UNITED STATES | |
SECURITIES AND EXCHANGE COMMISSION | |
Washington, D.C. 20549 | |
FORM N-CSR | |
CERTIFIED SHAREHOLDER REPORT OF REGISTERED | |
MANAGEMENT INVESTMENT COMPANIES | |
Investment Company Act file number 811-21777 | |
John Hancock Funds III | |
(Exact name of registrant as specified in charter) | |
601 Congress Street, Boston, Massachusetts 02210 | |
(Address of principal executive offices) (Zip code) | |
Salvatore Schiavone | |
Treasurer | |
601 Congress Street | |
Boston, Massachusetts 02210 | |
(Name and address of agent for service) | |
Registrant's telephone number, including area code: 617-663-4497 | |
Date of fiscal year end: | February 28 |
Date of reporting period: | February 28, 2014 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internationalcorex1x1.jpg)
A look at performance
Total returns for the period ended February 28, 2014
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 | 20.22 | 15.24 | — | 4.11 | 20.22 | 103.20 | — | 40.52 | |
Class B2 | 20.50 | 15.36 | — | 3.99 | 20.50 | 104.33 | — | 39.24 | |
Class C2 | 24.50 | 15.59 | — | 3.99 | 24.50 | 106.33 | — | 39.24 | |
Class I2,3 | 26.94 | 16.95 | — | 5.22 | 26.94 | 118.76 | — | 53.75 | |
Class R12,3 | 26.00 | 16.05 | — | 4.46 | 26.00 | 110.50 | — | 44.59 | |
Class R22,3 | 26.32 | 15.47 | — | 3.78 | 26.32 | 105.32 | — | 36.81 | |
Class R33,4 | 26.12 | — | — | 11.39 | 26.12 | — | — | 67.37 | |
Class R43,4 | 26.66 | — | — | 11.76 | 26.66 | — | — | 70.03 | |
Class R53,4 | 26.87 | — | — | 12.06 | 26.87 | — | — | 72.21 | |
Class R62,3 | 27.00 | 17.03 | — | 5.42 | 27.00 | 119.52 | — | 56.19 | |
Class 13,5 | 27.09 | 17.01 | — | 3.19 | 27.09 | 119.37 | — | 25.79 | |
Class NAV3,6 | 27.14 | 17.07 | — | 3.63 | 27.14 | 119.88 | — | 30.65 | |
Index1,† | 19.78 | 18.14 | — | 5.61 | 19.78 | 130.16 | — | 58.59 | |
Performance figures assume all distributions 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 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 to Class I, Class R1, Class R2, 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 and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and/or expense limitations are contractual at least until 6-30-14 for Class B, Class C, Class R1, Class R2, Class R3, Class R4, Class R5 and Class R6 shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. For all other classes, the net expenses equal the gross expenses. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R1 | Class R2 | Class R3 | Class R4* | Class R5 | Class R6 | Class 1 | Class NAV | |
Net (%) | 1.58 | 2.30 | 2.30 | 1.17 | 1.90 | 1.65 | 1.80 | 1.40 | 1.20 | 1.04 | 1.08 | 1.03 |
Gross (%) | 1.58 | 2.94 | 2.77 | 1.17 | 7.39 | 20.95 | 47.50 | 42.53 | 21.16 | 21.97 | 1.08 | 1.03 |
* The fund’s distributor has contractually agreed to waive 0.10% of Rule 12b-1 fees for Class R4 shares. The current waiver agreement will remain in effect at least through 6-30-14.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800–225–5291 or visit the fund’s website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† Index is the MSCI EAFE Index.
See the following page for footnotes.
6 | International Core Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internationalcorex3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class B7 | 9-16-05 | $13,924 | $13,924 | $15,859 |
Class C7 | 9-16-05 | 13,924 | 13,924 | 15,859 |
Class I3 | 9-16-05 | 15,375 | 15,375 | 15,859 |
Class R13 | 9-16-05 | 14,459 | 14,459 | 15,859 |
Class R23 | 9-16-05 | 13,681 | 13,681 | 15,859 |
Class R33 | 5-22-09 | 16,737 | 16,737 | 17,598 |
Class R43 | 5-22-09 | 17,003 | 17,003 | 17,598 |
Class R53 | 5-22-09 | 17,221 | 17,221 | 17,598 |
Class R63 | 9-16-05 | 15,619 | 15,619 | 15,859 |
Class 13 | 11-6-06 | 12,579 | 12,579 | 12,613 |
Class NAV3 | 8-29-06 | 13,065 | 13,065 | 13,203 |
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 expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 From 6-12-06. 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; Class R6 shares were first offered on 9-1-11; Class R2 shares were first offered on 3-1-12. Returns prior to these dates are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class B, Class C, Class I, Class R1, Class R6, and Class R2 shares, as applicable.
3 For certain types of investors, as described in the fund’s Class I, Class R1, Class R2, Class R3, Class R4, Class R5, Class R6, Class 1, and Class NAV share prospectuses.
4 From 5-22-09.
5 From 11-6-06.
6 From 8-29-06.
7 The contingent deferred sales charge is not applicable.
Annual report | International Core Fund | 7 |
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC
Stocks in developed markets outside the United States generated strong performance during the 12 months ended February 28, 2014. Key catalysts included the eurozone’s return to economic growth following a recession, Japan’s progress in reviving its long-stagnant economy, and the continuing economic recovery in the United Kingdom. When developed-market equities briefly retreated during the period, concerns about tighter monetary policy in the United States often played a large role.
During the period, John Hancock International Core Fund’s Class A shares returned 26.56%, excluding sales charges, outpacing the 19.78% return of the fund’s benchmark, the MSCI EAFE Index. With respect to the three inputs for our quantitative investment process—momentum, intrinsic value, and quality—stocks that we ranked highly due to their momentum characteristics served to aid the fund’s performance, particularly during the early months of the period.
Our stock selection in the United Kingdom was the most significant contributor to relative performance, as the fund’s U.K.-based holdings outperformed the U.K.-based component of the benchmark by a wide margin. Similarly, the fund’s positions in companies based in France significantly outperformed. The fund’s relative underweight exposure to Australian equities significantly aided performance, as this market posted negative returns during the period.
At the individual security level, an overweight position in U.K.-based pharmaceutical company AstraZeneca PLC was the largest contributor to the fund’s relative performance. Among the fund’s French positions, the most significant contributors were energy company Total SA—the fund’s largest individual equity holding during the period—and automaker Peugeot SA.
The most significant detractors among the fund’s individual holdings were positions in two Japanese stocks, petroleum refiner JX Holdings, Inc. and automaker Toyota Motor Corp. While JX Holdings declined in price, Toyota was a detractor because the fund had an underweight position early in the period, when the stock strongly outperformed the market.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance does not guarantee future results.
8 | International Core Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
▪ Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the fund’s actual ongoing operating expenses and is based on the fund’s actual return. It assumes an account value of $1,000.00 on September 1, 2013, with the same investment held until February 28, 2014.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1,000.00 | $1,195.50 | $8.00 | 1.47% |
Class B | 1,000.00 | 1,190.70 | 12.49 | 2.30% |
Class C | 1,000.00 | 1,190.70 | 12.49 | 2.30% |
Class I | 1,000.00 | 1,197.30 | 6.27 | 1.15% |
Class R1 | 1,000.00 | 1,192.80 | 10.33 | 1.90% |
Class R2 | 1,000.00 | 1,194.60 | 8.98 | 1.65% |
Class R3 | 1,000.00 | 1,193.50 | 9.79 | 1.80% |
Class R4 | 1,000.00 | 1,196.20 | 7.68 | 1.41% |
Class R5 | 1,000.00 | 1,197.00 | 6.54 | 1.20% |
Class R6 | 1,000.00 | 1,197.60 | 6.16 | 1.13% |
Class 1 | 1,000.00 | 1,198.00 | 5.72 | 1.05% |
Class NAV | 1,000.00 | 1,198.40 | 5.45 | 1.00% |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 28, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Annual report | 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, 2013, with the same investment held until February 28, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1,000.00 | $1,017.50 | $7.35 | 1.47% |
Class B | 1,000.00 | 1,013.40 | 11.48 | 2.30% |
Class C | 1,000.00 | 1,013.40 | 11.48 | 2.30% |
Class I | 1,000.00 | 1,019.10 | 5.80 | 1.15% |
Class R1 | 1,000.00 | 1,015.40 | 9.49 | 1.90% |
Class R2 | 1,000.00 | 1,016.60 | 8.25 | 1.65% |
Class R3 | 1,000.00 | 1,015.90 | 9.00 | 1.80% |
Class R4 | 1,000.00 | 1,017.80 | 7.05 | 1.41% |
Class R5 | 1,000.00 | 1,018.80 | 6.01 | 1.20% |
Class R6 | 1,000.00 | 1,019.20 | 5.66 | 1.13% |
Class 1 | 1,000.00 | 1,019.60 | 5.26 | 1.05% |
Class NAV | 1,000.00 | 1,019.80 | 5.01 | 1.00% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectuses for details regarding transaction costs.
1 Expenses are equal to the fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | International Core Fund | Annual report |
Portfolio summary
Top 10 Holdings (23.7% of Net Assets on 2-28-14)1,2 | ||||
Total SA | 4.2% | Telefonica SA | 1.8% | |
AstraZeneca PLC | 3.0% | Rio Tinto PLC | 1.8% | |
Royal Dutch Shell PLC, Class A | 3.0% | E.ON SE | 1.5% | |
BP PLC | 3.0% | Enel SpA | 1.5% | |
Banco Santander SA | 2.6% | Royal Dutch Shell PLC, Class B | 1.3% | |
Sector Composition1,3 | ||||
Financials | 18.4% | Materials | 7.5% | |
Energy | 15.3% | Utilities | 7.2% | |
Consumer Discretionary | 14.5% | Consumer Staples | 3.7% | |
Industrials | 10.5% | Information Technology | 3.4% | |
Telecommunication Services | 9.1% | Short-Term Investments & Other | 2.9% | |
Health Care | 7.5% | |||
Top 10 Countries1,2,3 | ||||
United Kingdom | 20.5% | Netherlands | 6.6% | |
Japan | 17.3% | Italy | 5.7% | |
France | 12.5% | Australia | 4.3% | |
Germany | 8.1% | Hong Kong | 2.5% | |
Spain | 7.8% | Switzerland | 2.4% | |
1 As a percentage of net assets on 2-28-14.
2 Cash and cash equivalents not included.
3 Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Hedging and other strategic transactions may increase volatility and result in losses if not successful. Sector investing is subject to greater risks than the market as a whole. Because the fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors and investments focused in one sector may fluctuate more widely than investments diversified across sectors. Please see the fund’s prospectuses for additional risks.
Annual report | International Core Fund | 11 |
Fund’s investments
As of 2-28-14
Shares | Value | |
Common Stocks 96.5% | $1,463,298,006 | |
(Cost $1,217,160,332) | ||
Australia 4.3% | 65,192,465 | |
Arrium, Ltd. | 2,312,745 | 3,198,384 |
BHP Billiton, Ltd. | 392,853 | 13,474,299 |
BlueScope Steel, Ltd. (I) | 729,748 | 4,020,331 |
Commonwealth Bank of Australia | 59,546 | 3,977,112 |
CSL, Ltd. | 32,443 | 2,095,136 |
Flight Centre Travel Group, Ltd. | 25,957 | 1,206,461 |
Goodman Fielder, Ltd. | 1,632,477 | 911,277 |
GPT Group | 392,205 | 1,304,312 |
Investa Office Fund | 338,076 | 967,597 |
JB Hi-Fi, Ltd. (L) | 130,844 | 2,144,388 |
Macquarie Group, Ltd. | 36,679 | 1,849,707 |
Mirvac Group | 1,269,980 | 2,005,035 |
Myer Holdings, Ltd. (L) | 487,035 | 1,142,762 |
National Australia Bank, Ltd. | 244,274 | 7,596,660 |
Pacific Brands, Ltd. | 715,097 | 358,581 |
QBE Insurance Group, Ltd. | 346,369 | 3,981,763 |
Rio Tinto, Ltd. | 111,043 | 6,634,016 |
Stockland | 734,659 | 2,537,145 |
Tabcorp Holdings, Ltd. | 506,897 | 1,607,521 |
Westpac Banking Corp. | 139,277 | 4,179,978 |
Austria 0.4% | 6,914,797 | |
OMV AG | 83,243 | 3,782,616 |
Voestalpine AG | 69,646 | 3,132,181 |
Belgium 1.0% | 15,315,090 | |
Ageas | 101,299 | 4,633,951 |
Belgacom SA | 111,163 | 3,344,092 |
Delhaize Group SA | 74,361 | 5,339,488 |
KBC Groep NV | 31,586 | 1,997,559 |
Canada 0.8% | 12,613,002 | |
BlackBerry, Ltd. (I)(L) | 367,300 | 3,665,371 |
First Quantum Minerals, Ltd. | 136,700 | 2,651,780 |
IGM Financial, Inc. | 26 | 1,268 |
Magna International, Inc. | 43,400 | 3,863,396 |
Methanex Corp. (L) | 30,200 | 2,116,427 |
Sherritt International Corp. | 113,900 | 314,760 |
12 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
China 0.1% | $914,466 | |
Yangzijiang Shipbuilding Holdings, Ltd. | 1,020,000 | 914,466 |
Denmark 0.6% | 9,028,785 | |
Coloplast A/S, Class B | 17,816 | 1,499,903 |
Pandora A/S | 54,226 | 3,668,906 |
Vestas Wind Systems A/S (I) | 107,160 | 3,859,976 |
Finland 1.3% | 19,965,498 | |
Neste Oil OYJ (L) | 76,618 | 1,640,268 |
Nokia OYJ (I) | 1,839,882 | 14,004,611 |
Sampo OYJ, Class A | 74,361 | 3,762,734 |
Tieto OYJ | 21,985 | 557,885 |
France 12.5% | 189,079,243 | |
Air France KLM (I) | 374,285 | 5,141,285 |
Airbus Group NV | 65,592 | 4,819,522 |
Alcatel-Lucent (I) | 1,089,506 | 4,714,586 |
AXA SA | 344,315 | 8,968,479 |
BNP Paribas SA | 145,989 | 11,924,720 |
Bouygues SA | 78,860 | 3,174,076 |
Carrefour SA | 47,728 | 1,755,901 |
Cie Generale des Etablissements Michelin | 23,815 | 2,894,961 |
Credit Agricole SA (I) | 163,054 | 2,581,533 |
GDF Suez | 451,664 | 11,566,618 |
Lagardere SCA | 56,105 | 2,250,130 |
Orange SA | 673,857 | 8,404,371 |
Peugeot SA (I)(L) | 507,877 | 8,945,861 |
Publicis Groupe SA | 38,873 | 3,689,250 |
Rallye SA | 15,543 | 656,282 |
Renault SA | 66,820 | 6,613,495 |
Safran SA | 56,456 | 3,968,506 |
Sanofi | 29,960 | 3,116,135 |
