. | |||||
Series 2006-ASP5, Class A2B (P) | 0.323 | 10-25-36 | 2,010,989 | 1,093,111 | |
Series 2006-ASP5, Class A2C (P) | 0.373 | 10-25-36 | 1,687,697 | 923,233 | |
Series 2006-ASP5, Class A2D (P) | 0.453 | 10-25-36 | 3,237,475 | 1,788,074 | |
ACE Securities Corp. Home Equity Loan Trust | |||||
Series 2005-HE3, Class M2 (P) | 0.643 | 05-25-35 | 2,419,980 | 2,317,351 | |
Aegis Asset Backed Securities Trust | |||||
Series 2004-3, Class A1 (P) | 0.553 | 09-25-34 | 1,658,322 | 1,629,449 | |
Series 2005-4, Class M1 (P) | 0.643 | 10-25-35 | 4,810,000 | 4,242,814 | |
Ameriquest Mortgage Securities, Inc. | |||||
Series 2005-R1, Class M1 (P) | 0.643 | 03-25-35 | 1,982,482 | 1,952,565 | |
Series 2005-R3, Class M2 (P) | 0.663 | 05-25-35 | 2,840,000 | 2,646,017 | |
Argent Securities, Inc. | |||||
Series 2003-W10, Class M1 (P) | 1.273 | 01-25-34 | 1,705,622 | 1,662,893 | |
Series 2004-W6, Class M1 (P) | 0.743 | 05-25-34 | 2,195,144 | 2,153,992 | |
Series 2006-M2, Class A2C (P) | 0.343 | 09-25-36 | 8,700,957 | 3,742,473 | |
Asset Backed Funding Certificates | |||||
Series 2005-AQ1, Class A4 | 5.010 | 06-25-35 | 1,639,732 | 1,660,276 | |
Series 2005-HE1, Class M1 (P) | 0.613 | 03-25-35 | 2,876,841 | 2,772,987 | |
Asset Backed Securities Corp. Home Equity | |||||
Series 2006-HE1, Class A3 (P) | 0.393 | 01-25-36 | 2,981,546 | 2,817,561 |
28 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Bayview Financial Acquisition Trust | |||||
Series 2006-A, Class 2A3 (P) | 0.543 | 02-28-41 | 1,010,170 | $1,002,084 | |
Bravo Mortgage Asset Trust | |||||
Series 2006-1A, Class A2 (P)(S) | 0.433 | 07-25-36 | 4,193,708 | 3,904,233 | |
Carrington Mortgage Loan Trust | |||||
Series 2005-OPT2, Class M2 (P) | 0.643 | 05-25-35 | 2,734,753 | 2,654,056 | |
Citicorp Residential Mortgage Securities, Inc. | |||||
Series 2007-2, Class A6 (P) | 6.013 | 06-25-37 | 1,980,393 | 2,007,261 | |
CKE Restaurant Holdings, Inc. | |||||
Series 2013-1A, Class A2 (S) | 4.474 | 03-20-43 | 7,775,000 | 8,132,720 | |
ContiMortgage Home Equity Loan Trust | |||||
Series 1995-2, Class A5 | 8.100 | 08-15-25 | 152,713 | 152,242 | |
Countrywide Asset-Backed Certificates | |||||
Series 2004-10, Class AF5B | 5.110 | 02-25-35 | 3,098,800 | 3,246,718 | |
Series 2006-3, Class 2A2 (P) | 0.373 | 06-25-36 | 1,784,668 | 1,715,065 | |
Credit-Based Asset Servicing and | |||||
Securitization LLC | |||||
Series 2005-CB2, Class M1 (P) | 0.633 | 04-25-36 | 3,327,660 | 3,265,103 | |
CSMC Trust | |||||
Series 2006-CF2, Class M1 (P)(S) | 0.663 | 05-25-36 | 3,245,000 | 3,138,275 | |
Dominos Pizza Master Issuer LLC | |||||
Series 2012-1A, Class A2 (S) | 5.216 | 01-25-42 | 5,686,344 | 6,308,026 | |
Encore Credit Receivables Trust | |||||
Series 2005-2, Class M2 (P) | 0.653 | 11-25-35 | 3,350,000 | 3,152,303 | |
Fremont Home Loan Trust | |||||
Series 2005-1, Class M3 (P) | 0.958 | 06-25-35 | 2,500,000 | 2,382,150 | |
GSAA Trust | |||||
Series 2005-10, Class M3 (P) | 0.743 | 06-25-35 | 4,265,000 | 3,970,523 | |
Home Equity Asset Trust | |||||
Series 2005-5, Class M1 (P) | 0.673 | 11-25-35 | 3,235,000 | 3,163,859 | |
Series 2005-6, Class M1 (P) | 0.663 | 12-25-35 | 1,810,000 | 1,774,227 | |
Home Equity Mortgage Loan | |||||
Asset-Backed Trust | |||||
Series 2005-C, Class AII3 (P) | 0.563 | 10-25-35 | 3,212,500 | 3,031,871 | |
Leaf Receivables Funding 6 LLC | |||||
Series 2011-1, Class A (S) | 1.700 | 12-20-18 | 84,299 | 84,299 | |
Mastr Asset Backed Securities Trust | |||||
Series 2007-HE2, Class A2 (P) | 0.893 | 08-25-37 | 1,478,379 | 1,436,498 | |
Merrill Lynch Mortgage Investors, Inc. | |||||
Series 2005-WMC1, Class M1 (P) | 0.943 | 09-25-35 | 2,074,762 | 1,944,461 | |
Morgan Stanley ABS Capital I | |||||
Series 2006-HE4, Class A3 (P) | 0.343 | 06-25-36 | 2,875,249 | 2,073,150 | |
New Century Home Equity Loan Trust | |||||
Series 2005-1, Class M1 (P) | 0.643 | 03-25-35 | 3,195,000 | 3,094,195 | |
Series 2005-3, Class M1 (P) | 0.673 | 07-25-35 | 1,715,000 | 1,687,671 | |
NovaStar Home Equity Loan | |||||
Series 2004-4, Class M3 (P) | 1.273 | 03-25-35 | 5,869,023 | 5,856,986 | |
Park Place Securities, Inc. | |||||
Series 2004-WHQ2, Class M2 (P) | 0.823 | 02-25-35 | 6,525,423 | 6,515,622 | |
Series 2005-WCH1, Class M2 (P) | 0.713 | 01-25-36 | 5,813,470 | 5,701,724 | |
People’s Choice Home Loan Securities Trust | |||||
Series 2005-1, Class M3 (P) | 1.063 | 01-25-35 | 2,555,000 | 2,531,793 | |
RAMP Trust | |||||
Series 2005-RS3, Class M1 (P) | 0.613 | 03-25-35 | 2,855,000 | 2,684,928 |
See notes to financial statements | Annual report | Bond Fund | 29 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Renaissance Home Equity Loan Trust | |||||
Series 2005-2, Class AF3 | 4.499 | 08-25-35 | 739,084 | $741,223 | |
Series 2005-2, Class AF4 | 4.934 | 08-25-35 | 2,680,000 | 2,610,435 | |
Sonic Capital LLC | |||||
Series 2011-1A, Class A2 (S) | 5.438 | 05-20-41 | 2,732,714 | 3,017,209 | |
Soundview Home Loan Trust | |||||
Series 2006-OPT2, Class A3 (P) | 0.373 | 05-25-36 | 1,452,757 | 1,380,665 | |
Specialty Underwriting & Residential | |||||
Finance Trust | |||||
Series 2006-BC1, Class A2D (P) | 0.493 | 12-25-36 | 6,930,000 | 6,651,982 | |
Westgate Resorts LLC | |||||
Series 2012-2A, Class A (S) | 3.000 | 01-20-25 | 3,186,636 | 3,227,467 | |
Series 2012-3A, Class A (S) | 2.500 | 03-20-25 | 2,396,141 | 2,412,614 | |
Series 2012-3A, Class B (S) | 4.500 | 03-20-25 | 707,194 | 717,582 | |
Series 2013-1A, Class B (S) | 3.750 | 08-20-25 | 1,760,000 | 1,760,000 | |
Shares | Value | ||||
Preferred Securities 1.2% | $24,076,876 | ||||
(Cost $22,603,491) | |||||
Consumer Staples 0.1% | 2,167,337 | ||||
Food & Staples Retailing 0.1% | |||||
Ocean Spray Cranberries, Inc., Series A, | |||||
6.250% (S) | 23,250 | 2,167,337 | |||
Financials 0.8% | 16,667,681 | ||||
Capital Markets 0.1% | |||||
The Goldman Sachs Group, Inc., 5.500% | 85,725 | 2,202,061 | |||
Commercial Banks 0.5% | |||||
PNC Financial Services Group, Inc. (6.125% to | |||||
5-1-22, then 3 month LIBOR + 4.067%) | 106,775 | 2,910,687 | |||
Regions Financial Corp., 6.375% | 102,790 | 2,603,671 | |||
U.S. Bancorp (6.000% to 4-15-17, then | |||||
3 month LIBOR + 4.861%) | 85,150 | 2,282,020 | |||
Wells Fargo & Company, Series L, 7.500% | 1,342 | 1,684,210 | |||
Consumer Finance 0.1% | |||||
