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 811-21777 | |
John Hancock Funds III | |
(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: | February 28 |
Date of reporting period: | February 28, 2011 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/uscorex1x1.jpg)
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC
U.S. stocks delivered solid gains during the 12 months ended February 28, 2011, all of them occurring in the second half of the period. The first six months saw the market struggle with concern about the European sovereign debt crisis, weakness in the energy sector following a massive oil spill in the Gulf of Mexico and tepid data on the U.S. economy. However, after Fed Chairman Ben Bernanke proposed another round of quantitative easing at the end of August to stimulate economic growth, his remarks ignited an impressive rally that boosted the S&P 500 Index to a gain of 22.57%, while the average large blend fund monitored by Morningstar, Inc. advanced 20.92%.
During the 12-month period, John Hancock U.S. Core Fund’s Class A shares returned 14.26% at net asset value, trailing the S&P 500 Index and the Morningstar peer average. The Fund’s emphasis on quality was the main factor weighing on its results, particularly overweightings in health care and consumer staples, which underperformed the broader market. Conversely, the Fund had light exposures to outperforming cyclical sectors such as energy, materials and industrials. At the stock level, Microsoft Corp. was the Fund’s biggest detractor and largest holding at period end. In health care, drug manufacturer Merck & Company, Inc., health/personal products maker Johnson & Johnson and medical device maker Medtronic, Inc. held back performance. Positions in consumer staples holdings Wal-Mart Stores, Inc. and The Procter & Gamble Company also were unrewarding. Additionally, underweighting strong-performing energy companies Exxon Mobil Corp. and Schlumberger, Ltd. detracted. On the positive side, the Fund benefited from underweighting or not owning several weak-performing commercial banks, notably Bank of America Corp. and JPMorgan Chase & Co. Overweighting consumer electronics and computer maker Apple, Inc. also added value, as did wireless infrastructure manufacturer QUALCOMM, Inc. and enterprise software maker Oracle Corp.
This commentary reflects the views of the portfolio management team through the end of the Fund’s period discussed in this report. The team’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
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.
6 | U.S. Core Fund | Annual report |
A look at performance
For the period ended February 28, 2011
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception | 1-year | 5-year | 10-year | inception | ||
Class A1 | 8.53 | — | — | –0.02 | 8.53 | — | — | –0.08 | |
Class B1 | 8.51 | — | — | –0.02 | 8.51 | — | — | –0.09 | |
Class C1 | 12.52 | — | — | 0.38 | 12.52 | — | — | 1.79 | |
Class i1,2 | 14.81 | — | — | 1.50 | 14.81 | — | — | 7.28 | |
Class R11,2 | 13.92 | — | — | 0.84 | 13.92 | — | — | 4.03 | |
Class R32,3 | 13.99 | — | — | 20.21 | 13.99 | — | — | 38.64 | |
Class R42,3 | 14.37 | — | — | 20.57 | 14.37 | — | — | 39.38 | |
Class R52,3 | 14.68 | — | — | 20.93 | 14.68 | — | — | 40.12 | |
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I, Class R1, Class R3, Class R4 and Class R5 shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The waivers and expense limitations are contractual at least until 6-30-11. The net expenses are as follows: Class A — 1.35%, Class B — 2.05%, Class C — 2.05%, Class I — 0.89%, Class R1 — 1.64%. Class R3 — 1.54%, Class R4 — 1.24% and Class R5 — 0.94%. Had the fee waivers and expense limitations not been in place, the gross expenses would be as follows: Class A — 1.91%, Class B —7.27%, Class C — 3.86%, Class I — 1.33%, Class R1 — 19.92%, Class R3 — 7.43%, Class R4 — 7.17% and Class R5 — 6.92%.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Fund’s performance results reflect any applicable expense reductions, without which the expenses would increase and results would have been less favorable.
1 From 6-12-06.
2 For certain types of investors, as described in the Fund’s Class I, Class R1, Class R3, Class R4 and Class R5 share prospectuses.
3 From 5-22-09.
Annual report | U.S. Core Fund | 7 |
A look at performance
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Period | Without | With maximum | ||
beginning | sales charge | sales charge | Index | |
Class B | 6-12-06 | $10,184 | $9,991 | $11,720 |
Class C2 | 6-12-06 | 10,179 | 10,179 | 11,720 |
Class I3 | 6-12-06 | 10,728 | 10,728 | 11,720 |
Class R13 | 6-12-06 | 10,403 | 10,403 | 11,720 |
Class R33 | 5-22-09 | 13,864 | 13,864 | 15,489 |
Class R43 | 5-22-09 | 13,938 | 13,938 | 15,489 |
Class R53 | 5-22-09 | 14,012 | 14,012 | 15,489 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B, Class C, Class I, Class R1, Class R3, Class R4 and Class R5 shares, respectively, as of 2-28-11. 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.
S&P 500 Index is an unmanaged index that includes 500 widely traded common stocks.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 NAV represents net asset value and POP represents public offering price.
2 The contingent deferred sales charge, if any, is not applicable.
3 For certain types of investors, as described in the Fund’s Class I, Class R1, Class R3, Class R4 and Class R5 shares prospectuses.
8 | U.S. Core Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about 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 September 1, 2010 with the same investment held until February 28, 2011.
Account value | Ending value on | Expenses paid during | |
on 9-1-10 | 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,214.50 | $7.41 |
Class B | 1,000.00 | 1,210.50 | 11.24 |
Class C | 1,000.00 | 1,210.70 | 11.24 |
Class I | 1,000.00 | 1,217.30 | 4.84 |
Class R1 | 1,000.00 | 1,213.30 | 9.00 |
Class R3 | 1,000.00 | 1,213.80 | 8.51 |
Class R4 | 1,000.00 | 1,215.70 | 6.87 |
Class R5 | 1,000.00 | 1,217.50 | 5.17 |
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 February 28, 2011, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/uscorex5x1.jpg)
Annual report | U.S. Core 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 September 1, 2010, with the same investment held until February 28, 2011. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value on | Expenses paid during | |
on 9-1-10 | 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,018.10 | $6.76 |
Class B | 1,000.00 | 1,014.60 | 10.24 |
Class C | 1,000.00 | 1,014.60 | 10.24 |
Class I | 1,000.00 | 1,020.30 | 4.41 |
Class R1 | 1,000.00 | 1,016.70 | 8.20 |
Class R3 | 1,000.00 | 1,017.10 | 7.75 |
Class R4 | 1,000.00 | 1,018.60 | 6.26 |
Class R5 | 1,000.00 | 1,020.10 | 4.71 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.35%, 2.05%, 2.05%, 0.88%, 1.64%, 1.55%, 1.25% and 0.94% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4 and Class R5 shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | U.S. Core Fund | Annual report |
Portfolio summary
Top 10 Holdings1 | ||||
Microsoft Corp. | 4.7% | The Procter & Gamble Company | 2.7% | |
Pfizer, Inc. | 4.6% | Johnson & Johnson | 2.6% | |
Google, Inc., Class A | 4.1% | Merck & Company, Inc. | 2.5% | |
Wal-Mart Stores, Inc. | 3.9% | International Business Machines Corp. | 2.4% | |
Oracle Corp. | 3.6% | The Coca-Cola Company | 2.3% | |
Sector Composition2,3 | ||||
Information Technology | 27% | Energy | 4% | |
Health Care | 25% | Financials | 4% | |
Consumer Staples | 19% | Telecommunication Services | 3% | |
Consumer Discretionary | 8% | Materials | 1% | |
Industrials | 4% | Short-Term Investments & Other | 5% | |
1 As a percentage of net assets on 2-28-11. Cash and cash equivalents are not included in Top 10 Holdings.
2 As a percentage of net assets on 2-28-11.
3 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.
Annual report | U.S. Core Fund | 11 |
Fund’s investments
As of 2-28-11
Shares | Value | |
Common Stocks 94.50% | $64,985,279 | |
(Cost $57,685,254) | ||
Consumer Discretionary 8.63% | 5,931,530 | |
Auto Components 0.12% | ||
Autoliv, Inc. | 500 | 37,445 |
TRW Automotive Holdings Corp. (I) | 800 | 45,440 |
Distributors 0.14% | ||
Genuine Parts Company | 1,800 | 94,842 |
Diversified Consumer Services 0.36% | ||
Apollo Group, Inc., Class A (I) | 3,000 | 135,780 |
ITT Educational Services, Inc. (I) | 500 | 37,925 |
Strayer Education, Inc. | 50 | 6,872 |
Weight Watchers International, Inc. | 1,100 | 67,243 |
Hotels, Restaurants & Leisure 2.13% | ||
Chipotle Mexican Grill, Inc. (I) | 160 | 39,200 |
Darden Restaurants, Inc. | 900 | 42,417 |
Las Vegas Sands Corp. (I) | 3,800 | 177,232 |
McDonald’s Corp. | 13,700 | 1,036,816 |
Yum! Brands, Inc. | 3,300 | 166,089 |
Household Durables 0.15% | ||
Fortune Brands, Inc. | 1,000 | 61,860 |
Mohawk Industries, Inc. (I) | 700 | 40,677 |
Internet & Catalog Retail 0.22% | ||
Liberty Media Corp. — Interactive, Series A (I) | 5,200 | 83,512 |
Netflix, Inc. (I)(L) | 330 | 68,201 |
Leisure Equipment & Products 0.06% | ||
Hasbro, Inc. | 900 | 40,410 |
Media 1.55% | ||
Charter Communications, Inc., Class A (I) | 1,000 | 45,770 |
Comcast Corp., Class A | 13,400 | 345,184 |
Gannett Company, Inc. | 2,900 | 47,879 |
Liberty Global, Inc., Series A (I) | 1,300 | 54,730 |
The McGraw-Hill Companies, Inc. | 2,200 | 85,096 |
The Washington Post Company, Class B | 80 | 34,647 |
Time Warner Cable, Inc. | 1,800 | 129,924 |
Time Warner, Inc. | 6,100 | 233,020 |
Viacom, Inc., Class B | 2,000 | 89,320 |
12 | U.S. Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Multiline Retail 0.71% | ||
Dollar Tree, Inc. (I) | 2,300 | $115,736 |
Family Dollar Stores, Inc. | 1,600 | 80,128 |
Macy’s, Inc. | 3,700 | 88,430 |
Sears Holdings Corp. (I)(L) | 2,000 | 166,620 |
Target Corp. | 700 | 36,785 |
Specialty Retail 1.91% | ||
Advance Auto Parts, Inc. | 1,600 | 100,288 |
Aeropostale, Inc. (I) | 4,549 | 118,001 |
AutoNation, Inc. (I)(L) | 2,400 | 80,736 |
AutoZone, Inc. (I) | 760 | 196,042 |
Best Buy Company, Inc. | 4,400 | 141,856 |
Foot Locker, Inc. | 1,900 | 37,753 |
Home Depot, Inc. | 5,000 | 187,350 |
Jos. A. Bank Clothiers, Inc. (I) | 359 | 16,553 |
Limited Brands, Inc. | 1,700 | 54,434 |
O’Reilly Automotive, Inc. (I) | 1,200 | 66,696 |
PetSmart, Inc. | 900 | 36,783 |
Ross Stores, Inc. | 1,100 | 79,244 |
TJX Companies, Inc. | 3,400 | 169,558 |
Tractor Supply Company | 600 | 31,242 |
Textiles, Apparel & Luxury Goods 1.28% | ||
Coach, Inc. (L) | 3,400 | 186,728 |
Fossil, Inc. (I) | 600 | 46,044 |
NIKE, Inc., Class B | 6,300 | 560,889 |
VF Corp. | 900 | 86,103 |
Consumer Staples 19.62% | 13,492,030 | |
Beverages 4.51% | ||
Brown Forman Corp., Class B | 1,900 | 131,385 |
Coca-Cola Enterprises, Inc. | 3,600 | 94,680 |
Hansen Natural Corp. (I) | 1,500 | 86,325 |
PepsiCo, Inc. | 18,600 | 1,179,612 |
The Coca-Cola Company | 25,200 | 1,610,784 |
Food & Staples Retailing 5.77% | ||
Costco Wholesale Corp. | 2,400 | 179,496 |
CVS Caremark Corp. | 3,500 | 115,710 |
Safeway, Inc. | 2,400 | 52,368 |
SUPERVALU, Inc. | 2,000 | 17,260 |
Sysco Corp. | 7,600 | 211,204 |
The Kroger Company | 5,900 | 135,110 |
Wal-Mart Stores, Inc. | 51,640 | 2,684,247 |
Walgreen Company | 13,300 | 576,422 |
Food Products 1.93% | ||
Campbell Soup Company (L) | 3,600 | 121,176 |
Dean Foods Company (I) | 900 | 9,504 |
Flowers Foods, Inc. | 1,600 | 42,560 |
General Mills, Inc. | 6,700 | 248,838 |
H.J. Heinz Company | 2,000 | 100,440 |
See notes to financial statements | Annual report | U.S. Core Fund | 13 |
Shares | Value | |
Food Products (continued) | ||
Hormel Foods Corp. | 4,000 | $109,600 |
Kellogg Company | 4,000 | 214,240 |
Kraft Foods, Inc., Class A | 5,400 | 171,936 |
McCormick & Company, Inc., Class B | 1,600 | 76,240 |
Sara Lee Corp. | 2,800 | 47,936 |
The Hershey Company | 3,500 | 183,120 |
Household Products 4.08% | ||
Church & Dwight Company, Inc. | 800 | 60,352 |
Clorox Company | 2,000 | 135,520 |
Colgate-Palmolive Company | 5,600 | 439,712 |
Kimberly-Clark Corp. | 4,800 | 316,320 |
The Procter & Gamble Company | 29,400 | 1,853,670 |
Personal Products 0.48% | ||
Avon Products, Inc. | 2,200 | 61,182 |
Herbalife, Ltd. | 1,000 | 78,410 |
The Estee Lauder Companies, Inc., Class A | 2,000 | 188,820 |
Tobacco 2.85% | ||
Altria Group, Inc. | 27,900 | 707,823 |
Lorillard, Inc. | 2,161 | 165,900 |
Philip Morris International, Inc. | 14,918 | 936,552 |
Reynolds American, Inc. | 4,300 | 147,576 |
Energy 3.79% | 2,607,664 | |
Energy Equipment & Services 0.35% | ||
Halliburton Company | 241 | 11,313 |
National Oilwell Varco, Inc. | 1,900 | 151,183 |
Rowan Companies, Inc. (I) | 900 | 38,403 |
Schlumberger, Ltd. | 455 | 42,506 |
Oil, Gas & Consumable Fuels 3.44% | ||
Anadarko Petroleum Corp. | 217 | 17,757 |
Apache Corp. | 108 | 13,459 |
Chevron Corp. | 5,697 | 591,064 |
ConocoPhillips | 14,773 | 1,150,374 |
Exxon Mobil Corp. | 1,228 | 105,031 |
Marathon Oil Corp. | 4,400 | 218,240 |
Occidental Petroleum Corp. | 680 | 69,340 |
Pioneer Natural Resources Company | 600 | 61,404 |
Sunoco, Inc. | 1,200 | 50,232 |
Valero Energy Corp. | 3,100 | 87,358 |
Financials 2.70% | 1,857,394 | |
Commercial Banks 0.21% | ||
CapitalSource, Inc. | 5,700 | 43,206 |
CIT Group, Inc. (I) | 1,500 | 64,980 |
First Citizens BancShares, Inc. | 50 | 10,100 |
TCF Financial Corp. | 700 | 11,361 |
Valley National Bancorp | 900 | 12,267 |
14 | U.S. Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Consumer Finance 0.10% | ||
SLM Corp. (I) | 4,900 | $72,618 |
Diversified Financial Services 0.14% | ||
Bank of America Corp. | 6,610 | 94,457 |
Insurance 2.08% | ||
Allied World Assurance Company Holdings, Ltd. | 800 | 49,368 |
American Financial Group, Inc. | 1,400 | 48,482 |
American International Group, Inc. (I)(L) | 7,600 | 281,656 |
Arch Capital Group, Ltd. (I) | 600 | 54,300 |
Aspen Insurance Holdings, Ltd. | 1,000 | 29,550 |
Assurant, Inc. | 1,100 | 44,693 |
Axis Capital Holdings, Ltd. | 1,000 | 36,320 |
Brown & Brown, Inc. | 1,900 | 49,666 |
Chubb Corp. | 1,000 | 60,680 |
Endurance Specialty Holdings, Ltd. | 600 | 29,754 |
Everest Re Group, Ltd. | 400 | 35,460 |
Hartford Financial Services Group, Inc. | 1,900 | 56,240 |
PartnerRe, Ltd. | 500 | 39,650 |
Platinum Underwriters Holdings, Ltd. | 200 | 8,340 |
Prudential Financial, Inc. | 1,500 | 98,745 |
RenaissanceRe Holdings, Ltd. | 600 | 40,212 |
StanCorp Financial Group, Inc. | 200 | 9,200 |
The Travelers Companies, Inc. | 4,900 | 293,657 |
Torchmark Corp. | 600 | 39,150 |
Transatlantic Holdings, Inc. | 600 | 30,558 |
Validus Holdings, Ltd. | 1,800 | 55,710 |
W.R. Berkley Corp. | 1,400 | 41,930 |
Real Estate Investment Trusts 0.17% | ||
Annaly Capital Management, Inc. | 4,900 | 87,857 |
National Retail Properties, Inc. | 500 | 12,845 |
Omega Healthcare Investors, Inc. | 600 | 14,382 |
Health Care 24.66% | 16,960,349 | |
Biotechnology 1.65% | ||
Amgen, Inc. (I) | 12,300 | 631,359 |
Biogen Idec, Inc. (I)(L) | 2,300 | 157,320 |
Cephalon, Inc. (I) | 600 | 33,786 |
Gilead Sciences, Inc. (I) | 8,000 | 311,840 |
Health Care Equipment & Supplies 3.86% | ||
Alere, Inc. (I) | 2,659 | 102,744 |
Baxter International, Inc. | 7,863 | 417,918 |
Becton, Dickinson & Company | 2,600 | 208,000 |
C.R. Bard, Inc. | 800 | 78,208 |
DENTSPLY International, Inc. | 1,300 | 48,581 |
Edwards Lifesciences Corp. (I) | 1,480 | 125,859 |
Gen-Probe, Inc. (I) | 500 | 31,440 |
IDEXX Laboratories, Inc. (I)(L) | 900 | 69,930 |
Intuitive Surgical, Inc. (I) | 160 | 52,472 |
Kinetic Concepts, Inc. (I) | 1,100 | 53,867 |
Medtronic, Inc. | 16,400 | 654,688 |
See notes to financial statements | Annual report | U.S. Core Fund | 15 |
Shares | Value | |
Health Care Equipment & Supplies (continued) | ||
ResMed, Inc. (I)(L) | 1,700 | $53,720 |
St. Jude Medical, Inc. (I) | 3,400 | 162,792 |
STERIS Corp. | 400 | 13,540 |
Stryker Corp. | 4,200 | 265,692 |
Varian Medical Systems, Inc. (I) | 1,200 | 83,136 |
Zimmer Holdings, Inc. (I) | 3,700 | 230,658 |
Health Care Providers & Services 4.56% | ||
Aetna, Inc. | 4,200 | 156,912 |
AMERIGROUP Corp. (I) | 500 | 28,675 |
AmerisourceBergen Corp. | 4,800 | 181,968 |
Cardinal Health, Inc. | 3,900 | 162,396 |
Catalyst Health Solutions, Inc. (I) | 300 | 13,563 |
Coventry Health Care, Inc. (I) | 2,000 | 60,400 |
Express Scripts, Inc. (I) | 5,300 | 297,966 |
Health Net, Inc. (I) | 1,400 | 41,188 |
Henry Schein, Inc. (I) | 900 | 62,082 |
Humana, Inc. (I) | 2,300 | 149,523 |
Laboratory Corp. of America Holdings (I) | 1,500 | 135,195 |
Lincare Holdings, Inc. (L) | 3,340 | 97,996 |
McKesson Corp. | 1,500 | 118,920 |
MEDNAX, Inc. (I) | 600 | 38,958 |
Omnicare, Inc. | 1,100 | 31,493 |
Owens & Minor, Inc. | 300 | 9,360 |
Patterson Companies, Inc. | 1,400 | 46,732 |
Quest Diagnostics, Inc. | 1,900 | 107,825 |
Triple-S Management Corp., Class B (I) | 3,591 | 70,958 |
UnitedHealth Group, Inc. | 21,356 | 909,338 |
VCA Antech, Inc. (I) | 700 | 17,528 |
WellPoint, Inc. (I) | 5,986 | 397,889 |
Health Care Technology 0.11% | ||
Cerner Corp. (I)(L) | 720 | 72,324 |
Life Sciences Tools & Services 0.38% | ||
Covance, Inc. (I) | 600 | 33,858 |
Mettler-Toledo International, Inc. (I) | 490 | 83,971 |
Pharmaceutical Product Development, Inc. | 1,500 | 41,205 |
Techne Corp. | 300 | 21,507 |
Waters Corp. (I) | 1,000 | 83,050 |
Pharmaceuticals 14.10% | ||
Abbott Laboratories | 19,400 | 933,140 |
Allergan, Inc. | 3,900 | 289,263 |
Bristol-Myers Squibb Company | 20,200 | 521,362 |
Eli Lilly & Company | 24,900 | 860,544 |
Endo Pharmaceuticals Holdings, Inc. (I) | 2,900 | 103,008 |
Forest Laboratories, Inc. (I) | 7,000 | 226,800 |
Johnson & Johnson | 28,700 | 1,763,328 |
Merck & Company, Inc. | 52,683 | 1,715,885 |
Pfizer, Inc. | 165,488 | 3,183,989 |
Warner Chilcott PLC, Class A | 4,337 | 102,700 |
16 | U.S. Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Industrials 4.44% | $3,055,280 | |
Aerospace & Defense 1.15% | ||
General Dynamics Corp. | 3,700 | 281,644 |
L-3 Communications Holdings, Inc. | 800 | 63,432 |
Northrop Grumman Corp. | 1,300 | 86,684 |
Precision Castparts Corp. | 970 | 137,498 |
Rockwell Collins, Inc. | 1,200 | 77,328 |
United Technologies Corp. | 1,700 | 142,018 |
Air Freight & Logistics 0.35% | ||
C.H. Robinson Worldwide, Inc. | 2,400 | 173,736 |
Expeditors International of Washington, Inc. | 1,400 | 66,920 |
Airlines 0.09% | ||
United Continental Holdings, Inc. (I) | 2,600 | 62,504 |
Commercial Services & Supplies 0.36% | ||
Copart, Inc. (I)(L) | 1,000 | 42,010 |
Pitney Bowes, Inc. | 2,800 | 70,504 |
Rollins, Inc. | 2,250 | 44,145 |
Stericycle, Inc. (I) | 1,100 | 95,062 |
Industrial Conglomerates 1.02% | ||
3M Company | 7,600 | 700,948 |
Machinery 1.07% | ||
Caterpillar, Inc. | 1,700 | 174,981 |
Cummins, Inc. | 1,070 | 108,198 |
Danaher Corp. | 5,500 | 278,300 |
Deere & Company | 1,300 | 117,195 |
Joy Global, Inc. | 600 | 58,428 |
Professional Services 0.13% | ||
Dun & Bradstreet Corp. | 400 | 32,320 |
IHS, Inc., Class A (I) | 700 | 58,590 |
Road & Rail 0.17% | ||
Union Pacific Corp. | 1,200 | 114,492 |
Trading Companies & Distributors 0.10% | ||
Fastenal Company (L) | 1,100 | 68,343 |
Information Technology 26.84% | 18,457,845 | |
Communications Equipment 3.07% | ||
Aruba Networks, Inc. (I) | 400 | 12,180 |
Cisco Systems, Inc. (I) | 36,600 | 679,296 |
F5 Networks, Inc. (I) | 580 | 68,446 |
Harris Corp. | 800 | 37,328 |
QUALCOMM, Inc. | 21,800 | 1,298,844 |
Tellabs, Inc. | 2,400 | 12,936 |
Computers & Peripherals 3.51% | ||
Apple, Inc. (I) | 4,310 | 1,522,335 |
Dell, Inc. (I) | 11,015 | 174,367 |
Hewlett-Packard Company | 9,300 | 405,759 |
Lexmark International, Inc., Class A (I) | 900 | 33,777 |
NCR Corp. (I) | 1,800 | 34,380 |
See notes to financial statements | Annual report | U.S. Core Fund | 17 |
Shares | Value | |
Computers & Peripherals (continued) | ||
NetApp, Inc. (I) | 1,700 | $87,822 |
Seagate Technology PLC (I) | 2,900 | 36,830 |
Western Digital Corp. (I) | 3,919 | 119,843 |
Electronic Equipment, Instruments & Components 0.21% | ||
Dolby Laboratories, Inc., Class A (I) | 1,500 | 75,855 |
Ingram Micro, Inc., Class A (I) | 2,600 | 51,818 |
Tech Data Corp. (I) | 300 | 14,874 |
Internet Software & Services 4.92% | ||
eBay, Inc. (I) | 17,500 | 586,338 |
Google, Inc., Class A (I) | 4,567 | 2,801,398 |
IT Services 4.61% | ||
Accenture PLC, Class A | 5,900 | 303,732 |
Amdocs, Ltd. (I) | 2,400 | 71,616 |
Automatic Data Processing, Inc. | 3,700 | 185,000 |
Broadridge Financial Solutions, Inc. | 1,700 | 38,964 |
Cognizant Technology Solutions Corp., Class A (I) | 3,700 | 284,419 |
Computer Sciences Corp. | 900 | 43,317 |
Fiserv, Inc. (I) | 1,100 | 69,597 |
Global Payments, Inc. | 1,200 | 57,588 |
International Business Machines Corp. | 10,321 | 1,670,763 |
Jack Henry & Associates, Inc. | 1,300 | 41,483 |
MasterCard, Inc., Class A | 907 | 218,188 |
NeuStar, Inc., Class A (I) | 200 | 5,050 |
Paychex, Inc. | 4,000 | 134,520 |
Total Systems Services, Inc. (L) | 2,500 | 44,375 |
Office Electronics 0.14% | ||
Xerox Corp. | 8,800 | 94,600 |
Semiconductors & Semiconductor Equipment 0.16% | ||
Texas Instruments, Inc. | 3,100 | 110,391 |
Software 10.22% | ||
Adobe Systems, Inc. (I) | 2,300 | 79,350 |
ANSYS, Inc. (I) | 600 | 33,792 |
BMC Software, Inc. (I) | 1,900 | 94,050 |
Citrix Systems, Inc. (I) | 1,600 | 112,256 |
FactSet Research Systems, Inc. | 820 | 86,002 |
Informatica Corp. (I) | 1,400 | 65,814 |
Intuit, Inc. (I) | 5,600 | 294,448 |
McAfee, Inc. (I) | 900 | 43,155 |
MICROS Systems, Inc. (I) | 1,300 | 61,932 |
Microsoft Corp. | 122,241 | 3,249,166 |
Oracle Corp. | 74,147 | 2,439,436 |
Quest Software, Inc. (I) | 1,700 | 45,543 |
Salesforce.com, Inc. (I) | 610 | 80,685 |
Symantec Corp. (I) | 9,100 | 164,073 |
TIBCO Software, Inc. (I) | 1,200 | 29,544 |
VMware, Inc., Class A (I) | 1,800 | 150,570 |
18 | U.S. Core Fund | Annual report | See notes to financial statements |
Shares | Value | |||
Materials 0.73% | $497,786 | |||
Chemicals 0.55% | ||||
E.I. Du Pont de Nemours & Company | 3,900 | 213,993 | ||
Ecolab, Inc. | 2,000 | 97,280 | ||
Sigma-Aldrich Corp. | 1,000 | 63,890 | ||
Metals & Mining 0.02% | ||||
Commercial Metals Company | 600 | 10,002 | ||
Paper & Forest Products 0.16% | ||||
Schweitzer-Mauduit International, Inc. | 2,054 | 112,621 | ||
Telecommunication Services 3.09% | 2,125,401 | |||
Diversified Telecommunication Services 2.97% | ||||
AT&T, Inc. | 28,000 | 794,640 | ||
CenturyLink, Inc. (L) | 1,900 | 78,242 | ||
Verizon Communications, Inc. | 31,700 | 1,170,364 | ||
Wireless Telecommunication Services 0.12% | ||||
MetroPCS Communications, Inc. (I) | 2,200 | 31,680 | ||
Telephone & Data Systems, Inc. | 1,500 | 50,475 | ||
Investment Companies 1.01% | $692,247 | |||
(Cost $635,987) | ||||
Financials 1.01% | 692,247 | |||
SPDR S&P 500 ETF Trust | 5,199 | 692,247 | ||
Yield | Shares | Value | ||
Securities Lending Collateral 1.63% | $1,124,229 | |||
(Cost $1,124,155) | ||||
John Hancock Collateral Investment Trust (W) | 0.2855% (Y) | 112,340 | 1,124,229 | |
Short-Term Investments 3.34% | $2,299,518 | |||
(Cost $2,299,512) | ||||
Maturity | ||||
Yield* | date | Par value | Value | |
U.S. Government 0.43% | 299,993 | |||
U.S. Treasury Bill | 0.180% | 3-10-11 | $300,000 | 299,993 |
Shares | Value | |||
Short-Term Securities 2.91% | 1,999,525 | |||
State Street Institutional Treasury Money | ||||
Market Fund | 0.0453% (Y) | 1,999,525 | 1,999,525 | |
Total investments (Cost $61,744,908)† 100.48% | $69,101,273 | |||
Other assets and liabilities, net (0.48%) | ($329,900) | |||
Total net assets 100.00% | $68,771,373 | |||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
See notes to financial statements | Annual report | U.S. Core Fund | 19 |
Notes to Schedule of Investments
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 2-28-11.
(W) Investment is an affiliate of the Fund, the adviser and/or subadviser. Also, it represents the investment of securities lending collateral received.
(Y) The rate shown is the annualized seven-day yield as of 2-28-11.
† At 2-28-11, the aggregate cost of investment securities for federal income tax purposes was $62,554,907. Net unrealized appreciation aggregated $6,546,366, of which $6,969,277 related to appreciated investment securities and $422,911 related to depreciated investment securities.
20 | U.S. Core 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
Financial statements
Statement of assets and liabilities 2-28-11
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 public offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $60,620,753) including | |
$1,091,259 of securities loaned (Note 2) | $67,977,044 |
Investments in affiliated issuers, at value (Cost $1,124,155) (Note 2) | 1,124,229 |
Total investments, at value (Cost $61,744,908) | 69,101,273 |
Receivable for fund shares sold | 791,944 |
Dividends and interest receivable | 142,140 |
Receivable for securities lending income | 2,226 |
Other receivables and prepaid expenses | 6,271 |
Total assets | 70,043,854 |
Liabilities | |
Payable for investments purchased | 4,513 |
Payable for fund shares repurchased | 14,187 |
Payable upon return of securities loaned (Note 2) | 1,125,131 |
Payable to affiliates | |
Accounting and legal services fees | 874 |
Transfer agent fees | 12,832 |
Distribution and service fees | 3 |
Trustees’ fees | 615 |
Due to adviser | 102,961 |
Other liabilities and accrued expenses | 11,365 |
Total liabilities | 1,272,481 |
Net assets | |
Capital paid-in | $63,928,417 |
Undistributed net investment income | 144,998 |
Accumulated net realized loss on investments and futures contracts | (2,658,407) |
Net unrealized appreciation (depreciation) on investments | 7,356,365 |
Net assets | $68,771,373 |
See notes to financial statements | Annual report | U.S. Core Fund | 21 |
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 ($31,179,454 ÷ 1,608,524 shares) | $19.38 |
Class B ($824,284 ÷ 42,665 shares)1 | $19.32 |
Class C ($2,377,992 ÷ 123,169 shares)1 | $19.31 |
Class I ($34,172,344 ÷ 1,761,956 shares) | $19.39 |
Class R1 ($113,771 ÷ 5,879 shares) | $19.35 |
Class R3 ($34,510 ÷ 1,779.359 shares) | $19.39 |
Class R4 ($34,509 ÷ 1,779.359 shares) | $19.39 |
Class R5 ($34,509 ÷ 1,779.359 shares) | $19.39 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $20.40 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
22 | U.S. Core 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 operations For the year ended 2-28-11
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 | |
Dividends | $1,070,628 |
Securities lending | 11,561 |
Interest | 2,090 |
Less foreign taxes withheld | (18) |
Total investment income | 1,084,261 |
Expenses | |
Investment management fees (Note 5) | 386,107 |
Distribution and service fees (Note 5) | 106,110 |
Accounting and legal services fees (Note 5) | 6,737 |
Transfer agent fees (Note 5) | 62,533 |
Trustees’ fees (Note 5) | 3,510 |
State registration fees (Note 5) | 56,044 |
Printing and postage (Note 5) | 11,383 |
Professional fees | 48,721 |
Custodian fees | 12,140 |
Registration and filing fees | 32,269 |
Other | 7,702 |
Total expenses | 733,256 |
Less expense reductions (Note 5) | (140,827) |
Net expenses | 592,429 |
Net investment income | 491,832 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 1,571,228 |
Investments in affiliated issuers | (819) |
Futures contracts (Note 3) | 89,593 |
1,660,002 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 5,111,297 |
Investments in affiliated issuers | (137) |
Futures contracts (Note 3) | (18,147) |
Translation of assets and liabilities in foreign currencies | 215 |
5,093,228 | |
Net realized and unrealized gain | 6,753,230 |
Increase in net assets from operations | $7,245,062 |
See notes to financial statements | Annual report | U.S. Core Fund | 23 |
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 | |
2-28-11 | 2-28-10 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $491,832 | $197,722 |
Net realized gain (loss) | 1,660,002 | (1,312,068) |
Change in net unrealized appreciation (depreciation) | 5,093,228 | 7,710,519 |
Increase in net assets resulting from operations | 7,245,062 | 6,596,173 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (167,314) | (77,787) |
Class I | (207,682) | (124,896) |
Class R1 | (282) | (22) |
Class R3 | (117) | (34) |
Class R4 | (209) | (113) |
Class R5 | (301) | (193) |
Total distributions | (375,905) | (203,045) |
From Fund share transactions (Note 6) | 20,847,789 | 22,212,754 |
Total increase | 27,716,946 | 28,605,882 |
Net assets | ||
Beginning of year | 41,054,427 | 12,448,545 |
End of year | $68,771,373 | $41,054,427 |
Undistributed net investment income | $144,998 | $29,071 |
24 | U.S. Core Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of period | $17.06 | $12.25 | $19.42 | $22.24 | $20.00 |
Net investment income2 | 0.14 | 0.11 | 0.15 | 0.16 | 0.12 |
Net realized and unrealized gain (loss) on investments | 2.29 | 4.76 | (7.19) | (1.88) | 2.41 |
Total from investment operations | 2.43 | 4.87 | (7.04) | (1.72) | 2.53 |
Less distributions | |||||
From net investment income | (0.11) | (0.06) | (0.13) | (0.17) | (0.09) |
From net realized gain | — | — | — | (0.93) | (0.20) |
Total distributions | (0.11) | (0.06) | (0.13) | (1.10) | (0.29) |
Net asset value, end of period | $19.38 | $17.06 | $12.25 | $19.42 | $22.24 |
Total return (%)3,4 | 14.26 | 39.78 | (36.34) | (8.16) | 12.645 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $31 | $22 | $11 | $18 | $19 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.50 | 1.766 | 1.75 | 1.86 | 1.937 |
Expenses net of fee waivers | 1.35 | 1.356 | 1.35 | 1.34 | 1.347 |
Expenses net of fee waivers and credits | 1.35 | 1.356 | 1.35 | 1.34 | 1.347 |
Net investment income | 0.82 | 0.72 | 0.86 | 0.70 | 0.767 |
Portfolio turnover (%) | 78 | 44 | 61 | 81 | 36 |
1 The inception date for Class A shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Not annualized.
6 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
7 Annualized.
See notes to financial statements | Annual report | U.S. Core Fund | 25 |
CLASS B SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of period | $17.02 | $12.26 | $19.38 | $22.20 | $20.00 |
Net investment income2 | 0.03 | 0.01 | 0.04 | —3 | 0.02 |
Net realized and unrealized gain (loss) on investments | 2.27 | 4.75 | (7.16) | (1.88) | 2.40 |
Total from investment operations | 2.30 | 4.76 | (7.12) | (1.88) | 2.42 |
From net investment income | — | — | — | (0.01) | (0.02) |
From net realized gain | — | — | — | (0.93) | (0.20) |
Total distributions | — | — | — | (0.94) | (0.22) |
Net asset value, end of period | $19.32 | $17.02 | $12.26 | $19.38 | $22.20 |
Total return (%)4,5 | 13.51 | 38.83 | (36.74) | (8.84) | 12.076 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1 | —7 | —7 | —7 | —7 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 3.02 | 7.678 | 8.79 | 6.98 | 13.589 |
Expenses net of fee waivers | 2.05 | 2.088 | 2.40 | 2.05 | 2.049 |
Expenses net of fee waivers and credits | 2.05 | 2.058 | 2.05 | 2.05 | 2.049 |
Net investment income | 0.19 | 0.03 | 0.24 | —10 | 0.129 |
Portfolio turnover (%) | 78 | 44 | 61 | 81 | 36 |
1 The inception date for Class B shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Does not reflect the effect of sales charges, if any.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Not annualized.
7 Less than $500,000.
8 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
9 Annualized.
10 Less than 0.005%.
CLASS C SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of period | $17.01 | $12.26 | $19.39 | $22.21 | $20.00 |
Net investment income2 | 0.02 | —3 | 0.01 | —4 | 0.03 |
Net realized and unrealized gain (loss) on investments | 2.28 | 4.75 | (7.14) | (1.88) | 2.40 |
Total from investment operations | 2.30 | 4.75 | (7.13) | (1.88) | 2.43 |
From net investment income | — | — | — | (0.01) | (0.02) |
From net realized gain | — | — | — | (0.93) | (0.20) |
Total distributions | — | — | — | (0.94) | (0.22) |
Net asset value, end of period | $19.31 | $17.01 | $12.26 | $19.39 | $22.21 |
Total return (%)5,6 | 13.52 | 38.74 | (36.77) | (8.84) | 12.127 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | $2 | $1 | $3 | $3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.40 | 3.928 | 3.43 | 2.94 | 3.829 |
Expenses net of fee waivers | 2.05 | 2.068 | 2.07 | 2.05 | 2.049 |
Expenses net of fee waivers and credits | 2.05 | 2.058 | 2.05 | 2.05 | 2.049 |
Net investment income (loss) | 0.12 | —10 | 0.06 | (0.01) | 0.169 |
Portfolio turnover (%) | 78 | 44 | 61 | 81 | 36 |
1 The inception date for Class C shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Less than ($0.005) per share.
4 Less than $0.005 per share.
5 Does not reflect the effect of sales charges, if any.
6 Total returns would have been lower had certain expenses not been reduced during the periods shown.
7 Not annualized.
8 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
9 Annualized.
10 Less than (0.005%).
26 | U.S. Core Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of period | $17.06 | $12.25 | $19.43 | $22.26 | $20.00 |
Net investment income2 | 0.24 | 0.16 | 0.21 | 0.25 | 0.18 |
Net realized and unrealized gain (loss) on investments | 2.28 | 4.79 | (7.19) | (1.89) | 2.41 |
Total from investment operations | 2.52 | 4.95 | (6.98) | (1.64) | 2.59 |
Less distributions | |||||
From net investment income | (0.19) | (0.14) | (0.20) | (0.26) | (0.13) |
From net realized gain | — | — | — | (0.93) | (0.20) |
Total distributions | (0.19) | (0.14) | (0.20) | (1.19) | (0.33) |
Net asset value, end of period | $19.39 | $17.06 | $12.25 | $19.43 | $22.26 |
Total return (%)3 | 14.81 | 40.35 | (36.06) | (7.82) | 12.954 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $34 | $16 | —5 | —5 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.12 | 1.396 | 10.44 | 12.79 | 17.837 |
Expenses net of fee waivers | 0.88 | 0.876 | 0.95 | 0.95 | 0.957 |
Expenses net of fee waivers and credits | 0.88 | 0.876 | 0.95 | 0.95 | 0.957 |
Net investment income | 1.34 | 0.94 | 1.19 | 1.10 | 1.167 |
Portfolio turnover (%) | 78 | 44 | 61 | 81 | 36 |
1 The inception date for Class I shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Includes the impact of proxy expenses, which amounted to less than 0.005% of average net assets.
7 Annualized.
CLASS R1 SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of period | $17.03 | $12.23 | $19.37 | $22.20 | $20.00 |
Net investment income2 | 0.09 | 0.07 | 0.13 | 0.13 | 0.06 |
Net realized and unrealized gain (loss) on investments | 2.28 | 4.73 | (7.16) | (1.88) | 2.42 |
Total from investment operations | 2.37 | 4.80 | (7.03) | (1.75) | 2.48 |
Less distributions | |||||
From net investment income | (0.05) | —3 | (0.11) | (0.15) | (0.08) |
From net realized gain | — | — | — | (0.93) | (0.20) |
Total distributions | (0.05) | —3 | (0.11) | (1.08) | (0.28) |
Net asset value, end of period | $19.35 | $17.03 | $12.23 | $19.37 | $22.20 |
Total return (%)4 | 13.92 | 39.28 | (36.37) | (8.32) | 12.385 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —6 | —6 | —6 | —6 | —6 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 4.66 | 20.807 | 19.51 | 15.98 | 21.128 |
Expenses net of fee waivers | 1.67 | 1.667 | 1.95 | 1.45 | 1.698 |
Expenses net of fee waivers and credits | 1.67 | 1.667 | 1.45 | 1.45 | 1.698 |
Net investment income | 0.48 | 0.43 | 0.76 | 0.59 | 0.418 |
Portfolio turnover (%) | 78 | 44 | 61 | 81 | 36 |
1 The inception date for Class R1 shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Less than ($0.005) per share.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Not annualized.
6 Less than $500,000.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
8 Annualized.
See notes to financial statements | Annual report | U.S. Core Fund | 27 |
CLASS R3 SHARES Period ended | 2-28-11 | 2-28-101 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $17.07 | $14.05 | |||
Net investment income2 | 0.10 | 0.03 | |||
Net realized and unrealized gain on investments | 2.29 | 3.01 | |||
Total from investment operations | 2.39 | 3.04 | |||
Less distributions | |||||
From net investment income | (0.07) | (0.02) | |||
Net asset value, end of period | $19.39 | $17.07 | |||
Total return (%)3 | 13.99 | 21.634 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 39.27 | 9.876 | |||
Expenses net of fee waivers | 1.58 | 1.666 | |||
Expenses net of fee waivers and credits | 1.58 | 1.666 | |||
Net investment income | 0.57 | 0.216 | |||
Portfolio turnover (%) | 78 | 44 | |||
1 The inception date for Class R3 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
CLASS R4 SHARES Period ended | 2-28-11 | 2-28-101 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $17.06 | $14.05 | |||
Net investment income2 | 0.15 | 0.06 | |||
Net realized and unrealized gain on investments | 2.30 | 3.01 | |||
Total from investment operations | 2.45 | 3.07 | |||
Less distributions | |||||
From net investment income | (0.12) | (0.06) | |||
Net asset value, end of period | $19.39 | $17.06 | |||
Total return (%)3 | 14.37 | 21.874 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 39.00 | 9.616 | |||
Expenses net of fee waivers | 1.28 | 1.366 | |||
Expenses net of fee waivers and credits | 1.28 | 1.366 | |||
Net investment loss | 0.87 | 0.506 | |||
Portfolio turnover (%) | 78 | 44 | |||
1 The inception date for Class R4 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
28 | U.S. Core Fund | Annual report | See notes to financial statements |
CLASS R5 SHARES Period ended | 2-28-11 | 2-28-101 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $17.06 | $14.05 | |||
Net investment income2 | 0.21 | 0.10 | |||
Net realized and unrealized gain on investments | 2.29 | 3.02 | |||
Total from investment operations | 2.50 | 3.12 | |||
Less distributions | |||||
From net investment income | (0.17) | (0.11) | |||
Net asset value, end of period | $19.39 | $17.06 | |||
Total return (%)3 | 14.68 | 22.184 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 38.74 | 9.366 | |||
Expenses net of fee waivers | 0.98 | 1.066 | |||
Expenses net of fee waivers and credits | 0.98 | 1.066 | |||
Net investment income | 1.17 | 0.816 | |||
Portfolio turnover (%) | 78 | 44 | |||
1 The inception date for Class R5 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
See notes to financial statements | Annual report | U.S. Core Fund | 29 |
Notes to financial statements
Note 1 — Organization
John Hancock U.S. Core Fund (the Fund) is a diversified series of John Hancock Funds III (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 total return.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of Assets and Liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class R1, Class R3, Class R4 and Class R5 shares are available only to certain retirement plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, printing and postage, registration and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. 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, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
As of February 28, 2011, all investments of the Fund are categorized as Level 1 under the hierarchy described above, except U.S. Treasury Bills, which are Level 2. Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the year ended February 28, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their closing net asset values each day. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the
30 | U.S. Core Fund | Annual report |
close of trading. Other portfolio securities and assets, where 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.
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. Dividend income is recorded on the ex-date.
Securities lending. The Fund may lend its securities to earn additional income. It receives and maintains cash collateral received from the borrower in an amount not less than the market value of the loaned securities. The Fund will invest its collateral in JHCIT, an affiliate of the Fund, and as a result, the Fund will receive the benefit of any gains and bear any losses generated by JHCIT. Although risk of the loss of the securities lent is mitigated by holding the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities or if collateral investments decline in value. The Fund may receive compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Income received from JHCIT is a component of securities lending income as recorded on the Statement of Operations.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to a 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 has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law for any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with State Street Bank and Trust Company (SSBT) which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 31, 2010, the amount of the line of credit was $150 million. 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. For the year ended February 28, 2011, the Fund had no borrowings under the line of credit.
Effective March 30, 2011, the line of credit with SSBT expired and a similar arrangement was established with Citibank N.A.
Expenses. The majority of expenses are directly attributable to an individual 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 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 asset value of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rates applicable to each class.
Annual report | U.S. Core Fund | 31 |
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.
For federal income tax purposes, the Fund has a capital loss carryforward of $1,848,409 available to offset future net realized capital gains as of February 28, 2011. The loss carryforward expires as follows: February 28, 2018 — $1,848,409.
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment 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.
As of February 28, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended February 28, 2011 and 2010 was as follows:
FEBRUARY 28, 2011 | FEBRUARY 28, 2010 | |||
Ordinary Income | $375,905 | $203,045 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of February 28, 2011, the components of distributable earnings on a tax basis included $145,320 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 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 wash sales loss deferrals.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objectives. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, derivatives expose the Fund to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
32 | U.S. Core Fund | Annual report |
Futures. A futures contract is a contractual agreement to buy or sell a particular commodity, 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 hedged security values and/or interest rates and potential losses in excess of the amounts recognized on the Statement of Assets and Liabilities.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. 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 contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) is recorded by the Fund.
During the year ended February 28, 2011, the Fund used futures contracts to gain market exposure. During year ended February 28, 2011, the Fund held futures contracts with notional absolute values ranging from zero to $1.9 million, as measured at each quarter end. There were no open futures contracts as of February 28, 2011.
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 February 28, 2011:
STATEMENT OF | ||||
OPERATIONS | FUTURES | |||
RISK | LOCATION | CONTRACTS | ||
Equity contracts | Net realized gain | $89,593 |
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 February 28, 2011:
STATEMENT OF | ||||
OPERATIONS | FUTURES | |||
RISK | LOCATION | CONTRACTS | ||
Equity contracts | Change in | ($18,147) | ||
unrealized | ||||
appreciation | ||||
(depreciation) |
Note 4 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Trust. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Annual report | U.S. Core Fund | 33 |
Management fee. The Fund has an investment management contract with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.78% of the first $500,000,000 of the Fund’s average daily net assets; (b) 0.76% of the next $500,000,000; (c) 0.75% of the next $1,000,000,000; (d) 0.74% of the next $1,000,000,000; and (e) 0.72% of the Fund’s average daily net assets in excess of $3,000,000,000. The Adviser has a subadvisory agreement with Grantham, Mayo Van Otterloo & Co. LLC. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the year ended February 28, 2011 were equivalent to an annual effective rate of 0.78% of the Fund’s average daily net assets.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Fund. This agreement excludes taxes, portfolio brokerage commissions, interest, litigation and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.35%, 2.05%, 2.05%, 0.89%, 1.64%, 1.54%, 1.24% and 0.94% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4 and Class R5 shares, respectively. The fee waivers and/or reimbursements will continue in effect until June 30, 2011. Prior to July 1, 2010, the fee waivers and/or reimbursements were such that the above expenses would not exceed 0.87%, 1.75%, 1.65%, 1.35% and 1.05% for Class I, Class R1, Class R3, Class R4 and Class R5 shares, respectively.
Effective June 26, 2010, the Adviser has voluntarily agreed to waive fees and/or reimburse certain other fund level expenses. This agreement excludes advisory, interest, overdraft, litigation, Rule 12b-1, class specific and other extraordinary expenses not incurred in the ordinary course of business. The fee waivers and/or reimbursement are such that these expenses will not exceed 0.04% of average daily net assets. During the period from May 1, 2010 to June 26, 2010, the fee waiver and/or reimbursement was such that these expenses did not exceed 0.09% of average daily net assets.
Accordingly, these expense reductions amounted to $40,615, $5,407, $7,461, $48,692, $2,975, $11,875, $11,890 and $11,912 for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4 and Class R5 shares, respectively, for the year ended February 28, 2011.
Accounting and legal services. Pursuant to the service agreement the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of the Fund, including the preparation of all tax returns, 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. The accounting and legal services fees incurred for the year ended February 28, 2011 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B, Class C, Class R1, Class R3 and Class R4 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 R1, Class R3, Class R4 and Class R5 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.
