UNITED STATES | |
SECURITIES AND EXCHANGE COMMISSION | |
Washington, D.C. 20549 | |
FORM N-CSR | |
CERTIFIED SHAREHOLDER REPORT OF REGISTERED | |
MANAGEMENT INVESTMENT COMPANIES | |
Investment Company Act file number 811- 2402 | |
John Hancock Sovereign Bond Fund | |
(Exact name of registrant as specified in charter) | |
601 Congress Street, Boston, Massachusetts 02210 | |
(Address of principal executive offices) (Zip code) | |
Salvatore Schiavone | |
Treasurer | |
601 Congress Street | |
Boston, Massachusetts 02210 | |
(Name and address of agent for service) | |
Registrant's telephone number, including area code: 617-663-4497 | |
Date of fiscal year end: | May 31 |
Date of reporting period: | May 31, 2014 |
ITEM 1. REPORTS TO STOCKHOLDERS.
A look at performance
Total returns for the period ended May 31, 2014
SEC 30-day | SEC 30-day | |||||||
Average annual total returns (%) | Cumulative total returns (%) | yield (%) | yield (%) | |||||
with maximum sales charge | with maximum sales charge | subsidized | unsubsidized1 | |||||
| ||||||||
as of | as of | |||||||
1-year | 5-year | 10-year | 1-year | 5-year | 10-year | 5-31-14 | 5-31-14 | |
| ||||||||
Class A | –0.09 | 9.44 | 5.96 | –0.09 | 57.02 | 78.38 | 2.99 | 2.94 |
| ||||||||
Class B | –1.63 | 9.31 | 5.80 | –1.63 | 56.07 | 75.66 | 2.43 | 2.37 |
| ||||||||
Class C | 2.34 | 9.58 | 5.65 | 2.34 | 57.97 | 73.25 | 2.42 | 2.37 |
| ||||||||
Class I2 | 4.40 | 10.78 | 6.83 | 4.40 | 66.83 | 93.57 | 3.43 | 3.37 |
| ||||||||
Class R22,3 | 4.01 | 10.38 | 6.39 | 4.01 | 63.86 | 85.76 | 3.03 | 2.98 |
| ||||||||
Class R62,3 | 4.58 | 10.89 | 6.90 | 4.58 | 67.68 | 94.88 | 3.54 | 3.47 |
| ||||||||
Index† | 2.44 | 5.28 | 4.99 | 2.44 | 29.32 | 62.72 | — | — |
|
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 returns for Class C shares have been adjusted to reflect the elimination of the front-end sales charge effective 7-15-04. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5%, 4%, 3%, 3%, 2%, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable to Class I, Class R2, and Class R6 shares.
The expense ratios of the fund, both net (including any fee waivers 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. The fee waivers and/or expense limitations are contractual at least until 9-30-14 for all classes of shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R2 | Class R6* | |
Net (%) | 0.98 | 1.68 | 1.68 | 0.60 | 1.03 | 0.49 |
Gross (%) | 1.03 | 1.73 | 1.73 | 0.65 | 1.08 | 0.57 |
* For Class R6 shares, the fund’s advisor has contractually agreed to waive all class specific expenses of the fund, including transfer agency fees and service fees, as applicable, to the extent they exceed 0.00% of average annual net assets. The current waiver agreement will remain in effect through 9-30-15.
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 may pay on fund distributions or on the redemption of fund shares. The fund’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† Index is the Barclays Government/Credit Bond Index.
See the following page for footnotes.
6 | Bond Fund | Annual report |
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
| ||||
Class B4 | 5-31-04 | $17,566 | $17,566 | $16,272 |
| ||||
Class C4 | 5-31-04 | 17,325 | 17,325 | 16,272 |
| ||||
Class I2 | 5-31-04 | 19,357 | 19,357 | 16,272 |
| ||||
Class R22 | 5-31-04 | 18,576 | 18,576 | 16,272 |
| ||||
Class R62 | 5-31-04 | 19,488 | 19,488 | 16,272 |
|
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 Class C shares investment with maximum sales charge has been adjusted to reflect the elimination of the front-end sales charge, effective 7-15-04.
Barclays Government/Credit Bond Index is an unmanaged index of U.S. government bonds, U.S. corporate bonds, and Yankee bonds.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 Unsubsidized yield reflects what the yield would have been without the effect of reimbursements and waivers.
2 For certain types of investors, as described in the fund’s prospectuses.
3 Class R6 shares and Class R2 shares were first offered 9-1-11 and 3-1-12, respectively. Returns prior to these dates are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class R2 and Class R6 shares, as applicable.
4 The contingent deferred sales charge is not applicable.
Annual report | Bond Fund | 7 |
Management’s discussion of
Fund performance
John Hancock Asset Management
a division of Manulife Asset Management (US) LLC
Despite the volatility that characterized the second half of 2013, the global fixed-income markets nonetheless finished the twelve-month reporting period in positive territory. The environment was favorable for market segments that offered a yield advantage relative to U.S. Treasuries, including investment-grade and high-yield corporate bonds, emerging-market bonds, and commercial mortgage-backed securities.
For the 12 months ended May 31, 2014, John Hancock Bond Fund’s Class A shares had a total return of 4.06%, excluding sales charges, outpacing the 2.44% return of its benchmark, the Barclays Government/Credit Bond Index.
The fund was positioned very favorably for the environment of the past twelve months. Just under half of the fund’s total investments were allocated to corporate bonds, which enabled it to take capitalize on the outperformance of this market segment. The fund’s corporate bond allocation also incorporated high-yield (below-investment-grade) bonds, as the benchmark has no exposure to this outperforming market segment. Our decision to invest in non-U.S. corporate bonds was an additional positive for performance. We added modestly to the fund’s allocation to European corporate debt during the past year, which reflected our belief that the region’s return to positive economic growth provides latitude for this market segment to outperform. The fund’s overweight position in corporates was funded by its underweight in U.S. Treasuries. This was also helpful to performance given that U.S. Treasury yields rose (as prices fell) during the reporting period. The underweight in Treasuries also enabled us to invest in other, higher-yielding segments of the bond market, including asset-backed securities, commercial mortgage-backed securities, and non-agency mortgage-backed notes. We maintained our approach of keeping duration—or interest-rate sensitivity—below that of the benchmark. This reflected our view that Treasury yields will gradually move higher in the longer term, aided fund performance.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance does not guarantee future results.
8 | Bond Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
■ Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the fund’s actual ongoing operating expenses and is based on the fund’s actual return. It assumes an account value of $1,000.00 on December 1, 2013, with the same investment held until May 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 12-1-2013 | on 5-31-2014 | ended 5-31-20141 | expense ratio | |
| ||||
Class A | $1,000.00 | $1,048.10 | $4.70 | 0.92% |
| ||||
Class B | 1,000.00 | 1,044.50 | 8.26 | 1.62% |
| ||||
Class C | 1,000.00 | 1,044.40 | 8.26 | 1.62% |
| ||||
Class I | 1,000.00 | 1,049.10 | 3.12 | 0.61% |
| ||||
Class R2 | 1,000.00 | 1,047.40 | 5.10 | 1.00% |
| ||||
Class R6 | 1,000.00 | 1,050.30 | 2.50 | 0.49% |
|
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at May 31, 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:
Annual report | Bond Fund | 9 |
Your expenses
Hypothetical example for comparison purposes
This table allows you to compare the fund’s ongoing operating expenses with those of any other fund. It provides an example of the fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the fund’s actual return). It assumes an account value of $1,000.00 on December 1, 2013, with the same investment held until May 31, 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.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 12-1-2013 | on 5-31-2014 | ended 5-31-20141 | expense ratio | |
| ||||
Class A | $1,000.00 | $1,020.30 | $4.63 | 0.92% |
| ||||
Class B | 1,000.00 | 1,016.90 | 8.15 | 1.62% |
| ||||
Class C | 1,000.00 | 1,016.90 | 8.15 | 1.62% |
| ||||
Class I | 1,000.00 | 1,021.90 | 3.07 | 0.61% |
| ||||
Class R2 | 1,000.00 | 1,019.90 | 5.04 | 1.00% |
| ||||
Class R6 | 1,000.00 | 1,022.50 | 2.47 | 0.49% |
|
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 182/365 (to reflect the one-half year period).
10 | Bond Fund | Annual report |
Portfolio summary
Portfolio Composition1 | ||||
| ||||
Corporate Bonds | 47.8% | Capital Preferred Securities | 1.6% | |
|
| |||
U.S. Government Agency | 18.3% | Term Loans | 1.0% | |
|
| |||
Collateralized Mortgage Obligations | 11.6% | Preferred Securities | 1.0% | |
|
| |||
U.S. Government | 8.3% | Foreign Government Obligations | 0.1% | |
|
| |||
Asset Backed Securities | 5.6% | Convertible Bonds | 0.1% | |
|
| |||
U.S. Government Agency | Short-Term Investments & Other | 2.8% | ||
Collateralized Mortgage Obligations | 1.8% |
| ||
|
||||
Quality Composition1,2 | ||||
| ||||
U.S. Government | 8.3% | BBB | 29.0% | |
|
| |||
U.S. Government Agency | 18.3% | BB | 12.2% | |
|
| |||
U.S. Government Agency Collateralized | B | 8.1% | ||
Mortgage Obligations | 1.8% |
| ||
|
CCC & Below | 3.8% | ||
AAA | 1.1% |
| ||
|
Not Rated | 0.5% | ||
AA | 4.2% |
| ||
|
Equity | 1.0% | ||
A | 8.9% |
| ||
|
Short-Term Investments & Other | 2.8% | ||
|
1 As a percentage of net assets on 5-31-14.
2 Ratings are from Moody’s Investors Service, Inc. If not available, we have used ratings from Standard & Poor’s Ratings Services. In the absence of ratings from these agencies, we have used Fitch Ratings, Inc. “Not Rated” securities are those with no ratings available from these agencies. All ratings are as of 5-31-14 and do not reflect subsequent downgrades or upgrades, if any.
Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if a creditor is unable or unwilling to make principal or interest payments. Investments in higher-yielding, lower-rated securities include a higher risk of default. Foreign investing 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. Events in the financial markets have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. In addition, reduced liquidity in credit and fixed-income markets may adversely affect issuers worldwide. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. Sector investing is subject to greater risks than the market as a whole. Because the fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors and investments focused in one sector may fluctuate more widely than investments diversified across sectors. Please see the fund’s prospectuses for additional risks.
Annual report | Bond Fund | 11 |
Fund’s investments
As of 5-31-14
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Corporate Bonds 47.8% | $936,082,964 | ||||
| |||||
(Cost $887,382,466) | |||||
Consumer Discretionary 4.7% | 92,502,640 | ||||
Auto Components 0.6% | |||||
| |||||
Dana Holding Corp. | 6.000 | 09-15-23 | 2,630,000 | 2,781,228 | |
| |||||
Delphi Corp. | 5.000 | 02-15-23 | 6,805,000 | 7,272,844 | |
| |||||
Stackpole International Intermediate Company | |||||
SA (S) | 7.750 | 10-15-21 | 1,695,000 | 1,771,275 | |
Automobiles 1.4% | |||||
| |||||
Chrysler Group LLC | 8.000 | 06-15-19 | 1,040,000 | 1,136,200 | |
| |||||
Ford Motor Credit Company LLC | 5.875 | 08-02-21 | 13,600,000 | 15,927,096 | |
| |||||
Ford Motor Credit Company LLC | 8.000 | 12-15-16 | 2,885,000 | 3,362,727 | |
| |||||
General Motors Company (S) | 4.875 | 10-02-23 | 3,025,000 | 3,168,687 | |
| |||||
General Motors Company (S) | 6.250 | 10-02-43 | 2,600,000 | 2,954,250 | |
Hotels, Restaurants & Leisure 0.6% | |||||
| |||||
Arcos Dorados Holdings, Inc. (S) | 10.250 | 07-13-16 | BRL 3,275,000 | 1,366,837 | |
| |||||
CCM Merger, Inc. (S) | 9.125 | 05-01-19 | 2,495,000 | 2,669,650 | |
| |||||
Landry’s, Inc. (S) | 9.375 | 05-01-20 | 2,610,000 | 2,880,787 | |
| |||||
PF Chang’s China Bistro, Inc. (S) | 10.250 | 06-30-20 | 1,590,000 | 1,633,725 | |
| |||||
Seminole Indian Tribe of Florida (S) | 6.535 | 10-01-20 | 2,594,000 | 2,892,310 | |
| |||||
Waterford Gaming LLC (S) | 8.625 | 09-15-14 | 498,150 | 111,614 | |
Internet & Catalog Retail 0.2% | |||||
| |||||
QVC, Inc. | 4.375 | 03-15-23 | 2,170,000 | 2,185,908 | |
| |||||
QVC, Inc. | 5.125 | 07-02-22 | 1,800,000 | 1,907,532 | |
Media 0.9% | |||||
| |||||
21st Century Fox America, Inc. | 6.150 | 03-01-37 | 975,000 | 1,179,774 | |
| |||||
21st Century Fox America, Inc. | 6.400 | 12-15-35 | 880,000 | 1,099,990 | |
| |||||
AMC Entertainment, Inc. | 5.875 | 02-15-22 | 2,605,000 | 2,696,175 | |
| |||||
CBS Corp. | 7.875 | 07-30-30 | 3,230,000 | 4,348,669 | |
| |||||
Cinemark USA, Inc. | 7.375 | 06-15-21 | 925,000 | 1,023,281 | |
| |||||
Myriad International Holdings BV (S) | 6.000 | 07-18-20 | 1,770,000 | 1,984,613 | |
| |||||
Radio One, Inc. (S) | 9.250 | 02-15-20 | 865,000 | 934,200 | |
| |||||
Time Warner Cable, Inc. | 8.250 | 04-01-19 | 2,360,000 | 3,004,037 | |
| |||||
WideOpenWest Finance LLC (S) | 10.250 | 07-15-19 | 690,000 | 774,525 | |
Multiline Retail 0.2% | |||||
| |||||
Macy’s Retail Holdings, Inc. | 7.875 | 08-15-36 | 2,885,000 | 3,187,631 | |
| |||||
Tops Holding II Corp. | 8.750 | 06-15-18 | 1,580,000 | 1,649,125 |
12 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Specialty Retail 0.7% | |||||
| |||||
AutoNation, Inc. | 5.500 | 02-01-20 | 4,385,000 | $4,757,725 | |
| |||||
Hillman Group, Inc. | 10.875 | 06-01-18 | 1,675,000 | 1,777,175 | |
| |||||
Jo-Ann Stores Holdings, Inc., PIK (S) | 9.750 | 10-15-19 | 2,915,000 | 3,024,312 | |
| |||||
L Brands, Inc. | 6.625 | 04-01-21 | 3,585,000 | 4,033,125 | |
| |||||
New Look Bondco I PLC (S) | 8.375 | 05-14-18 | 855,000 | 916,988 | |
Textiles, Apparel & Luxury Goods 0.1% | |||||
| |||||
Hot Topic, Inc. (S) | 9.250 | 06-15-21 | 1,925,000 | 2,088,625 | |
Consumer Staples 1.7% | 33,390,704 | ||||
Beverages 0.2% | |||||
| |||||
Ajecorp BV (S) | 6.500 | 05-14-22 | 2,145,000 | 2,005,575 | |
| |||||
Crestview DS Merger Sub II, Inc. (S) | 10.000 | 09-01-21 | 2,175,000 | 2,414,250 | |
Food & Staples Retailing 0.5% | |||||
| |||||
Safeway, Inc. | 4.750 | 12-01-21 | 925,000 | 950,628 | |
| |||||
Safeway, Inc. | 5.000 | 08-15-19 | 5,820,000 | 6,071,226 | |
| |||||
Smithfield Foods, Inc. (S) | 5.875 | 08-01-21 | 600,000 | 637,500 | |
| |||||
Tops Holding Corp. | 8.875 | 12-15-17 | 960,000 | 1,047,600 | |
Food Products 0.3% | |||||
| |||||
Bunge, Ltd. Finance Corp. | 8.500 | 06-15-19 | 2,236,000 | 2,813,525 | |