Societe Generale SA | 266,904 | 17,710,746 |
Total SA | 988,840 | 64,155,057 |
Valeo SA | 30,232 | 4,228,931 |
Vivendi SA | 273,492 | 7,798,798 |
Germany 7.5% | 113,431,439 | |
Allianz SE | 20,331 | 3,625,740 |
Aurubis AG (L) | 54,649 | 3,036,114 |
Bayer AG | 23,136 | 3,280,694 |
Continental AG | 31,043 | 7,545,141 |
Daimler AG | 195,816 | 18,216,166 |
Deutsche Lufthansa AG (I) | 211,734 | 5,475,970 |
Deutsche Post AG | 233,071 | 8,738,600 |
Deutsche Telekom AG | 214,094 | 3,621,889 |
Duerr AG | 37,083 | 3,094,414 |
E.ON SE | 1,231,012 | 23,439,316 |
Leoni AG | 49,076 | 3,710,679 |
Merck KGaA | 11,447 | 2,009,008 |
Metro AG (I) | 79,431 | 3,285,410 |
See notes to financial statements | Annual report | International Core Fund | 13 |
Shares | Value | |
Germany (continued) | ||
Muenchener Rueckversicherungs AG | 18,506 | $4,046,176 |
ProSiebenSat.1 Media AG | 78,652 | 3,743,948 |
RWE AG�� | 313,428 | 12,533,038 |
Salzgitter AG | 36,495 | 1,538,728 |
Sky Deutschland AG (I) | 238,235 | 2,490,408 |
Hong Kong 2.5% | 37,628,919 | |
AIA Group, Ltd. | 539,400 | 2,642,812 |
Cheung Kong Holdings, Ltd. | 379,000 | 5,951,215 |
Esprit Holdings, Ltd. (I) | 1,392,651 | 2,617,810 |
Galaxy Entertainment Group, Ltd. (I) | 847,000 | 8,525,516 |
Melco International Development, Ltd. | 417 | 1,497 |
Noble Group, Ltd. | 2,224,000 | 1,809,546 |
Power Assets Holdings, Ltd. | 207 | 1,732 |
Sun Hung Kai Properties, Ltd. | 619,000 | 7,934,672 |
Swire Pacific, Ltd., Class A | 214,500 | 2,413,765 |
Swire Properties, Ltd. | 100 | 267 |
Wharf Holdings, Ltd. | 202,000 | 1,416,197 |
Xinyi Glass Holdings Company, Ltd. | 3,732,000 | 3,323,934 |
Yue Yuen Industrial Holdings, Ltd. | 324,380 | 989,956 |
Ireland 0.3% | 4,025,894 | |
Shire PLC | 72,781 | 4,025,894 |
Isle of Man 0.1% | 1,337,002 | |
Playtech PLC | 97,819 | 1,337,002 |
Israel 0.4% | 6,717,819 | |
Africa Israel Investments, Ltd. (I) | 209,623 | 503,031 |
Bezeq The Israeli Telecommunication Corp., Ltd. | 1,239,318 | 2,018,884 |
Partner Communications Company, Ltd. (I) | 157,594 | 1,463,227 |
Teva Pharmaceutical Industries, Ltd. | 54,712 | 2,732,677 |
Italy 5.7% | 86,271,943 | |
A2A SpA | 1,153,039 | 1,494,240 |
Azimut Holding SpA | 90,618 | 3,020,392 |
Enel SpA | 4,570,229 | 23,420,228 |
Eni SpA | 585,936 | 14,066,332 |
Fiat SpA (I) | 619,171 | 6,464,853 |
Finmeccanica SpA (I) | 814,697 | 7,995,064 |
Intesa Sanpaolo SpA | 2,311,609 | 7,149,661 |
Mediaset SpA (I) | 752,572 | 4,314,258 |
Mediolanum SpA | 285,157 | 2,627,591 |
Recordati SpA | 60,435 | 1,115,408 |
Telecom Italia SpA | 6,426,831 | 7,300,026 |
Telecom Italia SpA | 4,260,935 | 3,730,565 |
UniCredit SpA | 450,278 | 3,573,325 |
Japan 17.3% | 262,200,351 | |
Adastria Holdings Company, Ltd. (L) | 34,340 | 797,310 |
Alps Electric Company, Ltd. (I) | 46 | 596 |
COLOPL, Inc. (I)(L) | 103,200 | 2,977,996 |
CyberAgent, Inc. | 79,000 | 3,480,323 |
14 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
Japan (continued) | ||
Daikyo, Inc. (L) | 734,000 | $1,622,636 |
Daito Trust Construction Company, Ltd. | 57,900 | 5,396,268 |
Daiwa Securities Group, Inc. | 423,000 | 3,828,014 |
Daiwabo Holdings Company, Ltd. | 351,000 | 670,604 |
Dena Company, Ltd. (L) | 314,561 | 6,819,587 |
DIC Corp. | 517,000 | 1,423,975 |
Fuji Electric Company, Ltd. | 398,000 | 1,829,631 |
Fuji Heavy Industries, Ltd. | 248,916 | 6,756,719 |
Fuji Oil Company, Ltd. | 44,500 | 603,195 |
Gree, Inc. (L) | 489,300 | 5,429,964 |
Gunze, Ltd. | 168,000 | 443,216 |
Hanwa Company, Ltd. | 177,000 | 783,367 |
Haseko Corp. (I) | 453,500 | 2,909,777 |
Hino Motors, Ltd. | 149,000 | 2,211,220 |
Inpex Corp. | 267,400 | 3,397,767 |
ITOCHU Corp. | 731,300 | 9,113,393 |
JFE Holdings, Inc. | 194,300 | 3,965,792 |
JX Holdings, Inc. | 1,803,000 | 9,363,881 |
K’s Holdings Corp. | 96,300 | 2,637,113 |
Kakaku.com, Inc. | 131,000 | 2,187,623 |
Kao Corp. | 83,650 | 2,880,416 |
Kawasaki Kisen Kaisha, Ltd. | 1,833,000 | 4,161,645 |
KDDI Corp. | 121,700 | 7,442,639 |
Keyence Corp. | 7,600 | 3,272,758 |
Kinugawa Rubber Industrial Company, Ltd. | 118,000 | 535,156 |
Kobe Steel, Ltd. (I) | 1,176,000 | 1,611,021 |
Kohnan Shoji Company, Ltd. (L) | 50,000 | 506,602 |
Konami Corp. | 23 | 579 |
Kurimoto, Ltd. | 103,000 | 242,945 |
Leopalace21 Corp. (I) | 526,500 | 2,572,482 |
Marubeni Corp. | 851,824 | 5,988,493 |
Mazda Motor Corp. (I) | 1,196,000 | 5,776,692 |
Medipal Holdings Corp. | 100,935 | 1,560,303 |
MEIJI Holdings Company, Ltd. | 22,400 | 1,478,498 |
Mitsubishi Chemical Holdings Corp. | 693,900 | 3,140,041 |
Mitsubishi Corp. | 515,495 | 9,894,111 |
Mitsui & Company, Ltd. | 454,000 | 6,998,765 |
Mitsui Engineering & Shipbuilding Company, Ltd. | 637,000 | 1,319,989 |
Mitsui Mining & Smelting Company, Ltd. | 617,000 | 1,624,185 |
Mitsui O.S.K. Lines, Ltd. | 955,000 | 3,975,931 |
Murata Manufacturing Company, Ltd. | 29,400 | 2,806,821 |
Namco Bandai Holdings, Inc. | 68,600 | 1,538,531 |
Nidec Corp. | 27,200 | 3,344,733 |
Nippon Light Metal Holdings Company, Ltd. | 901,300 | 1,244,949 |
Nippon Paper Industries Company, Ltd. (L) | 142,900 | 2,826,698 |
Nippon Telegraph & Telephone Corp. | 129,000 | 7,262,580 |
Nippon Yusen KK | 1,117,000 | 3,578,163 |
Nipro Corp. (L) | 136,100 | 1,200,958 |
See notes to financial statements | Annual report | International Core Fund | 15 |
Shares | Value | |
Japan (continued) | ||
Nitori Holdings Company, Ltd. | 51,900 | $2,350,971 |
North Pacific Bank, Ltd. | 133,200 | 502,896 |
NTT DOCOMO, Inc. | 290,100 | 4,835,254 |
Orient Corp. (I)(L) | 579,100 | 1,172,847 |
Osaka Gas Company, Ltd. | 120 | 500 |
Panasonic Corp. | 420,700 | 5,269,420 |
Pigeon Corp. | 37,000 | 1,669,493 |
Resona Holdings, Inc. | 1,583,900 | 8,275,337 |
Round One Corp. | 196,600 | 1,501,838 |
Ryohin Keikaku Company, Ltd. | 23,600 | 2,143,276 |
Sanix, Inc. (I)(L) | 103,400 | 1,118,205 |
SoftBank Corp. | 43,300 | 3,281,417 |
Sojitz Corp. | 1,751,000 | 3,108,637 |
Sumitomo Corp. | 661,700 | 8,753,476 |
Sumitomo Mitsui Company, Ltd. (I)(L) | 1,405,500 | 1,512,043 |
Sumitomo Mitsui Trust Holdings, Inc. | 375,000 | 1,759,190 |
Sumitomo Realty & Development Company, Ltd. | 58,000 | 2,343,464 |
Taiheiyo Cement Corp. | 575,000 | 2,030,700 |
Taisei Corp. | 437,000 | 1,952,337 |
Takeda Pharmaceutical Company, Ltd. | 76,889 | 3,695,045 |
The Daiei, Inc. (I) | 181,158 | 561,821 |
Tokyo Electric Power Company, Inc. (I) | 1,343,000 | 6,281,282 |
Tokyo Tatemono Company, Ltd. | 234,000 | 1,911,261 |
Tokyotokeiba Company, Ltd. (L) | 200,000 | 647,134 |
TonenGeneral Sekiyu KK | 122,133 | 1,079,602 |
Tosoh Corp. | 267,000 | 1,035,567 |
Toyota Motor Corp. | 252,100 | 14,509,131 |
Toyota Tsusho Corp. | 235,200 | 5,814,015 |
UNY Group Holdings Company, Ltd. (L) | 274,500 | 1,633,615 |
Yamada Denki Company, Ltd. | 1,208,800 | 4,013,926 |
Luxembourg 0.2% | 2,710,352 | |
ArcelorMittal | 172,593 | 2,710,352 |
Macau 0.5% | 7,183,454 | |
Sands China, Ltd. | 854,800 | 7,183,454 |
Netherlands 6.6% | 99,786,858 | |
Aegon NV | 614,591 | 5,540,271 |
Corbion NV | 59,093 | 1,328,368 |
Delta Lloyd NV | 55,292 | 1,575,052 |
ING Groep NV (I) | 426,645 | 6,195,765 |
Koninklijke BAM Groep NV | 250,508 | 1,488,616 |
Koninklijke KPN NV (I) | 1,790,838 | 6,382,612 |
PostNL NV (I) | 905,397 | 4,311,530 |
Royal Dutch Shell PLC, Class A | 1,250,173 | 45,512,655 |
Royal Dutch Shell PLC, Class B | 503,055 | 19,570,100 |
SNS REAAL NV (I) | 69,009 | 0 |
Unilever NV | 150,748 | 5,961,299 |
Wereldhave NV | 22,389 | 1,920,590 |
16 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | |
New Zealand 0.4% | $5,779,920 | |
Chorus, Ltd. (L) | 403,451 | 516,386 |
Fletcher Building, Ltd. | 328,645 | 2,598,739 |
Telecom Corp. of New Zealand, Ltd. | 1,270,027 | 2,664,795 |
Norway 0.7% | 11,262,302 | |
DNB ASA | 86,249 | 1,561,209 |
Statoil ASA | 214,142 | 5,648,215 |
TGS-NOPEC Geophysical Company ASA | 81,568 | 2,569,377 |
Vard Holdings, Ltd. (I) | 277,000 | 200,265 |
Yara International ASA | 31,650 | 1,283,236 |
Portugal 0.5% | 7,180,386 | |
EDP—Energias de Portugal SA | 1,430,155 | 6,189,291 |
Portugal Telecom SGPS SA | 221,345 | 991,095 |
Singapore 0.4% | 6,597,723 | |
Ezion Holdings, Ltd. | 533,000 | 947,610 |
Ezra Holdings, Ltd. | 944,000 | 794,786 |
Golden Agri-Resources, Ltd. | 11,076,000 | 4,855,327 |
Spain 7.8% | 117,745,599 | |
ACS Actividades de Construccion y Servicios SA | 116,885 | 4,192,792 |
Amadeus IT Holding SA, A Shares | 83,466 | 3,665,410 |
Banco Bilbao Vizcaya Argentaria SA | 1,016,219 | 12,554,882 |
Banco Santander SA | 4,325,419 | 39,043,981 |
Distribuidora Internacional de Alimentacion SA | 298,080 | 2,553,127 |
Enagas SA | 87,327 | 2,537,243 |
Fomento de Construcciones y Contratas SA (I) | 44,709 | 1,016,014 |
Gas Natural SDG SA | 271,947 | 6,964,657 |
Iberdrola SA | 1,677,585 | 11,111,384 |
Repsol SA | 291,807 | 7,308,553 |
Telefonica SA | 1,752,584 | 26,797,556 |
Sweden 0.7% | 10,371,196 | |
Boliden AB | 115,594 | 1,831,376 |
Investor AB, B Shares | 114,916 | 4,088,922 |
NCC AB, B Shares | 47,044 | 1,636,915 |
Swedbank AB, Class A | 99,844 | 2,813,983 |
Switzerland 2.4% | 36,938,284 | |
Actelion, Ltd. (I) | 36,821 | 3,901,518 |
Givaudan SA (I) | 996 | 1,560,431 |
Novartis AG | 131,919 | 10,979,629 |
Roche Holding AG | 34,673 | 10,675,816 |
Swiss Life Holding AG (I) | 9,151 | 2,276,161 |
Swiss Re AG (I) | 26,779 | 2,499,515 |
Zurich Insurance Group AG (I) | 16,487 | 5,045,214 |
United Kingdom 20.5% | 311,181,439 | |
Aberdeen Asset Management PLC | 289,689 | 1,890,040 |
Admiral Group PLC | 32,944 | 790,909 |
Anglo American PLC | 176,623 | 4,510,893 |
Ashtead Group PLC | 128,038 | 1,876,002 |
See notes to financial statements | Annual report | International Core Fund | 17 |
Shares | Value | |
United Kingdom (continued) | ||
ASOS PLC (I) | 35,640 | $4,146,171 |
Associated British Foods PLC | 34,961 | 1,753,772 |
AstraZeneca PLC | 671,845 | 45,670,166 |
Aviva PLC | 378,601 | 3,010,082 |
BAE Systems PLC | 1,500,185 | 10,297,593 |
Barclays PLC | 1,295,048 | 5,455,477 |
BBA Aviation PLC (I) | 71,543 | 402,584 |
BG Group PLC | 406,830 | 7,401,755 |
BHP Billiton PLC | 376,548 | 12,134,950 |
BP PLC | 5,369,938 | 45,381,643 |
BT Group PLC | 1,516,992 | 10,433,615 |
Bunzl PLC | 85,868 | 2,260,157 |
Darty PLC | 88,849 | 172,145 |
Dixons Retail PLC (I) | 3,585,750 | 3,085,225 |
Drax Group PLC | 186,521 | 2,517,384 |
easyJet PLC | 102,635 | 2,951,744 |
GlaxoSmithKline PLC | 394,801 | 11,058,229 |
Home Retail Group PLC | 807,350 | 2,649,817 |
Imperial Tobacco Group PLC | 88,853 | 3,624,281 |
ITV PLC | 1,164,825 | 3,936,704 |
Lancashire Holdings, Ltd. | 81,909 | 1,006,270 |
Lloyds Banking Group PLC (I) | 11,681,662 | 16,132,401 |
Mondi PLC | 89,080 | 1,633,485 |
Next PLC | 61,449 | 6,927,127 |
Persimmon PLC (I) | 65,449 | 1,583,418 |
Premier Foods PLC (I) | 222,106 | 535,866 |
Prudential PLC | 358,755 | 8,123,197 |
Reckitt Benckiser Group PLC | 34,489 | 2,837,205 |
Reed Elsevier PLC | 98,454 | 1,509,426 |
Rio Tinto PLC | 464,794 | 26,651,599 |
Rolls-Royce Holdings PLC | 240,841 | 4,024,859 |
SSE PLC | 76,674 | 1,800,134 |
Standard Life PLC | 253,649 | 1,655,118 |
Taylor Wimpey PLC | 705,659 | 1,475,606 |
Tesco PLC | 1,058,466 | 5,828,579 |
Thomas Cook Group PLC (I) | 1,287,640 | 3,987,845 |
Trinity Mirror PLC (I) | 163,704 | 625,040 |
Tullett Prebon PLC | 133,425 | 748,360 |
Unilever PLC | 158,556 | 6,484,945 |
Vodafone Group PLC | 4,485,098 | 18,689,237 |
Whitbread PLC | 28,828 | 2,163,533 |
WHSmith PLC | 87,065 | 1,703,542 |
William Hill PLC | 352,176 | 2,341,224 |
WPP PLC | 242,079 | 5,302,085 |
United States 1.0% | 15,923,780 | |
Valeant Pharmaceuticals International, Inc. (I) | 39,900 | 5,695,470 |
Verizon Communications, Inc. | 216,257 | 10,228,310 |
18 | International Core Fund | Annual report | See notes to financial statements |
Shares | Value | ||
Preferred Securities 0.6% | $9,853,663 | ||
(Cost $6,898,621) | |||
Germany 0.6% | 9,853,663 | ||
Porsche Automobil Holding SE | 59,367 | 6,235,544 | |
Volkswagen AG | 13,919 | 3,618,119 | |
Yield (%) | Shares | Value | |
Securities Lending Collateral 2.8% | $42,100,345 | ||
(Cost $42,100,209) | |||
John Hancock Collateral Investment Trust (W) | 0.1432 (Y) | 4,207,174 | 42,100,345 |
Short-Term Investments 2.4% | $36,258,363 | ||
(Cost $36,258,363) | |||
Money Market Funds 2.4% | 36,258,363 | ||
State Street Institutional Treasury Money | |||
Market Fund | 0.0000 (Y) | 36,258,363 | 36,258,363 |
Total investments (Cost $1,302,417,525)† 102.3% | $1,551,510,377 | ||
Other assets and liabilities, net (2.3%) | ($35,058,879) | ||
Total net assets 100.0% | $1,516,451,498 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund.
(I) Non-income producing security.
(L) A portion of this security is on loan as of 2-28-14
(W) Investment is an affiliate of the fund, the advisor and/or subadvisor. This investment represents collateral received for securities lending.
(Y) The rate shown is the annualized seven-day yield as of 2-28-14.
† At 2-28-14, the aggregate cost of investment securities for federal income tax purposes was $1,358,542,559. Net unrealized appreciation aggregated $192,967,818, of which $223,608,425 related to appreciated investment securities and $30,640,607 related to depreciated investment securities.
