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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
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FORM N-CSR |
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED |
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MANAGEMENT INVESTMENT COMPANIES |
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Investment Company Act file number 811-21777 |
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John Hancock Funds III |
(Exact name of registrant as specified in charter) |
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601 Congress Street, Boston, Massachusetts 02210 |
(Address of principal executive offices) (Zip code) |
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Salvatore Schiavone |
Treasurer |
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601 Congress Street |
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Boston, Massachusetts 02210 |
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(Name and address of agent for service) |
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Registrant's telephone number, including area code: 617-663-4497 |
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Date of fiscal year end: | February 28 |
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Date of reporting period: | August 31, 2011 |
ITEM 1. SCHEDULE OF INVESTMENTS
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| John Hancock |
| U.S. Core Fund |
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Semiannual Report | |
8.31.11 | |
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John Hancock U.S. Core Fund | |
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Table of Contents | |
Your Expenses | Page 3 |
Portfolio Summary | Page 5 |
Portfolio of Investments | Page 6 |
Financial Statements | Page 13 |
Financial Highlights | Page 16 |
Notes to Financial Statements | Page 22 |
More Information | Page 35 |
U.S. Core Fund
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding your 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 (if applicable), minimum account fee charge, etc.
• Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on March 1, 2011 with the same investment held until August 31, 2011.
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| Account value | Ending value | Expenses paid during |
| on 3-1-11 | on 8-31-11 | period ended 8-31-111 |
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Class A | $1,000.00 | $979.40 | $6.72 |
Class B | 1,000.00 | 975.70 | 10.18 |
Class C | 1,000.00 | 975.70 | 10.18 |
Class I | 1,000.00 | 981.90 | 4.43 |
Class R1 | 1,000.00 | 978.30 | 8.16 |
Class R5 | 1,000.00 | 981.40 | 4.68 |
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 August 31, 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:
Example
[ My account value $8,600.00 / $1,000.00 = 8.6 ] x $[ “expenses paid” from table ] = My actual expenses
Hypothetical example for comparison purposes
This table allows you to compare your fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not your fund’s actual return). It assumes an account value of $1,000.00 on March 1, 2011, with the same investment held until August 31, 2011. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
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| Account value | Ending value | Expenses paid during |
| on 3-1-11 | on 8-31-11 | period ended 8-31-111 |
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Class A | $1,000.00 | $1,018.30 | $6.85 |
Class B | 1,000.00 | 1,014.80 | 10.38 |
Class C | 1,000.00 | 1,014.80 | 10.38 |
Class I | 1,000.00 | 1,020.70 | 4.52 |
Class R1 | 1,000.00 | 1,016.90 | 8.31 |
Class R5 | 1,000.00 | 1,020.40 | 4.77 |
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%, 0.89%, 1.64% and 0.94% for Class A, Class B, Class C, Class I, Class R1 and Class R5 shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
U.S. Core Fund
Portfolio Summary
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| Value as a |
| percentage of |
Top 10 holdings (33.7% of Net Assets)1 | Fund's net assets |
Microsoft Corp. | 4.9% |
Pfizer, Inc. | 4.5% |
Wal-Mart Stores, Inc. | 4.0% |
Oracle Corp. | 3.6% |
Google, Inc., Class A | 3.3% |
International Business Machines Corp. | 3.0% |
The Procter & Gamble Company | 2.7% |
Johnson & Johnson | 2.6% |
The Coca-Cola Company | 2.6% |
Merck & Company, Inc. | 2.5% |
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| Value as a |
| percentage of |
Sector Composition 2 | Fund's net assets |
Information Technology | 26% |
Health Care | 25% |
Consumer Staples | 20% |
Energy | 7% |
Consumer Discretionary | 6% |
Industrials | 4% |
Telecommunication Services | 3% |
Financials | 3% |
Materials | 1% |
Short-Term Investments & Other | 5% |
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| Value as a |
| percentage of |
Portfolio Composition | Fund's net assets |
Common Stocks | 94% |
Investment Companies | 1% |
Short-Term Investments & Other | 5% |
1 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.
U.S. Core Fund
As of 8-31-11 (Unaudited)
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| Shares | Value |
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Common Stocks 93.71% | | $73,182,548 |
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(Cost $68,852,727) | | |
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Consumer Discretionary 6.34% | | 4,947,493 |
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Automobiles 0.13% | | |
General Motors Company (I) (L) | 4,100 | 98,521 |
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Distributors 0.15% | | |
Genuine Parts Company (L) | 2,100 | 115,542 |
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Diversified Consumer Services 0.42% | | |
Apollo Group, Inc., Class A (I) | 4,200 | 196,665 |
H&R Block, Inc. | 4,500 | 68,040 |
Weight Watchers International, Inc. | 1,100 | 66,572 |
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Hotels, Restaurants & Leisure 1.51% | | |
Choice Hotels International, Inc. | 200 | 6,216 |
McDonald's Corp. | 13,000 | 1,175,980 |
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Household Durables 0.07% | | |
KB Home (L) | 8,100 | 53,379 |
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Internet & Catalog Retail 0.30% | | |
Liberty Media Corp. - Interactive, Series A (I) | 4,800 | 75,936 |
priceline.com, Inc. (I) (L) | 290 | 155,805 |
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Media 0.47% | | |
CBS Corp., Class B | 4,900 | 122,745 |
Charter Communications, Inc., Class A (I) | 1,600 | 79,808 |
Gannett Company, Inc. | 2,900 | 33,495 |
The McGraw-Hill Companies, Inc. | 3,100 | 130,541 |
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Multiline Retail 0.75% | | |
Dollar Tree, Inc. (I) | 1,900 | 135,698 |
Family Dollar Stores, Inc. | 1,300 | 69,407 |
J.C. Penney Company, Inc. | 3,000 | 79,890 |
Sears Holdings Corp. (I) (L) | 2,200 | 131,758 |
Target Corp. | 3,200 | 165,344 |
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Specialty Retail 1.37% | | |
Abercrombie & Fitch Company, Class A | 600 | 38,166 |
Advance Auto Parts, Inc. | 1,800 | 109,296 |
Aeropostale, Inc. (I) | 1,100 | 12,298 |
AutoNation, Inc. (I) (L) | 2,000 | 80,760 |
AutoZone, Inc. (I) | 440 | 135,080 |
Best Buy Company, Inc. | 5,500 | 140,745 |
GameStop Corp., Class A (I) (L) | 1,700 | 40,681 |
Lowe's Companies, Inc. | 6,300 | 125,559 |
Ross Stores, Inc. | 1,900 | 145,398 |
TJX Companies, Inc. | 4,500 | 245,790 |
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Textiles, Apparel & Luxury Goods 1.17% | | |
Coach, Inc. | 4,200 | 236,124 |
Fossil, Inc. (I) | 940 | 90,813 |
NIKE, Inc., Class B | 5,500 | 476,575 |
VF Corp. (L) | 930 | 108,866 |
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Consumer Staples 19.75% | | 15,427,404 |
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Beverages 4.72% | | |
Brown Forman Corp., Class B | 1,700 | 121,975 |
Coca-Cola Enterprises, Inc. | 2,800 | 77,336 |
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See notes to financial statements | |
| 6 |
U.S. Core Fund
As of 8-31-11 (Unaudited)
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| Shares | Value |
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Consumer Staples (continued) | | |
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Hansen Natural Corp. (I) | 1,900 | $162,108 |
PepsiCo, Inc. | 20,585 | 1,326,292 |
The Coca-Cola Company | 28,400 | 2,000,780 |
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Food & Staples Retailing 6.00% | | |
Costco Wholesale Corp. | 3,000 | 235,620 |
CVS Caremark Corp. | 7,900 | 283,689 |
Safeway, Inc. | 3,000 | 54,990 |
SUPERVALU, Inc. (L) | 500 | 3,985 |
Sysco Corp. | 7,100 | 198,303 |
The Kroger Company | 7,100 | 167,276 |
Wal-Mart Stores, Inc. | 58,040 | 3,088,308 |
Walgreen Company | 18,600 | 654,906 |
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Food Products 1.43% | | |
Campbell Soup Company (L) | 3,200 | 101,984 |
Dean Foods Company (I) | 1,600 | 13,824 |
Flowers Foods, Inc. | 1,650 | 31,433 |
General Mills, Inc. | 7,300 | 276,743 |
H.J. Heinz Company | 2,600 | 136,864 |
Hormel Foods Corp. (L) | 3,300 | 91,113 |
Kellogg Company | 4,200 | 228,144 |
McCormick & Company, Inc., Non Voting Shares | 1,600 | 76,464 |
The Hershey Company | 2,700 | 158,355 |
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Household Products 4.06% | | |
Church & Dwight Company, Inc. | 1,600 | 69,664 |
Clorox Company | 1,600 | 111,520 |
Colgate-Palmolive Company | 5,800 | 521,826 |
Kimberly-Clark Corp. | 4,800 | 331,968 |
The Procter & Gamble Company | 33,600 | 2,139,648 |
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Personal Products 0.59% | | |
Avon Products, Inc. | 3,300 | 74,448 |
Herbalife, Ltd. | 2,600 | 145,080 |
The Estee Lauder Companies, Inc., Class A | 2,470 | 241,220 |
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Tobacco 2.95% | | |
Altria Group, Inc. | 7,400 | 201,206 |
Lorillard, Inc. | 1,830 | 203,899 |
Philip Morris International, Inc. (L) | 23,618 | 1,637,200 |
Reynolds American, Inc. | 6,900 | 259,233 |
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Energy 7.58% | | 5,918,218 |
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Energy Equipment & Services 1.40% | | |
Baker Hughes, Inc. | 2,600 | 158,886 |
Halliburton Company | 4,300 | 190,791 |
National Oilwell Varco, Inc. | 4,900 | 323,988 |
Schlumberger, Ltd. | 5,360 | 418,723 |
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Oil, Gas & Consumable Fuels 6.18% | | |
Anadarko Petroleum Corp. | 1,800 | 132,750 |
Apache Corp. | 108 | 11,132 |
Chevron Corp. | 10,489 | 1,037,467 |
ConocoPhillips | 17,900 | 1,218,453 |
Exxon Mobil Corp. (L) | 25,200 | 1,865,808 |
Hess Corp. | 1,980 | 117,493 |
Marathon Oil Corp. | 6,900 | 185,748 |
Occidental Petroleum Corp. | 880 | 76,331 |
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See notes to financial statements | |
| 7 |
U.S. Core Fund
As of 8-31-11 (Unaudited)
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| Shares | Value |
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Energy (continued) | | |
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The Williams Companies, Inc. | 2,400 | $64,776 |
Valero Energy Corp. | 5,100 | 115,872 |
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Financials 1.73% | | 1,351,037 |
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Commercial Banks 0.11% | | |
CIT Group, Inc. (I) | 2,500 | 86,425 |
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Consumer Finance 0.24% | | |
Discover Financial Services | 3,900 | 98,124 |
SLM Corp. | 6,300 | 86,499 |
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Diversified Financial Services 0.15% | | |
Bank of America Corp. | 9,310 | 76,063 |
Leucadia National Corp. (L) | 1,400 | 41,482 |
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Insurance 1.12% | | |
Allied World Assurance Company Holdings, Ltd. | 400�� | 20,760 |
American International Group, Inc. (I) | 3,000 | 75,990 |
AON Corp. | 1,500 | 70,095 |
Arch Capital Group, Ltd. (I) | 1,400 | 47,152 |
Assurant, Inc. | 2,100 | 73,857 |
Endurance Specialty Holdings, Ltd. | 500 | 18,080 |
Hartford Financial Services Group, Inc. | 2,900 | 55,506 |
Protective Life Corp. | 700 | 13,293 |
Prudential Financial, Inc. | 1,700 | 85,357 |
RenaissanceRe Holdings, Ltd. | 600 | 39,342 |
The Travelers Companies, Inc. | 6,000 | 302,760 |
Transatlantic Holdings, Inc. | 600 | 30,378 |
Validus Holdings, Ltd. | 1,800 | 46,476 |
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Real Estate Investment Trusts 0.11% | | |
Annaly Capital Management, Inc. | 4,600 | 83,398 |
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Health Care 25.09% | | 19,591,921 |
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Biotechnology 2.04% | | |
Amgen, Inc. | 14,600 | 808,913 |
Biogen Idec, Inc. (I) (L) | 3,380 | 318,396 |
Cephalon, Inc. (I) | 600 | 48,384 |
Gilead Sciences, Inc. (I) | 10,400 | 414,804 |
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Health Care Equipment & Supplies 3.83% | | |
Alere, Inc. (I) | 4,559 | 113,838 |
Baxter International, Inc. | 7,800 | 436,644 |
Becton, Dickinson & Company | 2,900 | 236,002 |
C.R. Bard, Inc. | 1,100 | 104,786 |
CareFusion Corp. (I) | 1,800 | 46,098 |
Covidien PLC | 2,200 | 114,796 |
DENTSPLY International, Inc. | 1,600 | 56,320 |
Edwards Lifesciences Corp. (I) | 1,280 | 96,576 |
Gen-Probe, Inc. (I) | 500 | 29,985 |
IDEXX Laboratories, Inc. (I) (L) | 900 | 71,802 |
Intuitive Surgical, Inc. (I) | 360 | 137,286 |
Kinetic Concepts, Inc. (I) | 1,300 | 87,802 |
Medtronic, Inc. | 18,800 | 659,316 |
ResMed, Inc. (I) (L) | 1,700 | 52,649 |
St. Jude Medical, Inc. | 4,200 | 191,268 |
STERIS Corp. | 400 | 12,872 |
Stryker Corp. | 4,400 | 214,896 |
Varian Medical Systems, Inc. (I) | 1,200 | 68,352 |
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See notes to financial statements | |
| 8 |
U.S. Core Fund
As of 8-31-11 (Unaudited)
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| Shares | Value |
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Health Care (continued) | | |
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Zimmer Holdings, Inc. (I) | 4,600 | $261,694 |
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Health Care Providers & Services 4.48% | | |
Aetna, Inc. | 5,500 | 220,165 |
AMERIGROUP Corp. (I) (L) | 500 | 24,735 |
AmerisourceBergen Corp. | 4,400 | 174,152 |
Cardinal Health, Inc. | 4,200 | 178,500 |
Coventry Health Care, Inc. (I) | 2,800 | 92,064 |
Express Scripts, Inc. (I) | 7,100 | 333,274 |
Henry Schein, Inc. (I) | 900 | 59,319 |
Humana, Inc. | 2,700 | 209,628 |
Laboratory Corp. of America Holdings (I) | 1,400 | 116,942 |
Lincare Holdings, Inc. (L) | 3,240 | 69,757 |
McKesson Corp. | 2,200 | 175,846 |
Mednax, Inc. (I) | 600 | 39,186 |
Patterson Companies, Inc. | 1,400 | 40,908 |
Quest Diagnostics, Inc. | 2,200 | 110,154 |
Triple-S Management Corp., Class B (I) | 3,591 | 61,227 |
UnitedHealth Group, Inc. | 24,856 | 1,181,157 |
WellPoint, Inc. | 6,500 | 411,450 |
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Health Care Technology 0.16% | | |
Cerner Corp. (I) (L) | 1,900 | 125,324 |
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Life Sciences Tools & Services 0.28% | | |
Mettler-Toledo International, Inc. (I) | 490 | 78,042 |
Pharmaceutical Product Development, Inc. | 1,100 | 34,628 |
Techne Corp. | 500 | 36,235 |
Waters Corp. (I) | 900 | 71,883 |
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Pharmaceuticals 14.30% | | |
Abbott Laboratories | 23,300 | 1,223,483 |
Allergan, Inc. | 3,700 | 302,697 |
Bristol-Myers Squibb Company | 20,100 | 597,975 |
Eli Lilly & Company | 28,200 | 1,057,782 |
Endo Pharmaceuticals Holdings, Inc. (I) | 3,300 | 105,303 |
Forest Laboratories, Inc. (I) | 7,600 | 260,224 |
Johnson & Johnson | 31,300 | 2,059,540 |
Merck & Company, Inc. | 59,383 | 1,966,765 |
Pfizer, Inc. | 183,186 | 3,476,870 |
Warner Chilcott PLC, Class A (I) | 6,637 | 113,227 |
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Industrials 3.69% | | 2,884,064 |
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Aerospace & Defense 1.13% | | |
Alliant Techsystems, Inc. | 200 | 12,694 |
General Dynamics Corp. | 4,300 | 275,544 |
ITT Corp. | 1,700 | 80,478 |
L-3 Communications Holdings, Inc. | 1,200 | 81,384 |
Precision Castparts Corp. | 790 | 129,442 |
United Technologies Corp. | 4,100 | 304,425 |
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Air Freight & Logistics 0.28% | | |
C.H. Robinson Worldwide, Inc. (L) | 2,200 | 155,100 |
Expeditors International of Washington, Inc. | 1,400 | 63,700 |
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Commercial Services & Supplies 0.35% | | |
Copart, Inc. (I) | 700 | 30,128 |
Pitney Bowes, Inc. | 2,800 | 56,868 |
R.R. Donnelley & Sons Company | 2,900 | 44,225 |
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See notes to financial statements | |
| 9 |
U.S. Core Fund
As of 8-31-11 (Unaudited)
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| Shares | Value |
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Industrials (continued) | | |
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Rollins, Inc. | 2,250 | $47,048 |
Stericycle, Inc. (I) | 1,100 | 96,481 |
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Industrial Conglomerates 1.25% | | |
3M Company | 8,500 | 705,330 |
Danaher Corp. | 5,900 | 270,279 |
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Machinery 0.37% | | |
Caterpillar, Inc. | 2,200 | 200,200 |
Joy Global, Inc. | 1,030 | 85,954 |
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Professional Services 0.08% | | |
IHS, Inc., Class A (I) | 800 | 62,072 |
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Trading Companies & Distributors 0.23% | | |
Fastenal Company (L) | 3,000 | 100,440 |
W.W. Grainger, Inc. | 450 | 69,345 |
WESCO International, Inc. (I) | 300 | 12,927 |
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Information Technology 25.99% | | 20,296,687 |
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Communications Equipment 2.66% | | |
ADTRAN, Inc. | 400 | 12,424 |
Cisco Systems, Inc. | 30,724 | 481,752 |
QUALCOMM, Inc. | 30,700 | 1,579,822 |
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Computers & Peripherals 3.30% | | |
Apple, Inc. (I) | 3,890 | 1,496,989 |
Dell, Inc. (I) | 14,715 | 218,738 |
Hewlett-Packard Company | 26,600 | 692,398 |
Seagate Technology PLC | 6,500 | 75,270 |
Western Digital Corp. (I) | 3,200 | 94,368 |
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Electronic Equipment, Instruments & Components 0.21% | | |
Arrow Electronics, Inc. (I) | 1,800 | 56,160 |
Dolby Laboratories, Inc., Class A (I) | 1,200 | 40,320 |
Ingram Micro, Inc., Class A (I) | 3,200 | 57,088 |
Tech Data Corp. (I) | 300 | 14,124 |
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Internet Software & Services 4.07% | | |
AOL, Inc. (I) | 600 | 9,348 |
eBay, Inc. (I) | 18,600 | 574,182 |
Google, Inc., Class A (I) | 4,800 | 2,596,608 |
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IT Services 5.49% | | |
Accenture PLC, Class A | 11,900 | 637,721 |
Amdocs, Ltd. (I) | 2,900 | 79,663 |
Automatic Data Processing, Inc. | 4,700 | 235,141 |
Broadridge Financial Solutions, Inc. | 1,700 | 35,394 |
Cognizant Technology Solutions Corp., Class A (I) | 4,000 | 253,800 |
Computer Sciences Corp. | 1,600 | 49,056 |
Fiserv, Inc. (I) | 900 | 50,247 |
Global Payments, Inc. | 1,200 | 54,996 |
International Business Machines Corp. | 13,711 | 2,357,058 |
Jack Henry & Associates, Inc. | 1,300 | 38,012 |
MasterCard, Inc., Class A | 890 | 293,442 |
Paychex, Inc. | 4,500 | 121,410 |
Total Systems Services, Inc. (L) | 2,500 | 45,375 |
VeriFone Systems, Inc. (I) | 1,000 | 35,220 |
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Semiconductors & Semiconductor Equipment 0.53% | | |
ON Semiconductor Corp. (I) | 4,900 | 35,623 |
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See notes to financial statements | |
| 10 |
U.S. Core Fund
As of 8-31-11 (Unaudited)
| | | |
| | Shares | Value |
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Information Technology (continued) | | | |
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Texas Instruments, Inc. | | 14,500 | $380,045 |
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Software 9.73% | | | |
Adobe Systems, Inc. (I) | | 2,800 | 70,672 |
ANSYS, Inc. (I) | | 800 | 43,184 |
BMC Software, Inc. (I) | | 2,500 | 101,525 |
Citrix Systems, Inc. (I) | | 1,800 | 108,774 |
FactSet Research Systems, Inc. | | 680 | 59,772 |
Informatica Corp. (I) | | 1,900 | 79,382 |
Intuit, Inc. | | 4,200 | 207,186 |
MICROS Systems, Inc. (I) | | 1,000 | 47,660 |
Microsoft Corp. | | 144,041 | 3,831,491 |
Oracle Corp. | | 100,347 | 2,816,740 |
Quest Software, Inc. (I) | | 1,200 | 20,676 |
Symantec Corp. (I) | | 9,900 | 169,785 |
TIBCO Software, Inc. (I) | | 1,700 | 38,046 |
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Materials 0.77% | | | 604,226 |
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Chemicals 0.24% | | | |
Ecolab, Inc. (L) | | 2,300 | 123,280 |
Sigma-Aldrich Corp. | | 1,000 | 64,390 |
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Metals & Mining 0.40% | | | |
Alcoa, Inc. | | 4,900 | 62,769 |
Freeport-McMoRan Copper & Gold, Inc. | | 5,300 | 249,842 |
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Paper & Forest Products 0.13% | | | |
Schweitzer-Mauduit International, Inc. | | 1,733 | 103,945 |
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Telecommunication Services 2.77% | | | 2,161,498 |
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Diversified Telecommunication Services 2.66% | | | |
AT&T, Inc. | | 26,300 | 749,024 |
CenturyLink, Inc. | | 4,200 | 151,830 |
Verizon Communications, Inc. (L) | | 32,400 | 1,171,908 |
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Wireless Telecommunication Services 0.11% | | | |
Sprint Nextel Corp. (I) | | 23,600 | 88,736 |
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Investment Companies 0.92% | | | $718,079 |
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(Cost $698,240) | | | |
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Financials 0.92% | | | 718,079 |
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SPDR S&P 500 ETF Trust (L) | | 5,883 | 718,079 |
| Yield | | |
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Securities Lending Collateral 6.35% | | | $4,958,688 |
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(Cost $4,958,717) | | | |
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John Hancock Collateral Investment Trust (W) | 0.2283%(Y) | 495,626 | 4,958,688 |
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Short-Term Investments 3.73% | | | $2,912,758 |
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(Cost $2,912,758) | | | |
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Money Market Funds 3.73% | | | 2,912,758 |
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State Street Institutional Treasury Money Market Fund | 0.000% (Y) | 2,912,758 | 2,912,758 |
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See notes to financial statements | |
| 11 |
U.S. Core Fund
As of 8-31-11 (Unaudited)
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Total investments (Cost $77,422,442)† 104.71% | $81,772,073 |
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Other assets and liabilities, net (4.71%) | ($3,676,377) |
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Total net assets 100.00% | $78,095,696 |
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The percentage shown for each investment category is the total value of the 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 8-31-11.
(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 8-31-11.
† At 8-31-11, the aggregate cost of investment securities for federal income tax purposes was $78,232,441. Net unrealized appreciation aggregated $3,539,632, of which $5,370,718 related to appreciated investment securities and $1,831,086 related to depreciated investment securities.
| |
See notes to financial statements | |
| 12 |
U.S. Core Fund
Statement of Assets and Liabilities — August 31, 2011 (Unaudited)
| | |
Assets | | |
|
Investments in unaffiliated issuers, at value (Cost | | |
$72,463,725) including $4,839,237 of securities | | |
loaned (Note 2) | $ | 76,813,385 |
Investments in affiliated issuers, at value (Cost | | |
$4,958,717) (Note 2) | | 4,958,688 |
| | |
Total investments, at value (Cost $77,422,442) | | 81,772,073 |
| | |
Cash held at broker for futures contracts | | 110,000 |
Receivable for investments sold | | 32,425 |
Receivable for fund shares sold | | 1,076,150 |
Dividends and interest receivable | | 207,018 |
Receivable for securities lending income | | 2,125 |
Receivable for futures variation margin | | 16,125 |
Receivable due from adviser | | 643 |
Other receivables and prepaid expenses | | 73,700 |
| | |
Total assets | | 83,290,259 |
|
|
Liabilities | | |
|
Due to custodian | | 7,188 |
Payable for investments purchased | | 9,367 |
Payable for fund shares repurchased | | 45,411 |
Payable upon return of securities loaned (Note 2) | | 4,959,995 |
Payable to affiliates | | |
Accounting and legal services fees | | 679 |
Transfer agent fees | | 8,195 |
Trustees' fees | | 631 |
Other liabilities and accrued expenses | | 163,097 |
| | |
Total liabilities | | 5,194,563 |
|
|
Net assets | | |
|
Capital paid-in | $ | 74,604,061 |
Undistributed net investment income | | 570,274 |
Accumulated net realized loss on investments and | | |
future contracts | | (1,437,208) |
Net unrealized appreciation (depreciation) on | | |
investments | | 4,358,569 |
| | |
Net assets | $ | 78,095,696 |
|
|
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 ($31,978,152 ÷ 1,684,449 shares) | $ | 18.98 |
Class B ($900,928 ÷ 47,782 shares)1 | $ | 18.85 |
Class C ($2,436,912 ÷ 129,336 shares)1 | $ | 18.84 |
Class I ($42,626,767 ÷ 2,238,962 shares) | $ | 19.04 |
Class R1 ($118,487 ÷ 6,260 shares) | $ | 18.93 |
Class R5 ($34,450 ÷ 1,810 shares) | $ | 19.03 |
|
Maximum offering price per share | | |
Class A (net asset value per share ÷ 95%)2 | $ | 19.98 |
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 | |
| 13 |
U.S. Core Fund
Statement of Operations — August 31, 2011 (Unaudited)
| | |
Investment income | | |
|
Dividends | $ | 832,543 |
Securities lending | | 14,429 |
Interest | | 41 |
| | |
Total investment income | | 847,013 |
|
Expenses | | |
|
Investment management fees (Note 5) | | 286,535 |
Distribution and service fees (Note 5) | | 65,804 |
Accounting and legal services fees (Note 5) | | 4,184 |
Transfer agent fees (Note 5) | | 42,361 |
Trustees' fees (Note 5) | | 2,220 |
State registration fees (Note 5) | | 37,728 |
Printing and postage (Note 5) | | 12,450 |
Professional fees | | 24,962 |
Custodian fees | | 6,092 |
Registration and filing fees | | 16,275 |
Merger fees | | 102,000 |
Other | | 27,067 |
| | |
Total expenses | | 627,678 |
Less expense reductions (Note 5) | | (205,941) |
| | |
Net expenses | | 421,737 |
|
Net investment income | | 425,276 |
|
|
Realized and unrealized gain (loss) | | |
|
Net realized gain (loss) on | | |
Investments in unaffiliated issuers | | 1,221,501 |
Investments in affiliated issuers | | (302) |
| | 1,221,199 |
|
Change in net unrealized appreciation | | |
(depreciation) of | | |
Investments in unaffiliated issuers | | (3,006,631) |
Investments in affiliated issuers | | (103) |
Futures contracts (Note 3) | | 8,938 |
| | (2,997,796) |
|
Net realized and unrealized loss | | (1,776,597) |
|
Decrease in net assets from operations | $ | (1,351,321) |
| |
See notes to financial statements | |
| 14 |
U.S. Core Fund
Statements of Changes in Net Assets
| | | | |
| | Six months | | |
| | ended | | Year ended |
| | 8/31/11 1 | | 2/28/11 |
| | (Unaudited) | | |
Increase (decrease) in net assets | | | | |
|
From operations | | | | |
Net investment income | $ | 425,276 | $ | 491,832 |
Net realized gain | | 1,221,199 | | 1,660,002 |
Change in net unrealized appreciation | | | | |
(depreciation) | | (2,997,796) | | 5,093,228 |
| | | | |
Increase (decrease) in net assets resulting | | | | |
from operations | | (1,351,321) | | 7,245,062 |
|
Distributions to shareholders | | | | |
From net investment income | | | | |
Class A | | — | | (167,314) |
Class I | | — | | (207,682) |
Class R1 | | — | | (282) |
Class R3 | | — | | (117) |
Class R4 | | — | | (209) |
Class R5 | | — | | (301) |
|
Total distributions | | — | | (375,905) |
|
From Fund share transactions (Note 6) | | 10,675,644 | | 20,847,789 |
|
Total increase | | 9,324,323 | | 27,716,946 |
|
Net assets | | | | |
|
Beginning of period | | 68,771,373 | | 41,054,427 |
End of period | $ | 78,095,696 | $ | 68,771,373 |
|
Undistributed net investment income | $ | 570,274 | $ | 144,998 |
1 Class R3 and R4 shares were terminated on 7-21-11.
| |
See notes to financial statements | |
| 15 |
U.S. Core Fund
Financial Highlights (For a share outstanding throughout the period)
| | | | | | | | | | | | |
Class A Shares | | | | | | | | | | | | |
|
Period ended | | | | | | | | | | | | |
| | 8-31-111 | | 2-28-11 | | 2-28-10 | | 2-28-09 | | 2-29-08 | | 2-28-072 |
Per share operating performance | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net asset value, beginning of period | $ | 19.38 | $ | 17.06 | $ | 12.25 | $ | 19.42 | $ | 22.24 | $ | 20.00 |
Net investment income3 | | 0.09 | | 0.14 | | 0.11 | | 0.15 | | 0.16 | | 0.12 |
Net realized and unrealized gain (loss) on | | | | | | | | | | | | |
investments | | (0.49) | | 2.29 | | 4.76 | | (7.19) | | (1.88) | | 2.41 |
Total from investment operations | | (0.40) | | 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 | $ | 18.98 | $ | 19.38 | $ | 17.06 | $ | 12.25 | $ | 19.42 | $ | 22.24 |
|
Total return (%)4,5 | | (2.06)6 | | 14.26 | | 39.78 | | (36.34) | | (8.16) | | 12.646 |
|
Ratios and supplemental data | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net assets, end of period (in millions) | $ | 32 | $ | 31 | $ | 22 | $ | 11 | $ | 18 | $ | 19 |
Ratios (as a percentage of average net | | | | | | | | | | | | |
assets): | | | | | | | | | | | | |
Expenses before reductions | | 1.848 | | 1.50 | | 1.767 | | 1.75 | | 1.86 | | 1.938 |
Expenses net of fee waivers | | 1.358 | | 1.35 | | 1.357 | | 1.35 | | 1.34 | | 1.348 |
Expenses net of fee waivers and credits | | 1.358 | | 1.35 | | 1.357 | | 1.35 | | 1.34 | | 1.348 |
Net investment income | | 0.968 | | 0.82 | | 0.72 | | 0.86 | | 0.70 | | 0.768 |
Portfolio turnover (%) | | 20 | | 78 | | 44 | | 61 | | 81 | | 36 |
1 Unaudited.
2 The inception date for Class A shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
8 Annualized.
| |
See notes to financial statements | |
| 16 |
U.S. Core Fund
Financial Highlights (For a share outstanding throughout the period)
| | | | | | | | | | | | |
Class B Shares | | | | | | | | | | | | |
|
Period ended | | | | | | | | | | | | |
| | 8-31-111 | | 2-28-11 | | 2-28-10 | | 2-28-09 | | 2-29-08 | | 2-28-072 |
Per share operating performance | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net asset value, beginning of period | $ | 19.32 | $ | 17.02 | $ | 12.26 | $ | 19.38 | $ | 22.20 | $ | 20.00 |
| | | | | | | | | | | | |
Net investment income3 | | 0.02 | | 0.03 | | 0.01 | | 0.04 | | —4 | | 0.02 |
Net realized and unrealized gain (loss) on | | | | | | | | | | | | |
investments | | (0.49) | | 2.27 | | 4.75 | | (7.16) | | (1.88) | | 2.40 |
| | | | | | | | | | | | |
Total from investment operations | | (0.47) | | 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 | $ | 18.85 | $ | 19.32 | $ | 17.02 | $ | 12.26 | $ | 19.38 | $ | 22.20 |
|
Total return (%)5,6 | | (2.43)7 | | 13.51 | | 38.83 | | (36.74) | | (8.84) | | 12.077 |
|
Ratios and supplemental data | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net assets, end of period (in millions) | $ | 1 | $ | 1 | | —8 | | —8 | | —8 | | —8 |
Ratios (as a percentage of average net | | | | | | | | | | | | |
assets): | | | | | | | | | | | | |
Expenses before reductions | | 3.849 | | 3.02 | | 7.6710 | | 8.79 | | 6.98 | | 13.589 |
Expenses net of fee waivers | | 2.059 | | 2.05 | | 2.0810 | | 2.40 | | 2.05 | | 2.049 |
Expenses net of fee waivers and credits | | 2.059 | | 2.05 | | 2.0510 | | 2.05 | | 2.05 | | 2.049 |
Net investment income | | 0.269 | | 0.19 | | 0.03 | | 0.24 | | —11 | | 0.129 |
Portfolio turnover (%) | | 20 | | 78 | | 44 | | 61 | | 81 | | 36 |
1 Unaudited.
2 The inception date for Class B shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Less than $500,000.
9 Annualized.
10 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
11 Less than 0.005%.
| |
See notes to financial statements | |
| 17 |
U.S. Core Fund
Financial Highlights (For a share outstanding throughout the period)
| | | | | | | | | | | | |
Class C Shares | | | | | | | | | | | | |
|
Period ended | | | | | | | | | | | | |
| | 8-31-111 | | 2-28-11 | | 2-28-10 | | 2-28-09 | | 2-29-08 | | 2-28-072 |
Per share operating performance | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net asset value, beginning of period | $ | 19.31 | $ | 17.01 | $ | 12.26 | $ | 19.39 | $ | 22.21 | $ | 20.00 |
| | | | | | | | | | | | |
Net investment income3 | | 0.02 | | 0.02 | | —4 | | 0.01 | | —5 | | 0.03 |
Net realized and unrealized gain (loss) on | | | | | | | | | | | | |
investments | | (0.49) | | 2.28 | | 4.75 | | (7.14) | | (1.88) | | 2.40 |
| | | | | | | | | | | | |
Total from investment operations | | (0.47) | | 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 | $ | 18.84 | $ | 19.31 | $ | 17.01 | $ | 12.26 | $ | 19.39 | $ | 22.21 |
|
Total return (%)6,7 | | (2.43)8 | | 13.52 | | 38.74 | | (36.77) | | (8.84) | | 12.128 |
|
Ratios and supplemental data | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net assets, end of period (in millions) | $ | 2 | $ | 2 | $ | 2 | $ | 1 | $ | 3 | $ | 3 |
Ratios (as a percentage of average net | | | | | | | | | | | | |
assets): | | | | | | | | | | | | |
Expenses before reductions | | 2.969 | | 2.40 | | 3.9210 | | 3.43 | | 2.94 | | 3.829 |
Expenses net of fee waivers | | 2.059 | | 2.05 | | 2.0610 | | 2.07 | | 2.05 | | 2.049 |
Expenses net of fee waivers and credits | | 2.059 | | 2.05 | | 2.0510 | | 2.05 | | 2.05 | | 2.049 |
Net investment income (loss) | | 0.249 | | 0.12 | | —11 | | 0.06 | | (0.01) | | 0.169 |
Portfolio turnover (%) | | 20 | | 78 | | 44 | | 61 | | 81 | | 36 |
1 Unaudited.
2 The inception date for Class C shares is 6-12-06.
3 Based on the average daily shares outstanding.
4 Less than ($0.005) per share.
5 Less than $0.005 per share.
6 Does not reflect the effect of sales charges, if any.
7 Total returns would have been lower had certain expenses not been reduced during the periods shown.
8 Not annualized.
9 Annualized.
10 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
11 Less than (0.005%).
| |
See notes to financial statements | |
| 18 |
U.S. Core Fund
Financial Highlights (For a share outstanding throughout the period)
| | | | | | | | | | | | |
Class I Shares | | | | | | | | | | | | |
|
Period ended | | | | | | | | | | | | |
| | 8-31-111 | | 2-28-11 | | 2-28-10 | | 2-28-09 | | 2-29-08 | | 2-28-072 |
Per share operating performance | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net asset value, beginning of period | $ | 19.39 | $ | 17.06 | $ | 12.25 | $ | 19.43 | $ | 22.26 | $ | 20.00 |
| | | | | | | | | | | | |
Net investment income3 | | 0.14 | | 0.24 | | 0.16 | | 0.21 | | 0.25 | | 0.18 |
Net realized and unrealized gain (loss) on | | | | | | | | | | | | |
investments | | (0.49) | | 2.28 | | 4.79 | | (7.19) | | (1.89) | | 2.41 |
| | | | | | | | | | | | |
Total from investment operations | | (0.35) | | 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 | $ | 19.04 | $ | 19.39 | $ | 17.06 | $ | 12.25 | $ | 19.43 | $ | 22.26 |
|
Total return (%)4 | | (1.81)5 | | 14.81 | | 40.35 | | (36.06) | | (7.82) | | 12.955 |
|
Ratios and supplemental data | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net assets, end of period (in millions) | $ | 43 | $ | 34 | $ | 16 | | —6 | | —6 | | —6 |
Ratios (as a percentage of average net | | | | | | | | | | | | |
assets): | | | | | | | | | | | | |
Expenses before reductions | | 1.377 | | 1.12 | | 1.398 | | 10.44 | | 12.79 | | 17.837 |
Expenses net of fee waivers | | 0.897 | | 0.88 | | 0.878 | | 0.95 | | 0.95 | | 0.957 |
Expenses net of fee waivers and credits | | 0.897 | | 0.88 | | 0.878 | | 0.95 | | 0.95 | | 0.957 |
Net investment income | | 1.427 | | 1.34 | | 0.94 | | 1.19 | | 1.10 | | 1.167 |
Portfolio turnover (%) | | 20 | | 78 | | 44 | | 61 | | 81 | | 36 |
1 Unaudited.
2 The inception date for Class I shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Annualized.
8 Includes the impact of proxy expenses, which amounted to less than 0.005% of average net assets.
| |
See notes to financial statements | |
| 19 |
U.S. Core Fund
Financial Highlights (For a share outstanding throughout the period)
| | | | | | | | | | | | |
Class R1 Shares | | | | | | | | | | | | |
|
Period ended | | | | | | | | | | | | |
| | 8-31-111 | | 2-28-11 | | 2-28-10 | | 2-28-09 | | 2-29-08 | | 2-28-072 |
Per share operating performance | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
Net asset value, beginning of period | $ | 19.35 | $ | 17.03 | $ | 12.23 | $ | 19.37 | $ | 22.20 | $ | 20.00 |
| | | | | | | | | | | | |
Net investment income3 | | 0.06 | | 0.09 | | 0.07 | | 0.13 | | 0.13 | | 0.06 |
Net realized and unrealized gain (loss) on | | | | | | | | | | | | |
investments | | (0.48) | | 2.28 | | 4.73 | | (7.16) | | (1.88) | | 2.42 |
| | | | | | | | | | | | |
Total from investment operations | | (0.42) | | 2.37 | | 4.80 | | (7.03) | | (1.75) | | 2.48 |
|
Less distributions | | | | | | | | | | | | |
From net investment income | | — | | (0.05) | | —4 | | (0.11) | | (0.15) | | (0.08) |
From net realized gain | | — | | — | | — | | — | | (0.93) | | (0.20) |
| | | | | | | | | | | | |
Total distributions | | — | | (0.05) | | —4 | | (0.11) | | (1.08) | | (0.28) |
|
Net asset value, end of period | $ | 18.93 | $ | 19.35 | $ | 17.03 | $ | 12.23 | $ | 19.37 | $ | 22.20 |
|
Total return (%)5 | | (2.17)6 | | 13.92 | | 39.28 | | (36.37) | | (8.32) | | 12.386 |
|
Ratios and supplemental data | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| |
|
|
Net assets, end of period (in millions) | | —7 | | —7 | | —7 | | —7 | | —7 | | —7 |
Ratios (as a percentage of average net | | | | | | | | | | | | |
assets): | | | | | | | | | | | | |
Expenses before reductions | | 10.498 | | 4.66 | | 20.809 | | 19.51 | | 15.98 | | 21.128 |
Expenses net of fee waivers | | 1.648 | | 1.67 | | 1.669 | | 1.95 | | 1.45 | | 1.698 |
Expenses net of fee waivers and credits | | 1.648 | | 1.67 | | 1.669 | | 1.45 | | 1.45 | | 1.698 |
Net investment income | | 0.668 | | 0.48 | | 0.43 | | 0.76 | | 0.59 | | 0.418 |
Portfolio turnover (%) | | 20 | | 78 | | 44 | | 61 | | 81 | | 36 |
1 Unaudited.
2 The inception date for Class R1 shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Annualized.
9 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
| |
See notes to financial statements | |
| 20 |
U.S. Core Fund
Financial Highlights (For a share outstanding throughout the period)
| | | | | | | |
Class R5 Shares | | | | | | | |
|
Period ended | | | | | | | |
| | | 8-31-111 | | 2-28-11 | | 2-28-102 |
Per share operating performance | | | | | | | |
| |
| |
| |
|
Net asset value, beginning of period | | $ | 19.39 | $ | 17.06 | $ | 14.05 |
Net investment income3 | | | 0.13 | | 0.21 | | 0.10 |
Net realized and unrealized gain (loss) on | | | | | | | |
investments | | | (0.49) | | 2.29 | | 3.02 |
Total from investment operations | | | (0.36) | | 2.50 | | 3.12 |
|
Less distributions | | | | | | | |
From net investment income | | | — | | (0.17) | | (0.11) |
Net asset value, end of period | | $ | 19.03 | $ | 19.39 | $ | 17.06 |
|
Total return (%)4 | | | (1.86)5 | | 14.68 | | 22.185 |
|
Ratios and supplemental data | | | | | | | |
| |
| |
| |
|
Net assets, end of period (in millions) | | | — 6 | | — 6 | | — 6 |
Ratios (as a percentage of average net | | | | | | | |
assets): | | | | | | | |
Expenses before reductions | | | 29.457 | | 38.74 | | 9.367 |
Expenses net of fee waivers | | | 0.947 | | 0.98 | | 1.067 |
Expenses net of fee waivers and credits | | | 0.947 | | 0.98 | | 1.067 |
Net investment income | | | 1.367 | | 1.17 | | 0.817 |
Portfolio turnover (%) | | | 20 | | 78 | | 44 |
1 Unaudited.
2 The inception date for Class R5 shares is 5-22-09.
3 Based on the average daily shares outstanding.
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 Annualized.
| |
See notes to financial statements | |
| 21 |
U.S. Core Fund
Notes to financial statements (Unaudited)
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 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, and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase. Class R3 and R4 shares were terminated on July 21, 2011.
