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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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)
Michael J. Leary
Treasurer
Treasurer
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant’s telephone number, including area code: 617-663-4490
Date of fiscal year end: May 31 | ||
Date of reporting period: November 30, 2009 |
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John Hancock
Bond Fund
![(PHOTO)](https://capedge.com/proxy/N-CSRS/0000950123-10-008684/b78482a1s4408699.gif)
Semiannual Report
11.30.09
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CEO corner | ||
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page 1 Managers’ report page 2 SEMIANNUAL REPORT A look at performance page 6 Your expenses page 8 Portfolio summary page 10 Fun d’s investments page 11 Financial statements page 32 Financial highlights page 35 Notes to financial statements page 38 More information page 52 | To Our Shareholders, Financial markets posted strong results during the six months ended November 30, 2009. After outperforming stocks during the height of the financial crisis in 2008 and early 2009, bonds overall produced positive, but more modest, results during the period. Interest rates remained at near historic lows — a product of efforts to lift the economy out of recession — and inflation remained in check. In this environment, investors sought out higher-yielding, riskier investments, to the benefit of high-yield bonds and lower investment-grade corporate securities. During the six months, the broad Barclays Capital U.S. Aggregate Bond Index returned 6.21%. Equities outpaced bonds by a wide margin. The stock market climbed steadily, continuing its rebound from its March 2009 bottom. Massive government stimulus programs aimed at stabili zing the financial system and signs of an improving economy began to bear fruit, while investors grew more comfortable venturing back into stocks. As a result, the broad S&P 500 Index returned 20.50% during the six-month period ended November 30, 2009. Despite these improvements and market gains, high unemployment, a housing market still on the mend and an improved, but still slow-growing, economy are factors that we believe could cause the Federal Reserve to keep interest rates low until there are more significant signs of a recovery. Looking further out, however, the talk is turning to the potential for rising interest rates. Interest rates have been low for several years and are currently at or near historic low levels, and there are rumblings from Fed watchers that the Fed’s next move will be to tighten money supply and eventually raise interest rates. That would be a significant shift in market conditions. Given this potential, it could be time to consult your financi al adviser about how to position your portfolio for a rising rate environment. When interest rates rise, bond prices generally fall, which could potentially mean a decline in a bond mutual fund’s share price. Of course, there are factors that could keep the share price up even as yields rise, such as an increase in demand for municipal bonds — something that could occur if tax rates rise. In any event, working with your financial adviser to possibly adjust your portfolio in anticipation of the next interest rate moves could potentially be just the ticket to keeping your investment goals on track. Sincerely, ![]() Keith F. Hartstein, President and Chief Executive Officer |
This commentary reflects the CEO’s views as of November 30, 2009. They are subject to change at any time.
Not part of the semiannual report
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Your fund at a glance
The Fund seeks a high level of current income consistent with prudent investment risk. Under normal market conditions, the Fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in a diversified portfolio of bonds. These may include, but are not limited to, corporate bonds and debentures, as well as U.S. government and agency securities.
Over the last six months
4 | U.S. bonds gained ground as economic and credit conditions improved. |
4 | Corporate bonds, both investment-grade and high-yield, generated the best returns, while Treasury bonds lagged. |
4 | The Fund outperformed its benchmark index and peer group average due to a substantial position in corporate bonds. |
John Hancock Bond Fund
Fund performance for the six months ended November 30, 2009.
![](https://capedge.com/proxy/N-CSRS/0000950123-10-008684/b78482a1s4408603.gif)
Total returns for the Fund are at net asset value with all distributions reinvested. These returns do not reflect the deduction of the maximum sales charge, which would reduce the performance shown above.
Past performance is no guarantee of future results.
Class R1 shares converted to Class A shares on August 21, 2009.
Portfolio Composition
Corporate Bonds | 59% | |
U.S. Government & Agency Obligations | 18% | |
Collateralized Mortgage Obligations | 16% | |
Asset-Backed Securities | 3% | |
Preferred Stocks | 1% | |
Short-Term Investments & Other | 3% | |
As a percentage of net assets on November 30, 2009.
Not part of the semiannual report | 1 |
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Managers’ report
John Hancock
Bond Fund
U.S. bonds advanced during the six months ended November 30, 2009. The Barclays Capital U.S. Aggregate Index, a broad measure of domestic bond market performance, returned 6.21% for the six-month period.
The bond market rally was driven primarily by strong returns for corporate bonds, which benefited from improving economic and credit conditions. A series of programs from the federal government, coupled with historically low short-term interest rates from the Federal Reserve, helped stabilize the U.S. economy following a severe downturn in late 2008 and early 2009. The unemployment rate continued to climb — reaching a 26-year high of 10.2% by the end of the period — but the pace of job losses began to slow. What’s more, the manufacturing sector showed signs of expansion and government programs such as “Cash for Clunkers” and tax credits for first-time homebuyers helped buoy auto and home sales. As a result, the economy grew at a 2.8% annual rate in the third quarter of 2009 — its first quarter of positive growth in more than a year.
In this environment, investors’ appetite for risk increased, boosting demand for corporate bonds and commercial mortgage-backed securities, both of which posted double-digit gains during the six-month period. High-yield corporate bonds generated the best results, returning more than 20%. Mortgage-backed securities posted modest gains as purchases of these securities by the Federal Reserve to help support the housing market were offset by concerns about increased refinancing activity as mortgage rates declined.
SCORECARD | ||||||
INVESTMENT | PERIOD’S PERFORMANCE ... AND WHAT’S BEHIND THE NUMBERS | |||||
Liberty Mutual | 5 | Insurance firm benefited from better credit conditions and a broad rally in financial assets | ||||
Vale Capital II | 5 | Preferred stock of Brazilian metals and mining company rallied as commodity prices rose | ||||
Mashantucket Western Pequot Tribe | 6 | Owner of Foxwoods casino struggled with declining tourism and weak consumer spending |
2 | Not part of the semiannual report |
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![]() | ![]() | ![]() |
Portfolio Managers, MFC Global Investment Management (U.S.), LLC
Howard C. Greene, CFA, Barry H. Evans, CFA and Jeffrey N. Given, CFA
“ | The bond market rally was driven primarily by strong returns for corporate bonds, which benefited from improving economic and credit conditions.” |
Treasury bonds posted the smallest gains amid increased issuance to fund a burgeoning federal budget deficit.
Fund performance
For the six months ended November 30, 2009, John Hancock Bond Fund’s Class A shares posted a total return of 17.44% at net asset value (NAV). The Fund comfortably outperformed the 6.73% return of its benchmark index, the Barclays Capital Government/Credit Bond Index, and the 9.71% average return of its peer group, the Morningstar, Inc.1 intermediate-term bond category. Keep in mind that your NAV return will differ from the Fund’s performance if you were not invested in the Fund for the entire period or did not reinvest all distributions. See page one for the NAV results of other share classes during the period and pages six and seven for historical performance information.
Corporate bonds boosted performance
The primary factor behind the Fund’s outperformance of both the broad bond market index and its peer group average was its significant exposure to corporate bonds, which comprised more than half of the Fund’s portfolio throughout the six-month period. This included a noteworthy position in high-yield corporate bonds, which were the best performers in the fixed-income market during the period.
We continued to increase the Fund’s position in corporate securities, expanding its holdings to approximately 60% of the portfolio by the end of the period. Most of our purchases in the corporate market were focused on the financial sector, which had been left behind when corporate bonds began to rebound in early 2009. As a result, we were able to find attractive valuations in this segment of the corporate bond market.
The best contributor among the Fund’s corporate bond holdings came from the financial sector — insurance company Liberty Mutual Group, Inc. The Liberty bonds
Not part of the semiannual report | 3 |
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SECTOR COMPOSITION2
Financials | 26% | |||
U.S. Government Agency | 18% | |||
Mortgage Bonds | 16% | |||
Consumer Discretionary | 7% | |||
Utilities | 6% | |||
Industrials | 5% | |||
Energy | 5% | |||
Materials | 5% | |||
Consumer Staples | 4% | |||
Telecommunication Services | 3% | |||
Other | 5% |
have relatively long maturities of 25 to 30 years, and these bonds rebounded sharply amid better credit conditions and a broad rally in financial assets. Another top contributor was Vale Capital II, which is a preferred stock of Brazilian metals and mining company Vale SA. Vale benefited from rising prices for metals and other commodities as the global economic environment improved.
On the downside, the Fund’s worst performers came from the gaming sector, which was adversely affected by declining tourism and weak consumer spending stemming from the economic downturn. The most notable detractors included Little Traverse Bay Bands of Odawa Indians, a small casino in northern Michigan, and Mashantucket Western Pequot Tribe, which owns the Foxwoods casino in Connecticut.
Shifting away from mortgage-backed securities
The increase in the Fund’s corporate bonds was matched by a corresponding decrease in its holdings of mortgage-backed securities, particularly those issued by government agencies such as Fannie Mae and Freddie Mac. With refinancing activity increasing and many mortgage-backed securities trading at considerable premiums as a result of the Fed’s purchases, we viewed the risk/reward trade-off as unfavorable for these securities.
The Fund continued to benefit from its modest position in interest-only mortgage securities, which rallied significantly during the six-month period as prepayments slowed and interest income increased. In addi-
tion, the Fund’s position in commercial mortgage-backed securities added value as the sector rebounded substantially after a severe decline earlier in 2009.
Positioning for a steeper yield curve
Throughout the six-month period, the Fund’s portfolio was positioned to benefit from a steeper yield curve, which means a widening gap between short- and long-term interest rates. In practice, this involved concentrating the majority of the Fund’s investments in intermediate-term bonds, particularly those maturing in five to 10 years. This strategy proved valuable over the past six months as the yield curve grew modestly steeper.
Looking ahead, the most likely situation in which the yield curve would flatten would be if the Fed raises short-term
4 | Not part of the semiannual report |
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“ | The primary factor behind the Fund’s outperformance of both the broad bond market index and its peer group average was its significant exposure to corporate bonds. . .” |
interest rates. However, we don’t believe this will happen until at least the latter half of 2010, so we intend to maintain our current positioning.
Outlook
The U.S. economy appears to be on the road to recovery, but we expect it to be a long and gradual journey as the economy faces many obstacles, from consumer deleveraging (i.e., reducing debt levels) to persistently high unemployment. A slow, steady growth environment is ideal for corporate bonds, as is the trend toward rebuilding balance sheets throughout corporate America. Furthermore, we continue to believe that valuations in this segment of the bond market remain attractive; on a historical basis, the yield spreads between Treasury and corporate bonds are roughly where they should be in the early stages of a recovery. Consequently, we intend to remain heavily weighted in the corporate sector, with limited exposure to the Treasury and mortgage-backed segments of the bond market.
This commentary reflects the views of the portfolio managers through the end of the Fund’s period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results
The major factors in this Fund’s performance are interest rate and credit risk. When interest rates rise, bond prices usually fall. Generally, an increase in the Fund’s average maturity will make it more sensitive to interest-rate risk.
Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
1Figures from Morningstar, Inc. include reinvested dividends and do not take into account sales charges. Actual load-adjusted performance is lower.
2As a percentage of net assets on November 30, 2009.
Not part of the semiannual report | 5 |
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A look at performance
For the period ended November 30, 2009
Cumulative total returns (%) | SEC 30- | |||||||||||||||||||||||||||||||
Average annual returns (%) | with maximum sales charge (POP) | day yield | ||||||||||||||||||||||||||||||
with maximum sales charge (POP) | Six | (%) as of | ||||||||||||||||||||||||||||||
Class | 1-year | 5-year | 10-year | months | 1-year | 5-year | 10-year | 11-30-09 | ||||||||||||||||||||||||
A | 24.56 | 4.11 | 5.58 | 12.16 | 24.56 | 22.29 | 72.15 | 6.80 | ||||||||||||||||||||||||
B | 24.52 | 4.01 | 5.48 | 12.12 | 24.52 | 21.75 | 70.51 | 6.50 | ||||||||||||||||||||||||
C | 28.53 | 4.34 | 5.33 | 16.04 | 28.53 | 23.69 | 68.10 | 6.45 | ||||||||||||||||||||||||
I1,2 | 31.06 | 5.53 | 6.53 | 17.75 | 31.06 | 30.89 | 88.28 | 7.60 |
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 4.5% and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The returns for Class C shares have been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I 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 the expense ratios disclosed in the Financial Highlights tables in this report. The net expenses equal the gross expenses and are as follows: Class A — 1.11%, Class B — 1.81%, Class C — 1.81 and Class I — 0.65%.
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 date, please call 1-800-225-5291 or visit the Fund’s Web Site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on the redemption of fund shares.
The Fund’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and the results would have been less favorable.
1For certain types of investors as described in the Fund’s Class I shares prospectus.
2November 9, 1973 is the inception date for the oldest class of shares, Class A shares. The inception date for Class I shares is September 4, 2001. The returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses to Class I shares.
6 | Bond Fund ï Semiannual report |
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Growth of $10,000
This chart shows what happened to a hypothetical $10,000 investment in John Hancock Bond Fund Class A shares for the period indicated. For comparison, we’ve shown the same investment in the Barclays Capital Government/Credit Bond Index.
![(LINE GRAPH)](https://capedge.com/proxy/N-CSRS/0000950123-10-008684/b78482a1b7848277.gif)
Without sales | With maximum | |||||||||||||||
Class | Period beginning | charge | sales charge | Index | ||||||||||||
B2 | 11-30-99 | $ | 17,051 | $ | 17,051 | $ | 18,715 | |||||||||
C2 | 11-30-99 | 16,810 | 16,810 | 18,715 | ||||||||||||
I3,4 | 11-30-99 | 18,828 | 18,828 | 18,715 | ||||||||||||
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B, Class C and Class I shares, respectively, as of November 30, 2009. The Class C shares investment with maximum sales charges has been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in the different classes and the fee structure of those classes.
Barclays Capital Government/Credit Bond Index is an unmanaged index of U.S. government, U.S. corporate and Yankee bonds.
It is not possible to invest directly in an index. Index figures do not reflect sales charges or direct expenses, which would have resulted in lower values if they did.
1 | NAV represents net asset value and POP represents public offering price. | |
2 | No contingent deferred sales charge applicable. | |
3 | For certain types of investors as described in the Fund’s Class I shares prospectus. | |
4 | November 9, 1973 is the inception date for the oldest class of shares, Class A shares. The inception date for Class I shares is September 4, 2001. The returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses to Class I shares. |
Semiannual report ï Bond Fund | 7 |
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Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses |
As a shareholder of the Fund, you incur two types of costs:
§ | Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc. |
§ | Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses. |
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns |
This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on June 1, 2009 with the same investment held until November 30, 2009.