Ally Financial, Inc., 7.300% | 48,470 | 1,230,169 | |||
Discover Financial Services, 6.500% | 60,000 | 1,569,000 | |||
Diversified Financial Services 0.1% | |||||
Citigroup Capital XIII (7.875% to 10-30-15, | |||||
then 3 month LIBOR + 6.370%) | 16,000 | 449,440 | |||
GMAC Capital Trust I (8.125% to 2-15-16, | |||||
then 3 month LIBOR + 5.785%) | 65,230 | 1,736,423 | |||
Industrials 0.2% | 3,202,049 | ||||
Aerospace & Defense 0.1% | |||||
United Technologies Corp., 7.500% | 31,265 | 1,886,530 | |||
Airlines 0.1% | |||||
Continental Airlines Finance Trust II, 6.000% | 27,300 | 1,315,519 | |||
Materials 0.0% | 355,577 | ||||
Metals & Mining 0.0% | |||||
ArcelorMittal, 6.000% | 16,860 | 355,577 |
30 | Bond Fund | Annual report | See notes to financial statements |
Shares | Value | ||||
Utilities 0.1% | $1,684,232 | ||||
Electric Utilities 0.1% | |||||
Duke Energy Corp., 5.125% | 60,035 | 1,496,072 | |||
PPL Corp., 8.750% | 3,500 | 188,160 | |||
Par value | Value | ||||
Short-Term Investments 1.0% | $19,670,000 | ||||
(Cost $19,670,000) | |||||
Repurchase Agreement 1.0% | 19,670,000 | ||||
Barclays Tri-Party Repurchase Agreement dated 5-31-13 at 0.060% | |||||
to be repurchased at $6,428,032 on 6-3-13, collateralized by | |||||
$6,392,800 U.S. Treasury Notes, 1.500% due 8-31-18 (valued at | |||||
$6,556,616, including interest) | $6,428,000 | 6,428,000 | |||
Repurchase Agreement with State Street Corp. dated 5-31-13 at | |||||
0.010% to be repurchased at $13,242,011 on 6-3-13, collateralized | |||||
by $13,385,000 U.S. Treasury Notes, 0.875% due 2-28-17 (valued | |||||
at $13,510,484, including interest) | 13,242,000 | 13,242,000 | |||
Total investments (Cost $1,865,875,354)† 99.3% | $1,939,330,690 | ||||
Other assets and liabilities, net 0.7% | $14,645,443 | ||||
Total net assets 100.0% | $1,953,976,133 | ||||
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.
BRL Brazilian Real
GO General Obligation
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 at end of period.
USGG U.S. Generic Government Yield Index
(C) Security purchased on a when-issued or delayed delivery.
(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 $434,987,531 or 22.3% of the Fund’s net assets as of 5-31-13.
† At 5-31-13, the aggregate cost of investment securities for federal income tax purposes was $1,869,794,946. Net unrealized appreciation aggregated $69,535,744, of which $94,037,710 related to appreciated investment securities and $24,501,966 related to depreciated investment securities.
See notes to financial statements | Annual report | Bond Fund | 31 |
FINANCIAL STATEMENTS
Financial statements
Statement of assets and liabilities 5-31-13
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 $1,865,875,354) | $1,939,330,690 |
Cash | 247 |
Cash held at broker for futures contracts | 791,775 |
Receivable for investments sold | 3,017,847 |
Receivable for fund shares sold | 8,225,885 |
Dividends and interest receivable | 19,211,239 |
Other receivables and prepaid expenses | 127,345 |
Total assets | 1,970,705,028 |
Liabilities | |
Payable for investments purchased | 8,908,471 |
Payable for delayed delivery securities purchased | 1,390,000 |
Payable for fund shares repurchased | 4,979,979 |
Payable for futures variation margin | 64,688 |
Distributions payable | 626,277 |
Payable to affiliates | |
Accounting and legal services fees | 59,940 |
Transfer agent fees | 253,282 |
Distribution and service fees | 166,780 |
Trustees’ fees | 49,162 |
Other liabilities and accrued expenses | 230,316 |
Total liabilities | 16,728,895 |
Net assets | $1,953,976,133 |
Net assets consist of | |
Paid-in capital | $1,873,338,585 |
Undistributed net investment income | 3,801,967 |
Accumulated net realized gain (loss) on investments, futures contracts and | |
foreign currency transactions | 3,872,164 |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | 72,963,417 |
Net assets | $1,953,976,133 |
32 | Bond Fund | Annual report | See notes to financial statements |
FINANCIAL STATEMENTS
Statement of assets and liabilities (continued)
Net asset value per share | |
Based on net asset values and shares outstanding — the Fund has an | |
unlimited number of shares authorized with no par value | |
Class A ($1,434,021,488 ÷ 87,603,152 shares)1 | $16.37 |
Class B ($43,568,483 ÷ 2,661,773 shares)1 | $16.37 |
Class C ($195,038,625 ÷ 11,913,999 shares)1 | $16.37 |
Class I ($276,658,998 ÷ 16,899,107 shares) | $16.37 |
Class R2 ($2,065,060 ÷ 126,064 shares) | $16.38 |
Class R6 ($2,623,479 ÷ 160,148 shares) | $16.38 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95.5%)2 | $17.14 |
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 $100,000. On sales of $100,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | Bond Fund | 33 |
Statement of operations For the year ended 5-31-13
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 | $78,513,126 |
Dividends | 1,278,050 |
Securities lending | 20,983 |
Total investment income | 79,812,159 |
Expenses | |
Investment management fees | 7,841,466 |
Distribution and service fees | 5,759,589 |
Accounting and legal services fees | 322,924 |
Transfer agent fees | 2,839,113 |
Trustees’ fees | 97,302 |
State registration fees | 185,506 |
Printing and postage | 136,220 |
Professional fees | 144,869 |
Custodian fees | 159,059 |
Registration and filing fees | 111,698 |
Other | 39,585 |
Total expenses | 17,637,331 |
Less expense reductions | (829,607) |
Net expenses | 16,807,724 |
Net investment income | 63,004,435 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 19,514,695 |
Investments in affiliated issuers | 1,601 |
Futures contracts | (163,933) |
Foreign currency transactions | (2,992) |
19,349,371 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 34,397,731 |
Futures contracts | (482,312) |
Translation of assets and liabilities in foreign currencies | (3,637) |
33,911,782 | |
Net realized and unrealized gain | 53,261,153 |
Increase in net assets from operations | $116,265,588 |
34 | Bond Fund | Annual report | See notes to financial statements |
FINANCIAL STATEMENTS
Statements of changes in net assets
These Statements of changes in net assets show how the value of the fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of fund share transactions.