34 | U.S. Core Fund | Annual report |
CLASS | 12b–1 FEES | SERVICE FEES | ||
Class A | 0.30% | — | ||
Class B | 1.00% | — | ||
Class C | 1.00% | — | ||
Class R1 | 0.50% | 0.25% | ||
Class R3 | 0.50% | 0.15% | ||
Class R4 | 0.25% | 0.10% | ||
Class R5 | — | 0.05% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $32,941 for the year ended February 28, 2011. Of this amount, $5,676 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $26,842 was paid as sales commissions to broker-dealers and $423 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a broker-dealer affiliate of the Adviser.
Class B and Class C shares are subject to contingent deferred sales charges (CDSC). Class B shares that are redeemed within six years of purchase are subject to CDSC, at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2011, CDSCs received by the Distributor amounted to $261 and $121 for Class B and Class C shares, respectively.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services or Transfer Agent), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain revenues that Signature Services receives in connection with the service they provide to the funds. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to July 1, the transfer agent fees were made up of three components:
• The Fund paid a monthly transfer agent fee at an annual rate of 0.05% for Class A, Class B, Class C, Class R1, Class R3, Class R4 and Class R5 shares and 0.04% for Class I shares, based on each class’s average daily net assets.
• The Fund paid a monthly fee based on an annual rate of $16.50 per shareholder account.
• In addition, Signature Services was reimbursed for certain out-of-pocket expenses.
Annual report | U.S. Core Fund | 35 |
Class level expenses. Class level expenses for the year ended February 28, 2011 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
SHARE CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $78,782 | $43,102 | $3,804 | $6,840 |
Class B | 5,587 | 1,488 | 4,052 | 120 |
Class C | 21,195 | 4,256 | 3,761 | 504 |
Class I | — | 12,373 | 6,827 | 3,776 |
Class R1 | 310 | 350 | 2,923 | 66 |
Class R3 | 157 | 320 | 11,559 | 25 |
Class R4 | 79 | 320 | 11,559 | 25 |
Class R5 | — | 324 | 11,559 | 27 |
Total | $106,110 | $62,533 | $56,044 | $11,383 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within other receivables and prepaid expenses and payable to affiliates — trustees’ fees, respectively, in the accompanying Statement of Assets and Liabilities.
Note 6 — Fund share transactions
Transactions in Fund shares for the year ended February 28, 2011 and for the year ended February 28, 2010 were as follows:
Year ended 2-28-11 | Year ended 2-28-101 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 460,570 | $8,297,278 | 455,553 | $7,151,566 |
Distributions reinvested | 8,755 | 163,886 | 4,368 | 75,873 |
Repurchased | (177,915) | (3,252,228) | (72,964) | (1,132,654) |
Net increase | 291,410 | $5,208,936 | 386,957 | $6,094,785 |
Class B shares | ||||
Sold | 25,910 | $455,620 | 11,993 | $182,687 |
Repurchased | (5,850) | (105,831) | (5,610) | (86,556) |
Net increase | 20,060 | $349,789 | 6,383 | $96,131 |
Class C shares | ||||
Sold | 40,635 | $708,765 | 68,921 | $1,077,457 |
Repurchased | (16,680) | (297,360) | (21,998) | (334,545) |
Net increase | 23,955 | $411,405 | 46,923 | $742,912 |
Class I shares | ||||
Sold | 1,074,227 | $19,696,800 | 1,020,503 | $16,466,223 |
Distributions reinvested | 9,115 | 170,640 | 6,074 | 105,386 |
Repurchased | (279,012) | (4,999,129) | (80,937) | (1,367,705) |
Net increase | 804,330 | $14,868,311 | 945,640 | $15,203,904 |
36 | U.S. Core Fund | Annual report |
Year ended 2-28-11 | Year ended 2-28-101 | |||
Shares | Amount | Shares | Amount | |
Class R1 shares | ||||
Sold | 502 | $9,066 | — | — |
Distributions reinvested | 15 | 282 | 1 | $22 |
Net increase | 517 | $9,348 | 1 | $22 |
Class R3 shares | ||||
Sold | — | — | 1,779 | $25,000 |
Net increase | — | — | 1,779 | $25,000 |
Class R4 shares | ||||
Sold | — | — | 1,779 | $25,000 |
Net increase | — | — | 1,779 | $25,000 |
Class R5 shares | ||||
Sold | — | — | 1,779 | $25,000 |
Net increase | — | — | 1,779 | $25,000 |
Net increase | 1,140,272 | $20,847,789 | 1,391,241 | $22,212,754 |
1 The inception date for Class R3, Class R4 and Class R5 shares is 5-22-09.
Affiliates of the Fund owned 49%, 91%, 100%, 100% and 100% of shares of beneficial interest of Class A, Class R1, Class R3, Class R4 and Class R5 shares on February 28, 2011.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $57,073,926 and $37,002,876, respectively, for the year ended February 28, 2011.
Annual report | U.S. Core Fund | 37 |
Auditors’ report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock U.S. Core Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio 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 U.S. Core Fund (the “Fund”) at February 28, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011 by correspondence with the custodian 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
April 19, 2011
38 | U.S. Core Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended February 28, 2011.
The Fund designates the maximum amount allowable for the corporate dividends received deduction for the fiscal year ended February 28, 2011.
The Fund designates 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. This amount will be reflected on Form 1099-DIV for the calendar year 2011.
Shareholders will be mailed a 2011 Form 1099-DIV in January 2012. This will reflect the total of all distributions that are taxable for calendar year 2011.
Annual report | U.S. Core Fund | 39 |
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 |
Steven R. Pruchansky, Born: 1944 | 2006 | 47 |
Chairperson (since January 2011); 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 (since 2008); 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). | ||
James F. Carlin, Born: 1940 | 2006 | 47 |
Chief Executive Officer, Director and Treasurer, Alpha Analytical Laboratories (environmental, chemical | ||
and pharmaceutical analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance | ||
Agency, Inc. (since 1995); Chairman and Chief Executive Officer, CIMCO, LLC (management/ | ||
investments) (since 1987). | ||
William H. Cunningham, Born: 1944 | 2006 | 47 |
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 of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson,2 Born: 1952 | 2008 | 47 |
Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); 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 Corp. (1996–2009); Board of Directors of | ||
Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (since 2007). | ||
Charles L. Ladner,2 Born: 1938 | 2006 | 47 |
Vice Chairperson (since March 2011); Chairman and Trustee, Dunwoody Village, Inc. (retirement | ||
services) (since 2008); Director, Philadelphia Archdiocesan Educational Fund (since 2009); Senior Vice | ||
President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); | ||
Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (gas | ||
distribution) (until 1997); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association | ||
(Cooperating Association, National Park Service) (until 2005). |
40 | U.S. Core 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 |
Stanley Martin,2 Born: 1947 | 2008 | 47 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore, Born: 1939 | 2006 | 47 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). | ||
Patti McGill Peterson,2 Born: 1943 | 2006 | 47 |
Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy | ||
(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President, | ||
Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public | ||
Affairs, Cornell University (1997–1998); Former President Wells College, St. Lawrence University and the | ||
Association of Colleges and Universities of the State of New York. Director of the following: Niagara | ||
Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until | ||
1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007); | ||
Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development | ||
Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational | ||
Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 47 |
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (“KPMG”) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
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 |
Hugh McHaffie,4 Born: 1959 | 2010 | 47 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Trust and John Hancock Funds II (since 2009); Trustee, John Hancock retail | ||
funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment | ||
Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior Vice President, Individual | ||
Business Product Management, MetLife, Inc. (1999–2006). |
Annual report | U.S. Core Fund | 41 |
Non-Independent Trustees3 (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 |
John G. Vrysen, Born: 1955 | 2009 | 47 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock Funds II | ||
and John Hancock Trust (since 2007); Chief Operating Officer, John Hancock retail funds (until 2009); | ||
Trustee, John Hancock retail funds (since 2009). | ||
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 | |
Keith F. Hartstein, Born: 1956 | 2006 | |
President and Chief Executive Officer | ||
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | ||
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | ||
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | ||
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | ||
Force Marketing Committee (since 2003). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Senior Vice President and Chief Operating Officer | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | ||
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | ||
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock Trust | ||
(since 2006); Senior Vice President, Product Management and Development, John Hancock Funds, | ||
LLC (until 2009). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | ||
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | ||
Funds II and John Hancock Trust (since 2006); Vice President and Associate General Counsel, | ||
Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal Counsel, MML | ||
Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual Select Funds and | ||
MassMutual Premier Funds (2004–2006). |
42 | U.S. Core Fund | Annual report |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Trust, John Hancock Advisers, LLC and John Hancock | |
Investment Management Services, LLC (since 2005); Vice President and Chief Compliance Officer, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Trust (since 2007); | |
Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, Goldman | |
Sachs (2005–2007). | |
Salvatore Schiavone,4 Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock Closed-End Funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Trust (since 2007); Assistant Treasurer, | |
John Hancock retail funds, John Hancock Funds II and John Hancock Trust (2007–2009); Assistant | |
Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management Research | |
Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
4 Mr. McHaffie and Mr. Schiavone were appointed by the Board of Trustees effective 8-31-10.
Annual report | U.S. Core Fund | 43 |
More information
Trustees | Investment adviser | |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management | |
James F. Carlin | Services, LLC | |
William H. Cunningham | ||
Deborah C. Jackson* | Subadviser | |
Charles L. Ladner, Vice Chairperson* | Grantham, Mayo, Van Otterloo & Co. LLC | |
Stanley Martin* | ||
Hugh McHaffie | Principal distributor | |
Dr. John A. Moore | John Hancock Funds, LLC | |
Patti McGill Peterson* | ||
Gregory A. Russo | Custodian | |
John G. Vrysen | State Street Bank and Trust Company | |
Officers | Transfer agent | |
Keith F. Hartstein | John Hancock Signature Services, Inc. | |
President and Chief Executive Officer | ||
Legal counsel | ||
Andrew G. Arnott | K&L Gates LLP | |
Senior Vice President and Chief Operating Officer | ||
Independent registered | ||
Thomas M. Kinzler | public accounting firm | |
Secretary and Chief Legal Officer | PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | ||
Chief Compliance Officer | The report is certified under the Sarbanes-Oxley | |
Act, which requires mutual funds and other public | ||
Charles A. Rizzo | companies to affirm that, to the best of their | |
Chief Financial Officer | knowledge, the information in their financial reports | |
is fairly and accurately stated in all material respects. | ||
Salvatore Schiavone | ||
Treasurer | ||
*Member of the Audit Committee |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
44 | U.S. Core Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/uscorex41x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock U.S. Core Fund. | 6500A 2/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/11 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/internationalcorex1x1.jpg)
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC
International stocks fared quite well during the 12 months ended February 28, 2011, thanks to a vigorous second-half rally. During the first half of the period, global markets struggled with concern about the European sovereign debt crisis, weakness in the energy sector following a massive oil spill from an explosion at a BP drilling rig in the Gulf of Mexico and tepid data on the U.S. economy that led investors to fear a double-dip recession. Over the summer, anxiety about the European debt situation eased, and BP managed to contain its leaking undersea well. Meanwhile, Fed Chairman Ben Bernanke proposed another round of quantitative easing at the end of August to stimulate U.S. economic growth. His remarks ignited an impressive global stock rally that boosted the MSCI EAFE Index to a gain of 20.54%, while the average large value fund monitored by Morningstar, Inc. advanced 19.64%.
During the period, John Hancock International Core Fund’s Class A shares returned 21.13% at net asset value. Our quantitative model’s momentum criteria were particularly helpful to relative performance during the period. At the sector level, the strongest contributions came from energy, financials and information technology. Geographically, Japan, Sweden and the United Kingdom were noteworthy contributors. A large underweighting in U.K.-based energy major BP PLC, a benchmark component, was timely. After the Gulf of Mexico spill occurred, we increased the position, although it remained underweighted versus our benchmark. An out-of-benchmark position in Canadian auto parts company Magna International, Inc. also bolstered performance, as did not owning Teva Pharmaceuticals, an Israel-based manufacturer of generic drugs, underweighting global bank HSBC Holdings PLC and overweighting Danish insulin maker Novo Nordisk A/S. Conversely, the Fund’s sizable overweighting in health care detracted from performance. On a country basis, weak picks in Switzerland and Hong Kong had a negative impact. At the stock level, overweighting two drug stocks, France’s Sanofi-Aventis S.A. and U.K.-headquartered GlaxoSmithKline PLC, was counterproductive, while Japanese bank Resona Holdings, Inc. saw its share price plunge when the company revealed its plans to raise substantial capital.
This commentary reflects the views of the portfolio management team through the end of the Fund’s period discussed in this report. The team’s statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. 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.
6 | International Core Fund | Annual report |
A look at performance
For the period ended February 28, 2011
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception | 1-year | 5-year | 10-year | inception | ||
Class A1 | 15.09 | 0.56 | — | 2.31 | 15.09 | 2.85 | — | 13.27 | |
Class B2 | 15.28 | 0.56 | — | 2.40 | 15.28 | 2.81 | — | 13.79 | |
Class C2 | 19.32 | 0.89 | — | 2.56 | 19.32 | 4.54 | — | 14.77 | |
Class i2,3 | 21.73 | 2.09 | — | 3.78 | 21.73 | 10.88 | — | 22.42 | |
Class R12,3 | 20.71 | 1.39 | — | 3.04 | 20.71 | 7.13 | — | 17.74 | |
Class R33,4 | 20.87 | — | — | 18.84 | 20.87 | — | — | 35.86 | |
Class R43,4 | 21.21 | — | — | 19.20 | 21.21 | — | — | 36.59 | |
Class R53,4 | 21.59 | — | — | 19.56 | 21.59 | — | — | 37.33 | |
Class 13,5 | 21.75 | — | — | –0.02 | 21.75 | — | — | –0.10 | |
Class NAV3,6 | 21.85 | — | — | 0.80 | 21.85 | — | — | 3.63 | |
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I, Class R1, Class R3, Class R4, Class R5, Class 1 and Class NAV shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The waivers and expense limitations are contractual at least until 6-30-11. The net expenses are as follows: Class A — 1.60%, Class B — 2.30%, Class C — 2.30%, Class R1 — 1.89%, Class R3 —1.79%, Class R4 — 1.49% and Class R5 — 1.19%. Had the fee waivers and expense limitations not been in place, the gross expenses would be as follows: Class A — 1.62%, Class B — 2.62%, Class C — 2.51%, Class R1 — 8.19%, Class R3 — 8.46%, Class R4 — 8.20% and Class R5 — 7.95%. For the other classes, the net expenses equal the gross expenses and are as follows: Class I — 1.05%, Class NAV — 1.01% and Class 1 — 1.05%.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Fund’s performance results reflect any applicable expense reductions, without which the expenses increase and results would have been less favorable.
1 On 6-9-06, through a reorganization, the Fund acquired all of the assets of the GMO International Disciplined Equity Fund (the predecessor fund). The predecessor fund offered its Class III shares, inception date 9-16-05, in exchange for Class A shares, which were first offered on 6-12-06. The predecessor fund’s Class III shares returns have been recalculated to reflect the gross fees and expenses of Class A shares.
2 Class B, Class C, Class I and Class R1 shares were first offered on 6-12-06. Returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class B, Class C, Class I and Class R1 shares, respectively.
3 For certain types of investors, as described in the Fund’s Class I, Class R1, Class R3, Class R4, Class R5, Class 1 and Class NAV share prospectuses.
4 From 5-22-09.
5 From 11-6-06.
6 From 8-29-06.
Annual report | International Core Fund | 7 |
A look at performance
Period | Without | With maximum | ||
beginning | sales charge | sales charge | Index | |
Class B3 | 9-16-05 | $11,473 | $11,379 | $12,901 |
Class C3,4 | 9-16-05 | 11,477 | 11,477 | 12,901 |
Class I3,5 | 9-16-05 | 12,242 | 12,242 | 12,901 |
Class R13,5 | 9-16-05 | 11,774 | 11,774 | 12,901 |
Class R35 | 5-22-09 | 13,586 | 13,586 | 14,315 |
Class R45 | 5-22-09 | 13,659 | 13,659 | 14,315 |
Class R55 | 5-22-09 | 13,733 | 13,733 | 14,315 |
Class 15 | 11-6-06 | 9,990 | 9,990 | 10,260 |
Class NAV5 | 8-29-06 | 10,363 | 10,363 | 10,740 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5, Class 1 and Class NAV shares, respectively, as of 2-28-10. 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.
MSCI EAFE Index (gross of foreign withholding tax on dividends) (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. The index consists of 21 developed market country indexes. It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 On 6-9-06, through a reorganization, the Fund acquired all of the assets of the GMO International Disciplined Equity Fund (the predecessor fund). The predecessor fund offered its Class III shares, inception date 9-16-05, in exchange for Class A shares, which were first offered on 6-12-06. The predecessor fund’s Class III shares returns have been recalculated to reflect the gross fees and expenses of Class A shares.
2 NAV represents net asset value and POP represents public offering price.
3 Class B, Class C, Class I and Class R1 shares were first offered on 6-12-06. Returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class B, Class C, Class I and Class R1 shares, respectively.
4 The contingent deferred sales charge, if any, is not applicable.
5 For certain types of investors, as described in the Fund’s Class I, Class R1, Class R3, Class R4, Class R5, Class 1 and Class NAV share prospectuses.
8 | International Core Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about 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 September 1, 2010 with the same investment held until February 28, 2011.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,253.20 | $9.05 |
Class B | 1,000.00 | 1,248.60 | 12.82 |
Class C | 1,000.00 | 1,249.00 | 12.83 |
Class I | 1,000.00 | 1,255.70 | 6.38 |
Class R1 | 1,000.00 | 1,251.00 | 10.55 |
Class R3 | 1,000.00 | 1,251.90 | 9.99 |
Class R4 | 1,000.00 | 1,253.90 | 8.33 |
Class R5 | 1,000.00 | 1,255.80 | 6.66 |
Class 1 | 1,000.00 | 1,256.40 | 6.04 |
Class NAV | 1,000.00 | 1,256.50 | 5.76 |
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 February 28, 2011, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/internationalcorex5x1.jpg)
Annual report | International Core 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 September 1, 2010, with the same investment held until February 28, 2011. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,016.80 | $8.10 |
Class B | 1,000.00 | 1,013.40 | 11.48 |
Class C | 1,000.00 | 1,013.40 | 11.48 |
Class I | 1,000.00 | 1,019.10 | 5.71 |
Class R1 | 1,000.00 | 1,015.40 | 9.44 |
Class R3 | 1,000.00 | 1,015.90 | 8.95 |
Class R4 | 1,000.00 | 1,017.40 | 7.45 |
Class R5 | 1,000.00 | 1,018.90 | 5.96 |
Class 1 | 1,000.00 | 1,019.40 | 5.41 |
Class NAV | 1,000.00 | 1,019.70 | 5.16 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.62%, 2.30%, 2.30%, 1.14%, 1.89%, 1.79%, 1.49%, 1.19%, 1.08% and 1.03% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5, Class 1 and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | International Core Fund | Annual report |
Portfolio summary
Top 10 Holdings1 | ||||
GlaxoSmithKline PLC | 2.8% | Novartis AG | 2.0% | |
Total SA | 2.6% | Royal Dutch Shell PLC, A shares | 1.6% | |
Sanofi-Aventis SA | 2.6% | Novo Nordisk A/S | 1.4% | |
Eni SpA | 2.3% | Enel SpA | 1.4% | |
AstraZeneca PLC | 2.3% | Vodafone Group PLC | 1.3% | |
Sector Composition2,3 | ||||
Consumer Discretionary | 16% | Telecommunication Services | 7% | |
Health Care | 15% | Consumer Staples | 6% | |
Energy | 12% | Utilities | 5% | |
Financials | 12% | Information Technology | 4% | |
Industrials | 11% | Short-Term Investments & Other | 4% | |
Materials | 8% | |||
1 As a percentage of net assets on 2-28-11. Cash and cash equivalents are not included in Top 10 Holdings or Top Five Countries.
2 As a percentage of net assets on 2-28-11.
3 International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. 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.
Annual report | International Core Fund | 11 |
Fund’s investments
As of 2-28-11
Shares | Value | |
Common Stocks 94.16% | $1,508,777,873 | |
(Cost $1,352,542,643) | ||
Australia 4.26% | 68,269,545 | |
BHP Billiton, Ltd. | 74,944 | 3,540,700 |
BlueScope Steel, Ltd. | 1,094,561 | 2,334,544 |
Commonwealth Bank of Australia | 158,461 | 8,604,330 |
Dexus Property Group | 2,226,934 | 1,945,125 |
General Property Trust, Ltd. | 781,431 | 2,473,574 |
Goodman Fielder, Ltd. | 1,035,757 | 1,318,405 |
Goodman Group | 3,608,277 | 2,583,532 |
ING Industrial Fund | 1,895,397 | 1,023,682 |
ING Office Fund | 3,274,224 | 2,040,700 |
Macquarie Office Trust | 667,561 | 2,181,058 |
Mirvac Group, Ltd. | 1,274,507 | 1,692,657 |
Newcrest Mining, Ltd. | 40,437 | 1,568,012 |
Pacific Brands, Ltd. | 994,344 | 904,728 |
Qantas Airways, Ltd. (I) | 504,911 | 1,204,523 |
QBE Insurance Group, Ltd. (L) | 100,802 | 1,870,771 |
Rio Tinto, Ltd. | 50,195 | 4,381,043 |
Stockland | 907,935 | 3,521,933 |
Suncorp-Metway, Ltd. | 190,707 | 1,644,520 |
TABCORP Holdings, Ltd. | 329,604 | 2,559,564 |
Telstra Corp., Ltd. | 3,019,803 | 8,599,592 |
Wesfarmers, Ltd. | 131,945 | 4,450,513 |
Westfield Group | 96,810 | 964,389 |
Woodside Petroleum, Ltd. (L) | 104,191 | 4,539,501 |
Woolworths, Ltd. | 84,633 | 2,322,149 |
Austria 0.55% | 8,825,927 | |
Erste Group Bank AG | 18,543 | 979,233 |
Immofinanz AG (I)(L) | 395,708 | 1,748,363 |
OMV AG | 98,452 | 4,190,394 |
Raiffeisen International Bank Holding AG (L) | 31,763 | 1,907,937 |
Belgium 0.81% | 13,004,057 | |
Ageas | 556,722 | 1,766,137 |
Belgacom SA | 80,430 | 3,014,296 |
Colruyt SA | 45,245 | 2,273,638 |
Delhaize Group SA | 25,808 | 1,995,839 |
Dexia SA (I) | 315,923 | 1,380,206 |
12 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Belgium (continued) | ||
Mobistar SA | 19,088 | $1,218,884 |
Umicore | 26,854 | 1,355,057 |
Bermuda 0.10% | 1,551,515 | |
Golden Ocean Group, Ltd. (L) | 509,800 | 657,538 |
Lancashire Holdings, Ltd. | 91,502 | 893,977 |
Canada 2.55% | 40,858,275 | |
Barrick Gold Corp. (L) | 100,100 | 5,283,442 |
BCE, Inc. (L) | 82,300 | 3,051,254 |
Canadian Pacific Railway, Ltd. | 12,400 | 841,600 |
EnCana Corp. | 320,500 | 10,417,776 |
IGM Financial, Inc. | 38,700 | 1,880,130 |
Magna International, Inc. | 87,000 | 4,284,854 |
Methanex Corp. | 44,600 | 1,297,763 |
Metro, Inc. | 33,900 | 1,535,279 |
National Bank of Canada | 23,065 | 1,777,207 |
Research In Motion, Ltd. (I) | 43,400 | 2,865,637 |
RONA, Inc. | 82,400 | 1,255,231 |
Sun Life Financial, Inc. | 103,300 | 3,431,106 |
Teck Resources, Ltd., Class B | 32,600 | 1,803,561 |
Yellow Media, Inc. (L) | 197,700 | 1,133,435 |
Denmark 1.63% | 26,207,386 | |
Carlsberg A/S | 22,147 | 2,354,784 |
D.S. Norden A/S | 13,905 | 492,713 |
Danske Bank A/S (I) | 58,605 | 1,374,621 |
Novo Nordisk A/S | 174,608 | 21,985,268 |
Finland 1.09% | 17,537,421 | |
Metra Oyj | 19,632 | 1,508,772 |
Metso Oyj | 58,864 | 3,041,851 |
Neste Oil Oyj (L) | 83,552 | 1,482,934 |
Nokia AB Oyj | 361,797 | 3,118,809 |
Sampo Oyj, A Shares | 39,726 | 1,232,335 |
Stora Enso Oyj, Series R | 281,980 | 3,182,498 |
UPM-Kymmene Oyj | 182,747 | 3,634,185 |
YIT Oyj | 11,664 | 336,037 |
France 10.54% | 168,902,508 | |
Arkema | 24,632 | 1,802,173 |
BNP Paribas | 155,436 | 12,149,062 |
Casino Guichard Perrachon SA | 14,172 | 1,387,610 |
Cie de Saint-Gobain SA | 25,704 | 1,536,196 |
Dassault Systemes SA | 24,048 | 1,841,209 |
Essilor International SA | 25,100 | 1,792,509 |
Eutelsat Communications | 16,060 | 640,655 |
France Telecom SA | 173,048 | 3,834,704 |
Hermes International SA | 15,810 | 3,442,166 |
L’Oreal SA | 28,066 | 3,263,462 |
Lagardere S.C.A. | 65,191 | 2,934,087 |
LVMH Moet Hennessy Louis Vuitton SA | 64,577 | 10,179,025 |
See notes to financial statements | Annual report | International Core Fund | 13 |
Shares | Value | |
France (continued) | ||
Nexans SA | 7,234 | $654,786 |
PagesJaunes Groupe SA (L) | 91,685 | 894,193 |
Peugeot SA (I) | 30,085 | 1,205,279 |
PPR | 17,043 | 2,587,328 |
Renault SA (I) | 59,891 | 3,672,708 |
Rhodia SA | 137,543 | 3,967,307 |
Sanofi-Aventis SA | 604,849 | 41,753,681 |
Schneider Electric SA | 26,581 | 4,396,499 |
Societe Generale | 88,551 | 6,233,915 |
Technip SA | 5,386 | 531,581 |
Total SA | 688,682 | 42,254,232 |
Valeo SA (I) | 47,654 | 2,967,404 |
Vivendi SA | 361,054 | 10,290,579 |
Wendel | 26,070 | 2,690,158 |
Germany 6.30% | 101,002,135 | |
Adidas AG | 15,142 | 971,609 |
Aixtron AG (L) | 22,379 | 921,710 |
BASF SE | 92,890 | 7,723,923 |
Bayerische Motoren Werke (BMW) AG | 108,955 | 8,836,470 |
Bilfinger Berger AG | 20,564 | 1,723,799 |
Daimler AG (I) | 225,895 | 15,911,032 |
Deutsche Lufthansa AG (I) | 126,374 | 2,583,303 |
Deutsche Post AG | 42,756 | 784,115 |
Dialog Semiconductor PLC (I) | 22,032 | 450,048 |
E.ON AG | 454,823 | 14,930,404 |
Fresenius AG | 8,411 | 766,968 |
Heidelberger Druckmaschinen AG (I) | 41,808 | 204,641 |
Infineon Technologies AG | 590,881 | 6,463,088 |
Kloeckner & Company SE (I) | 67,574 | 2,198,720 |
Lanxess AG | 75,209 | 5,597,232 |
Leoni AG (I) | 23,361 | 978,382 |
MAN AG | 35,149 | 4,462,885 |
MTU Aero Engines Holding AG | 36,539 | 2,436,102 |
Norddeutsche Affinerie AG (L) | 44,282 | 2,356,591 |
Puma AG | 4,537 | 1,349,174 |
RWE AG | 19,638 | 1,325,334 |
Salzgitter AG | 31,388 | 2,605,572 |
SAP AG | 117,305 | 7,077,480 |
Siemens AG | 13,133 | 1,768,333 |
Software AG | 14,302 | 2,308,079 |
Suedzucker AG | 62,829 | 1,725,860 |
Symrise AG | 42,181 | 1,107,153 |
Volkswagen AG | 9,442 | 1,434,128 |
Greece 0.47% | 7,484,844 | |
Alpha Bank A.E. (I) | 227,616 | 1,517,642 |
National Bank of Greece SA (I) | 239,371 | 2,241,372 |
OPAP SA | 143,654 | 2,999,867 |
Public Power Corp. SA | 46,958 | 725,963 |
14 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Hong Kong 1.51% | $24,272,304 | |
Cathay Pacific Airways, Ltd. | 605,000 | 1,414,337 |
CLP Holdings, Ltd. | 655,699 | 5,356,280 |
Esprit Holdings, Ltd. | 458,995 | 2,259,579 |
Hong Kong & China Gas Company, Ltd. | 713,130 | 1,607,017 |
Hong Kong Electric Holdings, Ltd. | 607,854 | 3,974,173 |
Hutchison Whampoa, Ltd. | 332,000 | 3,928,499 |
Noble Group, Ltd. | 253,727 | 409,790 |
Pacific Basin Shipping, Ltd. | 2,371,000 | 1,386,158 |
Swire Pacific, Ltd., Class A | 162,000 | 2,271,764 |
Yue Yuen Industrial Holdings, Ltd. | 526,718 | 1,664,707 |
Ireland 0.98% | 15,729,846 | |
C&C Group PLC | 257,317 | 1,255,313 |
CRH PLC | 250,827 | 5,800,980 |
DCC PLC | 62,315 | 1,999,262 |
Experian PLC | 74,653 | 946,475 |
Kerry Group PLC | 76,353 | 2,774,705 |
Paddy Power PLC | 23,715 | 966,233 |
Shire PLC | 70,175 | 1,986,878 |
Israel 0.29% | 4,667,196 | |
Bezek Israeli Telecommunications Corp., Ltd. | 647,541 | 1,762,314 |
Israel Chemicals, Ltd. | 104,982 | 1,745,324 |
Partner Communications Company, Ltd. | 62,197 | 1,159,558 |
Italy 5.45% | 87,374,334 | |
BGP Holdings PLC (I) | 2,714,128 | 4 |
Bulgari SpA | 51,892 | 549,827 |
Enel SpA | 3,629,517 | 21,625,884 |
Eni SpA | 1,535,795 | 37,478,044 |
Fiat SpA | 157,084 | 1,460,449 |
Finmeccanica SpA | 41,892 | 524,307 |
Fondiaria-Sai SpA (L) | 159,263 | 1,500,138 |
Italcementi SpA — RSP | 38,152 | 193,569 |
Mediaset SpA | 205,570 | 1,321,467 |
Milano Assicurazioni SpA | 129,493 | 215,277 |
Parmalat SpA | 3 | 9 |
Recordati SpA | 92,425 | 863,610 |
Saipem SpA | 80,675 | 4,079,703 |
Snam Rete Gas SpA | 485,884 | 2,657,732 |
Telecom Italia SpA | 2,035,184 | 3,178,721 |
Telecom Italia RSP | 3,983,387 | 5,270,546 |
Terna Rete Elettrica Nazionale SpA | 419,339 | 1,933,781 |
UniCredit Italiano SpA | 1,756,898 | 4,521,266 |
Japan 23.23% | 372,156,580 | |
Advance Residence Investment Corp. | 705 | 1,467,219 |
AEON Company, Ltd. (L) | 175,300 | 2,212,280 |
AEON Credit Service Company, Ltd. | 115,200 | 1,758,776 |
Aiful Corp. (I)(L) | 418,000 | 886,032 |
Aisin Seiki Company, Ltd. | 36,300 | 1,386,965 |
See notes to financial statements | Annual report | International Core Fund | 15 |
Shares | Value | |
Japan (continued) | ||
All Nippon Airways Company, Ltd. (I) | 342,000 | $1,236,032 |
Alps Electric Company, Ltd. | 298,946 | 4,024,974 |
Anritsu Corp. (L) | 120,000 | 1,126,033 |
Asahi Diamond Industrial Company, Ltd. | 71,000 | 1,377,839 |
Asahi Kasei Corp. | 244,000 | 1,687,459 |
Astellas Pharma, Inc. | 170,900 | 6,711,641 |
Bank of Yokohama, Ltd. | 182,000 | 982,296 |
Canon, Inc. | 64,500 | 3,119,516 |
Circle K Sunkus Company, Ltd. | 32,600 | 551,066 |
Cosmo Oil Company, Ltd. | 434,000 | 1,575,135 |
CyberAgent, Inc. | 746 | 2,394,392 |
Daiei, Inc. (I)(L) | 123,050 | 501,297 |
Daikyo, Inc. (I)(L) | 829,000 | 1,611,827 |
Dainippon Ink & Chemicals, Inc. | 298,000 | 792,817 |
Dainippon Screen Manufacturing Company, Ltd. (I) | 446,000 | 4,326,764 |
Daito Trust Construction Company, Ltd. | 100,000 | 8,195,421 |
Dena Company, Ltd. | 87,400 | 3,374,286 |
Denki Kagaku Kogyo Kabushiki Kaisha | 246,000 | 1,321,920 |
Don Quijote Company, Ltd. (L) | 56,800 | 1,979,839 |
Eisai Company, Ltd. (L) | 61,780 | 2,311,326 |
Electric Power Development Company, Ltd. | 36,200 | 1,142,967 |
Fanuc, Ltd. | 67,400 | 10,491,252 |
Fast Retailing Company, Ltd. | 21,300 | 3,342,884 |
Fuji Electric Holdings Company, Ltd. | 304,000 | 1,030,080 |
Fuji Heavy Industries, Ltd. | 425,116 | 3,663,432 |
Fuji Oil Company, Ltd. | 48,500 | 694,393 |
Gunze, Ltd. | 178,000 | 766,160 |
Hanwa Company, Ltd. | 331,000 | 1,542,877 |
Haseko Corp. (I) | 1,737,000 | 1,620,600 |
Hikari Tsushin, Inc. | 31,000 | 757,756 |
Hitachi, Ltd. (L) | 1,487,000 | 9,027,456 |
Honda Motor Company, Ltd. | 246,412 | 10,743,854 |
Inpex Corp. | 219 | 1,539,988 |
Isuzu Motors, Ltd. | 864,000 | 3,893,324 |
Itochu Corp. | 387,000 | 4,019,691 |
JFE Holdings, Inc. | 68,700 | 2,170,279 |
JX Holdings, Inc. | 1,794,300 | 12,617,398 |
K’s Holding Corp. | 80,200 | 2,708,615 |
Kajima Corp. | 952,000 | 2,550,150 |
Kakaku.com, Inc. | 236 | 1,380,209 |
Kao Corp. | 207,850 | 5,604,440 |
Kawasaki Kisen Kaisha, Ltd. | 684,000 | 2,987,963 |
KDDI Corp. | 1,106 | 7,179,628 |
Komatsu, Ltd. | 186,500 | 5,713,158 |
Konami Corp. | 52,923 | 1,125,871 |
Lawson, Inc. | 25,100 | 1,236,560 |
Leopalace21 Corp. (I)(L) | 390,200 | 661,247 |
Makino Milling Machine Company, Ltd. (I) | 129,000 | 1,212,345 |
16 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Japan (continued) | ||
Marubeni Corp. | 587,824 | $4,510,375 |
Mazda Motor Corp. | 1,151,000 | 2,968,280 |
Mitsubishi Chemical Holdings Corp. | 495,000 | 3,625,249 |
Mitsubishi Corp. | 68,595 | 1,903,860 |
Mitsubishi Electric Corp. | 320,000 | 3,793,949 |
Mitsubishi UFJ Lease & Finance Company, Ltd. | 44,510 | 1,978,926 |
Mitsui Mining & Smelting Company, Ltd. | 507,000 | 2,012,948 |
Mitsui O.S.K. Lines, Ltd. | 469,000 | 3,114,032 |
Mizuho Financial Group, Inc. | 3,090,300 | 6,371,526 |
Murata Manufacturing Company, Ltd. | 10,700 | 798,366 |
Net One Systems Company, Ltd. | 375 | 602,809 |
Nintendo Company, Ltd. | 8,700 | 2,554,645 |
Nippon Light Metal Company, Ltd. (I) | 972,000 | 2,094,730 |
Nippon Steel Corp. | 555,000 | 2,017,494 |
Nippon Telegraph & Telephone Corp. | 199,600 | 9,763,131 |
Nippon Yakin Kogyo Company, Ltd. (I)(L) | 217,500 | 617,212 |
Nippon Yusen Kabushiki Kaisha | 826,000 | 3,646,163 |
Nissan Motor Company, Ltd. | 841,700 | 8,632,381 |
Nisshinbo Holdings, Inc. | 88,000 | 965,463 |
Nitori Company, Ltd. | 24,250 | 2,147,350 |
Nitto Denko Corp. | 61,500 | 3,717,506 |
NSK, Ltd. | 160,000 | 1,529,262 |
NTT DoCoMo, Inc. | 5,208 | 9,787,156 |
Obayashi Corp. | 358,000 | 1,606,062 |
OKUMA Corp. (I) | 133,000 | 1,251,599 |
Omron Corp. | 47,500 | 1,321,575 |
Oriental Land Company, Ltd. | 15,400 | 1,541,506 |
ORIX Corp. (L) | 63,390 | 7,121,547 |
Osaka Gas Company, Ltd. | 895,120 | 3,405,095 |
Pacific Metals Company, Ltd. | 48,000 | 454,039 |
Pioneer Corp. (I) | 512,200 | 2,758,919 |
Point, Inc. | 38,340 | 1,839,762 |
Resona Holdings, Inc. | 602,400 | 3,290,433 |
Ricoh Company, Ltd. | 144,000 | 1,905,683 |
Round One Corp. | 219,700 | 1,441,371 |
Ryohin Keikaku Company, Ltd. (L) | 30,200 | 1,440,501 |
Sankyo Company, Ltd. | 50,000 | 2,836,003 |
Sawai Pharmaceutical Company, Ltd. (L) | 11,500 | 1,078,640 |
Secom Company, Ltd. | 42,000 | 2,118,990 |
SEGA SAMMMY HOLDINGS, Inc. | 107,600 | 2,453,388 |
Seven & I Holdings Company, Ltd. | 144,100 | 4,020,355 |
Shimamura Company, Ltd. | 11,700 | 1,131,702 |
Showa Shell Sekiyu KK | 119,300 | 1,081,440 |
Softbank Corp. | 126,600 | 5,210,733 |
Sojitz Holdings Corp. | 1,416,100 | 3,192,261 |
Sumitomo Corp. | 603,000 | 8,948,703 |
Sumitomo Heavy Industries, Ltd. | 184,000 | 1,294,623 |
Taiheiyo Cement Corp. (I) | 1,950,000 | 2,905,708 |
See notes to financial statements | Annual report | International Core Fund | 17 |
Shares | Value | |
Japan (continued) | ||
Taisei Corp. | 962,000 | $2,276,190 |
Taisho Pharmaceuticals Company, Ltd. | 46,790 | 1,024,127 |
Takeda Pharmaceutical Company, Ltd. | 415,989 | 20,699,494 |
Takefuji Corp. | 83,020 | 1,015 |
The Sumitomo Trust & Banking Company, Ltd. | 603,841 | 3,844,728 |
Toho Zinc Company, Ltd. | 154,000 | 881,967 |
Tokyo Gas Company, Ltd. | 304,397 | 1,359,637 |
Tokyo Steel Manufacturing Company, Ltd. | 133,300 | 1,487,549 |
Tokyo Tatemono Company, Ltd. | 462,000 | 2,177,815 |
TonenGeneral Sekiyu KK | 124,133 | 1,463,702 |
Tosoh Corp. | 370,000 | 1,326,336 |
Toyota Motor Corp. | 275,400 | 12,847,898 |
Toyota Tsusho Corp. | 210,400 | 3,998,342 |
Tsugami Corp. (L) | 96,000 | 719,021 |
Unicharm Corp. | 38,800 | 1,502,453 |
UNY Company, Ltd. | 197,500 | 1,971,509 |
USS Company, Ltd. | 15,240 | 1,233,788 |
Yahoo! Japan Corp. | 3,295 | 1,241,754 |
Yamada Denki Company, Ltd. | 54,940 | 4,194,380 |
Yamaha Motor Company, Ltd. (I) | 98,200 | 1,741,463 |
Zeon Corp. | 295,000 | 3,022,232 |
Netherlands 1.81% | 28,967,827 | |
CSM | 40,017 | 1,422,540 |
Heineken NV | 76,367 | 3,938,276 |
ING Groep NV (I) | 1,316,992 | 16,515,747 |
Koninklijke BAM Groep NV | 310,529 | 1,996,554 |
Koninklijke Boskalis Westinster NV | 29,116 | 1,513,645 |
Koninklijke DSM NV | 29,533 | 1,735,923 |
Koninklijke Philips Electronics NV | 1 | 33 |
Koninklijke Vopak NV | 16,044 | 776,569 |
Reed Elsevier NV | 1 | 13 |
Wereldhave NV | 10,529 | 1,068,527 |
New Zealand 0.32% | 5,097,111 | |
Fletcher Building, Ltd. | 309,172 | 2,046,874 |
Telecom Corp. of New Zealand, Ltd. | 1,939,940 | 3,050,237 |
Norway 0.17% | 2,681,534 | |
DnB NOR ASA | 88,393 | 1,367,176 |
Yara International ASA | 24,800 | 1,314,358 |
Portugal 0.02% | 259,199 | |
Jeronimo Martins SGPS SA | 16,167 | 259,199 |
Singapore 2.20% | 35,185,832 | |
CapitaCommercial Trust | 1,564,000 | 1,700,697 |
Cosco Corp. Singapore, Ltd. | 522,000 | 810,479 |
Ezra Holdings, Ltd. | 590,000 | 726,833 |
Genting Singapore PLC (I) | 2,360,000 | 3,563,980 |
Golden Agri-Resources, Ltd. | 8,913,000 | 4,592,886 |
Jaya Holdings, Ltd. (I) | 811,000 | 354,170 |
18 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Singapore (continued) | ||
Midas Holdings, Ltd. | 590,000 | $345,067 |
Neptune Orient Lines, Ltd. (I) | 1,444,854 | 2,334,011 |
Oversea-Chinese Banking Corp., Ltd. | 367,000 | 2,665,782 |
SembCorp Marine, Ltd. | 912,573 | 3,843,638 |
Singapore Exchange, Ltd. | 419,000 | 2,604,766 |
Singapore Press Holdings, Ltd. | 825,000 | 2,518,015 |
Singapore Telecommunications, Ltd. | 2,104,350 | 4,929,224 |
Suntec Real Estate Investment Trust | 1,424,000 | 1,658,260 |
Swiber Holdings, Ltd. (I) | 531,000 | 329,018 |
Venture Corp., Ltd. | 119,000 | 886,486 |
Yangzijiang Shipbuilding Holdings, Ltd. | 936,000 | 1,322,520 |
Spain 1.85% | 29,606,592 | |
Banco Popular Espanol SA | 440,427 | 2,664,047 |
Banco Santander SA | 484,954 | 5,968,815 |
Gas Natural SDG SA | 90,727 | 1,549,703 |
Iberdrola SA | 344,455 | 3,004,930 |
Inditex SA | 44,771 | 3,239,981 |
Repsol YPF SA | 273,172 | 9,163,464 |
Telefonica SA | 157,887 | 4,015,652 |
Sweden 3.27% | 52,442,133 | |
Alfa Laval AB | 94,273 | 1,927,327 |
Assa Abloy AB, Series B | 59,188 | 1,656,487 |
Atlas Copco AB, Series A | 195,190 | 4,901,632 |
Boliden AB | 180,420 | 3,840,227 |
Hennes & Mauritz AB, B Shares | 227,472 | 7,423,122 |
Modern Times Group AB, B Shares | 30,584 | 2,048,377 |
NCC AB | 90,165 | 2,356,529 |
Sandvik AB | 243,614 | 4,670,593 |
Scania AB, Series B | 61,414 | 1,368,448 |
Skandinaviska Enskilda Banken AB, Series A | 201,250 | 1,831,284 |
SKF AB, B Shares | 99,899 | 2,787,176 |
Swedbank AB, Class A (I) | 454,864 | 8,013,132 |
Trelleborg AB, Series B | 236,195 | 2,362,209 |
Volvo AB, Series B (I) | 419,431 | 7,255,590 |
Switzerland 5.54% | 88,726,877 | |
Clariant AG (I) | 137,661 | 2,269,467 |
Compagnie Financiere Richemont SA, BR Shares | 176,638 | 10,127,754 |
Nestle SA | 346,096 | 19,590,797 |
Novartis AG | 564,164 | 31,683,037 |
Roche Holdings AG | 83,373 | 12,570,736 |
Swisscom AG | 4,022 | 1,776,987 |
Synthes AG | 32,618 | 4,475,532 |
The Swatch Group AG, BR Shares | 14,619 | 6,232,567 |
United Kingdom 19.22% | 307,966,895 | |
3i Group PLC | 335,850 | 1,704,797 |
Acergy SA | 86,216 | 2,217,664 |
Aggreko PLC | 84,000 | 1,975,600 |
See notes to financial statements | Annual report | International Core Fund | 19 |
Shares | Value | |
United Kingdom (continued) | ||
Amlin PLC | 226,458 | $1,427,374 |
Antofagasta PLC | 74,448 | 1,701,764 |
ARM Holdings PLC | 649,429 | 6,537,211 |
Asos PLC (I)(L) | 39,270 | 1,202,578 |
Associated British Foods PLC | 84,717 | 1,330,828 |
AstraZeneca PLC | 741,996 | 36,179,443 |
Barclays PLC | 1,528,173 | 7,935,299 |
BG Group PLC | 379,304 | 9,253,860 |
BHP Billiton PLC | 114,710 | 4,544,658 |
BP PLC | 933,714 | 7,524,459 |
British American Tobacco PLC | 88,822 | 3,554,549 |
BT Group PLC | 3,150,507 | 9,391,101 |
Burberry Group PLC | 297,824 | 5,803,942 |
Capita Group PLC | 134,818 | 1,589,897 |
Centrica PLC | 649,448 | 3,595,023 |
Cobham PLC | 507,987 | 1,861,988 |
Compass Group PLC | 294,452 | 2,648,905 |
Cookson Group PLC (I) | 43,396 | 461,086 |
Daily Mail & General Trust | 63,676 | 581,595 |
Diageo PLC | 226,690 | 4,432,120 |
Dixons Retail PLC (I) | 1,372,811 | 432,400 |
Drax Group PLC | 364,522 | 2,339,162 |
Electrocomponents PLC | 106,447 | 479,138 |
Eurasian Natural Resources Corp. | 91,329 | 1,431,265 |
GlaxoSmithKline PLC | 2,353,157 | 45,235,655 |
Home Retail Group PLC | 756,197 | 2,713,422 |
HSBC Holdings PLC | 171,097 | 1,883,100 |
ICAP PLC | 102,434 | 867,018 |
IMI PLC | 174,952 | 2,527,466 |
Kazakhmys PLC | 75,035 | 1,760,349 |
Ladbrokes PLC | 13,856 | 30,540 |
Lloyds Banking Group PLC (I) | 4,787,487 | 4,831,358 |
National Express Group PLC (I) | 93,384 | 376,225 |
Next PLC | 128,364 | 4,128,836 |
Petrofac, Ltd. | 67,161 | 1,520,623 |
Punch Taverns PLC (I) | 634,860 | 687,034 |
Reckitt Benckiser Group PLC | 90,566 | 4,667,489 |
Reed Elsevier PLC | 99,729 | 890,527 |
Rio Tinto PLC | 193,557 | 13,653,015 |
Royal Dutch Shell PLC, A Shares | 719,028 | 25,882,094 |
Royal Dutch Shell PLC, B Shares | 446,919 | 15,969,896 |
Sage Group PLC | 374,218 | 1,729,082 |
Scottish & Southern Energy PLC | 159,402 | 3,210,205 |
Smith & Nephew PLC | 216,744 | 2,510,083 |
Standard Chartered PLC | 200,534 | 5,302,171 |
Taylor Woodrow PLC (I) | 1,835,317 | 1,179,436 |
Tesco PLC | 256,723 | 1,688,412 |
The Weir Group PLC | 106,169 | 2,956,948 |
20 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |||
United Kingdom (continued) | ||||
Travis Perkins PLC | 138,518 | $2,239,950 | ||
Trinity Mirror PLC (I) | 140,795 | 185,401 | ||
Unilever PLC | 1 | 30 | ||
United Utilities Group PLC | 101,648 | 979,204 | ||
Vodafone Group PLC | 7,600,234 | 21,565,727 | ||
William Hill PLC | 423,222 | 1,321,155 | ||
Wolseley PLC (I) | 164,064 | 5,709,168 | ||
WPP PLC | 168,025 | 2,311,523 | ||
Xstrata PLC | 220,682 | 5,036,980 | ||
Yell Group PLC (I)(L) | 2,421,736 | 279,067 | ||
Shares | Value | |||
Preferred Securities 1.06% | $17,006,279 | |||
(Cost $12,776,808) | ||||
Germany 1.06% | 17,006,279 | |||
Bayerische Motoren Werke AG | 11,115 | 598,903 | ||
Henkel AG & Company KGaA | 19,368 | 1,167,467 | ||
Porsche Automobil Holding SE | 40,879 | 3,238,289 | ||
ProSiebenSat.1 Media AG | 94,563 | 3,058,860 | ||
Volkswagen AG | 52,736 | 8,942,760 | ||
Shares | Value | |||
Rights 0.00% | $1 | |||
(Cost $0) | ||||
Austria 0.00% | 1 | |||
Immofinanz AG (Expiration Date: 3-2-11, Strike Price: EUR 4.12) (I)(L) | 395,708 | 1 | ||
Shares | Value | |||
Securities Lending Collateral 2.61% | $41,799,045 | |||
(Cost $41,797,486) | ||||
John Hancock Collateral Investment Trust (W) | 0.2855% (Y) | 4,176,814 | 41,799,045 | |
Maturity | ||||
date | Par value | Value | ||
Short-Term Investments 3.68% | $58,852,163 | |||
(Cost $58,852,092) | ||||
U.S. Government 0.21% | 3,349,920 | |||
U.S. Treasury Bills | 0.1800% | 3-10-11 | $3,350,000 | 3,349,920 |
Shares | Value | |||
Short-Term Securities 3.47% | 55,502,243 | |||
State Street Institutional Treasury Money | ||||
Market Fund | 0.0453% (Y) | 55,502,243 | 55,502,243 | |
Total investments (Cost $1,465,969,029)† 101.51% | $1,626,435,361 | |||
Other assets and liabilities, net (1.51%) | ($24,121,312) | |||
Total net assets 100.00% | $1,602,314,049 | |||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
See notes to financial statements | Annual report | International Core Fund | 21 |
Notes to Schedule of Investments
Currency abbreviation | |
EUR | Euro |
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 2-28-11.
