UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811- 2402
John Hancock Sovereign Bond Fund
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Salvatore Schiavone
Treasurer
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4497
Date of fiscal year end: | May 31 |
Date of reporting period: | November 30, 2014 |
ITEM 1: REPORTS TO STOCKHOLDERS.
John Hancock
Bond Fund
Semiannual report 11/30/14
A message to shareholders
Dear fellow shareholder,
Robust economic growth in the United States continues to set the standard globally. Unemployment has ratcheted down to pre-recession levels, consumer confidence and spending are rising, and inflation remains low. Bond markets have turned in positive performance against this backdrop as investors pursue yield where they can find it. Despite a 30-year bull market in bonds, many U.S. bond yields look compelling when compared with other developed markets around the world.
The coming year may likely present greater challenges for bond investors, however. The U.S. Federal Reserve (Fed) has signaled its intention to be patient in beginning to raise short-term interest rates. Once the Fed does raise the rates, it may have an adverse affect on many fixed-income portfolios, particularly those that invest in less-liquid markets. At John Hancock Investments, we are closely monitoring our fixed-income portfolios and communicating regularly with their portfolio managers about these issues. Now may also be a good time for you to discuss your fixed-income strategy with your financial advisor to determine if your portfolio continues to match your long-term goals.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an initiative to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us and wish you a happy and healthy 2015.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of November 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Bond Fund
1
INVESTMENT OBJECTIVE
The fund seeks a high level of current income consistent with prudent investment risk.
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/14 (%)
The Barclays Government/Credit Bond Index is an unmanaged index of U.S. government bonds, U.S. corporate bonds, and Yankee bonds. It is not possible to invest directly in an index.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
2
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Interest rates fell further
The yield curve flattened during the period as longer-term interest rates continued their downward slide.
Certain credit-sensitive sectors faced pressure
High-yield and emerging-market debt posted choppy returns as investors worried over the stability of issuers amid falling energy prices.
United States continued to attract capital
The U.S. continued to be the most attractive opportunity for investors on the global stage, with the dollar strengthening and high-quality securities offering higher yields than many of their counterparts in developed countries.
PORTFOLIO COMPOSITION AS OF 11/30/14 (%)
A note about risks
Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if a creditor, grantor, or counterparty is unable or unwilling to make principal, interest, or settlement payments. Investments in higher-yielding, lower-rated securities include a higher risk of default. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, and may be subject to early repayment and the market's perception of issuer creditworthiness. Certain market conditions, including reduced trading volume, heightened volatility, and rising interest rates, may impair liquidity, the ability of the fund to sell securities or close derivative positions at advantageous prices. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. Fund distributions generally depend on income from underlying investments and may vary or cease altogether in the future. Please see the fund's prospectuses for additional risks.
3
An interview with Portfolio Manager Howard C. Greene, CFA, John Hancock Asset Management, a division of Manulife Asset Management (US) LLC
![howardcgreene.jpg](https://capedge.com/proxy/N-CSRS/0001145443-15-000074/howardcgreene.jpg)
Howard C. Greene, CFA
Portfolio Manager
John Hancock Asset Management
![jeffreyngiven.jpg](https://capedge.com/proxy/N-CSRS/0001145443-15-000074/jeffreyngiven.jpg)
Jeffrey N. Given, CFA
Portfolio Manager
John Hancock Asset Management
A number of sectors in the bond markets experienced volatility in the second half of the year. What's been driving that turbulence?
A number of factors combined to make for a fairly choppy six months. In the United States, yields on longer-dated U.S. Treasuries fell while yields on short-term debt rose slightly, resulting in a flatter yield curve. This in part reflects investors' belief that the U.S. Federal Reserve (Fed) will raise the benchmark for short-term lending, the federal funds rate, sometime in 2015. While we tend to believe that rates may stay lower for longer than some investors expect, the concerns about the Fed's path to normalizing monetary policy have had consequences in a number of segments of the bond markets. This was especially true in the emerging markets, many of which depend on foreign investment to finance their governments. All else being equal, higher interest rates in the United States tend to make emerging-market debt less attractive, and investors generally sold off positions over the past six months.
High yield also came under pressure in recent months. A significant portion of the new energy boom in the United States has been financed by corporations issuing debt to expand or establish operations. As energy prices have tumbled this year, some of these companies' profits have been squeezed to the point where, if prolonged, it could affect their ability to continue to make debt payments.
Last, the economy in Europe continued to struggle, prompting the European Central Bank to begin exploring ways to expand its current asset purchase program. There is some concern that a material slowdown on the continent could hamper the global economy, and international credit was mixed over the six-month period as a result.
4
Given this level of uncertainty, what changes did you make to the portfolio over the period?
During the past six months, we've been selling some of the fund's positions in investment-grade corporate debt, generally locking in profits, and using those proceeds to take advantage of some other opportunities we had been seeing. Specifically, we've been targeting select opportunities in the asset-backed securities market, typically securities backed by credit card or auto payments. Some of these trades were into securities with similar yield characteristics, and often at higher credit ratings.
We've also been investing selectively in some floating-rate mortgage securities, which offer some protection from rising rates and in many cases continue to trade at steep discounts to par. These securities—backed by pools of adjustable-rate mortgage payments—were hurt badly in the
QUALITY COMPOSITION AS OF 11/30/14 (%)
5
aftermath of the credit crisis and we believe there are still pockets of attractively priced securities, especially given the significant recovery in the housing market over the past few years.
With yields down over the period, did the fund's limited exposure to the Treasury market hurt performance?
U.S. Treasuries have been one of the best-performing investments in 2014, so in hindsight, having a limited exposure to that market definitely detracted from returns. That said, our view of interest-rate risk, and therefore the Treasury market, remains unchanged. We believe rates on the long end of the curve will be volatile, and that there will be continued upward pressure on the short end in anticipation of the Fed's eventual move to raise the federal funds rate. While it's impossible to predict exactly when short-term rates will begin to rise, we know they'll have to rise eventually and, all in all, we view the risks in the Treasury market as outweighing the potential rewards as a result.
Another factor that hampered the fund's returns was our decision to keep the fund's duration lower than than of its benchmark, the Barclays Government/Credit Bond Index. The duration of the fund was 5.1 years versus 6.1 for the benchmark.
That said, which positions outside the Treasury market offered the biggest contribution to returns?
The fund's holdings in mortgage-backed securities, particularly nonagency securities, were significant contributors. The fund's exposure to commercial mortgage-backed securities also helped relative performance. In general, all of these holdings tend to be geared to the strength of the real estate market and the economy broadly, and both continued to show signs of improvement during the period.
While we reduced the fund's exposure somewhat, holdings in investment-grade corporate bonds also aided performance. This was particularly true of investments in U.S. utilities and foreign-currency-denominated financials.
6
As we head into 2015, what factors are you watching most closely?
Energy prices and their effect on both the high-yield market and certain emerging economies would be toward the top of our list. Traditional thinking has it that lower energy prices, especially in the United States, leads consumers, who are saving on their gasoline and heating bills, to spend more. But with consumers still feeling limited confidence in the economy and still working to get their household balance sheets in order, we're not convinced that will necessarily be the case.
With regard to emerging markets, oil exporters like Mexico and Venezuela will likely feel the pinch from lower energy prices, and it remains to be seen what kind of ripple effect that has on other issuers in the emerging-market space. In the end, we don't foresee any significant shifts in strategy. We plan to continue to focus on fundamentals using thorough research and analysis, and our flexible investment mandate should help us pursue opportunities in the bond markets as they arise.
MANAGED BY
![]() | Howard C. Greene, CFA On the fund since 2002 Investing since 1979 |
![]() | Jeffrey N. Given, CFA On the fund since 2006 Investing since 1993 |
7
TOTAL RETURNS FOR THE PERIOD ENDED NOVEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | SEC 30-day yield (%) subsidized | SEC 30-day yield (%) unsubsidized1 | ||||||||
1-year | 5-year | 10-year | 6-month | 5-year | 10-year | as of 11-30-14 | as of 11-30-14 | ||||
Class A | 2.33 | 6.34 | 5.70 | -2.40 | 35.98 | 74.06 | 3.01 | 2.95 | |||
Class B | 0.77 | 6.13 | 5.54 | -3.72 | 34.67 | 71.51 | 2.42 | 2.37 | |||
Class C | 4.83 | 6.46 | 5.40 | 0.33 | 36.76 | 69.16 | 2.44 | 2.39 | |||
Class I2 | 6.84 | 7.61 | 6.56 | 1.84 | 44.29 | 88.85 | 3.42 | 3.37 | |||
Class R22,3 | 6.45 | 7.23 | 6.13 | 1.64 | 41.79 | 81.32 | 3.14 | 3.08 | |||
Class R62,3 | 6.95 | 7.72 | 6.64 | 1.83 | 45.01 | 90.11 | 3.54 | 3.47 | |||
Index† | 5.28 | 4.30 | 4.80 | 1.87 | 23.43 | 59.83 | — | — |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 4.0% and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The returns for Class A shares have been adjusted to reflect the reduction in the maximum sales charge from 4.5% to 4.0%, effective 2-3-14. 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 sold within one year of purchase are subject to a 1% CDSC. Sales charges are not applicable to Class I, Class R2, and Class R6 shares.
The expense ratios of the fund, both net (including any fee waivers and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R2 | Class R6 | |
Gross (%) | 0.98 | 1.68 | 1.68 | 0.66 | 1.06 | 0.56 |
Net (%) | 0.93 | 1.63 | 1.63 | 0.61 | 1.01 | 0.49 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index is the Barclays Government/Credit Bond Index. |
See the following page for footnotes.
8
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Bond Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in the Barclays Government/Credit Bond Index.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index ($) | |
Class B4 | 11-30-04 | 17,151 | 17,151 | 15,983 |
Class C4 | 11-30-04 | 16,916 | 16,916 | 15,983 |
Class I2,3 | 11-30-04 | 18,885 | 18,885 | 15,983 |
Class R22,3 | 11-30-04 | 18,132 | 18,132 | 15,983 |
Class R62,3 | 11-30-04 | 19,011 | 19,011 | 15,983 |
The values shown in the chart for Class A shares with maximum sales charge have been adjusted to reflect the reduction in the Class A shares' maximum sales charge from 4.5% to 4.0%, which became effective on 2-3-14.
Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in the different classes and the fee structure of those classes.
The Barclays Government/Credit Bond Index is an unmanaged index of U.S. government bonds, U.S. corporate bonds, and Yankee bonds.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 | Unsubsidized yield reflects what the yield would have been without the effect of reimbursements and waivers. |
2 | For certain types of investors, as described in the fund's prospectuses. |
3 | Class R6 shares and Class R2 shares were first offered 9-1-11 and 3-1-12, respectively. Returns prior to these dates are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class R2 and Class R6 shares, as applicable. |
4 | The contingent deferred sales charge is not applicable. |
9
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
• | Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc. |
• | Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses. |
We are presenting only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the fund's actual ongoing operating expenses, and is based on the fund's actual return. It assumes an account value of $1,000.00 on June 1, 2014, with the same investment held until November 30, 2014.
Account value on 6-1-2014 | Ending value on 11-30-2014 | Expenses paid during period ended 11-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,016.80 | $4.50 | 0.89% |
Class B | 1,000.00 | 1,012.70 | 8.02 | 1.59% |
Class C | 1,000.00 | 1,013.30 | 8.02 | 1.59% |
Class I | 1,000.00 | 1,018.40 | 2.99 | 0.59% |
Class R2 | 1,000.00 | 1,016.40 | 4.80 | 0.95% |
Class R6 | 1,000.00 | 1,018.30 | 2.38 | 0.47% |
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, 2014, 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:
10
Hypothetical example for comparison purposes
This table allows you to compare the fund's ongoing operating expenses with those of any other fund. It provides an example of the fund's hypothetical account values and hypothetical expenses based on each class's actual expense ratio and an assumed 5% annualized return before expenses (which is not the fund's actual return). It assumes an account value of $1,000.00 on June 1, 2014, with the same investment held until November 30, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Account value on 6-1-2014 | Ending value on 11-30-2014 | Expenses paid during period ended 11-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,020.60 | $4.51 | 0.89% |
Class B | 1,000.00 | 1,017.10 | 8.04 | 1.59% |
Class C | 1,000.00 | 1,017.10 | 8.04 | 1.59% |
Class I | 1,000.00 | 1,022.10 | 2.99 | 0.59% |
Class R2 | 1,000.00 | 1,020.30 | 4.81 | 0.95% |
Class R6 | 1,000.00 | 1,022.70 | 2.38 | 0.47% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectuses for details regarding transaction costs.
1 | Expenses are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
11
Fund's investments
As of 11-30-14 (unaudited) | |||||||||||||||||||||||||||||
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||||||||
Corporate bonds 43.8% | $1,039,470,814 | ||||||||||||||||||||||||||||
(Cost $1,015,331,380) | |||||||||||||||||||||||||||||
Consumer discretionary 4.5% | 106,352,533 | ||||||||||||||||||||||||||||
Auto components 0.6% | |||||||||||||||||||||||||||||
Dana Holding Corp. | 6.000 | 09-15-23 | 3,355,000 | 3,514,363 | |||||||||||||||||||||||||
Delphi Corp. | 5.000 | 02-15-23 | 7,870,000 | 8,440,543 | |||||||||||||||||||||||||
Stackpole International Intermediate Company SA (S) | 7.750 | 10-15-21 | 2,420,000 | 2,468,400 | |||||||||||||||||||||||||
Automobiles 1.4% | |||||||||||||||||||||||||||||
Chrysler Group LLC | 8.000 | 06-15-19 | 1,040,000 | 1,102,400 | |||||||||||||||||||||||||
