UNITED STATES | |
SECURITIES AND EXCHANGE COMMISSION | |
Washington, D.C. 20549 | |
FORM N-CSR | |
CERTIFIED SHAREHOLDER REPORT OF REGISTERED | |
MANAGEMENT INVESTMENT COMPANIES | |
Investment Company Act file number 811-21777 | |
John Hancock Funds III | |
(Exact name of registrant as specified in charter) | |
601 Congress Street, Boston, Massachusetts 02210 | |
(Address of principal executive offices) (Zip code) | |
Salvatore Schiavone | |
Treasurer | |
601 Congress Street | |
Boston, Massachusetts 02210 | |
(Name and address of agent for service) | |
Registrant's telephone number, including area code: 617-663-4497 | |
Date of fiscal year end: | February 29 |
Date of reporting period: | February 29, 2012 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/interncorex1x1.jpg)
A look at performance
Total returns for the period ended February 29, 2012
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge | with maximum sales charge | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception | 1-year | 5-year | 10-year | inception | ||
Class A1 | –13.29 | –4.75 | — | 0.52 | –13.29 | –21.61 | — | 3.38 | |
Class B2 | –13.88 | –4.76 | — | 0.61 | –13.88 | –21.65 | — | 3.97 | |
Class C2 | –10.31 | –4.46 | — | 0.61 | –10.31 | –20.38 | — | 3.97 | |
Class I2,3 | –8.33 | –3.31 | — | 1.80 | –8.33 | –15.50 | — | 12.22 | |
Class R12,3 | –9.00 | –3.96 | — | 1.07 | –9.00 | –18.30 | — | 7.14 | |
Class R33,4 | –8.95 | — | — | 7.97 | –8.95 | — | — | 23.71 | |
Class R43,4 | –8.67 | — | — | 8.30 | –8.67 | — | — | 24.76 | |
Class R53,4 | –8.38 | — | — | 8.63 | –8.38 | — | — | 25.82 | |
Class R63,5 | –8.23 | –3.20 | — | 2.04 | –8.23 | –15.02 | — | 13.92 | |
Class 13,6 | –8.27 | –3.25 | — | –1.63 | –8.27 | –15.23 | — | –8.36 | |
Class NAV 3,7 | –8.24 | –3.20 | — | –0.91 | –8.24 | –15.02 | — | –4.90 | |
Performance figures assume all dividends have been reinvested. 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 R6, 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. For Class R6 shares the fee waivers and expense limitations are contractual at least until 6-30-13. 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 R6 | Class 1 | Class NAV | |
Net (%) | 1.60 | 2.23 | 2.30 | 1.15 | 1.90 | 1.80 | 1.50 | 1.20 | 1.10 | 1.07 | 1.02 |
Gross (%) | 1.60 | 2.23 | 2.41 | 1.15 | 6.67 | 43.50 | 43.17 | 30.63 | 1.10 | 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 | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/interncorex3x1.jpg)
Without | With maximum | |||
Start date | sales charge | sales charge | Index | |
Class B 8 | 9-16-05 | $10,397 | $10,397 | $11,996 |
Class C8 | 9-16-05 | 10,397 | 10,397 | 11,996 |
Class I 3 | 9-16-05 | 11,222 | 11,222 | 11,996 |
Class R1 3 | 9-16-05 | 10,714 | 10,714 | 11,996 |
Class R33 | 5-22-09 | 12,371 | 12,371 | 13,311 |
Class R4 3 | 5-22-09 | 12,476 | 12,476 | 13,311 |
Class R5 3 | 5-22-09 | 12,582 | 12,582 | 13,311 |
Class R6 3 | 9-16-05 | 11,392 | 11,392 | 11,996 |
Class 1 3 | 11-6-06 | 9,164 | 9,164 | 9,541 |
Class NAV 3 | 8-29-06 | 9,510 | 9,510 | 9,987 |
MSCI EAFE Index (gross of foreign withholding tax on dividends) (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. The index consists of 21 developed market country indexes. It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 On 6-9-06, through a reorganization, the Fund acquired all of the assets of the GMO International Disciplined Equity Fund (the predecessor fund). The predecessor fund offered its Class III shares, inception date 9-16-05, in exchange for Class A shares, which were first offered on 6-12-06. The predecessor fund’s Class III shares returns have been recalculated to reflect the gross fees and expenses of Class A shares.
2 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 prospectuses.
4 From 5-22-09.
5 Class R6 shares were first offered on 9-1-11. Returns prior to that date are those of Class A that have been recalculated to apply the gross fees and expenses of Class R6 shares.
6 From 11-6-06.
7 From 8-29-06.
8 No contingent deferred sales charge is applicable.
Annual report | International Core Fund | 7 |
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC
Faced with multiple headwinds, most international developed stock markets lost ground during the 12 months ended February 29, 2012. Challenges included a major earthquake, tsunami and nuclear accident in Japan, partisan bickering over the U.S. debt ceiling, a downgrade of the U.S. sovereign debt rating and intensifying concern over debt-strapped eurozone nations, especially Greece. Greek stocks, a relatively small component of the Fund’s benchmark, the MSCI EAFE Index, lost more than half of their value during the period, while Italy saw its market decline by almost 25%. Key benchmark components Germany and France had losses of roughly 9% and 15%, respectively, while the United Kingdom performed relatively better, at 0%. Japan saw its stock market fall by about 10% during the period. Against this backdrop, the MSCI EAFE Index lost 7.01%, while the average large value fund monitored by Morningstar, Inc. declined 8.83%.
During the period, John Hancock International Core Fund’s Class A shares declined 8.73%, excluding sales charges. Our quality-adjusted valuation screen, one of our stock-picking tools, delivered mixed results, leading us to underweight financials, which helped performance, and underweight consumer staples, which hurt. The momentum part of our model struggled amid the period’s numerous sharp reversals. In geographical terms, the Fund benefited most from stock selection in France, the United Kingdom and Japan. Negatives included weak picks in Canada and exposure to Australia which hurt mainly because of a stronger dollar versus the U.S. At the stock level, overweighted positions in two power utilities headed the Fund’s list of detractors: Italy’s Enel SpA and Germany’s E.ON AG. Substantial amounts of debt and exposure to nuclear power hampered both stocks. Debt concerns also sidetracked Spanish telecom services carrier Telefonica SA. On the positive side, the U.K.’s GlaxoSmithKline PLC and France’s Sanofi S.A. — both makers of pharmaceuticals — were the Fund’s two largest relative contributors. Additionally, the Fund got a boost from a small out-of-benchmark stake in French specialty chemical firm Rhodia SA, which was bought by a competitor.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
8 | International Core Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on September 1, 2011 with the same investment held until February 29, 2012.
Account value | Ending value on | Expenses paid during | |
on 9-1-11 | 2-29-12 | period ended 2-29-121 | |
Class A | $1,000.00 | $1,012.50 | $8.06 |
Class B | 1,000.00 | 1,009.10 | 11.49 |
Class C | 1,000.00 | 1,008.70 | 11.49 |
Class I | 1,000.00 | 1,014.40 | 6.06 |
Class R1 | 1,000.00 | 1,011.20 | 9.50 |
Class R3 | 1,000.00 | 1,011.60 | 9.00 |
Class R4 | 1,000.00 | 1,013.20 | 7.51 |
Class R5 | 1,000.00 | 1,014.50 | 6.01 |
Class R6 | 1,000.00 | 1,014.90 | 5.56 |
Class 1 | 1,000.00 | 1,014.90 | 5.51 |
Class NAV | 1,000.00 | 1,015.30 | 5.26 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 29, 2012, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Annual report | International Core Fund | 9 |
Your expenses
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on September 1, 2011, with the same investment held until February 29, 2012. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value on | Expenses paid during | |
on 9-1-11 | 2-29-12 | period ended 2-29-121 | |
Class A | $1,000.00 | $1,016.90 | $8.07 |
Class B | 1,000.00 | 1,013.40 | 11.51 |
Class C | 1,000.00 | 1,013.40 | 11.51 |
Class I | 1,000.00 | 1,018.80 | 6.07 |
Class R1 | 1,000.00 | 1,015.40 | 9.52 |
Class R3 | 1,000.00 | 1,015.90 | 9.02 |
Class R4 | 1,000.00 | 1,017.40 | 7.52 |
Class R5 | 1,000.00 | 1,018.90 | 6.02 |
Class R6 | 1,000.00 | 1,019.30 | 5.57 |
Class 1 | 1,000.00 | 1,019.40 | 5.52 |
Class NAV | 1,000.00 | 1,019.60 | 5.27 |
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 1.61%, 2.30%, 2.30%, 1.21%, 1.90%, 1.80%, 1.50%, 1.20%, 1.11%, 1.10% and 1.05% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5, Class R6, Class 1 and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
10 | International Core Fund | Annual report |
Portfolio summary
Top 10 Holdings (23.3% of Net Assets on 2-29-12)1,2 | ||||
Total SA | 4.1% | ENI SpA | 2.0% | |
Sanofi | 3.8% | Novartis AG | 1.6% | |
GlaxoSmithKline PLC | 2.8% | Vodafone Group PLC | 1.5% | |
AstraZeneca PLC | 2.7% | Enel SpA | 1.4% | |
E.ON AG | 2.0% | Nestle SA | 1.4% | |
Sector Composition1,3 | ||||
Health Care | 15.8% | Consumer Staples | 8.4% | |
Energy | 13.5% | Utilities | 6.9% | |
Financials | 11.4% | Materials | 5.6% | |
Consumer Discretionary | 10.2% | Information Technology | 3.7% | |
Telecommunication Services | 9.9% | Short-Term Investments & Other | 5.0% | |
Industrials | 9.6% | |||
Top 10 Countries1,2,3 | ||||
Japan | 22.5% | Australia | 5.0% | |
United Kingdom | 18.9% | Switzerland | 4.7% | |
France | 11.1% | Spain | 4.6% | |
Germany | 7.0% | Netherlands | 4.2% | |
Italy | 5.3% | Canada | 3.0% | |
1 As a percentage of net assets on 2-29-12.
2 Cash and cash equivalents not included.
3 International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
Annual report | International Core Fund | 11 |
Fund’s investments
As of 2-29-12
Shares | Value | |
Common Stocks 94.34% | $1,496,049,817 | |
(Cost $1,521,078,586) | ||
Australia 5.02% | 79,596,747 | |
Billabong International, Ltd. (L) | 593,423 | 1,921,511 |
BlueScope Steel, Ltd. | 1,756,432 | 786,496 |
Charter Hall Office REIT (L) | 721,379 | 2,364,495 |
Commonwealth Bank of Australia | 90,252 | 4,757,586 |
Dexus Property Group | 2,406,468 | 2,297,408 |
Goodman Fielder, Ltd. | 2,440,896 | 1,695,515 |
Goodman Group | 3,899,173 | 2,881,923 |
GPT Group | 844,429 | 2,807,479 |
Iluka Resources, Ltd. | 181,294 | 3,209,310 |
Investa Office Fund | 2,858,010 | 1,909,308 |
JB Hi-Fi, Ltd. (L) | 39,757 | 482,705 |
Mirvac Group | 1,377,257 | 1,762,992 |
National Australia Bank, Ltd. | 78,364 | 1,974,779 |
OneSteel, Ltd., ADR | 1,947,049 | 2,171,891 |
Pacific Brands, Ltd. | 1,084,476 | 826,268 |
Qantas Airways, Ltd. (I) | 545,616 | 1,007,658 |
QBE Insurance Group, Ltd. | 765,602 | 9,538,723 |
Resolute Mining, Ltd. (I) | 625,002 | 1,370,223 |
Stockland | 981,132 | 3,317,624 |
TABCORP Holdings, Ltd. | 615,264 | 1,789,096 |
Telstra Corp., Ltd. | 4,340,327 | 15,328,517 |
Wesfarmers, Ltd. | 206,164 | 6,398,630 |
Westpac Banking Corp. | 404,337 | 8,996,610 |
Austria 0.65% | 10,364,086 | |
Andritz AG | 24,399 | 2,415,915 |
OMV AG | 126,840 | 4,719,415 |
Raiffeisen Bank International AG (L) | 34,324 | 1,238,909 |
Voestalpine AG | 56,327 | 1,989,847 |
Belgium 0.68% | 10,714,153 | |
Ageas | 601,604 | 1,274,726 |
Anheuser-Busch InBev NV | 48,405 | 3,253,330 |
Belgacom SA | 86,914 | 2,767,649 |
Colruyt SA | 41,797 | 1,636,872 |
Delhaize Group SA | 14,448 | 794,533 |
Mobistar SA | 20,627 | 987,043 |
12 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Bermuda 0.11% | $1,719,515 | |
Golden Ocean Group, Ltd. | 550,900 | 515,659 |
Lancashire Holdings, Ltd. | 98,879 | 1,203,856 |
Canada 2.98% | 47,173,415 | |
BCE, Inc. (L) | 88,900 | 3,642,434 |
Canadian National Railway Company | 44,800 | 3,451,970 |
Canadian Natural Resources, Ltd. | 216,400 | 8,033,121 |
Canadian Pacific Railway, Ltd. | 13,400 | 1,004,069 |
Enbridge, Inc. | 112,500 | 4,338,774 |
Encana Corp. (L) | 346,300 | 7,055,847 |
First Quantum Minerals, Ltd. | 88,400 | 2,022,716 |
Husky Energy, Inc. | 45,200 | 1,221,078 |
IGM Financial, Inc. | 41,800 | 1,930,206 |
Methanex Corp. | 42,500 | 1,332,407 |
Metro, Inc. | 36,600 | 1,896,120 |
National Bank of Canada | 16,165 | 1,259,284 |
Precision Drilling Corp. (I) | 101,257 | 1,225,993 |
Research In Motion, Ltd. (I) | 237,700 | 3,370,490 |
RONA, Inc. | 74,400 | 704,561 |
Sun Life Financial, Inc. (Toronto Stock Exchange) (L) | 213,100 | 4,684,345 |
China 0.07% | 1,090,749 | |
Yangzijiang Shipbuilding Holdings, Ltd. | 1,011,000 | 1,090,749 |
Denmark 0.30% | 4,715,063 | |
D/S Norden A/S | 15,026 | 441,413 |
Novo Nordisk A/S | 30,460 | 4,273,650 |
Finland 0.41% | 6,566,225 | |
Neste Oil OYJ | 90,288 | 1,110,135 |
Nokia OYJ | 1,035,944 | 5,456,090 |
France 11.11% | 176,156,768 | |
Air France KLM (I)(L) | 364,667 | 2,150,448 |
Alcatel-Lucent (I) | 15,210 | 38,101 |
Archos SA (I)(L) | 50,259 | 594,650 |
Arkema SA | 41,507 | 3,798,382 |
Artprice.com (I)(L) | 7,340 | 481,752 |
BNP Paribas SA | 33,222 | 1,614,119 |
Cie Generale d’Optique Essilor International SA | 28,076 | 2,235,868 |
Cie Generale des Etablissements Michelin | 25,572 | 1,763,374 |
Dassault Systemes SA | 25,987 | 2,158,712 |
France Telecom SA | 264,857 | 4,050,132 |
Lagardere SCA | 70,447 | 2,106,670 |
LVMH Moet Hennessy Louis Vuitton SA | 21,470 | 3,606,957 |
PagesJaunes Groupe (L) | 196,905 | 697,529 |
Peugeot SA | 105,654 | 2,114,254 |
Rallye SA | 22,155 | 808,197 |
Renault SA | 90,587 | 4,790,248 |
Safran SA | 52,116 | 1,746,987 |
Sanofi | 808,678 | 59,856,960 |
Societe Generale SA | 79,117 | 2,544,755 |
See notes to financial statements | Annual report | International Core Fund | 13 |
Shares | Value | |
France (continued) | ||
SOITEC (I)(L) | 46,064 | $306,561 |
Total SA | 1,163,207 | 65,111,067 |
Unibail-Rodamco SE | 16,685 | 3,222,218 |
Valeo SA | 29,428 | 1,583,308 |
Vivendi SA | 298,649 | 6,404,402 |
Wendel SA | 28,172 | 2,371,117 |
Germany 6.39% | 101,405,030 | |
Adidas AG | 42,270 | 3,317,719 |
Aurubis AG (L) | 51,738 | 3,078,374 |
BASF SE | 102,076 | 8,951,853 |
Bayerische Motoren Werke (BMW) AG | 56,913 | 5,263,730 |
Bilfinger Berger SE | 27,734 | 2,711,876 |
Continental AG (I) | 11,907 | 1,083,269 |
Deutsche Lufthansa AG | 97,100 | 1,346,827 |
Deutsche Post AG | 86,026 | 1,509,312 |
E.ON AG | 1,358,888 | 31,288,290 |
Fresenius Medical Care AG & Company KGaA | 44,225 | 3,097,004 |
Fresenius SE & Company KGaA | 41,267 | 4,265,219 |
GEA Group AG | 77,951 | 2,631,935 |
Gildemeister AG (I) | 20,457 | 329,752 |
Kloeckner & Company SE | 51,701 | 797,595 |
Lanxess AG | 25,733 | 1,923,157 |
Leoni AG | 71,858 | 3,600,296 |
Linde AG | 19,147 | 3,180,311 |
Puma SE | 4,903 | 1,701,041 |
RWE AG | 176,219 | 8,014,822 |
Salzgitter AG | 33,918 | 2,072,776 |
SAP AG | 66,289 | 4,473,425 |
SGL Carbon SE (I)(L) | 17,678 | 856,972 |
Software AG | 46,365 | 1,761,706 |
Suedzucker AG | 67,894 | 1,965,771 |
Volkswagen AG | 12,883 | 2,181,998 |
Greece 0.21% | 3,295,380 | |
Alpha Bank AE (I) | 5,675 | 9,788 |
National Bank of Greece SA (I) | 4,283 | 13,113 |
OPAP SA | 272,999 | 2,419,320 |
Public Power Corp. SA | 184,078 | 853,159 |
Hong Kong 1.69% | 26,838,246 | |
AIA Group, Ltd. | 690,400 | 2,612,945 |
CLP Holdings, Ltd. | 704,699 | 6,239,650 |
Esprit Holdings, Ltd. (L) | 1,373,095 | 3,077,920 |
Galaxy Entertainment Group, Ltd. (I) | 781,000 | 1,906,479 |
Hong Kong & China Gas Company, Ltd. | 841,443 | 2,145,196 |
Melco International Development Ltd. (I) | 1,827,000 | 1,795,324 |
Pacific Basin Shipping, Ltd. | 1,614,121 | 835,204 |
Power Assets Holdings, Ltd. | 656,854 | 4,899,068 |
Sino-Forest Corp. (I) | 26,210 | 9,010 |
Swire Pacific, Ltd., Class A | 130,000 | 1,471,190 |
14 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Hong Kong (continued) | ||
Swire Properties, Ltd. | 122,500 | $301,346 |
Yue Yuen Industrial Holdings, Ltd. | 454,380 | 1,544,914 |
Ireland 1.19% | 18,945,069 | |
C&C Group PLC | 199,547 | 974,020 |
C&C Group PLC — London Exchange | 5,405 | 26,298 |
CRH PLC | 254,112 | 5,429,444 |
DCC PLC | 64,511 | 1,656,889 |
Experian PLC | 2,439 | 36,637 |
Kerry Group PLC | 65,864 | 2,806,735 |
Paddy Power PLC | 34,345 | 2,043,156 |
Paddy Power PLC — London Exchange | 2,971 | 176,649 |
Shire PLC | 166,003 | 5,795,241 |
Israel 0.12% | 1,857,593 | |
Africa Israel Investments, Ltd. (I) | 248,950 | 821,064 |
Cellcom Israel, Ltd. | 14,595 | 197,722 |
Mellanox Technologies, Ltd. (I) | 5,777 | 221,022 |
Partner Communications Company, Ltd. | 84,490 | 617,785 |
Italy 5.28% | 83,729,888 | |
Banco Popolare Societa Cooperativa (L) | 1,795,448 | 3,292,693 |
BGP Holdings PLC | 2,714,128 | 4 |
Davide Campari Milano SpA | 240,064 | 1,795,862 |
Enel SpA | 5,705,693 | 22,864,559 |
ENI SpA | 1,336,794 | 30,863,686 |
Exor SpA | 43,258 | 1,085,451 |
Finmeccanica SpA (L) | 891,428 | 4,503,338 |
Fondiaria-Sai SpA (I)(L) | 220,301 | 404,236 |
Italcementi SpA — RSP | 41,228 | 133,868 |
Lottomatica SpA (I) | 40,951 | 695,316 |
Mediaset SpA | 222,143 | 657,645 |
Milano Assicurazioni SpA (I) | 1,508,781 | 573,280 |
Pirelli & C. SpA | 209,307 | 2,176,824 |
Recordati SpA | 89,392 | 678,199 |
Saipem SpA | 13,152 | 663,976 |
Snam Rete Gas SpA | 525,056 | 2,539,681 |
Telecom Italia SpA | 3,985,722 | 4,585,644 |
Telecom Italia SpA, RSP | 3,930,583 | 3,715,501 |
Terna Rete Elettrica Nazionale SpA | 453,146 | 1,705,488 |
Tod’s SpA | 7,733 | 794,637 |
Japan 22.53% | 357,254,166 | |
Advance Residence Investment Corp. | 423 | 785,304 |
AEON Company, Ltd. (L) | 495,600 | 6,280,913 |
AEON Credit Service Company, Ltd. | 88,100 | 1,273,870 |
Aiful Corp. (I)(L) | 451,700 | 779,395 |
Alps Electric Company, Ltd. | 323,046 | 2,896,637 |
Anritsu Corp. (L) | 253,000 | 3,037,662 |
Asahi Group Holdings, Ltd. | 90,800 | 1,986,137 |
Astellas Pharma, Inc. | 184,700 | 7,597,111 |
See notes to financial statements | Annual report | International Core Fund | 15 |
Shares | Value | |
Japan (continued) | ||
Bandai Namco Holdings, Inc. | 120,400 | $1,682,061 |
Bridgestone Corp. | 212,500 | 5,123,662 |
Calsonic Kansei Corp. | 258,000 | 1,493,854 |
CAPCOM Company, Ltd. | 53,000 | 1,175,085 |
Circle K Sunkus Company, Ltd. | 35,200 | 770,294 |
Cosmo Oil Company, Ltd. | 469,000 | 1,362,776 |
Daikyo, Inc. (I) | 1,022,000 | 2,631,738 |
Daito Trust Construction Company, Ltd. | 113,800 | 10,030,749 |
Dena Company, Ltd. | 46,300 | 1,508,074 |
DIC Corp. | 322,000 | 662,905 |
Digital Garage, Inc. (I) | 236 | 606,523 |
Don Quijote Company, Ltd. | 61,400 | 2,121,671 |
East Japan Railway Company | 28,100 | 1,802,333 |
EDION Corp. | 134,200 | 975,674 |
Eisai Company, Ltd. | 104,280 | 4,218,434 |
Electric Power Development Company, Ltd. | 39,100 | 997,040 |
FANUC Corp. | 20,600 | 3,743,497 |
Fast Retailing Company, Ltd. (L) | 23,000 | 4,767,259 |
Fuji Electric Company, Ltd. | 329,000 | 849,410 |
Fuji Heavy Industries, Ltd. | 127,116 | 962,220 |
Fuji Oil Company, Ltd. | 52,400 | 719,862 |
Gree, Inc. (L) | 127,200 | 3,980,890 |
Gunze, Ltd. | 223,000 | 691,811 |
Hanwa Company, Ltd. | 183,000 | 853,928 |
Haseko Corp. (I) | 1,877,000 | 1,378,568 |
Hikari Tsushin, Inc. | 33,500 | 945,115 |
Hitachi, Ltd. | 851,000 | 4,956,163 |
Honda Motor Company, Ltd. | 12 | 458 |
Inpex Corp. | 621 | 4,384,598 |
ITOCHU Corp. | 660,200 | 7,529,403 |
Japan Tobacco, Inc. | 537 | 2,853,586 |
JFE Holdings, Inc. | 201,100 | 4,243,477 |
JGC Corp. | 58,000 | 1,679,468 |
Juki Corp. (L) | 240,000 | 522,750 |
JVC Kenwood Holdings, Ltd. (I) | 123,800 | 570,967 |
JX Holdings, Inc. | 1,939,000 | 12,185,487 |
K’s Holding Corp. | 100,400 | 3,352,599 |
Kajima Corp. | 1,617,000 | 4,977,655 |
Kakaku.com, Inc. | 51,000 | 1,494,438 |
Kao Corp. | 202,450 | 5,183,577 |
Kawasaki Kisen Kaisha, Ltd. (L) | 1,052,000 | 2,219,941 |
KDDI Corp. | 2,084 | 13,243,690 |
Kinugawa Rubber Industrial Company, Ltd. | 148,000 | 1,109,127 |
Konami Corp. | 100,523 | 2,767,213 |
Lawson, Inc. | 36,400 | 2,141,377 |
Leopalace21 Corp. (I)(L) | 421,700 | 1,028,873 |
Makino Milling Machine Company, Ltd. | 172,000 | 1,292,420 |
Marubeni Corp. | 634,824 | 4,508,417 |
16 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Japan (continued) | ||
Mazda Motor Corp. (I)(L) | 1,244,000 | $2,060,729 |
Mitsubishi Chemical Holdings Corp. | 806,500 | 4,651,349 |
Mitsubishi Corp. | 162,795 | 3,989,371 |
Mitsubishi Heavy Industries, Ltd. | 469,000 | 2,197,661 |
Mitsubishi UFJ Lease & Finance Company, Ltd. | 42,500 | 1,816,773 |
Mitsui & Company, Ltd. | 149,400 | 2,577,755 |
Mitsui Mining & Smelting Company, Ltd. | 548,000 | 1,662,608 |
Mitsui O.S.K. Lines, Ltd. | 507,000 | 2,313,892 |
Mizuho Financial Group, Inc. | 2,763,400 | 4,629,236 |
Nachi-Fujikoshi Corp. | 128,000 | 705,649 |
NET One Systems Company, Ltd. | 847 | 2,092,189 |
Nintendo Company, Ltd. | 14,300 | 2,092,458 |
Nippon Chemi-Con Corp. (L) | 234,000 | 975,995 |
Nippon Light Metal Company, Ltd. | 1,132,000 | 1,729,902 |
Nippon Paper Group, Inc. (L) | 87,000 | 1,867,029 |
Nippon Steel Corp. | 1,838,000 | 5,284,719 |
Nippon Telegraph & Telephone Corp. | 354,400 | 16,705,053 |
Nippon Yusen Kabushiki Kaisha | 893,000 | 2,663,415 |
Nipro Corp. (L) | 99,300 | 757,126 |
Nissan Motor Company, Ltd. | 238,200 | 2,450,075 |
Nisshinbo Holdings, Inc. | 95,000 | 904,999 |
Nitori Holdings Company, Ltd. | 26,200 | 2,215,197 |
Nitto Boseki Company, Ltd. | 223,000 | 752,344 |
NTT DoCoMo, Inc. | 3,933 | 6,700,566 |
Obayashi Corp. | 387,000 | 1,742,802 |
OKUMA Corp. | 128,000 | 1,067,812 |
ORIX Corp. | 28,660 | 2,765,011 |
Osaka Gas Company, Ltd. | 594,120 | 2,276,853 |
Penta-Ocean Construction Company, Ltd. (L) | 694,000 | 2,309,959 |
Point, Inc. | 29,230 | 1,096,053 |
Resona Holdings, Inc. | 2,331,500 | 11,145,810 |
Ricoh Company, Ltd. | 156,000 | 1,426,607 |
Round One Corp. | 237,400 | 1,552,813 |
Ryohin Keikaku Company, Ltd. | 36,000 | 1,715,172 |
Sankyo Company, Ltd. | 54,000 | 2,591,121 |
Sanrio Company, Ltd. (L) | 46,500 | 1,902,164 |
SCSK Corp. | 50,300 | 770,922 |
Sega Sammy Holdings, Inc. | 116,300 | 2,197,597 |
Seven & I Holdings Company, Ltd. | 141,400 | 3,909,812 |
Shimamura Company, Ltd. | 12,600 | 1,378,848 |
Ship Healthcare Holdings, Inc. | 21,400 | 411,590 |
Showa Shell Sekiyu KK | 128,900 | 870,291 |
Sojitz Corp. | 1,530,300 | 2,830,898 |
Sumitomo Corp. | 790,100 | 11,735,976 |
Sumitomo Osaka Cement Company, Ltd. | 406,000 | 1,223,887 |
Taiheiyo Cement Corp. | 2,185,000 | 4,661,955 |
Taisei Corp. | 1,541,000 | 4,062,947 |
Takeda Pharmaceutical Company, Ltd. | 480,489 | 21,710,818 |
See notes to financial statements | Annual report | International Core Fund | 17 |
Shares | Value | |
Japan (continued) | ||
The Daiei, Inc. (I)(L) | 197,000 | $701,117 |
Toho Zinc Company, Ltd. | 246,000 | 1,086,495 |
Tokyo Gas Company, Ltd. | 397 | 1,809 |
Tokyo Steel Manufacturing Company, Ltd. | 700 | 5,884 |
Tokyo Tatemono Company, Ltd. | 638,000 | 2,597,191 |
TonenGeneral Sekiyu KK | 134,133 | 1,236,952 |
Toray Industries, Inc. | 525,000 | 3,719,601 |
Tosoh Corp. | 400,000 | 1,169,428 |
Toyota Tsusho Corp. | 253,800 | 5,101,605 |
UNY Company, Ltd. | 287,700 | 2,873,296 |
USS Company, Ltd. | 19,790 | 1,939,690 |
West Japan Railway Company | 31,400 | 1,281,026 |
Yahoo! Japan Corp. | 5,501 | 1,734,495 |
Yamada Denki Company, Ltd. | 122,260 | 7,954,596 |
Yamato Transport Company, Ltd. | 79,300 | 1,252,141 |
Zeon Corp. | 54,000 | 506,886 |
Jersey, C.I. 0.22% | 3,546,754 | |
Randgold Resources, Ltd. | 30,960 | 3,546,754 |
Netherlands 4.17% | 66,080,209 | |
Aegon NV (I) | 562,357 | 2,936,047 |
ASML Holding NV | 26,477 | 1,215,705 |
CSM NV | 44,724 | 841,062 |
European Aeronautic Defence & Space Company NV | 158,498 | 5,758,119 |
ING Groep NV, ADR (I) | 711,213 | 6,285,752 |
Koninklijke BAM Groep NV | 335,564 | 1,585,269 |
Royal Dutch Shell PLC, B Shares | 581,098 | 21,564,359 |
Royal Dutch Shell PLC, Class A (London Stock Exchange) | 417,282 | 15,160,062 |
Unilever NV | 297,792 | 9,883,720 |
Wereldhave NV | 11,378 | 850,114 |
New Zealand 0.63% | 9,970,526 | |
Chorus, Ltd. | 710,572 | 1,928,847 |
Fletcher Building, Ltd. (New Zealand Exchange) | 361,491 | 1,963,427 |
Telecom Corp. of New Zealand, Ltd. | 3,403,979 | 6,078,252 |
Norway 0.15% | 2,370,480 | |
Telenor ASA | 47,039 | 868,642 |
TGS Nopec Geophysical Company ASA | 51,996 | 1,501,838 |
Portugal 0.28% | 4,455,258 | |
Electricidade de Portugal SA | 749,378 | 2,184,591 |
Jeronimo Martins SGPS SA (I) | 122,957 | 2,270,667 |
Singapore 1.49% | 23,627,531 | |
CapitaCommercial Trust | 640,000 | 603,938 |
Ezra Holdings, Ltd. (I) | 918,000 | 911,094 |
Golden Agri-Resources, Ltd. | 9,632,000 | 5,591,520 |
Jaya Holdings, Ltd. (I) | 876,000 | 399,976 |
Midas Holdings, Ltd. (L) | 638,000 | 199,753 |
Oversea-Chinese Banking Corp., Ltd. | 101,987 | 728,139 |
Singapore Exchange, Ltd. | 453,000 | 2,597,820 |
18 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Singapore (continued) | ||
Singapore Press Holdings, Ltd. | 786,000 | $2,375,813 |
Singapore Telecommunications, Ltd. | 3,618,350 | 9,148,062 |
Swiber Holdings, Ltd. (I)(L) | 912,000 | 513,458 |
Venture Corp., Ltd. | 83,000 | 557,958 |
Spain 4.61% | 73,079,796 | |
Banco Popular Espanol SA (L) | 999,953 | 4,100,455 |
Banco Santander SA (I) | 1,455,409 | 12,067,040 |
Ferrovial SA | 189,528 | 2,398,424 |