The fund had the following sector composition as a percentage of net assets on 2-28-14:
Financials | 18.4% | |
Energy | 15.3% | |
Consumer Discretionary | 14.5% | |
Industrials | 10.5% | |
Telecommunication Services | 9.1% | |
Health Care | 7.5% | |
Materials | 7.5% | |
Utilities | 7.2% | |
Consumer Staples | 3.7% | |
Information Technology | 3.4% | |
Short-Term Investments & Other | 2.9% | |
Total | 100.0% |
See notes to financial statements | Annual report | International Core Fund | 19 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 2-28-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $1,260,317,316) | |
including $39,970,410 of securities loaned) | $1,509,410,032 |
Investments in affiliated issuers, at value (Cost $42,100,209) | 42,100,345 |
Total investments, at value (Cost $1,302,417,525) | 1,551,510,377 |
Foreign currency, at value (Cost $306,793) | 307,111 |
Receivable for investments sold | 53,723 |
Receivable for fund shares sold | 2,825,625 |
Receivable for forward foreign currency exchange contracts | 490,492 |
Dividends and interest receivable | 9,344,310 |
Receivable for securities lending income | 104,343 |
Receivable due from advisor | 7,089 |
Other receivables and prepaid expenses | 44,777 |
Total assets | 1,564,687,847 |
Liabilities | |
Due to custodian | 1,978,618 |
Payable for forward foreign currency exchange contracts | 2,480,372 |
Payable for fund shares repurchased | 1,083,825 |
Payable upon return of securities loaned | 42,063,426 |
Payable to affiliates | |
Accounting and legal services fees | 24,024 |
Transfer agent fees | 130,475 |
Distribution and service fees | 61 |
Trustees’ fees | 1,296 |
Other liabilities and accrued expenses | 474,252 |
Total liabilities | 48,236,349 |
Net assets | $1,516,451,498 |
Net assets consist of | |
Paid-in capital | $1,433,155,511 |
Undistributed net investment income | 19,791,794 |
Accumulated net realized gain (loss) on investments, futures contracts and | |
foreign currency transactions | (183,689,470) |
Net unrealized appreciation (depreciation) on investments, futures | |
contracts and translation of assets and liabilities in foreign currencies | 247,193,663 |
Net assets | $1,516,451,498 |
20 | 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 ($109,373,238 ÷ 3,089,618 shares) | $35.40 |
Class B ($3,382,456 ÷ 95,903 shares)1 | $35.27 |
Class C ($8,299,248 ÷ 235,314 shares)1 | $35.27 |
Class I ($526,623,379 ÷ 14,827,278 shares) | $35.52 |
Class R1 ($418,545 ÷ 11,847 shares) | $35.33 |
Class R2 ($179,876 ÷ 5,063 shares) | $35.53 |
Class R3 ($168,187 ÷ 4,732.5 shares) | $35.54 |
Class R4 ($115,005 ÷ 3,239 shares) | $35.51 |
Class R5 ($119,166 ÷ 3,356 shares) | $35.51 |
Class R6 ($158,302 ÷ 4,451 shares) | $35.57 |
Class 1 ($44,460,621 ÷ 1,249,719 shares) | $35.58 |
Class NAV ($823,153,475 ÷ 23,157,658 shares) | $35.55 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $37.26 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | International Core Fund | 21 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-28-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $62,334,554 |
Securities lending | 2,216,494 |
Interest | 201 |
Less foreign taxes withheld | (3,497,911) |
Total investment income | 61,053,338 |
Expenses | |
Investment management fees | 11,849,236 |
Distribution and service fees | 385,922 |
Accounting and legal services fees | 158,107 |
Transfer agent fees | 682,745 |
Trustees’ fees | 49,752 |
State registration fees | 216,317 |
Printing and postage | 30,992 |
Professional fees | 133,449 |
Custodian fees | 1,230,595 |
Registration and filing fees | 45,667 |
Other | 35,180 |
Total expenses | 14,817,962 |
Less expense reductions | (170,382) |
Net expenses | 14,647,580 |
Net investment income | 46,405,758 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 99,092,532 |
Investments in affiliated issuers | (8,173) |
Futures contracts | 7,991,547 |
Foreign currency transactions | 803,262 |
107,879,168 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 172,068,179 |
Investments in affiliated issuers | 2,006 |
Futures contracts | 1,012,863 |
Translation of assets and liabilities in foreign currencies | (2,306,598) |
170,776,450 | |
Net realized and unrealized gain | 278,655,618 |
Increase in net assets from operations | $325,061,376 |
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
Statements of changes in net assets
These Statements of changes in net assets show how the value of the fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of fund share transactions.
Year | Year | |
ended | ended | |
2-28-14 | 2-28-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $46,405,758 | $40,352,982 |
Net realized gain (loss) | 107,879,168 | (58,781,704) |
Change in net unrealized appreciation (depreciation) | 170,776,450 | 95,935,770 |
Increase in net assets resulting from operations | 325,061,376 | 77,507,048 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (2,725,982) | (2,647,541) |
Class B | (67,781) | (81,696) |
Class C | (122,674) | (110,204) |
Class I | (15,844,643) | (18,793,937) |
Class R1 | (9,593) | (8,398) |
Class R2 | (3,451) | (3,287) |
Class R3 | (3,281) | (1,054) |
Class R4 | (2,592) | (1,317) |
Class R5 | (3,325) | (2,763) |
Class R6 | (4,764) | (3,906) |
Class 1 | (1,354,021) | (1,358,914) |
Class NAV | (26,043,066) | (21,987,219) |
Total distributions | (46,185,173) | (45,000,236) |
From fund share transactions | 97,994,393 | (478,701,052) |
Total increase (decrease) | 376,870,596 | (446,194,240) |
Net assets | ||
Beginning of year | 1,139,580,902 | 1,585,775,142 |
End of year | $1,516,451,498 | $1,139,580,902 |
Undistributed net investment income | $19,791,794 | $17,198,315 |
See notes to financial statements | Annual report | International Core Fund | 23 |
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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.81 | $27.72 | $30.85 | $25.74 | $18.43 |
Net investment income1 | 1.055 | 0.71 | 0.58 | 0.33 | 0.24 |
Net realized and unrealized gain (loss) on investments | 6.52 | 1.31 | (3.32) | 5.09 | 7.59 |
Total from investment operations | 7.57 | 2.02 | (2.74) | 5.42 | 7.83 |
Less distributions | |||||
From net investment income | (0.98) | (0.93) | (0.39) | (0.31) | (0.52) |
Net asset value, end of period | $35.40 | $28.81 | $27.72 | $30.85 | $25.74 |
Total return (%)2,3 | 26.56 | 7.41 | (8.73) | 21.13 | 42.33 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $109 | $91 | $374 | $333 | $225 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.46 | 1.58 | 1.58 | 1.61 | 1.954 |
Expenses net of fee waivers | 1.46 | 1.58 | 1.58 | 1.60 | 1.664 |
Expenses net of fee waivers and credits | 1.46 | 1.58 | 1.58 | 1.60 | 1.624 |
Net investment income | 3.275 | 2.66 | 2.05 | 1.21 | 0.94 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 44 |
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 applicable periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
5 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
CLASS B SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.70 | $27.61 | $30.70 | $25.62 | $18.36 |
Net investment income1 | 0.735 | 0.42 | 0.44 | 0.18 | 0.17 |
Net realized and unrealized gain (loss) on investments | 6.53 | 1.41 | (3.34) | 5.01 | 7.44 |
Total from investment operations | 7.26 | 1.83 | (2.90) | 5.19 | 7.61 |
Less distributions | |||||
From net investment income | (0.69) | (0.74) | (0.19) | (0.11) | (0.35) |
Net asset value, end of period | $35.27 | $28.70 | $27.61 | $30.70 | $25.62 |
Total return (%)2,3 | 25.50 | 6.71 | (9.38) | 20.28 | 41.35 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $3 | $3 | $4 | $5 | $6 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.64 | 2.94 | 2.49 | 2.36 | 3.074 |
Expenses net of fee waivers | 2.30 | 2.30 | 2.30 | 2.30 | 2.364 |
Expenses net of fee waivers and credits | 2.30 | 2.30 | 2.30 | 2.30 | 2.334 |
Net investment income | 2.285 | 1.56 | 1.58 | 0.65 | 0.69 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 44 |
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 applicable periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
5 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
24 | International Core Fund | Annual report | See notes to financial statements |
CLASS C SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.70 | $27.61 | $30.71 | $25.62 | $18.36 |
Net investment income1 | 0.835 | 0.42 | 0.43 | 0.17 | 0.15 |
Net realized and unrealized gain (loss) on investments | 6.43 | 1.41 | (3.34) | 5.03 | 7.46 |
Total from investment operations | 7.26 | 1.83 | (2.91) | 5.20 | 7.61 |
Less distributions | |||||
From net investment income | (0.69) | (0.74) | (0.19) | (0.11) | (0.35) |
Net asset value, end of period | $35.27 | $28.70 | $27.61 | $30.71 | $25.62 |
Total return (%)2,3 | 25.50 | 6.71 | (9.41) | 20.32 | 41.35 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $8 | $4 | $4 | $5 | $5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.46 | 2.77 | 2.50 | 2.47 | 2.694 |
Expenses net of fee waivers | 2.30 | 2.30 | 2.30 | 2.30 | 2.364 |
Expenses net of fee waivers and credits | 2.30 | 2.30 | 2.30 | 2.30 | 2.334 |
Net investment income | 2.595 | 1.54 | 1.53 | 0.62 | 0.60 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 44 |
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 applicable periods shown.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
5 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
CLASS I SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.90 | $27.78 | $30.94 | $25.80 | $18.45 |
Net investment income1 | 1.103 | 0.68 | 0.72 | 0.45 | 0.35 |
Net realized and unrealized gain (loss) on investments | 6.60 | 1.49 | (3.36) | 5.12 | 7.63 |
Total from investment operations | 7.70 | 2.17 | (2.64) | 5.57 | 7.98 |
Less distributions | |||||
From net investment income | (1.08) | (1.05) | (0.52) | (0.43) | (0.63) |
Net asset value, end of period | $35.52 | $28.90 | $27.78 | $30.94 | $25.80 |
Total return (%)2 | 26.94 | 7.92 | (8.33) | 21.73 | 43.10 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $527 | $392 | $411 | $291 | $84 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.15 | 1.17 | 1.16 | 1.12 | 1.06 |
Expenses net of fee waivers and credits | 1.15 | 1.17 | 1.16 | 1.12 | 1.06 |
Net investment income | 3.423 | 2.49 | 2.54 | 1.61 | 1.34 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 44 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
3 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
See notes to financial statements | Annual report | International Core Fund | 25 |
CLASS R1 SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.75 | $27.66 | $30.77 | $25.67 | $18.36 |
Net investment income1 | 0.855 | 0.51 | 0.53 | 0.24 | 0.23 |
Net realized and unrealized gain (loss) on investments | 6.56 | 1.43 | (3.33) | 5.06 | 7.50 |
Total from investment operations | 7.41 | 1.94 | (2.80) | 5.30 | 7.73 |
Less distributions | |||||
From net investment income | (0.83) | (0.85) | (0.31) | (0.20) | (0.42) |
Net asset value, end of period | $35.33 | $28.75 | $27.66 | $30.77 | $25.67 |
Total return (%)2 | 26.00 | 7.10 | (9.00) | 20.71 | 42.00 |
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 | 5.71 | 7.16 | 7.37 | 6.88 | 8.854 |
Expenses net of fee waivers and credits | 1.90 | 1.90 | 1.90 | 1.92 | 1.924 |
Net investment income | 2.675 | 1.87 | 1.88 | 0.90 | 0.92 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 44 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
3 Less than $500,000.
4 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
5 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
CLASS R2 SHARES Period ended | 2-28-14 | 2-28-131 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $28.91 | $27.80 | |||
Net investment income2 | 0.945 | 0.59 | |||
Net realized and unrealized gain on investments | 6.60 | 1.43 | |||
Total from investment operations | 7.54 | 2.02 | |||
Less distributions | |||||
From net investment income | (0.92) | (0.91) | |||
Net asset value, end of period | $35.53 | $28.91 | |||
Total return (%)3 | 26.32 | 7.39 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —4 | —4 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 15.89 | 20.70 | |||
Expenses net of fee waivers and credits | 1.65 | 1.65 | |||
Net investment income | 2.945 | 2.16 | |||
Portfolio turnover (%) | 47 | 53 |
1 The inception date for Class R2 shares is 3-1-12.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
4 Less than $500,000.
5 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
26 | International Core Fund | Annual report | See notes to financial statements |
CLASS R3 SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.92 | $27.80 | $30.94 | $25.80 | $23.33 |
Net investment income2 | 1.098 | 0.53 | 0.57 | 0.29 | 0.02 |
Net realized and unrealized gain (loss) on investments | 6.40 | 1.46 | (3.38) | 5.08 | 2.90 |
Total from investment operations | 7.49 | 1.99 | (2.81) | 5.37 | 2.92 |
Less distributions | |||||
From net investment income | (0.87) | (0.87) | (0.33) | (0.23) | (0.45) |
Net asset value, end of period | $35.54 | $28.92 | $27.80 | $30.94 | $25.80 |
Total return (%)3 | 26.12 | 7.28 | (8.95) | 20.87 | 12.404 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | —5 | —5 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 18.96 | 47.36 | 45.66 | 44.55 | 10.976 |
Expenses net of fee waivers and credits | 1.80 | 1.80 | 1.80 | 1.83 | 1.916 |
Net investment income | 3.368 | 1.93 | 2.01 | 1.05 | 0.106 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 447 |
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 applicable periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 3-1-09 to 2-28-10.
8 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
CLASS R4 SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.89 | $27.79 | $30.94 | $25.80 | $23.33 |
Net investment income2 | 0.998 | 0.64 | 0.65 | 0.37 | 0.08�� |
Net realized and unrealized gain (loss) on investments | 6.63 | 1.44 | (3.38) | 5.08 | 2.91 |
Total from investment operations | 7.62 | 2.08 | (2.73) | 5.45 | 2.99 |
Less distributions | |||||
From net investment income | (1.00) | (0.98) | (0.42) | (0.31) | (0.52) |
Net asset value, end of period | $35.51 | $28.89 | $27.79 | $30.94 | $25.80 |
Total return (%)3 | 26.66 | 7.61 | (8.67) | 21.21 | 12.694 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | —5 | —5 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 21.10 | 42.45 | 42.74 | 44.22 | 10.716 |
Expenses net of fee waivers and credits | 1.40 | 1.43 | 1.50 | 1.53 | 1.616 |
Net investment income | 3.058 | 2.34 | 2.29 | 1.34 | 0.406 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 447 |
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 applicable periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 3-1-09 to 2-28-10.
8 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
See notes to financial statements | Annual report | International Core Fund | 27 |
CLASS R5 SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.90 | $27.78 | $30.94 | $25.79 | $23.33 |
Net investment income2 | 1.118 | 0.70 | 0.73 | 0.44 | 0.14 |
Net realized and unrealized gain (loss) on investments | 6.57 | 1.45 | (3.38) | 5.10 | 2.91 |
Total from investment operations | 7.68 | 2.15 | (2.65) | 5.54 | 3.05 |
Less distributions | |||||
From net investment income | (1.07) | (1.03) | (0.51) | (0.39) | (0.59) |
Net asset value, end of period | $35.51 | $28.90 | $27.78 | $30.94 | $25.79 |
Total return (%)3 | 26.87 | 7.88 | (8.38) | 21.59 | 12.954 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —5 | —5 | —5 | —5 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 16.15 | 21.14 | 20.87 | 31.41 | 10.506 |
Expenses net of fee waivers and credits | 1.20 | 1.20 | 1.20 | 1.22 | 1.316 |
Net investment income | 3.458 | 2.57 | 2.58 | 1.58 | 0.706 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 447 |
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 applicable periods shown.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 3-1-09 to 2-28-10.
8 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
CLASS R6 SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $28.94 | $27.82 | $28.00 | ||
Net investment income2 | 1.138 | 0.73 | 0.26 | ||
Net realized and unrealized gain on investments | 6.60 | 1.45 | 0.10 | ||
Total from investment operations | 7.73 | 2.18 | 0.36 | ||
Less distributions | |||||
From net investment income | (1.10) | (1.06) | (0.54) | ||
Net asset value, end of period | $35.57 | $28.94 | $27.82 | ||
Total return (%)3 | 27.00 | 7.95 | 1.494 | ||
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 | 14.17 | 21.97 | 16.836 | ||
Expenses net of fee waivers and credits | 1.12 | 1.12 | 1.126 | ||
Net investment income | 3.508 | 2.66 | 1.986 | ||
Portfolio turnover (%) | 47 | 53 | 427 |
1 The inception date for Class R6 shares is 9-1-11.
2 Based on the average daily shares outstanding.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods 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.