Account value | Ending value | Expenses paid during | ||||||||||
on 6-1-09 | on 11-30-09 | period ended 11-30-09 1 | ||||||||||
Class A | $ | 1,000.00 | $ | 1,174.40 | $ | 6.10 | ||||||
Class B | 1,000.00 | 1,171.20 | 9.91 | |||||||||
Class C | 1,000.00 | 1,170.40 | 9.90 | |||||||||
Class I | 1,000.00 | 1,177.50 | 3.49 | |||||||||
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at November 30, 2009, 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:
Example |
[ | My account value $8,600.00 | / | $1,000.00 = 8.6 | ] | x | $ | [ | “expenses paid” from table | ] | = | My actual expenses | |||||||||||
8 | Bond Fund ï Semiannual report |
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Hypothetical example for comparison purposes |
This table allows you to compare your fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not your fund’s actual return). It assumes an account value of $1,000.00 on June 1, 2009, with the same investment held until November 30, 2009. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | ||||||||||
on 6-1-09 | on 11-30-09 | period ended 11-30-09 1 | ||||||||||
Class A | $ | 1,000.00 | $ | 1,019.40 | $ | 5.67 | ||||||
Class B | 1,000.00 | 1,015.90 | 9.20 | |||||||||
Class C | 1,000.00 | 1,015.90 | 9.20 | |||||||||
Class I | 1,000.00 | 1,021.90 | 3.24 | |||||||||
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1Expenses are equal to the Fund’s annualized expense ratio of 1.12%, 1.82%, 1.82% and 0.64% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
Semiannual report ï Bond Fund | 9 |
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Portfolio summary
Portfolio Composition1 | ||||
Corporate Bonds | 59% | |||
U.S. Government & Agency Obligations | 18% | |||
Collateralized Mortgage Obligations | 16% | |||
Asset-Backed Securities | 3% | |||
Preferred Stocks | 1% | |||
Short-Term Investments & Other | 3% | |||
Sector Composition1,2 | ||||
Financials | 26% | |||
U.S. Government Agency | 18% | |||
Mortgage Bonds | 16% | |||
Consumer Discretionary | 7% | |||
Utilities | 6% | |||
Industrials | 5% | |||
Energy | 5% | |||
Materials | 5% | |||
Consumer Staples | 4% | |||
Telecommunication Services | 3% | |||
Other | 5% | |||
Quality Composition1 | ||||
AAA | 26% | |||
AA | 6% | |||
A | 19% | |||
BBB | 26% | |||
BB | 9% | |||
B | 6% | |||
CCC | 5% | |||
Short-Term Investments & Other | 3% | |||
10 | Bond Fund ï Semiannual report |
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Fund’s investments
As of 11-30-09 (unaudited)
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Corporate Bonds 58.38% | $503,116,725 | |||||||||||||
(Cost $482,472,159) | ||||||||||||||
Consumer Discretionary 6.98% | 60,166,304 | |||||||||||||
Auto Components 0.77% | ||||||||||||||
Allison Transmission, Inc., | ||||||||||||||
Gtd Sr Note (S) | 11.000 | % | 11-01-15 | $1,940,000 | 2,007,900 | |||||||||
Exide Technologies, | ||||||||||||||
Sr Sec Note Series B | 10.500 | 03-15-13 | 1,945,000 | 1,935,275 | ||||||||||
Goodyear Tire & Rubber Company, | ||||||||||||||
Sr Note | 10.500 | 05-15-16 | 1,000,000 | 1,075,000 | ||||||||||
Tenneco, Inc., | ||||||||||||||
Gtd Sr Sub Note | 8.625 | 11-15-14 | 1,675,000 | 1,641,500 | ||||||||||
Hotels, Restaurants & Leisure 1.82% | ||||||||||||||
Arcos Dorados BV, | ||||||||||||||
Gtd Sr Note (S) | 7.500 | 10-01-19 | 1,075,000 | 1,075,000 | ||||||||||
Greektown Holdings LLC, | ||||||||||||||
Sr Note (H)(S) | 10.750 | 12-01-13 | 1,170,000 | 244,238 | ||||||||||
HRP Myrtle Beach Operations LLC, | ||||||||||||||
Sr Note (H)(S) | Zero | 04-01-12 | 1,075,000 | — | ||||||||||
Jacobs Entertainment, Inc., | ||||||||||||||
Gtd Sr Note | 9.750 | 06-15-14 | 2,435,000 | 2,215,850 | ||||||||||
Little Traverse Bay Bands of Odawa Indians, | ||||||||||||||
Sr Note (H)(S) | 10.250 | 02-15-14 | 2,210,000 | 552,500 | ||||||||||
Mashantucket Western Pequot Tribe, | ||||||||||||||
Bond Series A (S) | 8.500 | 11-15-15 | 395,000 | 94,800 | ||||||||||
MGM Mirage, Inc., | ||||||||||||||
Sr Sec Note (S) | 10.375 | 05-15-14 | 350,000 | 373,625 | ||||||||||
Mohegan Tribal Gaming Authority, | ||||||||||||||
Gtd Sr Sub Note | 8.000 | 04-01-12 | 420,000 | 331,800 | ||||||||||
Sr Sub Note | 7.125 | 08-15-14 | 1,050,000 | 661,500 | ||||||||||
MTR Gaming Group, Inc., | ||||||||||||||
Gtd Sr Sec Note (S) | 12.625 | 07-15-14 | 710,000 | 658,525 | ||||||||||
Gtd Sr Sub Note Series B | 9.000 | 06-01-12 | 1,495,000 | 1,151,150 | ||||||||||
Pokagon Gaming Authority, | ||||||||||||||
Sr Note (S) | 10.375 | 06-15-14 | 1,190,000 | 1,240,575 |
See notes to financial statements Semiannual report ï Bond Fund | 11 |
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Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Hotels, Restaurants & Leisure (continued) | ||||||||||||||
Seminole Tribe of Florida, | ||||||||||||||
Bond (S) | 6.535 | % | 10-01-20 | $2,260,000 | $2,074,703 | |||||||||
Starwood Hotels & Resorts Worldwide, Inc., Sr Note | 6.250 | 02-15-13 | 1,770,000 | 1,800,975 | ||||||||||
Turning Stone Resort Casino Enterprise, | ||||||||||||||
Sr Note (S) | 9.125 | 09-15-14 | 1,890,000 | 1,838,025 | ||||||||||
Waterford Gaming LLC, | ||||||||||||||
Sr Note (S) | 8.625 | 09-15-14 | 1,074,000 | 612,180 | ||||||||||
Yonkers Racing Corp., | ||||||||||||||
Sr Sec Note (S) | 11.375 | 07-15-16 | 745,000 | 774,800 | ||||||||||
Household Durables 0.37% | ||||||||||||||
Whirlpool Corp., | ||||||||||||||
Sr Note | 8.600 | 05-01-14 | 1,450,000 | 1,676,832 | ||||||||||
Sr Note | 8.000 | 05-01-12 | 1,415,000 | 1,548,805 | ||||||||||
Media 3.24% | ||||||||||||||
AMC Entertainment, Inc., | ||||||||||||||
Sr Note | 8.750 | 06-01-19 | 525,000 | 534,187 | ||||||||||
Sr Sub Note | 8.000 | 03-01-14 | 2,225,000 | 2,097,063 | ||||||||||
Cablevision Systems Corp., | ||||||||||||||
Sr Note (S) | 8.625 | 09-15-17 | 550,000 | 563,750 | ||||||||||
Charter Communications Holdings II LLC, Gtd Sr Note (H)(S) | 10.250 | 10-01-13 | 1,680,000 | 1,948,800 | ||||||||||
Cinemark USA, Inc., | ||||||||||||||
Gtd Sr Note (S) | 8.625 | 06-15-19 | 725,000 | 746,750 | ||||||||||
Comcast Cable Holdings LLC, | ||||||||||||||
Sr Note | 9.800 | 02-01-12 | 3,715,000 | 4,259,274 | ||||||||||
Comcast Corp., | ||||||||||||||
Gtd Note | 6.500 | 01-15-15 | 1,295,000 | 1,455,748 | ||||||||||
CSC Holdings, Inc., | ||||||||||||||
Sr Note | 7.875 | 02-15-18 | 1,690,000 | 1,728,025 | ||||||||||
DirecTV Holdings LLC, | ||||||||||||||
Gtd Sr Note | 7.625 | 05-15-16 | 1,400,000 | 1,508,500 | ||||||||||
Gtd Sr Note (S) | 4.750 | 10-01-14 | 1,110,000 | 1,145,867 | ||||||||||
Grupo Televisa SA, | ||||||||||||||
Sr Bond (S) | 6.625 | 01-15-40 | 1,170,000 | 1,171,412 | ||||||||||
News America Holdings, Inc., | ||||||||||||||
Gtd Sr Note | 8.250 | 08-10-18 | 2,085,000 | 2,519,447 | ||||||||||
News America, Inc., | ||||||||||||||
Gtd Sr Note | 6.900 | 03-01-19 | 830,000 | 951,317 | ||||||||||
Regal Cinemas Corp., | ||||||||||||||
Gtd Sr Note (S) | 8.625 | 07-15-19 | 465,000 | 476,625 | ||||||||||
Time Warner Cable, Inc., | ||||||||||||||
Gtd Sr Note | 6.750 | 07-01-18 | 1,995,000 | 2,227,021 | ||||||||||
Time Warner Entertainment Company LP, | ||||||||||||||
Gtd Sr Deb | 8.375 | 03-15-23 | 1,705,000 | 2,031,729 |
12 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Media (continued) | ||||||||||||||
XM Satellite Radio, Inc., | ||||||||||||||
Gtd Sr Note (S) | 13.000 | % | 08-01-13 | $2,000,000 | $2,075,000 | |||||||||
Sr Sec Note (S) | 11.250 | 06-15-13 | 415,000 | 437,825 | ||||||||||
Multiline Retail 0.19% | ||||||||||||||
Macy’s Retail Holdings, Inc., | ||||||||||||||
Gtd Note | 8.875 | 07-15-15 | 1,540,000 | 1,636,250 | ||||||||||
Personal Products 0.07% | ||||||||||||||
Revlon Consumer Products Corp., | ||||||||||||||
Gtd Sec Sr Note (S) | 9.750 | 11-15-15 | 570,000 | 578,550 | ||||||||||
Specialty Retail 0.33% | ||||||||||||||
Staples, Inc., | ||||||||||||||
Sr Note | 9.750 | 01-15-14 | 1,870,000 | 2,261,606 | ||||||||||
Toys R Us Property Company LLC, | ||||||||||||||
Sr Sec Note (S) | 8.500 | 12-01-17 | 570,000 | 570,000 | ||||||||||
Textiles, Apparel & Luxury Goods 0.19% | ||||||||||||||
Burlington Coat Factory Warehouse Corp., | ||||||||||||||
Gtd Sr Note | 11.125 | 04-15-14 | 1,600,000 | 1,656,000 | ||||||||||
Consumer Staples 4.16% | 35,885,917 | |||||||||||||
Beverages 1.03% | ||||||||||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||||||||
Gtd Sr Note (S) | 5.375 | 01-15-20 | 1,005,000 | 1,054,704 | ||||||||||
Gtd Sr Note (S) | 4.125 | 01-15-15 | 1,655,000 | 1,704,559 | ||||||||||
Dr Pepper Snapple Group, Inc., | ||||||||||||||
Gtd Sr Note | 6.820 | 05-01-18 | 1,215,000 | 1,406,828 | ||||||||||
Gtd Sr Note | 6.120 | 05-01-13 | 885,000 | 979,167 | ||||||||||
Miller Brewing Company, | ||||||||||||||
Gtd Note (S) | 5.500 | 08-15-13 | 1,580,000 | 1,712,396 | ||||||||||
SABMiller PLC, | ||||||||||||||
Sr Note (S) | 6.500 | 07-15-18 | 1,850,000 | 2,076,631 | ||||||||||
Food & Staples Retailing 0.55% | ||||||||||||||
ASG Consolidated LLC-ASG Finance, Inc., | ||||||||||||||
Sr Note | 11.500 | 11-01-11 | 1,670,000 | 1,624,075 | ||||||||||
CVS Caremark Corp., | ||||||||||||||
Jr Sub Bond (6.302% to 6-1-12 then 3 mth LIBOR + 206.5 bps) | 6.302 | 06-01-37 | 3,635,000 | 3,126,100 | ||||||||||
Food Products 0.96% | ||||||||||||||
Bunge Ltd. Finance Corp., | ||||||||||||||
Gtd Sr Note | 8.500 | 06-15-19 | 890,000 | 1,037,317 | ||||||||||
Gtd Sr Note | 5.350 | 04-15-14 | 2,100,000 | 2,171,650 | ||||||||||
Kraft Foods, Inc., | ||||||||||||||
Sr Note | 6.000 | 02-11-13 | 2,760,000 | 3,003,714 | ||||||||||
Smithfield Foods, Inc., | ||||||||||||||
Gtd Sr Sec Note (S) | 10.000 | 07-15-14 | 1,195,000 | 1,251,763 |
See notes to financial statements Semiannual report ï Bond Fund | 13 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Food Products (continued) | ||||||||||||||
Tyson Foods, Inc., | ||||||||||||||
Sr Note | 10.500 | % | 03-01-14 | $705,000 | $796,650 | |||||||||
Household Products 0.23% | ||||||||||||||
Yankee Acquisition Corp., | ||||||||||||||
Gtd Sr Sub Note | 8.500 | 02-15-15 | 2,005,000 | 1,954,875 | ||||||||||
Personal Products 0.07% | ||||||||||||||
JohnsonDiversey, Inc., | ||||||||||||||
Sr Note (S) | 8.250 | 11-15-19 | 575,000 | 573,562 | ||||||||||
Tobacco 1.32% | ||||||||||||||
Alliance One International, Inc., | ||||||||||||||
Gtd Sr Note | 8.500 | 05-15-12 | 890,000 | 903,350 | ||||||||||
Sr Note | 10.000 | 07-15-16 | 1,640,000 | 1,722,000 | ||||||||||
Altria Group, Inc., | ||||||||||||||
Gtd Sr Note | 8.500 | 11-10-13 | 3,355,000 | 3,932,100 | ||||||||||
Philip Morris International, Inc., | ||||||||||||||
Sr Note | 5.650 | 05-16-18 | 2,905,000 | 3,158,952 | ||||||||||
Reynolds American, Inc., | ||||||||||||||
Sr Sec Note | 7.250 | 06-01-13 | 1,535,000 | 1,695,524 | ||||||||||
Energy 5.24% | 45,190,457 | |||||||||||||
Energy Equipment & Services 0.61% | ||||||||||||||
Drummond Company, Inc., | ||||||||||||||
Sr Note (S) | 7.375 | 02-15-16 | 2,130,000 | 2,007,525 | ||||||||||
NGPL Pipeco LLC, | ||||||||||||||
Sr Note (S) | 7.119 | 12-15-17 | 2,150,000 | 2,425,441 | ||||||||||
Petrobras International Finance Company, Gtd Sr Note | 5.750 | 01-20-20 | 860,000 | 876,125 | ||||||||||
Oil, Gas & Consumable Fuels 4.63% | ||||||||||||||
Arch Coal, Inc., | ||||||||||||||
Sr Note (S) | 8.750 | 08-01-16 | 410,000 | 422,300 | ||||||||||
Buckeye Partners LP, | ||||||||||||||
Sr Note | 5.125 | 07-01-17 | 1,260,000 | 1,273,061 | ||||||||||
Cenovus Energy, Inc., | ||||||||||||||
Gtd Sr Note (S) | 5.700 | 10-15-19 | 825,000 | 874,703 | ||||||||||
Sr Note (S) | 4.500 | 09-15-14 | 1,545,000 | 1,618,956 | ||||||||||
Energy Transfer Partners LP, | ||||||||||||||
Sr Note | 9.700 | 03-15-19 | 1,445,000 | 1,804,526 | ||||||||||
Sr Note | 8.500 | 04-15-14 | 1,450,000 | 1,695,649 | ||||||||||
Enterprise Products Operating LLC, | ||||||||||||||
Gtd Jr Sub Note (7.000% to 6-1-17 then 3 mth LIBOR + 277.75 bps) | 7.000 | 06-01-67 | 2,640,000 | 2,336,400 | ||||||||||
Gtd Jr Sub Note (7.034% to 1-15-18 then greater of 3 mth LIBOR + 268 bps or 7.034%) | 7.034 | 01-15-68 | 2,130,000 | 1,956,938 | ||||||||||
Gtd Sr Note Series G | 5.600 | 10-15-14 | 2,760,000 | 3,002,996 |
14 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||
Gulf South Pipeline Company LP, | ||||||||||||||
Sr Note (S) | 5.750 | % | 08-15-12 | $1,460,000 | $1,561,136 | |||||||||
Kinder Morgan Energy Partners LP, | ||||||||||||||
Sr Bond | 7.750 | 03-15-32 | 840,000 | 979,082 | ||||||||||
Sr Note | 9.000 | 02-01-19 | 1,430,000 | 1,763,098 | ||||||||||
Sr Note | 5.125 | 11-15-14 | 980,000 | 1,044,445 | ||||||||||
MarkWest Energy Partners LP, | ||||||||||||||
Gtd Sr Note Series B | 8.500 | 07-15-16 | 1,745,000 | 1,758,087 | ||||||||||
McMoRan Exploration Company, | ||||||||||||||
Gtd Sr Note | 11.875 | 11-15-14 | 1,230,000 | 1,242,300 | ||||||||||
Nustar Logistics LP, | ||||||||||||||
Gtd Sr Note | 7.650 | 04-15-18 | 1,390,000 | 1,563,322 | ||||||||||
ONEOK Partners LP, | ||||||||||||||
Gtd Sr Note | 6.150 | 10-01-16 | 3,020,000 | 3,200,469 | ||||||||||
Sr Note | 8.625 | 03-01-19 | 1,455,000 | 1,780,742 | ||||||||||
Petro-Canada, | ||||||||||||||
Sr Note | 6.050 | 05-15-18 | 1,415,000 | 1,537,559 | ||||||||||
Petroleos Mexicanos, | ||||||||||||||
Gtd Note (S) | 4.875 | 03-15-15 | 1,965,000 | 1,969,912 | ||||||||||
Regency Energy Partners LP, | ||||||||||||||
Sr Note (S) | 9.375 | 06-01-16 | 1,225,000 | 1,295,438 | ||||||||||
Southern Union Company, | ||||||||||||||
Jr Sub Note, Series A (7.200% to 11-01-11 then 3 mth LIBOR + 301.75 bps quarterly) | 7.200 | 11-01-66 | 1,375,000 | 1,141,250 | ||||||||||
Spectra Energy Capital LLC, | ||||||||||||||
Gtd Sr Note | 6.200 | 04-15-18 | 1,440,000 | 1,571,401 | ||||||||||
Woodside Finance, Ltd., | ||||||||||||||
Note (S) | 4.500 | 11-10-14 | 2,430,000 | 2,487,596 | ||||||||||
Financials 21.94% | 189,040,773 | |||||||||||||
Capital Markets 3.44% | ||||||||||||||
Bear Stearns Companies., Inc., | ||||||||||||||
Sr Note | 7.250 | 02-01-18 | 1,950,000 | 2,255,035 | ||||||||||