| |||||
Simmons Foods, Inc. (S) | 10.500 | 11-01-17 | 3,495,000 | 3,774,600 | |
Household Products 0.1% | |||||
| |||||
Harbinger Group, Inc. | 7.875 | 07-15-19 | 2,555,000 | 2,791,338 | |
Personal Products 0.2% | |||||
| |||||
Prestige Brands, Inc. (S) | 5.375 | 12-15-21 | 1,770,000 | 1,812,037 | |
| |||||
Revlon Consumer Products Corp. | 5.750 | 02-15-21 | 2,000,000 | 2,030,000 | |
Tobacco 0.4% | |||||
| |||||
Alliance One International, Inc. | 9.875 | 07-15-21 | 5,500,000 | 5,610,000 | |
| |||||
Vector Group, Ltd. | 7.750 | 02-15-21 | 1,345,000 | 1,432,425 | |
Energy 6.0% | 117,377,689 | ||||
Energy Equipment & Services 0.9% | |||||
| |||||
Astoria Depositor Corp. (S) | 8.144 | 05-01-21 | 3,565,000 | 3,743,250 | |
| |||||
Exterran Partners LP | 6.000 | 04-01-21 | 670,000 | 680,050 | |
| |||||
Key Energy Services, Inc. | 6.750 | 03-01-21 | 1,890,000 | 1,975,050 | |
| |||||
Nostrum Oil & Gas Finance BV (S) | 6.375 | 02-14-19 | 2,300,000 | 2,374,750 | |
| |||||
Offshore Group Investment, Ltd. | 7.125 | 04-01-23 | 1,530,000 | 1,545,300 | |
| |||||
Precision Drilling Corp. | 6.625 | 11-15-20 | 1,405,000 | 1,503,350 | |
| |||||
RKI Exploration & Production LLC (S) | 8.500 | 08-01-21 | 1,775,000 | 1,925,875 | |
| |||||
Rowan Companies, Inc. | 4.875 | 06-01-22 | 1,990,000 | 2,130,574 | |
| |||||
Trinidad Drilling, Ltd. (S) | 7.875 | 01-15-19 | 1,180,000 | 1,256,700 | |
Gas Utilities 0.1% | |||||
| |||||
DCP Midstream LLC (5.850% to 5-21-23, then | |||||
3 month LIBOR + 3.850%) (S) | 5.850 | 05-21-43 | 2,710,000 | 2,560,950 | |
Oil, Gas & Consumable Fuels 5.0% | |||||
| |||||
Access Midstream Partners LP | 4.875 | 03-15-24 | 1,455,000 | 1,524,113 | |
| |||||
Afren PLC (S) | 6.625 | 12-09-20 | 2,600,000 | 2,644,200 | |
| |||||
Afren PLC (S) | 10.250 | 04-08-19 | 1,260,000 | 1,423,800 | |
| |||||
Baytex Energy Corp. (S) | 5.625 | 06-01-24 | 440,000 | 438,347 |
See notes to financial statements | Annual report | Bond Fund | 13 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Oil, Gas & Consumable Fuels (continued) | |||||
| |||||
BreitBurn Energy Partners LP | 7.875 | 04-15-22 | 2,180,000 | $2,343,500 | |
| |||||
CNOOC Finance 2013, Ltd. | 3.000 | 05-09-23 | 2,940,000 | 2,765,211 | |
| |||||
Continental Resources, Inc. | 5.000 | 09-15-22 | 5,520,000 | 5,982,300 | |
| |||||
DCP Midstream LLC (S) | 9.750 | 03-15-19 | 2,675,000 | 3,443,156 | |
| |||||
DCP Midstream Operating LP | 3.875 | 03-15-23 | 1,500,000 | 1,517,978 | |
| |||||
Denbury Resources, Inc. | 5.500 | 05-01-22 | 1,785,000 | 1,838,550 | |
| |||||
Ecopetrol SA | 5.875 | 09-18-23 | 1,300,000 | 1,451,125 | |
| |||||
Energy Transfer Partners LP | 5.200 | 02-01-22 | 1,445,000 | 1,602,768 | |
| |||||
Energy Transfer Partners LP | 9.700 | 03-15-19 | 2,140,000 | 2,801,964 | |
| |||||
Energy XXI Gulf Coast, Inc. (S) | 6.875 | 03-15-24 | 1,035,000 | 1,042,763 | |
| |||||
Enterprise Products Operating LLC (7.000% to | |||||
6-1-17, then 3 month LIBOR + 2.778%) | 7.000 | 06-01-67 | 4,085,000 | 4,319,887 | |
| |||||
Enterprise Products Operating LLC (8.375% to | |||||
8-1-16, then 3 month LIBOR + 3.708%) | 8.375 | 08-01-66 | 1,520,000 | 1,717,600 | |
| |||||
EP Energy LLC | 7.750 | 09-01-22 | 1,145,000 | 1,283,831 | |
| |||||
EV Energy Partners LP | 8.000 | 04-15-19 | 2,370,000 | 2,476,650 | |
| |||||
FTS International, Inc. (S) | 6.250 | 05-01-22 | 1,240,000 | 1,264,800 | |
| |||||
Halcon Resources Corp. | 8.875 | 05-15-21 | 1,385,000 | 1,475,025 | |
| |||||
Jones Energy Holdings LLC (S) | 6.750 | 04-01-22 | 1,045,000 | 1,102,475 | |
| |||||
Kerr-McGee Corp. | 6.950 | 07-01-24 | 3,665,000 | 4,689,950 | |
| |||||
Kinder Morgan Energy Partners LP | 7.750 | 03-15-32 | 1,090,000 | 1,418,234 | |
| |||||
Lukoil International Finance BV (S) | 3.416 | 04-24-18 | 4,655,000 | 4,568,882 | |
| |||||
MarkWest Energy Partners LP | 6.500 | 08-15-21 | 1,414,000 | 1,527,120 | |
| |||||
Midstates Petroleum Company, Inc. | 9.250 | 06-01-21 | 3,010,000 | 3,235,750 | |
| |||||
Newfield Exploration Company | 5.750 | 01-30-22 | 1,890,000 | 2,050,650 | |
| |||||
NuStar Logistics LP | 8.150 | 04-15-18 | 1,446,000 | 1,648,440 | |
| |||||
Pacific Rubiales Energy Corp. (S) | 5.125 | 03-28-23 | 1,920,000 | 1,891,200 | |
| |||||
Pacific Rubiales Energy Corp. (S) | 5.375 | 01-26-19 | 2,275,000 | 2,368,844 | |
| |||||
Petrobras International Finance Company | 5.375 | 01-27-21 | 2,840,000 | 2,946,009 | |
| |||||
Petroleos de Venezuela SA | 5.375 | 04-12-27 | 3,755,000 | 2,168,512 | |
| |||||
Petroleos Mexicanos | 4.875 | 01-24-22 | 1,475,000 | 1,585,625 | |
| |||||
Plains Exploration & Production Company | 6.750 | 02-01-22 | 4,780,000 | 5,365,550 | |
| |||||
Plains Exploration & Production Company | 6.875 | 02-15-23 | 1,645,000 | 1,869,131 | |
| |||||
Regency Energy Partners LP | 5.500 | 04-15-23 | 3,300,000 | 3,374,250 | |
| |||||
Regency Energy Partners LP | 5.875 | 03-01-22 | 615,000 | 653,438 | |
| |||||
Rex Energy Corp. | 8.875 | 12-01-20 | 1,190,000 | 1,320,900 | |
| |||||
Summit Midstream Holdings LLC | 7.500 | 07-01-21 | 1,115,000 | 1,209,775 | |
| |||||
TransCanada Pipelines, Ltd. (6.350% to | |||||
5-15-17, then 3 month LIBOR + 2.210%) | 6.350 | 05-15-67 | 3,910,000 | 4,066,400 | |
| |||||
Tullow Oil PLC (S) | 6.000 | 11-01-20 | 1,550,000 | 1,596,500 | |
| |||||
Tullow Oil PLC (S) | 6.250 | 04-15-22 | 1,720,000 | 1,775,900 | |
| |||||
WPX Energy, Inc. | 6.000 | 01-15-22 | 1,805,000 | 1,890,737 | |
Financials 18.7% | 365,241,611 | ||||
Banks 5.8% | |||||
| |||||
Alfa Bank OJSC (S) | 7.750 | 04-28-21 | 695,000 | 740,175 | |
| |||||
Banco do Brasil SA/Cayman Island (6.250% | |||||
to 4-15-24, then 10 Year U.S. Treasury | |||||
+ 4.398%) (Q)(S) | 6.250 | 04-15-24 | 3,300,000 | 2,780,250 | |
| |||||
Banco Santander Brasil SA (S) | 8.000 | 03-18-16 | BRL 6,000,000 | 2,524,216 |
14 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Banks (continued) | |||||
| |||||
Bank of America Corp. | 3.300 | 01-11-23 | 1,645,000 | $1,617,915 | |
| |||||
Bank of America Corp. | 5.000 | 05-13-21 | 4,705,000 | 5,242,843 | |
| |||||
Bank of America Corp. | 5.700 | 01-24-22 | 2,765,000 | 3,205,028 | |
| |||||
Bank of America Corp. | 6.875 | 04-25-18 | 4,365,000 | 5,165,187 | |
| |||||
Bank of America NA | 5.300 | 03-15-17 | 895,000 | 986,083 | |
| |||||
Barclays Bank PLC (S) | 10.179 | 06-12-21 | 3,950,000 | 5,433,288 | |
| |||||
BPCE SA (S) | 5.700 | 10-22-23 | 4,240,000 | 4,584,746 | |
| |||||
Citigroup, Inc. | 3.875 | 10-25-23 | 1,235,000 | 1,254,607 | |
| |||||
Citigroup, Inc. | 5.500 | 09-13-25 | 2,760,000 | 3,047,244 | |
| |||||
Citigroup, Inc. | 6.125 | 08-25-36 | 2,120,000 | 2,417,775 | |
| |||||
Commerzbank AG (S) | 8.125 | 09-19-23 | 4,050,000 | 4,839,920 | |
| |||||
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 | 4,155,000 | 4,480,336 | |
| |||||
Fifth Third Bancorp (5.100% to 6-30-23, then | |||||
3 month LIBOR + 3.033%) (Q) | 5.100 | 06-30-23 | 2,940,000 | 2,763,600 | |
| |||||
HBOS PLC (S) | 6.000 | 11-01-33 | 3,110,000 | 3,385,888 | |
| |||||
HBOS PLC (S) | 6.750 | 05-21-18 | 5,490,000 | 6,334,104 | |
| |||||
ICICI Bank, Ltd. (S) | 4.700 | 02-21-18 | 2,325,000 | 2,475,567 | |
| |||||
ICICI Bank, Ltd. (S) | 5.750 | 11-16-20 | 2,410,000 | 2,659,317 | |
| |||||
JPMorgan Chase & Company | 4.625 | 05-10-21 | 5,965,000 | 6,592,936 | |
| |||||
JPMorgan Chase & Company (5.150% to | |||||
5-1-23, then 3 month LIBOR + 3.250%) (Q) | 5.150 | 05-01-23 | 2,590,000 | 2,473,450 | |
| |||||
JPMorgan Chase & Company (6.750% to | |||||
2-1-24, then 3 month LIBOR + 3.780%) (Q) | 6.750 | 02-01-24 | 5,480,000 | 5,918,400 | |
| |||||
JPMorgan Chase & Company (7.900% to | |||||
4-30-18, then 3 month LIBOR + 3.470%) (Q) | 7.900 | 04-30-18 | 2,840,000 | 3,202,100 | |
| |||||
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 | 2,680,000 | 2,870,950 | |
| |||||
Manufacturers & Traders Trust Company | |||||
(5.629% to 12-1-16, then 3 month LIBOR | |||||
+ 6.400%) | 5.629 | 12-01-21 | 1,065,000 | 1,109,162 | |
| |||||
Mizuho Financial Group Cayman 3, Ltd. (S) | 4.600 | 03-27-24 | 2,975,000 | 3,071,384 | |
| |||||
Nordea Bank AB (S) | 3.125 | 03-20-17 | 2,945,000 | 3,103,992 | |
| |||||
Oversea-Chinese Banking Corp., Ltd. (S) | 4.000 | 10-15-24 | 1,360,000 | 1,377,037 | |
| |||||
PNC Financial Services Group, Inc. (P)(Q) | 4.447 | 07-07-14 | 1,695,000 | 1,698,390 | |
| |||||
PNC Financial Services Group, Inc. (4.850% to | |||||
6-1-23, then 3 month LIBOR + 3.040%) (Q) | 4.850 | 06-01-23 | 2,150,000 | 2,064,000 | |
| |||||
Synovus Financial Corp. | 7.875 | 02-15-19 | 1,075,000 | 1,233,563 | |
| |||||
Wachovia Bank NA | 5.850 | 02-01-37 | 1,915,000 | 2,366,090 | |
| |||||
Wells Fargo & Company (5.900% to 6-15-24, | |||||
then 3 month LIBOR + 3.110%) (Q) | 5.900 | 06-15-24 | 4,525,000 | 4,756,906 | |
| |||||
Wells Fargo & Company, Series K (7.980% to | |||||
3-15-18, then 3 month LIBOR + 3.770%) (Q) | 7.980 | 03-15-18 | 5,182,000 | 5,901,002 | |
Capital Markets 2.8% | |||||
| |||||
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 | 2,155,298 | |
| |||||
Fifth Street Finance Corp. | 4.875 | 03-01-19 | 2,875,000 | 2,995,244 | |
| |||||
Jefferies Group LLC | 6.875 | 04-15-21 | 3,720,000 | 4,352,400 | |
| |||||
Jefferies Group LLC | 8.500 | 07-15-19 | 1,965,000 | 2,448,296 |
See notes to financial statements | Annual report | Bond Fund | 15 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Capital Markets (continued) | |||||
| |||||
Macquarie Bank, Ltd. (S) | 6.625 | 04-07-21 | 1,255,000 | $1,446,083 | |
| |||||
Macquarie Group, Ltd. (S) | 6.000 | 01-14-20 | 1,495,000 | 1,692,890 | |
| |||||
Morgan Stanley | 4.100 | 05-22-23 | 4,005,000 | 4,027,909 | |
| |||||
Morgan Stanley | 5.500 | 01-26-20 | 3,210,000 | 3,661,486 | |
| |||||
Morgan Stanley | 5.550 | 04-27-17 | 1,620,000 | 1,806,498 | |
| |||||
Morgan Stanley | 5.750 | 01-25-21 | 3,130,000 | 3,619,579 | |
| |||||
Morgan Stanley | 7.300 | 05-13-19 | 6,640,000 | 8,109,757 | |
| |||||
Morgan Stanley (5.450% to 7-15-19, then | |||||
3 month LIBOR + 3.610%) (Q) | 5.450 | 07-15-19 | 2,335,000 | 2,416,725 | |
| |||||
The Goldman Sachs Group, Inc. | 5.250 | 07-27-21 | 7,400,000 | 8,310,148 | |
| |||||
The Goldman Sachs Group, Inc. | 5.750 | 01-24-22 | 680,000 | 786,026 | |
| |||||
UBS AG | 7.625 | 08-17-22 | 2,555,000 | 3,065,668 | |
| |||||
Walter Investment Management Corp. (S) | 7.875 | 12-15-21 | 2,995,000 | 3,021,206 | |
Consumer Finance 1.1% | |||||
| |||||
Capital One Financial Corp. | 4.750 | 07-15-21 | 3,995,000 | 4,449,711 | |
| |||||
Credit Acceptance Corp. (S) | 6.125 | 02-15-21 | 2,975,000 | 3,101,437 | |
| |||||
Credito Real SAB de CV (S) | 7.500 | 03-13-19 | 3,035,000 | 3,277,800 | |
| |||||
Discover Bank | 7.000 | 04-15-20 | 1,340,000 | 1,614,279 | |
| |||||
Discover Financial Services | 5.200 | 04-27-22 | 2,795,000 | 3,093,204 | |
| |||||
Enova International, Inc. (S) | 9.750 | 06-01-21 | 2,750,000 | 2,705,313 | |
| |||||
Springleaf Finance Corp. | 6.000 | 06-01-20 | 2,285,000 | 2,319,275 | |
Diversified Financial Services 2.7% | |||||
| |||||
Doric Nimrod Air Alpha 2013-1 | |||||
Pass Through Trust (S) | 5.250 | 05-30-23 | 2,609,136 | 2,733,070 | |
| |||||
Doric Nimrod Air Alpha 2013-1 | |||||
Pass Through Trust (S) | 6.125 | 11-30-19 | 1,935,000 | 2,026,912 | |
| |||||
Doric Nimrod Air Finance Alpha, Ltd. 2012-1 | |||||
Class A Pass Through (S) | 5.125 | 11-30-22 | 1,548,685 | 1,578,898 | |
| |||||
General Electric Capital Corp. (P) | 0.704 | 08-15-36 | 2,745,000 | 2,280,241 | |
| |||||
General Electric Capital Corp. | 4.375 | 09-16-20 | 1,610,000 | 1,772,773 | |
| |||||
General Electric Capital Corp. | 5.300 | 02-11-21 | 880,000 | 1,000,430 | |
| |||||
General Electric Capital Corp. | 5.550 | 05-04-20 | 4,270,000 | 4,984,905 | |
| |||||
General Electric Capital Corp. (7.125% until | |||||
6-15-22, then 3 month LIBOR + 5.296%) (Q) | 7.125 | 06-15-22 | 3,750,000 | 4,425,000 | |
| |||||
ING Bank NV (S) | 5.800 | 09-25-23 | 1,755,000 | 1,960,319 | |
| |||||
Intercorp Retail Trust (S) | 8.875 | 11-14-18 | 750,000 | 815,625 | |
| |||||
Leucadia National Corp. | 5.500 | 10-18-23 | 4,420,000 | 4,715,269 | |
| |||||
Nationstar Mortgage LLC | 7.875 | 10-01-20 | 2,050,000 | 2,070,500 | |
| |||||
Nationstar Mortgage LLC | 9.625 | 05-01-19 | 1,755,000 | 1,926,113 | |
| |||||
Rabobank Nederland NV | 3.875 | 02-08-22 | 6,445,000 | 6,832,048 | |
| |||||
Rabobank Nederland NV (11.000% to 6-30-19, | |||||
then 3 month LIBOR + 10.868%) (Q)(S) | 11.000 | 06-30-19 | 3,579,000 | 4,800,513 | |
| |||||
The Bear Stearns Companies LLC | 7.250 | 02-01-18 | 2,100,000 | 2,507,595 | |
| |||||
USB Realty Corp. (P)(Q)(S) | 1.475 | 01-15-17 | 2,900,000 | 2,668,000 | |
| |||||
Voya Financial, Inc. | 5.500 | 07-15-22 | 1,475,000 | 1,690,362 | |
| |||||
Voya Financial, Inc. (5.650% to 5-15-23, then | |||||
3 month LIBOR + 3.580%) | 5.650 | 05-15-53 | 1,760,000 | 1,784,200 |
16 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Insurance 3.3% | |||||
| |||||
American International Group, Inc. | 4.125 | 02-15-24 | 1,985,000 | $2,085,654 | |
| |||||
American International Group, Inc. (8.175% to | |||||
5-15-38, then 3 month LIBOR + 4.195%) | 8.175 | 05-15-58 | 4,434,000 | 5,996,985 | |
| |||||
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 | 1,664,985 | |
| |||||
AXA SA | 8.600 | 12-15-30 | 1,695,000 | 2,271,920 | |
| |||||
AXA SA (6.379% to 12-14-36, then 3 month | |||||
LIBOR + 2.256%) (Q)(S) | 6.379 | 12-14-36 | 1,575,000 | 1,706,906 | |
| |||||
CNA Financial Corp. | 7.250 | 11-15-23 | 3,415,000 | 4,295,315 | |
| |||||
Genworth Holdings, Inc. | 7.625 | 09-24-21 | 3,040,000 | 3,814,495 | |
| |||||
Glen Meadow Pass-Through Trust (6.505% to | |||||
2-15-17, then 3 month LIBOR + 2.125%) (S) | 6.505 | 02-12-67 | 4,320,000 | 4,298,400 | |
| |||||
Liberty Mutual Group, Inc. (S) | 5.000 | 06-01-21 | 4,480,000 | 4,959,947 | |
| |||||
Liberty Mutual Group, Inc. (S) | 7.800 | 03-15-37 | 3,235,000 | 3,817,300 | |
| |||||
Lincoln National Corp. (6.050% to 4-20-17, | |||||
then 3 month LIBOR + 2.040%) | 6.050 | 04-20-67 | 2,275,000 | 2,309,125 | |
| |||||
Lincoln National Corp. (7.000% to 5-17-16, | |||||
then 3 month LIBOR + 2.358%) | 7.000 | 05-17-66 | 915,000 | 951,600 | |
| |||||
MetLife, Inc. | 6.400 | 12-15-36 | 1,940,000 | 2,164,167 | |
| |||||
Nippon Life Insurance Company (P)(S) | 5.000 | 10-18-42 | 1,795,000 | 1,925,138 | |
| |||||
Pacific LifeCorp. (S) | 6.000 | 02-10-20 | 2,115,000 | 2,430,010 | |
| |||||
Prudential Financial, Inc. (P) | 5.200 | 03-15-44 | 760,000 | 765,700 | |
| |||||