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 August 31, 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 six months ended August 31, 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, including exchange-traded funds, 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 by the Fund in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), 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. 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 the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian 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, effective March 30, 2011, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 30, 2011, the Fund had a similar agreement with State Street Bank and Trust Company. 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 six months ended August 31, 2011, the Fund had no borrowings under the line of credit.
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 assets 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 assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
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 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, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. 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.
During the six months ended August 31, 2011, the Fund used futures contracts to gain market exposure. The following table summarizes the contracts held at August 31, 2011. During the six months ended August 31, 2011, the Fund held futures contracts with absolute notional values ranging up to $1.5 million as measured at each quarter end.
| | | | | |
| | | | | UNREALIZED |
| NUMBER OF | | EXPIRATION | | APPRECIATION |
OPEN CONTRACTS | CONTRACTS | POSITION | DATE | VALUE | (DEPRECIATION) |
|
S&P 500 E-Mini Index Futures | 25 | Long | 9/16/2011 | $1,522,125 | $8,938 |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at August 31, 2011 by risk category:
| | | | |
RISK | STATEMENT OF | FINANCIAL | ASSET | LIABILITY |
| ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES |
| LIABILITIES | LOCATION | FAIR VALUE | FAIR VALUE |
| LOCATION | | | |
|
|
Equity Contracts | Receivable/payable for | Futures† | $8,938 | — |
| futures | | | |
† Reflects cumulative appreciation/depreciation on futures. Only the year end variation margin is separately disclosed in the Statement of assets and liabilities.
Effect of derivative instruments on the Statement of Operations
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended August 31, 2011:
| | |
RISK | STATEMENT OF | FUTURES CONTRACTS |
| OPERATIONS LOCATION | |
|
|
Equity Contracts | Change in net unrealized | $8,938 |
| 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).
Management fee. The Fund has an investment management agreement 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 six months ended August 31, 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 limit the Fund’s total expenses, excluding taxes, litigation, short dividend, acquired fund fees, brokerage commissions, interest and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, to 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, of the Fund’s average daily net asset value, on an annual basis. The fee waivers and/or reimbursements will continue in effect until June 30, 2012 except for Class R3 and Class R4 shares which were terminated on July 21, 2011.
Accordingly, these expense reductions amounted to $80,323, $7,384, $11,058, $90,065, $5,208, $3,421, $3,438 and $5,044 for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4 and Class R5 shares, respectively, for the six months ended August 31, 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 six months ended August 31, 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 for each class of the Fund’s shares.
| | | | |
Class | 12b-1 Fee | 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% | | |
| | |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $14,888 for the six months ended August 31, 2011. Of this amount, $2,434 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $12,395 was paid as sales commissions to broker-dealers and $59 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 (CDSCs). Class B shares that are redeemed within six years of purchase are subject to CDSCs, 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 six months ended August 31, 2011, CDSCs received by the Distributor amounted to $604 and $35 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 fees that Signature Services receives with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended August 31, 2011 were:
| | | | |
Class | Distribution and | Transfer agent fees | State registration | Printing and |
| service fees | | fees | postage |
|
Class A | $49,125 | $27,263 | $5,117 | $9,276 |
|
Class B | 4,116 | 684 | 4,990 | 177 |
|
Class C | 12,158 | 2,023 | 4,987 | 466 |
|
Class I | — | 12,360 | 6,059 | 2,344 |
|
Class R1 | 300 | 18 | 4,954 | 93 |
|
Class R3 | 70 | 4 | 3,370 | 9 |
|
Class R4 | 35 | 4 | 3,369 | 19 |
|
Class R5 | — | 5 | 4,882 | 66 |
|
Total | $65,804 | $42,361 | $37,728 | $12,450 |
|
Trustee expenses. The Fund 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 six months ended August 31, 2011 and for the year ended February 28, 2011 were as follows:
| | | | | | |
| Six months ended | Year ended |
| 8/31/111 | 2/28/11 |
|
|
| Shares | | Amount | Shares | | Amount |
Class A shares | | | | | | |
Sold | 332,380 | $ | 6,510,358 | 460,570 | $ | 8,297,278 |
Distributions reinvested | — | | — | 8,755 | | 163,886 |
Repurchased | (256,455) | | (5,048,579) | (177,915) | | (3,252,228) |
|
|
Net increase | 75,925 | $ | 1,461,779 | 291,410 | $ | 5,208,936 |
|
|
Class B shares | | | | | | |
Sold | 8,629 | $ | 161,295 | 25,910 | $ | 455,620 |
Repurchased | (3,512) | | (67,945) | (5,850) | | (105,831) |
|
|
Net increase | 5,117 | $ | 93,350 | 20,060 | $ | 349,789 |
|
|
Class C shares | | | | | | |
Sold | 12,120 | $ | 232,836 | 40,635 | $ | 708,765 |
Repurchased | (5,953) | | (117,791) | (16,680) | | (297,360) |
|
|
Net increase | 6,167 | $ | 115,045 | 23,955 | $ | 411,405 |
|
|
Class I shares | | | | | | |
Sold | 674,501 | $ | 12,915,508 | 1,074,227 | $ | 19,696,800 |
Distributions reinvested | — | | — | 9,115 | | 170,640 |
Repurchased | (197,495) | | (3,845,356) | (279,012) | | (4,999,129) |
|
|
Net increase | 477,006 | $ | 9,070,152 | 804,330 | $ | 14,868,311 |
|
|
Class R1 shares | | | | | | |
Sold | 381 | $ | 7,317 | 502 | $ | 9,066 |
Distributions reinvested | — | | — | 15 | | 282 |
|
|
Net increase | 381 | $ | 7,317 | 517 | $ | 9,348 |
|
|
Class R3 shares | | | | | | |
Repurchased | (1,779) | | (36,278) | — | | — |
|
|
Net decrease | (1,779) | $ | (36,278) | — | | — |
|
|
Class R4 shares | | | | | | |
Repurchased | (1,779) | | (36,321) | — | | — |
|
|
Net decrease | (1,779) | $ | (36,321) | — | | — |
|
|
Class R5 shares | | | | | | |
Sold | 31 | $ | 600 | — | | — |
|
|
Net increase | 31 | $ | 600 | — | | — |
|
|
Net increase | 561,069 | $ | 10,675,644 | 1,140,272 | $ | 20,847,789 |
|
|
1 Class R3 and R4 shares were terminated on 7-21-11.
Affiliates of the Fund owned 47%, 86% and 98% of shares of beneficial interest of Class A, Class R1 and Class R5, respectively, on August 31, 2011.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $43,518,980 and $14,414,376, respectively, for the six months ended August 31, 2011.
Note 8 — Fund reorganization
The Board of Trustees have approved an Agreement and Plan of Reorganization providing for the merger of the Fund into John Hancock Funds II U.S. Equity Fund. A shareholders’ meeting has been scheduled for October 26, 2011 to approve the merger. The merger is scheduled to occur immediately after the close of business on Friday October 28, 2011, subject to regulatory and shareholder approval.
Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreement: John Hancock U.S. Core Fund
The Board of Trustees (the Board, the members of which are referred to as “Trustees”) of John Hancock U.S. Core Fund (the “Fund”), a series of John Hancock Funds III, met in-person on May 1–3 and June 5–7, 2011 to consider the approval of the Fund’s investment advisory agreement (the “Advisory Agreement”) with John Hancock Investment Management Services, LLC (the “Adviser”), the Fund’s investment adviser. The Board also considered the approval of the investment subadvisory agreement (the “Subadvisory Agreement”) between the Adviser and Grantham, Mayo, Van Otterloo & Co. LLC (the “Subadviser”) on behalf of the Fund. The Advisory Agreement and the Subadvisory Agreement are referred to as the “Agreements.”
Activities and composition of the Board
The Board consists of eleven individuals, nine of whom are Independent Trustees. “Independent Trustees” are generally those individuals who are not employed by or have any significant business or professional relationship with the Adviser or the Subadviser. The Trustees are responsible for the oversight of operations of the Fund and perform various duties required of directors of investment companies by the Investment Company Act of 1940, as amended (the “1940 Act”). The Independent Trustees have hired independent legal counsel to assist them in connection with their duties. The Board has appointed an Independent Trustee as Chairperson. The Board has established four standing committees that are composed entirely of Independent Trustees: the Audit Committee; the Compliance Committee; the Nominating, Governance and Administration Committee; and the Contracts/Operations Committee. Additionally, Investment Performance Committees A and B are standing committees of the Board that are each composed of Independent Trustees and one Trustee who is affiliated with the Adviser. Investment Performance Committee B oversees and monitors matters relating to the investment performance of the Fund. The Board has also designated an Independent Trustee as Vice Chairperson to serve in the absence of the Chairperson. The Board also designates working groups or ad hoc committees as it deems appropriate.
The approval process
Under the 1940 Act, the Board is required to consider the continuation of the Agreements each year. Throughout the year, the Board, acting directly and through its committees, regularly reviews and assesses the quality of the services that the Fund receives under these Agreements. The Board reviews reports of the Adviser at least quarterly, which include Fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. The Board considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by the Adviser and Subadviser to the Fund and its shareholders.
Prior to the May 1-3, 2011 meeting, the Board requested and received materials specifically relating to the Agreements. The materials provided in connection with the May meeting included information compiled and prepared by Morningstar, Inc. (“Morningstar”) on Fund fees and
expenses, and the investment performance of the Fund. This Fund information is assembled in a format that permits comparison with similar information from a “Category” and a subset of the Category referred to as the “Peer Group,” each as determined by Morningstar, and with the Fund’s benchmark index. The Category includes all funds that invest similarly to the way the Fund invests. The Peer Group represents funds of similar size, excluding passively managed funds and funds-of-funds. The Fund’s benchmark index is an unmanaged index of securities that is provided as a basis for comparison with the Fund’s performance. Other material provided for the Fund review included (a) information on the profitability of the Agreements to the Adviser and a discussion of any additional benefits to the Adviser or Subadviser or their affiliates that result from being the Adviser or Subadviser to the Fund; (b) a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients, such as institutional clients and other investment companies, having similar investment mandates, as well as the performance of those other clients and a comparison of the services provided to those other clients and the services provided to the Fund; (c) the impact of economies of scale; (d) a summary of aggregate amounts paid by the Fund to the Adviser; and (e) sales and redemption data regarding the Fund’s shares.
At an in-person meeting held on May 1–3, 2011, the Board reviewed materials relevant to its consideration of the Agreements. As a result of the discussions that occurred during the May 1–3, 2011 meeting, the Board asked the Adviser for additional information on certain matters. The Adviser provided the additional information and the Board also considered this information as part of its consideration of the Agreements.
At an in-person meeting held on June 5–7, 2011, the Board, including the Independent Trustees, formally considered the continuation of the Advisory Agreement between the Adviser and the Fund and the Subadvisory Agreement between the Adviser and the Subadviser with respect to the Fund, each for an additional one-year term. The Board considered what it believed were key relevant factors that are described under separate headings presented below.
The Board also considered other matters important to the approval process, such as payments made to and by the Adviser or its affiliates relating to the distribution of Fund shares and other services. The Board reviewed services related to the valuation and pricing of Fund portfolio holdings. Other important matters considered by the Board were the direct and indirect benefits to the Adviser, the Subadviser and their affiliates from their relationship with the Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review.
Nature, extent and quality of services
The Board reviewed the nature, extent and quality of services provided by the Adviser and the Subadviser, including the investment advisory services and the resulting performance of the Fund.
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. It considered the background and experience of
senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Subadviser responsible for the daily investment activities of the Fund, including, among other things, portfolio trading capabilities, use of technology, commitment to compliance and approach to training and retaining portfolio managers and other research, advisory and management personnel.
The Board considered the Subadviser’s history and experience providing investment services to the Fund. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadviser’s compliance departments.
In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Fund by the Adviser under a separate agreement. The Board noted that the Adviser and its affiliates provide the Fund with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. The Board reviewed the structure and duties of the Adviser’s administration, accounting, legal and compliance departments and its affiliate’s transfer agency operations and considered the Adviser’s and its affiliate’s policies and procedures for assuring compliance with applicable laws and regulations.
The Board also received information about the nature, extent and quality of services provided by and fee rates charged by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board reviewed a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients having similar investment mandates, the services provided to those other clients as compared to the services provided to the Fund, the performance of those other clients as compared to the performance by the Fund and other factors relating to those other clients. The Board considered the significant differences between the Adviser’s and Subadviser’s services to the Fund and the services they provide to other clients. For other clients that are not mutual funds, the differences in services relate to the greater share purchase and redemption activity in a mutual fund, the generally higher turnover of mutual fund portfolio holdings, the more burdensome regulatory and legal obligations of mutual funds and the higher marketing costs for mutual funds. When compared to all clients including mutual funds, the Adviser has greater oversight and supervisory responsibility for the Fund and undertakes greater entrepreneurial risk as the sponsor of the Fund.
Fund performance
The Board was provided with reports, independently prepared by Morningstar, which included a comprehensive analysis of the Fund’s performance. The Board also examined materials provided by the Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook. The Board also reviewed a narrative and statistical
analysis of the Morningstar data that was prepared by the Adviser, which analyzed various factors that may affect the Morningstar rankings. The Board reviewed information regarding the investment performance of the Fund as compared to its Morningstar Category as well as its benchmark index (see chart below). The Board was provided with a description of the methodology used by Morningstar to select the funds in the Category. The Board also considered updated performance information provided by the Adviser at its May and June 2011 meetings. The Board regularly reviews the performance of the Fund throughout the year and attaches more importance to performance over relatively longer periods of time, typically three to five years.
Set forth below is the performance of the Fund over certain time periods ended December 31, 2010 and that of its Category and benchmark index over the same periods:
| | | | |
| 1-Yr | 3-Yr | 5-Yr | 10-Yr |
|
U.S. Core Fund Class A Shares | 7.95% | -3.76% | - | - |
|
Large Blend Category Average | 14.11% | -2.90% | - | - |
|
S&P 500 TR | 15.06% | -2.86% | - | - |
|
The Board noted the Fund’s underperformance as compared to its Category’s average performance and its benchmark index’s performance. The Board approved the merger of the Fund into another fund within the John Hancock Fund complex at its June 2011 meeting.
Expenses and fees
The Board, including the Independent Trustees, reviewed the Fund’s contractual advisory fee rate payable by the Fund to the Adviser as compared with the other funds in its Peer Group. The Board also received information about the investment subadvisory fee rate payable by the Adviser to the Subadviser for investment subadvisory services. The Board considered the services provided and the fees charged by the Adviser and the Subadviser to other clients with similar investment mandates, including separately managed institutional accounts.
In addition, the Board considered the cost of the services provided to the Fund by the Adviser. The Board received and considered expense information regarding the Fund’s various components, including advisory fees, distribution fees and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, administration fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also considered expense information regarding the Fund’s total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the Adviser’s contractual fee waiver/expense reimbursement agreement into account (Net Expense Ratio). The Board considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of the Peer Group median. As part of its analysis, the Board reviewed the Adviser’s methodology in allocating its costs to the management of the Fund and the Fund complex.
The Board noted that the Fund’s advisory fee ratio was nine basis points above the Peer Group median advisory fee ratio. The Board noted the following information about the Fund’s Gross
and Net Expense Ratios for Class A shares contained in the Fund’s 2010 financial statements in relation with the Fund’s Peer Group median provided by Morningstar in April 2011:
| | | | |
| Fund (Class A) | Peer Group Median | | |
| | |
Advisory Fee Ratio | 0.78% | 0.69% | | |
| | |
Gross Expense Ratio | 1.51% | 1.57% | | |
| | |
Net Expense Ratio | 1.35% | 1.36% | | |
| | |
The Board viewed favorably the Adviser’s contractual agreement to waive all or a portion of its advisory fees and to reimburse or pay operating expenses to the extent necessary to maintain the Fund’s Net Expense Ratio at 1.35% for Class A shares, excluding certain expenses such as taxes, brokerage commissions, interest, litigation and extraordinary expenses, until June 30, 2012. The Board favorably considered the impact of this contractual agreement toward ultimately lowering the Fund’s Gross Expense Ratio. The Board also received and considered information relating to the Fund’s Gross Expense Ratio and Net Expense Ratio that reflected the new methodology for calculating transfer agent fees that was approved by the Trustees at the June 2010 meeting.
The Board received and reviewed statements relating to the Adviser’s financial condition and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by the Adviser for services under the Advisory Agreement, as well as from other relationships between the Fund and the Adviser and its affiliates. The Board reviewed the Adviser’s profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2010 compared to available aggregate profitability data provided for the year ended December 31, 2009. The Board reviewed the Adviser’s profitability with respect to other fund complexes managed by the Adviser and/or its affiliates. The Board reviewed the Adviser’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products.
The Board also considered a comparison of the Adviser’s profitability to that of other similar investment advisers whose profitability information is publicly available. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Adviser, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited.
The Board did not consider profitability information with respect to the Subadviser, which is not affiliated with the Adviser. The Board considered that the subadvisory fee under the Subadvisory Agreement had been negotiated by the Adviser and the Subadviser on an arm’s length basis. For this reason, the Subadviser’s separate profitability from its relationship with the Fund was not a factor in determining whether to renew the Subadvisory Agreement. In evaluating overall fees for investment management, the Board recognized the inherently higher cost structure of subadvised funds.
Economies of scale
The Board, including the Independent Trustees, considered the extent to which economies of scale might be realized as the assets of the Fund increase. Possible changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale (e.g., through the use of breakpoints in the advisory fee at higher asset levels) are periodically discussed. The Board also considered the Adviser’s overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the Fund.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the contractual advisory fee rate.
Other benefits to the Adviser and the Subadviser
The Board understands that the Adviser, the Subadviser or their affiliates may derive other ancillary benefits from their relationship with the Fund, both tangible and intangible, such as their ability to leverage investment professionals who manage other portfolios, an increase in their profile in the investment advisory community and, in the case of the Adviser, the engagement of its affiliates and/or significant shareholders as service providers to the Fund, including for administrative, transfer agency and distribution services. The Board believes that certain of these benefits are difficult to quantify. The Board also was informed that the Subadviser may use third-party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts.
Board determination
The Board unanimously approved the continuation of the Advisory Agreement between the Adviser and the Fund for an additional one-year term. The Subadvisory Agreement between the Adviser and the Subadviser with respect to the Fund was also approved for an additional one-year term. Based upon its evaluation of relevant factors in their totality, the Board was satisfied that the terms of the Agreements, including the advisory and subadvisory fee rates, were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or any group of factors as all-important or controlling, but considered all factors together. Different Trustees may have attributed different weights to the various factors considered. The Independent Trustees were also assisted by independent legal counsel in making this determination. The Trustees’ conclusions may be based in part on their consideration of these arrangements in prior years and on their on going regular review of Fund performance and operations throughout the year.
More information
| |
Trustees | Investment adviser |
Steven R. Pruchansky, Chairperson | John Hancock Investment Management Services, LLC |
James F. Carlin | |
William H. Cunningham | Subadviser |
Deborah C. Jackson | Grantham, Mayo, Van Otterloo & Co. LLC |
Charles L. Ladner,* Vice Chairperson | |
Stanley Martin* | Principal distributor |
Hugh McHaffie† | John Hancock Funds, LLC |
Dr. John A. Moore * # | |
Patti McGill Peterson* | Custodian |
Gregory A. Russo | State Street Bank and Trust Company |
John G. Vrysen† | |
| Transfer agent |
| John Hancock Signature Services, Inc. |
Officers | |
Keith F. Hartstein | Legal counsel |
President and Chief Executive Officer | K&L Gates LLP |
Andrew G. Arnott | |
Senior Vice President and Chief Operating Officer | |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | |
Francis V. Knox, Jr. | |
Chief Compliance Officer | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
* Member of the Audit Committee
† Non-Independent Trustee
# Effective 9-13-11
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record, if any, 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 at www.jhfunds.com or by calling 1-800-225-5291.
| | |
You can also contact us: | | |
1-800-225-5291 | Regular mail: | Express mail: |
www. 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 |
A look at performance
Total returns for the period ended August 31, 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 | | 6-months | 1-year | 5-year | 10-year | inception |
|
Class A1 | 7.32 | –2.98 | — | 0.35 | | –14.35 | 7.32 | –14.02 | — | 2.10 |
|
Class B2 | 7.13 | –2.99 | — | 0.36 | | –14.69 | 7.13 | –14.09 | — | 2.19 |
|
Class C2 | 11.17 | –2.68 | — | 0.51 | | –11.09 | 11.17 | –12.68 | — | 3.07 |
|
Class I2,3 | 13.48 | –1.51 | — | 1.71 | | –9.63 | 13.48 | –7.32 | — | 10.63 |
|
Class R12,3 | 12.58 | –2.18 | — | 0.98 | | –10.01 | 12.58 | –10.43 | — | 5.96 |
|
Class R33,4 | 12.69 | — | — | 9.23 | | –9.99 | 12.69 | — | — | 22.30 |
|
Class R43,4 | 13.03 | — | — | 9.56 | | –9.86 | 13.03 | — | — | 23.13 |
|
Class R53,4 | 13.41 | — | — | 9.90 | | –9.70 | 13.41 | — | — | 24.02 |
|
Class 13,5 | 13.56 | — | — | –2.10 | | –9.62 | 13.56 | — | — | –9.71 |
|
Class NAV 3,6 | 13.56 | –1.40 | — | –1.30 | | –9.62 | 13.56 | –6.81 | — | –6.33 |
|
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 those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 6-30-12 for Class C, Class R1, Class R3, Class R4 and Class R5 shares. Had the fee waivers and expense limitations not been in place gross expenses would apply. For all other classes the net expenses equal the gross expenses. The expense ratios are as follows:
| | | | | | | | | | |
| Class A | Class B | Class C | Class I | Class R1 | Class R3 | Class R4 | Class R5 | Class 1 | Class NAV |
Net (%) | 1.60 | 2.23 | 2.30 | 1.15 | 1.90 | 1.80 | 1.50 | 1.20 | 1.07 | 1.02 |
Gross (%) | 1.60 | 2.23 | 2.41 | 1.15 | 6.67 | 43.50 | 43.17 | 30.63 | 1.07 | 1.02 |
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.
| |
6 | International Core Fund | Semiannual report |
| | | | |
| | Without | With maximum | |
| Start date | sales charge | sales charge | Index |
|
Class B 2 | 9-16-05 | $10,304 | $10,219 | $11,506 |
|
Class C2,3 | 9-16-05 | 10,307 | 10,307 | 11,506 |
|
Class I 2,3 | 9-16-05 | 11,063 | 11,063 | 11,506 |
|
Class R1 2,3 | 9-16-05 | 10,596 | 10,596 | 11,506 |
|
Class R33 | 5-22-09 | 12,230 | 12,230 | 12,768 |
|
Class R4 3 | 5-22-09 | 12,313 | 12,313 | 12,768 |
|
Class R5 3 | 5-22-09 | 12,402 | 12,402 | 12,768 |
|
Class 1 3 | 11-6-06 | 9,029 | 9,029 | 9,151 |
|
Class NAV 3 | 8-29-06 | 9,367 | 9,367 | 9,579 |
|
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.
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 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.
7 NAV represents net asset value and POP represents public offering price. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in different classes and the fee structure of those classes.
| |
Semiannual report | International Core Fund | 7 |
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 March 1, 2011 with the same investment held until August 31, 2011.
| | | |
| Account value | Ending value | Expenses paid during |
| on 3-1-11 | on 8-31-11 | period ended 8-31-111 |
|
Class A | $1,000.00 | $901.50 | $7.36 |
|
Class B | 1,000.00 | 898.00 | 10.97 |
|
Class C | 1,000.00 | 898.10 | 10.97 |
|
Class I | 1,000.00 | 903.70 | 5.26 |
|
Class R1 | 1,000.00 | 899.90 | 9.03 |
|
Class R3 | 1,000.00 | 900.10 | 8.60 |
|
Class R4 | 1,000.00 | 901.40 | 7.12 |
|
Class R5 | 1,000.00 | 903.00 | 5.69 |
|
Class 1 | 1,000.00 | 903.80 | 5.02 |
|
Class NAV | 1,000.00 | 903.80 | 4.79 |
|
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 August 31, 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:
| |
8 | International Core Fund | Semiannual report |
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 March 1, 2011, with the same investment held until August 31, 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 3-1-11 | on 8-31-11 | period ended 8-31-111 |
|
Class A | $1,000.00 | $1,017.40 | $7.81 |
|
Class B | 1,000.00 | 1,013.60 | 11.64 |
|
Class C | 1,000.00 | 1,013.60 | 11.64 |
|
Class I | 1,000.00 | 1,019.60 | 5.58 |
|
Class R1 | 1,000.00 | 1,015.60 | 9.58 |
|
Class R3 | 1,000.00 | 1,016.10 | 9.12 |
|
Class R4 | 1,000.00 | 1,017.60 | 7.56 |
|
Class R5 | 1,000.00 | 1,019.20 | 6.04 |
|
Class 1 | 1,000.00 | 1,019.90 | 5.33 |
|
Class NAV | 1,000.00 | 1,020.10 | 5.08 |
|
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 1.54%, 2.30%, 2.30%, 1.10%, 1.89%, 1.79%, 1.49%, 1.19%, 1.05% and 1.00% 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 184/366 (to reflect the one-half year period).
| |
Semiannual report | International Core Fund | 9 |
Portfolio summary
| | | | |
Top 10 Holdings (22.4% of Net Assets on 8-31-11)1,3 | | | |
|
Sanofi | 3.6% | | Novartis AG | 1.9% |
| |
|
GlaxoSmithKline PLC | 2.9% | | Enel SpA | 1.6% |
| |
|
Total SA | 2.9% | | Royal Dutch Shell PLC | 1.6% |
| |
|
AstraZeneca PLC | 2.9% | | Takeda Pharmaceutical Company, Ltd. | 1.5% |
| |
|
ENI SpA | 2.1% | | Vodafone Group PLC | 1.4% |
| |
|
|
Sector Composition2,3 | | | | |
|
Health Care | 15% | | Materials | 8% |
| |
|
Energy | 13% | | Utilities | 6% |
| |
|
Consumer Discretionary | 12% | | Consumer Staples | 5% |
| |
|
Financials | 11% | | Information Technology | 5% |
| |
|
Industrials | 11% | | Short-Term Investments & Other | 5% |
| |
|
Telecommunication Services | 9% | | | |
| | |
1 Cash and cash equivalents not included in Top 10 Holdings or Top 10 Countries.
2 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.