Year | Year | |
ended | ended | |
5-31-13 | 5-31-12 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $63,004,435 | $53,583,466 |
Net realized gain | 19,349,371 | 14,531,688 |
Change in net unrealized appreciation (depreciation) | 33,911,782 | (6,055,090) |
Increase in net assets resulting from operations | 116,265,588 | 62,060,064 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (53,420,052) | (48,082,010) |
Class B | (1,524,202) | (1,350,772) |
Class C | (5,484,474) | (3,924,487) |
Class I | (9,174,395) | (4,407,508) |
Class R2 | (22,100) | (1,228) |
Class R6 | (110,196) | (15,017) |
From net realized gain | ||
Class A | (2,677,938) | (839,265) |
Class B | (92,529) | (27,704) |
Class C | (331,835) | (81,124) |
Class I | (432,679) | (65,359) |
Class R2 | (228) | — |
Class R6 | (5,437) | (87) |
Total distributions | (73,276,065) | (58,794,561) |
From Fund share transactions | 572,779,681 | 250,252,179 |
Total increase | 615,769,204 | 253,517,682 |
Net assets | ||
Beginning of year | 1,338,206,929 | 1,084,689,247 |
End of year | $1,953,976,133 | $1,338,206,929 |
Undistributed net investment income | $3,801,967 | $1,173,676 |
See notes to financial statements | Annual report | Bond Fund | 35 |
Financial highlights
The Financial highlights show how the fund’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.86 | $15.86 | $15.00 | $12.96 | $14.31 |
Net investment income1 | 0.63 | 0.72 | 0.81 | 0.97 | 0.87 |
Net realized and unrealized gain (loss) on investments | 0.61 | 0.08 | 0.92 | 2.05 | (1.34) |
Total from investment operations | 1.24 | 0.80 | 1.73 | 3.02 | (0.47) |
Less distributions | |||||
From net investment income | (0.70) | (0.79) | (0.87) | (0.98) | (0.88) |
From net realized gain | (0.03) | (0.01) | — | — | — |
Total distributions | (0.73) | (0.80) | (0.87) | (0.98) | (0.88) |
Net asset value, end of period | $16.37 | $15.86 | $15.86 | $15.00 | $12.96 |
Total return (%)2,3 | 7.93 | 5.21 | 11.78 | 23.83 | (3.02) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1,434 | $1,061 | $912 | $819 | $686 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.03 | 1.06 | 1.05 | 1.08 | 1.164 |
Expenses net of fee waivers and credits | 0.98 | 1.02 | 1.05 | 1.07 | 1.164 |
Net investment income | 3.84 | 4.63 | 5.24 | 6.71 | 6.71 |
Portfolio turnover (%) | 72 | 76 | 73 | 88 | 90 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS B SHARES Period ended | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.86 | $15.86 | $15.00 | $12.95 | $14.31 |
Net investment income1 | 0.51 | 0.61 | 0.70 | 0.86 | 0.77 |
Net realized and unrealized gain (loss) on investments | 0.61 | 0.08 | 0.92 | 2.07 | (1.34) |
Total from investment operations | 1.12 | 0.69 | 1.62 | 2.93 | (0.57) |
Less distributions | |||||
From net investment income | (0.58) | (0.68) | (0.76) | (0.88) | (0.79) |
From net realized gain | (0.03) | (0.01) | — | — | — |
Total distributions | (0.61) | (0.69) | (0.76) | (0.88) | (0.79) |
Net asset value, end of period | $16.37 | $15.86 | $15.86 | $15.00 | $12.95 |
Total return (%)2,3 | 7.18 | 4.48 | 11.00 | 23.05 | (3.77) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $44 | $37 | $28 | $25 | $28 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.73 | 1.76 | 1.75 | 1.78 | 1.864 |
Expenses net of fee waivers and credits | 1.68 | 1.72 | 1.75 | 1.77 | 1.864 |
Net investment income | 3.15 | 3.92 | 4.53 | 6.01 | 5.96 |
Portfolio turnover (%) | 72 | 76 | 73 | 88 | 90 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
36 | Bond Fund | Annual report | See notes to financial statements |
CLASS C SHARES Period ended | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.87 | $15.86 | $15.00 | $12.96 | $14.31 |
Net investment income1 | 0.51 | 0.61 | 0.70 | 0.86 | 0.78 |
Net realized and unrealized gain (loss) on investments | 0.60 | 0.09 | 0.92 | 2.06 | (1.34) |
Total from investment operations | 1.11 | 0.70 | 1.62 | 2.92 | (0.56) |
Less distributions | |||||
From net investment income | (0.58) | (0.68) | (0.76) | (0.88) | (0.79) |
From net realized gain | (0.03) | (0.01) | — | — | — |
Total distributions | (0.61) | (0.69) | (0.76) | (0.88) | (0.79) |
Net asset value, end of period | $16.37 | $15.87 | $15.86 | $15.00 | $12.96 |
Total return (%)2,3 | 7.11 | 4.55 | 11.00 | 22.98 | (3.70) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $195 | $116 | $71 | $40 | $26 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.72 | 1.77 | 1.75 | 1.78 | 1.864 |
Expenses net of fee waivers and credits | 1.67 | 1.72 | 1.75 | 1.77 | 1.864 |
Net investment income | 3.12 | 3.91 | 4.50 | 5.98 | 6.02 |
Portfolio turnover (%) | 72 | 76 | 73 | 88 | 90 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS I SHARES Period ended | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | 5-31-09 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.87 | $15.86 | $14.99 | $12.96 | $14.31 |
Net investment income1 | 0.68 | 0.78 | 0.88 | 1.03 | 0.93 |
Net realized and unrealized gain (loss) on investments | 0.61 | 0.09 | 0.92 | 2.05 | (1.35) |
Total from investment operations | 1.29 | 0.87 | 1.80 | 3.08 | (0.42) |
Less distributions | |||||
From net investment income | (0.76) | (0.85) | (0.93) | (1.05) | (0.93) |
From net realized gain | (0.03) | (0.01) | — | — | — |
Total distributions | (0.79) | (0.86) | (0.93) | (1.05) | (0.93) |
Net asset value, end of period | $16.37 | $15.87 | $15.86 | $14.99 | $12.96 |
Total return (%)2 | 8.27 | 5.70 | 12.33 | 24.31 | (2.60) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $277 | $123 | $74 | $30 | $19 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.65 | 0.67 | 0.62 | 0.63 | 0.703 |
Expenses net of fee waivers and credits | 0.60 | 0.62 | 0.62 | 0.63 | 0.703 |
Net investment income | 4.19 | 4.99 | 5.64 | 7.13 | 7.22 |
Portfolio turnover (%) | 72 | 76 | 73 | 88 | 90 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Annual report | Bond Fund | 37 |
CLASS R2 SHARES Period ended | 5-31-13 | 5-31-121 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $15.87 | $15.80 | |||
Net investment income2 | 0.62 | 0.17 | |||
Net realized and unrealized gain on investments | 0.64 | 0.09 | |||
Total from investment operations | 1.26 | 0.26 | |||
Less distributions | |||||
From net investment income | (0.72) | (0.19) | |||
From net realized gain | (0.03) | — | |||
Total distributions | (0.75) | (0.19) | |||
Net asset value, end of period | $16.38 | $15.87 | |||
Total return (%)3 | 8.09 | 1.684 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.03 | 0.866 | |||