Charles Schwab Corp., | ||||||||||||||
Sr Note | 4.950 | 06-01-14 | 1,475,000 | 1,597,347 | ||||||||||
Goldman Sachs Group, Inc., | ||||||||||||||
Jr Sub Note | 6.750 | 10-01-37 | 1,830,000 | 1,883,504 | ||||||||||
Sr Note | 7.500 | 02-15-19 | 2,030,000 | 2,397,278 | ||||||||||
Sr Note | 5.125 | 01-15-15 | 3,045,000 | 3,232,319 | ||||||||||
Inmarsat Finance PLC, | ||||||||||||||
Gtd Sr Note (S) | 7.375 | 12-01-17 | 430,000 | 441,966 | ||||||||||
Jefferies Group, Inc., | ||||||||||||||
Sr Note | 6.450 | 06-08-27 | 1,115,000 | 948,995 | ||||||||||
Macquarie Group, Ltd., | ||||||||||||||
Sr Note (S) | 7.300 | 08-01-14 | 1,085,000 | 1,185,821 |
See notes to financial statements Semiannual report ï Bond Fund | 15 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Capital Markets (continued) | ||||||||||||||
Merrill Lynch & Company, Inc., | ||||||||||||||
Jr Sub Bond | 7.750 | % | 05-14-38 | $1,770,000 | $1,954,133 | |||||||||
MTN | 6.875 | 04-25-18 | 3,095,000 | 3,319,787 | ||||||||||
Morgan Stanley, | ||||||||||||||
Sr Note | 7.300 | 05-13-19 | 2,070,000 | 2,333,343 | ||||||||||
Sr Note Series MTN | 6.625 | 04-01-18 | 3,230,000 | 3,504,272 | ||||||||||
Northern Trust Company, | ||||||||||||||
Sr Note | 4.625 | 05-01-14 | 1,600,000 | 1,743,294 | ||||||||||
Sub Note | 6.500 | 08-15-18 | 920,000 | 1,071,047 | ||||||||||
TD Ameritrade Holding Corp., | ||||||||||||||
Gtd Note | 5.600 | 12-01-19 | 1,755,000 | 1,784,465 | ||||||||||
Commercial Banks 3.21% | ||||||||||||||
Allfirst Preferred Capital Trust, | ||||||||||||||
Gtd Jr Sub Note (P) | 1.784 | 07-15-29 | 1,305,000 | 840,890 | ||||||||||
BPCE SA, | ||||||||||||||
Sub Bond (12.50% to 9-30-19 then 3 mth LIBOR + 12.98%) (S) | 12.500 | 08-30-49 | 1,239,000 | 1,450,026 | ||||||||||
Chuo Mitsui Trust & Banking Company Ltd., | ||||||||||||||
Jr Sub Note (5.506% to 4-15-15 then 3 mth LIBOR + 249 bps quarterly) (S) | 5.506 | 12-15-49 | 2,530,000 | 2,310,700 | ||||||||||
Credit Suisse New York, | ||||||||||||||
Sr Note | 5.300 | 08-13-19 | 1,680,000 | 1,760,443 | ||||||||||
Lloyds TSB Group PLC, | ||||||||||||||
Note (P)(S) | 6.413 | 12-31-49 | 2,410,000 | 1,301,400 | ||||||||||
Mizuho Financial Group, Ltd., | ||||||||||||||
Gtd Sub Bond | 8.375 | 12-29-49 | 1,110,000 | 1,104,450 | ||||||||||
Regions Financial Corp., | ||||||||||||||
Sr Note | 7.750 | 11-10-14 | 1,825,000 | 1,833,842 | ||||||||||
Royal Bank of Scotland Group Plc, | ||||||||||||||
Jr Sub Bond Series MTN (7.640% to 9-29-17 then variable) | 7.640 | 03-31-49 | 1,400,000 | 654,500 | ||||||||||
Sr Note | 6.400 | 10-21-19 | 1,530,000 | 1,550,989 | ||||||||||
Santander Issuances S.A., | ||||||||||||||
Sub Note (6.500% to 11-11-14 then variable) (S) | 6.500 | 08-11-19 | 3,300,000 | 3,622,714 | ||||||||||
Silicon Valley Bank, | ||||||||||||||
Sub Note | 6.050 | 06-01-17 | 2,335,000 | 2,211,754 | ||||||||||
SMFG Preferred Capital, | ||||||||||||||
Sub Bond (6.078% to 1-25-17 then variable) (S) | 6.078 | 01-01-49 | 2,215,000 | 1,833,954 | ||||||||||
Sovereign Capital Trust VI, | ||||||||||||||
Gtd Note | 7.908 | 06-13-36 | 1,840,000 | 1,797,700 | ||||||||||
Wachovia Bank NA, | ||||||||||||||
Sub Note | 5.850 | 02-01-37 | 1,665,000 | 1,617,797 | ||||||||||
Sub Note Series BKNT | 6.600 | 01-15-38 | 1,360,000 | 1,450,293 |
16 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Commercial Banks (continued) | ||||||||||||||
Westpac Banking Corp., | ||||||||||||||
Sr Note | 4.875 | % | 11-19-19 | $2,275,000 | $2,309,773 | |||||||||
Consumer Finance 1.70% | ||||||||||||||
American Express Company, | ||||||||||||||
Sr Note | 7.000 | 03-19-18 | 1,995,000 | 2,222,169 | ||||||||||
American Express Credit Company, | ||||||||||||||
Sr Note Series C | 7.300 | 08-20-13 | 2,700,000 | 3,066,968 | ||||||||||
Capital One Financial Corp., | ||||||||||||||
Sr Note | 7.375 | 05-23-14 | 2,430,000 | 2,787,242 | ||||||||||
Discover Financial Services, | ||||||||||||||
Sr Note | 10.250 | 07-15-19 | 2,400,000 | 2,818,824 | ||||||||||
Ford Motor Credit Company LLC, | ||||||||||||||
Sr Note | 7.500 | 08-01-12 | 375,000 | 371,625 | ||||||||||
Nelnet, Inc., | ||||||||||||||
Note (7.400% to 9-1-11 then 3 mth LIBOR + 337.5 bps) | 7.400 | 09-29-36 | 2,595,000 | 1,890,909 | ||||||||||
SLM Corp., | ||||||||||||||
Sr Note Series MTN | 8.450 | 06-15-18 | 1,650,000 | 1,490,440 | ||||||||||
Diversified Financial Services 6.29% | ||||||||||||||
American Honda Finance Corp., | ||||||||||||||
Note (S) | 7.625 | 10-01-18 | 2,750,000 | 3,219,472 | ||||||||||
Astoria Depositor Corp., | ||||||||||||||
Series B (S) | 8.144 | 05-01-21 | 3,590,000 | 2,872,000 | ||||||||||
Beaver Valley Funding, | ||||||||||||||
Sec Lease Obligation Bond | 9.000 | 06-01-17 | 3,286,000 | 3,630,833 | ||||||||||
Bosphorus Financial Services, Ltd., | ||||||||||||||
Sec Note (P)(S) | 2.240 | 02-15-12 | 1,496,250 | 1,425,045 | ||||||||||
Citigroup, Inc., | ||||||||||||||
Sr Note | 6.375 | 08-12-14 | 3,280,000 | 3,450,219 | ||||||||||
Sr Note | 6.125 | 11-21-17 | 2,925,000 | 2,938,780 | ||||||||||
Sr Note | 5.850 | 12-11-34 | 1,275,000 | 1,108,338 | ||||||||||
CME Group, Inc., | ||||||||||||||
Sr Note | 5.750 | 02-15-14 | 2,025,000 | 2,253,531 | ||||||||||
ERAC USA Finance Company, | ||||||||||||||
Gtd Sr Note (S) | 6.375 | 10-15-17 | 1,730,000 | 1,795,174 | ||||||||||
ESI Tractebel Acquisition Corp., | ||||||||||||||
Gtd Sec Bond Series B | 7.990 | 12-30-11 | 2,388,000 | 2,397,523 | ||||||||||
General Electric Capital Corp., | ||||||||||||||
Sr Note | 5.625 | 05-01-18 | 1,910,000 | 1,969,357 | ||||||||||
Sr Note Series MTN | 6.000 | 08-07-19 | 1,340,000 | 1,411,496 | ||||||||||
Harley-Davidson Funding Corp., | ||||||||||||||
Gtd Sr Note (S) | 5.750 | 12-15-14 | 2,300,000 | 2,319,297 | ||||||||||
Hyundai Capital Services, | ||||||||||||||
Sr Note (S) | 6.000 | 05-05-15 | 1,715,000 | 1,792,573 |
See notes to financial statements Semiannual report ï Bond Fund | 17 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Diversified Financial Services (continued) | ||||||||||||||
JPMorgan Chase & Company, | ||||||||||||||
Jr Sub Note Series 1 (7.900% to 4-30-18 then 3 mth LIBOR + 347 bps) | 7.900 | % | 04-30-18 | $2,470,000 | $2,415,462 | |||||||||
Sr Bond | 6.000 | 01-15-18 | 3,260,000 | 3,533,899 | ||||||||||
Sr Note | 4.650 | 06-01-14 | 2,575,000 | 2,750,721 | ||||||||||
PNC Funding Corp., | ||||||||||||||
Gtd Sr Note | 4.250 | 09-21-15 | 2,780,000 | 2,871,409 | ||||||||||
Rabobank Nederland NV, | ||||||||||||||
Jr Sub Note (11.000% to 6-4-19 then variable) (S) | 11.000 | 06-30-19 | 3,204,000 | 3,961,451 | ||||||||||
USB Realty Corp., | ||||||||||||||
Perpetual Bond (6.091% to 1-15-12 then variable) (S) | 6.091 | 12-22-49 | 2,900,000 | 2,015,500 | ||||||||||
Volvo Treasury AB, | ||||||||||||||
Note (S) | 5.950 | 04-01-15 | 2,215,000 | 2,316,812 | ||||||||||
Voto-Votorantim Overseas Trading Operations NV, | ||||||||||||||
Gtd Sr Note (S) | 6.625 | 09-25-19 | 1,800,000 | 1,773,000 | ||||||||||
Insurance 3.94% | ||||||||||||||
Aflac, Inc., Sr Note | 8.500 | 05-15-19 | 1,455,000 | 1,723,250 | ||||||||||
AXA SA, | ||||||||||||||
Sub Note (6.379% to 12-13-46 then 3 mth LIBOR + 225.6 bps) (S) | 6.379 | 12-14-49 | 1,170,000 | 938,925 | ||||||||||
CNA Financial Corp., | ||||||||||||||
Sr Note | 7.350 | 11-15-19 | 1,280,000 | 1,300,916 | ||||||||||
Sr Note | 6.500 | 08-15-16 | 1,315,000 | 1,306,305 | ||||||||||
Genworth Financial, Inc., | ||||||||||||||
Jr Sub Note (6.150% to 11-15-16 then 3 mth LIBOR + 200.25 bps) | 6.150 | 11-15-66 | 1,640,000 | 1,049,600 | ||||||||||
Horace Mann Educators Corp., | ||||||||||||||
Sr Note | 6.850 | 04-15-16 | 1,425,000 | 1,439,296 | ||||||||||
Liberty Mutual Group, Inc., | ||||||||||||||
Bond (S) | 7.300 | 06-15-14 | 2,330,000 | 2,364,766 | ||||||||||
Gtd Bond (S) | 7.800 | 03-15-37 | 2,635,000 | 2,081,650 | ||||||||||
Gtd Bond (S) | 7.500 | 08-15-36 | 3,070,000 | 2,762,150 | ||||||||||
Lincoln National Corp., | ||||||||||||||
Jr Sub Bond (6.050% to 4-20-17 then 3 mth LIBOR + 204 bps) | 6.050 | 04-20-67 | 915,000 | 654,225 | ||||||||||
Sr Note | 8.750 | 07-01-19 | 2,045,000 | 2,385,660 | ||||||||||
Massachusetts Mutual Life Insurance Company, Sub Note (S) | 8.875 | 06-01-39 | 895,000 | 1,096,658 | ||||||||||
MetLife, Inc., | ||||||||||||||
Sr Note | 6.750 | 06-01-16 | 1,445,000 | 1,659,915 | ||||||||||
New York Life Insurance Company, | ||||||||||||||
Sub Note (S) | 6.750 | 11-15-39 | 2,330,000 | 2,354,088 |
18 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Insurance (continued) | ||||||||||||||
Progressive Corp., | ||||||||||||||
Jr Sub Debenture (6.700% to 6-1-17 then 3 mth LIBOR + 201.75 bps) | 6.700 | % | 06-15-37 | $1,225,000 | $1,041,250 | |||||||||
Prudential Financial, Inc., | ||||||||||||||
Sr Note Series D | 5.150 | 01-15-13 | 2,700,000 | 2,854,734 | ||||||||||
Sr Note MTN Series D | 7.375 | 06-15-19 | 885,000 | 1,005,241 | ||||||||||
QBE Insurance Group, Ltd., | ||||||||||||||
Sr Note (S) | 9.750 | 03-14-14 | 1,739,000 | 2,016,788 | ||||||||||
Symetra Financial Corp., | ||||||||||||||
Jr Sub Bond (8.300% to 10-1-17 then 3 mth LIBOR + 417.7 bps) (S) | 8.300 | 10-15-37 | 970,000 | 805,100 | ||||||||||
Unum Group, | ||||||||||||||
Sr Note | 7.125 | 09-30-16 | 1,570,000 | 1,651,324 | ||||||||||
W.R. Berkley Corp., | ||||||||||||||
Sr Note | 5.600 | 05-15-15 | 1,460,000 | 1,477,911 | ||||||||||
Real Estate Investment Trusts 3.36% | ||||||||||||||
AMB Property L.P., | ||||||||||||||
Gtd Note | 6.625 | 12-01-19 | 1,965,000 | 1,978,401 | ||||||||||
Boston Properties LP, | ||||||||||||||
Sr Note | 5.875 | 10-15-19 | 1,085,000 | 1,110,703 | ||||||||||
Brandywine Operating Partnership LP, | ||||||||||||||
Gtd Sr Note | 7.500 | 05-15-15 | 1,390,000 | 1,423,923 | ||||||||||
Dexus Property Group, | ||||||||||||||
Gtd Note (S) | 7.125 | 10-15-14 | 1,985,000 | 2,035,340 | ||||||||||
Duke Realty LP, | ||||||||||||||
Sr Note | 8.250 | 08-15-19 | 2,035,000 | 2,200,897 | ||||||||||
Health Care REIT, Inc., | ||||||||||||||
Sr Note | 6.200 | 06-01-16 | 1,835,000 | 1,848,484 | ||||||||||
Healthcare Realty Trust, Inc., | ||||||||||||||
Sr Note | 8.125 | 05-01-11 | 1,340,000 | 1,415,938 | ||||||||||
HRPT Properties Trust, | ||||||||||||||
Sr Note | 6.650 | 01-15-18 | 1,070,000 | 1,015,166 | ||||||||||
Mack-Cali Realty Corp., | ||||||||||||||
Sr Note | 7.750 | 08-15-19 | 1,345,000 | 1,434,463 | ||||||||||
Nationwide Health Properties, Inc., | ||||||||||||||
Sr Note | 6.500 | 07-15-11 | 1,745,000 | 1,820,611 | ||||||||||
Plum Creek Timberlands LP, | ||||||||||||||
Gtd Sr Note | 5.875 | 11-15-15 | 1,740,000 | 1,824,099 | ||||||||||
ProLogis, | ||||||||||||||
Sr Note | 6.625 | 05-15-18 | 2,285,000 | 2,226,024 | ||||||||||
Sr Note | 5.625 | 11-15-15 | 1,615,000 | 1,571,650 | ||||||||||
Simon Property Group LP, | ||||||||||||||
Sr Note | 10.350 | 04-01-19 | 1,495,000 | 1,929,245 | ||||||||||
Sr Note | 5.625 | 08-15-14 | 2,520,000 | 2,674,859 |
See notes to financial statements Semiannual report ï Bond Fund | 19 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Real Estate Investment Trusts (continued) | ||||||||||||||
WEA Finance LLC, | ||||||||||||||
Gtd Sr Note (S) | 6.750 | % | 09-02-19 | $1,180,000 | $1,239,923 | |||||||||
Gtd Sr Note (S) | 5.400 | 10-01-12 | 1,095,000 | 1,147,395 | ||||||||||
Health Care 0.82% | 7,103,053 | |||||||||||||
Health Care Equipment & Supplies 0.14% | ||||||||||||||
Inverness Medical Innovations, Inc., | ||||||||||||||
Sr Note (S) | 7.875 | 02-01-16 | 1,225,000 | 1,203,562 | ||||||||||
Health Care Providers & Services 0.47% | ||||||||||||||
Medco Health Solutions, Inc., | ||||||||||||||
Sr Note | 7.250 | 08-15-13 | 3,615,000 | 4,104,941 | ||||||||||
Pharmaceuticals 0.21% | ||||||||||||||
Watson Pharmaceuticals, Inc., | ||||||||||||||
Sr Note | 6.125 | 08-15-19 | 1,690,000 | 1,794,550 | ||||||||||
Industrials 4.77% | 41,117,387 | |||||||||||||
Aerospace & Defense 0.31% | ||||||||||||||
BE Aerospace, Inc., | ||||||||||||||
Sr Note | 8.500 | 07-01-18 | 1,150,000 | 1,190,250 | ||||||||||
Embraer Overseas, Ltd., | ||||||||||||||
Gtd Sr Note | 6.375 | 01-15-20 | 1,535,000 | 1,488,950 | ||||||||||
Airlines 1.63% | ||||||||||||||
Continental Airlines, Inc., | ||||||||||||||
Series 1991-1 Class A | 6.545 | 02-02-19 | 729,897 | 704,351 | ||||||||||
Series 2000-2 Class B | 8.307 | 04-02-18 | 1,157,622 | 1,099,741 | ||||||||||
Series 2001-1 Class C | 7.033 | 06-15-11 | 574,842 | 540,351 | ||||||||||
Sr Sec Bond Series 981A | 6.648 | 09-15-17 | 705,222 | 662,909 | ||||||||||
Delta Air Lines, Inc., | ||||||||||||||
Collateralized Bond | 6.821 | 08-10-22 | 2,844,894 | 2,667,088 | ||||||||||
Series 2002-1 Class G2 | 6.417 | 07-02-12 | 2,955,000 | 2,807,250 | ||||||||||
Sr Sec Note (S) | 9.500 | 09-15-14 | 1,435,000 | 1,456,525 | ||||||||||
Northwest Airlines, Inc., | ||||||||||||||
Gtd Note Series 2007-1 Class A | 7.027 | 11-01-19 | 1,629,295 | 1,417,487 | ||||||||||
United Air Lines, Inc., | ||||||||||||||
Gtd Note | 10.400 | 11-01-16 | 795,000 | 818,850 | ||||||||||
Gtd Note | 9.750 | 01-15-17 | 1,825,000 | 1,852,375 | ||||||||||
Commercial Services & Supplies 0.23% | ||||||||||||||
ACCO Brands Corp., | ||||||||||||||
Gtd Sr Sec Note (S) | 10.625 | 03-15-15 | 315,000 | 339,806 | ||||||||||
Geo Group, Inc., | ||||||||||||||
Gtd Sr Note (S) | 7.750 | 10-15-17 | 290,000 | 294,350 | ||||||||||
Waste Management, Inc., | ||||||||||||||
Gtd Sr Note | 6.125 | 11-30-39 | 1,335,000 | 1,376,918 | ||||||||||
Construction Materials 0.12% | ||||||||||||||
Odebrecht Finance, Ltd., | ||||||||||||||
Gtd Sr Note (S) | 7.000 | 04-21-20 | 1,030,000 | 1,001,675 | ||||||||||
20 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Industrial Conglomerates 0.20% | ||||||||||||||
Hutchison Whampoa International, Ltd., | ||||||||||||||
Gtd Note (S) | 5.750 | % | 09-11-19 | $1,675,000 | $1,726,476 | |||||||||
Machinery 0.66% | ||||||||||||||
Altra Holdings, Inc., | ||||||||||||||
Sr Sec Note (S) | 8.125 | 12-01-16 | 805,000 | 809,025 | ||||||||||