3 As a percentage of net assets on 8-31-11.
| |
10 | International Core Fund | Semiannual report |
Fund’s investments
As of 8-31-11 (unaudited)
| | |
| Shares | Value |
Common Stocks 94.04% | $1,483,236,722 |
|
(Cost $1,549,207,741) | | |
| | |
Australia 4.82% | | 75,989,224 |
|
BHP Billiton, Ltd. | 239,035 | 10,170,740 |
|
Billabong International, Ltd. | 106,815 | 395,039 |
|
BlueScope Steel, Ltd. | 1,182,804 | 1,044,348 |
|
Charter Hall Office REIT | 721,379 | 2,602,589 |
|
Commonwealth Bank of Australia | 132,721 | 6,871,711 |
|
Dexus Property Group | 2,406,468 | 2,221,425 |
|
Goodman Fielder, Ltd. | 2,088,743 | 1,553,259 |
|
Goodman Group | 3,899,173 | 2,723,648 |
|
GPT Group | 844,429 | 2,831,068 |
|
Investa Office Fund | 3,538,189 | 2,329,380 |
|
Mirvac Group | 1,377,257 | 1,781,870 |
|
National Australia Bank, Ltd. | 130,458 | 3,328,479 |
|
Pacific Brands, Ltd. | 1,074,507 | 754,336 |
|
Qantas Airways, Ltd. (I) | 545,616 | 916,866 |
|
QBE Insurance Group, Ltd. (L) | 397,706 | 6,032,167 |
|
Stockland | 981,132 | 3,150,077 |
|
TABCORP Holdings, Ltd. | 460,383 | 1,387,009 |
|
Telstra Corp., Ltd. | 3,263,257 | 10,590,553 |
|
Wesfarmers, Ltd. | 206,164 | 6,801,337 |
|
Westfield Group | 104,615 | 914,112 |
|
Westpac Banking Corp. | 250,950 | 5,553,545 |
|
Woodside Petroleum, Ltd. | 53,861 | 2,035,666 |
| | |
Austria 0.67% | | 10,598,276 |
|
Andritz AG | 15,322 | 1,421,699 |
|
Immofinanz AG | 427,610 | 1,530,855 |
|
OMV AG | 145,566 | 5,731,401 |
|
Raiffeisen Bank International AG (L) | 34,324 | 1,429,460 |
|
Voestalpine AG | 12,629 | 484,861 |
| | |
Belgium 0.71% | | 11,158,073 |
|
Ageas | 601,604 | 1,203,496 |
|
Belgacom SA | 86,914 | 2,846,895 |
|
Colruyt SA | 48,893 | 2,558,556 |
|
Delhaize Group SA | 14,448 | 967,099 |
|
Dexia SA (I) | 360,358 | 841,496 |
|
Mobistar SA | 20,627 | 1,341,186 |
|
Umicore SA | 29,019 | 1,399,345 |
| | |
See notes to financial statements | Semiannual report | International Core Fund | 11 |
| | |
| Shares | Value |
Bermuda 0.10% | | $1,575,428 |
|
Golden Ocean Group, Ltd. | 550,900 | 480,172 |
|
Lancashire Holdings, Ltd. | 98,879 | 1,095,256 |
| | |
Canada 2.62% | | 41,410,503 |
|
BCE, Inc. | 88,900 | 3,574,882 |
|
Canadian National Railway Company (L) | 44,800 | 3,295,154 |
|
Canadian Natural Resources, Ltd. | 87,200 | 3,294,598 |
|
Canadian Pacific Railway, Ltd. | 13,400 | 769,546 |
|
Encana Corp. (L) | 346,300 | 8,794,527 |
|
IGM Financial, Inc. | 41,800 | 1,891,735 |
|
Magna International, Inc. | 44,000 | 1,670,949 |
|
Methanex Corp. | 48,200 | 1,250,650 |
|
Metro, Inc. | 36,600 | 1,741,985 |
|
National Bank of Canada | 24,965 | 1,848,985 |
|
Precision Drilling Corp. (I) | 101,257 | 1,412,407 |
|
Research In Motion, Ltd. (I) | 102,800 | 3,325,543 |
|
RONA, Inc. | 83,500 | 846,681 |
|
Sun Life Financial, Inc. | 176,700 | 4,788,745 |
|
Suncor Energy, Inc. | 66,300 | 2,124,471 |
|
Yellow Media, Inc. (L) | 942,600 | 779,645 |
| | |
China 0.06% | | 969,640 |
|
Yangzijiang Shipbuilding Holdings, Ltd. | 1,011,000 | 969,640 |
| | |
Denmark 0.91% | | 14,382,526 |
|
D/S Norden A/S | 15,026 | 447,275 |
|
Novo Nordisk A/S | 130,734 | 13,935,251 |
| | |
Finland 0.69% | | 10,854,665 |
|
Metso Oyj | 45,658 | 1,730,767 |
|
Neste Oil OYJ | 90,288 | 1,000,461 |
|
Nokia OYJ | 729,442 | 4,699,676 |
|
Sampo Oyj, A Shares | 42,929 | 1,227,368 |
|
UPM-Kymmene Oyj | 77,816 | 1,020,136 |
|
Wartsila Oyj | 42,429 | 1,176,257 |
| | |
France 11.03% | | 173,907,708 |
|
Alcatel-Lucent (I) | 833,032 | 3,054,808 |
|
Archos SA (I)(L) | 50,259 | 458,587 |
|
Arkema | 41,507 | 3,221,079 |
|
BNP Paribas | 128,402 | 6,594,975 |
|
Casino Guichard Perrachon SA | 15,315 | 1,271,610 |
|
Cie de Saint-Gobain SA | 102,213 | 5,126,224 |
|
Cie Generale d’Optique Essilor International SA | 18,847 | 1,444,849 |
|
Cie Generale de Geophysique-Veritas (I) | 44,544 | 1,134,434 |
|
Cie Generale des Etablissements Michelin | 25,572 | 1,872,318 |
|
Dassault Systemes SA | 25,987 | 2,105,752 |
|
France Telecom SA (L) | 264,857 | 5,075,816 |
|
L’Oreal SA | 16,288 | 1,772,812 |
|
Lagardere SCA | 70,447 | 2,408,129 |
|
LVMH Moet Hennessy Louis Vuitton SA | 21,470 | 3,636,397 |
|
PagesJaunes Groupe (L) | 128,128 | 833,290 |
| | |
12 | International Core Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
France (continued) | | |
|
Peugeot SA | 32,510 | $992,552 |
|
Renault SA | 64,719 | 2,633,527 |
|
Sanofi | 776,742 | 56,510,349 |
|
Schneider Electric SA | 43,477 | 5,811,572 |
|
Societe Generale | 79,117 | 2,641,490 |
|
SOITEC (I)(L) | 89,855 | 664,099 |
|
Total SA | 935,174 | 45,653,577 |
|
Valeo SA | 64,003 | 3,371,332 |
|
Vinci SA | 71,311 | 3,713,532 |
|
Vivendi SA | 390,473 | 9,512,656 |
|
Wendel SA | 28,172 | 2,391,942 |
| | |
Germany 7.04% | | 111,020,345 |
|
Aareal Bank AG (I) | 38,793 | 835,432 |
|
Aixtron Bank AG (L) | 41,991 | 940,971 |
|
Aurubis AG | 47,852 | 2,803,715 |
|
BASF SE | 275,684 | 19,618,950 |
|
Bayerische Motoren Werke (BMW) AG | 103,035 | 8,326,011 |
|
Bilfinger Berger SE | 27,734 | 2,322,104 |
|
Continental AG (I) | 11,907 | 876,159 |
|
Daimler AG | 66,028 | 3,563,868 |
|
Deutsche Lufthansa AG | 97,100 | 1,640,947 |
|
Deutsche Post AG | 46,203 | 705,134 |
|
E.ON AG | 954,346 | 20,918,889 |
|
Fresenius SE & Company KGaA | 9,089 | 939,228 |
|
GEA Group AG | 49,902 | 1,457,707 |
|
Gildemeister AG (I) | 57,308 | 986,215 |
|
Infineon Technologies AG | 638,517 | 5,417,022 |
|
K+S AG | 15,156 | 1,065,516 |
|
Kloeckner & Company SE | 94,191 | 1,557,446 |
|
Lanxess AG | 81,272 | 5,062,877 |
|
Leoni AG | 51,916 | 2,222,538 |
|
Linde AG | 16,323 | 2,494,776 |
|
MAN SE | 28,841 | 3,769,545 |
|
Puma SE | 4,903 | 1,698,890 |
|
RWE AG | 61,020 | 2,293,653 |
|
Salzgitter AG | 33,918 | 2,104,868 |
|
SAP AG | 66,289 | 3,614,243 |
|
Siemens AG | 53,027 | 5,457,676 |
|
Software AG | 46,365 | 2,038,848 |
|
Suedzucker AG | 67,894 | 2,373,155 |
|
ThyssenKrupp AG | 58,044 | 1,956,967 |
|
Volkswagen AG | 12,883 | 1,956,995 |
| | |
Greece 0.35% | | 5,533,011 |
|
Alpha Bank AE (I) | 245,966 | 797,314 |
|
National Bank of Greece SA (I) | 258,669 | 1,145,921 |
|
OPAP SA | 258,471 | 3,152,924 |
|
Public Power Corp. SA | 50,744 | 436,852 |
| | |
See notes to financial statements | Semiannual report | International Core Fund | 13 |
| | |
| Shares | Value |
Hong Kong 1.68% | | $26,466,788 |
|
CLP Holdings, Ltd. | 704,699 | 6,531,555 |
|
Esprit Holdings, Ltd. (L) | 970,295 | 2,725,804 |
|
Hong Kong & China Gas Company, Ltd. | 841,443 | 1,983,252 |
|
Hutchison Whampoa, Ltd. (L) | 331,000 | 3,188,499 |
|
Melco International Development, Ltd. (L) | 1,315,000 | 1,508,655 |
|
Pacific Basin Shipping, Ltd. | 2,562,000 | 1,251,101 |
|
Power Assets Holdings, Ltd. | 656,854 | 5,090,323 |
|
Sino-Forest Corp. (I)(L) | 262,100 | 180,145 |
|
Swire Pacific, Ltd., Class A | 175,000 | 2,333,252 |
|
Yue Yuen Industrial Holdings, Ltd. | 604,718 | 1,674,202 |
| | |
Ireland 1.03% | | 16,245,258 |
|
C&C Group PLC | 162,903 | 713,002 |
|
CRH PLC | 341,126 | 6,067,522 |
|
DCC PLC | 90,747 | 2,476,297 |
|
Experian PLC | 80,671 | 920,992 |
|
Kerry Group PLC | 82,509 | 3,199,931 |
|
Paddy Power PLC | 36,595 | 1,867,953 |
|
Shire PLC | 30,961 | 999,561 |
| | |
Israel 0.28% | | 4,437,497 |
|
Africa Israel Investments, Ltd. (I) | 132,898 | 534,290 |
|
Bezek Israeli Telecommunications Corp., Ltd. | 699,745 | 1,538,285 |
|
Israel Chemicals, Ltd. | 113,446 | 1,627,353 |
|
Partner Communications Company, Ltd. | 67,211 | 737,569 |
| | |
Italy 5.36% | | 84,535,898 |
|
Banco Popolare Societa Cooperativa | 685,187 | 1,174,670 |
|
BGP Holdings PLC (I) | 2,714,128 | 4 |
|
Enel SpA | 5,275,440 | 25,757,752 |
|
ENI SpA | 1,659,609 | 33,371,545 |
|
Exor SpA | 43,258 | 1,031,300 |
|
Finmeccanica SpA | 223,928 | 1,661,378 |
|
Fondiaria-Sai SpA (I) | 220,301 | 478,290 |
|
Italcementi SpA — RSP | 41,228 | 148,739 |
|
Mediaset SpA | 222,143 | 860,710 |
|
Milano Assicurazioni SpA (I) | 1,144,408 | 493,650 |
|
Recordati SpA | 99,876 | 965,454 |
|
Saipem SpA | 87,179 | 3,902,142 |
|
Snam Rete Gas SpA | 525,056 | 2,533,783 |
|
Telecom Italia SpA | 3,261,497 | 3,959,682 |
|
Telecom Italia SpA — RSP | 4,304,524 | 4,706,442 |
|
Terna Rete Elettrica Nazionale SpA | 453,146 | 1,642,665 |
|
UniCredit SpA | 1,365,439 | 1,847,692 |
| | |
Japan 23.91% | | 377,137,486 |
|
Advance Residence Investment Corp. | 595 | 1,243,403 |
|
AEON Company, Ltd. | 304,200 | 3,839,210 |
|
AEON Credit Service Company, Ltd. | 124,500 | 1,866,331 |
|
Aiful Corp. (I)(L) | 451,700 | 647,494 |
|
Aisin Seiki Company, Ltd. | 39,200 | 1,315,781 |
|
Alps Electric Company, Ltd. | 323,046 | 2,951,628 |
| | |
14 | International Core Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
Japan (continued) | | |
|
Anritsu Corp. (L) | 253,000 | $3,106,028 |
|
Asahi Diamond Industrial Company, Ltd. | 36,000 | 681,226 |
|
Asahi Kasei Corp. | 264,000 | 1,759,811 |
|
Astellas Pharma, Inc. | 184,700 | 6,993,402 |
|
Bridgestone Corp. | 55,100 | 1,227,957 |
|
Calsonic Kansei Corp. | 258,000 | 1,545,815 |
|
Canon, Inc. | 52,100 | 2,460,049 |
|
Circle K Sunkus Company, Ltd. | 35,200 | 591,116 |
|
Cosmo Oil Company, Ltd. | 469,000 | 1,243,591 |
|
CSK Corp. (I)(L) | 238,000 | 941,387 |
|
CyberAgent, Inc. (L) | 806 | 2,657,428 |
|
Daikyo, Inc. | 896,000 | 1,593,192 |
|
Dainippon Screen Manufacturing Company, Ltd. | 344,000 | 2,280,633 |
|
Daito Trust Construction Company, Ltd. | 133,100 | 12,357,365 |
|
Dena Company, Ltd. | 94,400 | 4,901,073 |
|
DIC Corp. | 322,000 | 704,987 |
|
Digital Garage, Inc. | 236 | 755,441 |
|
Don Quijote Company, Ltd. | 61,400 | 2,318,735 |
|
EDION Corp. | 50,100 | 436,278 |
|
Eisai Company, Ltd. | 66,780 | 2,843,425 |
|
Electric Power Development Company, Ltd. | 39,100 | 1,098,296 |
|
FANUC Corp. | 39,500 | 6,591,474 |
|
Fast Retailing Company, Ltd. (L) | 23,000 | 4,387,807 |
|
Fuji Electric Company, Ltd. | 329,000 | 950,815 |
|
Fuji Heavy Industries, Ltd. | 459,116 | 2,886,336 |
|
Fuji Oil Company, Ltd. | 52,400 | 841,085 |
|
Gunze, Ltd. | 256,000 | 852,247 |
|
Hanwa Company, Ltd. | 234,000 | 1,016,566 |
|
Haseko Corp. (I) | 1,877,000 | 1,337,057 |
|
Hikari Tsushin, Inc. | 33,500 | 783,582 |
|
Hitachi, Ltd. | 1,607,000 | 8,706,504 |
|
Honda Motor Company, Ltd. | 126,312 | 4,127,211 |
|
Inpex Corp. | 621 | 4,209,391 |
|
Isuzu Motors, Ltd. | 654,000 | 2,922,934 |
|
ITOCHU Corp. | 418,200 | 4,526,109 |
|
JFE Holdings, Inc. | 122,400 | 2,850,076 |
|
Juki Corp. (L) | 240,000 | 533,663 |
|
JVC Kenwood Holdings, Ltd. (I)(L) | 123,800 | 596,972 |
|
JX Holdings, Inc. | 1,939,000 | 12,298,294 |
|
K’s Holding Corp. | 86,700 | 3,808,332 |
|
Kajima Corp. | 1,485,000 | 4,733,941 |
|
Kakaku.com, Inc. | 51,000 | 1,888,949 |
|
Kao Corp. | 224,650 | 5,963,378 |
|
Kawasaki Kisen Kaisha, Ltd. | 739,000 | 1,912,191 |
|
KDDI Corp. | 1,349 | 10,133,216 |
|
Komatsu, Ltd. | 259,100 | 6,896,052 |
|
Konami Corp. (L) | 57,223 | 2,115,077 |
|
Lawson, Inc. (L) | 36,400 | 1,979,932 |
| | |
See notes to financial statements | Semiannual report | International Core Fund | 15 |
| | |
| Shares | Value |
Japan (continued) | | |
|
Leopalace21 Corp. (I)(L) | 421,700 | $944,610 |
|
Makino Milling Machine Company, Ltd. | 172,000 | 1,400,659 |
|
Marubeni Corp. | 634,824 | 4,035,601 |
|
Mazda Motor Corp. | 1,244,000 | 2,677,234 |
|
Mitsubishi Chemical Holdings Corp. | 676,000 | 4,761,019 |
|
Mitsubishi Corp. | 74,095 | 1,784,530 |
|
Mitsubishi Electric Corp. | 346,000 | 3,468,836 |
|
Mitsubishi Heavy Industries, Ltd. | 469,000 | 1,996,540 |
|
Mitsubishi UFJ Lease & Finance Company, Ltd. | 48,100 | 1,953,946 |
|
Mitsui & Company, Ltd. | 211,300 | 3,632,880 |
|
Mitsui Mining & Smelting Company, Ltd. | 548,000 | 1,652,462 |
|
Mitsui O.S.K. Lines, Ltd. | 507,000 | 2,152,390 |
|
Mizuho Financial Group, Inc. | 2,763,400 | 4,217,909 |
|
Murata Manufacturing Company, Ltd. | 15,200 | 933,814 |
|
Net One Systems Company, Ltd. | 477 | 1,291,222 |
|
Nintendo Company, Ltd. | 9,400 | 1,657,347 |
|
Nippon Chemi-Con Corp. | 276,000 | 1,523,329 |
|
Nippon Light Metal Company, Ltd. | 1,132,000 | 2,165,711 |
|
Nippon Steel Corp. | 995,000 | 3,004,258 |
|
Nippon Telegraph & Telephone Corp. | 215,700 | 10,040,079 |
|
Nippon Yakin Kogyo Company, Ltd. (L) | 235,000 | 528,623 |
|
Nippon Yusen Kabushiki Kaisha | 893,000 | 2,702,377 |
|
Nipro Corp. (L) | 61,300 | 1,125,142 |
|
Nissan Motor Company, Ltd. | 805,600 | 7,400,666 |
|
Nisshinbo Holdings, Inc. | 95,000 | 872,708 |
|
Nitori Holdings Company, Ltd. | 26,200 | 2,690,732 |
|
Nitto Denko Corp. | 66,500 | 2,602,666 |
|
NSK, Ltd. | 173,000 | 1,388,840 |
|
NTT DoCoMo, Inc. | 5,628 | 10,242,831 |
|
Obayashi Corp. | 387,000 | 1,902,707 |
|
OKUMA Corp. | 258,000 | 1,997,354 |
|
ORIX Corp. | 56,900 | 5,161,742 |
|
Osaka Gas Company, Ltd. | 967,120 | 3,921,805 |
|
Pioneer Corp. (I) | 101,100 | 477,684 |
|
Point, Inc. | 43,810 | 2,066,619 |
|
Promise Company, Ltd. (L) | 215,550 | 1,549,129 |
|
Resona Holdings, Inc. | 1,921,900 | 8,765,474 |
|
Ricoh Company, Ltd. | 156,000 | 1,418,863 |
|
Round One Corp. | 237,400 | 2,074,863 |
|
Ryohin Keikaku Company, Ltd. | 36,000 | 1,928,935 |
|
Sankyo Company, Ltd. | 54,000 | 2,776,161 |
|
Sawai Pharmaceutical Company, Ltd. | 2,900 | 297,128 |
|
Secom Company, Ltd. | 45,400 | 2,107,271 |
|
SEGA SAMMY HOLDINGS, INC. | 116,300 | 2,704,247 |
|
Seven & I Holdings Company, Ltd. | 22,200 | 589,595 |
|
Shimamura Company, Ltd. | 12,600 | 1,258,861 |
|
Showa Shell Sekiyu KK | 128,900 | 1,036,151 |
|
Softbank Corp. | 34,600 | 1,154,604 |
| | |
16 | International Core Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
Japan (continued) | | |
|
Sojitz Corp. | 1,530,300 | $2,872,361 |
|
Sumitomo Corp. | 651,600 | 8,511,474 |
|
Sumitomo Osaka Cement Company, Ltd. | 251,000 | 775,795 |
|
Taiheiyo Cement Corp. (L) | 2,453,000 | 4,374,931 |
|
Taisei Corp. | 1,415,000 | 3,780,354 |
|
Taisho Pharmaceuticals Company, Ltd. | 35,790 | 831,977 |
|
Takeda Pharmaceutical Company, Ltd. | 480,489 | 23,277,283 |
|
Takefuji Corp. (I) | 83,020 | 1,084 |
|
The Daiei, Inc. (I)(L) | 212,600 | 790,768 |
|
Toho Zinc Company, Ltd. | 166,000 | 705,750 |
|
Tokyo Gas Company, Ltd. | 329,397 | 1,513,090 |
|
Tokyo Steel Manufacturing Company, Ltd. | 144,000 | 1,363,431 |
|
Tokyo Tatemono Company, Ltd. | 638,000 | 2,158,116 |
|
TonenGeneral Sekiyu KK | 134,133 | 1,542,400 |
|
Toray Industries, Inc. | 337,000 | 2,547,049 |
|
Tosoh Corp. | 400,000 | 1,538,212 |
|
Toyota Motor Corp. | 210,500 | 7,560,089 |
|
Toyota Tsusho Corp. | 253,800 | 4,256,220 |
|
UNY Company, Ltd. (L) | 324,300 | 2,918,004 |
|
USS Company, Ltd. | 16,470 | 1,428,328 |
|
Yahoo! Japan Corp. | 5,501 | 1,779,374 |
|
Yamada Denki Company, Ltd. | 89,930 | 6,593,953 |
|
Yamaha Motor Company, Ltd. | 70,100 | 1,053,815 |
|
Zeon Corp. | 269,000 | 2,715,201 |
| | |
Netherlands 3.88% | | 61,197,882 |
|
CSM | 44,724 | 1,077,663 |
|
ING Groep NV (I) | 1,186,806 | 10,346,845 |
|
Koninklijke BAM Groep NV | 335,564 | 1,684,231 |
|
Koninklijke DSM NV | 18,774 | 939,836 |
|
Royal Dutch Shell PLC | 748,908 | 25,096,349 |
|
Royal Dutch Shell PLC, B Shares | 625,300 | 21,088,136 |
|
Wereldhave NV | 11,378 | 964,822 |
| | |
New Zealand 0.57% | | 8,934,301 |
|
Fletcher Building, Ltd. | 334,097 | 2,223,867 |
|
Telecom Corp. of New Zealand, Ltd. | 3,091,206 | 6,710,434 |
| | |
Norway 0.09% | | 1,474,020 |
|
Yara International ASA | 26,799 | 1,474,020 |
| | |
Portugal 0.11% | | 1,690,126 |
|
Jeronimo Martins SGPS SA | 90,726 | 1,690,126 |
| | |
Singapore 1.79% | | 28,192,438 |
|
CapitaCommercial Trust | 640,000 | 633,707 |
|
Cosco Corp. Singapore, Ltd. (L) | 564,000 | 522,321 |
|
Ezra Holdings, Ltd. (L) | 1,031,000 | 848,067 |
|
Golden Agri-Resources, Ltd. | 9,632,000 | 5,279,125 |
|
Jaya Holdings, Ltd. (I) | 876,000 | 359,151 |
| | |
See notes to financial statements | Semiannual report | International Core Fund | 17 |
| | |
| Shares | Value |
Singapore (continued) | | |
|
Midas Holdings, Ltd. (L) | 638,000 | $249,028 |
|
Oversea-Chinese Banking Corp., Ltd. | 152,159 | 1,105,600 |
|
SembCorp Marine, Ltd. | 986,573 | 3,334,516 |
|
Singapore Exchange, Ltd. | 453,000 | 2,637,021 |
|
Singapore Press Holdings, Ltd. | 786,000 | 2,480,197 |
|
Singapore Telecommunications, Ltd. | 3,251,350 | 8,396,731 |
|
Suntec Real Estate Investment Trust | 1,213,000 | 1,360,480 |
|
Swiber Holdings, Ltd. (I) | 574,000 | 266,938 |
|
Venture Corp., Ltd. | 116,000 | 719,556 |
| | |
Spain 3.69% | | 58,265,872 |
|
Banco Popular Espanol SA (L) | 999,953 | 5,212,428 |
|
Banco Santander SA (I) | 967,821 | 8,954,266 |
|
Fomento de Construcciones y Contratas SA (L) | 48,944 | 1,273,006 |
|
Gas Natural SDG SA | 341,928 | 6,256,011 |
|
Iberdrola SA | 741,652 | 5,468,695 |
|
Inditex SA | 48,380 | 4,134,616 |
|
Red Electrica De Corp. SA | 27,151 | 1,336,269 |
|
Repsol YPF SA | 295,195 | 8,507,288 |
|
Telefonica SA | 819,582 | 17,123,293 |
| | |
Sweden 1.50% | | 23,630,386 |
|
Atlas Copco AB, Series A | 210,926 | 4,745,435 |
|
Boliden AB | 137,730 | 1,895,447 |
|
Hennes & Mauritz AB, B Shares | 93,787 | 2,916,828 |
|
Investor AB, B Shares | 104,182 | 2,047,842 |
|
NCC AB | 83,473 | 1,593,423 |
|
SKF AB, B Shares | 65,877 | 1,553,469 |
|
Swedbank AB, Class A | 370,689 | 5,091,125 |
|
Telefonaktiebolaget LM Ericsson, B Shares | 146,287 | 1,641,196 |
|
Trelleborg AB, Series B | 255,237 | 2,145,621 |
| | |
Switzerland 4.56% | | 71,914,633 |
|
Cie Financiere Richemont SA | 94,927 | 5,507,695 |
|
Clariant AG (I) | 77,905 | 872,070 |
|
Nestle SA | 250,145 | 15,488,897 |
|
Novartis AG | 513,246 | 29,991,356 |
|
Roche Holdings AG | 32,517 | 5,692,117 |
|
Swisscom AG | 4,346 | 1,947,480 |
|
Syngenta AG (I) | 9,087 | 2,877,560 |
|
The Swatch Group AG, BR Shares | 8,041 | 3,655,147 |
|
Wolseley PLC | 128,005 | 3,327,480 |
|
Xstrata PLC | 145,947 | 2,554,831 |
| | |
United Kingdom 16.53% | | 260,779,941 |
|
3i Group PLC | 362,926 | 1,251,567 |
|
Aggreko PLC | 87,935 | 2,760,148 |
|
Amlin PLC | 244,715 | 1,238,668 |
|
Antofagasta PLC | 68,699 | 1,503,695 |
|
ARM Holdings PLC | 701,785 | 6,459,718 |
|
ASOS PLC (I) | 42,436 | 1,360,211 |
| | |
18 | International Core Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
United Kingdom (continued) | | |
|
Associated British Foods PLC | 91,547 | $1,589,318 |
|
AstraZeneca PLC | 958,359 | 45,393,586 |
|
BAE Systems PLC | 606,031 | 2,707,541 |
|
Barclays PLC | 2,030,600 | 5,598,714 |
|
BG Group PLC | 450,402 | 9,734,906 |
|
BHP Billiton PLC | 113,431 | 3,861,041 |
|
BP PLC | 1,018,045 | 6,665,463 |
|
British American Tobacco PLC | 145,047 | 6,458,262 |
|
BT Group PLC | 3,986,100 | 11,113,610 |
|
Burberry Group PLC | 321,834 | 7,191,891 |
|
Cobham PLC | 548,940 | 1,708,609 |
|
Cookson Group PLC | 104,076 | 889,081 |
|
Diageo PLC | 171,441 | 3,449,801 |
|
Dixons Retail PLC (I)(L) | 1,483,486 | 290,847 |
|
Drax Group PLC | 393,909 | 3,315,577 |
|
Electrocomponents PLC | 115,029 | 398,919 |
|
FirstGroup PLC | 318,720 | 1,897,845 |
|
GKN PLC | 327,000 | 1,071,821 |
|
GlaxoSmithKline PLC | 2,141,000 | 45,673,675 |
|
Home Retail Group PLC | 882,331 | 1,825,871 |
|
HSBC Holdings PLC | 1,526 | 13,286 |
|
ICAP PLC | 110,692 | 851,582 |
|
IMI PLC | 189,056 | 2,739,484 |
|
ITV PLC (I) | 1,353,000 | 1,344,617 |
|
Ladbrokes PLC | 13,856 | 28,738 |
|
Lloyds Banking Group PLC (I) | 5,173,450 | 2,819,599 |
|
National Express Group PLC | 100,913 | 410,748 |
|
Next PLC | 138,713 | 5,305,114 |
|
Petrofac, Ltd. | 72,575 | 1,609,831 |
|
Prudential PLC | 274,561 | 2,758,239 |
|
Punch Taverns PLC (I) | 644,963 | 100,987 |
|
Reckitt Benckiser Group PLC | 80,790 | 4,288,229 |
|
Rio Tinto PLC | 217,722 | 13,326,145 |
|
Royal Bank of Scotland Group PLC (I) | 4,707,046 | 1,845,633 |
|
Scottish & Southern Energy PLC | 202,971 | 4,282,262 |
|
Smith & Nephew PLC | 234,218 | 2,379,913 |
|
Spirit Pub Company PLC (I) | 644,963 | 455,431 |
|
Standard Chartered PLC | 157,034 | 3,567,784 |
|
Subsea 7 SA (I) | 51,845 | 1,200,455 |
|
Taylor Wimpey PLC (I) | 1,983,279 | 1,068,161 |
|
Tesco PLC | 196,835 | 1,207,563 |
|
The Capita Group PLC | 112,130 | 1,291,114 |
|
The Sage Group PLC | 404,387 | 1,651,071 |
|
The Weir Group PLC | 114,728 | 3,589,067 |
|
Thomas Cook Group PLC | 519,935 | 360,727 |
|
Travis Perkins PLC | 119,546 | 1,601,264 |
|
Trinity Mirror PLC (I) | 140,795 | 100,833 |
|
United Utilities Group PLC | 109,843 | 1,069,565 |
| | |
See notes to financial statements | Semiannual report | International Core Fund | 19 |
| | | |
| | Shares | Value |
United Kingdom (continued) | | | |
|
Vodafone Group PLC | | 8,483,510 | $22,215,792 |
|
William Hill PLC | | 457,342 | 1,675,215 |
|
Yell Group PLC (I)(L) | | 2,616,973 | 211,107 |
| | | |
Venezuela 0.06% | | | 934,797 |
|
Aviva PLC (I) | | 169,442 | 934,797 |
|
| | Shares | Value |
Preferred Securities 1.07% | | | $16,858,324 |
|
(Cost $14,676,065) | | | |
| | | |
Germany 1.07% | | | 16,858,324 |
|
Bayerische Motoren Werke AG | | 12,011 | 647,266 |
|
Porsche Automobil Holding SE | | 86,927 | 5,872,874 |
|
ProSiebenSat.1 Media AG | | 81,527 | 1,621,438 |
|
Volkswagen AG | | 52,457 | 8,716,746 |
|
| Yield % | Shares | Value |
Securities Lending Collateral 3.87% | | | $61,038,752 |
|
(Cost $61,037,874) | | | |
| | | |
John Hancock Collateral Investment Trust (W) | 0.2283 (Y) | 6,100,886 | 61,038,752 |
|
| Yield % | Shares | Value |
Short-Term Investments 3.25% | | | $51,212,459 |
|
(Cost $51,212,459) | | | |
| | | |
Money Market Funds 3.25% | | | 51,212,459 |
|
State Street Institutional Treasury Money | | | |
Market Fund | 0.0000 (Y) | 51,212,459 | 51,212,459 |
|
Total investments (Cost $1,676,134,139)† 102.23% | $1,612,346,257 |
|
|
Other assets and liabilities, net (2.23%) | | | ($35,144,870) |
|
|
Total net assets 100.00% | | $1,577,201,387 |
|
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
REIT Real Estate Investment Trust
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 8-31-11.
(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 8-31-11.
† At 8-31-11, the aggregate cost of investment securities for federal income tax purposes was $1,698,312,582. Net unrealized depreciation aggregated $85,966,325, of which $121,478,804 related to appreciated investment securities and $207,445,129 related to depreciated investment securities.
| | |
20 | International Core Fund | Semiannual report | See notes to financial statements |
The Fund had the following sector composition as a percentage of net assets on 8-31-11:
| | | | |
Health Care | 15% | | | |
Energy | 13% | | | |
Consumer Discretionary | 12% | | | |
Financials | 11% | | | |
Industrials | 11% | | | |
Telecommunication Services | 9% | | | |
Materials | 8% | | | |
Utilities | 6% | | | |
Consumer Staples | 5% | | | |
Information Technology | 5% | | | |
Short-Term Investments & Other | 5% | | | |
| | |
See notes to financial statements | Semiannual report | International Core 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 8-31-11 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
| |
Assets | |
|
Investments in unaffiliated issuers, at value (Cost $1,615,096,265) | |
including $57,553,532 of securities loaned (Note 2) | $1,551,307,505 |
Investments in affiliated issuers, at value (Cost $61,037,874) (Note 2) | 61,038,752 |
| |
Total investments, at value (Cost $1,676,134,139) | 1,612,346,257 |
Foreign currency, at value (Cost $1,179,358) | 1,179,358 |
Cash held at broker for futures contracts | 10,119,405 |
Receivable for investments sold | 5,633,324 |
Receivable for fund shares sold | 3,411,609 |
Receivable for forward foreign currency exchange contracts (Note 3) | 187,308 |
Dividends and interest receivable | 6,645,510 |
Receivable for securities lending income | 91,809 |
Receivable for futures variation margin | 1,462,507 |
Receivable due from adviser | 280 |
Other receivables and prepaid expenses | 129,436 |
| |
Total assets | 1,641,206,803 |
|
Liabilities | |
|
Payable for forward foreign currency exchange contracts (Note 3) | 1,443,066 |
Payable for fund shares repurchased | 928,666 |
Payable upon return of securities loaned (Note 2) | 61,002,470 |
Payable to affiliates | |
Accounting and legal services fees | 24,404 |
Transfer agent fees | 90,842 |
Distribution and service fees | 67 |
Trustees’ fees | 33,551 |
Other liabilities and accrued expenses | 482,350 |
| |
Total liabilities | 64,005,416 |
|
Net assets | |
|
Capital paid-in | $1,799,923,291 |
Undistributed net investment income | 30,185,915 |
Accumulated net realized gain (loss) on investments, futures contracts and | |
foreign currency transactions | (175,354,127) |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | (77,553,692) |
| |
Net assets | $1,577,201,387 |
| | |
22 | International Core Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of assets and liabilities (continued)
| |
Net asset value per share | |
|
Based on net asset values and shares outstanding — the Fund has an | |
unlimited number of shares authorized with no par value | |
Class A ($433,486,145 ÷ 15,588,964 shares)1 | $27.81 |
Class B ($4,108,059 ÷ 148,989 shares)1 | $27.57 |
Class C ($4,704,048 ÷ 170,590 shares)1 | $27.58 |
Class I ($336,491,061 ÷ 12,036,266 shares) | $27.96 |
Class R1 ($210,838 ÷ 7,614 shares) | $27.69 |
Class R3 ($29,846 ÷ 1,071.5 shares) | $27.85 |
Class R4 ($31,509 ÷ 1,129.6 shares) | $27.89 |
Class R5 ($66,987 ÷ 2,397.7 shares) | $27.94 |
Class 1 ($40,952,677 ÷ 1,462,088 shares) | $28.01 |
Class NAV ($757,120,217 ÷ 27,040,804 shares) | $28.00 |
|
Maximum offering price per share | |
|
Class A (net asset value per share ÷ 95%)2 | $29.27 |
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 | Semiannual 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 operations For the six-month period ended 8-31-11
(unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| |
Investment income | |
|
Dividends | $38,936,432 |
Securities lending | 1,964,119 |
Interest | 19,117 |
Less foreign taxes withheld | (3,726,028) |
| |
Total investment income | 37,193,640 |
|
Expenses | |
|
Investment management fees (Note 5) | 7,407,398 |
Distribution and service fees (Note 5) | 679,046 |
Accounting and legal services fees (Note 5) | 98,186 |
Transfer agent fees (Note 5) | 459,750 |
Trustees’ fees (Note 5) | 52,427 |
State registration fees (Note 5) | 62,307 |
Printing and postage (Note 5) | 179,946 |
Professional fees | 90,345 |
Custodian fees | 709,834 |
Registration and filing fees | 28,151 |
Other | 24,366 |
| |
Total expenses | 9,791,756 |
Less expense reductions (Note 5) | (26,396) |
| |
Net expenses | 9,765,360 |
| |
Net investment income | 27,428,280 |
|
Realized and unrealized gain (loss) | |
|
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 49,627,661 |
Futures contracts (Note 3) | 1,157,124 |
Foreign currency transactions | (4,904,375) |
| |
| 45,880,410 |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | (224,253,533) |
Investments in affiliated issuers | (681) |
Futures contracts (Note 3) | (14,659,511) |
Translation of assets and liabilities in foreign currencies | (315,602) |
| |
| (239,229,327) |
| |
Net realized and unrealized loss | (193,348,917) |
| |
Decrease in net assets from operations | ($165,920,637) |
| | |
24 | International Core Fund | Semiannual 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.
| | |
| Six months | |
| ended | Year |
| 8-31-11 | ended |
| (unaudited) | 2-28-11 |
|
Increase (decrease) in net assets | | |
|
From operations | | |
Net investment income | $27,428,280 | $23,097,293 |
Net realized gain | 45,880,410 | 5,624,346 |
Change in net unrealized appreciation (depreciation) | (239,229,327) | 249,810,283 |
| | |
Increase (decrease) in net assets resulting from operations | (165,920,637) | 278,531,922 |
| | |
Distributions to shareholders | | |
From net investment income | | |
Class A | — | (3,147,377) |
Class B | — | (20,240) |
Class C | — | (19,160) |
Class I | — | (3,662,817) |
Class R1 | — | (1,465) |
Class R3 | — | (245) |
Class R4 | — | (330) |
Class R5 | — | (672) |
Class 1 | — | (671,339) |
Class NAV | — | (13,024,392) |
| | |
Total distributions | — | (20,548,037) |
| | |
From Fund share transactions (Note 6) | 140,807,975 | 179,570,655 |
| | |
Total increase (decrease) | (25,112,662) | 437,554,540 |
|
Net assets | | |
|
Beginning of period | 1,602,314,049 | 1,164,759,509 |
| | |
End of period | $1,577,201,387 | $1,602,314,049 |
| | |
Undistributed net investment income | $30,185,915 | $2,757,635 |
| | |
See notes to financial statements | Semiannual report | International Core Fund | 25 |
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 | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $30.85 | $25.74 | $18.43 | $39.06 | $43.30 | $36.26 |
Net investment income3 | 0.42 | 0.33 | 0.24 | 0.76 | 0.35 | 0.63 |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (3.46) | 5.09 | 7.59 | (18.65) | (0.35) | 6.79 |
Total from investment operations | (3.04) | 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 period | $27.81 | $30.85 | $25.74 | $18.43 | $39.06 | $43.30 |
Total return (%)4,5 | (9.85)6 | 21.13 | 42.33 | (47.16) | (0.76) | 20.48 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $433 | $333 | $225 | $54 | $130 | $12 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 1.547 | 1.61 | 1.958 | 1.75 | 1.68 | 2.23 |
Expenses net of fee waivers | 1.547 | 1.60 | 1.668 | 1.75 | 1.65 | 1.40 |
Expenses net of fee waivers and credits | 1.547 | 1.60 | 1.628 | 1.70 | 1.65 | 1.40 |
Net investment income | 2.767 | 1.21 | 0.94 | 2.33 | 0.78 | 1.58 |
Portfolio turnover (%) | 19 | 39 | 44 | 54 | 509 | 37 |
1 Unaudited.
2 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 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.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Does not reflect the effect of sales charges, if any.
6 Not annualized.
7 Annualized.
8 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
9 Excludes merger activity.
| | |
26 | International Core Fund | Semiannual report | See notes to financial statements |
| | | | | | |
CLASS B SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $30.70 | $25.62 | $18.36 | $38.80 | $43.08 | $35.92 |
Net investment income (loss)3 | 0.33 | 0.18 | 0.17 | 0.53 | —4 | (0.25) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (3.46) | 5.01 | 7.44 | (18.49) | (0.33) | 7.79 |
Total from investment operations | (3.13) | 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 period | $27.57 | $30.70 | $25.62 | $18.36 | $38.80 | $43.08 |
Total return (%)5,6 | (10.20)7 | 20.28 | 41.35 | (47.53) | (1.48) | 21.017 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $4 | $5 | $6 | $7 | $20 | $1 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 2.418 | 2.36 | 3.079 | 2.75 | 2.48 | 6.838 |
Expenses net of fee waivers | 2.308 | 2.30 | 2.369 | 2.63 | 2.41 | 2.398 |
Expenses net of fee waivers and credits | 2.308 | 2.30 | 2.339 | 2.40 | 2.40 | 2.398 |
Net investment income (loss) | 2.188 | 0.65 | 0.69 | 1.64 | —10 | (0.84)8 |
Portfolio turnover (%) | 19 | 39 | 44 | 54 | 5011 | 37 |
1 Unaudited.
2 The inception date for Class B shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Annualized.
9 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
10 Less than 0.005%.
11 Excludes merger activity.
| | | | | | |
CLASS C SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $30.71 | $25.62 | $18.36 | $38.81 | $43.09 | $35.92 |
Net investment income (loss)3 | 0.32 | 0.17 | 0.15 | 0.55 | 0.13 | (0.24) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (3.45) | 5.03 | 7.46 | (18.52) | (0.46) | 7.79 |
Total from investment operations | (3.13) | 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 period | $27.58 | $30.71 | $25.62 | $18.36 | $38.81 | $43.09 |
Total return (%)4,5 | (10.19)6 | 20.32 | 41.35 | (47.55) | (1.48) | 21.046 |
|
Ratios and supplemental data | | | | | | |
Net assets, end of period (in millions) | $5 | $5 | $5 | $4 | $15 | $4 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 2.417 | 2.47 | 2.698 | 2.59 | 2.49 | 3.727 |
Expenses net of fee waivers | 2.307 | 2.30 | 2.368 | 2.43 | 2.40 | 2.397 |
Expenses net of fee waivers and credits | 2.307 | 2.30 | 2.338 | 2.40 | 2.40 | 2.397 |
Net investment income (loss) | 2.167 | 0.62 | 0.60 | 1.69 | 0.28 | (0.79) |
Portfolio turnover (%) | 19 | 39 | 44 | 54 | 509 | 37 |
1 Unaudited.
2 The inception date for Class C shares is 6-12-06.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Does not reflect the effect of sales charges, if any.
6 Not annualized.
7 Annualized.
8 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
9 Excludes merger activity.
| | |
See notes to financial statements | Semiannual report | International Core Fund | 27 |
| | | | | | |
CLASS I SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $30.94 | $25.80 | $18.45 | $39.20 | $43.43 | $35.92 |
Net investment income3 | 0.50 | 0.45 | 0.35 | 0.94 | 0.55 | 0.16 |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (3.48) | 5.12 | 7.63 | (18.77) | (0.35) | 7.73 |
Total from investment operations | (2.98) | 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 period | $27.96 | $30.94 | $25.80 | $18.45 | $39.20 | $43.43 |
Total return (%)4 | (9.63)5 | 21.73 | 43.10 | (46.91) | (0.33) | 21.995 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $336 | $291 | $84 | $1 | $3 | —6 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 1.107 | 1.12 | 1.06 | 2.37 | 2.34 | 12.527 |
Expenses net of fee waivers | 1.107 | 1.12 | 1.06 | 1.18 | 1.18 | 1.207 |
Expenses net of fee waivers and credits | 1.107 | 1.12 | 1.06 | 1.18 | 1.18 | 1.207 |
Net investment income | 3.287 | 1.61 | 1.34 | 2.87 | 1.24 | 0.567 |
Portfolio turnover (%) | 19 | 39 | 44 | 54 | 508 | 37 |
1 Unaudited.
2 The inception date for Class I shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Annualized.
8 Excludes merger activity.
| | | | | | |
CLASS R1 SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $30.77 | $25.67 | $18.36 | $38.94 | $43.19 | $35.92 |
Net investment income (loss)3 | 0.38 | 0.24 | 0.23 | 0.69 | 0.66 | (0.03) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (3.46) | 5.06 | 7.50 | (18.54) | (0.69) | 7.68 |
Total from investment operations | (3.08) | 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 period | $27.69 | $30.77 | $25.67 | $18.36 | $38.94 | $43.19 |
Total return (%)4 | (10.01)5 | 20.71 | 42.00 | (47.16) | (0.82) | 21.325 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | —6 | —6 | —6 | —6 | —6 | —6 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 6.537 | 6.88 | 8.858 | 15.16 | 13.85 | 20.407 |
Expenses net of fee waivers | 1.897 | 1.92 | 1.928 | 2.10 | 1.70 | 1.947 |
Expenses net of fee waivers and credits | 1.897 | 1.92 | 1.928 | 1.70 | 1.70 | 1.947 |
Net investment income (loss) | 2.557 | 0.90 | 0.92 | 2.21 | 1.48 | (0.10)7 |
Portfolio turnover (%) | 19 | 39 | 44 | 54 | 509 | 37 |
1 Unaudited.
2 The inception date for Class R1 shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Annualized.
8 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
9 Excludes merger activity.
| | |
28 | International Core Fund | Semiannual report | See notes to financial statements |
| | | | | | |
CLASS R3 SHARES Period ended | | | | 8-31-111 | 2-28-11 | 2-28-102 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | | | | $30.94 | $25.80 | $23.33 |
Net investment income3 | | | | 0.40 | 0.29 | 0.02 |
Net realized and unrealized gain (loss) on investments | | | | (3.49) | 5.08 | 2.90 |
Total from investment operations | | | | (3.09) | 5.37 | 2.92 |
Less distributions | | | | | | |
From net investment income | | | | — | (0.23) | (0.45) |
Net asset value, end of period | | | | $27.85 | $30.94 | $25.80 |
Total return (%)4 | | | | (9.99)5 | 20.87 | 12.405 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | | | | —6 | —6 | —6 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | | | | 33.517 | 44.55 | 10.977 |
Expenses net of fee waivers | | | | 1.797 | 1.83 | 1.917 |
Expenses net of fee waivers and credits | | | | 1.797 | 1.83 | 1.917 |
Net investment income | | | | 2.667 | 1.05 | 0.107 |
Portfolio turnover (%) | | | | 19 | 39 | 44 |
1 Unaudited.
2 The inception date for Class R3 shares is 5-22-09.
3 Based on the average daily shares outstanding.
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 Annualized.
| | | | | | |
CLASS R4 SHARES Period ended | | | | 8-31-111 | 2-28-11 | 2-28-102 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | | | | $30.94 | $25.80 | $23.33 |
Net investment income3 | | | | 0.45 | 0.37 | 0.08 |
Net realized and unrealized gain (loss) on investments | | | | (3.50) | 5.08 | 2.91 |
Total from investment operations | | | | (3.05) | 5.45 | 2.99 |
Less distributions | | | | | | |
From net investment income | | | | — | (0.31) | (0.52) |
Net asset value, end of period | | | | $27.89 | $30.94 | $25.80 |
Total return (%)4 | | | | (9.86)5 | 21.21 | 12.695 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | | | | —6 | —6 | —6 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | | | | 32.257 | 44.22 | 10.717 |
Expenses net of fee waivers | | | | 1.497 | 1.53 | 1.617 |
Expenses net of fee waivers and credits | | | | 1.497 | 1.53 | 1.617 |
Net investment loss | | | | 2.957 | 1.34 | 0.407 |
Portfolio turnover (%) | | | | 19 | 39 | 44 |
1 Unaudited.
2 The inception date for Class R4 shares is 5-22-09.
3 Based on the average daily shares outstanding.
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 Annualized.
| | |
See notes to financial statements | Semiannual report | International Core Fund | 29 |
| | | | | | |
CLASS R5 SHARES Period ended | | | | 8-31-111 | 2-28-11 | 2-28-102 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | | | | $30.94 | $25.79 | $23.33 |
Net investment income3 | | | | 0.49 | 0.44 | 0.14 |
Net realized and unrealized gain (loss) on investments | | | | (3.49) | 5.10 | 2.91 |
Total from investment operations | | | | (3.00) | 5.54 | 3.05 |
Less distributions | | | | | | |
From net investment income | | | | — | (0.39) | (0.59) |
Net asset value, end of period | | | | $27.94 | $30.94 | $25.79 |
Total return (%)4 | | | | (9.70)5 | 21.59 | 12.955 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | | | | —6 | —6 | —6 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | | | | 15.907 | 31.41 | 10.507 |
Expenses net of fee waivers | | | | 1.197 | 1.22 | 1.317 |
Expenses net of fee waivers and credits | | | | 1.197 | 1.22 | 1.317 |
Net investment income | | | | 3.247 | 1.58 | 0.707 |
Portfolio turnover (%) | | | | 19 | 39 | 44 |
1 Unaudited.
2 The inception date for Class R5 shares is 5-22-09.
3 Based on the average daily shares outstanding.
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 Annualized.
| | | | | | |
CLASS 1 SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $30.99 | $25.84 | $18.48 | $39.22 | $43.43 | $40.56 |
Net investment income3 | 0.52 | 0.50 | 0.46 | 0.93 | 0.95 | 0.02 |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (3.50) | 5.09 | 7.54 | (18.74) | (0.72) | 3.26 |
Total from investment operations | (2.98) | 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 period | $28.01 | $30.99 | $25.84 | $18.48 | $39.22 | $43.43 |
Total return (%)4 | (9.62)5 | 21.75 | 43.11 | (46.83) | (0.25) | 8.115 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $41 | $47 | $44 | $34 | $74 | $82 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 1.056 | 1.07 | 1.087 | 1.10 | 1.16 | 1.236 |
Expenses net of fee waivers | 1.056 | 1.07 | 1.077 | 1.10 | 1.14 | 1.176 |
Expenses net of all fee waivers and credits | 1.056 | 1.07 | 1.077 | 1.10 | 1.14 | 1.176 |
Net investment income | 3.416 | 1.83 | 1.83 | 2.88 | 2.09 | 0.166 |
Portfolio turnover (%) | 19 | 39 | 44 | 54 | 508 | 37 |
1 Unaudited.
2 The inception date for Class 1 shares is 11-6-06.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Not annualized.
6 Annualized.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
8 Excludes merger activity.
| | |
30 | International Core Fund | Semiannual report | See notes to financial statements |
| | | | | | |
CLASS NAV SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $30.98 | $25.82 | $18.47 | $39.21 | $43.42 | $39.18 |
Net investment income3 | 0.53 | 0.51 | 0.49 | 0.99 | 0.95 | 0.08 |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (3.51) | 5.10 | 7.51 | (18.78) | (0.70) | 4.58 |
Total from investment operations | (2.98) | 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 period | $28.00 | $30.98 | $25.82 | $18.47 | $39.21 | $43.42 |
Total return (%)4 | (9.62)5 | 21.85 | 43.14 | (46.80) | (0.20) | 11.905 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $757 | $920 | $800 | $603 | $1,415 | $1,244 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 1.006 | 1.02 | 1.047 | 1.04 | 1.11 | 1.086 |
Expenses net of fee waivers | 1.006 | 1.02 | 1.027 | 1.04 | 1.08 | 1.086 |
Expenses net of fee waivers and credits | 1.006 | 1.02 | 1.027 | 1.04 | 1.08 | 1.086 |
Net investment income | 3.506 | 1.87 | 1.99 | 3.06 | 2.09 | 0.386 |
Portfolio turnover (%) | 19 | 39 | 44 | 54 | 508 | 37 |
1 Unaudited.
2 The inception date for Class NAV shares is 8-29-06.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Not annualized.