Fomento de Construcciones y Contratas SA | 62,127 | 1,573,985 |
Gas Natural SDG SA | 447,634 | 7,564,727 |
Grifols SA (I) | 123,564 | 2,571,677 |
Grifols SA, B Shares (I) | 12,356 | 174,694 |
Iberdrola SA | 946,393 | 5,592,343 |
Inditex SA | 75,648 | 6,994,300 |
Red Electrica De Espana | 27,151 | 1,371,744 |
Repsol YPF SA | 243,108 | 6,333,521 |
Telefonica SA | 1,310,546 | 22,336,886 |
Sweden 0.55% | 8,763,057 | |
Boliden AB | 100,286 | 1,752,403 |
Investor AB, B Shares | 152,520 | 3,390,807 |
NCC AB | 62,019 | 1,377,754 |
Swedbank AB, Class A | 131,326 | 2,242,093 |
Switzerland 4.65% | 73,791,462 | |
Nestle SA | 369,854 | 22,601,625 |
Novartis AG | 464,485 | 25,317,832 |
Roche Holdings AG | 114,947 | 19,997,394 |
The Swatch Group AG, BR Shares | 8,041 | 3,642,176 |
Wolseley PLC | 57,595 | 2,232,435 |
United Kingdom 18.85% | 298,942,651 | |
3i Group PLC | 362,926 | 1,093,198 |
Aggreko PLC | 87,935 | 3,096,396 |
Amlin PLC | 244,715 | 1,367,681 |
ARM Holdings PLC | 435,088 | 3,940,381 |
ASOS PLC (I) | 42,436 | 1,237,414 |
Associated British Foods PLC | 91,547 | 1,744,742 |
AstraZeneca PLC | 941,827 | 42,192,449 |
Aviva PLC (I) | 391,593 | 2,293,099 |
BAE Systems PLC | 1,894,360 | 9,425,651 |
Barclays PLC | 4,849,986 | 18,888,654 |
BG Group PLC | 180,125 | 4,343,952 |
BP PLC | 2,437,540 | 19,131,564 |
British American Tobacco PLC | 427,804 | 21,622,063 |
BT Group PLC | 3,701,806 | 12,644,567 |
Burberry Group PLC | 295,601 | 6,626,888 |
Cobham PLC | 548,940 | 1,636,809 |
Cookson Group PLC | 104,076 | 1,115,036 |
Diageo PLC | 275,310 | 6,576,037 |
See notes to financial statements | Annual report | International Core Fund | 19 |
Shares | Value | |
United Kingdom (continued) | ||
Dixons Retail PLC (I) | 1,483,486 | $352,574 |
Drax Group PLC | 366,709 | 3,025,988 |
Electrocomponents PLC | 115,029 | 442,051 |
FirstGroup PLC | 373,292 | 1,746,846 |
GlaxoSmithKline PLC | 1,993,824 | 43,968,318 |
Home Retail Group PLC | 1,661,027 | 2,689,681 |
HSBC Holdings PLC | 1,544 | 13,633 |
IMI PLC | 154,196 | 2,377,467 |
Imperial Tobacco Group PLC | 125,692 | 4,980,979 |
ITV PLC | 254,835 | 347,793 |
Jazztel PLC (I) | 245,020 | 1,399,490 |
Ladbrokes PLC | 13,856 | 33,043 |
Legal & General Group PLC | 1,087,837 | 2,089,159 |
Lloyds Banking Group PLC (I) | 7,661,266 | 4,254,414 |
National Express Group PLC | 100,913 | 374,930 |
Next PLC | 138,713 | 6,117,643 |
Pearson PLC | 182,848 | 3,485,061 |
Prudential PLC | 64,212 | 727,284 |
Punch Taverns PLC (I) | 644,963 | 115,431 |
Reckitt Benckiser Group PLC | 48,446 | 2,682,080 |
Rio Tinto PLC | 123,972 | 7,058,389 |
Rolls-Royce Holdings PLC (I) | 302,692 | 3,920,541 |
Royal Bank of Scotland Group PLC (I) | 4,707,046 | 2,092,240 |
SABMiller PLC | 55,897 | 2,262,130 |
Scottish & Southern Energy PLC | 202,971 | 4,162,487 |
Smith & Nephew PLC | 186,667 | 1,833,909 |
Spirit Pub Company PLC (I) | 582,690 | 537,270 |
Tate & Lyle PLC | 139,270 | 1,545,384 |
Taylor Wimpey PLC (I) | 428,293 | 337,970 |
The Sage Group PLC | 404,387 | 1,995,374 |
The Weir Group PLC | 114,728 | 3,844,726 |
Thomas Cook Group PLC (L) | 2,004,884 | 901,634 |
Trinity Mirror PLC (I) | 140,795 | 102,971 |
Tullett Prebon PLC | 142,203 | 725,142 |
United Utilities Group PLC | 109,843 | 1,067,883 |
Vodafone Group PLC | 8,866,109 | 23,955,879 |
William Hill PLC | 620,167 | 2,212,583 |
Yell Group PLC (I)(L) | 2,616,973 | 185,693 |
Shares | Value | |
Preferred Securities 0.63% | $10,067,610 | |
(Cost $8,307,254) | ||
Germany 0.63% | 10,067,610 | |
Bayerische Motoren Werke (BMW) AG | 12,011 | 711,784 |
Porsche Automobil Holding SE | 86,927 | 5,657,783 |
Volkswagen AG | 19,780 | 3,698,043 |
20 | International Core Fund | Annual report | See notes to financial statements |
Yield (%) | Shares | Value | |
Securities Lending Collateral 4.20% | $66,581,092 | ||
(Cost $66,576,604) | |||
John Hancock Collateral Investment Trust (W) | 0.3743 (Y) | 6,651,790 | 66,581,092 |
Yield (%) | Par value | Value | |
Short-Term Investments 3.64% | $57,665,090 | ||
(Cost $57,665,090) | |||
Money Market Funds 3.64% | 57,665,090 | ||
State Street Institutional Treasury Money | |||
Market Fund | 0.0000 (Y) | $57,665,090 | 57,665,090 |
Total investments (Cost $1,653,627,534)† 102.81% | $1,630,363,609 | ||
Other assets and liabilities, net (2.81%) | ($44,588,467) | ||
Total net assets 100.00% | $1,585,775,142 | ||
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
REIT Real Estate Investment Trust
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 2-29-12.
(W) Investment is an affiliate of the Fund, the adviser and/or subadviser. Also, it represents the investment of securities lending collateral received.
(Y) The rate shown is the annualized seven-day yield as of 2-29-12.
† At 2-29-12, the aggregate cost of investment securities for federal income tax purposes was $1,668,723,964. Net unrealized depreciation aggregated $38,360,355, of which $121,304,967 related to appreciated investment securities and ($159,665,322) related to depreciated investment securities.
The Fund had the following sector composition as a percentage of net assets on 2-29-12:
Health Care | 15.8% | ||
Energy | 13.5% | ||
Financials | 11.4% | ||
Consumer Discretionary | 10.2% | ||
Telecommunication Services | 9.9% | ||
Industrials | 9.6% | ||
Consumer Staples | 8.4% | ||
Utilities | 6.9% | ||
Materials | 5.6% | ||
Information Technology | 3.7% | ||
Short-Term Investments & Other | 5.0% |
See notes to financial statements | Annual 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 2-29-12
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 $1,587,050,930) | |
including $63,008,305 of securities loaned) | $1,563,782,517 |
Investments in affiliated issuers, at value (Cost $66,576,604) | 66,581,092 |
Total investments, at value (Cost $1,653,627,534) | 1,630,363,609 |
Foreign currency, at value (Cost $1,315,257) | 1,330,504 |
Cash held at broker for futures contracts | 10,796,405 |
Receivable for fund shares sold | 3,505,863 |
Receivable for forward foreign currency exchange contracts | 1,426,195 |
Dividends and interest receivable | 8,040,647 |
Receivable for securities lending income | 114,646 |
Receivable due from adviser | 128 |
Other receivables and prepaid expenses | 159,749 |
Total assets | 1,655,737,746 |
Liabilities | |
Payable for forward foreign currency exchange contracts | 608,518 |
Payable for fund shares repurchased | 1,673,328 |
Payable upon return of securities loaned | 66,532,524 |
Payable for futures variation margin | 337,311 |
Payable to affiliates | |
Accounting and legal services fees | 52,839 |
Transfer agent fees | 102,650 |
Distribution and service fees | 15 |
Trustees’ fees | 34,198 |
Other liabilities and accrued expenses | 621,221 |
Total liabilities | 69,962,604 |
Net assets | |
Paid-in capital | $1,813,274,258 |
Undistributed net investment income | 11,462,292 |
Accumulated net realized gain (loss) on investments, futures contracts and | |
foreign currency transactions | (219,442,851) |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | (19,518,557) |
Net assets | $1,585,775,142 |
22 | International Core Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
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 ($373,532,884 ÷ 13,475,711 shares) | $27.72 |
Class B ($3,687,394 ÷ 133,543 shares)1 | $27.61 |
Class C ($4,386,410 ÷ 158,844 shares)1 | $27.61 |
Class I ($411,313,070 ÷ 14,805,613 shares) | $27.78 |
Class R1 ($249,667 ÷ 9,027 shares) | $27.66 |
Class R3 ($29,794 ÷ 1,072 shares) | $27.802 |
Class R4 ($34,716 ÷ 1,249 shares) | $27.792 |
Class R5 ($71,033 ÷ 2,557 shares) | $27.78 |
Class R6 ($99,512 ÷ 3,577 shares) | $27.82 |
Class 1 ($39,092,356 ÷ 1,404,982 shares) | $27.82 |
Class NAV ($753,278,306 ÷ 27,095,400 shares) | $27.80 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)3 | $29.18 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 Net assets and shares outstanding have been rounded for presentation purposes. The net asset value is as reported on 2-29-12.
3 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | International Core Fund | 23 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-29-12
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 | $63,284,898 |
Securities lending | 2,881,986 |
Interest | 3,845 |
Less foreign taxes withheld | (5,472,851) |
Total investment income | 60,697,878 |
Expenses | |
Investment management fees | 14,226,088 |
Distribution and service fees | 1,356,130 |
Accounting and legal services fees | 238,772 |
Transfer agent fees | 1,135,319 |
Trustees’ fees | 100,832 |
State registration fees | 154,977 |
Printing and postage | 290,034 |
Professional fees | 161,513 |
Custodian fees | 1,686,879 |
Registration and filing fees | 69,507 |
Other | 41,935 |
Total expenses | 19,461,986 |
Less expense reductions | (77,029) |
Net expenses | 19,384,957 |
Net investment income | 41,312,921 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 10,752,964 |
Investments in affiliated issuers | 11,592 |
Capital gain distributions received from affiliated underlying funds | 4,324 |
Futures contracts | (5,281,432) |
Foreign currency transactions | (6,514,319) |
(1,026,871) | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | (183,733,186) |
Investments in affiliated issuers | 2,929 |
Futures contracts | 822,635 |
Translation of assets and liabilities in foreign currencies | 1,713,430 |
(181,194,192) | |
Net realized and unrealized loss | (182,221,063) |
Decrease in net assets from operations | ($140,908,142) |
24 | International Core Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
Year | Year | |
ended | ended | |
2-29-12 | 2-28-11 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $41,312,921 | $23,097,293 |
Net realized gain (loss) | (1,026,871) | 5,624,346 |
Change in net unrealized appreciation (depreciation) | (181,194,192) | 249,810,283 |
Increase (decrease) in net assets resulting from operations | (140,908,142) | 278,531,922 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (6,432,365) | (3,147,377) |
Class B | (26,198) | (20,240) |
Class C | (31,262) | (19,160) |
Class I | (7,098,312) | (3,662,817) |
Class R1 | (2,560) | (1,465) |
Class R3 | (359) | (245) |
Class R4 | (492) | (330) |
Class R5 | (1,226) | (672) |
Class R6 | (1,923) | — |
Class 1 | (779,516) | (671,339) |
Class NAV | (15,625,962) | (13,024,392) |
Total distributions | (30,000,175) | (20,548,037) |
From Fund share transactions | 154,369,410 | 179,570,655 |
Total increase (decrease) | (16,538,907) | 437,554,540 |
Net assets | ||
Beginning of year | 1,602,314,049 | 1,164,759,509 |
End of year | $1,585,775,142 | $1,602,314,049 |
Undistributed net investment income | $11,462,292 | $2,757,635 |
See notes to financial statements | Annual report | International Core Fund | 25 |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $30.85 | $25.74 | $18.43 | $39.06 | $43.30 |
Net investment income1 | 0.58 | 0.33 | 0.24 | 0.76 | 0.35 |
Net realized and unrealized gain (loss) on investments | (3.32) | 5.09 | 7.59 | (18.65) | (0.35) |
Total from investment operations | (2.74) | 5.42 | 7.83 | (17.89) | — |
Less distributions | |||||
From net investment income | (0.39) | (0.31) | (0.52) | (1.56) | (0.45) |
From net realized gain | — | — | — | (1.18) | (3.79) |
Total distributions | (0.39) | (0.31) | (0.52) | (2.74) | (4.24) |
Net asset value, end of period | $27.72 | $30.85 | $25.74 | $18.43 | $39.06 |
Total return (%)2 | (8.73) | 21.133 | 42.333 | (47.16)3 | (0.76)3 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $374 | $333 | $225 | $54 | $130 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.58 | 1.61 | 1.954 | 1.75 | 1.68 |
Expenses net of fee waivers | 1.58 | 1.60 | 1.664 | 1.75 | 1.65 |
Expenses net of fee waivers and credits | 1.58 | 1.60 | 1.624 | 1.70 | 1.65 |
Net investment income | 2.05 | 1.21 | 0.94 | 2.33 | 0.78 |
Portfolio turnover (%) | 42 | 39 | 44 | 54 | 505 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
5 Excludes merger activity.
26 | International Core Fund | Annual report | See notes to financial statements |
CLASS B SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $30.70 | $25.62 | $18.36 | $38.80 | $43.08 |
Net investment income1 | 0.44 | 0.18 | 0.17 | 0.53 | —2 |
Net realized and unrealized gain (loss) on investments | (3.34) | 5.01 | 7.44 | (18.49) | (0.33) |
Total from investment operations | (2.90) | 5.19 | 7.61 | (17.96) | (0.33) |
Less distributions | |||||
From net investment income | (0.19) | (0.11) | (0.35) | (1.30) | (0.16) |
From net realized gain | — | — | — | (1.18) | (3.79) |
Total distributions | (0.19) | (0.11) | (0.35) | (2.48) | (3.95) |
Net asset value, end of period | $27.61 | $30.70 | $25.62 | $18.36 | $38.80 |
Total return (%)3,4 | (9.38) | 20.28 | 41.35 | (47.53) | (1.48) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $4 | $5 | $6 | $7 | $20 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.49 | 2.36 | 3.075 | 2.75 | 2.48 |
Expenses net of fee waivers | 2.30 | 2.30 | 2.365 | 2.63 | 2.41 |
Expenses net of fee waivers and credits | 2.30 | 2.30 | 2.335 | 2.40 | 2.40 |
Net investment income | 1.58 | 0.65 | 0.69 | 1.64 | —6 |
Portfolio turnover (%) | 42 | 39 | 44 | 54 | 507 |
1 Based on the average daily shares outstanding.
2 Less than $0.005 per share.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
6 Less than 0.005%.
7 Excludes merger activity.
CLASS C SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $30.71 | $25.62 | $18.36 | $38.81 | $43.09 |
Net investment income1 | 0.43 | 0.17 | 0.15 | 0.55 | 0.13 |
Net realized and unrealized gain (loss) on investments | (3.34) | 5.03 | 7.46 | (18.52) | (0.46) |
Total from investment operations | (2.91) | 5.20 | 7.61 | (17.97) | (0.33) |
Less distributions | |||||
From net investment income | (0.19) | (0.11) | (0.35) | (1.30) | (0.16) |
From net realized gain | — | — | — | (1.18) | (3.79) |
Total distributions | (0.19) | (0.11) | (0.35) | (2.48) | (3.95) |
Net asset value, end of period | $27.61 | $30.71 | $25.62 | $18.36 | $38.81 |
Total return (%)2,3 | (9.41) | 20.32 | 41.35 | (47.55) | (1.48) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $4 | $5 | $5 | $4 | $15 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.50 | 2.47 | 2.694 | 2.59 | 2.49 |
Expenses net of fee waivers | 2.30 | 2.30 | 2.364 | 2.43 | 2.40 |
Expenses net of fee waivers and credits | 2.30 | 2.30 | 2.334 | 2.40 | 2.40 |
Net investment income | 1.53 | 0.62 | 0.60 | 1.69 | 0.28 |
Portfolio turnover (%) | 42 | 39 | 44 | 54 | 505 |
1 Based on the average daily shares outstanding.
2 Does not reflect the effect of sales charges, if any.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
5 Excludes merger activity.
See notes to financial statements | Annual report | International Core Fund | 27 |
CLASS I SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $30.94 | $25.80 | $18.45 | $39.20 | $43.43 |
Net investment income1 | 0.72 | 0.45 | 0.35 | 0.94 | 0.55 |
Net realized and unrealized gain (loss) on investments | (3.36) | 5.12 | 7.63 | (18.77) | (0.35) |
Total from investment operations | (2.64) | 5.57 | 7.98 | (17.83) | 0.20 |
Less distributions | |||||
From net investment income | (0.52) | (0.43) | (0.63) | (1.74) | (0.64) |
From net realized gain | — | — | — | (1.18) | (3.79) |
Total distributions | (0.52) | (0.43) | (0.63) | (2.92) | (4.43) |
Net asset value, end of period | $27.78 | $30.94 | $25.80 | $18.45 | $39.20 |
Total return (%) | (8.33) | 21.732 | 43.102 | (46.91)2 | (0.33)2 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $411 | $291 | $84 | $1 | $3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.16 | 1.12 | 1.06 | 2.37 | 2.34 |
Expenses net of fee waivers | 1.16 | 1.12 | 1.06 | 1.18 | 1.18 |
Expenses net of fee waivers and credits | 1.16 | 1.12 | 1.06 | 1.18 | 1.18 |
Net investment income | 2.54 | 1.61 | 1.34 | 2.87 | 1.24 |
Portfolio turnover (%) | 42 | 39 | 44 | 54 | 503 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Excludes merger activity.
CLASS R1 SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $30.77 | $25.67 | $18.36 | $38.94 | $43.19 |
Net investment income1 | 0.53 | 0.24 | 0.23 | 0.69 | 0.66 |
Net realized and unrealized gain (loss) on investments | (3.33) | 5.06 | 7.50 | (18.54) | (0.69) |
Total from investment operations | (2.80) | 5.30 | 7.73 | (17.85) | (0.03) |
Less distributions | |||||
From net investment income | (0.31) | (0.20) | (0.42) | (1.55) | (0.43) |
From net realized gain | — | — | — | (1.18) | (3.79) |
Total distributions | (0.31) | (0.20) | (0.42) | (2.73) | (4.22) |
Net asset value, end of period | $27.66 | $30.77 | $25.67 | $18.36 | $38.94 |
Total return (%)2 | (9.00) | 20.71 | 42.00 | (47.16) | (0.82) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —3 | —3 | —3 | —3 | —3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 7.37 | 6.88 | 8.854 | 15.16 | 13.85 |
Expenses net of fee waivers | 1.90 | 1.92 | 1.924 | 2.10 | 1.70 |
Expenses net of fee waivers and credits | 1.90 | 1.92 | 1.924 | 1.70 | 1.70 |
Net investment income | 1.88 | 0.90 | 0.92 | 2.21 | 1.48 |
Portfolio turnover (%) | 42 | 39 | 44 | 54 | 505 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Less than $500,000.
4 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
5 Excludes merger activity.
28 | International Core Fund | Annual report | See notes to financial statements |
CLASS R3 SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-101 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $30.94 | $25.80 | $23.33 | ||
Net investment income2 | 0.57 | 0.29 | 0.02 | ||
Net realized and unrealized gain (loss) on investments | (3.38) | 5.08 | 2.90 | ||
Total from investment operations | (2.81) | 5.37 | 2.92 | ||
Less distributions | |||||
From net investment income | (0.33) | (0.23) | (0.45) | ||
Net asset value, end of period | $27.80 | $30.94 | $25.80 | ||
Total return (%)3 | (8.95) | 20.87 | 12.404 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | —5 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 45.66 | 44.55 | 10.976 | ||
Expenses net of fee waivers | 1.80 | 1.83 | 1.916 | ||
Expenses net of fee waivers and credits | 1.80 | 1.83 | 1.916 | ||
Net investment income | 2.01 | 1.05 | 0.106 | ||
Portfolio turnover (%) | 42 | 39 | 44 | ||
1 The inception date for Class R3 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
CLASS R4 SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-101 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $30.94 | $25.80 | $23.33 | ||
Net investment income2 | 0.65 | 0.37 | 0.08 | ||
Net realized and unrealized gain (loss) on investments | (3.38) | 5.08 | 2.91 | ||
Total from investment operations | (2.73) | 5.45 | 2.99 | ||
Less distributions | |||||
From net investment income | (0.42) | (0.31) | (0.52) | ||
Net asset value, end of period | $27.79 | $30.94 | $25.80 | ||
Total return (%)3 | (8.67) | 21.21 | 12.694 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | —5 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 42.74 | 44.22 | 10.716 | ||
Expenses net of fee waivers | 1.50 | 1.53 | 1.616 | ||
Expenses net of fee waivers and credits | 1.50 | 1.53 | 1.616 | ||
Net investment income | 2.29 | 1.34 | 0.406 | ||
Portfolio turnover (%) | 42 | 39 | 44 | ||
1 The inception date for Class R4 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
See notes to financial statements | Annual report | International Core Fund | 29 |
CLASS R5 SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-101 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $30.94 | $25.79 | $23.33 | ||
Net investment income2 | 0.73 | 0.44 | 0.14 | ||
Net realized and unrealized gain (loss) on investments | (3.38) | 5.10 | 2.91 | ||
Total from investment operations | (2.65) | 5.54 | 3.05 | ||
Less distributions | |||||
From net investment income | (0.51) | (0.39) | (0.59) | ||
Net asset value, end of period | $27.78 | $30.94 | $25.79 | ||
Total return (%)3 | (8.38) | 21.59 | 12.954 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | —5 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 20.87 | 31.41 | 10.506 | ||
Expenses net of fee waivers | 1.20 | 1.22 | 1.316 | ||
Expenses net of fee waivers and credits | 1.20 | 1.22 | 1.316 | ||
Net investment income | 2.58 | 1.58 | 0.706 | ||
Portfolio turnover (%) | 42 | 39 | 44 | ||
1 The inception date for Class R5 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
CLASS R6 SHARES Period ended | 2-29-121 |
Per share operating performance | |
Net asset value, beginning of period | $28.00 |
Net investment income2 | 0.26 |
Net realized and unrealized gain on investments | 0.10 |
Total from investment operations | 0.36 |
Less distributions | |
From net investment income | (0.54) |
Net asset value, end of period | $27.82 |
Total return (%)3 | 1.494 |
Ratios and supplemental data | |
Net assets, end of period (in millions) | —5 |
Ratios (as a percentage of average net assets): | |
Expenses before reductions | 16.836 |
Expenses net of fee waivers | 1.126 |
Expenses net of fee waivers and credits | 1.126 |
Net investment income | 1.986 |
Portfolio turnover (%) | 427 |
1 Period from 9-1-11 (inception date) to 2-29-12.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the period shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 3-1-11 to 2-29-12.
30 | International Core Fund | Annual report | See notes to financial statements |
CLASS 1 SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $30.99 | $25.84 | $18.48 | $39.22 | $43.43 |
Net investment income1 | 0.79 | 0.50 | 0.46 | 0.93 | 0.95 |
Net realized and unrealized gain (loss) on investments | (3.41) | 5.09 | 7.54 | (18.74) | (0.72) |
Total from investment operations | (2.62) | 5.59 | 8.00 | (17.81) | 0.23 |
Less distributions | |||||
From net investment income | (0.55) | (0.44) | (0.64) | (1.75) | (0.65) |
From net realized gain | — | — | — | (1.18) | (3.79) |
Total distributions | (0.55) | (0.44) | (0.64) | (2.93) | (4.44) |
Net asset value, end of period | $27.82 | $30.99 | $25.84 | $18.48 | $39.22 |
Total return (%) | (8.27) | 21.752 | 43.112 | (46.83)2 | (0.25)2 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $39 | $47 | $44 | $34 | $74 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.07 | 1.07 | 1.083 | 1.10 | 1.16 |
Expenses net of fee waivers | 1.07 | 1.07 | 1.073 | 1.10 | 1.14 |
Expenses net of fee waivers and credits | 1.07 | 1.07 | 1.073 | 1.10 | 1.14 |
Net investment income | 2.76 | 1.83 | 1.83 | 2.88 | 2.09 |
Portfolio turnover (%) | 42 | 39 | 44 | 54 | 504 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
4 Excludes merger activity.
CLASS NAV SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $30.98 | $25.82 | $18.47 | $39.21 | $43.42 |
Net investment income1 | 0.81 | 0.51 | 0.49 | 0.99 | 0.95 |
Net realized and unrealized gain (loss) on investments | (3.43) | 5.10 | 7.51 | (18.78) | (0.70) |
Total from investment operations | (2.62) | 5.61 | 8.00 | (17.79) | 0.25 |
Less distributions | |||||
From net investment income | (0.56) | (0.45) | (0.65) | (1.77) | (0.67) |
From net realized gain | — | — | — | (1.18) | (3.79) |
Total distributions | (0.56) | (0.45) | (0.65) | (2.95) | (4.46) |
Net asset value, end of period | $27.80 | $30.98 | $25.82 | $18.47 | $39.21 |
Total return (%) | (8.24) | 21.852 | 43.142 | (46.80)2 | (0.20)2 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $753 | $920 | $800 | $603 | $1,415 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.02 | 1.02 | 1.043 | 1.04 | 1.11 |
Expenses net of fee waivers | 1.02 | 1.02 | 1.023 | 1.04 | 1.08 |
Expenses net of fee waivers and credits | 1.02 | 1.02 | 1.023 | 1.04 | 1.08 |
Net investment income | 2.84 | 1.87 | 1.99 | 3.06 | 2.09 |
Portfolio turnover (%) | 42 | 39 | 44 | 54 | 504 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
4 Excludes merger activity.
See notes to financial statements | Annual report | International Core Fund | 31 |
Notes to financial statements
Note 1 — Organization
John Hancock International Core Fund (the Fund) is a series of John Hancock Funds III (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek high total return.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A, Class B and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class R1, Class R3, Class R4 and Class R5 shares are available only to certain retirement plans. Class R6 shares are available only to certain retirement plans, institutions and other investors. 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, and 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. Certain Class I shares may be exchanged for Class R6 shares within one year after the commencement of operations of Class R6 shares.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes 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 risks associated with investing in those securities.