(W)Investment is an affiliate of the Fund, the adviser and/or subadviser. Also, it represents the investment of securities lending collateral received.
(Y) The rate shown is the annualized seven-day yield as of 2-28-11.
† At 2-28-11, the aggregate cost of investment securities for federal income tax purposes was $1,488,147,472. Net unrealized appreciation aggregated $138,287,889, of which $204,457,955 related to appreciated investment securities and $66,170,066 related to depreciated investment securities.
The Fund had the following sector composition as a percentage of net assets on 2-28-11:
Consumer Discretionary | 16% | |||
Health Care | 15% | |||
Energy | 12% | |||
Financials | 12% | |||
Industrials | 11% | |||
Materials | 8% | |||
Telecommunication Services | 7% | |||
Consumer Staples | 6% | |||
Utilities | 5% | |||
Information Technology | 4% | |||
Short-Term Investments & Other | 4% |
22 | International Core 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
Financial statements
Statement of assets and liabilities 2-28-11
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 public offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $1,424,171,543) | |
including $39,580,580 of securities loaned (Note 2) | $1,584,636,316 |
Investments in affiliated issuers, at value (Cost $41,797,486) (Note 2) | 41,799,045 |
Total investments, at value (Cost $1,465,969,029) | 1,626,435,361 |
Foreign currency, at value (Cost $530,322) | 534,886 |
Cash held at broker for futures contracts | 8,102,405 |
Receivable for investments sold | 1,555,702 |
Receivable for forward foreign currency exchange contracts (Note 3) | 2,077,843 |
Receivable for fund shares sold | 4,166,757 |
Dividends and interest receivable | 6,300,085 |
Receivable for securities lending income | 36,357 |
Receivable for futures variation margin | 232,630 |
Other receivables and prepaid expenses | 115,371 |
Total assets | 1,649,557,397 |
Liabilities | |
Payable for investments purchased | 753 |
Payable for forward foreign currency exchange contracts (Note 3) | 2,922,469 |
Payable for fund shares repurchased | 1,577,835 |
Payable upon return of securities loaned (Note 2) | 41,764,997 |
Payable to affiliates | |
Accounting and legal services fees | 26,383 |
Transfer agent fees | 124,477 |
Distribution and service fees | 110 |
Trustees’ fees | 33,952 |
Investment management fees | 37,909 |
Other liabilities and accrued expenses | 754,463 |
Total liabilities | 47,243,348 |
Net assets | |
Capital paid-in | $1,659,115,316 |
Undistributed net investment income | 2,757,635 |
Accumulated net realized loss on investments, futures contracts and | |
foreign currency transactions | (221,234,537) |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | 161,675,635 |
Net assets | $1,602,314,049 |
See notes to financial statements | Annual report | International Core Fund | 23 |
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 ($332,891,503 ÷ 10,791,010 shares) | $30.85 |
Class B ($5,455,296 ÷ 177,672 shares)1 | $30.70 |
Class C ($5,444,780 ÷ 177,302 shares)1 | $30.71 |
Class I ($290,609,070 ÷ 9,391,796 shares) | $30.94 |
Class R1 ($229,120 ÷ 7,446 shares) | $30.77 |
Class R3 ($33,154 ÷ 1,072 shares) | $30.942 |
Class R4 ($33,666 ÷ 1,088 shares) | $30.94 |
Class R5 ($68,651 ÷ 2,219 shares) | $30.94 |
Class 1 ($47,113,203 ÷ 1,520,089 shares) | $30.99 |
Class NAV ($920,435,606 ÷ 29,712,520 shares) | $30.98 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)3 | $32.47 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 Net assets and shares outstanding have been rounded for presentation purposes. The net asset value is as reported on 2-28-11.
3 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
24 | International Core 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 operations For the year ended 2-28-11
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 | |
Dividends | $40,798,496 |
Securities lending | 1,567,413 |
Interest | 46,538 |
Less foreign taxes withheld | (3,497,023) |
Total investment income | 38,915,424 |
Expenses | |
Investment management fees (Note 5) | 12,067,909 |
Distribution and service fees (Note 5) | 934,606 |
Accounting and legal services fees (Note 5) | 169,034 |
Transfer agent fees (Note 5) | 680,446 |
Trustees’ fees (Note 5) | 77,837 |
State registration fees (Note 5) | 119,689 |
Printing and postage (Note 5) | 238,359 |
Professional fees | 186,633 |
Custodian fees | 1,344,642 |
Registration and filing fees | 47,744 |
Other | 40,053 |
Total expenses | 15,906,952 |
Less expense reductions (Note 5) | (88,821) |
Net expenses | 15,818,131 |
Net investment income | 23,097,293 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 2,784,606 |
Investments in affiliated issuers | (22,286) |
Futures contracts (Note 3) | 584,787 |
Foreign currency transactions | 2,277,239 |
5,624,346 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 246,555,446 |
Investments in affiliated issuers | 945 |
Futures contracts (Note 3) | 3,767,544 |
Translation of assets and liabilities in foreign currencies | (513,652) |
249,810,283 | |
Net realized and unrealized gain | 255,434,629 |
Increase in net assets from operations | $278,531,922 |
See notes to financial statements | Annual report | International Core Fund | 25 |
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 | |||
2-28-11 | 2-28-10 | |||
Increase (decrease) in net assets | ||||
From operations | ||||
Net investment income | $23,097,293 | $17,429,122 | ||
Net realized gain (loss) | 5,624,346 | (138,521,721) | ||
Change in net unrealized appreciation (depreciation) | 249,810,283 | 420,053,420 | ||
Increase in net assets resulting from operations | 278,531,922 | 298,960,821 | ||
Distributions to shareholders | ||||
From net investment income | ||||
Class A | (3,147,377) | (3,861,204) | ||
Class B | (20,240) | (95,282) | ||
Class C | (19,160) | (73,557) | ||
Class I | (3,662,817) | (1,997,302) | ||
Class R1 | (1,465) | (2,466) | ||
Class R3 | (245) | (477) | ||
Class R4 | (330) | (554) | ||
Class R5 | (672) | (631) | ||
Class 1 | (671,339) | (1,080,309) | ||
Class NAV | (13,024,392) | (18,258,674) | ||
Total distributions | (20,548,037) | (25,370,456) | ||
From Fund share transactions (Note 6) | 179,570,655 | 188,583,389 | ||
Total increase | 437,554,540 | 462,173,754 | ||
Net assets | ||||
Beginning of year | 1,164,759,509 | 702,585,755 | ||
End of year | $1,602,314,049 | $1,164,759,509 | ||
Undistributed (Accumulated distributions in excess of) | ||||
net investment income | $2,757,635 | ($3,293,725) |
26 | International Core Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $25.74 | $18.43 | $39.06 | $43.30 | $36.26 |
Net investment income2 | 0.33 | 0.24 | 0.76 | 0.35 | 0.63 |
Net realized and unrealized gain (loss) on investments | 5.09 | 7.59 | (18.65) | (0.35) | 6.79 |
Total from investment operations | 5.42 | 7.83 | (17.89) | — | 7.42 |
Less distributions | |||||
From net investment income | (0.31) | (0.52) | (1.56) | (0.45) | — |
From net realized gain | — | — | (1.18) | (3.79) | (0.38) |
Total distributions | (0.31) | (0.52) | (2.74) | (4.24) | (0.38) |
Net asset value, end of year | $30.85 | $25.74 | $18.43 | $39.06 | $43.30 |
Total return (%)3 | 21.13 | 42.33 | (47.16) | (0.76) | 20.48 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $333 | $225 | $54 | $130 | $12 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.61 | 1.954 | 1.75 | 1.68 | 2.23 |
Expenses net of fee waivers | 1.60 | 1.664 | 1.75 | 1.65 | 1.40 |
Expenses net of fee waivers and credits | 1.60 | 1.624 | 1.70 | 1.65 | 1.40 |
Net investment income | 1.21 | 0.94 | 2.33 | 0.78 | 1.58 |
Portfolio turnover (%) | 39 | 44 | 54 | 505 | 37 |
1 Effective 6-12-06, shareholders of the former GMO International Disciplined Equity Fund (the Predecessor Fund) became owners of an equal number of full and fractional Class A shares of the John Hancock International Core Fund. Additionally, the accounting and performance history of the former GMO International Disciplined Equity Fund was redesignated as that of John Hancock International Core Fund Class A.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
5 Excludes merger activity.
See notes to financial statements | Annual report | International Core Fund | 27 |
CLASS B SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $25.62 | $18.36 | $38.80 | $43.08 | $35.92 |
Net investment income (loss)2 | 0.18 | 0.17 | 0.53 | —3 | (0.25) |
Net realized and unrealized gain (loss) on investments | 5.01 | 7.44 | (18.49) | (0.33) | 7.79 |
Total from investment operations | 5.19 | 7.61 | (17.96) | (0.33) | 7.54 |
Less distributions | |||||
From net investment income | (0.11) | (0.35) | (1.30) | (0.16) | — |
From net realized gain | — | — | (1.18) | (3.79) | (0.38) |
Total distributions | (0.11) | (0.35) | (2.48) | (3.95) | (0.38) |
Net asset value, end of year | $30.70 | $25.62 | $18.36 | $38.80 | $43.08 |
Total return (%)4 | 20.28 | 41.35 | (47.53) | (1.48) | 21.015 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $5 | $6 | $7 | $20 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.36 | 3.076 | 2.75 | 2.48 | 6.837 |
Expenses net of fee waivers | 2.30 | 2.366 | 2.63 | 2.41 | 2.397 |
Expenses net of fee waivers and credits | 2.30 | 2.336 | 2.40 | 2.40 | 2.397 |
Net investment income (loss) | 0.65 | 0.69 | 1.64 | —8 | (0.84)7 |
Portfolio turnover (%) | 39 | 44 | 54 | 509 | 37 |
1 The inception date for Class B shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Not annualized.
6 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
7 Annualized.
8 Less than 0.005%.
9 Excludes merger activity.
CLASS C SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $25.62 | $18.36 | $38.81 | $43.09 | $35.92 |
Net investment income (loss)2 | 0.17 | 0.15 | 0.55 | 0.13 | (0.24) |
Net realized and unrealized gain (loss) on investments | 5.03 | 7.46 | (18.52) | (0.46) | 7.79 |
Total from investment operations | 5.20 | 7.61 | (17.97) | (0.33) | 7.55 |
Less distributions | |||||
From net investment income | (0.11) | (0.35) | (1.30) | (0.16) | — |
From net realized gain | — | — | (1.18) | (3.79) | (0.38) |
Total distributions | (0.11) | (0.35) | (2.48) | (3.95) | (0.38) |
Net asset value, end of year | $30.71 | $25.62 | $18.36 | $38.81 | $43.09 |
Total return (%)3 | 20.32 | 41.35 | (47.55) | (1.48) | 21.044 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $5 | $5 | $4 | $15 | $4 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.47 | 2.695 | 2.59 | 2.49 | 3.726 |
Expenses net of fee waivers | 2.30 | 2.365 | 2.43 | 2.40 | 2.396 |
Expenses net of fee waivers and credits | 2.30 | 2.335 | 2.40 | 2.40 | 2.396 |
Net investment income (loss) | 0.62 | 0.60 | 1.69 | 0.28 | (0.79)6 |
Portfolio turnover (%) | 39 | 44 | 54 | 507 | 37 |
1 The inception date for Class C shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
6 Annualized.
7 Excludes merger activity.
28 | International Core Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, end of year | $25.80 | $18.45 | $39.20 | $43.43 | $35.92 |
Net investment income2 | 0.45 | 0.35 | 0.94 | 0.55 | 0.16 |
Net realized and unrealized gain (loss) on investments | 5.12 | 7.63 | (18.77) | (0.35) | 7.73 |
Total from investment operations | 5.57 | 7.98 | (17.83) | 0.20 | 7.89 |
Less distributions | |||||
From net investment income | (0.43) | (0.63) | (1.74) | (0.64) | — |
From net realized gain | — | — | (1.18) | (3.79) | (0.38) |
Total distributions | (0.43) | (0.63) | (2.92) | (4.43) | (0.38) |
Net asset value, end of year | $30.94 | $25.80 | $18.45 | $39.20 | $43.43 |
Total return (%)3 | 21.73 | 43.10 | (46.91) | (0.33) | 21.994 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $291 | $84 | $1 | $3 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.12 | 1.06 | 2.37 | 2.34 | 12.526 |
Expenses net of fee waivers | 1.12 | 1.06 | 1.18 | 1.18 | 1.206 |
Expenses net of fee waivers and credits | 1.12 | 1.06 | 1.18 | 1.18 | 1.206 |
Net investment income | 1.61 | 1.34 | 2.87 | 1.24 | 0.566 |
Portfolio turnover (%) | 39 | 44 | 54 | 507 | 37 |
1 The inception date for Class I shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Excludes merger activity.
CLASS R1 SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $25.67 | $18.36 | $38.94 | $43.19 | $35.92 |
Net investment income (loss)2 | 0.24 | 0.23 | 0.69 | 0.66 | (0.03) |
Net realized and unrealized gain (loss) on investments | 5.06 | 7.50 | (18.54) | (0.69) | 7.68 |
Total from investment operations | 5.30 | 7.73 | (17.85) | (0.03) | 7.65 |
Less distributions | |||||
From net investment income | (0.20) | (0.42) | (1.55) | (0.43) | — |
From net realized gain | — | — | (1.18) | (3.79) | (0.38) |
Total distributions | (0.20) | (0.42) | (2.73) | (4.22) | (0.38) |
Net asset value, end of year | $30.77 | $25.67 | $18.36 | $38.94 | $43.19 |
Total return (%)3 | 20.71 | 42.00 | (47.16) | (0.82) | 21.324 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | —5 | —5 | —5 | —5 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 6.88 | 8.856 | 15.16 | 13.85 | 20.407 |
Expenses net of fee waivers | 1.92 | 1.926 | 2.10 | 1.70 | 1.947 |
Expenses net of fee waivers and credits | 1.92 | 1.926 | 1.70 | 1.70 | 1.947 |
Net investment income (loss) | 0.90 | 0.92 | 2.21 | 1.48 | (0.10)7 |
Portfolio turnover (%) | 39 | 44 | 54 | 508 | 37 |
1 The inception date for Class R1 shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
7 Annualized.
8 Excludes merger activity.
See notes to financial statements | Annual report | International Core Fund | 29 |
CLASS R3 SHARES Period ended | 2-28-11 | 2-28-101 | |||
Per share operating performance | |||||
Net asset value, beginning of year | $25.80 | $23.33 | |||
Net investment income2 | 0.29 | 0.02 | |||
Net realized and unrealized gain on investments | 5.08 | 2.90 | |||
Total from investment operations | 5.37 | 2.92 | |||
Less distributions | |||||
From net investment income | (0.23) | (0.45) | |||
Net asset value, end of year | $30.94 | $25.80 | |||
Total return (%)3 | 20.87 | 12.404 | |||
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | —5 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 44.55 | 10.976 | |||
Expenses net of fee waivers | 1.83 | 1.916 | |||
Expenses net of fee waivers and credits | 1.83 | 1.916 | |||
Net investment income | 1.05 | 0.106 | |||
Portfolio turnover (%) | 39 | 44 |
1 The inception date for Class R3 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
CLASS R4 SHARES Period ended | 2-28-11 | 2-28-101 | |||
Per share operating performance | |||||
Net asset value, beginning of year | $25.80 | $23.33 | |||
Net investment income2 | 0.37 | 0.08 | |||
Net realized and unrealized gain on investments | 5.08 | 2.91 | |||
Total from investment operations | 5.45 | 2.99 | |||
Less distributions | |||||
From net investment income | (0.31) | (0.52) | |||
Net asset value, end of year | $30.94 | $25.80 | |||
Total return (%)3 | 21.21 | 12.694 | |||
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | —5 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 44.22 | 10.716 | |||
Expenses net of fee waivers | 1.53 | 1.616 | |||
Expenses net of fee waivers and credits | 1.53 | 1.616 | |||
Net investment loss | 1.34 | 0.406 | |||
Portfolio turnover (%) | 39 | 44 |
1 The inception date for Class R4 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
30 | International Core Fund | Annual report | See notes to financial statements |
CLASS R5 SHARES Period ended | 2-28-11 | 2-28-101 | |||
Per share operating performance | |||||
Net asset value, beginning of year | $25.79 | $23.33 | |||
Net investment income2 | 0.44 | 0.14 | |||
Net realized and unrealized gain on investments | 5.10 | 2.91 | |||
Total from investment operations | 5.54 | 3.05 | |||
Less distributions | |||||
From net investment income | (0.39) | (0.59) | |||
Net asset value, end of year | $30.94 | $25.79 | |||
Total return (%)3 | 21.59 | 12.954 | |||
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | —5 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 31.41 | 10.506 | |||
Expenses net of fee waivers | 1.22 | 1.316 | |||
Expenses net of fee waivers and credits | 1.22 | 1.316 | |||
Net investment income | 1.58 | 0.706 | |||
Portfolio turnover (%) | 39 | 44 |
1 The inception date for Class R5 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
CLASS 1 SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $25.84 | $18.48 | $39.22 | $43.43 | $40.56 |
Net investment income2 | 0.50 | 0.46 | 0.93 | 0.95 | 0.02 |
Net realized and unrealized gain (loss) on investments | 5.09 | 7.54 | (18.74) | (0.72) | 3.26 |
Total from investment operations | 5.59 | 8.00 | (17.81) | 0.23 | 3.28 |
Less distributions | |||||
From net investment income | (0.44) | (0.64) | (1.75) | (0.65) | (0.03) |
From net realized gain | — | — | (1.18) | (3.79) | (0.38) |
Total distributions | (0.44) | (0.64) | (2.93) | (4.44) | (0.41) |
Net asset value, end of year | $30.99 | $25.84 | $18.48 | $39.22 | $43.43 |
Total return (%)3 | 21.75 | 43.11 | (46.83) | (0.25) | 8.114 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $47 | $44 | $34 | $74 | $82 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.07 | 1.085 | 1.10 | 1.16 | 1.236 |
Expenses net of fee waivers | 1.07 | 1.075 | 1.10 | 1.14 | 1.176 |
Expenses net of all fee waivers and credits | 1.07 | 1.075 | 1.10 | 1.14 | 1.176 |
Net investment income | 1.83 | 1.83 | 2.88 | 2.09 | 0.166 |
Portfolio turnover (%) | 39 | 44 | 54 | 507 | 37 |
1 The inception date for Class 1 shares is 11-6-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
6 Annualized.
7 Excludes merger activity.
See notes to financial statements | Annual report | International Core Fund | 31 |
CLASS NAV SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $25.82 | $18.47 | $39.21 | $43.42 | $39.18 |
Net investment income2 | 0.51 | 0.49 | 0.99 | 0.95 | 0.08 |
Net realized and unrealized gain (loss) on investments | 5.10 | 7.51 | (18.78) | (0.70) | 4.58 |
Total from investment operations | 5.61 | 8.00 | (17.79) | 0.25 | 4.66 |
Less distributions | |||||
From net investment income | (0.45) | (0.65) | (1.77) | (0.67) | (0.04) |
From net realized gain | — | — | (1.18) | (3.79) | (0.38) |
Total distributions | (0.45) | (0.65) | (2.95) | (4.46) | (0.42) |
Net asset value, end of year | $30.98 | $25.82 | $18.47 | $39.21 | $43.42 |
Total return (%)3 | 21.85 | 43.14 | (46.80) | (0.20) | 11.904 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $920 | $800 | $603 | $1,415 | $1,244 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.02 | 1.045 | 1.04 | 1.11 | 1.086 |
Expenses net of fee waivers | 1.02 | 1.025 | 1.04 | 1.08 | 1.086 |
Expenses net of fee waivers and credits | 1.02 | 1.025 | 1.04 | 1.08 | 1.086 |
Net investment income | 1.87 | 1.99 | 3.06 | 2.09 | 0.386 |
Portfolio turnover (%) | 39 | 44 | 54 | 507 | 37 |
1 The inception date for Class NAV shares is 8-29-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
6 Annualized.
7 Excludes merger activity.
32 | International Core Fund | Annual report | See notes to financial statements |
Notes to financial statements
Note 1 — Organization
John Hancock International Core Fund (the Fund) is a diversified series of John Hancock Funds III (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 high total return.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of Assets and Liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class R1, Class R3, Class R4 and Class R5 shares are available only to certain retirement plans. Class 1 shares are offered only to certain affiliates of Manulife Financial Corporation (MFC). Class NAV shares are sold to John Hancock affiliated funds of funds. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, printing and postage, registration and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. 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, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Annual report | International Core Fund | 33 |
The following is a summary of the values by input classification of the Fund’s investments as of February 28, 2011, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-11 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $68,269,545 | — | $68,269,545 | — |
Austria | 8,825,928 | — | 8,825,928 | — |
Belgium | 13,004,057 | — | 13,004,057 | — |
Bermuda | 1,551,515 | — | 1,551,515 | — |
Canada | 40,858,275 | $40,858,275 | — | — |
Denmark | 26,207,386 | — | 26,207,386 | — |
Finland | 17,537,421 | — | 17,537,421 | — |
France | 168,902,508 | — | 168,902,508 | — |
Germany | 101,002,135 | — | 101,002,135 | — |
Greece | 7,484,844 | — | 7,484,844 | — |
Hong Kong | 24,272,304 | — | 24,272,304 | — |
Ireland | 15,729,846 | — | 15,729,846 | — |
Israel | 4,667,196 | — | 4,667,196 | — |
Italy | 87,374,334 | — | 87,374,334 | — |
Japan | 372,156,580 | — | 372,156,580 | — |
Netherlands | 28,967,827 | — | 28,967,827 | — |
New Zealand | 5,097,111 | — | 5,097,111 | — |
Norway | 2,681,534 | — | 2,681,534 | — |
Portugal | 259,199 | — | 259,199 | — |
Singapore | 35,185,832 | — | 35,185,832 | — |
Spain | 29,606,592 | — | 29,606,592 | — |
Sweden | 52,442,133 | — | 52,442,133 | — |
Switzerland | 88,726,877 | — | 88,726,877 | — |
United Kingdom | 307,966,895 | — | 307,966,895 | — |
Preferred Securities | ||||
Germany | 17,006,279 | — | 17,006,279 | — |
Securities Lending | ||||
Collateral | 41,799,045 | 41,799,045 | — | — |
Short-Term Investments | 58,852,163 | 55,502,243 | 3,349,920 | — |
Total Investments in | ||||
Securities | $1,626,435,361 | $138,159,563 | $1,488,275,798 | — |
Other Financial | ||||
Instruments | ||||
Futures | $1,940,287 | $1,940,287 | — | — |
Forward Foreign | ||||
Currency Contracts | ($844,626) | — | ($844,626) | — |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the year ended February 28, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their closing net asset values each day. Foreign securities and currencies, including forward foreign
34 | International Core Fund | Annual report |
currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities and forward foreign currency contracts traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where 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. Generally, trading in non-U.S. securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of non-U.S. securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value non-U.S. securities in order to adjust for events which may occur between the close of foreign exchanges and the close of the NYSE.
Real estate investment trusts. From time to time, the Fund may invest in real estate investment trusts (REITs) and, as a result, will estimate the components of distributions from these securities. Distributions from REITs received in excess of income are recorded as a reduction of cost of investments and/or as a realized gain.
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. 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 is recorded when the Fund becomes aware of the dividends.
Securities lending. The Fund may lend its securities to earn additional income. It receives and maintains cash collateral received from the borrower in an amount not less than the market value of the loaned securities. The Fund will invest its collateral in John Hancock Collateral Investment Trust (JHCIT), an affiliate of the Fund, and as a result, the Fund will receive the benefit of any gains and bear any losses generated by JHCIT. Although risk of the loss of the securities lent is mitigated by holding the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities or if collateral investments decline in value. The Fund may receive compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Income received from JHCIT is a component of securities lending income as recorded on the Statement of Operations.
Foreign currency translation. Assets, including investments and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on securities is reflected as a component of the realized and unrealized gains (losses) on investments.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. Funds investing in a single country or in a limited geographic region tend to be riskier than funds that invest more broadly. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs) and accounting standards. Foreign investments are also subject to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
Annual report | International Core Fund | 35 |
The Fund may be subject to capital gains and repatriation taxes as imposed by certain countries in which it invests. Such taxes are generally based upon income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to a 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 has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law for any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with State Street Bank and Trust Company (SSBT) which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 31, 2010, the amount of the line of credit was $150 million. 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. For the year ended February 28, 2011, the Fund had no borrowings under the line of credit.
Effective March 30, 2011, the line of credit with SSBT expired, and a similar agreement was established with Citibank N.A.
Expenses. The majority of expenses are directly attributable to an individual 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 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 asset value of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has a capital loss carryforward of $208,228,163 available to offset future net realized capital gains as of February 28, 2011. The following table details the capital loss carryforward available as of February 28, 2011.
CAPITAL LOSS CARRYFORWARD EXPIRING AT FEBRUARY 28 | ||||
2017 | 2018 | 2019 | ||
$18,555,069 | $182,628,123 | $7,044,971 |
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain
36 | International Core Fund | Annual report |
their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
As of February 28, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended February 28, 2011 and February 28, 2010 was as follows:
FEBRUARY 28, 2011 | FEBRUARY 28, 2010 | |||
Ordinary Income | $20,548,037 | $25,370,456 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of February 28, 2011, the components of distributable earnings on a tax basis included $11,905,858 of undistributable 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 financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to foreign currency transactions, passive foreign investment companies, wash sale loss deferrals and derivative transactions.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objectives. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, derivatives expose the Fund to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
Futures. A futures contract is a contractual agreement to buy or sell a particular commodity, 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 hedged security values and/or interest rates and potential losses in excess of the amounts recognized on the Statement of Assets and Liabilities.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. 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 contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) is recorded by the Fund.
Annual report | International Core Fund | 37 |
During the year ended February 28, 2011, the Fund used futures contracts to gain market exposure. The following table summarizes the contracts held at February 28, 2011. During the year ended February 28, 2011, the Fund held futures contracts with notional absolute values ranging from $92.0 million to $133.8 million, as measured at each quarter end.
UNREALIZED | ||||||
OPEN | NUMBER OF | APPRECIATION | ||||
CONTRACTS | CONTRACTS | POSITION | EXPIRATION DATE | NOTIONAL VALUE | (DEPRECIATION) | |
DAX Index Futures | 72 | Long | Mar 2011 | $18,071,686 | $648,954 | |
FTSE 100 Index | 264 | Long | Mar 2011 | 25,636,547 | 624,775 | |
Futures | ||||||
FTSE MIB Index | 141 | Long | Mar 2011 | 21,868,052 | 1,732,374 | |
Futures | ||||||
SGX MSCI Singapore | 170 | Long | Mar 2011 | 9,453,059 | (46,249) | |
Index Futures | ||||||
TOPIX Index Futures | 93 | Long | Mar 2011 | 10,811,442 | 582,928 | |
ASX SPI 200 Index | 226 | Short | Mar 2011 | (27,761,782) | (201,143) | |
Futures | ||||||
S&P TSE 60 Index | 121 | Short | Mar 2011 | (20,240,770) | (1,401,352) | |
Futures | ||||||
Total | $1,940,287 |
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral, the risk that currency movements will not occur, thereby reducing the Fund’s total return, and the potential for losses in excess of the amounts recognized on the Statement of Assets and Liabilities.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by a Fund as an unrealized gain or loss. Realized gains or losses, 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, are recorded upon delivery or receipt of the currency.
During the year ended February 28, 2011, the Fund used forward foreign currency contracts to hedge against anticipated currency exchange rates. The following table summarizes the contracts held at February 28, 2011. During the year ended February 28, 2011, the Fund held forward foreign currency contracts with USD absolute values ranging from $115.2 million to $308.5 million, as measured at each quarter end.
38 | International Core Fund | Annual report |
PRINCIPAL | PRINCIPAL | |||||
AMOUNT | AMOUNT COVERED | UNREALIZED | ||||
COVERED BY | BY CONTRACT | SETTLEMENT | APPRECIATION | |||
CURRENCY | CONTRACT | (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
Buys | ||||||
GBP | 3,234,062 | $5,182,332 | Bank of America N.A. | 4-20-11 | $72,819 | |
GBP | 3,260,002 | 5,217,470 | Brown Brothers | 4-20-11 | 79,831 | |
Harriman & Company | ||||||
GBP | 17,093,966 | 27,332,055 | Mellon Bank NA | 4-20-11 | 444,587 | |
GBP | 16,602,804 | 26,527,014 | Morgan Stanley | 4-20-11 | 451,521 | |
Capital Services, Inc. | ||||||
HKD | 41,093,478 | 5,276,512 | Barclays Bank PLC | 4-20-11 | 2,540 | |
HKD | 105,805,753 | 13,582,253 | Brown Brothers | 4-20-11 | 10,027 | |
Harriman & Company | ||||||
HKD | 41,093,478 | 5,275,672 | Morgan Stanley | 4-20-11 | 3,380 | |
Capital Services, Inc. | ||||||
HKD | 82,186,956 | 10,549,503 | State Street Bank & | 4-20-11 | 8,601 | |
Trust Company | ||||||
SEK | 160,534,185 | 24,596,837 | Deutsche Bank AG | 4-20-11 | 689,678 | |
SGD | 26,662,857 | 20,801,430 | Bank of America N.A. | 4-20-11 | 169,447 | |
SGD | 13,331,429 | 10,399,742 | Barclays Bank PLC | 4-20-11 | 85,697 | |
SGD | 1,876,439 | 1,463,503 | Mellon Bank NA | 4-20-11 | 12,354 | |
SGD | 3,752,879 | 2,926,530 | Royal Bank of Scotland | 4-20-11 | 25,186 | |
PLC | ||||||
SGD | 1,876,439 | 1,463,145 | State Street Bank & | 4-20-11 | 12,713 | |
Trust Company | ||||||
Total | $160,593,998 | $2,068,381 | ||||
Sells | ||||||
CAD | 20,258,042 | $20,465,067 | Bank of America N.A. | 4-20-11 | ($364,430) | |
CAD | 5,475,675 | 5,531,158 | Morgan Stanley | 4-20-11 | (98,979) | |
Capital Services, Inc. | ||||||
CAD | 9,324,164 | 9,422,402 | Royal Bank of Scotland | 4-20-11 | (164,785) | |
PLC | ||||||
CHF | 7,466,186 | 7,693,292 | Barclays Bank PLC | 4-20-11 | (346,214) | |
CHF | 4,484,764 | 4,620,705 | Brown Brothers | 4-20-11 | (208,439) | |
Harriman & Company | ||||||
CHF | 1,830,252 | 1,881,253 | Deutsche Bank AG | 4-20-11 | (89,542) | |
CHF | 8,197,186 | 8,453,853 | Royal Bank of Scotland | 4-20-11 | (372,785) | |
PLC | ||||||
DKK | 56,230,617 | 10,147,211 | Royal Bank of Scotland | 4-20-11 | (256,201) | |
PLC | ||||||
DKK | 56,230,617 | 10,154,880 | State Street Bank & | 4-20-11 | (248,531) | |
Trust Company | ||||||
EUR | 5,256,000 | 7,076,169 | Morgan Stanley | 4-20-11 | (172,418) | |
Capital Services, Inc. | ||||||
EUR | 10,666,523 | 14,351,828 | Royal Bank of Scotland | 4-20-11 | (358,448) | |
PLC | ||||||
EUR | 2,701,000 | 3,634,844 | State Street Bank & | 4-20-11 | (90,124) | |
Trust Company | ||||||
JPY | 251,402,000 | 3,017,687 | JPMorgan Chase Bank | 4-20-11 | (56,533) | |
JPY | 424,686,000 | 5,098,149 | Mellon Bank NA | 4-20-11 | (95,040) | |
NZD | 3,623,763 | 2,726,338 | Royal Bank of Scotland | 4-20-11 | 9,462 | |
PLC | ||||||
Total | $114,274,836 | ($2,913,007) |
Annual report | International Core Fund | 39 |
Currency Abbreviations | ||||
CAD | Canadian Dollar | HKD | Hong Kong Dollar | |
CHF | Swiss Franc | JPY | Japanese Yen | |
DKK | Danish Krone | NZD | New Zealand Dollar | |
EUR | Euro | SEK | Swedish Krona | |
GBP | Pound Sterling | SGD | Singapore Dollar |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at February 28, 2011 by risk category:
FINANCIAL | ASSET | LIABILITY | ||
STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
Equity contracts | Receivable for futures | Futures† | $3,589,031 | ($1,648,744) |
Foreign exchange | Receivable/payable for | Forward for- | 2,077,843 | (2,922,469) |
contracts | forward foreign currency | eign currency | ||
contracts | contracts | |||
Total | $5,666,874 | ($4,571,213) |
† Reflects cumulative appreciation/deprecation of futures as disclosed in Note 3. Only the period end variation margin is separately disclosed on the Statement 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 February 28, 2011:
FOREIGN | ||||
STATEMENT OF | FUTURES | CURRENCY | ||
RISK | OPERATIONS LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
Equity contracts | Net realized gain | $584,787 | — | $584,787 |
Foreign exchange | Net realized gain | — | $2,336,962 | 2,336,962 |
contracts | (loss) | |||
Total | $584,787 | $2,336,962 | $2,921,749 |
* Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of Operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 28, 2011:
TRANSLATION OF ASSETS | ||||
STATEMENT OF OPERATIONS | FUTURES | AND LIABILITIES IN | ||
RISK | LOCATION | CONTRACTS | FOREIGN CURRENCIES* | TOTAL |
Equity contracts | Change in unrealized | $3,767,544 | — | $3,767,544 |
appreciation | ||||
(depreciation) | ||||
Foreign exchange | Change in unrealized | — | ($632,837) | (632,837) |
contracts | appreciation | |||
(depreciation) | ||||
Total | $3,767,544 | ($632,837) | $3,134,707 |
* Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in this caption on the Statement of Operations.
40 | International Core Fund | Annual report |
Note 4 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Trust. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management contract with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.920% of the first $100,000,000 of the Fund’s average daily net assets; b) 0.895% of the next $900,000,000; c) 0.880% of the next $1,000,000,000; d) 0.850% of the next $1,000,000,000; e) 0.825% of the next $1,000,000,000; and f) 0.800% of the Fund’s average daily net asset in excess of $4,000,000,000. The Adviser has a subadvisory agreement with Grantham, Mayo, Van Otterloo & Co. LLC. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the year ended February 28, 2011 were equivalent to an annual effective rate of 0.89% of the Fund’s average daily net assets.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Fund. This agreement excludes taxes, portfolio brokerage commissions, interest, litigation and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.60%, 2.30%, 2.30%, 1.14%, 1.89%, 1.79%, 1.49%, 1.19% and 1.10% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5 and Class 1 shares, respectively. Prior to July 1, 2010, the fee waivers and/or reimbursements were such that these expenses would not exceed 1.60%, 2.30%, 2.30%, 1.12%, 2.00%, 1.90%, 1.60%, 1.30%, 1.10% and 1.05% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5, Class 1 and Class NAV shares, respectively. The fee waivers and/or reimbursements will continue in effect until June 30, 2011.
Accordingly, these expense reductions amounted to $29,949, $3,265, $8,547, $9,495, $12,495, $12,509 and $12,561 for Class A, Class B, Class C, Class R1, Class R3, Class R4 and Class R5, respectively, for the year ended February 28, 2011.
Accounting and legal services. Pursuant to a service agreement the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of 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 February 28, 2011, amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B, Class C, Class R1, Class R3, Class R4 and Class 1 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
Annual report | International Core Fund | 41 |
service plan for Class R1, Class R3, Class R4 and Class R5 shares, the Fund pays for certain other services. The Fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Fund’s shares.
CLASS | 12b–1 FEES | SERVICE FEE | |||
Class A | 0.30% | — | |||
Class B | 1.00% | — | |||
Class C | 1.00% | — | |||
Class R1 | 0.50% | 0.25% | |||
Class R3 | 0.50% | 0.15% | |||
Class R4 | 0.25% | 0.10% | |||
Class R5 | — | 0.05% | |||
Class 1 | 0.05% | — |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $35,481 for the year ended February 28, 2011. Of this amount, $5,248 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $24,001 was paid as sales commissions to broker-dealers and $6,232 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a broker-dealer affiliate of the Adviser.
Class B and Class C shares are subject to contingent deferred sales charges (CDSC). Class B shares that are redeemed within six years of purchase are subject to CDSC, at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2011, CDSCs received by the Distributor amounted to $8,698 and $340 for Class B and Class C shares, respectively.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services or Transfer Agent), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain revenues that Signature Services receives in connection with the service it provides to the funds. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to July 1, 2010, the transfer agent fees were made up of three components:
• The Fund paid a monthly transfer agent fee at an annual rate of 0.05% for Class A, Class B, Class C, Class R1, Class R3, Class R4 and Class R5 shares and 0.04% for Class I shares, based on each class’s average daily net assets.
42 | International Core Fund | Annual report |
• The Fund paid a monthly fee based on an annual rate of $16.50 per shareholder account.
• In addition, Signature Services was reimbursed for certain out-of-pocket expenses.
Class level expenses. Class level expenses for the year ended February 28, 2011 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $803,006 | $552,198 | $24,444 | $195,311 |
Class B | 57,089 | 19,097 | (1,219) | 1,428 |
Class C | 51,226 | 13,465 | 7,848 | 1,546 |
Class I | — | 94,225 | 42,727 | 40,624 |
Class R1 | 1,144 | 479 | 9,337 | 257 |
Class R3 | 146 | 320 | 12,184 | 85 |
Class R4 | 73 | 320 | 12,184 | 85 |
Class R5 | 2 | 342 | 12,184 | 117 |
Class 1 | 21,920 | — | — | (1,094) |
Total | $934,606 | $680,446 | $119,689 | $238,359 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates – Trustees’ fees, respectively, in the accompanying Statement of Assets and Liabilities.
Note 6 — Fund share transactions
Transactions in Fund shares for the years ended February 28, 2011 and 2010 were as follows:
Year ended 2-28-11 | Year ended 2-28-101 | |||||
Shares | Amount | Shares | Amount | |||
Class A shares | ||||||
Sold | 4,988,845 | $135,149,591 | 6,631,074 | $175,433,435 | ||
Distributions reinvested | 107,875 | 3,096,325 | 127,968 | 3,461,527 | ||
Repurchased | (3,062,983) | (83,492,001) | (937,289) | (23,342,208) | ||
Net increase | 2,033,737 | $54,753,915 | 5,821,753 | $155,552,754 | ||
Class B shares | ||||||
Sold | 16,897 | $459,057 | 34,238 | $822,466 | ||
Distributions reinvested | 657 | 18,794 | 3,234 | 87,218 | ||
Repurchased | (89,983) | (2,431,531) | (157,836) | (3,860,326) | ||
Net decrease | (72,429) | ($1,953,680) | (120,364) | ($2,950,642) | ||
Class C shares | ||||||
Sold | 42,245 | $1,142,066 | 33,391 | $831,273 | ||
Distributions reinvested | 552 | 15,791 | 2,024 | 54,586 | ||
Repurchased | (70,516) | (1,901,411) | (70,882) | (1,706,967) | ||
Net decrease | (27,719) | ($743,554) | (35,467) | ($821,108) | ||
Class I shares | ||||||
Sold | 7,465,309 | $205,795,143 | 3,684,749 | $84,068,147 | ||
Distributions reinvested | 125,109 | 3,598,127 | 69,850 | 1,892,236 | ||
Repurchased | (1,435,344) | (40,176,056) | (566,742) | (14,806,818) | ||
Net increase | 6,155,074 | $169,217,214 | 3,187,857 | $71,153,565 |
Annual report | International Core Fund | 43 |
Year ended 2-28-11 | Year ended 2-28-101 | |||||
Shares | Amount | Shares | Amount | |||
Class R1 shares | ||||||
Sold | 1,366 | $35,353 | 2,549 | $60,268 | ||
Distributions reinvested | 51 | 1,465 | 91 | 2,466 | ||
Repurchased | (323) | (8,639) | (897) | (22,016) | ||
Net increase | 1,094 | $28,179 | 1,743 | $40,718 | ||
Class R3 shares | ||||||
Sold | — | — | 1,072 | $25,000 | ||
Net increase | — | — | 1,072 | $25,000 | ||
Class R4 shares | ||||||
Sold | 16 | $504 | 1,072 | $25,000 | ||
Net increase | 16 | $504 | 1,072 | $25,000 | ||
Class R5 shares | ||||||
Sold | 959 | $27,352 | 1,425 | $34,030 | ||
Distributions reinvested | 9 | 255 | — | — | ||
Repurchased | — | (8) | (174) | (4,500) | ||
Net increase | 968 | $27,599 | 1,251 | $29,530 | ||
Class 1 shares | ||||||
Sold | 125,007 | $3,404,068 | 125,633 | $3,081,025 | ||
Distributions reinvested | 23,310 | 671,339 | 39,820 | 1,080,309 | ||
Repurchased | (312,147) | (8,546,125) | (306,337) | (7,335,607) | ||
Net decrease | (163,830) | ($4,470,718) | (140,884) | ($3,174,273) | ||
Class NAV shares | ||||||
Sold | 3,439,057 | $88,261,114 | 4,768,948 | $118,536,541 | ||
Distributions reinvested | 452,550 | 13,024,392 | 673,503 | 18,258,674 | ||
Repurchased | (5,176,286) | (138,574,310) | (7,076,676) | (168,092,370) | ||
Net decrease | (1,284,679) | ($37,288,804) | (1,634,225) | ($31,297,155) | ||
Net increase | 6,642,232 | $179,570,655 | 7,083,808 | $188,583,389 | ||
1 The inception date for Class R3, Class R4 and Class R5 shares is 5-22-09.
Affiliates of the Fund owned 47%, 100%, 99% and 48% of shares of beneficial interest of Class R1, Class R3, Class R4 and Class R5 shares, respectively, on February 28, 2011.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $710,197,121 and $500,879,445, respectively, for the year ended February 28, 2011.
44 | International Core Fund | Annual report |
Auditors’ report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock International Core Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio 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 International Core Fund (the “Fund”) at February 28, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011 by correspondence with the custodian 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
April 19, 2011
Annual report | International Core Fund | 45 |
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 February 28, 2011.
The Fund designates 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. This amount will be reflected on Form 1099-DIV for the calendar year 2011.
The Fund designates the maximum amount allowable for the corporate dividends received deduction for the fiscal year ended February 28, 2011.
Income derived from foreign sources was $22,101,128. The Fund intends to pass through foreign tax credits of $1,716,697 for the fiscal year ended February 28, 2011.
Shareholders will be mailed a 2011 Form 1099-DIV in January 2012. This will reflect the total of all distributions that are taxable for calendar year 2011.
46 | International Core 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 |
Steven R. Pruchansky, Born: 1944 | 2006 | 47 |
Chairperson (since January 2011); 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 (since 2008); 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). | ||
James F. Carlin, Born: 1940 | 2006 | 47 |
Chief Executive Officer, Director and Treasurer, Alpha Analytical Laboratories (environmental, chemical | ||
and pharmaceutical analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance | ||
Agency, Inc. (since 1995); Chairman and Chief Executive Officer, CIMCO, LLC (management/ | ||
investments) (since 1987). | ||
William H. Cunningham, Born: 1944 | 2006 | 47 |
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 of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson,2 Born: 1952 | 2008 | 47 |
Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); 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 Corp. (1996–2009); Board of Directors of | ||
Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (since 2007). | ||
Charles L. Ladner,2 Born: 1938 | 2006 | 47 |
Vice Chairperson (since March 2011); Chairman and Trustee, Dunwoody Village, Inc. (retirement | ||
services) (since 2008); Director, Philadelphia Archdiocesan Educational Fund (since 2009); Senior Vice | ||
President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); | ||
Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (gas | ||
distribution) (until 1997); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association | ||
(Cooperating Association, National Park Service) (until 2005). |
Annual report | International Core Fund | 47 |
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 |
Stanley Martin,2 Born: 1947 | 2008 | 47 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore, Born: 1939 | 2006 | 47 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). | ||
Patti McGill Peterson,2 Born: 1943 | 2006 | 47 |
Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy | ||
(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President, | ||
Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public | ||
Affairs, Cornell University (1997–1998); Former President Wells College, St. Lawrence University and the | ||
Association of Colleges and Universities of the State of New York. Director of the following: Niagara | ||
Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until | ||
1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007); | ||
Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development | ||
Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational | ||
Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 47 |
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (“KPMG”) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
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 |
Hugh McHaffie,4 Born: 1959 | 2010 | 47 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Trust and John Hancock Funds II (since 2009); Trustee, John Hancock retail | ||
funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment | ||
Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior Vice President, Individual | ||
Business Product Management, MetLife, Inc. (1999–2006). |
48 | International Core Fund | Annual report |
Non-Independent Trustees3 (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 |
John G. Vrysen, Born: 1955 | 2009 | 47 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock Funds II | ||
and John Hancock Trust (since 2007); Chief Operating Officer, John Hancock retail funds (until 2009); | ||
Trustee, John Hancock retail funds (since 2009). | ||
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 | |
Keith F. Hartstein, Born: 1956 | 2006 | |
President and Chief Executive Officer | ||
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | ||
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | ||
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | ||
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | ||
Force Marketing Committee (since 2003). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Senior Vice President and Chief Operating Officer | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | ||
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | ||
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock Trust | ||
(since 2006); Senior Vice President, Product Management and Development, John Hancock Funds, | ||
LLC (until 2009). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | ||
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | ||
Funds II and John Hancock Trust (since 2006); Vice President and Associate General Counsel, | ||
Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal Counsel, MML | ||
Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual Select Funds and | ||
MassMutual Premier Funds (2004–2006). |
Annual report | International Core Fund | 49 |
Principal officers who are not Trustees (continued)
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Trust, John Hancock Advisers, LLC and John Hancock | |
Investment Management Services, LLC (since 2005); Vice President and Chief Compliance Officer, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Trust (since 2007); | |
Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, Goldman | |
Sachs (2005–2007). | |
Salvatore Schiavone,4 Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock Closed-End Funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Trust (since 2007); Assistant Treasurer, | |
John Hancock retail funds, John Hancock Funds II and John Hancock Trust (2007–2009); Assistant | |
Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management Research | |
Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
4 Mr. McHaffie and Mr. Schiavone were appointed by the Board of Trustees effective 8-31-10.
50 | International Core Fund | Annual report |
More information
Trustees | Investment adviser | |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management | |
James F. Carlin | Services, LLC | |
William H. Cunningham | ||
Deborah C. Jackson* | Subadviser | |
Charles L. Ladner, Vice Chairperson* | Grantham, Mayo, Van Otterloo & Co. LLC | |
Stanley Martin* | ||
Hugh McHaffie | Principal distributor | |
Dr. John A. Moore | John Hancock Funds, LLC | |
Patti McGill Peterson* | ||
Gregory A. Russo | Custodian | |
John G. Vrysen | State Street Bank and Trust Company | |
Officers | Transfer agent | |
Keith F. Hartstein | John Hancock Signature Services, Inc. | |
President and Chief Executive Officer | ||
Legal counsel | ||
Andrew G. Arnott | K&L Gates LLP | |
Senior Vice President and Chief Operating Officer | ||
Independent registered | ||
Thomas M. Kinzler | public accounting firm | |
Secretary and Chief Legal Officer | PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | ||
Chief Compliance Officer | The report is certified under the Sarbanes-Oxley | |
Act, which requires mutual funds and other public | ||
Charles A. Rizzo | companies to affirm that, to the best of their | |
Chief Financial Officer | knowledge, the information in their financial reports | |
is fairly and accurately stated in all material respects. | ||
Salvatore Schiavone | ||
Treasurer | ||
*Member of the Audit Committee
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
Annual report | International Core Fund | 51 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/internationalcorex48x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock International Core Fund. | 6600A 2/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/11 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/growthoppsx1x1.jpg)
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC
U.S. stocks delivered solid gains during the 12 months ended February 28, 2011, all of them occurring in the second half of the period. The first six months saw the market struggle with concern about the European sovereign debt crisis, weakness in the energy sector following a massive oil spill in the Gulf of Mexico and tepid data on the U.S. economy. However, after Fed Chairman Ben Bernanke proposed another round of quantitative easing at the end of August to stimulate economic growth, an impressive rally ensued that boosted the Fund’s benchmark, the Russell 2500 Growth Index, to a gain of 36.42% for the period, while the average small growth fund monitored by Morningstar, Inc. advanced 34.61%.