Prudential Financial, Inc. (5.875% to 9-1-22, | |||||
then 3 month LIBOR + 4.175%) | 5.875 | 09-15-42 | 4,300,000 | 4,590,250 | |
| |||||
Teachers Insurance & Annuity Association of | |||||
America (S) | 6.850 | 12-16-39 | 3,225,000 | 4,353,876 | |
| |||||
The Hanover Insurance Group, Inc. | 6.375 | 06-15-21 | 735,000 | 852,117 | |
| |||||
Unum Group | 7.125 | 09-30-16 | 1,785,000 | 2,035,569 | |
| |||||
USI, Inc. (S) | 7.750 | 01-15-21 | 2,265,000 | 2,332,950 | |
| |||||
White Mountains Re Group, Ltd. (7.506% | |||||
to 6-30-17, then 3 month LIBOR | |||||
+ 3.200%) (Q)(S) | 7.506 | 06-30-17 | 2,375,000 | 2,499,139 | |
| |||||
WR Berkley Corp. | 5.375 | 09-15-20 | 1,705,000 | 1,907,312 | |
Real Estate Investment Trusts 2.8% | |||||
| |||||
ARC Properties Operating Partnership LP (S) | 4.600 | 02-06-24 | 4,175,000 | 4,296,188 | |
| |||||
Corrections Corp. of America | 4.625 | 05-01-23 | 2,140,000 | 2,118,600 | |
| |||||
DDR Corp. | 7.500 | 04-01-17 | 5,155,000 | 5,973,660 | |
| |||||
DDR Corp. | 7.875 | 09-01-20 | 715,000 | 910,197 | |
| |||||
Goodman Funding Pty, Ltd. (S) | 6.375 | 04-15-21 | 3,120,000 | 3,627,156 | |
| |||||
Health Care REIT, Inc. | 4.950 | 01-15-21 | 1,095,000 | 1,212,281 | |
| |||||
Health Care REIT, Inc. | 6.125 | 04-15-20 | 4,995,000 | 5,843,371 | |
| |||||
Healthcare Realty Trust, Inc. | 6.500 | 01-17-17 | 2,120,000 | 2,390,315 | |
| |||||
Highwoods Realty LP | 5.850 | 03-15-17 | 4,765,000 | 5,309,925 | |
| |||||
Host Hotels & Resorts LP | 5.250 | 03-15-22 | 2,420,000 | 2,680,769 | |
| |||||
MPT Operating Partnership LP | 6.375 | 02-15-22 | 1,685,000 | 1,807,162 | |
| |||||
MPT Operating Partnership LP | 6.875 | 05-01-21 | 1,175,000 | 1,280,750 | |
| |||||
Omega Healthcare Investors, Inc. (S) | 4.950 | 04-01-24 | 2,330,000 | 2,343,582 | |
| |||||
Prologis International Funding II (S) | 4.875 | 02-15-20 | 1,055,000 | 1,138,920 | |
| |||||
Rayonier AM Products, Inc. (S) | 5.500 | 06-01-24 | 660,000 | 668,250 |
See notes to financial statements | Annual report | Bond Fund | 17 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Real Estate Investment Trusts (continued) | |||||
| |||||
Ventas Realty LP | 4.000 | 04-30-19 | 1,985,000 | $2,136,027 | |
| |||||
Ventas Realty LP | 4.750 | 06-01-21 | 4,815,000 | 5,312,664 | |
| |||||
WEA Finance LLC (S) | 6.750 | 09-02-19 | 1,520,000 | 1,850,725 | |
| |||||
Weyerhaeuser Company | 7.375 | 03-15-32 | 3,410,000 | 4,538,366 | |
Real Estate Management & Development 0.1% | |||||
| |||||
General Shopping Investments, Ltd. | |||||
(12.000% to 3-20-17, then 5 Year USGG | |||||
+ 11.052%) (Q)(S) | 12.000 | 03-20-17 | 1,270,000 | 1,052,512 | |
| |||||
NANA Development Corp. (S) | 9.500 | 03-15-19 | 1,685,000 | 1,693,425 | |
Thrifts & Mortgage Fin ance 0.1% | |||||
| |||||
Nationstar Mortgage LLC | 10.875 | 04-01-15 | 2,290,000 | 2,301,450 | |
Health Care 1.8% | 34,403,406 | ||||
Health Care Equipment & Supplies 0.1% | |||||
| |||||
Alere, Inc. | 7.250 | 07-01-18 | 2,005,000 | 2,190,462 | |
Health Care Providers & Services 0.9% | |||||
| |||||
Community Health Systems, Inc. (S) | 6.875 | 02-01-22 | 710,000 | 747,275 | |
| |||||
HCA, Inc. | 7.500 | 02-15-22 | 1,855,000 | 2,137,888 | |
| |||||
LifePoint Hospitals, Inc. (S) | 5.500 | 12-01-21 | 550,000 | 576,125 | |
| |||||
Medco Health Solutions, Inc. | 7.125 | 03-15-18 | 1,820,000 | 2,163,134 | |
| |||||
National Mentor Holdings, Inc. (S) | 12.500 | 02-15-18 | 2,871,000 | 3,050,437 | |
| |||||
Quest Diagnostics, Inc. | 2.700 | 04-01-19 | 2,950,000 | 2,983,444 | |
| |||||
Quest Diagnostics, Inc. | 4.250 | 04-01-24 | 2,500,000 | 2,564,610 | |
| |||||
Select Medical Corp. | 6.375 | 06-01-21 | 1,910,000 | 1,991,175 | |
| |||||
WellCare Health Plans, Inc. | 5.750 | 11-15-20 | 1,330,000 | 1,416,450 | |
Pharmaceuticals 0.8% | |||||
| |||||
Endo Finance LLC (S) | 7.250 | 01-15-22 | 2,295,000 | 2,501,550 | |
| |||||
Forest Laboratories, Inc. (S) | 5.000 | 12-15-21 | 1,825,000 | 1,998,375 | |
| |||||
Grifols Worldwide Operations, Ltd. (S) | 5.250 | 04-01-22 | 2,465,000 | 2,551,275 | |
| |||||
Mylan, Inc. (S) | 7.875 | 07-15-20 | 3,685,000 | 4,101,306 | |
| |||||
Salix Pharmaceuticals, Ltd. (S) | 6.000 | 01-15-21 | 1,480,000 | 1,587,300 | |
| |||||
Valeant Pharmaceuticals International, Inc. (S) | 7.500 | 07-15-21 | 1,660,000 | 1,842,600 | |
Industrials 6.0% | 117,772,333 | ||||
Aerospace & Defense 0.8% | |||||
| |||||
Embraer Overseas, Ltd. (S) | 5.696 | 09-16-23 | 1,548,000 | 1,664,100 | |
| |||||
Huntington Ingalls Industries, Inc. | 7.125 | 03-15-21 | 1,605,000 | 1,753,463 | |
| |||||
Kratos Defense & Security Solutions, Inc. | 10.000 | 06-01-17 | 2,800,000 | 2,950,500 | |
| |||||
Textron Financial Corp. (6.000% to 2-15-17, | |||||
then 3 month LIBOR + 1.735%) (S) | 6.000 | 02-15-67 | 4,770,000 | 4,197,600 | |
| |||||
Textron, Inc. | 5.600 | 12-01-17 | 2,195,000 | 2,470,832 | |
| |||||
Textron, Inc. | 7.250 | 10-01-19 | 1,440,000 | 1,757,367 | |
| |||||
TransDigm, Inc. (S) | 6.500 | 07-15-24 | 1,380,000 | 1,400,700 | |
Airlines 2.2% | |||||
| |||||
America West Airlines 2000-1 | |||||
Pass Through Trust | 8.057 | 07-02-20 | 571,921 | 660,569 | |
| |||||
American Airlines 2011-1 Class B | |||||
Pass Through Trust (S) | 7.000 | 01-31-18 | 4,988,630 | 5,412,664 | |
| |||||
American Airlines 2013-2 Class A | |||||
Pass Through Trust (S) | 4.950 | 01-15-23 | 2,474,521 | 2,669,390 |
18 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Airlines (continued) | |||||
| |||||
American Airlines 2013-2 Class B | |||||
Pass Through Trust (S) | 5.600 | 07-15-20 | 1,198,566 | $1,255,497 | |
| |||||
British Airways PLC 2013-1 Class A | |||||
Pass Through Trust (S) | 4.625 | 06-20-24 | 4,244,495 | 4,435,497 | |
| |||||
British Airways PLC 2013-1 Class B | |||||
Pass Through Trust (S) | 5.625 | 06-20-20 | 1,856,000 | 1,967,360 | |
| |||||
Continental Airlines 1997-4 Class A | |||||
Pass Through Trust | 6.900 | 01-02-18 | 1,547,405 | 1,675,066 | |
| |||||
Continental Airlines 1998-1 Class A | |||||
Pass Through Trust | 6.648 | 09-15-17 | 380,312 | 411,687 | |
| |||||
Continental Airlines 1999-1 Class A | |||||
Pass Through Trust | 6.545 | 02-02-19 | 853,941 | 956,414 | |
| |||||
Continental Airlines 2000-2 Class B | |||||
Pass Through Trust | 8.307 | 04-02-18 | 239,242 | 258,381 | |
| |||||
Continental Airlines 2007-1 Class A | |||||
Pass Through Trust | 5.983 | 04-19-22 | 2,233,284 | 2,545,944 | |
| |||||
Continental Airlines 2010-1 Class A | |||||
Pass Through Trust | 4.750 | 01-12-21 | 701,310 | 757,415 | |
| |||||
Continental Airlines 2012-1 Class B | |||||
Pass Through Trust | 6.250 | 04-11-20 | 1,190,708 | 1,297,871 | |
| |||||
Delta Air Lines 2002-1 Class G-1 | |||||
Pass Through Trust | 6.718 | 01-02-23 | 3,237,926 | 3,764,089 | |
| |||||
Delta Air Lines 2007-1 Class A | |||||
Pass Through Trust | 6.821 | 08-10-22 | 4,355,795 | 5,172,507 | |
| |||||
Delta Air Lines 2010-1 Class A | |||||
Pass Through Trust | 6.200 | 07-02-18 | 735,692 | 823,975 | |
| |||||
Delta Air Lines 2011-1 Class A | |||||
Pass Through Trust | 5.300 | 04-15-19 | 1,360,548 | 1,503,406 | |
| |||||
Northwest Airlines 2007-1 Class A | |||||
Pass Through Trust | 7.027 | 11-01-19 | 1,633,841 | 1,870,748 | |
| |||||
UAL 2009-1 Pass Through Trust | 10.400 | 11-01-16 | 358,094 | 410,018 | |
| |||||
UAL 2009-2A Pass Through Trust | 9.750 | 01-15-17 | 1,289,091 | 1,479,232 | |
| |||||
US Airways 2010-1 Class A Pass Through Trust | 6.250 | 04-22-23 | 1,495,731 | 1,697,655 | |
| |||||
US Airways 2012-1 Class A Pass Through Trust | 5.900 | 10-01-24 | 913,192 | 1,027,341 | |
Building Products 0.2% | |||||
| |||||
Masco Corp. | 7.125 | 03-15-20 | 1,680,000 | 1,965,600 | |
| |||||
Owens Corning | 4.200 | 12-15-22 | 2,710,000 | 2,772,295 | |
Commercial Services & Supplies 0.6% | |||||
| |||||
Ahern Rentals, Inc. (S) | 9.500 | 06-15-18 | 1,380,000 | 1,528,350 | |
| |||||
Casella Waste Systems, Inc. | 7.750 | 02-15-19 | 2,385,000 | 2,504,250 | |
| |||||
Iron Mountain, Inc. | 5.750 | 08-15-24 | 2,845,000 | 2,845,000 | |
| |||||
Iron Mountain, Inc. | 6.000 | 08-15-23 | 3,080,000 | 3,272,500 | |
| |||||
Safway Group Holding LLC (S) | 7.000 | 05-15-18 | 1,225,000 | 1,298,500 | |
Construction & Engineering 0.4% | |||||
| |||||
Aeropuertos Dominicanos Siglo XXI SA (S) | 9.250 | 11-13-19 | 3,025,000 | 2,783,000 | |
| |||||
Empresas ICA SAB de CV (S) | 8.375 | 07-24-17 | 1,675,000 | 1,754,563 | |
| |||||
Tutor Perini Corp. | 7.625 | 11-01-18 | 2,945,000 | 3,114,337 | |
Industrial Conglomerates 0.4% | |||||
| |||||
Odebrecht Finance, Ltd. (S) | 7.125 | 06-26-42 | 2,525,000 | 2,727,000 | |
| |||||
Odebrecht Finance, Ltd. (P)(Q)(S) | 7.500 | 09-14-15 | 970,000 | 1,008,800 |
See notes to financial statements | Annual report | Bond Fund | 19 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Industrial Conglomerates (continued) | |||||
| |||||
Odebrecht Finance, Ltd. (S) | 8.250 | 04-25-18 | BRL 2,850,000 | $1,113,132 | |
| |||||
Odebrecht Offshore Drilling Finance, Ltd. (S) | 6.625 | 10-01-22 | 900,000 | 959,625 | |
| |||||
Tenedora Nemak SA de CV (S) | 5.500 | 02-28-23 | 1,980,000 | 2,049,300 | |
Machinery 0.1% | |||||
| |||||
SPL Logistics Escrow LLC (S) | 8.875 | 08-01-20 | 1,216,000 | 1,352,800 | |
Marine 0.3% | |||||
| |||||
Global Ship Lease, Inc. (S) | 10.000 | 04-01-19 | 1,050,000 | 1,115,625 | |
| |||||
Navios Maritime Acquisition Corp. (S) | 8.125 | 11-15-21 | 2,040,000 | 2,136,900 | |
| |||||
Navios South American Logistics, Inc. (S) | 7.250 | 05-01-22 | 2,585,000 | 2,659,319 | |
Road & Rail 0.1% | |||||
| |||||
Penske Truck Leasing Company LP (S) | 3.750 | 05-11-17 | 2,515,000 | 2,680,241 | |
Trading Companies & Distributors 0.8% | |||||
| |||||
Air Lease Corp. | 3.375 | 01-15-19 | 2,965,000 | 3,039,125 | |
| |||||
Air Lease Corp. | 3.875 | 04-01-21 | 1,455,000 | 1,480,463 | |
| |||||
Air Lease Corp. | 4.750 | 03-01-20 | 1,480,000 | 1,592,850 | |
| |||||
Air Lease Corp. | 5.625 | 04-01-17 | 1,200,000 | 1,320,000 | |
| |||||
Aircastle, Ltd. | 6.250 | 12-01-19 | 1,360,000 | 1,472,200 | |
| |||||
Aircastle, Ltd. | 7.625 | 04-15-20 | 885,000 | 1,019,963 | |
| |||||
Glencore Funding LLC (S) | 4.125 | 05-30-23 | 2,625,000 | 2,592,345 | |
| |||||
International Lease Finance Corp. (S) | 7.125 | 09-01-18 | 1,435,000 | 1,661,012 | |
| |||||
United Rentals North America, Inc. | 5.750 | 11-15-24 | 1,810,000 | 1,873,350 | |
Transportation Infrastructure 0.1% | |||||
| |||||
Florida East Coast Holdings Corp. (S) | 6.750 | 05-01-19 | 1,760,000 | 1,832,600 | |
Information Technology 0.4% | 8,346,200 | ||||
Communications Equipment 0.1% | |||||
| |||||
Altice Financing SA (S) | 6.500 | 01-15-22 | 970,000 | 1,023,350 | |
Internet Software & Services 0.1% | |||||
| |||||
Ancestry.com, Inc. | 11.000 | 12-15-20 | 1,980,000 | 2,321,550 | |
| |||||
Ancestry.com, Inc., PIK (S) | 9.625 | 10-15-18 | 1,270,000 | 1,308,100 | |
Semiconductors & Semiconductor Equipment 0.1% | |||||
| |||||
Micron Technology, Inc. (S) | 5.875 | 02-15-22 | 2,540,000 | 2,711,450 | |
Software 0.1% | |||||
| |||||
Blackboard, Inc. (S) | 7.750 | 11-15-19 | 935,000 | 981,750 | |
Materials 3.0% | 58,771,968 | ||||
Chemicals 0.7% | |||||
| |||||
Braskem Finance, Ltd. (S) | 7.000 | 05-07-20 | 3,250,000 | 3,648,125 | |
| |||||
CF Industries, Inc. | 7.125 | 05-01-20 | 2,730,000 | 3,337,316 | |
| |||||
Incitec Pivot Finance LLC (S) | 6.000 | 12-10-19 | 1,920,000 | 2,164,145 | |
| |||||
Methanex Corp. | 5.250 | 03-01-22 | 2,290,000 | 2,515,075 | |
| |||||
Nufarm Australia, Ltd. (S) | 6.375 | 10-15-19 | 1,005,000 | 1,045,200 | |
| |||||
Rain CII Carbon LLC (S) | 8.250 | 01-15-21 | 1,225,000 | 1,270,938 | |
Construction Materials 0.4% | |||||
| |||||
American Gilsonite Company (S) | 11.500 | 09-01-17 | 2,785,000 | 3,028,687 | |
| |||||
Cemex SAB de CV (S) | 6.500 | 12-10-19 | 2,350,000 | 2,499,930 | |
| |||||
Magnesita Finance, Ltd. (P)(Q)(S) | 8.625 | 04-05-17 | 2,220,000 | 2,161,725 |
20 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Containers & Packaging 0.4% | |||||
| |||||
ARD Finance SA, PIK (S) | 11.125 | 06-01-18 | 2,333,477 | $2,496,820 | |
| |||||
Consolidated Container Company LLC (S) | 10.125 | 07-15-20 | 2,011,000 | 2,056,248 | |
| |||||
Tekni-Plex, Inc. (S) | 9.750 | 06-01-19 | 1,266,000 | 1,414,755 | |
| |||||
Wise Metals Group LLC (S) | 8.750 | 12-15-18 | 2,215,000 | 2,358,975 | |
Metals & Mining 1.4% | |||||
| |||||
Allegheny Technologies, Inc. | 9.375 | 06-01-19 | 5,025,000 | 6,275,200 | |
| |||||
AngloGold Ashanti Holdings PLC | 8.500 | 07-30-20 | 2,780,000 | 3,115,268 | |
| |||||
ArcelorMittal | 10.350 | 06-01-19 | 1,695,000 | 2,148,412 | |
| |||||
AuRico Gold, Inc. (S) | 7.750 | 04-01-20 | 855,000 | 840,038 | |
| |||||
Commercial Metals Company | 7.350 | 08-15-18 | 1,570,000 | 1,789,800 | |
| |||||
Edgen Murray Corp. (S) | 8.750 | 11-01-20 | 1,177,000 | 1,350,607 | |
| |||||
Gerdau Trade, Inc. (S) | 4.750 | 04-15-23 | 1,550,000 | 1,522,875 | |
| |||||
JMC Steel Group (S) | 8.250 | 03-15-18 | 920,000 | 943,000 | |
| |||||
MMC Norilsk Nickel OJSC (S) | 5.550 | 10-28-20 | 1,515,000 | 1,524,469 | |
| |||||
Rain CII Carbon LLC (S) | 8.000 | 12-01-18 | 2,070,000 | 2,168,325 | |
| |||||
SunCoke Energy, Inc. | 7.625 | 08-01-19 | 582,000 | 619,481 | |
| |||||
Thompson Creek Metals Company, Inc. | 7.375 | 06-01-18 | 2,005,000 | 1,949,862 | |
| |||||
Vedanta Resources PLC (S) | 7.125 | 05-31-23 | 1,950,000 | 2,052,375 | |
| |||||
Xstrata Finance Canada, Ltd. (S) | 4.250 | 10-25-22 | 1,475,000 | 1,484,517 | |
Paper & Forest Products 0.1% | |||||
| |||||
Neenah Paper, Inc. (S) | 5.250 | 05-15-21 | 980,000 | 989,800 | |
Telecommunication Services 3.4% | 67,663,711 | ||||
Diversified Telecommunication Services 2.5% | |||||
| |||||
American Tower Corp. | 3.400 | 02-15-19 | 1,580,000 | 1,648,405 | |
| |||||
American Tower Corp. | 4.700 | 03-15-22 | 2,210,000 | 2,345,340 | |
| |||||
CenturyLink, Inc. | 5.625 | 04-01-20 | 950,000 | 1,004,625 | |
| |||||
CenturyLink, Inc. | 5.800 | 03-15-22 | 2,915,000 | 3,031,600 | |
| |||||
CenturyLink, Inc. | 6.450 | 06-15-21 | 1,880,000 | 2,044,500 | |
| |||||
CenturyLink, Inc. | 7.600 | 09-15-39 | 1,645,000 | 1,653,225 | |
| |||||
Columbus International, Inc. (S) | 7.375 | 03-30-21 | 1,350,000 | 1,429,312 | |
| |||||
Crown Castle Towers LLC (S) | 4.883 | 08-15-20 | 3,660,000 | 4,067,080 | |
| |||||
Crown Castle Towers LLC (S) | 6.113 | 01-15-20 | 3,009,000 | 3,489,221 | |
| |||||
GTP Acquisition Partners I LLC (S) | 4.704 | 05-15-18 | 3,440,000 | 3,510,014 | |
| |||||
Oi SA (S) | 9.750 | 09-15-16 | BRL 3,440,000 | 1,422,265 | |
| |||||