32 | International Core Fund | Annual report |
The following is a summary of the values by input classification of the Fund’s investments as of February 29, 2012, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-29-12 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $79,596,747 | — | $79,596,747 | — |
Austria | 10,364,086 | — | 10,364,086 | — |
Belgium | 10,714,153 | — | 10,714,153 | — |
Bermuda | 1,719,515 | — | 1,719,515 | — |
Canada | 47,173,415 | $47,173,415 | — | — |
China | 1,090,749 | — | 1,090,749 | — |
Denmark | 4,715,063 | — | 4,715,063 | — |
Finland | 6,566,225 | — | 6,566,225 | — |
France | 176,156,768 | — | 176,156,768 | — |
Germany | 101,405,030 | — | 101,405,030 | — |
Greece | 3,295,380 | — | 3,295,380 | — |
Hong Kong | 26,838,246 | — | 26,829,236 | $9,010 |
Ireland | 18,945,069 | — | 18,945,069 | — |
Israel | 1,857,593 | — | 1,857,593 | — |
Italy | 83,729,888 | — | 83,729,884 | 4 |
Japan | 357,254,166 | — | 357,254,166 | — |
Jersey, C.I. | 3,546,754 | — | 3,546,754 | — |
Netherlands | 66,080,209 | — | 66,080,209 | — |
New Zealand | 9,970,526 | — | 9,970,526 | — |
Norway | 2,370,480 | — | 2,370,480 | — |
Portugal | 4,455,258 | — | 4,455,258 | — |
Singapore | 23,627,531 | — | 23,627,531 | — |
Spain | 73,079,796 | — | 73,079,796 | — |
Sweden | 8,763,057 | — | 8,763,057 | — |
Switzerland | 73,791,462 | — | 73,791,462 | — |
United Kingdom | 298,942,651 | — | 298,942,651 | — |
Preferred Securities | ||||
Germany | 10,067,610 | — | 10,067,610 | — |
Securities Lending | ||||
Collateral | 66,581,092 | 66,581,092 | — | — |
Short-Term Investments | ||||
Money Market Funds | 57,665,090 | 57,665,090 | — | — |
Total Investments in | ||||
Securities | $1,630,363,609 | $171,419,597 | $1,458,934,998 | $9,014 |
Other Financial | ||||
Instruments | ||||
Futures | $2,762,922 | ($1,774,021) | $4,536,943 | — |
Forward Foreign | ||||
Currency Contracts | $817,677 | — | $817,677 | — |
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. During the year ended February 29, 2012, there were no significant transfers into or out of Level 1, Level 2 or Level 3.
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
Annual report | International Core Fund | 33 |
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 includes coupon interest and amortization/accretion of premiums/discounts on debt securities. 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 taxes are provided for based on the Fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Securities lending. The Fund may lend its securities to earn additional income. It receives cash collateral 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. Net 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 the value of 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
34 | International Core Fund | Annual report |
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.
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 may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, as of March 30, 2011, the Fund and other affiliated funds 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 year ended February 29, 2012, the Fund had no borrowings under the line of credit.
Expenses. Expenses that are directly attributable to an individual fund are allocated to the Fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those 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.
For federal income tax purposes, the Fund has a capital loss carryforward of $180,841,491 available to offset future net realized capital gains as of February 29, 2012. Net capital losses of $27,964,263, that are the result of security transactions occurring after October 31, 2011, are treated as occurring on March 1, 2012, the first day of the Fund’s next taxable year. The
Annual report | International Core Fund | 35 |
loss carryforward expires as follows: February 28, 2018 – $173,798,079 and February 28, 2019 – $7,043,412.
As of February 29, 2012, 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. The tax character of distributions for the years ended February 29, 2012 and February 28, 2011 was as follows:
FEBRUARY 29, 2012 | FEBRUARY 28, 2011 | |||
Ordinary Income | $30,000,175 | $20,548,037 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of February 29, 2012, the components of distributable earnings on a tax basis included $16,657,515 of undistributed ordinary income.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to 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 may result in additional disclosure for transfers between levels as well as expanded disclosure for securities categorized as Level 3 under the fair value hierarchy.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the impact, if any, on the Fund’s financial statement disclosures.
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, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement
36 | International Core Fund | Annual report |
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) and unrealized gain or loss is recorded by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the year ended February 29, 2012, the Fund used futures contracts to gain or hedge exposure to certain securities markets. The following table summarizes the contracts held at February 29, 2012. During the year ended February 29, 2012, the Fund held futures contracts with USD absolute notional values ranging from $119.6 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 | 33 | Long | Mar 2012 | $7,534,103 | $124,843 | ||
FTSE 100 Index | 148 | Long | Mar 2012 | 13,781,076 | 47,392 | ||
Futures | |||||||
FTSE MIB Index | 311 | Long | Mar 2012 | 33,891,360 | 2,286,259 | ||
Futures | |||||||
SGX MSCI Singapore | 43 | Long | Mar 2012 | 2,390,933 | 14,202 | ||
Index Futures | |||||||
TOPIX Index Futures | 254 | Long | Mar 2012 | 26,043,671 | 2,250,684 | ||
ASX SPI 200 Index | 73 | Short | Mar 2012 | (8,392,568) | (211,654) | ||
Futures | |||||||
S&P TSE 60 Index | 236 | Short | Mar 2012 | (34,241,407) | (1,748,804) | ||
Futures | |||||||
Total | $2,762,922 |
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.
Annual report | International Core Fund | 37 |
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 the 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 or settlement with the counterparty.
During the year ended February 29, 2012, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates. The following table summarizes the contracts held at February 29, 2012. During the year ended February 29, 2012, 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.
PRINCIPAL AMOUNT | PRINCIPAL AMOUNT | UNREALIZED | |||||
COVERED BY | COVERED BY | SETTLEMENT | APPRECIATION | ||||
CURRENCY | CONTRACT | CONTRACT (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | ||
Buys | |||||||
GBP | 7,249,062 | $11,459,955 | Bank of America | 4-20-12 | $68,446 | ||
N.A. | |||||||
GBP | 8,626,968 | 13,628,884 | Brown Brothers | 4-20-12 | 90,842 | ||
Harriman & | |||||||
Company | |||||||
GBP | 2,819,785 | 4,451,251 | JPMorgan Chase | 4-20-12 | 33,138 | ||
Bank | |||||||
GBP | 10,834,126 | 17,101,993 | Mellon Bank NA | 4-20-12 | 127,843 | ||
GBP | 5,351,804 | 8,456,525 | Morgan Stanley | 4-20-12 | 54,610 | ||
Capital Services, | |||||||
Inc. | |||||||
GBP | 8,260,364 | 13,040,323 | Royal Bank of | 4-20-12 | 96,382 | ||
Scotland PLC | |||||||
HKD | 41,093,478 | 5,299,751 | Barclays Bank PLC | 4-20-12 | (984) | ||
HKD | 105,805,753 | 13,644,345 | Brown Brothers | 4-20-12 | (1,302) | ||
Harriman & | |||||||
Company | |||||||
HKD | 24,623,000 | 3,175,807 | JPMorgan Chase | 4-20-12 | (813) | ||
Bank | |||||||
HKD | 41,093,478 | 5,300,284 | Morgan Stanley | 4-20-12 | (1,517) | ||
Capital Services, | |||||||
Inc. | |||||||
HKD | 94,442,890 | 12,179,877 | State Street Bank & | 4-20-12 | (2,010) | ||
Trust Company | |||||||
SEK | 22,137,987 | 3,313,115 | Bank of America | 4-20-12 | 26,301 | ||
N.A. | |||||||
SGD | 21,386,458 | 17,023,233 | Bank of America | 4-20-12 | 77,780 | ||
N.A. | |||||||
SGD | 13,331,429 | 10,613,350 | Barclays Bank PLC | 4-20-12 | 46,710 | ||
SGD | 1,942,000 | 1,545,931 | JPMorgan Chase | 4-20-12 | 6,929 | ||
Bank |
38 | International Core Fund | Annual report |
PRINCIPAL AMOUNT | PRINCIPAL AMOUNT | UNREALIZED | |||||
COVERED BY | COVERED BY | SETTLEMENT | APPRECIATION | ||||
CURRENCY | CONTRACT | CONTRACT (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | ||
Buys (continued) | |||||||
SGD | 3,337,439 | $2,656,097 | Mellon Bank NA | 4-20-12 | $12,582 | ||
SGD | 3,752,879 | 2,989,037 | Royal Bank of | 4-20-12 | 11,836 | ||
Scotland PLC | |||||||
SGD | 2,906,439 | 2,312,129 | State Street Bank & | 4-20-12 | 11,914 | ||
Trust Company | |||||||
Total | $148,191,887 | $658,687 | |||||
Sells | |||||||
AUD | 6,273,706 | $6,651,383 | Bank of America | 4-20-12 | ($39,295) | ||
N.A. | |||||||
CAD | 15,988,529 | 16,024,424 | Bank of America | 4-20-12 | (117,436) | ||
N.A. | |||||||
CAD | 8,597,508 | 8,629,870 | Barclays Bank PLC | 4-20-12 | (50,089) | ||
CAD | 9,827,877 | 9,853,990 | Morgan Stanley | 4-20-12 | (68,137) | ||
Capital Services, | |||||||
Inc. | |||||||
CAD | 8,592,538 | 8,614,669 | Royal Bank of | 4-20-12 | (60,272) | ||
Scotland PLC | |||||||
CHF | 1,691,349 | 1,851,727 | Bank of America | 4-20-12 | (18,862) | ||
N.A. | |||||||
CHF | 1,887,776 | 2,072,785 | Morgan Stanley | 4-20-12 | (15,048) | ||
Capital Services, | |||||||
Inc. | |||||||
DKK | 6,513,276 | 1,160,322 | Royal Bank of | 4-20-12 | (7,246) | ||
Scotland PLC | |||||||
DKK | 2,600,271 | 462,641 | State Street Bank & | 4-20-12 | (3,483) | ||
Trust Company | |||||||
EUR | 8,338,399 | 11,027,032 | Brown Brothers | 4-20-12 | (84,330) | ||
Harriman & | |||||||
Company | |||||||
EUR | 4,525,960 | 6,006,071 | JPMorgan Chase | 4-20-12 | (25,012) | ||
Bank | |||||||
EUR | 11,746,955 | 15,540,763 | State Street Bank & | 4-20-12 | (112,682) | ||
Trust Company | |||||||
NZD | 1,035,193 | 861,208 | Brown Brothers | 4-20-12 | 384 | ||
Harriman & | |||||||
Company | |||||||
NZD | 4,771,542 | 3,974,847 | JPMorgan Chase | 4-20-12 | 7,028 | ||
Bank | |||||||
NZD | 3,623,763 | 3,016,007 | Royal Bank of | 4-20-12 | 2,634 | ||
Scotland PLC | |||||||
YEN | 342,577,105 | 4,302,381 | Deutsche Bank AG | 4-20-12 | 86,252 | ||
London | |||||||
YEN | 2,490,785,852 | 31,281,494 | JPMorgan Chase | 4-20-12 | 627,155 | ||
Bank | |||||||
YEN | 152,430,105 | 1,913,401 | Mellon Bank NA | 4-20-12 | 37,429 | ||
Total | $133,245,015 | $158,990 |
Annual report | International Core Fund | 39 |
Currency Abbreviation | |||
AUD | Australian Dollar | ||
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 February 29, 2012 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† | $4,723,380 | ($1,960,458) | |
Foreign exchange | Receivable-payable for | Forward foreign | 1,426,195 | (608,518) | |
contracts | forward foreign | currency contracts | |||
currency contracts | |||||
Total | $6,149,575 | ($2,568,976) |
†Reflects cumulative appreciation/depreciation of futures as disclosed herein. Only the period end variation margin is separately disclosed on the Statement of assets and liabilities.
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 29, 2012:
FOREIGN | ||||
STATEMENT OF | FUTURES | CURRENCY | ||
RISK | OPERATIONS LOCATION | CONTRACTS | TRANSACTION* | TOTAL |
Equity contracts | Net realized | ($5,281,432) | — | ($5,281,432) |
gain (loss) | ||||
Foreign exchange | Net realized | — | ($6,768,088) | (6,768,088) |
contracts | gain (loss) | |||
Total | ($5,281,432) | ($6,768,088) | ($12,049,520) |
*Realized gain-loss associated with forward foreign currency contracts is included in the caption on the Statement of operations.
40 | International Core Fund | Annual 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 year ended February 29, 2012:
TRANSLATION | ||||
OF ASSETS | ||||
AND LIABILITIES | ||||
STATEMENT OF | FUTURES | IN FOREIGN | ||
RISK | OPERATIONS LOCATION | CONTRACTS | CURRENCIES* | TOTAL |
Equity contracts | Change in unrealized | $822,635 | — | $822,635 |
appreciation (depreciation) | ||||
Foreign exchange | Change in unrealized | — | $1,662,303 | 1,662,303 |
contracts | appreciation (depreciation) | |||
Total | $822,635 | $1,662,303 | $2,484,938 |
*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 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, portfolio brokerage commissions, interest expense, litigation and indemnification expenses, 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%, 1.12% and 1.15% for Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5, Class R6 and Class 1 shares, respectively. The fee waivers for Class A, Class B, Class C, Class R1, Class R3, Class R4, Class R5 and Class R6 will continue in effect until June 30, 2013. The fee waivers for Class I and Class 1 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.
Accordingly, these expense reductions amounted to $8,098, $9,527, $12,061, $13,303, $13,322, $13,369 and $7,349 for Class B, Class C, Class R1, Class R3, Class R4, Class R5 and Class R6 shares, respectively, for the year ended February 29, 2012.
Annual report | International Core Fund | 41 |
The investment management fees, including the impact of waivers and reimbursements described above, incurred for the year ended February 29, 2012 were equivalent to a net effective rate of 0.88% of the Fund’s average daily net assets.
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 to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended February 29, 2012 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, Class R5 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 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% | ||
Class 1 | 0.05% | — |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $34,811 for the year ended February 29, 2012. Of this amount, $5,081 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $24,554 was paid as sales commissions to broker-dealers and $5,176 was paid as sales commissions to sales personnel of Signator Investors, Inc., 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 year ended February 29, 2012, CDSCs received by the Distributor amounted to $3,792 and $916 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), 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
42 | International Core Fund | Annual report |
one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to 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 year ended February 29, 2012 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $1,242,985 | $810,501 | $31,336 | $189,927 |
Class B | 42,845 | 8,186 | 11,089 | 771 |
Class C | 47,820 | 9,206 | 12,446 | 1,118 |
Class I | — | 307,291 | 40,300 | 97,796 |
Class R1 | 1,250 | 74 | 12,434 | 222 |
Class R3 | 152 | 10 | 13,341 | 37 |
Class R4 | 82 | 11 | 13,341 | 45 |
Class R5 | 22 | 23 | 13,341 | 104 |
Class R6 | — | 17 | 7,349 | 14 |
Class 1 | 20,974 | — | — | — |
Total | $1,356,130 | $1,135,319 | $154,977 | $290,034 |
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 years ended February 29, 2012 and February 28, 2011 were as follows:
Year ended 2-29-12 | Year ended 2-28-11 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 9,664,641 | $283,603,855 | 4,988,845 | $135,149,591 |
Distributions reinvested | 256,155 | 6,396,207 | 107,875 | 3,096,325 |
Repurchased | (7,236,095) | (200,862,649) | (3,062,983) | (83,492,001) |
Net increase | 2,684,701 | $89,137,413 | 2,033,737 | $54,753,915 |
Class B shares | ||||
Sold | 19,415 | $552,860 | 16,897 | $459,057 |
Distributions reinvested | 1,017 | 25,331 | 657 | 18,794 |
Repurchased | (64,561) | (1,836,330) | (89,983) | (2,431,531) |
Net decrease | (44,129) | ($1,258,139) | (72,429) | ($1,953,680) |
Class C shares | ||||
Sold | 20,551 | $588,450 | 42,245 | $1,142,066 |
Distributions reinvested | 1,054 | 26,257 | 552 | 15,791 |
Repurchased | (40,063) | (1,110,406) | (70,516) | (1,901,411) |
Net decrease | (18,458) | ($495,699) | (27,719) | ($743,554) |
Annual report | International Core Fund | 43 |
Year ended 2-29-12 | Year ended 2-28-11 | |||
Shares | Amount | Shares | Amount | |
Class I shares | ||||
Sold | 7,061,327 | $199,845,476 | 7,465,309 | $205,795,143 |
Distributions reinvested | 280,468 | 7,011,688 | 125,109 | 3,598,127 |
Repurchased | (1,927,978) | (54,524,977) | (1,435,344) | (40,176,056) |
Net increase | 5,413,817 | $152,332,187 | 6,155,074 | $169,217,214 |
Class R1 shares | ||||
Sold | 2,236 | $60,522 | 1,366 | $35,353 |
Distributions reinvested | 102 | 2,560 | 51 | 1,465 |
Repurchased | (757) | (21,279) | (323) | (8,639) |
Net increase | 1,581 | $41,803 | 1,094 | $28,179 |
Class R4 shares | ||||
Sold | 160 | $4,313 | 16 | $504 |
Distributions reinvested | 1 | 39 | — | — |
Repurchased | — | (2) | — | — |
Net increase | 161 | $4,350 | 16 | $504 |
Class R5 shares | ||||
Sold | 672 | $18,393 | 959 | $27,352 |
Distributions reinvested | 27 | 680 | 9 | 255 |
Repurchased | (361) | (9,367) | — | (8) |
Net increase | 338 | $9,706 | 968 | $27,599 |
Class R6 shares1 | ||||
Sold | 3,577 | $100,148 | — | — |
Net increase | 3,577 | $100,148 | — | — |
Class 1 shares | ||||
Sold | 96,037 | $2,833,836 | 125,007 | $3,404,068 |
Distributions reinvested | 31,131 | 779,516 | 23,310 | 671,339 |
Repurchased | (242,275) | (6,879,292) | (312,147) | (8,546,125) |
Net decrease | (115,107) | ($3,265,940) | (163,830) | ($4,470,718) |
Class NAV shares | ||||
Sold | 2,458,509 | $67,970,413 | 3,439,057 | $88,261,114 |
Distributions reinvested | 624,789 | 15,625,962 | 452,550 | 13,024,392 |
Repurchased | (5,700,418) | (165,832,794) | (5,176,286) | (138,574,310) |
Net decrease | (2,617,120) | ($82,236,419) | (1,284,679) | ($37,288,804) |
Net increase | 5,309,361 | $154,369,410 | 6,642,232 | $179,570,655 |
1 Period from 9-1-11 (inception date) to 2-29-12.
Affiliates of the Fund owned 40%, 100%, 86%, 42%, 100% and 100% of shares of beneficial interest of Class R1, Class R3, Class R4, Class R5, Class R6 and Class NAV, respectively, on February 29, 2012.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $799,752,335 and $648,549,829, respectively, for the year ended February 29, 2012.
44 | International Core Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock International Core Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock International Core Fund (the “Fund”) at February 29, 2012, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 23, 2012
Annual report | International Core Fund | 45 |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended February 29, 2012.
With respect to the ordinary dividends paid by the Fund for the fiscal year ended February 29, 2012, the Fund designates the maximum amount allowable for the corporate dividends-received deduction.
The Fund designates the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This amount will be reflected on Form 1099-DIV for the calendar year 2012.
Income derived from foreign sources was $42,723,980. The Fund intends to pass through foreign tax credits of $2,612,211 for the fiscal year ended February 29, 2012.
Eligible shareholders will be mailed a 2012 Form 1099-DIV in early 2013. This Form will reflect the tax character of all distributions for calendar year 2012.
46 | International Core Fund | Annual report |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Steven R. Pruchansky, Born: 1944 | 2006 | 48 |
Chairman (since January 2011); Chairman and Chief Executive Officer, Greenscapes of Southwest | ||
Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); | ||
Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real | ||
estate) (since 2000); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty | ||
Trust (until 1994); President, Maxwell Building Corp. (until 1991). | ||
William H. Cunningham, Born: 1944 | 2006 | 48 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 48 |
President, Cambridge College, Cambridge, Massachusetts (since May 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–May 2011); Board of Directors of Eastern Bank | ||
Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); | ||
Board of Directors of American Student Assistance Corp. (1996–2009); Board of Directors of Boston | ||
Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (2007–2011). | ||
Stanley Martin,2 Born: 1947 | 2008 | 48 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore,2 Born: 1939 | 2006 | 48 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). |
Annual report | International Core Fund | 47 |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Patti McGill Peterson,2 Born: 1943 | 2006 | 48 |
Presidential Advisor for Global Initiatives, American Council on Education (since 2011); Chairperson | ||
of the Board of the Trust (during 2009 and 2010); Principal, PMP Globalinc (consulting) (2007–2011); | ||
Senior Associate, Institute for Higher Education Policy (2007–2011); Executive Director, CIES | ||
(international education agency) (until 2007); Vice President, Institute of International Education (until | ||
2007); Former President Wells College, St. Lawrence University and the Association of Colleges and | ||
Universities of the State of New York. Director of the following: Mutual Fund Directors Forum (since | ||
2011); Niagara Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); | ||
ONBANK (until 1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison | ||
(since 2007); Ford Foundation, International Fellowships Program (until 2007); UNCF, International | ||
Development Partnerships (until 2005); Roth Endowment (since 2002); Council for International | ||
Educational Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 48 |
Member, Audit Committee and Finance Committee of NCH Healthcare Systems, Inc. (since 2011); | ||
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Hugh McHaffie, Born: 1959 | 2010 | 48 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Variable Insurance Trust and John Hancock Funds II (since 2009); Trustee, | ||
John Hancock retail funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, | ||
John Hancock Investment Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior | ||
Vice President, Individual Business Product Management, MetLife, Inc. (1999–2006). | ||
John G. Vrysen, Born: 1955 | 2009 | 48 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock | ||
Funds II and John Hancock Variable Insurance Trust (since 2007); Chief Operating Officer, John Hancock | ||
retail funds (until 2009); Trustee, John Hancock retail funds (since 2009). |
48 | International Core Fund | Annual report |
Principal officers who are not Trustees
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Keith F. Hartstein, Born: 1956 | 2006 |
President and Chief Executive Officer | |
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | |
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | |
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | |
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | |
Force Marketing Committee (since 2003). | |
Andrew G. Arnott, Born: 1971 | 2009 |
Senior Vice President and Chief Operating Officer | |
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | |
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | |
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | |
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | |
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock | |
Variable Insurance Trust (since 2006); Senior Vice President, Product Management and Development, | |
John Hancock Funds, LLC (until 2009). | |
Thomas M. Kinzler, Born: 1955 | 2006 |
Secretary and Chief Legal Officer | |
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | |
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | |
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | |
Funds II and John Hancock Variable Insurance Trust (since 2006); Vice President and Associate General | |
Counsel, Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal | |
Counsel, MML Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual | |
Select Funds and MassMutual Premier Funds (2004–2006). | |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Variable Insurance Trust, John Hancock Advisers, | |
LLC and John Hancock Investment Management Services, LLC (since 2005); Vice President and Chief | |
Compliance Officer, John Hancock Asset Management a division of Manulife Asset Management (US) | |
LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Variable Insurance Trust | |
(since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, | |
Goldman Sachs (2005–2007). |
Annual report | International Core Fund | 49 |
Principal officers who are not Trustees (continued)
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock closed-end funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Variable Insurance Trust (since | |
October 2010) and (2007–2009); Assistant Treasurer, John Hancock retail funds (2007–2009); | |
Assistant Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management | |
Research Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
50 | International Core Fund | Annual report |
More information
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
William H. Cunningham | Services, LLC |
Deborah C. Jackson | |
Stanley Martin* | Subadviser |
Hugh McHaffie† | Grantham, Mayo, Van Otterloo & Co. LLC |
Dr. John A. Moore,* Vice Chairman^ | |
Patti McGill Peterson* | Principal distributor |
Gregory A. Russo | John Hancock Funds, LLC |
John G. Vrysen† | |
Custodian | |
Officers | State Street Bank and Trust Company |
Keith F. Hartstein | |
President and Chief Executive Officer | Transfer agent |
John Hancock Signature Services, Inc. | |
Andrew G. Arnott | Legal counsel |
Senior Vice President and Chief Operating Officer | K&L Gates LLP |
Thomas M. Kinzler | Independent registered |
Secretary and Chief Legal Officer | public accounting firm |
PricewaterhouseCoopers LLP | |
Francis V. Knox, Jr. | |
Chief Compliance Officer | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
^Effective 1-1-12 |
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 1-202-551-8090 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 |
Annual report | International Core Fund | 51 |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/interncorex48x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock International Core Fund. | 6600A 2/12 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/12 |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalgrowthx1x1.jpg)
A look at performance
Total returns for the period ended February 29, 2012
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge | with maximum sales charge | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception1 | 1-year | 5-year | 10-year | inception1 | ||
Class A | –8.59 | –2.16 | — | 1.60 | –8.59 | –10.36 | — | 9.53 | |
Class B | –9.23 | –2.27 | — | 1.60 | –9.23 | –10.83 | — | 9.50 | |
Class C | –5.47 | –1.92 | — | 1.73 | –5.47 | –9.25 | — | 10.34 | |
Class I2 | –3.42 | –0.72 | — | 2.97 | –3.42 | –3.57 | — | 18.22 | |
Class 12 | –3.33 | –0.70 | — | 3.00 | –3.33 | –3.43 | — | 18.42 | |
Performance figures assume all dividends have been reinvested. 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 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 | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalgrowthx3x1.jpg)
Without | With maximum | ||||
Start date | sales charge | sales charge | Index 1 | Index 2 | |
Class B | 6-12-06 | $11,050 | $10,950 | $11,426 | $10,742 |
Class C3 | 6-12-06 | 11,034 | 11,034 | 11,426 | 10,742 |
Class I 2 | 6-12-06 | 11,822 | 11,822 | 11,426 | 10,742 |
Class 1 2 | 6-12-06 | 11,842 | 11,842 | 11,426 | 10,742 |
MSCI EAFE Index (gross of foreign withholding tax on dividends) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The index consists of 21 developed market country indexes.
MSCI EAFE Growth Index (gross of foreign withholding tax on dividends) is a free float-adjusted market capitalization index that is designed to measure the performance of growth-oriented developed market stocks within Europe, Australasia and the Far East. The index consists of 21 developed market country indexes.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 From 6-12-06.
2 For certain types of investors, as described in the Fund’s prospectuses.
3 No contingent deferred sales charge is applicable.
Annual report | International Growth Fund | 7 |
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC
Faced with multiple headwinds, most international developed stock markets lost ground during the 12 months ended February 29, 2012. Challenges included a major earthquake, tsunami and nuclear accident in Japan, partisan bickering over the U.S. debt ceiling, a downgrade of the U.S. sovereign debt rating and intensifying concern over debt-strapped eurozone nations, especially Greece. Greek stocks, a relatively small component of the Fund’s benchmark, the MSCI EAFE Growth Index, lost almost half of their value during the period, while Italy saw its market decline by almost 26%. Key benchmark components Australia and France had losses of roughly 7%, while the United Kingdom slid approximately 3%. Japan saw its stock market fall by about 11% during the period. Against this backdrop, the MSCI EAFE Growth Index returned –4.72%, while the average foreign large growth fund monitored by Morningstar, Inc. finished at –3.88%.
During the period, John Hancock International Growth Fund’s Class A shares declined 3.80%, excluding sales charges. A focus on quality and valuation worked in the Fund’s favor. These two factors were instrumental in keeping the Fund overweighted in health care and underweighted in financials, the benchmark’s worst performing sector during the period. However, it also prompted us to underweight consumer staples, which posted the best return among the benchmark’s 10 sectors. U.K. drug manufacturer GlaxoSmithKline PLC was the Fund’s largest relative contributor. Glaxo began the period with a reasonable valuation, in part due to what we considered excessive investor pessimism regarding the company’s product pipeline. Underweighting two weak performing benchmark components in the banking industry, U.K.-based HSBC Holdings PLC and UBS AG, a Swiss company, which we sold, also aided Fund performance. Conversely, not owning Japanese automaker Toyota Motor Corp. hampered our results, given the stock’s break-even performance. Belgian brewer Anheuser-Busch InBev NV was another underweighting that hurt.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
8 | International Growth Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on September 1, 2011 with the same investment held until February 29, 2012.