During the 12-month period, John Hancock Growth Opportunities Fund’s Class A shares returned 40.83% at net asset value, handily beating the Russell 2500 Growth Index and the Morningstar peer average. Favorable stock selection was the main driver of the Fund’s outperformance, with industrials, information technology and consumer discretionary adding the most value. At the stock level, the Fund’s results were aided by two communications equipment stocks, Acme Packet, Inc. and F5 Networks, Inc. Acme Packet, the top contributor, makes session-border-control equipment used to integrate Internet Protocol (IP) capabilities with corporate phone systems. The company hit a sweet spot in the adoption of its products, and its stock gained more than 350% during the period. Other contributors included Polypore International, Inc. and WABCO Holdings, Inc., both from the industrials sector. Consumer discretionary holdings Fossil, Inc. and Deckers Outdoor Corp. bolstered performance as well. Conversely, an underweighting and weak stock selection in energy detracted. Stocks that had a negative impact included Genworth Financial, Inc., which was hampered by poor performance in its residential mortgage and mortgage insurance businesses. Additionally, the company suffered a downgrade in its credit rating. Lincare Holdings, Inc. a provider of respiratory care equipment, Cree, Inc., a maker of LED (light-emitting diode) lights, and coal producer Massey Energy Company also weighed on performance. We sold Genworth, Cree and Massey Energy during the period.
This commentary reflects the views of the portfolio management team through the end of the Fund’s period discussed in this report. The team’s statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
The Fund is non-diversified, which means that it may invest a greater percentage of its total assets in the securities of fewer issuers than a diversified fund. 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.
6 | Growth Opportunities Fund | Annual report |
A look at performance
For the period ended February 28, 2011 | |||||||||
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception1 | 1-year | 5-year | 10-year | inception1 | ||
Class A2 | 33.78 | –0.51 | — | 1.00 | 33.78 | –2.51 | — | 5.57 | |
Class B2 | 34.84 | –0.51 | — | 1.13 | 34.84 | –2.54 | — | 6.31 | |
Class C2 | 38.78 | –0.12 | — | 1.29 | 38.78 | –0.60 | — | 7.26 | |
Class i2,3 | 41.44 | 1.00 | — | 2.44 | 41.44 | 5.12 | — | 14.03 | |
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The waivers and expense limitations are contractual at least until 6-30-11. The net expenses are as follows: Class A — 1.50%, Class B — 2.20%, Class C — 2.20% and Class I — 1.04%. Had the fee waivers and expense limitations not been in place, the gross expenses would be as follows: Class A — 1.81%, Class B —2.52%, Class C — 2.98% and Class I — 25.10%.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Fund’s performance results reflect any applicable expense reductions, without which the expenses would increase and results would have been less favorable.
1 From 9-16-05.
2 On 6-9-06, through a reorganization the Fund acquired all of the assets of the GMO Small/Mid Cap Growth Fund (the predecessor fund). The predecessor fund offered its Class III shares, inception date 9-16-05, in exchange for Class A shares, which were first offered on 6-12-06. The predecessor fund’s Class III shares returns have been recalculated to reflect the gross fees and expenses of Class A shares. The inception date for Class B, Class C and Class I shares is 6-12-06; the returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class B, Class C and Class I shares, respectively.
3 For certain types of investors, as described in the Fund’s Class I share prospectus.
Annual report | Growth Opportunities Fund | 7 |
A look at performance
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/growthoppsx4x1.jpg)
Period | Without | With maximum | ||
beginning | sales charge | sales charge | Index | |
Class B1 | 9-16-05 | $10,731 | $10,631 | $14,413 |
Class C1,3 | 9-16-05 | 10,726 | 10,726 | 14,413 |
Class I1,4 | 9-16-05 | 11,403 | 11,403 | 14,413 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B, Class C and Class I shares, respectively, as of 2-28-11. 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.
Russell 2500 Growth Index is an unmanaged index containing those securities in the Russell 2500 Index with a greater-than-average growth orientation.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 On 6-9-06, through a reorganization the Fund acquired all of the assets of the GMO Small/Mid Cap Growth Fund (the predecessor fund). The predecessor fund offered its Class III shares, inception date 9-16-05, in exchange for Class A shares, which were first offered on 6-12-06. The predecessor fund’s Class III shares’ returns have been recalculated to reflect the gross fees and expenses of Class A shares. The inception date for Class B, Class C and Class I shares is 6-12-06; the returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class B, Class C and Class I shares, respectively.
2 NAV represents net asset value and POP represents public offering price.
3 The contingent deferred sales charge, if any, is not applicable.
4 For certain types of investors, as described in the Fund’s Class I share prospectus.
8 | Growth Opportunities Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about 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 September 1, 2010 with the same investment held until February 28, 2011.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,424.30 | $9.02 |
Class B | 1,000.00 | 1,420.00 | 13.20 |
Class C | 1,000.00 | 1,419.30 | 13.20 |
Class I | 1,000.00 | 1,427.70 | 6.26 |
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 February 28, 2011, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/growthoppsx5x1.jpg)
Annual report | Growth Opportunities 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 September 1, 2010, with the same investment held until February 28, 2011. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,017.40 | $7.50 |
Class B | 1,000.00 | 1,013.90 | 10.99 |
Class C | 1,000.00 | 1,013.90 | 10.99 |
Class I | 1,000.00 | 1,019.60 | 5.21 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.50%, 2.20%, 2.20% and 1.04% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | Growth Opportunities Fund | Annual report |
Portfolio summary
Top 10 Holdings1 | ||||
Acme Packet, Inc. | 2.9% | Atmel Corp. | 2.3% | |
Chipotle Mexican Grill, Inc. | 2.9% | Mettler-Toledo International, Inc. | 2.0% | |
Riverbed Technology, Inc. | 2.6% | Erie Indemnity Company | 1.8%�� | |
TIBCO Software, Inc. | 2.6% | Albemarle Corp. | 1.7% | |
Herbalife, Ltd. | 2.3% | Fossil, Inc. | 1.6% | |
Sector Composition2,3 | ||||
Information Technology | 28% | Energy | 5% | |
Consumer Discretionary | 20% | Consumer Staples | 5% | |
Industrials | 17% | Financials | 5% | |
Health Care | 11% | Telecommunication Services | 1% | |
Materials | 6% | Short-Term Investments & Other | 2% | |
1 As a percentage of net assets on 2-28-11. Cash and cash equivalents are not included in Top 10 Holdings.
2 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.
3 As a percentage of net assets on 2-28-11.
Annual report | Growth Opportunities Fund | 11 |
Fund’s investments
As of 2-28-11
Shares | Value | |
Common Stocks 98.03% | $70,349,103 | |
(Cost $54,079,129) | ||
Consumer Discretionary 20.26% | 14,543,468 | |
Auto Components 2.95% | ||
Autoliv, Inc. | 900 | 67,401 |
BorgWarner, Inc. (I) | 9,000 | 698,490 |
Cooper Tire & Rubber Company | 2,300 | 53,958 |
Dorman Products, Inc. (I) | 4,100 | 142,147 |
Lear Corp. | 400 | 42,320 |
Standard Motor Products, Inc. | 1,300 | 15,119 |
Tenneco, Inc. (I)(L) | 9,000 | 358,920 |
TRW Automotive Holdings Corp. (I) | 13,000 | 738,400 |
Diversified Consumer Services 2.02% | ||
CPI Corp. | 400 | 9,228 |
Pre-Paid Legal Services, Inc. (I)(L) | 2,700 | 178,038 |
Sotheby’s | 8,000 | 393,760 |
Universal Technical Institute, Inc. | 800 | 14,720 |
Weight Watchers International, Inc. | 14,000 | 855,820 |
Hotels, Restaurants & Leisure 4.32% | ||
BJ’s Restaurants, Inc. (I) | 500 | 17,975 |
California Pizza Kitchen, Inc. (I) | 4,700 | 79,148 |
Carrols Restaurant Group, Inc. (I) | 1,400 | 11,088 |
CEC Entertainment, Inc. (I) | 2,900 | 112,201 |
Chipotle Mexican Grill, Inc. (I)(L) | 8,400 | 2,058,000 |
Cracker Barrel Old Country Store, Inc. | 3,900 | 194,376 |
DineEquity, Inc. (I) | 1,500 | 85,815 |
Domino’s Pizza, Inc. (I) | 5,300 | 89,411 |
Life Time Fitness, Inc. (I) | 3,600 | 138,060 |
Panera Bread Company, Class A (I) | 1,600 | 186,800 |
Texas Roadhouse, Inc., Class A (I) | 1,300 | 22,074 |
The Cheesecake Factory, Inc. (I) | 3,600 | 104,544 |
Internet & Catalog Retail 0.15% | ||
1-800-Flowers.com, Inc., Class A (I) | 4,300 | 11,782 |
HSN, Inc. (I) | 3,000 | 97,440 |
Leisure Equipment & Products 0.76% | ||
Polaris Industries, Inc. (L) | 7,100 | 535,695 |
Sturm Ruger & Company, Inc. | 700 | 12,642 |
12 | Growth Opportunities Fund | Annual report | See notes to financial statements |
Shares | Value | |
Media 0.06% | ||
Arbitron, Inc. | 1,000 | $39,810 |
Specialty Retail 4.88% | ||
Abercrombie & Fitch Company, Class A | 1,300 | 74,581 |
AnnTaylor Stores Corp. (I) | 1,300 | 30,173 |
AutoNation, Inc. (I)(L) | 2,000 | 67,280 |
Big 5 Sporting Goods Corp. | 1,900 | 26,486 |
Hibbett Sports, Inc. (I) | 6,400 | 201,024 |
Jos. A. Bank Clothiers, Inc. (I) | 6,650 | 306,632 |
Monro Muffler Brake, Inc. | 3,450 | 112,746 |
PetSmart, Inc. | 13,900 | 568,093 |
Sally Beauty Holdings, Inc. (I) | 21,200 | 274,964 |
The Cato Corp., Class A | 7,700 | 186,725 |
The Children’s Place Retail Stores, Inc. (I) | 3,100 | 141,670 |
The Finish Line, Inc., Class A | 100 | 1,746 |
Tractor Supply Company | 21,500 | 1,119,505 |
Williams-Sonoma, Inc. | 10,800 | 389,772 |
Textiles, Apparel & Luxury Goods 5.12% | ||
CROCS, Inc. (I) | 19,900 | 351,235 |
Deckers Outdoor Corp. (I) | 9,300 | 820,446 |
Fossil, Inc. (I) | 15,400 | 1,181,796 |
G-III Apparel Group, Ltd. (I) | 700 | 27,524 |
Liz Claiborne, Inc. (I)(L) | 7,700 | 39,578 |
Maidenform Brands, Inc. (I) | 3,500 | 94,990 |
Oxford Industries, Inc. | 2,200 | 53,064 |
Steven Madden, Ltd. (I) | 4,350 | 187,659 |
Under Armour, Inc., Class A (I)(L) | 13,900 | 920,597 |
Consumer Staples 4.94% | 3,542,342 | |
Beverages 1.11% | ||
Boston Beer Company, Inc. (I) | 4,200 | 389,844 |
Hansen Natural Corp. (I) | 7,000 | 402,850 |
Food & Staples Retailing 0.85% | ||
BJ’s Wholesale Club, Inc. (I) | 1,000 | 48,420 |
Casey’s General Stores, Inc. | 1,100 | 45,177 |
Pricesmart, Inc. | 7,600 | 270,484 |
Ruddick Corp. | 3,000 | 110,100 |
Susser Holdings Corp. (I) | 600 | 8,310 |
The Pantry, Inc. (I) | 500 | 7,880 |
United Natural Foods, Inc. (I) | 2,800 | 118,860 |
Food Products 0.18% | ||
B&G Foods, Inc. | 1,700 | 25,500 |
Darling International, Inc. (I) | 7,300 | 101,397 |
John B. Sanfilippo & Son, Inc. (I) | 200 | 2,410 |
Household Products 0.09% | ||
WD-40 Company | 1,600 | 65,056 |
See notes to financial statements | Annual report | Growth Opportunities Fund | 13 |
Shares | Value | |
Personal Products 2.56% | ||
Herbalife, Ltd. | 20,900 | $1,638,769 |
Inter Parfums, Inc. | 3,800 | 68,666 |
USANA Health Sciences, Inc. (I) | 3,700 | 128,834 |
Tobacco 0.15% | ||
Vector Group, Ltd. | 6,500 | 109,785 |
Energy 5.22% | 3,742,949 | |
Energy Equipment & Services 4.06% | ||
CARBO Ceramics, Inc. | 2,600 | 322,322 |
Core Laboratories NV | 3,100 | 320,385 |
Dresser-Rand Group, Inc. (I) | 4,200 | 206,976 |
Dril-Quip, Inc. (I) | 7,100 | 544,570 |
Hercules Offshore, Inc. (I) | 2,000 | 9,880 |
Lufkin Industries, Inc. | 5,200 | 406,380 |
Newpark Resources, Inc. (I) | 1,400 | 9,772 |
OYO Geospace Corp. (I) | 200 | 20,336 |
Rowan Companies, Inc. (I) | 1,600 | 68,272 |
RPC, Inc. (L) | 49,850 | 976,063 |
Superior Energy Services, Inc. (I) | 800 | 30,648 |
Oil, Gas & Consumable Fuels 1.16% | ||
Apco Oil and Gas International, Inc. | 1,700 | 137,598 |
Callon Petroleum Company (I) | 4,400 | 36,872 |
Clayton Williams Energy, Inc. (I) | 3,500 | 371,280 |
Cloud Peak Energy, Inc. (I) | 3,000 | 61,500 |
Enbridge Energy Management LLC (I) | 2 | 134 |
Holly Corp. | 3,300 | 188,562 |
International Coal Group, Inc. (I) | 100 | 987 |
Teekay Tankers, Ltd., Class A | 400 | 4,276 |
Whiting Petroleum Corp. (I) | 400 | 26,136 |
Financials 4.79% | 3,436,561 | |
Capital Markets 0.14% | ||
Virtus Investment Partners, Inc. (I) | 1,700 | 99,076 |
Commercial Banks 0.09% | ||
Bank of the Ozarks, Inc. (L) | 1,000 | 43,050 |
First Interstate Bancsystem, Inc. | 300 | 4,286 |
OmniAmerican Bancorp, Inc. (I) | 400 | 6,268 |
SunTrust Banks, Inc. | 100 | 3,017 |
SY Bancorp, Inc. | 400 | 9,920 |
Consumer Finance 1.69% | ||
Credit Acceptance Corp. (I) | 7,800 | 550,680 |
EZCORP, Inc., Class A (I) | 12,900 | 369,972 |
First Cash Financial Services, Inc. (I) | 6,200 | 202,988 |
Nelnet, Inc., Class A | 900 | 20,097 |
World Acceptance Corp. (I) | 1,100 | 65,791 |
Diversified Financial Services 0.08% | ||
Interactive Brokers Group, Inc., Class A | 100 | 1,545 |
Life Partners Holdings, Inc. | 1,625 | 13,423 |
14 | Growth Opportunities Fund | Annual report | See notes to financial statements |
Shares | Value | |
Diversified Financial Services (continued) | ||
MarketAxess Holdings, Inc. | 800 | $17,112 |
Portfolio Recovery Associates, Inc. (I) | 300 | 25,005 |
Insurance 2.25% | ||
Axis Capital Holdings, Ltd. | 6,000 | 217,920 |
Brown & Brown, Inc. | 4,200 | 109,788 |
Endurance Specialty Holdings, Ltd. | 300 | 14,877 |
Erie Indemnity Company, Class A | 18,200 | 1,271,088 |
Real Estate Investment Trusts 0.54% | ||
Alexander’s, Inc. | 300 | 118,719 |
Anworth Mortgage Asset Corp. | 100 | 714 |
Apollo Commercial Real Estate Finance, Inc. | 300 | 5,106 |
Associated Estates Realty Corp. | 4,800 | 78,000 |
Chesapeake Lodging Trust | 300 | 5,580 |
Colony Financial, Inc. | 200 | 4,250 |
CreXus Investment Corp. | 300 | 3,960 |
Getty Realty Corp. | 700 | 20,594 |
MFA Financial, Inc. | 100 | 847 |
Pennymac Mortgage Investment Trust | 200 | 3,770 |
Saul Centers, Inc. | 2,700 | 124,200 |
Terreno Realty Corp. (I) | 200 | 3,666 |
Urstadt Biddle Properties, Inc., Class A | 700 | 13,573 |
Walter Investment Management Corp. | 392 | 7,679 |
Health Care 10.35% | 7,429,940 | |
Biotechnology 0.48% | ||
Emergent Biosolutions, Inc. (I) | 2,600 | 54,704 |
Immunogen, Inc. (I) | 100 | 901 |
Incyte Corp. (I)(L) | 7,400 | 101,232 |
InterMune, Inc. (I) | 3,800 | 139,118 |
Neurocrine Biosciences, Inc. (I) | 5,400 | 36,450 |
NPS Pharmaceuticals, Inc. (I) | 1,600 | 12,368 |
Health Care Equipment & Supplies 2.84% | ||
Analogic Corp. | 900 | 48,780 |
Atrion Corp. | 100 | 17,634 |
Delcath Systems, Inc. (I)(L) | 6,100 | 39,955 |
Exactech, Inc. (I) | 1,900 | 36,005 |
Hill-Rom Holdings, Inc. | 21,200 | 807,084 |
Merit Medical Systems, Inc. (I) | 4,800 | 81,984 |
Neogen Corp. (I) | 4,800 | 179,472 |
NxStage Medical, Inc. (I)(L) | 26,700 | 550,821 |
Orthofix International NV (I) | 2,800 | 88,480 |
The Cooper Companies, Inc. | 3,100 | 191,642 |
Health Care Providers & Services 2.34% | ||
Almost Family, Inc. (I) | 900 | 35,100 |
AMERIGROUP Corp. (I) | 3,500 | 200,725 |
AMN Healthcare Services, Inc. (I) | 1,200 | 8,964 |
Chemed Corp. | 2,300 | 150,512 |
Corvel Corp. (I) | 5,300 | 262,350 |
See notes to financial statements | Annual report | Growth Opportunities Fund | 15 |
Shares | Value | |
Health Care Providers & Services (continued) | ||
Health Management Associates, Inc., Class A (I) | 42,600 | $426,000 |
HMS Holdings Corp. (I) | 2,000 | 151,120 |
Lincare Holdings, Inc. | 50 | 1,467 |
Molina Healthcare, Inc. (I) | 6,100 | 213,683 |
MWI Veterinary Supply, Inc. (I) | 1,100 | 76,142 |
National Research Corp. | 1,000 | 32,710 |
Rural/Metro Corp. (I) | 4,600 | 68,954 |
The Providence Service Corp. (I) | 2,600 | 42,666 |
US Physical Therapy, Inc. (I) | 500 | 9,885 |
Health Care Technology 0.44% | ||
Computer Programs & Systems, Inc. | 800 | 43,208 |
SXC Health Solutions Corp. (I) | 5,500 | 271,425 |
Life Sciences Tools & Services 3.46% | ||
Albany Molecular Research, Inc. (I) | 100 | 452 |
Dionex Corp. (I) | 1,300 | 153,166 |
eResearch Technology, Inc. (I) | 10,900 | 69,215 |
Mettler-Toledo International, Inc. (I) | 8,300 | 1,422,371 |
Parexel International Corp. (I) | 8,600 | 201,842 |
PerkinElmer, Inc. | 6,400 | 169,600 |
Pharmaceutical Product Development, Inc. | 16,500 | 453,255 |
Sequenom, Inc. (I) | 1,628 | 9,996 |
Pharmaceuticals 0.79% | ||
Akorn, Inc. (I) | 19,000 | 106,210 |
Hi-Tech Pharmacal Company, Inc. (I) | 800 | 18,472 |
Impax Laboratories, Inc. (I) | 12,500 | 257,375 |
Questcor Pharmaceuticals, Inc. (I)(L) | 11,300 | 146,448 |
The Medicines Company (I) | 2,300 | 39,997 |
Industrials 16.78% | 12,040,423 | |
Aerospace & Defense 0.89% | ||
Astronics Corp. (I) | 2,400 | 51,744 |
Cubic Corp. | 500 | 25,155 |
DigitalGlobe, Inc. (I) | 19 | 613 |
GeoEye, Inc. (I) | 4,600 | 204,930 |
Hexcel Corp. (I) | 15,700 | 291,235 |
TransDigm Group, Inc. (I) | 800 | 64,304 |
Air Freight & Logistics 0.24% | ||
HUB Group, Inc., Class A (I) | 600 | 20,976 |
Pacer International, Inc. (I) | 1,100 | 5,973 |
Park-Ohio Holdings Corp. (I) | 1,400 | 30,912 |
UTi Worldwide, Inc. | 5,700 | 113,430 |
Airlines 0.72% | ||
Alaska Air Group, Inc. (I) | 700 | 41,615 |
Hawaiian Holdings, Inc. (I) | 500 | 3,320 |
Skywest, Inc. | 100 | 1,650 |
United Continental Holdings, Inc. (I)(L) | 19,440 | 467,338 |
16 | Growth Opportunities Fund | Annual report | See notes to financial statements |
Shares | Value | |
Building Products 0.21% | ||
A.O. Smith Corp. | 2,500 | $101,000 |
AAON, Inc. (L) | 1,700 | 52,190 |
Masco Corp. | 100 | 1,359 |
Commercial Services & Supplies 1.06% | ||
Consolidated Graphics, Inc. (I) | 600 | 32,724 |
Deluxe Corp. | 7,100 | 181,405 |
Herman Miller, Inc. | 1,700 | 45,798 |
HNI Corp. | 100 | 3,173 |
Interface, Inc., Class A | 7,400 | 123,358 |
Knoll, Inc. (L) | 6,100 | 126,087 |
Rollins, Inc. | 10,200 | 200,124 |
Schawk, Inc., Class A | 2,300 | 41,561 |
Standard Parking Corp. (I) | 300 | 5,448 |
Construction & Engineering 0.35% | ||
Chicago Bridge & Iron Company NV (I) | 5,900 | 209,568 |
KBR, Inc. | 1,300 | 42,640 |
Electrical Equipment 3.46% | ||
Acuity Brands, Inc. (L) | 2,700 | 152,604 |
AMETEK, Inc. | 24,800 | 1,040,360 |
AZZ, Inc. | 1,200 | 51,192 |
Franklin Electric Company, Inc. | 1,900 | 80,750 |
Polypore International, Inc. (I) | 17,300 | 1,011,012 |
Thomas & Betts Corp. (I) | 1,600 | 88,624 |
Vicor Corp. | 3,700 | 56,351 |
Machinery 6.45% | ||
Actuant Corp., Class A | 1,400 | 39,620 |
Altra Holdings, Inc. (I) | 600 | 12,978 |
ArvinMeritor, Inc. (I) | 19,500 | 349,440 |
Blount International, Inc. (I) | 2,300 | 34,960 |
CLARCOR, Inc. | 1,100 | 45,254 |
Colfax Corp. (I) | 1,800 | 39,924 |
EnPro Industries, Inc. (I) | 500 | 19,840 |
Force Protection, Inc. (I) | 100 | 504 |
FreightCar America, Inc. (I) | 100 | 2,812 |
Gardner Denver, Inc. | 9,300 | 680,202 |
Middleby Corp. (I) | 3,700 | 331,779 |
Pall Corp. | 3,200 | 173,952 |
RBC Bearings, Inc. (I) | 1,400 | 50,666 |
Sauer-Danfoss, Inc. (I) | 7,600 | 232,028 |
The Toro Company | 8,600 | 536,640 |
Timken Company | 10,600 | 516,432 |
TriMas Corp. (I) | 23,400 | 481,338 |
WABCO Holdings, Inc. (I) | 18,500 | 1,080,955 |
Professional Services 1.35% | ||
Acacia Research — Acacia Technologies (I) | 3,800 | 111,416 |
Administaff, Inc. | 6,000 | 179,580 |
Exponent, Inc. (I) | 2,500 | 98,375 |
See notes to financial statements | Annual report | Growth Opportunities Fund | 17 |
Shares | Value | |
Professional Services (continued) | ||
IHS, Inc., Class A (I) | 5,100 | $426,870 |
The Advisory Board Company (I) | 2,900 | 148,364 |
VSE Corp. | 100 | 2,711 |
Road & Rail 0.95% | ||
Celadon Group, Inc. (I) | 2,000 | 29,220 |
Genesee & Wyoming, Inc., Class A (I) | 5,700 | 296,913 |
Old Dominion Freight Lines, Inc. (I) | 10,000 | 307,800 |
Ryder Systems, Inc. | 1,000 | 47,830 |
Trading Companies & Distributors 1.10% | ||
Applied Industrial Technologies, Inc. | 6,800 | 217,872 |
CAI International, Inc. (I) | 500 | 10,590 |
DXP Enterprises, Inc. (I) | 2,600 | 55,276 |
TAL International Group, Inc. | 3,800 | 132,544 |
Textainer Group Holdings, Ltd. | 3,900 | 137,865 |
Titan Machinery, Inc. (I) | 400 | 10,292 |
WESCO International, Inc. (I)(L) | 3,900 | 227,058 |
Information Technology 28.04% | 20,122,482 | |
Communications Equipment 7.88% | ||
Acme Packet, Inc. (I)(L) | 28,000 | 2,106,720 |
ADTRAN, Inc. | 19,700 | 895,956 |
Aruba Networks, Inc. (I) | 1,800 | 54,810 |
Finisar Corp. (I) | 1,200 | 49,224 |
Ixia (I) | 17,200 | 301,860 |
Loral Space & Communications, Inc. (I) | 4,600 | 348,036 |
Plantronics, Inc. | 1,000 | 34,890 |
Riverbed Technology, Inc. (I) | 45,100 | 1,862,179 |
Tellabs, Inc. | 300 | 1,617 |
Computers & Peripherals 1.15% | ||
NCR Corp. (I) | 34,700 | 662,770 |
Stratasys, Inc. (I) | 1,400 | 63,532 |
Super Micro Computer, Inc. (I) | 6,500 | 97,175 |
Electronic Equipment, Instruments & Components 1.06% | ||
Anixter International, Inc. | 900 | 64,458 |
Coherent, Inc. (I) | 800 | 49,400 |
Comverge, Inc. (I) | 100 | 509 |
DDi Corp. | 3,000 | 31,110 |
FARO Technologies, Inc. (I) | 2,900 | 103,385 |
Insight Enterprises, Inc. (I) | 1,100 | 20,119 |
MTS Systems Corp. | 300 | 13,893 |
Spectrum Control, Inc. (I) | 500 | 7,005 |
Trimble Navigation, Ltd. (I) | 9,200 | 452,180 |
Universal Display Corp. (I) | 400 | 16,836 |
Internet Software & Services 1.38% | ||
Ancestry.com, Inc. (I) | 5,100 | 167,586 |
Earthlink, Inc. | 100 | 823 |
IAC/InterActiveCorp (I) | 3,300 | 102,531 |
Liquidity Services, Inc. (I) | 2,900 | 46,603 |
18 | Growth Opportunities Fund | Annual report | See notes to financial statements |
Shares | Value | |
Internet Software & Services (continued) | ||
LogMeIn, Inc. (I)(L) | 2,000 | $71,780 |
OpenTable, Inc. (I) | 5,900 | 524,333 |
Stamps.com, Inc. | 800 | 10,752 |
Support.com, Inc. (I) | 1,600 | 8,928 |
Travelzoo, Inc. (I) | 1,400 | 55,230 |
ValueClick, Inc. (I) | 100 | 1,493 |
IT Services 2.24% | ||
Cardtronics, Inc. (I) | 6,900 | 130,755 |
Forrester Research, Inc. | 600 | 21,708 |
Gartner, Inc. (I) | 3,500 | 132,020 |
Global Cash Access Holdings, Inc. (I) | 14,700 | 50,568 |
iGate Corp. | 7,000 | 126,700 |
Sapient Corp. (I) | 20,000 | 237,000 |
Syntel, Inc. | 5,800 | 305,370 |
VeriFone Systems, Inc. (I) | 12,400 | 563,456 |
Virtusa Corp. (I) | 2,300 | 38,847 |
Office Electronics 0.17% | ||
Zebra Technologies Corp., Class A (I) | 3,300 | 123,156 |
Semiconductors & Semiconductor Equipment 6.79% | ||
Atmel Corp. (I) | 110,700 | 1,625,076 |
AXT, Inc. (I) | 1,900 | 14,098 |
Cirrus Logic, Inc. (I)(L) | 25,800 | 602,430 |
Entropic Communications, Inc. (I)(L) | 28,000 | 259,280 |
GSI Technology, Inc. (I) | 1,400 | 13,174 |
GT Solar International, Inc. (I)(L) | 18,100 | 193,489 |
IXYS Corp. (I) | 3,100 | 38,502 |
Lattice Semiconductor Corp. (I) | 23,400 | 155,376 |
Micrel, Inc. | 10,760 | 144,614 |
MIPS Technologies, Inc. (I) | 16,500 | 200,805 |
MKS Instruments, Inc. | 100 | 3,002 |
Novellus Systems, Inc. (I) | 3,700 | 147,852 |
NVE Corp. (I) | 1,100 | 65,175 |
OmniVision Technologies, Inc. (I) | 8,900 | 272,518 |
Silicon Image, Inc. (I) | 16,600 | 133,464 |
Skyworks Solutions, Inc. (I)(L) | 25,100 | 902,094 |
TriQuint Semiconductor, Inc. (I) | 7,100 | 101,175 |
Software 7.37% | ||
ACI Worldwide, Inc. (I) | 3,400 | 106,454 |
Actuate Corp. (I) | 4,500 | 21,465 |
Ariba, Inc. (I) | 6,300 | 194,985 |
Compuware Corp. (I) | 11,800 | 132,868 |
FactSet Research Systems, Inc. | 2,200 | 230,736 |
Fortinet, Inc. (I) | 600 | 24,504 |
Informatica Corp. (I)(L) | 10,600 | 498,306 |
Manhattan Associates, Inc. (I) | 3,600 | 115,920 |
MICROS Systems, Inc. (I) | 13,900 | 662,196 |
Opnet Technologies, Inc. | 3,600 | 122,688 |
Parametric Technology Corp. (I) | 10,200 | 241,740 |
See notes to financial statements | Annual report | Growth Opportunities Fund | 19 |
Shares | Value | |
Software (continued) | ||
Progress Software Corp. (I) | 4,050 | $118,908 |
Quest Software, Inc. (I) | 14,700 | 393,813 |
Radiant Systems, Inc. (I) | 11,300 | 193,795 |
Renaissance Learning, Inc. | 5,700 | 61,218 |
Rovi Corp. (I) | 210 | 11,612 |
Smith Micro Software, Inc. (I) | 9,100 | 85,267 |
Synchronoss Technologies, Inc. (I) | 4,500 | 154,170 |
TIBCO Software, Inc. (I) | 75,500 | 1,858,810 |
Virnetx Holding Corp. | 5,300 | 63,600 |
Materials 6.26% | 4,492,798 | |
Chemicals 4.12% | ||
Albemarle Corp. | 20,800 | 1,197,248 |
Balchem Corp. | 3,800 | 136,800 |
Ferro Corp. (I) | 1,200 | 19,104 |
Hawkins, Inc. | 2,300 | 88,021 |
Innophos Holdings, Inc. | 800 | 34,264 |
International Flavors & Fragrances, Inc. | 11,200 | 637,840 |
Kraton Performance Polymers, Inc. (I) | 5,600 | 192,080 |
LSB Industries, Inc. (I) | 2,100 | 63,588 |
NewMarket Corp. | 1,100 | 140,921 |
Omnova Solutions, Inc. (I) | 4,200 | 29,568 |
PolyOne Corp. (I) | 12,300 | 170,724 |
Quaker Chemical Corp. | 1,100 | 42,603 |
Rockwood Holdings, Inc. (I) | 3,000 | 139,650 |
The Scotts Miracle-Gro Company, Class A | 1,200 | 67,404 |
Containers & Packaging 0.46% | ||
Ball Corp. | 1,800 | 64,980 |
Crown Holdings, Inc. (I) | 1,700 | 65,416 |
Rock-Tenn Company, Class A (L) | 1,100 | 75,515 |
Silgan Holdings, Inc. | 3,300 | 120,384 |
Metals & Mining 1.60% | ||
Brush Engineered Materials, Inc. (I) | 300 | 13,131 |
Carpenter Technology Corp. | 8,300 | 345,112 |
Globe Specialty Metals, Inc. | 6,400 | 149,056 |
Stillwater Mining Company (I) | 7,400 | 176,638 |
Titanium Metals Corp. (I) | 13,900 | 263,961 |
US Gold Corp. (I) | 28,000 | 203,280 |
Paper & Forest Products 0.08% | ||
Clearwater Paper Corp. (I) | 700 | 55,510 |
Telecommunication Services 1.33% | 954,251 | |
Diversified Telecommunication Services 0.11% | ||
Consolidated Communications Holdings, Inc. | 4,300 | 78,647 |
Wireless Telecommunication Services 1.22% | ||
MetroPCS Communications, Inc. (I) | 54,900 | 790,560 |
USA Mobility, Inc. | 5,700 | 85,044 |
20 | Growth Opportunities Fund | Annual report | See notes to financial statements |
Shares | Value | ||
Utilities 0.06% | $43,889 | ||
Gas Utilities 0.06% | |||
South Jersey Industries, Inc. | 800 | 43,889 | |
Yield | Shares | Value | |
Securities Lending Collateral 9.43% | $6,770,934 | ||
(Cost $6,770,627) | |||
John Hancock Collateral Investment Trust (W) | 0.2855% (Y) | 676,593 | 6,770,934 |
Yield | Shares | Value | |
Short-Term Investments 2.53% | $1,818,545 | ||
(Cost $1,818,545) | |||
State Street Institutional Treasury | |||
Money Market Fund | 0.0453% (Y) | 1,818,545 | 1,818,545 |
Total investments (Cost $62,668,301)† 109.99% | $78,938,582 | ||
Other assets and liabilities, net (9.99%) | ($7,171,788) | ||
Total net assets 100.00% | $71,766,794 | ||
The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund.
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 2-28-11.
(W)Investment is an affiliate of the Fund, the adviser and/or subadviser. Also, it represents the investment of securities lending collateral received.
(Y) The rate shown is the annualized seven-day yield as of 2-28-11.
† At 2-28-11, the aggregate cost of investment securities for federal income tax purposes was $62,711,639. Net unrealized appreciation aggregated $16,226,943, of which $16,799,125 related to appreciated investment securities and $572,182 related to depreciated investment securities.
See notes to financial statements | Annual report | Growth Opportunities Fund | 21 |
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 2-28-11
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 public offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $55,897,674) including | |
$6,585,457 of securities loaned (Note 2) | $72,167,648 |
Investments in affiliated issuers, at value (Cost $6,770,627) (Note 2) | 6,770,934 |
Total investments, at value (Cost $62,668,301) | 78,938,582 |
Receivable for investments sold | 933,550 |
Receivable for fund shares sold | 70,481 |
Dividends and interest receivable | 14,646 |
Receivable for securities lending income | 1,609 |
Other receivables and prepaid expenses | 12,598 |
Total assets | 79,971,466 |
Liabilities | |
Payable for investments purchased | 1,204,428 |
Payable for fund shares repurchased | 63,123 |
Payable upon return of securities loaned (Note 2) | 6,770,167 |
Payable to affiliates | |
Accounting and legal services fees | 1,196 |
Transfer agent fees | 21,307 |
Trustees’ fees | 8,015 |
Due to Adviser | 27,038 |
Other liabilities and accrued expenses | 109,398 |
Total liabilities | 8,204,672 |
Net assets | |
Capital paid-in | $86,292,529 |
Accumulated net investment loss | (5,598) |
Accumulated net realized loss on investments and futures contracts | (30,790,418) |
Net unrealized appreciation (depreciation) on investments | 16,270,281 |
Net assets | $71,766,794 |
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 ($63,118,428 ÷ 2,652,231 shares) | $23.80 |
Class B ($5,144,341 ÷ 223,090 shares)1 | $23.06 |
Class C ($3,321,521 ÷ 144,111 shares)1 | $23.05 |
Class I ($182,504 ÷ 7,510 shares) | $24.30 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $25.05 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
22 | Growth Opportunities 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 operations For the year ended 2-28-11
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 | |
Dividends | $370,844 |
Securities lending | 31,606 |
Interest | 2,823 |
Less foreign taxes withheld | (163) |
Total investment income | 405,110 |
Expenses | |
Investment management fees (Note 5) | 475,337 |
Distribution and service fees (Note 5) | 228,099 |
Accounting and legal services fees (Note 5) | 11,558 |
Transfer agent fees (Note 5) | 169,920 |
Trustees’ fees (Note 5) | 3,962 |
State registration fees (Note 5) | 38,020 |
Printing and postage (Note 5) | 22,184 |
Professional fees | 46,722 |
Custodian fees | 12,772 |
Registration and filing fees | 25,164 |
Other | 79,547 |
Total expenses | 1,113,285 |
Less expense reductions (Note 5) | (172,440) |
Net expenses | 940,845 |
Net investment loss | (535,735) |
Realized and unrealized gain (loss) | |
Net realized gain on | |
Investments in unaffiliated issuers | 10,021,126 |
Investments in affiliated issuers | 741 |
Futures contracts (Note 3) | 305,152 |
10,327,019 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 11,154,809 |
Investments in affiliated issuers | (2,668) |
Futures contracts (Note 3) | (112,098) |
11,040,043 | |
Net realized and unrealized gain | 21,367,062 |
Increase in net assets from operations | $20,831,327 |
See notes to financial statements | Annual report | Growth Opportunities Fund | 23 |
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 | |
2-28-11 | 2-28-10 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment loss | ($535,735) | ($389,560) |
Net realized gain (loss) | 10,327,019 | (8,764,202) |
Change in net unrealized appreciation (depreciation) | 11,040,043 | 27,627,086 |
Increase in net assets resulting from operations | 20,831,327 | 18,473,324 |
From Fund share transactions (Note 6) | (2,659,363) | (7,035,680) |
Total increase | 18,171,964 | 11,437,644 |
Net assets | ||
Beginning of year | 53,594,830 | 42,157,186 |
End of year | $71,766,794 | $53,594,830 |
Accumulated net investment loss | ($5,598) | ($942) |
24 | Growth Opportunities Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $16.90 | $11.53 | $20.76 | $24.34 | $23.29 |
Net investment loss2 | (0.16) | (0.10) | (0.10) | (0.15) | (0.07)3 |
Net realized and unrealized gain (loss) on investments | 7.06 | 5.47 | (9.13) | (3.43) | 1.36 |
Total from investment operations | 6.90 | 5.37 | (9.23) | (3.58) | 1.29 |
Less distributions | |||||
From net realized gain | — | — | — | —4 | (0.24) |
Net asset value, end of year | $23.80 | $16.90 | $11.53 | $20.76 | $24.34 |
Total return (%)5,6 | 40.83 | 46.57 | (44.46) | (14.69) | 5.57 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $63 | $47 | $36 | $72 | $5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.74 | 2.127 | 2.01 | 1.81 | 5.59 |
Expenses net of fee waivers | 1.50 | 1.647 | 1.81 | 1.55 | 1.32 |
Expenses net of fee waivers and credits | 1.50 | 1.517 | 1.54 | 1.54 | 1.32 |
Net investment loss | (0.82) | (0.68) | (0.52) | (0.64) | (0.34)3 |
Portfolio turnover (%) | 126 | 125 | 140 | 2628 | 96 |
1 Effective 6-12-06, shareholders of the former GMO Small/Mid Cap Growth Fund (the Predecessor Fund) became owners of an equal number of full and fractional Class A shares of the John Hancock Growth Opportunities Fund. Additionally, the accounting and performance history of the former GMO Small/Mid Cap Growth Fund was redesignated as that of John Hancock Growth Opportunities Fund Class A.
2 Based on the average daily shares outstanding.
3 Net investment loss per share and ratio of net investment loss to average net assets reflects a special dividend received by the Fund, which amounted to $0.03 per share and 0.14% of average net assets.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Does not reflect the effect of sales charges, if any.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
8 Excludes merger activity.
See notes to financial statements | Annual report | Growth Opportunities Fund | 25 |
CLASS B SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $16.49 | $11.33 | $20.52 | $24.23 | $22.17 |
Net investment loss2 | (0.28) | (0.20) | (0.23) | (0.31) | (0.20)3 |
Net realized and unrealized gain (loss) on investments | 6.85 | 5.36 | (8.96) | (3.40) | 2.50 |
Total from investment operations | 6.57 | 5.16 | (9.19) | (3.71) | 2.30 |
Less distributions | |||||
From net realized gain | — | — | — | —4 | (0.24) |
Net asset value, end of year | $23.06 | $16.49 | $11.33 | $20.52 | $24.23 |
Total return (%)5,6 | 39.84 | 45.54 | (44.79) | (15.29) | 10.407 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $5 | $5 | $5 | $13 | —8 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.69 | 3.199 | 3.07 | 2.61 | 14.6210 |
Expenses net of fee waivers | 2.20 | 2.249 | 2.72 | 2.25 | 2.2210 |
Expenses net of fee waivers and credits | 2.20 | 2.219 | 2.24 | 2.24 | 2.2210 |
Net investment loss | (1.52) | (1.38) | (1.24) | (1.34) | (1.21)3,10 |
Portfolio turnover (%) | 126 | 125 | 140 | 26211 | 96 |
1 The inception date for Class B shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Net investment loss per share and ratio of net investment loss to average net assets reflects a special dividend received by the Fund, which amounted to $0.02 per share and 0.11% of average net assets.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Does not reflect the effect of sales charges, if any.
7 Not annualized.
8 Less than $500,000.
9 Includes the impact of proxy expenses, which amounted to 0.04% of average net assets.
10 Annualized.
11 Excludes merger activity.
CLASS C SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $16.49 | $11.32 | $20.53 | $24.23 | $22.17 |
Net investment loss2 | (0.29) | (0.20) | (0.21) | (0.32) | (0.19)3 |
Net realized and unrealized gain (loss) on investments | 6.85 | 5.37 | (9.00) | (3.38) | 2.49 |
Total from investment operations | 6.56 | 5.17 | (9.21) | (3.70) | 2.30 |
Less distributions | |||||
From net realized gain | — | — | — | —4 | (0.24) |
Net asset value, end of year | $23.05 | $16.49 | $11.32 | $20.53 | $24.23 |
Total return (%)5,6 | 39.78 | 45.67 | (44.86) | (15.25) | 10.407 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $3 | $2 | $2 | $3 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.78 | 3.278 | 3.45 | 3.14 | 10.439 |
Expenses net of fee waivers | 2.20 | 2.288 | 2.55 | 2.25 | 2.229 |
Expenses net of fee waivers and credits | 2.20 | 2.218 | 2.24 | 2.24 | 2.229 |
Net investment loss | (1.53) | (1.39) | (1.21) | (1.35) | (1.15)3,9 |
Portfolio turnover (%) | 126 | 125 | 140 | 26210 | 96 |
1 The inception date for Class C shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Net investment loss per share and ratio of net investment loss to average net assets reflects a special dividend received by the Fund, which amounted to $0.03 per share and 0.11% of average net assets.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Does not reflect the effect of sales charges, if any.
7 Not annualized.
8 Includes the impact of proxy expenses, which amounted to 0.04% of average net assets.
9 Annualized.
10 Excludes merger activity.
26 | Growth Opportunities Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $17.18 | $11.66 | $20.90 | $24.41 | $22.17 |
Net investment loss2 | (0.06) | (0.04) | (0.01) | (0.07) | (0.02)3 |
Net realized and unrealized gain (loss) on investments | 7.18 | 5.56 | (9.23) | (3.44) | 2.50 |
Total from investment operations | 7.12 | 5.52 | (9.24) | (3.51) | 2.48 |
Less distributions | |||||
From net realized gain | — | — | — | —4 | (0.24) |
Net asset value, end of year | $24.30 | $17.18 | $11.66 | $20.90 | $24.41 |
Total return (%)5 | 41.44 | 47.34 | (44.21) | (14.36) | 11.226 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | —7 | —7 | —7 | —7 | —7 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 7.92 | 26.998 | 121.96 | 12.17 | 16.269 |
Expenses net of fee waivers | 1.04 | 1.078 | 1.09 | 1.04 | 1.139 |
Expenses net of fee waivers and credits | 1.04 | 1.078 | 1.09 | 1.04 | 1.139 |
Net investment loss | (0.31) | (0.27) | (0.04) | (0.30) | (0.10)3,9 |
Portfolio turnover (%) | 126 | 125 | 140 | 26210 | 96 |
1 The inception date for Class I shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Net investment loss per share and ratio of net investment loss to average net assets reflects a special dividend received by the Fund, which amounted to $0.03 per share and 0.11% of average net assets.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Not annualized.
7 Less than $500,000.
8 Includes the impact of proxy expenses, which amounted to 0.01% of average net assets.
9 Annualized.
10 Excludes merger activity.
See notes to financial statements | Annual report | Growth Opportunities Fund | 27 |
Notes to financial statements
Note 1 — Organization
John Hancock Growth Opportunities Fund (the Fund) is a non-diversified series of John Hancock Funds III (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 long-term capital growth.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of Assets and Liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, printing and postage, state registration fees and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase. Class R1 shares converted into Class A shares on August 21, 2009.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. 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 quoted prices in active markets for identical securities. Level 2 includes significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these techniques are received from independent pricing vendors and 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, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
As of February 28, 2011, all investments are categorized as Level 1 under the hierarchy described above. Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the year ended February 28, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their closing net asset values each day. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the
28 | Growth Opportunities Fund | Annual report |
close of trading. Other portfolio securities and assets, where 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.
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. Dividend income is recorded on the ex-date for dividends of foreign securities where the dividend may not be known until after ex-date.
Securities lending. The Fund may lend its securities to earn additional income. It receives and maintains cash collateral received from the borrower in an amount not less than the market value of the loaned securities. The Fund will invest its collateral in JHCIT, an affiliate of the Fund, and as a result, the Fund will receive the benefit of any gains and bear any losses generated by JHCIT. Although risk of the loss of the securities lent is mitigated by holding the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities or if collateral investments decline in value. The Fund may receive compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Income received from JHCIT is a component of securities lending income as recorded on the Statement of Operations.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to a 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 has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law for any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with State Street Bank and Trust Company (SSBT) which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 31, 2010, the amount of the line of credit was $150 million. 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. For the year ended February 28, 2011, the Fund had no borrowings under the line of credit.
Effective March 30, 2011, the line of credit with SSBT expired and a similar arrangement was established with Citibank N.A.
Expenses. The majority of expenses are directly attributable to an individual 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 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 asset value of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rates applicable to each class.
Annual report | Growth Opportunities Fund | 29 |
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.
For federal income tax purposes, the Fund has a capital loss carryforward of $30,747,080 available to offset future net realized capital gains. The loss carryforward expires as follows: February 28, 2017 — $11,007,488 and February 28, 2018 — $19,739,592.
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment 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.
As of February 28, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, at least annually. There were no distributions during the years ended February 28, 2011 and February 28, 2010.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of February 28, 2011, the Fund had no distributable earnings on a tax basis.
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 tax return of capital.
Capital accounts within 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 net operating losses, wash sale loss deferrals and merger related transactions.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objectives. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, derivatives expose the Fund to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
30 | Growth Opportunities Fund | Annual report |
Futures. A futures contract is a contractual agreement to buy or sell a particular commodity, 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 hedged security values and/or interest rates and potential losses in excess of the amounts recognized on the Statement of Assets and Liabilities.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. 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 contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) is recorded by the Fund.
During the year ended February 28, 2011, the Fund used futures contracts to maintain diversity and liquidity of the portfolio. During year ended February 28, 2011, the Fund held futures contracts with notional absolute values ranging from zero to $2.2 million, as measured at each quarter end. There were no open futures contracts as of February 28, 2011.
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 February 28, 2011:
RISK | STATEMENT OF OPERATIONS LOCATION | FUTURES CONTRACTS |
Equity contracts | Net realized gain | $305,152 |
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 February 28, 2011:
RISK | STATEMENT OF OPERATIONS LOCATION | FUTURES |
Change in unrealized appreciation | ||
Equity contracts | (depreciation) | ($112,098) |
Note 4 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Trust. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Annual report | Growth Opportunities Fund | 31 |
Management fee. The Fund has an investment management contract with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.80% of the first $500,000,000 of the Fund’s average daily net assets; (b) 0.78% of the next $500,000,000; and (c) 0.77% of the next $1,500,000,000; and (d) 0.76% of the Fund’s average daily net assets in excess of $2,500,000,000. The Adviser has a subadvisory agreement with Grantham, Mayo, Van Otterloo & Co. LLC. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the year ended February 28, 2011 were equivalent to an annual effective rate of 0.80% of the Fund’s average daily net assets.
The Adviser has agreed to reimburse or limit certain expenses for each share class of the Fund. This agreement excludes taxes, portfolio brokerage commissions, interest and litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. In addition, fees incurred under any agreement or plans of the Fund dealing with services for the shareholders and others with beneficial interest in shares of the Fund, are excluded. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.50%, 2.20%, 2.20% and 1.04% for Class A, Class B, Class C and Class I shares, respectively. The fee waivers and/or reimbursements will continue in effect until June 30, 2011. Prior to July 1, 2010, the fee waivers and/or reimbursements were such that the above expenses would not exceed 1.02% for Class I shares.
Accordingly, these expense reductions amounted to $123,423, $22,539, $15,101 and $11,377 for Class A, Class B, Class C and Class I shares, respectively, for the year ended February 28, 2011.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of 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 February 28, 2011 amounted to an annual rate of 0.02% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B and Class C 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. The Fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Fund’s shares.
CLASS | 12b–1 FEE | ||
Class A | 0.30% | ||
Class B | 1.00% | ||
Class C | 1.00% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $32,748 for the year ended February 28, 2011. Of this amount, $5,175 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $19,940 was paid as sales commissions to broker-dealers and $7,633 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a broker-dealer affiliate of the Adviser.
32 | Growth Opportunities Fund | Annual report |
Class B and Class C shares are subject to contingent deferred sales charges (CDSC). Class B shares that are redeemed within six years of purchase are subject to CDSC, at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2011, CDSCs received by the Distributor amounted to $8,151 and $86 for Class B and Class C shares, respectively.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services or Transfer Agent), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain revenues that Signature Services receives in connection with the performance of the service they provide to the funds. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets
Prior to July 1, 2010, the transfer agent fees were made up of three components:
• The Fund paid a monthly transfer agent fee at an annual rate of 0.05% for Class A, Class B, and Class C shares and 0.04% for Class I shares, based on each class’s average daily net assets.