PAETEC Holding Corp. | 9.875 | 12-01-18 | 2,119,000 | 2,304,412 | |
| |||||
T-Mobile USA, Inc. | 6.125 | 01-15-22 | 970,000 | 1,028,200 | |
| |||||
T-Mobile USA, Inc. | 6.250 | 04-01-21 | 1,200,000 | 1,275,000 | |
| |||||
Telecom Italia Capital SA | 6.999 | 06-04-18 | 2,130,000 | 2,454,825 | |
| |||||
Telecom Italia Capital SA | 7.200 | 07-18-36 | 1,940,000 | 2,114,600 | |
| |||||
Telefonica Emisiones SAU | 6.421 | 06-20-16 | 4,270,000 | 4,721,241 | |
| |||||
Verizon Communications, Inc. | 3.450 | 03-15-21 | 2,935,000 | 3,039,498 | |
| |||||
Verizon Communications, Inc. | 6.550 | 09-15-43 | 3,220,000 | 4,080,407 | |
| |||||
Wind Acquisition Finance SA (S) | 7.375 | 04-23-21 | 2,395,000 | 2,478,825 | |
Wireless Telecommunication Services 0.9% | |||||
| |||||
Comcel Trust (S) | 6.875 | 02-06-24 | 2,220,000 | 2,375,400 | |
| |||||
Digicel Group, Ltd. (S) | 8.250 | 09-30-20 | 2,455,000 | 2,645,263 | |
| |||||
Millicom International Cellular SA (S) | 4.750 | 05-22-20 | 1,485,000 | 1,459,013 |
See notes to financial statements | Annual report | Bond Fund | 21 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Wireless Telecommunication Services (continued) | |||||
| |||||
Millicom International Cellular SA (S) | 6.625 | 10-15-21 | 2,015,000 | $2,143,456 | |
| |||||
SBA Tower Trust (S) | 2.933 | 12-15-17 | 2,220,000 | 2,267,368 | |
| |||||
SBA Tower Trust (S) | 3.598 | 04-15-18 | 2,545,000 | 2,550,670 | |
| |||||
SBA Tower Trust (S) | 5.101 | 04-17-17 | 2,090,000 | 2,244,946 | |
| |||||
SoftBank Corp. (S) | 4.500 | 04-15-20 | 2,800,000 | 2,835,000 | |
Utilities 2.1% | 40,612,702 | ||||
Electric Utilities 1.2% | |||||
| |||||
Beaver Valley II Funding Corp. | 9.000 | 06-01-17 | 566,000 | 599,145 | |
| |||||
BVPS II Funding Corp. | 8.890 | 06-01-17 | 1,009,000 | 1,056,443 | |
| |||||
DPL, Inc. | 7.250 | 10-15-21 | 2,975,000 | 3,190,687 | |
| |||||
Electricite de France SA (5.250% to 1-29-23, | |||||
then 10 Year Swap Rate + 3.709%) (Q)(S) | 5.250 | 01-29-23 | 3,355,000 | 3,448,940 | |
| |||||
Israel Electric Corp., Ltd. (S) | 5.625 | 06-21-18 | 2,790,000 | 2,970,094 | |
| |||||
Israel Electric Corp., Ltd. (S) | 6.875 | 06-21-23 | 1,415,000 | 1,608,459 | |
| |||||
Israel Electric Corp., Ltd. (S) | 7.250 | 01-15-19 | 2,720,000 | 3,083,800 | |
| |||||
NextEra Energy Capital Holdings, Inc. (6.650% | |||||
to 6-15-17, then 3 month LIBOR + 2.125%) | 6.650 | 06-15-67 | 1,355,000 | 1,365,840 | |
| |||||
PNPP II Funding Corp. | 9.120 | 05-30-16 | 307,000 | 320,389 | |
| |||||
PPL Capital Funding, Inc. (6.700% to 3-30-17, | |||||
then 3 month LIBOR + 2.665%) | 6.700 | 03-30-67 | 2,860,000 | 2,877,875 | |
| |||||
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 | 2,106,513 | |
| |||||
W3A Funding Corp. | 8.090 | 01-02-17 | 1,010,965 | 1,011,678 | |
Gas Utilities 0.1% | |||||
| |||||
LBC Tank Terminals Holding Netherlands BV (S) | 6.875 | 05-15-23 | 755,000 | 800,300 | |
Independent Power and Renewable Electricity Producers 0.3% | |||||
| |||||
Calpine Corp. (S) | 6.000 | 01-15-22 | 745,000 | 799,012 | |
| |||||
NRG Energy, Inc. | 7.625 | 01-15-18 | 2,460,000 | 2,807,475 | |
| |||||
NRG Energy, Inc. | 8.250 | 09-01-20 | 1,910,000 | 2,110,550 | |
Multi-Utilities 0.5% | |||||
| |||||
CMS Energy Corp. | 5.050 | 03-15-22 | 3,889,000 | 4,425,896 | |
| |||||
Integrys Energy Group, Inc. (6.110% to | |||||
12-1-16, then 3 month LIBOR + 2.120%) | 6.110 | 12-01-66 | 3,915,000 | 3,949,256 | |
| |||||
Wisconsin Energy Corp. (6.250% to 5-15-17, | |||||
then 3 month LIBOR + 2.113%) | 6.250 | 05-15-67 | 2,010,000 | 2,080,350 | |
U.S. Government & Agency Obligations 26.6% | $520,267,270 | ||||
| |||||
(Cost $514,152,492) | |||||
U.S. Government 8.3% | 162,899,847 | ||||
| |||||
U.S. Treasury | |||||
Bond | 3.625 | 02-15-44 | 86,430,000 | 91,480,796 | |
Note | 1.000 | 06-30-19 | 9,785,000 | 9,508,271 | |
Note | 2.500 | 05-15-24 | 61,766,000 | 61,910,780 | |
U.S. Government Agency 18.3% | 357,367,423 | ||||
| |||||
Federal Home Loan Mortgage Corp. | |||||
30 Yr Pass Thru | 3.000 | 03-01-43 | 7,152,559 | 7,110,609 | |
30 Yr Pass Thru (P) | 3.036 | 03-01-44 | 1,052,325 | 1,093,653 | |
30 Yr Pass Thru | 3.500 | 05-01-42 | 5,048,727 | 5,199,337 |
22 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government Agency (continued) | |||||
30 Yr Pass Thru | 3.500 | 06-01-42 | 12,173,911 | $12,537,076 | |
30 Yr Pass Thru | 4.000 | 11-01-43 | 9,207,097 | 9,746,936 | |
30 Yr Pass Thru | 4.000 | 02-01-44 | 2,404,891 | 2,552,661 | |
30 Yr Pass Thru | 4.500 | 11-01-39 | 7,691,982 | 8,328,544 | |
30 Yr Pass Thru | 4.500 | 03-01-41 | 5,315,820 | 5,777,335 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 3,826,873 | 4,232,581 | |
30 Yr Pass Thru | 5.500 | 07-01-37 | 216,723 | 241,993 | |
30 Yr Pass Thru | 5.500 | 05-01-38 | 839,558 | 937,714 | |
30 Yr Pass Thru | 5.500 | 11-01-39 | 16,426,703 | 18,344,648 | |
30 Yr Pass Thru | 6.500 | 09-01-39 | 2,007,509 | 2,250,496 | |
| |||||
Federal National Mortgage Association | |||||
15 Yr Pass Thru | 3.000 | 09-01-27 | 8,216,709 | 8,557,895 | |
15 Yr Pass Thru | 3.500 | 02-01-26 | 1,285,013 | 1,360,106 | |
15 Yr Pass Thru | 3.500 | 03-01-26 | 10,307,026 | 10,909,343 | |
15 Yr Pass Thru | 4.000 | 12-01-24 | 6,434,129 | 6,891,807 | |
30 Yr Pass Thru (P) | 2.913 | 03-01-44 | 921,232 | 955,060 | |
30 Yr Pass Thru | 3.000 | 10-01-42 | 7,891,515 | 7,821,186 | |
30 Yr Pass Thru | 3.000 | 12-01-42 | 4,079,323 | 4,046,793 | |
30 Yr Pass Thru | 3.000 | 01-01-43 | 2,932,278 | 2,906,145 | |
30 Yr Pass Thru | 3.000 | 03-01-43 | 2,035,794 | 2,024,649 | |
30 Yr Pass Thru | 3.000 | 05-01-43 | 2,717,969 | 2,703,089 | |
30 Yr Pass Thru | 3.000 | 06-01-43 | 4,946,934 | 4,899,755 | |
30 Yr Pass Thru | 3.400 | 09-27-32 | 4,955,000 | 4,617,956 | |
30 Yr Pass Thru | 3.500 | 06-01-42 | 6,302,235 | 6,498,363 | |
30 Yr Pass Thru | 3.500 | 08-01-42 | 11,203,379 | 11,552,034 | |
30 Yr Pass Thru | 3.500 | 01-01-43 | 4,732,238 | 4,877,290 | |
30 Yr Pass Thru | 4.000 | 11-01-40 | 2,561,000 | 2,718,962 | |
30 Yr Pass Thru | 4.000 | 01-01-41 | 9,729,038 | 10,326,082 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 8,479,517 | 9,048,903 | |
30 Yr Pass Thru | 4.000 | 09-01-41 | 5,408,619 | 5,758,278 | |
30 Yr Pass Thru | 4.000 | 10-01-41 | 3,885,638 | 4,136,838 | |
30 Yr Pass Thru | 4.000 | 01-01-42 | 7,786,010 | 8,289,363 | |
30 Yr Pass Thru | 4.000 | 01-01-44 | 6,790,607 | 7,246,585 | |
30 Yr Pass Thru | 4.500 | 08-01-40 | 9,331,115 | 10,099,681 | |
30 Yr Pass Thru | 4.500 | 02-01-41 | 14,934,163 | 16,159,562 | |
30 Yr Pass Thru | 4.500 | 06-01-41 | 15,286,147 | 16,631,188 | |
30 Yr Pass Thru | 4.500 | 07-01-41 | 6,785,507 | 7,382,570 | |
30 Yr Pass Thru | 4.500 | 08-01-41 | 9,118,331 | 9,920,662 | |
30 Yr Pass Thru | 5.000 | 08-01-40 | 11,345,758 | 12,548,912 | |
30 Yr Pass Thru | 5.000 | 09-01-40 | 19,011,504 | 21,109,803 | |
30 Yr Pass Thru | 5.000 | 02-01-41 | 6,922,897 | 7,718,688 | |
30 Yr Pass Thru | 5.000 | 03-01-41 | 7,636,975 | 8,536,328 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 2,628,048 | 2,949,443 | |
30 Yr Pass Thru | 5.000 | 04-01-41 | 11,647,805 | 12,882,989 | |
30 Yr Pass Thru | 5.500 | 05-01-35 | 3,459,737 | 3,875,902 | |
30 Yr Pass Thru | 5.500 | 04-01-36 | 931,990 | 1,041,185 | |
30 Yr Pass Thru | 5.500 | 05-01-36 | 4,169,839 | 4,660,998 | |
30 Yr Pass Thru | 5.500 | 01-01-39 | 3,224,962 | 3,612,384 | |
30 Yr Pass Thru | 6.000 | 02-01-37 | 945,087 | 1,067,529 | |
30 Yr Pass Thru | 6.000 | 07-01-38 | 3,543,933 | 4,012,458 | |
30 Yr Pass Thru | 6.500 | 01-01-39 | 4,419,102 | 4,961,795 | |
30 Yr Pass Thru | 6.500 | 06-01-39 | 1,510,546 | 1,695,281 |
See notes to financial statements | Annual report | Bond Fund | 23 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Foreign Government Obligations 0.1% | $2,711,125 | ||||
| |||||
(Cost $2,539,975) | |||||
Argentina 0.1% | 2,711,125 | ||||
City of Buenos Aires (S) | 9.950 | 03-01-17 | 2,645,000 | 2,711,125 | |
Convertible Bonds 0.1% | $1,059,561 | ||||
| |||||
(Cost $702,974) | |||||
Consumer Discretionary 0.1% | 1,059,561 | ||||
Media 0.1% | |||||
| |||||
Sirius XM Radio, Inc. (S) | 7.000 | 12-01-14 | 586,000 | 1,059,561 | |
Term Loans (M) 1.0% | $19,010,753 | ||||
| |||||
(Cost $18,889,464) | |||||
Consumer Discretionary 0.1% | 1,844,308 | ||||
Hotels, Restaurants & Leisure 0.1% | |||||
| |||||
CCM Merger, Inc. | 5.000 | 03-01-17 | 656,325 | 655,094 | |
| |||||
Marina District Finance Company, Inc. | 6.750 | 08-15-18 | 648,375 | 657,088 | |
Specialty Retail 0.0% | |||||
| |||||
Toys R Us Property Company I LLC | 6.000 | 08-21-19 | 557,200 | 532,126 | |
Consumer Staples 0.1% | 2,482,560 | ||||
Household Products 0.1% | |||||
| |||||
The Sun Products Corp. | 5.500 | 03-18-20 | 2,582,637 | 2,482,560 | |
Energy 0.1% | 1,529,550 | ||||
Oil, Gas & Consumable Fuels 0.1% | |||||
| |||||
Templar Energy LLC | 8.000 | 11-25-20 | 1,545,000 | 1,529,550 | |
Financials 0.1% | 2,150,983 | ||||
Capital Markets 0.1% | |||||
| |||||
Walter Investment Management Corp. | 4.750 | 12-11-20 | 1,664,194 | 1,641,832 | |
Real Estate Investment Trusts 0.0% | |||||
| |||||
iStar Financial, Inc. | 4.500 | 10-15-17 | 507,881 | 509,151 | |
Health Care 0.1% | 1,650,248 | ||||
Health Care Providers & Services 0.1% | |||||
| |||||
CRC Health Corp. | 5.250 | 03-29-21 | 565,000 | 566,648 | |
| |||||
CRC Health Corp. | 9.000 | 09-28-21 | 1,080,000 | 1,083,600 | |
Industrials 0.3% | 5,673,135 | ||||
Aerospace & Defense 0.1% | |||||
| |||||
WP CPP Holdings LLC | 4.750 | 12-27-19 | 987,500 | 988,734 | |
Air Freight & Logistics 0.1% | |||||
| |||||
Syncreon Group BV | 5.250 | 10-28-20 | 2,992,500 | 3,007,463 | |
Airlines 0.1% | |||||
| |||||
Delta Air Lines, Inc. | 3.500 | 10-18-18 | 1,681,742 | 1,676,938 |
24 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Information Technology 0.0% | $948,617 | ||||
Software 0.0% | |||||
| |||||
BMC Software Finance, Inc. | 5.000 | 09-10-20 | 448,875 | 449,658 | |
| |||||
Sybil Finance BV | 5.000 | 03-18-20 | 500,000 | 498,959 | |
Materials 0.1% | 1,426,091 | ||||
Metals & Mining 0.1% | |||||
| |||||
FMG Resources August 2006 Pty, Ltd. | 3.750 | 06-30-19 | 1,428,323 | 1,426,091 | |
Utilities 0.1% | 1,305,261 | ||||
Electric Utilities 0.1% | |||||
| |||||
La Frontera Generation LLC | 4.500 | 09-30-20 | 1,304,283 | 1,305,261 | |
Capital Preferred Securities 1.6% | $30,673,378 | ||||
| |||||
(Cost $29,188,793) | |||||
Financials 1.6% | 30,673,378 | ||||
Banks 0.4% | |||||
| |||||
Allfirst Preferred Capital Trust (P) | 1.727 | 07-15-29 | 1,305,000 | 1,167,975 | |
| |||||
PNC Financial Services Group, Inc. (6.750% to | |||||
8-1-21, then 3 month LIBOR + 3.678%) (Q) | 6.750 | 08-01-21 | 3,260,000 | 3,594,150 | |
| |||||
Sovereign Capital Trust VI | 7.908 | 06-13-36 | 2,613,000 | 2,795,910 | |
Capital Markets 0.4% | |||||
| |||||
Goldman Sachs Capital II (P)(Q) | 4.000 | 07-07-14 | 4,605,000 | 3,707,025 | |
| |||||
State Street Capital Trust IV (P) | 1.233 | 06-15-37 | 4,580,000 | 3,824,300 | |
Diversified Financial Services 0.2% | |||||
| |||||
BAC Capital Trust XIV, Series G (P)(Q) | 4.000 | 06-15-14 | 4,458,000 | 3,610,980 | |
Insurance 0.6% | |||||
| |||||
MetLife Capital Trust IV (7.875% to 12-15-32, | |||||
then 3 month LIBOR + 3.960%) (S) | 7.875 | 12-15-37 | 960,000 | 1,180,800 | |
| |||||
MetLife Capital Trust X (9.250% to 4-8-33, | |||||
then 3 month LIBOR + 5.540%) (S) | 9.250 | 04-08-38 | 2,050,000 | 2,808,500 | |
| |||||
ZFS Finance USA Trust II (6.450% to 6-15-16 | |||||
then 3 month LIBOR + 2.000%) (S) | 6.450 | 12-15-65 | 5,885,000 | 6,355,800 | |
| |||||
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 | 1,627,938 | |
Collateralized Mortgage Obligations 13.4% | $262,545,143 | ||||
| |||||
(Cost $247,707,888) | |||||
Commercial & Residential 11.6% | 227,466,964 | ||||
Adjustable Rate Mortgage Trust | |||||
Series 2005-4, Class 7A12 (P) | 0.730 | 08-25-35 | 1,767,483 | 1,672,384 | |
| |||||
American Home Mortgage Assets Trust | |||||
Series 2006-6, Class XP IO | 2.639 | 12-25-46 | 19,490,452 | 1,398,035 | |
| |||||
American Home Mortgage Investment Trust | |||||
Series 2005-1, Class 1A1 (P) | 0.370 | 06-25-45 | 4,033,970 | 3,803,206 | |
| |||||
Americold 2010 LLC Trust | |||||
Series 2010-ARTA, Class D (S) | 7.443 | 01-14-29 | 4,285,000 | 4,943,279 | |
| |||||
Banc of America Commercial Mortgage | |||||
Securities Trust | |||||
Series 2013-DSNY, Class E (P)(S) | 2.752 | 09-15-26 | 2,300,000 | 2,307,177 |
See notes to financial statements | Annual report | Bond Fund | 25 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
Bear Stearns Adjustable Rate Mortgage Trust | |||||
Series 2005-2, Class A1 (P) | 2.580 | 03-25-35 | 3,080,380 | $3,125,538 | |
Series 2005-5, Class A2 (P) | 2.260 | 08-25-35 | 3,369,087 | 3,419,169 | |
| |||||
Bear Stearns Alt-A Trust | |||||
Series 2004-12, Class 1A1 (P) | 0.850 | 01-25-35 | 5,546,745 | 5,388,086 | |
Series 2005-5, Class 1A4 (P) | 0.710 | 07-25-35 | 2,937,505 | 2,760,691 | |
Series 2005-7, Class 11A1 (P) | 0.690 | 08-25-35 | 4,784,331 | 4,346,148 | |
| |||||
Bear Stearns Asset Backed Securities Trust | |||||
Series 2004-AC5, Class A1 (P) | 5.750 | 10-25-34 | 2,158,849 | 2,216,169 | |
| |||||
Citigroup/Deutsche Bank Commercial | |||||
Mortgage Trust | |||||
Series 2005-CD1, Class C (P) | 5.228 | 07-15-44 | 2,290,000 | 2,379,372 | |
| |||||
Commercial Mortgage Pass Through Certificates | |||||
Series 2006-GG7, Class AM (P) | 5.820 | 07-10-38 | 3,325,000 | 3,612,952 | |
Series 2010-C1, Class D (P)(S) | 5.908 | 07-10-46 | 3,280,000 | 3,601,253 | |
Series 2012-CR2, Class XA IO | 1.928 | 08-15-45 | 19,633,146 | 2,110,799 | |
Series 2012-LC4, Class B (P) | 4.934 | 12-10-44 | 1,955,000 | 2,145,698 | |
Series 2012-LC4, Class C (P) | 5.647 | 12-10-44 | 4,110,000 | 4,598,880 | |
Series 2013-300P, Class D (P)(S) | 4.394 | 08-10-30 | 4,315,000 | 4,384,726 | |
Series 2013-CR11, Class B (P) | 5.165 | 10-10-46 | 3,835,000 | 4,266,599 | |
Series 2013-CR13, Class C (P) | 4.757 | 10-10-46 | 2,855,000 | 2,987,169 | |
Series 2013-LC13, Class B (P)(S) | 5.009 | 08-10-46 | 3,565,000 | 3,909,133 | |
Series 2014-CR15, Class XA IO | 1.364 | 02-10-47 | 39,440,824 | 3,024,086 | |
Series 2014-CR16, Class C (P) | 4.906 | 04-10-47 | 3,650,000 | 3,839,300 | |
Series 2014-TWC, Class D (P)(S) | 2.402 | 02-13-32 | 2,970,000 | 2,971,179 | |
| |||||
Deutsche Mortgage Securities, Inc. Mortgage | |||||
Loan Trust | |||||
Series 2004-4, Class 2AR1 (P) | 0.690 | 06-25-34 | 3,623,347 | 3,412,638 | |
| |||||
Extended Stay America Trust | |||||
Series 2013-ESFL, Class DFL (P)(S) | 3.291 | 12-05-31 | 3,615,000 | 3,636,531 | |