Account value | Ending value on | Expenses paid during | |
on 9-1-11 | 2-29-12 | period ended 2-29-121 | |
Class A | $1,000.00 | $962.00 | $7.81 |
Class B | 1,000.00 | 955.30 | 11.18 |
Class C | 1,000.00 | 954.80 | 11.18 |
Class I | 1,000.00 | 965.80 | 6.16 |
Class 1 | 1,000.00 | 966.70 | 5.62 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 29, 2012, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalgrowthx5x1.jpg)
Annual report | International Growth Fund | 9 |
Your expenses
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on September 1, 2011, with the same investment held until February 29, 2012. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value on | Expenses paid during | |
on 9-1-11 | 2-29-12 | period ended 2-29-121 | |
Class A | $1,000.00 | $1,016.90 | $8.02 |
Class B | 1,000.00 | 1,013.40 | 11.51 |
Class C | 1,000.00 | 1,013.40 | 11.51 |
Class I | 1,000.00 | 1,018.60 | 6.32 |
Class 1 | 1,000.00 | 1,019.10 | 5.77 |
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 1.60%, 2.30%, 2.30%, 1.26% and 1.15% 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 182/366 (to reflect the one-half year period).
10 | International Growth Fund | Annual report |
Portfolio summary
Top 10 Holdings (26.6% of Net Assets on 2-29-12)1,2 | ||||
Roche Holdings AG | 5.9% | Novo Nordisk A/S | 1.7% | |
British American Tobacco PLC | 4.1% | Diageo PLC | 1.6% | |
GlaxoSmithKline PLC | 3.7% | SAP AG | 1.6% | |
Nestle SA | 3.6% | Unilever NV | 1.6% | |
Novartis AG | 1.8% | Canon, Inc. | 1.0% | |
Sector Composition1,3 | ||||
Health Care | 20.3% | Financials | 5.4% | |
Consumer Staples | 19.5% | Telecommunication Services | 4.5% | |
Industrials | 12.9% | Energy | 4.2% | |
Consumer Discretionary | 12.1% | Utilities | 2.9% | |
Materials | 7.5% | Short-Term Investments & Other | 3.4% | |
Information Technology | 7.3% | |||
Top 10 Countries1,2,3 | ||||
United Kingdom | 24.7% | Canada | 4.1% | |
Japan | 19.8% | Australia | 3.7% | |
Switzerland | 12.6% | Netherlands | 3.1% | |
Germany | 7.8% | Hong Kong | 2.5% | |
France | 5.9% | Singapore | 2.1% | |
1 As a percentage of net assets on 2-29-12.
2 Cash and cash equivalents not included.
3 International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
Annual report | International Growth Fund | 11 |
Fund’s investments
As of 2-29-12
Shares | Value | |
Common Stocks 95.86% | $213,357,191 | |
(Cost $189,997,043) | ||
Australia 3.68% | 8,185,091 | |
AGL Energy, Ltd. | 20,256 | 301,185 |
BlueScope Steel, Ltd. (I) | 210,210 | 94,128 |
Campbell Brothers, Ltd. | 3,944 | 250,655 |
Coca-Cola Amatil, Ltd. | 25,327 | 325,800 |
Cochlear, Ltd. | 3,579 | 235,268 |
CSL, Ltd. | 21,192 | 742,526 |
Iluka Resources, Ltd. | 29,382 | 520,127 |
National Australia Bank, Ltd. | 16,062 | 404,764 |
Qantas Airways, Ltd. (I) | 57,171 | 105,585 |
Telstra Corp., Ltd. | 382,334 | 1,350,270 |
Transurban Group, Ltd. | 24,633 | 147,249 |
Wesfarmers, Ltd. | 38,900 | 1,207,324 |
Westpac Banking Corp. | 8,225 | 183,009 |
Woodside Petroleum, Ltd. | 10,110 | 401,385 |
Woolworths, Ltd. | 71,040 | 1,915,816 |
Austria 0.30% | 672,312 | |
Andritz AG | 2,723 | 269,623 |
Erste Group Bank AG (I) | 3,804 | 95,064 |
Voestalpine AG | 8,708 | 307,625 |
Belgium 0.66% | 1,474,162 | |
Anheuser-Busch InBev NV | 11,053 | 742,879 |
Bekaert SA | 2,704 | 90,427 |
Colruyt SA | 8,471 | 331,745 |
Mobistar SA | 3,863 | 184,852 |
Telenet Group Holding NV (I) | 3,155 | 124,259 |
Bermuda 0.07% | 155,743 | |
Lancashire Holdings, Ltd. | 12,792 | 155,743 |
Canada 4.14% | 9,211,276 | |
BCE, Inc. (L) | 18,600 | 762,084 |
Canadian National Railway Company | 27,400 | 2,111,250 |
Cenovus Energy, Inc. | 5,500 | 213,785 |
Enbridge, Inc. (L) | 52,800 | 2,036,331 |
Franco-Nevada Corp. | 4,200 | 185,582 |
Goldcorp, Inc. | 7,300 | 353,915 |
Imperial Oil, Ltd. | 8,600 | 411,030 |
12 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Canada (continued) | ||
Pembina Pipeline Corp. | 5,700 | $161,705 |
Potash Corp. of Saskatchewan, Inc. | 16,200 | 753,637 |
Rogers Communications, Inc., Class B (L) | 12,800 | 490,681 |
Saputo, Inc. (L) | 7,300 | 302,786 |
Shaw Communications, Inc., Class B (L) | 11,900 | 244,266 |
Shoppers Drug Mart Corp. (L) | 8,600 | 365,312 |
Valeant Pharmaceuticals International, Inc. (I) | 10,302 | 546,310 |
Yamana Gold, Inc. | 15,700 | 272,602 |
China 0.07% | 163,990 | |
Yangzijiang Shipbuilding Holdings, Ltd. | 152,000 | 163,990 |
Denmark 1.87% | 4,152,823 | |
Novo Nordisk A/S | 27,223 | 3,819,487 |
Novozymes A/S, B shares (L) | 11,209 | 333,336 |
Finland 0.38% | 850,167 | |
Kone OYJ | 8,062 | 478,320 |
Nokian Renkaat OYJ | 6,155 | 273,138 |
Sampo OYJ, Class A | 3,508 | 98,709 |
France 5.95% | 13,234,563 | |
Air France KLM (I)(L) | 12,967 | 76,467 |
Air Liquide SA | 1,298 | 168,644 |
Alcatel-Lucent (I) | 149,144 | 373,604 |
Arkema SA | 4,761 | 435,688 |
BNP Paribas SA | 1,660 | 80,652 |
Bureau Veritas SA | 4,274 | 352,813 |
Carrefour SA | 26,489 | 663,056 |
Cie de Saint-Gobain | 9,477 | 448,959 |
Cie Generale d’Optique Essilor International SA | 12,442 | 990,835 |
Cie Generale des Etablissements Michelin | 5,845 | 403,055 |
Credit Agricole SA (I)(L) | 12,558 | 80,129 |
Danone SA | 11,762 | 796,141 |
Dassault Systemes SA | 6,207 | 515,609 |
Eutelsat Communications | 10,219 | 381,145 |
Faurecia | 4,639 | 129,441 |
ICADE | 1,888 | 156,380 |
Iliad SA | 1,866 | 247,547 |
L’Oreal SA | 7,263 | 828,390 |
Legrand SA, ADR | 6,198 | 225,032 |
LVMH Moet Hennessy Louis Vuitton SA | 3,692 | 620,255 |
Neopost SA (L) | 2,139 | 146,421 |
Pernod-Ricard SA | 2,433 | 251,448 |
Remy Cointreau SA | 1,184 | 116,021 |
Renault SA | 4,937 | 261,069 |
Safran SA | 7,799 | 261,431 |
Sanofi | 26,601 | 1,968,960 |
Sodexo | 2,137 | 164,540 |
Technip SA | 2,891 | 315,258 |
Total SA | 9,132 | 511,168 |
See notes to financial statements | Annual report | International Growth Fund | 13 |
Shares | Value | |
France (continued) | ||
Unibail-Rodamco SE | 2,098 | $405,167 |
Valeo SA | 3,465 | 186,427 |
Wendel SA | 3,040 | 255,864 |
Zodiac Aerospace | 4,326 | 416,947 |
Germany 7.01% | 15,611,383 | |
Adidas AG | 7,804 | 612,526 |
Aixtron SE NA | 7,701 | 127,773 |
Aurubis AG (L) | 5,796 | 344,858 |
BASF SE | 17,947 | 1,573,915 |
Bayerische Motoren Werke (BMW) AG | 10,975 | 1,015,048 |
Beiersdorf AG | 6,489 | 406,007 |
Bilfinger Berger SE | 3,830 | 374,504 |
Continental AG (I) | 4,143 | 376,920 |
Deutsche Boerse AG | 2,809 | 186,256 |
Deutsche Lufthansa AG | 16,088 | 223,149 |
Fielmann AG | 1,875 | 181,619 |
Fraport AG Frankfurt Airport Services Worldwide | 4,247 | 260,912 |
Fresenius Medical Care AG & Company KGaA | 6,054 | 423,952 |
Fresenius SE & Company KGaA | 6,531 | 675,022 |
GEA Group AG | 14,738 | 497,613 |
Infineon Technologies AG (I) | 40,215 | 406,296 |
K&S AG | 5,442 | 271,366 |
Kabel Deutschland Holding AG (I) | 4,953 | 297,164 |
Kloeckner & Company SE | 10,548 | 162,725 |
Lanxess AG | 790 | 59,041 |
Leoni AG | 3,306 | 165,640 |
Linde AG | 3,994 | 663,402 |
Merck KGaA | 3,350 | 346,252 |
Metro AG | 5,459 | 216,059 |
Rheinmetall AG | 2,271 | 137,546 |
SAP AG | 52,403 | 3,536,347 |
SGL Carbon SE (I) | 4,523 | 219,260 |
Software AG | 6,389 | 242,759 |
Stada Arzneimittel AG | 5,241 | 160,375 |
Suedzucker AG | 9,732 | 281,776 |
ThyssenKrupp AG | 11,129 | 300,327 |
TUI AG (I)(L) | 14,740 | 116,138 |
Volkswagen AG | 3,294 | 557,906 |
Wincor Nixdorf AG | 3,517 | 190,930 |
Greece 0.04% | 83,347 | |
OPAP SA | 9,405 | 83,347 |
Hong Kong 2.49% | 5,537,439 | |
AIA Group, Ltd. | 242,800 | 918,921 |
CLP Holdings, Ltd. | 100,500 | 889,862 |
Galaxy Entertainment Group, Ltd. (I) | 148,000 | 361,279 |
Hang Seng Bank, Ltd. | 33,000 | 459,865 |
Hong Kong & China Gas Company, Ltd. | 396,505 | 1,010,860 |
14 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Hong Kong (continued) | ||
Hong Kong Exchanges & Clearing, Ltd. | 17,300 | $318,672 |
Jardine Matheson Holdings, Ltd. | 6,000 | 304,305 |
Noble Group, Ltd. | 81,000 | 91,055 |
Power Assets Holdings, Ltd. | 100,000 | 745,838 |
SJM Holdings, Ltd. | 142,000 | 295,027 |
Xinyi Glass Holdings Company, Ltd. | 228,000 | 141,755 |
Ireland 1.68% | 3,729,440 | |
CRH PLC | 15,261 | 326,072 |
DCC PLC | 2,435 | 62,540 |
DCC PLC (Irish Stock Exchange) | 3,213 | 83,223 |
Elan Corp. PLC (I) | 13,309 | 166,283 |
Elan Corp. PLC (European Composite Exchange) (I) | 912 | 11,385 |
Experian PLC | 56,214 | 844,403 |
Kerry Group PLC | 2,641 | 112,544 |
Kerry Group PLC (London Exchange) | 2,831 | 121,524 |
Paddy Power PLC | 4,371 | 260,027 |
Paddy Power PLC (London Exchange) | 1,442 | 85,738 |
Shire PLC | 47,426 | 1,655,663 |
WPP PLC | 3 | 38 |
Italy 0.27% | 607,559 | |
Assicurazioni Generali SpA | 13,291 | 213,996 |
Autostrade SpA | 6,231 | 104,369 |
Enel SpA | 45,939 | 184,092 |
Mediobanca SpA | 16,159 | 105,102 |
Japan 19.81% | 44,086,210 | |
AEON Company, Ltd. (L) | 14,700 | 186,298 |
Ajinomoto Company, Inc. | 13,000 | 152,805 |
Anritsu Corp. (L) | 13,000 | 156,085 |
Asahi Group Holdings, Ltd. | 17,700 | 387,165 |
Astellas Pharma, Inc. | 8,700 | 357,850 |
Bandai Namco Holdings, Inc. | 20,100 | 280,809 |
Bridgestone Corp. | 41,600 | 1,003,032 |
Canon, Inc. | 50,900 | 2,305,677 |
CAPCOM Company, Ltd. | 6,400 | 141,897 |
Central Japan Railway Company, Ltd. | 48 | 394,650 |
CHIYODA Corp. | 14,000 | 179,766 |
Chugai Pharmaceutical Company, Ltd. | 24,600 | 402,970 |
CyberAgent, Inc. | 57 | 162,513 |
Daihatsu Motor Company, Ltd. | 11,000 | 211,227 |
Daito Trust Construction Company, Ltd. | 11,800 | 1,040,095 |
Dena Company, Ltd. | 10,900 | 355,033 |
DIC Corp. | 79,000 | 162,638 |
East Japan Railway Company | 6,200 | 397,668 |
Eisai Company, Ltd. | 17,800 | 720,063 |
FamilyMart Company, Ltd. | 3,800 | 147,964 |
FANUC Corp. | 6,500 | 1,181,200 |
Fast Retailing Company, Ltd. (L) | 4,400 | 911,997 |
See notes to financial statements | Annual report | International Growth Fund | 15 |
Shares | Value | |
Japan (continued) | ||
Gree, Inc. | 13,100 | $409,982 |
Hirose Electric Company, Ltd. | 2,700 | 277,882 |
Hisamitsu Pharmaceutical Company, Inc. | 9,900 | 447,245 |
Hitachi, Ltd. | 122,000 | 710,519 |
Honda Motor Company, Ltd. | 17,400 | 664,058 |
Hoya Corp. | 30,000 | 696,862 |
Idemitsu Kosan Company, Ltd. | 1,200 | 123,145 |
Inpex Corp. | 147 | 1,037,900 |
Ishikawajima-Harima Heavy Industries Company, Ltd. | 111,000 | 279,949 |
ITOCHU Corp. | 46,000 | 524,618 |
Izumi Company, Ltd. | 4,000 | 67,678 |
Japan Tobacco, Inc. | 80 | 425,115 |
JFE Holdings, Inc. | 9,300 | 196,242 |
JGC Corp. | 13,000 | 376,432 |
K’s Holding Corp. | 6,500 | 217,051 |
Kao Corp. | 42,000 | 1,075,378 |
Kawasaki Kisen Kaisha, Ltd. (I) | 55,000 | 116,062 |
KDDI Corp. | 226 | 1,436,216 |
Keyence Corp. | 3,100 | 814,138 |
Kintetsu Corp. (L) | 50,000 | 190,308 |
Kobe Steel, Ltd. (I) | 79,000 | 137,335 |
Komatsu, Ltd. | 7,800 | 233,162 |
Konami Corp. | 11,900 | 327,585 |
Kurita Water Industries, Ltd. | 5,200 | 133,826 |
Lawson, Inc. (L) | 7,900 | 464,749 |
Makita Corp. | 8,400 | 349,995 |
Marubeni Corp. | 68,000 | 482,925 |
Mazda Motor Corp. (I)(L) | 112,000 | 185,532 |
Mediceo Holdings Company, Ltd. | 6,700 | 80,473 |
Mitsubishi Chemical Holdings Corp. | 73,000 | 421,015 |
Mitsubishi Corp. | 29,700 | 727,813 |
Mitsubishi Electric Corp. | 26,000 | 233,727 |
Mitsubishi Estate Company, Ltd. | 11,000 | 199,317 |
Mitsubishi Heavy Industries, Ltd. | 59,000 | 276,465 |
Mitsui Engineering & Shipbuilding Company, Ltd. | 102,000 | 194,860 |
Mitsui O.S.K. Lines, Ltd. | 33,000 | 150,608 |
Murata Manufacturing Company, Ltd. | 2,500 | 149,277 |
NET One Systems Company, Ltd. | 85 | 209,960 |
Nidec Corp. | 3,300 | 311,754 |
Nintendo Company, Ltd. | 4,900 | 716,996 |
Nippon Telegraph & Telephone Corp. | 6,800 | 320,526 |
Nissan Motor Company, Ltd. | 30,800 | 316,802 |
Nitori Holdings Company, Ltd. | 6,700 | 566,482 |
Nitto Denko Corp. | 7,700 | 315,966 |
Nomura Research Institute, Ltd. | 8,300 | 197,613 |
NSK, Ltd. | 22,000 | 174,193 |
NTT DoCoMo, Inc. | 506 | 862,061 |
Odakyu Electric Railway Company, Ltd. | 40,000 | 382,112 |
16 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Japan (continued) | ||
Olympus Corp. (I) | 6,400 | $106,774 |
Ono Pharmaceutical Company, Ltd. | 3,200 | 174,538 |
Oriental Land Company, Ltd. | 2,700 | 279,483 |
Point, Inc. | 2,950 | 110,618 |
Rakuten, Inc. | 247 | 245,622 |
Resona Holdings, Inc. | 64,500 | 308,344 |
Ricoh Company, Ltd. | 17,000 | 155,464 |
Ryohin Keikaku Company, Ltd. | 3,400 | 161,988 |
Sankyo Company, Ltd. | 2,600 | 124,758 |
Sanrio Company, Ltd. (L) | 3,700 | 151,355 |
Santen Pharmaceutical Company, Ltd. | 8,500 | 335,749 |
Sawai Pharmaceutical Company, Ltd. | 2,300 | 223,983 |
Secom Company, Ltd. | 5,600 | 265,871 |
Sega Sammy Holdings, Inc. | 10,400 | 196,518 |
Seven & I Holdings Company, Ltd. | 20,800 | 575,135 |
Shimamura Company, Ltd. | 3,300 | 361,127 |
Shimano, Inc. | 2,000 | 116,032 |
Shimizu Corp. | 28,000 | 112,995 |
Shin-Etsu Chemical Company, Ltd. | 8,400 | 450,735 |
Shionogi & Company, Ltd. | 12,600 | 174,584 |
Shiseido Company, Ltd. | 16,400 | 284,915 |
Shizuoka Bank, Ltd. | 23,000 | 233,108 |
SMC Corp. | 3,200 | 546,702 |
Softbank Corp. | 7,300 | 217,738 |
Stanley Electric Company, Ltd. | 12,400 | 210,420 |
Start Today Company, Ltd. | 6,900 | 126,089 |
Sumitomo Corp., Ltd. | 12,000 | 178,273 |
Sysmex Corp. | 6,300 | 226,878 |
Takeda Pharmaceutical Company, Ltd. | 30,200 | 1,364,582 |
Terumo Corp. | 14,200 | 685,044 |
THK Company, Ltd. | 6,700 | 142,206 |
Toray Industries, Inc. | 139,000 | 984,809 |
Toshiba Corp. | 47,000 | 205,160 |
Toyota Tsusho Corp. | 6,900 | 138,696 |
Trend Micro, Inc. | 9,000 | 261,870 |
Tsumura & Company, Ltd. | 8,900 | 256,985 |
Ube Industries, Ltd. | 47,000 | 135,183 |
Unicharm Corp. | 11,800 | 610,488 |
West Japan Railway Company | 7,900 | 322,296 |
Yahoo! Japan Corp. | 1,712 | 539,803 |
Yamada Denki Company, Ltd. | 10,250 | 666,895 |
Yamato Kogyo Company, Ltd. | 4,200 | 131,449 |
Yamato Transport Company, Ltd. | 25,600 | 404,222 |
Zeon Corp. | 14,000 | 131,415 |
Jersey, C.I. 0.23% | 515,975 | |
Randgold Resources, Ltd. | 4,504 | 515,975 |
See notes to financial statements | Annual report | International Growth Fund | 17 |
Shares | Value | |
Luxembourg 0.36% | $790,293 | |
Millicom International Cellular SA, ADR | 3,285 | 367,935 |
SES SA | 17,508 | 422,358 |
Macau 0.30% | 670,388 | |
Sands China, Ltd. | 129,200 | 479,958 |
Wynn Macau, Ltd. | 72,400 | 190,430 |
Netherlands 3.10% | 6,905,217 | |
Aegon NV (I) | 30,018 | 156,723 |
ASML Holding NV | 6,792 | 311,858 |
European Aeronautic Defence & Space Company NV | 26,989 | 980,491 |
Koninklijke (Royal) KPN NV | 86,421 | 935,676 |
Koninklijke Ahold NV | 15,637 | 216,092 |
Reed Elsevier NV | 14,291 | 176,398 |
Royal Dutch Shell PLC, B Shares | 16,064 | 596,130 |
Unilever NV (L) | 106,413 | 3,531,849 |
New Zealand 0.13% | 292,076 | |
Telecom Corp. of New Zealand, Ltd. | 163,570 | 292,076 |
Norway 0.35% | 766,196 | |
Telenor ASA | 15,475 | 285,768 |
TGS Nopec Geophysical Company ASA | 9,954 | 287,509 |
Yara International ASA | 3,935 | 192,919 |
Singapore 2.07% | 4,614,391 | |
Ezra Holdings, Ltd. (I) | 103,000 | 102,225 |
Golden Agri-Resources, Ltd. | 705,000 | 409,263 |
Hyflux, Ltd. | 82,500 | 96,528 |
Keppel Corp., Ltd. | 73,400 | 644,264 |
Oversea-Chinese Banking Corp., Ltd. | 6 | 43 |
SembCorp Industries, Ltd. | 64,000 | 269,227 |
Singapore Airport Terminal Services, Ltd. | 76,000 | 147,312 |
Singapore Exchange, Ltd. | 72,000 | 412,898 |
Singapore Post, Ltd. | 183,000 | 141,927 |
Singapore Press Holdings, Ltd. | 189,000 | 571,283 |
Singapore Technologies Engineering, Ltd. | 199,000 | 505,575 |
Singapore Telecommunications, Ltd. | 338,000 | 854,546 |
SMRT Corp., Ltd. | 89,000 | 123,295 |
StarHub, Ltd. | 51,000 | 119,757 |
Wilmar International, Ltd. | 53,000 | 216,248 |
Spain 1.63% | 3,617,424 | |
Acciona SA | 1,734 | 136,224 |
Enagas SA | 5,176 | 106,312 |
Gas Natural SDG SA | 11,420 | 192,991 |
Iberdrola SA | 33,122 | 195,722 |
Inditex SA | 19,096 | 1,765,587 |
Red Electrica De Espana | 11,291 | 570,453 |
Repsol YPF SA | 24,955 | 650,135 |
18 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Sweden 1.94% | $4,318,805 | |
Atlas Copco AB, Series B | 4,388 | 101,558 |
Elekta AB, Series B | 5,349 | 250,482 |
Hennes & Mauritz AB, B Shares | 51,838 | 1,861,735 |
Investor AB, B Shares | 16,488 | 366,559 |
Kinnevik Investment AB | 8,028 | 182,899 |
Lundin Petroleum AB (I) | 11,062 | 257,801 |
Scania AB, Series B | 12,676 | 253,564 |
Swedbank AB, Class A | 19,338 | 330,152 |
Swedish Match AB | 9,692 | 370,084 |
Telefonaktiebolaget LM Ericsson, B Shares | 34,291 | 343,971 |
Switzerland 12.55% | 27,942,750 | |
ABB, Ltd. (I) | 9,486 | 193,792 |
Actelion, Ltd. (I) | 4,193 | 157,986 |
Geberit AG (I) | 1,899 | 407,595 |
Kuehne & Nagel International AG | 1,949 | 256,253 |
Nestle SA | 130,327 | 7,964,229 |
Nobel Biocare Holding AG (I) | 7,730 | 91,272 |
Novartis AG | 72,517 | 3,952,707 |
Roche Holdings AG (I) | 75,617 | 13,155,132 |
SGS SA | 211 | 394,819 |
Swisscom AG | 405 | 161,219 |
Syngenta AG (I) | 1,565 | 510,887 |
Wolseley PLC | 9,774 | 378,849 |
Xstrata PLC | 16,686 | 318,010 |
United Kingdom 24.73% | 55,052,607 | |
Aberdeen Asset Management PLC | 59,804 | 228,973 |
Admiral Group PLC | 25,535 | 437,660 |
Aggreko PLC | 36,997 | 1,302,750 |
AMEC PLC | 13,058 | 229,685 |
ARM Holdings PLC | 41,459 | 375,474 |
Ashmore Group PLC | 44,897 | 275,419 |
ASOS PLC (I) | 10,186 | 297,019 |
Associated British Foods PLC (I) | 7,316 | 139,431 |
AstraZeneca PLC | 32,570 | 1,459,088 |
Babcock International Group PLC | 28,004 | 335,149 |
BAE Systems PLC | 58,162 | 289,393 |
Balfour Beatty PLC | 50,042 | 221,211 |
Barclays PLC | 101,703 | 396,090 |
BG Group PLC | 52,241 | 1,259,861 |
BHP Billiton PLC | 36,895 | 1,192,756 |
BP PLC | 20,699 | 162,461 |
British American Tobacco PLC | 181,506 | 9,173,676 |
British Sky Broadcasting Group PLC | 57,492 | 612,237 |
BT Group PLC | 242,930 | 829,796 |
Bunzl PLC | 28,509 | 436,376 |
Burberry Group PLC | 54,326 | 1,217,900 |
Capita PLC | 37,290 | 454,539 |
Centrica PLC | 60,341 | 291,512 |
See notes to financial statements | Annual report | International Growth Fund | 19 |
Shares | Value | |
United Kingdom (continued) | ||
Chemring Group PLC | 15,270 | $106,407 |
Cobham PLC | 110,452 | 329,342 |
Cookson Group PLC | 4,876 | 52,240 |
Croda International PLC | 15,743 | 539,357 |
Diageo PLC | 150,677 | 3,599,061 |
Drax Group PLC | 42,918 | 354,148 |
Eurasian Natural Resources Corp. | 8,206 | 91,235 |
GlaxoSmithKline PLC | 372,916 | 8,223,639 |
HSBC Holdings PLC | 78,395 | 692,215 |
ICAP PLC | 26,390 | 161,500 |
IG Group Holdings PLC | 39,055 | 274,787 |
IMI PLC | 21,891 | 337,526 |
Imperial Tobacco Group PLC | 23,296 | 923,184 |
Inchcape PLC | 44,487 | 265,137 |
Inmarsat PLC | 13,612 | 103,690 |
Intercontinental Hotels Group PLC | 9,811 | 223,729 |
International Power PLC | 29,310 | 161,134 |
Intertek Group PLC | 11,024 | 406,088 |
Investec PLC | 13,087 | 83,203 |
John Wood Group PLC | 23,523 | 283,294 |
Johnson Matthey PLC | 12,632 | 463,709 |
Kazakhmys PLC | 5,927 | 104,527 |
Land Securities Group PLC | 24,339 | 261,278 |
Lloyds Banking Group PLC (I) | 2,223,884 | 1,234,956 |
London Stock Exchange Group PLC | 16,522 | 236,999 |
Man Group PLC | 94,837 | 197,266 |
Marks & Spencer Group PLC | 69,405 | 400,247 |
Mondi PLC | 34,492 | 322,641 |
National Grid PLC | 37,324 | 381,348 |
Next PLC | 23,362 | 1,030,332 |
Pearson PLC | 29,991 | 571,625 |
Pennon Group PLC | 22,535 | 257,382 |
Petrofac, Ltd. | 11,492 | 290,795 |
Prudential PLC | 4,777 | 54,106 |
Reckitt Benckiser Group PLC | 32,628 | 1,806,360 |
Reed Elsevier PLC | 57,897 | 506,078 |
Resolution, Ltd. | 70,769 | 302,684 |
Rexam PLC | 42,934 | 283,570 |
Rightmove PLC | 4,609 | 105,889 |
Rio Tinto PLC | 31,837 | 1,812,651 |
Rolls-Royce Holdings PLC (I) | 59,097 | 765,439 |
SABMiller PLC | 9,509 | 384,826 |
Scottish & Southern Energy PLC | 28,803 | 590,686 |
Smith & Nephew PLC | 57,394 | 563,867 |
Smiths Group PLC | 26,493 | 458,646 |
Spectris PLC | 11,110 | 307,865 |
Tate & Lyle PLC | 41,994 | 465,979 |
20 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | ||
United Kingdom (continued) | |||
Tesco PLC | 88,066 | $442,954 | |
The Sage Group PLC | 75,511 | 372,595 | |
The Weir Group PLC | 15,905 | 533,005 | |
Tullett Prebon PLC | 14,637 | 74,639 | |
Unilever PLC | 6,799 | 219,480 | |
William Hill PLC | 60,468 | 215,733 | |
WM Morrison Supermarket PLC | 44,054 | 203,078 | |
United States 0.05% | 115,564 | ||
Sims Metal Management, Ltd. | 7,092 | 115,564 | |
Preferred Securities 0.76% | $1,700,055 | ||
(Cost $1,376,258) | |||
Germany 0.76% | 1,700,055 | ||
Bayerische Motoren Werke (BMW) AG | 3,521 | 208,658 | |
Hugo Boss AG | 3,591 | 373,560 | |
Porsche Automobil Holding SE | 6,986 | 454,695 | |
Volkswagen AG | 3,547 | 663,142 | |
Escrow Certificates 0.00% | $0 | ||
(Cost $0) | |||
Austria 0.00% | 0 | ||
Immofinanz AG — Escrow Shares (L) | 49,581 | 0 | |
Warrants 0.00% | $1,122 | ||
(Cost $5,399) | |||
Canada 0.00% | 1,122 | ||
Kinross Gold Corp. (Expiration Date: 9-17-14, | |||
Strike Price: $21.30) (I) | 1,133 | 1,122 | |
Yield % | Shares | Value | |
Securities Lending Collateral 2.78% | $6,175,492 | ||
(Cost $6,173,522) | |||
John Hancock Collateral Investment Trust (W) | 0.3743 (Y) | 616,963 | 6,175,492 |
Short-Term Investments 2.32% | $5,169,892 | ||
(Cost $5,169,892) | |||
Money Market Funds 2.32% | 5,169,892 | ||
State Street Institutional Treasury Money | |||
Market Fund | 0.0000 (Y) | 5,169,892 | 5,169,892 |
Total investments (Cost $202,722,114)† 101.72% | $226,403,752 | ||
Other assets and liabilities, net (1.72%) | ($3,820,002) | ||
Total net assets 100.00% | $222,583,750 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
See notes to financial statements | Annual report | International Growth Fund | 21 |
Notes to Schedule of Investments
ADR American Depositary Receipts
(I) Non-income producing security.