• The Fund paid a monthly fee based on an annual rate of $16.50 per shareholder account.
• In addition, Signature Services was reimbursed for certain out-of-pocket expenses.
Class level expenses. Class level expenses for the year ended February 28, 2011 were: | ||||
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $156,179 | $146,649 | $8,412 | $19,240 |
Class B | 45,912 | 16,142 | 9,306 | 1,434 |
Class C | 26,008 | 6,719 | 9,969 | 966 |
Class I | — | 410 | 10,333 | 544 |
Total | $228,099 | $169,920 | $38,020 | $22,184 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and payable to affiliates — trustees’ fees, respectively, in the accompanying Statement of Assets and Liabilities.
Annual report | Growth Opportunities Fund | 33 |
Note 6 — Fund share transactions
Transactions in Fund shares for the years ended February 28, 2011 and February 28, 2010 were as follows:
Year ended 2-28-11 | Year ended 2-28-10 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 309,928 | $6,227,473 | 239,627 | $3,485,927 |
Exchanged from Class R1 | — | — | 6,731 | 100,417 |
Repurchased | (428,241) | (8,291,062) | (581,309) | (8,514,817) |
Net decrease | (118,313) | ($2,063,589) | (334,951) | ($4,928,473) |
Class B shares | ||||
Sold | 38,918 | $771,837 | 33,636 | $477,682 |
Repurchased | (98,790) | (1,855,707) | (152,890) | (2,199,177) |
Net decrease | (59,872) | ($1,083,870) | (119,254) | ($1,721,495) |
Class C shares | ||||
Sold | 72,408 | $1,350,138 | 20,040 | $295,286 |
Repurchased | (53,653) | (968,349) | (45,542) | (585,976) |
Net increase (decrease) | 18,755 | $381,789 | (25,502) | ($290,690) |
Class I shares | ||||
Sold | 50,028 | $943,676 | 5,869 | $76,363 |
Repurchased | (44,392) | (837,369) | (5,195) | (76,017) |
Net increase | 5,636 | $106,307 | 674 | $346 |
Class R1 shares | ||||
Sold | — | — | 381 | $5,049 |
Exchanged for Class A | — | — | (6,769) | (100,417) |
Net decrease | — | — | (6,388) | ($95,368) |
Net decrease | (153,794) | ($2,659,363) | (485,421) | ($7,035,680) |
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $71,878,215 and $73,894,903, respectively, for the year ended February 28, 2011.
Note 8 — Subsequent event
At the close of business on April 8, 2011, the Fund was acquired by the John Hancock Small Company Fund (the Acquiring Fund). This reorganization was approved by the Board of Trustees on December 7, 2010 and subsequently approved by the shareholders of the Fund on March 23, 2011. Under the terms of the reorganization, the Fund transferred all of its assets and liabilities to the Acquiring Fund in exchange for shares of equal value of the Acquiring Fund. Upon completion of the reorganization the Fund terminated. In addition, the Fund incurred $71,600 of merger expenses, which amounted to 0.12% of average net assets.
34 | Growth Opportunities Fund | Annual report |
Auditors’ report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock Growth Opportunities Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio 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 Growth Opportunities Fund (the “Fund”) at February 28, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011 by correspondence with the custodian 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
April 19, 2011
Annual report | Growth Opportunities Fund | 35 |
Shareholder meeting
The Fund held a Special Meeting of Shareholders on March 23, 2011. The following proposal was considered by the shareholders:
Proposal: Approve an Agreement and Plan of Reorganization between John Hancock Growth Opportunities Fund and John Hancock Small Company Fund. The votes cast are set forth below.
THE PROPOSAL PASSED ON MARCH 23, 2011.
FOR | AGAINST | ABSTAIN | UNINSTRUCTED |
1,145,331.1523 | 69,182.3307 | 72,823.8580 | 266,667.0000 |
36 | Growth Opportunities 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 |
Steven R. Pruchansky, Born: 1944 | 2006 | 47 |
Chairperson (since January 2011); 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 (since 2008); 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). | ||
James F. Carlin, Born: 1940 | 2006 | 47 |
Chief Executive Officer, Director and Treasurer, Alpha Analytical Laboratories (environmental, chemical | ||
and pharmaceutical analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance | ||
Agency, Inc. (since 1995); Chairman and Chief Executive Officer, CIMCO, LLC (management/ | ||
investments) (since 1987). | ||
William H. Cunningham, Born: 1944 | 2006 | 47 |
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 of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson,2 Born: 1952 | 2008 | 47 |
Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); 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 Corp. (1996–2009); Board of Directors of | ||
Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (since 2007). | ||
Charles L. Ladner,2 Born: 1938 | 2006 | 47 |
Vice Chairperson (since March 2011); Chairman and Trustee, Dunwoody Village, Inc. (retirement | ||
services) (since 2008); Director, Philadelphia Archdiocesan Educational Fund (since 2009); Senior Vice | ||
President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); | ||
Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (gas | ||
distribution) (until 1997); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association | ||
(Cooperating Association, National Park Service) (until 2005). |
Annual report | Growth Opportunities Fund | 37 |
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 |
Stanley Martin,2 Born: 1947 | 2008 | 47 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore, Born: 1939 | 2006 | 47 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). | ||
Patti McGill Peterson,2 Born: 1943 | 2006 | 47 |
Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy | ||
(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President, | ||
Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public | ||
Affairs, Cornell University (1997–1998); Former President Wells College, St. Lawrence University and the | ||
Association of Colleges and Universities of the State of New York. Director of the following: Niagara | ||
Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until | ||
1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007); | ||
Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development | ||
Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational | ||
Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 47 |
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (“KPMG”) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
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 |
Hugh McHaffie,4 Born: 1959 | 2010 | 47 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Trust and John Hancock Funds II (since 2009); Trustee, John Hancock retail | ||
funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment | ||
Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior Vice President, Individual | ||
Business Product Management, MetLife, Inc. (1999–2006). |
38 | Growth Opportunities Fund | Annual report |
Non-Independent Trustees3 (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 |
John G. Vrysen, Born: 1955 | 2009 | 47 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock Funds II | ||
and John Hancock Trust (since 2007); Chief Operating Officer, John Hancock retail funds (until 2009); | ||
Trustee, John Hancock retail funds (since 2009). | ||
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 | |
Keith F. Hartstein, Born: 1956 | 2006 | |
President and Chief Executive Officer | ||
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | ||
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | ||
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | ||
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | ||
Force Marketing Committee (since 2003). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Senior Vice President and Chief Operating Officer | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | ||
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | ||
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock Trust | ||
(since 2006); Senior Vice President, Product Management and Development, John Hancock Funds, | ||
LLC (until 2009). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | ||
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | ||
Funds II and John Hancock Trust (since 2006); Vice President and Associate General Counsel, | ||
Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal Counsel, MML | ||
Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual Select Funds and | ||
MassMutual Premier Funds (2004–2006). |
Annual report | Growth Opportunities Fund | 39 |
Principal officers who are not Trustees (continued) | ||
Name, Year of Birth | Officer | |
Position(s) held with Fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Francis V. Knox, Jr., Born: 1947 | 2006 | |
Chief Compliance Officer | ||
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | ||
retail funds, John Hancock Funds II, John Hancock Trust, John Hancock Advisers, LLC and John Hancock | ||
Investment Management Services, LLC (since 2005); Vice President and Chief Compliance Officer, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (2005–2008). | ||
Charles A. Rizzo, Born: 1957 | 2007 | |
Chief Financial Officer | ||
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | ||
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Trust (since 2007); | ||
Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, Goldman | ||
Sachs (2005–2007). | ||
Salvatore Schiavone,4 Born: 1965 | 2010 | |
Treasurer | ||
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | ||
John Hancock retail funds (since 2010); Treasurer, John Hancock Closed-End Funds (since 2009); | ||
Assistant Treasurer, John Hancock Funds II and John Hancock Trust (since 2007); Assistant Treasurer, | ||
John Hancock retail funds, John Hancock Funds II and John Hancock Trust (2007–2009); Assistant | ||
Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management Research | ||
Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
4 Mr. McHaffie and Mr. Schiavone were appointed by the Board of Trustees effective 8-31-10.
40 | Growth Opportunities Fund | Annual report |
More information
Trustees | Investment adviser |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management |
James F. Carlin | Services, LLC |
William H. Cunningham | |
Deborah C. Jackson* | Subadviser |
Charles L. Ladner, Vice Chairperson* | Grantham, Mayo, Van Otterloo & Co. LLC |
Stanley Martin* | |
Hugh McHaffie | Principal distributor |
Dr. John A. Moore | John Hancock Funds, LLC |
Patti McGill Peterson* | |
Gregory A. Russo | Custodian |
John G. Vrysen | State Street Bank and Trust Company |
Officers | Transfer agent |
Keith F. Hartstein | John Hancock Signature Services, Inc. |
President and Chief Executive Officer | |
Legal counsel | |
Andrew G. Arnott | K&L Gates LLP |
Senior Vice President and Chief Operating Officer | |
Independent registered | |
Thomas M. Kinzler | public accounting firm |
Secretary and Chief Legal Officer | PricewaterhouseCoopers LLP |
Francis V. Knox, Jr. | The report is certified under the Sarbanes-Oxley |
Chief Compliance Officer | Act, which requires mutual funds and other public |
companies to affirm that, to the best of their | |
Charles A. Rizzo | knowledge, the information in their financial reports |
Chief Financial Officer | is fairly and accurately stated in all material respects. |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
Annual report | Growth Opportunities Fund | 41 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/growthoppsx38x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock Growth Opportunities Fund. | 8400A 2/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/11 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/intlgrowthx1x1.jpg)
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC
International stocks fared quite well during the 12 months ended February 28, 2011, thanks to a vigorous second-half rally. During the first half of the period, global markets struggled with concern about the European sovereign debt crisis, weakness in the energy sector following the BP drilling rig explosion and oil leak in the Gulf of Mexico and tepid data on the U.S. economy that led investors to fear a double-dip recession. Over the summer, anxiety about the European debt situation eased and BP managed to contain its leaking undersea well. Meanwhile, the Federal Reserve proposed another round of quantitative easing to stimulate U.S. economic growth. The Fed’s remarks ignited a global stock rally that boosted the MSCI EAFE Growth Index to a gain of 21.72%, while the average large blend fund monitored by Morningstar, Inc. advanced 20.63%.
During the period, John Hancock International Growth Fund’s Class A shares returned 21.58% at net asset value. The strongest sector contributions came from industrials, financials and consumer staples. Geographically, Denmark, Sweden and Japan were noteworthy contributors. The top individual contributor was Danish insulin maker Novo Nordisk A/S, whose stock advanced by more than 80%. Overweighting U.K.-headquartered mining company Rio Tinto PLC also helped, as did underweighting two weak benchmark components from the financial sector, Barclays PLC and Westpac Banking Corp. Not owning Israel-based Teva Pharmaceuticals further bolstered performance. Conversely, the Fund’s sizable overweighting in health care weighed on performance, although we offset that negative with positive stock selection in the sector. On a country basis, weak picks in Switzerland detracted. Additionally, our efforts to hedge an out-of-benchmark Canadian exposure via currency forward contracts had a mildly negative impact. At the stock level, a large overweighting in U.K. drug stock GlaxoSmithKline PLC was counterproductive. Other notable detractors were benchmark components we underweighted or didn’t own for quality or valuation reasons: Australian natural resources company BHP Billiton Ltd, Swiss bank UBS AG and two German stocks, automaker Daimler AG and industrial conglomerate Siemens AG.
This commentary reflects the views of the portfolio managers through the end of the Fund’s period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. 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.
6 | International Growth Fund | Annual report |
A look at performance
| |||||||||
For the period ended February 28, 2011 | |||||||||
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception1 | 1-year | 5-year | 10-year | inception1 | ||
Class A | 15.52 | — | — | 2.78 | 15.52 | — | — | 13.85 | |
Class B | 15.56 | — | — | 2.75 | 15.56 | — | — | 13.66 | |
Class C | 19.59 | — | — | 3.11 | 19.59 | — | — | 15.56 | |
Class I2 | 22.08 | — | — | 4.37 | 22.08 | — | — | 22.41 | |
Class 12 | 22.11 | — | — | 4.39 | 22.11 | — | — | 22.50 | |
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I and Class 1 shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The waivers and expense limitations are contractual at least until 6-30-11. The net expenses are as follows: Class A — 1.70%, Class B — 2.40%, Class C — 2.40 and Class 1 — 1.20%. Had the fee waivers and expense limitations not been in place, the gross expenses would be as follows: Class A — 1.79%, Class B — 4.17%, Class C — 3.67% and Class 1 — 1.22%. For Class I, the net expenses equal the gross expenses and are 1.23%.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Fund’s performance results reflect any applicable expense reductions, without which the expenses increase and results would have been less favorable.
1 From 6-12-06.
2 For certain types of investors, as described in the Fund’s Class I and Class 1 shares prospectuses.
Annual report | International Growth Fund | 7 |
A look at performance
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/intlgrowthx4x1.jpg)
Period | Without | With maximum | |||
beginning | sales charge | sales charge | Index 1 | Index 2 | |
Class B | 6-12-06 | $11,566 | $11,366 | $11,552 | $11,991 |
Class C2 | 6-12-06 | 11,556 | 11,556 | 11,552 | 11,991 |
Class I3 | 6-12-06 | 12,241 | 12,241 | 11,552 | 11,991 |
Class 13 | 6-12-06 | 12,250 | 12,250 | 11,552 | 11,991 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B, Class C, Class I and Class 1 shares, respectively, as of 2-28-11. 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.
MSCI EAFE Index (gross of foreign withholding tax on dividends) — Index 1 — is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The index consists of 21 developed market country indexes.
MSCI EAFE Growth Index (gross of foreign withholding tax on dividends) — Index 2 — is a free float-adjusted market capitalization index that is designed to measure the performance of growth-oriented developed market stocks within Europe, Australasia and the Far East. The Index consists of 21 developed market country indexes.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 NAV represents net asset value and POP represents public offering price.
2 The contingent deferred sales charge, if any, is not applicable.
3 For certain types of investors, as described in the Fund’s Class I and Class 1 shares prospectuses.
8 | International Growth Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about 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 September 1, 2010 with the same investment held until February 28, 2011.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,232.10 | $8.86 |
Class B | 1,000.00 | 1,226.80 | 13.25 |
Class C | 1,000.00 | 1,227.10 | 13.25 |
Class I | 1,000.00 | 1,234.30 | 6.32 |
Class 1 | 1,000.00 | 1,234.60 | 6.26 |
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 February 28, 2011, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/intlgrowthx5x1.jpg)
Annual report | International Growth 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 September 1, 2010, with the same investment held until February 28, 2011. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,016.90 | $8.00 |
Class B | 1,000.00 | 1,012.90 | 11.98 |
Class C | 1,000.00 | 1,012.90 | 11.98 |
Class I | 1,000.00 | 1,019.10 | 5.71 |
Class 1 | 1,000.00 | 1,019.20 | 5.66 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.60%, 2.40%, 2.40%, 1.14% and 1.13% for Class A, Class B, Class C, Class I and Class 1 shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | International Growth Fund | Annual report |
Portfolio summary
Top 10 Holdings1 | ||||
GlaxoSmithKline PLC | 3.5% | British American Tobacco PLC | 1.6% | |
Nestle SA | 3.2% | SAP AG | 1.5% | |
Novo Nordisk A/S | 2.9% | Daimler AG | 1.4% | |
Roche Holdings AG | 2.4% | Honda Motor Company, Ltd. | 1.2% | |
Novartis AG | 1.8% | Canon, Inc. | 1.2% | |
Sector Composition2,3 | ||||
Health Care | 17% | Financials | 8% | |
Consumer Discretionary | 16% | Telecommunication Services | 4% | |
Industrials | 16% | Energy | 3% | |
Consumer Staples | 13% | Utilities | 2% | |
Materials | 9% | Short-Term Securities & Other | 4% | |
Information Technology | 8% | |||
1 As a percentage of net assets on 2-28-11. Cash and cash equivalents not included in Top 10 Holdings and Top Five Countries.
2 As a percentage of net assets on 2-28-11.
3 International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. 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.
Annual report | International Growth Fund | 11 |
Fund’s investments
As of 2-28-11
Shares | Value | |
Common Stocks 93.99% | $242,526,085 | |
(Cost $203,718,076) | ||
Australia 4.02% | 10,383,783 | |
BHP Billiton, Ltd. | 45,178 | 2,134,417 |
Cochlear, Ltd. | 3,748 | 296,225 |
CSL, Ltd. | 15,954 | 579,731 |
Fortescue Metals Group, Ltd. (I) | 31,629 | 216,178 |
JB Hi-Fi, Ltd. (L) | 7,072 | 141,478 |
Newcrest Mining, Ltd. | 17,436 | 676,110 |
Rio Tinto, Ltd. | 16,443 | 1,435,153 |
Sims Group, Ltd. | 6,858 | 131,100 |
Telstra Corp., Ltd. | 193,663 | 551,500 |
Wesfarmers, Ltd. | 15,801 | 532,969 |
Westpac Banking Corp. | 16,846 | 405,667 |
Woodside Petroleum, Ltd. (L) | 22,686 | 988,407 |
Woolworths, Ltd. | 83,638 | 2,294,848 |
Austria 0.27% | 688,618 | |
Andritz AG | 2,881 | 243,497 |
Immofinanz AG (I)(L) | 39,303 | 173,653 |
Immofinanz AG — Escrow Shares (I)(L) | 49,581 | 0 |
Raiffeisen International Bank Holding AG | 2,773 | 166,568 |
Voestalpine AG | 2,267 | 104,900 |
Belgium 0.97% | 2,509,541 | |
Anheuser-Busch InBev NV | 5,495 | 307,082 |
Bekaert SA | 4,005 | 434,743 |
Belgacom SA | 6,631 | 248,512 |
Colruyt SA | 9,285 | 466,587 |
Delhaize Group SA | 2,611 | 201,919 |
Mobistar SA | 3,863 | 246,676 |
Telenet Group Holding NV (I) | 5,111 | 229,204 |
Umicore | 7,428 | 374,818 |
Bermuda 0.23% | 582,458 | |
Alliance Oil Company, Ltd., SADR (I) | 6,651 | 119,596 |
Frontline, Ltd. | 3,858 | 104,455 |
Golden Ocean Group, Ltd. (L) | 63,400 | 81,773 |
Seadrill, Ltd. | 7,262 | 276,634 |
12 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Canada 3.12% | $8,050,162 | |
Bank of Montreal (L) | 6,200 | 395,401 |
Barrick Gold Corp. | 27,600 | 1,456,773 |
Canadian National Railway Company | 22,600 | 1,652,983 |
Eldorado Gold Corp. | 15,300 | 260,630 |
Enbridge, Inc. | 4,600 | 274,849 |
Imperial Oil, Ltd. | 3,900 | 203,079 |
Magna International, Inc. | 10,700 | 526,988 |
Pacific Rubiales Energy Corp. | 6,600 | 221,189 |
Potash Corp. of Saskatchewan, Inc. | 2,400 | 147,871 |
Research In Motion, Ltd. (I) | 12,700 | 838,562 |
Rogers Communications, Inc., Class B | 10,100 | 356,575 |
Royal Bank of Canada | 4,200 | 245,503 |
Saputo, Inc. | 4,900 | 207,590 |
Shaw Communications, Inc., Class B | 6,000 | 127,775 |
Shoppers Drug Mart Corp. | 8,700 | 368,936 |
Silver Wheaton Corp. (I) | 5,500 | 233,802 |
Teck Resources, Ltd., Class B | 6,400 | 354,073 |
Valeant Pharmaceuticals International, Inc. | 4,425 | 177,583 |
Cayman Islands 0.14% | 366,540 | |
Sands China, Ltd. (I) | 90,000 | 214,789 |
Wynn Macau, Ltd. | 56,000 | 151,751 |
Denmark 3.55% | 9,153,370 | |
A P Moller Maersk A/S, Series A | 21 | 208,186 |
Carlsberg A/S | 5,058 | 537,793 |
Danske Bank A/S (I) | 15,321 | 359,365 |
Novo Nordisk A/S | 58,767 | 7,399,479 |
Novozymes A/S, B Shares | 4,639 | 648,547 |
Finland 1.11% | 2,868,437 | |
Kone Oyj (L) | 11,134 | 607,369 |
Metra Oyj | 5,174 | 397,636 |
Metso Oyj | 9,734 | 503,013 |
Nokia AB Oyj | 20,710 | 178,527 |
Nokian Renkaat Oyj | 6,062 | 247,076 |
Stora Enso Oyj, Series R | 25,531 | 288,149 |
UPM-Kymmene Oyj | 32,518 | 646,667 |
France 6.38% | 16,472,940 | |
Air Liquide SA | 2,323 | 300,664 |
Arkema | 3,329 | 243,563 |
BNP Paribas | 20,446 | 1,598,084 |
Bureau Veritas SA | 4,684 | 361,493 |
Carrefour SA | 5,212 | 255,888 |
Christian Dior SA | 1,369 | 197,408 |
Cie de Saint-Gobain SA | 3,778 | 225,792 |
Credit Agricole SA | 12,073 | 212,183 |
Danone SA | 9,579 | 600,374 |
Dassault Systemes SA | 3,681 | 281,832 |
Essilor International SA | 4,567 | 326,151 |
See notes to financial statements | Annual report | International Growth Fund | 13 |
Shares | Value | |
France (continued) | ||
Eutelsat Communications | 5,471 | $218,245 |
Hermes International SA | 3,669 | 798,818 |
L’Oreal SA | 7,961 | 925,690 |
Legrand SA, ADR | 8,608 | 361,040 |
LVMH Moet Hennessy Louis Vuitton SA | 11,960 | 1,885,209 |
Neopost SA | 2,001 | 189,795 |
Peugeot SA (I) | 5,367 | 215,015 |
PPR | 3,033 | 460,445 |
Publicis Groupe SA | 3,402 | 194,076 |
Renault SA (I) | 13,874 | 850,798 |
Rhodia SA | 6,377 | 183,939 |
Safran SA | 8,249 | 293,776 |
Sanofi-Aventis SA | 19,065 | 1,316,087 |
Schneider Electric SA | 5,011 | 828,820 |
SEB SA | 1,638 | 161,071 |
Societe Generale | 11,284 | 794,384 |
Total SA | 19,529 | 1,198,206 |
Valeo SA (I) | 4,387 | 273,178 |
Vallourec SA | 1,832 | 189,647 |
Wendel | 3,040 | 313,697 |
Zodiac SA | 3,122 | 217,572 |
Germany 6.47% | 16,703,916 | |
Adidas AG | 5,063 | 324,875 |
BASF SE | 17,048 | 1,417,563 |
Bayerische Motoren Werke (BMW) AG | 30,580 | 2,480,100 |
Beiersdorf AG | 4,055 | 243,421 |
Daimler AG (I) | 51,634 | 3,636,868 |
Deutsche Lufthansa AG (I) | 13,692 | 279,888 |
Henkel AG & Company, KGaA | 993 | 50,704 |
Infineon Technologies AG | 57,022 | 623,710 |
K&S AG | 3,272 | 252,567 |
Lanxess AG | 11,207 | 834,051 |
Linde AG | 1,491 | 227,632 |
MAN AG | 7,053 | 895,523 |
Metro AG | 2,605 | 190,542 |
Norddeutsche Affinerie AG (L) | 1,710 | 91,002 |
SAP AG | 62,792 | 3,788,493 |
Software AG | 1,774 | 286,291 |
Stada Arzneimittel AG | 7,447 | 297,930 |
Suedzucker AG | 3,083 | 84,687 |
Symrise AG | 6,284 | 164,940 |
Volkswagen AG | 2,281 | 346,457 |
Wacker Chemie AG | 1,012 | 186,672 |
Greece 0.38% | 969,065 | |
Alpha Bank A.E. (I) | 14,196 | 94,653 |
EFG Eurobank Ergasias SA (I) | 14,671 | 93,765 |
National Bank of Greece SA (I) | 44,525 | 416,914 |
OPAP SA | 17,418 | 363,733 |
14 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Hong Kong 2.44% | $6,286,908 | |
BOC Hong Kong Holdings, Ltd. | 79,500 | 247,474 |
Cathay Pacific Airways, Ltd. | 83,000 | 194,033 |
CLP Holdings, Ltd. | 110,500 | 902,653 |
Esprit Holdings, Ltd. | 83,663 | 411,863 |
Hang Seng Bank, Ltd. | 31,700 | 507,214 |
Hong Kong & China Gas Company, Ltd. | 299,550 | 675,027 |
Hong Kong Electric Holdings, Ltd. | 85,500 | 559,002 |
Hong Kong Exchanges & Clearing, Ltd. | 37,400 | 813,369 |
Hutchison Whampoa, Ltd. | 74,000 | 875,629 |
Jardine Matheson Holdings, Ltd. | 6,000 | 277,078 |
SJM Holdings, Ltd. | 142,000 | 210,503 |
Sun Hung Kai Properties, Ltd. | 8,000 | 129,261 |
Swire Pacific, Ltd., Class A | 34,500 | 483,802 |
Ireland 1.01% | 2,612,006 | |
CRH PLC | 24,280 | 561,534 |
Experian PLC | 42,058 | 533,225 |
Shire PLC | 53,588 | 1,517,247 |
Israel 0.07% | 192,700 | |
Israel Chemicals, Ltd. | 11,591 | 192,700 |
Italy 0.16% | 419,063 | |
Assicurazioni Generali SpA | 5,014 | 113,464 |
Fiat SpA | 14,478 | 134,606 |
Mediobanca SpA | 16,159 | 170,993 |
Japan 19.35% | 49,920,127 | |
AEON Company, Ltd. (L) | 17,800 | 224,635 |
Asahi Glass Company, Ltd. | 18,000 | 251,404 |
Astellas Pharma, Inc. | 12,700 | 498,759 |
Canon, Inc. | 61,500 | 2,974,422 |
Central Japan Railway Company, Ltd. | 43 | 385,039 |
Chugai Pharmaceutical Company, Ltd. | 18,300 | 352,061 |
Daihatsu Motor Company, Ltd. | 12,000 | 189,573 |
Daiichi Sankyo Company, Ltd. | 11,100 | 238,216 |
Dainippon Ink & Chemicals, Inc. | 44,000 | 117,060 |
Daito Trust Construction Company, Ltd. | 13,000 | 1,065,405 |
Dena Company, Ltd. | 11,900 | 459,428 |
Denso Corp. | 4,300 | 161,154 |
Eisai Company, Ltd. (L) | 13,000 | 486,359 |
FamilyMart Company, Ltd. | 3,800 | 143,835 |
Fanuc, Ltd. | 15,900 | 2,474,939 |
Fast Retailing Company, Ltd. | 4,600 | 721,937 |
Fuji Heavy Industries, Ltd. | 44,000 | 379,169 |
Fujitsu, Ltd. | 24,000 | 162,414 |
Gree, Inc. | 8,500 | 138,693 |
Hirose Electric Company, Ltd. | 2,700 | 309,565 |
Hisamitsu Pharmaceutical Company, Inc. | 10,900 | 440,293 |
Hitachi, Ltd. | 324,000 | 1,966,978 |
Honda Motor Company, Ltd. | 68,300 | 2,977,961 |
See notes to financial statements | Annual report | International Growth Fund | 15 |
Shares | Value | |
Japan (continued) | ||
Hoya Corp. | 32,900 | $787,410 |
Idemitsu Kosan Company, Ltd. | 1,300 | 153,867 |
Inpex Corp. | 130 | 914,148 |
Ishikawajima-Harima Heavy Industries Company, Ltd. | 55,000 | 144,422 |
Isuzu Motors, Ltd. | 118,000 | 531,727 |
Itochu Corp. | 30,300 | 314,720 |
Japan Tobacco, Inc. | 88 | 365,981 |
JX Holdings, Inc. | 89,400 | 628,655 |
Kao Corp. | 46,000 | 1,240,338 |
Kawasaki Kisen Kaisha, Ltd. | 55,000 | 240,260 |
KDDI Corp. | 64 | 415,458 |
Keyence Corp. | 4,100 | 1,118,276 |
Kintetsu Corp. (L) | 51,000 | 161,217 |
Kobe Steel Company, Ltd. | 88,000 | 240,990 |
Komatsu, Ltd. | 39,700 | 1,216,152 |
Kurita Water Industries, Ltd. | 5,300 | 150,549 |
Lawson, Inc. | 6,100 | 300,519 |
Marubeni Corp. | 13,000 | 99,749 |
Mazda Motor Corp. | 62,000 | 159,890 |
Mitsubishi Chemical Holdings Corp. | 114,000 | 834,906 |
Mitsubishi Electric Corp. | 52,000 | 616,517 |
Mitsubishi Estate Company, Ltd. | 11,000 | 225,210 |
Mitsui O.S.K. Lines, Ltd. | 61,000 | 405,023 |
Murata Manufacturing Company, Ltd. | 10,100 | 753,598 |
Nabtesco Corp. | 6,900 | 164,069 |
NHK Spring Company, Ltd. | 19,000 | 222,831 |
Nidec Corp. (L) | 3,500 | 326,116 |
Nintendo Company, Ltd. | 3,800 | 1,115,822 |
Nippon Yusen Kabushiki Kaisha | 77,000 | 339,897 |
Nissan Motor Company, Ltd. | 91,100 | 934,311 |
Nitori Company, Ltd. | 5,800 | 513,593 |
Nitto Denko Corp. | 10,300 | 622,607 |
Nomura Research Institute, Ltd. | 8,300 | 194,775 |
NSK, Ltd. | 22,000 | 210,274 |
NTT Data Corp. | 37 | 131,909 |
NTT DoCoMo, Inc. | 554 | 1,041,107 |
Odakyu Electric Railway Company, Ltd. | 42,000 | 391,320 |
Olympus Corp. | 6,400 | 187,646 |
Omron Corp. | 9,600 | 267,097 |
Ono Pharmaceutical Company, Ltd. | 2,200 | 115,106 |
Oriental Land Company, Ltd. | 4,300 | 430,420 |
ORIX Corp. | 880 | 98,864 |
Rakuten, Inc. | 259 | 230,516 |
Resona Holdings, Inc. | 12,700 | 69,370 |
Ricoh Company, Ltd. | 29,000 | 383,783 |
Sankyo Company, Ltd. | 2,600 | 147,472 |
Santen Pharmaceutical Company, Ltd. | 6,500 | 254,167 |
Sawai Pharmaceutical Company, Ltd. | 2,500 | 234,487 |
16 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Japan (continued) | ||
Secom Company, Ltd. | 13,200 | $665,968 |
SEGA SAMMMY HOLDINGS, Inc. | 10,900 | 248,531 |
Shimamura Company, Ltd. | 1,900 | 183,781 |
Shin-Etsu Chemical Company, Ltd. | 11,700 | 674,187 |
Shionogi & Company, Ltd. | 12,600 | 239,231 |
Shiseido Company, Ltd. | 18,000 | 366,681 |
SMC Corp. | 3,400 | 582,109 |
Softbank Corp. | 43,000 | 1,769,838 |
Stanley Electric Company, Ltd. | 12,400 | 228,202 |
Sumitomo Corp. | 34,700 | 514,959 |
Sumitomo Heavy Industries, Ltd. | 22,000 | 154,792 |
Sysmex Corp. | 3,200 | 207,685 |
Takeda Pharmaceutical Company, Ltd. | 42,100 | 2,094,884 |
Teijin, Ltd. | 39,000 | 188,981 |
Terumo Corp. | 15,500 | 850,177 |
The Sumitomo Trust & Banking Company, Ltd. | 24,000 | 152,811 |
THK Company, Ltd. | 6,700 | 177,302 |
Toshiba Corp. | 47,000 | 308,254 |
Toyota Tsusho Corp. | 12,100 | 229,943 |
Trend Micro, Inc. | 7,300 | 226,946 |
Tsumura & Company, Ltd. | 6,200 | 201,229 |
Unicharm Corp. | 19,300 | 747,354 |
Yahoo! Japan Corp. | 1,116 | 420,576 |
Yamada Denki Company, Ltd. | 4,520 | 345,078 |
Yamato Kogyo Company, Ltd. | 4,200 | 138,556 |
Zeon Corp. | 23,000 | 235,632 |
Luxembourg 0.33% | 838,442 | |
Millicom International Cellular SA | 5,161 | 452,530 |
Oriflame Cosmetics SA | 3,026 | 177,308 |
SES SA | 8,103 | 208,604 |
Netherlands 2.06% | 5,311,352 | |
Aegon NV (I) | 30,018 | 230,895 |
ASML Holding NV | 7,445 | 322,969 |
Fugro NV | 4,794 | 403,734 |
Heineken NV | 7,027 | 362,385 |
Koninklijke (Royal) KPN NV | 61,895 | 1,002,245 |
Koninklijke Philips Electronics NV | 10,932 | 356,796 |
Koninklijke Vopak NV | 4,877 | 236,059 |
Reed Elsevier NV | 36,234 | 478,404 |
Unilever NV (L) | 63,545 | 1,917,865 |
Norway 0.48% | 1,242,818 | |
Norsk Hydro ASA | 20,011 | 165,098 |
Statoil ASA | 5,134 | 135,302 |
Telenor ASA | 6,900 | 114,681 |
TGS Nopec Geophysical Company ASA | 10,055 | 260,178 |
Yara International ASA | 10,709 | 567,559 |
See notes to financial statements | Annual report | International Growth Fund | 17 |
Shares | Value | |
Singapore 3.32% | $8,570,613 | |
CapitaCommercial Trust | 157,000 | 170,722 |
Cosco Corp. Singapore, Ltd. | 161,000 | 249,975 |
Ezra Holdings, Ltd. | 103,000 | 126,888 |
Fraser and Neave, Ltd. | 55,000 | 243,138 |
Genting Singapore PLC (I) | 388,000 | 585,943 |
Golden Agri-Resources, Ltd. | 773,000 | 398,328 |
Hyflux, Ltd. | 82,500 | 126,377 |
Keppel Corp., Ltd. | 94,000 | 836,408 |
Midas Holdings, Ltd. | 131,000 | 76,617 |
Neptune Orient Lines, Ltd. (I) | 142,000 | 229,386 |
Olam International, Ltd. | 62,000 | 136,327 |
Oversea-Chinese Banking Corp., Ltd. | 67,000 | 486,669 |
SembCorp Industries, Ltd. | 65,000 | 243,626 |
SembCorp Marine, Ltd. | 148,000 | 623,357 |
Singapore Airport Terminal Services, Ltd. | 76,000 | 152,471 |
Singapore Exchange, Ltd. | 79,000 | 491,113 |
Singapore Post, Ltd. | 183,000 | 163,982 |
Singapore Press Holdings, Ltd. | 207,000 | 631,793 |
Singapore Technologies Engineering, Ltd. | 218,000 | 547,701 |
Singapore Telecommunications, Ltd. | 497,000 | 1,164,172 |
SMRT Corp., Ltd. | 89,000 | 137,182 |
StarHub, Ltd. | 51,000 | 105,378 |
United Overseas Bank, Ltd. | 14,000 | 199,162 |
Wilmar International, Ltd. | 57,000 | 229,130 |
Yangzijiang Shipbuilding Holdings, Ltd. | 152,000 | 214,768 |
Spain 0.57% | 1,469,686 | |
Inditex SA | 14,339 | 1,037,683 |
Red Electrica De Espana | 2,381 | 128,070 |
Telefonica SA | 11,950 | 303,933 |
Sweden 6.29% | 16,221,955 | |
Alfa Laval AB | 24,884 | 508,731 |
Assa Abloy AB, Series B | 24,111 | 674,791 |
Atlas Copco AB, Series A | 61,884 | 1,554,038 |
Atlas Copco AB, Series B | 46,356 | 1,052,711 |
Boliden AB | 16,459 | 350,329 |
Elekta AB, Series B | 12,312 | 469,552 |
Getinge AB, Series B | 4,236 | 103,447 |
Hennes & Mauritz AB, B Shares | 77,493 | 2,528,839 |
Hexagon AB | 15,807 | 349,039 |
Investor AB, B Shares | 19,871 | 457,314 |
Kinnevik Investment AB | 8,028 | 180,139 |
Lundin Petroleum AB (I) | 11,701 | 145,737 |
Modern Times Group AB, B Shares | 5,121 | 342,981 |
Sandvik AB | 36,739 | 704,364 |
Scania AB, Series B | 42,176 | 939,780 |
Skandinaviska Enskilda Banken AB, Series A | 54,899 | 499,556 |
SKF AB, B Shares | 42,897 | 1,196,824 |
Swedbank AB, Class A (I) | 51,380 | 905,138 |
18 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Sweden (continued) | ||
Swedish Match AB | 19,019 | $600,482 |
Tele2 AB, Series B | 19,071 | 434,421 |
Telefonaktiebolaget LM Ericsson, B Shares | 49,301 | 633,529 |
Volvo AB, Series B (I) | 91,927 | 1,590,213 |
Switzerland 9.61% | 24,803,492 | |
Compagnie Financiere Richemont SA, BR Shares | 29,363 | 1,683,563 |
Geberit AG | 2,422 | 522,621 |
Kuehne & Nagel International AG | 2,062 | 277,124 |
Nestle SA | 145,403 | 8,230,551 |
Nobel Biocare Holding AG | 7,730 | 148,656 |
Novartis AG | 80,368 | 4,513,408 |
Roche Holdings AG | 41,303 | 6,227,545 |
Schindler Holding AG | 3,094 | 348,551 |
SGS SA | 386 | 671,468 |
Sonova Holding AG | 3,687 | 490,297 |
Swisscom AG | 674 | 297,785 |
Synthes AG | 4,504 | 617,996 |
The Swatch Group AG, BR Shares | 802 | 341,919 |
UBS AG (Swiss Exchange) (I) | 21,740 | 432,008 |
United Kingdom 21.66% | 55,888,093 | |
Admiral Group PLC | 27,988 | 768,311 |
Aggreko PLC | 38,577 | 907,294 |
AMEC PLC (I) | 15,001 | 283,803 |
Antofagasta PLC | 14,862 | 339,722 |
ARM Holdings PLC | 100,196 | 1,008,582 |
Asos PLC (I) | 10,289 | 315,083 |
Associated British Foods PLC (I) | 15,547 | 244,229 |
AstraZeneca PLC | 41,610 | 2,028,888 |
Babcock International Group PLC | 17,470 | 159,304 |
BAE Systems PLC | 35,239 | 188,651 |
Balfour Beatty PLC | 29,784 | 169,405 |
Barclays PLC | 111,473 | 578,843 |
BG Group PLC | 58,791 | 1,434,321 |
BHP Billiton PLC | 16,541 | 655,332 |
British American Tobacco PLC | 101,989 | 4,081,476 |
British Sky Broadcasting Group PLC | 91,419 | 1,169,503 |
BT Group PLC | 342,045 | 1,019,575 |
Bunzl PLC | 23,132 | 285,726 |
Burberry Group PLC | 69,734 | 1,358,964 |
Cairn Energy PLC (I) | 22,013 | 153,257 |
Capita Group PLC | 40,873 | 482,012 |
Carnival PLC | 1,121 | 50,179 |
Centrica PLC | 187,362 | 1,037,143 |
Chemring Group PLC (I) | 3,054 | 162,949 |
Cobham PLC | 85,258 | 312,507 |
Compass Group PLC (I) | 79,536 | 715,510 |
Croda International PLC | 17,255 | 444,249 |
Diageo PLC | 141,782 | 2,772,045 |
See notes to financial statements | Annual report | International Growth Fund | 19 |
Shares | Value | |
United Kingdom (continued) | ||
Drax Group PLC | 13,172 | $84,526 |
Eurasian Natural Resources Corp. | 15,303 | 239,821 |
Fresnillo PLC | 12,854 | 334,490 |
GKN PLC | 61,175 | 208,696 |
GlaxoSmithKline PLC | 473,482 | 9,101,929 |
ICAP PLC | 40,766 | 345,050 |
IG Group Holdings PLC | 42,806 | 311,934 |
IMI PLC | 23,154 | 334,497 |
Informa PLC | 42,872 | 302,842 |
Inmarsat PLC | 27,790 | 302,950 |
Intercontinental Hotels Group PLC | 22,850 | 508,037 |
International Power PLC | 29,310 | 159,269 |
Intertek Group PLC | 19,376 | 568,159 |
Investec PLC | 13,087 | 100,573 |
ITV PLC (I) | 166,557 | 236,661 |
Legal & General Group PLC | 195,590 | 377,631 |
Lloyds Banking Group PLC (I) | 1,617,088 | 1,631,907 |
Man Group PLC | 94,837 | 442,790 |
Marks & Spencer Group PLC | 52,305 | 294,487 |
National Grid PLC | 23,205 | 215,827 |
Next PLC | 14,547 | 467,905 |
Petrofac, Ltd. | 18,340 | 415,244 |
Petropavlovsk PLC | 9,294 | 164,216 |
Randgold Resources, Ltd. (I) | 2,713 | 219,643 |
Reckitt Benckiser Group PLC | 42,844 | 2,208,046 |
Reed Elsevier PLC | 71,603 | 639,377 |
Rio Tinto PLC | 30,830 | 2,174,669 |
Rolls-Royce Group PLC (I) | 47,868 | 480,099 |
Sage Group PLC | 51,391 | 237,453 |
Scottish & Southern Energy PLC | 6,039 | 121,620 |
Serco Group PLC | 24,578 | 217,525 |
Severn Trent PLC | 17,804 | 430,835 |
Smith & Nephew PLC | 62,908 | 728,529 |
Smiths Group PLC | 29,038 | 632,535 |
Spectris PLC | 8,906 | 201,959 |
Standard Chartered PLC | 90,504 | 2,392,943 |
Tesco PLC | 32,136 | 211,352 |
The Weir Group PLC | 23,492 | 654,284 |
Tullett Prebon PLC | 14,637 | 96,873 |
Unilever PLC | 14,297 | 424,230 |
Vodafone Group PLC | 484,878 | 1,375,845 |
Wolseley PLC (I) | 13,535 | 470,997 |
WPP PLC | 41,686 | 573,475 |
Xstrata PLC | 49,048 | 1,119,500 |
20 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | ||
Preferred Securities 0.93% | $2,397,754 | ||
(Cost $1,639,369) | |||
Germany 0.93% | 2,397,754 | ||
Porsche Automobil Holding SE | 3,814 | 302,131 | |
ProSiebenSat.1 Media AG | 10,663 | 344,920 | |
Volkswagen AG | 10,324 | 1,750,703 | |
Shares | Value | ||
Rights 0.00% | $0 | ||
(Cost $0) | |||
Austria 0.00% | 0 | ||
Immofinanz AG (Expiration Date: 3-2-11, Strike Price: EUR 4.12) (I)(L) | 39,303 | 0 | |
Shares | Value | ||
Warrants 0.00% | $3,230 | ||
(Cost $5,399) | |||
Canada 0.00% | 3,230 | ||
Kinross Gold Corp. (Expiration Date: 9-17-14, Strike Price: $21.30) (I) | 1,133 | 3,230 | |
Shares | Value | ||
Securities Lending Collateral 1.19% | $3,069,679 | ||
(Cost $3,069,468) | |||
John Hancock Collateral Investment Trust (W) | 0.2855% (Y) | 306,741 | 3,069,679 |
Shares | Value | ||
Short-Term Investments 4.16% | $10,748,557 | ||
(Cost $10,748,557) | |||
Short-Term Securities 4.16% | 10,748,557 | ||
State Street Institutional Treasury Money Market Fund | 0.0453% (Y) | 10,748,557 | 10,748,557 |
Total investments (Cost $219,180,869)† 100.27% | $258,745,305 | ||
Other assets and liabilities, net (0.27%) | ($707,785) | ||
Total net assets 100.00% | $258,037,520 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
See notes to financial statements | Annual report | International Growth Fund | 21 |
Notes to Schedule of Investments
Currency abbreviation
EUR Euro
ADR American Depositary Receipts
SADR Sponsored American Depositary Receipts
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 2-28-11.
(W) Investment is an affiliate of the Fund, the adviser and/or subadviser. Also, it represents the investments of securities lending collateral received.
(Y) The rate shown is the annualized seven-day yield as of 2-28-11.
† At 2-28-11, the aggregate cost of investment securities for federal income tax purposes was $220,040,489. Net unrealized appreciation aggregated $38,704,816, of which $41,315,160 related to appreciated investment securities and $2,610,344 related to depreciated investment securities.
The Fund had the following sector composition as a percentage of net assets on 2-28-11:
Health Care | 17% | ||
Consumer Discretionary | 16% | ||
Industrials | 16% | ||
Consumer Staples | 13% | ||
Materials | 9% | ||
Information Technology | 8% | ||
Financials | 8% | ||
Telecommunication Services | 4% | ||
Energy | 3% | ||
Utilities | 2% | ||
Short-Term Securities & Other | 4% |
22 | International Growth 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
Financial statements
Statement of assets and liabilities 2-28-11
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 public offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $216,111,401) including | |
$2,934,685 of securities loaned (Note 2) | $255,675,626 |
Investments in affiliated issuers, at value (Cost $3,069,468) (Note 2) | 3,069,679 |
Total investments, at value (Cost $219,180,869) | 258,745,305 |
Foreign currency, at value (Cost $249,551) | 251,893 |
Cash held at broker for futures contracts | 1,278,640 |
Receivable for forward foreign currency exchange contracts (Note 3) | 371,523 |
Receivable for fund shares sold | 699,821 |
Dividends and interest receivable | 730,029 |
Receivable for securities lending income | 2,258 |
Receivable for futures variation margin | 52,263 |
Other receivables and prepaid expenses | 14,168 |
Total assets | 262,145,900 |
Liabilities | |
Payable for forward foreign currency exchange contracts (Note 3) | 677,897 |
Payable for fund shares repurchased | 167,672 |
Payable upon return of securities loaned (Note 2) | 3,072,429 |
Payable to affiliates | |
Accounting and legal services fees | 3,351 |
Transfer agent fees | 29,737 |
Trustees’ fees | 1,826 |
Due to adviser | 6,831 |
Other liabilities and accrued expenses | 148,637 |
Total liabilities | 4,108,380 |
Net assets | |
Capital paid-in | $221,707,048 |
Accumulated distributions in excess of net investment income | (470,256) |
Accumulated net realized loss on investments, futures contracts and | |
foreign currency transactions | (2,639,521) |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | 39,440,249 |
Net assets | $258,037,520 |
See notes to financial statements | Annual report | International Growth Fund | 23 |
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 ($44,727,389 ÷ 2,131,369 shares) | $20.99 |
Class B ($792,690 ÷ 37,876 shares)1 | $20.93 |
Class C ($1,119,316 ÷ 53,541 shares)1 | $20.91 |
Class I ($203,642,618 ÷ 9,678,402 shares) | $21.04 |
Class 1 ($7,755,507 ÷ 368,920 shares) | $21.02 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $22.09 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
24 | International Growth 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 operations For the year ended 2-28-11
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 | |
Dividends | $5,159,835 |
Securities lending | 115,060 |
Interest | 7,030 |
Less foreign taxes withheld | (393,205) |
Total investment income | 4,888,720 |
Expenses | |
Investment management fees (Note 5) | 1,892,983 |
Distribution and service fees (Note 5) | 111,562 |
Accounting and legal services fees (Note 5) | 24,325 |
Transfer agent fees (Note 5) | 136,113 |
Trustees’ fees (Note 5) | 13,996 |
State registration fees (Note 5) | 42,537 |
Printing and postage (Note 5) | 9,544 |
Professional fees | 64,185 |
Custodian fees | 224,873 |
Registration and filing fees | 29,912 |
Other | 9,520 |
Total expenses | 2,559,550 |
Less expense reductions (Note 5) | (21,255) |
Net expenses | 2,538,295 |
Net investment income | 2,350,425 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 7,188,523 |
Investments in affiliated issuers | (3,237) |
Futures contracts (Note 3) | 1,370,588 |
Foreign currency transactions | (262,726) |
8,293,148 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 33,642,964 |
Investments in affiliated issuers | 1 |
Futures contracts (Note 3) | 147,964 |
Translation of assets and liabilities in foreign currencies | (342,565) |
33,448,364 | |
Net realized and unrealized gain | 41,741,512 |
Increase in net assets from operations | $44,091,937 |
See notes to financial statements | Annual report | International Growth Fund | 25 |
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 | |
2-28-11 | 2-28-10 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $2,350,425 | $935,458 |
Net realized gain (loss) | 8,293,148 | (3,844,492) |
Change in net unrealized appreciation (depreciation) | 33,448,364 | 25,186,082 |
Increase in net assets resulting from operations | 44,091,937 | 22,277,048 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (211,992) | (118,341) |
Class I | (1,859,699) | (1,187,527) |
Class 1 | (65,793) | (48,594) |
Class NAV1 | (47,095) | (45,290) |
Total distributions | (2,184,579) | (1,399,752) |
From Fund share transactions (Note 6) | 49,129,284 | 103,903,777 |
Total increase | 91,036,642 | 124,781,073 |
Net assets | ||
Beginning of year | 167,000,878 | 42,219,805 |
End of year | $258,037,520 | $167,000,878 |
Accumulated distributions in excess of net investment income | ($470,256) | ($423,376) |
1 Class NAV shares were terminated on 12-22-10.
26 | International Growth Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $17.36 | $12.46 | $22.86 | $23.94 | $20.00 |
Net investment income (loss)2 | 0.13 | 0.14 | 0.31 | 0.26 | (0.01) |
Net realized and unrealized gain (loss) on investments | 3.61 | 4.86 | (10.31) | 0.53 | 4.44 |
Total from investment operations | 3.74 | 5.00 | (10.00) | 0.79 | 4.43 |
Less distributions | |||||
From net investment income | (0.11) | (0.10) | (0.40) | (0.18) | (0.09) |
From net realized gain | — | — | — | (1.69) | (0.40) |
Total distributions | (0.11) | (0.10) | (0.40) | (1.87) | (0.49) |
Net asset value, end of year | $20.99 | $17.36 | $12.46 | $22.86 | $23.94 |
Total return (%)3 | 21.58 | 40.07 | (44.00) | 2.85 | 22.184 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $45 | $23 | $13 | $26 | $20 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.60 | 1.685 | 1.94 | 2.21 | 2.286 |
Expenses net of fee waivers | 1.60 | 1.645 | 1.62 | 1.56 | 1.666 |
Expenses net of fee waivers and credits | 1.60 | 1.635 | 1.62 | 1.56 | 1.666 |
Net investment income (loss) | 0.69 | 0.86 | 1.59 | 1.02 | (0.06)6 |
Portfolio turnover (%) | 48 | 37 | 59 | 97 | 41 |
1 The inception date for Class A shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
6 Annualized.
See notes to financial statements | Annual report | International Growth Fund | 27 |
CLASS B SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $17.36 | $12.48 | $22.81 | $23.91 | $20.00 |
Net investment income (loss)2 | 0.01 | 0.05 | 0.15 | (0.01) | (0.16) |
Net realized and unrealized gain (loss) on investments | 3.56 | 4.83 | (10.25) | 0.60 | 4.48 |
Total from investment operations | 3.57 | 4.88 | (10.10) | 0.59 | 4.32 |
Less distributions | |||||
From net investment income | — | — | (0.23) | — | (0.01) |
From net realized gain | — | — | — | (1.69) | (0.40) |
Total distributions | — | — | (0.23) | (1.69) | (0.41) |
Net asset value, end of year | $20.93 | $17.36 | $12.48 | $22.81 | $23.91 |
Total return (%)3 | 20.56 | 39.10 | (44.43) | 2.03 | 21.644 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $1 | $1 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 4.24 | 4.835 | 4.68 | 4.62 | 10.946 |
Expenses net of fee waivers | 2.40 | 2.445 | 2.65 | 2.41 | 2.396 |
Expenses net of fee waivers and credits | 2.40 | 2.405 | 2.40 | 2.40 | 2.396 |
Net investment income (loss) | 0.04 | 0.29 | 0.80 | (0.03) | (0.94)6 |
Portfolio turnover (%) | 48 | 37 | 59 | 97 | 41 |
1 The inception date for Class B shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
6 Annualized.
CLASS C SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $17.34 | $12.47 | $22.79 | $23.90 | $20.00 |
Net investment income (loss)2 | 0.01 | (0.01) | 0.20 | 0.05 | (0.16) |
Net realized and unrealized gain (loss) on investments | 3.56 | 4.88 | (10.29) | 0.53 | 4.47 |
Total from investment operations | 3.57 | 4.87 | (10.09) | 0.58 | 4.31 |
Less distributions | |||||
From net investment income | — | — | (0.23) | — | (0.01) |
From net realized gain | — | — | — | (1.69) | (0.40) |
Total distributions | — | — | (0.23) | (1.69) | (0.41) |
Net asset value, end of year | $20.91 | $17.34 | $12.47 | $22.79 | $23.90 |
Total return (%)3 | 20.59 | 39.05 | (44.43) | 1.99 | 21.594 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $1 | $1 | $1 | $2 | $2 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 3.45 | 3.955 | 3.81 | 3.73 | 6.716 |
Expenses net of fee waivers | 2.40 | 2.415 | 2.42 | 2.40 | 2.396 |
Expenses net of fee waivers and credits | 2.40 | 2.405 | 2.40 | 2.40 | 2.396 |
Net investment income (loss) | 0.03 | (0.06) | 1.03 | 0.21 | (0.98)6 |
Portfolio turnover (%) | 48 | 37 | 59 | 97 | 41 |
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
6 Annualized.
28 | International Growth Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $17.40 | $12.48 | $22.90 | $23.97 | $20.00 |
Net investment income2 | 0.23 | 0.14 | 0.18 | 0.36 | 0.07 |
Net realized and unrealized gain (loss) on investments | 3.60 | 4.95 | (10.12) | 0.54 | 4.45 |
Total from investment operations | 3.83 | 5.09 | (9.94) | 0.90 | 4.52 |
Less distributions | |||||
From net investment income | (0.19) | (0.17) | (0.48) | (0.28) | (0.15) |
From net realized gain | — | — | — | (1.69) | (0.40) |
Total distributions | (0.19) | (0.17) | (0.48) | (1.97) | (0.55) |
Net asset value, end of year | $21.04 | $17.40 | $12.48 | $22.90 | $23.97 |
Total return (%)3 | 22.08 | 40.76 | (43.74) | 3.27 | 22.604 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $204 | $134 | $23 | $1 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.14 | 1.236 | 1.67 | 5.07 | 17.207 |
Expenses net of fee waivers | 1.14 | 1.216 | 1.20 | 1.20 | 1.197 |
Expenses net of fee waivers and credits | 1.14 | 1.216 | 1.20 | 1.20 | 1.197 |
Net investment income | 1.21 | 0.84 | 1.16 | 1.43 | 0.427 |
Portfolio turnover (%) | 48 | 37 | 59 | 97 | 41 |
1 The inception date for Class I shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Includes the impact of proxy expenses, which amounted to 0.01% of average net assets.