Expenses net of fee waivers and credits | 0.98 | 0.806 | |||
Net investment income | 3.88 | 4.286 | |||
Portfolio turnover (%) | 72 | 767 |
1 The inception date for Class R2 shares is 3-1-12.
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 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
CLASS R6 SHARES Period ended | 5-31-13 | 5-31-121 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $15.87 | $15.55 | |||
Net investment income2 | 0.70 | 0.57 | |||
Net realized and unrealized gain on investments | 0.61 | 0.40 | |||
Total from investment operations | 1.31 | 0.97 | |||
Less distributions | |||||
From net investment income | (0.77) | (0.64) | |||
From net realized gain | (0.03) | (0.01) | |||
Total distributions | (0.80) | (0.65) | |||
Net asset value, end of period | $16.38 | $15.87 | |||
Total return (%)3 | 8.42 | 6.384 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $3 | $2 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.57 | 0.635 | |||
Expenses net of fee waivers and credits | 0.52 | 0.575 | |||
Net investment income | 4.30 | 5.045 | |||
Portfolio turnover (%) | 72 | 766 |
1 The inception date for Class R6 shares is 9-1-11.
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 Portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
38 | Bond Fund | Annual report | See notes to financial statements |
Notes to financial statements
Note 1 — Organization
John Hancock Bond Fund (the Fund) is a series of John Hancock Sovereign Bond Fund (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek a high level of current income consistent with prudent investment risk.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions, certain investors and certain 529 plans. 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 as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. 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, 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. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities and 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, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the Fund’s Pricing Committee following procedures established by the Board of Trustees, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
Annual report | Bond Fund | 39 |
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 other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events 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 May 31, 2013, by major security category or type:
LEVEL 3 | |||||
LEVEL 2 | SIGNIFICANT | ||||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | ||
INVESTMENTS IN SECURITIES | VALUE AT 5-31-13 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Corporate Bonds | $917,347,180 | — | $914,720,197 | $2,626,983 | |
U.S. Government & Agency | |||||
Obligations | 469,743,046 | — | 469,743,046 | — | |
Foreign Government | |||||
Obligations | 2,921,600 | — | 2,921,600 | — | |
Convertible Bonds | 1,150,025 | — | 1,150,025 | — | |
Municipal Bonds | 1,894,382 | — | 1,894,382 | — | |
Term Loans | 12,248,405 | — | 12,248,405 | — | |
Capital Preferred Securities | 22,641,888 | — | 22,641,888 | — | |
Collateralized Mortgage | |||||
Obligations | 327,103,272 | — | 325,804,241 | 1,299,031 | |
Asset Backed Securities | 140,534,016 | — | 138,774,016 | 1,760,000 | |
Preferred Securities | 24,076,876 | $18,391,959 | 5,684,917 | — | |
Short-Term Investments | 19,670,000 | — | 19,670,000 | — | |
Total Investments in | |||||
Securities | $1,939,330,690 | $18,391,959 | $1,915,252,717 | $5,686,014 | |
Other Financial | |||||
Instruments: | |||||
Futures | ($482,312) | ($482,312) | — | — |
Repurchase agreements. The Fund may enter into repurchase agreements. When the Fund enters into a repurchase agreement, it receives collateral that 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. Collateral for certain tri-party repurchase agreements is held at a third-party custodian bank in a segregated account for the benefit of the Fund.
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
40 | Bond Fund | Annual report |
receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the Fund becomes aware of the dividends. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Securities lending. The Fund may lend its portfolio 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). JHCIT 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 the risk of the loss of the securities lent is mitigated by receiving collateral from the borrower and through securities lending provider indemnification, the Fund could experience a delay in recovering its securities and possible losses of income or value if the borrower fails to return the securities, collateral investments decline in value or the fund loses its 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 securities are financial instruments structured to separate principal and interest cash flows so that one class receives principal payments from the underlying 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 security. If the underlying 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 Fund’s 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. that enables them to participate in a $300 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. Prior to March 27, 2013, the Fund participated in a $100 million unsecured line of credit, also with Citibank, with terms otherwise similar to the existing agreement. Commitment fees for the year ended May 31, 2013 were $2,275. For the year ended May 31, 2013, the Fund had no borrowings under either line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual report | Bond Fund | 41 |
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, 2013 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. The tax character of distributions for the years ended May 31, 2013 and 2012 was as follows:
MAY 31, 2013 | MAY 31, 2012 | |||||
Ordinary Income | $73,276,065 | $57,781,022 | ||||
Long-Term Capital Gain | — | $1,013,539 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of May 31, 2013, the components of distributable earnings on a tax basis consisted of $7,605,925 of undistributed ordinary income and $4,151,767 of long-term capital gains.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to distributions payable and amortization and accretion on debt securities.
New accounting pronouncements. In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities and in January 2013, Accounting Standards Update No. 2013-1, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. These updates create 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. These updates may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments.
42 | Bond Fund | Annual report |
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. The use of derivatives involves risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the Fund to the risk of loss up to the notional value of the futures contracts. Use of short futures contracts subjects the Fund to unlimited risk of loss.
Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures collateral receivable/payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the year ended May 31, 2013, the Fund used futures contracts to manage duration of the portfolio. During the year ended May 31, 2013, the Fund held futures contracts with notional values ranging up to $21.0 million, as measured at each quarter end. The following table summarizes the contracts held at May 31, 2013.