Case New Holland, Inc., | ||||||||||||||
Gtd Sr Note (S) | 7.750 | 09-01-13 | 1,375,000 | 1,371,563 | ||||||||||
Ingersoll-Rand Global Holding Company, Ltd., | ||||||||||||||
Gtd Note | 6.875 | 08-15-18 | 2,095,000 | 2,369,177 | ||||||||||
Terex Corp., | ||||||||||||||
Sr Note | 10.875 | 06-01-16 | 1,105,000 | 1,174,062 | ||||||||||
Marine 0.22% | ||||||||||||||
Navios Maritime Holdings, Inc., | ||||||||||||||
Sr Note | 9.500 | 12-15-14 | 1,975,000 | 1,942,906 | ||||||||||
Road & Rail 0.65% | ||||||||||||||
CSX Corp., | ||||||||||||||
Sr Note | 5.500 | 08-01-13 | 2,530,000 | 2,750,720 | ||||||||||
Kansas City Southern, | ||||||||||||||
Sr Note | 9.375 | 05-01-12 | 1,810,000 | 1,850,725 | ||||||||||
RailAmerica, Inc., | ||||||||||||||
Gtd Sr Sec Note (S) | 9.250 | 07-01-17 | 945,000 | 987,525 | ||||||||||
Trading Companies & Distributors 0.57% | ||||||||||||||
GATX Corp., | ||||||||||||||
Sr Note | 8.750 | 05-15-14 | 2,375,000 | 2,740,444 | ||||||||||
United Rentals North America, Inc., | ||||||||||||||
Gtd Sr Note (S) | 10.875 | 06-15-16 | 530,000 | 563,125 | ||||||||||
Gtd Sr Note | 7.000 | 02-15-14 | 1,805,000 | 1,592,913 | ||||||||||
Transportation Infrastructure 0.18% | ||||||||||||||
CMA CGM SA, | ||||||||||||||
Sr Note (S) | 7.250 | 02-01-13 | 2,690,000 | 1,519,850 | ||||||||||
Information Technology 1.23% | 10,585,805 | |||||||||||||
Electronic Equipment, Instruments & Components 0.59% | ||||||||||||||
Amphenol Corp., | ||||||||||||||
Sr Note | 4.750 | 11-15-14 | 2,160,000 | 2,200,381 | ||||||||||
Tyco Electronics Group SA, | ||||||||||||||
Gtd Note | 6.000 | 10-01-12 | 1,760,000 | 1,891,982 | ||||||||||
Gtd Sr Note | 6.550 | 10-01-17 | 970,000 | 1,034,555 | ||||||||||
IT Services 0.20% | ||||||||||||||
Fiserv, Inc., | ||||||||||||||
Gtd Sr Note | 6.800 | 11-20-17 | 1,505,000 | 1,703,579 | ||||||||||
Office Electronics 0.44% | ||||||||||||||
Xerox Corp., | ||||||||||||||
Sr Note | 8.250 | 05-15-14 | 1,160,000 | 1,349,560 | ||||||||||
Sr Note | 6.750 | 02-01-17 | 2,204,000 | 2,405,748 | ||||||||||
See notes to financial statements Semiannual report ï Bond Fund | 21 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Materials 4.41% | $37,966,381 | |||||||||||||
Chemicals 0.75% | ||||||||||||||
American Pacific Corp., | ||||||||||||||
Gtd Sr Note | 9.000 | % | 02-01-15 | $2,160,000 | 2,014,200 | |||||||||
Ecolab, Inc., | ||||||||||||||
Sr Note | 4.875 | 02-15-15 | 1,515,000 | 1,626,365 | ||||||||||
RPM International, Inc., | ||||||||||||||
Sr Note | 6.500 | 02-15-18 | 1,325,000 | 1,371,599 | ||||||||||
Sterling Chemicals, Inc., | ||||||||||||||
Gtd Sr Sec Note | 10.250 | 04-01-15 | 1,490,000 | 1,415,500 | ||||||||||
Construction Materials 0.39% | ||||||||||||||
CRH America, Inc., | ||||||||||||||
Gtd Note | 8.125 | 07-15-18 | 1,930,000 | 2,260,779 | ||||||||||
Holcim US Finance Sarl & Cie SCS, | ||||||||||||||
Gtd Note (S) | 6.000 | 12-30-19 | 1,035,000 | 1,099,166 | ||||||||||
Containers & Packaging 0.29% | ||||||||||||||
BWAY Corp., | ||||||||||||||
Sr Sub Note (S) | 10.000 | 04-15-14 | 1,390,000 | 1,456,025 | ||||||||||
Graphic Packaging International, Inc., | ||||||||||||||
Gtd Sr Note | 9.500 | 06-15-17 | 495,000 | 522,225 | ||||||||||
U.S. Corrugated, Inc., | ||||||||||||||
Sr Sec Note | 10.000 | 06-12-13 | 605,000 | 526,350 | ||||||||||
Food Products 0.22% | ||||||||||||||
Mosaic Co., | ||||||||||||||
Sr Note (S) | 7.625 | 12-01-16 | 1,780,000 | 1,909,281 | ||||||||||
Metals & Mining 1.87% | ||||||||||||||
Allegheny Technologies, Inc., | ||||||||||||||
Sr Note | 9.375 | 06-01-19 | 1,205,000 | 1,386,614 | ||||||||||
ArcelorMittal, | ||||||||||||||
Sr Note | 9.850 | 06-01-19 | 2,360,000 | 2,907,765 | ||||||||||
CII Carbon LLC, | ||||||||||||||
Gtd Sr Sub Note (S) | 11.125 | 11-15-15 | 1,835,000 | 1,814,356 | ||||||||||
Commercial Metals Company, | ||||||||||||||
Sr Note | 7.350 | 08-15-18 | 1,295,000 | 1,402,866 | ||||||||||
Gerdau Holdings, Inc., | ||||||||||||||
Gtd Sr Note (S) | 7.000 | 01-20-20 | 1,345,000 | 1,334,240 | ||||||||||
Rio Tinto Alcan, Inc., | ||||||||||||||
Sr Note | 6.125 | 12-15-33 | 1,725,000 | 1,785,760 | ||||||||||
Rio Tinto Finance USA, Ltd., | ||||||||||||||
Gtd Sr Note | 8.950 | 05-01-14 | 1,455,000 | 1,749,658 | ||||||||||
Teck Resources, Ltd., | ||||||||||||||
Sr Sec Note | 10.750 | 05-15-19 | 835,000 | 974,862 | ||||||||||
Vale Overseas, Ltd., | ||||||||||||||
Gtd Note | 6.875 | 11-10-39 | 1,290,000 | 1,333,397 |
22 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Metals & Mining (continued) | ||||||||||||||
Vedanta Resources PLC, | ||||||||||||||
Note (S) | 8.750 | % | 01-15-14 | $1,445,000 | $1,448,613 | |||||||||
Paper & Forest Products 0.89% | ||||||||||||||
International Paper Company, | ||||||||||||||
Sr Note | 9.375 | 05-15-19 | 1,650,000 | 2,047,158 | ||||||||||
Sr Note | 7.950 | 06-15-18 | 2,130,000 | 2,465,839 | ||||||||||
NewPage Corp., | ||||||||||||||
Gtd Sr Sec Note (S) | 11.375 | 12-31-14 | 540,000 | 531,900 | ||||||||||
PE Paper Escrow GmbH, | ||||||||||||||
Sr Sec Note (S) | 12.000 | 08-01-14 | 385,000 | 422,538 | ||||||||||
Solo Cup Company, | ||||||||||||||
Sr Sec Note (S) | 10.500 | 11-01-13 | 570,000 | 599,925 | ||||||||||
Verso Paper Holdings LLC, | ||||||||||||||
Gtd Sr Note Series B | 9.125 | 08-01-14 | 1,695,000 | 1,559,400 | ||||||||||
Telecommunication Services 3.12% | 26,868,877 | |||||||||||||
Diversified Telecommunication Services 1.77% | ||||||||||||||
Axtel SAB de CV, | ||||||||||||||
Sr Note (S) | 9.000 | 09-22-19 | 630,000 | 644,175 | ||||||||||
CenturyTel, Inc., | ||||||||||||||
Sr Note | 6.150 | 09-15-19 | 1,320,000 | 1,358,850 | ||||||||||
Cincinnati Bell, Inc., | ||||||||||||||
Gtd Sr Sub Note | 8.375 | 01-15-14 | 1,825,000 | 1,813,594 | ||||||||||
Citizens Communications Company, | ||||||||||||||
Sr Note | 6.250 | 01-15-13 | 2,087,000 | 2,050,477 | ||||||||||
Intelsat Jackson Holdings, Ltd., | ||||||||||||||
Gtd Sr Note | 11.500 | 06-15-16 | 1,585,000 | 1,676,138 | ||||||||||
Qwest Corp., | ||||||||||||||
Sr Note | 7.875 | 09-01-11 | 1,620,000 | 1,682,775 | ||||||||||
Telecom Italia Capital SA, | ||||||||||||||
Gtd Sr Note | 6.175 | 06-18-14 | 1,405,000 | 1,550,606 | ||||||||||
Verizon Wireless Capital LLC, | ||||||||||||||
Sr Note | 7.375 | 11-15-13 | 1,470,000 | 1,712,259 | ||||||||||
West Corp., | ||||||||||||||
Gtd Sr Sub Note | 11.000 | 10-15-16 | 2,695,000 | 2,715,213 | ||||||||||
Wireless Telecommunication Services 1.35% | ||||||||||||||
America Movil SAB de CV, | ||||||||||||||
Sr Sec Note | 5.750 | 01-15-15 | 1,595,000 | 1,718,638 | ||||||||||
American Tower Corp., | ||||||||||||||
Sr Note (S) | 4.625 | 04-01-15 | 1,365,000 | 1,399,616 | ||||||||||
Crown Castle International Corp., | ||||||||||||||
Sr Note | 7.125 | 11-01-19 | 710,000 | 701,125 | ||||||||||
Digicel Group, Ltd., | ||||||||||||||
Sr Note (S) | 12.000 | 04-01-14 | 1,140,000 | 1,273,950 | ||||||||||
Sr Note (S) | 8.875 | 01-15-15 | 2,115,000 | 2,051,550 |
See notes to financial statements Semiannual report ï Bond Fund | 23 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Wireless Telecommunication Services (continued) | ||||||||||||||
NII Capital Corp., | ||||||||||||||
Gtd Sr Note (S) | 10.000 | % | 08-15-16 | $940,000 | $996,400 | |||||||||
Roger’s Communication, Inc., | ||||||||||||||
Sr Note | 6.750 | 03-15-15 | 1,595,000 | 1,825,911 | ||||||||||
SBA Telecommunications, Inc., | ||||||||||||||
Gtd Sr Note (S) | 8.000 | 08-15-16 | 545,000 | 561,350 | ||||||||||
Sprint Capital Corp., | ||||||||||||||
Gtd Note | 7.625 | 01-30-11 | 1,125,000 | 1,136,250 | ||||||||||
Utilities 5.71% | 49,191,771 | |||||||||||||
Electric Utilities 3.11% | ||||||||||||||
Allegheny Energy Supply Company LLC, | ||||||||||||||
Sr Note (S) | 5.750 | 10-15-19 | 1,160,000 | 1,151,218 | ||||||||||
Aquila, Inc., | ||||||||||||||
Sr Note | 11.875 | 07-01-12 | 1,615,000 | 1,878,030 | ||||||||||
BVPS II Funding Corp., | ||||||||||||||
Collateralized Lease Bond | 8.890 | 06-01-17 | 2,163,000 | 2,488,930 | ||||||||||
Commonwealth Edison Company, | ||||||||||||||
Sec Bond | 5.800 | 03-15-18 | 2,995,000 | 3,272,127 | ||||||||||
Delmarva Power & Light Company, | ||||||||||||||
1st Mtg Bond | 6.400 | 12-01-13 | 1,475,000 | 1,673,995 | ||||||||||
Duke Energy Corp., | ||||||||||||||
Sr Note | 6.300 | 02-01-14 | 1,465,000 | 1,634,134 | ||||||||||
FirstEnergy Solutions Corp., | ||||||||||||||
Gtd Sr Note (S) | 4.800 | 02-15-15 | 1,495,000 | 1,553,698 | ||||||||||
Israel Electric Corp., Ltd., | ||||||||||||||
Sec Note (S) | 7.250 | 01-15-19 | 2,395,000 | 2,630,716 | ||||||||||
ITC Holdings Corp., | ||||||||||||||
Sr Note (S) | 5.875 | 09-30-16 | 745,000 | 773,476 | ||||||||||
Monongahela Power Company, | ||||||||||||||
Sec Bond (S) | 7.950 | 12-15-13 | 2,705,000 | 3,018,637 | ||||||||||
Nevada Power Company, | ||||||||||||||
Mtg Note Series L | 5.875 | 01-15-15 | 1,540,000 | 1,690,552 | ||||||||||
PNPP II Funding Corp., | ||||||||||||||
Sec Collateralized Bond | 9.120 | 05-30-16 | 944,000 | 1,053,504 | ||||||||||
Texas Competitive Electric Holdings Company LLC, | ||||||||||||||
Gtd Sr Note Series A | 10.250 | 11-01-15 | 2,505,000 | 1,778,550 | ||||||||||
Waterford 3 Funding Corp., | ||||||||||||||
Sec Bond | 8.090 | 01-02-17 | 2,096,292 | 2,205,509 | ||||||||||
Gas Utilities 0.49% | ||||||||||||||
DCP Midstream LLC, | ||||||||||||||
Sr Note (S) | 9.750 | 03-15-19 | 1,705,000 | 2,079,595 | ||||||||||
EQT Corp., | ||||||||||||||
Sr Note | 8.125 | 06-01-19 | 1,080,000 | 1,261,265 |
24 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Gas Utilities (continued) | ||||||||||||||
Questar Market Resources, Inc., | ||||||||||||||
Sr Note | 6.800 | % | 03-01-20 | $835,000 | $898,718 | |||||||||
Independent Power Producers & Energy Traders 0.54% | ||||||||||||||
AES Eastern Energy LP, Sr Pass Thru Ctf Series 1999-A | 9.000 | 01-02-17 | 3,124,140 | 3,135,856 | ||||||||||
IPALCO Enterprises, Inc., | ||||||||||||||
Sr Sec Note | 8.625 | 11-14-11 | 1,405,000 | 1,454,175 | ||||||||||
Multi-Utilities 1.12% | ||||||||||||||
DTE Energy Company, | ||||||||||||||
Sr Note | 7.625 | 05-15-14 | 1,310,000 | 1,481,499 | ||||||||||
PG&E Corp., | ||||||||||||||
Sr Note | 5.750 | 04-01-14 | 1,740,000 | 1,917,463 | ||||||||||
Sempra Energy, | ||||||||||||||
Sr Bond | 8.900 | 11-15-13 | 1,415,000 | 1,685,576 | ||||||||||
Sr Note | 6.500 | 06-01-16 | 1,745,000 | 1,945,783 | ||||||||||
Teco Finance, Inc., | ||||||||||||||
Gtd Sr Note | 7.000 | 05-01-12 | 1,166,000 | 1,262,253 | ||||||||||
Gtd Sr Note | 6.572 | 11-01-17 | 1,304,000 | 1,366,978 | ||||||||||
Water Utilities 0.45% | ||||||||||||||
Indiantown Cogeneration LP, | ||||||||||||||
1st Mtg Note Series A-9 | 9.260 | 12-15-10 | 529,712 | 533,897 | ||||||||||
Midwest Generation LLC, | ||||||||||||||
Note Series B | 8.560 | 01-02-16 | 2,483,531 | 2,508,366 | ||||||||||
Salton Sea Funding Corp., | ||||||||||||||
Sr Sec Bond Series F | 7.475 | 11-30-18 | 781,098 | 857,271 | ||||||||||
U.S. Government & Agency Obligations 17.96% | $154,785,854 | |||||||||||||
(Cost $148,741,656) | ||||||||||||||
U.S. Government 1.85% | 15,964,705 | |||||||||||||
U.S. Treasury Bonds, | ||||||||||||||
Bond | 4.500 | 08-15-39 | 5,015,000 | 5,268,884 | ||||||||||
Bond | 4.250 | 05-15-39 | 6,250,000 | 6,297,850 | ||||||||||
U.S. Treasury Notes, | ||||||||||||||
Note | 3.375 | 11-15-19 | 815,000 | 826,972 | ||||||||||
Note | 2.375 | 10-31-14 | 3,505,000 | 3,570,999 | ||||||||||
U.S. Government Agency 16.11% | 138,821,149 | |||||||||||||
Federal Home Loan Bank, | ||||||||||||||
Bond | 5.375 | 05-18-16 | 3,665,000 | 4,176,454 | ||||||||||
Federal Home Loan Mortgage Corp., 30 Yr Pass Thru Ctf | 5.000 | 07-01-35 | 7,224,326 | 7,597,676 | ||||||||||
Federal National Mortgage Association, | ||||||||||||||
15 Yr Pass Thru Ctf | 4.000 | 06-01-24 | 29,367,799 | 30,214,417 | ||||||||||
30 Yr Pass Thru Ctf | 5.500 | 05-01-35 | 17,250,222 | 18,431,459 | ||||||||||
30 Yr Pass Thru Ctf (P) | 5.308 | 12-01-38 | 4,002,705 | 4,255,842 | ||||||||||
30 Yr Pass Thru Ctf (P) | 5.244 | 12-01-38 | 1,898,522 | 2,011,455 | ||||||||||
30 Yr Pass Thru Ctf | 5.000 | 11-01-33 | 3,788,219 | 3,990,208 |
See notes to financial statements Semiannual report ï Bond Fund | 25 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
U.S. Government Agency (continued) | ||||||||||||||
30 Yr Pass Thru Ctf | 5.000 | % | 03-01-38 | $4,877,480 | $5,123,831 | |||||||||
30 Yr Pass Thru Ctf | 5.000 | 03-01-38 | 15,057,119 | 15,817,621 | ||||||||||
30 Yr Pass Thru Ctf | 5.000 | 05-01-38 | 19,238,115 | 20,250,116 | ||||||||||
30 Yr Pass Thru Ctf (P) | 4.893 | 12-01-38 | 2,931,664 | 3,095,208 | ||||||||||
Bond | 4.000 | 07-01-24 | 18,921,787 | 19,467,266 | ||||||||||
Note | 1.875 | 10-29-12 | 4,360,000 | 4,389,596 | ||||||||||
Convertible Bonds 0.12% | $1,016,863 | |||||||||||||
(Cost $930,000) | ||||||||||||||
Industrials 0.12% | 1,016,863 | |||||||||||||
Airlines 0.08% | ||||||||||||||
US Airways Group, Inc., | ||||||||||||||
Conv Sr Note | 7.250 | 05-15-14 | 680,000 | 674,050 | ||||||||||
Machinery 0.04% | ||||||||||||||
Terex Corp., | ||||||||||||||
Bond | 4.000 | 06-01-15 | 250,000 | 342,813 | ||||||||||
Municipal Bonds 0.17% | $1,477,858 | |||||||||||||
(Cost $1,470,188) | ||||||||||||||
California 0.17% | 1,477,858 | |||||||||||||
State of California, | ||||||||||||||
Taxable Various Purposes | 6.200 | 10-01-19 | 1,455,000 | 1,477,858 | ||||||||||
Term Loans 0.16% | $1,360,935 | |||||||||||||
(Cost $1,571,891) | ||||||||||||||
Consumer Discretionary 0.06% | 537,335 | |||||||||||||
Hotels, Restaurants & Leisure 0.06% | ||||||||||||||
East Valley Tourist Development Authority, Tranche | 12.00 | 08-06-12 | 778,747 | 537,335 | ||||||||||
Financials 0.10% | 823,600 | |||||||||||||
Real Estate Management & Development 0.10% | ||||||||||||||
Realogy Corp., Tranche | 13.500 | 10-16-17 | 800,000 | 823,600 | ||||||||||
Collateralized Mortgage Obligations 15.60% | $134,460,907 | |||||||||||||
(Cost $160,622,723) | ||||||||||||||
American Home Mortgage Assets, | ||||||||||||||