7 Annualized.
CLASS 1 SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $17.38 | $12.47 | $22.89 | $23.97 | $20.00 |
Net investment income2 | 0.23 | 0.20 | 0.36 | 0.29 | 0.07 |
Net realized and unrealized gain (loss) on investments | 3.60 | 4.89 | (10.29) | 0.61 | 4.45 |
Total from investment operations | 3.83 | 5.09 | (9.93) | 0.90 | 4.52 |
Less distributions | |||||
From net investment income | (0.19) | (0.18) | (0.49) | (0.29) | (0.15) |
From net realized gain | — | — | — | (1.69) | (0.40) |
Total distributions | (0.19) | (0.18) | (0.49) | (1.98) | (0.55) |
Net asset value, end of year | $21.02 | $17.38 | $12.47 | $22.89 | $23.97 |
Total return (%)3 | 22.11 | 40.73 | (43.72) | 3.28 | 22.634 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $8 | $5 | $3 | $3 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.13 | 1.245 | 1.51 | 1.83 | 2.006 |
Expenses net of fee waivers | 1.13 | 1.195 | 1.15 | 1.15 | 1.156 |
Expenses net of all fee waivers and credits | 1.13 | 1.195 | 1.15 | 1.15 | 1.156 |
Net investment income | 1.21 | 1.23 | 1.94 | 1.14 | 0.416 |
Portfolio turnover (%) | 48 | 37 | 59 | 97 | 41 |
1 The inception date for Class 1 shares is 6-12-06.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
6 Annualized.
See notes to financial statements | Annual report | International Growth Fund | 29 |
Notes to financial statements
Note 1 — Organization
John Hancock International Growth Fund (the Fund) is a diversified series of John Hancock Funds III (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 high total return primarily through capital appreciation.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of Assets and Liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class 1 shares are offered only to certain affiliates of Manulife Financial Corporation (MFC). Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, printing and postage, registration and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase. Class NAV shares were terminated on December 22, 2010.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. 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, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the values by input classification of the Fund’s investments as of February 28, 2011, by major security category or type:
30 | International Growth Fund | Annual report |
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-11 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $10,383,783 | — | $10,383,783 | — |
Austria | 688,618 | — | 688,618 | — |
Belgium | 2,509,541 | — | 2,509,541 | — |
Bermuda | 582,458 | — | 582,458 | — |
Canada | 8,050,162 | $8,050,162 | — | — |
Cayman Islands | 366,540 | — | 366,540 | — |
Denmark | 9,153,370 | — | 9,153,370 | — |
Finland | 2,868,437 | — | 2,868,437 | — |
France | 16,472,940 | — | 16,472,940 | — |
Germany | 16,703,916 | — | 16,703,916 | — |
Greece | 969,065 | — | 969,065 | — |
Hong Kong | 6,286,908 | — | 6,286,908 | — |
Ireland | 2,612,006 | — | 2,612,006 | — |
Israel | 192,700 | — | 192,700 | — |
Italy | 419,063 | — | 419,063 | — |
Japan | 49,920,127 | — | 49,920,127 | — |
Luxembourg | 838,442 | — | 838,442 | — |
Netherlands | 5,311,352 | — | 5,311,352 | — |
Norway | 1,242,818 | — | 1,242,818 | — |
Singapore | 8,570,613 | — | 8,570,613 | — |
Spain | 1,469,686 | — | 1,469,686 | — |
Sweden | 16,221,955 | — | 16,221,955 | — |
Switzerland | 24,803,492 | — | 24,803,492 | — |
United Kingdom | 55,888,093 | — | 55,888,093 | — |
Preferred Securities | ||||
Germany | 2,397,754 | — | 2,397,754 | — |
Warrants | ||||
Canada | 3,230 | 3,230 | — | — |
Securities Lending | ||||
Collateral | 3,069,679 | 3,069,679 | — | — |
Short-Term Investments | 10,748,557 | 10,748,557 | — | — |
Total Investments in | ||||
Securities | $258,745,305 | $21,871,628 | $236,873,677 | — |
Other Financial | ||||
Instruments | ||||
Futures | $162,636 | $162,636 | — | — |
Forward Foreign | ||||
Currency Contracts | ($306,374) | — | ($306,374) | — |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the year ended February 28, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their closing net asset values each day. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange
Annual report | International Growth Fund | 31 |
rates supplied by an independent pricing service. Certain securities and forward foreign currency contracts traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where 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. Generally, trading in non-U.S. securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of non-U.S. securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value non-U.S. securities in order to adjust for events which may occur between the close of foreign exchanges and the close of the NYSE.
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. 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 is recorded when the Fund becomes aware of the dividends.
Securities lending. The Fund may lend its securities to earn additional income. It receives and maintains cash collateral received from the borrower in an amount not less than the market value of the loaned securities. The Fund will invest its collateral in John Hancock Collateral Investment Trust (JHCIT), an affiliate of the Fund, and as a result, the Fund will receive the benefit of any gains and bear any losses generated by JHCIT. Although risk of the loss of the securities lent is mitigated by holding the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities or if collateral investments decline in value. The Fund may receive compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Income received from JHCIT is a component of securities lending income as recorded on the Statement of Operations.
Foreign currency translation. Assets, including investments, and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on securities is reflected as a component of the realized and unrealized gains (losses) on investments.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. Funds investing in a single country or in a limited geographic region tend to be riskier than funds that invest more broadly. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs) and accounting standards. Foreign investments are also subject to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
The Fund may be subject to capital gains and repatriation taxes as imposed by certain countries in which it invests. Such taxes are generally based upon income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation.
32 | International Growth Fund | Annual report |
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to a 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 has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law for any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with State Street Bank and Trust Company (SSBT) which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 31, 2010, the amount of the line of credit was $150 million. 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. For the year ended February 28, 2011, the Fund had no borrowings under the line of credit.
Effective March 30, 2011, the line of credit with SSBT expired, and a similar arrangement was established with Citibank N.A.
Expenses. The majority of expenses are directly attributable to an individual fund. Expenses of the Trust 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 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 asset value of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has a capital loss carryforward of $1,852,776 available to offset future net realized capital gains as of February 28, 2011. The loss carryforward expires as follows: February 28, 2018 — $1,852,776. Net currency losses of $613,644, that are a result of security transactions occurring after October 31, 2010, are treated as occurring on March 1, 2011, the first day of the Fund’s next taxable year.
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment 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.
As of February 28, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
Annual report | International Growth Fund | 33 |
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 and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended February 28, 2011 and February 28, 2010 was as follows:
FEBRUARY 28, 2011 | FEBRUARY 28, 2010 | ||
Ordinary Income | $2,184,579 | $1,399,752 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of February 28, 2011, the Fund has no distributable earnings on a tax basis.
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 financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to foreign currency transactions, passive foreign investment companies, wash sale deferrals and derivative transactions.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objectives. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, derivatives expose the Fund to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
Futures. A futures contract is a contractual agreement to buy or sell a particular commodity, 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 hedged security values and/or interest rates and potential losses in excess of the amounts recognized on the Statements of Assets and Liabilities.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. 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 contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) is recorded by the Fund.
During the year ended February 28, 2011, the Fund used futures contracts to gain market exposure, maintain diversification and liquidity and adjust exposure to foreign currencies. The following table summarizes the contracts held at February 28, 2011. During the year ended February 28, 2011, the Fund held futures contracts with notional absolute values ranging from $12.3 million to $20.7 million as measured at each quarter end.
34 | International Growth Fund | Annual report |
UNREALIZED | |||||
OPEN | NUMBER OF | APPRECIATION | |||
CONTRACTS | CONTRACTS | POSITION | EXPIRATION DATE | NOTIONAL VALUE | (DEPRECIATION) |
DAX Index Futures | 23 | Long | Mar 2011 | $5,772,900 | $159,237 |
FTSE 100 Index | 67 | Long | Mar 2011 | 6,506,245 | 131,858 |
Futures | |||||
SGX MSCI Singapore | 8 | Long | Mar 2011 | 444,850 | (2,176) |
Index Futures | |||||
ASX SPI 200 Index | 42 | Short | Mar 2011 | (5,159,269) | (50,867) |
Futures | |||||
FTSE MIB Index | 2 | Short | Mar 2011 | (310,185) | (24,818) |
Futures | |||||
S&P TSE 60 Index | 5 | Short | Mar 2011 | (836,395) | (50,598) |
Futures | |||||
Total | $162,636 |
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral, the risk that currency movements will not occur, thereby reducing the Fund’s total return, and the potential for losses in excess of the amounts recognized on the Statements of Assets and Liabilities.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by a Fund as an unrealized gain or loss. Realized gains or losses, 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, are recorded upon delivery or receipt of the currency.
During the year ended February 28, 2011, the Fund used forward foreign currency contracts to hedge against anticipated currency exchange rates.
The following table summarizes the contracts held at February 28, 2011. During the year ended February 28, 2011, the Fund held forward foreign currency contracts with USD absolute values ranging from $24.2 million to $50.8 million, as measured at each quarter end.
PRINCIPAL | ||||||
PRINCIPAL | AMOUNT | |||||
AMOUNT | COVERED | UNREALIZED | ||||
COVERED BY | BY CONTRACT | SETTLEMENT | APPRECIATION | |||
CURRENCY | CONTRACT | (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
Buys | ||||||
AUD | 149,033 | $148,167 | Brown Brothers | 4-20-11 | $2,652 | |
Harriman & Company | ||||||
AUD | 724,675 | 719,928 | JPMorgan Chase Bank | 4-20-11 | 13,434 | |
EUR | 540,433 | 727,435 | Bank of America N.A. | 4-20-11 | 17,880 | |
EUR | 945,132 | 1,268,892 | Deutsche Bank AG | 4-20-11 | 34,546 | |
EUR | 664,614 | 894,239 | Royal Bank of Scotland PLC | 4-20-11 | 22,334 | |
GBP | 881,417 | 1,412,402 | Bank of America N.A. | 4-20-11 | 19,846 | |
GBP | 474,203 | 758,654 | Barclays Bank PLC | 4-20-11 | 11,897 | |
GBP | 1,146,471 | 1,834,870 | Brown Brothers | 4-20-11 | 28,075 | |
Harriman & Company | ||||||
GBP | 1,553,874 | 2,484,733 | JPMorgan Chase Bank | 4-20-11 | 40,217 | |
GBP | 1,211,533 | 1,935,718 | Morgan Stanley Capital | 4-20-11 | 32,948 | |
Services, Inc. |
Annual report | International Growth Fund | 35 |
PRINCIPAL | ||||||
PRINCIPAL | AMOUNT | |||||
AMOUNT | COVERED | UNREALIZED | ||||
COVERED BY | BY CONTRACT | SETTLEMENT | APPRECIATION | |||
CURRENCY | CONTRACT | (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
Buys (continued) | ||||||
HKD | 8,392,911 | $1,077,672 | Barclays Bank PLC | 4-20-11 | $519 | |
HKD | 11,190,548 | 1,436,527 | Brown Brothers | 4-20-11 | 1,060 | |
Harriman & Company | ||||||
HKD | 4,697,105 | 603,879 | Mellon Bank NA | 4-20-11 | (468) | |
HKD | 8,392,911 | 1,077,501 | Morgan Stanley Capital | 4-20-11 | 690 | |
Services, Inc. | ||||||
HKD | 16,785,822 | 2,154,625 | State Street Bank & | 4-20-11 | 1,757 | |
Trust Company | ||||||
JPY | 322,142,600 | 3,862,598 | Deutsche Bank AG | 4-20-11 | 76,659 | |
JPY | 73,531,690 | 882,633 | JPMorgan Chase Bank | 4-20-11 | 16,535 | |
NOK | 2,404,324 | 416,882 | Brown Brothers | 4-20-11 | 11,351 | |
Harriman & Company | ||||||
SGD | 1,845,284 | 1,439,626 | Bank of America N.A. | 4-20-11 | 11,727 | |
SGD | 922,641 | 719,745 | Barclays Bank PLC | 4-20-11 | 5,931 | |
SGD | 766,929 | 601,631 | Brown Brothers | 4-20-11 | 1,574 | |
Harriman & Company | ||||||
SGD | 751,694 | 586,273 | Mellon Bank NA | 4-20-11 | 4,949 | |
SGD | 751,694 | 586,419 | Morgan Stanley Capital | 4-20-11 | 4,804 | |
Services, Inc. | ||||||
SGD | 751,694 | 586,178 | Royal Bank of Scotland PLC | 4-20-11 | 5,045 | |
SGD | 751,694 | 586,130 | State Street Bank & | 4-20-11 | 5,093 | |
Trust Company | ||||||
Total | $28,803,357 | $371,055 | ||||
Sells | ||||||
CAD | 4,246,070 | $4,289,462 | Bank of America N.A. | 4-20-11 | ($76,384) | |
CAD | 2,102,590 | 2,124,215 | Royal Bank of Scotland PLC | 4-20-11 | (37,687) | |
CHF | 1,870,933 | 1,927,843 | Barclays Bank PLC | 4-20-11 | (86,757) | |
CHF | 1,093,905 | 1,127,063 | Brown Brothers | 4-20-11 | (50,842) | |
Harriman & Company | ||||||
CHF | 1,717,392 | 1,771,166 | Royal Bank of Scotland PLC | 4-20-11 | (78,102) | |
CHF | 2,693,080 | 2,776,114 | State Street Bank & | 4-20-11 | (123,765) | |
Trust Company | ||||||
NOK | 2,125,898 | 362,732 | Barclays Bank PLC | 4-20-11 | (15,910) | |
NOK | 4,812,506 | 821,093 | Brown Brothers | 4-20-11 | (36,059) | |
Harriman & Company | ||||||
NOK | 2,125,898 | 362,311 | Royal Bank of Scotland PLC | 4-20-11 | (16,331) | |
SEK | 7,155,724 | 1,097,992 | Barclays Bank PLC | 4-20-11 | (29,141) | |
SEK | 9,540,966 | 1,463,877 | Brown Brothers | 4-20-11 | (38,966) | |
Harriman & Company | ||||||
SEK | 6,411,075 | 982,297 | Deutsche Bank AG | 4-20-11 | (27,543) | |
SEK | 7,181,998 | 1,100,200 | JPMorgan Chase Bank | 4-20-11 | (31,071) | |
SEK | 7,155,724 | 1,098,262 | Mellon Bank NA | 4-20-11 | (28,871) | |
Total | $21,304,627 | ($677,429) |
36 | International Growth Fund | Annual report |
Currency Abbreviations | ||||
AUD | Australian Dollar | HKD | Hong Kong Dollar | |
CAD | Canadian Dollar | JPY | Japanese Yen | |
CHF | Swiss Franc | NOK | Norwegian Krone | |
EUR | Euro | SEK | Swedish Krona | |
GBP | Pound Sterling | SGD | Singapore Dollar |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at February 28, 2011 by risk category:
FINANCIAL | ASSET | LIABILITY | ||
STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
Equity contracts | Receivable for futures varia- | Futures† | $291,095 | ($128,459) |
tion margin; net unrealized | ||||
appreciation (depreciation) | ||||
on investments | ||||
Foreign exchange | Receivable/Payable for | Forward foreign | 371,523 | (677,897) |
contracts | forward foreign currency | currency | ||
exchange contracts | contracts | |||
Total | $662,618 | ($806,356) |
† Reflects cumulative appreciation/depreciation of futures as disclosed in Note 3. Only the period end variation margin is separately disclosed on the Statement 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 February 28, 2011:
FOREIGN | ||||
STATEMENT OF | FUTURES | CURRENCY | ||
RISK | OPERATIONS LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
Equity contracts | Net realized gain | $1,370,588 | — | $1,370,588 |
Foreign exchange | Net realized gain | |||
contracts | (loss) | — | ($275,418) | (275,418) |
Total | $1,370,588 | ($275,418) | $1,095,170 |
* Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of Operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 28, 2011:
TRANSLATION | ||||
OF ASSETS | ||||
AND LIABILITIES | ||||
FUTURES | IN FOREIGN | |||
RISK | STATEMENT OF OPERATIONS LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
Equity contracts | Change in unrealized appreciation | $147,964 | — | $147,964 |
(depreciation) | ||||
Foreign exchange | Change in unrealized appreciation | — | ($364,800) | (364,800) |
contracts | (depreciation) | |||
Total | $147,964 | ($364,800) | ($216,836) |
* Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in this caption on the Statement of Operations.
Annual report | International Growth Fund | 37 |
Note 4 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Trust. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management contract with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.920% of the first $100,000,000 of the Fund’s average daily net assets; b) 0.895% of the next $900,000,000; c) 0.880% of the next $1,000,000,000; d) 0.850% of the next $1,000,000,000; e) 0.825% of the next $1,000,000,000; and f) 0.800% of the Fund’s average daily net asset in excess of $4,000,000,000. The Adviser has a subadvisory agreement with Grantham, Mayo, Van Otterloo & Co. LLC. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the year ended February 28, 2011 were equivalent to an annual effective rate of 0.91% of the Fund’s average daily net assets.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Fund. This agreement excludes taxes, portfolio brokerage commissions, interest, litigation and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.70%, 2.40%, 2.40%, 1.24% and 1.20% for Class A, Class B, Class C, Class I and Class 1 shares, respectively. Prior to July 1, 2010, the fee waivers and/or reimbursements were such that these expenses would not exceed 1.70%, 2.40%, 2.40%, 1.22%, 1.20% and 1.15% for Class A, Class B, Class C, Class I, Class 1 and Class NAV shares, respectively. The fee waivers and/or reimbursements will continue in effect until June 30, 2011.
Accordingly, these expense reductions amounted to $11,045 and $10,210 for Class B and Class C shares, respectively, for the year ended February 28, 2011.
Accounting and legal services. Pursuant to a service agreement the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of 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 February 28, 2011, amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B, Class C and Class 1 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. The Fund may pay up to the following contractual
38 | International Growth Fund | Annual report |
rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Fund’s shares.
CLASS | 12b-1 FEES | ||
Class A | 0.30% | ||
Class B | 1.00% | ||
Class C | 1.00% | ||
Class 1 | 0.05% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $15,406 for the year ended February 28, 2011. Of this amount, $2,556 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $12,086 was paid as sales commissions to broker-dealers and $764 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a broker-dealer affiliate of the Adviser.
Class B and Class C shares are subject to contingent deferred sales charges (CDSC). Class B shares that are redeemed within six years of purchase are subject to CDSC, at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2011, CDSCs received by the Distributor amounted to $1,165 and $64 for Class B and Class C shares, respectively.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services or Transfer Agent), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain revenues that Signature Services receives in connection with the service it provides to the funds. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to July 1, the transfer agent fees were made up of three components:
• The Fund paid a monthly transfer agent fee at an annual rate of 0.05% for Class A, Class B and Class C shares and 0.04% for Class I shares, based on each class’s average daily net assets.
• The Fund paid a monthly fee based on an annual rate of $16.50 per shareholder account.
• In addition, Signature Services was reimbursed for certain out-of-pocket expenses.
Annual report | International Growth Fund | 39 |
Class level expenses. Class level expenses for the year ended February 28, 2011 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $92,883 | $53,409 | $10,509 | $2,741 |
Class B | 5,990 | 2,055 | 10,708 | 195 |
Class C | 9,707 | 2,302 | 10,689 | 314 |
Class I | — | 78,347 | 10,631 | 6,434 |
Class 1 | 2,982 | — | — | (140) |
Total | $111,562 | $136,113 | $42,537 | $9,544 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of Assets and Liabilities.
Note 6 — Fund share transactions
Transactions in Fund shares for the years ended February 28, 2011 and 2010 were as follows:
Year ended 2-28-11 | Year ended 2-28-10 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 1,001,925 | $18,930,095 | 368,180 | $6,341,223 |
Exchanged from Class R1 | — | — | 7,263 | 121,989 |
Distributions reinvested | 10,486 | 210,444 | 6,431 | 116,714 |
Repurchased | (182,969) | (3,423,082) | (105,391) | (1,656,573) |
Net increase | 829,442 | $15,717,457 | 276,483 | $4,923,353 |
Class B shares | ||||
Sold | 18,488 | $350,796 | 11,882 | $200,465 |
Repurchased | (13,173) | (234,105) | (20,091) | (318,226) |
Net increase (decrease) | 5,315 | $116,691 | (8,209) | ($117,761) |
Class C shares | ||||
Sold | 14,797 | $278,217 | 43,030 | $684,156 |
Repurchased | (12,304) | (222,459) | (40,666) | (591,385) |
Net increase | 2,493 | $55,758 | 2,364 | $92,771 |
Class I shares | ||||
Sold | 3,607,016 | $67,388,025 | 6,511,940 | $108,774,330 |
Distributions reinvested | 919 | 18,465 | 499 | 9,073 |
Repurchased | (1,611,195) | (30,758,599) | (638,236) | (10,431,836) |
Net increase | 1,996,740 | $36,647,891 | 5,874,203 | $98,351,567 |
Class R1 shares | ||||
Sold | — | — | 1,969 | $26,066 |
Exchanged for Class A | — | — | (7,270) | (121,989) |
Repurchased | — | — | (897) | (12,532) |
Net decrease | — | — | (6,198) | ($108,455) |
40 | International Growth Fund | Annual report |
Year ended 2-28-11 | Year ended 2-28-10 | |||
Shares | Amount | Shares | Amount | |
Class 1 shares | ||||
Sold | 191,560 | $3,635,364 | 155,089 | $2,534,636 |
Distributions reinvested | 3,275 | 65,793 | 2,674 | 48,594 |
Repurchased | (102,225) | (1,936,307) | (84,600) | (1,398,184) |
Net increase | 92,610 | $1,764,850 | 73,163 | $1,185,046 |
Class NAV shares1 | ||||
Sold | 25,913 | $465,996 | 194,492 | $2,950,895 |
Distributions reinvested | 2,350 | 47,095 | 2,499 | 45,290 |
Repurchased | (288,620) | (5,686,454) | (191,058) | (3,418,929) |
Net increase (decrease) | (260,357) | ($5,173,363) | 5,933 | ($422,744) |
Net increase | 2,666,243 | $49,129,284 | 6,217,739 | $103,903,777 |
1 Class NAV shares were terminated on 12-22-10. |
Affiliates of the Fund owned 39% of shares of beneficial interest of Class A on February 28, 2011.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $140,485,265 and $94,075,467, respectively, for the year ended February 28, 2011.
Annual report | International Growth Fund | 41 |
Auditors’ report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of John Hancock Funds III and Shareholders of John Hancock International Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio 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 International Growth Fund (the “Fund”) at February 28, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 19, 2011
42 | International Growth Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended February 28, 2011.
The Fund designates 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. This amount will be reflected on Form 1099-DIV for the calendar year 2011.
The Fund designates the maximum amount allowable for the corporate dividends received deduction for the fiscal year ended February 28, 2011.
Income derived from foreign sources was $2,812,259. The Fund intends to pass through foreign tax credits of $227,679 for the fiscal year ended February 28, 2011.
Shareholders will be mailed a 2011 Form 1099-DIV in January 2012. This will reflect the total of all distributions that are taxable for calendar year 2011.
Annual report | International Growth Fund | 43 |
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 |
Steven R. Pruchansky, Born: 1944 | 2006 | 47 |
Chairperson (since January 2011); 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 (since 2008); 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). | ||
James F. Carlin, Born: 1940 | 2006 | 47 |
Chief Executive Officer, Director and Treasurer, Alpha Analytical Laboratories (environmental, chemical | ||
and pharmaceutical analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance | ||
Agency, Inc. (since 1995); Chairman and Chief Executive Officer, CIMCO, LLC (management/ | ||
investments) (since 1987). | ||
William H. Cunningham, Born: 1944 | 2006 | 47 |
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 of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson,2 Born: 1952 | 2008 | 47 |
Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); 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 Corp. (1996–2009); Board of Directors of | ||
Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (since 2007). | ||
Charles L. Ladner,2 Born: 1938 | 2006 | 47 |
Vice Chairperson (since March 2011); Chairman and Trustee, Dunwoody Village, Inc. (retirement | ||
services) (since 2008); Director, Philadelphia Archdiocesan Educational Fund (since 2009); Senior Vice | ||
President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); | ||
Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (gas | ||
distribution) (until 1997); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association | ||
(Cooperating Association, National Park Service) (until 2005). |
44 | International Growth 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 |
Stanley Martin,2 Born: 1947 | 2008 | 47 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore, Born: 1939 | 2006 | 47 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). | ||
Patti McGill Peterson,2 Born: 1943 | 2006 | 47 |
Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy | ||
(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President, | ||
Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public | ||
Affairs, Cornell University (1997–1998); Former President Wells College, St. Lawrence University and the | ||
Association of Colleges and Universities of the State of New York. Director of the following: Niagara | ||
Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until | ||
1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007); | ||
Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development | ||
Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational | ||
Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 47 |
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (“KPMG”) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
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 |
Hugh McHaffie,4 Born: 1959 | 2010 | 47 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Trust and John Hancock Funds II (since 2009); Trustee, John Hancock retail | ||
funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment | ||
Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior Vice President, Individual | ||
Business Product Management, MetLife, Inc. (1999–2006). |
Annual report | International Growth Fund | 45 |
Non-Independent Trustees3 (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 |
John G. Vrysen, Born: 1955 | 2009 | 47 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock Funds II | ||
and John Hancock Trust (since 2007); Chief Operating Officer, John Hancock retail funds (until 2009); | ||
Trustee, John Hancock retail funds (since 2009). | ||
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 | |
Keith F. Hartstein, Born: 1956 | 2006 | |
President and Chief Executive Officer | ||
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | ||
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | ||
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | ||
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | ||
Force Marketing Committee (since 2003). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Senior Vice President and Chief Operating Officer | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | ||
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | ||
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock Trust | ||
(since 2006); Senior Vice President, Product Management and Development, John Hancock Funds, | ||
LLC (until 2009). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | ||
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | ||
Funds II and John Hancock Trust (since 2006); Vice President and Associate General Counsel, | ||
Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal Counsel, MML | ||
Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual Select Funds and | ||
MassMutual Premier Funds (2004–2006). |
46 | International Growth Fund | Annual report |
Principal officers who are not Trustees (continued) | ||
Name, Year of Birth | Officer | |
Position(s) held with Fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Francis V. Knox, Jr., Born: 1947 | 2006 | |
Chief Compliance Officer | ||
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | ||
retail funds, John Hancock Funds II, John Hancock Trust, John Hancock Advisers, LLC and John Hancock | ||
Investment Management Services, LLC (since 2005); Vice President and Chief Compliance Officer, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (2005–2008). | ||
Charles A. Rizzo, Born: 1957 | 2007 | |
Chief Financial Officer | ||
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | ||
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Trust (since 2007); | ||
Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, Goldman | ||
Sachs (2005–2007). | ||
Salvatore Schiavone,4 Born: 1965 | 2010 | |
Treasurer | ||
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | ||
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | ||
John Hancock retail funds (since 2010); Treasurer, John Hancock Closed-End Funds (since 2009); | ||
Assistant Treasurer, John Hancock Funds II and John Hancock Trust (since 2007); Assistant Treasurer, | ||
John Hancock retail funds, John Hancock Funds II and John Hancock Trust (2007–2009); Assistant | ||
Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management Research | ||
Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
4 Mr. McHaffie and Mr. Schiavone were appointed by the Board of Trustees effective 8-31-10.
Annual report | International Growth Fund | 47 |
More information
Trustees | Investment adviser | |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management | |
James F. Carlin | Services, LLC | |
William H. Cunningham | ||
Deborah C. Jackson* | Subadviser | |
Charles L. Ladner, Vice Chairperson* | Grantham, Mayo, Van Otterloo & Co. LLC | |
Stanley Martin* | ||
Hugh McHaffie | Principal distributor | |
Dr. John A. Moore | John Hancock Funds, LLC | |
Patti McGill Peterson* | ||
Gregory A. Russo | Custodian | |
John G. Vrysen | State Street Bank and Trust Company | |
Officers | Transfer agent | |
Keith F. Hartstein | John Hancock Signature Services, Inc. | |
President and Chief Executive Officer | ||
Legal counsel | ||
Andrew G. Arnott | K&L Gates LLP | |
Senior Vice President and Chief Operating Officer | ||
Independent registered | ||
Thomas M. Kinzler | public accounting firm | |
Secretary and Chief Legal Officer | PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | ||
Chief Compliance Officer | The report is certified under the Sarbanes-Oxley | |
Act, which requires mutual funds and other public | ||
Charles A. Rizzo | companies to affirm that, to the best of their | |
Chief Financial Officer | knowledge, the information in their financial reports | |
is fairly and accurately stated in all material respects. | ||
Salvatore Schiavone | ||
Treasurer | ||
*Member of the Audit Committee |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
48 | International Growth Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/intlgrowthx45x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock International Growth Fund. | 8700A 2/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/11 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/interallocationx1x1.jpg)
Management’s discussion of
Portfolio performance
By John Hancock Asset Management1
During the 12-month period ended February 28, 2011, international developed markets posted strong results, with the MSCI EAFE Index returning 20.54%. In Europe, Germany’s strong recovery helped propel its markets to a 32.18% gain. Japan lagged the overall MSCI EAFE Index, with a 17.45% return, weighed down by the impact of a stronger yen.
Emerging markets had a return of 21.23% for the 12-month period — roughly in line with developed international markets. Over the 12-month period, the euro advanced about 1% against the U.S. dollar, adding a small tailwind to the returns of U.S. investors, as their euro-based proceeds would translate into more dollars.
Portfolio performance
For the 12 months ended February 28, 2011, John Hancock International Allocation Portfolio’s Class A shares posted a total return of 22.43% at net asset value, versus 20.54% for the benchmark MSCI EAFE Index and 20.63% for the average foreign large blend fund, according to Morningstar, Inc.
Both asset allocation and performance by underlying managers added to relative results during the period. Allocations to the international small-cap sector helped performance, while weightings to emerging markets partially offset that with modest underperformance. Among managers, International Opportunities Fund (Marsico) had strong relative performance, helped by stock selection in consumer discretionary, materials and industrials sectors. International Value Fund (Franklin) had success with strong stock selection in financials and health care.
During the period, we established a new position in the International Growth Stock Fund (Invesco). This move was made to further diversify our exposures within the growth portion of the Portfolio. Additionally, we moved from the International Growth Fund (GMO) to the International Core Fund (GMO), which we feel will better complement the rest of our overall developed-market exposures.
This commentary reflects the views of the portfolio managers through the end of the Portfolio’s period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting.
1 Effective 1-1-11, Manulife Asset Management (US) LLC has been added as a subadviser. Manulife Asset Management (US) LLC and Manulife Asset Management (North America) Limited are doing business as John Hancock Asset Management.
6 | International Allocation Portfolio | Annual report |
A look at performance
For the period ended February 28, 2011
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception1 | 1-year | 5-year | 10-year | inception1 | ||
Class A | 16.30 | — | — | –2.03 | 16.30 | — | — | –8.19 | |
Class B | 16.35 | — | — | –1.95 | 16.35 | — | — | –7.89 | |
Class C | 20.49 | — | — | –1.50 | 20.49 | — | — | –6.12 | |
Class I 2 | 22.87 | — | — | –0.38 | 22.87 | — | — | –1.56 | |
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I shares.
The expense ratios of the Portfolio, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Portfolio and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The waivers and expense limitations are contractual at least until 6-30-11. The following expense ratios include expenses of the underlying affiliated funds in which the Portfolio invests. The net expenses are as follows: Class A — 1.68%, Class B — 2.38%, Class C — 2.38% and Class I — 1.22%. Had the fee waivers and expense limitations not been in place, the gross expenses would be as follows: Class A — 2.16%, Class B — 3.78%, Class C — 3.06% and Class I — 5.32%.
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 Portfolio’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1–800–225–5291 or visit the Portfolio’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares.
The Portfolio’s performance results reflect any applicable expense reductions, without which the expenses increase and results would have been less favorable.
1 From 12-29-06.
2 For certain types of investors, as described in the Portfolio’s Class I share prospectus.
Annual report | International Allocation Portfolio | 7 |
A look at performance
Period | Without | With maximum | ||
beginning | sales charge | sales charge | Index | |
Class B | 12-29-06 | $9,377 | $9,211 | $9,641 |
Class C2 | 12-29-06 | 9,388 | 9,388 | 9,641 |
Class I3 | 12-29-06 | 9,844 | 9,844 | 9,641 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Portfolio’s Class B, Class C and Class I shares, respectively, as of 2-28-11. 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.
MSCI EAFE Index (gross of foreign withholding tax on dividends) (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 NAV represents net asset value and POP represents public offering price.
2 The contingent deferred sales charge, if any, is not applicable.
3 For certain types of investors, as described in the Portfolio’s Class I share prospectus.
8 | International Allocation Portfolio | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding portfolio expenses
As a shareholder of the Portfolio, 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 portfolio 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 Portfolio’s actual ongoing operating expenses, and is based on the Portfolio’s actual return. It assumes an account value of $1,000.00 on September 1, 2010 with the same investment held until February 28, 2011.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111,2 | |
Class A | $1,000.00 | $1,235.20 | $3.49 |
Class B | 1,000.00 | 1,229.60 | 7.35 |
Class C | 1,000.00 | 1,231.10 | 7.36 |
Class I | 1,000.00 | 1,237.80 | 0.94 |
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 February 28, 2011, 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 | International Allocation Portfolio | 9 |
Your expenses
Hypothetical example for comparison purposes
This table allows you to compare the Portfolio’s ongoing operating expenses with those of any other portfolio. It provides an example of the Portfolio’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 Portfolio’s actual return). It assumes an account value of $1,000.00 on September 1, 2010, with the same investment held until February 28, 2011. Look in any other portfolio shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111,2 | |
Class A | $1,000.00 | $1,021.70 | $3.16 |
Class B | 1,000.00 | 1,018.20 | 6.66 |
Class C | 1,000.00 | 1,018.20 | 6.66 |
Class I | 1,000.00 | 1,024.00 | 0.85 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Portfolio’s annualized expense ratio of 0.63%, 1.33%, 1.33% and 0.17% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
2 The Portfolio’s expense ratios do not include fees and expenses indirectly incurred by the underlying funds, whose ratios can vary based on the mix of underlying funds. The range of expense ratios of the underlying funds held were 0.91% to 1.11%.
10 | International Allocation Portfolio | Annual report |
Asset allocation
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/interallocationx7x1.jpg)
1 As a percentage of net assets on 2-28-11.
Annual report | International Allocation Portfolio | 11 |
Portfolio’s investments
Investment companies
Underlying Funds’ Subadvisers
Dimensional Fund Advisors LP | (DFA) |
Templeton Investment Counsel, LLC | (Franklin) |
Grantham, Mayo, Van Otterloo & Co. LLC | (GMO) |
Invesco Advisers, Inc. | (Invesco) |
Marsico Capital Management, LLC | (Marsico) |
John Hancock Asset Management* | (John Hancock) |
*Manulife Asset Management (North America) Limited is doing business as John Hancock Asset Management.
As of 2-28-11
Shares | Value | |
Affiliated Investment Companies 100.11% | $20,119,079 | |
(Cost $17,088,215) | ||
EQUITY 100.11% | 20,119,079 | |
International Large Cap 74.59% | ||
John Hancock Funds II (G) | ||
International Growth Stock, Class NAV (Invesco) | 222,510 | 2,498,790 |
International Opportunities, Class NAV (Marsico) | 174,253 | 2,498,790 |
International Value, Class NAV (Franklin) | 321,672 | 4,995,567 |
John Hancock Funds III (G) | ||
International Core, Class NAV (GMO) | 161,251 | 4,995,567 |
Emerging Markets 18.01% | ||
John Hancock Funds II (G) | ||
Emerging Markets, Class NAV (DFA) | 224,698 | 2,615,480 |
John Hancock Investment Trust III (G) | ||
Greater China Opportunities, Class NAV (John Hancock1) (A) | 49,311 | 1,005,954 |
International Small Cap 7.51% | ||
John Hancock Funds II (G) | ||
International Small Company, Class NAV (DFA) | 167,845 | 1,508,931 |
Total investments (Cost $17,088,215)† 100.11% | $20,119,079 | |
Other assets and liabilities, net (0.11%) | ($22,965) | |
Total net assets 100.00% | $20,096,114 | |
The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the portfolio.
(A) The subadviser is an affiliate of the adviser.
(G) The underlying fund’s subadviser is shown parenthetically.
1 Manulife Asset Management (North America) Limited is doing business as John Hancock Asset Management.
† At 2-28-11, the aggregate cost of investment securities for federal income tax purposes was $19,468,650. Net unrealized appreciation aggregated $650,429, of which $650,429 related to appreciated investment securities and $0 related to depreciated investment securities.
12 | International Allocation Portfolio | 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
Financial statements
Statement of assets and liabilities 2-28-11
This Statement of Assets and Liabilities is the Portfolio’s balance sheet. It shows the value of what the Portfolio owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
Assets | |
Investments in affiliated funds, at value | 20,119,079 |
Total investments, at value (Cost $17,088,215) | 20,119,079 |
Receivable for portfolio shares sold | 97,179 |
Receivable due from adviser | 4,107 |
Other receivables and prepaid expenses | 22,177 |
Total assets | 20,242,542 |
Liabilities | |
Due to custodian | 314 |
Payable for investments purchased | 79,879 |
Payable for fund shares repurchased | 12,969 |
Payable to affiliates | |
Accounting and legal services fees | 292 |
Transfer agent fees | 6,072 |
Trustees’ fees | 641 |
Other liabilities and accrued expenses | 46,261 |
Total liabilities | 146,428 |
Net assets | |
Capital paid-in | $32,711,953 |
Undistributed net investment income | 137,738 |
Accumulated net realized loss on investments | (15,784,441) |
Net unrealized appreciation (depreciation) on investments | 3,030,864 |
Net assets | $20,096,114 |
Net asset value per share | |
Based on net asset values and shares outstanding — the Portfolio has an | |
unlimited number of shares authorized with no par value | |
Class A ($11,482,643 ÷ 1,375,601 shares) | $8.35 |
Class B ($2,310,198 ÷ 278,210 shares)1 | $8.30 |
Class C ($6,034,038 ÷ 726,153 shares)1 | $8.31 |
Class I ($269,235 ÷ 32,114 shares) | $8.38 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $8.79 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | International Allocation Portfolio | 13 |
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 2-28-11
This Statement of Operations summarizes the Portfolio’s investment income earned and expenses incurred in operating the Portfolio. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $231,592 |
Total investment income | 231,592 |
Expenses | |
Investment management fees (Note 4) | 13,122 |
Distribution and service fees (Note 4) | 103,948 |
Accounting and legal services fees (Note 4) | 2,853 |
Transfer agent fees (Note 4) | 39,723 |
Trustees’ fees (Note 4) | 1,417 |
State registration fees (Note 4) | 39,582 |
Printing and postage (Note 4) | 9,899 |
Professional fees | 36,929 |
Custodian fees | 12,001 |
Registration and filing fees | 20,993 |
Other | 4,426 |
Total expenses | 284,893 |
Less expense reductions (Note 4) | (118,808) |
Net expenses | 166,085 |
Net investment income | 65,507 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in affiliated issuers | (190,146) |
Capital gain distributions received from affiliated underlying funds | 156,004 |
(34,142) | |
Change in net unrealized appreciation (depreciation) of | |
Investments in affiliated issuers | 3,589,573 |
3,589,573 | |
Net realized and unrealized gain | 3,555,431 |
Increase in net assets from operations | $3,620,938 |
14 | International Allocation Portfolio | 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 Portfolio’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 Portfolio share transactions.
Year | Year | |||
ended | ended | |||
2-28-11 | 2-28-10 | |||
Increase (decrease) in net assets | ||||
From operations | ||||
Net investment income | $65,507 | $75,504 | ||
Net realized loss | (34,142) | (10,066,907) | ||
Change in net unrealized appreciation (depreciation) | 3,589,573 | 20,230,923 | ||
Increase in net assets resulting from operations | 3,620,938 | 10,239,520 | ||
Distributions to shareholders | ||||
From net investment income | ||||
Class A | — | (83,517) | ||
Class B | — | (2,809) | ||
Class C | — | (12,136) | ||
Class I | — | (3,728) | ||
From net realized gain | ||||
Class A | — | (2,419) | ||
Class B | — | (300) | ||
Class C | — | (1,298) | ||
Class I | — | (72) | ||
Total distributions | — | (106,279) | ||
From Portfolio share transactions (Note 5) | (607,486) | (10,301,661) | ||
Total increase (decrease) | 3,013,452 | (168,420) | ||
Net assets | ||||
Beginning of year | 17,082,662 | 17,251,082 | ||
End of year | $20,096,114 | $17,082,662 | ||
Undistributed (distributions in excess of) net investment income | $137,738 | ($408) |
See notes to financial statements | Annual report | International Allocation Portfolio | 15 |
Financial highlights
The Financial Highlights show how the Portfolio’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $6.82 | $4.31 | $9.48 | $9.96 | $10.00 |
Net investment income (loss)2,3 | 0.05 | 0.02 | 0.12 | 0.13 | (0.01) |
Net realized and unrealized gain (loss) on investments | 1.48 | 2.55 | (4.86) | (0.03) | (0.03) |
Total from investment operations | 1.53 | 2.57 | (4.74) | 0.10 | (0.04) |
Less distributions | |||||
From net investment income | — | (0.06) | (0.14) | (0.13) | — |
From net realized gain | — | —4 | (0.29) | (0.45) | — |
Total distributions | — | (0.06) | (0.43) | (0.58) | — |
Net asset value, end of year | $8.35 | $6.82 | $4.31 | $9.48 | $9.96 |
Total return (%)5 | 22.43 | 59.59 | (50.67) | 0.70 | (0.40)6 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $11 | $10 | $13 | $30 | $3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.157 | 1.067,8 | 0.927 | 1.117 | 8.539 |
Expenses net of fee waivers | 0.657 | 0.677,8 | 0.617 | 0.587 | 0.609 |
Expenses net of fee waivers and credits | 0.657 | 0.667,8 | 0.617 | 0.587 | 0.609 |
Net investment income (loss)3 | 0.62 | 0.29 | 1.56 | 1.21 | (0.60)9 |
Portfolio turnover (%) | 64 | 41 | 23 | 23 | 3 |
1 The inception date for Class A shares is 12-29-06.
2 Based on the average daily shares outstanding.
3 Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Not annualized.
7 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-28-11, 2-28-10, 2-28-09 and 2-29-08, respectively, based on the mix of underlying funds held by the Portfolio.
8 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
9 Annualized.
16 | International Allocation Portfolio | Annual report | See notes to financial statements |
CLASS B SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $6.84 | $4.32 | $9.46 | $9.95 | $10.00 |
Net investment income (loss)2,3 | — | 0.03 | 0.06 | 0.07 | (0.02) |
Net realized and unrealized gain (loss) on investments | 1.46 | 2.51 | (4.83) | (0.06) | (0.03) |
Total from investment operations | 1.46 | 2.54 | (4.77) | 0.01 | (0.05) |
Less distributions | |||||
From net investment income | — | (0.02) | (0.08) | (0.05) | — |
From net realized gain | — | —4 | (0.29) | (0.45) | — |
Total distributions | — | (0.02) | (0.37) | (0.50) | — |
Net asset value, end of year | $8.30 | $6.84 | $4.32 | $9.46 | $9.95 |
Total return (%)5 | 21.35 | 58.73 | (51.01) | (0.13) | (0.50)6 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $2 | $1 | $1 | $2 | —7 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.338 | 3.068,9 | 3.038 | 4.028 | 28.5810 |
Expenses net of fee waivers | 1.348 | 1.448,9 | 1.538 | 1.348 | 1.2610 |
Expenses net of fee waivers and credits | 1.348 | 1.378,9 | 1.318 | 1.338 | 1.2610 |
Net investment income (loss)3 | 0.05 | 0.48 | 0.80 | 0.70 | (1.26)10 |
Portfolio turnover (%) | 64 | 41 | 23 | 23 | 3 |
1 The inception date for Class B shares is 12-29-06.
2 Based on the average daily shares outstanding.
3 Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Not annualized.
7 Less than $500,000.
8 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-28-11, 2-28-10, 2-28-09 and 2-29-08, respectively, based on the mix of underlying funds held by the Portfolio.