Ford Motor Company | 4.750 | 01-15-43 | 1,045,000 | 1,083,022 | |||||||||||||||||||||||||
Ford Motor Credit Company LLC | 5.875 | 08-02-21 | 14,775,000 | 17,198,854 | |||||||||||||||||||||||||
Ford Motor Credit Company LLC | 8.000 | 12-15-16 | 2,885,000 | 3,255,221 | |||||||||||||||||||||||||
General Motors Company | 4.875 | 10-02-23 | 3,270,000 | 3,466,200 | |||||||||||||||||||||||||
General Motors Company | 6.250 | 10-02-43 | 2,675,000 | 3,109,688 | |||||||||||||||||||||||||
General Motors Financial Company, Inc. | 4.375 | 09-25-21 | 2,775,000 | 2,875,594 | |||||||||||||||||||||||||
Hotels, restaurants and leisure 0.4% | |||||||||||||||||||||||||||||
Arcos Dorados Holdings, Inc. (S) | 10.250 | 07-13-16 | BRL | 3,275,000 | 1,205,635 | ||||||||||||||||||||||||
CCM Merger, Inc. (S) | 9.125 | 05-01-19 | 2,495,000 | 2,682,125 | |||||||||||||||||||||||||
MGM Resorts International | 6.000 | 03-15-23 | 3,900,000 | 3,958,500 | |||||||||||||||||||||||||
Seminole Tribe of Florida, Inc. (S) | 6.535 | 10-01-20 | 2,289,000 | 2,460,675 | |||||||||||||||||||||||||
Waterford Gaming LLC (S) | 8.625 | 09-15-49 | 445,953 | 34,052 | |||||||||||||||||||||||||
Internet and catalog retail 0.3% | |||||||||||||||||||||||||||||
QVC, Inc. | 4.375 | 03-15-23 | 2,440,000 | 2,435,196 | |||||||||||||||||||||||||
QVC, Inc. | 5.125 | 07-02-22 | 1,840,000 | 1,940,565 | |||||||||||||||||||||||||
QVC, Inc. (S) | 5.450 | 08-15-34 | 2,260,000 | 2,193,497 | |||||||||||||||||||||||||
Media 0.5% | |||||||||||||||||||||||||||||
21st Century Fox America, Inc. | 6.150 | 03-01-37 | 975,000 | 1,221,882 | |||||||||||||||||||||||||
21st Century Fox America, Inc. | 6.400 | 12-15-35 | 1,115,000 | 1,440,664 | |||||||||||||||||||||||||
AMC Entertainment, Inc. | 5.875 | 02-15-22 | 3,425,000 | 3,510,625 | |||||||||||||||||||||||||
Myriad International Holdings BV (S) | 6.000 | 07-18-20 | 1,770,000 | 1,947,354 | |||||||||||||||||||||||||
Time Warner Cable, Inc. | 8.250 | 04-01-19 | 2,485,000 | 3,075,583 | |||||||||||||||||||||||||
WideOpenWest Finance LLC | 10.250 | 07-15-19 | 690,000 | 748,650 | |||||||||||||||||||||||||
Multiline retail 0.2% | |||||||||||||||||||||||||||||
Macy's Retail Holdings, Inc. | 7.875 | 08-15-36 | 3,235,000 | 3,544,593 | |||||||||||||||||||||||||
Tops Holding II Corp. | 8.750 | 06-15-18 | 1,680,000 | 1,638,000 | |||||||||||||||||||||||||
Specialty retail 0.9% | |||||||||||||||||||||||||||||
AutoNation, Inc. | 5.500 | 02-01-20 | 5,364,000 | 5,874,213 | |||||||||||||||||||||||||
Bed Bath & Beyond, Inc. | 3.749 | 08-01-24 | 1,330,000 | 1,349,637 | |||||||||||||||||||||||||
Conn's, Inc. (S) | 7.250 | 07-15-22 | 3,845,000 | 3,335,538 | |||||||||||||||||||||||||
Jo-Ann Stores Holdings, Inc., PIK (S) | 9.750 | 10-15-19 | 4,075,000 | 3,708,250 |
L Brands, Inc. | 6.625 | 04-01-21 | 4,595,000 | $5,180,863 | |||||||||||||||||||||||||
The Hillman Group, Inc. (S) | 6.375 | 07-15-22 | 1,105,000 | 1,074,613 | |||||||||||||||||||||||||
Textiles, apparel and luxury goods 0.2% | |||||||||||||||||||||||||||||
Hot Topic, Inc. (S) | 9.250 | 06-15-21 | 2,535,000 | 2,718,788 | |||||||||||||||||||||||||
Quiksilver, Inc. (S) | 7.875 | 08-01-18 | 2,875,000 | 2,558,750 | |||||||||||||||||||||||||
Consumer staples 1.6% | 37,771,897 | ||||||||||||||||||||||||||||
Beverages 0.4% | |||||||||||||||||||||||||||||
Ajecorp BV (S) | 6.500 | 05-14-22 | 2,145,000 | 1,930,500 | |||||||||||||||||||||||||
Constellation Brands, Inc. | 4.250 | 05-01-23 | 2,975,000 | 2,963,993 | |||||||||||||||||||||||||
Constellation Brands, Inc. | 4.750 | 11-15-24 | 1,625,000 | 1,657,500 | |||||||||||||||||||||||||
Crestview DS Merger Sub II, Inc. | 10.000 | 09-01-21 | 2,175,000 | 2,566,500 | |||||||||||||||||||||||||
Food and staples retailing 0.4% | |||||||||||||||||||||||||||||
Safeway, Inc. | 4.750 | 12-01-21 | 925,000 | 941,661 | |||||||||||||||||||||||||
Safeway, Inc. | 5.000 | 08-15-19 | 6,020,000 | 6,223,091 | |||||||||||||||||||||||||
Tops Holding Corp. | 8.875 | 12-15-17 | 960,000 | 988,800 | |||||||||||||||||||||||||
Food products 0.2% | |||||||||||||||||||||||||||||
Bunge, Ltd. Finance Corp. | 8.500 | 06-15-19 | 2,286,000 | 2,838,192 | |||||||||||||||||||||||||
Tyson Foods, Inc. | 3.950 | 08-15-24 | 2,420,000 | 2,500,484 | |||||||||||||||||||||||||
Household products 0.1% | |||||||||||||||||||||||||||||
Harbinger Group, Inc. | 7.875 | 07-15-19 | 3,025,000 | 3,259,438 | |||||||||||||||||||||||||
Personal products 0.2% | |||||||||||||||||||||||||||||
Prestige Brands, Inc. (S) | 5.375 | 12-15-21 | 2,000,000 | 1,970,000 | |||||||||||||||||||||||||
Revlon Consumer Products Corp. | 5.750 | 02-15-21 | 2,270,000 | 2,298,375 | |||||||||||||||||||||||||
Tobacco 0.3% | |||||||||||||||||||||||||||||
Alliance One International, Inc. | 9.875 | 07-15-21 | 5,900,000 | 5,590,250 | |||||||||||||||||||||||||
Vector Group, Ltd. | 7.750 | 02-15-21 | 1,905,000 | 2,043,113 | |||||||||||||||||||||||||
Energy 5.9% | 140,622,381 | ||||||||||||||||||||||||||||
Energy equipment and services 0.8% | |||||||||||||||||||||||||||||
Astoria Depositor Corp. (S) | 8.144 | 05-01-21 | 5,280,000 | 5,596,800 | |||||||||||||||||||||||||
Exterran Partners LP | 6.000 | 04-01-21 | 730,000 | 657,000 | |||||||||||||||||||||||||
Key Energy Services, Inc. | 6.750 | 03-01-21 | 1,990,000 | 1,532,300 | |||||||||||||||||||||||||
Nostrum Oil & Gas Finance BV (S) | 6.375 | 02-14-19 | 2,500,000 | 2,400,000 | |||||||||||||||||||||||||
Precision Drilling Corp. | 6.625 | 11-15-20 | 1,405,000 | 1,362,850 | |||||||||||||||||||||||||
RKI Exploration & Production LLC (S) | 8.500 | 08-01-21 | 1,875,000 | 1,781,250 | |||||||||||||||||||||||||
Rowan Companies, Inc. | 4.875 | 06-01-22 | 2,030,000 | 2,075,105 | |||||||||||||||||||||||||
Teine Energy, Ltd. (S) | 6.875 | 09-30-22 | 1,805,000 | 1,678,650 | |||||||||||||||||||||||||
Trinidad Drilling, Ltd. (S) | 7.875 | 01-15-19 | 1,180,000 | 1,185,900 | |||||||||||||||||||||||||
Oil, gas and consumable fuels 5.1% | |||||||||||||||||||||||||||||
Access Midstream Partners LP | 4.875 | 05-15-23 | 1,425,000 | 1,453,500 | |||||||||||||||||||||||||
Access Midstream Partners LP | 4.875 | 03-15-24 | 3,310,000 | 3,376,200 |
Afren PLC (S) | 6.625 | 12-09-20 | 2,600,000 | $2,106,000 | |||||||||||||||||||||||||
Afren PLC (S) | 10.250 | 04-08-19 | 1,260,000 | 1,164,290 | |||||||||||||||||||||||||
California Resources Corp. (S) | 5.500 | 09-15-21 | 1,880,000 | 1,687,300 | |||||||||||||||||||||||||
California Resources Corp. (S) | 6.000 | 11-15-24 | 4,265,000 | 3,803,847 | |||||||||||||||||||||||||
Chesapeake Energy Corp. | 5.750 | 03-15-23 | 2,350,000 | 2,491,000 | |||||||||||||||||||||||||
Cimarex Energy Company | 4.375 | 06-01-24 | 3,680,000 | 3,634,000 | |||||||||||||||||||||||||
CNOOC Finance 2013, Ltd. | 3.000 | 05-09-23 | 2,940,000 | 2,822,418 | |||||||||||||||||||||||||
Consolidated Energy Finance SA (S) | 6.750 | 10-15-19 | 2,655,000 | 2,661,638 | |||||||||||||||||||||||||
Continental Resources, Inc. | 5.000 | 09-15-22 | 6,385,000 | 6,576,358 | |||||||||||||||||||||||||
CSI Compressco LP (S) | 7.250 | 08-15-22 | 1,730,000 | 1,574,300 | |||||||||||||||||||||||||
DCP Midstream LLC (S) | 9.750 | 03-15-19 | 2,675,000 | 3,421,539 | |||||||||||||||||||||||||
DCP Midstream LLC (5.850% to 5-21-23, then 3 month LIBOR + 3.850%) (S) | 5.850 | 05-21-43 | 2,710,000 | 2,693,063 | |||||||||||||||||||||||||
DCP Midstream Operating LP | 3.875 | 03-15-23 | 1,500,000 | 1,479,246 | |||||||||||||||||||||||||
Denbury Resources, Inc. | 5.500 | 05-01-22 | 1,785,000 | 1,673,438 | |||||||||||||||||||||||||
Ecopetrol SA | 5.875 | 09-18-23 | 1,300,000 | 1,417,000 | |||||||||||||||||||||||||
Energy Transfer Partners LP | 5.200 | 02-01-22 | 1,950,000 | 2,132,803 | |||||||||||||||||||||||||
Energy Transfer Partners LP | 9.700 | 03-15-19 | 2,415,000 | 3,084,136 | |||||||||||||||||||||||||
Energy XXI Gulf Coast, Inc. (S) | 6.875 | 03-15-24 | 1,035,000 | 776,250 | |||||||||||||||||||||||||
Enterprise Products Operating LLC (7.000% to 6-1-17, then 3 month LIBOR + 2.778%) | 7.000 | 06-01-67 | 4,145,000 | 4,310,800 | |||||||||||||||||||||||||
Enterprise Products Operating LLC (8.375% to 8-1-16, then 3 month LIBOR + 3.708%) | 8.375 | 08-01-66 | 3,510,000 | 3,831,663 | |||||||||||||||||||||||||
EP Energy LLC | 7.750 | 09-01-22 | 1,270,000 | 1,295,400 | |||||||||||||||||||||||||
EV Energy Partners LP | 8.000 | 04-15-19 | 2,470,000 | 2,371,200 | |||||||||||||||||||||||||
Freeport-McMoran Oil & Gas LLC | 6.750 | 02-01-22 | 3,407,000 | 3,803,064 | |||||||||||||||||||||||||
Freeport-McMoran Oil & Gas LLC | 6.875 | 02-15-23 | 1,069,000 | 1,206,153 | |||||||||||||||||||||||||
FTS International, Inc. (S) | 6.250 | 05-01-22 | 1,240,000 | 1,016,800 | |||||||||||||||||||||||||
Halcon Resources Corp. | 8.875 | 05-15-21 | 1,510,000 | 1,162,700 | |||||||||||||||||||||||||
Jones Energy Holdings LLC (S) | 6.750 | 04-01-22 | 1,095,000 | 988,238 | |||||||||||||||||||||||||
Kerr-McGee Corp. | 6.950 | 07-01-24 | 2,930,000 | 3,627,100 | |||||||||||||||||||||||||
Kinder Morgan Energy Partners LP | 7.750 | 03-15-32 | 1,190,000 | 1,495,347 | |||||||||||||||||||||||||
Kinder Morgan, Inc. | 4.300 | 06-01-25 | 2,540,000 | 2,560,442 | |||||||||||||||||||||||||
Kosmos Energy, Ltd. (S) | 7.875 | 08-01-21 | 1,570,000 | 1,475,800 | |||||||||||||||||||||||||
Lukoil International Finance BV (S) | 3.416 | 04-24-18 | 4,655,000 | 4,236,050 | |||||||||||||||||||||||||
MarkWest Energy Partners LP | 6.500 | 08-15-21 | 2,189,000 | 2,292,978 | |||||||||||||||||||||||||
Midstates Petroleum Company, Inc. | 9.250 | 06-01-21 | 3,510,000 | 2,913,300 | |||||||||||||||||||||||||
Newfield Exploration Company | 5.750 | 01-30-22 | 2,160,000 | 2,316,600 | |||||||||||||||||||||||||
Pacific Rubiales Energy Corp. (S) | 5.125 | 03-28-23 | 1,920,000 | 1,771,200 | |||||||||||||||||||||||||
Pacific Rubiales Energy Corp. (S) | 5.375 | 01-26-19 | 2,475,000 | 2,456,438 | |||||||||||||||||||||||||
Petrobras International Finance Company SA | 5.375 | 01-27-21 | 1,865,000 | 1,856,943 | |||||||||||||||||||||||||
Petroleos de Venezuela SA | 5.375 | 04-12-27 | 3,755,000 | 1,592,120 | |||||||||||||||||||||||||
Petroleos Mexicanos (S) | 4.250 | 01-15-25 | 1,025,000 | 1,036,788 |
Petroleos Mexicanos | 4.875 | 01-24-22 | 2,125,000 | $2,263,125 | |||||||||||||||||||||||||
Plains All American Pipeline LP | 3.600 | 11-01-24 | 2,335,000 | 2,337,132 | |||||||||||||||||||||||||
Regency Energy Partners LP | 5.000 | 10-01-22 | 930,000 | 911,400 | |||||||||||||||||||||||||
Regency Energy Partners LP | 5.500 | 04-15-23 | 4,425,000 | 4,425,000 | |||||||||||||||||||||||||
Regency Energy Partners LP | 5.875 | 03-01-22 | 855,000 | 880,650 | |||||||||||||||||||||||||
Rex Energy Corp. | 8.875 | 12-01-20 | 1,190,000 | 1,178,100 | |||||||||||||||||||||||||
Summit Midstream Holdings LLC | 7.500 | 07-01-21 | 1,115,000 | 1,204,200 | |||||||||||||||||||||||||
TransCanada Pipelines, Ltd. (6.350% to 5-15-17, then 3 month LIBOR + 2.210%) | 6.350 | 05-15-67 | 3,910,000 | 3,890,450 | |||||||||||||||||||||||||
Tullow Oil PLC (S) | 6.000 | 11-01-20 | 1,550,000 | 1,364,000 | |||||||||||||||||||||||||
Tullow Oil PLC (S) | 6.250 | 04-15-22 | 1,720,000 | 1,474,900 | |||||||||||||||||||||||||
WPX Energy, Inc. | 5.250 | 09-15-24 | 910,000 | 878,150 | |||||||||||||||||||||||||
WPX Energy, Inc. | 6.000 | 01-15-22 | 1,865,000 | 1,899,969 | |||||||||||||||||||||||||
Financials 17.4% | 414,109,530 | ||||||||||||||||||||||||||||
Banks 7.2% | |||||||||||||||||||||||||||||
Banco do Brasil SA (6.250% to 4-15-24, then 10 Year U.S. Treasury + 4.398%) (Q)(S) | 6.250 | 04-15-24 | 3,300,000 | 2,541,000 | |||||||||||||||||||||||||
Banco Santander Brasil SA (S) | 8.000 | 03-18-16 | BRL | 6,000,000 | 2,243,764 | ||||||||||||||||||||||||
Bank of America Corp. | 3.300 | 01-11-23 | 1,645,000 | 1,648,711 | |||||||||||||||||||||||||
Bank of America Corp. | 4.200 | 08-26-24 | 2,380,000 | 2,432,824 | |||||||||||||||||||||||||
Bank of America Corp. | 4.250 | 10-22-26 | 2,145,000 | 2,162,319 | |||||||||||||||||||||||||
Bank of America Corp. | 5.000 | 05-13-21 | 4,705,000 | 5,251,792 | |||||||||||||||||||||||||
Bank of America Corp. | 6.875 | 04-25-18 | 4,665,000 | 5,414,283 | |||||||||||||||||||||||||
Bank of America Corp. (6.250% to 9-5-24, then 3 month LIBOR + 3.705%) (Q) | 6.250 | 09-05-24 | 3,735,000 | 3,713,991 | |||||||||||||||||||||||||
Bank of America Corp. (8.000% to 1-30-18, then 3 month LIBOR + 3.630%) (Q) | 8.000 | 01-30-18 | 3,765,000 | 4,028,550 | |||||||||||||||||||||||||
Barclays Bank PLC (S) | 10.179 | 06-12-21 | 3,775,000 | 5,086,197 | |||||||||||||||||||||||||
BPCE SA (S) | 4.500 | 03-15-25 | 3,575,000 | 3,526,090 | |||||||||||||||||||||||||
BPCE SA (S) | 5.700 | 10-22-23 | 4,440,000 | 4,759,858 | |||||||||||||||||||||||||
Citigroup, Inc. | 3.750 | 06-16-24 | 2,775,000 | 2,857,442 | |||||||||||||||||||||||||
Citigroup, Inc. | 3.875 | 10-25-23 | 1,495,000 | 1,557,498 | |||||||||||||||||||||||||
Citigroup, Inc. | 6.125 | 08-25-36 | 2,595,000 | 3,079,084 | |||||||||||||||||||||||||
Commerzbank AG (S) | 8.125 | 09-19-23 | 5,575,000 | 6,519,405 | |||||||||||||||||||||||||
Credit Agricole SA (6.625% to 9-23-19, then 5 Year U.S. Swap Rate + 4.697%) (Q)(S) | 6.625 | 09-23-19 | 3,300,000 | 3,242,250 | |||||||||||||||||||||||||
Credit Agricole SA (7.875% to 1-23-24, then 5 Year U.S. Swap Rate + 4.898%) (Q)(S) | 7.875 | 01-23-24 | 4,655,000 | 4,833,072 | |||||||||||||||||||||||||
Credit Agricole SA (8.125% to 9-19-18, then 5 Year U.S. Swap Rate + 6.283%) (S) | 8.125 | 09-19-33 | 1,800,000 | 2,034,432 | |||||||||||||||||||||||||
Fifth Third Bancorp (5.100% to 6-30-23, then 3 month LIBOR + 3.033%) (Q) | 5.100 | 06-30-23 | 3,040,000 | 2,853,800 | |||||||||||||||||||||||||
HBOS PLC (S) | 6.000 | 11-01-33 | 3,480,000 | 3,967,931 |
HBOS PLC (S) | 6.750 | 05-21-18 | 5,590,000 | $6,282,042 | |||||||||||||||||||||||||
HSBC Holdings PLC (6.375% to 9-17-24, then 5 Year U.S. ISDAFIX + 3.705%) (Q) | 6.375 | 09-17-24 | 1,455,000 | 1,488,465 | |||||||||||||||||||||||||
ICICI Bank, Ltd. (S) | 4.700 | 02-21-18 | 2,325,000 | 2,475,918 | |||||||||||||||||||||||||
ICICI Bank, Ltd. (S) | 5.750 | 11-16-20 | 2,410,000 | 2,704,606 | |||||||||||||||||||||||||
ING Bank NV (S) | 5.800 | 09-25-23 | 4,004,000 | 4,501,985 | |||||||||||||||||||||||||
JPMorgan Chase & Company | 4.625 | 05-10-21 | 7,295,000 | 8,066,344 | |||||||||||||||||||||||||
JPMorgan Chase & Company (5.000% to 7-1-19, then 3 month LIBOR + 3.320%) (Q) | 5.000 | 07-01-19 | 4,515,000 | 4,433,730 | |||||||||||||||||||||||||
JPMorgan Chase & Company (5.150% to 5-1-23, then 3 month LIBOR + 3.250%) (Q) | 5.150 | 05-01-23 | 2,860,000 | 2,738,450 | |||||||||||||||||||||||||
JPMorgan Chase & Company (6.750% to 2-1-24, then 3 month LIBOR + 3.780%) (Q) | 6.750 | 02-01-24 | 6,715,000 | 7,151,475 | |||||||||||||||||||||||||
JPMorgan Chase & Company (7.900% to 4-30-18, then 3 month LIBOR + 3.470%) (Q) | 7.900 | 04-30-18 | 3,865,000 | 4,195,883 | |||||||||||||||||||||||||
Lloyds Banking Group PLC (7.500% to 6-27-24, then 5 Year U.S. Swap Rate + 4.760%) (Q) | 7.500 | 06-27-24 | 2,780,000 | 2,856,450 | |||||||||||||||||||||||||
Manufacturers & Traders Trust Company (5.629% to 12-1-16, then 3 month LIBOR + 6.400%) | 5.629 | 12-01-21 | 1,925,000 | 2,007,621 | |||||||||||||||||||||||||
Mizuho Financial Group Cayman 3, Ltd. (S) | 4.600 | 03-27-24 | 3,085,000 | 3,251,501 | |||||||||||||||||||||||||
Oversea-Chinese Banking Corp., Ltd. (4.000% to 10-15-19, then 5 Year U.S. Swap Rate + 2.203%) (S) | 4.000 | 10-15-24 | 1,360,000 | 1,403,374 | |||||||||||||||||||||||||
Rabobank Nederland NV | 3.875 | 02-08-22 | 7,410,000 | 7,913,339 | |||||||||||||||||||||||||
Rabobank Nederland NV (11.000% to 6-30-19, then 3 month LIBOR + 10.868%) (Q)(S) | 11.000 | 06-30-19 | 4,629,000 | 5,984,371 | |||||||||||||||||||||||||
Societe Generale SA (8.250% to 11-29-18, then 5 Year U.S. Swap Rate + 6.394%) (Q) | 8.250 | 11-29-18 | 3,000,000 | 3,169,740 | |||||||||||||||||||||||||
Synovus Financial Corp. | 7.875 | 02-15-19 | 1,075,000 | 1,206,688 | |||||||||||||||||||||||||
The PNC Financial Services Group, Inc. (P)(Q) | 4.451 | 01-15-15 | 1,695,000 | 1,699,238 | |||||||||||||||||||||||||
The PNC Financial Services Group, Inc. (4.850% to 6-1-23, then 3 month LIBOR + 3.040%) (Q) | 4.850 | 06-01-23 | 3,095,000 | 2,924,775 | |||||||||||||||||||||||||