Series 2006-6, Class A1A (P) | 0.426 | 12-25-46 | 2,598,489 | 1,264,740 | ||||||||||
Series 2006-6, Class XP IO | 0.647 | 12-25-46 | 35,008,898 | 1,575,400 | ||||||||||
Series 2007-5, Class XP IO | 3.241 | 06-25-47 | 33,733,954 | 1,918,619 | ||||||||||
American Home Mortgage Investment Trust, | ||||||||||||||
Series 2007-1, Class GIOP IO | 2.078 | 05-25-47 | 28,393,779 | 1,756,865 | ||||||||||
American Tower Trust, | ||||||||||||||
Series 2007-1A, Class C (S) | 5.615 | 04-15-37 | 2,875,000 | 2,918,125 | ||||||||||
Series 2007-1A, Class D (S) | 5.957 | 04-15-37 | 3,175,000 | 3,175,000 |
26 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Collateralized Mortgage Obligations (continued) | ||||||||||||||
Banc of America Commercial Mortgage, Inc., | ||||||||||||||
Series 2005-6, Class A4 (P) | 5.351 | % | 09-10-47 | $2,965,000 | $3,006,785 | |||||||||
Series 2006-2, Class A3 (P) | 5.900 | 05-10-45 | 5,400,000 | 5,400,962 | ||||||||||
Series 2006-3, Class A4 (P) | 5.889 | 07-10-44 | 5,260,000 | 4,732,353 | ||||||||||
Series 2006-4, Class A3A | 5.600 | 07-10-46 | 4,245,000 | 4,009,041 | ||||||||||
Banc of America Funding Corp., | ||||||||||||||
Series 2006-B, Class 6A1 (P) | 5.827 | 03-20-36 | 2,829,118 | 1,892,333 | ||||||||||
Series 2007-E, Class 4A1 (P) | 5.736 | 07-20-47 | 1,767,123 | 1,138,254 | ||||||||||
Bear Stearns Alt-A Trust, | ||||||||||||||
Series 2005-3, Class B2 (P) | 5.122 | 04-25-35 | 1,161,300 | 70,812 | ||||||||||
Bear Stearns Commercial Mortgage Securities, Inc., | ||||||||||||||
Series 2006-PW14, Class D (S) | 5.412 | 12-11-38 | 2,480,000 | 607,701 | ||||||||||
Bear Stearns Mortgage Funding Trust, | ||||||||||||||
Series 2006-AR1, Class 2A1 (P) | 0.456 | 08-25-36 | 1,652,880 | 814,126 | ||||||||||
Chaseflex Trust, | ||||||||||||||
Series 2005-2, Class 4A1 | 5.000 | 05-25-20 | 2,037,617 | 1,858,689 | ||||||||||
Citigroup Commercial Mortgage Trust, | ||||||||||||||
Series 2006-C4, Class A3 (P) | 5.913 | 03-15-49 | 3,350,000 | 3,222,812 | ||||||||||
Citigroup Mortgage Loan Trust, Inc., | ||||||||||||||
Series 2005-10, Class 1A5A (P) | 5.830 | 12-25-35 | 2,076,169 | 1,301,559 | ||||||||||
Series 2005-5, Class 2A3 | 5.000 | 08-25-35 | 1,271,283 | 1,223,212 | ||||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, | ||||||||||||||
Series 2005-CD1, Class C (P) | 5.399 | 07-15-44 | 1,030,000 | 664,053 | ||||||||||
ContiMortgage Home Equity Loan Trust, | ||||||||||||||
Series 1995-2 Class A-5 | 8.100 | 08-15-25 | 200,951 | 174,853 | ||||||||||
Countrywide Alternative Loan Trust, | ||||||||||||||
Series 2007-25, Class 1A2 | 6.500 | 11-25-37 | 4,890,639 | 3,081,866 | ||||||||||
Series 2005-59, Class 2X IO | 2.826 | 11-20-35 | 28,855,913 | 858,463 | ||||||||||
Series 2006-11CB, Class 3A1 | 6.500 | 05-25-36 | 3,235,453 | 2,038,841 | ||||||||||
Crown Castle Towers LLC, | ||||||||||||||
Series 2006-1A, Class F (S) | 6.650 | 11-15-36 | 5,065,000 | 5,140,975 | ||||||||||
Series 2006-1A, Class E (S) | 6.065 | 11-15-36 | 2,900,000 | 2,965,250 | ||||||||||
DB Master Finance LLC, | ||||||||||||||
Series 2006-1, Class-M1 (S) | 8.285 | 06-20-31 | 1,065,000 | 894,004 | ||||||||||
DSLA Mortgage Loan Trust, | ||||||||||||||
Series 2005-AR5, Class X2 IO | 2.885 | 08-19-45 | 23,321,968 | 911,014 | ||||||||||
First Horizon Alternative Mortgage Securities, | ||||||||||||||
Series 2006-RE1, Class A1 | 5.500 | 05-25-35 | 3,079,125 | 2,350,719 | ||||||||||
Series 2004-AA5, Class B1 (P) | 2.635 | 12-25-34 | 1,173,997 | 107,650 | ||||||||||
Global Tower Partners Acquisition Partners LLC, | ||||||||||||||
Series 2007-1A, Class F (S) | 7.050 | 05-15-37 | 780,000 | 697,414 |
See notes to financial statements Semiannual report ï Bond Fund | 27 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Collateralized Mortgage Obligations (continued) | ||||||||||||||
GMAC Commercial Mortgage Securities, Inc., | ||||||||||||||
Series 2003-C2, Class B (P) | 5.686 | % | 05-10-40 | $7,495,000 | $7,422,544 | |||||||||
GMAC Mortgage Corp. Loan Trust, | ||||||||||||||
Series 2006-AR1, Class 2A1 (P) | 5.628 | 04-19-36 | 2,014,723 | 1,508,888 | ||||||||||
Greenpoint Mortgage Funding Trust, | ||||||||||||||
Series 2005-AR1, Class A3 (P) | 0.516 | 06-25-45 | 551,363 | 137,090 | ||||||||||
Series 2005-AR4, Class 4A2 (P) | 0.596 | 10-25-45 | 2,466,308 | 836,162 | ||||||||||
Series 2006-AR1, Class A2A (P) | 0.606 | 02-25-36 | 3,952,701 | 1,084,836 | ||||||||||
Greenwich Capital Commercial Funding Corp., | ||||||||||||||
Series 2007-GG9, Class C (P) | 5.554 | 03-10-39 | 1,810,000 | 622,497 | ||||||||||
Series 2007-GG9, Class F (P) | 5.633 | 03-10-39 | 995,000 | 245,737 | ||||||||||
Greenwich Capital Commercial Funding Corp., | ||||||||||||||
Series 2007-GG9, Class A4 | 5.444 | 03-10-39 | 4,670,000 | 3,985,208 | ||||||||||
GSR Mortgage Loan Trust, | ||||||||||||||
Series 2004-9, Class B1 (P) | 4.054 | 08-25-34 | 1,662,899 | 668,012 | ||||||||||
Series 2006-AR1, Class 3A1 (P) | 5.347 | 01-25-36 | 4,481,102 | 3,295,250 | ||||||||||
Harborview Mortgage Loan Trust, | ||||||||||||||
Series 2005-11, Class X IO | 2.800 | 08-19-45 | 16,025,901 | 661,068 | ||||||||||
Series 2005-16, Class 2A1B (P) | 0.567 | 01-19-36 | 1,463,615 | 386,770 | ||||||||||
Series 2005-8, Class 1X IO | 2.672 | 09-19-35 | 24,236,769 | 920,241 | ||||||||||
Series 2006-SB1, Class A1A (P) | 1.482 | 12-19-36 | 2,978,832 | 1,074,448 | ||||||||||
Series 2007-3, Class ES | 0.350 | 05-19-47 | 55,841,334 | 523,513 | ||||||||||
Series 2007-4, Class ES (P) | 0.350 | 07-19-47 | 58,363,812 | 547,161 | ||||||||||
Series 2007-6, Class ES (S) | 0.342 | 08-19-37 | 43,094,898 | 404,015 | ||||||||||
IndyMac Index Mortgage Loan Trust, | ||||||||||||||
Series 2004-AR13, Class B1 | 5.296 | 01-25-35 | 1,161,480 | 178,225 | ||||||||||
Series 2005-AR18, Class 1X IO | 2.699 | 10-25-36 | 39,234,365 | 1,200,572 | ||||||||||
Series 2005-AR18, Class 2X IO | 2.427 | 10-25-36 | 66,759,618 | 2,082,900 | ||||||||||
Series 2005-AR5, Class B1 (P) | 4.380 | 05-25-35 | 1,631,931 | 51,762 | ||||||||||
JPMorgan Chase Commercial Mortgage Securities Corp., | ||||||||||||||
Series 2006-LDP7, Class A4 (P) | 6.065 | 04-15-45 | 3,345,000 | 3,180,986 | ||||||||||
Series 2005-LDP3, Class A4B (P) | 4.996 | 08-15-42 | 3,635,000 | 3,160,538 | ||||||||||
Series 2005-LDP4, Class B (P) | 5.129 | 10-15-42 | 1,646,000 | 860,995 | ||||||||||
JPMorgan Mortgage Trust, | ||||||||||||||
Series 2006-A7, Class 2A5 (P) | 5.767 | 01-25-37 | 3,614,825 | 759,359 | ||||||||||
Series 2005-S2, Class 2A16 | 6.500 | 09-25-35 | 2,019,983 | 1,979,899 | ||||||||||
Series 2005-S3, Class 2A2 | 5.500 | 01-25-21 | 2,339,264 | 2,247,155 | ||||||||||
LB-UBS Commercial Mortgage Trust, | ||||||||||||||
Series 2006-C4, Class A4 (P) | 6.080 | 06-15-38 | 3,950,000 | 3,852,954 | ||||||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, | ||||||||||||||
Series 2006-2, Class A4 (P) | 6.104 | 06-12-46 | 4,535,000 | 4,405,739 |
28 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Collateralized Mortgage Obligations (continued) | ||||||||||||||
MLCC Mortgage Investors, Inc., | ||||||||||||||
Series 2007-3, Class M1 (P) | 5.915 | % | 09-25-37 | $1,564,541 | $483,469 | |||||||||
Series 2007-3, Class M2 (P) | 5.915 | 09-25-37 | 584,832 | 228,489 | ||||||||||
Series 2007-3, Class M3 (P) | 5.915 | 09-25-37 | 374,896 | 132,493 | ||||||||||
Morgan Stanley Capital I, | ||||||||||||||
Series 2005-HQ7, Class A4 (P) | 5.378 | 11-14-42 | 3,065,000 | 3,115,450 | ||||||||||
Series 2005-IQ10, Class A4A (P) | 5.230 | 09-15-42 | 2,680,000 | 2,696,247 | ||||||||||
Series 2006-IQ12, Class E (P) | 5.538 | 12-15-43 | 2,430,000 | 475,120 | ||||||||||
Provident Funding Mortgage Loan Trust, | ||||||||||||||
Series 2005-1, Class B1 (P) | 4.285 | 05-25-35 | 1,564,066 | 407,035 | ||||||||||
Residential Accredit Loans, Inc., | ||||||||||||||
Series 2005-QA12, Class NB5 (P) | 5.945 | 12-25-35 | 2,121,214 | 1,205,174 | ||||||||||
Series 2005-QO4, Class XIO (P) | 2.969 | 12-25-45 | 45,995,902 | 1,782,341 | ||||||||||
Residential Asset Securitization Trust, | ||||||||||||||
Series 2006-A7CB, Class 2A1 | 6.500 | 07-25-36 | 3,608,640 | 2,201,834 | ||||||||||
Structured Asset Securities Corp., | ||||||||||||||
Series 2003-6A, Class B1 (P) | 4.323 | 03-25-33 | 2,196,063 | 950,209 | ||||||||||
Washington Mutual, Inc., | ||||||||||||||
Series 2005-AR13, Class X IO | 1.961 | 10-25-45 | 143,299,548 | 3,761,613 | ||||||||||
Series 2005-AR19, Class B1 (P) | 0.936 | 12-25-45 | 2,346,195 | 291,768 | ||||||||||
Series 2005-6, Class 1CB | 6.500 | 08-25-35 | 1,314,605 | 959,867 | ||||||||||
Series 2007-OA5, Class 1XPP IO | 0.851 | 06-25-47 | 147,423,792 | 1,704,588 | ||||||||||
Series 2007-OA6, Class 1XPP IO | 0.796 | 07-25-47 | 85,175,168 | 851,752 | ||||||||||
Series 2005-AR19, Class A1B3 (P) | 0.586 | 12-25-45 | 1,034,466 | 387,266 | ||||||||||
Series 2006-AR4, Class 1A1B (P) | 1.572 | 05-25-46 | 2,646,600 | 742,107 | ||||||||||
Series 2005-AR13, Class B1 (P) | 0.836 | 10-25-45 | 4,025,651 | 443,855 | ||||||||||
Series 2005-AR6, Class B1 (P) | 0.836 | 04-25-45 | 4,519,123 | 453,111 | ||||||||||
Wells Fargo Mortgage Backed Securities Trust, | ||||||||||||||
Series 2006-AR15, Class A3 (P) | 5.665 | 10-25-36 | 3,842,255 | 1,130,105 | ||||||||||
Asset Backed Securities 3.47% | $29,945,720 | |||||||||||||
(Cost $35,717,746) | ||||||||||||||
Bank of America Auto Trust, | ||||||||||||||
Series 2009-1A, Class A4 (S) | 3.520 | 06-15-16 | 2,525,000 | 2,627,794 | ||||||||||
Bayview Financial Acquisition Trust, | ||||||||||||||
Series 2006-A, Class 2A3 (P) | 0.593 | 02-28-41 | 2,438,269 | 1,908,356 | ||||||||||
BMW Vehicle Lease Trust, | ||||||||||||||
Series 2009-1, Class A4 | 3.660 | 08-15-13 | 2,855,000 | 2,955,156 | ||||||||||
Carrington Mortgage Loan Trust, | ||||||||||||||
Series 2006-NC4, Class A5 (P) | 0.296 | 10-25-36 | 895,405 | 769,942 | ||||||||||
Countrywide Asset-Backed Certificates, | ||||||||||||||
Series 2006-3, Class 2A2 (P) | 0.416 | 06-25-36 | 3,877,825 | 3,115,180 | ||||||||||
DB Master Finance LLC, | ||||||||||||||
Series 2006-1, Class-A2 (S) | 5.779 | 06-20-31 | 4,605,000 | 4,402,334 | ||||||||||
Dominos Pizza Master Issuer LLC, | ||||||||||||||
Series 2007-1, Class M1 (S) | 7.629 | 04-25-37 | 3,715,000 | 2,897,700 | ||||||||||
Series 2007-1, Class A2 (S) | 5.261 | 04-25-37 | 3,180,000 | 2,728,380 |
See notes to financial statements Semiannual report ï Bond Fund | 29 |
Table of Contents
Maturity | ||||||||||||||
Rate | date | Par value | Value | |||||||||||
Asset Backed Securities (continued) | ||||||||||||||
Hertz Vehicle Financing LLC, | ||||||||||||||
Series 2009-2A, Class A2 (S) | 5.290 | % | 03-25-16 | $3,090,000 | $3,151,279 | |||||||||
Lehman XS Trust, | ||||||||||||||
Series 2005-5N, Class 3A2 (P) | 0.596 | 11-25-35 | 2,891,759 | 967,033 | ||||||||||
Series 2005-7N, Class 1A1B (P) | 0.536 | 12-25-35 | 3,308,523 | 846,340 | ||||||||||
Series 2006-2N, Class 1A2 (P) | 0.576 | 02-25-46 | 6,372,029 | 1,287,635 | ||||||||||
Renaissance Home Equity Loan Trust, | ||||||||||||||
Series 2005-2, Class AF3 | 4.499 | 08-25-35 | 750,678 | 735,439 | ||||||||||
Series 2005-2, Class AF4 | 4.934 | 08-25-35 | 2,365,000 | 1,553,152 | ||||||||||
Shares | Value | |||||||||||||
Preferred Stocks 1.11% | $9,574,740 | |||||||||||||
(Cost $8,867,278) | ||||||||||||||
Consumer Staples 0.18% | 1,511,978 | |||||||||||||
Food & Staples Retailing 0.18% | ||||||||||||||
Ocean Spray Cranberries, Inc., 6.250%, Series A (S) | 23,250 | 1,511,978 | ||||||||||||
Financials 0.23% | 2,017,264 | |||||||||||||
Diversified Financial Services 0.23% | ||||||||||||||
Bank of America Corp., 8.625% | 89,220 | 2,017,264 | ||||||||||||
Materials 0.50% | 4,329,643 | |||||||||||||
Metals & Mining 0.50% | ||||||||||||||
Freeport-McMoRan Copper & Gold, Inc., 6.750% | 14,970 | 1,770,202 | ||||||||||||
Vale Capital II, 6.750% | 30,663 | 2,559,441 | ||||||||||||
Telecommunication Services 0.20% | 1,715,855 | |||||||||||||
Wireless Telecommunication Services 0.20% | ||||||||||||||
Telephone & Data Systems, Inc., 7.600%, Series A | 72,953 | 1,715,855 | ||||||||||||
Maturity | ||||||||||||||
Yield* | date | Par value | Value | |||||||||||
Short-Term Investments 1.62% | $14,000,000 | |||||||||||||
(Cost $14,000,000) | ||||||||||||||
U.S. Government Agency 1.62% | 14,000,000 | |||||||||||||
Federal Home Loan Bank, | ||||||||||||||
Discount Note | 0.020 | % | 12-01-09 | $14,000,000 | 14,000,000 | |||||||||
Total investments (Cost $854,393,641)† 98.59% | $849,739,602 | |||||||||||||
Other assets and liabilities, net 1.41% | $12,112,217 | |||||||||||||
Total net assets 100.00% | $861,851,819 |
The percentage shown for each investment category is the total value of that category as a percentage of the net assets applicable to common shareholders. | ||
Gtd | Guaranteed | |
IO | Interest Only Security — Interest Tranche of Stripped Mortgage Pool | |
REIT | Real Estate Investment Trust | |
(H) | Issuer filed for protection under the Federal Bankruptcy Code and/or is in default of interest payment. |
30 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
(P) | Variable rate obligation. The coupon rate shown represents the rate at period end. | |
(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 $183,170,356 or 21.25% of the Fund’s net assets as of November 30, 2009. | |
* | Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end. | |
† | At November 30, 2009, the aggregate cost of investment securities for federal income tax purposes was $854,665,398. Net unrealized depreciation aggregated $4,925,796, of which $63,475,040 related to appreciated investment securities and $68,400,836 related to depreciated investment securities. |
See notes to financial statements Semiannual report ï Bond Fund | 31 |
Table of Contents
Financial statements
Statement of assets and liabilities 11-30-09 (unaudited)
This Statement of Assets and Liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | ||||||
Investments, at value (Cost $854,393,641) | $849,739,602 | |||||