8 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
28 | International Core Fund | Annual report | See notes to financial statements |
CLASS 1 SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.94 | $27.82 | $30.99 | $25.84 | $18.48 |
Net investment income1 | 1.144 | 0.75 | 0.79 | 0.50 | 0.46 |
Net realized and unrealized gain (loss) on investments | 6.61 | 1.44 | (3.41) | 5.09 | 7.54 |
Total from investment operations | 7.75 | 2.19 | (2.62) | 5.59 | 8.00 |
Less distributions | |||||
From net investment income | (1.11) | (1.07) | (0.55) | (0.44) | (0.64) |
Net asset value, end of period | $35.58 | $28.94 | $27.82 | $30.99 | $25.84 |
Total return (%)2 | 27.09 | 8.00 | (8.27) | 21.75 | 43.11 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $44 | $37 | $39 | $47 | $44 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.06 | 1.08 | 1.07 | 1.07 | 1.083 |
Expenses net of fee waivers and credits | 1.06 | 1.08 | 1.07 | 1.07 | 1.073 |
Net investment income | 3.534 | 2.76 | 2.76 | 1.83 | 1.83 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 44 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
4 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
CLASS NAV SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $28.92 | $27.80 | $30.98 | $25.82 | $18.47 |
Net investment income1 | 1.144 | 0.82 | 0.81 | 0.51 | 0.49 |
Net realized and unrealized gain (loss) on investments | 6.62 | 1.38 | (3.43) | 5.10 | 7.51 |
Total from investment operations | 7.76 | 2.20 | (2.62) | 5.61 | 8.00 |
Less distributions | |||||
From net investment income | (1.13) | (1.08) | (0.56) | (0.45) | (0.65) |
Net asset value, end of period | $35.55 | $28.92 | $27.80 | $30.98 | $25.82 |
Total return (%)2 | 27.14 | 8.06 | (8.24) | 21.85 | 43.14 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $823 | $611 | $753 | $920 | $800 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.01 | 1.03 | 1.02 | 1.02 | 1.043 |
Expenses net of fee waivers and credits | 1.00 | 1.03 | 1.02 | 1.02 | 1.023 |
Net investment income | 3.544 | 3.03 | 2.84 | 1.87 | 1.99 |
Portfolio turnover (%) | 47 | 53 | 42 | 39 | 44 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
3 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
4 Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.24 and 0.77%, respectively.
See notes to financial statements | Annual report | International Core Fund | 29 |
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 and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions and certain investors. Class R1, Class R2, 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 offered to John Hancock affiliated funds of funds and certain 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the exchange where the security was acquired or most likely will be sold. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. 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. Futures contracts are valued at settlement prices, which are the official closing prices published by the exchange on which they trade. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing vendor. Securities that trade only in the over-the-counter (OTC) market are valued using bid prices. Certain short-term securities with maturities of 60 days or less at the time of purchase are valued at amortized cost.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund’s Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed. Trading in foreign securities may be completed before the daily close of trading on the NYSE. Significant events at the issuer or market level may affect the values of securities between the time when the valuation
30 | International Core Fund | Annual report |
of the securities is generally determined and the close of the NYSE. If a significant event occurs, these securities may be fair valued, as determined in good faith by the fund’s Pricing Committee, following procedures established by the Board of Trustees. The fund uses fair value adjustment factors provided by an independent pricing vendor to value certain foreign securities in order to adjust for events that may occur between the close of foreign exchanges or markets and the close of the NYSE.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the fund’s investments as of February 28, 2014, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $65,192,465 | — | $65,192,465 | — |
Austria | 6,914,797 | — | 6,914,797 | — |
Belgium | 15,315,090 | — | 15,315,090 | — |
Canada | 12,613,002 | $12,613,002 | — | — |
China | 914,466 | — | 914,466 | — |
Denmark | 9,028,785 | — | 9,028,785 | — |
Finland | 19,965,498 | — | 19,965,498 | — |
France | 189,079,243 | — | 189,079,243 | — |
Germany | 113,431,439 | — | 113,431,439 | — |
Hong Kong | 37,628,919 | — | 37,628,919 | — |
Ireland | 4,025,894 | — | 4,025,894 | — |
Isle of Man | 1,337,002 | — | 1,337,002 | — |
Israel | 6,717,819 | — | 6,717,819 | — |
Italy | 86,271,943 | — | 86,271,943 | — |
Japan | 262,200,351 | — | 262,200,351 | — |
Luxembourg | 2,710,352 | — | 2,710,352 | — |
Macau | 7,183,454 | — | 7,183,454 | — |
Netherlands | 99,786,858 | — | 99,786,858 | — |
New Zealand | 5,779,920 | — | 5,779,920 | — |
Norway | 11,262,302 | — | 11,262,302 | — |
Portugal | 7,180,386 | — | 7,180,386 | — |
Singapore | 6,597,723 | — | 6,597,723 | — |
Spain | 117,745,599 | — | 117,745,599 | — |
Sweden | 10,371,196 | — | 10,371,196 | — |
Switzerland | 36,938,284 | — | 36,938,284 | — |
Annual report | International Core Fund | 31 |
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
United Kingdom | $311,181,439 | — | $311,181,439 | — |
United States | 15,923,780 | $5,695,470 | 10,228,310 | — |
Preferred Securities | ||||
Germany | 9,853,663 | — | 9,853,663 | — |
Securities Lending | ||||
Collateral | 42,100,345 | 42,100,345 | — | — |
Short-Term Investments | 36,258,363 | 36,258,363 | — | — |
Total Investments in | ||||
Securities | $1,551,510,377 | $96,667,180 | $1,454,843,197 | — |
Other Financial | ||||
Instruments: | ||||
Forward Foreign | ||||
Currency Contracts | ($1,989,880) | — | ($1,989,880) | — |
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, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Foreign taxes are provided for based on the fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Securities lending. The fund may lend its securities to earn additional income. The fund 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, which has a floating net asset value (NAV) and is registered with the Securities and Exchange Commission as an investment company. JHCIT invests cash received as collateral as part of the securities lending program in short-term money market investments. The fund will receive the benefit of any gains and bear any losses generated by JHCIT with respect to the cash collateral.
If a borrower fails to return loaned securities when due, then the lending agent is responsible to and indemnifies the fund for the lent securities. The lending agent uses the collateral received from the borrower to purchase replacement securities of the same issue, type, class and series of the loaned securities. If the value of the collateral is less than the purchase cost of replacement securities, the lending agent is responsible for satisfying the shortfall but only to the extent that the shortfall is not due to any decrease in the value of JHCIT.
Although the risk of the loss of the securities lent is mitigated by receiving collateral from the borrower and through lending agent indemnification, the fund could experience a delay in recovering securities or could experience a lower than expected return if the borrower fails to return the securities on a timely basis. 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.
Obligations to repay collateral received by the fund is shown on the Statements of assets and liabilities as Payable upon return of securities loaned.
32 | International Core Fund | Annual report |
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), accounting standards and other factors. 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 withholding tax on income and/or capital gains or repatriation taxes imposed by certain countries in which the fund invests. Taxes are accrued based upon investment income, realized gains or unrealized appreciation.
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund’s custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to potentially participate in a $300 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Prior to March 27, 2013, the fund participated in a $100 million unsecured line of credit, also with Citibank N.A., with terms otherwise similar to the existing agreement. Commitment fees for the year ended February 28, 2014 were $1,382. For the year ended February 28, 2014, the fund had no borrowings under either line of credit.
Expenses. Within the John Hancock funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage expenses, 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.
Annual report | International Core Fund | 33 |
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, as of February 28, 2014, the fund has a capital loss carryforward of $130,214,592 available to offset future net realized capital gains. The following table details the capital loss carryforward available as of February 28, 2014:
CAPITAL LOSS CARRYFORWARD EXPIRING AT FEBRUARY 28 | ||||
2018 | 2019 | |||
$123,171,180 | $7,043,412 |
As of February 28, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended February 28, 2014 and 2013 was as follows:
FEBRUARY 28, 2014 | FEBRUARY 28, 2013 | |||
Ordinary Income | $46,185,173 | $45,000,236 |
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 28, 2014 the components of distributable earnings on a tax basis consisted of $20,489,720 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, derivative transactions, wash sale loss deferrals and investments in passive foreign investment companies.
Note 3 — Derivative instruments
The fund may invest in derivatives in order to meet its investment objective. Derivatives include a variety of different instruments that may be traded in the over-the-counter market, on a regulated exchange or through a clearing facility. The risks in using derivatives vary depending upon the structure of the instruments, including the use of leverage, optionality, the liquidity or lack of liquidity of the contract, the creditworthiness of the counterparty or clearing organization and the volatility of the position. Some derivatives involve risks that are potentially greater than the risks associated with investing directly in the referenced securities or other referenced underlying instrument. Specifically, the fund is exposed to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its
34 | International Core Fund | Annual report |
obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction.
Forward foreign currency contracts are typically traded through the OTC market. Certain forwards are regulated by the Commodity Futures Trading Commission (the CFTC) as swaps. Derivative counterparty risk is managed through an ongoing evaluation of the creditworthiness of all potential counterparties and, if applicable, designated clearing organizations. The fund attempts to reduce its exposure to counterparty risk for derivatives traded in the OTC market, whenever possible, by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement with each of its OTC counterparties. The ISDA gives each party to the agreement the right to terminate all transactions traded under the agreement if there is certain deterioration in the credit quality or contractual default of the other party, as defined in the ISDA. Upon an event of default or a termination of the ISDA, the non-defaulting party has the right to close out all transactions and to net amounts owed.
As defined by the ISDA, the fund may have collateral agreements with certain counterparties to mitigate counterparty risk on OTC derivatives. Subject to established minimum levels, collateral for OTC transactions is generally determined based on the net aggregate unrealized gain or loss on contracts with a particular counterparty. Collateral pledged to the fund is held in a segregated account by a third-party agent or held by the custodian bank for the benefit of the fund and can be in the form of cash or debt securities issued by the U.S. government or related agencies; collateral posted by the fund for OTC transactions is held in a segregated account at the fund’s custodian and is noted in the accompanying portfolio of investments, or if cash is posted, on the Statement of assets and liabilities. The fund’s maximum risk of loss due to counterparty risk is equal to the asset value of outstanding contracts offset by collateral received.
Futures are traded or cleared on an exchange or central clearinghouse. Exchange-traded or cleared transactions generally present less counterparty risk to a fund than OTC transactions. The exchange or clearinghouse stands between the fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the exchange or clearinghouse and the clearing member.
Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the fund to the risk of loss up to the notional value of the futures contracts. Use of short futures contracts subjects the fund to unlimited risk of loss.
Upon entering into a futures contract, the fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures collateral receivable/payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the fund. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the year ended February 28, 2014, the fund used futures contracts to gain exposure to certain securities markets. During the year ended February 28, 2014, the fund held futures contracts with notional values ranging up to $73 million as measured at each quarter end. There were no open futures contracts as of February 28, 2014.
Annual report | International Core Fund | 35 |
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell specific currencies at a price that is set on the date of the contract. The forward contract calls for delivery of the currencies 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 if applicable, the risk that currency movements will not favor the fund 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.
During the year ended February 28, 2014, the fund used forward foreign currency contracts to manage against anticipated changes in currency exchange rates. During the year ended February 28, 2014, the fund held forward foreign currency contracts with U.S. Dollar notional values ranging from $290 million to $388 million as measured at each quarter end. The following table summarizes the contracts held at February 28, 2014:
CONTRACTUAL | NET UNREALIZED | |||||||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |||||
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) | ||||
AUD | 7,217,882 | USD | 6,452,859 | Bank of New | 4-4-14 | — | ($25,410) | ($25,410) | ||
York | ||||||||||
AUD | 7,217,883 | USD | 6,498,188 | Barclays Bank | 4-4-14 | — | (70,738) | (70,738) | ||
PLC Wholesale | ||||||||||
CAD | 2,663,440 | USD | 2,423,232 | Bank of America | 4-4-14 | — | (19,679) | (19,679) | ||
N.A. | ||||||||||
CAD | 2,663,440 | USD | 2,422,300 | Barclays Bank | 4-4-14 | — | (18,747) | (18,747) | ||
PLC Wholesale | ||||||||||
EUR | 1,639,669 | USD | 2,215,319 | Bank of America | 4-4-14 | $47,867 | — | 47,867 | ||
N.A. | ||||||||||
EUR | 979,969 | USD | 1,322,978 | Barclays Bank | 4-4-14 | 29,644 | — | 29,644 | ||
PLC Wholesale | ||||||||||
EUR | 2,472,064 | USD | 3,377,470 | Brown Brothers | 4-4-14 | 34,647 | — | 34,647 | ||
Harriman & | ||||||||||
Company | ||||||||||
EUR | 821,881 | USD | 1,110,838 | Deutsche Bank | 4-4-14 | 23,580 | — | 23,580 | ||
AG London | ||||||||||
EUR | 843,395 | USD | 1,139,688 | Morgan Stanley | 4-4-14 | 24,425 | — | 24,425 | ||
and Company | ||||||||||
International PLC | ||||||||||
EUR | 832,354 | USD | 1,124,345 | State Street | 4-4-14 | 24,529 | — | 24,529 | ||
Bank and Trust | ||||||||||
Company | ||||||||||
JPY | 1,526,953,061 | USD | 14,823,817 | Bank of America | 4-4-14 | 182,562 | — | 182,562 | ||
N.A. | ||||||||||
JPY | 1,230,653,930 | USD | 12,136,866 | Bank of New | 4-4-14 | — | (42,415) | (42,415) | ||
York | ||||||||||
JPY | 1,690,011,501 | USD | 16,493,087 | Barclays Bank | 4-4-14 | 115,775 | — | 115,775 | ||
PLC Wholesale | ||||||||||
JPY | 890,114,166 | USD | 8,780,931 | Brown Brothers | 4-4-14 | — | (33,189) | (33,189) | ||
Harriman & | ||||||||||
Company |
36 | International Core Fund | Annual report |
CONTRACTUAL | NET UNREALIZED | |||||||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |||||
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) | ||||
JPY | 699,745,840 | USD | 6,904,932 | Deutsche Bank | 4-4-14 | — | ($28,067) | ($28,067) | ||
AG London | ||||||||||
JPY | 599,782,149 | USD | 5,918,601 | JPMorgan Chase | 4-4-14 | — | (24,145) | (24,145) | ||
Bank | ||||||||||
JPY | 882,757,172 | USD | 8,703,212 | Morgan Stanley | 4-4-14 | — | (27,772) | (27,772) | ||
and Company | ||||||||||
International PLC | ||||||||||
JPY | 757,715,620 | USD | 7,471,900 | State Street | 4-4-14 | — | (25,326) | (25,326) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
SGD | 1,170,589 | USD | 922,850 | Bank of America | 4-4-14 | $597 | — | 597 | ||
N.A. | ||||||||||
SGD | 7,413,167 | USD | 5,863,523 | Barclays Bank | 4-4-14 | — | (15,470) | (15,470) | ||
PLC Wholesale | ||||||||||
SGD | 2,992,272 | USD | 2,359,399 | Brown Brothers | 4-4-14 | 1,126 | — | 1,126 | ||
Harriman & | ||||||||||
Company | ||||||||||
SGD | 2,618,505 | USD | 2,067,235 | Deutsche Bank | 4-4-14 | — | (1,566) | (1,566) | ||
AG London | ||||||||||
SGD | 1,708,301 | USD | 1,345,878 | JPMorgan Chase | 4-4-14 | 1,756 | — | 1,756 | ||
Bank | ||||||||||
SGD | 10,542,765 | USD | 8,328,090 | Morgan Stanley | 4-4-14 | — | (11,180) | (11,180) | ||
and Company | ||||||||||
International PLC | ||||||||||
SGD | 3,301,260 | USD | 2,602,791 | Royal Bank of | 4-4-14 | 1,487 | — | 1,487 | ||
Scotland PLC | ||||||||||