6 Annualized.
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 | Semiannual report | International Core Fund | 31 |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock International Core Fund (the Fund) is a diversified series of John Hancock Fund 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, transfer agent fees, printing and postage and registration 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.
| |
32 | International Core Fund | Semiannual report |
The following is a summary of the values by input classification of the Fund’s investments as of August 31, 2011, by major security category or type:
| | | | |
| | | | LEVEL 3 |
| | | LEVEL 2 | SIGNIFICANT |
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE |
| VALUE AT 8-31-11 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS |
|
Common Stocks | | | | |
Australia | $75,989,224 | — | $75,989,224 | — |
Austria | 10,598,276 | — | 10,598,276 | — |
Belgium | 11,158,073 | — | 11,158,073 | — |
Bermuda | 1,575,428 | — | 1,575,428 | — |
Canada | 41,410,503 | $41,410,503 | — | — |
China | 969,640 | — | 969,640 | — |
Denmark | 14,382,526 | — | 14,382,526 | — |
Finland | 10,854,665 | — | 10,854,665 | — |
France | 173,907,708 | — | 173,907,708 | — |
Germany | 111,020,345 | — | 111,020,345 | — |
Greece | 5,533,011 | — | 5,533,011 | — |
Hong Kong | 26,466,788 | — | 26,286,643 | $180,145 |
Ireland | 16,245,258 | — | 16,245,258 | — |
Israel | 4,437,497 | — | 4,437,497 | — |
Italy | 84,535,898 | — | 84,535,894 | 4 |
Japan | 377,137,486 | — | 377,136,402 | 1,084 |
Netherlands | 61,197,882 | — | 61,197,882 | — |
New Zealand | 8,934,301 | — | 8,934,301 | — |
Norway | 1,474,020 | — | 1,474,020 | — |
Portugal | 1,690,126 | — | 1,690,126 | — |
Singapore | 28,192,438 | — | 28,192,438 | — |
Spain | 58,265,872 | — | 58,265,872 | — |
Sweden | 23,630,386 | — | 23,630,386 | — |
Switzerland | 71,914,633 | — | 71,914,633 | — |
United Kingdom | 260,779,941 | — | 260,779,941 | — |
Venezuela | 934,797 | — | 934,797 | — |
Preferred Securities | | | | |
Germany | 16,858,324 | — | 16,858,324 | — |
Securities Lending | | | | |
Collateral | 61,038,752 | 61,038,752 | — | — |
Short-Term Investments | 51,212,459 | 51,212,459 | — | — |
|
|
Total Investments in | | | | |
Securities | $1,612,346,257 | $153,661,714 | $1,458,503,310 | $181,233 |
Other Financial | | | | |
Instruments | | | | |
Futures | ($12,709,906) | $12,709,906 | — | — |
Forward Foreign Currency | | | | |
Contracts | ($1,255,758) | — | ($1,255,758) | — |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the six months ended August 31, 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, including exchange-traded funds, 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
| |
Semiannual report | International Core Fund | 33 |
quoted bid or evaluated price. Investments by the Funds in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their respective net asset values each business day. Foreign securities and currencies, including forward foreign 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.
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 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. 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.
| |
34 | International Core Fund | Semiannual report |
Foreign taxes. 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 the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian 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, effective March 30, 2011, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 30, 2011, the Fund had a similar agreement with State Street Bank and Trust Company. 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 six months ended August 31, 2011, the Fund had no borrowings under the line of credit.
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 assets 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 assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
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 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.
| |
Semiannual report | International Core Fund | 35 |
As of February 28, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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.
New accounting pronouncement. In May 2011, Accounting Standards Update 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued and is effective during interim and annual periods beginning after December 15, 2011. ASU 2011-04 amends Financial Accounting Standards Board (FASB) Topic 820, Fair Value Measurement. The amendments are the result of the work by the FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. Management is currently evaluating the application of ASU 2011-04 and its impact, if any, on the Fund’s financial statements.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. 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.
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.
| |
36 | International Core Fund | Semiannual report |
During the six months ended August 31, 2011, the Fund used futures contracts to gain market exposure. The following table summarizes the contracts held at August 31, 2011. During the six months ended August 31, 2011, the Fund held futures contracts with absolute notional values ranging from $133.8 million to $138.3 million, as measured at each quarter end.
| | | | | | |
| | | | | | UNREALIZED |
OPEN | NUMBER OF | | | | | APPRECIATION |
CONTRACTS | CONTRACTS | | POSITION | EXPIRATION DATE | NOTIONAL VALUE | (DEPRECIATION) |
|
DAX Index Futures | 101 | | Long | Sep 2011 | $21,010,352 | ($5,226,670) |
FTSE 100 Index | 172 | | Long | Sep 2011 | 15,038,123 | (1,245,308) |
Futures | | | | | | |
FTSE MIB Index | 242 | | Long | Sep 2011 | 27,014,578 | (7,572,456) |
Futures | | | | | | |
SGX MSCI Singapore | 54 | | Long | Sep 2011 | 2,950,428 | 129,765 |
Index Futures | | | | | | |
TOPIX Index Futures | 99 | | Long | Sep 2011 | 9,968,525 | (438,852) |
ASX SPI 200 Index | 211 | | Short | Sep 2011 | (24,184,444) | 1,316,144 |
Futures | | | | | | |
S&P TSE 60 Index | 131 | | Short | Sep 2011 | (19,460,717) | 327,471 |
Futures | | | | | | |
Total | | | | | | ($12,709,906) |
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 six months ended August 31, 2011, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates. The following table summarizes the contracts held at August 31, 2011. During the six months ended August 31, 2011, the Fund held forward foreign currency contracts with USD absolute values ranging from $274.9 million to $490.1 million, as measured at each quarter end.
| |
Semiannual report | International Core Fund | 37 |
| | | | | | |
| PRINCIPAL | PRINCIPAL AMOUNT | | | | UNREALIZED |
| AMOUNT COVERED | COVERED BY | | | SETTLEMENT | APPRECIATION |
CURRENCY | BY CONTRACT | CONTRACT (USD) | | COUNTERPARTY | DATE | (DEPRECIATION) |
|
BUYS | | | | | | |
CHF | 3,391,455 | $4,435,171 | | Morgan Stanley | 10-21-11 | ($219,910) |
| | | | Capital Services, Inc. | | |
CHF | 1,695,728 | 2,215,418 | | Royal Bank of | 10-21-11 | (107,788) |
| | | | Scotland PLC | | |
GBP | 7,249,062 | 11,844,975 | | Bank of America N.A. | 10-21-11 | (84,139) |
GBP | 3,464,002 | 5,672,476 | | Brown Brothers | 10-21-11 | (52,500) |
| | | | Harriman & Company | | |
GBP | 5,400,000 | 8,840,880 | | JPMorgan Chase Bank | 10-21-11 | (79,952) |
GBP | 10,834,126 | 17,731,564 | | Mellon Bank NA | 10-21-11 | (154,341) |
GBP | 10,412,804 | 17,047,520 | | Morgan Stanley | 10-21-11 | (153,848) |
| | | | Capital Services, Inc. | | |
GBP | 8,260,364 | 13,511,874 | | Royal Bank of | 10-21-11 | (110,308) |
| | | | Scotland PLC | | |
HKD | 41,093,478 | 5,276,580 | | Barclays Bank PLC | 10-21-11 | 4,021 |
| | | | Wholesale | | |
HKD | 105,805,753 | 13,586,875 | | Brown Brothers | 10-21-11 | 9,393 |
| | | | Harriman & Company | | |
HKD | 24,623,000 | 3,161,740 | | JPMorgan Chase Bank | 10-21-11 | 2,369 |
HKD | 41,093,478 | 5,276,982 | | Morgan Stanley | 10-21-11 | 3,619 |
| | | | Capital Services, Inc. | | |
HKD | 122,006,671 | 15,672,321 | | State Street Bank & | 10-21-11 | 5,800 |
| | | | Trust Company | | |
SGD | 26,662,857 | 22,148,909 | | Bank of America N.A. | 10-21-11 | (2,539) |
SGD | 13,331,429 | 11,094,731 | | Barclays Bank PLC | 10-21-11 | (21,546) |
SGD | 1,942,000 | 1,612,984 | | JPMorgan Chase Bank | 10-21-11 | 56 |
SGD | 3,337,439 | 2,774,552 | | Mellon Bank NA | 10-21-11 | (2,450) |
SGD | 3,752,879 | 3,118,188 | | Royal Bank of | 10-21-11 | (1,018) |
| | | | Scotland PLC | | |
SGD | 2,906,439 | 2,415,792 | | State Street Bank & | 10-21-11 | (1,682) |
| | | | Trust Company | | |
| | $167,439,532 | | | | ($966,760) |
SELLS | | | | | | |
CAD | 20,008,895 | $20,272,190 | | Bank of America N.A. | 10-21-11 | ($136,597) |
CAD | 9,827,877 | 9,957,595 | | Morgan Stanley | 10-21-11 | (66,700) |
| | | | Capital Services, Inc. | | |
CAD | 5,669,549 | 5,741,135 | | Royal Bank of | 10-21-11 | (41,724) |
| | | | Scotland PLC | | |
DKK | 56,230,617 | 10,835,480 | | Royal Bank of | 10-21-11 | (1,938) |
| | | | Scotland PLC | | |
DKK | 16,722,152 | 3,222,889 | | State Street Bank & | 10-21-11 | 1 |
| | | | Trust Company | | |
EUR | 2,149,000 | 3,104,246 | | JPMorgan Chase Bank | 10-21-11 | 19,148 |
EUR | 11,826,353 | 16,975,784 | | State Street Bank & | 10-21-11 | (2,092) |
| | | | Trust Company | | |
GBP | 5,061,000 | 8,306,240 | | Morgan Stanley | 10-21-11 | 95,303 |
| | | | Capital Services, Inc. | | |
NZD | 4,771,542 | 4,098,134 | | JPMorgan Chase Bank | 10-21-11 | 47,597 |
NZD | 3,623,763 | 2,989,007 | | Royal Bank of | 10-21-11 | (87,187) |
| | | | Scotland PLC | | |
SEK | 14,372,530 | 2,223,301 | | Bank of America N.A. | 10-21-11 | (37,069) |
YEN | 342,577,105 | 4,459,188 | | Deutsche Bank AG | 10-21-11 | (16,791) |
| |
38 | International Core Fund | Semiannual report |
| | | | | | |
| PRINCIPAL | PRINCIPAL AMOUNT | | | | UNREALIZED |
| AMOUNT COVERED | COVERED BY | | | SETTLEMENT | APPRECIATION |
CURRENCY | BY CONTRACT | CONTRACT (USD) | | COUNTERPARTY | DATE | (DEPRECIATION) |
|
SELLS (continued) | | | | | |
YEN | 2,660,844,633 | $34,708,329 | | JPMorgan Chase Bank | 10-21-11 | ($57,230) |
YEN | 152,430,105 | 1,987,873 | | Mellon Bank NA | 10-21-11 | (3,719) |
| | $128,881,390 | | | | ($288,998) |
Currency Abbreviation
| |
CAD | Canadian Dollar |
CHF | Swiss Franc |
DKK | Danish Krone |
EUR | Euro |
GBP | Pound Sterling |
HKD | Hong Kong Dollar |
NZD | New Zealand Dollar |
SEK | Swedish Krona |
SGD | Singapore Dollar |
YEN | Japanese Yen |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at August 31, 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† | $1,773,380 | ($14,483,286) |
Foreign exchange | Receivable-payable for | Forward foreign | 187,308 | (1,443,066) |
contracts | forward foreign | currency contracts | | |
| currency contracts | | | |
Total | | | $1,960,688 | ($15,926,352) |
†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 six months ended August 31, 2011:
| | | | |
| | | FOREIGN | |
| STATEMENT OF | FUTURES | CURRENCY | |
RISK | OPERATIONS LOCATION | CONTRACTS | TRANSACTION* | TOTAL |
|
Equity contracts | Net realized | $1,157,124 | — | $1,157,124 |
| gain (loss) | | | |
Foreign exchange | Net realized | | | |
contracts | gain (loss) | — | ($5,121,221) | ($5,121,221) |
Total | | $1,157,124 | ($5,121,221) | ($3,964,097) |
*Reflects gain-loss associated with forward foreign currency contracts is included in the caption on the Statement of operations.
| |
Semiannual report | International Core Fund | 39 |
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended August 31, 2011:
| | | | |
| | | TRANSLATION | |
| | | OF ASSETS | |
| | | AND LIABILITIES | |
| STATEMENT OF | FUTURES | IN FOREIGN | |
RISK | OPERATIONS LOCATION | CONTRACTS | CURRENCIES* | TOTAL |
|
Equity contracts | Change in unrealized | ($14,659,511) | — | ($14,659,511) |
| appreciation (depreciation) | | | |
Foreign exchange | Change in unrealized | | | |
contracts | appreciation (depreciation) | — | ($411,132) | ($411,132) |
Total | | ($14,659,511) | ($411,132) | ($15,070,643) |
*Change in unrealized appreciation-depreciation associated with forward foreign currency contracts is included in the caption on the Statement of operations.
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 MFC.
Management fee. The Fund has an investment management agreement 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 six months ended August 31, 2011 were equivalent to an annual effective rate of 0.88% 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%, 1.24%, 1.90%, 1.80%, 1.50%, 1.20% and 1.15% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5 and Class 1 shares, respectively. The fee waivers and-or reimbursements will continue in effect until June 30, 2012. Prior to July 1, 2011, the fee waivers and-or reimbursements were such that these expenses did 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, respectively.
| |
40 | International Core Fund | Semiannual report |
Accordingly, these expense reductions amounted to $2,629, $2,972, $5,290, $5,157, $5,168 and $5,180 for Class B, Class C, Class R1, Class R3, Class R4 and Class R5, respectively, for the six months ended August 31, 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 six months ended August 31, 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 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 $22,508 for the six months ended August 31, 2011. Of this amount, $3,316 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $15,838 was paid as sales commissions to broker-dealers and $3,354 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 (CDSCs). Class B shares that are redeemed within six years of purchase are subject to CDSCs, 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 six months ended August 31, 2011, CDSCs received by the Distributor amounted to $2,427 and $113 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
| |
Semiannual report | International Core Fund | 41 |
that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and-or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended August 31, 2011 were:
| | | | |
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
|
Class A | $615,999 | $343,257 | $11,903 | $139,852 |
Class B | 24,475 | 4,059 | 4,855 | 1,109 |
Class C | 26,262 | 4,365 | 5,331 | 1,183 |
Class I | — | 108,015 | 19,221 | 37,577 |
Class R1 | 699 | 34 | 5,451 | 126 |
Class R3 | 81 | 5 | 5,182 | 20 |
Class R4 | 42 | 5 | 5,182 | 25 |
Class R5 | 3 | 10 | 5,182 | 54 |
Class 1 | 11,485 | — | — | — |
Total | $679,046 | $459,750 | $62,307 | $179,946 |
Trustee expenses. The Fund 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 six months ended August 31, 2011 and for the year ended February 28, 2011 were as follows:
| | | | |
| Six months ended 8-31-11 | Year ended 2-28-11 |
| Shares | Amount | Shares | Amount |
Class A shares | | | | |
|
Sold | 7,123,938 | $216,568,103 | 4,988,845 | $135,149,591 |
Distributions reinvested | 2 | 44 | 107,875 | 3,096,325 |
Repurchased | (2,325,986) | (68,303,819) | (3,062,983) | (83,492,001) |
| | | | |
Net increase | 4,797,954 | $148,264,328 | 2,033,737 | $54,753,915 |
|
Class B shares | | | | |
|
Sold | 10,413 | $317,017 | 16,897 | $459,057 |
Distributions reinvested | — | — | 657 | 18,794 |
Repurchased | (39,096) | (1,170,028) | (89,983) | (2,431,531) |
| | | | |
Net decrease | (28,683) | ($853,011) | (72,429) | ($1,953,680) |
|
Class C shares | | | | |
|
Sold | 12,118 | $365,315 | 42,245 | $1,142,066 |
Distributions reinvested | — | — | 552 | 15,791 |
Repurchased | (18,830) | (555,251) | (70,516) | (1,901,411) |
| | | | |
Net decrease | (6,712) | ($189,936) | (27,719) | ($743,554) |
| |
42 | International Core Fund | Semiannual report |
| | | | |
| Six months ended 8-31-11 | Year ended 2-28-11 |
| Shares | Amount | Shares | Amount |
Class I shares | | | | |
|
Sold | 3,628,385 | $109,330,751 | 7,465,309 | $205,795,143 |
Distributions reinvested | — | — | 125,109 | 3,598,127 |
Repurchased | (983,915) | (29,533,090) | (1,435,344) | (40,176,056) |
| | | | |
Net increase | 2,644,470 | $79,797,661 | 6,155,074 | $169,217,214 |
|
Class R1 shares | | | | |
|
Sold | 546 | $16,236 | 1,366 | $35,353 |
Distributions reinvested | — | — | 51 | 1,465 |
Repurchased | (378) | (11,316) | (323) | (8,639) |
| | | | |
Net increase | 168 | $4,920 | 1,094 | $28,179 |
|
Class R4 shares | | | | |
|
Sold | 42 | $1,244 | 16 | $504 |
Repurchased | — | — | — | — |
| | | | |
Net increase | 42 | $1,244 | 16 | $504 |
|
Class R5 shares | | | | |
|
Sold | 179 | $5,409 | 959 | $27,352 |
Distributions reinvested | — | — | 9 | 255 |
Repurchased | — | — | — | (8) |
| | | | |
Net increase | 179 | $5,409 | 968 | $27,599 |
|
Class 1 shares | | | | |
|
Sold | 69,888 | $2,141,404 | 125,007 | $3,404,068 |
Distributions reinvested | — | — | 23,310 | 671,339 |
Repurchased | (127,889) | (3,839,862) | (312,147) | (8,546,125) |
| | | | |
Net decrease | (58,001) | ($1,698,458) | (163,830) | ($4,470,718) |
|
Class NAV shares | | | | |
|
Sold | 1,279,796 | $37,366,130 | 3,439,057 | $88,261,114 |
Distributions reinvested | — | — | 452,550 | 13,024,392 |
Repurchased | (3,951,512) | (121,890,312) | (5,176,286) | (138,574,310) |
| | | | |
Net decrease | (2,671,716) | ($84,524,182) | (1,284,679) | ($37,288,804) |
|
Net increase | 4,677,701 | $140,807,975 | 6,642,232 | $179,570,655 |
|
There were no Fund share transactions for the six months ended August 31, 2011 for Class R3 shares.
Affiliates of the Fund owned 46%, 100%, 95% and 45% of shares of beneficial interest of Class R1, Class R3, Class R4 and Class R5, respectively, on August 31, 2011.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $451,871,334 and $304,782,170, respectively, for the six months ended August 31, 2011.
| |
Semiannual report | International Core Fund | 43 |
Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreement
The Board of Trustees (the Board, the members of which are referred to as Trustees) of John Hancock International Core Fund (the Fund), a series of John Hancock Funds III, met in-person on May 1–3 and June 5–7, 2011 to consider the approval of the Fund’s investment advisory agreement (the Advisory Agreement) with John Hancock Investment Management Services, LLC (the Adviser), the Fund’s investment adviser. The Board also considered the approval of the investment subadvisory agreement (the Subadvisory Agreement) between the Adviser and Grantham, Mayo, Van Otterloo & Co. LLC (the Subadviser) on behalf of the Fund. The Advisory Agreement and the Subadvisory Agreement are referred to as the Agreements.
Activities and composition of the Board
The Board consists of eleven individuals, nine of whom are Independent Trustees. Independent Trustees are generally those individuals who are not employed by or have any significant business or professional relationship with the Adviser or the Subadviser. The Trustees are responsible for the oversight of operations of the Fund and perform various duties required of directors of investment companies by the Investment Company Act of 1940, as amended (the 1940 Act). The Independent Trustees have hired independent legal counsel to assist them in connection with their duties. The Board has appointed an Independent Trustee as Chairperson. The Board has established four standing committees that are composed entirely of Independent Trustees: the Audit Committee; the Compliance Committee; the Nominating, Governance and Administration Committee; and the Contracts/Operations Committee. Additionally, Investment Performance Committees A and B are standing committees of the Board that are each composed of Independent Trustees and one Trustee who is affiliated with the Adviser. Investment Performance Committee B oversees and monitors matters relating to the investment performance of the Fund. The Board has also designated an Independent Trustee as Vice Chairperson to serve in the absence of the Chairperson. The Board also designates working groups or ad hoc committees as it deems appropriate.
The approval process
Under the 1940 Act, the Board is required to consider the continuation of the Agreements each year. Throughout the year, the Board, acting directly and through its committees, regularly reviews and assesses the quality of the services that the Fund receives under these Agreements. The Board reviews reports of the Adviser at least quarterly, which include Fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. The Board considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by the Adviser and Subadviser to the Fund and its shareholders.
Prior to the May 1–3, 2011 meeting, the Board requested and received materials specifically relating to the Agreements. The materials provided in connection with the May meeting included information compiled and prepared by Morningstar, Inc. (Morningstar) on Fund fees and expenses, and the investment performance of the Fund. This Fund information is assembled in a format that permits comparison with similar information from a Category and a subset of the Category referred to as the Peer Group, each as determined by Morningstar, and with the Fund’s benchmark index. The Category includes all funds that invest similarly to the way the Fund invests. The Peer Group represents funds of similar size, excluding passively managed funds and funds-of-funds. The Fund’s benchmark index is an unmanaged index of securities that is provided as a basis for comparison with the Fund’s performance. Other material provided for the Fund review included (a) information on the profitability of the Agreements to the Adviser and a discussion of any additional benefits to the Adviser or Subadviser or their affiliates that result from being the Adviser or Subadviser to the Fund; (b) a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients, such as institutional clients and other investment companies, having
| |
44 | International Core Fund | Semiannual report |
similar investment mandates, as well as the performance of those other clients and a comparison of the services provided to those other clients and the services provided to the Fund; (c) the impact of economies of scale; (d) a summary of aggregate amounts paid by the Fund to the Adviser; and (e) sales and redemption data regarding the Fund’s shares.
At an in-person meeting held on May 1–3, 2011, the Board reviewed materials relevant to its consideration of the Agreements. As a result of the discussions that occurred during the May 1–3, 2011 meeting, the Board asked the Adviser for additional information on certain matters. The Adviser provided the additional information and the Board also considered this information as part of its consideration of the Agreements.
At an in-person meeting held on June 5–7, 2011, the Board, including the Independent Trustees, formally considered the continuation of the Advisory Agreement between the Adviser and the Fund and the Subadvisory Agreement between the Adviser and the Subadviser with respect to the Fund, each for an additional one-year term. The Board considered what it believed were key relevant factors that are described under separate headings presented below.
The Board also considered other matters important to the approval process, such as payments made to and by the Adviser or its affiliates relating to the distribution of Fund shares and other services. The Board reviewed services related to the valuation and pricing of Fund portfolio holdings. Other important matters considered by the Board were the direct and indirect benefits to the Adviser, the Subadviser and their affiliates from their relationship with the Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review.
Nature, extent and quality of services
The Board reviewed the nature, extent and quality of services provided by the Adviser and the Subadviser, including the investment advisory services and the resulting performance of the Fund.
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. It considered the background and experience of senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Subadviser responsible for the daily investment activities of the Fund, including, among other things, portfolio trading capabilities, use of technology, commitment to compliance and approach to training and retaining portfolio managers and other research, advisory and management personnel.
The Board considered the Subadviser’s history and experience providing investment services to the Fund. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadviser’s compliance departments.
In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Fund by the Adviser under a separate agreement. The Board noted that the Adviser and its affiliates provide the Fund with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. The Board reviewed the structure and duties of the Adviser’s administration, accounting, legal and compliance departments and its affiliate’s transfer agency operations and considered the Adviser’s and its affiliate’s policies and procedures for assuring compliance with applicable laws and regulations.
| |
Semiannual report | International Core Fund | 45 |
The Board also received information about the nature, extent and quality of services provided by and fee rates charged by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board reviewed a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients having similar investment mandates, the services provided to those other clients as compared to the services provided to the Fund, the performance of those other clients as compared to the performance by the Fund and other factors relating to those other clients. The Board considered the significant differences between the Adviser’s and Subadviser’s services to the Fund and the services they provide to other clients. For other clients that are not mutual funds, the differences in services relate to the greater share purchase and redemption activity in a mutual fund, the generally higher turnover of mutual fund portfolio holdings, the more burdensome regulatory and legal obligations of mutual funds and the higher marketing costs for mutual funds. When compared to all clients including mutual funds, the Adviser has greater oversight and supervisory responsibility for the Fund and undertakes greater entrepreneurial risk as the sponsor of the Fund.
Fund performance
The Board was provided with reports, independently prepared by Morningstar, which included a comprehensive analysis of the Fund’s performance. The Board also examined materials provided by the Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook. The Board also reviewed a narrative and statistical analysis of the Morningstar data that was prepared by the Adviser, which analyzed various factors that may affect the Morningstar rankings. The Board reviewed information regarding the investment performance of the Fund as compared to its Morningstar Category as well as its benchmark index (see chart below). The Board was provided with a description of the methodology used by Morningstar to select the funds in the Category. The Board also considered updated performance information provided by the Adviser at its May and June 2011 meetings. The Board regularly reviews the performance of the Fund throughout the year and attaches more importance to performance over relatively longer periods of time, typically three to five years.
Set forth below is the performance of the Fund over certain time periods ended December 31, 2010 and that of its Category and benchmark index over the same periods:
| | | | |
| 1 YEAR | 3 YEAR | 5 YEAR | 10 YEAR |
|
International Core Fund Class A | 9.11% | –7.79% | 1.74% | — |
Foreign Large Value Category Average | 7.93% | –6.72% | 2.52% | — |
MSCI EAFE NR Index | 7.75% | –7.02% | 2.46% | — |
The Board noted that, although the Fund had underperformed its Category’s average performance and its benchmark index’s performance over the two longer comparison periods, the Fund’s performance had recently improved. The Board concluded that the Adviser and Subadviser were taking steps to address the underperformance which the Board would continue to monitor.
Expenses and fees
The Board, including the Independent Trustees, reviewed the Fund’s contractual advisory fee rate payable by the Fund to the Adviser as compared with the other funds in its Peer Group. The Board also received information about the investment subadvisory fee rate payable by the Adviser to the Subadviser for investment subadvisory services. The Board considered the services provided and the fees charged by the Adviser and the Subadviser to other clients with similar investment mandates, including separately managed institutional accounts.
In addition, the Board considered the cost of the services provided to the Fund by the Adviser. The Board received and considered expense information regarding the Fund’s various components,
| |
46 | International Core Fund | Semiannual report |
including advisory fees, distribution fees and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, administration fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also considered expense information regarding the Fund’s total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the Adviser’s contractual fee waiver/expense reimbursement agreement into account (Net Expense Ratio). The Board considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of the Peer Group median. As part of its analysis, the Board reviewed the Adviser’s methodology in allocating its costs to the management of the Fund and the Fund complex.
The Board noted that the Fund’s advisory fee ratio was seven basis points above the Peer Group median advisory fee ratio. The Board noted the following information about the Fund’s Gross and Net Expense Ratios for Class A shares contained in the Fund’s 2010 financial statements in relation with the Fund’s Peer Group median provided by Morningstar in April 2011:
| | |
| FUND (CLASS A) | PEER GROUP MEDIAN |
|
Advisory Fee Ratio | 0.89% | 0.82% |
Gross Expense Ratio | 1.57% | 1.53% |
Net Expense Ratio | 1.57% | 1.49% |
The Board viewed favorably the Adviser’s contractual agreement to waive all or a portion of its advisory fees and to reimburse or pay operating expenses to the extent necessary to maintain the Fund’s expense ratio at 1.60% for Class A shares, excluding certain expenses such as taxes, brokerage commissions, interest, litigation and extraordinary expenses, until June 30, 2012. The Board favorably considered the potential impact of this contractual agreement toward ultimately lowering the Fund’s Gross Expense Ratio. The Board also received and considered information relating to the Fund’s Gross Expense Ratio and Net Expense Ratio that reflected the new methodology for calculating transfer agent fees that was approved by the Trustees at the June 2010 meeting.
The Board received and reviewed statements relating to the Adviser’s financial condition and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by the Adviser for services under the Advisory Agreement, as well as from other relationships between the Fund and the Adviser and its affiliates. The Board reviewed the Adviser’s profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2010 compared to available aggregate profitability data provided for the year ended December 31, 2009. The Board reviewed the Adviser’s profitability with respect to other fund complexes managed by the Adviser and/or its affiliates. The Board reviewed the Adviser’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products.
The Board also considered a comparison of the Adviser’s profitability to that of other similar investment advisers whose profitability information is publicly available. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Adviser, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited.
The Board did not consider profitability information with respect to the Subadviser, which is not affiliated with the Adviser. The Board considered that the subadvisory fee under the Subadvisory Agreement had been negotiated by the Adviser and the Subadviser on an arm’s length basis. For this reason, the Subadviser’s separate profitability from its relationship with the Fund was not a factor in determining whether to renew the Subadvisory Agreement. In evaluating overall fees for investment management, the Board recognized the inherently higher cost structure of subadvised funds.
| |
Semiannual report | International Core Fund | 47 |
Economies of scale
The Board, including the Independent Trustees, considered the extent to which economies of scale might be realized as the assets of the Fund increase. Possible changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale (e.g., through the use of breakpoints in the advisory fee at higher asset levels) are periodically discussed. The Board also considered the Adviser’s overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the Fund.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the contractual advisory fee rate.
Other benefits to the Adviser and the Subadviser
The Board understands that the Adviser, the Subadviser or their affiliates may derive other ancillary benefits from their relationship with the Fund, both tangible and intangible, such as their ability to leverage investment professionals who manage other portfolios, an increase in their profile in the investment advisory community and, in the case of the Adviser, the engagement of its affiliates and/or significant shareholders as service providers to the Fund, including for administrative, transfer agency and distribution services. The Board believes that certain of these benefits are difficult to quantify. The Board also was informed that the Subadviser may use third-party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts.
Board determination
The Board unanimously approved the continuation of the Advisory Agreement between the Adviser and the Fund for an additional one-year term. The Subadvisory Agreement between the Adviser and Subadviser with respect to the Fund was also approved for an additional one-year term. Based upon its evaluation of relevant factors in their totality, the Board was satisfied that the terms of the Agreements, including the advisory and subadvisory fee rates, were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or any group of factors as all-important or controlling, but considered all factors together. Different Trustees may have attributed different weights to the various factors considered. The Independent Trustees were also assisted by independent legal counsel in making this determination. The Trustees’ conclusions may be based in part on their consideration of these arrangements in prior years and on their ongoing regular review of Fund performance and operations throughout the year.
| |
48 | International Core Fund | Semiannual report |
More information
| |
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
James F. Carlin | Services, LLC |
William H. Cunningham | |
Deborah C. Jackson | Subadviser |
Charles L. Ladner,* Vice Chairman | 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 | |
| |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | |
| |
Francis V. Knox, Jr. | |
Chief Compliance Officer | |
| |
Charles A. Rizzo | |
Chief Financial Officer | |
| |
Salvatore Schiavone | |
Treasurer | |
|
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 9-13-11 | |
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 at 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 |
| |
Semiannual report | International Core Fund | 49 |
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. | 660SA 8/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 10/11 |
A look at performance
Total returns for the period ended August 31, 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 | | 6-months | 1-year | 5-year | 10-year | inception1 |
|
Class A | 10.09 | –0.62 | — | 1.32 | | –10.64 | 10.09 | –3.06 | — | 7.07 |
|
Class B | 10.01 | –0.71 | — | 1.38 | | –10.95 | 10.01 | –3.48 | — | 7.44 |
|
Class C | 13.96 | –0.37 | — | 1.53 | | –7.25 | 13.96 | –1.84 | — | 8.27 |
|
Class I2 | 16.39 | 0.87 | — | 2.78 | | –5.70 | 16.39 | 4.41 | — | 15.43 |
|
Class 12 | 16.41 | 0.87 | — | 2.80 | | –5.71 | 16.41 | 4.44 | — | 15.51 |
|
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 those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 6-30-12 for Class A, Class B and Class C shares. Had the fee waivers and expense limitations not been in place gross expenses would apply. For Class I and Class 1 shares the net expenses equal the gross expenses. The expense ratios are as follows:
| | | | | |
| Class A | Class B | Class C | Class I | Class 1 |
Net (%) | 1.60 | 2.30 | 2.30 | 1.17 | 1.13 |
Gross (%) | 1.63 | 4.10 | 3.41 | 1.17 | 1.13 |
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.
| |
6 | International Growth Fund | Semiannual report |
| | | | | |
| | Without | With maximum | | |
| Start date | sales charge | sales charge | Index 1 | Index 2 |
|
Class B | 6-12-06 | $10,842 | $10,744 | $11,020 | $10,303 |
|
Class C4 | 6-12-06 | 10,827 | 10,827 | 11,020 | 10,303 |
|
Class I 2 | 6-12-06 | 11,543 | 11,543 | 11,020 | 10,303 |
|
Class 1 2 | 6-12-06 | 11,551 | 11,551 | 11,020 | 10,303 |
|
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 equity performance of developed markets.
MSCI EAFE Growth 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 performance of growth-oriented developed market 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 From 6-12-06.
2 For certain types of investors, as described in the Fund’s Class I and Class 1 shares prospectuses.
3 NAV represents net asset value and POP represents public offering price. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in different classes and the fee structure of those classes.
4 No contingent deferred sales charge is applicable.
| |
Semiannual report | International Growth Fund | 7 |
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 March 1, 2011 with the same investment held until August 31, 2011.
| | | |
| Account value | Ending value | Expenses paid during |
| on 3-1-11 | on 8-31-11 | period ended 8-31-111 |
|
Class A | $1,000.00 | $940.40 | $7.66 |
|
Class B | 1,000.00 | 937.40 | 11.49 |
|
Class C | 1,000.00 | 936.90 | 11.49 |
|
Class I | 1,000.00 | 943.00 | 5.62 |
|
Class 1 | 1,000.00 | 942.90 | 5.47 |
|
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at August 31, 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:
| |
8 | International Growth Fund | Semiannual report |
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 March 1, 2011, with the same investment held until August 31, 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 3-1-11 | on 8-31-11 | period ended 8-31-111 |
|
Class A | $1,000.00 | $1,017.30 | $7.96 |
|
Class B | 1,000.00 | 1,013.30 | 11.94 |
|
Class C | 1,000.00 | 1,013.30 | 11.94 |
|
Class I | 1,000.00 | 1,019.40 | 5.84 |
|
Class 1 | 1,000.00 | 1,019.60 | 5.69 |
|
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 1.57%, 2.36%, 2.36%, 1.15% and 1.12% 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 184/366 (to reflect the one-half year period).
| |
Semiannual report | International Growth Fund | 9 |
Portfolio summary
| | | | |
Top 10 Holdings (22.4% of Net Assets on 8-31-11)1 | | |
|
Roche Holdings AG | 4.0% | | BASF SE | 1.7% |
| |
|
Nestle SA | 3.3% | | Novartis AG | 1.6% |
| |
|
GlaxoSmithKline PLC | 3.2% | | Novo Nordisk A/S | 1.6% |
| |
|
British American Tobacco PLC | 2.5% | | SAP AG | 1.4% |
| |
|
BHP Billiton, Ltd. | 1.8% | | Rio Tinto PLC | 1.3% |
| |
|
|
Sector Composition2,3 | | | | |
|
Health Care | 17% | | Information Technology | 7% |
| |
|
Industrials | 16% | | Energy | 5% |
| |
|
Consumer Staples | 14% | | Telecommunication Services | 4% |
| |
|
Consumer Discretionary | 13% | | Utilities | 3% |
| |
|
Materials | 11% | | Short-Term Investment & Other | 2% |
| |
|
Financials | 8% | | | |
| | |
1 As a percentage of net assets on 8-31-11. Cash and cash equivalents not included.
2 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.