Series 2013-ESHM, Class M (S) | 7.625 | 12-05-19 | 980,093 | 999,597 | |
| |||||
GMACM Mortgage Loan Trust | |||||
Series 2004-AR2, Class 3A (P) | 3.116 | 08-19-34 | 2,447,224 | 2,396,346 | |
| |||||
GS Mortgage Securities Corp. II | |||||
Series 2013-KYO, Class D (P)(S) | 2.751 | 11-08-29 | 3,685,000 | 3,751,853 | |
| |||||
HarborView Mortgage Loan Trust | |||||
Series 2005-8, Class 1X IO | 2.170 | 09-19-35 | 11,178,432 | 637,115 | |
Series 2005-9, Class 2A1C (P) | 0.599 | 06-20-35 | 4,731,614 | 4,495,738 | |
Series 2005-11, Class X IO | 2.422 | 08-19-45 | 8,980,187 | 503,321 | |
Series 2007-3, Class ES IO (S) | 0.350 | 05-19-47 | 56,208,225 | 597,212 | |
Series 2007-4, Class ES IO | 0.350 | 07-19-47 | 60,038,641 | 600,386 | |
Series 2007-6, Class ES IO (S) | 0.342 | 08-19-37 | 47,026,112 | 499,652 | |
| |||||
Hilton USA Trust | |||||
Series 2013-HLF, Class EFL (P)(S) | 3.901 | 11-05-30 | 3,360,000 | 3,360,060 | |
Series 2013-HLT, Class DFX (S) | 4.407 | 11-05-30 | 2,542,000 | 2,629,335 | |
| |||||
IndyMac Index Mortgage Loan Trust | |||||
Series 2005-AR18, Class 1X IO | 2.029 | 10-25-36 | 24,171,725 | 1,924,574 | |
Series 2005-AR18, Class 2X IO | 1.660 | 10-25-36 | 38,222,470 | 1,426,019 | |
| |||||
JPMBB Commercial Mortgage Securities Trust | |||||
Series 2014-C19, Class C (P) | 4.835 | 04-15-47 | 4,435,000 | 4,561,633 | |
| |||||
JPMorgan Chase Commercial Mortgage Securities Corp. | |||||
Series 2007-LD12, Class AM (P) | 6.006 | 02-15-51 | 5,600,000 | 6,244,258 | |
Series 2007-LDPX, Class AM (P) | 5.464 | 01-15-49 | 6,175,000 | 6,567,415 | |
Series 2012-HSBC, Class XA IO (S) | 1.431 | 07-05-32 | 20,100,000 | 2,022,261 | |
Series 2012-PHH, Class D (P)(S) | 3.419 | 10-15-25 | 1,575,000 | 1,581,709 |
26 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Commercial & Residential (continued) | |||||
JPMorgan Chase Commercial Mortgage Securities Corp. | |||||
Series 2013-INMZ, Class M (P)(S) | 6.130 | 09-15-18 | 5,165,000 | $5,227,804 | |
Series 2013-JWRZ, Class D (P)(S) | 3.141 | 04-15-30 | 3,095,000 | 3,102,512 | |
Series 2014-FBLU, Class D (P)(S) | 2.752 | 12-15-28 | 4,830,000 | 4,840,211 | |
Series 2014-FBLU, Class E (P)(S) | 3.652 | 12-15-28 | 3,465,000 | 3,475,960 | |
| |||||
LB–UBS Commercial Mortgage Trust | |||||
Series 2006-C6, Class AM | 5.413 | 09-15-39 | 3,059,000 | 3,338,323 | |
| |||||
MASTR Adjustable Rate Mortgages Trust | |||||
Series 2004-11, Class M2 (P) | 1.250 | 11-25-34 | 3,370,000 | 3,141,248 | |
| |||||
Merrill Lynch Mortgage Investors Trust | |||||
Series 2004-1, Class 2A1 (P) | 2.146 | 12-25-34 | 3,223,554 | 3,167,326 | |
| |||||
Morgan Stanley Bank of America Merrill | |||||
Lynch Trust | |||||
Series 2013-C7, Class C (P) | 4.187 | 02-15-46 | 2,403,000 | 2,426,494 | |
| |||||
Morgan Stanley Mortgage Loan Trust | |||||
Series 2004-6AR, Class 2A2 (P) | 2.736 | 08-25-34 | 4,926,129 | 4,910,602 | |
| |||||
MortgageIT Trust | |||||
Series 2005-2, Class 1A2 (P) | 0.480 | 05-25-35 | 3,039,930 | 2,903,504 | |
| |||||
Motel 6 Trust | |||||
Series 2012-MTL6, Class D (S) | 3.781 | 10-05-25 | 6,035,000 | 6,111,451 | |
| |||||
Residential Accredit Loans, Inc. | |||||
Series 2005-QO4, Class XIO IO | 2.356 | 12-25-45 | 22,364,982 | 2,101,823 | |
| |||||
Springleaf Mortgage Loan Trust | |||||
Series 2012-3A, Class M1 (P)(S) | 2.660 | 12-25-59 | 1,520,000 | 1,512,695 | |
| |||||
Thornburg Mortgage Securities Trust | |||||
Series 2004-1, Class II2A (P) | 1.573 | 03-25-44 | 2,781,904 | 2,754,302 | |
| |||||
UBS Commercial Mortgage Trust | |||||
Series 2012-C1, Class B | 4.822 | 05-10-45 | 2,220,000 | 2,409,413 | |
Series 2012-C1, Class C (P)(S) | 5.535 | 05-10-45 | 1,580,000 | 1,751,168 | |
| |||||
UBS-Barclays Commercial Mortgage Trust | |||||
Series 2012-C2, Class XA IO (S) | 1.780 | 05-10-63 | 27,361,949 | 2,357,423 | |
| |||||
VFC 2013-1 LLC | |||||
Series 2013-1, Class A (S) | 3.130 | 03-20-26 | 1,277,424 | 1,291,462 | |
| |||||
VNDO Mortgage Trust | |||||
Series 2013-PENN, Class D (P)(S) | 3.947 | 12-13-29 | 4,103,000 | 4,174,015 | |
| |||||
Wachovia Bank Commercial Mortgage Trust | |||||
Series 2007-C31, Class AM (P) | 5.591 | 04-15-47 | 1,810,000 | 1,993,912 | |
| |||||
WaMu Mortgage Pass Through Certificates | |||||
Series 2005-AR2, Class 2A1B (P) | 0.520 | 01-25-45 | 1,649,061 | 1,487,653 | |
Series 2005-AR2, Class 2A3 (P) | 0.500 | 01-25-45 | 2,488,887 | 2,316,439 | |
Series 2005-AR8, Class 2AB2 (P) | 0.570 | 07-25-45 | 4,306,489 | 4,087,608 | |
Series 2005-AR13, Class X IO | 1.480 | 10-25-45 | 98,794,671 | 4,823,966 | |
Series 2005-AR19, Class A1A2 (P) | 0.440 | 12-25-45 | 4,400,273 | 4,046,975 | |
| |||||
Wells Fargo Commercial Mortgage Trust | |||||
Series 2013-120B, Class C (P)(S) | 2.710 | 03-18-28 | 6,490,000 | 6,322,058 | |
Series 2013-BTC, Class E (P)(S) | 3.550 | 04-16-35 | 4,215,000 | 3,584,111 | |
| |||||
WF-RBS Commercial Mortgage Trust | |||||
Series 2012-C9, Class XA IO (S) | 2.238 | 11-15-45 | 29,939,286 | 3,627,534 | |
Series 2013-C15, Class B (P) | 4.485 | 08-15-46 | 1,072,000 | 1,137,044 | |
Series 2013-C16, Class B (P) | 4.985 | 09-15-46 | 1,800,000 | 1,983,247 | |
U.S. Government Agency 1.8% | 35,078,179 | ||||
| |||||
Federal Home Loan Mortgage Corp. | |||||
Series 290, Class IO | 3.500 | 11-15-32 | 11,075,249 | 2,232,056 | |
Series 3794, Class PI IO | 4.500 | 02-15-38 | 2,037,989 | 219,302 |
See notes to financial statements | Annual report | Bond Fund | 27 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
U.S. Government Agency (continued) | |||||
Federal Home Loan Mortgage Corp. | |||||
Series 4077, Class IK IO | 5.000 | 07-15-42 | 4,719,542 | $910,442 | |
Series 4136, Class IH IO | 3.500 | 09-15-27 | 15,441,913 | 1,932,217 | |
Series K017, Class X1 IO | 1.441 | 12-25-21 | 14,731,874 | 1,260,165 | |
Series K018, Class X1 IO | 1.451 | 01-25-22 | 19,671,945 | 1,698,358 | |
Series K021, Class X1 IO | 1.510 | 06-25-22 | 4,672,931 | 451,330 | |
Series K022, Class X1 IO | 1.303 | 07-25-22 | 36,382,352 | 3,039,454 | |
Series K709, Class X1 IO | 1.541 | 03-25-19 | 17,215,104 | 1,097,756 | |
Series K710, Class X1 IO | 1.781 | 05-25-19 | 13,980,933 | 1,051,157 | |
Series K711, Class X1 IO | 1.709 | 07-25-19 | 49,704,890 | 3,652,812 | |
| |||||
Federal National Mortgage Association | |||||
Series 2009-50, Class GI IO | 5.000 | 05-25-39 | 2,205,502 | 310,996 | |
Series 2009-78, Class IB IO | 5.000 | 06-25-39 | 2,819,931 | 355,001 | |
Series 2012-118, Class IB IO | 3.500 | 11-25-42 | 7,992,073 | 1,629,475 | |
Series 2012-137, Class QI IO | 3.000 | 12-25-27 | 16,403,712 | 2,272,434 | |
Series 2012-137, Class WI IO | 3.500 | 12-25-32 | 11,820,026 | 2,190,752 | |
Series 402, Class 3 IO | 4.000 | 11-25-39 | 1,721,654 | 347,305 | |
Series 402, Class 4 IO | 4.000 | 10-25-39 | 2,683,051 | 490,078 | |
Series 402, Class 7 IO | 4.500 | 11-25-39 | 2,583,084 | 493,344 | |
Series 407, Class 7 IO | 5.000 | 03-25-41 | 2,444,609 | 501,199 | |
Series 407, Class 8 IO | 5.000 | 03-25-41 | 1,215,131 | 258,081 | |
Series 407, Class 15 IO | 5.000 | 01-25-40 | 2,964,957 | 590,992 | |
Series 407, Class 21 IO | 5.000 | 01-25-39 | 1,474,430 | 231,011 | |
Series 407, Class C6 IO | 5.500 | 01-25-40 | 5,936,423 | 1,273,705 | |
| |||||
Government National Mortgage Association | |||||
Series 2012-114, Class IO | 1.034 | 01-16-53 | 11,103,639 | 993,531 | |
Series 2013-42, Class IA IO | 3.500 | 03-20-43 | 15,768,332 | 2,441,036 | |
Series 2013-42, Class YI IO | 3.500 | 03-20-43 | 20,609,131 | 3,154,190 | |
Asset Backed Securities 5.6% | 110,920,284 | ||||
| |||||
(Cost $107,288,243) | |||||
ACE Securities Corp. Home Equity Loan Trust | |||||
Series 2005-HE3, Class M2 (P) | 0.600 | 05-25-35 | 2,419,980 | 2,301,062 | |
| |||||
Aegis Asset Backed Securities Trust | |||||
Series 2004-3, Class A1 (P) | 0.870 | 09-25-34 | 1,473,181 | 1,442,205 | |
Series 2005-4, Class M1 (P) | 0.600 | 10-25-35 | 4,810,000 | 4,100,857 | |
| |||||
Ameriquest Mortgage Securities, Inc. | |||||
Series 2005-R3, Class M2 (P) | 0.620 | 05-25-35 | 3,070,000 | 2,812,234 | |
| |||||
Argent Securities, Inc. | |||||
Series 2003-W10, Class M1 (P) | 1.232 | 01-25-34 | 1,615,597 | 1,554,682 | |
Series 2004-W6, Class M1 (P) | 0.700 | 05-25-34 | 1,705,732 | 1,658,865 | |
| |||||
Asset Backed Funding Certificates | |||||
Series 2005-HE1, Class M1 (P) | 0.780 | 03-25-35 | 2,452,856 | 2,340,540 | |
| |||||
Bravo Mortgage Asset Trust | |||||
Series 2006-1A, Class A2 (P)(S) | 0.390 | 07-25-36 | 3,674,189 | 3,398,948 | |
| |||||
Citicorp Residential Mortgage Securities, Inc. | |||||
Series 2007-2, Class A6 (P) | 5.764 | 06-25-37 | 1,668,408 | 1,674,932 | |
| |||||
CKE Restaurant Holdings, Inc. | |||||
Series 2013-1A, Class A2 (S) | 4.474 | 03-20-43 | 7,067,375 | 7,269,855 | |
| |||||
ContiMortgage Home Equity Loan Trust | |||||
Series 1995-2, Class A5 | 8.100 | 08-15-25 | 130,015 | 127,612 | |
| |||||
Countrywide Asset-Backed Certificates | |||||
Series 2004-10, Class AF5B (P) | 5.420 | 02-25-35 | 2,925,911 | 2,996,753 |
28 | Bond Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Credit-Based Asset Servicing and Securitization LLC | |||||
Series 2005-CB2, Class M1 (P) | 0.810 | 04-25-36 | 2,474,937 | $2,431,646 | |
Series 2005-CB4, Class M1 (P) | 0.572 | 07-25-35 | 1,680,000 | 1,612,556 | |
| |||||
Credit Suisse Mortgage Trust | |||||
Series 2006-CF2, Class M1 (P)(S) | 0.620 | 05-25-36 | 4,910,000 | 4,724,323 | |
Series 2014-ICE, Class D (P)(S) | 2.400 | 04-15-27 | 3,080,000 | 3,080,000 | |
| |||||
Dominos Pizza Master Issuer LLC | |||||
Series 2012-1A, Class A2 (S) | 5.216 | 01-25-42 | 6,179,169 | 6,676,462 | |
| |||||
Encore Credit Receivables Trust | |||||
Series 2005-2, Class M2 (P) | 0.840 | 11-25-35 | 3,350,000 | 3,111,416 | |
| |||||
Ford Credit Auto Owner Trust | |||||
Series 2014-1, Class B (S) | 2.410 | 11-15-25 | 3,225,000 | 3,252,970 | |
| |||||
Fremont Home Loan Trust | |||||
Series 2005-1, Class M3 (P) | 0.915 | 06-25-35 | 2,087,554 | 2,058,767 | |
| |||||
GSAA Home Equity Trust | |||||
Series 2005-11, Class 3A1 (P) | 0.420 | 10-25-35 | 4,572,631 | 4,299,832 | |
| |||||
GSAA Trust | |||||
Series 2005-10, Class M3 (P) | 0.700 | 06-25-35 | 4,265,000 | 4,041,655 | |
| |||||
Home Equity Asset Trust | |||||
Series 2005-6, Class M1 (P) | 0.620 | 12-25-35 | 1,810,000 | 1,784,398 | |
| |||||
Home Equity Mortgage Loan | |||||
Asset-Backed Trust | |||||
Series 2005-C, Class AII3 (P) | 0.520 | 10-25-35 | 3,212,500 | 3,057,985 | |
| |||||
Merrill Lynch Mortgage Investors, Inc. | |||||
Series 2005-WMC1, Class M1 (P) | 0.900 | 09-25-35 | 2,074,762 | 1,945,102 | |
| |||||
New Century Home Equity Loan Trust | |||||
Series 2005-1, Class M1 (P) | 0.825 | 03-25-35 | 5,350,000 | 5,038,994 | |
| |||||
RAMP Trust | |||||
Series 2005-RS3, Class M1 (P) | 0.570 | 03-25-35 | 2,355,000 | 2,217,275 | |
| |||||
Renaissance Home Equity Loan Trust | |||||
Series 2005-2, Class AF4 (P) | 4.934 | 08-25-35 | 2,680,000 | 2,598,474 | |
| |||||
Sonic Capital LLC | |||||
Series 2011-1A, Class A2 (S) | 5.438 | 05-20-41 | 2,587,696 | 2,783,991 | |
| |||||
Soundview Home Loan Trust | |||||
Series 2005-CTX1, Class M2 (P) | 0.592 | 11-25-35 | 2,648,500 | 2,417,787 | |
Series 2006-OPT2, Class A3 (P) | 0.330 | 05-25-36 | 1,218,582 | 1,127,960 | |
| |||||
Specialty Underwriting & Residential | |||||
Finance Trust | |||||
Series 2006-BC1, Class A2D (P) | 0.450 | 12-25-36 | 6,930,000 | 6,573,022 | |
| |||||
Structured Asset Securities Corp. Mortgage | |||||
Loan Trust | |||||
Series 2005-2XS, Class 2A2 (P) | 1.652 | 02-25-35 | 3,350,715 | 3,225,496 | |
| |||||
TAL Advantage LLC | |||||
Series 2014-1A, Class A (S) | 3.510 | 02-22-39 | 2,291,250 | 2,331,560 | |
| |||||
Westgate Resorts LLC | |||||
Series 2012-2A, Class A (S) | 3.000 | 01-20-25 | 1,943,303 | 1,959,704 | |
Series 2012-2A, Class B (S) | 4.500 | 01-20-25 | 3,504,391 | 3,563,545 | |
Series 2012-3A, Class A (S) | 2.500 | 03-20-25 | 1,625,356 | 1,633,482 | |
Series 2012-3A, Class B (S) | 4.500 | 03-20-25 | 478,046 | 487,009 | |
Series 2013-1A, Class B (S) | 3.750 | 08-20-25 | 1,196,490 | 1,206,328 |
See notes to financial statements | Annual report | Bond Fund | 29 |
Shares | Value | |
Preferred Securities 1.0% | $19,002,165 | |
| ||
(Cost $17,846,759) | ||
Consumer Staples 0.1% | 2,083,056 | |
Food & Staples Retailing 0.1% | ||
| ||
Ocean Spray Cranberries, Inc., Series A, | ||
6.250% (S) | 23,250 | 2,083,056 |
Financials 0.7% | 13,498,578 | |
Banks 0.3% | ||
| ||
FNB Corp. (7.250% to 2-24-24, then 3 month | ||
LIBOR + 4.600%) | 61,350 | 1,679,763 |
| ||
Regions Financial Corp., 6.375% | 102,790 | 2,532,746 |
| ||
Wells Fargo & Company, Series L, 7.500% | 2,684 | 1,653,344 |
Capital Markets 0.1% | ||
| ||
The Goldman Sachs Group, Inc., 5.500% | 74,825 | 1,797,296 |
Consumer Finance 0.3% | ||
| ||
Ally Financial, Inc., 7.000% (S) | 3,594 | 3,624,549 |
| ||
Discover Financial Services, 6.500% | 60,000 | 1,507,200 |
Real Estate Investment Trusts 0.0% | ||
| ||
Weyerhaeuser Company, 6.375% | 12,000 | 703,680 |
Industrials 0.2% | 3,420,531 | |
Aerospace & Defense 0.1% | ||
| ||
United Technologies Corp., 7.500% | 31,265 | 2,057,237 |
Airlines 0.1% | ||
| ||
Continental Airlines Finance Trust II, 6.000% | 27,300 | 1,363,294 |
Notional | Value | |
Purchased Options 0.0% | $125,000 | |
| ||
(Cost $1,027,992) | ||
Put Options 0.0% | 125,000 | |
Exchange Traded on 10 Year U.S. Treasury | ||
Note Futures Option (Expiration Date: | ||
8-22-14; Strike Price: $117) (I) | 8,000,000 | 125,000 |
30 | Bond Fund | Annual report | See notes to financial statements |
Par value | Value | |
Short-Term Investments 3.0% | $59,883,000 | |
| ||
(Cost $59,883,000) | ||
Repurchase Agreement 3.0% | 59,883,000 | |
Barclays Tri-Party Repurchase Agreement dated 5-30-14 at 0.050% | ||
to be repurchased at $53,623,223 on 6-2-14, collateralized by | ||
$53,404,400 U.S. Treasury Notes, 1.375% due 11-30-15 (valued at | ||
$54,695,784, including interest) | 53,623,000 | 53,623,000 |
| ||
Repurchase Agreement with State Street Corp. dated 5-30-14 at | ||
0.000% to be repurchased at $6,260,000 on 6-2-14, collateralized | ||
by $6,455,000 U.S. Treasury Notes, 0.625% due 11-30-17 (valued | ||
at $6,386,809, including interest) | 6,260,000 | 6,260,000 |
Total investments (Cost $1,886,610,046)† 100.2% | $1,962,280,643 | |
| ||
Other assets and liabilities, net (0.2%) | ($4,644,248) | |
| ||
Total net assets 100.0% | $1,957,636,395 | |
|
The percentage shown for each investment category is the total value of that category as a percentage of the net assets applicable of the fund.