SGD | 3,554,576 | USD | 2,801,614 | State Street | 4-4-14 | 2,497 | — | 2,497 | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 8,457,505 | AUD | 9,533,773 | Bank of America | 4-4-14 | — | (32,221) | (32,221) | ||
N.A. | ||||||||||
USD | 4,891,345 | AUD | 5,513,300 | Bank of New | 4-4-14 | — | (18,192) | (18,192) | ||
York | ||||||||||
USD | 8,733,499 | AUD | 9,838,345 | Barclays Bank | 4-4-14 | — | (27,445) | (27,445) | ||
PLC Wholesale | ||||||||||
USD | 8,171,041 | AUD | 9,211,997 | Brown Brothers | 4-4-14 | — | (32,146) | (32,146) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 4,574,055 | AUD | 5,163,173 | Deutsche Bank | 4-4-14 | — | (23,697) | (23,697) | ||
AG London | ||||||||||
USD | 8,823,535 | AUD | 9,948,659 | Morgan Stanley | 4-4-14 | — | (35,642) | (35,642) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 1,997,176 | AUD | 2,251,608 | State Street | 4-4-14 | — | (7,857) | (7,857) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 2,890,814 | CAD | 3,208,197 | Bank of America | 4-4-14 | — | (4,340) | (4,340) | ||
N.A. | ||||||||||
USD | 977,680 | CAD | 1,084,198 | Bank of New | 4-4-14 | — | (727) | (727) | ||
York | ||||||||||
USD | 4,723,878 | CAD | 5,242,040 | Barclays Bank | 4-4-14 | — | (6,666) | (6,666) | ||
PLC Wholesale | ||||||||||
USD | 753,404 | CAD | 835,807 | Morgan Stanley | 4-4-14 | — | (848) | (848) | ||
and Company | ||||||||||
International PLC |
Annual report | International Core Fund | 37 |
CONTRACTUAL | NET UNREALIZED | |||||||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |||||
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) | ||||
USD | 1,296,594 | CAD | 1,439,388 | Royal Bank of | 4-4-14 | — | ($2,345) | ($2,345) | ||
Scotland PLC | ||||||||||
USD | 3,993,980 | CAD | 4,432,619 | State Street | 4-4-14 | — | (6,123) | (6,123) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 2,073,393 | CHF | 1,875,177 | Bank of America | 4-4-14 | — | (59,234) | (59,234) | ||
N.A. | ||||||||||
USD | 7,346,449 | CHF | 6,642,586 | Barclays Bank | 4-4-14 | — | (208,125) | (208,125) | ||
PLC Wholesale | ||||||||||
USD | 4,505,700 | CHF | 4,071,756 | Brown Brothers | 4-4-14 | — | (125,084) | (125,084) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 3,469,937 | CHF | 3,133,166 | JPMorgan Chase | 4-4-14 | — | (93,394) | (93,394) | ||
Bank | ||||||||||
USD | 4,251,192 | CHF | 3,843,515 | Morgan Stanley | 4-4-14 | — | (120,016) | (120,016) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 6,689,373 | CHF | 6,049,066 | State Street | 4-4-14 | — | (190,195) | (190,195) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 2,647,924 | EUR | 1,936,506 | Bank of America | 4-4-14 | — | (24,978) | (24,978) | ||
N.A. | ||||||||||
USD | 2,647,476 | EUR | 1,936,507 | Brown Brothers | 4-4-14 | — | (25,427) | (25,427) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 5,620,390 | GBP | 3,450,463 | Bank of America | 4-4-14 | — | (156,240) | (156,240) | ||
N.A. | ||||||||||
USD | 2,780,790 | GBP | 1,705,410 | Bank of New | 4-4-14 | — | (74,341) | (74,341) | ||
York | ||||||||||
USD | 10,051,467 | GBP | 6,132,658 | Barclays Bank | 4-4-14 | — | (215,590) | (215,590) | ||
PLC Wholesale | ||||||||||
USD | 2,753,008 | GBP | 1,688,356 | Brown Brothers | 4-4-14 | — | (73,572) | (73,572) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 6,826,884 | GBP | 4,136,283 | Deutsche Bank | 4-4-14 | — | (97,920) | (97,920) | ||
AG London | ||||||||||
USD | 3,357,685 | GBP | 2,059,778 | Morgan Stanley | 4-4-14 | — | (90,715) | (90,715) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 4,743,313 | GBP | 2,843,491 | State Street | 4-4-14 | — | (17,149) | (17,149) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 4,631,032 | JPY | 471,692,808 | Bank of America | 4-4-14 | — | (4,606) | (4,606) | ||
N.A. | ||||||||||
USD | 4,680,246 | JPY | 478,839,669 | Bank of New | 4-4-14 | — | (25,629) | (25,629) | ||
York | ||||||||||
USD | 4,693,494 | JPY | 478,839,668 | Brown Brothers | 4-4-14 | — | (12,380) | (12,380) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 4,681,363 | JPY | 476,457,382 | Morgan Stanley | 4-4-14 | — | (1,100) | (1,100) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 2,979,290 | NZD | 3,666,146 | Bank of America | 4-4-14 | — | (87,441) | (87,441) | ||
N.A. |
38 | International Core Fund | Annual report |
CONTRACTUAL | NET UNREALIZED | |||||||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |||||
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) | ||||
USD | 2,983,656 | NZD | 3,666,146 | Barclays Bank | 4-4-14 | — | ($83,075) | ($83,075) | ||
PLC Wholesale | ||||||||||
USD | 1,658,676 | SEK | 10,833,735 | Bank of America | 4-4-14 | — | (30,158) | (30,158) | ||
N.A. | ||||||||||
USD | 1,465,958 | SEK | 9,581,355 | Bank of New | 4-4-14 | — | (27,647) | (27,647) | ||
York | ||||||||||
USD | 2,187,595 | SEK | 14,300,529 | Barclays Bank | 4-4-14 | — | (41,665) | (41,665) | ||
PLC Wholesale | ||||||||||
USD | 1,489,195 | SEK | 9,726,526 | Deutsche Bank | 4-4-14 | — | (27,040) | (27,040) | ||
AG London | ||||||||||
USD | 1,490,536 | SEK | 9,726,526 | Morgan Stanley | 4-4-14 | — | (25,698) | (25,698) | ||
and Company | ||||||||||
International PLC | ||||||||||
$490,492 | ($2,480,372) | ($1,989,880) |
Currency Abbreviation | |
AUD | Australian Dollar |
CAD | Canadian Dollar |
CHF | Swiss Franc |
EUR | Euro |
GBP | Pound Sterling |
JPY | Japanese Yen |
NZD | New Zealand Dollar |
SEK | Swedish Krona |
SGD | Singapore Dollar |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at February 28, 2014 by risk category:
FINANCIAL | ASSET | LIABILITY | ||
STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
Foreign currency | Receivable/payable for | Forward foreign | $490,492 | ($2,480,372) |
contracts | forward foreign currency | currency | ||
exchange contracts | contracts | |||
$490,492 | ($2,480,372) |
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 28, 2014:
FOREIGN | |||
STATEMENT OF | FUTURES | CURRENCY | |
RISK | OPERATIONS LOCATION | CONTRACTS | TRANSACTION* |
Equity contracts | Net realized | $7,991,547 | — |
gain (loss) on: | |||
Foreign exchange | Net realized | — | $1,425,081 |
contracts | gain (loss) on: | ||
Total | $7,991,547 | $1,425,081 |
* Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
Annual report | International Core Fund | 39 |
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 28, 2014:
TRANSLATION | |||
OF ASSETS | |||
AND LIABILITIES | |||
STATEMENT OF | FUTURES | IN FOREIGN | |
RISK | OPERATIONS LOCATION | CONTRACTS | CURRENCIES* |
Equity contracts | Change in unrealized | $1,012,863 | — |
appreciation | |||
(depreciation) of: | |||
Foreign exchange | Change in unrealized | — | ($2,462,105) |
contracts | appreciation | ||
(depreciation) of: | |||
Total | $1,012,863 | ($2,462,105) |
* 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 Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor or JHA) serves as investment advisor for the fund. Prior to January 1, 2014, John Hancock Investment Management Services, LLC (JHIMS) served as investment advisor for the fund. JHIMS and JHA have identical officers, directors and other personnel, and share common facilities and resources. Terms of the investment management contract with JHA are substantially identical to the former contract with JHIMS. In this report, depending on the context, the term “Advisor” shall refer to either JHA in its current capacity as investment advisor, or to JHIMS in its capacity as investment advisor prior to January 1, 2014. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor equivalent, on an annual basis, to the sum of: a) 0.920% of the first $100,000,000 of the fund’s average daily net assets; b) 0.895% of the next $900,000,000 of the fund’s average daily net assets; c) 0.880% of the next $1,000,000,000 of the fund’s average daily net assets; d) 0.850% of the next $1,000,000,000 of the fund’s average daily net assets; e) 0.825% of the next $1,000,000,000 of the fund’s average daily net assets; and f) 0.800% of the fund’s average daily net assets in excess of $4,000,000,000. The Advisor has a subadvisory agreement with Grantham, Mayo, Van Otterloo & Co. LLC. The fund is not responsible for payment of the subadvisory fees.
Effective June 1, 2013, the Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock funds complex, including the fund (the participating portfolios). The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the participating portfolios that exceeds $75 billion but
40 | International Core Fund | Annual report |
is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; and 0.015% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
The Advisor has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the fund. This agreement excludes certain expenses such as taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund’s business, acquired fund fees and expenses paid indirectly and short dividend expense. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.60%, 2.30%, 2.30%, 1.90%, 1.65%, 1.80%, 1.40%, 1.20% and 1.12% for Class A, Class B, Class C, Class R1, Class R2, Class R3, Class R4, Class R5 and Class R6 shares, respectively. These expense limitations will remain in effect through June 30, 2014, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at the time.
Effective February 1, 2014, the Advisor has contractually agreed to waive fees and/or reimburse Rule 12b-1 fees, bluesky fees, printing fees, class offering fees and transfer agent expenses for Class R6 to the extent that these expenses will not exceed 0.00%. This expense limitation will remain in effect through June 30, 2015, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at the time. This waiver was in effect on a voluntary basis as of January 1, 2014.
The expense reductions amounted to $4,006, $10,893, $8,508, $20,964, $13,729, $16,948, $14,476, $14,505, $14,548, $17,024, $1,792 and $32,915 for Class A, Class B, Class C, Class I, Class R1, Class R2, Class R3, Class R4, Class R5, Class R6, Class 1 and Class NAV shares, respectively, for the year ended February 28, 2014.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended February 28, 2014 were equivalent to a net annual effective rate of 0.87% of the fund’s average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended February 28, 2014 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 R2, 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 R2, Class R3, Class R4 and Class R5, 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.
Annual report | International Core Fund | 41 |
CLASS | RULE 12b-1 FEE | SERVICE FEE | |||
Class A | 0.30% | — | |||
Class B | 1.00% | — | |||
Class C | 1.00% | — | |||
Class R1 | 0.50% | 0.25% | |||
Class R2 | 0.25% | 0.25% | |||
Class R3 | 0.50% | 0.15% | |||
Class R41 | 0.25% | 0.10% | |||
Class R5 | — | 0.05% | |||
Class 1 | 0.05% | — |
1 The Distributor has contractually agreed to waive 0.10% of 12b-1 fees for Class R4 shares to limit the 12b-1 fees on Class R4 shares to 0.15% of the average daily net assets of Class R4 shares, until at least June 30, 2014, unless renewed by mutual agreement of the fund and the Distributor based upon a determination that this is appropriate under the circumstances at the time. Accordingly, the fee limitation amounted to $74 for Class R4 shares for the period ended February 28, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $667,045 for the year ended February 28, 2014. Of this amount, $114,802 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $546,751 was paid as sales commissions to broker-dealers and $5,492 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2014, CDSCs received by the Distributor amounted to $65, $5,245 and $2,039 for Class A, Class B and Class C shares, respectively.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to October 1, 2013, Signature Services Cost were calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Share Classes and all other Retail Share Classes. Within each of these categories, the applicable costs were allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
42 | International Core Fund | Annual report |
Class level expenses. Class level expenses for the year ended February 28, 2014 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING & | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $277,718 | $132,747 | $29,862 | — |
Class B | 31,664 | 4,532 | 15,310 | $226 |
Class C | 53,182 | 7,582 | 15,503 | 679 |
Class I | — | 537,682 | 63,965 | 28,366 |
Class R1 | 1,910 | 84 | 14,478 | 462 |
Class R2 | 298 | 28 | 17,263 | 117 |
Class R3 | 489 | 19 | 14,542 | 85 |
Class R4 | 221 | 17 | 14,542 | 91 |
Class R5 | 33 | 23 | 14,542 | 137 |
Class R6 | — | 31 | 16,310 | 829 |
Class 1 | 20,407 | — | — | — |
Total | $385,922 | $682,745 | $216,317 | $30,992 |
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expense are allocated to the fund based on its net assets relative to other funds within the John Hancock funds complex.
Note 6 — Fund share transactions
Transactions in fund shares for the years ended February 28, 2014 and 2013 were as follows:
Year ended 2-28-14 | Year ended 2-28-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 1,193,640 | $38,456,859 | 4,184,895 | $113,473,414 |
Distributions reinvested | 81,472 | 2,673,898 | 92,891 | 2,589,802 |
Repurchased | (1,331,870) | (42,221,240) | (14,607,121) | (395,841,939) |
Net decrease | (56,758) | ($1,090,483) | (10,329,335) | ($279,778,723) |
Class B shares | ||||
Sold | 13,546 | $440,429 | 16,963 | $453,201 |
Distributions reinvested | 1,976 | 64,743 | 2,780 | 77,294 |
Repurchased | (29,505) | (928,889) | (43,400) | (1,182,374) |
Net decrease | (13,983) | ($423,717) | (23,657) | ($651,879) |
Class C shares | ||||
Sold | 117,924 | $3,922,667 | 26,519 | $731,362 |
Distributions reinvested | 3,341 | 109,417 | 3,511 | 97,597 |
Repurchased | (39,449) | (1,256,759) | (35,376) | (961,865) |
Net increase (decrease) | 81,816 | $2,775,325 | (5,346) | ($132,906) |
Class I shares | ||||
Sold | 4,439,315 | $141,793,583 | 8,474,389 | $232,106,900 |
Distributions reinvested | 476,506 | 15,681,818 | 666,942 | 18,627,692 |
Repurchased | (3,669,369) | (120,019,840) | (10,366,118) | (294,915,181) |
Net increase (decrease) | 1,246,452 | $37,455,561 | (1,224,787) | ($44,180,589) |
Class R1 shares | ||||
Sold | 1,918 | $59,034 | 2,046 | $56,945 |
Distributions reinvested | 193 | 6,367 | 302 | 8,398 |
Repurchased | (671) | (22,021) | (968) | (27,733) |
Net increase | 1,440 | $43,380 | 1,380 | $37,610 |
Annual report | International Core Fund | 43 |
Year ended 2-28-14 | Year ended 2-28-13 | |||
Shares | Amount | Shares | Amount | |
Class R2 shares1 | ||||
Sold | 1,462 | $51,139 | 3,597 | $100,000 |
Distributions reinvested | 4 | 113 | — | — |
Net increase | 1,466 | $51,252 | 3,597 | $100,000 |
Class R3 shares | ||||
Sold | 3,627 | $118,957 | 135 | $3,372 |
Distributions reinvested | 71 | 2,354 | 4 | 118 |
Repurchased | (176) | (5,970) | — | — |
Net increase | 3,522 | $115,341 | 139 | $3,490 |
Class R4 shares | ||||
Sold | 1,820 | $58,734 | 116 | $3,182 |
Distributions reinvested | 46 | 1,518 | 10 | 266 |
Repurchased | (3) | (104) | — | — |
Net increase | 1,863 | $60,148 | 126 | $3,448 |
Class R5 shares | ||||
Sold | 615 | $19,956 | 408 | $10,959 |
Distributions reinvested | 66 | 2,178 | 59 | 1,655 |
Repurchased | (88) | (2,755) | (260) | (7,099) |
Net increase | 593 | $19,379 | 207 | $5,515 |
Class R6 shares | ||||
Sold | 629 | $21,064 | 217 | $6,070 |
Distributions reinvested | 26 | 843 | 5 | 135 |
Repurchased | (3) | (99) | — | — |
Net increase | 652 | $21,808 | 222 | $6,205 |
Class 1 shares | ||||
Sold | 135,764 | $4,396,731 | 75,968 | $2,070,732 |
Distributions reinvested | 41,081 | 1,354,021 | 48,585 | 1,358,914 |
Repurchased | (219,509) | (7,109,480) | (237,152) | (6,491,709) |
Net increase | (42,664) | ($1,358,728) | (112,599) | ($3,062,063) |
Class NAV shares | ||||
Sold | 2,032,900 | $61,320,907 | 4,217,064 | $112,431,436 |
Distributions reinvested | 790,861 | 26,043,066 | 786,663 | 21,987,219 |
Repurchased | (787,930) | (27,038,846) | (10,977,300) | (285,469,815) |
Net increase (decrease) | 2,035,831 | $60,325,127 | (5,973,573) | ($151,051,160) |
Total net increase (decrease) | 3,260,230 | $97,994,393 | (17,663,626) | ($478,701,052) |
1 The inception date for Class R2 shares is 3-1-12.
Affiliates of the fund owned 32%, 71%, 23%, 33%, 32%, 80%, 100% and 100% of shares of beneficial interest of Class R1, Class R2, Class R3, Class R4, Class R5, Class R6, Class 1 and Class NAV, respectively, on February 28, 2014.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $718,071,567 and $604,299,455, respectively, for the year ended February 28, 2014.
44 | International Core Fund | Annual report |
Note 8 — Investment by affiliated funds
Certain investors in the fund are affiliated funds that are managed by the Advisor and its affiliates. The affiliated funds do not invest in the fund for the purpose of exercising management or control; however, this investment may represent a significant portion of the fund’s net assets. At February 28, 2014, funds within the John Hancock funds complex held 54.2% of the fund. The following funds had an affiliate ownership of 5% or more of the fund’s net assets:
AFFILIATED | ||||
PORTFOLIO | CONCENTRATION | |||
Lifestyle Growth Fund | 20.2% | |||
Lifestyle Balanced Fund | 16.5% | |||
Lifestyle Aggressive Fund | 8.5% |
Annual report | International Core Fund | 45 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Funds III 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 Funds III International Core Fund (the “Fund”) at February 28, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2014 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 14, 2014
46 | International Core Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended February 28, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Income derived from foreign sources was $35,169,906. The fund intends to pass through foreign tax credits of $1,052,772.
Eligible shareholders will be mailed a 2014 Form 1099-DIV in early 2015. This will reflect the tax character of all distributions paid in calendar year 2014.