3 As a percentage of net assets on 8-31-11.
| |
10 | International Growth Fund | Semiannual report |
Fund’s investments
As of 8-31-11 (unaudited)
| | |
| Shares | Value |
|
Common Stocks 97.21% | | $251,179,376 |
|
(Cost $238,060,168) | | |
|
Australia 5.06% | | 13,084,539 |
|
BHP Billiton, Ltd. | 107,286 | 4,564,930 |
|
BlueScope Steel, Ltd. | 81,096 | 71,603 |
|
Coca-Cola Amatil, Ltd. | 27,760 | 350,391 |
|
Cochlear, Ltd. | 3,748 | 304,190 |
|
CSL, Ltd. | 18,230 | 550,224 |
|
Iluka Resources, Ltd. | 18,052 | 319,887 |
|
JB Hi-Fi, Ltd. (L) | 7,072 | 112,454 |
|
National Australia Bank, Ltd. | 25,704 | 655,807 |
|
Qantas Airways, Ltd. (I) | 57,171 | 96,071 |
|
Rio Tinto, Ltd. | 2,751 | 214,690 |
|
Telstra Corp., Ltd. | 133,233 | 432,394 |
|
Wesfarmers, Ltd. | 47,701 | 1,573,653 |
|
Westpac Banking Corp. | 33,741 | 746,691 |
|
Woodside Petroleum, Ltd. | 22,007 | 831,750 |
|
Woolworths, Ltd. | 83,638 | 2,259,804 |
| | |
Austria 0.29% | | 740,124 |
|
Andritz AG | 2,881 | 267,322 |
|
Immofinanz AG (I) | 39,303 | 140,706 |
|
Immofinanz AG — Escrow Shares (I)(L) | 49,581 | 0 |
|
Raiffeisen Bank International AG (L) | 2,773 | 115,485 |
|
Voestalpine AG | 5,642 | 216,611 |
| | |
Belgium 0.56% | | 1,433,710 |
|
Bekaert SA (L) | 4,005 | 226,989 |
|
Colruyt SA | 9,285 | 485,881 |
|
Mobistar SA | 3,863 | 251,176 |
|
Telenet Group Holding NV (I) | 5,111 | 206,856 |
|
Umicore SA | 5,450 | 262,808 |
| | |
Bermuda 0.05% | | 138,186 |
|
Alliance Oil Company, Ltd., ADR (I) | 6,651 | 82,926 |
|
Golden Ocean Group, Ltd. (L) | 63,400 | 55,260 |
| | |
Canada 3.62% | | 9,354,874 |
|
Agrium, Inc. | 2,200 | 188,661 |
|
Barrick Gold Corp. | 6,000 | 305,422 |
|
BCE, Inc. | 6,300 | 253,338 |
|
Canadian National Railway Company | 25,000 | 1,838,813 |
| | |
See notes to financial statements | Semiannual report | International Growth Fund | 11 |
| | |
| Shares | Value |
Canada (continued) | | |
|
Cenovus Energy, Inc. | 5,600 | $202,430 |
|
Enbridge, Inc. (L) | 21,500 | 713,520 |
|
Imperial Oil, Ltd. | 8,700 | 356,777 |
|
Magna International, Inc. (L) | 8,000 | 303,809 |
|
Potash Corp. of Saskatchewan, Inc. | 18,900 | 1,089,650 |
|
Research In Motion, Ltd. (I) | 12,700 | 410,840 |
|
Rogers Communications, Inc., Class B (L) | 10,100 | 392,016 |
|
Saputo, Inc. | 7,400 | 305,128 |
|
Shaw Communications, Inc., Class B | 11,900 | 272,194 |
|
Shoppers Drug Mart Corp. (L) | 8,700 | 353,313 |
|
Silver Wheaton Corp. | 11,800 | 467,638 |
|
Suncor Energy, Inc. | 25,000 | 801,082 |
|
Teck Resources, Ltd., Class B | 6,400 | 284,285 |
|
Valeant Pharmaceuticals International, Inc. | 18,202 | 815,958 |
| | |
China 0.06% | | 145,782 |
|
Yangzijiang Shipbuilding Holdings, Ltd. | 152,000 | 145,782 |
| | |
Denmark 1.91% | | 4,932,891 |
|
Danske Bank A/S (I) | 15,321 | 226,928 |
|
Novo Nordisk A/S | 38,433 | 4,096,666 |
|
Novozymes A/S, Class B | 4,160 | 609,297 |
| | |
Finland 0.70% | | 1,810,920 |
|
Kone Oyj | 11,134 | 657,903 |
|
Metso Oyj | 7,475 | 283,356 |
|
Nokian Renkaat Oyj | 6,062 | 224,744 |
|
Sampo Oyj, Class A | 4,015 | 114,792 |
|
UPM-Kymmene Oyj | 18,555 | 243,248 |
|
Wartsila Oyj | 10,348 | 286,877 |
| | |
France 6.68% | | 17,255,227 |
|
Air France KLM (I) | 12,967 | 127,566 |
|
Air Liquide SA | 2,323 | 301,442 |
|
Alcatel-Lucent (I) | 157,750 | 578,484 |
|
Arkema | 5,219 | 405,011 |
|
BNP Paribas | 15,222 | 781,831 |
|
Bureau Veritas SA | 4,684 | 381,456 |
|
Carrefour SA | 20,065 | 533,876 |
|
Christian Dior SA | 1,369 | 198,370 |
|
Cie de Saint-Gobain SA | 24,470 | 1,227,228 |
|
Cie Generale d’Optique Essilor International SA | 9,030 | 692,258 |
|
Cie Generale des Etablissements Michelin | 6,406 | 469,031 |
|
Credit Agricole SA (L) | 12,558 | 122,964 |
|
Danone SA | 12,892 | 879,655 |
|
Dassault Systemes SA | 3,681 | 298,275 |
|
Eutelsat Communications | 7,976 | 354,615 |
|
Faurecia | 4,639 | 135,322 |
|
ICADE | 1,888 | 191,153 |
|
L’Oreal SA | 7,961 | 866,488 |
|
Legrand SA, ADR | 6,198 | 246,061 |
| | |
12 | International Growth Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
France (continued) | | |
|
LVMH Moet Hennessy Louis Vuitton SA | 5,051 | $855,493 |
|
Neopost SA | 2,074 | 149,263 |
|
Peugeot SA | 9,025 | 275,539 |
|
Renault SA | 16,658 | 677,842 |
|
Safran SA | 8,249 | 320,116 |
|
Sanofi | 35,596 | 2,589,718 |
|
Schneider Electric SA | 7,921 | 1,058,800 |
|
SEB SA | 1,638 | 162,304 |
|
Societe Generale | 7,144 | 238,518 |
|
Technip SA | 3,169 | 309,263 |
|
Total SA | 4,647 | 226,859 |
|
Unibail-Rodamco SE | 942 | 203,660 |
|
Valeo SA | 6,136 | 323,211 |
|
Vinci SA | 10,840 | 564,495 |
|
Wendel SA | 3,040 | 258,111 |
|
Zodiac SA | 3,122 | 250,949 |
| | |
Germany 8.73% | | 22,566,343 |
|
Adidas AG | 8,553 | 594,393 |
|
Aixtron Bank AG (L) | 7,701 | 172,571 |
|
Allianz SE | 2,113 | 217,937 |
|
Aurubis AG | 4,419 | 258,915 |
|
BASF SE | 60,911 | 4,334,709 |
|
Bayerische Motoren Werke (BMW) AG | 19,926 | 1,610,172 |
|
Beiersdorf AG | 4,055 | 238,071 |
|
Bilfinger Berger SE | 4,198 | 351,489 |
|
Continental AG (I) | 4,382 | 322,443 |
|
Daimler AG | 17,203 | 928,534 |
|
Deutsche Boerse AG (I) | 2,809 | 162,379 |
|
Deutsche Lufthansa AG | 23,427 | 395,906 |
|
Fielmann AG | 1,161 | 123,842 |
|
Fraport AG, ADR | 2,764 | 193,063 |
|
Fresenius Medical Care AG | 3,065 | 208,010 |
|
Fresenius SE & Company KGaA | 2,993 | 309,287 |
|
GEA Group AG | 16,153 | 471,852 |
|
Hochtief AG | 2,550 | 181,093 |
|
Infineon Technologies AG | 80,378 | 681,907 |
|
K&S AG | 8,543 | 600,601 |
|
Kabel Deutschland Holding AG (I) | 5,239 | 293,188 |
|
Kloeckner & Company SE | 10,548 | 174,411 |
|
Lanxess AG | 9,105 | 567,200 |
|
Leoni AG | 3,306 | 141,531 |
|
Linde AG | 4,377 | 668,972 |
|
MAN SE | 5,126 | 669,973 |
|
Merck KGaA | 3,672 | 329,005 |
|
Metro AG | 5,459 | 239,691 |
|
Rheinmetall AG | 2,271 | 150,645 |
|
SAP AG | 66,262 | 3,612,771 |
|
Siemens AG | 13,761 | 1,416,318 |
| | |
See notes to financial statements | Semiannual report | International Growth Fund | 13 |
| | |
| Shares | Value |
Germany (continued) | | |
|
Software AG | 6,690 | $294,185 |
|
Stada Arzneimittel AG | 3,905 | 137,466 |
|
Suedzucker AG | 10,666 | 372,818 |
|
ThyssenKrupp AG | 11,771 | 396,862 |
|
Volkswagen AG | 3,610 | 548,378 |
|
Wincor Nixdorf AG | 3,517 | 195,755 |
| | |
Greece 0.16% | | 421,779 |
|
Alpha Bank AE (I) | 14,196 | 46,017 |
|
EFG Eurobank Ergasias SA (I) | 14,671 | 33,667 |
|
National Bank of Greece SA (I) | 29,260 | 129,624 |
|
OPAP SA | 17,418 | 212,471 |
| | |
Hong Kong 3.44% | | 8,877,874 |
|
AIA Group, Ltd. | 262,600 | 931,705 |
|
BOC Hong Kong Holdings, Ltd. | 79,500 | 219,516 |
|
Cheung Kong Holdings, Ltd. | 22,000 | 310,315 |
|
CLP Holdings, Ltd. | 110,500 | 1,024,177 |
|
Esprit Holdings, Ltd. (I) | 83,663 | 235,030 |
|
Galaxy Entertainment Group, Ltd. (I) | 155,000 | 389,662 |
|
Hang Seng Bank, Ltd. | 46,000 | 680,655 |
|
Hong Kong & China Gas Company, Ltd. | 434,505 | 1,024,113 |
|
Hong Kong Exchanges & Clearing, Ltd. | 37,400 | 702,566 |
|
Hutchison Whampoa, Ltd. | 138,000 | 1,329,344 |
|
Jardine Matheson Holdings, Ltd. | 6,000 | 332,014 |
|
Power Assets Holdings, Ltd. | 85,500 | 662,587 |
|
SJM Holdings, Ltd. | 142,000 | 327,702 |
|
Sun Hung Kai Properties, Ltd. | 8,000 | 113,171 |
|
Swire Pacific, Ltd., Class A | 34,500 | 459,984 |
|
Xinyi Glass Holdings Company, Ltd. | 228,000 | 135,333 |
| | |
Ireland 1.11% | | 2,867,555 |
|
CRH PLC | 27,713 | 492,924 |
|
Experian PLC | 79,517 | 907,817 |
|
Shire PLC | 45,433 | 1,466,783 |
|
WPP PLC | 3 | 31 |
| | |
Israel 0.06% | | 166,270 |
|
Israel Chemicals, Ltd. | 11,591 | 166,270 |
| | |
Italy 0.45% | | 1,169,811 |
|
Assicurazioni Generali SpA | 5,014 | 90,578 |
|
Enel SpA | 142,192 | 694,264 |
|
Mediobanca SpA | 16,159 | 149,083 |
|
Saipem SpA | 5,270 | 235,886 |
| | |
Japan 19.31% | | 49,898,194 |
|
Asahi Glass Company, Ltd. | 18,000 | 176,427 |
|
Astellas Pharma, Inc. | 6,100 | 230,968 |
|
Bridgestone Corp. | 18,400 | 410,062 |
|
Canon, Inc. | 67,300 | 3,177,761 |
|
Central Japan Railway Company, Ltd. | 13 | 108,233 |
|
Chugai Pharmaceutical Company, Ltd. | 26,900 | 471,617 |
| | |
14 | International Growth Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
Japan (continued) | | |
|
Daihatsu Motor Company, Ltd. | 12,000 | $200,724 |
|
Daiichi Sankyo Company, Ltd. | 11,100 | 222,037 |
|
Daito Trust Construction Company, Ltd. | 13,000 | 1,206,955 |
|
Dena Company, Ltd. | 11,900 | 617,826 |
|
Denso Corp. | 10,100 | 323,158 |
|
DIC Corp. | 79,000 | 172,963 |
|
Eisai Company, Ltd. | 13,000 | 553,527 |
|
FamilyMart Company, Ltd. | 3,800 | 139,975 |
|
FANUC Corp. | 11,700 | 1,952,411 |
|
Fast Retailing Company, Ltd. | 3,500 | 667,710 |
|
Fuji Heavy Industries, Ltd. | 44,000 | 276,616 |
|
Fujitsu, Ltd. | 24,000 | 122,136 |
|
Hirose Electric Company, Ltd. | 2,700 | 253,200 |
|
Hisamitsu Pharmaceutical Company, Inc. | 10,900 | 463,358 |
|
Hitachi, Ltd. | 281,000 | 1,522,419 |
|
Honda Motor Company, Ltd. | 64,100 | 2,094,450 |
|
Hoya Corp. | 32,900 | 724,378 |
|
Idemitsu Kosan Company, Ltd. | 1,300 | 136,371 |
|
Inpex Corp. | 202 | 1,369,238 |
|
Ishikawajima-Harima Heavy Industries Company, Ltd. | 117,000 | 296,437 |
|
Isuzu Motors, Ltd. | 88,000 | 393,300 |
|
Itochu Corp. | 12,700 | 137,450 |
|
Japan Tobacco, Inc. | 88 | 379,958 |
|
JGC Corp. | 11,000 | 313,246 |
|
JX Holdings, Inc. | 63,300 | 401,486 |
|
K’s Holding Corp. | 3,200 | 140,561 |
|
Kao Corp. | 46,000 | 1,221,079 |
|
Kawasaki Heavy Industries, Ltd. | 63,000 | 190,680 |
|
Kawasaki Kisen Kaisha, Ltd. (I) | 55,000 | 142,315 |
|
KDDI Corp. | 172 | 1,292,004 |
|
Keyence Corp. | 4,100 | 1,103,861 |
|
Kintetsu Corp. (L) | 51,000 | 194,141 |
|
Kobe Steel, Ltd. | 45,000 | 84,279 |
|
Komatsu, Ltd. | 72,200 | 1,921,632 |
|
Kurita Water Industries, Ltd. | 5,300 | 140,734 |
|
Lawson, Inc. | 6,100 | 331,802 |
|
Makita Corp. | 9,200 | 383,577 |
|
Marubeni Corp. | 75,000 | 476,778 |
|
Mazda Motor Corp. (I) | 81,000 | 174,322 |
|
Mitsubishi Chemical Holdings Corp. | 101,500 | 714,857 |
|
Mitsubishi Corp. | 5,200 | 125,239 |
|
Mitsubishi Electric Corp. | 52,000 | 521,328 |
|
Mitsubishi Estate Company, Ltd. | 11,000 | 181,905 |
|
Mitsubishi Heavy Industries, Ltd. | 104,000 | 442,730 |
|
Mitsui & Company, Ltd. | 45,000 | 773,685 |
|
Mitsui O.S.K. Lines, Ltd. | 33,000 | 140,096 |
|
Murata Manufacturing Company, Ltd. | 10,100 | 620,495 |
|
Nabtesco Corp. | 6,900 | 154,180 |
| | |
See notes to financial statements | Semiannual report | International Growth Fund | 15 |
| | |
| Shares | Value |
Japan (continued) | | |
|
Nidec Corp. | 3,500 | $306,522 |
|
Nintendo Company, Ltd. | 4,400 | 775,779 |
|
Nissan Motor Company, Ltd. | 91,100 | 836,893 |
|
Nitori Holdings Company, Ltd. | 5,800 | 595,658 |
|
Nitto Denko Corp. | 10,300 | 403,120 |
|
Nomura Research Institute, Ltd. | 8,300 | 188,749 |
|
NSK, Ltd. | 22,000 | 176,615 |
|
NTT DoCoMo, Inc. | 554 | 1,008,267 |
|
Odakyu Electric Railway Company, Ltd. | 42,000 | 374,454 |
|
Olympus Corp. | 6,400 | 187,118 |
|
Ono Pharmaceutical Company, Ltd. | 2,200 | 127,309 |
|
Oriental Land Company, Ltd. | 4,300 | 426,494 |
|
ORIX Corp. | 880 | 79,830 |
|
Rakuten, Inc. | 259 | 291,787 |
|
Resona Holdings, Inc. | 70,800 | 322,907 |
|
Ricoh Company, Ltd. | 29,000 | 263,763 |
|
Sankyo Company, Ltd. | 2,600 | 133,667 |
|
Santen Pharmaceutical Company, Ltd. | 6,500 | 258,047 |
|
Sawai Pharmaceutical Company, Ltd. | 2,500 | 256,145 |
|
Secom Company, Ltd. | 13,200 | 612,687 |
|
SEGA SAMMY HOLDINGS, INC. | 10,900 | 253,451 |
|
Shimamura Company, Ltd. | 1,900 | 189,828 |
|
Shimizu Corp. | 28,000 | 126,074 |
|
Shin-Etsu Chemical Company, Ltd. | 9,200 | 466,360 |
|
Shionogi & Company, Ltd. | 12,600 | 203,623 |
|
Shiseido Company, Ltd. | 18,000 | 343,958 |
|
SMC Corp. | 3,400 | 540,643 |
|
Softbank Corp. | 20,700 | 690,760 |
|
Stanley Electric Company, Ltd. | 12,400 | 178,968 |
|
Sumitomo Corp. | 28,900 | 377,504 |
|
Sysmex Corp. | 6,400 | 241,738 |
|
Takeda Pharmaceutical Company, Ltd. | 48,400 | 2,344,737 |
|
Teijin, Ltd. | 39,000 | 149,990 |
|
Terumo Corp. | 15,500 | 819,385 |
|
THK Company, Ltd. | 6,700 | 138,728 |
|
Toray Industries, Inc. | 123,000 | 929,635 |
|
Toshiba Corp. | 47,000 | 205,518 |
|
Toyota Tsusho Corp. | 12,100 | 202,917 |
|
Trend Micro, Inc. | 9,500 | 300,673 |
|
Tsumura & Company, Ltd. | 6,200 | 192,146 |
|
Unicharm Corp. | 13,000 | 616,039 |
|
Yahoo! Japan Corp. | 1,876 | 606,818 |
|
Yamada Denki Company, Ltd. | 11,230 | 823,419 |
|
Yamato Kogyo Company, Ltd. | 4,200 | 108,639 |
|
Zeon Corp. | 23,000 | 232,155 |
| | |
16 | International Growth Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
Luxembourg 0.35% | | $906,257 |
|
Millicom International Cellular SA | 3,600 | 404,118 |
|
Oriflame Cosmetics SA | 3,026 | 136,286 |
|
SES SA | 13,389 | 365,853 |
| | |
Macau 0.38% | | 968,785 |
|
Sands China, Ltd. (I) | 168,400 | 531,131 |
|
Wynn Macau, Ltd. | 135,600 | 437,654 |
| | |
Mexico 0.17% | | 438,024 |
|
Fresnillo PLC | 12,854 | 438,024 |
| | |
Netherlands 2.50% | | 6,470,637 |
|
Aegon NV (I) | 30,018 | 134,491 |
|
ASML Holding NV | 7,445 | 263,596 |
|
European Aeronautic Defence & Space Company | 9,012 | 285,808 |
|
ING Groep NV (I) | 34,902 | 304,284 |
|
Koninklijke (Royal) KPN NV | 72,802 | 1,030,922 |
|
Reed Elsevier NV | 29,050 | 343,137 |
|
Royal Dutch Shell PLC (London Stock Exchange) | 7,893 | 264,499 |
|
Royal Dutch Shell PLC, B Shares | 50,212 | 1,693,391 |
|
Unilever NV (L) | 63,545 | 2,150,509 |
| | |
Norway 0.42% | | 1,078,431 |
|
Norsk Hydro ASA | 20,011 | 121,672 |
|
Telenor ASA | 6,900 | 115,754 |
|
TGS Nopec Geophysical Company ASA | 10,055 | 251,980 |
|
Yara International ASA | 10,709 | 589,025 |
| | |
Singapore 2.38% | | 6,153,566 |
|
CapitaCommercial Trust | 157,000 | 155,456 |
|
Cosco Corp. Singapore, Ltd. | 161,000 | 149,102 |
|
Ezra Holdings, Ltd. | 103,000 | 84,724 |
|
Genting Singapore PLC (I) | 156,000 | 215,694 |
|
Golden Agri-Resources, Ltd. | 773,000 | 423,667 |
|
Hyflux, Ltd. | 82,500 | 118,519 |
|
Keppel Corp., Ltd. | 103,400 | 798,550 |
|
Midas Holdings, Ltd. | 131,000 | 51,133 |
|
Oversea-Chinese Banking Corp., Ltd. | 355 | 2,579 |
|
SembCorp Industries, Ltd. | 65,000 | 232,645 |
|
SembCorp Marine, Ltd. | 105,000 | 354,889 |
|
Singapore Airport Terminal Services, Ltd. | 76,000 | 143,071 |
|
Singapore Exchange, Ltd. | 79,000 | 459,878 |
|
Singapore Post, Ltd. | 183,000 | 161,032 |
|
Singapore Press Holdings, Ltd. | 207,000 | 653,182 |
|
Singapore Technologies Engineering, Ltd. | 218,000 | 532,220 |
|
Singapore Telecommunications, Ltd. (Board Lot 10) | 430,000 | 1,110,491 |
|
SMRT Corp., Ltd. | 89,000 | 133,703 |
|
StarHub, Ltd. | 51,000 | 122,158 |
|
Wilmar International, Ltd. | 57,000 | 250,873 |
| | |
See notes to financial statements | Semiannual report | International Growth Fund | 17 |
| | |
| Shares | Value |
Spain 1.14% | | $2,936,843 |
|
Acciona SA | 1,734 | 162,111 |
|
Distribuidora Internacional De Alimentacion SA (I) | 13,625 | 58,717 |
|
Enagas SA | 5,176 | 108,602 |
|
Inditex SA | 16,980 | 1,451,132 |
|
Red Electrica De Espana | 9,031 | 444,471 |
|
Repsol YPF SA | 16,655 | 479,984 |
|
Telefonica SA | 11,096 | 231,826 |
| | |
Sweden 4.16% | | 10,736,445 |
|
Alfa Laval AB | 24,884 | 488,345 |
|
Assa Abloy AB, Series B | 7,285 | 168,978 |
|
Atlas Copco AB, Series A | 52,290 | 1,176,426 |
|
Atlas Copco AB, Series B (I) | 37,286 | 749,308 |
|
Boliden AB | 16,459 | 226,510 |
|
Elekta AB, Series B | 9,080 | 339,944 |
|
Hennes & Mauritz AB, B Shares | 64,875 | 2,017,648 |
|
Hexagon AB | 15,807 | 267,464 |
|
Investor AB, B Shares | 30,781 | 605,043 |
|
Kinnevik Investment AB | 8,028 | 171,306 |
|
Lundin Petroleum AB (I) | 11,701 | 177,025 |
|
Sandvik AB | 26,154 | 349,191 |
|
Scania AB, Series B | 30,888 | 558,153 |
|
Skandinaviska Enskilda Banken AB, Series A | 54,899 | 324,914 |
|
SKF AB, B Shares | 35,121 | 828,201 |
|
Swedbank AB, Class A | 51,380 | 705,664 |
|
Swedish Match AB | 10,623 | 384,722 |
|
Telefonaktiebolaget LM Ericsson, B Shares | 60,550 | 679,311 |
|
Volvo AB, Series B | 41,703 | 518,292 |
| | |
Switzerland 10.83% | | 27,979,443 |
|
ABB, Ltd. (I) | 9,486 | 201,921 |
|
Cie Financiere Richemont SA | 11,055 | 641,415 |
|
Geberit AG (I) | 2,081 | 435,989 |
|
Kuehne & Nagel International AG | 2,062 | 286,691 |
|
Nestle SA | 137,157 | 8,492,717 |
|
Nobel Biocare Holding AG (I) | 7,730 | 98,092 |
|
Novartis AG | 72,406 | 4,231,020 |
|
Roche Holdings AG | 60,225 | 10,542,416 |
|
SGS SA | 331 | 614,412 |
|
STMicroelectronics NV | 36,056 | 239,141 |
|
Swisscom AG | 405 | 181,484 |
|
Syngenta AG (I) | 1,005 | 318,251 |
|
Wolseley PLC | 19,212 | 499,414 |
|
Xstrata PLC | 68,350 | 1,196,480 |
| | |
United Kingdom 22.65% | | 58,533,028 |
|
Aberdeen Asset Management PLC | 59,804 | 194,317 |
|
Admiral Group PLC | 27,988 | 620,187 |
|
Aggreko PLC | 37,371 | 1,173,020 |
|
AMEC PLC | 22,961 | 340,372 |
| | |
18 | International Growth Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
United Kingdom (continued) | | |
|
Antofagasta PLC | 20,776 | $454,748 |
|
ARM Holdings PLC | 75,773 | 697,467 |
|
ASOS PLC (I) | 10,289 | 329,796 |
|
AstraZeneca PLC | 30,189 | 1,429,931 |
|
Babcock International Group PLC | 30,694 | 312,523 |
|
BAE Systems PLC | 61,517 | 274,837 |
|
Balfour Beatty PLC | 50,042 | 202,298 |
|
Barclays PLC | 111,473 | 307,350 |
|
BG Group PLC (I) | 124,234 | 2,685,171 |
|
BHP Billiton PLC | 31,596 | 1,075,486 |
|
BP PLC | 51,267 | 335,661 |
|
British American Tobacco PLC | 142,599 | 6,349,264 |
|
British Sky Broadcasting Group PLC | 83,341 | 893,382 |
|
BT Group PLC | 474,223 | 1,322,177 |
|
Bunzl PLC | 23,132 | 300,334 |
|
Burberry Group PLC | 69,734 | 1,558,317 |
|
Centrica PLC | 110,671 | 537,350 |
|
Chemring Group PLC | 15,270 | 138,769 |
|
Cobham PLC | 121,062 | 376,813 |
|
Cookson Group PLC | 16,439 | 140,432 |
|
Croda International PLC | 17,255 | 504,465 |
|
Diageo PLC | 154,359 | 3,106,071 |
|
Eurasian Natural Resources Corp. | 15,303 | 169,330 |
|
GKN PLC | 111,328 | 364,904 |
|
GlaxoSmithKline PLC | 381,849 | 8,145,935 |
|
HSBC Holdings PLC | 102,310 | 890,730 |
|
ICAP PLC | 40,766 | 313,623 |
|
IG Group Holdings PLC | 42,806 | 310,681 |
|
IMI PLC | 23,154 | 335,509 |
|
Inchcape PLC | 44,936 | 235,242 |
|
Inmarsat PLC | 27,790 | 212,223 |
|
Intercontinental Hotels Group PLC | 16,234 | 276,192 |
|
International Power PLC | 29,310 | 161,720 |
|
Intertek Group PLC | 19,376 | 634,899 |
|
Investec PLC | 13,087 | 91,747 |
|
ITV PLC (I) | 286,287 | 284,513 |
|
John Wood Group PLC | 23,761 | 229,227 |
|
Johnson Matthey PLC | 13,846 | 381,964 |
|
Kingfisher PLC | 70,974 | 271,813 |
|
Land Securities Group PLC | 25,174 | 300,870 |
|
Legal & General Group PLC | 195,590 | 333,246 |
|
Lloyds Banking Group PLC (I) | 1,828,096 | 996,337 |
|
London Stock Exchange Group PLC | 10,970 | 163,435 |
|
Man Group PLC | 94,837 | 343,644 |
|
Marks & Spencer Group PLC | 76,072 | 397,235 |
|
National Grid PLC | 40,910 | 413,216 |
|
Next PLC | 21,483 | 821,623 |
|
Pearson PLC (I) | 25,518 | 460,742 |
| | |
See notes to financial statements | Semiannual report | International Growth Fund | 19 |
| | |
| Shares | Value |
United Kingdom (continued) | | |
|
Pennon Group PLC | 15,501 | $162,759 |
|
Petrofac, Ltd. | 18,340 | 406,811 |
|
Prudential PLC | 72,534 | 728,676 |
|
Reckitt Benckiser Group PLC | 42,844 | 2,274,104 |
|
Reed Elsevier PLC | 71,603 | 585,830 |
|
Resolution, Ltd. | 75,565 | 326,681 |
|
Rexam PLC | 45,412 | 260,280 |
|
Rio Tinto PLC (I) | 54,789 | 3,353,479 |
|
Rolls-Royce Holdings PLC (I) | 3 | 31 |
|
Royal Bank of Scotland Group PLC (I) | 300,196 | 117,707 |
|
Schroders PLC (I) | 9,481 | 228,329 |
|
Scottish & Southern Energy PLC | 31,570 | 666,061 |
|
Severn Trent PLC | 17,804 | 424,455 |
|
Smith & Nephew PLC | 62,908 | 639,215 |
|
Smiths Group PLC | 29,038 | 469,563 |
|
Spectris PLC | 11,751 | 274,222 |
|
Standard Chartered PLC (I) | 64,178 | 1,458,112 |
|
Tate & Lyle PLC | 26,653 | 250,878 |
|
Tesco PLC | 96,526 | 592,178 |
|
The Capita Group PLC | 40,873 | 470,630 |
|
The Sage Group PLC | 82,765 | 337,921 |
|
The Weir Group PLC | 23,492 | 734,907 |
|
Tullett Prebon PLC | 14,637 | 88,718 |
|
Unilever PLC | 14,297 | 480,335 |
|
Vodafone Group PLC | 3 | 8 |
| | |
United States 0.04% | | 113,838 |
|
Sims Group, Ltd. | 6,908 | 113,838 |
|
|
Preferred Securities 1.06% | | $2,750,558 |
|
(Cost $2,168,081) | | |
| | |
Germany 1.06% | | 2,750,558 |
|
Bayerische Motoren Werke (BMW) AG | 1,795 | 96,731 |
|
Hugo Boss Ag, Pfd | 2,637 | 259,688 |
|
Porsche Automobil Holding SE | 9,879 | 667,435 |
|
ProSiebenSat.1 Media AG | 10,663 | 212,069 |
|
Volkswagen AG | 9,115 | 1,514,635 |
|
|
Warrants 0.00% | | $3,471 |
|
(Cost $5,399) | | |
| | |
Canada 0.00% | | 3,471 |
|
Kinross Gold Corp. (Expiration Date: 9-17-14, | | |
Strike Price: $21.30) (I) | 1,133 | 3,471 |
| | |
20 | International Growth Fund | Semiannual report | See notes to financial statements |
| | | |
| Yield % | Shares | Value |
|
Securities Lending Collateral 0.83% | | | $2,149,543 |
|
(Cost $2,149,696) | | | |
| | | |
John Hancock Collateral Investment Trust (W) | 0.2283 (Y) | 214,849 | 2,149,543 |
|
Short-Term Investments 2.60% | | | $6,712,366 |
|
(Cost $6,712,366) | | | |
| | | |
Money Market Funds 2.60% | | | 6,712,366 |
|
State Street Institutional Treasury | | | |
Money Market Fund | 0.000 (Y) | 6,712,366 | 6,712,366 |
|
Total investments (Cost $249,095,710)† 101.70% | | $262,795,314 |
|
Other assets and liabilities, net (1.70%) | | | ($4,405,358) |
|
Total net assets 100.00% | | | $258,389,956 |
|
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
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 8-31-11.
(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 8-31-11.
† At 8-31-11, the aggregate cost of investment securities for federal income tax purposes was $249,955,330. Net unrealized appreciation aggregated $12,839,984, of which $28,806,659 related to appreciated investment securities and $15,966,675 related to depreciated investment securities.
| | | | |
The Fund had the following sector composition as a percentage of net assets on 8-31-11: | | |
| | | | |
Health Care | 17% | | | |
Industrials | 16% | | | |
Consumer Staples | 14% | | | |
Consumer Discretionary | 13% | | | |
Materials | 11% | | | |
Financials | 8% | | | |
Information Technology | 7% | | | |
Energy | 5% | | | |
Telecommunication Services | 4% | | | |
Utilities | 3% | | | |
Short-Term Investments & Other | 2% | | | |
| | |
See notes to financial statements | Semiannual report | International Growth 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 8-31-11 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
| |
Assets | |
|
Investments in unaffiliated issuers, at value (Cost $246,946,014) including | |
$2,079,247 of securities loaned (Note 2) | $260,645,771 |
Investments in affiliated issuers, at value (Cost $2,149,696) (Note 2) | 2,149,543 |
| |
Total investments, at value (Cost $249,095,710) | 262,795,314 |
Foreign currency, at value (Cost $228,309) | 228,309 |
Cash held at broker for futures contracts | 1,714,640 |
Receivable for investments sold | 293,786 |
Receivable for fund shares sold | 1,098,255 |
Receivable for forward foreign currency exchange contracts (Note 3) | 265,175 |
Dividends and interest receivable | 862,879 |
Receivable for securities lending income | 3,840 |
Receivable for futures variation margin | 249,680 |
Receivable due from adviser | 505 |
Other receivables and prepaid expenses | 47,410 |
| |
Total assets | 267,559,793 |
|
Liabilities | |
|
Payable for forward foreign currency exchange contracts (Note 3) | 292,976 |
Payable for fund shares repurchased | 6,604,071 |
Payable upon return of securities loaned (Note 2) | 2,152,485 |
Payable to affiliates | |
Accounting and legal services fees | 4,267 |
Transfer agent fees | 23,961 |
Trustees’ fees | 1,917 |
Other liabilities and accrued expenses | 90,160 |
| |
Total liabilities | 9,169,837 |
|
Net assets | |
|
Capital paid-in | $237,969,395 |
Undistributed net investment income | 3,177,750 |
Accumulated net realized gain on investments, futures contracts and | |
foreign currency transactions | 5,058,021 |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | 12,184,790 |
| |
Net assets | $258,389,956 |
| | |
22 | International Growth Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of assets and liabilities (continued)
| |
Net asset value per share | |
|
Based on net asset values and shares outstanding — the Fund has an |
unlimited number of shares authorized with no par value | |
Class A ($40,993,286 ÷ 2,076,308 shares) | $19.74 |
Class B ($851,939 ÷ 43,418 shares)1 | $19.62 |
Class C ($1,431,545 ÷ 73,084 shares)1 | $19.59 |
Class I ($206,003,803 ÷ 10,384,653 shares) | $19.84 |
Class 1 ($9,109,383 ÷ 459,614 shares) | $19.82 |
|
Maximum offering price per share | |
|
Class A (net asset value per share ÷ 95%)2 | $20.78 |
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 | Semiannual 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 operations For the six-month period ended 8-31-11
(unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| |
Investment income | |
|
Dividends | $5,600,573 |
Securities lending | 182,855 |
Interest | 184 |
Less foreign taxes withheld | (479,307) |
| |
Total investment income | 5,304,305 |
|
Expenses | |
|
Investment management fees (Note 5) | 1,223,381 |
Distribution and service fees (Note 5) | 74,996 |
Accounting and legal services fees (Note 5) | 16,861 |
Transfer agent fees (Note 5) | 108,121 |
Trustees’ fees (Note 5) | 9,314 |
State registration fees (Note 5) | 24,747 |
Printing and postage (Note 5) | 7,311 |
Professional fees | 35,805 |
Custodian fees | 142,661 |
Registration and filing fees | 16,877 |
Other | 10,781 |
| |
Total expenses | 1,670,855 |
Less expense reductions (Note 5) | (14,556) |
| |
Net expenses | 1,656,299 |
| |
Net investment income | 3,648,006 |
|
Realized and unrealized gain (loss) | |
|
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 7,812,371 |
Investments in affiliated issuers | 172 |
Futures contracts (Note 3) | 671,027 |
Foreign currency transactions | (786,028) |
| 7,697,542 |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | (25,864,468) |
Investments in affiliated issuers | (364) |
Futures contracts (Note 3) | (1,668,109) |
Translation of assets and liabilities in foreign currencies | 277,482 |
| (27,255,459) |
Net realized and unrealized loss | (19,557,917) |
| |
Decrease in net assets from operations | ($15,909,911) |
| | |
24 | International Growth Fund | Semiannual 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.
| | |
| Six months | |
| ended | Year |
| 8-31-11 | ended |
| (Unaudited) | 2-28-11 |
|
Increase (decrease) in net assets | | |
|
From operations | | |
Net investment income | $3,648,006 | $2,350,425 |
Net realized gain | 7,697,542 | 8,293,148 |
Change in net unrealized appreciation (depreciation) | (27,255,459) | 33,448,364 |
| | |
Increase (decrease) in net assets resulting from operations | (15,909,911) | 44,091,937 |
| | |
Distributions to shareholders | | |
From net investment income | | |
Class A | — | (211,992) |
Class I | — | (1,859,699) |
Class 1 | — | (65,793) |
Class NAV1 | — | (47,095) |
| | |
Total distributions | — | (2,184,579) |
| | |
From Fund share transactions (Note 6) | 16,262,347 | 49,129,284 |
| | |
Total increase | 352,436 | 91,036,642 |
|
Net assets | | |
|
Beginning of period | 258,037,520 | 167,000,878 |
| | |
End of period | $258,389,956 | $258,037,520 |
| | |
Undistributed (accumulated distributions in excess of) net | | |
investment income | $3,177,750 | ($470,256) |
1Class NAV shares were terminated on 12-22-10.
| | |
See notes to financial statements | Semiannual report | International Growth Fund | 25 |
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 | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $20.99 | $17.36 | $12.46 | $22.86 | $23.94 | $20.00 |
Net investment income (loss)3 | 0.27 | 0.13 | 0.14 | 0.31 | 0.26 | (0.01) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (1.52) | 3.61 | 4.86 | (10.31) | 0.53 | 4.44 |
Total from investment operations | (1.25) | 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 period | $19.74 | $20.99 | $17.36 | $12.46 | $22.86 | $23.94 |
Total return (%)4,5 | (5.96)6 | 21.58 | 40.07 | (44.00) | 2.85 | 22.186 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $41 | $45 | $23 | $13 | $26 | $20 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 1.597 | 1.60 | 1.688 | 1.94 | 2.21 | 2.287 |
Expenses net of fee waivers | 1.577 | 1.60 | 1.648 | 1.62 | 1.56 | 1.667 |
Expenses net of fee waivers and credits | 1.577 | 1.60 | 1.638 | 1.62 | 1.56 | 1.667 |
Net investment income (loss) | 2.537 | 0.69 | 0.86 | 1.59 | 1.02 | (0.06)7 |
Portfolio turnover (%) | 20 | 48 | 37 | 59 | 97 | 41 |
| |
1 Unaudited.
2 The inception date for Class A shares is 6-12-06.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Does not reflect the effect of sales charges, if any.
6 Not annualized.
7 Annualized.
8 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
| | |
26 | International Growth Fund | Semiannual report | See notes to financial statements |
| | | | | | |
CLASS B SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $20.93 | $17.36 | $12.48 | $22.81 | $23.91 | $20.00 |
Net investment income (loss)3 | 0.16 | 0.01 | 0.05 | 0.15 | (0.01) | (0.16) |
Net realized and unrealized gain (loss) | | | | | | �� |
on investments | (1.47) | 3.56 | 4.83 | (10.25) | 0.60 | 4.48 |
Total from investment operations | (1.31) | 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 period | $19.62 | $20.93 | $17.36 | $12.48 | $22.81 | $23.91 |
Total return (%)4,5 | (6.26)6 | 20.56 | 39.10 | (44.43) | 2.03 | 21.646 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $1 | $1 | $1 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 3.667 | 4.24 | 4.838 | 4.68 | 4.62 | 10.947 |
Expenses net of fee waivers | 2.367 | 2.40 | 2.448 | 2.65 | 2.41 | 2.397 |
Expenses net of fee waivers and credits | 2.367 | 2.40 | 2.408 | 2.40 | 2.40 | 2.397 |
Net investment income (loss) | 1.497 | 0.04 | 0.29 | 0.80 | (0.03) | (0.94)7 |
Portfolio turnover (%) | 20 | 48 | 37 | 59 | 97 | 41 |
| |
1 Unaudited.
2 The inception date for Class B shares is 6-12-06.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Does not reflect the effect of sales charges, if any.
6 Not annualized.
7 Annualized.
8 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
| | | | | | |
CLASS C SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $20.91 | $17.34 | $12.47 | $22.79 | $23.90 | $20.00 |
Net investment income (loss)3 | 0.23 | 0.01 | (0.01) | 0.20 | 0.05 | (0.16) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (1.55) | 3.56 | 4.88 | (10.29) | 0.53 | 4.47 |
Total from investment operations | (1.32) | 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 period | $19.59 | $20.91 | $17.34 | $12.47 | $22.79 | $23.90 |
Total return (%)4,5 | (6.31)6 | 20.59 | 39.05 | (44.43) | 1.99 | 21.596 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $1 | $1 | $1 | $1 | $2 | $2 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 3.187 | 3.45 | 3.958 | 3.81 | 3.73 | 6.717 |
Expenses net of fee waivers | 2.367 | 2.40 | 2.418 | 2.42 | 2.40 | 2.397 |
Expenses net of fee waivers and credits | 2.367 | 2.40 | 2.408 | 2.40 | 2.40 | 2.397 |
Net investment income (loss) | 1.417 | 0.03 | (0.06) | 1.03 | 0.21 | (0.98)7 |
Portfolio turnover (%) | 20 | 48 | 37 | 59 | 97 | 41 |
| |
1 Unaudited.
2 The inception date for Class C shares is 6-12-06.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Does not reflect the effect of sales charges, if any.