Cash | 58,489 | |||||
Foreign currency, at value (Cost $10,699) | 10,808 | |||||
Cash collateral at broker for futures contracts | 219,449 | |||||
Receivable for investments sold | 23,344 | |||||
Receivable for fund shares sold | 269,963 | |||||
Dividends and interest receivable | 13,570,679 | |||||
Receivable from affiliates | 17,429 | |||||
Other receivables and prepaid assets | 93,567 | |||||
Total assets | 864,003,330 | |||||
Liabilities | ||||||
Payable for investments purchased | 43,400 | |||||
Payable for fund shares repurchased | 273,794 | |||||
Unrealized depreciation of swap contracts (Note 3) | 320,159 | |||||
Payable for futures variation margin | 32,750 | |||||
Distributions payable | 938,751 | |||||
Payable to affiliates | ||||||
Accounting and legal services fees | 20,223 | |||||
Transfer agent fees | 335,666 | |||||
Distribution and service fees | 26,061 | |||||
Other liabilities and accrued expenses | 160,707 | |||||
Total liabilities | 2,151,511 | |||||
Net assets | ||||||
Capital paid-in | 900,298,505 | |||||
Distributions in excess of net investment income | (85,916 | ) | ||||
Accumulated net realized loss on investments, futures contracts, foreign currency transactions and swap agreements | (33,285,018 | ) | ||||
Net unrealized appreciation (depreciation) on investments, futures contracts, translation of assets and liabilities in foreign currencies and swap agreements | (5,075,752 | ) | ||||
Net assets | $861,851,819 | |||||
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 ($780,832,117 ¸ 53,107,155 shares) | $14.70 | |||||
Class B ($27,302,971 ¸ 1,857,107 shares)1 | $14.70 | |||||
Class C ($32,646,146 ¸ 2,220,288 shares)1 | $14.70 | |||||
Class I ($21,070,585 ¸ 1,433,215 shares) | $14.70 | |||||
Maximum offering price per share | ||||||
Class A (net asset value per share ¸ 95.5%)2 | $15.39 |
1 | Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge. | |
2 | On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced. |
32 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Statement of operations For the period ended 11-30-09 (unaudited)
This Statement of Operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
Investment income | ||||||
Interest | $31,938,293 | |||||
Dividends | 370,920 | |||||
Securities lending | 792 | |||||
Less foreign taxes withheld | (2,021 | ) | ||||
Total investment income | 32,307,984 | |||||
Expenses | ||||||
Investment management fees (Note 5) | 2,056,370 | |||||
Distribution and service fees (Note 5) | 1,400,154 | |||||
Accounting and legal services fees (Note 5) | 80,467 | |||||
Transfer agent fees (Note 5) | 1,035,928 | |||||
Trustees’ fees (Note 6) | 20,147 | |||||
State registration fees (Note 5) | 34,182 | |||||
Printing and postage fees | 137,970 | |||||
Other | 73,758 | |||||
Total expenses | 4,838,976 | |||||
Less expense reductions (Note 5) | (102,362 | ) | ||||
Net expenses | 4,736,614 | |||||
Net investment income | 27,571,370 | |||||
Realized and unrealized gain (loss) | ||||||
Net realized gain (loss) on | ||||||
Investments in unaffiliated issuers | 2,356,491 | |||||
Investments in affiliated issuers | 70 | |||||
Futures contracts (Note 3) | (318,515 | ) | ||||
Swap contracts (Note 3) | 38,799 | |||||
Foreign currency transactions | 299,005 | |||||
2,375,850 | ||||||
Change in net unrealized appreciation (depreciation) of | ||||||
Investments | 100,446,505 | |||||
Futures contracts (Note 3) | 248,652 | |||||
Swap contracts (Note 3) | 274,603 | |||||
Translation of assets and liabilities in foreign currencies | 5,504 | |||||
100,975,264 | ||||||
Net realized and unrealized gain | 103,351,114 | |||||
Increase in net assets from operations | $130,922,484 |
See notes to financial statements Semiannual report ï Bond Fund | 33 |
Table of Contents
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.
Period | Year | |||||||||
ended | ended | |||||||||
11-30-091 | 5-31-09 | |||||||||
Increase (decrease) in net assets | ||||||||||
From operations | ||||||||||
Net investment income | $27,571,370 | $52,778,739 | ||||||||
Net realized gain (loss) | 2,375,850 | (14,392,036 | ) | |||||||
Change in net unrealized appreciation (depreciation) | 100,975,264 | (71,838,760 | ) | |||||||
Increase (decrease) in net assets resulting from operations | 130,922,484 | (33,452,057 | ) | |||||||
Distributions to shareholders | ||||||||||
From net investment income | ||||||||||
Class A2 | (25,954,337 | ) | (48,395,953 | ) | ||||||
Class B | (891,123 | ) | (1,985,117 | ) | ||||||
Class C | (953,659 | ) | (1,498,050 | ) | ||||||
Class I | (776,468 | ) | (1,353,495 | ) | ||||||
Class R12 | (12,611 | ) | (61,014 | ) | ||||||
Total distributions | (28,588,198 | ) | (53,293,629 | ) | ||||||
From Fund share transactions (Note 7) | (61,135 | ) | (71,142,760 | ) | ||||||
Total increase (decrease) | 102,273,151 | (157,888,446 | ) | |||||||
Net assets | ||||||||||
Beginning of period | 759,578,668 | 917,467,114 | ||||||||
End of period | $861,851,819 | $759,578,668 | ||||||||
Undistributed (distributions in excess of) net investment income | ($85,916 | ) | $930,912 |
1 | Semiannual period from 6-1-09 to 11-30-09. Unaudited. | |
2 | Effective at the close of business on August 21, 2009, Class R1 converted into Class A. |
34 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 11-30-091 | 05-31-09 | 05-31-08 | 05-31-07 | 05-31-06 | 05-31-05 | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.96 | $14.31 | $14.75 | $14.51 | $15.30 | $14.98 | ||||||||||||||||||
Net investment income2 | 0.47 | 0.87 | 0.81 | 0.75 | 0.68 | 0.67 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.76 | (1.34 | ) | (0.43 | ) | 0.26 | (0.74 | ) | 0.38 | |||||||||||||||
Total from investment operations | 2.23 | (0.47 | ) | 0.38 | 1.01 | (0.06 | ) | 1.05 | ||||||||||||||||
Less distributions | ||||||||||||||||||||||||
From net investment income | (0.49 | ) | (0.88 | ) | (0.82 | ) | (0.77 | ) | (0.72 | ) | (0.73 | ) | ||||||||||||
Return of capital | — | — | — | — | (0.01 | ) | — | |||||||||||||||||
Total distributions | (0.49 | ) | (0.88 | ) | (0.82 | ) | (0.77 | ) | (0.73 | ) | (0.73 | ) | ||||||||||||
Net asset value, end of period | $14.70 | $12.96 | $14.31 | $14.75 | $14.51 | $15.30 | ||||||||||||||||||
Total return (%)3 | 17.44 | 4 | (3.02 | ) | 2.57 | 7.08 | (0.45 | )5 | 7.11 | 5 | ||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $781 | $686 | $824 | $870 | $899 | $1,012 | ||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||
Expenses before reductions | 1.15 | 6 | 1.16 | 7 | 1.05 | 1.05 | 1.08 | 1.06 | ||||||||||||||||
Expenses net of fee waivers | 1.12 | 6 | 1.16 | 7 | 1.05 | 1.05 | 1.07 | 1.05 | ||||||||||||||||
Expenses net of fee waivers and credits | 1.12 | 6 | 1.16 | 7 | 1.05 | 1.05 | 1.07 | 1.05 | ||||||||||||||||
Net investment income | 6.79 | 6 | 6.71 | 5.54 | 5.11 | 4.56 | 4.41 | |||||||||||||||||
Portfolio turnover (%) | 46 | 90 | 90 | 106 | 135 | 139 |
1 | Semiannual period from 6-1-09 to 11-30-09. Unaudited. | |
2 | Based on the average daily shares outstanding. | |
3 | Assumes dividend reinvestment (if applicable). | |
4 | Not annualized. | |
5 | Total returns would have been lower had certain expenses not been reduced during the periods shown. | |
6 | Annualized. | |
7 | Includes the impact of proxy expenses, which amounted to 0.03% of average net assets. |
See notes to financial statements Semiannual report ï Bond Fund | 35 |
Table of Contents
CLASS B SHARES Period ended | 11-30-091 | 05-31-09 | 05-31-08 | 05-31-07 | 05-31-06 | 05-31-05 | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.95 | $14.31 | $14.75 | $14.51 | $15.30 | $14.98 | ||||||||||||||||||
Net investment income2 | 0.42 | 0.77 | 0.71 | 0.65 | 0.58 | 0.57 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.77 | (1.34 | ) | (0.43 | ) | 0.26 | (0.74 | ) | 0.37 | |||||||||||||||
Total from investment operations | 2.19 | (0.57 | ) | 0.28 | 0.91 | (0.16 | ) | 0.94 | ||||||||||||||||
Less distributions | ||||||||||||||||||||||||
From net investment income | (0.44 | ) | (0.79 | ) | (0.72 | ) | (0.67 | ) | (0.62 | ) | (0.62 | ) | ||||||||||||
Return of capital | — | — | — | — | (0.01 | ) | — | |||||||||||||||||
Total distributions | (0.44 | ) | (0.79 | ) | (0.72 | ) | (0.67 | ) | (0.63 | ) | (0.62 | ) | ||||||||||||
Net asset value, end of period | $14.70 | $12.95 | $14.31 | $14.75 | $14.51 | $15.30 | ||||||||||||||||||
Total return (%)3 | 17.12 | 4 | (3.77 | ) | 1.86 | 5 | 6.33 | (1.14 | )5 | 6.37 | 5 | |||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $27 | $28 | $42 | $59 | $87 | $128 | ||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||
Expenses before reductions | 1.84 | 6 | 1.86 | 7 | 1.76 | 1.75 | 1.78 | 1.76 | ||||||||||||||||
Expenses net of fee waivers | 1.82 | 6 | 1.86 | 7 | 1.76 | 1.75 | 1.77 | 1.75 | ||||||||||||||||
Expenses net of fee waivers and credits | 1.82 | 6 | 1.86 | 7 | 1.75 | 1.75 | 1.77 | 1.75 | ||||||||||||||||
Net investment income | 6.09 | 6 | 5.96 | 4.82 | 4.40 | 3.84 | 3.70 | |||||||||||||||||
Portfolio turnover (%) | 46 | 90 | 90 | 106 | 135 | 139 |
1 | Semiannual period from 6-1-09 to 11-30-09. Unaudited. | |
2 | Based on the average daily shares outstanding. | |
3 | Assumes dividend reinvestment (if applicable). | |
4 | Not annualized. | |
5 | Total returns would have been lower had certain expenses not been reduced during the periods shown. | |
6 | Annualized. | |
7 | Includes the impact of proxy expenses, which amounted to 0.03% of average net assets. |
CLASS C SHARES Period ended | 11-30-091 | 05-31-09 | 05-31-08 | 05-31-07 | 05-31-06 | 05-31-05 | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.96 | $14.31 | $14.75 | $14.51 | $15.30 | $14.98 | ||||||||||||||||||
Net investment income2 | 0.42 | 0.78 | 0.71 | 0.65 | 0.58 | 0.57 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.76 | (1.34 | ) | (0.43 | ) | 0.26 | (0.74 | ) | 0.37 | |||||||||||||||
Total from investment operations | 2.18 | (0.56 | ) | 0.28 | 0.91 | (0.16 | ) | 0.94 | ||||||||||||||||
Less distributions | ||||||||||||||||||||||||
From net investment income | (0.44 | ) | (0.79 | ) | (0.72 | ) | (0.67 | ) | (0.62 | ) | (0.62 | ) | ||||||||||||
Return of capital | — | — | — | — | (0.01 | ) | — | |||||||||||||||||
Total distributions | (0.44 | ) | (0.79 | ) | (0.72 | ) | (0.67 | ) | (0.63 | ) | (0.62 | ) | ||||||||||||
Net asset value, end of period | $14.70 | $12.96 | $14.31 | $14.75 | $14.51 | $15.30 | ||||||||||||||||||
Total return (%)3 | 17.04 | 4 | (3.70 | ) | 1.86 | 6.33 | (1.14 | )5 | 6.37 | 5 | ||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $33 | $26 | $29 | $23 | $24 | $28 | ||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||
Expenses before reductions | 1.84 | 6 | 1.86 | 7 | 1.75 | 1.75 | 1.78 | 1.76 | ||||||||||||||||
Expenses net of fee waivers | 1.82 | 6 | 1.86 | 7 | 1.75 | 1.75 | 1.77 | 1.75 | ||||||||||||||||
Expenses net of fee waivers and credits | 1.82 | 6 | 1.86 | 7 | 1.75 | 1.75 | 1.77 | 1.75 | ||||||||||||||||
Net investment income | 6.07 | 6 | 6.02 | 4.86 | 4.41 | 3.86 | 3.71 | |||||||||||||||||
Portfolio turnover (%) | 46 | 90 | 90 | 106 | 135 | 139 |
1 | Semiannual period from 6-1-09 to 11-30-09. Unaudited. | |
2 | Based on the average daily shares outstanding. | |
3 | Assumes dividend reinvestment (if applicable). | |
4 | Not annualized. | |
5 | Total returns would have been lower had certain expenses not been reduced during the periods shown. | |
6 | Annualized. | |
7 | Includes the impact of proxy expenses, which amounted to 0.03% of average net assets. |
36 | Bond Fund ï Semiannual report See notes to financial statements |
Table of Contents
CLASS I SHARES Period ended | 11-30-091 | 05-31-09 | 05-31-08 | 05-31-07 | 05-31-06 | 05-31-05 | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.96 | $14.31 | $14.74 | $14.51 | $15.30 | $14.98 | ||||||||||||||||||
Net investment income2 | 0.51 | 0.93 | 0.88 | 0.81 | 0.75 | 0.73 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.76 | (1.35 | ) | (0.43 | ) | 0.25 | (0.74 | ) | 0.38 | |||||||||||||||
Total from investment operations | 2.27 | (0.42 | ) | 0.45 | 1.06 | 0.01 | 1.11 | |||||||||||||||||
Less distributions | ||||||||||||||||||||||||
From net investment income | (0.53 | ) | (0.93 | ) | (0.88 | ) | (0.83 | ) | (0.79 | ) | (0.79 | ) | ||||||||||||
Return of capital | — | — | — | — | (0.01 | ) | — | |||||||||||||||||
Total distributions | (0.53 | ) | (0.93 | ) | (0.88 | ) | (0.83 | ) | (0.80 | ) | (0.79 | ) | ||||||||||||
Net asset value, end of year | $14.70 | $12.96 | $14.31 | $14.74 | $14.51 | $15.30 | ||||||||||||||||||
Total return (%)3 | 17.75 | 4 | (2.60 | ) | 3.01 | 7.53 | (0.01 | ) | 7.55 | |||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $21 | $19 | $22 | $5 | $5 | $5 | ||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||
Expenses before reductions | 0.66 | 5 | 0.70 | 6 | 0.62 | 0.62 | 0.64 | 0.65 | ||||||||||||||||
Expenses net of fee waivers | 0.64 | 5 | 0.70 | 6 | 0.62 | 0.62 | 0.64 | 0.65 | ||||||||||||||||
Expenses net of fee waivers and credits | 0.64 | 5 | 0.70 | 6 | 0.62 | 0.62 | 0.64 | 0.65 | ||||||||||||||||
Net investment income | 7.26 | 5 | 7.22 | 6.08 | 5.54 | 4.99 | 4.82 | |||||||||||||||||
Portfolio turnover (%) | 46 | 90 | 90 | 106 | 135 | 139 |
1 | Semiannual period from 6-1-09 to 11-30-09. Unaudited. | |
2 | Based on the average daily shares outstanding. | |
3 | Assumes dividend reinvestment (if applicable). | |
4 | Not annualized. | |
5 | Annualized. | |
6 | Includes the impact of proxy expenses, which amounted to 0.03% of average net assets. |
See notes to financial statements Semiannual report ï Bond Fund | 37 |
Table of Contents
Notes to financial statements
(unaudited)
Note 1
Organization
John Hancock Bond Fund (the Fund) is a diversified series of John Hancock Sovereign Bond Fund, an open-end management investment company registered under the Investment Company Act of 1940, 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.