(L) All or a portion of this security is on loan as of 2-29-12.
(W) Investment is an affiliate of the Fund, the adviser and/or subadviser. Also, it represents the investment of securities lending collateral received.
(Y) The rate shown is the annualized seven-day yield as of 2-29-12.
† At 2-29-12, the aggregate cost of investment securities for federal income tax purposes was $203,401,740. Net unrealized appreciation aggregated $23,002,012, of which $31,253,416 related to appreciated investment securities and $8,251,404 related to depreciated investment securities.
The Fund had the following sector composition as a percentage of net assets of 2-29-12:
Health Care | 20.3% | |||||
Consumer Staples | 19.5% | |||||
Industrials | 12.9% | |||||
Consumer Discretionary | 12.1% | |||||
Materials | 7.5% | |||||
Information Technology | 7.3% | |||||
Financials | 5.4% | |||||
Telecommunication Services | 4.5% | |||||
Energy | 4.2% | |||||
Utilities | 2.9% | |||||
Short-Term Investments & Other | 3.4% |
22 | International Growth Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 2-29-12
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 $196,548,592) including | |
$5,904,844 of securities loaned | $220,228,260 |
Investments in affiliated issuers, at value (Cost $6,173,522) | 6,175,492 |
Total investments, at value (Cost $202,722,114) | 226,403,752 |
Foreign currency, at value (Cost $123,849) | 123,331 |
Cash held at broker for futures contracts | 1,042,640 |
Receivable for fund shares sold | 745,719 |
Receivable for forward foreign currency exchange contracts | 91,064 |
Dividends and interest receivable | 981,600 |
Receivable for securities lending income | 6,398 |
Other receivables and prepaid expenses | 25,386 |
Total assets | 229,419,890 |
Liabilities | |
Payable for forward foreign currency exchange contracts | 216,480 |
Payable for fund shares repurchased | 228,597 |
Payable upon return of securities loaned | 6,177,137 |
Payable for futures variation margin | 64,836 |
Payable to affiliates | |
Accounting and legal services fees | 7,483 |
Transfer agent fees | 21,046 |
Trustees’ fees | 2,334 |
Due to adviser | 636 |
Other liabilities and accrued expenses | 117,591 |
Total liabilities | 6,836,140 |
Net assets | |
Paid-in capital | $202,193,467 |
Undistributed net investment income | 341,320 |
Accumulated net realized loss on investments, futures contracts and | |
foreign currency transactions | (4,005,167) |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | 24,054,130 |
Net assets | $222,583,750 |
See notes to financial statements | Annual report | International Growth Fund | 23 |
F I N A N C I A L S T A T E M E N T S
Statement of assets and liabilities (continued)
Net asset value per share | |
Based on net asset values and shares outstanding — the Fund has an | |
unlimited number of shares authorized with no par value | |
Class A ($49,389,172 ÷ 2,471,578 shares) | $19.98 |
Class B ($973,083 ÷ 48,793 shares)1 | $19.94 |
Class C ($1,623,562 ÷ 81,550 shares)1 | $19.91 |
Class I ($161,553,373 ÷ 8,072,937 shares) | $20.01 |
Class 1 ($9,044,560 ÷ 452,317 shares) | $20.00 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $21.03 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
24 | International Growth Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-29-12
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 | $8,022,259 |
Securities lending | 219,952 |
Interest | 239 |
Less foreign taxes withheld | (598,324) |
Total investment income | 7,644,126 |
Expenses | |
Investment management fees | 2,252,328 |
Distribution and service fees | 152,032 |
Accounting and legal services fees | 37,671 |
Transfer agent fees | 257,034 |
Trustees’ fees | 18,190 |
State registration fees | 61,022 |
Printing and postage | 13,488 |
Professional fees | 64,477 |
Custodian fees | 326,111 |
Registration and filing fees | 24,456 |
Other | 17,133 |
Total expenses | 3,223,942 |
Less expense reductions | (59,157) |
Net expenses | 3,164,785 |
Net investment income | 4,479,341 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | (1,359,249) |
Investments in affiliated issuers | (654) |
Capital gain distributions received from affiliated underlying funds | 171 |
Futures contracts | 6,504 |
Foreign currency transactions | (503,060) |
(1,856,288) | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | (15,884,557) |
Investments in affiliated issuers | 1,759 |
Futures contracts | 330,469 |
Translation of assets and liabilities in foreign currencies | 166,210 |
(15,386,119) | |
Net realized and unrealized loss | (17,242,407) |
Decrease in net assets from operations | ($12,763,066) |
See notes to financial statements | Annual report | International Growth Fund | 25 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
Year | Year | |
ended | ended | |
2-29-12 | 2-28-11 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $4,479,341 | $2,350,425 |
Net realized gain (loss) | (1,856,288) | 8,293,148 |
Change in net unrealized appreciation (depreciation) | (15,386,119) | 33,448,364 |
Increase (decrease) in net assets resulting from operations | (12,763,066) | 44,091,937 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (431,740) | (211,992) |
Class B | (2,245) | — |
Class C | (4,082) | — |
Class I | (2,612,306) | (1,859,699) |
Class 1 | (126,750) | (65,793) |
Class NAV1 | — | (47,095) |
Total distributions | (3,177,123) | (2,184,579) |
From Fund share transactions | (19,513,581) | 49,129,284 |
Total increase (decrease) | (35,453,770) | 91,036,642 |
Net assets | ||
Beginning of year | 258,037,520 | 167,000,878 |
End of year | $222,583,750 | $258,037,520 |
Undistributed (accumulated distributions in excess of) | ||
net investment income | $341,320 | ($470,256) |
1 Class NAV shares were terminated on 12-22-10.
26 | International Growth Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $20.99 | $17.36 | $12.46 | $22.86 | $23.94 |
Net investment income1 | 0.30 | 0.13 | 0.14 | 0.31 | 0.26 |
Net realized and unrealized gain (loss) on investments | (1.12) | 3.61 | 4.86 | (10.31) | 0.53 |
Total from investment operations | (0.82) | 3.74 | 5.00 | (10.00) | 0.79 |
Less distributions | |||||
From net investment income | (0.19) | (0.11) | (0.10) | (0.40) | (0.18) |
From net realized gain | — | — | — | — | (1.69) |
Total distributions | (0.19) | (0.11) | (0.10) | (0.40) | (1.87) |
Net asset value, end of period | $19.98 | $20.99 | $17.36 | $12.46 | $22.86 |
Total return (%)2,3 | (3.80) | 21.58 | 40.07 | (44.00) | 2.85 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $49 | $45 | $23 | $13 | $26 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.66 | 1.60 | 1.684 | 1.94 | 2.21 |
Expenses net of fee waivers | 1.59 | 1.60 | 1.644 | 1.62 | 1.56 |
Expenses net of fee waivers and credits | 1.59 | 1.60 | 1.634 | 1.62 | 1.56 |
Net investment income | 1.50 | 0.69 | 0.86 | 1.59 | 1.02 |
Portfolio turnover (%) | 55 | 48 | 37 | 59 | 97 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Does not reflect the effect of sales charges, if any.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS B SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $20.93 | $17.36 | $12.48 | $22.81 | $23.91 |
Net investment income (loss)1 | 0.12 | 0.01 | 0.05 | 0.15 | (0.01) |
Net realized and unrealized gain (loss) on investments | (1.06) | 3.56 | 4.83 | (10.25) | 0.60 |
Total from investment operations | (0.94) | 3.57 | 4.88 | (10.10) | 0.59 |
Less distributions | |||||
From net investment income | (0.05) | — | — | (0.23) | — |
From net realized gain | — | — | — | — | (1.69) |
Total distributions | (0.05) | — | — | (0.23) | (1.69) |
Net asset value, end of period | $19.94 | $20.93 | $17.36 | $12.48 | $22.81 |
Total return (%)2,3 | (4.47) | 20.56 | 39.10 | (44.43) | 2.03 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1 | $1 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 4.00 | 4.24 | 4.834 | 4.68 | 4.62 |
Expenses net of fee waivers | 2.33 | 2.40 | 2.444 | 2.65 | 2.41 |
Expenses net of fee waivers and credits | 2.33 | 2.40 | 2.404 | 2.40 | 2.40 |
Net investment income (loss) | 0.63 | 0.04 | 0.29 | 0.80 | (0.03) |
Portfolio turnover (%) | 55 | 48 | 37 | 59 | 97 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Does not reflect the effect of sales charges, if any.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Annual report | International Growth Fund | 27 |
CLASS C SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $20.91 | $17.34 | $12.47 | $22.79 | $23.90 |
Net investment income (loss)1 | 0.10 | 0.01 | (0.01) | 0.20 | 0.05 |
Net realized and unrealized gain (loss) on investments | (1.05) | 3.56 | 4.88 | (10.29) | 0.53 |
Total from investment operations | (0.95) | 3.57 | 4.87 | (10.09) | 0.58 |
Less distributions | |||||
From net investment income | (0.05) | — | — | (0.23) | — |
From net realized gain | — | — | — | — | (1.69) |
Total distributions | (0.05) | — | — | (0.23) | (1.69) |
Net asset value, end of period | $19.91 | $20.91 | $17.34 | $12.47 | $22.79 |
Total return (%)2,3 | (4.52) | 20.59 | 39.05 | (44.43) | 1.99 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | $1 | $1 | $1 | $2 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 3.34 | 3.45 | 3.954 | 3.81 | 3.73 |
Expenses net of fee waivers | 2.33 | 2.40 | 2.414 | 2.42 | 2.40 |
Expenses net of fee waivers and credits | 2.33 | 2.40 | 2.404 | 2.40 | 2.40 |
Net investment income (loss) | 0.52 | 0.03 | (0.06) | 1.03 | 0.21 |
Portfolio turnover (%) | 55 | 48 | 37 | 59 | 97 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Does not reflect the effect of sales charges, if any.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS I SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $21.04 | $17.40 | $12.48 | $22.90 | $23.97 |
Net investment income1 | 0.37 | 0.23 | 0.14 | 0.18 | 0.36 |
Net realized and unrealized gain (loss) on investments | (1.12) | 3.60 | 4.95 | (10.12) | 0.54 |
Total from investment operations | (0.75) | 3.83 | 5.09 | (9.94) | 0.90 |
Less distributions | |||||
From net investment income | (0.28) | (0.19) | (0.17) | (0.48) | (0.28) |
From net realized gain | — | — | — | — | (1.69) |
Total distributions | (0.28) | (0.19) | (0.17) | (0.48) | (1.97) |
Net asset value, end of period | $20.01 | $21.04 | $17.40 | $12.48 | $22.90 |
Total return (%)2 | (3.42) | 22.08 | 40.76 | (43.74) | 3.27 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $162 | $204 | $134 | $23 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.20 | 1.14 | 1.233 | 1.67 | 5.07 |
Expenses net of fee waivers | 1.20 | 1.14 | 1.213 | 1.20 | 1.20 |
Expenses net of fee waivers and credits | 1.20 | 1.14 | 1.213 | 1.20 | 1.20 |
Net investment income | 1.88 | 1.21 | 0.84 | 1.16 | 1.43 |
Portfolio turnover (%) | 55 | 48 | 37 | 59 | 97 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.01% of average net assets.
28 | International Growth Fund | Annual report | See notes to financial statements |
CLASS 1 SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of period | $21.02 | $17.38 | $12.47 | $22.89 | $23.97 |
Net investment income1 | 0.36 | 0.23 | 0.20 | 0.36 | 0.29 |
Net realized and unrealized gain (loss) on investments | (1.09) | 3.60 | 4.89 | (10.29) | 0.61 |
Total from investment operations | (0.73) | 3.83 | 5.09 | (9.93) | 0.90 |
Less distributions | |||||
From net investment income | (0.29) | (0.19) | (0.18) | (0.49) | (0.29) |
From net realized gain | — | — | — | — | (1.69) |
Total distributions | (0.29) | (0.19) | (0.18) | (0.49) | (1.98) |
Net asset value, end of period | $20.00 | $21.02 | $17.38 | $12.47 | $22.89 |
Total return (%)2 | (3.33) | 22.11 | 40.73 | (43.72) | 3.28 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $9 | $8 | $5 | $3 | $3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.16 | 1.13 | 1.243 | 1.51 | 1.83 |
Expenses net of fee waivers | 1.14 | 1.13 | 1.193 | 1.15 | 1.15 |
Expenses net of fee waivers and credits | 1.14 | 1.13 | 1.193 | 1.15 | 1.15 |
Net investment income | 1.83 | 1.21 | 1.23 | 1.94 | 1.14 |
Portfolio turnover (%) | 55 | 48 | 37 | 59 | 97 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
See notes to financial statements | Annual report | International Growth Fund | 29 |
Notes to financial statements
Note 1 — Organization
John Hancock International Growth Fund (the Fund) is a 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 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 risks associated with investing in those securities.
30 | International Growth Fund | Annual report |
The following is a summary of the values by input classification of the Fund’s investments as of February 29, 2012, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-29-12 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $8,185,091 | — | $8,185,091 | |
Austria | 672,312 | — | 672,312 | — |
Belgium | 1,474,162 | — | 1,474,162 | — |
Bermuda | 155,743 | — | 155,743 | — |
Canada | 9,211,276 | $9,211,276 | — | — |
China | 163,990 | — | 163,990 | — |
Denmark | 4,152,823 | — | 4,152,823 | — |
Finland | 850,167 | — | 850,167 | — |
France | 13,234,563 | — | 13,234,563 | — |
Germany | 15,611,383 | — | 15,611,383 | — |
Greece | 83,347 | — | 83,347 | — |
Hong Kong | 5,537,439 | — | 5,537,439 | — |
Ireland | 3,729,440 | — | 3,729,440 | — |
Italy | 607,559 | — | 607,559 | — |
Japan | 44,086,210 | — | 44,086,210 | — |
Jersey, C.I. | 515,975 | — | 515,975 | — |
Luxembourg | 790,293 | — | 790,293 | — |
Macau | 670,388 | — | 670,388 | — |
Netherlands | 6,905,217 | — | 6,905,217 | — |
New Zealand | 292,076 | — | 292,076 | — |
Norway | 766,196 | — | 766,196 | — |
Singapore | 4,614,391 | — | 4,614,391 | — |
Spain | 3,617,424 | — | 3,617,424 | — |
Sweden | 4,318,805 | — | 4,318,805 | — |
Switzerland | 27,942,750 | — | 27,942,750 | — |
United Kingdom | 55,052,607 | — | 55,052,607 | — |
United States | 115,564 | — | 115,564 | — |
Preferred Securities | — | |||
Germany | 1,700,055 | — | 1,700,055 | — |
Warrants | ||||
Canada | 1,122 | 1,122 | — | — |
Securities Lending | ||||
Collateral | 6,175,492 | 6,175,492 | — | — |
Short-Term Investments | 5,169,892 | 5,169,892 | — | — |
Total Investments in | ||||
Securities | $226,403,752 | $20,557,782 | $205,845,970 | — |
Other Financial | ||||
Instruments | ||||
Futures | $493,105 | $493,502 | ($397) | — |
Forward Foreign | ||||
Currency Contracts | ($125,416) | — | ($125,416) | — |
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. During the year ended February 29, 2012, there were no significant transfers into or out of Level 1, Level 2 or Level 3.
Annual report | International Growth Fund | 31 |
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, 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. 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 taxes are provided for based on the Fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Securities lending. The Fund may lend its securities to earn additional income. It receives cash collateral 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. Net 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 the value of 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,
32 | International Growth Fund | Annual report |
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.
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 may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, 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 year ended February 29, 2012, the Fund had no borrowings under the line of credit.
Expenses. Expenses that are directly attributable to an individual fund are allocated to the Fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees, 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.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those 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.
For federal income tax purposes, the Fund has no capital loss carryforward available to offset future net realized capital gains as of February 29, 2012. Net capital losses of $3,346,083, that are a result of security transactions occurring after October 31, 2011 are treated as occurring on March 1, 2012, the first day of the Fund’s next taxable year.
Annual report | International Growth Fund | 33 |
As of February 29, 2012, 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. The tax character of distributions for the years ended February 29, 2012 and February 28, 2011 was as follows:
FEBRUARY 29, 2012 | FEBRUARY 28, 2011 | ||
Ordinary Income | $3,177,123 | $2,184,579 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of February 29, 2012, the components of distributable earnings on a tax basis included $259,579 of undistributed ordinary income.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to 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 may result in additional disclosure for transfers between levels as well as expanded disclosure for securities categorized as Level 3 under the fair value hierarchy.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the impact, if any, on the Fund’s financial statement disclosures.
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, the Fund is exposed 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.
34 | International Growth Fund | Annual report |
Futures. A futures contract is a contractual agreement to buy or sell a particular commodity, currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in hedged security values and/or interest rates and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade.
Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the year ended February 29, 2012, the Fund used futures contracts to gain or hedge exposure to certain securities markets. The following table summarizes the contracts held at February 29, 2012. During the year ended February 29, 2012, the Fund held futures contracts with USD absolute notional values ranging from $11.9 million to $26.8 million, as measured at each quarter end.
UNREALIZED | |||||
OPEN | NUMBER OF | APPRECIATION | |||
CONTRACTS | CONTRACTS | POSITION | EXPIRATION DATE | NOTIONAL VALUE | (DEPRECIATION) |
CAC 40 Index Futures | 19 | Long | Mar 2012 | $873,575 | $13,495 |
DAX Index Futures | 24 | Long | Mar 2012 | 5,479,348 | 502,577 |
FTSE 100 Index | 18 | Long | Mar 2012 | 1,676,077 | 58,625 |
Futures | |||||
ASX SPI 200 Index | 25 | Short | Mar 2012 | (2,874,167) | (79,104) |
Futures | |||||
FTSE MIB Index | 5 | Short | Mar 2012 | (544,877) | (397) |
Futures | |||||
S&P TSE 60 Index | 3 | Short | Mar 2012 | (435,272) | (2,091) |
Futures | |||||
Total | $493,105 |
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 the 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 or settlement with the counterparty.
Annual report | International Growth Fund | 35 |
During the year ended February 29, 2012, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates. The following table summarizes the contracts held at February 29, 2012. During the year ended February 29, 2012, the Fund held forward foreign currency contracts with USD absolute values ranging from $45.8 million to $95.4 million, as measured at each quarter end.
PRINCIPAL | ||||||
PRINCIPAL | AMOUNT | |||||
AMOUNT | COVERED | UNREALIZED | ||||
COVERED BY | BY CONTRACT | SETTLEMENT | APPRECIATION | |||
CURRENCY | CONTRACT | (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
Buys | ||||||
AUD | 811,239 | $860,076 | Bank of America N.A. | 4-20-12 | $5,081 | |
AUD | 756,440 | 806,678 | Mellon Bank NA | 4-20-12 | 38 | |
AUD | 252,147 | 270,390 | Morgan Stanley Capital | 4-20-12 | (1,485) | |
Services, Inc. | ||||||
EUR | 460,057 | 608,301 | Bank of America N.A. | 4-20-12 | 4,749 | |
EUR | 785,679 | 1,039,013 | Brown Brothers | 4-20-12 | 7,946 | |
Harriman & Company | ||||||
EUR | 986,371 | 1,304,870 | Deutsche Bank AG | 4-20-12 | 9,522 | |
EUR | 1,252,622 | 1,658,331 | JPMorgan Chase Bank | 4-20-12 | 10,854 | |
EUR | 614,621 | 815,752 | Morgan Stanley Capital | 4-20-12 | 3,264 | |
Services, Inc. | ||||||
EUR | 946,289 | 1,252,586 | Royal Bank of Scotland PLC | 4-20-12 | 8,395 | |
GBP | 59,919 | 94,725 | Bank of America N.A. | 4-20-12 | 566 | |
GBP | 94,291 | 148,856 | Barclays Bank PLC | 4-20-12 | 1,098 | |
GBP | 19,431 | 30,673 | JPMorgan Chase Bank | 4-20-12 | 228 | |
GBP | 81,658 | 129,030 | Morgan Stanley Capital | 4-20-12 | 833 | |
Services, Inc. | ||||||
GBP | 103,156 | 162,848 | Royal Bank of Scotland PLC | 4-20-12 | 1,204 | |
HKD | 11,073,287 | 1,427,945 | Bank of America N.A. | 4-20-12 | (109) | |
HKD | 8,392,911 | 1,082,419 | Barclays Bank PLC | 4-20-12 | (201) | |
HKD | 3,724,303 | 480,273 | Brown Brothers | 4-20-12 | (46) | |
Harriman & Company | ||||||
HKD | 4,697,105 | 605,705 | Mellon Bank NA | 4-20-12 | (40) | |
HKD | 7,862,732 | 1,014,144 | Morgan Stanley Capital | 4-20-12 | (290) | |
Services, Inc. | ||||||
HKD | 8,117,663 | 1,046,899 | State Street Bank & | 4-20-12 | (173) | |
Trust Company | ||||||
JPY | 73,348,630 | 921,176 | Deutsche Bank AG | 4-20-12 | (18,467) | |
JPY | 73,531,690 | 923,476 | JPMorgan Chase Bank | 4-20-12 | (18,515) | |
JPY | 45,318,584 | 568,831 | Royal Bank of Scotland PLC | 4-20-12 | (11,091) | |
SGD | 1,845,284 | 1,468,813 | Bank of America N.A. | 4-20-12 | 6,711 | |
SGD | 922,641 | 734,528 | Barclays Bank PLC | 4-20-12 | 3,233 | |
SGD | 4,223,146 | 3,361,066 | Brown Brothers | 4-20-12 | 15,841 | |
Harriman & Company | ||||||
SGD | 751,694 | 598,235 | Mellon Bank NA | 4-20-12 | 2,834 | |
SGD | 982,435 | 782,359 | Morgan Stanley Capital | 4-20-12 | 3,215 | |
Services, Inc. | ||||||
SGD | 751,694 | 598,698 | Royal Bank of Scotland PLC | 4-20-12 | 2,371 | |
SGD | 751,694 | 597,987 | State Street Bank & | 4-20-12 | 3,081 | |
Trust Company | ||||||
Total | $25,394,683 | $40,647 |
36 | International Growth Fund | Annual report |
PRINCIPAL | ||||||
PRINCIPAL | AMOUNT | |||||
AMOUNT | COVERED | UNREALIZED | ||||
COVERED BY | BY CONTRACT | SETTLEMENT | APPRECIATION | |||
CURRENCY | CONTRACT | (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
Sells | ||||||
CAD | 2,605,799 | $2,611,649 | Bank of America N.A. | 4-20-12 | ($19,140) | |
CAD | 488,456 | 489,636 | Barclays Bank PLC | 4-20-12 | (3,504) | |
CAD | 933,979 | 936,461 | Morgan Stanley Capital | 4-20-12 | (6,475) | |
Services, Inc. | ||||||
CAD | 2,784,506 | 2,791,678 | Royal Bank of Scotland PLC | 4-20-12 | (19,532) | |
CAD | 729,810 | 731,485 | State Street Bank & | 4-20-12 | (5,324) | |
Trust Company | ||||||
CHF | 1,273,534 | 1,397,507 | Barclays Bank PLC | 4-20-12 | (10,989) | |
CHF | 2,031,615 | 2,224,014 | Brown Brothers | 4-20-12 | (22,900) | |
Harriman & Company | ||||||
CHF | 4,943,741 | 5,420,251 | Royal Bank of Scotland PLC | 4-20-12 | (47,400) | |
CHF | 2,495,776 | 2,735,547 | State Street Bank & | 4-20-12 | (24,718) | |
Trust Company | ||||||
SEK | 1,175,853 | 175,998 | Brown Brothers | 4-20-12 | (1,374) | |
Harriman & Company | ||||||
SEK | 4,226,694 | 634,448 | Deutsche Bank AG | 4-20-12 | (3,130) | |
SEK | 53,497 | 8,030 | JPMorgan Chase Bank | 4-20-12 | (40) | |
SEK | 1,526,946 | 228,796 | Mellon Bank NA | 4-20-12 | (1,537) | |
Total | $20,385,500 | ($166,063) |
Currency Abbreviations
AUD | Australian Dollar | HKD | Hong Kong Dollar | |
CAD | Canadian Dollar | JPY | Japanese Yen | |
CHF | Swiss Franc | SEK | Swedish Krona | |
EUR | Euro | SGD | Singapore Dollar | |
GBP | Pound Sterling |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at February 29, 2012 by risk category:
FINANCIAL | ASSET | LIABILITY | ||
STATEMENT OF ASSETS AND | INSTRUMENT | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
Equity contracts | Receivable for future | Future† | $574,697 | ($81,592) |
variation margin; net | ||||
unrealized appreciation | ||||
(depreciation) on investments | ||||
Foreign exchange | Receivable/Payable for | Forward foreign | 91,064 | (216,480) |
contracts | forward foreign currency | currency | ||
exchange contracts | contracts | |||
Total | $665,761 | ($298,072) |
† Reflects cumulative appreciation/depreciation on futures as disclosed herein. Only the period end variation margin is separately disclosed in the Statement of assets and liabilities.
Annual report | International Growth Fund | 37 |
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 29, 2012:
STATEMENT OF | FOREIGN | |||
OPERATIONS | FUTURES | CURRENCY | ||
RISK | LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
Net realized | ||||
Equity contracts | gain (loss) on | $6,504 | — | $6,504 |
Foreign exchange | Net realized | — | ($551,591) | (551,591) |
contracts | gain (loss) on | |||
Total | $6,504 | ($551,591) | ($545,087) |
* Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 29, 2012:
TRANSLATION OF | ||||
ASSETS AND | ||||
LIABILITIES IN | ||||
FUTURES | FOREIGN | |||
RISK | STATEMENT OF OPERATIONS LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
Equity contracts | Change in unrealized appreciation | $330,469 | — | $330,469 |
(depreciation) of | ||||
Foreign exchange | Change in unrealized appreciation | — | $180,958 | 180,958 |
contracts | (depreciation) of | |||
Total | $330,469 | $180,958 | $511,427 |
* 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;
38 | International Growth Fund | Annual report |
(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 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, portfolio brokerage commissions, interest expense, litigation and indemnification expenses 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, 2013. 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.
Accordingly, these expense reductions amounted to $29,219, $13,931, $14,316 and $1,691 for Class A, Class B, Class C and Class 1 shares, respectively, for the year ended February 29, 2012.
The investment management fees, including the impact of the waivers, reimbursements and amounts recaptured described above, incurred for the year ended February 29, 2012 were equivalent to a net effective rate of 0.88% of the Fund’s average daily net assets.
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 to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended February 29, 2012 amounted to an annual rate of 0.02% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B, Class C and Class 1 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund may pay up to the following contractual 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 $46,350 for the year ended February 29, 2012. Of this amount, $6,799 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $38,509 was paid as sales commissions to broker-dealers and $1,042 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Adviser.
Annual report | International Growth Fund | 39 |
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 year ended February 29, 2012, CDSCs received by the Distributor amounted to $3,170 and $233 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), 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 in connection 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 year ended February 29, 2012 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $125,251 | $81,091 | $16,859 | $4,918 |
Class B | 8,378 | 1,633 | 13,890 | 279 |
Class C | 14,116 | 2,783 | 14,238 | 368 |
Class I | — | 171,527 | 16,035 | 7,923 |
Class 1 | 4,287 | — | — | — |
Total | $152,032 | $257,034 | $61,022 | $13,488 |
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.