The PNC Financial Services Group, Inc. (6.750% to 8-1-21, then 3 month LIBOR + 3.678%) (Q) | 6.750 | 08-01-21 | 4,110,000 | 4,490,586 | |||||||||||||||||||||||||
Wells Fargo & Company (5.900% to 6-15-24, then 3 month LIBOR + 3.110%) (Q) | 5.900 | 06-15-24 | 5,815,000 | 5,982,181 | |||||||||||||||||||||||||
Wells Fargo & Company, Series K (7.980% to 3-15-18, then 3 month LIBOR + 3.770%) (Q) | 7.980 | 03-15-18 | 6,422,000 | 7,096,310 | |||||||||||||||||||||||||
Wells Fargo Bank NA | 5.850 | 02-01-37 | 1,915,000 | 2,422,563 | |||||||||||||||||||||||||
Capital markets 2.6% | |||||||||||||||||||||||||||||
Ares Capital Corp. | 3.875 | 01-15-20 | 3,525,000 | 3,539,995 | |||||||||||||||||||||||||
Credit Suisse Group AG (7.500% to 12-11-23, then 5 Year U.S. Swap Rate + 4.598%) (Q)(S) | 7.500 | 12-11-23 | 1,975,000 | 2,088,563 | |||||||||||||||||||||||||
Fifth Street Finance Corp. | 4.875 | 03-01-19 | 2,925,000 | 3,035,390 | |||||||||||||||||||||||||
FS Investment Corp. | 4.000 | 07-15-19 | 3,620,000 | 3,646,444 |
Jefferies Group LLC | 6.875 | 04-15-21 | 4,070,000 | $4,724,619 | |||||||||||||||||||||||||
Jefferies Group LLC | 8.500 | 07-15-19 | 2,115,000 | 2,595,888 | |||||||||||||||||||||||||
Morgan Stanley | 4.100 | 05-22-23 | 4,640,000 | 4,736,169 | |||||||||||||||||||||||||
Morgan Stanley | 4.350 | 09-08-26 | 700,000 | 711,075 | |||||||||||||||||||||||||
Morgan Stanley | 5.500 | 01-26-20 | 3,210,000 | 3,643,225 | |||||||||||||||||||||||||
Morgan Stanley | 5.550 | 04-27-17 | 1,620,000 | 1,773,634 | |||||||||||||||||||||||||
Morgan Stanley | 7.300 | 05-13-19 | 7,065,000 | 8,492,837 | |||||||||||||||||||||||||
Morgan Stanley (5.450% to 7-15-19, then 3 month LIBOR + 3.610%) (Q) | 5.450 | 07-15-19 | 2,335,000 | 2,352,513 | |||||||||||||||||||||||||
Stifel Financial Corp. | 4.250 | 07-18-24 | 2,510,000 | 2,569,148 | |||||||||||||||||||||||||
The Bear Stearns Companies LLC | 7.250 | 02-01-18 | 2,150,000 | 2,507,693 | |||||||||||||||||||||||||
The Goldman Sachs Group, Inc. | 5.250 | 07-27-21 | 9,700,000 | 10,951,766 | |||||||||||||||||||||||||
The Goldman Sachs Group, Inc. | 5.750 | 01-24-22 | 885,000 | 1,026,015 | |||||||||||||||||||||||||
Walter Investment Management Corp. | 7.875 | 12-15-21 | 2,995,000 | 2,695,500 | |||||||||||||||||||||||||
Consumer finance 1.2% | |||||||||||||||||||||||||||||
Ally Financial, Inc. | 5.125 | 09-30-24 | 5,775,000 | 5,890,500 | |||||||||||||||||||||||||
Capital One Financial Corp. | 4.750 | 07-15-21 | 2,600,000 | 2,882,209 | |||||||||||||||||||||||||
Credit Acceptance Corp. (S) | 6.125 | 02-15-21 | 3,075,000 | 3,198,000 | |||||||||||||||||||||||||
Credito Real SAB de CV (S) | 7.500 | 03-13-19 | 3,135,000 | 3,252,563 | |||||||||||||||||||||||||
Discover Bank | 7.000 | 04-15-20 | 735,000 | 878,086 | |||||||||||||||||||||||||
Discover Financial Services | 5.200 | 04-27-22 | 3,985,000 | 4,405,983 | |||||||||||||||||||||||||
Enova International, Inc. (S) | 9.750 | 06-01-21 | 2,875,000 | 2,903,750 | |||||||||||||||||||||||||
Springleaf Finance Corp. | 5.250 | 12-15-19 | 3,660,000 | 3,679,717 | |||||||||||||||||||||||||
Synchrony Financial | 4.250 | 08-15-24 | 2,660,000 | 2,721,794 | |||||||||||||||||||||||||
Diversified financial services 1.6% | |||||||||||||||||||||||||||||
Ashtead Capital, Inc. (S) | 5.625 | 10-01-24 | 1,570,000 | 1,656,350 | |||||||||||||||||||||||||
Doric Nimrod Air Alpha 2013-1 Class A Pass Through Trust (S) | 5.250 | 05-30-23 | 3,306,383 | 3,488,234 | |||||||||||||||||||||||||
Doric Nimrod Air Alpha 2013-1 Class B Pass Through Trust (S) | 6.125 | 11-30-19 | 1,796,218 | 1,908,481 | |||||||||||||||||||||||||
Doric Nimrod Air Finance Alpha, Ltd. 2012-1 Class A Pass Through Trust (S) | 5.125 | 11-30-22 | 1,913,220 | 2,004,650 | |||||||||||||||||||||||||
General Electric Capital Corp. (P) | 0.712 | 08-15-36 | 2,895,000 | 2,552,553 | |||||||||||||||||||||||||
General Electric Capital Corp. | 4.375 | 09-16-20 | 1,810,000 | 1,995,807 | |||||||||||||||||||||||||
General Electric Capital Corp. | 5.550 | 05-04-20 | 3,095,000 | 3,589,299 | |||||||||||||||||||||||||
General Electric Capital Corp. (7.125% until 6-15-22, then 3 month LIBOR + 5.296%) (Q) | 7.125 | 06-15-22 | 4,675,000 | 5,458,063 | |||||||||||||||||||||||||
Leucadia National Corp. | 5.500 | 10-18-23 | 4,745,000 | 5,009,572 | |||||||||||||||||||||||||
Nationstar Mortgage LLC | 7.875 | 10-01-20 | 2,848,000 | 2,741,200 | |||||||||||||||||||||||||
Nationstar Mortgage LLC | 9.625 | 05-01-19 | 1,785,000 | 1,923,338 | |||||||||||||||||||||||||
USB Realty Corp. (P)(Q)(S) | 1.378 | 01-15-17 | 2,900,000 | 2,671,625 | |||||||||||||||||||||||||
Voya Financial, Inc. (5.650% to 5-15-23, then 3 month LIBOR + 3.580%) | 5.650 | 05-15-53 | 2,380,000 | 2,374,050 |
Insurance 2.0% | |||||||||||||||||||||||||||||
American International Group, Inc. | 4.125 | 02-15-24 | 1,985,000 | $2,113,501 | |||||||||||||||||||||||||
American International Group, Inc. (8.175% to 5-15-38, then 3 month LIBOR + 4.195%) | 8.175 | 05-15-58 | 310,000 | 424,700 | |||||||||||||||||||||||||
Aquarius + Investments PLC (6.375% to 9-1-19, then 5 Year U.S. Swap Rate + 5.210%) | 6.375 | 09-01-24 | 1,570,000 | 1,641,027 | |||||||||||||||||||||||||
Assured Guaranty US Holdings, Inc. | 5.000 | 07-01-24 | 3,375,000 | 3,589,333 | |||||||||||||||||||||||||
AXA SA | 8.600 | 12-15-30 | 1,695,000 | 2,292,349 | |||||||||||||||||||||||||
AXA SA (6.379% to 12-14-36, then 3 month LIBOR + 2.256%) (Q)(S) | 6.379 | 12-14-36 | 1,575,000 | 1,701,000 | |||||||||||||||||||||||||
CNA Financial Corp. | 7.250 | 11-15-23 | 3,540,000 | 4,422,118 | |||||||||||||||||||||||||
Liberty Mutual Group, Inc. (S) | 7.800 | 03-15-37 | 3,335,000 | 3,910,288 | |||||||||||||||||||||||||
Lincoln National Corp. (6.050% to 4-20-17, then 3 month LIBOR + 2.040%) | 6.050 | 04-20-67 | 2,275,000 | 2,297,750 | |||||||||||||||||||||||||
MetLife, Inc. | 6.400 | 12-15-36 | 2,320,000 | 2,579,550 | |||||||||||||||||||||||||
Nippon Life Insurance Company (5.000% to 10-18-22, then 3 month LIBOR + 4.240%) (S) | 5.000 | 10-18-42 | 1,795,000 | 1,889,238 | |||||||||||||||||||||||||
Nippon Life Insurance Company (5.100% to 10-16-24, then 5 Year U.S. ISDAFIX + 3.650%) (S) | 5.100 | 10-16-44 | 2,960,000 | 3,078,400 | |||||||||||||||||||||||||
Pacific LifeCorp. (S) | 6.000 | 02-10-20 | 1,775,000 | 2,035,322 | |||||||||||||||||||||||||
Prudential Financial, Inc. (5.200% to 3-15-24, then 3 month LIBOR + 3.040%) | 5.200 | 03-15-44 | 760,000 | 757,150 | |||||||||||||||||||||||||
Prudential Financial, Inc. (5.875% to 9-1-22, then 3 month LIBOR + 4.175%) | 5.875 | 09-15-42 | 5,300,000 | 5,618,000 | |||||||||||||||||||||||||
Sirius International Group, Ltd. (7.506% to 6-30-17, then 3 month LIBOR + 3.200%) (Q)(S) | 7.506 | 06-30-17 | 2,375,000 | 2,481,875 | |||||||||||||||||||||||||
Teachers Insurance & Annuity Association of America (S) | 6.850 | 12-16-39 | 3,770,000 | 5,057,900 | |||||||||||||||||||||||||
USI, Inc. (S) | 7.750 | 01-15-21 | 2,525,000 | 2,556,563 | |||||||||||||||||||||||||
Real estate investment trusts 2.7% | |||||||||||||||||||||||||||||
American Tower Corp. | 3.400 | 02-15-19 | 1,580,000 | 1,619,794 | |||||||||||||||||||||||||
American Tower Corp. | 4.700 | 03-15-22 | 2,210,000 | 2,329,241 | |||||||||||||||||||||||||
ARC Properties Operating Partnership LP | 4.600 | 02-06-24 | 4,175,000 | 3,972,458 | |||||||||||||||||||||||||
Corrections Corp. of America | 4.625 | 05-01-23 | 2,240,000 | 2,172,800 | |||||||||||||||||||||||||
Crown Castle Towers LLC (S) | 4.883 | 08-15-20 | 3,660,000 | 4,063,628 | |||||||||||||||||||||||||
Crown Castle Towers LLC (S) | 6.113 | 01-15-20 | 3,184,000 | 3,694,287 | |||||||||||||||||||||||||
DDR Corp. | 7.500 | 04-01-17 | 5,155,000 | 5,826,676 | |||||||||||||||||||||||||
Education Realty Operating Partnership LP | 4.600 | 12-01-24 | 2,250,000 | 2,299,219 | |||||||||||||||||||||||||
Goodman Funding Pty, Ltd. (S) | 6.375 | 04-15-21 | 3,220,000 | 3,755,521 | |||||||||||||||||||||||||
Health Care REIT, Inc. | 4.950 | 01-15-21 | 1,095,000 | 1,205,585 | |||||||||||||||||||||||||
Highwoods Realty LP | 5.850 | 03-15-17 | 5,065,000 | 5,544,316 | |||||||||||||||||||||||||
Iron Mountain, Inc. | 5.750 | 08-15-24 | 3,810,000 | 3,862,388 | |||||||||||||||||||||||||
Iron Mountain, Inc. | 6.000 | 08-15-23 | 3,130,000 | 3,278,675 | |||||||||||||||||||||||||
iStar Financial, Inc. | 5.000 | 07-01-19 | 980,000 | 960,400 | |||||||||||||||||||||||||
MPT Operating Partnership LP | 6.375 | 02-15-22 | 1,730,000 | 1,851,100 |
MPT Operating Partnership LP | 6.875 | 05-01-21 | 1,585,000 | $1,695,950 | |||||||||||||||||||||||||
Omega Healthcare Investors, Inc. (S) | 4.500 | 01-15-25 | 2,025,000 | 2,036,781 | |||||||||||||||||||||||||
Omega Healthcare Investors, Inc. | 4.950 | 04-01-24 | 3,205,000 | 3,283,523 | |||||||||||||||||||||||||
Ventas Realty LP | 3.750 | 05-01-24 | 1,735,000 | 1,744,010 | |||||||||||||||||||||||||
Ventas Realty LP | 4.750 | 06-01-21 | 4,075,000 | 4,451,123 | |||||||||||||||||||||||||
Weyerhaeuser Company | 7.375 | 03-15-32 | 3,610,000 | 4,800,365 | |||||||||||||||||||||||||
Real estate management and development 0.1% | |||||||||||||||||||||||||||||
General Shopping Investments, Ltd. (12.000% to 3-20-17, then 5 Year USGG + 11.052%) (Q)(S) | 12.000 | 03-20-17 | 1,270,000 | 1,136,650 | |||||||||||||||||||||||||
NANA Development Corp. (S) | 9.500 | 03-15-19 | 1,685,000 | 1,600,750 | |||||||||||||||||||||||||
Health care 1.6% | 38,052,407 | ||||||||||||||||||||||||||||
Health care equipment and supplies 0.2% | |||||||||||||||||||||||||||||
Alere, Inc. | 7.250 | 07-01-18 | 2,065,000 | 2,183,738 | |||||||||||||||||||||||||
Crimson Merger Sub, Inc. (S) | 6.625 | 05-15-22 | 2,615,000 | 2,438,488 | |||||||||||||||||||||||||
Health care providers and services 0.8% | |||||||||||||||||||||||||||||
Community Health Systems, Inc. | 6.875 | 02-01-22 | 710,000 | 751,713 | |||||||||||||||||||||||||
Covenant Surgical Partners, Inc. (S) | 8.750 | 08-01-19 | 1,365,000 | 1,361,588 | |||||||||||||||||||||||||
HCA, Inc. | 5.250 | 04-15-25 | 3,235,000 | 3,332,050 | |||||||||||||||||||||||||
HCA, Inc. | 7.500 | 02-15-22 | 1,955,000 | 2,238,475 | |||||||||||||||||||||||||
Medco Health Solutions, Inc. | 7.125 | 03-15-18 | 1,970,000 | 2,293,996 | |||||||||||||||||||||||||
Quest Diagnostics, Inc. | 2.700 | 04-01-19 | 2,580,000 | 2,614,771 | |||||||||||||||||||||||||
Quest Diagnostics, Inc. | 4.250 | 04-01-24 | 2,540,000 | 2,624,800 | |||||||||||||||||||||||||
Select Medical Corp. | 6.375 | 06-01-21 | 2,635,000 | 2,687,700 | |||||||||||||||||||||||||
WellCare Health Plans, Inc. | 5.750 | 11-15-20 | 1,330,000 | 1,369,900 | |||||||||||||||||||||||||
Pharmaceuticals 0.6% | |||||||||||||||||||||||||||||
Endo Finance LLC (S) | 7.250 | 01-15-22 | 2,295,000 | 2,455,650 | |||||||||||||||||||||||||
Grifols Worldwide Operations, Ltd. (S) | 5.250 | 04-01-22 | 2,965,000 | 3,053,950 | |||||||||||||||||||||||||
Mallinckrodt International Finance SA (S) | 5.750 | 08-01-22 | 2,725,000 | 2,786,313 | |||||||||||||||||||||||||
Mylan, Inc. (S) | 7.875 | 07-15-20 | 3,785,000 | 4,066,475 | |||||||||||||||||||||||||
Valeant Pharmaceuticals International, Inc. (S) | 7.500 | 07-15-21 | 1,660,000 | 1,792,800 | |||||||||||||||||||||||||
Industrials 4.7% | 112,635,900 | ||||||||||||||||||||||||||||
Aerospace and defense 0.6% | |||||||||||||||||||||||||||||
Embraer Overseas, Ltd. (S) | 5.696 | 09-16-23 | 1,548,000 | 1,662,165 | |||||||||||||||||||||||||
Huntington Ingalls Industries, Inc. (S) | 5.000 | 12-15-21 | 930,000 | 945,113 | |||||||||||||||||||||||||
Huntington Ingalls Industries, Inc. | 7.125 | 03-15-21 | 2,080,000 | 2,259,400 | |||||||||||||||||||||||||
Textron Financial Corp. (6.000% to 2-15-17, then 3 month LIBOR + 1.735%) (S) | 6.000 | 02-15-67 | 4,770,000 | 4,352,625 | |||||||||||||||||||||||||
Textron, Inc. | 5.600 | 12-01-17 | 2,195,000 | 2,432,809 | |||||||||||||||||||||||||
Textron, Inc. | 7.250 | 10-01-19 | 2,110,000 | 2,528,489 | |||||||||||||||||||||||||
Airlines 2.0% | |||||||||||||||||||||||||||||
America West Airlines 2000-1 Pass Through Trust | 8.057 | 07-02-20 | 500,728 | 568,327 |
American Airlines 2011-1 Class B Pass Through Trust (S) | 7.000 | 01-31-18 | 4,903,461 | $5,209,927 | |||||||||||||||||||||||||
American Airlines 2013-2 Class A Pass Through Trust | 4.950 | 01-15-23 | 2,463,757 | 2,636,220 | |||||||||||||||||||||||||
American Airlines 2013-2 Class B Pass Through Trust (S) | 5.600 | 07-15-20 | 1,154,093 | 1,177,175 | |||||||||||||||||||||||||
British Airways PLC 2013-1 Class A Pass Through Trust (S) | 4.625 | 06-20-24 | 4,283,568 | 4,540,582 | |||||||||||||||||||||||||
British Airways PLC 2013-1 Class B Pass Through Trust (S) | 5.625 | 06-20-20 | 2,001,605 | 2,121,702 | |||||||||||||||||||||||||
Continental Airlines 1997-4 Class A Pass Through Trust | 6.900 | 01-02-18 | 1,528,409 | 1,606,816 | |||||||||||||||||||||||||
Continental Airlines 1998-1 Class A Pass Through Trust | 6.648 | 09-15-17 | 375,465 | 391,422 | |||||||||||||||||||||||||
Continental Airlines 1999-1 Class A Pass Through Trust | 6.545 | 02-02-19 | 853,735 | 937,999 | |||||||||||||||||||||||||
Continental Airlines 2000-2 Class B Pass Through Trust | 8.307 | 04-02-18 | 171,381 | 184,663 | |||||||||||||||||||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | 5.983 | 04-19-22 | 2,476,792 | 2,718,279 | |||||||||||||||||||||||||
Continental Airlines 2012-1 Class B Pass Through Trust | 6.250 | 04-11-20 | 1,174,440 | 1,241,970 | |||||||||||||||||||||||||
Delta Air Lines 2002-1 Class G-1 Pass Through Trust | 6.718 | 01-02-23 | 3,895,749 | 4,470,372 | |||||||||||||||||||||||||
Delta Air Lines 2007-1 Class A Pass Through Trust | 6.821 | 08-10-22 | 4,211,430 | 4,880,205 | |||||||||||||||||||||||||
Delta Air Lines 2010-1 Class A Pass Through Trust | 6.200 | 07-02-18 | 687,645 | 756,409 | |||||||||||||||||||||||||
Delta Air Lines 2011-1 Class A Pass Through Trust | 5.300 | 04-15-19 | 1,283,281 | 1,392,360 | |||||||||||||||||||||||||
Northwest Airlines 2007-1 Class A Pass Through Trust | 7.027 | 11-01-19 | 1,584,483 | 1,808,212 | |||||||||||||||||||||||||
UAL 2009-1 Pass Through Trust | 10.400 | 11-01-16 | 290,316 | 324,776 | |||||||||||||||||||||||||
UAL 2009-2A Pass Through Trust | 9.750 | 01-15-17 | 1,157,513 | 1,284,839 | |||||||||||||||||||||||||
United Airlines 2014-2 Class A Pass Through Trust | 3.750 | 09-03-26 | 3,105,000 | 3,112,763 | |||||||||||||||||||||||||
United Airlines 2014-2 Class B Pass Through Trust | 4.625 | 09-03-22 | 1,810,000 | 1,769,275 | |||||||||||||||||||||||||
US Airways 2010-1 Class A Pass Through Trust | 6.250 | 04-22-23 | 3,285,818 | 3,680,117 | |||||||||||||||||||||||||
US Airways 2012-1 Class A Pass Through Trust | 5.900 | 10-01-24 | 880,899 | 982,203 | |||||||||||||||||||||||||
US Airways 2012-1 Class C Pass Through Trust | 9.125 | 10-01-15 | 801,150 | 831,193 | |||||||||||||||||||||||||
Building products 0.2% | |||||||||||||||||||||||||||||
Masco Corp. | 7.125 | 03-15-20 | 1,680,000 | 1,936,200 | |||||||||||||||||||||||||
Owens Corning | 4.200 | 12-15-22 | 3,240,000 | 3,278,128 | |||||||||||||||||||||||||
Commercial services and supplies 0.2% | |||||||||||||||||||||||||||||
Ahern Rentals, Inc. (S) | 9.500 | 06-15-18 | 1,380,000 | 1,469,700 | |||||||||||||||||||||||||
Casella Waste Systems, Inc. | 7.750 | 02-15-19 | 2,510,000 | 2,541,375 | |||||||||||||||||||||||||
Safway Group Holding LLC (S) | 7.000 | 05-15-18 | 1,225,000 | 1,234,984 | |||||||||||||||||||||||||
Construction and engineering 0.1% | |||||||||||||||||||||||||||||
Tutor Perini Corp. | 7.625 | 11-01-18 | 2,945,000 | 3,055,438 | |||||||||||||||||||||||||
Industrial conglomerates 0.3% | |||||||||||||||||||||||||||||
Odebrecht Finance, Ltd. (S) | 7.125 | 06-26-42 | 2,585,000 | 2,436,363 |
Odebrecht Finance, Ltd. (Q)(S) | 7.500 | 09-14-15 | 970,000 | $916,650 | |||||||||||||||||||||||||
Odebrecht Finance, Ltd. (S) | 8.250 | 04-25-18 | BRL | 2,850,000 | 957,825 | ||||||||||||||||||||||||
Odebrecht Offshore Drilling Finance, Ltd. (S) | 6.625 | 10-01-22 | 878,490 | 856,528 | |||||||||||||||||||||||||
Tenedora Nemak SA de CV (S) | 5.500 | 02-28-23 | 1,980,000 | 2,022,570 | |||||||||||||||||||||||||
Machinery 0.2% | |||||||||||||||||||||||||||||