^ All par values are denominated in U.S. dollars unless otherwise indicated.
BRL Brazilian Real
IO Interest-Only Security— (Interest Tranche of Stripped Mortgage Pool). Rate shown is the annualized yield at the end of the period.
LIBOR London Interbank Offered Rate
PIK Paid-in-kind
USGG U.S. Generic Government Yield Index
(I) Non-income producing security.
(M) Term loans are variable rate obligations. The coupon rate shown represents the rate at period end.
(P) Variable rate obligation. The coupon rate shown represents the rate at period end.
(Q) Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date.
(S) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $515,206,432 or 26.32% of the fund’s net assets as of May 31, 2014.
† At 5-31-14, the aggregate cost of investment securities for federal income tax purposes was $1,893,045,107. Net unrealized appreciation aggregated $69,235,536, of which $84,838,673 related to appreciated investment securities and $15,603,137 related to depreciated investment securities.
See notes to financial statements | Annual report | Bond Fund | 31 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 5-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
| |
Investments, at value (Cost $1,886,610,046) | $1,962,280,643 |
Cash | 244,812 |
Receivable for investments sold | 7,323,988 |
Receivable for fund shares sold | 10,463,000 |
Dividends and interest receivable | 19,719,129 |
Receivable due from advisor | 251 |
Other receivables and prepaid expenses | 94,400 |
Total assets | 2,000,126,223 |
Liabilities | |
| |
Payable for investments purchased | 7,400,546 |
Payable for delayed delivery securities purchased | 29,576,065 |
Payable for fund shares repurchased | 4,219,690 |
Distributions payable | 523,011 |
Payable to affiliates | |
Accounting and legal services fees | 67,246 |
Transfer agent fees | 352,745 |
Distribution and service fees | 138,749 |
Trustees’ fees | 2,496 |
Other liabilities and accrued expenses | 209,280 |
Total liabilities | 42,489,828 |
Net assets | $1,957,636,395 |
Net assets consist of | |
| |
Paid-in capital | $1,891,000,371 |
Undistributed net investment income | 5,266,114 |
Accumulated net realized gain (loss) on investments, futures contracts and | |
foreign currency transactions | (14,302,208) |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 75,672,118 |
Net assets | $1,957,636,395 |
32 | Bond Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of 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 ($1,411,295,700 ÷ 86,792,122 shares)1 | $16.26 |
Class B ($32,592,164 ÷ 2,004,531 shares)1 | $16.26 |
Class C ($162,302,893 ÷ 9,980,667 shares)1 | $16.26 |
Class I ($302,130,184 ÷ 18,578,578 shares) | $16.26 |
Class R2 ($6,798,631 ÷ 417,793 shares) | $16.27 |
Class R6 ($42,516,823 ÷ 2,612,073 shares) | $16.28 |
Maximum offering price per share | |
| |
Class A (net asset value per share ÷ 96%)2 | $16.94 |
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.
See notes to financial statements | Annual report | Bond Fund | 33 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 5-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
| |
Interest | $85,580,759 |
Dividends | 1,276,860 |
Total investment income | 86,857,619 |
Expenses | |
| |
Investment management fees | 8,642,293 |
Distribution and service fees | 6,080,516 |
Accounting and legal services fees | 377,389 |
Transfer agent fees | 2,496,223 |
Trustees’ fees | 54,485 |
State registration fees | 210,217 |
Printing and postage | 190,912 |
Professional fees | 130,929 |
Custodian fees | 193,964 |
Registration and filing fees | 53,974 |
Other | 49,713 |
Total expenses | 18,480,615 |
Less expense reductions | (1,030,963) |
Net expenses | 17,449,652 |
Net investment income | 69,407,967 |
Realized and unrealized gain (loss) | |
| |
Net realized gain (loss) on | |
Investments and foreign currency transactions | 1,791,438 |
Futures contracts | (3,037,349) |
(1,245,911) | |
Change in net unrealized appreciation (depreciation) of | |
Investments and translation of assets and liabilities in foreign currencies | 2,226,389 |
Futures contracts | 482,312 |
2,708,701 | |
Net realized and unrealized gain | 1,462,790 |
Increase in net assets from operations | $70,870,757 |
34 | Bond Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of fund share transactions.
Year | Year | |
ended | ended | |
5-31-14 | 5-31-13 | |
Increase (decrease) in net assets | ||
| ||
From operations | ||
Net investment income | $69,407,967 | $63,004,435 |
Net realized gain (loss) | (1,245,911) | 19,349,371 |
Change in net unrealized appreciation (depreciation) | 2,708,701 | 33,911,782 |
Increase in net assets resulting from operations | 70,870,757 | 116,265,588 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (57,110,614) | (53,420,052) |
Class B | (1,268,051) | (1,524,202) |
Class C | (5,772,362) | (5,484,474) |
Class I | (10,994,882) | (9,174,395) |
Class R2 | (190,232) | (22,100) |
Class R6 | (1,713,305) | (110,196) |
From net realized gain | ||
Class A | (5,785,899) | (2,677,938) |
Class B | (150,431) | (92,529) |
Class C | (679,388) | (331,835) |
Class I | (1,012,012) | (432,679) |
Class R2 | (21,658) | (228) |
Class R6 | (173,447) | (5,437) |
Total distributions | (84,872,281) | (73,276,065) |
From fund share transactions | 17,661,786 | 572,779,681 |
Total increase | 3,660,262 | 615,769,204 |
Net assets | ||
| ||
Beginning of year | 1,953,976,133 | 1,338,206,929 |
End of year | $1,957,636,395 | $1,953,976,133 |
Undistributed net investment income | $5,266,114 | $3,801,967 |
See notes to financial statements | Annual report | Bond Fund | 35 |
Financial highlights
The Financial highlights show how the fund’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 5-31-14 | 5-31-13 | 5-31-12 | 5-31-11 | 5-31-10 |
Per share operating performance | |||||
| |||||
Net asset value, beginning of period | $16.37 | $15.86 | $15.86 | $15.00 | $12.96 |
Net investment income1 | 0.61 | 0.63 | 0.72 | 0.81 | 0.97 |
Net realized and unrealized gain on investments | 0.02 | 0.61 | 0.08 | 0.92 | 2.05 |
Total from investment operations | 0.63 | 1.24 | 0.80 | 1.73 | 3.02 |
Less distributions | |||||
From net investment income | (0.67) | (0.70) | (0.79) | (0.87) | (0.98) |
From net realized gain | (0.07) | (0.03) | (0.01) | — | — |
Total distributions | (0.74) | (0.73) | (0.80) | (0.87) | (0.98) |
Net asset value, end of period | $16.26 | $16.37 | $15.86 | $15.86 | $15.00 |
Total return (%)2,3 | 4.06 | 7.93 | 5.21 | 11.78 | 23.83 |
Ratios and supplemental data | |||||
| |||||
Net assets, end of period (in millions) | $1,411 | $1,434 | $1,061 | $912 | $819 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.98 | 1.03 | 1.06 | 1.05 | 1.08 |
Expenses including reductions | 0.92 | 0.98 | 1.02 | 1.05 | 1.07 |
Net investment income | 3.80 | 3.84 | 4.63 | 5.24 | 6.71 |
Portfolio turnover (%) | 77 | 72 | 76 | 73 | 88 |
1 Based on average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
CLASS B SHARES Period ended | 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 | $16.37 | $15.86 | $15.86 | $15.00 | $12.95 |
Net investment income1 | 0.50 | 0.51 | 0.61 | 0.70 | 0.86 |
Net realized and unrealized gain on investments | 0.02 | 0.61 | 0.08 | 0.92 | 2.07 |
Total from investment operations | 0.52 | 1.12 | 0.69 | 1.62 | 2.93 |
Less distributions | |||||
From net investment income | (0.56) | (0.58) | (0.68) | (0.76) | (0.88) |
From net realized gain | (0.07) | (0.03) | (0.01) | — | — |
Total distributions | (0.63) | (0.61) | (0.69) | (0.76) | (0.88) |
Net asset value, end of period | $16.26 | $16.37 | $15.86 | $15.86 | $15.00 |
Total return (%)2,3 | 3.34 | 7.18 | 4.48 | 11.00 | 23.05 |
Ratios and supplemental data | |||||
| |||||
Net assets, end of period (in millions) | $33 | $44 | $37 | $28 | $25 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.68 | 1.73 | 1.76 | 1.75 | 1.78 |
Expenses including reductions | 1.62 | 1.68 | 1.72 | 1.75 | 1.77 |
Net investment income | 3.11 | 3.15 | 3.92 | 4.53 | 6.01 |
Portfolio turnover (%) | 77 | 72 | 76 | 73 | 88 |
1 Based on average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
36 | Bond Fund | Annual report | See notes to financial statements |
CLASS C SHARES Period ended | 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 | $16.37 | $15.87 | $15.86 | $15.00 | $12.96 |
Net investment income1 | 0.49 | 0.51 | 0.61 | 0.70 | 0.86 |
Net realized and unrealized gain on investments | 0.03 | 0.60 | 0.09 | 0.92 | 2.06 |
Total from investment operations | 0.52 | 1.11 | 0.70 | 1.62 | 2.92 |
Less distributions | |||||
From net investment income | (0.56) | (0.58) | (0.68) | (0.76) | (0.88) |
From net realized gain | (0.07) | (0.03) | (0.01) | — | — |
Total distributions | (0.63) | (0.61) | (0.69) | (0.76) | (0.88) |
Net asset value, end of period | $16.26 | $16.37 | $15.87 | $15.86 | $15.00 |
Total return (%)2,3 | 3.34 | 7.11 | 4.55 | 11.00 | 22.98 |
Ratios and supplemental data | |||||
| |||||
Net assets, end of period (in millions) | $162 | $195 | $116 | $71 | $40 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.68 | 1.72 | 1.77 | 1.75 | 1.78 |
Expenses including reductions | 1.62 | 1.67 | 1.72 | 1.75 | 1.77 |
Net investment income | 3.10 | 3.12 | 3.91 | 4.50 | 5.98 |
Portfolio turnover (%) | 77 | 72 | 76 | 73 | 88 |
1 Based on average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
CLASS I SHARES Period ended | 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 | $16.37 | $15.87 | $15.86 | $14.99 | $12.96 |
Net investment income1 | 0.66 | 0.68 | 0.78 | 0.88 | 1.03 |
Net realized and unrealized gain on investments | 0.02 | 0.61 | 0.09 | 0.92 | 2.05 |
Total from investment operations | 0.68 | 1.29 | 0.87 | 1.80 | 3.08 |
Less distributions | |||||
From net investment income | (0.72) | (0.76) | (0.85) | (0.93) | (1.05) |
From net realized gain | (0.07) | (0.03) | (0.01) | — | — |
Total distributions | (0.79) | (0.79) | (0.86) | (0.93) | (1.05) |
Net asset value, end of period | $16.26 | $16.37 | $15.87 | $15.86 | $14.99 |
Total return (%)2 | 4.40 | 8.27 | 5.70 | 12.33 | 24.31 |
Ratios and supplemental data | |||||
| |||||
Net assets, end of period (in millions) | $302 | $277 | $123 | $74 | $30 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.66 | 0.65 | 0.67 | 0.62 | 0.63 |
Expenses including reductions | 0.60 | 0.60 | 0.62 | 0.62 | 0.63 |
Net investment income | 4.11 | 4.19 | 4.99 | 5.64 | 7.13 |
Portfolio turnover (%) | 77 | 72 | 76 | 73 | 88 |
1 Based on average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
See notes to financial statements | Annual report | Bond Fund | 37 |
CLASS R2 SHARES Period ended | 5-31-14 | 5-31-13 | 5-31-121 | ||||
Per share operating performance | |||||||
| |||||||
Net asset value, beginning of period | $16.38 | $15.87 | $15.80 | ||||
Net investment income2 | 0.60 | 0.62 | 0.17 | ||||
Net realized and unrealized gain on investments | 0.02 | 0.64 | 0.09 | ||||
Total from investment operations | 0.62 | 1.26 | 0.26 | ||||
Less distributions | |||||||
From net investment income | (0.66) | (0.72) | (0.19) | ||||
From net realized gain | (0.07) | (0.03) | — | ||||
Total distributions | (0.73) | (0.75) | (0.19) | ||||
Net asset value, end of period | $16.27 | $16.38 | $15.87 | ||||
Total return (%)3 | 4.01 | 8.09 | 1.684 | ||||
Ratios and supplemental data | |||||||
| |||||||
Net assets, end of period (in millions) | $7 | $2 | —5 | ||||
Ratios (as a percentage of average net assets): | |||||||
Expenses before reductions | 1.05 | 1.03 | 0.866 | ||||
Expenses including reductions | 0.99 | 0.98 | 0.806 | ||||
Net investment income | 3.76 | 3.88 | 4.286 | ||||
Portfolio turnover (%) | 77 | 72 | 767 | ||||
1 The inception date for Class R2 shares is 3-1-12.
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 Less than $500,000.
6 Annualized.
7 The portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
CLASS R6 SHARES Period ended | 5-31-14 | 5-31-13 | 5-31-121 | ||
Per share operating performance | |||||
| |||||
Net asset value, beginning of period | $16.38 | $15.87 | $15.55 | ||
Net investment income2 | 0.68 | 0.70 | 0.57 | ||
Net realized and unrealized gain on investments | 0.03 | 0.61 | 0.40 | ||
Total from investment operations | 0.71 | 1.31 | 0.97 | ||
Less distributions | |||||
From net investment income | (0.74) | (0.77) | (0.64) | ||
From net realized gain | (0.07) | (0.03) | (0.01) | ||
Total distributions | (0.81) | (0.80) | (0.65) | ||
Net asset value, end of period | $16.28 | $16.38 | $15.87 | ||
Total return (%)3 | 4.58 | 8.42 | 6.384 | ||
Ratios and supplemental data | |||||
| |||||
Net assets, end of period (in millions) | $43 | $3 | $2 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.56 | 0.57 | 0.635 | ||
Expenses including reductions | 0.50 | 0.52 | 0.575 | ||
Net investment income | 4.26 | 4.30 | 5.045 | ||
Portfolio turnover (%) | 77 | 72 | 766 | ||
1 The inception date for Class R6 shares is 9-1-11.
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.
6 The portfolio turnover is shown for the period from 6-1-11 to 5-31-12.
38 | Bond Fund | Annual report | See notes to financial statements |
Notes to financial statements
Note 1 — Organization
John Hancock Bond Fund (the fund) is a series of John Hancock Sovereign Bond Fund (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to seek a high level of current income consistent with prudent investment risk.
The fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions and certain investors. Class R2 shares are available only to certain retirement plans. Class R6 shares are available only to certain retirement plans, institutions and other investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the 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. Futures contracts are valued at settlement prices, which are the official closing prices published by the exchange on which they trade. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing 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.
Annual report | Bond Fund | 39 |
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the fund’s investments as of May 31, 2014, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 5-31-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
| ||||
Corporate Bonds | $936,082,964 | — | $935,971,350 | $111,614 |
U.S. Government & Agency | ||||
Obligations | 520,267,270 | — | 520,267,270 | — |
Foreign Government | ||||
Obligations | 2,711,125 | — | 2,711,125 | — |
Convertible Bonds | 1,059,561 | — | 1,059,561 | — |
Term Loans | 19,010,753 | — | 19,010,753 | — |
Capital Preferred Securities | 30,673,378 | — | 30,673,378 | — |
Collateralized Mortgage | ||||
Obligations | 262,545,143 | — | 260,847,893 | 1,697,250 |
Asset Backed Securities | 110,920,284 | — | 110,920,284 | — |
Preferred Securities | 19,002,165 | $10,251,503 | 8,750,662 | — |
Purchased Options | 125,000 | 125,000 | — | — |
Short-Term Investments | 59,883,000 | — | 59,883,000 | — |
| ||||
Total Investments | ||||
in Securities | $1,962,280,643 | $10,376,503 | $1,950,095,276 | $1,808,864 |
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.