40 | International Growth Fund | Annual report |
Note 6 — Fund share transactions
Transactions in Fund shares for the years ended February 29, 2012 and February 28, 2011 were as follows:
Year ended 2-29-12 | Year ended 2-28-11 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 1,620,299 | $32,324,292 | 1,001,925 | $18,930,095 |
Distributions reinvested | 23,931 | 428,365 | 10,486 | 210,444 |
Repurchased | (1,304,021) | (27,324,773) | (182,969) | (3,423,082) |
Net increase | 340,209 | $5,427,884 | 829,442 | $15,717,457 |
Class B shares | ||||
Sold | 25,355 | $511,368 | 18,488 | $350,796 |
Distributions reinvested | 117 | 2,099 | — | — |
Repurchased | (14,555) | (291,119) | (13,173) | (234,105) |
Net increase | 10,917 | $222,348 | 5,315 | $116,691 |
Class C shares | ||||
Sold | 41,214 | $820,514 | 14,797 | $278,217 |
Distributions reinvested | 185 | 3,306 | — | — |
Repurchased | (13,390) | (262,293) | (12,304) | (222,459) |
Net increase | 28,009 | $561,527 | 2,493 | $55,758 |
Class I shares | ||||
Sold | 2,600,769 | $52,660,106 | 3,607,016 | $67,388,025 |
Distributions reinvested | 2,431 | 43,561 | 919 | 18,465 |
Repurchased | (4,208,665) | (80,252,057) | (1,611,195) | (30,758,599) |
Net increase (decrease) | (1,605,465) | ($27,548,390) | 1,996,740 | $36,647,891 |
Class 1 shares | ||||
Sold | 218,296 | $4,496,153 | 191,560 | $3,635,364 |
Distributions reinvested | 7,081 | 126,750 | 3,275 | 65,793 |
Repurchased | (141,980) | (2,799,853) | (102,225) | (1,936,307) |
Net increase | 83,397 | $1,823,050 | 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 increase (decrease) | — | — | (260,357) | ($5,173,363) |
Net increase (decrease) | (1,142,933) | ($19,513,581) | 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 $132,013,925 and $144,846,219, respectively, for the year ended February 29, 2012.
Annual report | International Growth Fund | 41 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of John Hancock International Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock International Growth Fund (the “Fund”) at February 29, 2012, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 23, 2012
42 | International Growth Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended February 29, 2012.
With respect to the ordinary dividends paid by the Fund for the fiscal year ended February 29, 2012, the Fund designates the maximum amount allowable for the corporate dividends-received deduction.
The Fund designates the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This amount will be reflected on Form 1099-DIV for the calendar year 2012.
Income derived from foreign sources was $6,331,387. The Fund intends to pass through foreign tax credits of $347,425 for the fiscal year.
Eligible shareholders will be mailed a 2012 Form 1099-DIV in early 2013. This Form will reflect the tax character of all distributions for calendar year 2012.
Annual report | International Growth Fund | 43 |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Steven R. Pruchansky, Born: 1944 | 2006 | 48 |
Chairman (since January 2011); Chairman and Chief Executive Officer, Greenscapes of Southwest | ||
Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); | ||
Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real | ||
estate) (since 2000); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty | ||
Trust (until 1994); President, Maxwell Building Corp. (until 1991). | ||
William H. Cunningham, Born: 1944 | 2006 | 48 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 48 |
President, Cambridge College, Cambridge, Massachusetts (since May 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–May 2011); Board of Directors of Eastern Bank | ||
Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); | ||
Board of Directors of American Student Assistance Corp. (1996–2009); Board of Directors of Boston | ||
Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (2007–2011). | ||
Stanley Martin,2 Born: 1947 | 2008 | 48 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore,2 Born: 1939 | 2006 | 48 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). |
44 | International Growth Fund | Annual report |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Patti McGill Peterson,2 Born: 1943 | 2006 | 48 |
Presidential Advisor for Global Initiatives, American Council on Education (since 2011); Chairperson | ||
of the Board of the Trust (during 2009 and 2010); Principal, PMP Globalinc (consulting) (2007–2011); | ||
Senior Associate, Institute for Higher Education Policy (2007–2011); Executive Director, CIES | ||
(international education agency) (until 2007); Vice President, Institute of International Education (until | ||
2007); Former President Wells College, St. Lawrence University and the Association of Colleges and | ||
Universities of the State of New York. Director of the following: Mutual Fund Directors Forum (since | ||
2011); Niagara Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); | ||
ONBANK (until 1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison | ||
(since 2007); Ford Foundation, International Fellowships Program (until 2007); UNCF, International | ||
Development Partnerships (until 2005); Roth Endowment (since 2002); Council for International | ||
Educational Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 48 |
Member, Audit Committee and Finance Committee of NCH Healthcare Systems, Inc. (since 2011); | ||
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Hugh McHaffie, Born: 1959 | 2010 | 48 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Variable Insurance Trust and John Hancock Funds II (since 2009); Trustee, | ||
John Hancock retail funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, | ||
John Hancock Investment Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior | ||
Vice President, Individual Business Product Management, MetLife, Inc. (1999–2006). | ||
John G. Vrysen, Born: 1955 | 2009 | 48 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock | ||
Funds II and John Hancock Variable Insurance Trust (since 2007); Chief Operating Officer, John Hancock | ||
retail funds (until 2009); Trustee, John Hancock retail funds (since 2009). |
Annual report | International Growth Fund | 45 |
Principal officers who are not Trustees | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Keith F. Hartstein, Born: 1956 | 2006 |
President and Chief Executive Officer | |
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | |
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | |
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | |
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | |
Force Marketing Committee (since 2003). | |
Andrew G. Arnott, Born: 1971 | 2009 |
Senior Vice President and Chief Operating Officer | |
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | |
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | |
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | |
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | |
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock | |
Variable Insurance Trust (since 2006); Senior Vice President, Product Management and Development, | |
John Hancock Funds, LLC (until 2009). | |
Thomas M. Kinzler, Born: 1955 | 2006 |
Secretary and Chief Legal Officer | |
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | |
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | |
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | |
Funds II and John Hancock Variable Insurance Trust (since 2006); Vice President and Associate General | |
Counsel, Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal | |
Counsel, MML Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual | |
Select Funds and MassMutual Premier Funds (2004–2006). | |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Variable Insurance Trust, John Hancock Advisers, | |
LLC and John Hancock Investment Management Services, LLC (since 2005); Vice President and Chief | |
Compliance Officer, John Hancock Asset Management a division of Manulife Asset Management (US) | |
LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Variable Insurance Trust | |
(since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, | |
Goldman Sachs (2005–2007). |
46 | International Growth Fund | Annual report |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock closed-end funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Variable Insurance Trust (since | |
October 2010) and (2007–2009); Assistant Treasurer, John Hancock retail funds (2007–2009); | |
Assistant Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management | |
Research Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
Annual report | International Growth Fund | 47 |
More information
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
William H. Cunningham | Services, LLC |
Deborah C. Jackson | |
Stanley Martin* | Subadviser |
Hugh McHaffie† | Grantham, Mayo, Van Otterloo & Co. LLC |
Dr. John A. Moore,* Vice Chairman^ | |
Patti McGill Peterson* | Principal distributor |
Gregory A. Russo | John Hancock Funds, LLC |
John G. Vrysen† | |
Custodian | |
Officers | State Street Bank and Trust Company |
Keith F. Hartstein | |
President and Chief Executive Officer | Transfer agent |
John Hancock Signature Services, Inc. | |
Andrew G. Arnott | |
Senior Vice President and Chief Operating Officer | Legal counsel |
K&L Gates LLP | |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | Independent registered |
public accounting firm | |
Francis V. Knox, Jr. | PricewaterhouseCoopers LLP |
Chief Compliance Officer | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
^Effective 1-1-12 |
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 1-202-551-8090 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 |
48 | International Growth Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalgrowthx45x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock International Growth Fund. | 8700A 2/12 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/12 |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalallocax1x1.jpg)
A look at performance
Total returns for the period ended February 29, 2012
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge | with maximum sales charge | ||||||||
Since | Since | ||||||||
1-year | 5-year | 10-year | inception1 | 1-year | 5-year | 10-year | inception1 | ||
Class A | –11.98 | –3.09 | — | –3.08 | –11.98 | –14.52 | — | –14.93 | |
Class B | –12.54 | –3.15 | — | –2.97 | –12.54 | –14.79 | — | –14.45 | |
Class C | –8.99 | –2.81 | — | –2.81 | –8.99 | –13.27 | — | –13.70 | |
Class I2 | –6.96 | –1.68 | — | –1.69 | –6.96 | –8.14 | — | –8.42 | |
Performance figures assume all dividends have been reinvested. 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 following expense ratios include expenses of the underlying affiliated funds in which the Portfolio invests. 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 | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalallocax3x1.jpg)
Without | With maximum | |||
Start date | sales charge | sales charge | Index | |
Class B | 12-29-06 | $8,631 | $8,555 | $8,965 |
Class C3 | 12-29-06 | 8,630 | 8,630 | 8,965 |
Class I2 | 12-29-06 | 9,158 | 9,158 | 8,965 |
MSCI EAFE Index (gross of foreign withholding tax on dividends) (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.
It is not possible to invest directly in an index. Index figures do not reflect sales charges, which would have resulted in lower values if they did.
1 From 12-29-06.
2 For certain types of investors, as described in the Portfolio’s prospectus.
3 No contingent deferred sales charge is applicable.
Annual report | International Allocation Portfolio | 7 |
Management’s discussion of
Portfolio performance
By John Hancock Asset Management1
During the 12 months ended February 29, 2012, international developed markets lost ground, with the Portfolio’s benchmark, the MSCI EAFE Index, declining 7.01%. This result reflected growing investor concern about the sovereign debt of certain fiscally challenged eurozone nations such as Greece and Italy, as well as weakness in the euro versus the U.S. dollar. During the period, Greece received approval for further bailout funds to help it stave off defaulting on its sovereign debt. However, the nation remained mired in a painful multi-year recession. Against this backdrop, Greek stocks lost more than half of their value. Most other markets in the region finished in the red as well. Key benchmark components Germany and France lost roughly 8% and 14%, respectively, while the United Kingdom performed relatively better at 0%. Japan saw its stock market fall by about 10% during the period.
For the 12 months ended February 29, 2012, John Hancock International Allocation Portfolio’s Class A declined 7.34%, excluding sales charges, versus –7.01% for the Portfolio’s benchmark, the MSCI EAFE Index, and –7.40% for the average foreign large blend fund, according to Morningstar, Inc. Asset allocation bolstered the Portfolio’s relative results during the period. In particular, the Portfolio’s presence in emerging markets was helpful, given their significant outperformance versus developed international markets. Secondly, the Portfolio’s allocation to China benefited its performance. Largely offsetting the positive influence of asset allocation were the mixed results of the Portfolio’s underlying fund managers. On the one hand, International Growth Stock Fund (Invesco) strongly outperformed due to rewarding stock picking in the financials and consumer discretionary sectors, among other factors. On the other hand, Emerging Markets Fund (DFA) came up considerably short of its benchmark because of the fund’s tilt toward smaller companies. Greater China Opportunities Fund (John Hancock) also disappointed us.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting.
1 Manulife Asset Management (US) LLC and Manulife Asset Managment (North America) Limited are doing business as John Hancock Asset Management.
8 | International Allocation Portfolio | Annual report |
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 September 1, 2011 with the same investment held until February 29, 2012.
Account value | Ending value | Expenses paid during | |
on 9-1-11 | on 2-29-12 | period ended 2-29-121,2 | |
Class A | $1,000.00 | $1,027.50 | $3.18 |
Class B | 1,000.00 | 1,024.00 | 6.69 |
Class C | 1,000.00 | 1,022.60 | 6.69 |
Class I | 1,000.00 | 1,028.60 | 1.36 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 29, 2012, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalallocax5x1.jpg)
Annual report | International Allocation Portfolio | 9 |
Your expenses
Hypothetical example for comparison purposes
This table allows you to compare the Portfolio’s ongoing operating expenses with those of any other 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 September 1, 2011, with the same investment held until February 29, 2012. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-11 | on 2-29-12 | period ended 2-29-121,2 | |
Class A | $1,000.00 | $1,022.50 | $3.17 |
Class B | 1,000.00 | 1,018.20 | 6.67 |
Class C | 1,000.00 | 1,018.20 | 6.67 |
Class I | 1,000.00 | 1,023.70 | 1.36 |
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 0.27% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 182/366 (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 were 0.48% to 1.35%.
10 | International Allocation Portfolio | Annual report |
Portfolio summary
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalallocax7x1.jpg)
1 As a percentage of net assets on 2-29-12.
Annual report | International Allocation Portfolio | 11 |
Portfolio’s investments
Investment companies | |
Underlying Funds’ Subadvisers | |
Atlantis Investment Management (Hong Kong) Ltd. | (Atlantis) |
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 2-29-12
Shares | Value | |
Affiliated Investment Companies 98.45% | $16,157,006 | |
(Cost $14,592,536) | ||
EQUITY 98.45% | 16,157,006 | |
International Large Cap 72.95% | ||
John Hancock Funds II (G) | ||
International Growth Stock, Class NAV (Invesco) | 210,010 | 2,303,810 |
International Opportunities, Class NAV (Marsico) (I) | 128,398 | 1,711,541 |
International Value, Class NAV (Franklin) | 289,924 | 3,980,655 |
John Hancock Funds III (G) | ||
International Core, Class NAV (GMO) | 143,039 | 3,976,481 |
Emerging Markets 18.88% | ||
John Hancock Funds II (G) | ||
China Emerging Leaders, Class NAV (Atlantis) (I) | 36,581 | 411,176 |
Emerging Markets, Class NAV (DFA) | 186,840 | 2,001,061 |
John Hancock Investment Trust (G) | ||
Greater China Opportunities, Class NAV (John Hancock) (A) | 37,448 | 685,298 |
International Small Cap 6.62% | ||
John Hancock Funds II (G) | ||
International Small Company, Class NAV (DFA) | 134,694 | 1,086,984 |
12 | International Allocation Portfolio | Annual report | See notes to financial statements |
Shares | Value | |
Unaffiliated Investment Companies 1.54% | $253,094 | |
(Cost $249,733) | ||
Equity 1.54% | ||
WisdomTree Japan Hedged Equity Fund | 2,710 | 96,612 |
WisdomTree Japan SmallCap Dividend Fund | 3,554 | 156,482 |
Total investments (Cost $14,842,269)† 99.99% | $16,410,100 | |
Other assets and liabilities, net 0.01% | $1,413 | |
Total net assets 100.00% | $16,411,513 | |
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.
(I) Non-income producing.
† At 2-29-12, the aggregate cost of investment securities for federal income tax purposes was $16,978,482. Net unrealized depreciation aggregated $568,382.
See notes to financial statements | Annual report | International Allocation Portfolio | 13 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 2-29-12
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) | $253,094 |
Investments in affiliated funds, at value (Cost $14,592,536) | 16,157,006 |
Total investments, at value (Cost $14,842,269) | 16,410,100 |
Cash | 49,294 |
Receivable for investments sold | 18,302 |
Receivable for portfolio shares sold | 5,400 |
Receivable due from adviser | 1,632 |
Other receivables and prepaid expenses | 29,045 |
Total assets | 16,513,773 |
Liabilities | |
Payable for portfolio shares repurchased | 51,692 |
Payable to affiliates | |
Accounting and legal services fees | 709 |
Transfer agent fees | 2,782 |
Trustees’ fees | 612 |
Other liabilities and accrued expenses | 46,465 |
Total liabilities | 102,260 |
Net assets | |
Paid-in capital | $30,839,683 |
Undistributed net investment income | 141,553 |
Accumulated net realized gain (loss) on investments | (16,137,554) |
Net unrealized appreciation (depreciation) on investments | 1,567,831 |
Net assets | $16,411,513 |
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 ($8,410,156 ÷ 1,101,431 shares) | $7.64 |
Class B ($2,200,274 ÷ 289,556 shares)1 | $7.60 |
Class C ($5,575,220 ÷ 733,180 shares)1 | $7.60 |
Class I ($225,863 ÷ 29,451 shares) | $7.67 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $8.04 |
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.
14 | International Allocation Portfolio | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-29-12
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 | |
Income distributions received from affiliated underlying funds | $299,988 |
Dividends | 5,209 |
Total investment income | 305,197 |
Expenses | |
Investment management fees | 13,747 |
Distribution and service fees | 107,458 |
Accounting and legal services fees | 3,245 |
Transfer agent fees | 33,775 |
Trustees’ fees | 1,308 |
State registration fees | 59,660 |
Printing and postage | 9,806 |
Professional fees | 35,410 |
Custodian fees | 12,000 |
Registration and filing fees | 25,074 |
Other | 8,712 |
Total expenses | 310,195 |
Less expense reductions | (144,496) |
Net expenses | 165,699 |
Net investment income | 139,498 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in affiliated issuers | (353,113) |
Capital gain distributions received from affiliated underlying funds | 2,485 |
(350,628) | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 3,361 |
Investments in affiliated issuers | (1,466,394) |
(1,463,033) | |
Net realized and unrealized loss | (1,813,661) |
Decrease in net assets from operations | ($1,674,163) |
See notes to financial statements | Annual report | International Allocation Portfolio | 15 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Portfolio’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Portfolio share transactions.
Year | Year | |
ended | ended | |
2-29-12 | 2-28-11 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $139,498 | $65,507 |
Net realized loss | (350,628) | (34,142) |
Change in net unrealized appreciation (depreciation) | (1,463,033) | 3,589,573 |
Increase (decrease) in net assets resulting from operations | (1,674,163) | 3,620,938 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (96,271) | — |
Class B | (9,867) | — |
Class C | (25,766) | — |
Class I | (3,759) | — |
From net realized gain | ||
Class A | (1,275) | — |
Class B | (330) | — |
Class C | (862) | — |
Class I | (38) | — |
Total distributions | (138,168) | — |
From Portfolio share transactions | (1,872,270) | (607,486) |
Total increase (decrease) | (3,684,601) | 3,013,452 |
Net assets | ||
Beginning of year | 20,096,114 | 17,082,662 |
End of year | $16,411,513 | $20,096,114 |
Undistributed net investment income | $141,553 | $137,738 |
16 | International Allocation Portfolio | Annual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Portfolio’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of year | $8.35 | $6.82 | $4.31 | $9.48 | $9.96 |
Net investment income1,2 | 0.08 | 0.05 | 0.02 | 0.12 | 0.13 |
Net realized and unrealized gain (loss) on investments | (0.70) | 1.48 | 2.55 | (4.86) | (0.03) |
Total from investment operations | (0.62) | 1.53 | 2.57 | (4.74) | 0.10 |
Less distributions | |||||
From net investment income | (0.09) | — | (0.06) | (0.14) | (0.13) |
From net realized gain | —3 | — | —3 | (0.29) | (0.45) |
Total distributions | (0.09) | — | (0.06) | (0.43) | (0.58) |
Net asset value, end of year | $7.64 | $8.35 | $6.82 | $4.31 | $9.48 |
Total return (%)4,5 | (7.34) | 22.43 | 59.59 | (50.67) | 0.70 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $8 | $11 | $10 | $13 | $30 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.286 | 1.156 | 1.066,7 | 0.926 | 1.116 |
Expenses net of fee waivers | 0.636 | 0.656 | 0.676,7 | 0.616 | 0.586 |
Expenses net of fee waivers and credits | 0.636 | 0.656 | 0.666,7 | 0.616 | 0.586 |
Net investment income2 | 1.01 | 0.62 | 0.29 | 1.56 | 1.21 |
Portfolio turnover (%) | 18 | 64 | 41 | 23 | 23 |
1 Based on the average daily shares outstanding.
2 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.
3 Less than ($0.005) per share.
4 Does not reflect the effect of sales charges, if any.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.48% to 1.35%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-29-12, 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.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Annual report | International Allocation Portfolio | 17 |
CLASS B SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of year | $8.30 | $6.84 | $4.32 | $9.46 | $9.95 |
Net investment income1,2 | 0.03 | — | 0.03 | 0.06 | 0.07 |
Net realized and unrealized gain (loss) on investments | (0.70) | 1.46 | 2.51 | (4.83) | (0.06) |
Total from investment operations | (0.67) | 1.46 | 2.54 | (4.77) | 0.01 |
Less distributions | |||||
From net investment income | (0.03) | — | (0.02) | (0.08) | (0.05) |
From net realized gain | —3 | — | —3 | (0.29) | (0.45) |
Total distributions | (0.03) | — | (0.02) | (0.37) | (0.50) |
Net asset value, end of year | $7.60 | $8.30 | $6.84 | $4.32 | $9.46 |
Total return (%)4,5 | (7.96) | 21.35 | 58.73 | (51.01) | (0.13) |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $2 | $2 | $1 | $1 | $2 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.486 | 2.336 | 3.066,7 | 3.036 | 4.026 |
Expenses net of fee waivers | 1.336 | 1.346 | 1.446,7 | 1.536 | 1.346 |
Expenses net of fee waivers and credits | 1.336 | 1.346 | 1.376,7 | 1.316 | 1.336 |
Net investment income2 | 0.43 | 0.05 | 0.48 | 0.80 | 0.70 |
Portfolio turnover (%) | 18 | 64 | 41 | 23 | 23 |
1 Based on the average daily shares outstanding.
2 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.
3 Less than ($0.005) per share.
4 Does not reflect the effect of sales charges, if any.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.48% to 1.35%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-29-12, 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.
7 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
CLASS C SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of year | $8.31 | $6.84 | $4.32 | $9.46 | $9.95 |
Net investment income1,2 | 0.04 | —3 | 0.03 | 0.06 | 0.08 |
Net realized and unrealized gain (loss) on investments | (0.72) | 1.47 | 2.51 | (4.83) | (0.07) |
Total from investment operations | (0.68) | 1.47 | 2.54 | (4.77) | 0.01 |
Less distributions | |||||
From net investment income | (0.03) | — | (0.02) | (0.08) | (0.05) |
From net realized gain | —3 | — | —3 | (0.29) | (0.45) |
Total distributions | (0.03) | — | (0.02) | (0.37) | (0.50) |
Net asset value, end of year | $7.60 | $8.31 | $6.84 | $4.32 | $9.46 |
Total return (%)4,5 | (8.07) | 21.49 | 58.73 | (51.01) | (0.13) |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $6 | $6 | $5 | $3 | $8 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.066 | 1.966 | 2.116,7 | 1.926 | 2.316 |
Expenses net of fee waivers | 1.336 | 1.356 | 1.406,7 | 1.316 | 1.336 |
Expenses net of fee waivers and credits | 1.336 | 1.356 | 1.376,7 | 1.316 | 1.336 |
Net investment income (loss)2 | 0.52 | (0.06) | 0.44 | 0.76 | 0.79 |
Portfolio turnover (%) | 18 | 64 | 41 | 23 | 23 |
1 Based on the average daily shares outstanding.
2 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.
3 Less than ($0.005) per share.
4 Does not reflect the effect of sales charges, if any.
5 Total returns would have been lower had certain expenses not been reduced during the periods shown.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.48% to 1.35%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-29-12, 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.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
18 | International Allocation Portfolio | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-08 |
Per share operating performance | |||||
Net asset value, beginning of year | $8.38 | $6.82 | $4.30 | $9.49 | $9.97 |
Net investment income1,2 | 0.13 | 0.07 | 0.09 | 0.11 | 0.16 |
Net realized and unrealized gain (loss) on investments | (0.73) | 1.49 | 2.52 | (4.84) | (0.03) |
Total from investment operations | (0.60) | 1.56 | 2.61 | (4.73) | 0.13 |
Less distributions | |||||
From net investment income | (0.11) | — | (0.09) | (0.17) | (0.16) |
From net realized gain | —3 | — | —3 | (0.29) | (0.45) |
Total distributions | (0.11) | — | (0.09) | (0.46) | (0.61) |
Net asset value, end of year | $7.67 | $8.38 | $6.82 | $4.30 | $9.49 |
Total return (%)4 | (6.96) | 22.87 | 60.62 | (50.48) | 1.02 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | —5 | —5 | —5 | —5 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 6.586 | 5.696 | 4.686,7 | 1.356 | 7.176 |
Expenses net of fee waivers | 0.236 | 0.186 | 0.196,7 | 0.166 | 0.186 |
Expenses net of fee waivers and credits | 0.236 | 0.186 | 0.196,7 | 0.166 | 0.186 |
Net investment income2 | 1.63 | 0.91 | 1.46 | 1.44 | 1.55 |
Portfolio turnover (%) | 18 | 64 | 41 | 23 | 23 |
1 Based on the average daily shares outstanding.
2 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.
3 Less than ($0.005) per share.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Less than $500,000.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.48% to 1.35%, 0.91% to 1.11%, 0.91% to 1.17%, 0.99% to 1.17% and 1.02% for the years ended 2-29-12, 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.
7 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Annual report | International Allocation Portfolio | 19 |
Notes to financial statements
Note 1 — Organization
John Hancock International Allocation Portfolio (the Portfolio) is a 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 risks associated with investing in those securities.
20 | International Allocation Portfolio | Annual report |
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. During the year ended February 29, 2012, there were no significant transfers into or out of Level 1, Level 2 or Level 3. As of February 29, 2012, 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. 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. Income and capital gain distributions from underlying funds are recorded on ex-date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
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 may have a lien, security interest or security entitlement in any Portfolio property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of 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 year ended February 29, 2012, the Portfolio had no borrowings under the line of credit.
Expenses. Expenses that are directly attributable to an individual fund are allocated to the Portfolio. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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.
Annual report | International Allocation Portfolio | 21 |
Under the Regulated Investment Company Modernization Act of 2010, the Portfolio is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those 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.
For federal income tax purposes, the Portfolio has a capital loss carryforward of $13,723,865 available to offset future net realized capital gains as of February 29, 2012. The following table details the capital loss carryforward available as of February 29, 2012:
CAPITAL LOSS CARRYFORWARD EXPIRING AT FEBRUARY 28, | NO EXPIRATION DATE | |||
2017 | 2018 | 2019 | SHORT-TERM | LONG-TERM |
$1,965,278 | $6,868,187 | $4,555,665 | — | $334,735 |
Net capital losses of $277,476, that are a result of security transactions occurring after October 31, 2011, are treated as occurring on March 1, 2012, the first day of the Portfolio’s next taxable year.
As of February 29, 2012, 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.
The tax character of distributions for the years ended February 29, 2012 and February 28, 2011 was as follows:
FEBRUARY 29, 2012 | FEBRUARY 28, 2011 | ||||
Ordinary Income | $138,168 | — |
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 class level expenses that may be applied differently to each class. As of February 29, 2012, the components of distributable earnings on a tax basis included $141,969 of undistributed ordinary income.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Portfolio’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to 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 may result in additional disclosure for transfers
22 | International Allocation Portfolio | Annual report |
between levels as well as expanded disclosure for securities categorized as Level 3 under the fair value hierarchy.
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.
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, each an indirectly owned subsidiary of MFC and an affiliate of the Adviser. The Portfolio is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Portfolio. This agreement excludes certain expenses such as taxes, portfolio brokerage commissions, interest expense, litigation and indemnification expenses 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, 2013. 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, respectively.
The Adviser has voluntarily agreed to waive fees and/or reimburse certain other expenses of the Portfolio excluding adviser fees, Rule 12b-1 fees, transfer agent fees, service fees, blue sky fees, printing and postage, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. This voluntary expense reimbursement will continue in effect until terminated at any time by the Adviser on notice to the Portfolio. The fee waivers and/or reimbursements are such that these expenses will not exceed 0.16% of average net assets.
Annual report | International Allocation Portfolio | 23 |
For the year ended February 29, 2012, the expense reductions amounted to the following:
EXPENSE | |||||
CLASS | REDUCTIONS | ||||
Class A | $62,768 | ||||
Class B | 25,829 | ||||
Class C | 40,768 | ||||
Class I | 15,131 | ||||
Total | $144,496 |
The investment management fees, including the impact of the waivers and reimbursements described above, incurred for the year ended February 29, 2012 were equivalent to a net effective rate of 0.00% of the Portfolio’s average daily net assets.
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 to the Portfolio, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended February 29, 2012 amounted to an annual rate of 0.02% of the Portfolio’s average daily net assets.
Distribution and service plans. The Portfolio has a distribution agreement with the Distributor. The Portfolio has adopted distribution and service plans with respect to Class A, Class B, and Class C shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Portfolio. The Portfolio may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Portfolio’s shares.