Annual report | International Core Fund | 47 |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
James M. Oates, Born: 1946 | 2012 | 226 |
Managing Director, Wydown Group (financial consulting firm) (since 1994); Chairman and Director, | ||
Emerson Investment Management, Inc. (since 2000); Independent Chairman, Hudson Castle Group, Inc. | ||
(formerly IBEX Capital Markets, Inc.) (financial services company) (1997–2011); Director, Stifel Financial | ||
(since 1996); Director, Investor Financial Services Corporation (1995–2007); Director, Connecticut River | ||
Bancorp (since 1998); Director, Virtus Funds (formerly Phoenix Mutual Funds) (since 1988). | ||
Trustee and Chairperson of the Board, John Hancock retail funds3 (since 2012); Trustee (2005–2006 and | ||
since 2012) and Chairperson of the Board (since 2012), John Hancock Funds III; Trustee (since 2004) and | ||
Chairperson of the Board (since 2005), John Hancock Variable Insurance Trust; Trustee and Chairperson | ||
of the Board, John Hancock Funds II (since 2005). | ||
Charles L. Bardelis,2 Born: 1941 | 2012 | 226 |
Director, Island Commuter Corp. (marine transport). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock | ||
Funds II (since 2005). | ||
Peter S. Burgess,2 Born: 1942 | 2012 | 226 |
Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; | ||
Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln | ||
Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (since 2010); | ||
Director, PMA Capital Corporation (2004–2010). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
William H. Cunningham, Born: 1944 | 2006 | 226 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director, LIN Television (since 2009); | ||
Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, | ||
Resolute Energy Corporation (since 2009); Director, Southwest Airlines (since 2000); former Director, | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); former Director, Hicks Acquisition Company I, | ||
Inc. (until 2007); former Director, Texas Exchange Bank, SSB (formerly Bank of Crowley) (until 2009); | ||
former Advisory Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust | ||
(since 2012); Trustee, John Hancock Funds II (since 2012 and 2005–2006). |
48 | International Core Fund | Annual report |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Grace K. Fey, Born: 1946 | 2012 | 226 |
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier | ||
Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Theron S. Hoffman,2 Born: 1947 | 2012 | 226 |
Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd | ||
Organization (consulting firm) (2003–2010); President, Westport Resources Management (investment | ||
management consulting firm) (2006–2008); Senior Managing Director, Partner, and Operating Head, | ||
Putnam Investments (2000–2003); Executive Vice President, The Thomson Corp. (financial and legal | ||
information publishing) (1997–2000). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 226 |
President, Cambridge College, Cambridge, Massachusetts (since 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation | ||
(since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors | ||
of American Student Assistance Corporation (1996–2009); Board of Directors of Boston Stock Exchange | ||
(2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee of John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Hassell H. McClellan, Born: 1945 | 2012 | 226 |
Trustee, Virtus Variable Insurance Trust (formerly Phoenix Edge Series Funds) (since 2008); Director, The | ||
Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston | ||
College (retired 2013). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
Steven R. Pruchansky, Born: 1944 | 2006 | 226 |
Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director | ||
and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First | ||
American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Director, | ||
First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, | ||
Maxwell Building Corp. (until 1991). | ||
Trustee (since 1992) and Chairperson of the Board (2011–2012), John Hancock retail funds3; Trustee and | ||
Vice Chairperson of the Board, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and | ||
John Hancock Funds II (since 2012). |
Annual report | International Core Fund | 49 |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Gregory A. Russo, Born: 1949 | 2008 | 226 |
Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance | ||
Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare | ||
system); Director and Member of Finance Committee, The Moorings, Inc. (nonprofit continuing care | ||
community) (since 2012); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); | ||
Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester County, | ||
New York, Chamber of Commerce (1986–1992); Director, Treasurer, and Chairman of Audit and | ||
Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of Fundraising | ||
Campaign, United Way of Westchester and Putnam Counties, New York (1990–1995). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Non-Independent Trustees4 | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Craig Bromley, Born: 1966 | 2012 | 226 |
President, John Hancock Financial Services (since 2012); Senior Executive Vice President and General | ||
Manager, U.S. Division, John Hancock Financial Services (since 2012); President and Chief Executive | ||
Officer, Manulife Insurance Company (Manulife Japan) (2005–2012, including prior positions). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Warren A. Thomson, Born: 1955 | 2012 | 226 |
Senior Executive Vice President and Chief Investment Officer, Manulife Financial Corporation and The | ||
Manufacturers Life Insurance Company (since 2009); Chairman and Chief Executive Officer, Manulife | ||
Asset Management (since 2001, including prior positions); Director (since 2006), and President and | ||
Chief Executive Officer (since 2013), Manulife Asset Management Limited; Director and Chairman, | ||
Hancock Natural Resources Group, Inc. (since 2013). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Principal officers who are not Trustees | ||
Name, year of birth | Officer | |
Position(s) held with fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Hugh McHaffie, Born: 1959 | 2012 | |
President* | ||
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment Management Services, | ||
LLC, and John Hancock Funds, LLC (since 2010); President, John Hancock Advisers, LLC (since 2012); | ||
President, John Hancock Investment Management Services, LLC (since 2010); President (since 2012) and | ||
former Trustee (2010–2012), John Hancock retail funds,3 President, John Hancock Variable Insurance | ||
Trust and John Hancock Funds II (since 2009). | ||
*Until 3-13-14. |
50 | International Core Fund | Annual report |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
Andrew G. Arnott, Born: 1971 | 2009 |
Executive Vice President | |
President** | |
Senior Vice President, John Hancock Financial Services (since 2009); Director and Executive Vice | |
President, John Hancock Advisers, LLC (since 2005, including prior positions); Director and Executive | |
Vice President, John Hancock Investment Management Services, LLC (since 2006, including prior | |
positions); President, John Hancock Funds, LLC (since 2004, including prior positions); President | |
(effective 3-13-14) and Executive Vice President, John Hancock retail funds,3 John Hancock Variable | |
Insurance Trust, and John Hancock Funds II (since 2007, including prior positions). | |
**Effective 3-13-14. | |
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 Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds,3 | |
John Hancock Variable Insurance Trust, and John Hancock Funds II (since 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,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, | |
LLC, and John Hancock Investment Management Services, LLC (since 2005). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock | |
Funds II (since 2007). | |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable | |
Insurance Trust and John Hancock Funds II (since 2010 and 2007–2009, including prior positions). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation, or removal.
2 Member of the Audit Committee.
3 “John Hancock retail funds” comprises John Hancock Funds III and 36 other John Hancock funds consisting of 26 series of other John Hancock trusts and 10 closed-end funds.
4 Because Messrs. Bromley and Thomson are senior executives or directors of the advisor and/or its affiliates, each of them is considered an “interested person of the fund,” as defined in the Investment Company Act of 1940.
Annual report | International Core Fund | 51 |
More information
Trustees | Investment advisor |
James M. Oates, Chairperson | John Hancock Advisers, LLC |
Steven R. Pruchansky, Vice Chairperson | |
Charles L. Bardelis* | Subadvisor |
Craig Bromley† | Grantham, Mayo, Van Otterloo & Co. LLC |
Peter S. Burgess* | |
William H. Cunningham | Principal distributor |
Grace K. Fey | John Hancock Funds, LLC |
Theron S. Hoffman* | |
Deborah C. Jackson | Custodian |
Hassell H. McClellan | State Street Bank and Trust Company |
Gregory A. Russo | |
Warren A. Thomson† | Transfer agent |
John Hancock Signature Services, Inc. | |
Officers | |
Andrew G. Arnott# | Legal counsel |
President | 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 | |
Hugh McHaffie** | |
President | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 3-13-14 | |
**Through 3-13-14 |
The fund’s proxy voting policies and procedures, as well as the fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund’s Form N-Q is available on our website and the SEC’s website, sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | ||
800-225-5291 | Regular mail: | Express mail: |
jhinvestments.com | Investment Operations | Investment Operations |
John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. | |
P.O. Box 55913 | 30 Dan Road | |
Boston, MA 02205-5913 | Canton, MA 02021 |
52 | International Core Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internationalcorex49x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internationalcorex49x2.jpg)
This report is for the information of the shareholders of John Hancock International Core Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 66A 2/14 |
MF155709 | 4/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internatlgrowthx1x1.jpg)
A look at performance
Total returns for the period ended February 28, 2014
Average annual total returns (%) | Cumulative total returns (%) | ||||||||
with maximum sales charge | with maximum sales charge | ||||||||
1-year | 5-year | 10-year | Since inception1 | 1-year | 5-year | 10-year | Since inception1 | ||
Class A | 13.95 | 16.47 | — | 5.47 | 13.95 | 114.29 | — | 50.85 | |
Class B | 14.07 | 16.60 | — | 5.39 | 14.07 | 115.48 | — | 49.99 | |
Class C | 18.05 | 16.79 | — | 5.36 | 18.05 | 117.24 | — | 49.72 | |
Class I2 | 20.31 | 18.13 | — | 6.61 | 20.31 | 130.07 | — | 63.89 | |
Class 12 | 20.43 | 18.19 | — | 6.65 | 20.43 | 130.64 | — | 64.41 | |
Index 1† | 17.82 | 17.71 | — | 5.25 | 17.82 | 125.96 | — | 48.43 | |
Index 2† | 19.78 | 18.14 | — | 4.65 | 19.78 | 130.16 | — | 42.01 | |
Performance figures assume all distributions 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 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 to Class I and Class 1 shares.
The expense ratios of the fund, both net (including any fee waivers and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 6-30-14 for Class A, Class B, Class C, Class I, and Class 1 shares. Had the fee waivers and/or expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class 1 | ||||
Net (%) | 1.60 | 2.30 | 2.30 | 1.24 | 1.15 | |||
Gross (%) | 1.68 | 3.92 | 3.32 | 1.27 | 1.19 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund’s website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† Index 1 is the MSCI EAFE Growth Index; Index 2 is the MSCI EAFE Index.
See the following page for footnotes.
6 | International Growth Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internatlgrowthx3x1.jpg)
With maximum | Without | ||||
Start date | sales charge | sales charge | Index 1 | Index 2 | |
Class B3 | 6-12-06 | $14,999 | $14,999 | $14,843 | $14,201 |
Class C3 | 6-12-06 | 14,972 | 14,972 | 14,843 | 14,201 |
Class I2 | 6-12-06 | 16,389 | 16,389 | 14,843 | 14,201 |
Class 12 | 6-12-06 | 16,441 | 16,441 | 14,843 | 14,201 |
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.
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.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 From 6-12-06.
2 For certain types of investors, as described in the fund’s prospectuses.
3 The contingent deferred sales charge is not applicable.
Annual report | International Growth Fund | 7 |
Management’s discussion of
Fund performance
By Grantham, Mayo, Van Otterloo & Co. LLC (GMO)
Stocks in developed markets outside the United States generated strong performance during the 12 months ended February 28, 2014. Key catalysts included the eurozone’s return to economic growth following a recession, Japan’s progress in reviving its long-stagnant economy, and the continuing economic recovery in the United Kingdom.
During the period, John Hancock International Growth Fund’s Class A shares returned 19.95%, excluding sales charges, outpacing the 17.82% return of the fund’s benchmark, the MSCI EAFE Growth Index.
With respect to the three inputs for our quantitative investment process—intrinsic value, quality and momentum—stocks that we ranked highly due to their momentum characteristics served to aid the fund’s performance, particularly during the early months of the period.
Stock selection in the United Kingdom was a major contributor to relative performance, as the fund’s U.K.-based holdings outperformed the U.K.-based component of the benchmark by a sizable margin. The United Kingdom represented the fund’s largest country weighting during the period, and several U.K. stocks were standout performers. Foremost among these was Lloyds Banking Group PLC, a company in which the fund had an overweight position.
Stock selection in France also aided fund performance, with notable contributions from financial services company Societe Generale, SA and communications networking provider Alcatel-Lucent.
The fund’s relative underweight exposure to Australian equities significantly aided performance, as this market posted negative returns during the period.
The most significant performance detractor from a geographic standpoint was our stock selection in Japan. The largest detractor among the fund’s individual equity holdings was an underweight in Japan-based automaker Toyota Motor Corp. The fund’s lack of exposure to benchmark index component UBS AG hindered performance, as shares of the Switzerland-based bank surged. Also weighing on results was an underweight in pharmaceutical company Bayer AG (Germany), another strong performer.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance does not guarantee future results.
8 | International Growth Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
▪ Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the fund’s actual ongoing operating expenses and is based on the fund’s actual return. It assumes an account value of $1,000.00 on September 1, 2013, with the same investment held until February 28, 2014.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1,000.00 | $1,151.80 | $8.27 | 1.55% |
Class B | 1,000.00 | 1,147.90 | 12.25 | 2.30% |
Class C | 1,000.00 | 1,147.20 | 12.24 | 2.30% |
Class I | 1,000.00 | 1,153.30 | 6.46 | 1.21% |
Class 1 | 1,000.00 | 1,153.90 | 5.98 | 1.12% |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 28, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internatlgrowthx5x1.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, 2013, with the same investment held until February 28, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1,000.00 | $1,017.10 | $7.75 | 1.55% |
Class B | 1,000.00 | 1,013.40 | 11.48 | 2.30% |
Class C | 1,000.00 | 1,013.40 | 11.48 | 2.30% |
Class I | 1,000.00 | 1,018.80 | 6.06 | 1.21% |
Class 1 | 1,000.00 | 1,019.20 | 5.61 | 1.12% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectuses for details regarding transaction costs.
1 Expenses are equal to the fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | International Growth Fund | Annual report |
Portfolio summary
Top 10 Holdings (21.7% of Net Assets on 2-28-14)1,2 | ||||
Roche Holding AG | 3.5% | Novo Nordisk A/S, Class B | 1.9% | |
GlaxoSmithKline PLC | 3.3% | Daimler AG | 1.5% | |
Nestle SA | 2.8% | Lloyds Banking Group PLC | 1.5% | |
British American Tobacco PLC | 2.4% | Diageo PLC | 1.5% | |
Unilever NV | 1.9% | Toyota Motor Corp. | 1.4% | |
Sector Composition1,3 | ||||
Consumer Discretionary | 17.4% | Materials | 5.0% | |
Health Care | 16.9% | Telecommunication Services | 4.6% | |
Consumer Staples | 15.9% | Energy | 2.7% | |
Financials | 14.0% | Utilities | 1.4% | |
Industrials | 12.1% | Short-Term Investments & Other | 4.1% | |
Information Technology | 5.9% | |||
Top 10 Countries1,2,3 | ||||
United Kingdom | 22.1% | Australia | 5.9% | |
Japan | 15.7% | Denmark | 3.5% | |
Switzerland | 11.4% | Netherlands | 3.1% | |
Germany | 7.3% | Spain | 2.8% | |
France | 7.0% | Sweden | 2.5% | |
1 As a percentage of net assets on 2-28-14.
2 Cash and cash equivalents not included.
3 Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Growth stocks may be more susceptible to earnings disappointments. Hedging and other strategic transactions may increase volatility and result in losses if not successful. Sector investing is subject to greater risks than the market as a whole. Because the fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors and investments focused in one sector may fluctuate more widely than investments diversified across sectors. Please see the fund’s prospectuses for additional risks.