6 Not annualized.
7 Annualized.
8 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
| | |
See notes to financial statements | Semiannual report | International Growth Fund | 27 |
| | | | | | |
CLASS I SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $21.04 | $17.40 | $12.48 | $22.90 | $23.97 | $20.00 |
Net investment income3 | 0.29 | 0.23 | 0.14 | 0.18 | 0.36 | 0.07 |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (1.49) | 3.60 | 4.95 | (10.12) | 0.54 | 4.45 |
Total from investment operations | (1.20) | 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 period | $19.84 | $21.04 | $17.40 | $12.48 | $22.90 | $23.97 |
Total return (%)4 | (5.70)5 | 22.08 | 40.76 | (43.74) | 3.27 | 22.605 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $206 | $204 | $134 | $23 | $1 | —6 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 1.157 | 1.14 | 1.238 | 1.67 | 5.07 | 17.207 |
Expenses net of fee waivers | 1.157 | 1.14 | 1.218 | 1.20 | 1.20 | 1.197 |
Expenses net of fee waivers and credits | 1.157 | 1.14 | 1.218 | 1.20 | 1.20 | 1.197 |
Net investment income | 2.747 | 1.21 | 0.84 | 1.16 | 1.43 | 0.427 |
Portfolio turnover (%) | 20 | 48 | 37 | 59 | 97 | 41 |
| |
1 Unaudited.
2 The inception date for Class I shares is 6-12-06.
3 Based on the average daily shares outstanding.
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 Annualized.
8 Includes the impact of proxy expenses, which amounted to 0.01% of average net assets.
| | | | | | |
CLASS 1 SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $21.02 | $17.38 | $12.47 | $22.89 | $23.97 | $20.00 |
Net investment income3 | 0.29 | 0.23 | 0.20 | 0.36 | 0.29 | 0.07 |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (1.49) | 3.60 | 4.89 | (10.29) | 0.61 | 4.45 |
Total from investment operations | (1.20) | 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 period | $19.82 | $21.02 | $17.38 | $12.47 | $22.89 | $23.97 |
Total return (%)4 | (5.71)5 | 22.11 | 40.73 | (43.72) | 3.28 | 22.635 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $9 | $8 | $5 | $3 | $3 | $1 |
Ratios (as a percentage of average net assets): | | | | | | |
Expenses before reductions | 1.136 | 1.13 | 1.247 | 1.51 | 1.83 | 2.006 |
Expenses net of fee waivers | 1.126 | 1.13 | 1.197 | 1.15 | 1.15 | 1.156 |
Expenses net of all fee waivers and credits | 1.126 | 1.13 | 1.197 | 1.15 | 1.15 | 1.156 |
Net investment income | 2.716 | 1.21 | 1.23 | 1.94 | 1.14 | 0.416 |
Portfolio turnover (%) | 20 | 48 | 37 | 59 | 97 | 41 |
| |
1 Unaudited.
2 The inception date for Class 1 shares is 6-12-06.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Not annualized.
6 Annualized.
7 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
| | |
28 | International Growth Fund | Semiannual report | See notes to financial statements |
Notes to financial statements
(unaudited)
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, 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.
| |
Semiannual report | International Growth Fund | 29 |
The following is a summary of the values by input classification of the Fund’s investments as of August 31, 2011, by major security category or type:
| | | | |
| | | | LEVEL 3 |
| | | LEVEL 2 | SIGNIFICANT |
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE |
| VALUE AT 8-31-11 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS |
|
Common Stocks | | | | |
Australia | $13,084,539 | — | $13,084,539 | — |
Austria | 740,124 | — | 740,124 | — |
Belgium | 1,433,710 | — | 1,433,710 | — |
Bermuda | 138,186 | — | 138,186 | — |
Canada | 9,354,874 | $9,354,874 | — | — |
China | 145,782 | — | 145,782 | — |
Denmark | 4,932,891 | — | 4,932,891 | — |
Finland | 1,810,920 | — | 1,810,920 | — |
France | 17,255,227 | — | 17,255,227 | — |
Germany | 22,566,343 | — | 22,566,343 | — |
Greece | 421,779 | — | 421,779 | — |
Hong Kong | 8,877,874 | — | 8,877,874 | — |
Ireland | 2,867,555 | — | 2,867,555 | — |
Israel | 166,270 | — | 166,270 | — |
Italy | 1,169,811 | — | 1,169,811 | — |
Japan | 49,898,194 | — | 49,898,194 | — |
Luxembourg | 906,257 | — | 906,257 | — |
Macau | 968,785 | — | 968,785 | — |
Mexico | 438,024 | — | 438,024 | — |
Netherlands | 6,470,637 | — | 6,470,637 | — |
Norway | 1,078,431 | — | 1,078,431 | — |
Singapore | 6,153,566 | — | 6,153,566 | — |
Spain | 2,936,843 | — | 2,936,843 | — |
Sweden | 10,736,445 | — | 10,736,445 | — |
Switzerland | 27,979,443 | — | 27,979,443 | — |
United Kingdom | 58,533,028 | — | 58,533,028 | — |
United States | 113,838 | — | 113,838 | — |
Preferred Securities | | | | |
Germany | 2,750,558 | — | 2,750,558 | — |
Warrants | | | | |
Canada | 3,471 | 3,471 | — | — |
Securities Lending | | | | |
Collateral | 2,149,543 | 2,149,543 | — | — |
Short-Term Investments | 6,712,366 | 6,712,366 | — | — |
|
|
Total Investments in | | | | |
Securities | $262,795,314 | $18,220,254 | $244,575,060 | — |
Other Financial | | | | |
Instruments | | | | |
Futures | ($1,505,473) | ($1,505,473) | — | — |
Forward Foreign | | | | |
Currency Contracts | ($27,801) | ($27,801) | — | — |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the six months ended August 31, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets.
| |
30 | International Growth Fund | Semiannual report |
In order to value the securities, the Fund uses the following valuation techniques. Equity securities, including exchange-traded funds, 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 by the Funds in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their respective net asset values each business day. Foreign securities and currencies, including forward foreign 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.
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 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. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs) and accounting standards. Foreign
| |
Semiannual report | International Growth Fund | 31 |
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 the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian 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, effective March 30, 2011, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 30, 2011, the Fund had a similar agreement with State Street Bank and Trust Company. 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 six months ended August 31, 2011, the Fund had no borrowings under the line of credit.
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 assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees, are calculated daily for each class, based on the net asset value of the class and the applicable specific expense rates.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
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.
Under the 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, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
| |
32 | International Growth Fund | Semiannual report |
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.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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.
New accounting pronouncement. In May 2011, Accounting Standards Update 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued and is effective during interim and annual periods beginning after December 15, 2011. ASU 2011-04 amends Financial Accounting Standards Board (FASB) Topic 820, Fair Value Measurement. The amendments are the result of the work by the FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. Management is currently evaluating the application of ASU 2011-04 and its impact, if any, on the Fund’s financial statements.
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.
| |
Semiannual report | International Growth Fund | 33 |
During the six months ended August 31, 2011, the Fund used futures contracts to gain exposure to certain securities markets. The following table summarizes the contracts held at August 31, 2011. During the six months ended August 31, 2011, the Fund held futures contracts with absolute notional values ranging from $19.0 million to $26.7 million, as measured at each quarter end.
| | | | | |
| | | | | UNREALIZED |
OPEN | NUMBER OF | | | | APPRECIATION |
CONTRACTS | CONTRACTS | POSITION | EXPIRATION DATE | NOTIONAL VALUE | (DEPRECIATION) |
|
CAC 40 Index Futures | 6 | Long | Mar 2011 | $280,247 | $2,589 |
DAX Index Futures | 35 | Long | Mar 2011 | 7,280,815 | (1,773,460) |
FTSE 100 Index | 57 | Long | Mar 2011 | 4,983,564 | (343,609) |
Futures | | | | | |
ASX SPI 200 Index | 58 | Short | Mar 2011 | (6,647,857) | 346,899 |
Futures | | | | | |
FTSE MIB Index | 8 | Short | Mar 2011 | (893,044) | 260,703 |
Futures | | | | | |
OMX 30 Index | 4 | Short | Mar 2011 | (60,349) | (261) |
Futures | | | | | |
TOPIX Index Futures | 2 | Short | Mar 2011 | (201,384) | 1,666 |
| | | | | |
Total | | | | | ($1,505,473) |
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 six months ended August 31, 2011, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates. The following table summarizes the contracts held at August 31, 2011. During the six months ended August 31, 2011, the Fund held forward foreign currency contracts with USD absolute values ranging from $50.1 million to $95.3 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 | | | | | | | |
EUR | 460,057 | $660,317 | | Bank of America N.A. | | 10-21-11 | $140 |
EUR | 1,096,720 | 1,579,101 | | Brown Brothers | | 10-21-11 | (4,654) |
| | | | Harriman & Company | | | |
|
EUR | 804,567 | 1,157,378 | | Deutsche Bank AG | | 10-21-11 | (2,344) |
EUR | 614,621 | 883,325 | | Morgan Stanley Capital | | 10-21-11 | (977) |
| | | | Services, Inc. | | | |
|
GBP | 881,417 | 1,440,236 | | Bank of America N.A. | | 10-21-11 | (10,231) |
GBP | 474,203 | 776,688 | | Barclays Bank PLC | | 10-21-11 | (7,343) |
| |
34 | International Growth Fund | Semiannual report |
| | | | | | | |
| | PRINCIPAL | | | | | |
| PRINCIPAL | AMOUNT | | | | | |
| AMOUNT | COVERED | | | | | UNREALIZED |
| COVERED BY | BY CONTRACT | | | | SETTLEMENT | APPRECIATION |
CURRENCY | CONTRACT | (USD) | | COUNTERPARTY | | DATE | (DEPRECIATION) |
|
Buys (continued) | | | | | | |
GBP | 1,146,471 | $1,877,404 | | Brown Brothers | | 10-21-11 | ($17,376) |
| | | | Harriman & Company | | | |
GBP | 1,553,874 | 2,544,003 | | JPMorgan Chase Bank | | 10-21-11 | (23,006) |
GBP | 1,211,533 | 1,983,484 | | Morgan Stanley Capital | | 10-21-11 | (17,900) |
| | | | Services, Inc. | | | |
|
GBP | 518,783 | 848,598 | | Royal Bank of Scotland PLC | | 10-21-11 | (6,928) |
GBP | 593,000 | 970,522 | | State Street Bank & | | 10-21-11 | (8,442) |
| Trust Company | | | |
HKD | 11,073,287 | 1,421,898 | | Bank of America N.A. | | 10-21-11 | 1,043 |
HKD | 8,392,911 | 1,077,686 | | Barclays Bank PLC | | 10-21-11 | 821 |
HKD | 3,724,303 | 478,250 | | Brown Brothers | | 10-21-11 | 331 |
| | | | Harriman & Company | | | |
HKD | 4,697,105 | 603,333 | | Mellon Bank NA | | 10-21-11 | 255 |
HKD | 7,862,732 | 1,009,686 | | Morgan Stanley Capital | | 10-21-11 | 692 |
| | | | Services, Inc. | | | |
HKD | 16,785,822 | 2,156,217 | | State Street Bank & | | 10-21-11 | 798 |
| Trust Company | | | |
JPY | 136,283,419 | 1,773,946 | | Deutsche Bank AG London | | 10-21-11 | 6,680 |
JPY | 73,531,690 | 959,155 | | JPMorgan Chase Bank | | 10-21-11 | 1,582 |
JPY | 122,559,584 | 1,598,915 | | Royal Bank of Scotland PLC | | 10-21-11 | 2,400 |
SGD | 1,845,284 | 1,532,883 | | Bank of America N.A. | | 10-21-11 | (176) |
SGD | 922,641 | 767,844 | | Barclays Bank PLC | | 10-21-11 | (1,491) |
SGD | 2,982,621 | 2,478,061 | | Brown Brothers | | 10-21-11 | (674) |
| | | | Harriman & Company | | | |
SGD | 751,694 | 624,914 | | Mellon Bank NA | | 10-21-11 | (552) |
SGD | 982,435 | 817,293 | | Morgan Stanley Capital | | 10-21-11 | (1,275) |
| | | | Services, Inc. | | | |
SGD | 751,694 | 624,567 | | Royal Bank of Scotland PLC | | 10-21-11 | (204) |
SGD | 751,694 | 624,798 | | State Street Bank & | | 10-21-11 | (435) |
| Trust Company | | | |
| | | | | | | |
Total | | $33,270,502 | | | | | ($89,266) |
|
Sells | | | | | | | |
AUD | 638,123 | $616,681 | | JPMorgan Chase Bank | | 10-21-11 | ($17,010) |
CAD | 4,301,944 | 4,246,070 | | Bank of America N.A. | | 10-21-11 | (28,987) |
CAD | 967,838 | 933,979 | | Morgan Stanley Capital | | 10-21-11 | 15,193 |
| | | | Services, Inc. | | | |
CAD | 2,819,664 | 2,784,506 | | Royal Bank of Scotland PLC | | 10-21-11 | (20,492) |
CHF | 2,381,635 | 1,870,917 | | Barclays Bank PLC | | 10-21-11 | 56,261 |
CHF | 16,880 | 13,300 | | Brown Brothers | | 10-21-11 | 350 |
| | | | Harriman & Company | | | |
CHF | 2,211,527 | 1,717,377 | | Royal Bank of Scotland PLC | | 10-21-11 | 76,989 |
CHF | 3,203,656 | 2,495,776 | | State Street Bank & | | 10-21-11 | 101,640 |
| Trust Company | | | |
EUR | 1,130,750 | 798,000 | | Brown Brothers | | 10-21-11 | (14,856) |
| | | | Harriman & Company | | | |
GBP | 1,162,140 | 720,000 | | JPMorgan Chase Bank | | 10-21-11 | (5,984) |
NOK | 363,853 | 1,987,367 | | Brown Brothers | | 10-21-11 | (5,633) |
| | | | Harriman & Company | | | |
NOK | 319,539 | 1,754,411 | | Royal Bank of Scotland PLC | | 10-21-11 | (6,636) |
SEK | 1,112,087 | 7,155,724 | | Barclays Bank PLC | | 10-21-11 | (13,295) |
| |
Semiannual report | International Growth Fund | 35 |
| | | | | | | |
| | PRINCIPAL | | | | | |
| PRINCIPAL | AMOUNT | | | | | |
| AMOUNT | COVERED | | | | | UNREALIZED |
| COVERED BY | BY CONTRACT | | | | SETTLEMENT | APPRECIATION |
CURRENCY | CONTRACT | (USD) | | COUNTERPARTY | | DATE | (DEPRECIATION) |
|
Sells (continued) | | | | | | |
SEK | 1,150,114 | $7,386,719 | | Brown Brothers | | 10-21-11 | ($11,597) |
| | | | Harriman & Company | | | |
SEK | 996,127 | 6,411,075 | | Deutsche Bank AG London | | 10-21-11 | (12,144) |
SEK | 2,176,948 | 14,061,126 | | JPMorgan Chase Bank | | 10-21-11 | (34,448) |
SEK | 1,107,496 | 7,155,724 | | Mellon Bank NA | | 10-21-11 | (17,886) |
| | | | | | | |
Total | | $62,108,752 | | | | | $61,465 |
| | | | | |
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 August 31, 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† | $611,857 | ($2,117,330) |
| tion margin; net unrealized | | | |
| appreciation (depreciation | | | |
| on investments | | | |
| | | | |
Foreign exchange | Receivable/Payable for | Forward foreign | 265,175 | (292,976) |
contracts | forward foreign currency | currency | | |
| exchange contracts | contracts | | |
Total | | | $877,032 | ($2,410,306) |
† 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 six months ended August 31, 2011:
| | | | |
| | | FOREIGN | |
| STATEMENT OF | FUTURES | CURRENCY | |
RISK | OPERATIONS LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
|
Equity Contracts | Net realized gain | $671,027 | — | $671,027 |
Foreign Exchange | Net realized gain | — | ($807,601) | ($801,607) |
Contracts | | | | |
|
Totals | | $671,027 | ($807,601) | ($130,580) |
* Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
| |
36 | International Growth Fund | Semiannual report |
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended August 31, 2011:
| | | | |
| | | TRANSLATION | |
| | | OF ASSETS | |
| | | AND LIABILITIES | |
| | FUTURES | IN FOREIGN | |
RISK | STATEMENT OF OPERATIONS LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
|
Equity Contracts | Change in unrealized appreciation | ($1,668,109) | — | ($1,668,109) |
| (depreciation) | | | |
| | | | |
Foreign Exchange | Change in unrealized appreciation | — | $278,573 | 278,573 |
Contracts | (depreciation) | | | |
|
Totals | | ($1,668,109) | $278,573 | $1,389,536 |
* Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in this caption on the Statement of operations.
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 MFC.
Management fee. The Fund has an investment management agreement 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 six months ended August 31, 2011 were equivalent to an annual effective rate of 0.90% 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%, 1.24% and 1.15% for Class A, Class B, Class C, Class I and Class 1 shares, respectively. The fee waivers and/or reimbursements will continue in effect until June 30, 2012. Prior to July 1, 2011, the fee waivers and/or reimbursements were such that these expenses would 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.
| |
Semiannual report | International Growth Fund | 37 |
Accordingly, these expense reductions amounted to $3,544, $5,410, $5,370 and $232 for Class A, Class B, Class C and Class 1 shares, respectively, for the six months ended August 31, 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 six months ended August 31, 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 FEE | | |
| | |
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 $31,377 for the six months ended August 31, 2011. Of this amount, $4,592 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $25,796 was paid as sales commissions to broker-dealers and $989 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 (CDSCs). Class B shares that are redeemed within six years of purchase are subject to CDSCs, 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 six months ended August 31, 2011, CDSCs received by the Distributor amounted to $2,772 and $49 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 fees that Signature Services receives with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all
| |
38 | International Growth Fund | Semiannual report |
other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended August 31, 2011 were:
| | | | |
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
|
Class A | $62,106 | $34,406 | $6,749 | $2,588 |
Class B | 4,167 | 695 | 5,700 | 214 |
Class C | 6,560 | 1,095 | 5,821 | 308 |
Class I | — | 71,925 | 6,477 | 4,201 |
Class 1 | 2,163 | — | — | — |
| | | | |
Total | $74,996 | $108,121 | $24,747 | $7,311 |
Trustee expenses. The Fund 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 six months ended August 31, 2011 and for the year ended February 28, 2011 were as follows:
| | | | |
| Six months ended 8-31-11 | Year ended 2-28-11 |
| Shares | Amount | Shares | Amount |
Class A shares | | | | |
|
Sold | 936,789 | $19,557,773 | 1,001,925 | $18,930,095 |
Distributions reinvested | 2 | 35 | 10,486 | 210,444 |
Repurchased | (991,852) | (21,503,645) | (182,969) | (3,423,082) |
| | | | |
Net increase (decrease) | (55,061) | ($1,945,837) | 829,442 | $15,717,457 |
|
Class B shares | | | | |
|
Sold | 14,960 | $314,551 | 18,488 | $350,796 |
Repurchased | (9,418) | (195,339) | (13,173) | (234,105) |
| | | | |
Net increase | 5,542 | $119,212 | 5,315 | $116,691 |
|
Class C shares | | | | |
|
Sold | 26,692 | $553,171 | 14,797 | $278,217 |
Repurchased | (7,149) | (145,734) | (12,304) | (222,459) |
| | | | |
Net increase | 19,543 | $407,437 | 2,493 | $55,758 |
|
Class I shares | | | | |
|
Sold | 1,758,371 | $36,952,458 | 3,607,016 | $67,388,025 |
Distributions reinvested | — | — | 919 | 18,465 |
Repurchased | (1,052,120) | (21,224,734) | (1,611,195) | (30,758,599) |
| | | | |
Net increase | 706,251 | $15,727,724 | 1,996,740 | $36,647,891 |
|
| |
Semiannual report | International Growth Fund | 39 |
| | | | |
| Six months ended 8-31-11 | Year ended 2-28-11 |
| Shares | Amount | Shares | Amount |
Class 1 shares | | | | |
|
Sold | 152,170 | $3,244,579 | 191,560 | $3,635,364 |
Distributions reinvested | — | — | 3,275 | 65,793 |
Repurchased | (61,476) | (1,290,768) | (102,225) | (1,936,307) |
| | | | |
Net increase | 90,694 | $1,953,811 | 92,610 | $1,764,850 |
|
Class NAV shares1 | | | | |
|
Sold | — | — | 25,913 | $465,996 |
Distributions reinvested | — | — | 2,350 | 47,095 |
Repurchased | — | — | (288,620) | (5,686,454) |
| | | | |
Net decrease | — | — | (260,357) | ($5,173,363) |
|
Net increase | 766,969 | $16,262,347 | 2,666,243 | $49,129,284 |
|
1 Class NAV shares were terminated on 12-22-10.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $78,999,607 and $52,149,300, respectively, for the six months ended August 31, 2011.
| |
40 | International Growth Fund | Semiannual report |
Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreement
The Board of Trustees (the Board, the members of which are referred to as Trustees) of John Hancock International Growth Fund (the Fund), a series of John Hancock Funds III, met in-person on May 1–3 and June 5–7, 2011 to consider the approval of the Fund’s investment advisory agreement (the Advisory Agreement) with John Hancock Investment Management Services, LLC (the Adviser), the Fund’s investment adviser. The Board also considered the approval of the investment subadvisory agreement (the Subadvisory Agreement) between the Adviser and Grantham, Mayo, Van Otterloo & Co. LLC (the Subadviser) on behalf of the Fund. The Advisory Agreement and the Subadvisory Agreement are referred to as the Agreements.
Activities and composition of the Board
The Board consists of eleven individuals, nine of whom are Independent Trustees. Independent Trustees are generally those individuals who are not employed by or have any significant business or professional relationship with the Adviser or the Subadviser. The Trustees are responsible for the oversight of operations of the Fund and perform various duties required of directors of investment companies by the Investment Company Act of 1940, as amended (the 1940 Act). The Independent Trustees have hired independent legal counsel to assist them in connection with their duties. The Board has appointed an Independent Trustee as Chairperson. The Board has established four standing committees that are composed entirely of Independent Trustees: the Audit Committee; the Compliance Committee; the Nominating, Governance and Administration Committee; and the Contracts/Operations Committee. Additionally, Investment Performance Committees A and B are standing committees of the Board that are each composed of Independent Trustees and one Trustee who is affiliated with the Adviser. Investment Performance Committee B oversees and monitors matters relating to the investment performance of the Fund. The Board has also designated an Independent Trustee as Vice Chairperson to serve in the absence of the Chairperson. The Board also designates working groups or ad hoc committees as it deems appropriate.
The approval process
Under the 1940 Act, the Board is required to consider the continuation of the Agreements each year. Throughout the year, the Board, acting directly and through its committees, regularly reviews and assesses the quality of the services that the Fund receives under these Agreements. The Board reviews reports of the Adviser at least quarterly, which include Fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. The Board considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by the Adviser and Subadviser to the Fund and its shareholders.
Prior to the May 1–3, 2011 meeting, the Board requested and received materials specifically relating to the Agreements. The materials provided in connection with the May meeting included information compiled and prepared by Morningstar, Inc. (Morningstar) on Fund fees and expenses, and the investment performance of the Fund. This Fund information is assembled in a format that permits comparison with similar information from a Category and a subset of the Category referred to as the Peer Group, each as determined by Morningstar, and with the Fund’s benchmark index. The Category includes all funds that invest similarly to the way the Fund invests. The Peer Group represents funds of similar size, excluding passively managed funds and funds-of-funds. The Fund’s benchmark index is an unmanaged index of securities that is provided as a basis for comparison with the Fund’s performance. Other material provided for the Fund review included (a) information on the profitability of the Agreements to the Adviser and a discussion of any additional benefits to the Adviser or Subadviser or their affiliates that result from being the Adviser or Subadviser to the Fund; (b) a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients, such as institutional clients and other investment companies, having similar investment mandates, as well as the performance of those other clients and a comparison of
| |
Semiannual report | International Growth Fund | 41 |
the services provided to those other clients and the services provided to the Fund; (c) the impact of economies of scale; (d) a summary of aggregate amounts paid by the Fund to the Adviser; and (e) sales and redemption data regarding the Fund’s shares.
At an in-person meeting held on May 1–3, 2011, the Board reviewed materials relevant to its consideration of the Agreements. As a result of the discussions that occurred during the May 1–3, 2011 meeting, the Board asked the Adviser for additional information on certain matters. The Adviser provided the additional information and the Board also considered this information as part of its consideration of the Agreements.
At an in-person meeting held on June 5–7, 2011, the Board, including the Independent Trustees, formally considered the continuation of the Advisory Agreement between the Adviser and the Fund and the Subadvisory Agreement between the Adviser and the Subadviser with respect to the Fund, each for an additional one-year term. The Board considered what it believed were key relevant factors that are described under separate headings presented below.
The Board also considered other matters important to the approval process, such as payments made to and by the Adviser or its affiliates relating to the distribution of Fund shares and other services. The Board reviewed services related to the valuation and pricing of Fund portfolio holdings. Other important matters considered by the Board were the direct and indirect benefits to the Adviser, the Subadviser and their affiliates from their relationship with the Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review.
Nature, extent and quality of services
The Board reviewed the nature, extent and quality of services provided by the Adviser and the Subadviser, including the investment advisory services and the resulting performance of the Fund.
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. It considered the background and experience of senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Subadviser responsible for the daily investment activities of the Fund, including, among other things, portfolio trading capabilities, use of technology, commitment to compliance and approach to training and retaining portfolio managers and other research, advisory and management personnel.
The Board considered the Subadviser’s history and experience providing investment services to the Fund. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadviser’s compliance departments.
In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Fund by the Adviser under a separate agreement. The Board noted that the Adviser and its affiliates provide the Fund with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. The Board reviewed the structure and duties of the Adviser’s administration, accounting, legal and compliance departments and its affiliates’ transfer agency operations and considered the Adviser’s and its affiliates’ policies and procedures for assuring compliance with applicable laws and regulations.
The Board also received information about the nature, extent and quality of services provided by and fee rates charged by the Adviser and Subadviser to their other clients, including other registered
| |
42 | International Growth Fund | Semiannual report |
investment companies, institutional investors and separate accounts. The Board reviewed a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients having similar investment mandates, the services provided to those other clients as compared to the services provided to the Fund, the performance of those other clients as compared to the performance by the Fund and other factors relating to those other clients. The Board considered the significant differences between the Adviser’s and Subadviser’s services to the Fund and the services they provide to other clients. For other clients that are not mutual funds, the differences in services relate to the greater share purchase and redemption activity in a mutual fund, the generally higher turnover of mutual fund portfolio holdings, the more burdensome regulatory and legal obligations of mutual funds and the higher marketing costs for mutual funds. When compared to all clients including mutual funds, the Adviser has greater oversight and supervisory responsibility for the Fund and undertakes greater entrepreneurial risk as the sponsor of the Fund.
Fund performance
The Board was provided with reports, independently prepared by Morningstar, which included a comprehensive analysis of the Fund’s performance. The Board also examined materials provided by the Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook. The Board also reviewed a narrative and statistical analysis of the Morningstar data that was prepared by the Adviser, which analyzed various factors that may affect the Morningstar rankings. The Board reviewed information regarding the investment performance of the Fund as compared to its Morningstar Category as well as its benchmark index (see chart below). The Board was provided with a description of the methodology used by Morningstar to select the funds in the Category. The Board also considered updated performance information provided by the Adviser at its May and June 2011 meetings. The Board regularly reviews the performance of the Fund throughout the year and attaches more importance to performance over relatively longer periods of time, typically three to five years.
Set forth below is the performance of the Fund over certain time periods ended December 31, 2010 and that of its Category and benchmark index over the same periods:
| | | | |
| 1 YEAR | 3 YEAR | 5 YEAR | 10 YEAR |
|
International Growth Fund Class A | 13.23% | –5.01% | — | — |
Foreign Large Blend Category Average | 10.74% | –6.58% | — | — |
MSCI EAFE Growth NR Index | 12.25% | –5.94% | — | — |
The Board noted that the Fund’s performance compared favorably to the average performance of its Category and its benchmark index for all periods shown.
Expenses and fees
The Board, including the Independent Trustees, reviewed the Fund’s contractual advisory fee rate payable by the Fund to the Adviser as compared with the other funds in its Peer Group. The Board also received information about the investment subadvisory fee rate payable by the Adviser to the Subadviser for investment subadvisory services. The Board considered the services provided and the fees charged by the Adviser and the Subadviser to other clients with similar investment mandates, including separately managed institutional accounts.
In addition, the Board considered the cost of the services provided to the Fund by the Adviser. The Board received and considered expense information regarding the Fund’s various components, including advisory fees, distribution fees and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, administration fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also considered expense information regarding the Fund’s total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the Adviser’s contractual fee waiver/expense reimbursement agreement into account (Net Expense Ratio). The
| |
Semiannual report | International Growth Fund | 43 |
Board considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of the Peer Group median. As part of its analysis, the Board reviewed the Adviser’s methodology in allocating its costs to the management of the Fund and the Fund complex.
The Board noted that the Fund’s advisory fee ratio was six basis points above the Peer Group median advisory fee ratio. The Board noted the following information about the Fund’s Gross and Net Expense Ratios for Class A shares contained in the Fund’s 2010 financial statements in relation with the Fund’s Peer Group median provided by Morningstar in April 2011:
| | |
| FUND (CLASS A) | PEER GROUP MEDIAN |
|
Advisory Fee Ratio | 0.91% | 0.85% |
Gross Expense Ratio | 1.59% | 1.61% |
Net Expense Ratio | 1.59% | 1.50% |
The Board viewed favorably the Adviser’s contractual agreement to waive all or a portion of its advisory fees and to reimburse or pay operating expenses to the extent necessary to maintain the Fund’s Net Expense Ratio at 1.60% for Class A shares, excluding certain expenses such as taxes, brokerage commissions, interest, litigation and extraordinary expenses, until June 30, 2012. The Board favorably considered the impact of this contractual agreement toward ultimately lowering the Fund’s Gross Expense Ratio. The Board also received and considered information relating to the Fund’s Gross Expense Ratio and Net Expense Ratio that reflected the new methodology for calculating transfer agent fees that was approved by the Trustees at the June 2010 meeting.
The Board received and reviewed statements relating to the Adviser’s financial condition and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by the Adviser for services under the Advisory Agreement, as well as from other relationships between the Fund and the Adviser and its affiliates. The Board reviewed the Adviser’s profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2010 compared to available aggregate profitability data provided for the year ended December 31, 2009. The Board reviewed the Adviser’s profitability with respect to other fund complexes managed by the Adviser and/or its affiliates. The Board reviewed the Adviser’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products.
The Board also considered a comparison of the Adviser’s profitability to that of other similar investment advisers whose profitability information is publicly available. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Adviser, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited.
The Board did not consider profitability information with respect to the Subadviser, which is not affiliated with the Adviser. The Board considered that the subadvisory fee under the Subadvisory Agreement had been negotiated by the Adviser and the Subadviser on an arm’s length basis. For this reason, the Subadviser’s separate profitability from its relationship with the Fund was not a factor in determining whether to renew the Subadvisory Agreement. In evaluating overall fees for investment management, the Board recognized the inherently higher cost structure of subadvised funds.
Economies of scale
The Board, including the Independent Trustees, considered the extent to which economies of scale might be realized as the assets of the Fund increase. Possible changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale (e.g., through the use of breakpoints in the advisory fee at higher asset levels) are periodically discussed. The Board also considered the Adviser’s overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the Fund.
| |
44 | International Growth Fund | Semiannual report |
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the contractual advisory fee rate.
Other benefits to the Adviser and the Subadviser
The Board understands that the Adviser, the Subadviser or their affiliates may derive other ancillary benefits from their relationship with the Fund, both tangible and intangible, such as their ability to leverage investment professionals who manage other portfolios, an increase in their profile in the investment advisory community and, in the case of the Adviser, the engagement of its affiliates and/ or significant shareholders as service providers to the Fund, including for administrative, transfer agency and distribution services. The Board believes that certain of these benefits are difficult to quantify. The Board also was informed that the Subadviser may use third-party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts.
Board determination
The Board unanimously approved the continuation of the Advisory Agreement between the Adviser and the Fund for an additional one-year term. The Subadvisory Agreement between the Adviser and the Subadviser with respect to the Fund was also approved for an additional one-year term. Based upon its evaluation of relevant factors in their totality, the Board was satisfied that the terms of the Agreements, including the advisory and subadvisory fee rates, were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or any group of factors as all-important or controlling, but considered all factors together. Different Trustees may have attributed different weights to the various factors considered. The Independent Trustees were also assisted by independent legal counsel in making this determination. The Trustees’ conclusions may be based in part on their consideration of these arrangements in prior years and on their ongoing regular review of Fund performance and operations throughout the year.
| |
Semiannual report | International Growth Fund | 45 |
More information
| |
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
James F. Carlin | Services, LLC |
William H. Cunningham | |
Deborah C. Jackson | Subadviser |
Charles L. Ladner,* Vice Chairman | 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 | |
| |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | |
| |
Francis V. Knox, Jr. | |
Chief Compliance Officer | |
| |
Charles A. Rizzo | |
Chief Financial Officer | |
| |
Salvatore Schiavone | |
Treasurer | |
|
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 9-13-11 | |
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 at www.jhfunds.com or by calling 1-800-225-5291.
| | |
You can also contact us: | | |
1-800-225-5291 | Regular mail: | Express mail: |
www. 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 |
| |
46 | International Growth Fund | Semiannual report |
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. | 870SA 8/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 10/11 |
A look at performance
Total returns for the period ended August 31, 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 | | 6-months | 1-year | 5-year | 10-year | inception1 |
|
Class A | 5.76 | — | — | –3.96 | | –14.33 | 5.76 | — | — | –17.20 |
|
Class B | 5.52 | — | — | –3.96 | | –14.61 | 5.52 | — | — | –17.21 |
|
Class C | 9.67 | — | — | –3.57 | | –11.01 | 9.67 | — | — | –15.61 |
|
Class I2 | 11.96 | — | — | –2.45 | | –9.55 | 11.96 | — | — | –10.96 |
|
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 those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 6-30-12. Had the fee waivers and expense limitations not been in place gross expenses would apply. The expense ratios are as follows:
| | | | | | | |
| Class A | Class B | Class C | Class I | | | |
Net (%) | 1.63 | 2.33 | 2.33 | 1.32 | | | |
Gross (%) | 2.13 | 3.28 | 2.94 | 6.65 | | | |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the 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.
| |
6 | International Allocation Portfolio | Semiannual report |
| | | | |
| | Without | With maximum | |
| Start date | sales charge | sales charge | Index |
|
Class B | 12-29-06 | $8,428 | $8,279 | $8,599 |
|
Class C4 | 12-29-06 | 8,439 | 8,439 | 8,599 |
|
Class I 2 | 12-29-06 | 8,904 | 8,904 | 8,599 |
|
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.
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 From 12-29-06.
2 For certain types of investors, as described in the Portfolio’s Class I share prospectus.
3 NAV represents net asset value and POP represents public offering price. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in different classes and the fee structure of those classes.
4 No contingent deferred sales charge is applicable.
| |
Semiannual report | International Allocation Portfolio | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund 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 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 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 March 1, 2011 with the same investment held until August 31, 2011.
| | | |
| Account value | Ending value | Expenses paid during |
| on 3-1-11 | on 8-31-11 | period ended 8-31-111,2 |
|
Class A | $1,000.00 | $901.80 | $3.02 |
|
Class B | 1,000.00 | 898.80 | 6.37 |
|
Class C | 1,000.00 | 898.90 | 6.37 |
|
Class I | 1,000.00 | 904.50 | 0.96 |
|
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 August 31, 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:
| |
8 | International Allocation Portfolio | Semiannual report |
Hypothetical example for comparison purposes
This table allows you to compare the Portfolio’s ongoing operating expenses with those of any other fund. 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 March 1, 2011, with the same investment held until August 31, 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 3-1-11 | on 8-31-11 | period ended 8-31-111,2 |
|
Class A | $1,000.00 | $1,022.00 | $3.21 |
|
Class B | 1,000.00 | 1,018.50 | 6.77 |
|
Class C | 1,000.00 | 1,018.50 | 6.77 |
|
Class I | 1,000.00 | 1,024.20 | 1.02 |
|
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 0.20% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (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 by the Portfolio were 0.91% to 1.13%.
| |
Semiannual report | International Allocation Portfolio | 9 |
Portfolio summary
1 As a percentage of net assets on 8-31-11.
| |
10 | International Allocation Portfolio | Semiannual report |
Portfolio’s investments
Investment companies
Underlying Funds’ Subadvisers
| |
Dimensional Fund Advisors, Inc. | (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 8-31-11 (unaudited)
| | |
| Shares | Value |
Affiliated Investment Companies 98.50% | | $17,422,843 |
|
(Cost $16,197,320) | | |
| | |
EQUITY 98.50% | | 17,422,843 |
| | |
International Large Cap 73.00% | | |
|
John Hancock Funds II (G) | | |
International Growth Stock, Class NAV (Invesco) | 203,314 | 2,157,166 |
|
International Opportunities, Class NAV (Marsico) | 170,745 | 2,163,338 |
|
International Value, Class NAV (Franklin) | 316,829 | 4,296,198 |
| | |
John Hancock Funds III (G) | | |
| | |
International Core, Class NAV (GMO) | 153,404 | 4,295,314 |
| | |
Emerging Markets 18.00% | | |
|
John Hancock Funds II (G) | | |
Emerging Markets, Class NAV (DFA) | 215,309 | 2,299,502 |
| | |
John Hancock Investment Trust (G) | | |
Greater China Opportunities, Class NAV (John Hancock) (A) | 45,671 | 885,111 |
| | |
International Small Cap 7.50% | | |
|
John Hancock Funds II (G) | | |
International Small Company, Class NAV (DFA) | 162,726 | 1,326,214 |
| | |
See notes to financial statements | Semiannual report | International Allocation Portfolio | 11 |
| | |
| Shares | Value |
Unaffiliated Investment Companies 1.39% | | $244,779 |
|
(Cost $249,733) | | |
| | |
EQUITY 1.39% | | |
| | |
WisdomTree Japan SmallCap Dividend Fund | 3,554 | 155,132 |
|
WisdomTree Japan Hedged Equity Fund | 2,710 | 89,647 |
|
Total investments (Cost $16,447,053)† 99.89% | | $17,667,622 |
|
Other assets and liabilities, net 0.11% | | $20,232 |
|
Total net assets 100.00% | | $17,687,854 |
|
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.