CLASS | 12b–1 FEES | ||||
Class A | 0.30% | ||||
Class B | 1.00% | ||||
Class C | 1.00% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $13,021 for the year ended February 29, 2012. Of this amount, $2,203 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $10,250 was paid as sales commissions to broker-dealers and $568 was paid as sales commissions to sales personnel of Signator Investors, Inc., 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 year ended February 29, 2012, CDSCs received by the Distributor amounted to $4,807 and $331 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), 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)
24 | International Allocation Portfolio | Annual report |
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 in connection 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 year ended February 29, 2012 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $28,860 | $18,429 | $17,182 | $5,047 |
Class B | 22,467 | 4,334 | 14,851 | 1,389 |
Class C | 56,131 | 10,801 | 13,763 | 3,100 |
Class I | — | 211 | 13,864 | 270 |
Total | $107,458 | $33,775 | $59,660 | $9,806 |
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 years ended February 29, 2012 and February 28, 2011 were as follows:
Year ended 2-29-12 | Year ended 2-28-11 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 210,670 | $1,670,818 | 299,343 | $2,223,804 |
Distributions reinvested | 13,601 | 92,622 | — | — |
Repurchased | (498,441) | (3,784,069) | (429,709) | (3,132,873) |
Net decrease | (274,170) | ($2,020,629) | (130,366) | ($909,069) |
Class B shares | ||||
Sold | 68,532 | $540,059 | 124,785 | $912,788 |
Distributions reinvested | 1,396 | 9,475 | — | — |
Repurchased | (58,582) | (433,759) | (35,612) | (257,341) |
Net increase | 11,346 | $115,775 | 89,173 | $655,447 |
Class C shares | ||||
Sold | 160,969 | $1,211,850 | 185,601 | $1,310,203 |
Distributions reinvested | 3,389 | 23,014 | — | — |
Repurchased | (157,331) | (1,182,384) | (221,117) | (1,580,337) |
Net increase (decrease) | 7,027 | $52,480 | (35,516) | ($270,134) |
Annual report | International Allocation Portfolio | 25 |
Year ended 2-29-12 | Year ended 2-28-11 | |||
Shares | Amount | Shares | Amount | |
Class I shares | ||||
Sold | 21,746 | $166,343 | 12,543 | $92,073 |
Distributions reinvested | 540 | 3,694 | — | — |
Repurchased | (24,949) | (189,933) | (24,742) | (175,803) |
Net decrease | (2,663) | ($19,896) | (12,199) | ($83,730) |
Net decrease | (258,460) | ($1,872,270) | (88,908) | ($607,486) |
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $3,191,850 and $5,084,683, respectively, for the year ended February 29, 2012.
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 year ended February 29, 2012, the Portfolio did not hold 5% or more of any underlying fund’s net assets.
26 | International Allocation Portfolio | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock International Allocation Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock International Allocation Portfolio (the “Portfolio”) at February 29, 2012, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2012 by correspondence with the transfer agent and custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 23, 2012
Annual report | International Allocation Portfolio | 27 |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Portfolio, if any, paid during its taxable year ended February 29, 2012.
With respect to the ordinary dividends paid by the Portfolio for the fiscal year ended February 29, 2012, the Portfolio designates the maximum amount allowable for the corporate dividends-received deduction.
The Portfolio designates the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This amount will be reflected on Form 1099-DIV for the calendar year 2012.
Income derived from foreign sources was $304,006. The Portfolio intends to pass through foreign tax credits of $23,270 for the fiscal year.
Eligible shareholders will be mailed a 2012 Form 1099-DIV in early 2013. This Form will reflect the tax character of all distributions for calendar year 2012.
28 | International Allocation Portfolio | Annual report |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Steven R. Pruchansky, Born: 1944 | 2006 | 48 |
Chairman (since January 2011); Chairman and Chief Executive Officer, Greenscapes of Southwest | ||
Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); | ||
Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real | ||
estate) (since 2000); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty | ||
Trust (until 1994); President, Maxwell Building Corp. (until 1991). | ||
William H. Cunningham, Born: 1944 | 2006 | 48 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 48 |
President, Cambridge College, Cambridge, Massachusetts (since May 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–May 2011); Board of Directors of Eastern Bank | ||
Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); | ||
Board of Directors of American Student Assistance Corp. (1996–2009); Board of Directors of Boston | ||
Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (2007–2011). | ||
Stanley Martin,2 Born: 1947 | 2008 | 48 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore,2 Born: 1939 | 2006 | 48 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). |
Annual report | International Allocation Portfolio | 29 |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Patti McGill Peterson,2 Born: 1943 | 2006 | 48 |
Presidential Advisor for Global Initiatives, American Council on Education (since 2011); Chairperson | ||
of the Board of the Trust (during 2009 and 2010); Principal, PMP Globalinc (consulting) (2007–2011); | ||
Senior Associate, Institute for Higher Education Policy (2007–2011); Executive Director, CIES | ||
(international education agency) (until 2007); Vice President, Institute of International Education (until | ||
2007); Former President Wells College, St. Lawrence University and the Association of Colleges and | ||
Universities of the State of New York. Director of the following: Mutual Fund Directors Forum (since | ||
2011); Niagara Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); | ||
ONBANK (until 1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison | ||
(since 2007); Ford Foundation, International Fellowships Program (until 2007); UNCF, International | ||
Development Partnerships (until 2005); Roth Endowment (since 2002); Council for International | ||
Educational Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 48 |
Member, Audit Committee and Finance Committee of NCH Healthcare Systems, Inc. (since 2011); | ||
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Hugh McHaffie, Born: 1959 | 2010 | 48 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Variable Insurance Trust and John Hancock Funds II (since 2009); Trustee, | ||
John Hancock retail funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, | ||
John Hancock Investment Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior | ||
Vice President, Individual Business Product Management, MetLife, Inc. (1999–2006). | ||
John G. Vrysen, Born: 1955 | 2009 | 48 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock | ||
Funds II and John Hancock Variable Insurance Trust (since 2007); Chief Operating Officer, John Hancock | ||
retail funds (until 2009); Trustee, John Hancock retail funds (since 2009). |
30 | International Allocation Portfolio | Annual report |
Principal officers who are not Trustees | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Keith F. Hartstein, Born: 1956 | 2006 |
President and Chief Executive Officer | |
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | |
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | |
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | |
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | |
Force Marketing Committee (since 2003). | |
Andrew G. Arnott, Born: 1971 | 2009 |
Senior Vice President and Chief Operating Officer | |
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | |
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | |
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | |
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | |
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock | |
Variable Insurance Trust (since 2006); Senior Vice President, Product Management and Development, | |
John Hancock Funds, LLC (until 2009). | |
Thomas M. Kinzler, Born: 1955 | 2006 |
Secretary and Chief Legal Officer | |
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | |
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | |
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | |
Funds II and John Hancock Variable Insurance Trust (since 2006); Vice President and Associate General | |
Counsel, Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal | |
Counsel, MML Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual | |
Select Funds and MassMutual Premier Funds (2004–2006). | |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Variable Insurance Trust, John Hancock Advisers, | |
LLC and John Hancock Investment Management Services, LLC (since 2005); Vice President and Chief | |
Compliance Officer, John Hancock Asset Management a division of Manulife Asset Management (US) | |
LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Variable Insurance Trust | |
(since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, | |
Goldman Sachs (2005–2007). |
Annual report | International Allocation Portfolio | 31 |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock closed-end funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Variable Insurance Trust (since | |
October 2010) and (2007–2009); Assistant Treasurer, John Hancock retail funds (2007–2009); | |
Assistant Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management | |
Research Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
32 | International Allocation Portfolio | Annual report |
More information
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
William H. Cunningham | Services, LLC |
Deborah C. Jackson | |
Stanley Martin* | Subadviser |
Hugh McHaffie† | John Hancock Asset Management a division of |
Dr. John A. Moore,* Vice Chairman^ | Manulife Asset Management (US) LLC |
Patti McGill Peterson* | |
Gregory A. Russo | Principal distributor |
John G. Vrysen† | John Hancock Funds, LLC |
Officers | Custodian |
Keith F. Hartstein | State Street Bank and Trust Company |
President and Chief Executive Officer | |
Transfer agent | |
Andrew G. Arnott | John Hancock Signature Services, Inc. |
Senior Vice President and Chief Operating Officer | |
Legal counsel | |
Thomas M. Kinzler | K&L Gates LLP |
Secretary and Chief Legal Officer | |
Independent registered | |
Francis V. Knox, Jr. | public accounting firm |
Chief Compliance Officer | PricewaterhouseCoopers LLP |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
^Effective 1-1-12 |
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 1-202-551-8090 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 |
Annual report | International Allocation Portfolio | 33 |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/internationalallocax30x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock International Allocation Portfolio. | 3180A 2/12 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/12 |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/globsharehldryldx1x1.jpg)
A look at performance
Total returns for the period ended February 29, 2012
SEC 30-day | SEC 30-day | |||||||||
Average annual total returns (%) | Cumulative total returns (%) | yield (%) | yield (%) | |||||||
with maximum sales charge | with maximum sales charge | subsidized | unsubsidized1 | |||||||
Since | Since | as of | as of | |||||||
1-year | 5-year | 10-year | inception | 1-year | 5-year | 10-year | inception | 2-29-12 | 2-29-12 | |
Class A2 | 0.68 | 1.47 | — | 1.47 | 0.68 | 7.57 | — | 7.57 | 2.72 | 2.32 |
Class B2 | 0.33 | 1.45 | — | 1.45 | 0.33 | 7.47 | — | 7.47 | 2.21 | 1.41 |
Class C2 | 4.22 | 1.82 | — | 1.82 | 4.22 | 9.43 | — | 9.43 | 2.21 | 1.70 |
Class I2,3 | 6.45 | 3.02 | — | 3.02 | 6.45 | 16.02 | — | 16.02 | 3.29 | 2.90 |
Class R63,4 | 6.57 | 2.98 | — | 2.98 | 6.57 | 15.80 | — | 15.80 | 3.26 | –9.77 |
Class NAV 3,5 | 6.53 | — | — | 3.80 | 6.53 | — | — | 15.38 | 3.08 | 3.04 |
Performance figures assume all dividends have been reinvested. 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 NAV and Class R6 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 and Class I shares.
For Class R6 shares the fee waivers and expense limitations are contractual at least until 6-30-13. Had the fee waivers and expense limitations not been in place gross expenses would apply. For Class NAV shares the net expenses equal the gross expenses. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R6 | Class NAV | |
Net (%) | 1.42 | 2.12 | 2.12 | 0.97 | 0.97* | 0.99 |
Gross (%) | 1.56 | 2.88 | 2.38 | 1.12 | 1.07* | 0.99 |
* Expenses have been estimated for the class’s first full year of operations.
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 Global Shareholder Yield Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/globsharehldryldx3x1.jpg)
Without | With maximum | |||
Start date | sales charge | sales charge | Index | |
Class B | 3-1-07 | $10,943 | $10,747 | $9,986 |
Class C6 | 3-1-07 | 10,943 | 10,943 | 9,986 |
Class I 3 | 3-1-07 | 11,602 | 11,602 | 9,986 |
Class R63 | 3-1-07 | 11,580 | 11,580 | 9,986 |
Class NAV 3 | 4-28-08 | 11,538 | 11,538 | 9,516 |
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 prospectuses.
4 Class R6 shares were first offered 9-1-11. The returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class R6 shares.
5 From 4-28-08.
6 No contingent deferred sales charge is applicable.
Annual report | Global Shareholder Yield Fund 7 |
Management’s discussion of
Fund performance
By Epoch Investment Partners, Inc.
Many global equities markets finished the 12 months ended February 29, 2012 little changed, though that belies some sharp volatility during the period. Europe suffered from fiscal crises and Japan endured the tragic tsunami and nuclear disaster. Emerging-market shares lagged as growth slowed, but they rebounded late in the period to finish little changed overall. U.S. equities finished the period as the best performing major market. In that environment, John Hancock Global Shareholder Yield Fund’s Class A shares enjoyed a positive total return of 5.98%, excluding sales charges, and outperformed its benchmark, the MSCI World Index, which declined 1.13%, and the average world stock fund tracked by Morningstar, Inc., which lost 1.88%.
In a period of such solid performance relative to the benchmark, the Fund benefited from stock selection and allocation decisions across a number of sectors. The leading contribution to performance came from the consumer staples sector, due to stock selection and an overweight position in this, the best performing sector in the benchmark. Tobacco-related securities were the key contributors as a result of stakes in Lorillard, Inc., Imperial Tobacco Group PLC, Philip Morris International, Inc. and Reynolds American, Inc. In the financials sector, the Fund benefited from an underweight position in this poorest performing sector in the benchmark index. Stock selection was most effective in the utilities sector. The leading contributor in this space was multi-utility NiSource, Inc. Other notable individual contributors were Canadian telecommunications company BCE, Inc., U.S. pharmaceutical firm Bristol-Myers Squibb Company and U.K.-based printing and publishing firm Pearson PLC. Relative to the benchmark index, the leading detractors were in the information technology sector, where stock choices hurt, as did an underweight position. The key detractor in the space was Taiwanese mobile device maker HTC Corp., which we sold. Stock selection also detracted modestly from performance in the industrials sector, which was home to U.S.-based Pitney Bowes, Inc., a global mail stream technology company, and U.K.-based transportation concern FirstGroup PLC.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
8 Global Shareholder Yield Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on September 1, 2011 with the same investment held until February 29, 2012.
Account value | Ending value | Expenses paid during | |
on 9-1-11 | on 2-29-12 | period ended 2-29-121 | |
Class A | $1,000.00 | $1,067.80 | $7.30 |
Class B | 1,000.00 | 1,065.00 | 10.78 |
Class C | 1,000.00 | 1,065.00 | 10.78 |
Class I | 1,000.00 | 1,071.20 | 4.94 |
Class R6 | 1,000.00 | 1,071.20 | 5.00 |
Class NAV | 1,000.00 | 1,071.50 | 4.89 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 29, 2012, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/globsharehldryldx5x1.jpg)
Annual report | Global Shareholder Yield Fund 9 |
Your expenses
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on September 1, 2011, with the same investment held until February 29, 2012. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
Account value | Ending value | Expenses paid during | |
on 9-1-11 | on 2-29-12 | period ended 2-29-121 | |
Class A | $1,000.00 | $1,017.80 | $7.12 |
Class B | 1,000.00 | 1,014.40 | 10.52 |
Class C | 1,000.00 | 1,014.40 | 10.52 |
Class I | 1,000.00 | 1,020.10 | 4.82 |
Class R6 | 1,000.00 | 1,020.00 | 4.87 |
Class NAV | 1,000.00 | 1,020.10 | 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 1.42%, 2.10%, 2.10%, 0.96%, 0.97% and 0.95% for Class A, Class B, Class C, Class I, Class R6 and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
10 Global Shareholder Yield Fund | Annual report |
Portfolio summary
Top 10 Holdings (16.8% of Net Assets on 2-29-12)1,2 | ||||
Imperial Tobacco Group PLC | 2.0% | Vivendi SA | 1.6% | |
BCE, Inc. | 1.9% | CenturyLink, Inc. | 1.6% | |
Vodafone Group PLC | 1.8% | Anheuser-Busch InBev NV | 1.5% | |
Pearson PLC | 1.8% | Altria Group, Inc. | 1.5% | |
Nestle SA | 1.6% | Daimler AG | 1.5% | |
Sector Composition1,3 | ||||
Consumer Staples | 18.1% | Health Care | 8.0% | |
Telecommunication Services | 15.9% | Financials | 5.9% | |
Utilities | 11.8% | Information Technology | 5.0% | |
Consumer Discretionary | 10.0% | Materials | 3.3% | |
Industrials | 9.6% | Short-Term Investments & Other | 2.9% | |
Energy | 9.5% | |||
Top 10 Countries1,2,3 | ||||
United States | 48.7% | Canada | 3.4% | |
United Kingdom | 17.5% | Belgium | 2.0% | |
France | 7.3% | Netherlands | 1.5% | |
Germany | 5.5% | Taiwan | 1.4% | |
Switzerland | 4.8% | Hong Kong | 1.1% | |
1 As a percentage of net assets on 2-29-12.
2 Cash and cash equivalents not included.
3 International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
Annual report | Global Shareholder Yield Fund 11 |
Fund’s investments
As of 2-29-12
Shares | Value | |
Common Stocks 96.07% | $1,475,774,416 | |
(Cost $1,346,918,155) | ||
Australia 0.51% | 7,840,130 | |
Westpac Banking Corp. | 352,361 | 7,840,130 |
| ||
Belgium 2.05% | 31,445,449 | |
Anheuser-Busch InBev NV | 352,320 | 23,679,643 |
Mobistar SA | 162,288 | 7,765,806 |
| ||
Brazil 0.55% | 8,509,260 | |
CPFL Energia SA | 528,100 | 8,509,260 |
| ||
Canada 3.39% | 52,056,215 | |
BCE, Inc. | 708,600 | 29,032,942 |
Rogers Communications, Inc., Class B | 331,200 | 12,696,363 |
Shaw Communications, Inc., Class B | 503,100 | 10,326,910 |
| ||
France 7.28% | 111,883,247 | |
Air Liquide SA | 60,340 | 7,839,723 |
France Telecom SA | 962,100 | 14,712,210 |
Sanofi | 151,750 | 11,232,275 |
SCOR SE | 504,100 | 13,335,839 |
Total SA | 418,600 | 23,431,335 |
Vinci SA | 328,400 | 17,097,345 |
Vivendi SA | 1,130,100 | 24,234,520 |
| ||
Germany 5.08% | 77,965,154 | |
BASF SE | 265,000 | 23,239,948 |
Bayer AG | 118,050 | 8,722,668 |
Daimler AG | 389,800 | 23,533,838 |
Deutsche Telekom AG | 811,300 | 9,462,936 |
Muenchener Rueckversicherungs AG | 89,300 | 13,005,764 |
| ||
Hong Kong 1.11% | 17,048,016 | |
China Mobile, Ltd., ADR | 321,600 | 17,048,016 |
| ||
Italy 0.94% | 14,425,364 | |
Terna Rete Elettrica Nazionale SpA | 3,832,800 | 14,425,364 |
| ||
Netherlands 1.48% | 22,804,080 | |
Royal Dutch Shell PLC, ADR | 312,000 | 22,804,080 |
| ||
Norway 0.76% | 11,628,085 | |
Orkla ASA | 1,399,900 | 11,628,085 |
12 Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Philippines 0.71% | $10,829,041 | |
Philippine Long Distance Telephone Company, ADR | 164,151 | 10,829,041 |
| ||
Spain 0.56% | 8,624,241 | |
Telefonica SA | 506,000 | 8,624,241 |
| ||
Switzerland 4.77% | 73,251,533 | |
Nestle SA | 403,300 | 24,645,496 |
Novartis AG | 253,500 | 13,817,605 |
Roche Holdings AG | 83,500 | 14,526,542 |
Swisscom AG | 50,900 | 20,261,890 |
| ||
Taiwan 1.39% | 21,399,576 | |
Taiwan Semiconductor Manufacturing Company, Ltd., ADR | 1,473,800 | 21,399,576 |
| ||
United Kingdom 17.51% | 268,963,408 | |
AstraZeneca PLC, ADR | 416,700 | 18,705,663 |
BAE Systems PLC | 3,092,600 | 15,387,660 |
British American Tobacco PLC | 263,100 | 13,297,596 |
Compass Group PLC | 1,065,700 | 10,683,125 |
Diageo PLC, ADR | 174,700 | 16,694,332 |
FirstGroup PLC | 3,415,172 | 15,981,538 |
GlaxoSmithKline PLC | 621,250 | 13,699,964 |
Imperial Tobacco Group PLC | 782,500 | 31,009,260 |
National Grid PLC | 2,249,560 | 22,984,242 |
Pearson PLC | 1,408,500 | 26,845,839 |
Reckitt Benckiser Group PLC | 202,600 | 11,216,396 |
Scottish & Southern Energy PLC | 709,500 | 14,550,279 |
Unilever PLC | 236,200 | 7,624,818 |
United Utilities Group PLC | 1,456,563 | 14,160,564 |
Vodafone Group PLC | 10,213,900 | 27,597,557 |
WM Morrison Supermarket PLC | 1,849,250 | 8,524,575 |
| ||
United States 47.98% | 737,101,617 | |
Abbott Laboratories | 159,400 | 9,023,634 |
Altria Group, Inc. | 784,400 | 23,610,440 |
Arthur J. Gallagher & Company | 467,600 | 15,954,512 |
AT&T, Inc. | 545,400 | 16,683,786 |
Automatic Data Processing, Inc. | 164,200 | 8,919,344 |
Bristol-Myers Squibb Company | 336,000 | 10,809,120 |
CenturyLink, Inc. | 595,300 | 23,960,825 |
CMS Energy Corp. | 521,400 | 11,163,174 |
Coca-Cola Enterprises, Inc. | 290,900 | 8,407,010 |
Comcast Corp., Special Class A | 507,900 | 14,520,861 |
ConocoPhillips | 206,400 | 15,799,920 |
Diamond Offshore Drilling, Inc. | 180,500 | 12,358,835 |
Diebold, Inc. | 261,200 | 10,220,756 |
Duke Energy Corp. | 390,800 | 8,175,536 |
E.I. du Pont de Nemours & Company | 392,700 | 19,968,795 |
Emerson Electric Company | 309,200 | 15,555,852 |
Enterprise Products Partners LP | 244,800 | 12,700,224 |
Exxon Mobil Corp. | 100,800 | 8,719,200 |
See notes to financial statements | Annual report | Global Shareholder Yield Fund 13 |
Shares | Value | |
United States (continued) | ||
Genuine Parts Company | 157,500 | $9,872,100 |
H.J. Heinz Company | 147,900 | 7,795,809 |
Honeywell International, Inc. | 263,100 | 15,672,867 |
Integrys Energy Group, Inc. | 423,450 | 22,032,104 |
Johnson & Johnson | 173,800 | 11,310,904 |
Kimberly-Clark Corp. | 307,200 | 22,388,736 |
Kinder Morgan Energy Partners LP | 203,500 | 18,111,500 |
Lockheed Martin Corp. | 224,700 | 19,865,727 |
Lorillard, Inc. | 168,000 | 22,021,440 |
Markwest Energy Partners LP | 153,600 | 9,186,816 |
Mattel, Inc. | 493,500 | 16,009,140 |
McDonald’s Corp. | 97,000 | 9,630,160 |
Meggitt PLC | 1,749,400 | 10,755,728 |
Merck & Company, Inc. | 290,000 | 11,069,300 |
Microchip Technology, Inc. | 208,300 | 7,513,381 |
Microsoft Corp. | 450,300 | 14,292,522 |
NiSource, Inc. | 314,900 | 7,557,600 |
NYSE Euronext | 404,200 | 12,033,034 |
Oracle Corp. | 488,700 | 14,304,249 |
PepsiCo, Inc. | 107,500 | 6,766,050 |
Philip Morris International, Inc. | 261,200 | 21,815,424 |
Pitney Bowes, Inc. | 613,500 | 11,122,755 |
PPL Corp. | 69,732 | 1,990,849 |
Progress Energy, Inc. | 308,200 | 16,359,256 |
R.R. Donnelley & Sons Company | 932,300 | 12,884,386 |
Regal Entertainment Group | 1,066,700 | 14,741,794 |
Reynolds American, Inc. | 478,600 | 20,067,698 |
SCANA Corp. | 201,600 | 9,072,000 |
Southern Company | 161,300 | 7,127,847 |
Spectra Energy Corp. | 282,300 | 8,858,574 |
TECO Energy, Inc. | 718,200 | 12,891,690 |
The Coca-Cola Company | 119,100 | 8,320,326 |
The Travelers Companies, Inc. | 133,500 | 7,738,995 |
Time Warner, Inc. | 295,700 | 11,002,997 |
Vectren Corp. | 369,700 | 10,802,634 |
Verizon Communications, Inc. | 585,700 | 22,321,027 |
Waste Management, Inc. | 334,100 | 11,686,818 |
Williams Partners LP | 217,900 | 13,555,556 |
Preferred Securities 1.07% | $16,451,019 | |
(Cost $16,021,580) | ||
| ||
Germany 0.40% | 6,180,759 | |
ProSiebenSat.1 Media AG | 238,095 | 6,180,759 |
| ||
United States 0.67% | 10,270,260 | |
MetLife, Inc., Series B, 6.500% | 400,400 | 10,270,260 |
14 Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Shares | Value | |
Short-Term Investments 3.36% | $51,688,876 | |
(Cost $51,688,876) | ||
| ||
Money Market Funds 3.36% | 51,688,876 | |
State Street Institutional Treasury Money Market Fund, 0.000% (Y) | 51,688,876 | 51,688,876 |
Total investments (Cost $1,414,628,611)† 100.50% | $1,543,914,311 | |
Other assets and liabilities, net (0.50%) | ($7,756,252) | |
Total net assets 100.00% | $1,536,158,059 | |
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
(Y) The rate shown is the annualized seven-day yield as of 2-29-12.
† At 2-29-12, the aggregate cost of investment securities for federal income tax purposes was $1,416,909,148. Net unrealized appreciation aggregated $127,005,163, of which $143,694,275 related to appreciated investment securities and $16,689,112 related to depreciated investment securities.