UNREALIZED | ||||||
OPEN | NUMBER OF | EXPIRATION | APPRECIATION | |||
CONTRACTS | CONTRACTS | POSITION | DATE | NOTIONAL BASIS | NOTIONAL VALUE | (DEPRECIATION) |
Ultra Long U.S. | 138 | Long | Sep 2013 | $21,475,562 | $20,993,250 | ($482,312) |
Treasury Bond Futures |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at May 31, 2013 by risk category:
FINANCIAL | ASSET | LIABILITY | ||
STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
Interest rate contracts | Receivable/payable for | Futures † | — | ($482,312) |
futures |
† Reflects cumulative appreciation/depreciation on futures as disclosed in herein. Only the period end variation margin is separately disclosed on the Statement of assets and liabilities.
Annual report | Bond Fund | 43 |
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended May 31, 2013:
RISK | STATEMENT OF OPERATIONS LOCATION | FUTURES CONTRACTS |
Interest rate contracts | Net realized gain (loss) | ($163,933) |
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended May 31, 2013:
RISK | STATEMENT OF OPERATIONS LOCATION | FUTURES CONTRACTS |
Interest rate contracts | Change in unrealized appreciation | ($482,312) |
(depreciation) |
Note 4 — 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 Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the Fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management contract with the Advisor under which the Fund pays a daily management fee to the Advisor 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 of the Fund’s average daily net assets, (c) 0.450% of the next $500,000,000 of the Fund’s average daily net assets, (d) 0.450% of the next $500,000,000 of the Fund’s average daily net assets, (e) 0.400% of the next $500,000,000 of the Fund’s average daily net assets, and (f) 0.350% of the Fund’s average daily net assets in excess of $2,500,000,000. The Advisor 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 Advisor. The Fund is not responsible for payment of the subadvisory fees.
The Advisor 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 $629,121, $21,432, $77,656, $99,940, $283 and $1,175 for Class A, Class B, Class C, Class I, Class R2 and Class R6 shares, respectively, for the year ended May 31, 2013. These fee waivers and/or expense reimbursements expire on September 30, 2013, unless renewed by mutual agreement of the Fund and the Advisor based upon a determination that this is appropriate under the circumstances at the time.
The Advisor 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
44 | Bond Fund | Annual report |
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 Advisor based upon a determination that this is appropriate under the circumstances at the time. For the year ended May 31, 2013, there were no reductions related to this agreement.
The investment management fees incurred for the year ended May 31, 2013 were equivalent to a net annual effective rate of 0.423% of the Fund’s average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended May 31, 2013 amounted to an annual rate of 0.02% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B, Class C and Class R2 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, the Fund pays for certain other services. The Fund pays 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 | RULE 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 $5,995,598 for the year ended May 31, 2013. Of this amount, $729,248 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $5,014,913 was paid as sales commissions to broker-dealers and $251,437 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended May 31, 2013, CDSCs received by the Distributor amounted to $6,956, $75,056 and $32,767 for Class A, 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 Advisor. 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
Annual report | Bond Fund | 45 |
John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the year ended May 31, 2013 were:
DISTRIBUTION AND | TRANSFER | |||||
CLASS | SERVICE FEES | AGENT FEES | ||||
Class A | $3,773,581 | $2,271,936 | ||||
Class B | 428,144 | 77,571 | ||||
Class C | 1,555,376 | 280,089 | ||||
Class I | — | 208,719 | ||||
Class R2 | 2,488 | 147 | ||||
Class R6 | — | 651 | ||||
Total | $5,759,589 | $2,839,113 |
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Advisor or its affiliates. Under the John Hancock Group of Funds Deferred Compensation Plan (the Plan) which was terminated in November 2012, certain 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 6 — Fund share transactions
Transactions in Fund shares for the years ended May 31, 2013 and 2012 were as follows:
Year ended 5-31-13 | Year ended 5-31-12 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 31,359,267 | $513,399,559 | 17,261,878 | $270,183,160 |
Distributions reinvested | 3,107,572 | 50,865,272 | 2,714,480 | 42,442,158 |
Repurchased | (13,717,065) | (224,729,109) | (10,598,190) | (165,690,756) |
Net increase | 20,749,774 | $339,535,722 | 9,378,168 | $146,934,562 |
Class B shares | ||||
Sold | 824,871 | $13,396,156 | 1,035,630 | $16,188,306 |
Distributions reinvested | 75,797 | 1,240,109 | 62,614 | 979,149 |
Repurchased | (552,113) | (9,033,346) | (537,186) | (8,411,212) |
Net increase | 348,555 | $5,602,919 | 561,058 | $8,756,243 |
Class C shares | ||||
Sold | 6,521,506 | $106,789,726 | 3,942,885 | $61,652,552 |
Distributions reinvested | 296,969 | 4,863,774 | 182,225 | 2,851,353 |
Repurchased | (2,220,013) | (36,367,597) | (1,311,450) | (20,495,947) |
Net increase | 4,598,462 | $75,285,903 | 2,813,660 | $44,007,958 |
46 | Bond Fund | Annual report |
Year ended 5-31-13 | Year ended 5-31-12 | |||
Shares | Amount | Shares | Amount | |
Class I shares | ||||
Sold | 12,674,668 | $207,444,253 | 6,362,267 | $99,471,488 |
Distributions reinvested | 464,023 | 7,607,505 | 183,139 | 2,868,620 |
Repurchased | (3,978,496) | (65,248,968) | (3,458,701) | (53,859,614) |
Net increase | 9,160,195 | $149,802,790 | 3,086,705 | $48,480,494 |
Class R2 shares1 | ||||
Sold | 120,858 | $1,989,037 | 6,329 | $100,000 |
Distributions reinvested | 1,063 | 17,545 | — | — |
Repurchased | (2,186) | (36,129) | — | — |
Net increase | 119,735 | $1,970,453�� | 6,329 | $100,000 |
Class R6 shares2 | ||||
Sold | 89,583 | $1,469,475 | 131,747 | $2,083,958 |
Distributions reinvested | 6,742 | 110,443 | 689 | 10,926 |
Repurchased | (60,952) | (998,024) | (7,661) | (121,962) |
Net increase | 35,373 | $581,894 | 124,775 | $1,972,922 |
Net increase | 35,012,094 | $572,779,681 | 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 5% and 4% of shares of beneficial interest of Class R2 and Class R6, respectively, on May 31, 2013.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities and U.S. Treasury obligations, amounted to $1,212,076,074 and $713,297,959, respectively, for the year ended May 31, 2013. Purchases and sales of U.S. Treasury obligations aggregated $523,389,407 and $447,852,606, respectively, for the year ended May 31, 2013.
Annual report | Bond Fund | 47 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Sovereign Bond Fund and Shareholders of John Hancock Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock Bond Fund (the “Fund”) at May 31, 2013, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 2013 by correspondence with the custodian, agent banks and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 26, 2013
48 | Bond Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended May 31, 2013.
The Fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The Fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Eligible shareholders will be mailed a 2013 Form 1099-DIV in early 2014. This will reflect the tax character of all distributions paid in calendar year 2013.