Annual report | International Growth Fund | 11 |
Fund’s investments
As of 2-28-14
Shares | Value | |
Common Stocks 95.2% | $423,593,350 | |
(Cost $361,266,902) | ||
Australia 5.9% | 26,378,536 | |
BHP Billiton, Ltd. | 177,208 | 6,077,983 |
Coca-Cola Amatil, Ltd. | 40,835 | 412,243 |
Commonwealth Bank of Australia | 12,737 | 850,712 |
CSL, Ltd. | 36,481 | 2,355,906 |
Flight Centre Travel Group, Ltd. | 7,892 | 366,814 |
Fortescue Metals Group, Ltd. | 98,413 | 479,044 |
JB Hi-Fi, Ltd. (L) | 20,271 | 332,219 |
National Australia Bank, Ltd. | 94,151 | 2,927,995 |
Rio Tinto, Ltd. | 45,145 | 2,697,087 |
Suncorp Group, Ltd. | 52,704 | 573,072 |
Telstra Corp., Ltd. | 430,630 | 1,942,676 |
Westpac Banking Corp. | 39,110 | 1,173,768 |
Woodside Petroleum, Ltd. | 53,400 | 1,811,296 |
Woolworths, Ltd. | 135,817 | 4,377,721 |
Austria 0.1% | 441,521 | |
Erste Group Bank AG | 8,469 | 299,792 |
OMV AG | 3,119 | 141,729 |
Belgium 1.1% | 5,059,615 | |
Ageas | 30,988 | 1,417,555 |
Anheuser-Busch InBev NV | 8,562 | 895,534 |
Colruyt SA | 11,835 | 655,586 |
Delhaize Group SA | 12,356 | 887,222 |
KBC Groep NV | 12,484 | 789,512 |
Umicore SA | 8,433 | 414,206 |
Bermuda 0.2% | 888,465 | |
Seadrill, Ltd. | 24,116 | 888,465 |
Canada 1.9% | 8,601,815 | |
Canadian National Railway Company | 65,600 | 3,706,255 |
Canadian Pacific Railway, Ltd. | 3,600 | 564,888 |
Enbridge, Inc. (L) | 33,000 | 1,394,744 |
Magna International, Inc. | 20,200 | 1,798,170 |
Rogers Communications, Inc., Class B | 9,100 | 351,738 |
Saputo, Inc. | 8,900 | 439,173 |
Tim Hortons, Inc. | 6,400 | 346,847 |
12 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
China 0.1% | $307,512 | |
Yangzijiang Shipbuilding Holdings, Ltd. | 343,000 | 307,512 |
Denmark 3.5% | 15,453,280 | |
A.P. Moeller Maersk A/S, Series B | 26 | 317,535 |
Chr Hansen Holding A/S | 7,364 | 304,660 |
Coloplast A/S | 23,692 | 1,994,595 |
GN Store Nord A/S | 21,470 | 529,382 |
Novo Nordisk A/S, Class B | 177,848 | 8,463,611 |
Novozymes A/S, B Shares (L) | 29,419 | 1,367,322 |
Pandora A/S | 17,755 | 1,201,295 |
Vestas Wind Systems A/S (I) | 35,393 | 1,274,880 |
Finland 1.5% | 6,882,711 | |
Fortum OYJ | 29,916 | 708,294 |
Kone OYJ (L) | 45,693 | 1,858,298 |
Neste Oil OYJ (L) | 17,964 | $384,580 |
Nokia OYJ (I) | 192,243 | 1,463,294 |
Nokian Renkaat OYJ | 6,229 | 279,162 |
Orion OYJ, Series B | 9,495 | 312,267 |
Sampo OYJ, Class A | 26,045 | 1,317,900 |
Wartsila OYJ Abp | 9,469 | 558,916 |
France 7.0% | 31,129,880 | |
Airbus Group NV | 26,127 | 1,919,741 |
Alcatel-Lucent (I) | 305,978 | 1,324,049 |
AXA SA | 130,217 | 3,391,803 |
BNP Paribas SA | 11,138 | 909,778 |
Bureau Veritas SA | 36,081 | 993,077 |
Cap Gemini SA | 8,719 | 681,257 |
Carrefour SA | 17,177 | 631,938 |
Casino Guichard Perrachon SA | 7,160 | 811,070 |
Credit Agricole SA (I) | 61,476 | 973,312 |
Danone SA | 7,829 | 552,067 |
Dassault Systemes SA | 6,920 | 793,906 |
Electricite de France SA | 24,998 | 991,810 |
Essilor International SA | 14,895 | 1,551,541 |
ICADE | 2,735 | 269,360 |
Iliad SA | 4,969 | 1,211,692 |
L’Oreal SA | 19,326 | 3,274,129 |
Natixis | 33,305 | 239,186 |
Neopost SA | 3,723 | 341,687 |
Peugeot SA (I)(L) | 40,145 | 707,123 |
Publicis Groupe SA | 12,138 | 1,151,960 |
Renault SA | 3,552 | 351,558 |
Safran SA | 24,705 | 1,736,608 |
Sanofi | 4,206 | 437,465 |
Societe BIC SA | 2,182 | 279,513 |
Societe Generale SA | 47,264 | 3,136,261 |
Suez Environnement Company | 16,083 | 321,405 |
Teleperformance SA | 6,869 | 436,209 |
See notes to financial statements | Annual report | International Growth Fund | 13 |
Shares | Value | |
France (continued) | ||
Valeo SA | 6,440 | $900,844 |
Vallourec SA | 2,597 | 139,031 |
Wendel SA | 4,468 | 670,500 |
Germany 6.6% | 29,580,560 | |
Adidas AG | 2,664 | 309,745 |
Bayer AG | 12,898 | 1,828,942 |
Beiersdorf AG | 9,055 | 923,784 |
Continental AG | 9,970 | 2,423,253 |
Daimler AG | 73,314 | 6,820,178 |
Deutsche Lufthansa AG (I) | 25,451 | 658,226 |
Deutsche Post AG | 82,345 | 3,087,386 |
Deutsche Telekom AG | 49,397 | 835,663 |
Duerr AG | 9,838 | 820,938 |
Fielmann AG | 2,318 | 283,011 |
Freenet AG | 30,898 | 1,043,225 |
Hannover Rueckversicherung AG | 3,546 | 301,587 |
Hochtief AG | 4,029 | 374,289 |
KUKA AG | 5,590 | 278,349 |
Leoni AG | 3,358 | 253,901 |
Merck KGaA | 1,787 | 313,628 |
Metro AG (I) | 3,834 | 158,581 |
Muenchener Rueckversicherungs AG | 5,972 | 1,305,726 |
ProSiebenSat.1 Media AG | 12,690 | 604,062 |
Salzgitter AG | 6,748 | 284,514 |
SAP AG | 40,874 | 3,287,583 |
Sky Deutschland AG (I) | 95,430 | 997,585 |
Software AG | 6,751 | 268,665 |
Stada Arzneimittel AG | 11,167 | 574,035 |
Symrise AG | 6,477 | 317,721 |
ThyssenKrupp AG (I) | 10,910 | 296,741 |
Volkswagen AG | 2,459 | 626,597 |
Wacker Chemie AG | 2,247 | 302,645 |
Guernsey, Channel Islands 0.1% | 463,294 | |
Resolution, Ltd. | 73,318 | 463,294 |
Hong Kong 1.9% | 8,417,087 | |
AIA Group, Ltd. | 60,200 | 294,952 |
ASM Pacific Technology, Ltd. | 13,500 | 122,484 |
Cheung Kong Infrastructure Holdings, Ltd. | 45,000 | 294,786 |
CLP Holdings, Ltd. | 29,000 | 225,839 |
Galaxy Entertainment Group, Ltd. (I) | 250,000 | 2,516,386 |
Hang Seng Bank, Ltd. | 37,000 | 600,692 |
Hong Kong & China Gas Company, Ltd. | 423,580 | 913,324 |
Hong Kong Exchanges & Clearing, Ltd. | 31,983 | 497,598 |
Hong Kong Land Holdings, Ltd. | 55,000 | 345,389 |
Hutchison Whampoa, Ltd. | 42,000 | 567,346 |
Luk Fook Holdings International, Ltd. | 29,000 | 99,157 |
Noble Group, Ltd. | 476,000 | 387,295 |
14 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Hong Kong (continued) | ||
Power Assets Holdings, Ltd. | 105,000 | $878,306 |
Wharf Holdings, Ltd. | 45,000 | 315,489 |
Xinyi Glass Holdings Company, Ltd. | 402,000 | 358,044 |
Ireland 1.1% | 4,977,435 | |
Experian PLC | 55,057 | 995,852 |
Kerry Group PLC | 16,306 | 1,231,580 |
Paddy Power PLC | 9,989 | 833,981 |
Shire PLC | 23,777 | 1,315,229 |
Smurfit Kappa Group PLC | 21,576 | 600,793 |
Isle of Man 0.1% | 403,934 | |
Playtech PLC | 29,553 | 403,934 |
Israel 1.0% | 4,291,195 | |
Bezeq The Israeli Telecommunication Corp., Ltd. | 213,853 | 348,373 |
Israel Chemicals, Ltd. (L) | 30,276 | 257,015 |
Teva Pharmaceutical Industries, Ltd. | 73,795 | 3,685,807 |
Italy 1.3% | 5,659,235 | |
Assicurazioni Generali SpA | 40,149 | 901,477 |
Atlantia SpA | 18,440 | 466,729 |
Azimut Holding SpA | 33,908 | 1,130,189 |
Fiat SpA (I) | 136,646 | 1,426,740 |
Mediaset SpA (I) | 89,219 | 511,464 |
Saipem SpA | 12,309 | 289,174 |
UniCredit SpA | 80,063 | 635,365 |
Unione di Banche Italiane SCPA | 34,409 | 298,097 |
Japan 15.7% | 69,981,215 | |
3-D Matrix, Ltd. (I)(L) | 11,100 | 478,384 |
ABC–Mart, Inc. | 9,400 | 373,166 |
Aeon Company, Ltd. | 31,700 | 388,453 |
Aeon Mall Company, Ltd. | 8,700 | 241,574 |
Alps Electric Company, Ltd. (I) | 13,000 | 168,341 |
Anritsu Corp. | 19,000 | 218,009 |
Asahi Kasei Corp. | 66,000 | 470,357 |
Astellas Pharma, Inc. | 9,700 | 630,507 |
Bridgestone Corp. | 11,000 | 397,836 |
Central Japan Railway Company, Ltd. | 4,700 | 548,547 |
Chugai Pharmaceutical Company, Ltd. | 23,000 | 589,422 |
COLOPL, Inc. (I)(L) | 15,400 | 444,391 |
CROOZ, Inc. (L) | 8,100 | 457,099 |
CyberAgent, Inc. | 8,100 | 356,843 |
Daihatsu Motor Company, Ltd. | 16,500 | 265,811 |
Daikin Industries, Ltd. | 12,100 | 697,164 |
Dainippon Sumitomo Pharma Company, Ltd. | 9,500 | 176,357 |
Daito Trust Construction Company, Ltd. | 11,300 | 1,053,158 |
Daiwa Securities Group, Inc. | 81,000 | 733,024 |
Dena Company, Ltd. (L) | 21,200 | 459,610 |
Eisai Company, Ltd. | 10,400 | 406,939 |
FANUC Corp. | 4,100 | 713,744 |
See notes to financial statements | Annual report | International Growth Fund | 15 |
Shares | Value | |
Japan (continued) | ||
Fast Retailing Company, Ltd. | 2,300 | $796,239 |
Fuji Heavy Industries, Ltd. | 74,800 | 2,030,414 |
GNI Group, Ltd. (I) | 35,000 | 144,600 |
Gree, Inc. (L) | 32,400 | 359,556 |
Hino Motors, Ltd. | 37,000 | 549,095 |
Hirose Electric Company, Ltd. | 1,700 | 242,893 |
Hisamitsu Pharmaceutical Company, Inc. | 14,400 | 674,885 |
Hitachi, Ltd. | 182,000 | 1,441,258 |
Hoya Corp. | 37,100 | 1,102,714 |
Idemitsu Kosan Company, Ltd. | 7,300 | 149,406 |
IHI Corp. | 65,000 | 298,452 |
Iida Group Holdings Company, Ltd. (I) | 3,400 | 51,716 |
Ito En, Ltd. | 14,700 | 330,329 |
ITOCHU Corp. | 52,000 | 648,019 |
Izumi Company, Ltd. | 15,300 | 446,523 |
JAFCO Company, Ltd. | 3,700 | 193,415 |
Japan Exchange Group, Inc. | 10,700 | 255,294 |
Japan Real Estate Investment Corp. | 37 | 200,921 |
Japan Tissue Engineering Company, Ltd. (I)(L) | 48 | 168,893 |
Japan Tobacco, Inc. | 17,800 | 566,925 |
JGC Corp. | 10,000 | 370,901 |
K’s Holdings Corp. | 5,000 | 136,922 |
Kakaku.com, Inc. | 34,600 | 577,800 |
Kao Corp. | 21,600 | 743,778 |
KDDI Corp. | 21,300 | 1,302,615 |
Keio Corp. | 48,000 | 340,219 |
Keyence Corp. | 5,800 | 2,497,631 |
Kintetsu Corp. | 128,000 | 464,915 |
Kobe Steel, Ltd. (I) | 305,000 | 417,824 |
Kubota Corp. | 40,000 | 562,114 |
Lawson, Inc. | 8,000 | 556,254 |
Makita Corp. | 8,500 | 474,651 |
Mazda Motor Corp. (I) | 372,000 | 1,796,764 |
Medinet Company, Ltd. (I)(L) | 532 | 157,349 |
Medipal Holdings Corp. | 24,100 | 372,550 |
Minebea Company, Ltd. | 54,000 | 477,597 |
Mitsubishi Electric Corp. | 57,000 | 678,371 |
Mitsui Fudosan Company, Ltd. | 14,000 | 418,499 |
Monex Group, Inc. | 43,700 | 179,229 |
Murata Manufacturing Company, Ltd. | 10,800 | 1,031,077 |
Nidec Corp. | 8,000 | 983,745 |
Nippon Building Fund, Inc. | 37 | 212,198 |
Nippon Steel & Sumitomo Metal Corp. | 104,000 | 304,712 |
Nishimatsu Construction Company, Ltd. | 33,000 | 113,377 |
Nitori Holdings Company, Ltd. | 22,900 | 1,037,326 |
Nomura Holdings, Inc. | 100,000 | 678,349 |
Nomura Research Institute, Ltd. | 21,600 | 706,640 |
NSK, Ltd. | 29,000 | 318,987 |
16 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Japan (continued) | ||
NTT DOCOMO, Inc. | 40,300 | $671,702 |
Odakyu Electric Railway Company, Ltd. | 79,000 | 708,014 |
Oji Holdings Corp. | 65,000 | 312,202 |
Omron Corp. | 11,500 | 485,034 |
Ono Pharmaceutical Company, Ltd. | 7,100 | 703,906 |
Oracle Corp. Japan | 6,100 | 254,535 |
Oriental Land Company, Ltd. | 2,500 | 375,583 |
ORIX Corp. | 26,700 | 395,977 |
Panasonic Corp. | 135,500 | 1,697,187 |
Park24 Company, Ltd. | 25,600 | 517,571 |
Rakuten, Inc. | 21,100 | 303,328 |
Santen Pharmaceutical Company, Ltd. | 15,000 | 703,247 |
Sawai Pharmaceutical Company, Ltd. | 3,600 | 230,154 |
Secom Company, Ltd. | 7,800 | 441,583 |
Seiko Epson Corp. | 25,500 | 768,455 |
Seven Bank, Ltd. | 117,200 | 429,891 |
Sharp Corp. (I) | 57,000 | 185,251 |
Shimamura Company, Ltd. | 6,800 | 615,943 |
Shimano, Inc. | 11,000 | 997,030 |
Shionogi & Company, Ltd. | 17,400 | 378,055 |
SMC Corp. | 2,800 | 713,319 |
SoftBank Corp. | 11,300 | 856,351 |
Stanley Electric Company, Ltd. | 22,000 | 506,161 |
Start Today Company, Ltd. | 21,800 | 538,499 |
Sumitomo Realty & Development Company, Ltd. | 8,000 | 323,236 |
Sumitomo Rubber Industries, Ltd. | 17,500 | 236,359 |
Suzuken Company, Ltd. | 5,300 | 201,416 |
Sysmex Corp. | 12,600 | 754,899 |
Taiheiyo Cement Corp. | 64,000 | 226,026 |
Taisei Corp. | 81,000 | 361,875 |
Taiyo Yuden Company, Ltd. | 26,200 | 324,842 |
Takara Bio, Inc. | 15,000 | 255,589 |
Takeda Pharmaceutical Company, Ltd. | 12,900 | 619,934 |
TDK Corp. | 6,200 | 268,599 |
Terumo Corp. | 17,700 | 757,750 |
The Dai-ichi Life Insurance Company, Ltd. | 68,000 | 996,062 |
Tobu Railway Company, Ltd. | 112,000 | 545,171 |
Tokyo Electric Power Company, Inc. (I) | 98,300 | 459,754 |
Tokyo Gas Company, Ltd. | 43,000 | 216,012 |
Toshiba Corp. | 64,000 | 277,773 |
Tosoh Corp. | 103,000 | 399,488 |
TOTO, Ltd. | 21,000 | 298,001 |
Toyota Motor Corp. | 106,600 | 6,135,158 |
Trend Micro, Inc. | 16,000 | 538,294 |
Tsumura & Company, Ltd. | 19,300 | 514,775 |
Tsuruha Holdings, Inc. | 2,900 | 270,240 |
Unicharm Corp. | 10,200 | 579,842 |
USS Company, Ltd. | 6,300 | 85,138 |
See notes to financial statements | Annual report | International Growth Fund | 17 |
Shares | Value | |
Japan (continued) | ||
Yahoo Japan Corp. | 158,300 | $1,003,690 |
Yamada Denki Company, Ltd. | 81,000 | 268,968 |
Yamaha Corp. | 13,900 | 190,854 |
Yamaha Motor Company, Ltd. | 17,200 | 249,815 |
Luxembourg 0.4% | 1,597,822 | |
Millicom International Cellular SA, SDR | 7,953 | 828,106 |
SES SA | 22,101 | 769,716 |
Macau 0.4% | 1,633,673 | |
Sands China, Ltd. | 194,400 | 1,633,673 |
Netherlands 3.1% | 14,045,748 | |
ASML Holding NV | 3,926 | 338,835 |
Heineken NV | 9,603 | 648,432 |
ING Groep NV (I) | 154,081 | 2,237,574 |
Koninklijke Ahold NV | 25,862 | 482,086 |
Koninklijke KPN NV (I) | 44,157 | 157,377 |
PostNL NV (I) | 46,183 | 219,925 |
Randstad Holding NV | 9,399 | 590,414 |
Reed Elsevier NV | 37,663 | 824,249 |
Unilever NV | 216,131 | 8,546,856 |
New Zealand 0.1% | 397,315 | |
Telecom Corp. of New Zealand, Ltd. | 189,358 | 397,315 |
Norway 0.6% | 2,694,469 | |
DNB ASA | 42,357 | 766,712 |
Marine Harvest ASA (L) | 22,172 | 244,632 |
Norwegian Air Shuttle AS (I)(L) | 11,050 | 473,692 |
Statoil ASA | 33,309 | 878,559 |
TGS-NOPEC Geophysical Company ASA | 10,504 | 330,874 |
Portugal 0.1% | 378,361 | |
Jeronimo Martins SGPS SA | 7,449 | 126,293 |
Zon Optimus SGPS SA | 32,271 | 252,068 |
Singapore 1.9% | 8,514,438 | |
Ezion Holdings, Ltd. | 166,400 | 295,839 |
Keppel Corp., Ltd. | 54,400 | 449,828 |
Oversea-Chinese Banking Corp., Ltd. | 219,006 | 1,652,709 |
SATS, Ltd. | 107,000 | 252,619 |
Sembcorp Industries, Ltd. | 101,000 | 431,513 |
Singapore Exchange, Ltd. | 121,000 | 657,309 |
Singapore Press Holdings, Ltd. | 194,000 | 635,732 |
Singapore Technologies Engineering, Ltd. | 219,000 | 656,967 |
Singapore Telecommunications, Ltd. | 658,000 | 1,869,920 |
SMRT Corp., Ltd. | 140,000 | 113,208 |
StarHub, Ltd. | 163,000 | 537,835 |
United Overseas Bank, Ltd. | 59,000 | 960,959 |
Spain 2.8% | 12,299,437 | |