SPL Logistics Escrow LLC (S) | 8.875 | 08-01-20 | 1,256,000 | 1,347,060 | |||||||||||||||||||||||||
Trinity Industries, Inc. | 4.550 | 10-01-24 | 3,305,000 | 3,260,277 | |||||||||||||||||||||||||
Marine 0.3% | |||||||||||||||||||||||||||||
Global Ship Lease, Inc. (S) | 10.000 | 04-01-19 | 1,300,000 | 1,345,500 | |||||||||||||||||||||||||
Navios Maritime Acquisition Corp. (S) | 8.125 | 11-15-21 | 2,790,000 | 2,845,800 | |||||||||||||||||||||||||
Navios South American Logistics, Inc. (S) | 7.250 | 05-01-22 | 2,585,000 | 2,649,625 | |||||||||||||||||||||||||
Trading companies and distributors 0.7% | |||||||||||||||||||||||||||||
Air Lease Corp. | 3.375 | 01-15-19 | 3,610,000 | 3,668,663 | |||||||||||||||||||||||||
Air Lease Corp. | 3.875 | 04-01-21 | 1,455,000 | 1,460,456 | |||||||||||||||||||||||||
Air Lease Corp. | 4.750 | 03-01-20 | 1,580,000 | 1,686,650 | |||||||||||||||||||||||||
Air Lease Corp. | 5.625 | 04-01-17 | 1,300,000 | 1,397,500 | |||||||||||||||||||||||||
Aircastle, Ltd. | 6.250 | 12-01-19 | 1,460,000 | 1,565,850 | |||||||||||||||||||||||||
Aircastle, Ltd. | 7.625 | 04-15-20 | 885,000 | 1,000,050 | |||||||||||||||||||||||||
International Lease Finance Corp. (S) | 7.125 | 09-01-18 | 1,935,000 | 2,196,225 | |||||||||||||||||||||||||
United Rentals North America, Inc. | 5.750 | 11-15-24 | 2,365,000 | 2,453,688 | |||||||||||||||||||||||||
Transportation infrastructure 0.1% | |||||||||||||||||||||||||||||
Florida East Coast Holdings Corp. (S) | 6.750 | 05-01-19 | 2,195,000 | 2,244,388 | |||||||||||||||||||||||||
Information technology 0.6% | 13,772,344 | ||||||||||||||||||||||||||||
Communications equipment 0.0% | |||||||||||||||||||||||||||||
Altice Financing SA (S) | 6.500 | 01-15-22 | 970,000 | 979,700 | |||||||||||||||||||||||||
Electronic equipment, instruments and components 0.1% | |||||||||||||||||||||||||||||
Zebra Technologies Corp. (S) | 7.250 | 10-15-22 | 2,085,000 | 2,228,344 | |||||||||||||||||||||||||
Internet software and services 0.2% | |||||||||||||||||||||||||||||
Ancestry.com, Inc. | 11.000 | 12-15-20 | 2,055,000 | 2,311,875 | |||||||||||||||||||||||||
Ancestry.com, Inc., PIK (S) | 9.625 | 10-15-18 | 1,270,000 | 1,260,475 | |||||||||||||||||||||||||
IT services 0.1% | |||||||||||||||||||||||||||||
Sixsigma Networks Mexico SA de CV (S) | 8.250 | 11-07-21 | 2,495,000 | 2,582,325 | |||||||||||||||||||||||||
Semiconductors and semiconductor equipment 0.2% | |||||||||||||||||||||||||||||
Micron Technology, Inc. (S) | 5.875 | 02-15-22 | 3,210,000 | 3,394,575 | |||||||||||||||||||||||||
Software 0.0% | |||||||||||||||||||||||||||||
Blackboard, Inc. (S) | 7.750 | 11-15-19 | 1,010,000 | 1,015,050 | |||||||||||||||||||||||||
Materials 2.9% | 67,957,830 | ||||||||||||||||||||||||||||
Chemicals 1.0% | |||||||||||||||||||||||||||||
Braskem Finance, Ltd. (S) | 7.000 | 05-07-20 | 3,250,000 | 3,566,875 | |||||||||||||||||||||||||
CF Industries, Inc. | 7.125 | 05-01-20 | 1,700,000 | 2,049,673 |
Incitec Pivot Finance LLC (S) | 6.000 | 12-10-19 | 1,920,000 | $2,159,866 | |||||||||||||||||||||||||
Methanex Corp. | 5.250 | 03-01-22 | 1,985,000 | 2,171,217 | |||||||||||||||||||||||||
NOVA Chemicals Corp. (S) | 5.000 | 05-01-25 | 4,650,000 | 4,806,938 | |||||||||||||||||||||||||
Rain CII Carbon LLC (S) | 8.250 | 01-15-21 | 1,325,000 | 1,364,750 | |||||||||||||||||||||||||
Rockwood Specialties Group, Inc. | 4.625 | 10-15-20 | 4,760,000 | 4,974,200 | |||||||||||||||||||||||||
W.R. Grace & Co-Conn (S) | 5.125 | 10-01-21 | 1,305,000 | 1,353,938 | |||||||||||||||||||||||||
W.R. Grace & Co-Conn (S) | 5.625 | 10-01-24 | 1,090,000 | 1,151,313 | |||||||||||||||||||||||||
Construction materials 0.3% | |||||||||||||||||||||||||||||
American Gilsonite Company (S) | 11.500 | 09-01-17 | 3,035,000 | 3,050,175 | |||||||||||||||||||||||||
Cemex SAB de CV (S) | 6.500 | 12-10-19 | 2,500,000 | 2,606,250 | |||||||||||||||||||||||||
Magnesita Finance, Ltd. (Q)(S) | 8.625 | 04-05-17 | 2,220,000 | 2,220,000 | |||||||||||||||||||||||||
Containers and packaging 0.3% | |||||||||||||||||||||||||||||
Ardagh Finance Holdings SA, PIK (S) | 8.625 | 06-15-19 | 2,325,000 | 2,394,750 | |||||||||||||||||||||||||
Tekni-Plex, Inc. (S) | 9.750 | 06-01-19 | 1,266,000 | 1,386,270 | |||||||||||||||||||||||||
Wise Metals Group LLC (S) | 8.750 | 12-15-18 | 2,330,000 | 2,493,100 | |||||||||||||||||||||||||
Metals and mining 1.3% | |||||||||||||||||||||||||||||
Alcoa, Inc. | 5.125 | 10-01-24 | 4,540,000 | 4,792,015 | |||||||||||||||||||||||||
Allegheny Technologies, Inc. | 9.375 | 06-01-19 | 5,200,000 | 6,053,393 | |||||||||||||||||||||||||
ArcelorMittal | 10.350 | 06-01-19 | 1,845,000 | 2,246,288 | |||||||||||||||||||||||||
Commercial Metals Company | 7.350 | 08-15-18 | 1,570,000 | 1,738,775 | |||||||||||||||||||||||||
Gerdau Trade, Inc. (S) | 4.750 | 04-15-23 | 1,550,000 | 1,503,500 | |||||||||||||||||||||||||
Glencore Finance Canada, Ltd. (S) | 4.250 | 10-25-22 | 1,475,000 | 1,496,427 | |||||||||||||||||||||||||
Glencore Funding LLC (S) | 4.125 | 05-30-23 | 3,625,000 | 3,617,844 | |||||||||||||||||||||||||
JMC Steel Group (S) | 8.250 | 03-15-18 | 920,000 | 922,300 | |||||||||||||||||||||||||
MMC Norilsk Nickel OJSC (S) | 5.550 | 10-28-20 | 1,615,000 | 1,550,400 | |||||||||||||||||||||||||
Rain CII Carbon LLC (S) | 8.000 | 12-01-18 | 2,070,000 | 2,132,100 | |||||||||||||||||||||||||
Thompson Creek Metals Company, Inc. | 7.375 | 06-01-18 | 2,505,000 | 2,285,813 | |||||||||||||||||||||||||
Vedanta Resources PLC (S) | 7.125 | 05-31-23 | 1,950,000 | 1,869,660 | |||||||||||||||||||||||||
Telecommunication services 2.8% | 65,366,402 | ||||||||||||||||||||||||||||
Diversified telecommunication services 1.8% | |||||||||||||||||||||||||||||
CenturyLink, Inc. | 5.625 | 04-01-20 | 950,000 | 1,002,250 | |||||||||||||||||||||||||
CenturyLink, Inc. | 5.800 | 03-15-22 | 3,615,000 | 3,795,750 | |||||||||||||||||||||||||
CenturyLink, Inc. | 6.450 | 06-15-21 | 1,880,000 | 2,049,200 | |||||||||||||||||||||||||
CenturyLink, Inc. | 7.600 | 09-15-39 | 2,270,000 | 2,270,000 | |||||||||||||||||||||||||
Columbus International, Inc. (S) | 7.375 | 03-30-21 | 1,350,000 | 1,437,750 | |||||||||||||||||||||||||
GTP Acquisition Partners I LLC (S) | 4.704 | 05-15-18 | 3,440,000 | 3,397,709 | |||||||||||||||||||||||||
Oi SA (S) | 9.750 | 09-15-16 | BRL | 3,440,000 | 1,232,963 | ||||||||||||||||||||||||
PAETEC Holding Corp. | 9.875 | 12-01-18 | 2,119,000 | 2,235,545 | |||||||||||||||||||||||||
T-Mobile USA, Inc. | 6.125 | 01-15-22 | 970,000 | 986,975 | |||||||||||||||||||||||||
T-Mobile USA, Inc. | 6.250 | 04-01-21 | 1,200,000 | 1,230,000 | |||||||||||||||||||||||||
Telecom Italia Capital SA | 6.999 | 06-04-18 | 2,205,000 | 2,464,088 | |||||||||||||||||||||||||
Telecom Italia Capital SA | 7.200 | 07-18-36 | 2,190,000 | 2,370,675 |
Telefonica Emisiones SAU | 6.421 | 06-20-16 | 4,370,000 | $4,720,234 | |||||||||||||||||||||||||
Verizon Communications, Inc. | 3.450 | 03-15-21 | 3,365,000 | 3,488,953 | |||||||||||||||||||||||||
Verizon Communications, Inc. (S) | 5.012 | 08-21-54 | 1,804,000 | 1,884,691 | |||||||||||||||||||||||||
Verizon Communications, Inc. | 6.550 | 09-15-43 | 2,210,000 | 2,862,454 | |||||||||||||||||||||||||
Wind Acquisition Finance SA (S) | 7.375 | 04-23-21 | 2,495,000 | 2,401,438 | |||||||||||||||||||||||||
Windstream Corp. | 7.500 | 06-01-22 | 3,060,000 | 3,144,150 | |||||||||||||||||||||||||
Wireless telecommunication services 1.0% | |||||||||||||||||||||||||||||
Comcel Trust (S) | 6.875 | 02-06-24 | 2,320,000 | 2,470,800 | |||||||||||||||||||||||||
Digicel Group, Ltd. (S) | 8.250 | 09-30-20 | 3,035,000 | 3,110,875 | |||||||||||||||||||||||||
Millicom International Cellular SA (S) | 4.750 | 05-22-20 | 2,735,000 | 2,652,950 | |||||||||||||||||||||||||
Millicom International Cellular SA (S) | 6.625 | 10-15-21 | 2,415,000 | 2,550,844 | |||||||||||||||||||||||||
MTN Mauritius Investments, Ltd. (S) | 4.755 | 11-11-24 | 1,255,000 | 1,259,706 | |||||||||||||||||||||||||
SBA Tower Trust (S) | 2.933 | 12-15-17 | 2,420,000 | 2,452,314 | |||||||||||||||||||||||||
SBA Tower Trust (S) | 3.598 | 04-15-18 | 2,770,000 | 2,796,567 | |||||||||||||||||||||||||
SBA Tower Trust (S) | 5.101 | 04-17-17 | 2,135,000 | 2,259,633 | |||||||||||||||||||||||||
SoftBank Corp. (S) | 4.500 | 04-15-20 | 2,845,000 | 2,837,888 | |||||||||||||||||||||||||
Utilities 1.8% | 42,829,590 | ||||||||||||||||||||||||||||
Electric utilities 1.4% | |||||||||||||||||||||||||||||
Beaver Valley II Funding Corp. | 9.000 | 06-01-17 | 371,000 | 400,680 | |||||||||||||||||||||||||
BVPS II Funding Corp. | 8.890 | 06-01-17 | 822,000 | 861,838 | |||||||||||||||||||||||||
Dynegy Finance I, Inc. (S) | 6.750 | 11-01-19 | 965,000 | 1,003,600 | |||||||||||||||||||||||||
Dynegy Finance I, Inc. (S) | 7.625 | 11-01-24 | 1,535,000 | 1,623,263 | |||||||||||||||||||||||||
Electricite de France SA (5.250% to 1-29-23, then 10 Year Swap Rate + 3.709%) (Q)(S) | 5.250 | 01-29-23 | 3,415,000 | 3,538,794 | |||||||||||||||||||||||||
Empresa Electrica Angamos SA (S) | 4.875 | 05-25-29 | 2,770,000 | 2,759,613 | |||||||||||||||||||||||||
Israel Electric Corp., Ltd. (S) | 5.625 | 06-21-18 | 2,790,000 | 2,982,510 | |||||||||||||||||||||||||
Israel Electric Corp., Ltd. (S) | 6.875 | 06-21-23 | 1,515,000 | 1,746,871 | |||||||||||||||||||||||||
Israel Electric Corp., Ltd. (S) | 7.250 | 01-15-19 | 2,720,000 | 3,079,040 | |||||||||||||||||||||||||
NextEra Energy Capital Holdings, Inc. (6.650% to 6-15-17, then 3 month LIBOR + 2.125%) | 6.650 | 06-15-67 | 1,415,000 | 1,432,688 | |||||||||||||||||||||||||
NRG Energy, Inc. | 6.625 | 03-15-23 | 890,000 | 932,275 | |||||||||||||||||||||||||
NRG Energy, Inc. | 7.625 | 01-15-18 | 2,460,000 | 2,724,450 | |||||||||||||||||||||||||
NRG Energy, Inc. | 8.250 | 09-01-20 | 1,910,000 | 2,048,475 | |||||||||||||||||||||||||
NRG Yield Operating LLC (S) | 5.375 | 08-15-24 | 2,385,000 | 2,420,775 | |||||||||||||||||||||||||
PNPP II Funding Corp. | 9.120 | 05-30-16 | 189,000 | 196,032 | |||||||||||||||||||||||||
PPL Capital Funding, Inc. (6.700% to 3-30-17, then 3 month LIBOR + 2.665%) | 6.700 | 03-30-67 | 2,860,000 | 2,895,750 | |||||||||||||||||||||||||
Southern California Edison Company (6.250% to 2-1-22, then 3 month LIBOR + 4.199%) (Q) | 6.250 | 02-01-22 | 1,955,000 | 2,160,275 | |||||||||||||||||||||||||
W3A Funding Corp. | 8.090 | 01-02-17 | 1,010,965 | 1,011,874 | |||||||||||||||||||||||||
Multi-utilities 0.4% | |||||||||||||||||||||||||||||
CMS Energy Corp. | 5.050 | 03-15-22 | 2,669,000 | 2,983,216 |
Integrys Energy Group, Inc. (6.110% to 12-1-16, then 3 month LIBOR + 2.120%) | 6.110 | 12-01-66 | 3,915,000 | $3,976,466 | |||||||||||||||||||||||||
Wisconsin Energy Corp. (6.250% to 5-15-17, then 3 month LIBOR + 2.113%) | 6.250 | 05-15-67 | 2,010,000 | 2,051,105 | |||||||||||||||||||||||||
U.S. Government and Agency obligations 26.8% | $636,149,698 | ||||||||||||||||||||||||||||
(Cost $624,768,923) | |||||||||||||||||||||||||||||
U.S. Government 7.3% | 174,148,095 | ||||||||||||||||||||||||||||
U.S. Treasury | |||||||||||||||||||||||||||||
Bond | 3.125 | 02-15-42 | 40,275,000 | 42,232,123 | |||||||||||||||||||||||||
Bond | 3.125 | 08-15-44 | 91,465,000 | 95,545,162 | |||||||||||||||||||||||||
Note | 0.875 | 10-15-17 | 13,865,000 | 13,881,250 | |||||||||||||||||||||||||
Note | 2.250 | 11-15-24 | 22,336,000 | 22,489,560 | |||||||||||||||||||||||||
U.S. Government Agency 19.5% | 462,001,603 | ||||||||||||||||||||||||||||
Federal Home Loan Bank | |||||||||||||||||||||||||||||
15 Yr Pass Thru | 2.900 | 09-05-25 | 1,390,476 | 1,370,870 | |||||||||||||||||||||||||
15 Yr Pass Thru | 3.170 | 10-04-27 | 1,425,000 | 1,398,100 | |||||||||||||||||||||||||
15 Yr Pass Thru | 3.250 | 06-21-27 | 1,915,152 | 1,915,452 | |||||||||||||||||||||||||
Federal Home Loan Mortgage Corp. | |||||||||||||||||||||||||||||
30 Yr Pass Thru (P) | 2.555 | 06-01-44 | 3,647,068 | 3,753,250 | |||||||||||||||||||||||||
30 Yr Pass Thru (P) | 2.690 | 05-01-44 | 3,652,783 | 3,773,980 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.000 | 03-01-43 | 6,824,108 | 6,941,664 | |||||||||||||||||||||||||
30 Yr Pass Thru (P) | 3.012 | 03-01-44 | 912,434 | 947,043 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.500 | 05-01-42 | 4,743,728 | 4,947,745 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.500 | 06-01-42 | 11,444,618 | 11,936,826 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.500 | 04-01-44 | 11,612,612 | 12,151,964 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 11-01-43 | 8,848,451 | 9,473,026 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 02-01-44 | 2,358,916 | 2,527,633 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 11-01-39 | 6,885,571 | 7,493,169 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 02-01-41 | 10,058,011 | 10,932,980 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 03-01-41 | 5,026,569 | 5,507,824 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.000 | 04-01-41 | 3,394,977 | 3,765,772 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.500 | 07-01-37 | 187,540 | 210,792 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.500 | 05-01-38 | 702,518 | 790,388 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.500 | 11-01-39 | 14,118,126 | 15,872,965 | |||||||||||||||||||||||||
30 Yr Pass Thru | 6.500 | 09-01-39 | 1,642,226 | 1,864,171 | |||||||||||||||||||||||||
Federal National Mortgage Association | |||||||||||||||||||||||||||||
15 Yr Pass Thru | 3.000 | 09-01-27 | 7,704,857 | 8,037,430 | |||||||||||||||||||||||||
15 Yr Pass Thru | 3.400 | 09-27-32 | 4,955,000 | 4,834,470 | |||||||||||||||||||||||||
15 Yr Pass Thru | 3.500 | 02-01-26 | 1,148,515 | 1,218,592 | |||||||||||||||||||||||||
15 Yr Pass Thru | 3.500 | 03-01-26 | 9,574,529 | 10,158,725 | |||||||||||||||||||||||||
15 Yr Pass Thru | 4.000 | 12-01-24 | 5,807,661 | 6,230,305 | |||||||||||||||||||||||||
30 Yr Pass Thru (P) | 2.526 | 06-01-44 | 6,466,720 | 6,656,114 |
30 Yr Pass Thru (P) | 2.549 | 04-01-44 | 6,315,694 | $6,510,498 | |||||||||||||||||||||||||
30 Yr Pass Thru (P) | 2.906 | 03-01-44 | 860,957 | 892,690 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.000 | 10-01-42 | 7,542,976 | 7,644,040 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.000 | 12-01-42 | 3,944,712 | 3,996,333 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.000 | 01-01-43 | 2,783,691 | 2,818,378 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.000 | 03-01-43 | 1,944,149 | 1,977,488 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.000 | 05-01-43 | 2,619,131 | 2,664,045 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.000 | 06-01-43 | 4,673,958 | 4,730,739 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.500 | 06-01-42 | 6,046,551 | 6,317,938 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.500 | 08-01-42 | 10,720,698 | 11,201,874 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.500 | 01-01-43 | 4,504,812 | 4,702,074 | |||||||||||||||||||||||||
30 Yr Pass Thru | 3.500 | 07-01-43 | 11,070,981 | 11,571,338 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 11-01-40 | 2,432,097 | 2,609,374 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 01-01-41 | 13,100,668 | 14,018,959 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 09-01-41 | 12,962,276 | 13,928,198 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 10-01-41 | 9,562,069 | 10,248,038 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 01-01-42 | 7,275,908 | 7,807,390 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 09-01-43 | 14,692,461 | 15,841,457 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 10-01-43 | 18,729,168 | 20,158,729 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.000 | 01-01-44 | 6,577,966 | 7,080,049 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 08-01-40 | 8,548,226 | 9,307,883 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 02-01-41 | 13,619,558 | 14,821,378 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 06-01-41 | 14,226,646 | 15,553,170 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 07-01-41 | 6,119,690 | 6,690,303 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 08-01-41 | 8,479,876 | 9,271,882 | |||||||||||||||||||||||||