Please consult a tax advisor regarding the tax consequences of your investment in the Fund.
Annual report | Bond Fund | 49 |
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Sovereign Bond Fund (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (US) LLC (the Subadvisor) for John Hancock Bond Fund (the Fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on May 16-17, 2013, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meeting a variety of materials relating to the Fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for peer groups of similar mutual funds prepared by an independent third-party provider of mutual fund data; performance information for relevant indexes; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts; and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreement, as well as information regarding the Advisor’s revenues and costs of providing services to the Fund and compensation paid to affiliates of the Advisor. At the meeting at which the renewal of the Advisory Agreement and Subadvisory Agreement is considered, particular focus is given to information concerning Fund performance, comparability of fees and total expenses and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the Fund, including quarterly performance reports prepared by management containing reviews of investment results, and periodic presentations from the Subadvisor with respect to the Fund. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality and extent of the services to be provided to John Hancock Fund portfolios by the Advisor’s affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the Fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board’s conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board’s ongoing regular review of Fund performance and operations throughout the year.
50 | Bond Fund | Annual report |
Nature, extent and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent and quality of services provided to the Fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor’s compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust’s Chief Compliance Officer (CCO) regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor’s risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the Fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and other third-party service providers.
In considering the nature, extent and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor’s management and the quality of the performance of the Advisor’s duties, through Board meetings, discussions and reports during the preceding year and through each Trustee’s experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) the skills and competency with which the Advisor has in the past managed the Trust’s affairs and its subadvisory relationships, the Advisor’s oversight and monitoring of the Subadvisor’s investment performance and compliance programs, such as the Subadvisor’s compliance with fund policies and objective(s), review of brokerage matters, including with respect to trade allocation and best execution and the Advisor’s timeliness in responding to performance issues;
(b) the background, qualifications and skills of the Advisor’s personnel;
(c) the Advisor’s compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments;
(d) the Advisor’s administrative capabilities, including its ability to supervise the other service providers for the Fund;
(e) the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the Fund; and
(f) the Advisor’s reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments.
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the Fund.
Investment performance. In considering the Fund’s performance, the Board noted that it reviews at its regularly scheduled meetings information about the Fund’s performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) reviewed information prepared by management regarding the Fund’s performance;
(b) considered the comparative performance of the Fund’s benchmark;
Annual report | Bond Fund | 51 |
(c) considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of mutual fund data. Such report included the Fund’s ranking within a smaller group of peer funds and the Fund’s ranking within broader groups of funds; and
(d) took into account the Advisor’s analysis of the Fund’s performance and its plans and recommendations regarding the Trust’s subadvisory arrangements generally.
The Board noted that the Fund outperformed its benchmark index and peer group average for the one-, three- and five-year periods ended December 31, 2012.
The Board concluded that the performance of the Fund has generally been in line with or outperformed the historical performance of comparable funds and the Fund’s benchmark.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data including, among other data, the Fund’s contractual and actual advisory fees and total expenses as compared to similarly situated investment companies deemed to be comparable to the Fund. The Board considered the Fund’s ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the Fund’s ranking within broader groups of funds. In comparing the Fund’s actual and contractual management fee to that of comparable funds, the Board noted that such fee includes both advisory and administrative costs.
The Board noted that net management fees for this Fund are equal to the peer group median and that total expenses for this Fund are higher than the peer group median.
The Board also took into account management’s discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also took into account that management had agreed to implement an overall fee waiver across a number of funds in the complex, including the Fund, which is discussed further below. The Board also noted management’s discussion of the Fund’s expenses and that the Fund has a contractual fee waiver and/or expense reimbursement which reduces certain expenses of the Fund and that such waiver is not reflected in the comparative fee information. The Board reviewed information provided by the Advisor concerning investment advisory fees charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor’s and Subadvisor’s services to the Fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the Fund is reasonable.
Profitability/Indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor’s relationship with the Trust, the Board:
(a) reviewed financial information of the Advisor;
(b) reviewed and considered an analysis presented by the Advisor regarding the net profitability to the Advisor and its affiliates of the Fund;
(c) received and reviewed profitability information with respect to the John Hancock fund complex as a whole;
(d) received information with respect to the Advisor’s allocation methodologies used in preparing the profitability data;
(e) considered that the Advisor also provides administrative services to the Fund on a cost basis pursuant to an administrative services agreement;
52 | Bond Fund | Annual report |
(f) noted that the Fund’s Subadvisor is an affiliate of the Advisor;
(g) noted that affiliates of the Advisor provide transfer agency services and distribution services to the Fund, and that the Trust’s distributor also receives Rule 12b-1 payments to support distribution of the Fund;
(h) noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the Fund;
(i) noted that the subadvisory fees for the Fund are paid by the Advisor; and
(j) considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the Fund and the entrepreneurial risk that it assumes as Advisor.
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the Fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of Fund shareholders, the Board:
(a) with respect to each fund in the John Hancock fund complex, including the Fund (except those listed below), considered that the Advisor has agreed, effective June 1, 2013, to waive its management fee for the Fund and each of the open-end funds of John Hancock Funds II, John Hancock Funds III, each other John Hancock Fund (except those listed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $75 billion but is less than or equal to $125 billion, 0.0125% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $125 billion but is less than or equal to $150 billion and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $150 billion. (The John Hancock Funds that are not Participating Portfolios as of the date of this annual report are each of the fund of funds, money market funds, index funds and closed-end funds);
(b) reviewed the Trust’s advisory fee structure and the incorporation therein of any subadvisory fee breakpoints in the advisory fees charged and concluded that (i) the Fund’s fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the Fund and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the Fund to benefit from economies of scale if the Fund grows. The Board also took into account management’s discussion of the Fund’s advisory fee structure; and
(c) the Board also considered the effect of the Fund’s growth in size on its performance and fees. The Board also noted that if the Fund’s assets increase over time, the Fund may realize other economies of scale.
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) information relating to the Subadvisor’s business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds);
Annual report | Bond Fund | 53 |
(2) the historical and current performance of the Fund and comparative performance information relating to the Fund’s benchmark and comparable funds; and
(3) the subadvisory fee for the Fund, including any breakpoints, and comparative fee information, where available, prepared by an independent third-party provider of mutual fund data.
Nature, extent and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor’s Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor’s current level of staffing and its overall resources, as well as received information relating to the Subadvisor’s compensation program. The Board reviewed the Subadvisor’s history and investment experience, as well as information regarding the qualifications, background and responsibilities of the Subadvisor’s investment and compliance personnel who provide services to the Fund. The Board also considered, among other things, the Subadvisor’s compliance program and any disciplinary history. The Board also considered the Subadvisor’s risk assessment and monitoring process. The Board reviewed the Subadvisor’s regulatory history, including whether it was currently involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed by them to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor’s investment process and philosophy. The Board took into account that the Subadvisor’s responsibilities include the development and maintenance of an investment program for the Fund, which is consistent with the Fund’s investment objectives, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor’s brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the Fund.
The Board also received information and took into account any other potential conflicts of interests the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor’s relationship with the Fund, such as the opportunity to provide advisory services to additional portfolios of the Trust and reputational benefits.