40 | Bond Fund | Annual report |
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Stripped securities. Stripped securities are financial instruments structured to separate principal and interest cash flows so that one class receives principal payments from the underlying assets (PO or principal only), while the other class receives the interest cash flows (IO or interest only). Both PO and IO investments represent an interest in the cash flows of an underlying stripped security. If the underlying assets experience greater than anticipated prepayments of principal, the fund may fail to fully recover its initial investment in an IO security. The market value of these securities can be extremely volatile in response to changes in interest rates 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 potentially 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 year ended May 31, 2014 were $1,133. For the year ended May 31, 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.
Annual report | Bond Fund | 41 |
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 as of May 31, 2014, 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. The tax character of distributions for the years ended May 31, 2014 and 2013 was as follows:
MAY 31, 2014 | MAY 31, 2013 | |||
|
||||
Ordinary Income | $80,720,514 | $73,276,065 | ||
Long-Term Capital Gain | 4,151,767 | — | ||
Total | $84,872,281 | $73,276,065 |
Distributions paid by the fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of May 31, 2014, the components of distributable earnings on a tax basis consisted of $5,789,125 of undistributed ordinary income.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the fund’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to 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.
42 | Bond Fund | Annual report |
Futures and certain options are traded or cleared on an exchange. Exchange-traded 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.
Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the fund to the risk of loss up to the notional value of the futures contracts. Use of short futures contracts subjects the fund to unlimited risk of loss.
Upon entering into a futures contract, the fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures collateral receivable/ payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the fund. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the year ended May 31, 2014, the fund used futures contracts to manage duration of the fund. During the year ended May 31, 2014, the fund held futures contracts with notional values ranging up to approximately $56.4 million, as measured at each quarter end. There were no open futures contracts as of May 31, 2014.
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 year ended May 31, 2014, the fund used purchased options to manage the duration of the fund. During the year ended May 31, 2014, the fund held purchased options with market values ranging up to $1,027,992 during the period.
Annual report | Bond Fund | 43 |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at May 31, 2014 by risk category:
FINANCIAL | ASSET | LIABILITY | ||
STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
| ||||
Interest rate contracts | Investments, at value* | Purchased | $125,000 | — |
options |
* Purchased options are included in the Fund’s investments disclosed in the Statements of assets and liabilities.
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended May 31, 2014:
RISK | STATEMENT OF OPERATIONS LOCATION | FUTURES CONTRACTS |
| ||
Interest rate contracts | Net realized gain (loss) | ($3,037,349) |
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended May 31, 2014:
INVESTMENTS | ||||
(PURCHASED | FUTURES | |||
RISK | STATEMENT OF OPERATIONS LOCATION | OPTIONS) | CONTRACTS | TOTAL |
| ||||
Interest rate | Change in unrealised | (902,992) | $482,312 | ($420,680) |
contracts | appreciation (deppreciation) |
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 equivalent, on an annual basis, to the sum of: (a) 0.500% of the first $500,000,000 of the fund’s average daily net assets, (b) 0.475% of the next $500,000,000 of the fund’s average daily net assets, (c) 0.450% of the next $500,000,000 of the fund’s average daily net assets, (d) 0.450% of the next $500,000,000 of the fund’s average daily net assets, (e) 0.400% of the next $500,000,000 of the fund’s average daily net assets, and (f) 0.350% of the fund’s average daily net assets in excess of $2,500,000,000. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
44 | Bond Fund | Annual report |
Effective June 1, 2013, 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 September 30, 2014, 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 all or a portion of its management fee and/or reimburse or pay operating expenses of the fund to the extent necessary to maintain total operating expenses at 0.57% of average annual net assets for Class R6 shares, excluding certain expenses such as taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses, acquired fund fee, and short dividend expense. These fee waivers and/or reimbursements expire September 30, 2014, 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.
Effective February 1, 2014, 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 annual 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. The waiver was in effect on voluntary basis from January 1, 2014 to January 31, 2014.
For the year ended May 31, 2014. These expense reductions amounted to the following:
CLASS A | CLASS B | CLASS C | CLASS I | CLASS R2 | CLASS R6 | TOTAL |
| ||||||
$757,000 | $20,117 | $91,680 | $135,658 | $2,586 | $23,922 | $1,030,963 |
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended May 31, 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 year ended May 31, 2014 amounted to an annual rate of 0.02% of the fund’s average daily net assets.
Annual report | Bond Fund | 45 |
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 $3,953,207 for the year ended May 31, 2014. Of this amount, $518,411 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $3,315,362 was paid as sales commissions to broker-dealers and $119,434 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%. Prior to February 3, 2014, the up-front sales charge for Class A shares was 4.50%.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended May 31, 2014, CDSCs received by the Distributor amounted to $3,544, $114,321 and $60,051 for Class A, Class B and Class C shares, respectively.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated 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 Share 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.
Prior to October 1, 2013, Signature Services Cost were calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Share Classes and all other Retail Share Classes. Within each of these categories, the applicable costs were allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
46 | Bond Fund | Annual report |
Class level expenses. Class level expenses for the year ended May 31, 2014 were:
DISTRIBUTION | TRANSFER | |||
CLASS | AND SERVICE FEES | AGENT FEES | ||
|
||||
Class A | $4,059,537 | $1,915,359 | ||
Class B | 359,407 | 51,117 | ||
Class C | 1,639,090 | 232,835 | ||
Class I | — | 288,162 | ||
Class R2 | 22,482 | 954 | ||
Class R6 | — | 7,796 | ||
Total | $6,080,516 | $2,496,223 |
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 years ended May 31, 2014 and 2013 were as follows:
Year ended 5-31-14 | Year ended 5-31-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
| ||||
Sold | 21,003,026 | $334,911,089 | 31,359,267 | $513,399,559 |
Distributions reinvested | 3,661,005 | 58,309,591 | 3,107,572 | 50,865,272 |
Repurchased | (25,475,061) | (405,398,526) | (13,717,065) | (224,729,109) |
Net increase (decrease) | (811,030) | ($12,177,846) | 20,749,774 | $339,535,722 |
Class B shares | ||||
| ||||
Sold | 93,597 | $1,492,900 | 824,871 | $13,396,156 |
Distributions reinvested | 69,938 | 1,113,162 | 75,797 | 1,240,109 |
Repurchased | (820,777) | (13,043,733) | (552,113) | (9,033,346) |
Net increase (decrease) | (657,242) | ($10,437,671) | 348,555 | $5,602,919 |
Class C shares | ||||
| ||||
Sold | 2,656,856 | $42,448,897 | 6,521,506 | $106,789,726 |
Distributions reinvested | 351,321 | 5,593,733 | 296,969 | 4,863,774 |
Repurchased | (4,941,509) | (78,536,001) | (2,220,013) | (36,367,597) |
Net increase (decrease) | (1,933,332) | ($30,493,371) | 4,598,462 | $75,285,903 |
Class I shares | ||||
| ||||
Sold | 11,124,193 | $177,539,637 | 12,674,668 | $207,444,253 |
Distributions reinvested | 645,255 | 10,285,774 | 464,023 | 7,607,505 |
Repurchased | (10,089,977) | (160,700,623) | (3,978,496) | (65,248,968) |
Net increase | 1,679,471 | $27,124,788 | 9,160,195 | $149,802,790 |
Class R2 shares | ||||
| ||||
Sold | 406,327 | $6,474,215 | 120,858 | $1,989,037 |
Distributions reinvested | 12,971 | 206,978 | 1,063 | 17,545 |
Repurchased | (127,569) | (2,029,219) | (2,186) | (36,129) |
Net increase | 291,729 | $4,651,974 | 119,735 | $1,970,453 |
Annual report | Bond Fund | 47 |
Year ended 5-31-14 | Year ended 5-31-13 | |||
Shares | Amount | Shares | Amount | |
Class R6 shares | ||||
| ||||
Sold | 2,429,478 | $38,642,406 | 89,583 | $1,469,475 |
Distributions reinvested | 118,016 | 1,882,264 | 6,742 | 110,443 |
Repurchased | (95,569) | (1,530,758) | (60,952) | (998,024) |
Net increase | 2,451,925 | $38,993,912 | 35,373 | $581,894 |
Total net increase | 1,021,521 | $17,661,786 | 35,012,094 | $572,779,681 |
|
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities and U.S. Treasury obligations, amounted to $678,072,971 and $697,102,931, respectively, for the year ended May 31, 2014. Purchases and sales of U.S. Treasury obligations aggregated $710,847,425 and $697,773,782, respectively, for the year ended May 31, 2014.
48 | Bond Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Sovereign Bond Fund and
Shareholders of John Hancock Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock Bond Fund (the “Fund”) at May 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 2014 by correspondence with the custodian, agent banks and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 18, 2014
Annual report | Bond Fund | 49 |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended May 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $4,151,767 in capital gain dividends.
Eligible shareholders will be mailed a 2014 Form 1099-DIV in early 2015. This will reflect the tax character of all distributions paid in calendar year 2014.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
50 | Bond Fund | Annual report |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
James M. Oates, Born: 1946 | 2012 | 230 |
| ||
Managing Director, Wydown Group (financial consulting firm) (since 1994); Chairman and Director, | ||
Emerson Investment Management, Inc. (since 2000); Independent Chairman, Hudson Castle Group, Inc. | ||
(formerly IBEX Capital Markets, Inc.) (financial services company) (1997–2011); Director, Stifel Financial | ||
(since 1996); Director, Investor Financial Services Corporation (1995–2007); Director, Connecticut River | ||
Bancorp (since 1998); Director, Virtus Funds (formerly Phoenix Mutual Funds) (since 1988). | ||
Trustee and Chairperson of the Board, John Hancock retail funds3 (since 2012); Trustee (2005–2006 and | ||
since 2012) and Chairperson of the Board (since 2012), John Hancock Funds III; Trustee (since 2004) and | ||
Chairperson of the Board (since 2005), John Hancock Variable Insurance Trust; Trustee and Chairperson | ||
of the Board, John Hancock Funds II (since 2005). | ||
Charles L. Bardelis,2 Born: 1941 | 2012 | 230 |
| ||
Director, Island Commuter Corp. (marine transport). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock | ||
Funds II (since 2005). | ||
Peter S. Burgess,2 Born: 1942 | 2012 | 230 |
| ||
Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; | ||
Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln | ||
Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (since 2010); | ||
Director, PMA Capital Corporation (2004–2010). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
William H. Cunningham, Born: 1944 | 2005 | 230 |
| ||
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director, LIN Television (since 2009); | ||
Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, | ||
Resolute Energy Corporation (since 2009); Director, Southwest Airlines (since 2000); former Director, | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); former Director, Hicks Acquisition Company I, | ||
Inc. (until 2007); former Director, Texas Exchange Bank, SSB (formerly Bank of Crowley) (until 2009); | ||
former Advisory Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust | ||
(since 2012); Trustee, John Hancock Funds II (since 2012 and 2005–2006). |
Annual report | Bond Fund | 51 |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Grace K. Fey, Born: 1946 | 2012 | 230 |
| ||
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier | ||
Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Theron S. Hoffman,2 Born: 1947 | 2012 | 230 |
| ||
Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd | ||
Organization (consulting firm) (2003–2010); President, Westport Resources Management (investment | ||
management consulting firm) (2006–2008); Senior Managing Director, Partner, and Operating Head, | ||
Putnam Investments (2000–2003); Executive Vice President, The Thomson Corp. (financial and legal | ||
information publishing) (1997–2000). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 230 |
| ||
President, Cambridge College, Cambridge, Massachusetts (since 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation | ||
(since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors | ||
of American Student Assistance Corporation (1996–2009); Board of Directors of Boston Stock Exchange | ||
(2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee of John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Hassell H. McClellan, Born: 1945 | 2012 | 230 |
| ||
Trustee, Virtus Variable Insurance Trust (formerly Phoenix Edge Series Funds) (since 2008); Director, The | ||
Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston | ||
College (retired 2013). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
Steven R. Pruchansky, Born: 1944 | 2005 | 230 |
| ||
Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director | ||
and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First | ||
American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Director, | ||
First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, | ||
Maxwell Building Corp. (until 1991). | ||
Trustee (since 1992) and Chairperson of the Board (2011–2012), John Hancock retail funds3; Trustee and | ||
Vice Chairperson of the Board, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and | ||
John Hancock Funds II (since 2012). |
52 | Bond Fund | Annual report |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Gregory A. Russo, Born: 1949 | 2009 | 230 |
| ||
Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance | ||
Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare | ||
system); Director and Member of Finance Committee, The Moorings, Inc. (nonprofit continuing care | ||
community) (since 2012); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); | ||
Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester County, | ||
New York, Chamber of Commerce (1986–1992); Director, Treasurer, and Chairman of Audit and | ||
Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of Fundraising | ||
Campaign, United Way of Westchester and Putnam Counties, New York (1990–1995). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Non-Independent Trustees4 | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Craig Bromley, Born: 1966 | 2012 | 230 |
| ||
President, John Hancock Financial Services (since 2012); Senior Executive Vice President and General | ||
Manager, U.S. Division, Manulife Financial Corporation (since 2012); President and Chief Executive | ||
Officer, Manulife Insurance Company (Manulife Japan) (2005–2012, including prior positions). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Warren A. Thomson, Born: 1955 | 2012 | 230 |
| ||
Senior Executive Vice President and Chief Investment Officer, Manulife Financial Corporation and The | ||
Manufacturers Life Insurance Company (since 2009); Chairman and Chief Executive Officer, Manulife | ||
Asset Management (since 2001, including prior positions); Director (since 2006), and President and | ||
Chief Executive Officer (since 2013), Manulife Asset Management Limited; Director and Chairman, | ||
Hancock Natural Resources Group, Inc. (since 2013). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). |
Principal officers who are not Trustees
Name, year of birth | Officer | |
Position(s) held with fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Andrew G. Arnott, Born: 1971 | 2009 | |
| ||
President | ||
Senior Vice President, John Hancock Financial Services (since 2009); Director and Executive Vice | ||
President, John Hancock Advisers, LLC (since 2005, including prior positions); Director and Executive | ||
Vice President, John Hancock Investment Management Services, LLC (since 2006, including prior | ||
positions); President, John Hancock Funds, LLC (since 2004, including prior positions); President | ||
(effective 3-13-14) and Executive Vice President, John Hancock retail funds,3 John Hancock Variable | ||
Insurance Trust, and John Hancock Funds II (since 2007, including prior positions). |
Annual report | Bond Fund | 53 |
Principal officers who are not Trustees (continued)
Name, Year of Birth | Officer | |
Position(s) held with Fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
John J. Danello, Born: 1955 | 2006 | |
| ||
Senior Vice President, Secretary, and Chief Legal Officer | ||
Vice President and Chief Counsel, John Hancock Wealth Management (since 2005); Senior Vice | ||
President (since 2007) and Chief Legal Counsel (2007–2010), John Hancock Funds, LLC and The | ||
Berkeley Financial Group, LLC; Senior Vice President (since 2006, including prior positions) and Chief | ||
Legal Officer and Secretary (since 2014), John Hancock retail funds3 and John Hancock Variable | ||
Insurance Trust; Vice President, John Hancock Life & Health Insurance Company (since 2009); | ||
Vice President, John Hancock Life Insurance Company (USA) and John Hancock Life Insurance | ||
Company of New York (since 2010); and Senior Vice President, Secretary, and Chief Legal Counsel | ||
(2007–2014, including prior positions) of John Hancock Advisers, LLC and John Hancock Investment | ||
Management Services, LLC. | ||
Francis V. Knox, Jr., Born: 1947 | 2005 | |
| ||
Chief Compliance Officer | ||
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | ||
retail funds,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, | ||
LLC, and John Hancock Investment Management Services, LLC (since 2005). | ||
Charles A. Rizzo, Born: 1957 | 2007 | |
| ||
Chief Financial Officer | ||
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | ||
Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock | ||
Funds II (since 2007). | ||
Salvatore Schiavone, Born: 1965 | 2010 | |
| ||
Treasurer | ||
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | ||
John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable | ||
Insurance Trust and John Hancock Funds II (since 2010 and 2007–2009, including prior positions). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation, or removal.
2 Member of the Audit Committee.
3 “John Hancock retail funds” comprises John Hancock Funds III and 37 other John Hancock funds consisting of 27 series of other John Hancock trusts and 10 closed-end funds.
4 Because Messrs. Bromley and Thomson are senior executives or directors of the advisor and/or its affiliates, each of them is considered an “interested person of the fund,” as defined in the Investment Company Act of 1940.
54 | Bond Fund | Annual report |
More information
Trustees | Investment advisor |
James M. Oates, Chairperson | John Hancock Advisers, LLC |
Steven R. Pruchansky, Vice Chairperson | |
Charles L. Bardelis* | Subadvisor |
Craig Bromley† | John Hancock Asset Management a division of |
Peter S. Burgess* | Manulife Asset Management (US) LLC |
William H. Cunningham | |
Grace K. Fey | Principal distributor |
Theron S. Hoffman* | John Hancock Funds, LLC |
Deborah C. Jackson | |
Hassell H. McClellan | Custodian |
Gregory A. Russo | State Street Bank and Trust Company |
Warren A. Thomson† | |
Transfer agent | |
Officers | John Hancock Signature Services, Inc. |
Andrew G. Arnott | |
President | Legal counsel |
K&L Gates LLP | |
John J. Danello# | |
Senior Vice President, Secretary, | Independent registered |
and Chief Legal Officer | public accounting firm |
PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | |
Chief Compliance Officer | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 5-29-14 |
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 | Regular mail: | Express mail: |
jhinvestments.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | 30 Dan Road | |
Boston, MA 02205-5913 | Canton, MA 02021 |
Annual report | Bond Fund | 55 |
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
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. | 21A 5/14 |
MF188607 | 7/14 |
ITEM 2. CODE OF ETHICS.
As of the end of the year, May 31, 2014, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Covered Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Peter S. Burgess is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to the following for the fiscal years ended May 31, 2014 and 2013. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | May 31, 2014 | May 31, 2013 | ||
| ||||
John Hancock Bond Fund | $ | 47,189 | $ | 49,122 |
|
(b) Audit-Related Services
Audit-related fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser ("control affiliates") that provides ongoing services to the registrant. The nature of the services provided was affiliated service provider internal controls reviews. Amounts billed to the registrant were as follows:
Fund | May 31, 2014 | May 31, 2013 | ||
| ||||
John Hancock Bond Fund | $ | 558 | $ | 737 |
|
Amounts billed to control affiliates were $98,642 and $99,637 for the fiscal years ended May 31, 2014 and 2013, respectively.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to the following for the fiscal years ended May 31, 2014 and 2013. The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | May 31, 2014 | May 31, 2013 | ||
| ||||
John Hancock Bond Fund | $ | 2,941 | $ | 2,943 |
|
(d) All Other Fees
Other fees billed for professional services rendered by the principal accountant to the registrant or to the control affiliates for the fiscal years ended May 31, 2014 and 2013 amounted to the following:
Fund | May 31, 2014 | May 31, 2013 | ||
| ||||
John Hancock Bond Fund | $ | 382 | $ | 2,200 |
|
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust’s Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the “Auditor”) relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust’s Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per year/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per year/per fund are subject to specific pre-approval by the Audit Committee.