30 Yr Pass Thru | 4.500 | 05-01-42 | 15,869,545 | 17,349,257 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.000 | 08-01-40 | 9,919,490 | 11,011,797 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.000 | 09-01-40 | 17,263,049 | 19,226,063 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.000 | 02-01-41 | 6,383,610 | 7,122,463 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.000 | 03-01-41 | 7,098,330 | 7,946,526 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.000 | 04-01-41 | 13,383,728 | 14,890,356 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.000 | 07-01-42 | 5,149,053 | 5,716,053 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.500 | 05-01-35 | 3,122,089 | 3,512,960 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.500 | 04-01-36 | 796,677 | 893,927 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.500 | 05-01-36 | 3,584,429 | 4,024,222 | |||||||||||||||||||||||||
30 Yr Pass Thru | 5.500 | 01-01-39 | 2,835,920 | 3,195,839 | |||||||||||||||||||||||||
30 Yr Pass Thru | 6.000 | 02-01-37 | 829,490 | 939,073 | |||||||||||||||||||||||||
30 Yr Pass Thru | 6.000 | 07-01-38 | 3,008,934 | 3,411,985 | |||||||||||||||||||||||||
30 Yr Pass Thru | 6.500 | 01-01-39 | 3,692,569 | 4,214,297 | |||||||||||||||||||||||||
30 Yr Pass Thru | 6.500 | 06-01-39 | 1,285,407 | 1,471,290 |
Foreign government obligations 0.2% | $4,923,913 | ||||||||||||||||||||||||||||
(Cost $4,597,255) | |||||||||||||||||||||||||||||
Argentina 0.2% | 4,923,913 | ||||||||||||||||||||||||||||
City of Buenos Aires (S) | 9.950 | 03-01-17 | 2,645,000 | 2,737,575 | |||||||||||||||||||||||||
Republic of Argentina (H) | 8.280 | 12-31-33 | 2,376,454 | 2,186,338 | |||||||||||||||||||||||||
Municipal bonds 0.2% | $5,494,505 | ||||||||||||||||||||||||||||
(Cost $5,494,945) | |||||||||||||||||||||||||||||
State of Hawaii Department of Budget & Finance | 1.467 | 07-01-22 | 5,495,000 | 5,494,505 | |||||||||||||||||||||||||
Term loans (M) 0.8% | $18,086,823 | ||||||||||||||||||||||||||||
(Cost $18,448,027) | |||||||||||||||||||||||||||||
Consumer discretionary 0.1% | 2,314,505 | ||||||||||||||||||||||||||||
Hotels, restaurants and leisure 0.1% | |||||||||||||||||||||||||||||
Marina District Finance Company, Inc. | 6.750 | 08-15-18 | 2,301,272 | 2,314,505 | |||||||||||||||||||||||||
Consumer staples 0.1% | 2,485,789 | ||||||||||||||||||||||||||||
Household products 0.1% | |||||||||||||||||||||||||||||
The Sun Products Corp. | 5.500 | 03-23-20 | 2,582,637 | 2,485,789 | |||||||||||||||||||||||||
Energy 0.1% | 2,383,100 | ||||||||||||||||||||||||||||
Energy equipment and services 0.0% | |||||||||||||||||||||||||||||
Paragon Offshore Finance Company | 3.750 | 07-18-21 | 1,150,000 | 1,023,500 | |||||||||||||||||||||||||
Oil, gas and consumable fuels 0.1% | |||||||||||||||||||||||||||||
Templar Energy LLC | 8.500 | 11-25-20 | 1,545,000 | 1,359,600 | |||||||||||||||||||||||||
Financials 0.1% | 1,527,523 | ||||||||||||||||||||||||||||
Capital markets 0.1% | |||||||||||||||||||||||||||||
Walter Investment Management Corp. | 4.750 | 12-11-20 | 1,655,852 | 1,527,523 | |||||||||||||||||||||||||
Health care 0.1% | 2,567,426 | ||||||||||||||||||||||||||||
Health care providers and services 0.1% | |||||||||||||||||||||||||||||
CRC Health Corp. | 5.250 | 03-29-21 | 562,175 | 562,526 | |||||||||||||||||||||||||
CRC Health Corp. | 9.000 | 09-28-21 | 1,080,000 | 1,105,650 | |||||||||||||||||||||||||
Surgery Center Holdings, Inc. | 5.250 | 11-03-20 | 900,000 | 899,250 | |||||||||||||||||||||||||
Industrials 0.1% | 2,628,123 | ||||||||||||||||||||||||||||
Aerospace and defense 0.0% | |||||||||||||||||||||||||||||
WP CPP Holdings LLC | 4.750 | 12-27-19 | 982,500 | 978,202 | |||||||||||||||||||||||||
Airlines 0.1% | |||||||||||||||||||||||||||||
Delta Air Lines, Inc. | 3.250 | 10-18-18 | 1,673,227 | 1,649,921 | |||||||||||||||||||||||||
Information technology 0.1% | 911,594 | ||||||||||||||||||||||||||||
Software 0.1% | |||||||||||||||||||||||||||||
BMC Software Finance, Inc. | 5.000 | 09-10-20 | 431,000 | 424,094 | |||||||||||||||||||||||||
Sybil Finance BV | 4.750 | 03-20-20 | 487,500 | 487,500 |
Utilities 0.1% | $3,268,763 | ||||||||||||||||||||||||||||
Electric utilities 0.1% | |||||||||||||||||||||||||||||
ExGen Texas Power LLC | 5.750 | 09-16-21 | 2,065,000 | 2,068,872 | |||||||||||||||||||||||||
La Frontera Generation LLC | 4.500 | 09-30-20 | 1,199,891 | 1,199,891 | |||||||||||||||||||||||||
Capital preferred securities 1.2% | $29,151,496 | ||||||||||||||||||||||||||||
(Cost $28,204,171) | |||||||||||||||||||||||||||||
Financials 1.2% | 29,151,496 | ||||||||||||||||||||||||||||
Banks 0.3% | |||||||||||||||||||||||||||||
Allfirst Preferred Capital Trust (P) | 1.731 | 07-15-29 | 1,305,000 | 1,148,400 | |||||||||||||||||||||||||
BAC Capital Trust XIV, Series G (P)(Q) | 4.000 | 12-22-14 | 4,683,000 | 3,643,983 | |||||||||||||||||||||||||
Sovereign Capital Trust VI | 7.908 | 06-13-36 | 2,613,000 | 2,771,606 | |||||||||||||||||||||||||
Capital markets 0.4% | |||||||||||||||||||||||||||||
Goldman Sachs Capital II (P)(Q) | 4.000 | 01-05-15 | 5,655,000 | 4,220,044 | |||||||||||||||||||||||||
State Street Capital Trust IV (P) | 1.234 | 06-15-37 | 5,430,000 | 4,574,775 | |||||||||||||||||||||||||
Insurance 0.5% | |||||||||||||||||||||||||||||
MetLife Capital Trust IV (7.875% to 12-15-32, then 3 month LIBOR + 3.960%) (S) | 7.875 | 12-15-37 | 960,000 | 1,233,600 | |||||||||||||||||||||||||
MetLife Capital Trust X (9.250% to 4-8-33, then 3 month LIBOR + 5.540%) (S) | 9.250 | 04-08-38 | 2,300,000 | 3,283,250 | |||||||||||||||||||||||||
ZFS Finance USA Trust II (6.450% to 6-15-16 then 3 month LIBOR + 2.000%) (S) | 6.450 | 12-15-65 | 6,235,000 | 6,640,275 | |||||||||||||||||||||||||
ZFS Finance USA Trust V (6.500% to 5-9-17, then 3 month LIBOR + 2.285%) (S) | 6.500 | 05-09-37 | 1,525,000 | 1,635,563 | |||||||||||||||||||||||||
Collateralized mortgage obligations 14.3% | $338,301,014 | ||||||||||||||||||||||||||||
(Cost $323,133,730) | |||||||||||||||||||||||||||||
Commercial and residential 12.9% | 306,233,239 | ||||||||||||||||||||||||||||
Adjustable Rate Mortgage Trust Series 2005-4, Class 7A12 (P) | 0.735 | 08-25-35 | 1,767,483 | 1,667,429 | |||||||||||||||||||||||||
American Home Mortgage Assets Trust Series 2006-6, Class XP IO | 2.328 | 12-25-46 | 18,323,268 | 1,550,365 | |||||||||||||||||||||||||
American Home Mortgage Investment Trust Series 2005-1, Class 1A1 (P) | 0.375 | 06-25-45 | 3,807,843 | 3,538,503 | |||||||||||||||||||||||||
Americold 2010 LLC Trust Series 2010-ARTA, Class D (S) | 7.443 | 01-14-29 | 4,285,000 | 4,880,894 | |||||||||||||||||||||||||
BAMLL Commercial Mortgage Securities Trust | |||||||||||||||||||||||||||||
Series 2014-ICTS, Class D (P) (S) | 2.055 | 06-15-28 | 710,000 | 709,474 | |||||||||||||||||||||||||
Series 2014-ICTS, Class E (P) (S) | 3.104 | 06-15-28 | 1,425,000 | 1,418,348 | |||||||||||||||||||||||||
Banc of America Commercial Mortgage Securities Trust Series 2013-DSNY, Class E (P) (S) | 2.755 | 09-15-26 | 2,300,000 | 2,308,703 | |||||||||||||||||||||||||
Bear Stearns Adjustable Rate Mortgage Trust | |||||||||||||||||||||||||||||
Series 2005-2, Class A1 (P) | 2.580 | 03-25-35 | 4,118,618 | 4,157,477 | |||||||||||||||||||||||||
Series 2005-5, Class A2 (P) | 2.260 | 08-25-35 | 2,949,799 | 2,961,610 | |||||||||||||||||||||||||
Bear Stearns ALT-A Trust | |||||||||||||||||||||||||||||
Series 2004-12, Class 1A1 (P) | 0.855 | 01-25-35 | 6,426,418 | 6,245,758 |
Series 2005-5, Class 1A4 (P) | 0.715 | 07-25-35 | 3,649,983 | $3,273,590 | |||||||||||||||||||||||||
Series 2005-7, Class 11A1 (P) | 0.695 | 08-25-35 | 4,780,543 | 4,439,183 | |||||||||||||||||||||||||
Bear Stearns Asset Backed Securities Trust Series 2004-AC5, Class A1 (P) | 5.750 | 10-25-34 | 4,565,790 | 4,663,973 | |||||||||||||||||||||||||
BHMS Mortgage Trust Series 2014-ATLS, Class DFL (P) (S) | 3.155 | 07-05-33 | 4,600,000 | 4,599,968 | |||||||||||||||||||||||||
BLCP Hotel Trust Series 2014-CLRN, Class D (P) (S) | 2.655 | 08-15-29 | 4,025,000 | 4,027,475 | |||||||||||||||||||||||||
BWAY Mortgage Trust Series 2013-1515, Class F (P) (S) | 4.057 | 03-10-33 | 4,880,000 | 4,489,859 | |||||||||||||||||||||||||
CDGJ Commercial Mortgage Trust Series 2014-BXCH, Class D | 3.150 | 12-15-16 | 5,010,000 | 5,010,000 | |||||||||||||||||||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2005-CD1, Class C (P) | 5.399 | 07-15-44 | 2,290,000 | 2,348,079 | |||||||||||||||||||||||||
Commercial Mortgage Pass Through Certificates | |||||||||||||||||||||||||||||
Series 2006-GG7, Class AM (P) | 6.013 | 07-10-38 | 3,325,000 | 3,524,723 | |||||||||||||||||||||||||
Series 2012-CR2, Class XA IO | 2.072 | 08-15-45 | 19,474,809 | 1,969,682 | |||||||||||||||||||||||||
Series 2012-LC4, Class B (P) | 4.934 | 12-10-44 | 2,105,000 | 2,325,808 | |||||||||||||||||||||||||
Series 2012-LC4, Class C (P) | 5.822 | 12-10-44 | 4,510,000 | 5,078,887 | |||||||||||||||||||||||||
Series 2013-300P, Class D (P) (S) | 4.539 | 08-10-30 | 4,315,000 | 4,432,497 | |||||||||||||||||||||||||
Series 2013-CR11, Class B (P) | 5.332 | 10-10-46 | 6,629,000 | 7,473,561 | |||||||||||||||||||||||||
Series 2013-CR13, Class C (P) | 4.914 | 12-10-23 | 2,855,000 | 3,032,621 | |||||||||||||||||||||||||
Series 2013-LC13, Class B (P) (S) | 5.009 | 08-10-46 | 3,815,000 | 4,227,756 | |||||||||||||||||||||||||
Series 2014-CR15, Class XA IO | 1.504 | 02-10-47 | 39,266,420 | 2,794,473 | |||||||||||||||||||||||||
Series 2014-CR16, Class C (P) | 5.069 | 04-10-47 | 3,650,000 | 3,901,390 | |||||||||||||||||||||||||
Series 2014-FL4, Class D (P) (S) | 2.603 | 07-13-31 | 4,410,000 | 4,410,939 | |||||||||||||||||||||||||
Series 2014-PAT, Class D (P) (S) | 2.303 | 08-13-27 | 5,660,000 | 5,606,117 | |||||||||||||||||||||||||
Series 2014-TWC, Class D (P) (S) | 2.404 | 02-13-32 | 2,970,000 | 2,961,028 | |||||||||||||||||||||||||
Credit Suisse Mortgage Trust Series 2014-ICE, Class D (P) (S) | 2.304 | 04-15-27 | 3,080,000 | 3,075,700 | |||||||||||||||||||||||||
Deutsche Mortgage Securities, Inc. Mortgage Loan Trust Series 2004-4, Class 2AR1 (P) | 0.695 | 06-25-34 | 3,429,171 | 3,167,234 | |||||||||||||||||||||||||
Extended Stay America Trust Series 2013-ESFL, Class DFL (P) (S) | 3.296 | 12-05-31 | 3,615,000 | 3,615,553 | |||||||||||||||||||||||||
GMAC Mortgage Loan Trust Series 2004-AR2, Class 3A (P) | 2.921 | 08-19-34 | 2,497,431 | 2,430,353 | |||||||||||||||||||||||||
HarborView Mortgage Loan Trust | |||||||||||||||||||||||||||||
Series 2005-11, Class X IO | 2.348 | 08-19-45 | 8,585,448 | 455,358 | |||||||||||||||||||||||||
Series 2005-2, Class IX IO | 2.193 | 05-19-35 | 39,446,117 | 2,599,894 | |||||||||||||||||||||||||
Series 2005-9, Class 2A1C (P) | 0.605 | 06-20-35 | 4,444,619 | 4,071,457 | |||||||||||||||||||||||||
Series 2005-8, Class 1X IO | 2.083 | 09-19-35 | 10,294,296 | 550,560 | |||||||||||||||||||||||||
Series 2007-3, Class ES IO (S) | 0.350 | 05-19-47 | 53,065,392 | 563,820 | |||||||||||||||||||||||||
Series 2007-4, Class ES IO | 0.349 | 07-19-47 | 57,687,529 | 576,875 | |||||||||||||||||||||||||
Series 2007-6, Class ES IO (S) | 0.343 | 08-19-37 | 45,384,292 | 482,208 |
HILT Mortgage Trust Series 2014-ORL, Class D (P) (S) | 2.157 | 07-15-29 | 4,270,000 | $4,260,055 | |||||||||||||||||||||||||
Hilton USA Trust | |||||||||||||||||||||||||||||
Series 2013-HLF, Class EFL (P) (S) | 3.906 | 11-05-30 | 3,582,165 | 3,582,631 | |||||||||||||||||||||||||
Series 2013-HLT, Class DFX (S) | 4.407 | 11-05-30 | 2,542,000 | 2,615,118 | |||||||||||||||||||||||||
IndyMac Index Mortgage Loan Trust | |||||||||||||||||||||||||||||
Series 2005-AR12, Class AX2 IO | 2.180 | 07-25-35 | 65,123,069 | 4,803,087 | |||||||||||||||||||||||||
Series 2005-AR8, Class AX2 IO | 2.207 | 04-25-35 | 56,699,391 | 4,468,309 | |||||||||||||||||||||||||
Series 2005-AR18, Class 1X IO | 2.028 | 10-25-36 | 23,895,009 | 1,955,047 | |||||||||||||||||||||||||
Series 2005-AR18, Class 2X IO | 1.681 | 10-25-36 | 37,022,946 | 1,332,597 | |||||||||||||||||||||||||
JPMBB Commercial Mortgage Securities Trust Series 2014-C19, Class C (P) | 4.834 | 04-15-47 | 4,435,000 | 4,660,897 | |||||||||||||||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust | |||||||||||||||||||||||||||||
Series 2007-LD12, Class AM (P) | 6.197 | 02-15-51 | 6,050,000 | 6,645,834 | |||||||||||||||||||||||||
Series 2007-LDPX, Class AM (P) | 5.464 | 01-15-49 | 6,810,000 | 7,130,771 | |||||||||||||||||||||||||
Series 2012-HSBC, Class XA IO (S) | 1.582 | 07-05-32 | 20,100,000 | 1,913,942 | |||||||||||||||||||||||||
Series 2013-JWRZ, Class D (P) (S) | 3.144 | 04-15-30 | 3,095,000 | 3,096,643 | |||||||||||||||||||||||||
Series 2014-FBLU, Class D (P) (S) | 2.755 | 12-15-28 | 4,830,000 | 4,839,090 | |||||||||||||||||||||||||
Series 2014-FBLU, Class E (P) (S) | 3.655 | 12-15-28 | 3,465,000 | 3,463,999 | |||||||||||||||||||||||||
Series 2014-FL5, Class C (P) (S) | 2.254 | 07-15-31 | 7,575,000 | 7,569,372 | |||||||||||||||||||||||||
Series 2014-INN, Class F (P) (S) | 4.155 | 06-15-29 | 3,495,000 | 3,463,297 | |||||||||||||||||||||||||
Series 2014-PHH, Class C (P) (S) | 2.254 | 08-15-27 | 6,095,000 | 6,125,426 | |||||||||||||||||||||||||
MASTR Adjustable Rate Mortgages Trust Series 2004-11, Class M2 (P) | 1.255 | 11-25-34 | 3,370,000 | 3,262,039 | |||||||||||||||||||||||||
Merrill Lynch Mortgage Investors Trust | |||||||||||||||||||||||||||||
Series 2004-1, Class 2A1 (P) | 2.148 | 12-25-34 | 2,840,351 | 2,768,280 | |||||||||||||||||||||||||
Series 2005-2, Class 1A (P) | 1.571 | 10-25-35 | 4,494,315 | 4,356,380 | |||||||||||||||||||||||||
Morgan Stanley Bank of America Merrill Lynch Trust | |||||||||||||||||||||||||||||
Series 2013-C7, Class C (P) | 4.325 | 02-15-46 | 2,528,000 | 2,596,569 | |||||||||||||||||||||||||
Series 2014-C18, Class 300D | 5.279 | 08-15-31 | 2,795,000 | 2,861,600 | |||||||||||||||||||||||||
Morgan Stanley Capital I Trust Series 2014-150E, Class D (P) (S) | 4.438 | 09-09-32 | 7,575,000 | 7,908,823 | |||||||||||||||||||||||||
Morgan Stanley Mortgage Loan Trust Series 2004-6AR, Class 2A2 (P) | 2.761 | 08-25-34 | 4,455,792 | 4,398,415 | |||||||||||||||||||||||||
MortgageIT Trust Series 2005-2, Class 1A2 (P) | 0.485 | 05-25-35 | 2,848,151 | 2,642,323 | |||||||||||||||||||||||||
Motel 6 Trust Series 2012-MTL6, Class D (S) | 3.781 | 10-05-25 | 6,035,000 | 5,995,284 | |||||||||||||||||||||||||
Opteum Mortgage Acceptance Corp Asset Backed Pass-Through Certificates Series 2005-2, Class M2 (P) | 0.605 | 04-25-35 | 2,952,672 | 2,685,204 | |||||||||||||||||||||||||
Opteum Mortgage Acceptance Corp. Series 2005-3, Class APT (P) | 0.445 | 07-25-35 | 3,691,093 | 3,597,037 | |||||||||||||||||||||||||
Residential Accredit Loans, Inc. Series 2005-QO4, Class XIO IO | 2.348 | 12-25-45 | 21,217,201 | 2,663,964 |
Springleaf Mortgage Loan Trust Series 2012-3A, Class M1 (P) (S) | 2.660 | 12-25-59 | 1,520,000 | $1,519,913 | |||||||||||||||||||||||||
Thornburg Mortgage Securities Trust Series 2004-1, Class II2A (P) | 1.627 | 03-25-44 | 2,335,082 | 2,291,332 | |||||||||||||||||||||||||
TMSQ Mortgage Trust Series 2011-1500, Class D (P) (S) | 3.962 | 10-10-36 | 2,770,000 | 2,724,979 | |||||||||||||||||||||||||
UBS Commercial Mortgage Trust | |||||||||||||||||||||||||||||
Series 2012-C1, Class B | 4.822 | 05-10-45 | 2,445,000 | 2,668,925 | |||||||||||||||||||||||||
Series 2012-C1, Class C (P) (S) | 5.727 | 05-10-45 | 1,580,000 | 1,766,476 | |||||||||||||||||||||||||
UBS-Barclays Commercial Mortgage Trust Series 2012-C2, Class XA IO (S) | 1.918 | 05-10-63 | 27,116,010 | 2,191,489 | |||||||||||||||||||||||||
VNDO Mortgage Trust Series 2013-PENN, Class D (P) (S) | 4.078 | 12-13-29 | 4,103,000 | 4,171,282 | |||||||||||||||||||||||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C31, Class AM (P) | 5.591 | 04-15-47 | 1,810,000 | 1,956,581 | |||||||||||||||||||||||||
WaMu Mortgage Pass Through Certificates | |||||||||||||||||||||||||||||
Series 2005-AR13, Class X IO | 1.470 | 10-25-45 | 92,389,371 | 5,245,499 | |||||||||||||||||||||||||
Series 2005-AR19, Class A1A2 (P) | 0.445 | 12-25-45 | 4,141,554 | 3,899,803 | |||||||||||||||||||||||||
Series 2005-AR2, Class 2A1B (P) | 0.525 | 01-25-45 | 1,554,882 | 1,428,945 | |||||||||||||||||||||||||
Series 2005-AR2, Class 2A3 (P) | 0.505 | 01-25-45 | 2,346,745 | 2,158,536 | |||||||||||||||||||||||||