Subadvisory fees. The Board considered that the Fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. The Board also took into account the subadvisory fees paid by the Advisor to fees charged by the Fund’s Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the Fund’s performance as compared to the Fund’s peer group and benchmark and noted that the Board reviews information about the Fund’s performance results at its regularly scheduled meetings. The Board noted the Advisor’s expertise and resources in monitoring the performance, investment style and risk-adjusted
54 | Bond Fund | Annual report |
performance of the Subadvisor. The Board was mindful of the Advisor’s focus on the Subadvisor’s performance. The Board also noted the Subadvisor’s long-term performance record for similar accounts, as applicable.
The Board’s decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) The Subadvisor has extensive experience and demonstrated skills as a manager;
(2) The performance of the Fund generally has been in line with or outperformed the historical performance of comparable funds and the Fund’s benchmark and the Fund’s overall performance is satisfactory;
(3) The subadvisory fees are reasonable in relation to the level and quality of services being provided; and
(4) Subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the Fund in order to permit shareholders to benefit from economies of scale if the Fund grows.
* * * |
Based on their evaluation of all factors that they deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the Fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
Annual report | Bond Fund | 55 |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund as of December 1, 2012. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
James M. Oates,2 Born: 1946 | 2012 | 233 |
Managing Director, Wydown Group (financial consulting firm) (since 1994); Chairman and Director, | ||
Emerson Investment Management, Inc. (since 2000); Independent Chairman, Hudson Castle Group, Inc. | ||
(formerly IBEX Capital Markets, Inc.) (financial services company) (1997–2011); Director, Stifel Financial | ||
(since 1996); Director, Investor Financial Services Corporation (1995–2007); Director, Connecticut River | ||
Bancorp (since 1998); Director, Virtus Funds (formerly Phoenix Mutual Funds) (since 1988). Trustee | ||
and Chairperson of the Board, John Hancock retail funds (since 2012); Trustee (2005–2006 and since | ||
2012) and Chairperson of the Board (since 2012), John Hancock Funds III; Trustee (since 2004) and | ||
Chairperson of the Board (since 2005), John Hancock Variable Insurance Trust; Trustee and Chairperson | ||
of the Board (since 2005), John Hancock Funds II. | ||
Charles L. Bardelis,2,3 Born: 1941 | 2012 | 233 |
Director, Island Commuter Corp. (marine transport). Trustee, John Hancock retail funds (since 2012); | ||
Trustee, John Hancock Funds III (2005–2006 and since 2012); Trustee, John Hancock Variable Insurance | ||
Trust (since 1988); Trustee, John Hancock Funds II (since 2005). | ||
Peter S. Burgess,2,3 Born: 1942 | 2012 | 233 |
Consultant (financial, accounting and auditing matters) (since 1999); Certified Public Accountant; | ||
Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln | ||
Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (since 2010); | ||
former Director, PMA Capital Corporation (2004–2010). Trustee, John Hancock retail funds (since 2012); | ||
Trustee, John Hancock Funds III (2005–2006 and since 2012); Trustee, John Hancock Variable Insurance | ||
Trust and John Hancock Funds II (since 2005). | ||
William H. Cunningham, Born: 1944 | 1987 | 233 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas | ||
System and former President of the University of Texas, Austin, Texas; Director, LIN Television (since | ||
2009); Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); | ||
Director, Resolute Energy Corporation (since 2009); Director, Southwest Airlines (since 2000); former | ||
Director, Introgen (manufacturer of biopharmaceuticals) (until 2008); former Director, Hicks Acquisition | ||
Company I, Inc. (until 2007); former Director, Texas Exchange Bank, SSB (formerly Bank of Crowley) | ||
(until 2009); former Advisory Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) | ||
(until 2009). Trustee, John Hancock retail funds (since 1986); Trustee, John Hancock Variable Insurance | ||
Trust (since 2012); Trustee, John Hancock Funds II (since 2012 and 2005–2006). | ||
Grace K. Fey,2 Born: 1946 | 2012 | 233 |
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, | ||
Frontier Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009). | ||
Trustee, John Hancock retail funds (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). |
56 | Bond Fund | Annual report |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Theron S. Hoffman,2,3 Born: 1947 | 2012 | 233 |
Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd | ||
Organization (consulting firm) (2003–2010); President, Westport Resources Management (investment | ||
management consulting firm) (2006–2008); Senior Managing Director, Partner and Operating Head, | ||
Putnam Investments (2000–2003); Executive Vice President, The Thomson Corp. (financial and | ||
legal information publishing) (1997–2000). Trustee, John Hancock retail funds (since 2012); Trustee, | ||
John Hancock Variable Insurance Trust and John Hancock Funds II (since 2008). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 233 |
President, Cambridge College, Cambridge, Massachusetts (since 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation | ||
(since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors | ||
of American Student Assistance Corporation (1996–2009); Board of Directors of Boston Stock Exchange | ||
(2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). | ||
Trustee, John Hancock retail funds (since 2008); Trustee of John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Hassell H. McClellan,2 Born: 1945 | 2012 | 233 |
Associate Professor, The Wallace E. Carroll School of Management, Boston College (since 1984); | ||
Trustee, Virtus Variable Insurance Trust (formerly Phoenix Edge Series Funds) (since 2008); Director, | ||
The Barnes Group (since 2010). Trustee, John Hancock retail funds (since 2012); Trustee, John Hancock | ||
Funds III (2005–2006 and since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2005). | ||
Steven R. Pruchansky, Born: 1944 | 1994 | 233 |
Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director | ||
and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First | ||
American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Director, | ||
First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, | ||
Maxwell Building Corp. (until 1991). Trustee (since 1992) and Chairperson of the Board (2011–2012), | ||
John Hancock retail funds; Trustee and Vice Chairperson of the Board, John Hancock retail funds, | ||
John Hancock Variable Insurance Trust and John Hancock Funds II (since 2012). | ||
Gregory A. Russo, Born: 1949 | 2008 | 233 |
Director and Audit Committee Chairman (since 2012) and Member, Audit Committee and Finance | ||
Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare | ||
system); Director and Member of Finance Committee, The Moorings, Inc. (nonprofit continuing care | ||
community) (since 2012); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); | ||
Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester | ||
County, New York, Chamber of Commerce (1986–1992); Director, Treasurer and Chairman of | ||
Audit and Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of | ||
Fundraising Campaign, United Way of Westchester and Putnam Counties, New York (1990–1995). | ||
Trustee, John Hancock retail funds (since 2008); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). |
Annual report | Bond Fund | 57 |
Non-Independent Trustees4
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
James R. Boyle,2 Born: 1959 | 2012 | 233 |
Senior Executive Vice President, John Hancock Financial Services (1999–2012, including prior positions); | ||
Chairman and Director, John Hancock Advisers, LLC, John Hancock Funds, LLC and John Hancock | ||
Investment Management Services, LLC (2005–2010). Trustee, John Hancock retail funds (since 2012 and | ||
2005–2010), Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
Craig Bromley,2 Born: 1966 | 2012 | 233 |
President, John Hancock Financial Services (since 2012); Senior Executive Vice President and General | ||
Manager, U.S. Division, John Hancock Financial Services (since 2012); President and Chief Executive | ||
Officer, Manulife Insurance Company (Manulife (Japan) (2005–2012), including prior positions). | ||