John Hancock Advisers, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
The Board of Trustees has authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B, Class C and Class I shares. Class A, Class B and Class C shares are open to all retail investors. Class I shares are offered without any sales charge to various institutional and certain individual investors. Class R1 shares converted into Class A on August 21, 2009. The shares of each class represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission and the Internal Revenue Service. Shareholders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that distribution plan. Class B shares will convert to Class A shares eight years after purchase.
Note 2
Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after period end through the date that the financial statements were issued, January 25, 2010, 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 the regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied quotes and electronic data processing techniques, which take 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. Securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Debt obligations, where there are no prices available from an independent pricing service, are valued based on broker quotes or fair valued as described below. Certain short-term debt investments are valued at amortized cost. Investment in John Hancock Collateral Investment Trust (JHCIT), an affiliated registered investment company managed by MFC Global Investment Management (U.S.), LLC, a subsidiary of MFC, are valued at its net asset value each business day. JHCIT is a floating rate fund investing in high quality money market instruments.
38 | Bond Fund ï Semiannual report |
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Other assets and securities where market quotations are not readily available are valued at fair value as determined in good faith by the Fund’s Pricing Committee in accordance with procedures adopted by the Board of Trustees. Generally, trading in non-U.S. securities is substantially completed each day at various times prior to the close of trading on the NYSE. The values of such securities used in computing the net asset value of the Fund’s shares are generally determined as of such times. Occasionally, significant events that affect the values of such securities may occur between the times at which such values are generally determined and the close of the NYSE. Upon such an occurrence, these securities will be valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees.
Fair Value Measurements
The Fund uses a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three-tier hierarchy of inputs and the valuation techniques used are summarized below:
Level 1 — Exchange-traded prices in active markets for identical securities. This technique is used for exchange-traded domestic common and preferred equities, certain foreign equities, warrants and rights.
Level 2 — Prices determined using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these techniques are received from independent pricing vendors and are based on an evaluation of the inputs described. These techniques are used for certain domestic preferred equities, certain foreign equities, unlisted rights and warrants, and fixed income securities.
Level 3 — Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable, such as when there is little or no market activity for an investment, unobservable inputs may be used. Unobservable inputs reflect the Fund’s Pricing Committee’s own assumptions about the factors that market participants would use in pricing an investment and would be based on the best information available. Securities using this technique are generally thinly traded or privately placed, and may be valued using broker quotes, which may include the use of the brokers’ own judgments about the assumptions that market participants would use.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Semiannual report ï Bond Fund | 39 |
Table of Contents
The following is a summary of the inputs used to value the Fund’s investments as of November 30, 2009, by major security category or security type:
LEVEL 2 | LEVEL 3 | |||||||||||||||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | SIGNIFICANT | |||||||||||||
VALUE AT | QUOTED | OBSERVABLE | UNOBSERVABLE | |||||||||||||
11/30/2009 | PRICE | INPUTS | INPUTS | |||||||||||||
U.S. Government & Agency Obligations | $154,785,854 | — | $154,785,854 | — | ||||||||||||
Corporate Bonds | 503,116,725 | — | 499,718,375 | $3,398,350 | ||||||||||||
Convertible Bonds | 1,016,863 | — | 1,016,863 | — | ||||||||||||
Municipal Bonds | 1,477,858 | — | 1,477,858 | — | ||||||||||||
Term Loans | 1,360,935 | — | 1,360,935 | — | ||||||||||||
Collateralized Mortgage Obligations | 134,460,907 | — | 113,000,782 | 21,460,125 | ||||||||||||
Asset Backed Securities | 29,945,720 | — | 27,048,020 | 2,897,700 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Consumer Staples | 1,511,978 | — | 1,511,978 | — | ||||||||||||
Financials | 2,017,264 | $2,017,264 | — | — | ||||||||||||
Materials | 4,329,643 | 1,770,202 | 2,559,441 | — | ||||||||||||
Telecommunication Services | 1,715,855 | 1,715,855 | — | — | ||||||||||||
Short-Term Investments | 14,000,000 | — | 14,000,000 | — | ||||||||||||
Total investments in securities | $849,739,602 | $5,503,321 | $816,480,106 | $27,756,175 | ||||||||||||
Other Financial Instruments | ($421,822 | ) | ($101,663 | ) | ($320,159 | ) | — | |||||||||
Totals | $849,317,780 | $5,401,658 | $816,159,947 | $27,756,175 |
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
COLLATERALIZED | ASSET | |||||||||||||||
MORTGAGE | CORPORATE | BACKED | ||||||||||||||
OBLIGATIONS | BONDS | SECURITIES | TOTAL | |||||||||||||
Balance as of 5-31-09 | $18,353,377 | $3,073,250 | $1,414,600 | $22,841,227 | ||||||||||||
Accrued discounts/premiums | — | 655 | 88 | 743 | ||||||||||||
Realized gain (loss) | 1,878,944 | — | — | 1,878,944 | ||||||||||||
Change in unrealized appreciation (depreciation) | 11,998,878 | 313,695 | 1,093,012 | 13,405,585 | ||||||||||||
Net purchases (sales) | (9,146,481 | ) | — | 390,000 | (8,756,481 | ) | ||||||||||
Net transfers in and/or out of Level 3 | (1,624,593 | ) | 10,750 | — | (1,613,843 | ) | ||||||||||
Balance as of 11-30-09 | $21,460,125 | $3,398,350 | $2,897,700 | $27,756,175 |
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. Dividend income is recorded on the ex-dividend date. Discounts/premiums are accreted/amortized for financial reporting purposes. Non-cash dividends are recorded at the fair market value of the securities received. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. The Fund uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
Securities lending
The Fund may lend portfolio securities from time to time in order to earn additional income. The Fund retains beneficial
40 | Bond Fund ï Semiannual report |
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ownership of the securities it has loaned and continues to receive interest and dividends associated with securities and to participate in any changes in their value. On the settlement date of the loan, the Fund receives cash collateral against the loaned securities and maintains the cash collateral in an amount no less than the market value of the loaned securities.
The market value of the loaned securities is determined at the close of business of the Fund. Any additional required cash collateral is delivered to the Fund or excess collateral is returned to the borrower on the next business day. Cash collateral received is invested in JHCIT. JHCIT is not a stable value fund and thus the Fund receives the benefit of any gains and bears any losses generated by JHCIT.
The Fund may receive compensation for lending its securities either in the form of fees, and/or by retaining a portion of interest on the investment of any cash received as collateral. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. The Fund bears the risk in the event that invested collateral is not sufficient to meet obligations due on loans.
Line of credit
The Fund and other affiliated funds have entered into an agreement which enables them to participate in a $150 million unsecured committed line of credit with the Fund’s custodian. The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.08% per annum, 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 prorated basis based on average net assets. For the six-months ended November 30, 2009, there were no borrowings under the line of credit by the Fund.
Pursuant to the custodian agreement, the Fund’s custodian may, in its discretion, advance funds to the Fund to make properly authorized payments. When such payments result in an overdraft, the Fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law to the extent of any overdraft.
Expenses
The majority of expenses are directly identifiable to an individual fund. Trust expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the appropriate net asset value of the respective classes. Distribution and service fees, if any, and transfer agent fees, for all classes are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rate(s) applicable to each class.
When-issued/delayed delivery securities
The Fund may purchase or sell debt securities on a when-issued or delayed-delivery basis. These transactions involve a commitment by the Fund to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed delivery purchases are outstanding, the Fund is required to have sufficient cash
Semiannual report ï Bond Fund | 41 |
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and/or liquid securities to cover its commitments on these transactions. When purchasing a security on a delayed-delivery basis, the Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its NAV. The Fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery securities before they are delivered, which may result in a capital gain or loss. When the Fund has sold a security on a delayed-delivery basis, the Fund does not participate in future gains and losses with respect to the security. The Fund may receive compensation for interest forgone in the purchase of delayed-delivery securities. The market values of the securities purchased on a forward-delivery basis are identified in the Portfolio of Investments.
In a “To Be Announced” (TBA) transaction, the Fund commits to purchasing or selling securities for which all specific information is not yet known at the time of the trade, particularly the face amount and maturity date of the underlying security transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later.
Stripped securities
Stripped mortgage-backed securities are financial instruments that derive their value from other instruments so that one class receives most, if not all, of the principal from the underlying mortgage assets (principal only (PO)), while the other class receives most, if not all, of the interest cash flows (interest only (IO)). Both the PO and IO investments represent an interest in the cash flows of an underlying stripped mortgaged-backed security. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in an interest only security. The market value of these securities can be extremely volatile in response to changes in interest rates. Credit risk reflects the risk that the Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligation.
Federal income taxes
The Fund intends 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.
For federal income tax purposes, the Fund has a $20,576,668 capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, it will reduce the amount of capital gain distribution to be paid. The loss carryforward expires as follows: May 31, 2010 — $35,777, May 31, 2014 — $505,866, May 31, 2015 — $19,095,572 and May 31, 2017 — $939,453.
As of May 31, 2009, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains
The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. The Fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are paid annually. During the year ended May 31, 2009, the tax character of distributions paid ordinary income of $53,293,629. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions 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.
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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.
Note 3
Financial instruments
Futures
The Fund may purchase and sell financial futures contracts, including index futures and options on these contracts. A future is a contractual agreement to buy or sell a particular commodity, currency or financial instrument at a pre-determined price in the future. The Fund may use futures contracts to manage against a decline in the value of securities owned by the Fund due to anticipated interest rate, currency or market changes. In addition, the Fund will use futures contracts for duration management or to gain exposure to a securities market.
An index futures contract (index future) is a contract to buy a certain number of units of the relevant index at a fixed price and specific future date. The Fund may invest in index futures as a means of gaining exposure to securities without investing in them directly, thereby allowing the Fund to invest in the underlying securities over time. Investing in index futures also permits the Fund to maintain exposure to common stocks without incurring the brokerage costs associated with investment in individual common stocks.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. Upon entering into a futures contract, initial margin deposits, as set by the exchange or broker to the contract, are required and are met by the delivery of specific securities (or cash) as collateral to the broker. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.
During the six-month period ended November 30, 2009, the Fund held futures contracts with notional values that have ranged from approximately $13,600,000 to $29,250,000 and futures were used to manage duration of the portfolio.
The following summarizes the futures held by the fund at November 30, 2009:
UNREALIZED | ||||||||||||||
NUMBER OF | APPRECIATION/ | |||||||||||||
OPEN CONTRACTS | CONTRACTS | POSITION | EXPIRATION DATE | NOTIONAL VALUE | DEPRECIATION | |||||||||
U.S. Treasury 30-Year Bond Futures | 50 | Long | March 2010 | $6,135,938 | $91,240 | |||||||||
U.S. Treasury 10-Year Bond Futures | 89 | Short | March 2010 | (10,674,438 | ) | (103,202 | ) | |||||||
U.S. Treasury 5-Year Bond Futures | 136 | Short | March 2010 | (15,948,125 | ) | (89,701 | ) | |||||||
($101,663 | ) |
Credit default swap agreements
The Fund may enter credit default swaps to manage its exposure to credit risks, to gain exposure to certain credit markets or to enhance potential gain. Credit default swaps (CDS) involve the exchange of a fixed-rate premium (paid by the “Buyer”) for protection against the loss in value of an underlying debt instrument, reference entity or index, in the event of a defined credit event (such as default or bankruptcy). Under the terms of the swap, one party acts as a “guarantor” (the “Seller”), receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return, the Seller agrees to remedies that are specified within the credit default agreement and are dependent on the referenced obligation, entity or credit index. The Fund may enter into CDS in which the Fund may act as the
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Buyer or Seller. By acting as the Seller, in circumstances in which the Fund does not hold offsetting cash equivalent positions equaling the notional amount of the swap, the Fund effectively incurs economic leverage because it would be obligated to pay the Buyer such notional amount in the event of a default. The amount of loss in such case would be reduced by any recovery value on the underlying credit.
Swaps are marked to market daily based upon values from third party vendors or quotations from market makers to the extent available, and the change in value, if any, is recorded as unrealized appreciation/depreciation on the Fund’s Statement of Assets and Liabilities. If market quotations are not readily available or not deemed reliable, certain swaps may be fair valued in good faith by the Fund’s Pricing Committee in accordance with procedures adopted by the Board of Trustees. Upfront payments made/received by the Fund represent payments to compensate for differences between the stated terms of the swap and prevailing market conditions, including credit spreads, currency exchange rates, interest rates and other relevant factors. These payments are amortized or accreted for financial reporting purposes, with the un-amortized/un-accreted portion included in the Statement of Assets and Liabilities. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss on the Statement of Operations. Net periodic payments received or paid by the Fund are included as part of realized gains or losses on the Statement of Operations. In connection with these agreements, the Fund will hold cash and/or liquid securities equal to the net amount of the Fund’s exposure, in order to satisfy the Fund’s obligations in the event of default or bankruptcy/insolvency.
Entering into swaps involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that a counterparty may default on its obligation under the swap or disagree as to the meaning of the swap’s terms, and that there may be unfavorable interest rate changes. The Fund may also suffer losses if it is unable to terminate outstanding swaps or reduce its exposure through offsetting transactions.
The Fund is a party to International Swap Dealers Association, Inc., Master Agreements (“ISDA Master Agreements”) with select counterparties that govern over the counter derivative transactions, which may include foreign exchange derivative transactions, entered into by the Fund and those counterparties. The ISDA Master Agreements typically include standard representations and warranties, as well as a Credit Support Annex (“CSA”) that accompanies a schedule to ISDA master agreements provisions outlining the general obligations of the Fund and counterparties relating to events of default, termination events and other standard provisions. Termination events may include a decline in the Fund’s net asset value below a certain point over a certain period of time that is specified in the Schedule to the ISDA Master Agreement; such an event may entitle the counterparty to elect to terminate early and calculate damages based on that termination, with respect to some or all outstanding transactions under the applicable damage calculation provisions of the ISDA Master Agreement. An election by one or more counterparties to terminate ISDA Master Agreements could have a material impact in the financial statements of the Fund.
Implied credit spreads, represented in absolute terms, are utilized in determining the market value of CDS agreements on corporate issues as of period end, and are disclosed in the table below. The implied credit spread generally represents the yield of the instrument above a credit-risk free rate, such as the U.S. Treasury Bond Yield, and may include upfront payments required to be made to enter into the agreement. It also serves as an indicator of the current status of the payment/performance risk and represents the likelihood or risk of default for the credit derivative. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of
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default or other credit event occurring as defined under the terms of the agreement.
The maximum potential amount of future payments (undiscounted) that the Fund as the Seller could be required to make under a CDS agreement, would be an amount equal to the notional amount of the agreement. Notional amounts of all CDS agreements outstanding as of November 30, 2009, for which the Fund is the Seller, are disclosed in the table below. These potential amounts would be partially offset by any recovery values of the respective reference obligations, upfront payments received, or net amounts received from the settlement of buy protection CDS agreements entered into by the Fund for the same reference entity or entities.
During the six-month period ended November 30, 2009, the Fund held CDS on certain securities. Notional values are representative of the activity during the period. CDS were used to take a long position in the exposure to the reference credit and enhance potential gain. The following summarizes the contracts that the Fund held to as of November 30, 2009:
NOTIONAL | PAY / | |||||||||||||||||||||||||
IMPLIED | AMOUNT/ | RECEIVE | ||||||||||||||||||||||||
COUNTER- | REFERENCE | CREDIT | EXPOSURE | FIXED | MATURITY | UNREALIZED | MARKET | |||||||||||||||||||
PARTY | OBLIGATION | SPREAD | CURRENCY | PURCHASED | RATE | DATE | DEPRECIATION | VALUE | ||||||||||||||||||
Bank of America | The Goodyear Tire & Rubber Co. | 4.33% | USD | 5,000,000 | 1.51% | Jun 2012 | ($320,159 | ) | ($320,159 | ) |
Fair value of derivative instruments by risk category
The table below summarizes the fair values of derivatives held by the Fund at November 30, 2009 by risk category:
FINANCIAL | ASSET | LIABILITY | ||||||||||
STATEMENT OF ASSETS | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |||||||||
AND LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE | |||||||||
Interest rate contracts | Payable for futures variation margin; Net unrealized depreciation on investments, futures contracts, translation of assets and liabilities in foreign currencies and swap agreements | Futures† | — | ($ | 101,663 | ) | ||||||
Credit contracts | Unrealized depreciation of swap contracts; Net unrealized depreciation on investments, futures contracts, translation of assets and liabilities in foreign currencies and swap agreements | Credit default swaps | — | ($ | 320,159 | ) | ||||||
Total | — | ($ | 421,822 | ) |
† | Reflects cumulative appreciation/depreciation on Futures as disclosed in Note 3. Only the year end variation margin is separately disclosed on the Statement of Assets and Liabilities. |
Effect of derivative instruments on Statement of Operations
The table below summarizes the realized gain (loss) recognized in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category for the six-month period ended November 30, 2009:
FUTURES | SWAP | |||||||||||
CONTRACTS | CONTRACTS | TOTAL | ||||||||||
Statement of Operations location - Net realized gain (loss) of Interest rate contracts | ($ | 318,515 | ) | — | ($ | 318,515 | ) | |||||
Credit contracts | — | $ | 38,799 | 38,799 | ||||||||
Total | ($ | 318,515 | ) | $ | 38,799 | ($ | 279,716 | ) |
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The table below summarizes the change in unrealized appreciation (depreciation) recognized in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category for the six-month period ended November 30, 2009:
FUTURES | SWAP | |||||||||||
CONTRACTS | CONTRACTS | TOTAL | ||||||||||
Statement of Operations location - Change in unrealized appreciation (depreciation) on Interest rate contracts | $ | 248,652 | — | $ | 248,652 | |||||||
Credit contracts | — | $ | 274,603 | 274,603 | ||||||||
Total | $ | 248,652 | $ | 274,603 | $ | 523,255 |
Note 4
Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liability 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.