The Fund had the following sector composition as a percentage of total net assets on 2-29-12:
Consumer Staples | 18.1% | ||
Telecommunication Services | 15.9% | ||
Utilities | 11.8% | ||
Consumer Discretionary | 10.0% | ||
Industrials | 9.6% | ||
Energy | 9.5% | ||
Health Care | 8.0% | ||
Financials | 5.9% | ||
Information Technology | 5.0% | ||
Materials | 3.3% | ||
Short-Term Investments & Other | 2.9% |
See notes to financial statements | Annual report | Global Shareholder Yield Fund 15 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 2-29-12
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 $1,414,628,611) | $1,543,914,311 |
Foreign currency, at value (Cost $177,786) | 179,046 |
Receivable for fund shares sold | 4,543,442 |
Dividends and interest receivable | 5,879,754 |
Receivable due from adviser | 28,155 |
Other receivables and prepaid expenses | 156,288 |
Total assets | 1,554,700,996 |
Liabilities | |
Payable for investments purchased | 17,001,976 |
Payable for fund shares repurchased | 912,002 |
Payable to affiliates | |
Accounting and legal services fees | 50,954 |
Transfer agent fees | 62,241 |
Trustees’ fees | 4,458 |
Other liabilities and accrued expenses | 511,306 |
Total liabilities | 18,542,937 |
Net assets | |
Paid-in capital | $1,427,319,927 |
Undistributed net investment income | 5,269,247 |
Accumulated net realized loss on investments and foreign | |
currency transactions | (25,711,114) |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 129,279,999 |
Net assets | $1,536,158,059 |
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 ($215,264,558 ÷ 21,935,781 shares) | $9.81 |
Class B ($8,199,633 ÷ 835,824 shares)1 | $9.81 |
Class C ($44,707,871 ÷ 4,556,942 shares)1 | $9.81 |
Class I ($248,877,006 ÷ 25,289,565 shares) | $9.84 |
Class R6 ($105,894 ÷ 10,764 shares) | $9.84 |
Class NAV ($1,019,003,097 ÷ 103,585,879 shares) | $9.84 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $10.33 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
16 Global Shareholder Yield Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-29-12
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 | $33,883,447 |
Interest | 974 |
Less foreign taxes withheld | (1,501,740) |
Total investment income | 32,382,681 |
Expenses | |
Investment management fees | 6,667,207 |
Distribution and service fees | 644,217 |
Accounting and legal services fees | 125,867 |
Transfer agent fees | 463,737 |
Trustees’ fees | 39,976 |
State registration fees | 99,016 |
Printing and postage | 73,409 |
Professional fees | 81,865 |
Custodian fees | 602,486 |
Registration and filing fees | 150,199 |
Other | 20,350 |
Total expenses | 8,968,329 |
Less expense reductions | (693,805) |
Net expenses | 8,274,524 |
Net investment income | 24,108,157 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments | 8,957,516 |
Foreign currency transactions | (608,786) |
8,348,730 | |
Change in net unrealized appreciation (depreciation) of | |
Investments | 72,935,652 |
Translation of assets and liabilities in foreign currencies | (25,726) |
72,909,926 | |
Net realized and unrealized gain | 81,258,656 |
Increase in net assets from operations | $105,366,813 |
See notes to financial statements | Annual report | Global Shareholder Yield Fund 17 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
Year | Year | |
ended | ended | |
2-29-12 | 2-28-11 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $24,108,157 | $9,385,567 |
Net realized gain | 8,348,730 | 7,157,973 |
Change in net unrealized appreciation (depreciation) | 72,909,926 | 38,332,146 |
Increase in net assets resulting from operations | 105,366,813 | 54,875,686 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (2,555,172) | (723,542) |
Class B | (74,651) | (28,890) |
Class C | (348,064) | (90,915) |
Class I | (4,826,128) | (3,013,058) |
Class R6 | (1,084) | — |
Class NAV | (10,611,958) | (4,805,780) |
Total distributions | (18,417,057) | (8,662,185) |
From Fund share transactions | 1,095,081,829 | 65,670,818 |
Total increase | 1,182,031,585 | 111,884,319 |
Net assets | ||
Beginning of year | 354,126,474 | 242,242,155 |
End of year | $1,536,158,059 | $354,126,474 |
Undistributed net investment income | $5,269,247 | $1,147,879 |
18 Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 |
Per share operating performance | |||||
Net asset value, beginning of period | $9.50 | $8.10 | $6.10 | $9.52 | $10.00 |
Net investment income2 | 0.26 | 0.24 | 0.25 | 0.36 | 0.35 |
Net realized and unrealized gain (loss) on investments | 0.29 | 1.40 | 1.99 | (3.57) | (0.51) |
Total from investment operations | 0.55 | 1.64 | 2.24 | (3.21) | (0.16) |
Less distributions | |||||
From net investment income | (0.24) | (0.24) | (0.24) | (0.21) | (0.29) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.24) | (0.24) | (0.24) | (0.21) | (0.32) |
Net asset value, end of period | $9.81 | $9.50 | $8.10 | $6.10 | $9.52 |
Total return (%)3,4 | 5.98 | 20.64 | 37.19 | (34.21) | (1.84) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $215 | $56 | $22 | $11 | $27 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.53 | 1.55 | 1.665 | 1.72 | 1.79 |
Expenses net of fee waivers | 1.42 | 1.55 | 1.565 | 1.56 | 1.45 |
Expenses net of fee waivers and credits | 1.42 | 1.55 | 1.555 | 1.55 | 1.45 |
Net investment income | 2.78 | 2.80 | 3.34 | 4.28 | 3.31 |
Portfolio turnover (%) | 19 | 39 | 53 | 54 | 24 |
1 The inception date for Class A shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
See notes to financial statements | Annual report | Global Shareholder Yield Fund 19 |
CLASS B SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 |
Per share operating performance | |||||
Net asset value, beginning of period | $9.49 | $8.10 | $6.09 | $9.51 | $10.00 |
Net investment income2 | 0.20 | 0.19 | 0.20 | 0.29 | 0.22 |
Net realized and unrealized gain (loss) on investments | 0.29 | 1.38 | 2.00 | (3.56) | (0.45) |
Total from investment operations | 0.49 | 1.57 | 2.20 | (3.27) | (0.23) |
Less distributions | |||||
From net investment income | (0.17) | (0.18) | (0.19) | (0.15) | (0.23) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.17) | (0.18) | (0.19) | (0.15) | (0.26) |
Net asset value, end of period | $9.81 | $9.49 | $8.10 | $6.09 | $9.51 |
Total return (%)3,4 | 5.33 | 19.65 | 36.49 | (34.72) | (2.54) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $8 | $2 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.54 | 2.91 | 3.545 | 3.94 | 3.89 |
Expenses net of fee waivers | 2.11 | 2.25 | 2.295 | 2.43 | 2.23 |
Expenses net of fee waivers and credits | 2.11 | 2.25 | 2.255 | 2.25 | 2.23 |
Net investment income | 2.17 | 2.18 | 2.68 | 3.50 | 2.11 |
Portfolio turnover (%) | 19 | 39 | 53 | 54 | 24 |
1 The inception date for Class B shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
CLASS C SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 |
Per share operating performance | |||||
Net asset value, beginning of period | $9.50 | $8.10 | $6.10 | $9.51 | $10.00 |
Net investment income2 | 0.20 | 0.18 | 0.20 | 0.29 | 0.22 |
Net realized and unrealized gain (loss) on investments | 0.28 | 1.40 | 1.99 | (3.55) | (0.45) |
Total from investment operations | 0.48 | 1.58 | 2.19 | (3.26) | (0.23) |
Less distributions | |||||
From net investment income | (0.17) | (0.18) | (0.19) | (0.15) | (0.23) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.17) | (0.18) | (0.19) | (0.15) | (0.26) |
Net asset value, end of period | $9.81 | $9.50 | $8.10 | $6.10 | $9.51 |
Total return (%)3,4 | 5.22 | 19.78 | 36.27 | (34.62) | (2.54) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $45 | $11 | $4 | $3 | $5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.29 | 2.39 | 2.635 | 2.72 | 3.00 |
Expenses net of fee waivers | 2.11 | 2.25 | 2.275 | 2.28 | 2.23 |
Expenses net of fee waivers and credits | 2.11 | 2.25 | 2.255 | 2.25 | 2.22 |
Net investment income | 2.13 | 2.10 | 2.66 | 3.50 | 2.08 |
Portfolio turnover (%) | 19 | 39 | 53 | 54 | 24 |
1 The inception date for Class C shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the periods shown.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
20 Global Shareholder Yield Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-09 | 2-29-081 |
Per share operating performance | |||||
Net asset value, beginning of period | $9.53 | $8.13 | $6.11 | $9.53 | $10.00 |
Net investment income2 | 0.32 | 0.29 | 0.30 | 0.29 | 0.33 |
Net realized and unrealized gain (loss) on investments | 0.27 | 1.38 | 2.00 | (3.46) | (0.44) |
Total from investment operations | 0.59 | 1.67 | 2.30 | (3.17) | (0.11) |
Less distributions | |||||
From net investment income | (0.28) | (0.27) | (0.28) | (0.25) | (0.33) |
From net realized gain | — | — | — | — | (0.03) |
Total distributions | (0.28) | (0.27) | (0.28) | (0.25) | (0.36) |
Net asset value, end of period | $9.84 | $9.53 | $8.13 | $6.11 | $9.53 |
Total return (%)3 | 6.45 | 21.09 | 38.08 | (33.87) | (1.43) |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $249 | $123 | $86 | $57 | $3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.12 | 1.09 | 1.194 | 1.21 | 2.16 |
Expenses net of fee waivers | 0.97 | 1.08 | 1.084 | 1.10 | 1.09 |
Expenses net of fee waivers and credits | 0.97 | 1.08 | 1.084 | 1.10 | 1.09 |
Net investment income | 3.43 | 3.40 | 3.96 | 3.78 | 3.14 |
Portfolio turnover (%) | 19 | 39 | 53 | 54 | 24 |
1 The inception date for Class I shares is 3-1-07.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS R6 SHARES Period ended | 2-29-121 | ||||
Per share operating performance | |||||
Net asset value, beginning of period | $9.29 | ||||
Net investment income2 | 0.13 | ||||
Net realized and unrealized gain on investments | 0.52 | ||||
Total from investment operations | 0.65 | ||||
Less distributions | |||||
From net investment income | (0.10) | ||||
Total distributions | (0.10) | ||||
Net asset value, end of period | $9.84 | ||||
Total return (%)3 | 7.124 | ||||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | ||||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 15.936 | ||||
Expenses net of fee waivers | 0.976 | ||||
Expenses net of fee waivers and credits | 0.976 | ||||
Net investment income | 2.826 | ||||
Portfolio turnover (%) | 197 | ||||
1 Period from 9-1-11 (inception date) to 2-29-12.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover rate is shown for the period from 3-1-11 to 2-29-12.
See notes to financial statements | Annual report | Global Shareholder Yield Fund 21 |
CLASS NAV SHARES Period ended | 2-29-12 | 2-28-11 | 2-28-10 | 2-28-091 | |
Per share operating performance | |||||
Net asset value, beginning of period | $9.53 | $8.13 | $6.11 | $9.71 | |
Net investment income2 | 0.29 | 0.30 | 0.29 | 0.29 | |
Net realized and unrealized gain (loss) on investments | 0.31 | 1.38 | 2.01 | (3.67) | |
Total from investment operations | 0.60 | 1.68 | 2.30 | (3.38) | |
Less distributions | |||||
From net investment income | (0.29) | (0.28) | (0.28) | (0.22) | |
Total distributions | (0.29) | (0.28) | (0.28) | (0.22) | |
Net asset value, end of period | $9.84 | $9.53 | $8.13 | $6.11 | |
Total return (%)3 | 6.53 | 21.19 | 38.16 | (35.32)4 | |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1,019 | $162 | $129 | $67 | |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.99 | 0.99 | 1.055 | 1.096 | |
Expenses net of fee waivers | 0.94 | 0.99 | 1.005 | 1.056 | |
Expenses net of fee waivers and credits | 0.94 | 0.99 | 1.005 | 1.056 | |
Net investment income | 3.11 | 3.49 | 3.84 | 4.276 | |
Portfolio turnover (%) | 19 | 39 | 53 | 54 | |
1 The inception date for Class NAV shares is 4-28-08.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the periods shown.
4 Not annualized.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
6 Annualized.
22 Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Notes to financial statements
Note 1 — Organization
John Hancock Global Shareholder Yield Fund (the Fund) is a 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 R6 shares are available only to certain retirement plans, institutions and other 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. Certain Class I shares may be exchanged for Class R6 shares within one year after the commencement of operations of Class R6 shares.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes 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 risks associated with investing in those securities.
Annual report | Global Shareholder Yield Fund 23 |
The following is a summary of the values by input classification of the Fund’s investments as of February 29, 2012, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-29-12 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $7,840,130 | — | $7,840,130 | — |
Belgium | 31,445,449 | — | 31,445,449 | — |
Brazil | 8,509,260 | $8,509,260 | — | — |
Canada | 52,056,215 | 52,056,215 | — | — |
France | 111,883,247 | — | 111,883,247 | — |
Germany | 77,965,154 | — | 77,965,154 | — |
Hong Kong | 17,048,016 | 17,048,016 | — | — |
Italy | 14,425,364 | — | 14,425,364 | — |
Netherlands | 22,804,080 | 22,804,080 | — | — |
Norway | 11,628,085 | — | 11,628,085 | — |
Philippines | 10,829,041 | 10,829,041 | — | — |
Spain | 8,624,241 | — | 8,624,241 | — |
Switzerland | 73,251,533 | — | 73,251,533 | — |
Taiwan | 21,399,576 | 21,399,576 | — | — |
United Kingdom | 268,963,408 | 35,399,995 | 233,563,413 | — |
United States | 737,101,617 | 726,345,889 | 10,755,728 | — |
Preferred Securities | ||||
Germany | 6,180,759 | — | 6,180,759 | — |
United States | 10,270,260 | 10,270,260 | — | — |
Short-Term Investments | 51,688,876 | 51,688,876 | — | — |
Total Investments in | ||||
Securities | $1,543,914,311 | $956,351,208 | $587,563,103 | — |
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. During the year ended February 29, 2012, there were no significant transfers into or out of Level 1, Level 2 or Level 3.
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.
24 Global Shareholder Yield Fund | Annual report |
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. 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 taxes are provided for based on the Fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Foreign 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 the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. Funds investing in a single country or in a limited geographic region tend to be riskier than funds that invest more broadly. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs) and accounting standards. Foreign investments are also subject to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
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 may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, 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 year ended February 29, 2012, the Fund had no borrowings under the line of credit.
Expenses. Expenses that are directly attributable to an individual fund are allocated to the Fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state
Annual report | Global Shareholder Yield Fund 25 |
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.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those 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.
For federal income tax purposes, the Fund has a capital loss carryforward of $16,355,664 available to offset future net realized capital gains as of February 29, 2012. Net capital losses of $7,074,914 that are the result of security transactions occurring after October 31, 2011 are treated as occurring on March 1, 2012, the first day of the Fund’s next taxable year. The loss carryforward expires as follows: February 28, 2018.
As of February 29, 2012, 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. The tax character of distributions for the years ended February 29, 2012 and February 28, 2011 was as follows:
FEBRUARY 29, 2012 | FEBRUARY 28, 2011 | |
Ordinary Income | $18,417,057 | $8,662,185 |
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of February 29, 2012, the components of distributable earnings on a tax basis included $5,261,427 of undistributed ordinary income.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to wash sale loss deferrals and partnerships.
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 may result in additional disclosure for transfers between levels as well as expanded disclosure for securities categorized as Level 3 under the fair value hierarchy.
26 Global Shareholder Yield Fund | Annual report |
Note 3 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Trust. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Trust. The Adviser and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management 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 Investments 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 Fund’s average daily net assets until June 30, 2013.
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, portfolio brokerage commissions, interest expense, litigation and indemnification expenses and 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 1.42%, 2.12%, 2.12%, 0.97% and 0.97% for Class A, Class B, Class C, Class I and Class R6 shares, respectively. For Class A, Class B, Class C and Class R6 shares, this expense limitation shall remain in effect until June 30, 2013 and thereafter until terminated by the Adviser. For Class I shares, this expense limitation shall remain in effect until June 30, 2012, at which time it will increase to 1.06% until June 30, 2013 and thereafter until terminated by the Adviser. Prior to April 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 $133,068, $20,064, $41,276, $254,606, $237,406 and $7,385 for Class A, Class B, Class C, Class I, Class NAV and Class R6 shares, respectively, for the year ended February 29, 2012.
The investment management fees, including the impact of the waivers and reimbursements described above, incurred for the year ended February 29, 2012 were equivalent to the net annual effective rate of 0.77% of the Fund’s average daily net assets.
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 to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended February 29, 2012 amounted to an annual rate of 0.02% of the Fund’s average daily net assets.
Annual report | Global Shareholder Yield Fund 27 |
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A, Class B and Class C shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the Fund’s shares.
CLASS | 12b–1 FEE | |||
Class A | 0.30% | |||
Class B | 1.00% | |||
Class C | 1.00% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $612,834 for the year ended February 29, 2012. Of this amount, $101,165 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $502,746 was paid as sales commissions to broker-dealers and $8,923 was paid as sales commissions to sales personnel of Signator Investors, Inc., 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 year ended February 29, 2012, CDSCs received by the Distributor amounted to $15,669 and $10,253 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), 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 in connection 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 year ended February 29, 2012 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $360,437 | $247,057 | $24,417 | $18,318 |
Class B | 47,108 | 9,493 | 15,923 | 747 |
Class C | 236,672 | 47,820 | 19,471 | 3,794 |
Class I | — | 159,349 | 31,856 | 50,535 |
Class R6 | — | 18 | 7,349 | 15 |
Total | $644,217 | $463,737 | $99,016 | $73,409 |
28 Global Shareholder Yield Fund | Annual report |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of assets and liabilities.
Note 5 — Fund share transactions
Transactions in Fund shares for the years ended February 29, 2012 and February 28, 2011 were as follows:
Year ended 2-29-12 | Year ended 2-28-11 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 23,923,894 | $222,879,898 | 4,386,382 | $39,308,009 |
Distributions reinvested | 264,170 | 2,420,399 | 74,691 | 629,739 |
Repurchased | (8,136,254) | (76,349,490) | (1,275,643) | (11,028,313) |
Net increase | 16,051,810 | $148,950,807 | 3,185,430 | $28,909,435 |
Class B shares | ||||
Sold | 707,569 | $6,681,380 | 109,440 | $973,264 |
Distributions reinvested | 4,514 | 41,724 | 3,088 | 25,713 |
Repurchased | (96,598) | (901,603) | (44,582) | (387,162) |
Net increase | 615,485 | $5,821,501 | 67,946 | $611,815 |
Class C shares | ||||
Sold | 3,815,363 | $35,728,262 | 756,536 | $6,843,306 |
Distributions reinvested | 30,880 | 284,377 | 7,194 | 60,372 |
Repurchased | (398,328) | (3,718,939) | (165,715) | (1,417,482) |
Net increase | 3,447,915 | $32,293,700 | 598,015 | $5,486,196 |
Class I shares | ||||
Sold | 19,098,047 | $180,093,293 | 9,776,895 | $84,148,820 |
Distributions reinvested | 468,780 | 4,324,243 | 342,757 | 2,878,289 |
Repurchased | (7,200,716) | (67,155,686) | (7,811,522) | (65,298,399) |
Net increase | 12,366,111 | $117,261,850 | 2,308,130 | $21,728,710 |
Class R6 shares1 | ||||
Sold | 10,764 | $100,000 | — | — |
Net increase | 10,764 | $100,000 | — | — |
Class NAV shares | ||||
Sold | 86,174,622 | $787,875,241 | 1,838,986 | $14,832,210 |
Distributions reinvested | 1,163,218 | 10,611,958 | 571,534 | 4,805,780 |
Repurchased | (808,409) | (7,833,228) | (1,198,975) | (10,703,328) |
Net increase | 86,529,431 | $790,653,971 | 1,211,545 | $8,934,662 |
Net increase | 119,021,516 | $1,095,081,829 | 7,371,066 | $65,670,818 |
1 Period from 9-1-11 (inception date) to 2-29-12.
Affiliates of the Fund owned 100% of shares of beneficial interest of Class R6 and Class NAV on February 29, 2012.
Annual report | Global Shareholder Yield Fund 29 |
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $1,214,957,777 and $145,602,046, respectively, for the year ended February 29, 2012.
30 Global Shareholder Yield Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock Global Shareholder Yield Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock Global Shareholder Yield Fund (the “Fund”) at February 29, 2012, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2012 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 23, 2012
Annual report | Global Shareholder Yield Fund 31 |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended February 29, 2012.
The Fund designates the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This amount will be reflected on Form 1099-DIV for the calendar year 2012.
The Fund designates the maximum amount allowable for the corporate dividends received deduction for the fiscal year ended February 29, 2012.
Shareholders will be mailed a 2012 Form 1099-DIV in January 2013. This will reflect the total of all distributions that are taxable for calendar year 2012.
32 Global Shareholder Yield Fund | Annual report |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Steven R. Pruchansky, Born: 1944 | 2006 | 48 |
Chairman (since January 2011); Chairman and Chief Executive Officer, Greenscapes of Southwest | ||
Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); | ||
Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real | ||
estate) (since 2000); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty | ||
Trust (until 1994); President, Maxwell Building Corp. (until 1991). | ||
William H. Cunningham, Born: 1944 | 2006 | 48 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director of the following: LIN Television | ||
(since 2009); Lincoln National Corporation (insurance) (Chairman since 2009 and Director since 2006); | ||
Resolute Energy Corporation (since 2009); Nanomedical Systems, Inc. (biotechnology company) | ||
(Chairman since 2008); Yorktown Technologies, LP (tropical fish) (Chairman since 2007); Greater Austin | ||
Crime Commission (since 2001); Southwest Airlines (since 2000); former Director of the following: | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); Hicks Acquisition Company I, Inc. (until | ||
2007); Jefferson-Pilot Corporation (diversified life insurance company) (until 2006); and former Advisory | ||
Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 48 |
President, Cambridge College, Cambridge, Massachusetts (since May 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–May 2011); Board of Directors of Eastern Bank | ||
Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); | ||
Board of Directors of American Student Assistance Corp. (1996–2009); Board of Directors of Boston | ||
Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits | ||
company) (2007–2011). | ||
Stanley Martin,2 Born: 1947 | 2008 | 48 |
Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004–2006); | ||
Executive Vice President/Consultant, HSBC Bank USA (2000–2003); Chief Financial Officer/Executive | ||
Vice President, Republic New York Corporation & Republic National Bank of New York (1998–2000); | ||
Partner, KPMG LLP (1971–1998). | ||
Dr. John A. Moore,2 Born: 1939 | 2006 | 48 |
President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) | ||
(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former | ||
Assistant Administrator & Deputy Administrator, Environmental Protection Agency; Principal, | ||
Hollyhouse (consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit | ||
research) (until 2007). |
Annual report | Global Shareholder Yield Fund 33 |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Patti McGill Peterson,2 Born: 1943 | 2006 | 48 |
Presidential Advisor for Global Initiatives, American Council on Education (since 2011); Chairperson | ||
of the Board of the Trust (during 2009 and 2010); Principal, PMP Globalinc (consulting) (2007–2011); | ||
Senior Associate, Institute for Higher Education Policy (2007–2011); Executive Director, CIES | ||
(international education agency) (until 2007); Vice President, Institute of International Education (until | ||
2007); Former President Wells College, St. Lawrence University and the Association of Colleges and | ||
Universities of the State of New York. Director of the following: Mutual Fund Directors Forum (since | ||
2011); Niagara Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); | ||
ONBANK (until 1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison | ||
(since 2007); Ford Foundation, International Fellowships Program (until 2007); UNCF, International | ||
Development Partnerships (until 2005); Roth Endowment (since 2002); Council for International | ||
Educational Exchange (since 2003). | ||
Gregory A. Russo, Born: 1949 | 2008 | 48 |
Member, Audit Committee and Finance Committee of NCH Healthcare Systems, Inc. (since 2011); | ||
Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial | ||
Markets, KPMG (1998–2002). | ||
Non-Independent Trustees3 | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Hugh McHaffie, Born: 1959 | 2010 | 48 |
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
President of John Hancock Variable Insurance Trust and John Hancock Funds II (since 2009); Trustee, | ||
John Hancock retail funds (since 2010); Chairman and Director, John Hancock Advisers, LLC, | ||
John Hancock Investment Management Services, LLC and John Hancock Funds, LLC (since 2010); Senior | ||
Vice President, Individual Business Product Management, MetLife, Inc. (1999–2006). | ||
John G. Vrysen, Born: 1955 | 2009 | 48 |
Senior Vice President, John Hancock Financial Services (since 2006); Director, Executive Vice President | ||
and Chief Operating Officer, John Hancock Advisers, LLC, John Hancock Investment Management | ||
Services, LLC and John Hancock Funds, LLC (since 2005); Chief Operating Officer, John Hancock | ||
Funds II and John Hancock Variable Insurance Trust (since 2007); Chief Operating Officer, John Hancock | ||
retail funds (until 2009); Trustee, John Hancock retail funds (since 2009). |
34 Global Shareholder Yield Fund | Annual report |
Principal officers who are not Trustees | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Keith F. Hartstein, Born: 1956 | 2006 |
President and Chief Executive Officer | |
Senior Vice President, John Hancock Financial Services (since 2004); Director, President and Chief | |
Executive Officer, John Hancock Advisers, LLC and John Hancock Funds, LLC (since 2005); Director, | |
John Hancock Asset Management a division of Manulife Asset Management (US) LLC (since 2005); | |
Director, John Hancock Investment Management Services, LLC (since 2006); President and Chief | |
Executive Officer, John Hancock retail funds (since 2005); Member, Investment Company Institute Sales | |
Force Marketing Committee (since 2003). | |
Andrew G. Arnott, Born: 1971 | 2009 |
Senior Vice President and Chief Operating Officer | |
Senior Vice President, John Hancock Financial Services (since 2009); Executive Vice President, | |
John Hancock Advisers, LLC (since 2005); Executive Vice President, John Hancock Investment | |
Management Services, LLC (since 2006); Executive Vice President, John Hancock Funds, LLC (since | |
2004); Chief Operating Officer, John Hancock retail funds (since 2009); Senior Vice President, | |
John Hancock retail funds (since 2010); Vice President, John Hancock Funds II and John Hancock | |
Variable Insurance Trust (since 2006); Senior Vice President, Product Management and Development, | |
John Hancock Funds, LLC (until 2009). | |
Thomas M. Kinzler, Born: 1955 | 2006 |
Secretary and Chief Legal Officer | |
Vice President, John Hancock Financial Services (since 2006); Secretary and Chief Legal Counsel, | |
John Hancock Advisers, LLC, John Hancock Investment Management Services, LLC and John Hancock | |
Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds, John Hancock | |
Funds II and John Hancock Variable Insurance Trust (since 2006); Vice President and Associate General | |
Counsel, Massachusetts Mutual Life Insurance Company (1999–2006); Secretary and Chief Legal | |
Counsel, MML Series Investment Fund (2000–2006); Secretary and Chief Legal Counsel, MassMutual | |
Select Funds and MassMutual Premier Funds (2004–2006). | |
Francis V. Knox, Jr., Born: 1947 | 2006 |
Chief Compliance Officer | |
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock | |
retail funds, John Hancock Funds II, John Hancock Variable Insurance Trust, John Hancock Advisers, | |
LLC and John Hancock Investment Management Services, LLC (since 2005); Vice President and Chief | |
Compliance Officer, John Hancock Asset Management a division of Manulife Asset Management (US) | |
LLC (2005–2008). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds, John Hancock Funds II and John Hancock Variable Insurance Trust | |
(since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (2005–2007); Vice President, | |
Goldman Sachs (2005–2007). |
Annual report | Global Shareholder Yield Fund 35 |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds (since 2010); Treasurer, John Hancock closed-end funds (since 2009); | |
Assistant Treasurer, John Hancock Funds II and John Hancock Variable Insurance Trust (since | |
October 2010) and (2007–2009); Assistant Treasurer, John Hancock retail funds (2007–2009); | |
Assistant Treasurer, Fidelity Group of Funds (2005–2007); Vice President, Fidelity Management | |
Research Company (2005–2007). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation or removal.
2 Member of Audit Committee.
3 Because Messrs. McHaffie and Vrysen are senior executives or directors with the Adviser and/or its affiliates, each of them is considered an “interested person,” as defined in the Investment Company Act of 1940, of the Fund.
36 Global Shareholder Yield Fund | Annual report |
More information
Trustees | Investment adviser |
Steven R. Pruchansky, Chairman | John Hancock Investment Management |
William H. Cunningham | Services, LLC |
Deborah C. Jackson | |
Stanley Martin* | Subadviser |
Hugh McHaffie† | Epoch Investment Partners, Inc. |
Dr. John A. Moore,* Vice Chairman^ | |
Patti McGill Peterson* | Principal distributor |
Gregory A. Russo | John Hancock Funds, LLC |
John G. Vrysen† | |
Custodian | |
Officers | State Street Bank and Trust Company |
Keith F. Hartstein | |
President and Chief Executive Officer | Transfer agent |
John Hancock Signature Services, Inc. | |
Andrew G. Arnott | |
Senior Vice President and Chief Operating Officer | Legal counsel |
K&L Gates LLP | |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | Independent registered |
public accounting firm | |
Francis V. Knox, Jr. | PricewaterhouseCoopers LLP |
Chief Compliance Officer | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
^Effective 1-1-12 |
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 1-202-551-8090 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 |
Annual report | Global Shareholder Yield Fund 37 |
![](https://capedge.com/proxy/N-CSR/0000928816-12-000757/globsharehldryldx34x1.jpg)
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of the shareholders of John Hancock Global Shareholder Yield Fund. | 3200A 2/12 |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 4/12 |
ITEM 2. CODE OF ETHICS.
As of the end of the year, February 29, 2012, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Senior Financial Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Stanley Martin is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant, for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to $127,599 for the fiscal year ended February 29, 2012 (broken out as follows: John Hancock Global Shareholder Yield Fund - $27,376, John Hancock International Growth Fund - $35,808, John Hancock International Core Fund - $38,958 and John Hancock International Allocation Fund - $25,457) and $202,369 for the fiscal year ended February 28, 2011 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $25,833, John Hancock Global Shareholder Yield Fund - $25,833, John Hancock Growth Opportunities Fund - $28,680, John Hancock International Growth Fund - $33,065, John Hancock U.S. Core Fund - $28,088, John Hancock International Core Fund - $36,863 and John Hancock International Allocation Fund - $24,007). John Hancock Classic Value Mega Cap Fund liquidated prior to February 29, 2012. John Hancock Growth Opportunities Fund and John Hancock U.S. Core Fund both merged away prior to February 29, 2012. These fees were billed to the registrant and were approved by the registrant’s audit committee.
(b) Audit-Related Services
Audit-related fees amounted to $14,783 for the fiscal year ended February 29, 2012 (broken out as follows: John Hancock Global Shareholder Yield Fund - $2,238, John Hancock International Growth Fund - $2,238, John Hancock International Core Fund - $2,238 and John Hancock International Allocation Fund - $8,069) and $7,982 for the fiscal year ended February 28, 2011 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $347, John Hancock Global Shareholder Yield Fund - $347, John Hancock Growth Opportunities Fund - $347, John Hancock International Growth Fund - $347, John Hancock U.S. Core Fund - $347, John Hancock International Core Fund - $347 and John Hancock International Allocation Fund - $5,900) billed to the registrant or to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant ("control affiliates"). The nature of the services provided was security counts and affiliated service provider internal controls review.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to $14,460 for the fiscal year ended February 29, 2012 (broken out as follows: John Hancock Global Shareholder Yield Fund - $3,072, John Hancock International Growth Fund - $3,900, John Hancock International Core Fund - $4,786 and John Hancock International Allocation Portfolio - $2,702) and $23,223 for the fiscal year ended February 28, 2011 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $2,926, John Hancock Global Shareholder Yield Fund - $2,926, John Hancock Growth Opportunities - $3,598, John Hancock International Growth Fund - $3,715, John Hancock
U.S. Core Fund - $2,926, John Hancock International Core Fund - $4,558 and John Hancock International Allocation Portfolio - $2,574). The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
(d) All Other Fees
Other fees amounted to $4,733 for the fiscal year ended February 29, 2012 (broken out as follows: John Hancock Global Shareholder Yield Fund - $1,461, John Hancock International Growth Fund - $1,461, John Hancock International Core Fund - $1,461 and John Hancock International Allocation Portfolio - $350) and $133 for the fiscal year ended February 28, 2011 (broken out as follows: John Hancock Classic Value Mega Cap Fund - $19, John Hancock Global Shareholder Yield Fund - $19, John Hancock Growth Opportunities - $19, John Hancock International Growth Fund - $19, John Hancock U.S. Core Fund - $19, John Hancock International Core Fund - $19 and John Hancock International Allocation Portfolio - $19) billed to the registrant or to the control affiliates.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust’s Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the “Auditor”) relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust’s Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per year/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per year/per fund are subject to specific pre-approval by the Audit Committee.
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees, Tax Fees and All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f) According to the registrant’s principal accountant for the fiscal year ended February 29, 2012, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and rendered to the registrant's control affiliates were $2,673,534 for the fiscal year ended February 29, 2012 and $2,028,605 for the fiscal year ended February 28, 2011.
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:
Stanley Martin - Chairman
Dr. John A. Moore
Patti McGill Peterson
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
(c)(2) Contact person at the registrant.
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Funds III
By: /s/ Keith F. Hartstein
------------------------------
Keith F. Hartstein
President and
Chief Executive Officer
Date: April 23, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Keith F. Hartstein
-------------------------------
Keith F. Hartstein
President and
Chief Executive Officer
Date: April 23, 2012
By: /s/ Charles A. Rizzo
--------------------------------
Charles A. Rizzo
Chief Financial Officer
Date: April 23, 2012