† At 8-31-11, the aggregate cost of investment securities for federal income tax purposes was $18,827,488. Net unrealized depreciation aggregated $1,159,866, of which $1,416,856 related to appreciated investment securities and $2,576,722 related to depreciated investment securities.
| | |
12 | International Allocation Portfolio | Semiannual 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 8-31-11 (unaudited)
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 unaffiliated issuers, at value (Cost $249,733) | $244,779 |
Investments in affiliated funds, at value (Cost $16,197,320) | 17,422,843 |
| |
Total investments, at value (Cost $16,447,053) | 17,667,622 |
Cash | 37,567 |
Receivable for investments sold | 312 |
Receivable for portfolio shares sold | 100 |
Receivable due from adviser | 469 |
Other receivables and prepaid expenses | 34,861 |
| |
Total assets | 17,740,931 |
|
Liabilities | |
|
Payable for portfolio shares repurchased | 8,852 |
Payable to affiliates | |
Accounting and legal services fees | 153 |
Transfer agent fees | 2,518 |
Trustees’ fees | 511 |
Other liabilities and accrued expenses | 41,043 |
| |
Total liabilities | 53,077 |
|
Net assets | |
|
Capital paid-in | $32,285,794 |
Undistributed net investment income | 50,082 |
Accumulated net realized loss on investments | (15,868,591) |
Net unrealized appreciation (depreciation) on investments | 1,220,569 |
| |
Net assets | $17,687,854 |
|
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 ($9,708,885 ÷ 1,289,816 shares) | $7.53 |
Class B ($2,269,294 ÷ 304,117 shares)1 | $7.46 |
Class C ($5,474,192 ÷ 733,126 shares)1 | $7.47 |
Class I ($235,483 ÷ 31,081 shares) | $7.58 |
|
Maximum offering price per share | |
|
Class A (net asset value per share ÷ 95%)2 | $7.93 |
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 | Semiannual 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 six-month period ended 8-31-11
(unaudited)
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 | $3,185 |
| |
Total investment income | 3,185 |
|
Expenses | |
|
Investment management fees (Note 4) | 7,551 |
Distribution and service fees (Note 4) | 58,656 |
Accounting and legal services fees (Note 4) | 1,258 |
Transfer agent fees (Note 4) | 16,163 |
Trustees’ fees (Note 4) | 561 |
State registration fees (Note 4) | 22,513 |
Printing and postage (Note 4) | 5,437 |
Professional fees | 20,221 |
Custodian fees | 6,092 |
Registration and filing fees | 9,612 |
Other | 6,532 |
| |
Total expenses | 154,596 |
Less expense reductions (Note 4) | (63,755) |
| |
Net expenses | 90,841 |
| |
Net investment loss | (87,656) |
|
Realized and unrealized gain (loss) | |
|
Net realized gain (loss) on | |
Investments in affiliated issuers | (84,150) |
| |
| (84,150) |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | (4,954) |
Investments in affiliated issuers | (1,805,341) |
| |
| (1,810,295) |
| |
Net realized and unrealized loss | (1,894,445) |
| |
Decrease in net assets from operations | ($1,982,101) |
| | |
14 | International Allocation Portfolio | Semiannual 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.
| | |
| Six months | |
| ended | Year |
| 8-31-11 | ended |
| (unaudited) | 2-28-11 |
|
Increase (decrease) in net assets | | |
|
From operations | | |
Net investment income (loss) | ($87,656) | $65,507 |
Net realized loss | (84,150) | (34,142) |
Change in net unrealized appreciation (depreciation) | (1,810,295) | 3,589,573 |
| | |
Increase (decrease) in net assets resulting from operations | (1,982,101) | 3,620,938 |
| | |
From Portfolio share transactions (Note 5) | (426,159) | (607,486) |
| | |
Total increase (decrease) | (2,408,260) | 3,013,452 |
|
Net assets | | |
|
Beginning of period | 20,096,114 | 17,082,662 |
| | |
End of period | $17,687,854 | $20,096,114 |
| | |
Undistributed net investment income | $50,082 | $137,738 |
| | |
See notes to financial statements | Semiannual 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 | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $8.35 | $6.82 | $4.31 | $9.48 | $9.96 | $10.00 |
Net investment income (loss)3,4 | (0.02) | 0.05 | 0.02 | 0.12 | 0.13 | (0.01) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (0.80) | 1.48 | 2.55 | (4.86) | (0.03) | (0.03) |
Total from investment operations | (0.82) | 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 | — | — | —5 | (0.29) | (0.45) | — |
Total distributions | — | — | (0.06) | (0.43) | (0.58) | — |
Net asset value, end of period | $7.53 | $8.35 | $6.82 | $4.31 | $9.48 | $9.96 |
Total return (%)6 | (9.82)7 | 22.43 | 59.59 | (50.67) | 0.70 | (0.40)7 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $10 | $11 | $10 | $13 | $30 | $3 |
Ratios (as a percentage of average | | | | | | |
net assets): | | | | | | |
Expenses before reductions | 1.178,9 | 1.158 | 1.068,10 | 0.928 | 1.118 | 8.539 |
Expenses net of fee waivers | 0.638,9 | 0.658 | 0.678,10 | 0.618 | 0.588 | 0.609 |
Expenses net of fee waivers and credits | 0.638,9 | 0.658 | 0.668,10 | 0.618 | 0.588 | 0.609 |
Net investment income (loss)4 | (0.60)9 | 0.62 | 0.29 | 1.56 | 1.21 | (0.60)9 |
Portfolio turnover (%) | 9 | 64 | 41 | 23 | 23 | 3 |
1 Unaudited.
2 The inception date for Class A shares is 12-29-06.
3 Based on the average daily shares outstanding.
4 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.
5 Less than ($0.005) per share.
6 Total returns would have been lower had certain expenses not been reduced during the periods shown.
7 Not annualized.
8 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.13%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the periods ended 8-31-11, 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 Annualized.
10 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
| | |
16 | International Allocation Portfolio | Semiannual report | See notes to financial statements |
| | | | | | |
CLASS B SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $8.30 | $6.84 | $4.32 | $9.46 | $9.95 | $10.00 |
Net investment income (loss)3,4 | (0.05) | — | 0.03 | 0.06 | 0.07 | (0.02) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (0.79) | 1.46 | 2.51 | (4.83) | (0.06) | (0.03) |
Total from investment operations | (0.84) | 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 | — | — | —5 | (0.29) | (0.45) | — |
Total distributions | — | — | (0.02) | (0.37) | (0.50) | — |
Net asset value, end of period | $7.46 | $8.30 | $6.84 | $4.32 | $9.46 | $9.95 |
Total return (%)6 | (10.12)7 | 21.35 | 58.73 | (51.01) | (0.13) | (0.50)7 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $2 | $2 | $1 | $1 | $2 | —8 |
Ratios (as a percentage of average | | | | | | |
net assets): | | | | | | |
Expenses before reductions | 2.239,10 | 2.339 | 3.069,11 | 3.039 | 4.029 | 28.5810 |
Expenses net of fee waivers | 1.339,10 | 1.349 | 1.449,11 | 1.539 | 1.349 | 1.2610 |
Expenses net of fee waivers and credits | 1.339,10 | 1.349 | 1.379,11 | 1.319 | 1.339 | 1.2610 |
Net investment income (loss)4 | (1.30)10 | 0.05 | 0.48 | 0.80 | 0.70 | (1.26)10 |
Portfolio turnover (%) | 9 | 64 | 41 | 23 | 23 | 3 |
1 Unaudited.
2 The inception date for Class B shares is 12-29-06.
3 Based on the average daily shares outstanding.
4 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.
5 Less than ($0.005) per share.
6 Total returns would have been lower had certain expenses not been reduced during the periods shown.
7 Not annualized.
8 Less than $500,000.
9 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.13%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the periods ended 8-31-11, 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.
10 Annualized.
11 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
| | |
See notes to financial statements | Semiannual report | International Allocation Portfolio | 17 |
| | | | | | |
CLASS C SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $8.31 | $6.84 | $4.32 | $9.46 | $9.95 | $10.00 |
Net investment income (loss)3,4 | (0.05) | —5 | 0.03 | 0.06 | 0.08 | (0.02) |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (0.79) | 1.47 | 2.51 | (4.83) | (0.07) | (0.03) |
Total from investment operations | (0.84) | 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 | — | — | —5 | (0.29) | (0.45) | — |
Total distributions | — | — | (0.02) | (0.37) | (0.50) | — |
Net asset value, end of period | $7.47 | $8.31 | $6.84 | $4.32 | $9.46 | $9.95 |
Total return (%)6 | (10.11)7 | 21.49 | 58.73 | (51.01) | (0.13) | (0.50)7 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | $5 | $6 | $5 | $3 | $8 | $1 |
Ratios (as a percentage of average | | | | | | |
net assets): | | | | | | |
Expenses before reductions | 1.948,9 | 1.968 | 2.118,10 | 1.928 | 2.318 | 18.629 |
Expenses net of fee waivers | 1.338,9 | 1.358 | 1.408,10 | 1.318 | 1.338 | 1.279 |
Expenses net of fee waivers and credits | 1.338,9 | 1.358 | 1.378,10 | 1.318 | 1.338 | 1.279 |
Net investment income (loss)4 | (1.30)9 | (0.06) | 0.44 | 0.76 | 0.79 | (1.27)9 |
Portfolio turnover (%) | 9 | 64 | 41 | 23 | 23 | 3 |
1 Unaudited.
2 The inception date for Class C shares is 12-29-06.
3 Based on the average daily shares outstanding.
4 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.
5 Less than ($0.005) per share.
6 Total returns would have been lower had certain expenses not been reduced during the periods shown.
7 Not annualized.
8 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.13%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the periods ended 8-31-11, 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 Annualized.
10 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
| | |
18 | International Allocation Portfolio | Semiannual report | See notes to financial statements |
| | | | | | |
CLASS I SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 | 2-28-072 |
|
Per share operating performance | | | | | | |
|
Net asset value, beginning of period | $8.38 | $6.82 | $4.30 | $9.49 | $9.97 | $10.00 |
Net investment income (loss)3,4 | (0.01) | 0.07 | 0.09 | 0.11 | 0.16 | —5 |
Net realized and unrealized gain (loss) | | | | | | |
on investments | (0.79) | 1.49 | 2.52 | (4.84) | (0.03) | (0.03) |
Total from investment operations | (0.80) | 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 | — | — | —5 | (0.29) | (0.45) | — |
Total distributions | — | — | (0.09) | (0.46) | (0.61) | — |
Net asset value, end of period | $7.58 | $8.38 | $6.82 | $4.30 | $9.49 | $9.97 |
Total return (%)6 | (9.55)7 | 22.87 | 60.62 | (50.48) | 1.02 | (0.30)7 |
|
Ratios and supplemental data | | | | | | |
|
Net assets, end of period (in millions) | —8 | —8 | —8 | —8 | $1 | —8 |
Ratios (as a percentage of average | | | | | | |
net assets): | | | | | | |
Expenses before reductions | 4.129,10 | 5.699 | 4.689,11 | 1.359 | 7.179 | 25.0110 |
Expenses net of fee waivers | 0.209,10 | 0.189 | 0.199,11 | 0.169 | 0.189 | 0.1710 |
Expenses net of fee waivers and credits | 0.209,10 | 0.189 | 0.199,11 | 0.169 | 0.189 | 0.1710 |
Net investment income (loss)4 | (0.17)10 | 0.91 | 1.46 | 1.44 | 1.55 | (0.17)10 |
Portfolio turnover (%) | 9 | 64 | 41 | 23 | 23 | 3 |
1 Unaudited.
2 The inception date for Class I shares is 12-29-06.
3 Based on the average daily shares outstanding.
4 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.
5 Less than ($0.005) per share.
6 Total returns would have been lower had certain expenses not been reduced during the periods shown.
7 Not annualized.
8 Less than $500,000.
9 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.91% to 1.13%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the periods ended 8-31-11, 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.
10 Annualized.
11 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
| | |
See notes to financial statements | Semiannual report | International Allocation Portfolio | 19 |
Notes to financial statements
(unaudited)
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, if any, transfer agent fees, printing and postage and registration 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, including registered investment companies. 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.
| |
20 | International Allocation Portfolio | Semiannual report |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the six months ended August 31, 2011, there were no significant transfers in or out of Level 1 or Level 2 assets. As of August 31, 2011, all investments are categorized as Level 1 under the hierarchy described above.
In order to value the securities, the Portfolio uses the following valuation techniques. Equity securities, including exchange-traded funds, held by the Portfolio 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 by the Portfolio in underlying affiliated funds and/or other open-end management investment companies are valued at their respective net asset values each business day.
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 the 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, effective March 30, 2011, the Portfolio and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 30, 2011, the Portfolio had a similar agreement with State Street Bank and Trust Company. 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 six months ended August 31, 2011, the Portfolio had no borrowings under the line of credit.
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 assets 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 assets 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.
| |
Semiannual 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 |
Under the 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, derecognition or disclosure. The Portfolio’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Portfolio generally declares and pays dividends and capital gain distributions, if any, annually.
Distributions paid by the Portfolio with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Short-term gains from underlying funds are treated as ordinary income for tax purposes.
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.
New accounting pronouncement. In May 2011, Accounting Standards Update 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued and is effective during interim and annual periods beginning after December 15, 2011. ASU 2011-04 amends Financial Accounting Standards Board (FASB) Topic 820, Fair Value Measurement. The amendments are the result of the work by the FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. Management is currently evaluating the application of ASU 2011-04 and its impact, if any, on the Portfolio’s financial statements.
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.
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22 | International Allocation Portfolio | Semiannual report |
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 Portfolio has an investment management agreement 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 and John Hancock Asset Management a division of Manulife Asset Management (US) LLC, indirectly owned subsidiaries of MFC and affiliates of the Adviser. The Portfolio is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the six months ended August 31, 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 0.27% 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, 2012. Prior to July 1, 2011, the fee waivers and/or reimbursements were such that these expenses would not exceed 0.63%, 1.33%, 1.33% and 0.17% for Class A, Class B, Class C and Class I shares.
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 $29,648, $10,987, $18,273 and $4,847 for Class A, Class B, Class C and Class I shares, respectively, for the six months ended August 31, 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 six months ended August 31, 2011, amounted to an annual rate of 0.01% 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 provided as the distributor of shares of the Portfolio. The Portfolio may pay up to the following
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Semiannual report | International Allocation Portfolio | 23 |
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 $8,959 for the six months ended August 31, 2011. Of this amount, $1,531 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $7,184 was paid as sales commissions to broker-dealers and $244 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 (CDSCs). Class B shares that are redeemed within six years of purchase are subject to CDSCs, 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 six months ended August 31, 2011, CDSCs received by the Distributor amounted to $1,118 and $260 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 fees that Signature Services receives with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended August 31, 2011, were:
| | | | |
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
|
Class A | $16,337 | $9,043 | $6,802 | $3,017 |
Class B | 12,149 | 2,024 | 5,948 | 574 |
Class C | 30,170 | 5,016 | 5,546 | 1,702 |
Class I | — | 80 | 4,217 | 144 |
Total | $58,656 | $16,163 | $22,513 | $5,437 |
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24 | International Allocation Portfolio | Semiannual report |
Trustee expenses. The Portfolio 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 six months ended August 31, 2011, and for the year ended February 28, 2011, were as follows:
| | | | |
| Six months ended 8-31-11 | Year ended 2-28-11 |
| Shares | Amount | Shares | Amount |
Class A shares | | | | |
|
Sold | 151,166 | $1,249,179 | 299,343 | $2,223,804 |
Repurchased | (236,951) | (1,944,226) | (429,709) | (3,132,873) |
| | | | |
Net decrease | (85,785) | ($695,047) | (130,366) | ($909,069) |
|
Class B shares | | | | |
|
Sold | 47,741 | $393,237 | 124,785 | $912,788 |
Repurchased | (21,834) | (176,642) | (35,612) | (257,341) |
| | | | |
Net increase | 25,907 | $216,595 | 89,173 | $655,447 |
|
Class C shares | | | | |
|
Sold | 81,963 | $653,087 | 185,601 | $1,310,203 |
Repurchased | (74,990) | (592,386) | (221,117) | (1,580,337) |
| | | | |
Net increase (decrease) | 6,973 | $60,701 | (35,516) | ($270,134) |
|
Class I shares | | | | |
|
Sold | 10,283 | $84,748 | 12,543 | $92,073 |
Repurchased | (11,316) | (93,156) | (24,742) | (175,803) |
| | | | |
Net decrease | (1,033) | ($8,408) | (12,199) | ($83,730) |
|
Net decrease | (53,938) | ($426,159) | (88,908) | ($607,486) |
|
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $1,760,988 and $2,318,000, respectively, for the six months ended August 31, 2011.
Note 7 — Investment in affiliated underlying funds
The Portfolio invests primarily in affiliated underlying funds that are managed by the Adviser and affiliates. The Portfolio does not invest in the affiliated underlying funds for the purpose of exercising management or control; however, the Portfolio’s investment may represent a significant portion of each underlying fund’s net assets. For the six months ended August 31, 2011, the Portfolio did not hold 5% or more of any underlying fund’s net assets.
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Semiannual report | International Allocation Portfolio | 25 |
Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreements
The Board of Trustees (the Board, the members of which are referred to as Trustees) of John Hancock International Allocation Portfolio (the Portfolio), a series of John Hancock Funds III, met in-person on May 1–3 and June 5–7, 2011 to consider the approval of the Portfolio’s investment advisory agreement (the Advisory Agreement) with John Hancock Investment Management Services, LLC (the Adviser), the Portfolio’s investment adviser. The Board also considered the approval of the investment subadvisory agreements (together, the Subadvisory Agreements) among the Adviser, Manulife Asset Management (US) LLC and Manulife Asset Management (North America) Limited (together, the Subadvisers) on behalf of the Portfolio. The Advisory Agreement and the Subadvisory Agreements are referred to as the Agreements.
Activities and composition of the Board
The Board consists of eleven individuals, nine of whom are Independent Trustees. Independent Trustees are generally those individuals who are not employed by or have any significant business or professional relationship with the Adviser or the Subadvisers. The Trustees are responsible for the oversight of operations of the Portfolio and perform various duties required of directors of investment companies by the Investment Company Act of 1940, as amended (the 1940 Act). The Independent Trustees have hired independent legal counsel to assist them in connection with their duties. The Board has appointed an Independent Trustee as Chairperson. The Board has established four standing committees that are composed entirely of Independent Trustees: the Audit Committee; the Compliance Committee; the Nominating, Governance and Administration Committee; and the Contracts/Operations Committee. Additionally, Investment Performance Committees A and B are standing committees of the Board that are each composed of Independent Trustees and one Trustee who is affiliated with the Adviser. Investment Performance Committee B oversees and monitors matters relating to the investment performance of the Portfolio. The Board has also designated an Independent Trustee as Vice Chairperson to serve in the absence of the Chairperson. The Board also designates working groups or ad hoc committees as it deems appropriate.
The approval process
Under the 1940 Act, the Board is required to consider the continuation of the Agreements each year. Throughout the year, the Board, acting directly and through its committees, regularly reviews and assesses the quality of the services that the Portfolio receives under these Agreements. The Board reviews reports of the Adviser at least quarterly, which include Portfolio performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. The Board considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by the Adviser and Subadvisers to the Portfolio and its shareholders.
Prior to the May 1–3, 2011 meeting, the Board requested and received materials specifically relating to the Agreements. The materials provided in connection with the May meeting included information compiled and prepared by Morningstar, Inc. (Morningstar) on Portfolio fees and expenses, and the investment performance of the Portfolio. This Portfolio information is assembled in a format that permits comparison with similar information from a Category and a subset of the Category referred to as the Peer Group, each as determined by Morningstar, and with the Portfolio’s benchmark index. The Category includes all funds that invest similarly to the way the Portfolio invests. The Peer Group represents funds of similar size, excluding passively managed funds. The Portfolio’s benchmark index is an unmanaged index of securities that is provided as a basis for comparison with the Portfolio’s performance. Other material provided for the Portfolio review included (a) information on the profitability of the Agreements to the Adviser and a discussion of any additional benefits to the Adviser or Subadvisers or their affiliates that result from being the Adviser or Subadvisers to the Portfolio; (b) a general analysis provided by the Adviser and the Subadvisers concerning investment advisory fees charged to other clients, such as institutional clients and other investment companies,
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26 | International Allocation Portfolio | Semiannual report |
having similar investment mandates, as well as the performance of those other clients and a comparison of the services provided to those other clients and the services provided to the Portfolio; (c) the impact of economies of scale; (d) a summary of aggregate amounts paid by the Portfolio to the Adviser; and (e) sales and redemption data regarding the Portfolio’s shares.
At an in-person meeting held on May 1–3, 2011, the Board reviewed materials relevant to its consideration of the Agreements. As a result of the discussions that occurred during the May 1–3, 2011 meeting, the Board asked the Adviser for additional information on certain matters. The Adviser provided the additional information and the Board also considered this information as part of its consideration of the Agreements.
At an in-person meeting held on June 5–7, 2011, the Board, including the Independent Trustees, formally considered the continuation of the Advisory Agreement between the Adviser and the Portfolio and the Subadvisory Agreements between the Adviser and the Subadvisers with respect to the Portfolio, each for an additional one-year term. The Board considered what it believed were key relevant factors that are described under separate headings presented below.
The Board also considered other matters important to the approval process, such as payments made to and by the Adviser or its affiliates relating to the distribution of Portfolio shares and other services. The Board reviewed services related to the valuation and pricing of the Portfolio’s holdings. Other important matters considered by the Board were the direct and indirect benefits to the Adviser, the Subadvisers and their affiliates from their relationship with the Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review.
Nature, extent and quality of services
The Board reviewed the nature, extent and quality of services provided by the Adviser and the Subadvisers, including the investment advisory services and the resulting performance of the Portfolio.
The Board considered the ability of the Adviser and the Subadvisers, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. It considered the background and experience of senior management and investment professionals responsible for managing the Portfolio. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Subadvisers responsible for the daily investment activities of the Portfolio, including, among other things, portfolio trading capabilities, use of technology, commitment to compliance and approach to training and retaining portfolio managers and other research, advisory and management personnel.
The Board considered each Subadviser’s history and experience providing investment services to the Portfolio. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Portfolio’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadvisers’ compliance departments.
In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Portfolio by the Adviser under a separate agreement. The Board noted that the Adviser and its affiliates provide the Portfolio with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Portfolio. The Board reviewed the structure and duties of the Adviser’s administration, accounting, legal and compliance departments and its affiliate’s transfer agency operations and considered the Adviser’s and its affiliates’ policies and procedures for assuring compliance with applicable laws and regulations.
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Semiannual report | International Allocation Portfolio | 27 |
The Board also received information about the nature, extent and quality of services provided by and fee rates charged by the Adviser and Subadvisers to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board reviewed a general analysis provided by the Adviser and the Subadvisers concerning investment advisory fees charged to other clients having similar investment mandates, the services provided to those other clients as compared to the services provided to the Portfolio, the performance of those other clients as compared to the performance by the Portfolio and other factors relating to those other clients. The Board considered the significant differences between the Adviser’s and Subadvisers’ services to the Portfolio and the services they provide to other clients. For other clients that are not mutual funds, the differences in services relate to the greater share purchase and redemption activity in a mutual fund, the generally higher turnover of mutual fund portfolio holdings, the more burdensome regulatory and legal obligations of mutual funds and the higher marketing costs for mutual funds. When compared to all clients including mutual funds, the Adviser has greater oversight and supervisory responsibility for the Portfolio and undertakes greater entrepreneurial risk as the sponsor of the Portfolio.
Portfolio performance
The Board was provided with reports, independently prepared by Morningstar, which included a comprehensive analysis of the Portfolio’s performance. The Board also examined materials provided by the Portfolio’s management team discussing Portfolio performance and the Portfolio’s investment objective, strategies and outlook. The Board also reviewed a narrative and statistical analysis of the Morningstar data that was prepared by the Adviser, which analyzed various factors that may affect the Morningstar rankings. The Board reviewed information regarding the investment performance of the Portfolio as compared to its Morningstar Category as well as its benchmark index (see chart below). The Board was provided with a description of the methodology used by Morningstar to select the funds in the Category, which includes both funds-of-funds and stand-alone funds. The Board also considered updated performance information provided by the Adviser at its May and June 2011 meetings. The Board regularly reviews the performance of the Portfolio throughout the year and attaches more importance to performance over relatively longer periods of time, typically three to five years.
Set forth below is the performance of the Portfolio over certain time periods ended December 31, 2010 and that of its Category and benchmark index over the same periods:
| | | | |
| 1 YEAR | 3 YEAR | 5 YEAR | 10 YEAR |
|
International Allocation Portfolio | 13.29% | –5.09% | — | — |
Class A | | | | |
Foreign Large Blend Category Average | 12.38% | –4.54% | — | — |
MSCI EAFE GR Index | 8.21% | –6.55% | — | — |
The Board noted that the Portfolio had outperformed its Category’s average performance over one period shown and had underperformed its Category’s average performance for other period shown. However, the Board noted that the Category included stand-alone funds in addition to funds-of-funds like the Portfolio. The Board noted that the Portfolio’s performance compared favorably to its benchmark index’s performance for the periods shown.
Expenses and fees
The Board, including the Independent Trustees, reviewed the Portfolio’s contractual advisory fee rate payable by the Portfolio to the Adviser as compared with the other funds in its Peer Group, which, as noted above, included stand-alone funds as well as funds-of-funds. The Board also received information about the investment subadvisory fee rate payable by the Adviser to the Subadvisers for investment subadvisory services. The Board considered the services provided and the fees charged by the Adviser and the Subadvisers to other clients with similar investment mandates, including separately managed institutional accounts.
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28 | International Allocation Portfolio | Semiannual report |
In addition, the Board considered the cost of the services provided to the Portfolio by the Adviser. The Board received and considered expense information regarding the Portfolio’s various components, including advisory fees, distribution fees and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, administration fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also considered expense information regarding the Portfolio’s total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the Adviser’s contractual fee waiver/expense reimbursement agreement into account (Net Expense Ratio). The Board considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Portfolio to that of the Peer Group median. As part of its analysis, the Board reviewed the Adviser’s methodology in allocating its costs to the management of the Portfolio and the Fund complex.
The Board noted that the Portfolio’s advisory fee ratio was eighty-three basis points below the Peer Group median advisory fee ratio. The Board recognized that the large difference is due to the fact that the Portfolio’s advisory fee does not include the fees of the underlying funds and that the comparative expense ratio information provided to the Board was a more useful comparison than the advisory fee comparison. The Board noted the following information about the Portfolio’s Gross and Net Expense Ratios for Class A shares contained in the Portfolio’s 2010 financial statements in relation with the Portfolio’s Peer Group median provided by Morningstar in April 2011:
| | |
| PORTFOLIO (CLASS A) | PEER GROUP MEDIAN |
|
Advisory Fee Ratio | 0.07% | 0.90% |
Gross Expense Ratio | 1.18% | 1.30% |
Net Expense Ratio | 0.66% | 1.00% |
The Board viewed favorably the Adviser’s contractual agreement to waive all or a portion of its advisory fees and to reimburse or pay operating expenses to the extent necessary to maintain the Portfolio’s Net Expense Ratio at 0.63% for Class A shares, excluding certain expenses such as taxes, brokerage commissions, interest, litigation and extraordinary expenses and underlying fund expenses, until June 30, 2012. The Board favorably considered the impact of this contractual agreement toward ultimately lowering the Portfolio’s Gross Expense Ratio. The Board also received and considered information relating to the Portfolio’s Gross Expense Ratio and Net Expense Ratio that reflected the new methodology for calculating transfer agent fees that was approved by the Trustees at the June 2010 meeting, which had the effect of lowering the expense ratio.
The Board received and reviewed statements relating to the Adviser’s financial condition and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by the Adviser for services under the Advisory Agreement, as well as from other relationships between the Portfolio and the Adviser and its affiliates. The Board reviewed the Adviser’s profitability with respect to the Portfolio and other funds the Board currently oversees for the year ended December 31, 2010 compared to available aggregate profitability data provided for the year ended December 31, 2009. The Board reviewed the Adviser’s profitability with respect to other fund complexes managed by the Adviser and/or its affiliates. The Board reviewed the Adviser’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products.
The Board also considered a comparison of the Adviser’s profitability to that of other similar investment advisers whose profitability information is publicly available. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Adviser, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited.
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Semiannual report | International Allocation Portfolio | 29 |
The Board considered the profitability information with respect to the Subadvisers, which are affiliated with the Adviser. In addition, as noted above, the Board considered the assumptions and methodology for allocating expenses in the Subadvisers’ profitability analysis.
Economies of scale
The Board, including the Independent Trustees, considered the extent to which economies of scale might be realized as the assets of the Portfolio increase. Possible changes in the advisory fee rate or structure in order to enable the Portfolio to participate in these economies of scale (e.g., through the use of breakpoints in the advisory fee at higher asset levels) are periodically discussed. The Board also considered the Adviser’s overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the Portfolio.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably shared with the Portfolio as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the contractual advisory fee rate.
Other benefits to the Adviser and the Subadvisers
The Board understands that the Adviser, the Subadvisers or their affiliates may derive other ancillary benefits from their relationship with the Portfolio, both tangible and intangible, such as their ability to leverage investment professionals who manage other portfolios, an increase in their pro-file in the investment advisory community and the engagement of their affiliates and/or significant shareholders as service providers to the Portfolio, including for administrative, transfer agency and distribution services. The Board believes that certain of these benefits are difficult to quantify. The Board also was informed that the Subadvisers may use third-party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts.
Board determination
The Board unanimously approved the continuation of the Advisory Agreement between the Adviser and the Portfolio for an additional one-year term. The Subadvisory Agreements between the Adviser and the Subadvisers with respect to the Portfolio were also approved for an additional one-year term. Based upon its evaluation of relevant factors in their totality, the Board was satisfied that the terms of the Agreements, including the advisory and subadvisory fee rates, were fair and reasonable and in the best interest of the Portfolio and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or any group of factors as all-important or controlling, but considered all factors together. Different Trustees may have attributed different weights to the various factors considered. The Independent Trustees were also assisted by independent legal counsel in making this determination. The Trustees’ conclusions may be based in part on their consideration of these arrangements in prior years and on their ongoing regular review of Portfolio performance and operations throughout the year.
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30 | International Allocation Portfolio | Semiannual report |
More information
| |
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
James F. Carlin | Services, LLC |
William H. Cunningham | |
Deborah C. Jackson | Subadviser |
Charles L. Ladner,* Vice Chairman | 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 | |
| |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | |
| |
Francis V. Knox, Jr. | |
Chief Compliance Officer | |
| |
Charles A. Rizzo | |
Chief Financial Officer | |
| |
Salvatore Schiavone | |
Treasurer | |
|
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 9-13-11 | |
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 at 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 |
| |
Semiannual report | International Allocation Portfolio | 31 |
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. | 318SA 8/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 10/11 |
A look at performance
Total returns for the period ended August 31, 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 | | 6-months | 1-year | 5-year | 10-year | inception | | 8-31-11 | | 8-31-11 |
|
Class A | 11.86 | — | — | 0.172 | | –5.71 | 11.86 | — | — | 0.752 | | 2.92 | | 2.85 |
|
Class B | 12.00 | — | — | 0.202 | | –5.98 | 12.00 | — | — | 0.892 | | 2.48 | | 2.00 |
|
Class C | 16.00 | — | — | 0.602 | | –2.18 | 16.00 | — | — | 2.752 | | 2.48 | | 2.27 |
|
Class I3 | 18.28 | — | — | 1.792 | | –0.62 | 18.28 | — | — | 8.312 | | 3.59 | | 3.27 |
|
Class NAV 3 | 18.39 | — | — | 2.244 | | –0.58 | 18.39 | — | — | 7.684 | | 3.61 | | 3.53 |
|
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 those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 6-30-12 for Class A, Class B, Class C, Class I and Class NAV shares. Had the fee waivers and expense limitations not been in place gross expenses would apply. The expense ratios are as follows:
| | | | | | | | | | | |
| Class A | Class B | Class C | Class I | Class NAV | | | | | | |
Net (%) | 1.42 | 2.12 | 2.12 | 0.97 | 0.91 | | | | | | |
Gross (%) | 1.56 | 2.88 | 2.38 | 1.12 | 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.
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6 | Global Shareholder Yield Fund | Semiannual report |
| | | | | | | |
| | Without | With maximum | | | | |
| Start date | sales charge | sales charge | Index | | | |
| | | |
Class B | 3-1-07 | $10,275 | $10,089 | $9,200 | | | |
| | | |
Class C6 | 3-1-07 | 10,275 | 10,275 | 9,200 | | | |
| | | |
Class I 3 | 3-1-07 | 10,831 | 10,831 | 9,200 | | | |
| | | |
Class NAV 3 | 4-28-08 | 10,768 | 10,768 | 8,767 | | | |
| | | |
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 Unsubsidized yields reflect what the yields 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 share prospectuses. 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.
4 From 4-28-08.
5 NAV represents net asset value and POP represents public offering price. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in different classes and the fee structure of those classes.
6 No contingent deferred sales charge is applicable.
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Semiannual report | Global Shareholder Yield Fund | 7 |
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 March 1, 2011 with the same investment held until August 31, 2011.
| | | |
| Account value | Ending value | Expenses paid during |
| on 3-1-11 | on 8-31-11 | period ended 8-31-111 |
|
Class A | $1,000.00 | $992.50 | $7.06 |
|
Class B | 1,000.00 | 989.00 | 10.65 |
|
Class C | 1,000.00 | 987.90 | 10.69 |
|
Class I | 1,000.00 | 993.80 | 4.91 |
|
Class NAV | 1,000.00 | 994.20 | 4.51 |
|
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 August 31, 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:
| |
8 | Global Shareholder Yield Fund | Semiannual report |
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 March 1, 2011, with the same investment held until August 31, 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 3-1-11 | on 8-31-11 | period ended 8-31-111 |
|
Class A | $1,000.00 | $1,018.10 | $7.15 |
|
Class B | 1,000.00 | 1,014.40 | 10.79 |
|
Class C | 1,000.00 | 1,014.40 | 10.84 |
|
Class I | 1,000.00 | 1,020.20 | 4.98 |
|
Class NAV | 1,000.00 | 1,020.60 | 4.57 |
|
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 1.41%, 2.13%, 2.14%, 0.98% and 0.90% for Class A, Class B, Class C, Class I and Class NAV, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
| |
Semiannual report | Global Shareholder Yield Fund | 9 |
Portfolio summary
| | | | |
Top 10 Holdings (17.6% of Net Assets on 8-31-11) 1 | | | |
|
BCE, Inc. | 2.2% | | Nestle SA | 1.7% |
| |
|
Swisscom AG | 2.0% | | NiSource, Inc. | 1.6% |
| |
|
Vodafone Group PLC | 1.8% | | National Grid PLC | 1.6% |
| |
|
Imperial Tobacco Group PLC | 1.8% | | Philip Morris International, Inc. | 1.6% |
| |
|
Pearson PLC | 1.8% | | Diageo PLC | 1.5% |
| |
|
|
Sector Composition2,3 | | | | |
|
Consumer Staples | 18% | | Health Care | 7% |
| |
|
Telecommunication Services | 15% | | Information Technology | 5% |
| |
|
Utilities | 14% | | Financials | 4% |
| |
|
Consumer Discretionary | 10% | | Materials | 3% |
| |
|
Industrials | 9% | | Short-Term Investments & Other | 6% |
| |
|
Energy | 9% | | | |
| | |
1 As a percentage of net assets on 8-31-11. Cash and cash equivalents not included in Top 10 Holdings or Top 10 Countries.
2 As a percentage of net assets on 8-31-11.
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.
| |
10 | Global Shareholder Yield Fund | Semiannual report |
Fund’s investments
As of 8-31-11 (unaudited)
| | |
| Shares | Value |
Common Stocks 93.64% | | $450,720,940 |
|
(Cost $415,971,013) | | |
| | |
Australia 1.53% | | 7,358,095 |
|
BHP Billiton, Ltd., ADR | 29,000 | 2,469,930 |
|
JB Hi-Fi, Ltd. | 146,300 | 2,326,364 |
|
Westpac Banking Corp. | 115,761 | 2,561,801 |
| | |
Belgium 2.07% | | 9,964,881 |
|
Anheuser-Busch InBev NV | 117,020 | 6,461,034 |
|
Mobistar SA | 53,888 | 3,503,847 |
| | |
Brazil 0.91% | | 4,362,727 |
|
CPFL Energia SA | 334,700 | 4,362,727 |
| | |
Canada 3.91% | | 18,830,080 |
|
BCE, Inc. | 267,100 | 10,740,731 |
|
Rogers Communications, Inc., Class B | 110,000 | 4,269,478 |
|
Shaw Communications, Inc., Class B | 167,000 | 3,819,871 |
| | |
Finland 0.53% | | 2,570,186 |
|
Fortum OYJ | 95,600 | 2,570,186 |
| | |
France 6.66% | | 32,062,104 |
|
Air Liquide SA | 20,040 | 2,600,469 |
|
France Telecom SA | 319,400 | 6,121,098 |
|
SCOR SE | 167,400 | 3,942,777 |
|
Total SA | 139,000 | 6,785,740 |
|
Vinci SA | 109,000 | 5,676,193 |
|
Vivendi SA | 284,700 | 6,935,827 |
| | |
Germany 2.85% | | 13,710,838 |
|
BASF SE | 88,000 | 6,262,487 |
|
Daimler AG | 66,300 | 3,578,550 |
|
Muenchener Rueckversicherungs AG | 29,600 | 3,869,801 |
| | |
Hong Kong 1.14% | | 5,464,956 |
|
China Mobile, Ltd., ADR | 106,800 | 5,464,956 |
| | |
Italy 1.52% | | 7,307,413 |
|
Enel SpA | 551,800 | 2,694,207 |
|
Terna Rete Elettrica Nazionale SpA | 1,272,600 | 4,613,206 |
| | |
Netherlands 1.44% | | 6,946,380 |
|
Royal Dutch Shell PLC, ADR | 103,600 | 6,946,380 |
| | |
See notes to financial statements | Semiannual report | Global Shareholder Yield Fund | 11 |
| | |
| Shares | Value |
Norway 0.49% | | $2,357,142 |
|
Orkla ASA | 282,800 | 2,357,142 |
| | |
Philippines 0.65% | | 3,145,411 |
|
Philippine Long Distance Telephone Company, ADR | 54,551 | 3,145,411 |
| | |
Spain 0.72% | | 3,453,566 |
|
Telefonica SA | 165,300 | 3,453,566 |
| | |
Switzerland 5.30% | | 25,506,406 |
|
Nestle SA | 133,900 | 8,291,045 |
|
Novartis AG | 62,800 | 3,669,697 |
|
Roche Holdings AG | 22,600 | 3,956,141 |
|
Swisscom AG | 21,400 | 9,589,523 |
| | |
Taiwan 1.69% | | 8,151,452 |
|
HTC Corp. | 87,382 | 2,294,531 |
|
Taiwan Semiconductor Manufacturing Company, Ltd., ADR | 489,300 | 5,856,921 |
| | |
United Kingdom 18.95% | | 91,187,312 |
|
AstraZeneca PLC, ADR | 138,400 | 6,562,928 |
|
BAE Systems PLC | 1,026,800 | 4,587,395 |
|
British American Tobacco PLC | 87,300 | 3,887,059 |
|
Compass Group PLC (I) | 353,900 | 3,164,408 |
|
Diageo PLC, ADR | 90,200 | 7,239,452 |
|
FirstGroup PLC | 1,133,972 | 6,752,331 |
|
GlaxoSmithKline PLC | 164,450 | 3,508,191 |
|
Imperial Tobacco Group PLC | 259,800 | 8,603,416 |
|
Meggitt PLC (I) | 580,800 | 3,246,860 |
|
National Grid PLC | 746,960 | 7,544,753 |
|
Pearson PLC | 467,700 | 8,444,598 |
|
Reckitt Benckiser Group PLC | 67,300 | 3,572,197 |
|
Scottish & Southern Energy PLC | 235,600 | 4,970,666 |
|
Unilever PLC | 78,400 | 2,633,972 |
|
United Utilities Group PLC | 483,563 | 4,708,559 |
|
Vodafone Group PLC | 3,391,300 | 8,880,808 |
|
WM Morrison Supermarket PLC | 613,950 | 2,879,719 |
| | |
United States 43.28% | | 208,341,991 |
|
Abbott Laboratories | 52,900 | 2,777,779 |
|
Altria Group, Inc. | 260,500 | 7,082,995 |
|
Arthur J. Gallagher & Company | 155,300 | 4,381,013 |
|
AT&T, Inc. | 181,100 | 5,157,728 |
|
Automatic Data Processing, Inc. | 54,500 | 2,726,635 |
|
Bristol-Myers Squibb Company | 195,100 | 5,804,225 |
|
CenturyLink, Inc. | 197,700 | 7,146,855 |
|
Chevron Corp. | 35,700 | 3,531,087 |
|
CMS Energy Corp. | 173,100 | 3,410,070 |
|
Coca-Cola Enterprises, Inc. | 96,600 | 2,668,092 |
|
Comcast Corp., Special Class A | 168,600 | 3,567,576 |
|
ConocoPhillips | 35,400 | 2,409,678 |
|
Diamond Offshore Drilling, Inc. | 59,900 | 3,817,427 |
|
Diebold, Inc. | 86,700 | 2,483,088 |
|
Duke Energy Corp. | 129,700 | 2,452,627 |
| | |
12 | Global Shareholder Yield Fund | Semiannual report | See notes to financial statements |
| | |
| Shares | Value |
United States (continued) | | |
|
E.I. du Pont de Nemours & Company | 91,500 | $4,416,705 |
|
Emerson Electric Company | 56,400 | 2,625,420 |
|
Enterprise Products Partners LP | 81,300 | 3,426,795 |
|
Exxon Mobil Corp. | 33,500 | 2,480,340 |
|
Genuine Parts Company | 52,300 | 2,877,546 |
|
H.J. Heinz Company | 49,100 | 2,584,624 |
|
Honeywell International, Inc. | 57,100 | 2,729,951 |
|
Integrys Energy Group, Inc. | 48,150 | 2,410,871 |
|
Johnson & Johnson | 57,700 | 3,796,660 |
|
Kimberly-Clark Corp. | 79,700 | 5,512,052 |
|
Kinder Morgan Energy Partners LP | 67,600 | 4,742,816 |
|
Lockheed Martin Corp. | 61,800 | 4,584,942 |
|
Lorillard, Inc. | 55,800 | 6,217,236 |
|
Markwest Energy Partners LP | 51,000 | 2,450,550 |
|
McDonald’s Corp. | 32,200 | 2,912,812 |
|
Merck & Company, Inc. | 96,300 | 3,189,456 |
|
Microchip Technology, Inc. | 127,800 | 4,194,396 |
|
Microsoft Corp. | 149,500 | 3,976,700 |
|
NiSource, Inc. | 354,800 | 7,578,528 |
|
Oracle Corp. | 162,300 | 4,555,761 |
|
PepsiCo, Inc. | 35,700 | 2,300,151 |
|
Philip Morris International, Inc. | 107,800 | 7,472,696 |
|
Pitney Bowes, Inc. | 203,700 | 4,137,147 |
|
Progress Energy, Inc. | 102,300 | 4,992,240 |
|
R.R. Donnelley & Sons Company | 182,700 | 2,786,175 |
|
Regal Entertainment Group | 354,200 | 4,629,394 |
|
Reynolds American, Inc. | 161,600 | 6,071,312 |
|
SCANA Corp. | 67,400 | 2,710,828 |
|
Southern Company | 114,100 | 4,719,176 |
|
Spectra Energy Corp. | 93,700 | 2,433,389 |
|
TECO Energy, Inc. | 238,500 | 4,364,550 |
|
The Coca-Cola Company | 39,500 | 2,782,775 |
|
The Travelers Companies, Inc. | 44,300 | 2,235,378 |
|
Time Warner, Inc. | 98,200 | 3,109,012 |
|
Vectren Corp. | 122,700 | 3,358,299 |
|
Verizon Communications, Inc. | 165,100 | 5,971,665 |
|
Waste Management, Inc. | 110,900 | 3,664,136 |
|
Williams Partners LP | 72,400 | 3,922,632 |
|
|
Preferred Securities 0.69% | | $3,317,184 |
|
(Cost $3,169,320) | | |
| | |
United States 0.69% | | 3,317,184 |
|
MetLife, Inc., Series B, 6.500% | 132,900 | 3,317,184 |
| | |
See notes to financial statements | Semiannual report | Global Shareholder Yield Fund | 13 |
| | |
| Shares | Value |
Short-Term Investments 4.01% | | $19,324,861 |
|
(Cost $19,324,861) | | |
| | |
Money Market Funds 4.01% | | 19,324,861 |
|
State Street Institutional Treasury Money Market Fund, 0.000% (Y) | 19,324,861 | 19,324,861 |
|
Total investments (Cost $438,465,194)† 98.34% | | $473,362,985 |
|
Other assets and liabilities, net 1.66% | | $7,985,218 |
|
Total net assets 100.00% | | $481,348,203 |
|
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
(I) Non-income producing.