Series 2005-AR8, Class 2AB2 (P) | 0.575 | 07-25-45 | 4,078,672 | 3,763,035 | |||||||||||||||||||||||||
Wells Fargo Commercial Mortgage Trust | |||||||||||||||||||||||||||||
Series 2013-120B, Class C (P) (S) | 2.799 | 03-18-28 | 6,865,000 | 6,760,693 | |||||||||||||||||||||||||
Series 2013-BTC, Class E (P) (S) | 3.667 | 04-16-35 | 4,215,000 | 3,875,191 | |||||||||||||||||||||||||
WF-RBS Commercial Mortgage Trust | |||||||||||||||||||||||||||||
Series 2012-C9, Class XA IO (S) | 2.377 | 11-15-45 | 29,619,586 | 3,374,026 | |||||||||||||||||||||||||
Series 2013-C15, Class B (P) | 4.632 | 08-15-46 | 1,072,000 | 1,151,293 | |||||||||||||||||||||||||
Series 2013-C16, Class B (P) | 5.149 | 09-15-46 | 1,800,000 | 2,004,026 | |||||||||||||||||||||||||
U.S. Government Agency 1.4% | 32,067,775 | ||||||||||||||||||||||||||||
Federal Home Loan Mortgage Corp. | |||||||||||||||||||||||||||||
Series 290, Class IO | 3.500 | 11-15-32 | 10,573,482 | 1,904,275 | |||||||||||||||||||||||||
Series 3794, Class PI IO | 4.500 | 02-15-38 | 1,801,957 | 169,218 | |||||||||||||||||||||||||
Series 4077, Class IK IO | 5.000 | 07-15-42 | 4,340,130 | 861,382 | |||||||||||||||||||||||||
Series 4136, Class IH IO | 3.500 | 09-15-27 | 14,276,446 | 1,696,737 | |||||||||||||||||||||||||
Series K017, Class X1 IO | 1.582 | 12-25-21 | 20,547,541 | 1,644,481 | |||||||||||||||||||||||||
Series K018, Class X1 IO | 1.589 | 01-25-22 | 19,523,767 | 1,573,420 | |||||||||||||||||||||||||
Series K021, Class X1 IO | 1.639 | 06-25-22 | 4,645,017 | 419,501 | |||||||||||||||||||||||||
Series K022, Class X1 IO | 1.424 | 07-25-22 | 36,168,221 | 2,836,095 | |||||||||||||||||||||||||
Series K709, Class X1 IO | 1.668 | 03-25-19 | 17,083,221 | 978,031 | |||||||||||||||||||||||||
Series K710, Class X1 IO | 1.909 | 05-25-19 | 13,887,064 | 941,321 | |||||||||||||||||||||||||
Series K711, Class X1 IO | 1.829 | 07-25-19 | 49,416,043 | 3,248,710 | |||||||||||||||||||||||||
Federal National Mortgage Association | |||||||||||||||||||||||||||||
Series 2009-50, Class GI IO | 5.000 | 05-25-39 | 1,926,349 | 261,001 | |||||||||||||||||||||||||
Series 2009-78, Class IB IO | 5.000 | 06-25-39 | 2,424,770 | 290,540 | |||||||||||||||||||||||||
Series 2012-118, Class IB IO | 3.500 | 11-25-42 | 7,595,629 | 1,716,710 |
Series 2012-137, Class QI IO | 3.000 | 12-25-27 | 15,280,769 | $2,018,180 | |||||||||||||||||||||||||
Series 2012-137, Class WI IO | 3.500 | 12-25-32 | 11,316,855 | 2,192,084 | |||||||||||||||||||||||||
Series 402, Class 3 IO | 4.000 | 11-25-39 | 1,562,104 | 278,062 | |||||||||||||||||||||||||
Series 402, Class 4 IO | 4.000 | 10-25-39 | 2,433,705 | 426,012 | |||||||||||||||||||||||||
Series 402, Class 7 IO | 4.500 | 11-25-39 | 2,276,359 | 429,833 | |||||||||||||||||||||||||
Series 407, Class 15 IO | 5.000 | 01-25-40 | 2,620,355 | 519,277 | |||||||||||||||||||||||||
Series 407, Class 21 IO | 5.000 | 01-25-39 | 1,226,768 | 168,203 | |||||||||||||||||||||||||
Series 407, Class 7 IO | 5.000 | 03-25-41 | 2,175,192 | 451,302 | |||||||||||||||||||||||||
Series 407, Class 8 IO | 5.000 | 03-25-41 | 1,086,680 | 219,032 | |||||||||||||||||||||||||
Series 407, Class C6 IO | 5.500 | 01-25-40 | 5,153,109 | 1,109,889 | |||||||||||||||||||||||||
Government National Mortgage Association | |||||||||||||||||||||||||||||
Series 2012-114, Class IO | 1.030 | 01-16-53 | 10,912,662 | 926,976 | |||||||||||||||||||||||||
Series 2013-42, Class IA IO | 3.500 | 03-20-43 | 14,494,154 | 1,851,651 | |||||||||||||||||||||||||
Series 2013-42, Class YI IO | 3.500 | 03-20-43 | 18,994,781 | 2,935,852 | |||||||||||||||||||||||||
Asset backed securities 10.4% | 247,158,810 | ||||||||||||||||||||||||||||
(Cost $243,404,168) | |||||||||||||||||||||||||||||
ACE Securities Corp. Home Equity Loan Trust Series 2005-HE3, Class M2 (P) | 0.830 | 05-25-35 | 2,419,980 | 2,308,337 | |||||||||||||||||||||||||
Aegis Asset Backed Securities Trust | |||||||||||||||||||||||||||||
Series 2004-3, Class A1 (P) | 0.875 | 09-25-34 | 1,305,143 | 1,282,254 | |||||||||||||||||||||||||
Series 2005-4, Class M1 (P) | 0.605 | 10-25-35 | 5,060,000 | 4,519,395 | |||||||||||||||||||||||||
Ally Auto Receivables Trust Series 2014-2, Class A4 | 1.840 | 01-15-20 | 5,535,000 | 5,586,243 | |||||||||||||||||||||||||
Ally Master Owner Trust Series 2012-4, Class A | 1.720 | 07-15-19 | 2,315,000 | 2,334,397 | |||||||||||||||||||||||||
American Express Credit Account Master Trust | |||||||||||||||||||||||||||||
Series 2014-1, Class A4 | 1.490 | 04-15-20 | 5,600,000 | 5,630,845 | |||||||||||||||||||||||||
Series 2014-4, Class A | 1.430 | 06-15-20 | 5,695,000 | 5,712,563 | |||||||||||||||||||||||||
Ameriquest Mortgage Securities, Inc. Series 2005-R3, Class M2 (P) | 0.625 | 05-25-35 | 3,070,000 | 2,890,436 | |||||||||||||||||||||||||
Applebee's/IHOP Funding LLC Series 2014-1, Class A2 (S) | 4.277 | 09-05-44 | 8,440,000 | 8,477,592 | |||||||||||||||||||||||||
Argent Securities, Inc. | |||||||||||||||||||||||||||||
Series 2003-W10, Class M1 (P) | 1.232 | 01-25-34 | 1,585,140 | 1,526,431 | |||||||||||||||||||||||||
Series 2004-W6, Class M1 (P) | 0.980 | 05-25-34 | 1,454,740 | 1,412,717 | |||||||||||||||||||||||||
Asset Backed Funding Certificates Series 2005-HE1, Class M1 (P) | 0.785 | 03-25-35 | 2,241,548 | 2,142,875 | |||||||||||||||||||||||||
Bank of The West Auto Trust Series 2014-1, Class A4 (S) | 1.650 | 03-16-20 | 5,185,000 | 5,202,520 | |||||||||||||||||||||||||
Bravo Mortgage Asset Trust Series 2006-1A, Class A2 (P) (S) | 0.395 | 07-25-36 | 6,969,111 | 6,507,826 | |||||||||||||||||||||||||
Capital One Multi-Asset Execution Trust Series 2014-A5, Class A | 1.480 | 07-15-20 | 9,430,000 | 9,489,994 | |||||||||||||||||||||||||
CarMax Auto Owner Trust Series 2014-3, Class A3 | 1.160 | 06-17-19 | 4,710,000 | 4,718,892 | |||||||||||||||||||||||||
Chase Issuance Trust |
Series 2014-A6, Class A | 1.260 | 07-15-19 | 3,959,000 | $3,963,549 | |||||||||||||||||||||||||
Series 2014-A7, Class A | 1.380 | 11-15-19 | 7,330,000 | 7,330,000 | |||||||||||||||||||||||||
Chrysler Capital Auto Receivables Trust Series 2014-BA, Class A4 (S) | 1.760 | 12-16-19 | 2,145,000 | 2,164,009 | |||||||||||||||||||||||||
Citibank Credit Card Issuance Trust | |||||||||||||||||||||||||||||
Series 2007-A8, Class A8 | 5.650 | 09-20-19 | 3,610,000 | 4,039,139 | |||||||||||||||||||||||||
Series 2014-A8, Class A8 | 1.730 | 04-09-20 | 7,910,000 | 7,960,015 | |||||||||||||||||||||||||
Citicorp Residential Mortgage Securities, Inc. Series 2007-2, Class A6 (P) | 6.265 | 06-25-37 | 1,324,328 | 1,367,847 | |||||||||||||||||||||||||
CKE Restaurant Holdings, Inc. Series 2013-1A, Class A2 (S) | 4.474 | 03-20-43 | 7,868,875 | 8,058,090 | |||||||||||||||||||||||||
ContiMortgage Home Equity Loan Trust Series 1995-2, Class A5 | 8.100 | 08-15-25 | 124,656 | 119,896 | |||||||||||||||||||||||||
Countrywide Asset-Backed Certificates Series 2004-10, Class AF5B (P) | 5.613 | 02-25-35 | 2,745,649 | 2,799,346 | |||||||||||||||||||||||||
Credit Suisse Mortgage Trust Series 2006-CF2, Class M1 (P) (S) | 0.625 | 05-25-36 | 4,910,000 | 4,737,600 | |||||||||||||||||||||||||
Credit-Based Asset Servicing and Securitization LLC | |||||||||||||||||||||||||||||
Series 2005-CB2, Class M1 (P) | 0.815 | 04-25-36 | 2,036,150 | 2,033,762 | |||||||||||||||||||||||||
Series 2005-CB4, Class M1 (P) | 0.574 | 07-25-35 | 1,680,000 | 1,613,257 | |||||||||||||||||||||||||
Discover Card Execution Note Trust Series 2014-A5, Class A | 1.390 | 04-15-20 | 9,755,000 | 9,749,264 | |||||||||||||||||||||||||
Encore Credit Receivables Trust Series 2005-2, Class M2 (P) | 0.677 | 11-25-35 | 3,350,000 | 3,262,200 | |||||||||||||||||||||||||
Ford Credit Auto Owner Trust Series 2014-1, Class B (S) | 2.410 | 11-15-25 | 3,225,000 | 3,262,100 | |||||||||||||||||||||||||
Ford Credit Floorplan Master Owner Trust | |||||||||||||||||||||||||||||
Series 2012-5, Class A | 1.490 | 09-15-19 | 5,840,000 | 5,847,277 | |||||||||||||||||||||||||
Series 2014-4, Class A1 | 1.400 | 08-15-19 | 7,020,000 | 7,039,481 | |||||||||||||||||||||||||
Fremont Home Loan Trust Series 2005-1, Class M3 (P) | 0.920 | 06-25-35 | 1,689,215 | 1,693,286 | |||||||||||||||||||||||||
GE Equipment Midticket LLC Series 2014-1, Class A4 | 1.590 | 08-22-23 | 1,565,000 | 1,575,093 | |||||||||||||||||||||||||
GSAA Home Equity Trust Series 2005-11, Class 3A1 (P) | 0.425 | 10-25-35 | 4,191,889 | 3,912,827 | |||||||||||||||||||||||||
GSAA Trust Series 2005-10, Class M3 (P) | 0.705 | 06-25-35 | 4,265,000 | 4,057,990 | |||||||||||||||||||||||||
Home Equity Asset Trust | |||||||||||||||||||||||||||||
Series 2005-1, Class M4 (P) | 1.175 | 05-25-35 | 2,085,000 | 2,003,506 | |||||||||||||||||||||||||
Series 2005-6, Class M1 (P) | 0.625 | 12-25-35 | 1,652,996 | 1,648,136 | |||||||||||||||||||||||||
Home Equity Mortgage Loan Asset-Backed Trust Series 2005-C, Class AII3 (P) | 0.525 | 10-25-35 | 3,212,500 | 3,087,000 | |||||||||||||||||||||||||
Honda Auto Receivables Owner Trust Series 2014-3, Class A4 | 1.310 | 10-15-20 | 3,760,000 | 3,764,692 | |||||||||||||||||||||||||
John Deere Owner Trust Series 2014-B, Class A4 | 1.500 | 06-15-21 | 4,130,000 | 4,149,287 | |||||||||||||||||||||||||
Merrill Lynch Mortgage Investors, Inc. Series 2005-WMC1, Class M1 (P) | 0.905 | 09-25-35 | 2,074,762 | 1,948,961 |
MVW Owner Trust Series 2014-1A, Class A (S) | 2.250 | 09-20-31 | 1,553,967 | $1,551,449 | |||||||||||||||||||||||||
New Century Home Equity Loan Trust | |||||||||||||||||||||||||||||
Series 2005-1, Class M1 (P) | 0.830 | 03-25-35 | 5,350,000 | 4,990,271 | |||||||||||||||||||||||||
Series 2005-2, Class M2 (P) | 0.605 | 06-25-35 | 6,285,000 | 5,791,609 | |||||||||||||||||||||||||
Porsche Innovative Lease Owner Trust Series 2014-1, Class A4 (S) | 1.260 | 09-21-20 | 3,280,000 | 3,287,373 | |||||||||||||||||||||||||
RAMP Trust Series 2005-RS3, Class M1 (P) | 0.575 | 03-25-35 | 2,355,000 | 2,226,073 | |||||||||||||||||||||||||
Renaissance Home Equity Loan Trust Series 2005-2, Class AF4 (P) | 4.934 | 08-25-35 | 2,680,000 | 2,604,483 | |||||||||||||||||||||||||
Sierra Timeshare Receivables Funding LLC Series 2014-2A, Class A (S) | 2.050 | 06-20-31 | 4,429,939 | 4,459,584 | |||||||||||||||||||||||||
Sonic Capital LLC Series 2011-1A, Class A2 (S) | 5.438 | 05-20-41 | 2,823,182 | 3,007,889 | |||||||||||||||||||||||||
Soundview Home Loan Trust | |||||||||||||||||||||||||||||
Series 2005-CTX1, Class M2 (P) | 0.594 | 11-25-35 | 2,648,500 | 2,473,400 | |||||||||||||||||||||||||
Series 2006-OPT2, Class A3 (P) | 0.335 | 05-25-36 | 1,115,891 | 1,034,797 | |||||||||||||||||||||||||
Specialty Underwriting & Residential Finance Trust Series 2006-BC1, Class A2D (P) | 0.455 | 12-25-36 | 6,930,000 | 6,698,483 | |||||||||||||||||||||||||
Structured Asset Securities Corp. Mortgage Loan Trust Series 2005-2XS, Class 2A2 (P) | 1.656 | 02-25-35 | 4,360,543 | 4,197,463 | |||||||||||||||||||||||||
TAL Advantage V LLC Series 2014-1A, Class A (S) | 3.510 | 02-22-39 | 2,173,750 | 2,202,891 | |||||||||||||||||||||||||
Toyota Auto Receivables Owner Trust Series 2014-C, Class A4 | 1.440 | 04-15-20 | 2,835,000 | 2,850,142 | |||||||||||||||||||||||||
Volkswagen Credit Auto Master Trust Series 2014-1A, Class A2 (S) | 1.400 | 07-22-19 | 3,340,000 | 3,351,329 | |||||||||||||||||||||||||
Westgate Resorts LLC | |||||||||||||||||||||||||||||
Series 2012-2A, Class B (S) | 4.500 | 01-20-25 | 4,972,112 | 5,020,888 | |||||||||||||||||||||||||
Series 2012-3A, Class B (S) | 4.500 | 03-20-25 | 2,746,275 | 2,774,499 | |||||||||||||||||||||||||
Series 2013-1A, Class B (S) | 3.750 | 08-20-25 | 977,800 | 985,299 | |||||||||||||||||||||||||
Series 2014-1A, Class A (S) | 2.150 | 12-20-26 | 6,562,288 | 6,511,949 | |||||||||||||||||||||||||
Series 2014-1A, Class B (S) | 3.250 | 12-20-26 | 4,373,316 | 4,376,050 | |||||||||||||||||||||||||
Series 2014-AA, Class A (S) | 6.250 | 10-20-26 | 2,524,578 | 2,520,635 | |||||||||||||||||||||||||
World Omni Automobile Lease Securitization Trust Series 2014-A, Class A4 | 1.370 | 01-15-20 | 1,305,000 | 1,311,327 | |||||||||||||||||||||||||
Shares | Value | ||||||||||||||||||||||||||||
Preferred securities 1.2% | $29,653,198 | ||||||||||||||||||||||||||||
(Cost $29,054,286) | |||||||||||||||||||||||||||||
Consumer staples 0.1% | 2,116,478 | ||||||||||||||||||||||||||||
Food and staples retailing 0.1% | |||||||||||||||||||||||||||||
Ocean Spray Cranberries, Inc., Series A (S) | 23,250 | 2,116,478 | |||||||||||||||||||||||||||
Financials 0.8% | 20,531,856 | ||||||||||||||||||||||||||||
Banks 0.3% | |||||||||||||||||||||||||||||
FNB Corp. (7.250% to 2-15-24, then 3 month LIBOR + 4.600%) | 62,350 | 1,730,213 |
Regions Financial Corp., 6.375% | 115,690 | $2,895,721 | |||||||||||||||||||||||||||
Wells Fargo & Company, Series L, 7.500% | 1,342 | 1,637,307 | |||||||||||||||||||||||||||
Capital markets 0.1% | |||||||||||||||||||||||||||||
The Goldman Sachs Group, Inc. (5.500% to 5-10-23, then 3 month LIBOR + 3.640%) | 79,325 | 1,917,285 | |||||||||||||||||||||||||||
Consumer finance 0.2% | |||||||||||||||||||||||||||||
Ally Financial, Inc., 7.000% (S) | 4,494 | 4,510,993 | |||||||||||||||||||||||||||
Discover Financial Services, 6.500% | 60,000 | 1,518,600 | |||||||||||||||||||||||||||
Diversified financial services 0.2% | |||||||||||||||||||||||||||||
GMAC Capital Trust I (8.125% to 2-15-16, then 3 month LIBOR + 5.785%) | 212,456 | 5,617,337 | |||||||||||||||||||||||||||
Real estate investment trusts 0.0% | |||||||||||||||||||||||||||||
Weyerhaeuser Company, 6.375% | 12,000 | 704,400 | |||||||||||||||||||||||||||
Industrials 0.1% | 1,876,213 | ||||||||||||||||||||||||||||
Aerospace and defense 0.1% | |||||||||||||||||||||||||||||
United Technologies Corp., 7.500% | 31,265 | 1,876,213 | |||||||||||||||||||||||||||
Utilities 0.2% | 5,128,651 | ||||||||||||||||||||||||||||
Electric utilities 0.1% | |||||||||||||||||||||||||||||
Exelon Corp., 6.500% | 30,506 | 1,592,108 | |||||||||||||||||||||||||||
Multi-utilities 0.1% | |||||||||||||||||||||||||||||
Dominion Resources, Inc., 6.375% | 68,339 | 3,536,543 | |||||||||||||||||||||||||||
Par value | Value | ||||||||||||||||||||||||||||
Short-term investments 0.8% | $17,932,000 | ||||||||||||||||||||||||||||
(Cost $17,932,000) | |||||||||||||||||||||||||||||
Repurchase agreement 0.8% | 17,932,000 | ||||||||||||||||||||||||||||
Barclays Tri-Party Repurchase Agreement dated 11-28-14 at 0.060% to be repurchased at $16,594,083 on 12-1-14, collateralized by $14,454,800 U.S. Treasury Inflation Indexed Notes, 1.250% due 7-15-20 (valued at $16,926,051, including interest) | 16,594,000 | 16,594,000 | |||||||||||||||||||||||||||
Repurchase Agreement with State Street Corp. dated 11-28-14 at 0.000% to be repurchased at $1,338,000 on 12-1-14, collateralized by $1,330,000 Federal Home Loan Bank, 2.875% due 6-14-24 (valued at $1,368,304, including interest) | 1,338,000 | 1,338,000 | |||||||||||||||||||||||||||
Total investments (Cost $2,310,368,885)† 99.7% | $2,366,322,271 | ||||||||||||||||||||||||||||
Other assets and liabilities, net 0.3% | $6,386,178 | ||||||||||||||||||||||||||||
Total net assets 100.0% | $2,372,708,449 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund. | |||||||||
^All par values are denominated in U.S. dollars unless otherwise indicated. | |||||||||
Key to Currency Abbreviation | |||||||||
BRL | Brazilian Real | ||||||||
Key to Security Abbreviations and Legend | |||||||||
IO | Interest-Only Security - (Interest Tranche of Stripped Mortgage Pool). The coupon rate shown represents the rate at period end. | ||||||||
LIBOR | London Interbank Offered Rate | ||||||||
PIK | Payment-in-kind | ||||||||
USGG | U.S. Generic Government Yield Index | ||||||||
(H) | Non-income producing - Issuer is in default. | ||||||||
(M) | Term loans are variable rate obligations. The coupon rate shown represents the rate at period end. | ||||||||
(P) | Variable rate obligation. The coupon rate shown represents the rate at period end. | ||||||||
(Q) | Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date. | ||||||||
(S) | These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $605,308,097 or 25.5% of the fund's net assets as of 11-30-14. | ||||||||