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees, Tax Fees and All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f) According to the registrant’s principal accountant for the fiscal year ended May 31, 2014, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and rendered to the registrant's control affiliates for the fiscal years ended May 31, 2014 and 2013 amounted to the following:
Trust | May 31, 2014 | May 31, 2013 | ||
| ||||
John Hancock Sovereign Bond Fund | $ | 6,108,879 | $ | 2,841,066 |
|
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:
Peter S. Burgess - Chairman
Charles L. Bardelis
Theron S. Hoffman
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Covered Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into
any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
(c)(2) Contact person at the registrant.
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Sovereign Bond Fund | |
By: | /s/ Andrew Arnott |
Andrew Arnott | |
President | |
Date: | July 11, 2014 |
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: | July 11, 2014 |
By: | /s/ Charles A. Rizzo |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | July 11, 2014 |
CERTIFICATION
I, Andrew Arnott, certify that:
1. I have reviewed this report on Form N-CSR of the John Hancock Sovereign Bond Fund (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change 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 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: July 11, 2014 | /s/ Andrew Arnott __ |
Andrew Arnott | |
President |
CERTIFICATION
I, Charles A. Rizzo, certify that:
1. I have reviewed this report on Form N-CSR of the John Hancock Sovereign Bond Fund (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change 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 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: July 11, 2014 | /s/ Charles A. Rizzo __ |
Charles A. Rizzo | |
Chief Financial Officer |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of |
the Sarbanes-Oxley Act of 2002 |
In connection with the attached Report of John Hancock Sovereign Bond Fund (the “registrant”) on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify that, to the best of such officer's knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report.
/s/ Andrew Arnott |
Andrew Arnott |
President |
Dated: July 11, 2014 |
/s/ Charles A. Rizzo |
Charles A. Rizzo |
Chief Financial Officer |
Dated: July 11, 2014 |
A signed original of this written statement, required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
JOHN HANCOCK VARIABLE INSURANCE TRUST |
JOHN HANCOCK FUNDS |
JOHN HANCOCK FUNDS II |
SARBANES-OXLEY CODE OF ETHICS |
FOR |
PRINCIPAL EXECUTIVE, PRINCIPAL FINANCIAL OFFICERS & TREASURER |
I. Covered Officers/Purpose of the Code
This code of ethics (this “Code”) for John Hancock Variable Insurance Trust, John Hancock Funds1, and John Hancock Funds II and, each a registered management investment company under the Investment Company Act of 1940, as amended (“1940 Act”), which may issue shares in separate and distinct series (each investment company and series thereunder to be hereinafter referred to as a “Fund”), applies to each Fund’s Principal Executive Officer (“President”), Principal Financial Officer (“Chief Financial Officer”) and Treasurer (“Treasurer”) (the “Covered Officers” as set forth in Exhibit A) for the purpose of promoting:
► honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
► full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Fund;
► compliance with applicable laws and governmental rules and regulations;
► the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
► accountability for adherence to the Code.
____________________________
1 John Hancock Funds includes the following trusts: John Hancock Financial Opportunities Fund; John Hancock Bond Trust; John Hancock California Tax-Free Income Fund; John Hancock Capital Series; John Hancock Current Interest; john Hancock Funds III; John Hancock Income Securities Trust; John Hancock Investment Trust; John Hancock Investment Trust II; John Hancock Investment Trust III; John Hancock Investors Trust; John Hancock Municipal Securities Trust; John Hancock Premium Dividend Fund ; John Hancock Preferred Income Fund; John Hancock Preferred Income Fund II; John Hancock Preferred Income Fund III; John Hancock Sovereign Bond Fund; John Hancock Strategic Series; John Hancock Tax-Exempt Series Fund; John Hancock Tax-Advantaged Dividend Income Fund; John Hancock Tax-Advantaged Global Shareholder Yield Fund and John Hancock Hedged Equity and Income Fund.
1 of 6 |
Each of the Covered Officers should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest
Overview
A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between the Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the “Investment Company Act”) and the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as “affiliated persons” of the Fund. Each of the Covered Officers is an officer or employee of the investment adviser or a service provider (“Service Provider”) to the Fund. The Fund’s, the investment adviser’s and the Service Provider’s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Fund and the investment adviser and the Service Provider of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund, for the investment adviser or for the Service Provider), be involved in establishing policies and implementing decisions which will have different effects on the investment adviser, the Service Provider and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if such participation is performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, it will be deemed to have been handled ethically. In addition, it is recognized by the Fund’s Board of Trustees/Directors (the “Board”) that the Covered Officers may also be officers or employees of one or more other investment companies covered by other Codes.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but the Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund.
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Each Covered Officer must:
► not use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund;
► not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than for the benefit of the Fund; and
► not use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions.
Additionally, conflicts of interest may arise in other situations, the propriety of which may be discussed, if material, with the Fund’s Chief Compliance Officer (“CCO”). Examples of these include:
► service as a director/trustee on the board of any public or private company;
► the receipt of any non-nominal gifts;
► the receipt of any entertainment from any company with which the Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety (or other formulation as the Fund already uses in another code of conduct);
► any ownership interest in, or any consulting or employment relationship with, any of the Fund’s service providers, other than its investment adviser, any sub-adviser, principal underwriter, administrator or any affiliated person thereof; and
► a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.
III. Disclosure & Compliance
► Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Fund;
► Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund’s directors and auditors, and to governmental regulators and self-regulatory organizations;
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► Each Covered Officer should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Fund and the Fund’s adviser or any sub-adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund; and
► It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.
IV. Reporting & Accountability
Each Covered Officer must:
► upon adoption of the Code (or thereafter as applicable, upon becoming an Covered Officer), affirm in writing to the Fund’s CCO that he/she has received, read, and understands the Code;
► annually thereafter affirm to the Fund’s CCO that he/she has complied with the requirements of the Code;
► not retaliate against any employee or Covered Officer or their affiliated persons for reports of potential violations that are made in good faith;
► notify the Fund’s CCO promptly if he/she knows of any violation of this Code (Note: failure to do so is itself a violation of this Code); and
► report at least annually any change in his/her affiliations from the prior year.
The Fund’s CCO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by the Principal Executive Officer will be considered by the Fund’s Board or the Compliance Committee thereof (the “Committee”).
The Fund will follow these procedures in investigating and enforcing this Code:
► the Fund’s CCO will take all appropriate action to investigate any potential violations reported to him/her;
► if, after such investigation, the CCO believes that no violation has occurred, the CCO is not required to take any further action;
► any matter that the CCO believes is a violation will be reported to the Board or, if applicable, Compliance Committee;
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► if the Board or, if applicable, Compliance Committee concurs that a violation has occurred, the Board, either upon its determination of a violation or upon recommendation of the Compliance Committee, if applicable, will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Service Provider or the investment adviser or its board; or a recommendation to dismiss the Registrant’s Executive Officer;
► the Board, or if applicable the Compliance Committee, will be responsible for granting waivers, as appropriate; and
► any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.
V. Other Policies & Procedures
This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Fund, the Fund’s adviser, any sub-adviser, principal underwriter or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Fund’s and its investment adviser’s codes of ethics under Rule 204A-1 under the Investment Advisers Act and Rule 17j-1 under the Investment Company Act, respectively, are separate requirements applying to the Covered Officers and others, and are not part of this Code.
VI. Amendments
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Fund’s Board, including a majority of independent directors.
VII. Confidentiality
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Fund’s Board and its counsel, the investment adviser and the relevant Service Providers.
VIII. Internal Use
The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of the Fund, as to any fact, circumstance, or legal conclusion.
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Exhibit A |
Persons Covered by this Code of Ethics |
(As of March 13, 2014) |
John Hancock Variable Insurance Trust
► Principal Executive Officer and President – Andrew Arnott
► Principal Financial Officer and Chief Financial Officer – Charles Rizzo
► Treasurer – Salvatore Schiavone
John Hancock Funds
► Principal Executive Officer and President – Andrew Arnott
► Principal Financial Officer and Chief Financial Officer – Charles Rizzo
► Treasurer – Salvatore Schiavone
John Hancock Funds II
► Principal Executive Officer and President – Andrew Arnott
► Principal Financial Officer and Chief Financial Officer – Charles Rizzo
► Treasurer – Salvatore Schiavone
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JOHN HANCOCK FUNDS1 |
NOMINATING AND GOVERNANCE COMMITTEE CHARTER |
Overall Role and Responsibility
The Nominating and Governance Committee (the “Committee”) of each of the Trusts shall (1) make determinations and recommendations to the Board of Trustees (the “Board”) regarding issues related to (a) the composition of the Board and (b) corporate governance matters applicable to the Trustees who are not “interested persons” as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), of any of the Trusts, or of any Fund’s investment adviser, subadviser or principal underwriter and who are “independent” as defined in the rules of the New York Stock Exchange (“NYSE”) (the “Independent Trustees”) and (2) discharge such additional duties, responsibilities and functions as are delegated to it from time to time.
Membership
The Nominating and Governance Committee (the “Committee”) shall be composed of all of the Independent Trustees of the Board. One member of the Committee shall be appointed by the Board as Chair of the Committee. The chair shall be responsible for leadership of the Committee, including scheduling meetings or reviewing and approving the schedule for them, preparing agendas or reviewing and approving them before meetings, presiding over meetings of the Committee and making reports to the full Board, as appropriate.
Structure, Operations and Governance
Meetings and Actions by Written Consent. The Committee shall meet as often as required or as the Committee deems appropriate, with or without management present. Meetings may be called and notice given by the Committee chair or a majority of the members of the Committee. Members may attend meetings in person or by telephone. The Committee may act by written consent to the extent permitted by law and the Funds’ governing documents. The Committee shall report to the Board on any significant action it takes not later than the next following Board meeting.
Required Vote and Quorum. The affirmative vote of a majority of the members of the Committee participating in any meeting of the Committee at which a quorum is present is necessary for the adoption of any resolution. At least a majority of the Committee members present at the meeting in person or by telephone shall constitute a quorum for the transaction of business.
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1 “John Hancock Funds” includes each trust and series thereof listed in Appendix A, as may be amended from time to time (each individually, a “Trust,” and collectively, the “Trusts,” and each series thereof, a “Portfolio” or “Fund,” and collectively, the “Portfolios” or “Funds”).
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Delegation to Subcommittees. The Committee may delegate any portion of its authority to a subcommittee of one or more members.
Appropriate Resources and Authority. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to retain special counsel and other advisers, experts or consultants, at the Funds’ expense, as it determines necessary or appropriate to carry out its duties and responsibilities. In addition, the Committee shall have direct access to such officers of and service providers to the Funds as it deems desirable.
Review of Charter. The Committee Charter shall be approved by at least a majority of the Independent Trustees of the Trust. The Committee shall review and assess the adequacy of this Charter periodically and, where necessary or as it deems desirable, will recommend changes to the Board for its approval. The Board may amend this Charter at any time in response to recommendations from the Committee or on its own motion.
Executive Sessions. The Committee may meet privately and may invite non-members to attend such meetings. The Committee may meet with representatives of the Investment Management Services department of the Funds’ advisers, internal legal counsel of the Funds’ advisers, members of the John Hancock Funds Risk & Investment Operations Committee (the “RIO Committee”) and with representatives of the Funds’ service providers, including the subadvisers, to discuss matters that relate to the areas for which the Committee has responsibility.
Specific Duties and Responsibilities
The Committee shall have the following duties and powers, to be exercised at such times and in such manner as the Committee shall determine:
1. Except where a Trust is legally required to nominate individuals recommended by another, to identify individuals qualified to serve as Independent Trustees of the Trusts, and to consider and recommend to the full Board nominations of individuals to serve as Trustees.
2. To consider, as it deems necessary or appropriate, the criteria for persons to fill existing or newly created Trustee vacancies. The Committee shall use the criteria and principles set forth in Annex A to guide its Trustee selection process.
3. To consider and recommend changes to the Board regarding the size, structure, and composition of the Board.
4. To evaluate, from time to time, and determine changes to the retirement policies for the Independent Trustees, as appropriate.
5. To periodically review the Board’s committee structure and, in collaboration with the Chairs of the various Committees, the charters of the Board’s committees, and
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recommend to the Board of Trustees changes to the committee structure and charters as it deems appropriate.
6. To retain and terminate any firm(s) to be used to identify or evaluate or assist in identifying or evaluating potential Independent Board nominees, subject to the Board’s sole authority to approve the firm’s fees and other retention terms.
7. To consider and determine the amount of compensation to be paid by the Trusts to the Independent Trustees, including the compensation of the Chair of the Board or any Vice-Chair of the Board and of Committee Chairs, and to address compensation-related matters. The Chair of the Board has been granted the authority to approve special compensation to Independent Trustees in recognition of any significant amount of additional time and service to the Trusts provided by them, subject to ratification of any such special compensation by the Committee at the next regular meeting of the Committee.
8. To coordinate and administer an annual self-evaluation of the Board, which will include, at a minimum, a review of its effectiveness in overseeing the number of Funds in the Fund complex and the effectiveness of its committee structure.
9. To review the Board Governance Procedures and recommend to the Board of Trustees changes to the Procedures as the Committee deems appropriate.
10. To report its activities to the full Board and to make such recommendations with respect to the matters described above and other matters as the Committee may deem necessary or appropriate.
Additional Responsibilities
The Committee will also perform other tasks assigned to it from time to time by the Chair of the Board or by the Board, and will report findings and recommendations to the Board, as appropriate.
Last revised:
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ANNEX A |
The Committee may take into account a wide variety of factors in considering Trustee candidates, including (but not limited to) the criteria set forth below. The Committee may determine that a candidate who does not satisfy these criteria in one or more respects should nevertheless be considered as a nominee if the Committee finds that the criteria satisfied by the candidate and the candidate’s other qualifications demonstrate the appropriate level of fitness to serve.
General Criteria
1. Nominees should have a reputation for integrity, honesty and adherence to high ethical standards, and such other personal characteristics as a capacity for leadership and the ability to work well with others.
2. Nominees should have business, professional, academic, financial, accounting or other experience and qualifications which demonstrate that they will make a valuable contribution as Trustees.
3. Nominees should have a commitment to understand the Funds, and the responsibilities of a trustee/director of an investment company and to regularly attend and participate in meetings of the Board and its committees.
4. Nominees should have the ability to understand the sometimes conflicting interests of the various constituencies of the Funds, including shareholders and the investment adviser, and to act in the interests of all shareholders.
5. Nominees should not have, nor appear to have, a conflict of interest that would impair their ability to represent the interests of all the shareholders and to fulfill the responsibilities of a trustee.
6. Nominees should have experience on corporate or other institutional bodies having oversight responsibilities.
It is the intent of the Committee that at least one Independent Trustee be an “audit committee financial expert” as that term is defined in Item 3 of Form N-CSR.
Application of Criteria to Current Trustees
The re-nomination of current Trustees should not be viewed as automatic, but should be based on continuing qualification under the criteria set forth above based on, among other things, the current Trustees contribution to the Board and any committee on which he or she serves.
Review of Nominations
1. The Committee believes that it is in the best interests of each Trust and its shareholders to obtain highly-qualified candidates to serve as members of the Board.
2. In nominating candidates who would be Independent Trustees, the Committee believes that no particular qualities or skills nor any specific minimum qualifications or disqualifications are controlling or paramount. The Committee shall take into consideration any such factors as it deems appropriate. These factors may include (but are not limited to) the persons character, integrity, judgment, skill, diversity and experience with investment companies and other organizations of comparable purpose, complexity and size and subject to similar legal restrictions and oversight; the interplay of the candidates experience with the experience of other Board members; and the extent to which the candidate would be a desirable addition to the Board and any Committees thereof. Other factors that the Committee may take into consideration include a persons availability and commitment to attend meetings and perform his or her responsibilities; whether or not the person has or had any relationships that might impair or appear to impair his or her independence, such as any business, financial or family relationships with Fund management, the investment adviser and/or any subadviser of the Funds, as applicable, Fund service providers, or their affiliates or with Fund shareholders. The Committee will strive to achieve a group that reflects a diversity of experiences in respect of industries, professions and other experiences, and that is diversified as to gender and race.
3. While the Committee is solely responsible for the selection and recommendation to the Board of Independent Trustee candidates, the Committee may consider nominees recommended by any source, including shareholders, management, legal counsel and Board members, as it deems appropriate. The Committee may retain a professional search firm or a consultant to assist the Committee in a search for a qualified candidate. Any recommendations from shareholders shall be directed to the Secretary of the relevant Trust at such address as is set forth in the Trusts disclosure documents. Recommendations from management may be submitted to the Committee Chair. All recommendations shall include all information relating to such person that is required to be disclosed in solicitations of proxies for the election of Board members and as specified in the relevant Trusts By-Laws, and must be accompanied by a written consent of the proposed candidate to stand for election if nominated for the Board and to serve if elected by shareholders.
4. Any shareholder nomination must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934 in order to be considered by the Committee. In evaluating a nominee recommended by a shareholder, the Committee, in addition to the criteria discussed above, may consider the objectives of the shareholder in submitting that nomination and whether such objectives are consistent with the interests of all shareholders. If the Board determines to include a shareholders candidate among the slate of its designated nominees, the candidates name will be placed on the Trusts proxy card. If the Board determines not to include such candidate among its designated nominees, and the shareholder has satisfied the requirements of Rule 14a-8, the shareholders candidate will be treated as a nominee of the shareholder who originally nominated the candidate. In that case, the candidate will not be named on the proxy card distributed with the Trusts proxy statement.
5. As long as a current Independent Trustee continues, in the opinion of the Committee, to satisfy the criteria listed above, the Committee generally would favor the re-nomination of a current Trustee rather than a new candidate. Consequently, while the Committee will consider nominees recommended by shareholders to serve as trustees, the Committee may only act upon such recommendations if there is a vacancy on the Board, or the Committee determines that the selection of a new or additional Trustee is in the best interests of the relevant Trust. In the event that a vacancy arises or a change in Board membership is determined to be advisable, the Committee will, in addition to any shareholder recommendations, consider candidates identified by other means as discussed in this Annex A.
6. With respect to candidates for Independent Trustee, a biography of each candidate shall be acquired and shall be reviewed by counsel to the Independent Trustees and counsel to the Trust to determine the candidates eligibility to serve as an Independent Trustee.
7. The Committee may from time to time establish specific requirements and/or additional factors to be considered for Independent Trustee candidates as it deems necessary or appropriate.
8. After its consideration of relevant factors, the Committee shall present its recommendation(s) to the full Board for its consideration.
Appendix A |
List of John Hancock Fund Trusts |
John Hancock Financial Opportunities Fund | John Hancock Investors Trust |
John Hancock Bond Trust | John Hancock Municipal Securities Trust |
John Hancock California Tax-Free Income Fund | John Hancock Preferred Income Fund |
John Hancock Capital Series | John Hancock Preferred Income Fund II |
John Hancock Current Interest | John Hancock Preferred Income Fund III |
John Hancock Emerging Markets Income Fund | John Hancock Premium Dividend Fund |
John Hancock Flexible Income Opportunities Fund | John Hancock Series Trust |
John Hancock Funds II | John Hancock Sovereign Bond Fund |
John Hancock Funds III | John Hancock Strategic Diversified Income Fund |
John Hancock Hedged Equity & Income Fund | John Hancock Strategic Series |
John Hancock Income Securities Trust | John Hancock Tax-Advantaged Dividend Income Fund |
John Hancock Investment Trust | John Hancock Tax-Advantaged Global Shareholder Yield Fund |
John Hancock Investment Trust II | John Hancock Tax-Exempt Series Fund |
John Hancock Investment Trust III | John Hancock Variable Insurance Trust |
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