(Y) The rate shown is the annualized seven-day yield as of 8-31-11.
† At 8-31-11, the aggregate cost of investment securities for federal income tax purposes was $441,326,028. Net unrealized appreciation aggregated $32,036,957, of which $44,476,196 related to appreciated investment securities and $12,439,239 related to depreciated investment securities.
The portfolio had the following sector composition as a percentage of total net assets on 8-31-11:
| | | | | | | | |
Consumer Staples | 18% | | | | | | | |
Telecommunication Services | 15% | | | | | | | |
Utilities | 14% | | | | | | | |
Consumer Discretionary | 10% | | | | | | | |
Industrials | 9% | | | | | | | |
Energy | 9% | | | | | | | |
Health Care | 7% | | | | | | | |
Information Technology | 5% | | | | | | | |
Financials | 4% | | | | | | | |
Materials | 3% | | | | | | | |
Short-Term Investments & Other | 6% | | | | | | | |
| | |
14 | Global Shareholder Yield Fund | Semiannual 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 8-31-11 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
| |
Assets | |
|
Investments, at value (Cost $438,465,194) | $473,362,985 |
Foreign currency, at value (Cost $90,162) | 90,276 |
Receivable for fund shares sold | 12,096,330 |
Dividends and interest receivable | 1,975,428 |
Receivable due from adviser | 2,552 |
Other receivables and prepaid expenses | 58,294 |
| |
Total assets | 487,585,865 |
|
Liabilities | |
|
Payable for investments purchased | 5,435,295 |
Payable for fund shares repurchased | 678,481 |
Payable to affiliates | |
Accounting and legal services fees | 6,268 |
Transfer agent fees | 30,861 |
Trustees’ fees | 3,475 |
Other liabilities and accrued expenses | 83,282 |
| |
Total liabilities | 6,237,662 |
|
Net assets | |
|
Capital paid-in | $471,427,316 |
Undistributed net investment income | 2,110,753 |
Accumulated net realized loss on investments and foreign | |
currency transactions | (27,092,967) |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 34,903,101 |
| |
Net assets | $481,348,203 |
|
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 ($109,893,911 ÷ 11,861,136 shares) | $9.27 |
Class B ($4,549,586 ÷ 491,346 shares)1 | $9.26 |
Class C ($22,583,795 ÷ 2,438,505 shares)1 | $9.26 |
Class I ($172,626,553 ÷ 18,576,576 shares) | $9.29 |
Class NAV ($171,694,358 ÷ 18,479,907 shares) | $9.29 |
|
Maximum offering price per share | |
|
Class A (net asset value per share ÷ 95%)2 | $9.76 |
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 | Semiannual 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
Statement of operations For the six-month period ended 8-31-11 (unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| |
Investment income | |
|
Dividends | $11,384,460 |
Interest | 290 |
Less foreign taxes withheld | (749,814) |
| |
Total investment income | 10,634,936 |
|
Expenses | |
|
Investment management fees (Note 4) | 1,787,005 |
Distribution and service fees (Note 4) | 204,981 |
Accounting and legal services fees (Note 4) | 23,598 |
Transfer agent fees (Note 4) | 127,670 |
Trustees’ fees (Note 4) | 12,707 |
State registration fees (Note 4) | 33,493 |
Printing and postage (Note 4) | 39,629 |
Professional fees | 34,776 |
Custodian fees | 88,535 |
Registration and filing fees | 17,201 |
Other | 10,466 |
| |
Total expenses | 2,380,061 |
Less expense reductions (Note 4) | (174,174) |
| |
Net expenses | 2,205,887 |
| |
Net investment income | 8,429,049 |
|
Realized and unrealized gain (loss) | |
|
Net realized gain (loss) on | |
Investments | 8,597,615 |
Foreign currency transactions | (61,006) |
| |
| 8,536,609 |
Change in net unrealized appreciation (depreciation) of | |
Investments | (21,452,257) |
Translation of assets and liabilities in foreign currencies | (14,715) |
| |
| (21,466,972) |
| |
Net realized and unrealized loss | (12,930,363) |
| |
Decrease in net assets from operations | ($4,501,314) |
| | |
16 | Global Shareholder Yield Fund | Semiannual 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.
| | |
| Six months | |
| ended | Year |
| 8-31-11 | ended |
| (unaudited) | 2-28-11 |
Increase (decrease) in net assets | | |
|
From operations | | |
Net investment income | $8,429,049 | $9,385,567 |
Net realized gain | 8,536,609 | 7,157,973 |
Change in net unrealized appreciation (depreciation) | (21,466,972) | 38,332,146 |
| | |
Increase (decrease) in net assets resulting from operations | (4,501,314) | 54,875,686 |
| | |
Distributions to shareholders | | |
From net investment income | | |
Class A | (1,215,726) | (723,542) |
Class B | (45,768) | (28,890) |
Class C | (199,062) | (90,915) |
Class I | (2,782,745) | (3,013,058) |
Class NAV | (3,222,874) | (4,805,780) |
| | |
Total distributions | (7,466,175) | (8,662,185) |
| | |
From Fund share transactions (Note 5) | 139,189,218 | 65,670,818 |
| | |
Total increase | 127,221,729 | 111,884,319 |
|
Net assets | | |
|
Beginning of period | 354,126,474 | 242,242,155 |
| | |
End of period | $481,348,203 | $354,126,474 |
| | |
Undistributed net investment income | $2,110,753 | $1,147,879 |
| | |
See notes to financial statements | Semiannual report | Global Shareholder Yield 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 | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-082 |
|
Per share operating performance | | | | | |
|
Net asset value, beginning of period | $9.50 | $8.10 | $6.10 | $9.52 | $10.00 |
Net investment income3 | 0.18 | 0.24 | 0.25 | 0.36 | 0.35 |
Net realized and unrealized gain (loss) on investments | (0.25) | 1.40 | 1.99 | (3.57) | (0.51) |
Total from investment operations | (0.07) | 1.64 | 2.24 | (3.21) | (0.16) |
Less distributions | | | | | |
From net investment income | (0.16) | (0.24) | (0.24) | (0.21) | (0.29) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.16) | (0.24) | (0.24) | (0.21) | (0.32) |
Net asset value, end of period | $9.27 | $9.50 | $8.10 | $6.10 | $9.52 |
Total return (%)4,5 | (0.75)6 | 20.64 | 37.19 | (34.21) | (1.84) |
|
Ratios and supplemental data | | | | | |
|
Net assets, end of period (in millions) | $110 | $56 | $22 | $11 | $27 |
Ratios (as a percentage of average net assets): | | | | | |
Expenses before reductions | 1.488 | 1.55 | 1.667 | 1.72 | 1.79 |
Expenses net of fee waivers | 1.418 | 1.55 | 1.567 | 1.56 | 1.45 |
Expenses net of fee waivers and credits | 1.418 | 1.55 | 1.557 | 1.55 | 1.45 |
Net investment income | 3.758 | 2.80 | 3.34 | 4.28 | 3.31 |
Portfolio turnover (%) | 13 | 39 | 53 | 54 | 24 |
1 Unaudited.
2 The inception date for Class A shares is 3-1-07.
3 Based on the average daily shares outstanding.
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 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
8 Annualized.
| | |
18 | Global Shareholder Yield Fund | Semiannual report | See notes to financial statements |
| | | | | |
CLASS B SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-082 |
|
Per share operating performance | | | | | |
|
Net asset value, beginning of period | $9.49 | $8.10 | $6.09 | $9.51 | $10.00 |
Net investment income3 | 0.15 | 0.19 | 0.20 | 0.29 | 0.22 |
Net realized and unrealized gain (loss) on investments | (0.25) | 1.38 | 2.00 | (3.56) | (0.45) |
Total from investment operations | (0.10) | 1.57 | 2.20 | (3.27) | (0.23) |
Less distributions | | | | | |
From net investment income | (0.13) | (0.18) | (0.19) | (0.15) | (0.23) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.13) | (0.18) | (0.19) | (0.15) | (0.26) |
Net asset value, end of period | $9.26 | $9.49 | $8.10 | $6.09 | $9.51 |
Total return (%)4,5 | (1.10)6 | 19.65 | 36.49 | (34.72) | (2.54) |
|
Ratios and supplemental data | | | | | |
|
Net assets, end of period (in millions) | $5 | $2 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | | | | | |
Expenses before reductions | 2.568 | 2.91 | 3.547 | 3.94 | 3.89 |
Expenses net of fee waivers | 2.138 | 2.25 | 2.297 | 2.43 | 2.23 |
Expenses net of fee waivers and credits | 2.138 | 2.25 | 2.257 | 2.25 | 2.23 |
Net investment income | 3.058 | 2.18 | 2.68 | 3.50 | 2.11 |
Portfolio turnover (%) | 13 | 39 | 53 | 54 | 24 |
1 Unaudited.
2 The inception date for Class B shares is 3-1-07.
3 Based on the average daily shares outstanding.
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 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
8 Annualized.
| | | | | |
CLASS C SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-082 |
|
Per share operating performance | | | | | |
|
Net asset value, beginning of period | $9.50 | $8.10 | $6.10 | $9.51 | $10.00 |
Net investment income3 | 0.15 | 0.18 | 0.20 | 0.29 | 0.22 |
Net realized and unrealized gain (loss) on investments | (0.26) | 1.40 | 1.99 | (3.55) | (0.45) |
Total from investment operations | (0.11) | 1.58 | 2.19 | (3.26) | (0.23) |
Less distributions | | | | | |
From net investment income | (0.13) | (0.18) | (0.19) | (0.15) | (0.23) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.13) | (0.18) | (0.19) | (0.15) | (0.26) |
Net asset value, end of period | $9.26 | $9.50 | $8.10 | $6.10 | $9.51 |
Total return (%)4,5 | (1.21)6 | 19.78 | 36.27 | (34.62) | (2.54) |
|
Ratios and supplemental data | | | | | |
|
Net assets, end of period (in millions) | $23 | $11 | $4 | $3 | $5 |
Ratios (as a percentage of average net assets): | | | | | |
Expenses before reductions | 2.258 | 2.39 | 2.637 | 2.72 | 3.00 |
Expenses net of fee waivers | 2.148 | 2.25 | 2.277 | 2.28 | 2.23 |
Expenses net of fee waivers and credits | 2.148 | 2.25 | 2.257 | 2.25 | 2.22 |
Net investment income | 3.048 | 2.10 | 2.66 | 3.50 | 2.08 |
Portfolio turnover (%) | 13 | 39 | 53 | 54 | 24 |
1 Unaudited.
2 The inception date for Class C shares is 3-1-07.
3 Based on the average daily shares outstanding.
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 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
8 Annualized.
| | |
See notes to financial statements | Semiannual report | Global Shareholder Yield Fund | 19 |
| | | | | |
CLASS I SHARES Period ended | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-082 |
|
Per share operating performance | | | | | |
|
Net asset value, beginning of period | $9.53 | $8.13 | $6.11 | $9.53 | $10.00 |
Net investment income3 | 0.20 | 0.29 | 0.30 | 0.29 | 0.33 |
Net realized and unrealized gain (loss) on investments | (0.26) | 1.38 | 2.00 | (3.46) | (0.44) |
Total from investment operations | (0.06) | 1.67 | 2.30 | (3.17) | (0.11) |
Less distributions | | | | | |
From net investment income | (0.18) | (0.27) | (0.28) | (0.25) | (0.33) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.18) | (0.27) | (0.28) | (0.25) | (0.36) |
Net asset value, end of period | $9.29 | $9.53 | $8.13 | $6.11 | $9.53 |
Total return (%)4 | (0.62)5 | 21.09 | 38.08 | (33.87) | (1.43) |
|
Ratios and supplemental data | | | | | |
|
Net assets, end of period (in millions) | $173 | $123 | $86 | $57 | $3 |
Ratios (as a percentage of average net assets): | | | | | |
Expenses before reductions | 1.097 | 1.09 | 1.196 | 1.21 | 2.16 |
Expenses net of fee waivers | 0.987 | 1.08 | 1.086 | 1.10 | 1.09 |
Expenses net of fee waivers and credits | 0.987 | 1.08 | 1.086 | 1.10 | 1.09 |
Net investment income | 4.227 | 3.40 | 3.96 | 3.78 | 3.14 |
Portfolio turnover (%) | 13 | 39 | 53 | 54 | 24 |
1 Unaudited.
2 The inception date for Class I shares is 3-1-07.
3 Based on the average daily shares outstanding.
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.
| | | | | |
CLASS NAV SHARES Period ended | | 8-31-111 | 2-28-11 | 2-28-10 | 2-28-092 |
|
Per share operating performance | | | | | |
|
Net asset value, beginning of period | | $9.53 | $8.13 | $6.11 | $9.71 |
Net investment income3 | | 0.21 | 0.30 | 0.29 | 0.29 |
Net realized and unrealized gain (loss) on investments | | (0.26) | 1.38 | 2.01 | (3.67) |
Total from investment operations | | (0.05) | 1.68 | 2.30 | (3.38) |
Less distributions | | | | | |
From net investment income | | (0.19) | (0.28) | (0.28) | (0.22) |
Net asset value, end of period | | $9.29 | $9.53 | $8.13 | $6.11 |
Total return (%)4 | | (0.58)5 | 21.19 | 38.16 | (35.32)5 |
|
Ratios and supplemental data | | | | | |
|
Net assets, end of period (in millions) | | $172 | $162 | $129 | $67 |
Ratios (as a percentage of average net assets): | | | | | |
Expenses before reductions | | 0.967 | 0.99 | 1.056 | 1.097 |
Expenses net of fee waivers | | 0.907 | 0.99 | 1.006 | 1.057 |
Expenses net of fee waivers and credits | | 0.907 | 0.99 | 1.006 | 1.057 |
Net investment income | | 4.32 | 3.49 | 3.84 | 4.27 |
Portfolio turnover (%) | | 13 | 39 | 53 | 54 |
1 Unaudited.
2 The inception date for Class NAV shares is 4-28-08.
3 Based on the average daily shares outstanding.
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.
| | |
20 | Global Shareholder Yield Fund | Semiannual report | See notes to financial statements |
Notes to financial statements
(unaudited)
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, if any, transfer agent fees, printing and postage and state registration 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.
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Semiannual report | Global Shareholder Yield Fund | 21 |
The following is a summary of the values by input classification of the Fund’s investments as of August 31, 2011, by major security category or type:
| | | | |
| | | | LEVEL 3 |
| | | LEVEL 2 | SIGNIFICANT |
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE |
| VALUE AT 8-31-11 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS |
|
Common Stocks | | | | |
Australia | $7,358,095 | $2,469,930 | $4,888,165 | — |
Belgium | 9,964,881 | — | 9,964,881 | — |
Brazil | 4,362,727 | 4,362,727 | — | — |
Canada | 18,830,080 | 18,830,080 | — | — |
Finland | 2,570,186 | — | 2,570,186 | — |
France | 32,062,104 | — | 32,062,104 | — |
Germany | 13,710,838 | — | 13,710,838 | — |
Hong Kong | 5,464,956 | 5,464,956 | — | — |
Italy | 7,307,413 | — | 7,307,413 | — |
Netherlands | 6,946,380 | 6,946,380 | — | — |
Norway | 2,357,142 | — | 2,357,142 | — |
Philippines | 3,145,411 | 3,145,411 | — | — |
Spain | 3,453,566 | — | 3,453,566 | — |
Switzerland | 25,506,406 | — | 25,506,406 | — |
Taiwan | 8,151,452 | 5,856,921 | 2,294,531 | — |
United Kingdom | 91,187,312 | 13,802,380 | 77,384,932 | — |
United States | 208,341,991 | 208,341,991 | — | — |
Preferred Securities | | | | |
United States | 3,317,184 | 3,317,184 | — | — |
Short-Term Investments | 19,324,861 | 19,324,861 | — | — |
|
|
Total Investments in | | | | |
Securities | $473,362,985 | $291,862,821 | $181,500,164 | — |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. During the six months ended August 31, 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 by the Fund in open-end mutual funds are valued at their respective net asset values each business day. 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.
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.
| |
22 | Global Shareholder Yield Fund | Semiannual report |
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. 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.
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. 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 the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian 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, effective March 30, 2011, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $100 million unsecured committed line of credit. Prior to March 30, 2011, the Fund had a similar agreement with State Street Bank and Trust Company. 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 six months ended August 31, 2011, the Fund had no borrowings under the lines of credit.
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 assets 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 assets of each class and the specific expense rates applicable to each class.
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Semiannual report | Global Shareholder Yield Fund | 23 |
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 as of February 28, 2011. The loss carryforward expires as follows: February 28, 2017 — $3,529,884 and February 28, 2018 — $29,238,858.
Under the 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, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends quarterly and capital gain distributions, if any, annually.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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.
New accounting pronouncement. In May 2011, Accounting Standards Update 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued and is effective during interim and annual periods beginning after December 15, 2011. ASU 2011-04 amends Financial Accounting Standards Board (FASB) Topic 820, Fair Value Measurement. The amendments are the result of the work by the FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. Management is currently evaluating the application of ASU 2011-04 and its impact, if any, on the Fund’s financial statements.
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.
| |
24 | Global Shareholder Yield Fund | Semiannual report |
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 agreement 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 Adviser has contractually agreed to limit the Fund’s management fee to 0.800% of the average daily net assets until June 30, 2012.
The investment management fees incurred for the six months ended August 31, 2011 were equivalent to a net annual effective rate of 0.800% 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 certain expenses such as taxes, brokerage commissions, interest, litigation, extraordinary expenses, acquired fund fee expenses paid indirectly and short dividend expense. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.42%, 2.12%, 2.12% and 0.97% 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, 2012 and thereafter until terminated by the Adviser. Prior to July 1, 2011, the fee waivers and/or reimbursements were such that these expenses would not exceed 1.55%, 2.25%, 2.25% and 1.09% for Class A, Class B, Class C and Class I shares, respectively.
Accordingly, these expense reductions amounted to $24,525, $6,925, $8,952, $81,121 and $52,651 for Class A, Class B, Class C, Class I and Class NAV shares, respectively, for the six months ended August 31, 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 six months ended August 31, 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 FEE | | | | | | | | |
| | | | | | | | |
Class A | 0.30% | | | | | | | | |
Class B | 1.00% | | | | | | | | |
Class C | 1.00% | | | | | | | | |
| |
Semiannual report | Global Shareholder Yield Fund | 25 |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $236,651 for the six months ended August 31, 2011. Of this amount, $39,090 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $193,461 was paid as sales commissions to broker-dealers and $4,100 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 (CDSCs). Class B shares that are redeemed within six years of purchase are subject to CDSCs, 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 six months ended August 31, 2011, CDSCs received by the Distributor amounted to $8,654 and $5,299 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 fees that Signature Services receives with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended August 31, 2011 were:
| | | | |
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
|
Class A | $112,244 | $62,724 | $8,798 | $5,683 |
Class B | 16,442 | 2,762 | 6,405 | 424 |
Class C | 76,295 | 12,812 | 7,497 | 1,045 |
Class I | — | 49,372 | 10,793 | 32,477 |
| | | | |
Total | $204,981 | $127,670 | $33,493 | $39,629 |
Trustee expenses. The Fund 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.
| |
26 | Global Shareholder Yield Fund | Semiannual report |
Note 5 — Fund share transactions
Transactions in Fund shares for the six months ended August 31, 2011 and for the year ended February 28, 2011 were as follows:
| | | | |
| Six months ended 8-31-11 | Year ended 2-28-11 |
| Shares | Amount | Shares | Amount |
Class A shares | | | | |
|
Sold | 8,063,194 | $76,399,384 | 4,386,382 | $39,308,009 |
Distributions reinvested | 119,731 | 1,127,861 | 74,691 | 629,739 |
Repurchased | (2,205,760) | (21,041,548) | (1,275,643) | (11,028,313) |
| | | | |
Net increase | 5,977,165 | $56,485,697 | 3,185,430 | $28,909,435 |
|
Class B shares | | | | |
|
Sold | 327,710 | $3,138,196 | 109,440 | $973,264 |
Distributions reinvested | 2,768 | 26,097 | 3,088 | 25,713 |
Repurchased | (59,471) | (556,820) | (44,582) | (387,162) |
| | | | |
Net increase | 271,007 | $2,607,473 | 67,946 | $611,815 |
|
Class C shares | | | | |
|
Sold | 1,462,711 | $13,912,065 | 756,536 | $6,843,306 |
Distributions reinvested | 16,886 | 159,217 | 7,194 | 60,372 |
Repurchased | (150,119) | (1,425,083) | (165,715) | (1,417,482) |
| | | | |
Net increase | 1,329,478 | $12,646,199 | 598,015 | $5,486,196 |
|
Class I shares | | | | |
|
Sold | 8,099,880 | $77,395,651 | 9,776,895 | $84,148,820 |
Distributions reinvested | 266,534 | 2,516,081 | 342,757 | 2,878,289 |
Repurchased | (2,713,292) | (25,549,370) | (7,811,522) | (65,298,399) |
| | | | |
Net increase | 5,653,122 | $54,362,362 | 2,308,130 | $21,728,710 |
|
Class NAV shares | | | | |
|
Sold | 1,884,586 | $17,643,842 | 1,838,986 | $14,832,210 |
Distributions reinvested | 341,512 | 3,222,874 | 571,534 | 4,805,780 |
Repurchased | (802,639) | (7,779,229) | (1,198,975) | (10,703,328) |
| | | | |
Net increase | 1,423,459 | $13,087,487 | 1,211,545 | $8,934,662 |
|
Net increase | 14,654,231 | $139,189,218 | 7,371,066 | $65,670,818 |
|
Affiliates of the Fund owned 100% of shares of beneficial interest of Class NAV on August 31, 2011.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $178,071,753 and $52,238,271, respectively, for the six months ended August 31, 2011.
| |
Semiannual report | Global Shareholder Yield Fund | 27 |
Board Consideration of and Continuation of Investment Advisory Agreement and Subadvisory Agreement
The Board of Trustees (the Board, the members of which are referred to as Trustees) of John Hancock Global Shareholder Yield Fund (the Fund), a series of John Hancock Funds III, met in-person on May 1–3 and June 5–7, 2011 to consider the approval of the Fund’s investment advisory agreement (the Advisory Agreement) with John Hancock Investment Management Services, LLC (the Adviser), the Fund’s investment adviser. The Board also considered the approval of the investment subadvisory agreement (the Subadvisory Agreement) between the Adviser and Epoch Investment Partners, Inc. (the Subadviser) on behalf of the Fund. The Advisory Agreement and the Subadvisory Agreement are referred to as the Agreements.
Activities and composition of the Board
The Board consists of eleven individuals, nine of whom are Independent Trustees. Independent Trustees are generally those individuals who are not employed by or have any significant business or professional relationship with the Adviser or the Subadviser. The Trustees are responsible for the oversight of operations of the Fund and perform various duties required of directors of investment companies by the Investment Company Act of 1940, as amended (the 1940 Act). The Independent Trustees have hired independent legal counsel to assist them in connection with their duties. The Board has appointed an Independent Trustee as Chairperson. The Board has established four standing committees that are composed entirely of Independent Trustees: the Audit Committee; the Compliance Committee; the Nominating, Governance and Administration Committee; and the Contracts/Operations Committee. Additionally, Investment Performance Committees A and B are standing committees of the Board that are each composed of Independent Trustees and one Trustee who is affiliated with the Adviser. Investment Performance Committee A oversees and monitors matters relating to the investment performance of the Fund. The Board has also designated an Independent Trustee as Vice Chairperson to serve in the absence of the Chairperson. The Board also designates working groups or ad hoc committees as it deems appropriate.
The approval process
Under the 1940 Act, the Board is required to consider the continuation of the Agreements each year. Throughout the year, the Board, acting directly and through its committees, regularly reviews and assesses the quality of the services that the Fund receives under these Agreements. The Board reviews reports of the Adviser at least quarterly, which include Fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. The Board considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by the Adviser and Subadviser to the Fund and its shareholders.
Prior to the May 1–3, 2011 meeting, the Board requested and received materials specifically relating to the Agreements. The materials provided in connection with the May meeting included information compiled and prepared by Morningstar, Inc. (Morningstar) on Fund fees and expenses, and the investment performance of the Fund. This Fund information is assembled in a format that permits comparison with similar information from a Category and a subset of the Category referred to as the Peer Group, each as determined by Morningstar, and with the Fund’s benchmark index. The Category includes all funds that invest similarly to the way the Fund invests. The Peer Group represents funds of similar size, excluding passively managed funds and funds-of-funds. The Fund’s benchmark index is an unmanaged index of securities that is provided as a basis for comparison with the Fund’s performance. Other material provided for the Fund review included (a) information on the profitability of the Agreements to the Adviser and a discussion of any additional benefits to the Adviser or Subadviser or their affiliates that result from being the Adviser or Subadviser to the Fund; (b) a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients, such as institutional clients and other investment companies,
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28 | Global Shareholder Yield Fund | Semiannual report |
having similar investment mandates, as well as the performance of those other clients and a comparison of the services provided to those other clients and the services provided to the Fund; (c) the impact of economies of scale; (d) a summary of aggregate amounts paid by the Fund to the Adviser; and (e) sales and redemption data regarding the Fund’s shares.
At an in-person meeting held on May 1–3, 2011, the Board reviewed materials relevant to its consideration of the Agreements. As a result of the discussions that occurred during the May 1–3, 2011 meeting, the Board asked the Adviser for additional information on certain matters. The Adviser provided the additional information and the Board also considered this information as part of its consideration of the Agreements.
At an in-person meeting held on June 5–7, 2011, the Board, including the Independent Trustees, formally considered the continuation of the Advisory Agreement between the Adviser and the Fund and the Subadvisory Agreement between the Adviser and the Subadviser with respect to the Fund, each for an additional one-year term. The Board considered what it believed were key relevant factors that are described under separate headings presented below.
The Board also considered other matters important to the approval process, such as payments made to and by the Adviser or its affiliates relating to the distribution of Fund shares and other services. The Board reviewed services related to the valuation and pricing of Fund portfolio holdings. Other important matters considered by the Board were the direct and indirect benefits to the Adviser, the Subadviser and their affiliates from their relationship with the Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review.
Nature, extent and quality of services
The Board reviewed the nature, extent and quality of services provided by the Adviser and the Subadviser, including the investment advisory services and the resulting performance of the Fund.
The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory and supervisory personnel. It considered the background and experience of senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Subadviser responsible for the daily investment activities of the Fund, including, among other things, portfolio trading capabilities, use of technology, commitment to compliance and approach to training and retaining portfolio managers and other research, advisory and management personnel.
The Board considered the Subadviser’s history and experience providing investment services to the Fund. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadviser’s compliance departments.
In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Fund by the Adviser under a separate agreement. The Board noted that the Adviser and its affiliates provide the Fund with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. The Board reviewed the structure and duties of the Adviser’s administration, accounting, legal and compliance departments and its affiliate’s transfer agency operations and considered the Adviser’s and its affiliate’s policies and procedures for assuring compliance with applicable laws and regulations.
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Semiannual report | Global Shareholder Yield Fund | 29 |
The Board also received information about the nature, extent and quality of services provided by and fee rates charged by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board reviewed a general analysis provided by the Adviser and the Subadviser concerning investment advisory fees charged to other clients having similar investment mandates, the services provided to those other clients as compared to the services provided to the Fund the performance of those other clients as compared to the performance by the Fund, and other factors relating to those other clients. The Board considered the significant differences between the Adviser’s and Subadviser’s services to the Fund and the services they provide to other clients. For other clients that are not mutual funds, the differences in services relate to the greater share purchase and redemption activity in a mutual fund, the generally higher turnover of mutual fund portfolio holdings, the more burdensome regulatory and legal obligations of mutual funds and the higher marketing costs for mutual funds. When compared to all clients including mutual funds, the Adviser has greater oversight and supervisory responsibility for the Fund and undertakes greater entrepreneurial risk as the sponsor of the Fund.
Fund performance
The Board was provided with reports, independently prepared by Morningstar, which included a comprehensive analysis of the Fund’s performance. The Board also examined materials provided by the Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook. The Board also reviewed a narrative and statistical analysis of the Morningstar data that was prepared by the Adviser, which analyzed various factors that may affect the Morningstar rankings. The Board reviewed information regarding the investment performance of the Fund as compared to its Morningstar Category as well as its benchmark index (see chart below). The Board was provided with a description of the methodology used by Morningstar to select the funds in the Category. The Board also considered updated performance information provided by the Adviser at its May and June 2011 meetings. The Board regularly reviews the performance of the Fund throughout the year and attaches more importance to performance over relatively longer periods of time, typically three to five years.
Set forth below is the performance of the Fund over certain time periods ended December 31, 2010 and that of its Category and benchmark index over the same periods:
| | | | |
| 1 YEAR | 3 YEAR | 5 YEAR | 10 YEAR |
|
Global Shareholder Yield Fund Class A | 11.82% | –1.49% | — | — |
World Stock Category Average | 14.10% | –3.49% | — | — |
MSCI World NR Index | 11.76% | –4.85% | — | — |
The Board noted that the Fund had underperformed its Category’s average performance over the one-year period and had outperformed its Category’s average performance for the three-year period. The Board noted that the Fund’s performance compared favorably to its benchmark index for all periods shown.
Expenses and fees
The Board, including the Independent Trustees, reviewed the Fund’s contractual advisory fee rate payable by the Fund to the Adviser as compared with the other funds in its Peer Group. The Board also received information about the investment subadvisory fee rate payable by the Adviser to the Subadviser for investment subadvisory services. The Board considered the services provided and the fees charged by the Adviser and the Subadviser to other clients with similar investment mandates, including separately managed institutional accounts.
In addition, the Board considered the cost of the services provided to the Fund by the Adviser. The Board received and considered expense information regarding the Fund’s various components,
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30 | Global Shareholder Yield Fund | Semiannual report |
including advisory fees, distribution fees and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, administration fees and other miscellaneous fees (e.g., fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also considered expense information regarding the Fund’s total operating expense ratio (Gross Expense Ratio) and total operating expense ratio after taking the Adviser’s contractual fee waiver/expense reimbursement agreement into account (Net Expense Ratio). The Board considered information comparing the Gross Expense Ratio and Net Expense Ratio of the Fund to that of the Peer Group median. As part of its analysis, the Board reviewed the Adviser’s methodology in allocating its costs to the management of the Fund and the Fund complex.
The Board noted that the Fund’s advisory fee ratio was two basis points above the Peer Group median advisory fee ratio. The Board noted the following information about the Fund’s Gross and Net Expense Ratios for Class A shares contained in the Fund’s 2010 financial statements in relation with the Fund’s Peer Group median provided by Morningstar in April 2011:
| | |
| FUND (CLASS A) | PEER GROUP MEDIAN |
|
Advisory Fee Ratio | 0.88% | 0.86% |
Gross Expense Ratio | 1.52% | 1.51% |
Net Expense Ratio | 1.52% | 1.48% |
The Board viewed favorably the Adviser’s new contractual agreement to waive all its advisory fees to the extent necessary to maintain the Fund’s net advisory fee ratio at 0.80% until June 30, 2012. The Board also viewed favorably the Adviser’s new contractual agreement to waive all or a portion of its advisory fees and to reimburse or pay operating expenses to the extent necessary to maintain the Fund’s Net Expense Ratio at 1.42% for Class A shares, excluding certain expenses such as taxes, brokerage commissions, interest, litigation and extraordinary expenses, until June 30, 2012. The Board favorably considered the impact of these contractual agreements toward ultimately lowering the Fund’s Gross Expense Ratio. The Board also received and considered information relating to the Fund’s Gross Expense Ratio and Net Expense Ratio that reflected the new methodology for calculating transfer agent fees that was approved by the Trustees at the June 2010 meeting, which had the effect of lowering the expense ratio.
The Board received and reviewed statements relating to the Adviser’s financial condition and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by the Adviser for services under the Advisory Agreement, as well as from other relationships between the Fund and the Adviser and its affiliates. The Board reviewed the Adviser’s profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2010 compared to available aggregate profitability data provided for the year ended December 31, 2009. The Board reviewed the Adviser’s profitability with respect to other fund complexes managed by the Adviser and/or its affiliates. The Board reviewed the Adviser’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products.
The Board also considered a comparison of the Adviser’s profitability to that of other similar investment advisers whose profitability information is publicly available. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Adviser, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited.
The Board did not consider profitability information with respect to the Subadviser, which is not affiliated with the Adviser. The Board considered that the subadvisory fee under the Subadvisory Agreement had been negotiated by the Adviser and the Subadviser on an arm’s length basis. For this reason, the Subadviser’s separate profitability from its relationship with the Fund was not a factor in
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Semiannual report | Global Shareholder Yield Fund | 31 |
determining whether to renew the Subadvisory Agreement. In evaluating overall fees for investment management, the Board recognized the inherently higher cost structure of subadvised funds.
Economies of scale
The Board, including the Independent Trustees, considered the extent to which economies of scale might be realized as the assets of the Fund increase. Possible changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale (e.g., through the use of breakpoints in the advisory fee at higher asset levels) are periodically discussed. The Board also considered the Adviser’s overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the Fund.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the contractual advisory fee rate.
Other benefits to the Adviser and the Subadviser
The Board understands that the Adviser, the Subadviser or their affiliates may derive other ancillary benefits from their relationship with the Fund, both tangible and intangible, such as their ability to leverage investment professionals who manage other portfolios, an increase in their profile in the investment advisory community and, in the case of the Adviser, the engagement of its affiliates and/or significant shareholders as service providers to the Fund, including for administrative, transfer agency and distribution services. The Board believes that certain of these benefits are difficult to quantify. The Board also was informed that the Subadviser may use third-party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts.
Board determination
The Board unanimously approved the continuation of the Advisory Agreement between the Adviser and the Fund for an additional one-year term. The Subadvisory Agreement between the Adviser and Subadviser with respect to the Fund was also approved for an additional one-year term. Based upon its evaluation of relevant factors in their totality, the Board was satisfied that the terms of the Agreements, including the advisory and subadvisory fee rates, were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or any group of factors as all-important or controlling, but considered all factors together. Different Trustees may have attributed different weights to the various factors considered. The Independent Trustees were also assisted by independent legal counsel in making this determination. The Trustees’ conclusions may be based in part on their consideration of these arrangements in prior years and on their ongoing regular review of Fund performance and operations throughout the year.
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32 | Global Shareholder Yield Fund | Semiannual report |
More information
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Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
James F. Carlin | Services, LLC |
William H. Cunningham | |
Deborah C. Jackson | Subadviser |
Charles L. Ladner,* Vice Chairman | 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 | |
| |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | |
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Francis V. Knox, Jr. | |
Chief Compliance Officer | |
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Charles A. Rizzo | |
Chief Financial Officer | |
| |
Salvatore Schiavone | |
Treasurer | |
|
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 9-13-11 | |
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 at 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 |
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Semiannual report | Global Shareholder Yield Fund | 33 |
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. | 320SA 8/11 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 10/11 |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) This schedule is included as part of the Report to shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) 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 time periods specified in the rules and forms of the Securities and Exchange Commission. Such disclosure 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) The certification required by Rule 30a-2(a) under the 1940 Act.
(b) The certification required by Rule 30a-2(b) under the 1940 Act.
(c) Contact person at the registrant.
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: October 20, 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: October 20, 2011
By: /s/ Charles A. Rizzo
-------------------------------
Charles A. Rizzo
Chief Financial Officer
Date: October 20, 2011