9 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
10 Annualized.
See notes to financial statements | Annual report | International Allocation Portfolio | 17 |
CLASS C SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $6.84 | $4.32 | $9.46 | $9.95 | $10.00 |
Net investment income (loss)2,3 | —4 | 0.03 | 0.06 | 0.08 | (0.02) |
Net realized and unrealized gain (loss) on investments | 1.47 | 2.51 | (4.83) | (0.07) | (0.03) |
Total from investment operations | 1.47 | 2.54 | (4.77) | 0.01 | (0.05) |
Less distributions | |||||
From net investment income | — | (0.02) | (0.08) | (0.05) | — |
From net realized gain | — | —4 | (0.29) | (0.45) | — |
Total distributions | — | (0.02) | (0.37) | (0.50) | — |
Net asset value, end of year | $8.31 | $6.84 | $4.32 | $9.46 | $9.95 |
Total return (%)5 | 21.49 | 58.73 | (51.01) | (0.13) | (0.50)6 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $6 | $5 | $3 | $8 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.967 | 2.117,8 | 1.927 | 2.317 | 18.629 |
Expenses net of fee waivers | 1.357 | 1.407,8 | 1.317 | 1.337 | 1.279 |
Expenses net of fee waivers and credits | 1.357 | 1.377,8 | 1.317 | 1.337 | 1.279 |
Net investment income (loss)3 | (0.06) | 0.44 | 0.76 | 0.79 | (1.27)9 |
Portfolio turnover (%) | 64 | 41 | 23 | 23 | 3 |
1 The inception date for Class C shares is 12-29-06.
2 Based on the average daily shares outstanding.
3 Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Not annualized.
7 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-28-11, 2-28-10, 2-28-09 and 2-29-08, respectively, based on the mix of underlying funds held by the Portfolio.
8 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
9 Annualized.
18 | International Allocation Portfolio | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-071 |
Per share operating performance | |||||
Net asset value, beginning of year | $6.82 | $4.30 | $9.49 | $9.97 | $10.00 |
Net investment income2,3 | 0.07 | 0.09 | 0.11 | 0.16 | —4 |
Net realized and unrealized gain (loss) on investments | 1.49 | 2.52 | (4.84) | (0.03) | (0.03) |
Total from investment operations | 1.56 | 2.61 | (4.73) | 0.13 | (0.03) |
Less distributions | |||||
From net investment income | — | (0.09) | (0.17) | (0.16) | — |
From net realized gain | — | —4 | (0.29) | (0.45) | — |
Total distributions | — | (0.09) | (0.46) | (0.61) | — |
Net asset value, end of year | $8.38 | $6.82 | $4.30 | $9.49 | $9.97 |
Total return (%)5 | 22.87 | 60.62 | (50.48) | 1.02 | (0.30)6 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | —7 | —7 | —7 | $1 | —7 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 5.698 | 4.688,9 | 1.358 | 7.178 | 25.0110 |
Expenses net of fee waivers | 0.188 | 0.198,9 | 0.168 | 0.188 | 0.1710 |
Expenses net of fee waivers and credits | 0.188 | 0.198,9 | 0.168 | 0.188 | 0.1710 |
Net investment income (loss)3 | 0.91 | 1.46 | 1.44 | 1.55 | (0.17)10 |
Portfolio turnover (%) | 64 | 41 | 23 | 23 | 3 |
1 The inception date for Class I shares is 12-29-06.
2 Based on the average daily shares outstanding.
3 Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.
4 Less than ($0.005) per share.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Not annualized.
7 Less than $500,000.
8 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-28-11, 2-28-10, 2-28-09 and 2-29-08, respectively, based on the mix of underlying funds held by the Portfolio.
9 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
10 Annualized.
See notes to financial statements | Annual report | International Allocation Portfolio | 19 |
Notes to financial statements
Note 1 — Organization
John Hancock International Allocation Portfolio (the Portfolio) is a diversified series of John Hancock Funds III (JHF III or 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 Portfolio is to seek long-term growth of capital. The Portfolio is designed to provide diversification of investments within the international asset class.
The Portfolio operates as a “fund of funds”, investing in Class NAV shares of affiliated underlying funds of the Trust and John Hancock Funds II (JHF II) and other permitted investments, including other affiliated funds in the John Hancock Funds complex.
The Portfolio may offer multiple classes of shares. The shares currently offered are detailed in the Statement of Assets and Liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
The accounting policies of the underlying funds of the Portfolio are outlined in the underlying funds’ shareholder reports, available without charge by calling 1-800-344-1029 and jhfunds.com, on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or at the SEC’s public reference room in Washington, D.C. The underlying funds are not covered by this report.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Portfolio:
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. The Portfolio uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Portfolio’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
As of February 28, 2011, all investments are categorized as Level 1 under the hierarchy described above.
20 | International Allocation Portfolio | Annual report |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the year ended February 28, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
In order to value the securities, the Portfolio uses the following valuation techniques. Investments by the Portfolio in underlying affiliated funds and/or other investment companies are valued at their respective net asset values each business day. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading.
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. 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 is recorded when the Portfolio becomes aware of the dividends.
Line of credit. The Portfolio may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to a Portfolio to make properly authorized payments. The Portfolio is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian has a lien, security interest or security entitlement in any Portfolio property that is not segregated, to the maximum extent permitted by law for any overdraft.
In addition, the Portfolio and other affiliated funds have entered into an agreement with State Street Bank and Trust Company (SSBT) which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 31, 2010, the amount of the line of credit was $150 million. 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. For the year ended February 28, 2011, the Portfolio had no borrowings under the line of credit.
Effective March 30, 2011, the line of credit with SSBT expired, and a similar arrangement was established with Citibank N.A.
Expenses. The majority of expenses are directly attributable to an individual 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 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 asset value of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rates applicable to each class.
Federal income taxes. The Portfolio 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.
Annual report | International Allocation Portfolio | 21 |
For federal income tax purposes, the Portfolio has a capital loss carryforward of $13,389,130 available to offset future net realized capital gains as of February 28, 2011. The following table details the capital loss carryforward available as of February 28, 2011.
CAPITAL LOSS CARRYFORWARD EXPIRING AT FEBRUARY 28 | |||||
2017 | 2018 | 2019 | |||
$1,965,278 | $6,868,187 | $4,555,665 |
Net capital losses of $14,876, that are a result of security transactions occurring after October 31, 2010, are treated as occurring on March 1, 2011, the first day of the Portfolio’s next taxable year.
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Portfolio will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment 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.
As of February 28, 2011, the Portfolio had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Portfolio’s federal tax return is 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 Portfolio generally declares and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended February 28, 2011 and February 28, 2010 was as follows:
FEBRUARY 28, 2011 | FEBRUARY 28, 2010 | ||||
Ordinary Income | — | $106,279 |
Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of February 28, 2011, the components of distributable earnings on a tax basis included $138,154 of undistributable 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. Short-term gains from underlying funds are treated as ordinary income for tax purposes. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Portfolio’s financial statements as a return of capital.
Capital accounts within 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 wash sale loss deferrals and short-term distributions received from underlying funds.
Note 3 — Guarantees and indemnifications
Under the Portfolio’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. Additionally, in the normal course of business, the Portfolio enters into contracts with service providers that contain general indemnification clauses. The Portfolio’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. The risk of material loss from such claims is considered remote.
22 | International Allocation Portfolio | Annual report |
Note 4 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Portfolio. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Portfolio has an investment management contract with the Adviser under which the Portfolio pays the Adviser a management fee that has two components: (a) a fee on assets invested in the funds of JHF II and JHF III (Portfolio Assets) and (b) a fee on assets invested in other permitted investments (other than JHF II and JHF III), including other affiliated funds in the John Hancock Funds complex (Other Assets). The Portfolio pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.05% of the first $500,000,000 of the Portfolio Assets; (b) 0.04% of the Portfolio Assets in excess of $500,000,000; (c) 0.50% of the first $500,000,000 of the Other Assets and (d) 0.49% of the Other Assets in excess of $500,000,000. The Adviser has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (North America) Limited (formerly, MFC Global Investment Management (U.S.A.) Limited) and John Hancock Asset Management, a division of Manulife Asset Management (US) LLC). The Portfolio is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the year ended February 28, 2011 were equivalent to an annual effective rate of 0.07% of the Portfolio’s average daily net assets, which includes a voluntary waiver by the Adviser of 0.035% of the Portfolio’s average daily net assets.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Portfolio. This agreement excludes taxes, portfolio brokerage commissions, interest, litigation and other extraordinary expenses not incurred in the ordinary course of the Portfolio’s business. The fee waivers and/or reimbursements are such that these expenses will not exceed 0.63%, 1.33%, 1.33% and 0.17% for Class A, Class B, Class C and Class I shares, respectively. Prior to July 1, 2010, the fee waivers and/or reimbursements were such that these expenses would not exceed 0.68%, 1.38%, 1.38% and 0.20% for Class A, Class B, Class C and Class I shares, respectively. The fee waivers and/or reimbursements will continue in effect until June 30, 2011.
Effective May 1, 2010, the Adviser has voluntarily agreed to waive fees and/or reimburse certain other fund level expenses. This agreement excludes advisory, interest, overdraft, litigation, Rule 12b-1, class specific and other extraordinary expenses not incurred in the ordinary course of business. The fee waivers and/or reimbursement are such that these expenses will not exceed 0.16% of average daily net assets.
Accordingly, these expense reductions amounted to $52,997, $17,220, $33,335 and $15,256 for Class A, Class B, Class C and Class I shares, respectively, for the year ended February 28, 2011.
Accounting and legal services. Pursuant to a service agreement the Portfolio reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of the Portfolio, 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 February 28, 2011, amounted to an annual rate of 0.02% of the Portfolio’s average daily net assets.
Distribution and service plans. The Portfolio has a distribution agreement with the Distributor. The Portfolio has adopted distribution and service plans with respect to Class A, Class B, and Class C shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services
Annual report | International Allocation Portfolio | 23 |
provided as the distributor of shares of the Portfolio. The Portfolio 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 Portfolio’s shares.
CLASS | 12b–1 FEES | ||||
Class A | 0.30% | ||||
Class B | 1.00% | ||||
Class C | 1.00% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $14,651 for the year ended February 28, 2011. Of this amount, $2,444 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $11,461 was paid as sales commissions to broker-dealers and $746 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a broker-dealer affiliate of the Adviser.
Class B and Class C shares are subject to contingent deferred sales charges (CDSC). Class B shares that are redeemed within six years of purchase are subject to CDSC, at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2011, CDSCs received by the Distributor amounted to $2,457 and $393 for Class B and Class C shares, respectively.
Transfer agent fees. The Portfolio has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services or Transfer Agent), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Portfolio and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain revenues that Signature Services receives in connection with the service it provides to the funds. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to July 1, 2010, the transfer agent fees were made up of three components:
• The Portfolio paid a monthly transfer agent fee at an annual rate of 0.05% for Class A, Class B and Class C shares and 0.04% for Class I shares, based on each class’s average daily net assets.
• The Portfolio paid a monthly fee based on an annual rate of $16.50 per shareholder account.
• In addition, Signature Services was reimbursed for certain out-of-pocket expenses.
24 | International Allocation Portfolio | Annual report |
Class level expenses. Class level expenses for the year ended February 28, 2011 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $31,780 | $22,978 | $8,013 | $5,024 |
Class B | 17,501 | 4,378 | 8,740 | 1,156 |
Class C | 54,667 | 11,869 | 9,320 | 3,368 |
Class I | — | 498 | 13,509 | 351 |
Total | $103,948 | $39,723 | $39,582 | $9,899 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of Assets and Liabilities.
Note 5 — Portfolio share transactions
Transactions in Portfolio shares for the years ended February 28, 2011 and 2010 were as follows:
Year ended 2-28-11 | Year ended 2-28-10 | |||||
Shares | Amount | Shares | Amount | |||
Class A shares | ||||||
Sold | 299,343 | $2,223,804 | 522,788 | $3,506,036 | ||
Distributions reinvested | — | — | 10,629 | 75,571 | ||
Repurchased | (429,709) | (3,132,873) | (2,065,514) | (14,287,346) | ||
Net decrease | (130,366) | ($909,069) | (1,532,097) | ($10,705,739) | ||
Class B shares | ||||||
Sold | 124,785 | $912,788 | 82,988 | $561,962 | ||
Distributions reinvested | — | — | 385 | 2,746 | ||
Repurchased | (35,612) | (257,341) | (49,422) | (311,321) | ||
Net increase | 89,173 | $655,447 | 33,951 | $253,387 | ||
Class C shares | ||||||
Sold | 185,601 | $1,310,203 | 232,661 | $1,591,552 | ||
Distributions reinvested | — | — | 1,523 | 10,860 | ||
Repurchased | (221,117) | (1,580,337) | (225,150) | (1,384,944) | ||
Net increase (decrease) | (35,516) | ($270,134) | 9,034 | $217,468 | ||
Class I shares | ||||||
Sold | 12,543 | $92,073 | 23,320 | $141,232 | ||
Distributions reinvested | — | — | 355 | 2,524 | ||
Repurchased | (24,742) | (175,803) | (33,711) | (210,533) | ||
Net decrease | (12,199) | ($83,730) | (10,036) | ($66,777) | ||
Net decrease | (88,908) | ($607,486) | (1,499,148) | ($10,301,661) | ||
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $11,427,071 and $11,839,574, respectively, for the year ended February 28, 2011.
Annual report | International Allocation Portfolio | 25 |
Auditors’ report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock International Allocation Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio 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 International Allocation Portfolio (the “Portfolio”) at February 28, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’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 February 28, 2011 by correspondence with the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 19, 2011
26 | International Allocation Portfolio | 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 |
Steven R. Pruchansky, Born: 1944 | 2006 | 47 |
Chairperson (since January 2011); 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 (since 2008); 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). | ||
James F. Carlin, Born: 1940 | 2006 | 47 |
Chief Executive Officer, Director and Treasurer, Alpha Analytical Laboratories (environmental, chemical | ||
and pharmaceutical analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance | ||
Agency, Inc. (since 1995); Chairman and Chief Executive Officer, CIMCO, LLC (management/ | ||
investments) (since 1987). | ||
William H. Cunningham, Born: 1944 | 2006 | 47 |
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 of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson,2 Born: 1952 | 2008 | 47 |
Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); 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 Corp. (1996–2009); Board of Directors of | ||
Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (since 2007). | ||
Charles L. Ladner,2 Born: 1938 | 2006 | 47 |
Vice Chairperson (since March 2011); Chairman and Trustee, Dunwoody Village, Inc. (retirement | ||
services) (since 2008); Director, Philadelphia Archdiocesan Educational Fund (since 2009); Senior Vice | ||
President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); | ||
Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (gas | ||
distribution) (until 1997); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association | ||
(Cooperating Association, National Park Service) (until 2005). |
Annual report | International Allocation Portfolio | 27 |
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 |
Stanley Martin,2 Born: 1947 | 2008 | 47 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore, Born: 1939 | 2006 | 47 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). | ||
Patti McGill Peterson,2 Born: 1943 | 2006 | 47 |
Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy | ||
(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President, | ||
Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public | ||
Affairs, Cornell University (1997–1998); Former President Wells College, St. Lawrence University and the | ||
Association of Colleges and Universities of the State of New York. Director of the following: Niagara | ||
Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until | ||
1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007); | ||
Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development | ||
Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational | ||
Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 47 |
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (“KPMG”) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
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 |
Hugh McHaffie,4 Born: 1959 | 2010 | 47 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Trust and John Hancock Funds II (since 2009); Trustee, John Hancock retail | ||
funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment | ||
Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior Vice President, Individual | ||
Business Product Management, MetLife, Inc. (1999–2006). |
28 | International Allocation Portfolio | Annual report |
Non-Independent Trustees3 (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 |
John G. Vrysen, Born: 1955 | 2009 | 47 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock Funds II | ||
and John Hancock Trust (since 2007); Chief Operating Officer, John Hancock retail funds (until 2009); | ||
Trustee, John Hancock retail funds (since 2009). | ||
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 | |
Keith F. Hartstein, Born: 1956 | 2006 | |
President and Chief Executive Officer | ||
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | ||
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | ||
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | ||
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | ||
Force Marketing Committee (since 2003). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Senior Vice President and Chief Operating Officer | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | ||
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | ||
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock Trust | ||
(since 2006); Senior Vice President, Product Management and Development, John Hancock Funds, | ||
LLC (until 2009). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | ||
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | ||
Funds II and John Hancock Trust (since 2006); Vice President and Associate General Counsel, | ||
Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal Counsel, MML | ||
Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual Select Funds and | ||
MassMutual Premier Funds (2004–2006). |
Annual report | International Allocation Portfolio | 29 |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Trust, John Hancock Advisers, LLC and John Hancock | |
Investment Management Services, LLC (since 2005); Vice President and Chief Compliance Officer, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Trust (since 2007); | |
Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, Goldman | |
Sachs (2005–2007). | |
Salvatore Schiavone,4 Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock Closed-End Funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Trust (since 2007); Assistant Treasurer, | |
John Hancock retail funds, John Hancock Funds II and John Hancock Trust (2007–2009); Assistant | |
Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management Research | |
Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
4 Mr. McHaffie and Mr. Schiavone were appointed by the Board of Trustees effective 8-31-10.
30 | International Allocation Portfolio | Annual report |
More information
Trustees | Investment adviser | |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management | |
James F. Carlin | Services, LLC | |
William H. Cunningham | ||
Deborah C. Jackson* | Subadviser | |
Charles L. Ladner, Vice Chairperson* | John Hancock Asset Management | |
Stanley Martin* | ||
Hugh McHaffie | Principal distributor | |
Dr. John A. Moore | John Hancock Funds, LLC | |
Patti McGill Peterson* | ||
Gregory A. Russo | Custodian | |
John G. Vrysen | State Street Bank and Trust Company | |
Officers | Transfer agent | |
Keith F. Hartstein | John Hancock Signature Services, Inc. | |
President and Chief Executive Officer | ||
Legal counsel | ||
Andrew G. Arnott | K&L Gates LLP | |
Senior Vice President and Chief Operating Officer | ||
Independent registered | ||
Thomas M. Kinzler | public accounting firm | |
Secretary and Chief Legal Officer | PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | ||
Chief Compliance Officer | The report is certified under the Sarbanes-Oxley | |
Act, which requires mutual funds and other public | ||
Charles A. Rizzo | companies to affirm that, to the best of their | |
Chief Financial Officer | knowledge, the information in their financial reports | |
is fairly and accurately stated in all material respects. | ||
Salvatore Schiavone | ||
Treasurer | ||
*Member of the Audit Committee |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
Annual report | International Allocation Portfolio | 31 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/interallocationx28x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock International Allocation Portfolio. | 3180A 2/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/11 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/globalshyieldx1x1.jpg)
Management’s discussion of
Fund performance
By Epoch Investment Partners, Inc.
The 12 months ended February 28, 2011, produced positive global equity performance against a backdrop of economic and political uncertainty. It was a year in which growth shares outperformed value-oriented stocks, and developed and emerging-market stocks finished on roughly equal footing, as measured by the MSCI indexes. For the fiscal year, John Hancock Global Shareholder Yield Fund’s Class A shares posted a total return of 20.64% at net asset value. By comparison, the MSCI World Index had a return of 22.31%. The average return of the world stock funds tracked by Morningstar, Inc. was 21.32%.
The Fund’s shortfall compared with the benchmark MSCI World Index can be explained by the fact that the value-oriented, dividend-paying stocks we typically favor generally lagged the returns of the higher-beta, growth-oriented shares that drove the index’s return. Indeed, our stock selection had a positive effect on performance for the fiscal year; nevertheless, the Fund trailed the index because we held overweight positions in the lagging utilities and staples sectors. It also hurt to be underrepresented in three of the four best-performing market segments for the fiscal year. Stock choices in energy shares were other key detractors, including Diamond Offshore Drilling, Inc. and France Telecom SA. At the other end of the spectrum, after utilities, our stock selection contributed strongly in the information technology sector, especially smart-phone maker HTC Corp. Stock selection and an overweight position made the telecommunication sector another source of strength, as several of the top-10 contributors to return resided in this sector, such as BCE, Inc., Vodafone Group PLC, Swisscom AG, CenturyLink, Inc. and Verizon Communications, Inc. Stock choices also drove outperformance in the utilities and consumer staples sectors, where the most helpful holdings were NiSource, Inc. in utilities and Altria Group, Inc. and Philip Morris International in consumer staples.
This commentary reflects the views of the portfolio managers through the end of the Fund’s period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. 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.
6 | Global Shareholder Yield Fund | Annual report |
A look at performance
For the period ended February 28, 2011
SEC 30-day | SEC 30-day | ||||||||||||
Average annual total returns (%) | Cumulative total returns (%) | yield (%) | yield (%) | ||||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | subsidized | unsubsidized1 | ||||||||||
Since | Since | as of | as of | ||||||||||
1-year | 5-year | 10-year | inception | 1-year | 5-year | 10-year | inception | 2-28-11 | 2-28-11 | ||||
Class A2 | 14.56 | — | — | 0.37 | 14.56 | — | — | 1.51 | 2.24 | 2.24 | |||
Class B2 | 14.65 | — | — | 0.26 | 14.65 | — | — | 1.05 | 1.88 | –2.18 | |||
Class C2 | 18.78 | — | — | 0.99 | 18.78 | — | — | 4.00 | 1.89 | 1.19 | |||
Class i2,3 | 21.09 | — | — | 2.18 | 21.09 | — | — | 8.99 | 2.93 | 2.88 | |||
Class NAV 3,4 | 21.19 | — | — | 2.85 | 21.19 | — | — | 8.31 | 3.12 | 3.12 | |||
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I and Class NAV shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The waivers and expense limitations are contractual at least until 6-30-11. The net expenses are as follows: Class A — 1.55%, Class B — 2.25%, Class C — 2.25% and Class I — 1.09%. Had the fee waivers and expense limitations not been in place, the gross expenses would be as follows: Class A — 1.66%, Class B — 3.33%, Class C — 2.56% and Class I — 1.12%. For Class NAV the net expenses equal the gross expenses and are 0.99%.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Fund’s performance results reflect any applicable expense reductions, without which the expenses increase and results would have been less favorable.
1 Unsubsidized yields reflect what the yield would have been without the effect of reimbursements and waivers.
2 From 3-1-07.
3 For certain types of investors, as described in the Fund’s Class I and Class NAV shares prospectuses.
4 From 4-28-08.
Annual report | Global Shareholder Yield Fund | 7 |
A look at performance
Period | Without | With maximum | ||
beginning | sales charge | sales charge | Index | |
Class B | 3-1-07 | $10,389 | $10,105 | $10,101 |
Class C2 | 3-1-07 | 10,400 | 10,400 | 10,101 |
Class I3 | 3-1-07 | 10,899 | 10,899 | 10,101 |
Class NAV3 | 4-28-08 | 10,831 | 10,831 | 9,625 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the fund’s Class B, Class C, Class I and Class NAV shares, respectively, as of 2-28-11. 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.
MSCI World Index (gross of foreign withholding tax on dividends) — is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 NAV represents net asset value and POP represents public offering price.
2 The contingent deferred sales charge, if any, is not applicable.
3 For certain types of investors, as described in the Fund’s Class I and Class NAV shares prospectuses.
8 | Global Shareholder Yield Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about 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 September 1, 2010 with the same investment held until February 28, 2011.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,186.80 | $8.46 |
Class B | 1,000.00 | 1,183.00 | 12.18 |
Class C | 1,000.00 | 1,184.30 | 12.19 |
Class I | 1,000.00 | 1,190.30 | 5.92 |
Class NAV | 1,000.00 | 1,190.90 | 5.38 |
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 February 28, 2011, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/globalshyieldx5x1.jpg)
Annual report | Global Shareholder Yield 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 September 1, 2010, with the same investment held until February 28, 2011. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,017.10 | $7.80 |
Class B | 1,000.00 | 1,013.60 | 11.23 |
Class C | 1,000.00 | 1,013.60 | 11.23 |
Class I | 1,000.00 | 1,019.40 | 5.46 |
Class NAV | 1,000.00 | 1,019.90 | 4.96 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.56%, 2.25%, 2.25%, 1.09% and 0.99% for Class A, Class B, Class C, Class I and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | Global Shareholder Yield Fund | Annual report |
Portfolio summary
Top 10 Holdings1 | ||||
Swisscom AG | 2.0% | Diageo PLC | 1.7% | |
Philip Morris International, Inc. | 1.9% | France Telecom SA | 1.7% | |
BCE, Inc. | 1.8% | Pearson PLC | 1.7% | |
Vodafone Group PLC | 1.8% | National Grid PLC | 1.6% | |
Imperial Tobacco Group PLC | 1.7% | CenturyLink, Inc. | 1.6% | |
Sector Composition2,3 | ||||
Consumer Staples | 18% | Information Technology | 6% | |
Telecommunication Services | 15% | Health Care | 6% | |
Utilities | 13% | Financials | 5% | |
Consumer Discretionary | 11% | Materials | 4% | |
Energy | 10% | Short-Term Investments & Other | 4% | |
Industrials | 8% | |||
1 As a percentage of net assets on 2-28-11. Cash and cash equivalents are not included in Top 10 Holdings.
2 As a percentage of net assets on 2-28-11.
3 International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. 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.
Annual report | Global Shareholder Yield Fund | 11 |
Fund’s investments
As of 2-28-11
Shares | Value | |
Common Stocks 95.63% | $338,634,007 | |
(Cost $282,424,876) | ||
Australia 1.77% | 6,249,632 | |
BHP Billiton, Ltd., SADR | 27,100 | 2,563,660 |
JB Hi-Fi, Ltd. | 88,600 | 1,772,478 |
Westpac Banking Corp. | 79,461 | 1,913,494 |
Belgium 2.08% | 7,382,158 | |
Anheuser-Busch InBev NV | 86,520 | 4,835,069 |
Mobistar SA | 39,888 | 2,547,089 |
Brazil 0.91% | 3,219,633 | |
CPFL Energia SA | 123,800 | 3,219,633 |
Canada 3.06% | 10,826,878 | |
BCE, Inc. | 174,000 | 6,451,011 |
Rogers Communications, Inc., Class B | 81,300 | 2,870,249 |
Shaw Communications, Inc., Class B | 70,700 | 1,505,618 |
France 7.23% | 25,617,912 | |
Air Liquide SA | 14,840 | 1,920,727 |
France Telecom SA | 268,800 | 5,956,547 |
SCOR SE | 103,300 | 3,035,058 |
Total SA | 81,100 | 4,975,908 |
Vinci SA | 80,600 | 4,850,216 |
Vivendi SA | 171,200 | 4,879,456 |
Germany 3.08% | 10,891,632 | |
BASF SE | 45,500 | 3,783,384 |
Daimler AG (I) | 49,000 | 3,451,341 |
Muenchener Rueckversicherungs AG | 21,900 | 3,656,907 |
Hong Kong 0.44% | 1,550,456 | |
China Mobile, Ltd., SADR | 32,800 | 1,550,456 |
Italy 1.24% | 4,374,466 | |
Terna Rete Elettrica Nazionale SpA | 948,600 | 4,374,466 |
Netherlands 1.56% | 5,534,350 | |
Royal Dutch Shell PLC, ADR | 76,600 | 5,534,350 |
Norway 1.54% | 5,448,155 | |
Orkla ASA | 169,700 | 1,547,713 |
StatoilHydro ASA, SADR | 147,800 | 3,900,442 |
12 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Shares | Value | |
Philippines 0.38% | $1,358,798 | |
Philippine Long Distance Telephone Company, SADR | 27,351 | 1,358,798 |
Spain 1.57% | 5,564,895 | |
Telefonica SA | 218,800 | 5,564,895 |
Sweden 0.46% | 1,642,829 | |
Assa Abloy AB, Series B | 58,700 | 1,642,829 |
Switzerland 4.27% | 15,102,588 | |
Nestle SA | 99,000 | 5,603,904 |
Roche Holdings AG | 16,700 | 2,517,977 |
Swisscom AG | 15,800 | 6,980,707 |
Taiwan 2.51% | 8,882,798 | |
HTC Corp. | 101,650 | 3,693,302 |
Quanta Computer, Inc. | 1,179,000 | 2,314,865 |
Taiwan Semiconductor Manufacturing Company, Ltd., SADR | 233,900 | 2,874,631 |
United Kingdom 18.25% | 64,633,069 | |
AstraZeneca PLC, SADR | 102,300 | 5,030,091 |
BAE Systems PLC | 759,400 | 4,065,427 |
British American Tobacco PLC | 42,400 | 1,696,797 |
Compass Group PLC | 261,700 | 2,354,266 |
Diageo PLC, SADR | 76,600 | 5,994,716 |
FirstGroup PLC | 838,572 | 4,971,945 |
Imperial Tobacco Group PLC | 192,100 | 6,172,734 |
Meggitt PLC | 414,000 | 2,275,409 |
National Grid PLC | 624,260 | 5,806,173 |
Next PLC | 70,729 | 2,275,003 |
Pearson PLC | 345,900 | 5,912,665 |
Reckitt Benckiser Group PLC | 49,700 | 2,561,383 |
Scottish & Southern Energy PLC | 174,200 | 3,508,222 |
Unilever PLC | 53,000 | 1,572,652 |
United Utilities Group PLC | 257,663 | 2,482,140 |
Vodafone Group PLC | 2,226,500 | 6,317,712 |
William Morrison Supermarket PLC | 363,250 | 1,635,734 |
United States 45.28% | 160,353,758 | |
Abbott Laboratories | 39,100 | 1,880,710 |
Altria Group, Inc. | 192,600 | 4,886,262 |
Arthur J. Gallagher & Company | 114,800 | 3,604,720 |
AT&T, Inc. | 133,900 | 3,800,082 |
Automatic Data Processing, Inc. | 40,300 | 2,015,000 |
Bemis Company, Inc. | 51,900 | 1,704,915 |
Bristol-Myers Squibb Company | 144,300 | 3,724,383 |
CenturyLink, Inc. | 136,700 | 5,629,306 |
Chevron Corp. | 26,400 | 2,739,000 |
CMS Energy Corp. | 128,000 | 2,465,280 |
Coca-Cola Enterprises, Inc. | 71,400 | 1,877,820 |
Comcast Corp., Special Class A | 124,700 | 3,032,704 |
ConocoPhillips | 25,700 | 2,001,259 |
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 13 |
Shares | Value | |
United States (continued) | ||
Diamond Offshore Drilling, Inc. | 44,300 | $3,465,589 |
DPL, Inc. | 59,400 | 1,545,588 |
Duke Energy Corp. | 185,800 | 3,342,542 |
E.I. Du Pont de Nemours & Company | 67,700 | 3,714,699 |
Emerson Electric Company | 30,400 | 1,813,664 |
Enterprise Products Partners LP | 39,100 | 1,704,760 |
Exxon Mobil Corp. | 34,700 | 2,967,891 |
Genuine Parts Company | 38,700 | 2,039,103 |
H.J. Heinz Company | 36,300 | 1,822,986 |
Honeywell International, Inc. | 56,600 | 3,277,706 |
Johnson & Johnson | 73,800 | 4,534,272 |
Kellogg Company | 40,800 | 2,185,248 |
Kimberly-Clark Corp. | 58,900 | 3,881,510 |
Kinder Morgan Energy Partners LP | 50,000 | 3,682,500 |
Lorillard, Inc. | 60,400 | 4,636,908 |
McDonald’s Corp. | 23,800 | 1,801,184 |
Merck & Company, Inc. | 71,200 | 2,318,984 |
Microchip Technology, Inc. | 94,500 | 3,487,995 |
Microsoft Corp. | 150,900 | 4,010,922 |
Nicor, Inc. | 50,900 | 2,684,466 |
NiSource, Inc. | 262,400 | 5,027,584 |
NYSE Euronext | 59,900 | 2,216,300 |
Oracle Corp. | 120,000 | 3,948,000 |
PepsiCo, Inc. | 26,400 | 1,674,288 |
Philip Morris International, Inc. | 105,400 | 6,617,012 |
Pitney Bowes, Inc. | 150,600 | 3,792,108 |
Progress Energy, Inc. | 35,600 | 1,627,276 |
Regal Entertainment Group | 227,500 | 3,398,850 |
Reynolds American, Inc. | 62,200 | 2,134,704 |
SCANA Corp. | 42,700 | 1,728,496 |
Southern Company | 84,400 | 3,216,484 |
Spectra Energy Corp. | 69,300 | 1,853,775 |
TECO Energy, Inc. | 176,300 | 3,192,793 |
The Coca-Cola Company | 29,200 | 1,866,464 |
The Travelers Companies, Inc. | 32,800 | 1,965,704 |
Time Warner, Inc. | 72,600 | 2,773,320 |
Tupperware Brands Corp. | 70,000 | 3,755,500 |
Vectren Corp. | 90,800 | 2,389,856 |
Verizon Communications, Inc. | 122,100 | 4,507,932 |
Waste Management, Inc. | 43,100 | 1,597,286 |
Williams Partners LP | 53,800 | 2,790,068 |
14 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Shares | Value | |
Preferred Securities 0.69% | $2,442,755 | |
(Cost $2,301,838) | ||
United States 0.69% | 2,442,755 | |
MetLife, Inc., Series B, 6.500% | 98,300 | 2,442,755 |
Short-Term Investments 3.12% | $11,064,075 | |
(Cost $11,064,075) | ||
United States 3.12% | 11,064,075 | |
State Street Institutional Treasury Money Market Fund, 0.045% (Y) | 11,064,075 | 11,064,075 |
Total investments (Cost $295,790,789)† 99.44% | $352,140,837 | |
Other assets and liabilities, net 0.56% | $1,985,637 | |
Total net assets 100.00% | $354,126,474 | |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
ADR American Depositary Receipts
SADR Sponsored American Depositary Receipts
(I) Non-income producing security.
(Y) The rate shown is the annualized seven-day yield as of 2-28-11.
† At 2-28-11, the aggregate cost of investment securities for federal income tax purposes was $298,651,623. Net unrealized appreciation aggregated $53,489,214, of which $54,878,701 related to appreciated investment securities and $1,389,487 related to depreciated investment securities.
The Fund had the following sector composition as a percentage of total net assets on 2-28-11:
Consumer Staples | 18% | |||
Telecommunication Services | 15% | |||
Utilities | 13% | |||
Consumer Discretionary | 11% | |||
Energy | 10% | |||
Industrials | 8% | |||
Information Technology | 6% | |||
Health Care | 6% | |||
Financials | 5% | |||
Materials | 4% | |||
Short-Term Investments and Other | 4% |
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 15 |
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 2-28-11
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 public offering price per share.
Assets | |
Investments, at value (Cost $295,790,789) | $352,140,837 |
Foreign currency, at value (Cost $85,533) | 85,709 |
Receivable for fund shares sold | 2,521,390 |
Dividends and interest receivable | 1,124,398 |
Receivable due from adviser | 2,826 |
Other receivables and prepaid expenses | 46,079 |
Total assets | 355,921,239 |
Liabilities | |
Payable for investments purchased | 1,055,353 |
Payable for fund shares repurchased | 582,378 |
Payable to affiliates | |
Accounting and legal services fees | 5,366 |
Transfer agent fees | 27,681 |
Trustees’ fees | 3,406 |
Other liabilities and accrued expenses | 120,581 |
Total liabilities | 1,794,765 |
Net assets | |
Capital paid-in | $332,238,098 |
Undistributed net investment income | 1,147,879 |
Accumulated net realized loss on investments and foreign | |
currency transactions | (35,629,576) |
Net unrealized appreciation on investments and translation of assets and | |
liabilities in foreign currencies | 56,370,073 |
Net assets | $354,126,474 |
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 ($55,888,433 ÷ 5,883,971 shares) | $9.50 |
Class B ($2,091,710 ÷ 220,339 shares)1 | $9.49 |
Class C ($10,531,019 ÷ 1,109,027 shares)1 | $9.50 |
Class I ($123,131,857 ÷ 12,923,454 shares) | $9.53 |
Class NAV ($162,483,455 ÷ 17,056,448 shares) | $9.53 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $10.00 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
16 | Global Shareholder Yield 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 operations For the year ended 2-28-11
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 | |
Dividends | $13,115,758 |
Interest | 1,370 |
Less foreign taxes withheld | (623,656) |
Total investment income | 12,493,472 |
Expenses | |
Investment management fees (Note 4) | 2,451,550 |
Distribution and service fees (Note 4) | 157,215 |
Accounting and legal services fees (Note 4) | 38,071 |
Transfer agent fees (Note 4) | 120,755 |
Trustees’ fees (Note 4) | 19,400 |
State registration fees (Note 4) | 47,357 |
Printing and postage (Note 4) | 43,199 |
Professional fees | 67,259 |
Custodian fees | 142,537 |
Registration and filing fees | 26,412 |
Other | 16,063 |
Total expenses | 3,129,818 |
Less expense reductions (Note 4) | (21,913) |
Net expenses | 3,107,905 |
Net investment income | 9,385,567 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments | 7,320,587 |
Foreign currency transactions | (162,614) |
7,157,973 | |
Change in net unrealized appreciation (depreciation) of | |
Investments | 38,306,117 |
Translation of assets and liabilities in foreign currencies | 26,029 |
38,332,146 | |
Net realized and unrealized gain | 45,490,119 |
Increase in net assets from operations | $54,875,686 |
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 17 |
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 | ||||
2-28-11 | 2-28-10 | ||||
Increase (decrease) in net assets | |||||
From operations | |||||
Net investment income | $9,385,567 | $7,764,203 | |||
Net realized gain (loss) | 7,157,973 | (16,931,286) | |||
Change in net unrealized appreciation (depreciation) | 38,332,146 | 69,100,321 | |||
Increase in net assets resulting from operations | 54,875,686 | 59,933,238 | |||
Distributions to shareholders | |||||
From net investment income | |||||
Class A | (723,542) | (492,495) | |||
Class B | (28,890) | (22,183) | |||
Class C | (90,915) | (78,356) | |||
Class I | (3,013,058) | (2,859,421) | |||
Class R1 | — | (1,490) | |||
Class NAV | (4,805,780) | (3,900,810) | |||
Total distributions | (8,662,185) | (7,354,755) | |||
From Fund share transactions (Note 5) | 65,670,818 | 51,057,676 | |||
Total increase | 111,884,319 | 103,636,159 | |||
Net assets | |||||
Beginning of year | 242,242,155 | 138,605,996 | |||
End of year | $354,126,474 | $242,242,155 | |||
Undistributed net investment income | $1,147,879 | $709,494 |
18 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $8.10 | $6.10 | $9.52 | $10.00 | ||
Net investment income2 | 0.24 | 0.25 | 0.36 | 0.35 | ||
Net realized and unrealized gain (loss) on investments | 1.40 | 1.99 | (3.57) | (0.51) | ||
Total from investment operations | 1.64 | 2.24 | (3.21) | (0.16) | ||
Less distributions | ||||||
From net investment income | (0.24) | (0.24) | (0.21) | (0.29) | ||
From net realized gain | — | — | — | (0.03) | ||
Total distributions | (0.24) | (0.24) | (0.21) | (0.32) | ||
Net asset value, end of year | $9.50 | $8.10 | $6.10 | $9.52 | ||
Total return (%)3,4 | 20.64 | 37.19 | (34.21) | (1.84) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | $56 | $22 | $11 | $27 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.55 | 1.665 | 1.72 | 1.79 | ||
Expenses net of fee waivers | 1.55 | 1.565 | 1.56 | 1.45 | ||
Expenses net of fee waivers and credits | 1.55 | 1.555 | 1.55 | 1.45 | ||
Net investment income | 2.80 | 3.34 | 4.28 | 3.31 | ||
Portfolio turnover (%) | 39 | 53 | 54 | 24 |
1 The inception date for Class A shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 19 |
CLASS B SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $8.10 | $6.09 | $9.51 | $10.00 | ||
Net investment income2 | 0.19 | 0.20 | 0.29 | 0.22 | ||
Net realized and unrealized gain (loss) on investments | 1.38 | 2.00 | (3.56) | (0.45) | ||
Total from investment operations | 1.57 | 2.20 | (3.27) | (0.23) | ||
Less distributions | ||||||
From net investment income | (0.18) | (0.19) | (0.15) | (0.23) | ||
From net realized gain | — | — | — | (0.03) | ||
Total distributions | (0.18) | (0.19) | (0.15) | (0.26) | ||
Net asset value, end of year | $9.49 | $8.10 | $6.09 | $9.51 | ||
Total return (%)3,4 | 19.65 | 36.49 | (34.72) | (2.54) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | $2 | $1 | $1 | $1 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 2.91 | 3.545 | 3.94 | 3.89 | ||
Expenses net of fee waivers | 2.25 | 2.295 | 2.43 | 2.23 | ||
Expenses net of fee waivers and credits | 2.25 | 2.255 | 2.25 | 2.23 | ||
Net investment income | 2.18 | 2.68 | 3.50 | 2.11 | ||
Portfolio turnover (%) | 39 | 53 | 54 | 24 |
1 The inception date for Class B shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
CLASS C SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $8.10 | $6.10 | $9.51 | $10.00 | ||
Net investment income2 | 0.18 | 0.20 | 0.29 | 0.22 | ||
Net realized and unrealized gain (loss) on investments | 1.40 | 1.99 | (3.55) | (0.45) | ||
Total from investment operations | 1.58 | 2.19 | (3.26) | (0.23) | ||
Less distributions | ||||||
From net investment income | (0.18) | (0.19) | (0.15) | (0.23) | ||
From net realized gain | — | — | — | (0.03) | ||
Total distributions | (0.18) | (0.19) | (0.15) | (0.26) | ||
Net asset value, end of year | $9.50 | $8.10 | $6.10 | $9.51 | ||
Total return (%)3,4 | 19.78 | 36.27 | (34.62) | (2.54) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | $11 | $4 | $3 | $5 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 2.39 | 2.635 | 2.72 | 3.00 | ||
Expenses net of fee waivers | 2.25 | 2.275 | 2.28 | 2.23 | ||
Expenses net of fee waivers and credits | 2.25 | 2.255 | 2.25 | 2.22 | ||
Net investment income | 2.10 | 2.66 | 3.50 | 2.08 | ||
Portfolio turnover (%) | 39 | 53 | 54 | 24 |
1 The inception date for Class C shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
20 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $8.13 | $6.11 | $9.53 | $10.00 | ||
Net investment income2 | 0.29 | 0.30 | 0.29 | 0.33 | ||
Net realized and unrealized gain (loss) on investments | 1.38 | 2.00 | (3.46) | (0.44) | ||
Total from investment operations | 1.67 | 2.30 | (3.17) | (0.11) | ||
Less distributions | ||||||
From net investment income | (0.27) | (0.28) | (0.25) | (0.33) | ||
From net realized gain | — | — | — | (0.03) | ||
Total distributions | (0.27) | (0.28) | (0.25) | (0.36) | ||
Net asset value, end of year | $9.53 | $8.13 | $6.11 | $9.53 | ||
Total return (%)3 | 21.09 | 38.08 | (33.87) | (1.43) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | $123 | $86 | $57 | $3 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.09 | 1.194 | 1.21 | 2.16 | ||
Expenses net of fee waivers | 1.08 | 1.084 | 1.10 | 1.09 | ||
Expenses net of fee waivers and credits | 1.08 | 1.084 | 1.10 | 1.09 | ||
Net investment income | 3.40 | 3.96 | 3.78 | 3.14 | ||
Portfolio turnover (%) | 39 | 53 | 54 | 24 |
1 The inception date for Class I shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS NAV SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-091 | |||
Per share operating performance | ||||||
Net asset value, beginning of year | $8.13 | $6.11 | $9.71 | |||
Net investment income2 | 0.30 | 0.29 | 0.29 | |||
Net realized and unrealized gain (loss) on investments | 1.38 | 2.01 | (3.67) | |||
Total from investment operations | 1.68 | 2.30 | (3.38) | |||
Less distributions | ||||||
From net investment income | (0.28) | (0.28) | (0.22) | |||
Net asset value, end of year | $9.53 | $8.13 | $6.11 | |||
Total return (%)3 | 21.19 | 38.16 | (35.32)4 | |||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | $162 | $129 | $67 | |||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 0.99 | 1.055 | 1.096 | |||
Expenses net of fee waivers | 0.99 | 1.005 | 1.056 | |||
Expenses net of fee waivers and credits | 0.99 | 1.005 | 1.056 | |||
Net investment income | 3.49 | 3.84 | 4.276 | |||
Portfolio turnover (%) | 39 | 53 | 54 |
1 The inception date for Class NAV shares is 4-28-08.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
6 Annualized.
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 21 |
Notes to financial statements
Note 1 — Organization
John Hancock Global Shareholder Yield Fund (the Fund) is a diversified series of John Hancock Funds III (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 primary investment objective of the Fund is to seek to provide a high level of income. Capital appreciation is a secondary objective.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of Assets and Liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class NAV shares are sold to John Hancock affiliated funds of funds. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, print and postage, state registration and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. 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 quoted prices in active markets for identical securities. Level 2 includes significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these techniques are received from independent pricing vendors and 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, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
22 | Global Shareholder Yield Fund | Annual report |
The following is a summary of the values by input classification of the Fund’s investments as of February 28, 2011, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-11 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $6,249,632 | $2,563,660 | $3,685,972 | — |
Belgium | 7,382,158 | — | 7,382,158 | — |
Brazil | 3,219,633 | 3,219,633 | — | — |
Canada | 10,826,878 | 10,826,878 | — | — |
France | 25,617,912 | — | 25,617,912 | — |
Germany | 10,891,632 | — | 10,891,632 | — |
Hong Kong | 1,550,456 | 1,550,456 | — | — |
Italy | 4,374,466 | — | 4,374,466 | — |
Netherlands | 5,534,350 | 5,534,350 | — | — |
Norway | 5,448,155 | 3,900,442 | 1,547,713 | — |
Philippines | 1,358,798 | 1,358,798 | — | — |
Spain | 5,564,895 | — | 5,564,895 | — |
Sweden | 1,642,829 | — | 1,642,829 | — |
Switzerland | 15,102,588 | — | 15,102,588 | — |
Taiwan | 8,882,798 | 2,874,631 | 6,008,167 | — |
United Kingdom | 64,633,069 | 11,024,807 | 53,608,262 | — |
United States | 160,353,758 | 160,353,758 | — | — |
Preferred Securities | ||||
United States | 2,442,755 | 2,442,755 | — | — |
Short-Term Investments | 11,064,075 | 11,064,075 | ||
Total Investments in | ||||
Securities | $352,140,837 | $216,714,243 | $135,426,594 | — |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the year ended February 28, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where 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. Generally, trading in non-U.S. securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of non-U.S. securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value non-U.S. securities in order to adjust for events which may occur between the close of foreign exchanges and the close of the NYSE.
Annual report | Global Shareholder Yield Fund | 23 |
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. Dividend income is recorded on the ex-date except for dividends of foreign securities where the dividend may not be known until after ex-date. In these cases dividend income is recorded when the Fund becomes aware of the dividends.
Foreign currency translation. Assets, including investments and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on securities is reflected as a component of the realized and unrealized gains (losses) on investments.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. Funds investing in a single country or in a limited geographic region tend to be riskier than funds that invest more broadly. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs) and accounting standards. Foreign investments are also subject to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
The Fund may be subject to capital gains and repatriation taxes as imposed by certain countries in which it invests. Such taxes are generally based upon income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to a 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 has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law for any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with State Street Bank and Trust Company (SSBT) which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 31, 2010, the amount of the line of credit was $150 million. 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. For the year ended February 28, 2011, the Fund had no borrowings under the line of credit.
Effective March 30, 2011, the line of credit with SSBT expired and a similar arrangement was established with Citibank N.A.
Expenses. The majority of expenses are directly attributable to an individual 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 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 asset value of the class. Class-specific expenses, such as distribution and service fees, if any, transfer
24 | Global Shareholder Yield Fund | Annual report |
agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has a capital loss carryforward of $32,768,742 available to offset future net realized capital gains. The loss carryforward expires as follows: February 28, 2017 — $3,529,884 and February 28, 2018 — $29,238,858.
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment 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.
As of February 28, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends quarterly and capital gain distributions, if any, at least annually. The tax character of distributions for the years ended February 28, 2011 and February 28, 2010 were as follows:
FEBRUARY 28, 2011 | FEBRUARY 28, 2010 | ||||
Ordinary Income | $8,662,185 | $7,354,755 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of February 28, 2011, the components of distributable earnings on a tax basis included $1,149,666 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 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 wash sale loss deferrals.
Note 3 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is
Annual report | Global Shareholder Yield Fund | 25 |
unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Trust. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management contract with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.875% of the first $500,000,000 of the Fund’s average daily net assets; (b) 0.850% of the next $500,000,000; and (c) 0.800% of the Fund’s average daily net assets in excess of $1,000,000,000. The Adviser has a subadvisory agreement with Epoch Investment Partners, Inc. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the year ended February 28, 2011 were equivalent to an annual effective rate of 0.875% of the Fund’s average daily net assets.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Fund. This agreement excludes taxes, portfolio brokerage commissions, interest, litigation and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.55%, 2.25%, 2.25% and 1.09% for Class A, Class B, Class C and Class I shares, respectively. Prior to July 1, 2010, the fee waivers and/or reimbursements were such that these expenses would not exceed 1.07% and 1.00% for Class I and Class NAV shares, respectively. The fee waivers and/or reimbursements will continue in effect until June 30, 2011.
Accordingly, these expense reductions amounted to $9,789, $7,446 and $4,678 for Class B, Class C and Class I shares, respectively, for the year ended February 28, 2011.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of 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 February 28, 2011 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B and Class C 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. The Fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Fund’s shares.
CLASS | 12b–1 FEES | ||||
Class A | 0.30% | ||||
Class B | 1.00% | ||||
Class C | 1.00% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $159,439 for the year ended February 28, 2011. Of this amount, $26,289 was retained and used for printing prospectuses, advertising, sales literature and other
26 | Global Shareholder Yield Fund | Annual report |
purposes, $132,990 was paid as sales commissions to broker-dealers and $160 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a broker-dealer affiliate of the Adviser.
Class B and Class C shares are subject to contingent deferred sales charges (CDSC). Class B shares that are redeemed within six years of purchase are subject to CDSC, at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2011, CDSCs received by the Distributor amounted to $5,202 and $3,686 for Class B and Class C shares, respectively.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services or Transfer Agent), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain revenues that Signature Services received in connection with the performance of the service they provide to the funds. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets
Prior to July 1, the transfer agent fees were made up of three components:
• The Fund paid a monthly transfer agent fee at an annual rate of 0.05% for Class A, Class B, and Class C shares and 0.04% for Class I shares, based on each class’s average daily net assets.