Note 5
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.50% of the first $1,500,000,000 of the Fund’s average daily net asset value, (b) 0.45% of the next $500,000,000, (c) 0.40% of the next $500,000,000 and (d) 0.35% of the Fund’s average daily net asset value in excess of $2,500,000,000. The Fund has a subadvisory agreement with MFC Global Investment Management (U.S.), LLC, an indirectly owned subsidiary of MFC and an affiliate of the Adviser. The Fund is not responsible for payment of subadvisory fees. The investment management fees incurred for the six-month period ended November 30, 2009, were equivalent to an annual effective rate of 0.50% of the Fund’s average daily net assets.
Pursuant to the Advisory Agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of the Fund, including the preparation of all tax returns, annual, semiannual and periodic reports to shareholders and the preparation of all regulatory reports. These expenses are allocated based on the relative share of net assets of each class at the time the expense was incurred. The accounting and legal services fees incurred for the six-month period ended November 30, 2009, were equivalent to an annual effective rate of 0.02% of the Fund’s average daily net assets.
The Fund has a Distribution Agreement with the Distributor. The Fund has adopted Distribution Plans with respect to Class A, Class B and Class C shares, pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for the services it provides as distributor of shares of the Fund. Accordingly, Class A and B shares make daily payments and Class C shares make monthly payments to the Distributor at an annual rate not to exceed 0.30%, 1.00% and 1.00% of average daily net asset value of Class A, Class B and Class C shares, respectively. A maximum of 0.25% of such payments may be service fees, as defined by the Conduct Rules of the Financial Industry Regulatory Authority. Under the Conduct Rules, curtailment of a portion of the Fund’s Rule 12b-1 payments could occur under certain circumstances.
Class A shares are assessed up-front sales charges. During the six-month period ended November 30, 2009, the Distributor received net up-front sales charges of $278,383 with regard to sales of Class A shares. Of this amount, $31,523 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $170,195 was paid as sales commissions to unrelated broker-dealers and $76,665 was paid as sales commissions to
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sales personnel of Signator Investors, Inc. (Signator Investors), a related broker-dealer. Signator Investors is an affiliate of the Adviser.
Class B shares that are redeemed within six years of purchase are subject to a contingent deferred sales charge (CDSC) at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a CDSC at a rate of 1.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from the CDSCs are paid to the Distributor and are used in whole or in part to defray its expenses for providing distribution-related services to the Fund in connection with the sale of Class B and Class C shares. During the six-month period ended November 30, 2009, CDSCs received by the Distributor amounted to $15,366 and $1,037 for Class B and Class C shares, respectively.
The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an indirect subsidiary of MFC. The transfer agent fees are made up of three components:
• | The Fund pays a monthly transfer agent fee at an annual rate of 0.015% for all classes based on each class’s average daily net assets. |
• | All classes of the Fund pay a monthly fee based on an annual rate of $17.50 per shareholder account. |
• | In addition, Signature Services is reimbursed for certain out-of-pocket expenses. |
Signature Services has voluntarily agreed to waive certain transfer agent expenses. The amount of this waiver for the six-month period ended November 30, 2009 was $8,624.
Certain investor accounts that maintain small balances are charged an annual small accounts fee by Signature Services. Amounts related to these fees are credited to the Fund and netted against transfer agent expenses. For the six-month period ended November 30, 2009, these fees totaled $93,738.
Class level expenses for the six-month period ended November 30, 2009 were as follows:
Distribution and | Transfer | |||||||
Share Class | Service Fees | Agent Fees | ||||||
Class A | $ | 1,107,123 | $953,172 | |||||
Class B | 140,910 | 35,816 | ||||||
Class C | 150,721 | 38,970 | ||||||
Class I | — | 7,662 | ||||||
Converted Class | 1,400 | 308 | ||||||
Total | $ | 1,400,154 | $1,035,928 |
Note 6
Trustees’ Fees
The compensation of independent Trustees is borne by the Fund. The independent Trustees may elect to defer, for tax purposes, their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments into other John Hancock funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund’s deferred compensation liability are recorded on the Fund’s books as an other asset. The deferred compensation liability and the related other asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund.
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Note 7
Fund share transactions
This listing illustrates the number of Fund shares sold, reinvested and repurchased during the six-month period ended November 30, 2009, and the year ended May 31, 2009, along with the corresponding dollar value.
Period ended 11-30-091 | Year ended 5-31-09 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A shares2 | ||||||||||||||||
Sold | 2,024,665 | $28,258,230 | 4,592,147 | $57,927,810 | ||||||||||||
Issued in class | 14,793 | 205,314 | — | — | ||||||||||||
Distributions reinvested | 1,508,875 | 21,251,830 | 3,152,395 | 40,387,978 | ||||||||||||
Repurchased | (3,357,738 | ) | (46,796,578 | ) | (12,432,711 | ) | (158,640,619 | ) | ||||||||
Net increase (decrease) | 190,595 | $2,918,796 | (4,688,169 | ) | ($60,324,831 | ) | ||||||||||
Class B shares | ||||||||||||||||
Sold | 263,755 | $3,673,084 | 352,053 | $4,503,181 | ||||||||||||
Distributions reinvested | 44,070 | 619,882 | 115,841 | 1,486,548 | ||||||||||||
Repurchased | (607,346 | ) | (8,491,988 | ) | (1,224,799 | ) | (15,707,024 | ) | ||||||||
Net decrease | (299,521 | ) | ($4,199,022 | ) | (756,905 | ) | ($9,717,295 | ) | ||||||||
Class C shares | ||||||||||||||||
Sold | 397,652 | $5,497,960 | 611,213 | $7,703,800 | ||||||||||||
Distributions reinvested | 36,246 | 511,113 | 86,209 | 1,103,254 | ||||||||||||
Repurchased | (245,923 | ) | (3,454,857 | ) | (693,368 | ) | (9,067,496 | ) | ||||||||
Net increase (decrease) | 187,975 | $2,554,216 | 4,054 | ($260,442 | ) | |||||||||||
Class I shares | ||||||||||||||||
Sold | 277,596 | $3,913,236 | 1,848,899 | $22,570,485 | ||||||||||||
Distributions reinvested | 23,887 | 335,510 | 89,810 | 1,152,040 | ||||||||||||
Repurchased | (329,047 | ) | (4,702,832 | ) | (1,984,466 | ) | (24,433,546 | ) | ||||||||
Net decrease | (27,564 | ) | ($454,086 | ) | (45,757 | ) | ($711,021 | ) | ||||||||
Class R1 shares2 | ||||||||||||||||
Sold | 7,898 | $106,360 | 35,396 | $467,732 | ||||||||||||
Redeemed in class | (14,793 | ) | (205,314 | ) | — | — | ||||||||||
Distributions reinvested | 62 | 811 | 4,742 | 60,931 | ||||||||||||
Repurchased | (56,536 | ) | (782,896 | ) | (50,342 | ) | (657,834 | ) | ||||||||
Net decrease | (63,369 | ) | ($881,039 | ) | (10,204 | ) | ($129,171 | ) | ||||||||
Net decrease | (11,884 | ) | ($61,135 | ) | (5,496,981 | ) | ($71,142,760 | ) |
1 | Semiannual period from 6-1-09 to 11-30-09. Unaudited. | |
2 | Effective at the close of business on August 21, 2009, Class R1 converted into Class A. |
Note 8
Purchase and sale of securities
Purchases and proceeds from sales or maturities of securities, other than short-term securities and obligations of the U.S. government, during the six-month period ended November 30, 2009, aggregated $216,494,654 and $166,273,440, respectively. Purchases and proceeds from sales or maturities of obligations of the U.S. government aggregated $157,369,165 and $199,183,895, respectively, during the six-month period ended November 30, 2009.
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Board Consideration of and Continuation of Investment Advisory Agreement and Sub-Advisory Agreement: John Hancock Bond Fund
The Investment Company Act of 1940 (the “1940 Act”) requires the Board of Trustees (the “Board”) of John Hancock Sovereign Bond Fund (the “Trust”), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not “interested persons” of the Trust, as defined in the 1940 Act (the “Independent Trustees”), annually to meet in person to review and consider the continuation of existing advisory and sub-advisory agreements. At meetings held on May 6-7 and June 8-9, 2009, the Board considered the renewal of:
(i) | the investment advisory agreement (the “Advisory Agreement”) with John Hancock Advisers, LLC (the “Adviser”) and |
(ii) | the investment sub-advisory agreement (the “Sub-Advisory Agreement”) with MFC Global Investment Management (U.S.), LLC (the “Sub-Adviser”) for the John Hancock Bond Fund (the “Fund”). |
The Advisory Agreement and the Sub-Advisory Agreement are collectively referred to as the “Advisory Agreements.” The Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and Sub-Adviser and the continuation of the Advisory Agreements. During such meetings, the Board’s Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel.
In evaluating the Advisory Agreements, the Board, including the Contracts/Operations Committee and its Independent Trustees, reviewed a broad range of information requested for this purpose. The Independent Trustees considered the legal advice of independent legal counsel and relied on their own business judgment in determining the factors to be considered in evaluating the materials that were presented to them and the weight to be given to each such factor. The Board’s review and conclusions were based on a comprehensive consideration of all information presented to the Board and not the result of any single controlling factor. The key factors considered by the Board and the conclusions reached are described below.
Nature, Extent and Quality of Services
The Board considered the ability of the Adviser and the Sub-Adviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory, and supervisory personnel. It considered the background and experience of senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Sub-Adviser responsible for the daily investment activities of the Fund. The Board considered the Sub-Adviser’s history and experience with the Fund. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Sub-Adviser’s compliance department. In addition, the Board took into account the administrative and other non-advisory services provided to the Fund by the Adviser and its affiliates.
Based on the above factors, together with those referenced below, the Board concluded that, within the context of its full deliberations, the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser and Sub-Adviser supported renewal of the Advisory Agreements.
Fund Performance
The Board considered the performance results for the Fund over various time periods ended December 31, 2008. The Board also considered these results in comparison to the performance of a category of relevant funds (the “Category”), a peer group of
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comparable funds (the “Peer Group”) and a benchmark index. The funds within each Category and Peer Group were selected by Morningstar Inc. (“Morningstar”), an independent provider of investment company data. The Board reviewed the methodology used by Morningstar to select the funds in the Category and the Peer Group. The Board also considered updated performance information at its May and June 2009 meetings. Performance and other information may be quite different as of the date of this shareholders report.
The Board noted that the Fund’s performance for all periods under review was lower than the performance of the Peer Group and Category medians, and its benchmark index, the Barclays Capital Government/Credit Bond Index. The Adviser discussed with the Board factors that contributed to the Fund’s under-performance and discussed its outlook and recommendations with regard to the Fund’s performance. The Adviser noted that the Fund’s performance as of May 2009 was improved. The Board concluded that the Fund’s underperformance was being responsibly addressed by the Adviser and Sub-Adviser.
Investment Advisory Fee and Sub-Advisory Fee Rates and Expenses
The Board reviewed and considered the contractual investment advisory fee rate payable by the Fund to the Adviser for investment advisory services (the “Advisory Agreement Rate”). The Board received and considered information comparing the Advisory Agreement Rate with the advisory fees for the Category and Peer Group. The Board noted that the Advisory Agreement Rate was equal to the Category median and inline with the Peer Group median.
The Board received and considered expense information regarding the Fund’s various components, including advisory fees, distribution and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also received and considered expense information regarding the Fund’s total operating expense ratio (“Expense Ratio”). The Board received and considered information comparing the Expense Ratio of the Fund to that of the Peer Group and Category medians before the application of fee waivers and reimbursements (“Gross Expense Ratio”) and after the application of such waivers and reimbursement (“Net Expense Ratio”). The Board noted that the Fund’s Net Expense Ratio was higher than the Peer Group and Category medians. The Board also noted that the Fund’s Gross Expense Ratio was inline with the median of its Peer Group and was not appreciably higher than the median of its Category. The Board noted that, unlike the Fund, several funds in the Peer Group employed fee waivers or reimbursements.
The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Fund’s overall performance and expense results supported the re-approval of the Advisory Agreements.
The Board also received information about the investment sub-advisory fee rate (the “Sub-Advisory Agreement Rate”) payable by the Adviser to the Sub-Adviser for investment sub-advisory services. The Board concluded that the Sub-Advisory Agreement Rate was fair and equitable, based on its consideration of the factors described here.
Profitability
The Board received and considered a detailed profitability analysis of the Adviser based on the Advisory Agreements, as well as on other relationships between the Fund and the Adviser and its affiliates, including the Sub-Adviser. The Board also considered a comparison of the Adviser’s profitability to that of other similar investment advisers whose profitability information is publicly available. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits reported by the Adviser were not unreasonable.
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Economies of Scale
The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Fund’s ability to appropriately benefit from economies of scale under the Fund’s fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s and Sub-Adviser’s costs are not specific to individual Funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the Advisory Agreement Rate.
Information About Services to Other Clients
The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser and Sub-Adviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate and the Sub-Advisory Agreement Rate were not unreasonable, taking into account fee rates offered to others by the Adviser and Sub-Adviser, respectively, after giving effect to differences in services.
Other Benefits to the Adviser
The Board received information regarding potential “fall-out” or ancillary benefits received by the Adviser and its affiliates, including the Sub-Adviser, as a result of their relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser and Sub-Adviser with the Fund and benefits potentially derived from an increase in business as a result of their relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates).
Other Factors and Broader Review
As discussed above, the Board reviewed detailed materials received from the Adviser and Sub-Adviser as part of the annual re-approval process. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of the Adviser and Sub-Adviser at least quarterly, which include, among other things, fund performance reports and compliance reports. In addition, the Board meets with senior investment officers at various times throughout the year.
After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreements.
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More information
Trustees Patti McGill Peterson, Chairperson James R. Boyle† James F. Carlin William H. Cunningham Deborah C. Jackson* Charles L. Ladner Stanley Martin* Dr. John A. Moore Steven R. Pruchansky†† Gregory A. Russo John G. Vrysen† Officers Keith F. Hartstein President and Chief Executive Officer Andrew G. Arnott‡ Chief Operating Officer Thomas M. Kinzler Secretary and Chief Legal Officer Francis V. Knox, Jr. Chief Compliance Officer Charles A. Rizzo Chief Financial Officer Michael J. Leary Treasurer *Member of the Audit Committee ††Member of the Audit Committee effective 9-1-09 †Non-Independent Trustee ‡Effective 9-1-09 | Investment adviser John Hancock Advisers, LLC Subadviser MFC Global Investment Management (U.S.), LLC Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP The report i s certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respect. |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-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 Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us:
1-800-225-5291 | Regular mail: | Express mail: | ||
jhfunds.com | John Hancock Signature Services, Inc. P.O. Box 55913 Boston, MA 02205-5913 | John Hancock Signature Services, Inc. Mutual Fund Image Operations 30 Dan Road Canton, MA 02021 |
52 | Bond Fund ï Semiannual report |
Table of Contents
JOHN HANCOCK FAMILY OF FUNDS
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Balanced Fund | ||
Classic Value Fund | ||
Classic Value Mega Cap Fund | ||
Disciplined Value Fund | ||
Growth Opportunities Fund | ||
Large Cap Equity Fund | ||
Mid Cap Equity Fund | ||
Rainier Growth Fund | ||
Small Cap Equity Fund | ||
Small Cap Intrinsic Value Fund | ||
Small Company Fund | ||
Sovereign Investors Fund | ||
U.S. Core Fund | ||
U.S. Global Leaders Growth Fund | ||
Value Opportunities Fund | ||
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TARGET RISK | ||
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Lifestyle Aggressive Portfolio | ||
Lifestyle Balanced Portfolio | ||
Lifestyle Conservative Portfolio | ||
Lifestyle Growth Portfolio | ||
Lifestyle Moderate Portfolio | ||
TARGET DATE | ||
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Lifecycle 2045 Portfolio | ||
Lifecycle 2040 Portfolio | ||
Lifecycle 2035 Portfolio | ||
Lifecycle 2030 Portfolio | ||
Lifecycle 2025 Portfolio | ||
Lifecycle 2020 Portfolio | ||
Lifecycle 2015 Portfolio | ||
Lifecycle 2010 Portfolio | ||
RETIREMENT INCOME | ||
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Retirement Distribution Portfolio | ||
Retirement Rising Distribution Portfolio | ||
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Global Opportunities Fund | ||
Global Shareholder Yield Fund | ||
Greater China Opportunities Fund | ||
International Allocation Portfolio | ||
International Core Fund | ||
International Growth Fund | ||
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Financial Industries Fund | ||
Natural Resources Fund | ||
Regional Bank Fund | ||
Technical Opportunities Fund | ||
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Bond Fund | ||
Floating Rate Income Fund | ||
Government Income Fund | ||
High Yield Fund | ||
Investment Grade Bond Fund | ||
Strategic Income Fund | ||
Strategic Income Opportunities Fund | ||
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California Tax-Free Income Fund | ||
High Yield Municipal Bond Fund | ||
Massachusetts Tax-Free Income Fund | ||
New York Tax-Free Income Fund | ||
Tax-Free Bond Fund | ||
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Money Market Fund | ||
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Bank and Thrift Opportunity Fund | ||
Income Securities Trust | ||
Investors Trust | ||
Patriot Premium Dividend Fund II | ||
Preferred Income Fund | ||
Preferred Income Fund II | ||
Preferred Income Fund III | ||
Tax-Advantaged Dividend Income Fund | ||
Tax-Advantaged Global Shareholder Yield Fund |
The Fund’s investment objectives, risks, charges and expenses are included in the prospectus and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Funds at 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com. Please read the prospectus carefully before investing or sending money.
Not part of the semiannual report
Table of Contents
![(JOHN HANCOCK LOGO)](https://capedge.com/proxy/N-CSRS/0000950123-10-008684/b78482a1jhbkcover.gif)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock Bond Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 210SA 11/09 1/10 |
TABLE OF CONTENTS
Table of Contents
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) | Not applicable. | ||
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant’s principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) There were no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12. EXHIBITS.
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(a) Separate certifications for the registrant’s principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant’s principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Contact person at the registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Sovereign Bond Fund
By: | /s/ Keith F. Hartstein | |||
President and | ||||
Chief Executive Officer | ||||
Date: | January 25, 2010 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Keith F. Hartstein | |||
President and | ||||
Chief Executive Officer | ||||
Date: | January 25, 2010 |
By: | /s/ Charles A. Rizzo | |||
Chief Financial Officer | ||||
Date: | January 25, 2010 |