Trustee, John Hancock retail funds (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Warren A. Thomson,2 Born: 1955 | 2012 | 233 |
Senior Executive Vice President and Chief Investment Officer, Manulife Financial Corporation and The | ||
Manufacturers Life Insurance Company (since 2009); Chairman and Chief Executive Officer, Manulife | ||
Asset Management (since 2001, including prior positions); Director (since 2006), and President and | ||
Chief Executive Officer of Manulife Asset Management Limited (since 2013); Director and Chairman, | ||
Hancock Natural Resources Group, Inc. (since 2013). | ||
Principal officers who are not Trustees | ||
Name, Year of Birth | Officer | |
Position(s) held with Fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Hugh McHaffie, Born: 1959 | 2012 | |
President | ||
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment Management Services, | ||
LLC and John Hancock Funds, LLC (since 2010); President, John Hancock Advisers, LLC (since 2012); | ||
President, John Hancock Investment Management Services, LLC (since 2010). President (since 2012) and | ||
former Trustee (2010–2012), John Hancock retail funds; President, John Hancock Variable Insurance | ||
Trust and John Hancock Funds II (since 2009). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Executive Vice President | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); President, John Hancock Funds, LLC (since 2004, including | ||
prior positions); Executive Vice President, John Hancock retail funds (since 2007, including prior | ||
positions); Executive Vice President, John Hancock Variable Insurance Trust and John Hancock Funds II | ||
(since 2007, including prior positions). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, | ||
John Hancock Variable Insurance Trust and John Hancock Funds II (since 2006). |
58 | Bond Fund | Annual report |
Principal officers who are not Trustees (continued)
Name, Year of Birth | Officer | |
Position(s) held with Fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Francis V. Knox, Jr., Born: 1947 | 2005 | |
Chief Compliance Officer | ||
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | ||
retail funds, John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, | ||
LLC and John Hancock Investment Management Services, LLC (since 2005); Vice President and Chief | ||
Compliance Officer, John Hancock Asset Management a division of Manulife Asset Management (US) | ||
LLC (2005–2008). | ||
Charles A. Rizzo, Born: 1957 | 2007 | |
Chief Financial Officer | ||
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | ||
Officer, John Hancock retail funds, John Hancock Variable Insurance Trust and John Hancock Funds II | ||
(since 2007). | ||
Salvatore Schiavone, Born: 1965 | 2010 | |
Treasurer | ||
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | ||
John Hancock retail funds (since 2007, including prior positions); Treasurer, John Hancock Variable | ||
Insurance Trust and John Hancock Funds II (since 2010 and 2007–2009, including prior positions). |
John Hancock retail funds is comprised of John Hancock Funds III and 34 other John Hancock funds consisting of 24 series of other John Hancock trusts and 10 closed-end funds.
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Trust and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Became a Trustee of the Trust effective December 1, 2012.
3 Member of Audit Committee.
4 Because Messrs. Bromley and Thomson are senior executives or directors and Mr. Boyle held prior positions as a senior executive and director of the Advisor and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Trust.
Annual report | Bond Fund | 59 |
More information
Trustees | Investment advisor |
James M. Oates, Chairman | John Hancock Advisers, LLC |
Steven R. Pruchansky, Vice Chairman | |
Charles L. Bardelis* | Subadvisor |
James R. Boyle† | John Hancock Asset Management a division of |
Craig Bromley† | Manulife Asset Management (US) LLC |
Peter S. Burgess* | |
William H. Cunningham | Principal distributor |
Grace K. Fey | John Hancock Funds, LLC |
Theron S. Hoffman* | |
Deborah C. Jackson | Custodian |
Hassell H. McClellan | 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 | Independent registered |
Executive Vice President | public accounting firm |
PricewaterhouseCoopers LLP | |
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) website at sec.gov or on our website.
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 website and the SEC’s website, sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 800-SEC-0330 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 website at jhfunds.com or by calling 800-225-5291.
You can also contact us: | ||
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 |
60 | Bond Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-13-001168/bondfundx57x1.jpg)
800-225-5291
800-554-6713 TDD
800-338-8080 EASI-Line
jhfunds.com
![](https://capedge.com/proxy/N-CSR/0000928816-13-001168/bondfundx57x2.jpg)
This report is for the information of the shareholders of John Hancock Bond Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 21A 5/13 |
MF146648 | 7/13 |
ITEM 2. CODE OF ETHICS.
As of the end of the year, May 31, 2013, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Covered Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Effective December 12, 2012, Peter S. Burgess is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
Prior to December 12, 2012, Gregory A. Russo was the audit committee financial expert and was “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to the following for the fiscal years ended May 31, 2013 and 2012. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | May 31, 2013 | May 31, 2012 | ||
John Hancock Bond Fund | $ | 49,122 | $ | 43,795 |
(b) Audit-Related Services
Audit-related fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser ("control affiliates") that provides ongoing services to the registrant. The nature of the services provided was affiliated service provider internal controls reviews. Amounts billed to the registrant were as follows:
Fund | May 31, 2013 | May 31, 2012 | ||
John Hancock Bond Fund | $ | 737 | $ | 784 |
Amounts billed to control affiliates were $99,637 and $96,255 for the fiscal years ended May 31, 2013 and 2012, respectively.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to the following for the fiscal years ended May 31, 2013 and 2012. The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | May 31, 2013 | May 31, 2012 | ||
John Hancock Bond Fund | $ | 2,943 | $ | 2,857 |
(d) All Other Fees
Other fees billed for professional services rendered by the principal accountant to the registrant or to the control affiliates for the fiscal years ended May 31, 2013 and 2012 amounted to the following:
Fund | May 31, 2013 | May 31, 2012 | ||
John Hancock Bond Fund | $ | 2,200 | $ | 200 |
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust’s Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the “Auditor”) relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust’s Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per year/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per year/per fund are subject to specific pre-approval by the Audit Committee.
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees, Tax Fees and All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f) According to the registrant’s principal accountant for the fiscal year ended May 31, 2013, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and rendered to the registrant's control affiliates for the fiscal years ended May 31, 2013 and 2012 amounted to the following:
Trust | May 31, 2013 | May 31, 2012 | ||
John Hancock Sovereign Bond Fund | $ | 2,841,066 | $ | 3,334,303 |
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. Effective December 12, 2012, the members of the audit committee are as follows:
Peter S. Burgess - Chairman
Charles L. Bardelis
Theron S. Hoffman
Prior to December 12, 2012, the members of the audit committee were as follows:
Gregory A. Russo - Chairman
Dr. John A. Moore
Steven R. Pruchansky
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Covered Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
(c)(2) Contact person at the registrant.
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Sovereign Bond Fund | |
By: | /s/ Hugh McHaffie |
------------------------------ | |
Hugh McHaffie | |
President | |
Date: | July 25, 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: | July 25, 2013 |
By: | /s/ Charles A. Rizzo |
-------------------------------- | |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | July 25, 2013 |