• The Fund paid a monthly fee based on an annual rate of $16.50 per shareholder account.
• In addition, Signature Services was reimbursed for certain out-of-pocket expenses.
Class level expenses. Class level expenses for the year ended February 28, 2011 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $89,480 | $56,105 | $15,059 | $5,674 |
Class B | 14,948 | 3,464 | 9,768 | 528 |
Class C | 52,787 | 11,235 | 9,188 | 999 |
Class I | — | 49,951 | 13,342 | 35,998 |
Total | $157,215 | $120,755 | $47,357 | $43,199 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of Assets and Liabilities.
Annual report | Global Shareholder Yield Fund | 27 |
Note 5 — Fund share transactions
Transactions in Fund shares for the years ended February 28, 2011 and February 28, 2010 were as follows:
Year ended 2-28-11 | Year ended 2-28-10 | |||||
Shares | Amount | Shares | Amount | |||
Class A shares | ||||||
Sold | 4,386,382 | $39,308,009 | 1,434,058 | $10,960,022 | ||
Exchanged from Class R1 | — | — | 13,111 | 101,374 | ||
Distributions reinvested | 74,691 | 629,739 | 52,831 | 394,297 | ||
Repurchased | (1,275,643) | (11,028,313) | (554,163) | (4,116,860) | ||
Net increase | 3,185,430 | $28,909,435 | 945,837 | $7,338,833 | ||
Class B shares | ||||||
Sold | 109,440 | $973,264 | 77,695 | $606,655 | ||
Distributions reinvested | 3,088 | 25,713 | 2,748 | 20,403 | ||
Repurchased | (44,582) | (387,162) | (30,723) | (240,120) | ||
Net increase | 67,946 | $611,815 | 49,720 | $386,938 | ||
Class C shares | ||||||
Sold | 756,536 | $6,843,306 | 226,872 | $1,757,846 | ||
Distributions reinvested | 7,194 | 60,372 | 6,336 | 47,012 | ||
Repurchased | (165,715) | (1,417,482) | (136,551) | (975,972) | ||
Net increase | 598,015 | $5,486,196 | 96,657 | $828,886 | ||
Class I shares | ||||||
Sold | 9,776,895 | $84,148,820 | 7,646,302 | $56,063,766 | ||
Distributions reinvested | 342,757 | 2,878,289 | 360,676 | 2,669,843 | ||
Repurchased | (7,811,522) | (65,298,399) | (6,757,683) | (50,648,524) | ||
Net increase | 2,308,130 | $21,728,710 | 1,249,295 | $8,085,085 | ||
Class R1 shares | ||||||
Sold | — | — | 2,272 | $14,473 | ||
Exchanged for Class A | — | — | (13,113) | (101,374) | ||
Distributions reinvested | — | — | 215 | 1,490 | ||
Net decrease | — | — | (10,626) | ($85,411) | ||
Class NAV shares | ||||||
Sold | 1,838,986 | $14,832,210 | 4,816,056 | $34,847,758 | ||
Distributions reinvested | 571,534 | 4,805,780 | 521,545 | 3,900,810 | ||
Repurchased | (1,198,975) | (10,703,328) | (534,873) | (4,245,223) | ||
Net increase | 1,211,545 | $8,934,662 | 4,802,728 | $34,503,345 | ||
Net increase | 7,371,066 | $65,670,818 | 7,133,611 | $51,057,676 | ||
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $169,262,937 and $106,215,633, respectively, for the year ended February 28, 2011.
28 | Global Shareholder Yield Fund | Annual report |
Auditors’ report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock Global Shareholder Yield Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio 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 Global Shareholder Yield Fund (the “Fund”) at February 28, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011 by correspondence with the custodian 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
April 19, 2011
Annual report | Global Shareholder Yield Fund | 29 |
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 February 28, 2011.
The Fund designates the maximum amount allowable for the corporate dividends received deduction for the fiscal year ended February 28, 2011.
The Fund designates 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. This amount will be reflected on Form 1099-DIV for the calendar year 2011.
Shareholders will be mailed a 2011 Form 1099-DIV in January 2012. This will reflect the total of all distributions that are taxable for calendar year 2011.
30 | Global Shareholder Yield 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 |
Steven R. Pruchansky, Born: 1944 | 2006 | 47 |
Chairperson (since January 2011); 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 (since 2008); 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). | ||
James F. Carlin, Born: 1940 | 2006 | 47 |
Chief Executive Officer, Director and Treasurer, Alpha Analytical Laboratories (environmental, chemical | ||
and pharmaceutical analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance | ||
Agency, Inc. (since 1995); Chairman and Chief Executive Officer, CIMCO, LLC (management/ | ||
investments) (since 1987). | ||
William H. Cunningham, Born: 1944 | 2006 | 47 |
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 of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson,2 Born: 1952 | 2008 | 47 |
Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); 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 Corp. (1996–2009); Board of Directors of | ||
Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (since 2007). | ||
Charles L. Ladner,2 Born: 1938 | 2006 | 47 |
Vice Chairperson (since March 2011); Chairman and Trustee, Dunwoody Village, Inc. (retirement | ||
services) (since 2008); Director, Philadelphia Archdiocesan Educational Fund (since 2009); Senior Vice | ||
President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); | ||
Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (gas | ||
distribution) (until 1997); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association | ||
(Cooperating Association, National Park Service) (until 2005). |
Annual report | Global Shareholder Yield Fund | 31 |
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 |
Stanley Martin,2 Born: 1947 | 2008 | 47 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore, Born: 1939 | 2006 | 47 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). | ||
Patti McGill Peterson,2 Born: 1943 | 2006 | 47 |
Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy | ||
(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President, | ||
Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public | ||
Affairs, Cornell University (1997–1998); Former President Wells College, St. Lawrence University and the | ||
Association of Colleges and Universities of the State of New York. Director of the following: Niagara | ||
Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until | ||
1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007); | ||
Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development | ||
Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational | ||
Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 47 |
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (“KPMG”) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
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 |
Hugh McHaffie,4 Born: 1959 | 2010 | 47 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Trust and John Hancock Funds II (since 2009); Trustee, John Hancock retail | ||
funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment | ||
Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior Vice President, Individual | ||
Business Product Management, MetLife, Inc. (1999–2006). |
32 | Global Shareholder Yield Fund | Annual report |
Non-Independent Trustees3 (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 |
John G. Vrysen, Born: 1955 | 2009 | 47 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock Funds II | ||
and John Hancock Trust (since 2007); Chief Operating Officer, John Hancock retail funds (until 2009); | ||
Trustee, John Hancock retail funds (since 2009). | ||
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 | |
Keith F. Hartstein, Born: 1956 | 2006 | |
President and Chief Executive Officer | ||
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | ||
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | ||
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | ||
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | ||
Force Marketing Committee (since 2003). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Senior Vice President and Chief Operating Officer | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | ||
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | ||
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock Trust | ||
(since 2006); Senior Vice President, Product Management and Development, John Hancock Funds, | ||
LLC (until 2009). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | ||
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | ||
Funds II and John Hancock Trust (since 2006); Vice President and Associate General Counsel, | ||
Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal Counsel, MML | ||
Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual Select Funds and | ||
MassMutual Premier Funds (2004–2006). |
Annual report | Global Shareholder Yield Fund | 33 |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Trust, John Hancock Advisers, LLC and John Hancock | |
Investment Management Services, LLC (since 2005); Vice President and Chief Compliance Officer, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Trust (since 2007); | |
Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, Goldman | |
Sachs (2005–2007). | |
Salvatore Schiavone,4 Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock Closed-End Funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Trust (since 2007); Assistant Treasurer, | |
John Hancock retail funds, John Hancock Funds II and John Hancock Trust (2007–2009); Assistant | |
Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management Research | |
Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
4 Mr. McHaffie and Mr. Schiavone were appointed by the Board of Trustees effective 8-31-10.
34 | Global Shareholder Yield Fund | Annual report |
More information
Trustees | Investment adviser | |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management | |
James F. Carlin | Services, LLC | |
William H. Cunningham | ||
Deborah C. Jackson* | Subadviser | |
Charles L. Ladner, Vice Chairperson* | Epoch Investment Partners, Inc. | |
Stanley Martin* | ||
Hugh McHaffie | Principal distributor | |
Dr. John A. Moore | John Hancock Funds, LLC | |
Patti McGill Peterson* | ||
Gregory A. Russo | Custodian | |
John G. Vrysen | State Street Bank and Trust Company | |
Officers | Transfer agent | |
Keith F. Hartstein | John Hancock Signature Services, Inc. | |
President and Chief Executive Officer | ||
Legal counsel | ||
Andrew G. Arnott | K&L Gates LLP | |
Senior Vice President and Chief Operating Officer | ||
Independent registered | ||
Thomas M. Kinzler | public accounting firm | |
Secretary and Chief Legal Officer | PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | ||
Chief Compliance Officer | The report is certified under the Sarbanes-Oxley | |
Act, which requires mutual funds and other public | ||
Charles A. Rizzo | companies to affirm that, to the best of their | |
Chief Financial Officer | knowledge, the information in their financial reports | |
is fairly and accurately stated in all material respects. | ||
Salvatore Schiavone | ||
Treasurer | ||
*Member of the Audit Committee | ||
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
Annual report | Global Shareholder Yield Fund | 35 |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/globalshyieldx32x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock Global Shareholder Yield Fund. | 3200A 2/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/11 |
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Management’s discussion of
Fund performance
By Pzena Investment Management, LLC
The U.S. stock market generated strong returns for the year ended February 28, 2011. Stocks fell early in the period as a host of concerns — ranging from weaker-than-expected economic data, to a sovereign debt crisis in Europe, to a soaring U.S. fiscal deficit — clouded the economic outlook. In the second half of the period, however, the equity market shifted gears as evidence of improving economic activity, combined with another round of quantitative easing measures from the Federal Reserve, boosted investor confidence in the economy. The result was a sharp market rebound that extended through the end of the period. Most broad major stock indexes gained more than 20% for the 12 months.
For the year ended February 28, 2011, John Hancock Classic Value Mega Cap Fund’s Class A shares posted a total return of 19.12% at net asset value. The Fund performed in line with the 19.13% return of the Russell Top 200 Value Index, but trailed the 22.16% return of the Russell 1000 Value Index and the 20.44% return of the average large value fund, according to Morningstar, Inc.
The Fund’s underweight position in the energy sector and an emphasis on aerospace and defense companies in the industrials sector accounted for most of its underperformance. The most notable individual decliners included defense contractor L-3 Communications Holdings, Inc., diversified technology firm Hewlett-Packard Company and energy producer BP PLC. On the positive side, the leading performers in the Fund were primarily stocks that benefited from improving economic conditions, including electronic components manufacturer Tyco Electronics Ltd., advertising firm Omnicom Group, Inc. and financial services firm UBS AG.
We continue to find high-quality companies with dominant market positions trading at depressed valuations. Recent examples include network products maker Cisco Systems, Inc., money transfer firm The Western Union Company and medical instruments maker Becton, Dickinson & Company.
This commentary reflects the views of the portfolio managers through the end of the Fund’s period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
The Fund has been classified as non-diversified and may invest more than 5% of assets in securities of individual companies. 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.
6 | Classic Value Mega Cap Fund | Annual report |
A look at performance
For the period ended February 28, 2011
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge (POP) | with maximum sales charge (POP) | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception1 | 1-year | 5-year | 10-year | inception1 | ||
Class A | 13.23 | — | — | –7.28 | 13.23 | — | — | –26.08 | |
Class B | 13.34 | — | — | –7.43 | 13.34 | — | — | –26.58 | |
Class C | 17.31 | — | — | –6.72 | 17.31 | — | — | –24.29 | |
Class i2 | 19.67 | — | — | –5.65 | 19.67 | — | — | –20.77 | |
Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 5%, and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable for Class I shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The waivers and expense limitations are contractual at least until 6-30-11. The net expenses are as follows: Class A — 1.37%, Class B — 2.12%, Class C — 2.12% and Class I — 0.96%. Had the fee waivers and expense limitations not been in place, the gross expenses would be as follows: Class A — 3.74%, Class B — 10.90%, Class C — 7.05% and Class I — 8.29%.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The Fund’s performance results reflect any applicable expense reductions, without which the expenses increase and results would have been less favorable.
1 From 3-1-07.
2 For certain types of investors, as described in the Fund’s Class I share prospectus.
Annual report | Classic Value Mega Cap Fund | 7 |
A look at performance
Period | Without | With maximum | |||
beginning | sales charge | sales charge | Index 1 | Index 2 | |
Class B | 3-1-07 | $7,560 | $7,342 | $9,269 | $8,854 |
Class C2 | 3-1-07 | 7,571 | 7,571 | 9,269 | 8,854 |
Class I3 | 3-1-07 | 7,923 | 7,923 | 9,269 | 8,854 |
Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B, Class C and Class I shares, respectively, as of 2-28-11. 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.
Russell 1000 Value — Index 1 — is an unmanaged index containing those securities in the Russell 1000 Index with a less-than-average growth orientation.
Russell Top 200 Value — Index 2 — is an unmanaged index which measures the performance of the largest 200 companies within the Russell 3000 Index with a less-than-average growth orientation.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 NAV represents net asset value and POP represents public offering price.
2 The contingent deferred sales charge, if any, is not applicable.
3 For certain types of investors, as described in the Fund’s Class I share prospectus.
8 | Classic Value Mega Cap Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about 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 September 1, 2010 with the same investment held until February 28, 2011.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,283.00 | $7.76 |
Class B | 1,000.00 | 1,278.90 | 11.98 |
Class C | 1,000.00 | 1,278.50 | 11.98 |
Class I | 1,000.00 | 1,286.60 | 5.44 |
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 February 28, 2011, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/classicvaluemegacapx5x1.jpg)
Annual report | Classic Value Mega Cap 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 September 1, 2010, with the same investment held until February 28, 2011. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-10 | on 2-28-11 | period ended 2-28-111 | |
Class A | $1,000.00 | $1,018.00 | $6.85 |
Class B | 1,000.00 | 1,014.30 | 10.59 |
Class C | 1,000.00 | 1,014.30 | 10.59 |
Class I | 1,000.00 | 1,020.00 | 4.81 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.37%, 2.12%, 2.12% and 0.96% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | Classic Value Mega Cap Fund | Annual report |
Portfolio summary
Top 10 Holdings1 | ||||
Hewlett-Packard Company | 4.7% | Dell, Inc. | 3.4% | |
Exxon Mobil Corp. | 4.6% | Omnicom Group, Inc. | 3.2% | |
The Allstate Corp. | 4.0% | L-3 Communications Holdings, Inc. | 3.1% | |
Northrop Grumman Corp. | 3.9% | UBS AG | 3.1% | |
BP PLC | 3.7% | Edison International | 3.0% | |
Sector Composition2,3 | ||||
Financials | 33% | Consumer Discretionary | 6% | |
Information Technology | 20% | Utilities | 3% | |
Health Care | 11% | Materials | 3% | |
Energy | 10% | Consumer Staples | 2% | |
Industrials | 9% | Short-Term Investments & Other | 3% | |
1 As a percentage of net assets on 2-28-11. Cash and cash equivalents are not included in Top 10 Holdings.
2 As a percentage of net assets on 2-28-11.
3 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 perofrmance of those sectors.
Annual report | Classic Value Mega Cap Fund | 11 |
Fund’s investments
As of 2-28-11
Shares | Value | |
Common Stocks 96.42% | $6,186,614 | |
(Cost $5,318,846) | ||
Consumer Discretionary 5.82% | 373,565 | |
Media 3.76% | ||
Omnicom Group, Inc. | 3,975 | 202,328 |
Viacom, Inc., Class B | 875 | 39,078 |
Specialty Retail 2.06% | ||
Lowe’s Companies, Inc. | 5,050 | 132,159 |
Consumer Staples 1.83% | 117,497 | |
Personal Products 1.83% | ||
Avon Products, Inc. | 4,225 | 117,497 |
Energy 9.89% | 634,589 | |
Oil, Gas & Consumable Fuels 9.89% | ||
BP PLC, SADR | 4,850 | 235,080 |
Exxon Mobil Corp. | 3,425 | 292,940 |
Royal Dutch Shell PLC, ADR | 1,475 | 106,569 |
Financials 33.21% | 2,130,750 | |
Capital Markets 9.76% | ||
Morgan Stanley | 5,075 | 150,626 |
State Street Corp. | 3,350 | 149,812 |
The Goldman Sachs Group, Inc. | 775 | 126,930 |
UBS AG (I) | 10,000 | 198,500 |
Commercial Banks 4.33% | ||
PNC Financial Services Group, Inc. | 2,475 | 152,708 |
Wells Fargo & Company | 3,875 | 125,008 |
Consumer Finance 1.49% | ||
Capital One Financial Corp. | 1,925 | 95,807 |
Diversified Financial Services 7.36% | ||
Bank of America Corp. | 8,675 | 123,966 |
Citigroup, Inc. (I) | 33,306 | 155,872 |
JPMorgan Chase & Company | 4,125 | 192,596 |
Insurance 10.27% | ||
ACE, Ltd. | 2,900 | 183,425 |
Hartford Financial Services Group, Inc. | 2,075 | 61,420 |
MetLife, Inc. | 3,375 | 159,840 |
The Allstate Corp. | 8,000 | 254,240 |
12 | Classic Value Mega Cap Fund | Annual report | See notes to financial statements |
Shares | Value | ||
Health Care 10.71% | $687,189 | ||
Health Care Equipment & Supplies 6.05% | |||
Becton, Dickinson & Company | 2,075 | 166,000 | |
Medtronic, Inc. | 1,625 | 64,870 | |
Zimmer Holdings, Inc. (I) | 2,525 | 157,409 | |
Health Care Providers & Services 2.17% | |||
Aetna, Inc. | 3,725 | 139,166 | |
Pharmaceuticals 2.49% | |||
Johnson & Johnson | 2,600 | 159,744 | |
Industrials 8.93% | 572,807 | ||
Aerospace & Defense 8.93% | |||
L-3 Communications Holdings, Inc. | 2,525 | 200,207 | |
Northrop Grumman Corp. | 3,725 | 248,383 | |
The Boeing Company | 1,725 | 124,217 | |
Information Technology 20.09% | 1,289,385 | ||
Communications Equipment 1.96% | |||
Cisco Systems, Inc. (I) | 6,775 | 125,744 | |
Computers & Peripherals 8.10% | |||
Dell, Inc. (I) | 13,600 | 215,288 | |
Hewlett-Packard Company | 6,975 | 304,316 | |
Electronic Equipment, Instruments & Components 2.34% | |||
Tyco Electronics, Ltd. | 4,162 | 149,998 | |
IT Services 2.01% | |||
The Western Union Company | 5,875 | 129,191 | |
Software 5.68% | |||
CA, Inc. | 7,525 | 186,470 | |
Microsoft Corp. | 6,711 | 178,378 | |
Materials 2.93% | 187,808 | ||
Chemicals 2.93% | |||
PPG Industries, Inc. | 2,125 | 187,808 | |
Utilities 3.01% | 193,024 | ||
Electric Utilities 3.01% | |||
Edison International | 5,200 | 193,024 | |
Short-Term Investments 3.15% | $202,000 | ||
(Cost $202,000) | |||
Par Value | Value | ||
Repurchase Agreement 3.15% | $202,000 | ||
Repurchase Agreement with State Street Corp. dated | |||
2-28-11 at 0.010% to be repurchased at $202,000 | |||
on 3-1-11, collateralized by $210,000 Federal Home | |||
Loan Mortgage Corp., 4.50% due 6-23-25 | |||
(valued at $210,525, including interest) | $202,000 | 202,000 |
See notes to financial statements | Annual report | Classic Value Mega Cap Fund | 13 |
Total investments (Cost $5,520,846)† 99.57% | $6,388,614 |
Other assets and liabilities, net 0.43% | $27,846 |
Total net assets 100.00% | $6,416,460 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
ADR American Depositary Receipts
SADR Sponsored American Depositary Receipts
(I) Non-income producing security.
† At 2-28-11, the aggregate cost of investment securities for federal income tax purposes was $6,212,871. Net unrealized appreciation aggregated $175,743, of which $249,003 related to appreciated investment securities and $73,260 related to depreciated investment securities.
The Fund had the following country concentration as a percentage of total net assets on 2-28-11.
United States | 86% | |||
Switzerland | 5% | |||
United Kingdom | 4% | |||
Netherlands | 2% | |||
Short-Term Investments & Other | 3% |
14 | Classic Value Mega Cap 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
Financial statements
Statement of assets and liabilities 2-28-11
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 public offering price per share.
Assets | |
Investments, at value (Cost $5,520,846) | $6,388,614 |
Cash | 987 |
Receivable for fund shares sold | 26,995 |
Dividends and interest receivable | 12,875 |
Receivable for securities lending income | 6 |
Receivable due from adviser | 3,459 |
Other receivables and prepaid expenses | 27,444 |
Total assets | 6,460,380 |
Liabilities | |
Payable to affiliates | |
Accounting and legal services fees | 142 |
Transfer agent fees | 1,679 |
Trustees’ fees | 125 |
Other liabilities and accrued expenses | 41,974 |
Total liabilities | 43,920 |
Net assets | |
Capital paid-in | $10,373,671 |
Undistributed net investment income | 19 |
Accumulated net realized loss on investments | (4,824,998) |
Net unrealized appreciation on investments | 867,768 |
Net assets | $6,416,460 |
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 ($5,121,079 ÷ 699,452 shares) | $7.32 |
Class B ($302,997 ÷ 41,550 shares)1 | $7.29 |
Class C ($604,609 ÷ 82,875 shares)1 | $7.30 |
Class I ($387,775 ÷ 52,839 shares) | $7.34 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $7.71 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | Classic Value Mega Cap Fund | 15 |
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 2-28-11
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 | |
Dividends | $74,256 |
Securities lending | 145 |
Interest | 6 |
Total investment income | 74,407 |
Expenses | |
Investment management fees (Note 4) | 38,438 |
Distribution and service fees (Note 4) | 16,502 |
Accounting and legal services fees (Note 4) | 780 |
Transfer agent fees (Note 4) | 8,209 |
Trustees’ fees (Note 4) | 491 |
State registration fees (Note 4) | 35,783 |
Printing and postage (Note 4) | 2,663 |
Professional fees | 35,589 |
Custodian fees | 12,098 |
Registration and filing fees | 23,447 |
Other | 5,030 |
Total expenses | 179,030 |
Less expense reductions (Note 4) | (108,659) |
Net expenses | 70,371 |
Net investment income | 4,036 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 406,318 |
Investments in affiliated issuers | (33) |
406,285 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 443,628 |
Investments in affiliated issuers | (3) |
443,625 | |
Net realized and unrealized gain | 849,910 |
Increase in net assets from operations | $853,946 |
16 | Classic Value Mega Cap 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 | |||
2-28-11 | 2-28-10 | |||
Increase (decrease) in net assets | ||||
From operations | ||||
Net investment income | $4,036 | $19,525 | ||
Net realized gain (loss) | 406,285 | (173,212) | ||
Change in net unrealized appreciation (depreciation) | 443,625 | 2,161,309 | ||
Increase in net assets resulting from operations | 853,946 | 2,007,622 | ||
Distributions to shareholders | ||||
From net investment income | ||||
Class A | (2,954) | (29,972) | ||
Class B | — | (192) | ||
Class C | — | (460) | ||
Class I | (990) | (3,794) | ||
Total distributions | (3,944) | (34,418) | ||
From Fund share transactions (Note 5) | 1,433,426 | (443,268) | ||
Total increase | 2,283,428 | 1,529,936 | ||
Net assets | ||||
Beginning of year | 4,133,032 | 2,603,096 | ||
End of year | $6,416,460 | $4,133,032 | ||
Undistributed (accumulated distributions in excess of) net | ||||
investment income | $19 | ($73) |
See notes to financial statements | Annual report | Classic Value Mega Cap Fund | 17 |
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
CLASS A SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $6.15 | $3.45 | $7.60 | $10.00 | ||
Net investment income2 | 0.01 | 0.03 | 0.09 | 0.13 | ||
Net realized and unrealized gain (loss) on investments | 1.17 | 2.72 | (4.16) | (2.23) | ||
Total from investment operations | 1.18 | 2.75 | (4.07) | (2.10) | ||
Less distributions | ||||||
From net investment income | (0.01) | (0.05) | (0.08) | (0.11) | ||
From net realized gain | — | — | — | (0.19) | ||
Total distributions | (0.01) | (0.05) | (0.08) | (0.30) | ||
Net asset value, end of year | $7.32 | $6.15 | $3.45 | $7.60 | ||
Total return (%)3,4 | 19.12 | 79.57 | (53.77) | (21.28) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | $5 | $3 | $2 | $5 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 3.09 | 3.705 | 2.82 | 2.52 | ||
Expenses net of fee waivers | 1.37 | 1.395 | 1.37 | 1.37 | ||
Expenses net of fee waivers and credits | 1.37 | 1.395 | 1.37 | 1.37 | ||
Net investment income | 0.16 | 0.59 | 1.49 | 1.34 | ||
Portfolio turnover (%) | 58 | 76 | 114 | 38 |
1 The inception date for Class A shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.04% of average net assets.
18 | Classic Value Mega Cap Fund | Annual report | See notes to financial statements |
CLASS B SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $6.16 | $3.47 | $7.60 | $10.00 | ||
Net investment income (loss)2 | (0.04) | (0.01) | 0.05 | 0.05 | ||
Net realized and unrealized gain (loss) on investments | 1.17 | 2.71 | (4.15) | (2.21) | ||
Total from investment operations | 1.13 | 2.70 | (4.10) | (2.16) | ||
Less distributions | ||||||
From net investment income | — | (0.01) | (0.03) | (0.05) | ||
From net realized gain | — | — | — | (0.19) | ||
Total distributions | — | (0.01) | (0.03) | (0.24) | ||
Net asset value, end of year | $7.29 | $6.16 | $3.47 | $7.60 | ||
Total return (%)3,4 | 18.34 | 77.74 | (54.01) | (21.85) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | —5 | —5 | —5 | —5 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 6.75 | 12.016 | 14.22 | 11.98 | ||
Expenses net of fee waivers | 2.12 | 2.156 | 2.70 | 2.12 | ||
Expenses net of fee waivers and credits | 2.12 | 2.136 | 2.12 | 2.12 | ||
Net investment income (loss) | (0.58) | (0.24) | 0.80 | 0.58 | ||
Portfolio turnover (%) | 58 | 76 | 114 | 38 |
1 The inception date for Class B shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Less than $500,000.
6 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
CLASS C SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $6.17 | $3.47 | $7.61 | $10.00 | ||
Net investment income (loss)2 | (0.04) | (0.01) | 0.05 | 0.06 | ||
Net realized and unrealized gain (loss) on investments | 1.17 | 2.72 | (4.16) | (2.21) | ||
Total from investment operations | 1.13 | 2.71 | (4.11) | (2.15) | ||
Less distributions | ||||||
From net investment income | — | (0.01) | (0.03) | (0.05) | ||
From net realized gain | — | — | — | (0.19) | ||
Total distributions | — | (0.01) | (0.03) | (0.24) | ||
Net asset value, end of year | $7.30 | $6.17 | $3.47 | $7.61 | ||
Total return (%)3,4 | 18.31 | 78.03 | (54.07) | (21.75) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | $1 | —5 | —5 | —5 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 5.29 | 7.456 | 7.51 | 6.38 | ||
Expenses net of fee waivers | 2.12 | 2.146 | 2.29 | 2.12 | ||
Expenses net of fee waivers and credits | 2.12 | 2.136 | 2.12 | 2.12 | ||
Net investment income (loss) | (0.60) | (0.19) | 0.78 | 0.68 | ||
Portfolio turnover (%) | 58 | 76 | 114 | 38 |
1 The inception date for Class C shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Less than $500,000.
6 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Annual report | Classic Value Mega Cap Fund | 19 |
CLASS I SHARES Period ended | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 | ||
Per share operating performance | ||||||
Net asset value, beginning of year | $6.15 | $3.45 | $7.61 | $10.00 | ||
Net investment income2 | 0.04 | 0.05 | 0.12 | 0.17 | ||
Net realized and unrealized gain (loss) on investments | 1.17 | 2.72 | (4.17) | (2.23) | ||
Total from investment operations | 1.21 | 2.77 | (4.05) | (2.06) | ||
Less distributions | ||||||
From net investment income | (0.02) | (0.07) | (0.11) | (0.14) | ||
From net realized gain | — | — | — | (0.19) | ||
Total distributions | (0.02) | (0.07) | (0.11) | (0.33) | ||
Net asset value, end of year | $7.34 | $6.15 | $3.45 | $7.61 | ||
Total return (%)3 | 19.67 | 80.19 | (53.56) | (20.87) | ||
Ratios and supplemental data | ||||||
Net assets, end of year (in millions) | —4 | —4 | —4 | —4 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 5.73 | 8.735 | 17.79 | 13.02 | ||
Expenses net of fee waivers | 0.95 | 0.955 | 0.97 | 0.97 | ||
Expenses net of fee waivers and credits | 0.95 | 0.955 | 0.97 | 0.97 | ||
Net investment income | 0.56 | 0.80 | 1.96 | 1.80 | ||
Portfolio turnover (%) | 58 | 76 | 114 | 38 |
1 The inception date for Class I shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Less than $500,000.
5 Includes the impact of proxy expenses, which amounted to 0.01% of average net assets.
20 | Classic Value Mega Cap Fund | Annual report | See notes to financial statements |
Notes to financial statements
Note 1 — Organization
John Hancock Classic Value Mega Cap Fund (the Fund) is a non-diversified series of John Hancock Funds III (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 long-term growth of capital.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of Assets and Liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, print and postage, state registration and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase. Effective at the close of business on August 21, 2009, Class R1 shares converted into Class A shares.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. 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 quoted prices in active markets for identical securities. Level 2 includes 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, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
As of February 28, 2011, all investments of the Fund are categorized as Level 1 under the hierarchy described above, except Repurchase Agreements, which are Level 2. Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the year ended February 28, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their closing net asset values each day. Foreign securities and currencies are valued in
Annual report | Classic Value Mega Cap Fund | 21 |
U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where 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.
Repurchase agreements. The Fund may enter into repurchase agreements. When a Fund enters into a repurchase agreement, it receives collateral which is held in a segregated account by the Fund’s custodian. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline.
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. Dividend income is recorded on the ex-date except for dividends of foreign securities where the dividend may not be known until after ex-date. In these cases dividend income is recorded when the Fund becomes aware of the dividends.
Securities lending. The Fund may lend its securities to earn additional income. It receives and maintains cash collateral received from the borrower in an amount not less than the market value of the loaned securities. The Fund will invest its collateral in JHCIT, an affiliate of the Fund, and as a result, the Fund will receive the benefit of any gains and bear any losses generated by JHCIT. Although risk of the loss of the securities lent is mitigated by holding the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities or if collateral investments decline in value. The Fund may receive compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Income received from JHCIT is a component of securities lending income as recorded on the Statement of Operations.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to a 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 has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law for any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with State Street Bank and Trust Company (SSBT) which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 31, 2010, the amount of the line of credit was $150 million. 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. For the year ended February 28, 2011, the Fund had no borrowings under the line of credit.
Effective March 30, 2011, the line of credit with SSBT expired and a similar arrangement was established with Citibank N.A.
22 | Classic Value Mega Cap Fund | Annual report |
Expenses. The majority of expenses are directly attributable to an individual 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 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 asset value of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has a capital loss carryforward of $4,132,973 available to offset future net realized capital gains as of February 28, 2011. The loss carryforward expires as follows: February 28, 2017 — $1,205,196 and February 28, 2018 — $2,927,777.
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment 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.
As of February 28, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, at least annually.
The tax character of distributions for the years ended February 28, 2011 and February 28, 2010 was as follows:
FEBRUARY 28, 2011 | FEBRUARY 28, 2010 | ||||
Ordinary Income | $3,944 | $34,418 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class. As of February 28, 2011, the components of distributable earnings on a tax basis included $96 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.
Annual report | Classic Value Mega Cap Fund | 23 |
Capital accounts within 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 wash sale loss deferrals.
Note 3 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Trust. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management contract with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.79% of the first $2,500,000,000 of the Fund’s average daily net assets; (b) 0.78% of the next $2,500,000,000; and (c) 0.77% of the Fund’s average daily net asset in excess of $5,000,000,000. The Adviser has a subadvisory agreement with Pzena Investment Management, LLC. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the year ended February 28, 2011 were equivalent to an annual effective rate of 0.79% of the Fund’s average daily net assets.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Fund. This agreement excludes taxes, portfolio brokerage commissions, interest, litigation and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.37%, 2.12%, 2.12% and 0.96% for Class A, Class B, Class C and Class I shares, respectively. Prior to July 1, 2010, the fee waivers and/or reimbursements were such that these expenses would not exceed 0.94% for Class I shares. The fee waivers and/or reimbursements will continue in effect until June 30, 2011.
Effective May 1, 2010, the Adviser has voluntarily agreed to waive fees and/or reimburse certain other fund level expenses. This agreement excludes advisory, interest, overdraft, litigation, Rule 12b-1, class specific and other extraordinary expenses not incurred in the ordinary course of business. The fee waivers and/or reimbursement are such that these expenses will not exceed 0.16% of average daily net assets.
Accordingly, these expense reductions, described above, amounted to $65,103, $10,498, $15,109 and $17,949 for Class A, Class B, Class C and Class I shares, respectively, for the year ended February 28, 2011.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of 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
24 | Classic Value Mega Cap Fund | Annual report |
and legal services fees incurred for the year ended February 28, 2011 amounted to an annual rate of 0.02% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B and Class C 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. The Fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Fund’s shares.
CLASS | 12b–1 FEES | |||
Class A | 0.30% | |||
Class B | 1.00% | |||
Class C | 1.00% |
Currently, only 0.25% is charged for Class A shares for 12b-1 fees.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $8,975 for the year ended February 28, 2011. Of this amount, $1,191 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $7,194 was paid as sales commissions to broker-dealers and $590 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a broker-dealer affiliate of the Adviser.
Class B and Class C shares are subject to contingent deferred sales charges (CDSC). Class B shares that are redeemed within six years of purchase are subject to CDSC, at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC on the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2011, CDSCs received by the Distributor amounted to $1,649 and $0 for Class B and Class C shares, respectively.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services or Transfer Agent), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain revenues that Signature Services receives in connection with the service they provide to the funds. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to July 1, the transfer agent fees were made up of three components:
• The Fund paid a monthly transfer agent fee at an annual rate of 0.05% for Class A, Class B and Class C shares and 0.04% for Class I shares, based on each class’s average daily net assets.
Annual report | Classic Value Mega Cap Fund | 25 |
• The Fund paid a monthly fee based on an annual rate of $16.50 per shareholder account.
• In addition, Signature Services was reimbursed for certain out-of-pocket expenses.
Class level expenses. Class level expenses for the year ended February 28, 2011 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
SHARE CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $9,466 | $6,418 | $9,217 | $1,450 |
Class B | 2,267 | 177 | 7,316 | 172 |
Class C | 4,769 | 1,105 | 7,667 | 377 |
Class I | — | 509 | 11,583 | 664 |
Total | $16,502 | $8,209 | $35,783 | $2,663 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of Assets and Liabilities.
Note 5 — Fund share transactions
Transactions in Fund shares for the years ended February 28, 2011 and February 28, 2010 were as follows:
Year ended 2-28-11 | Year ended 2-28-10 | |||||
Shares | Amount | Shares | Amount | |||
Class A shares | ||||||
Sold | 352,716 | $2,377,573 | 109,696 | $629,324 | ||
Exchanged from Class R1 | — | — | 10,510 | 61,586 | ||
Distributions reinvested | 390 | 2,652 | 4,769 | 29,332 | ||
Repurchased | (168,024) | (1,084,501) | (256,886) | (1,470,756) | ||
Net increase (decrease) | 185,082 | $1,295,724 | (131,911) | ($750,514) | ||
Class B shares | ||||||
Sold | 19,702 | $132,319 | 13,088 | $77,435 | ||
Distributions reinvested | — | — | 31 | 192 | ||
Repurchased | (11,722) | (75,860) | (771) | (3,451) | ||
Net increase | 7,980 | $56,459 | 12,348 | $74,176 | ||
Class C shares | ||||||
Sold | 34,568 | $228,531 | 28,288 | $160,131 | ||
Distributions reinvested | — | — | 57 | 349 | ||
Repurchased | (11,909) | (75,046) | (31,198) | (162,017) | ||
Net increase (decrease) | 22,659 | $153,485 | (2,853) | ($1,537) | ||
Class I shares | ||||||
Sold | 25,917 | $164,566 | 58,081 | $340,017 | ||
Distributions reinvested | 7 | 45 | 130 | 800 | ||
Repurchased | (37,015) | (236,853) | (6,705) | (42,023) | ||
Net increase (decrease) | (11,091) | ($72,242) | 51,506 | $298,794 |
26 | Classic Value Mega Cap Fund | Annual report |
Year ended 2-28-11 | Year ended 2-28-10 | |||||
Shares | Amount | Shares | Amount | |||
Class R1 shares | ||||||
Exchanged for Class A | — | — | (10,524) | ($61,586) | ||
Repurchased | — | — | (512) | (2,601) | ||
Net decrease | — | — | (11,036) | ($64,187) | ||
Net increase (decrease) | 204,630 | $1,433,426 | (81,946) | ($443,268) | ||
Affiliates of the Fund owned 48% and 25% of shares of beneficial interest of Class A and Class B shares on February 28, 2011.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $3,925,195 and $2,721,824, respectively, for the year ended February 28, 2011.
Annual report | Classic Value Mega Cap Fund | 27 |
Auditors’ report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock Classic Value Mega Cap Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio 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 Classic Value Mega Cap Fund (the “Fund”) at February 28, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 19, 2011
28 | Classic Value Mega Cap Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended February 28, 2011.
The Fund designates the maximum amount allowable for the corporate dividends received deduction for the fiscal year ended February 28, 2011.
The Fund designates 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. This amount will be reflected on Form 1099-DIV for the calendar year 2011.
Shareholders will be mailed a 2011 Form 1099-DIV in January 2012. This will reflect the total of all distributions that are taxable for calendar year 2011.
Annual report | Classic Value Mega Cap Fund | 29 |
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 |
Steven R. Pruchansky, Born: 1944 | 2006 | 47 |
Chairperson (since January 2011); 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 (since 2008); 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). | ||
James F. Carlin, Born: 1940 | 2006 | 47 |
Chief Executive Officer, Director and Treasurer, Alpha Analytical Laboratories (environmental, chemical | ||
and pharmaceutical analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance | ||
Agency, Inc. (since 1995); Chairman and Chief Executive Officer, CIMCO, LLC (management/ | ||
investments) (since 1987). | ||
William H. Cunningham, Born: 1944 | 2006 | 47 |
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 of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson,2 Born: 1952 | 2008 | 47 |
Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); 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 Corp. (1996–2009); Board of Directors of | ||
Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (since 2007). | ||
Charles L. Ladner,2 Born: 1938 | 2006 | 47 |
Vice Chairperson (since March 2011); Chairman and Trustee, Dunwoody Village, Inc. (retirement | ||
services) (since 2008); Director, Philadelphia Archdiocesan Educational Fund (since 2009); Senior Vice | ||
President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); | ||
Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (gas | ||
distribution) (until 1997); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association | ||
(Cooperating Association, National Park Service) (until 2005). |
30 | Classic Value Mega Cap 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 |
Stanley Martin,2 Born: 1947 | 2008 | 47 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore, Born: 1939 | 2006 | 47 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). | ||
Patti McGill Peterson,2 Born: 1943 | 2006 | 47 |
Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy | ||
(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President, | ||
Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public | ||
Affairs, Cornell University (1997–1998); Former President Wells College, St. Lawrence University and the | ||
Association of Colleges and Universities of the State of New York. Director of the following: Niagara | ||
Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until | ||
1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007); | ||
Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development | ||
Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational | ||
Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 47 |
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (“KPMG”) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
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 |
Hugh McHaffie,4 Born: 1959 | 2010 | 47 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Trust and John Hancock Funds II (since 2009); Trustee, John Hancock retail | ||
funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment | ||
Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior Vice President, Individual | ||
Business Product Management, MetLife, Inc. (1999–2006). |
Annual report | Classic Value Mega Cap Fund | 31 |
Non-Independent Trustees3 (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 |
John G. Vrysen, Born: 1955 | 2009 | 47 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock Funds II | ||
and John Hancock Trust (since 2007); Chief Operating Officer, John Hancock retail funds (until 2009); | ||
Trustee, John Hancock retail funds (since 2009). | ||
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 | |
Keith F. Hartstein, Born: 1956 | 2006 | |
President and Chief Executive Officer | ||
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | ||
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | ||
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | ||
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | ||
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | ||
Force Marketing Committee (since 2003). | ||
Andrew G. Arnott, Born: 1971 | 2009 | |
Senior Vice President and Chief Operating Officer | ||
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | ||
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | ||
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | ||
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | ||
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock Trust | ||
(since 2006); Senior Vice President, Product Management and Development, John Hancock Funds, | ||
LLC (until 2009). | ||
Thomas M. Kinzler, Born: 1955 | 2006 | |
Secretary and Chief Legal Officer | ||
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | ||
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | ||
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | ||
Funds II and John Hancock Trust (since 2006); Vice President and Associate General Counsel, | ||
Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal Counsel, MML | ||
Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual Select Funds and | ||
MassMutual Premier Funds (2004–2006). |
32 | Classic Value Mega Cap Fund | Annual report |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Trust, John Hancock Advisers, LLC and John Hancock | |
Investment Management Services, LLC (since 2005); Vice President and Chief Compliance Officer, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Trust (since 2007); | |
Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, Goldman | |
Sachs (2005–2007). | |
Salvatore Schiavone,4 Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock Closed-End Funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Trust (since 2007); Assistant Treasurer, | |
John Hancock retail funds, John Hancock Funds II and John Hancock Trust (2007–2009); Assistant | |
Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management Research | |
Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
4 Mr. McHaffie and Mr. Schiavone were appointed by the Board of Trustees effective 8-31-10.
Annual report | Classic Value Mega Cap Fund | 33 |
More information
Trustees | Investment adviser | |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management | |
James F. Carlin | Services, LLC | |
William H. Cunningham | ||
Deborah C. Jackson* | Subadviser | |
Charles L. Ladner, Vice Chairperson* | Pzena Investment Management, LLC | |
Stanley Martin* | ||
Hugh McHaffie | Principal distributor | |
Dr. John A. Moore | John Hancock Funds, LLC | |
Patti McGill Peterson* | ||
Gregory A. Russo | Custodian | |
John G. Vrysen | State Street Bank and Trust Company | |
Officers | Transfer agent | |
Keith F. Hartstein | John Hancock Signature Services, Inc. | |
President and Chief Executive Officer | ||
Legal counsel | ||
Andrew G. Arnott | K&L Gates LLP | |
Senior Vice President and Chief Operating Officer | ||
Independent registered | ||
Thomas M. Kinzler | public accounting firm | |
Secretary and Chief Legal Officer | PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | ||
Chief Compliance Officer | The report is certified under the Sarbanes-Oxley | |
Act, which requires mutual funds and other public | ||
Charles A. Rizzo | companies to affirm that, to the best of their | |
Chief Financial Officer | knowledge, the information in their financial reports | |
is fairly and accurately stated in all material respects. | ||
Salvatore Schiavone | ||
Treasurer | ||
*Member of the Audit Committee | ||
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.
You can also contact us: | ||
1-800-225-5291 | Regular mail: | Express mail: |
jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
P.O. Box 55913 | Mutual Fund Image Operations | |
Boston, MA 02205-5913 | 30 Dan Road | |
Canton, MA 02021 |
34 | Classic Value Mega Cap Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-11-000633/classicvaluemegacapx31x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock Classic Value Mega Cap Fund. | 3220A 2/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/11 |
ITEM 2. CODE OF ETHICS.
As of the end of the period, February 28, 2011, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer and Chief Financial Officer (respectively, the principal executive officer, the principal financial 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.
The Board of Trustees of the Registrant has determined that it has one “audit committee financial expert” as that term is defined in Item 3(b) of Form N-CSR: Stanley Martin who is “independent” as that term is defined in Item 3(a) (2) of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant, PricewaterhouseCoopers LLP (“PWC”) 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 $202,369 for the fiscal year ended February 28, 2011 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $25,833, John Hancock Global Shareholder Yield Fund - $25,833, John Hancock Growth Opportunities Fund -$28,680, John Hancock International Growth Fund - $33,065, John Hancock U.S. Core Fund -$28,088, John Hancock International Core Fund - $36,863 and John Hancock International Allocation Fund - $24,007) and $233,674 for the fiscal year ended February 28, 2010 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $27,125, John Hancock Global Shareholder Yield Fund - $27,125, John Hancock Growth Opportunities Fund - $29,929, John Hancock International Growth Fund - $34,239, John Hancock Value Opportunities Fund -$27,641, John Hancock U.S. Core Fund - $27,641, John Hancock International Core Fund -$36,283 and John Hancock International Allocation Fund - $23,691). John Hancock Value Opportunities liquidated prior to February 28, 2011.
(b) Audit-Related Services
Audit-related fees for assurance and related services by PWC amounted to $7,982 for the fiscal year ended February 28, 2011(broken out as follows: John Hancock Classic Value Mega Cap Fund - $347, John Hancock Global Shareholder Yield Fund - $347, John Hancock Growth Opportunities Fund - $347, John Hancock International Growth Fund - $347, John Hancock U.S. Core Fund - $347, John Hancock International Core Fund - $347 and John Hancock International Allocation Fund - $5,900) and $14,863 for the fiscal year ended February 28, 2010 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $1,184, John Hancock Global Shareholder Yield Fund - $1,184, John Hancock Growth Opportunities Fund - $1,184, John Hancock International Growth Fund - $1,184, John Hancock Value Opportunities Fund - $1,184, John Hancock U.S. Core Fund - $1,184, John Hancock International Core Fund - $1,184 and John Hancock International Allocation Fund - $6,575) 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 that provides ongoing services to the registrant ("control affiliates"). The nature of the services provided was security counts and service provider internal controls review.
(c) Tax Fees
The aggregate fees billed for professional services rendered by PWC for the tax compliance, tax advice and tax planning (“tax fees”) amounted to $23,223 for the fiscal year ended February 28, 2011 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $2,926, John Hancock Global Shareholder Yield Fund - $2,926, John Hancock Growth Opportunities - $3,598, John Hancock International Growth Fund - $3,715, John Hancock U.S. Core Fund - $2,926, John
Hancock International Core Fund - $4,558 and John Hancock International Allocation Portfolio -$2,574) and $26,887 for the fiscal year ended February 28, 2010 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $2,841, John Hancock Global Shareholder Yield Fund -$2,841, John Hancock Growth Opportunities - $3,493, John Hancock International Growth Fund - $3,606, John Hancock Value Opportunities Fund - $2,841, John Hancock U.S. Core Fund -$2,841, John Hancock International Core Fund - $5,925 and John Hancock International Allocation Portfolio - $2,499). The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements.
(d) All Other Fees
Other fees amounted to $133 for the fiscal year ended February 28, 2011 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $19, John Hancock Global Shareholder Yield Fund - $19, John Hancock Growth Opportunities - $19, John Hancock International Growth Fund - $19, John Hancock U.S. Core Fund - $19, John Hancock International Core Fund - $19 and John Hancock International Allocation Portfolio - $19) and $440 for the fiscal year ended February 28, 2010 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $55, John Hancock Global Shareholder Yield Fund - $55, John Hancock Growth Opportunities - $55, John Hancock International Growth Fund - $55, John Hancock Value Opportunities Fund - $55, John Hancock U.S. Core Fund - $55, John Hancock International Core Fund - $55 and John Hancock International Allocation Portfolio - $559) billed to the registrant or to the control affiliates.
(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 PWC for the Reporting Period, 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 PWC for non-audit services rendered to the registrant and rendered to the registrant's control affiliates were $2,028,605 for the fiscal year ended February 28, 2011 and $5,696,633 for the fiscal year ended February 28, 2010.
(h) The registrant’s audit committee of the Board of Trustees has considered the provision of non-audit services that were rendered by PWC to the investment adviser and any control affiliate that provides services that were not pre-approved pursuant to paragraph (c) (7) (ii) of Rule 2-01 of Regulation S-X, to be compatible with maintaining PWC’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:
Stanley Martin - Chairman
Deborah C. Jackson
Charles L. Ladner
Patti McGill Peterson
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 – Governance Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in this Form N-CSR is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Within 90 days prior to the filing date of this Form N-CSR, the registrant had carried out an evaluation, under the supervision and with the participation of the registrant’s management, including the registrant's principal executive officer and the registrant’s principal financial officer, of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures relating to information required to be disclosed on Form N-CSR. Based on such evaluation, the registrant’s principal executive officer and principal financial officer concluded that the registrant’s disclosure controls and procedures are operating effectively to ensure that:
(i) information required to be disclosed in this Form N-CSR is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission, and
(ii) information is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) CHANGE IN REGISTRANT’S INTERNAL CONTROL: Not applicable.
ITEM 12. EXHIBITS.
(a)(1) See attached Code of Ethics.
(a)(2)(i) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER.
(a)(2)(ii) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER.
(b) CERTIFICATION PURSUANT TO Rule 30a-2(b) OF THE INVESTMENT COMPANY ACT OF 1940.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Governance 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 Funds III | |
By: | /s/ Keith F. Hartstein |
Keith F. Hartstein | |
President and | |
Chief Executive Officer | |
Date: | April 19, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Keith F. Hartstein |
Keith F. Hartstein | |
President and | |
Chief Executive Officer | |
Date: | April 19, 2011 |
By: | /s/ Charles A. Rizzo |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | April 19, 2011 |