† | At 11-30-14, the aggregate cost of investment securities for federal income tax purposes was $2,317,849,603. Net unrealized appreciation aggregated $48,472,668, of which $75,879,677 related to appreciated investment securities and $27,407,009 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 11-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||||
Investments, at value (Cost $2,310,368,885) | $2,366,322,271 | |||||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 2,808,780 | |||||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 12,708,471 | |||||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 22,542,575 | |||||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 158,376 | |||||||||||||||||||||||||||||||||||||||
Total assets | 2,404,540,473 | |||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||
Due to custodian | 4,267 | |||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 25,942,331 | |||||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 4,449,082 | |||||||||||||||||||||||||||||||||||||||
Distributions payable | 541,038 | |||||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 75,740 | |||||||||||||||||||||||||||||||||||||||
Transfer agent fees | 430,332 | |||||||||||||||||||||||||||||||||||||||
Distribution and service fees | 166,123 | |||||||||||||||||||||||||||||||||||||||
Trustees' fees | 3,890 | |||||||||||||||||||||||||||||||||||||||
Investment management fees | 368 | |||||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 218,853 | |||||||||||||||||||||||||||||||||||||||
Total liabilities | 31,832,024 | |||||||||||||||||||||||||||||||||||||||
Net assets | $2,372,708,449 | |||||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||||
Paid-in capital | $2,311,281,939 | |||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | 451,861 | |||||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 5,028,406 | |||||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 55,946,243 | |||||||||||||||||||||||||||||||||||||||
Net assets | $2,372,708,449 | |||||||||||||||||||||||||||||||||||||||
STATEMENT OF ASSETS AND LIABILITIES (continued)
Net asset value per share | ||||||||||||||||||
Based on net asset values and shares outstanding-the fund has an unlimited number of shares authorized with no par value | ||||||||||||||||||
Class A ($1,512,677,773 ÷ 93,282,374 shares)1 | $16.22 | |||||||||||||||||
Class B ($30,318,602 ÷ 1,869,816 shares)1 | $16.21 | |||||||||||||||||
Class C ($201,813,515 ÷ 12,444,351 shares)1 | $16.22 | |||||||||||||||||
Class I ($555,074,656 ÷ 34,226,844 shares) | $16.22 | |||||||||||||||||
Class R2 ($14,451,926 ÷ 890,332 shares) | $16.23 | |||||||||||||||||
Class R6 ($58,371,977 ÷ 3,595,824 shares) | $16.23 | |||||||||||||||||
Maximum offering price per share | ||||||||||||||||||
Class A (net asset value per share ÷ 96%)2 | $16.90 |
1 | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. | |||||||
2 | On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced. |
STATEMENT OF OPERATIONS For the six months ended 11-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||||
Interest | $44,093,516 | |||||||||||||||||||||||||||||||||||||||
Dividends | 885,043 | |||||||||||||||||||||||||||||||||||||||
Less foreign taxes withheld | (90 | ) | ||||||||||||||||||||||||||||||||||||||
Total investment income | 44,978,469 | |||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Investment management fees | 4,920,426 | |||||||||||||||||||||||||||||||||||||||
Distribution and service fees | 3,220,209 | |||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 191,540 | |||||||||||||||||||||||||||||||||||||||
Transfer agent fees | 1,290,822 | |||||||||||||||||||||||||||||||||||||||
Trustees' fees | 11,311 | |||||||||||||||||||||||||||||||||||||||
State registration fees | 93,546 | |||||||||||||||||||||||||||||||||||||||
Printing and postage | 81,241 | |||||||||||||||||||||||||||||||||||||||
Professional fees | 67,356 | |||||||||||||||||||||||||||||||||||||||
Custodian fees | 111,115 | |||||||||||||||||||||||||||||||||||||||
Registration and filing fees | 23,713 | |||||||||||||||||||||||||||||||||||||||
Other | 15,348 | |||||||||||||||||||||||||||||||||||||||
Total expenses | 10,026,627 | |||||||||||||||||||||||||||||||||||||||
Less expense reductions | (610,253 | ) | ||||||||||||||||||||||||||||||||||||||
Net expenses | 9,416,374 | |||||||||||||||||||||||||||||||||||||||
Net investment income | 35,562,095 | |||||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||||
Investments and foreign currency transactions | 19,330,614 | |||||||||||||||||||||||||||||||||||||||
19,330,614 | ||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||||
Investments and translation of assets and liabilities in foreign currencies | (19,725,875 | ) | ||||||||||||||||||||||||||||||||||||||
(19,725,875 | ) | |||||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss | (395,261 | ) | ||||||||||||||||||||||||||||||||||||||
Increase in net assets from operations | $35,166,834 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 11-30-14 | Year ended 5-31-14 | |||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $35,562,095 | $69,407,967 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) | 19,330,614 | (1,245,911 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (19,725,875 | ) | 2,708,701 | |||||||||||||||||||||||||||||||||||||||||||||||
Increase in net assets resulting from operations | 35,166,834 | 70,870,757 | ||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | (27,428,925 | ) | (57,110,614 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Class B | (492,251 | ) | (1,268,051 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Class C | (2,753,459 | ) | (5,772,362 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Class I | (8,512,752 | ) | (10,994,882 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | (181,481 | ) | (190,232 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | (1,007,480 | ) | (1,713,305 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (5,785,899 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Class B | — | (150,431 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Class C | — | (679,388 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (1,012,012 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (21,658 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (173,447 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (40,376,348 | ) | (84,872,281 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 420,281,568 | 17,661,786 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total increase | 415,072,054 | 3,660,262 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 1,957,636,395 | 1,953,976,133 | ||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $2,372,708,449 | $1,957,636,395 | ||||||||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $451,861 | $5,266,114 |
Financial highlights
Class A Shares Period ended | 11-30-14 | 1 | 5-31-14 | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.26 | $16.37 | $15.86 | $15.86 | $15.00 | $12.96 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.29 | 0.61 | 0.63 | 0.72 | 0.81 | 0.97 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | 0.02 | 0.61 | 0.08 | 0.92 | 2.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.27 | 0.63 | 1.24 | 0.80 | 1.73 | 3.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.67 | ) | (0.70 | ) | (0.79 | ) | (0.87 | ) | (0.98 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.07 | ) | (0.03 | ) | (0.01 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.31 | ) | (0.74 | ) | (0.73 | ) | (0.80 | ) | (0.87 | ) | (0.98 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.22 | $16.26 | $16.37 | $15.86 | $15.86 | $15.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 1.68 | 5 | 4.06 | 7.93 | 5.21 | 11.78 | 23.83 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1,513 | $1,411 | $1,434 | $1,061 | $912 | $819 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.95 | 6 | 0.98 | 1.03 | 1.06 | 1.05 | 1.08 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.89 | 6 | 0.92 | 0.98 | 1.02 | 1.05 | 1.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.61 | 6 | 3.80 | 3.84 | 4.63 | 5.24 | 6.71 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 77 | 72 | 76 | 73 | 88 |
1 | Six months ended 11-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
3 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||||||||
6 | Annualized. |
Class B Shares Period ended | 11-30-14 | 1 | 5-31-14 | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.26 | $16.37 | $15.86 | $15.86 | $15.00 | $12.95 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.24 | 0.50 | 0.51 | 0.61 | 0.70 | 0.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.04 | ) | 0.02 | 0.61 | 0.08 | 0.92 | 2.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.20 | 0.52 | 1.12 | 0.69 | 1.62 | 2.93 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.56 | ) | (0.58 | ) | (0.68 | ) | (0.76 | ) | (0.88 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.07 | ) | (0.03 | ) | (0.01 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.25 | ) | (0.63 | ) | (0.61 | ) | (0.69 | ) | (0.76 | ) | (0.88 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.21 | $16.26 | $16.37 | $15.86 | $15.86 | $15.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 1.27 | 5 | 3.34 | 7.18 | 4.48 | 11.00 | 23.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $30 | $33 | $44 | $37 | $28 | $25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.65 | 6 | 1.68 | 1.73 | 1.76 | 1.75 | 1.78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.59 | 6 | 1.62 | 1.68 | 1.72 | 1.75 | 1.77 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.92 | 6 | 3.11 | 3.15 | 3.92 | 4.53 | 6.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 77 | 72 | 76 | 73 | 88 |
1 | Six months ended 11-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
3 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||||||||
6 | Annualized. |
Class C Shares Period ended | 11-30-14 | 1 | 5-31-14 | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.26 | $16.37 | $15.87 | $15.86 | $15.00 | $12.96 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.24 | 0.49 | 0.51 | 0.61 | 0.70 | 0.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.03 | ) | 0.03 | 0.60 | 0.09 | 0.92 | 2.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.21 | 0.52 | 1.11 | 0.70 | 1.62 | 2.92 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.56 | ) | (0.58 | ) | (0.68 | ) | (0.76 | ) | (0.88 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.07 | ) | (0.03 | ) | (0.01 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.25 | ) | (0.63 | ) | (0.61 | ) | (0.69 | ) | (0.76 | ) | (0.88 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.22 | $16.26 | $16.37 | $15.87 | $15.86 | $15.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 1.33 | 5 | 3.34 | 7.11 | 4.55 | 11.00 | 22.98 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $202 | $162 | $195 | $116 | $71 | $40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.65 | 6 | 1.68 | 1.72 | 1.77 | 1.75 | 1.78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.59 | 6 | 1.62 | 1.67 | 1.72 | 1.75 | 1.77 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.90 | 6 | 3.10 | 3.12 | 3.91 | 4.50 | 5.98 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 77 | 72 | 76 | 73 | 88 |
1 | Six months ended 11-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
3 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||||||||
6 | Annualized. |
Class I Shares Period ended | 11-30-14 | 1 | 5-31-14 | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.26 | $16.37 | $15.87 | $15.86 | $14.99 | $12.96 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.32 | 0.66 | 0.68 | 0.78 | 0.88 | 1.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | 0.02 | 0.61 | 0.09 | 0.92 | 2.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.30 | 0.68 | 1.29 | 0.87 | 1.80 | 3.08 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.34 | ) | (0.72 | ) | (0.76 | ) | (0.85 | ) | (0.93 | ) | (1.05 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.07 | ) | (0.03 | ) | (0.01 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.34 | ) | (0.79 | ) | (0.79 | ) | (0.86 | ) | (0.93 | ) | (1.05 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.22 | $16.26 | $16.37 | $15.87 | $15.86 | $14.99 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 1.84 | 4 | 4.40 | 8.27 | 5.70 | 12.33 | 24.31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $555 | $302 | $277 | $123 | $74 | $30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.64 | 5 | 0.66 | 0.65 | 0.67 | 0.62 | 0.63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.59 | 5 | 0.60 | 0.60 | 0.62 | 0.62 | 0.63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.90 | 5 | 4.11 | 4.19 | 4.99 | 5.64 | 7.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 77 | 72 | 76 | 73 | 88 |
1 | Six months ended 11-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
3 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
4 | Not annualized. | |||||||||||||||||||||||||||||||||||||
5 | Annualized. |
Class R2 Shares Period ended | 11-30-14 | 1 | 5-31-14 | 5-31-13 | 5-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.27 | $16.38 | $15.87 | $15.80 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.29 | 0.60 | 0.62 | 0.17 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | 0.02 | 0.64 | 0.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.27 | 0.62 | 1.26 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.66 | ) | (0.72 | ) | (0.19 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.07 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.31 | ) | (0.73 | ) | (0.75 | ) | (0.19 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.23 | $16.27 | $16.38 | $15.87 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 1.64 | 5 | 4.01 | 8.09 | 1.68 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $14 | $7 | $2 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.00 | 7 | 1.05 | 1.03 | 0.86 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.95 | 7 | 0.99 | 0.98 | 0.80 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.57 | 7 | 3.76 | 3.88 | 4.28 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 77 | 72 | 76 | 8 |
1 | Six months ended 11-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-1-12. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||
6 | Less than $500,000. | |||||||||||||||||||||||||||||||
7 | Annualized. | |||||||||||||||||||||||||||||||
8 | The portfolio turnover is shown for the period from 6-1-11 to 5-31-12. |
Class R6 Shares Period ended | 11-30-14 | 1 | 5-31-14 | 5-31-13 | 5-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.28 | $16.38 | $15.87 | $15.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.33 | 0.68 | 0.70 | 0.57 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.03 | ) | 0.03 | 0.61 | 0.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.30 | 0.71 | 1.31 | 0.97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.35 | ) | (0.74 | ) | (0.77 | ) | (0.64 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.07 | ) | (0.03 | ) | (0.01 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.35 | ) | (0.81 | ) | (0.80 | ) | (0.65 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.23 | $16.28 | $16.38 | $15.87 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 1.83 | 5 | 4.58 | 8.42 | 6.38 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $58 | $43 | $3 | $2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.54 | 6 | 0.56 | 0.57 | 0.63 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.47 | 6 | 0.50 | 0.52 | 0.57 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 4.04 | 6 | 4.26 | 4.30 | 5.04 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 77 | 72 | 76 | 7 |
1 | Six months ended 11-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R6 shares is 9-1-11. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||
6 | Annualized. | |||||||||||||||||||||||||||||||
7 | The portfolio turnover is shown for the period from 6-1-11 to 5-31-12. |
Note 1 — Organization
John Hancock Bond Fund (the fund) is a series of John Hancock Sovereign Bond Fund (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to seek a high level of current income consistent with prudent investment risk.
The fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions and certain investors. Class R2 shares are available only to certain retirement plans. Class R6 shares are available only to certain retirement plans, institutions and other investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees, for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the exchange where the security was acquired or most likely will be sold. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. Debt obligations are valued based on the evaluated prices provided by an independent pricing vendor or from broker-dealers. Independent pricing vendors utilize matrix pricing which takes 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, as well as broker supplied prices. Foreign securities are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing vendor. Securities that trade only in the over-the-counter (OTC) market are valued using bid prices. Certain short-term securities with maturities of 60 days or less at the time of purchase are valued at amortized cost. Other fund securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund's Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund's own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
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The following is a summary of the values by input classification of the fund's investments as of November 30, 2014, by major security category or type:
Total market value at 11-30-14 | Level 1 quoted price | Level 2 significant observable inputs | Level 3 significant unobservable inputs | |
Corporate bonds | $1,039,470,814 | — | $1,039,436,762 | $34,052 |
U.S. Government and Agency obligations | 636,149,698 | — | 636,149,698 | — |
Foreign government obligations | 4,923,913 | — | 4,923,913 | — |
Municipal bonds | 5,494,505 | — | 5,494,505 | — |
Term loans | 18,086,823 | — | 18,086,823 | — |
Capital preferred securities | 29,151,496 | — | 29,151,496 | — |
Collateralized mortgage obligations | 338,301,014 | — | 336,678,111 | 1,622,903 |
Asset backed securities | 247,158,810 | — | 247,158,810 | — |
Preferred securities | 29,653,198 | $21,295,514 | 8,357,684 | — |
Short-term investments | 17,932,000 | — | 17,932,000 | — |
Total Investments in Securities | $2,366,322,271 | $21,295,514 | $2,343,369,802 | $1,656,955 |
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund's custodian, or for tri-party repurchase agreements, collateral is held at a third-party custodian bank in a segregated account for the benefit of the fund. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. Collateral received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, the MRA does not result in an offset of the reported amounts of assets and liabilities in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay back claims resulting from close-out of the transactions.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Foreign taxes are provided for based on the fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Foreign taxes. The fund may be subject to withholding tax on income and/or capital gains or repatriation taxes imposed by certain countries in which the fund invests. Taxes are accrued based upon investment income, realized gains or unrealized appreciation.
Stripped securities. Stripped securities are financial instruments structured to separate principal and interest cash flows so that one class receives principal payments from the underlying assets (PO or principal only), while the other class receives the interest cash flows (IO or interest only). Both PO and IO investments represent an interest in the cash flows of an underlying stripped security. If the underlying assets experience greater than anticipated prepayments of principal, the fund
47
may fail to fully recover its initial investment in an IO security. The market value of these securities can be extremely volatile in response to changes in interest rates or prepayments on the underlying securities. In addition, these securities present additional credit risk such that the fund may not receive all or part of its principal or interest payments because the borrower or issuer has defaulted on its obligation.
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund's custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $300 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended November 30, 2014 were $582. For the six months ended November 30, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund's relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses for an unlimited period. Capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
For federal income tax purposes, as of May 31, 2014, the fund has a short-term capital loss carryforward of $8,770,138 available to offset future net realized capital gains. This carryforward does not expire.
As of May 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are distributed annually.
Distributions paid by the fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
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Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to derivative transactions and amortization and accretion on debt securities.
Note 3 — Derivative Instruments
The fund may invest in derivatives in order to meet its investment objective. Derivatives include a variety of different instruments that may be traded in the OTC market, on a regulated exchange or through a clearing facility. The risks in using derivatives vary depending upon the structure of the instruments, including the use of leverage, optionality, the liquidity or lack of liquidity of the contract, the creditworthiness of the counterparty or clearing organization and the volatility of the position. Some derivatives involve risks that are potentially greater than the risks associated with investing directly in the referenced securities or other referenced underlying instrument. Specifically, the fund is exposed to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction.
Futures and certain options are traded or cleared on an exchange or central clearinghouse. Exchange-traded or cleared transactions generally present less counterparty risk to a fund than OTC transactions. The exchange or clearinghouse stands between the fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the exchange or clearinghouse and the clearing member.
As defined by the ISDA, the fund may have collateral agreements with certain counterparties to mitigate counterparty risk on OTC derivatives. Subject to established minimum levels, collateral for OTC transactions is generally determined based on the net aggregate unrealized gain or loss on contracts with a particular counterparty. Collateral pledged to the fund is held in a segregated account by a third-party agent or held by the custodian bank for the benefit of the fund and can be in the form of cash or debt securities issued by the U.S. government or related agencies; collateral posted by the fund for OTC transactions is held in a segregated account at the fund's custodian and is noted in the accompanying fund of investments, or if cash is posted, on the Statement of assets and liabilities. The fund's maximum risk of loss due to counterparty risk is equal to the asset value of outstanding contracts offset by collateral received.
Options. There are two types of options, put options and call options. Options are traded either over-the-counter or on an exchange. A call option gives the purchaser of the option the right to buy (and the seller the obligation to sell) the underlying instrument at the exercise price. A put option gives the purchaser of the option the right to sell (and the writer the obligation to buy) the underlying instrument at the exercise price. Writing puts and buying calls may increase the fund's exposure to changes in the value of the underlying instrument. Buying puts and writing calls may decrease the fund's exposure to such changes. Risks related to the use of options include the loss of premiums, possible illiquidity of the options markets, trading restrictions imposed by an exchange and movements in underlying security values, and for written options, potential losses in excess of the amounts recognized on the Statement of assets and liabilities. In addition, over-the-counter options are subject to the risks of all over-the-counter derivatives contracts.
When the fund purchases an option, the premium paid by the fund is included in the Fund's investments and subsequently "marked-to-market" to reflect current market value. If the purchased option expires, the fund realizes a loss equal to the cost of the option. If the fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium paid. If the fund enters into a closing sale transaction, the fund realizes a gain or loss, depending on whether proceeds from the closing sale are greater or less than the original cost.
During the six months ended November 30, 2014, the fund used purchased options to manage the duration of the fund. During the six months ended November 30, 2014, the fund held purchased options with market values ranging from up to $125,000, as measured at each quarter end. There were no open option contracts as of November 30, 2014.
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Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended November 30, 2014:
Risk | Statement of operations location | Investments and foreign currency translations* | ||||||
Interest rate contracts | Net realized gain (loss) | ($1,027,992 | ) |
* Realized gain/loss associated with purchased option contracts is included in the caption Investments in unaffiliated issuers and foreign currency transactions on the Statement of operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended November 30, 2014:
Risk | Statement of operations location | Investments and translation of assets and liabilities in foreign currencies* |
Interest rate contracts | Change in unrealized appreciation (depreciation) | $902,992 |
* Change in unrealized appreciation/depreciation associated with purchased option contracts is included in the caption Investments and translation of assets and liabilities in foreign currencies on the Statement of operations.
Note 4 — Guarantees and indemnifications
Under the Trust's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment advisor for the fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor, on an annual basis, to the sum of: (a) 0.500% of the first $500 million of the fund's average daily net assets, (b) 0.475% of the next $500 million of the fund's average daily net assets, (c) 0.450% of the next $500 million of the fund's average daily net assets, (d) 0.450% of the next $500 million of the fund's average daily net assets, (e) 0.400% of the next $500 million of the fund's average daily net assets, and (f) 0.350% of the fund's average daily net assets in excess of $2.5 billion. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock complex, including the fund (the participating portfolios). The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the participating portfolios that exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; and 0.015% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse or pay operating expenses of the fund in order to reduce the total annual fund operating expenses for Class A, Class B, Class C, Class I, Class R2 and Class R6 shares by 0.05% of the fund's average daily net assets. These fee waivers and/or reimbursements expire on
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September 30, 2015, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
The Advisor has contractually agreed to waive and/or reimburse all class-specific expenses for Class R6 shares of the fund, including transfer agency fees and service fees, as applicable, to the extent they exceed 0.00% of average net assets. The fee waiver and/or reimbursement expires September 30, 2015, unless renewed by mutual agreement of the fund and Advisor based upon a determination that this is appropriate under the circumstances at that time.
For the six months ended November 30, 2014, these expense reductions described above amounted to the following:
Class A | Class B | Class C | Class I | Class R2 | Class R6 | Total |
$411,361 | $9,027 | $50,642 | $118,620 | $2,793 | $17,810 | $610,253 |
The investment management fees incurred for the six months ended November 30, 2014 were equivalent to a net annual effective rate of 0.41% of the fund's average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended November 30, 2014 amounted to an annual rate of 0.02% of the fund's average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B, Class C and Class R2 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. In addition, under a service plan for Class R2 shares, the fund pays for certain other services. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund's shares.
Class | Rule 12b-1 fee | Service fee |
Class A | 0.30% | — |
Class B | 1.00% | — |
Class C | 1.00% | — |
Class R2 | 0.25% | 0.25% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $2,763,075 for the six months ended November 30, 2014. Of this amount, $381,925 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $2,282,025 was paid as sales commissions to broker-dealers and $99,125 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor. The up-front sales charge for Class A shares is 4.00%.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the six months ended November 30, 2014, CDSCs received by the Distributor amounted to $1,071, $30,935 and $12,800 for Class A, Class B and Class C shares, respectively.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to
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Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended November 30, 2014 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $2,154,693 | $900,272 |
Class B | 157,349 | 19,748 |
Class C | 885,710 | 110,860 |
Class I | — | 254,914 |
Class R2 | 22,457 | 844 |
Class R6 | — | 4,184 |
Total | $3,220,209 | $1,290,822 |
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 6 — Fund share transactions
Transactions in fund shares for the six months ended November 30, 2014 and for the year ended May 31, 2014 were as follows:
Six months ended 11-30-14 | Year ended 5-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 15,104,832 | $244,963,785 | 21,003,026 | $334,911,089 | ||||||||||||||||||||||
Distributions reinvested | 1,575,783 | 25,572,353 | 3,661,005 | 58,309,591 | ||||||||||||||||||||||
Repurchased | (10,190,363 | ) | (165,422,769 | ) | (25,475,061 | ) | (405,398,526 | ) | ||||||||||||||||||
Net increase (decrease) | 6,490,252 | $105,113,369 | (811,030 | ) | ($12,177,846 | ) | ||||||||||||||||||||
Class B shares | ||||||||||||||||||||||||||
Sold | 48,072 | $780,138 | 93,597 | $1,492,900 | ||||||||||||||||||||||
Distributions reinvested | 24,065 | 390,474 | 69,938 | 1,113,162 | ||||||||||||||||||||||
Repurchased | (206,852 | ) | (3,355,042 | ) | (820,777 | ) | (13,043,733 | ) | ||||||||||||||||||
Net (decrease) | (134,715 | ) | ($2,184,430 | ) | (657,242 | ) | ($10,437,671 | ) | ||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 3,523,402 | $57,137,292 | 2,656,856 | $42,448,897 | ||||||||||||||||||||||
Distributions reinvested | 150,062 | 2,435,128 | 351,321 | 5,593,733 | ||||||||||||||||||||||
Repurchased | (1,209,780 | ) | (19,629,145 | ) | (4,941,509 | ) | (78,536,001 | ) | ||||||||||||||||||
Net increase (decrease) | 2,463,684 | $39,943,275 | (1,933,332 | ) | ($30,493,371 | ) |
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Six months ended 11-30-14 | Year ended 5-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 17,297,645 | $280,547,192 | 11,124,193 | $177,539,637 | ||||||||||||||||||||||
Distributions reinvested | 469,209 | 7,612,777 | 645,255 | 10,285,774 | ||||||||||||||||||||||
Repurchased | (2,118,588 | ) | (34,362,753 | ) | (10,089,977 | ) | (160,700,623 | ) | ||||||||||||||||||
Net increase | 15,648,266 | $253,797,216 | 1,679,471 | $27,124,788 | ||||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 587,555 | $9,530,881 | 406,327 | $6,474,215 | ||||||||||||||||||||||
Distributions reinvested | 11,056 | 179,492 | 12,971 | 206,978 | ||||||||||||||||||||||
Repurchased | (126,072 | ) | (2,050,419 | ) | (127,569 | ) | (2,029,219 | ) | ||||||||||||||||||
Net increase | 472,539 | $7,659,954 | 291,729 | $4,651,974 | ||||||||||||||||||||||
Class R6 Shares | ||||||||||||||||||||||||||
Sold | 987,492 | $16,013,518 | 2,429,478 | $38,642,406 | ||||||||||||||||||||||
Distributions reinvested | 62,027 | 1,007,432 | 118,016 | 1,882,264 | ||||||||||||||||||||||
Repurchased | (65,768 | ) | (1,068,766 | ) | (95,569 | ) | (1,530,758 | ) | ||||||||||||||||||
Net increase | 983,751 | $15,952,184 | 2,451,925 | $38,993,912 | ||||||||||||||||||||||
Total net increase | 25,923,777 | $420,281,568 | 1,021,521 | $17,661,786 |
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities and U.S. Treasury obligations, amounted to $739,694,738 and $239,678,538, respectively, for the six months ended November 30, 2014. Purchases and sales of U.S. Treasury obligations aggregated $458,198,851 and $457,862,649, respectively, for the six months ended November 30, 2014.
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CONTINUATION OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Sovereign Bond Fund (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (US) LLC (the Subadvisor) for John Hancock Bond Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
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Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
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The Board noted that the fund outperformed its benchmark index and peer group average for the one-, three- and five-year periods ended December 31, 2013. The Board concluded that the fund's performance has outperformed the historical performance of comparable funds and the fund's benchmark.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees for the fund are lower than the peer group median and total expenses are higher than the peer group medium. The Board took into account management's discussion of the fund's expenses. The Board noted that the fund has a contractual fee waiver and/or expense reimbursement until September 30, 2015, which reduces certain expenses of the fund.
The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |||||||
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |||||||
(h) | noted that the fund's Subadvisor is an affiliate of the Advisor; | |||||||
(i) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; |
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(j) | noted that the subadvisory fee for the fund is paid by the Advisor; and | |||||||
(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $75 billion but is less than or equal to $125 billion, 0.0125% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $125 billion but is less than or equal to $150 billion and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $150 billion. (The funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also
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considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also considered any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fees as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the fund has outperformed the historical performance of comparable funds and the fund's benchmark; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
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Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor John Hancock Asset Management a division of Manulife Asset Management (US) 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 |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund's proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund's complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund's Form N-Q is available on our website and the SEC's website, sec.gov, and can be reviewed and copied (for a fee) at the SEC's Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | |||
800-225-5291 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
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Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Investment Grade Bond | INCOME FUNDS (continued) Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Income Allocation Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
John Hancock Investments
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John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
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As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
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Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF209430 | 21SA 11/14 1/15 |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) | Not applicable. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Contact person at the registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Sovereign Bond Fund
By: | /s/ Andrew Arnott |
Andrew Arnott | |
President |
Date: January 15, 2015
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/ Andrew Arnott |
Andrew Arnott | |
President |
Date: January 15, 2015
By: | /s/ Charles A. Rizzo |
Charles A. Rizzo | |
Chief Financial Officer |
Date: January 15, 2015