Amadeus IT Holding SA, A Shares (L) | 43,958 | 1,930,416 |
Banco Santander SA | 223,453 | 2,017,029 |
18 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Spain (continued) | ||
Bankinter SA | 56,431 | $455,541 |
CaixaBank SA | 56,935 | 358,513 |
Distribuidora Internacional de Alimentacion SA | 91,865 | 786,846 |
Enagas SA | 8,630 | 250,740 |
Ferrovial SA | 26,731 | 563,280 |
Gamesa Corporacion Tecnologica SA (I) | 73,839 | 828,860 |
Gas Natural SDG SA | 15,139 | 387,715 |
Grifols SA | 7,534 | 429,317 |
Inditex SA | 13,024 | 1,870,173 |
Red Electrica Corp. SA | 7,800 | 606,474 |
Sacyr SA (I) | 100,985 | 610,543 |
Telefonica SA | 78,742 | 1,203,990 |
Sweden 2.5% | 10,953,325 | |
Boliden AB | 18,436 | 292,085 |
Hennes & Mauritz AB, B Shares | 127,396 | 5,736,708 |
Investment AB Kinnevik, B Shares | 29,442 | 1,141,826 |
Investor AB, B Shares | 48,035 | 1,709,174 |
Scania AB, B Shares | 18,556 | 569,156 |
Skandinaviska Enskilda Banken AB, Series A | 34,309 | 481,482 |
Svenska Cellulosa AB, B Shares | 13,102 | 397,383 |
Swedbank AB, Class A | 22,194 | 625,511 |
Switzerland 11.4% | 50,711,460 | |
ABB, Ltd. (I) | 28,392 | 724,624 |
Actelion, Ltd. (I) | 16,307 | 1,727,874 |
Adecco SA (I) | 5,281 | 455,059 |
Cie Financiere Richemont SA | 24,085 | 2,392,731 |
Geberit AG | 5,067 | 1,592,383 |
Georg Fischer AG (I) | 434 | 347,494 |
Givaudan SA (I) | 504 | 789,616 |
Kuehne & Nagel International AG | 2,991 | 426,941 |
Nestle SA | 165,471 | 12,500,531 |
Novartis AG | 61,339 | 5,105,250 |
Pargesa Holding SA | 669 | 57,470 |
Partners Group Holding AG | 3,576 | 931,045 |
Roche Holding AG | 50,109 | 15,428,560 |
Schindler Holding AG, Participation Certificates | 4,096 | 613,684 |
SGS SA | 691 | 1,709,896 |
Sonova Holding AG (I) | 2,767 | 390,628 |
Straumann Holding AG | 1,179 | 253,000 |
Swiss Life Holding AG (I) | 3,548 | 882,507 |
Swisscom AG | 1,456 | 861,752 |
Syngenta AG | 2,705 | 984,730 |
The Swatch Group AG | 4,846 | 568,718 |
The Swatch Group AG, Bearer Shares | 2,518 | 1,676,886 |
Transocean, Ltd. | 6,881 | 290,081 |
See notes to financial statements | Annual report | International Growth Fund | 19 |
Shares | Value | |
United Kingdom 22.1% | $98,399,580 | |
Aberdeen Asset Management PLC | 50,863 | 331,849 |
Admiral Group PLC | 27,424 | 658,386 |
ARM Holdings PLC | 35,062 | 587,744 |
Ashmore Group PLC | 84,203 | 444,551 |
Ashtead Group PLC | 50,515 | 740,142 |
ASOS PLC (I) | 9,075 | 1,055,738 |
Associated British Foods PLC | 7,697 | 386,110 |
AstraZeneca PLC | 7,545 | 512,888 |
Aviva PLC | 33,598 | 267,122 |
Babcock International Group PLC | 33,156 | 816,272 |
Barratt Developments PLC | 112,834 | 830,403 |
BG Group PLC | 281,567 | 5,122,754 |
British American Tobacco PLC | 197,609 | 10,771,943 |
British Sky Broadcasting Group PLC | 27,721 | 436,045 |
BT Group PLC | 575,217 | 3,956,246 |
Bunzl PLC | 38,900 | 1,023,899 |
Burberry Group PLC | 19,840 | 511,182 |
Capita PLC | 53,268 | 1,016,648 |
Cobham PLC | 156,681 | 782,183 |
Diageo PLC | 211,460 | 6,640,271 |
easyJet PLC | 18,726 | 538,553 |
GlaxoSmithKline PLC | 518,377 | 14,519,547 |
ICAP PLC | 30,518 | 223,909 |
IG Group Holdings PLC | 38,883 | 411,981 |
IMI PLC | 20,430 | 521,224 |
Imperial Tobacco Group PLC | 19,394 | 791,074 |
Intercontinental Hotels Group PLC | 9,980 | 324,589 |
International Consolidated Airlines Group SA (I) | 104,753 | 763,928 |
Intertek Group PLC | 13,405 | 659,363 |
ITV PLC | 436,169 | 1,474,100 |
Legal & General Group PLC | 227,007 | 912,906 |
Lloyds Banking Group PLC (I) | 4,934,806 | 6,814,978 |
Man Group PLC | 177,525 | 307,564 |
Micro Focus International PLC | 17,593 | 230,586 |
Mondi PLC | 30,130 | 552,502 |
Next PLC | 17,873 | 2,014,818 |
Persimmon PLC (I) | 26,831 | 649,127 |
Prudential PLC | 122,464 | 2,772,921 |
Reckitt Benckiser Group PLC | 65,284 | 5,370,527 |
Reed Elsevier PLC | 67,006 | 1,027,288 |
Rightmove PLC | 16,722 | 770,756 |
Rio Tinto PLC | 89,289 | 5,119,891 |
Rolls-Royce Holdings PLC | 62,488 | 1,044,280 |
Smith & Nephew PLC | 44,888 | 714,450 |
Smiths Group PLC | 20,689 | 473,737 |
Spectris PLC | 15,394 | 632,291 |
Standard Chartered PLC | 63,588 | 1,346,054 |
Standard Life PLC | 60,473 | 394,600 |
20 | International Growth Fund | Annual report | See notes to financial statements |
Shares | Value | ||
United Kingdom (continued) | |||
Taylor Wimpey PLC | 355,151 | $742,658 | |
Telecity Group PLC | 17,124 | 189,039 | |
The Sage Group PLC | 61,221 | 442,090 | |
UBM PLC | 16,843 | 202,193 | |
Unilever PLC | 107,551 | 4,398,839 | |
Vodafone Group PLC | 298,443 | 1,243,602 | |
Whitbread PLC | 11,800 | 885,587 | |
William Hill PLC | 71,717 | 476,766 | |
WPP PLC | 70,718 | 1,548,886 | |
United States 0.7% | 3,050,432 | ||
Valeant Pharmaceuticals International, Inc. (I) | 16,602 | 2,369,829 | |
Verizon Communications, Inc. | 14,390 | 680,603 | |
Preferred Securities 0.7% | $3,060,106 | ||
(Cost $2,484,872) | |||
Germany 0.7% | 3,060,106 | ||
Bayerische Motoren Werke AG | 5,330 | 467,294 | |
Fuchs Petrolub SE | 4,379 | 436,341 | |
Volkswagen AG | 8,296 | 2,156,471 | |
Yield (%) | Shares | Value | |
Securities Lending Collateral 2.0% | $8,838,843 | ||
(Cost $8,838,772) | |||
John Hancock Collateral Investment Trust (W) | 0.1432 (Y) | 883,284 | 8,838,843 |
Short-Term Investments 3.6% | $16,114,855 | ||
(Cost $16,114,855) | |||
Money Market Funds 3.6% | 16,114,855 | ||
State Street Institutional Treasury Money | |||
Market Fund | 0.0000 (Y) | 16,114,855 | 16,114,855 |
Total investments (Cost $388,705,401)† 101.5% | $451,607,154 | ||
Other assets and liabilities, net (1.5%) | ($6,585,960) | ||
Total net assets 100.0% | $445,021,194 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund.
(I) Non-income producing security.
(L) A portion of this security is on loan as of 2-28-14.
(W) Investment is an affiliate of the fund, the advisor and/or subadvisor. This investment represents collateral received for securities lending.
(Y) The rate shown is the annualized seven-day yield as of 2-28-14.
† At 2-28-14, the aggregate cost of investment securities for federal income tax purposes was $390,137,359. Net unrealized appreciation aggregated $61,469,795, of which $65,240,269 related to appreciated investment securities and $3,770,474 related to depreciated investment securities.
See notes to financial statements | Annual report | International Growth Fund | 21 |
Notes to Schedule of Investments
The fund had the following sector composition as a percentage of net assets on 2-28-14:
Consumer Discretionary | 17.4% | |
Health Care | 16.9% | |
Consumer Staples | 15.9% | |
Financials | 14.0% | |
Industrials | 12.1% | |
Information Technology | 5.9% | |
Materials | 5.0% | |
Telecommunication Services | 4.6% | |
Energy | 2.7% | |
Utilities | 1.4% | |
Short-Term Investments & Other | 4.1% | |
Total | 100.0% |
22 | International Growth Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 2-28-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $379,866,629) including | |
$8,481,242 of securities loaned | $442,768,311 |
Investments in affiliated issuers, at value (Cost $8,838,772) | 8,838,843 |
Total investments, at value (Cost $388,705,401) | 451,607,154 |
Foreign currency, at value (Cost $61,663) | 61,789 |
Receivable for fund shares sold | 2,809,856 |
Receivable for forward foreign currency exchange contracts | 271,759 |
Dividends and interest receivable | 1,869,167 |
Receivable for securities lending income | 17,573 |
Receivable due from advisor | 2,808 |
Other receivables and prepaid expenses | 18,551 |
Total assets | 456,658,657 |
Liabilities | |
Due to custodian | 1,203,006 |
Payable for forward foreign currency exchange contracts | 827,702 |
Payable for fund shares repurchased | 475,531 |
Payable upon return of securities loaned | 8,841,480 |
Payable to affiliates | |
Accounting and legal services fees | 8,109 |
Transfer agent fees | 84,268 |
Trustees’ fees | 317 |
Other liabilities and accrued expenses | 197,050 |
Total liabilities | 11,637,463 |
Net assets | $445,021,194 |
Net assets consist of | |
Paid-in capital | $375,726,631 |
Undistributed net investment income | 1,479,942 |
Accumulated net realized gain (loss) on investments, futures contracts and | |
foreign currency transactions | 5,441,532 |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 62,373,089 |
Net assets | $445,021,194 |
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 ($129,733,823 ÷ 5,274,786 shares)1 | $24.60 |
Class B ($1,839,233 ÷ 75,086 shares)1 | $24.50 |
Class C ($7,401,521 ÷ 302,703 shares)1 | $24.45 |
Class I ($290,059,715 ÷ 11,779,674 shares) | $24.62 |
Class 1 ($15,986,902 ÷ 649,490 shares) | $24.61 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $25.89 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
24 | International Growth Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-28-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $7,871,238 |
Securities lending | 172,548 |
Interest | 263 |
Less foreign taxes withheld | (461,539) |
Total investment income | 7,582,510 |
Expenses | |
Investment management fees | 2,650,059 |
Distribution and service fees | 369,873 |
Accounting and legal services fees | 37,571 |
Transfer agent fees | 356,450 |
Trustees’ fees | 9,051 |
State registration fees | 79,284 |
Printing and postage | 21,195 |
Professional fees | 52,966 |
Custodian fees | 355,905 |
Registration and filing fees | 37,185 |
Other | 13,638 |
Total expenses | 3,983,177 |
Less expense reductions | (42,987) |
Net expenses | 3,940,190 |
Net investment income | 3,642,320 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 10,908,391 |
Investments in affiliated issuers | (279) |
Futures contracts | 2,548,246 |
Foreign currency transactions | 1,014,323 |
14,470,681 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 36,608,464 |
Investments in affiliated issuers | (129) |
Futures contracts | 46,920 |
Translation of assets and liabilities in foreign currencies | (635,435) |
36,019,820 | |
Net realized and unrealized gain | 50,490,501 |
Increase in net assets from operations | $54,132,821 |
See notes to financial statements | Annual report | International Growth Fund | 25 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of fund share transactions.
Year | Year | |
ended | ended | |
2-28-14 | 2-28-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $3,642,320 | $2,620,224 |
Net realized gain | 14,470,681 | 15,734,976 |
Change in net unrealized appreciation (depreciation) | 36,019,820 | 2,299,139 |
Increase in net assets resulting from operations | 54,132,821 | 20,654,339 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (764,184) | (1,285,069) |
Class B | — | (15,681) |
Class C | — | (25,379) |
Class I | (2,279,857) | (1,697,349) |
Class 1 | (155,256) | (235,326) |
From net realized gain | ||
Class A | (3,721,079) | (3,481,244) |
Class B | (49,417) | (63,206) |
Class C | (172,706) | (102,296) |
Class I | (6,999,524) | (3,872,467) |
Class 1 | (436,335) | (526,505) |
Total distributions | (14,578,358) | (11,304,522) |
From fund share transactions | 239,542,949 | (66,009,785) |
Total increase (decrease) | 279,097,412 | (56,659,968) |
Net assets | ||
Beginning of year | 165,923,782 | 222,583,750 |
End of year | $445,021,194 | $165,923,782 |
Undistributed (accumulated distributions in excess of) net | ||
investment income | $1,479,942 | ($68,504) |
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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $21.28 | $19.98 | $20.99 | $17.36 | $12.46 |
Net investment income1 | 0.25 | 0.23 | 0.30 | 0.13 | 0.14 |
Net realized and unrealized gain (loss) on investments | 3.94 | 2.65 | (1.12) | 3.61 | 4.86 |
Total from investment operations | 4.19 | 2.88 | (0.82) | 3.74 | 5.00 |
Less distributions | |||||
From net investment income | (0.15) | (0.42) | (0.19) | (0.11) | (0.10) |
From net realized gain | (0.72) | (1.16) | — | — | — |
Total distributions | (0.87) | (1.58) | (0.19) | (0.11) | (0.10) |
Net asset value, end of period | $24.60 | $21.28 | $19.98 | $20.99 | $17.36 |
Total return (%)2,3 | 19.95 | 14.82 | (3.80) | 21.58 | 40.07 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $130 | $73 | $49 | $45 | $23 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.56 | 1.68 | 1.66 | 1.60 | 1.684 |
Expenses net of fee waivers | 1.55 | 1.60 | 1.59 | 1.60 | 1.644 |
Expenses net of fee waivers and credits | 1.55 | 1.60 | 1.59 | 1.60 | 1.634 |
Net investment income | 1.09 | 1.13 | 1.50 | 0.69 | 0.86 |
Portfolio turnover (%) | 42 | 61 | 55 | 48 | 37 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $21.22 | $19.94 | $20.93 | $17.36 | $12.48 |
Net investment income1 | 0.10 | 0.10 | 0.12 | 0.01 | 0.05 |
Net realized and unrealized gain (loss) on investments | 3.90 | 2.62 | (1.06) | 3.56 | 4.83 |
Total from investment operations | 4.00 | 2.72 | (0.94) | 3.57 | 4.88 |
Less distributions | |||||
From net investment income | — | (0.28) | (0.05) | — | — |
From net realized gain | (0.72) | (1.16) | — | — | — |
Total distributions | (0.72) | (1.44) | (0.05) | — | — |
Net asset value, end of period | $24.50 | $21.22 | $19.94 | $20.93 | $17.36 |
Total return (%)2,3 | 19.07 | 14.00 | (4.47) | 20.56 | 39.10 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | $1 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 3.29 | 3.92 | 4.00 | 4.24 | 4.834 |
Expenses net of fee waivers | 2.30 | 2.30 | 2.33 | 2.40 | 2.444 |
Expenses net of fee waivers and credits | 2.30 | 2.30 | 2.33 | 2.40 | 2.404 |
Net investment income | 0.46 | 0.47 | 0.63 | 0.04 | 0.29 |
Portfolio turnover (%) | 42 | 61 | 55 | 48 | 37 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $21.18 | $19.91 | $20.91 | $17.34 | $12.47 |
Net investment income (loss)1 | 0.07 | 0.10 | 0.10 | 0.01 | (0.01) |
Net realized and unrealized gain (loss) on investments | 3.92 | 2.61 | (1.05) | 3.56 | 4.88 |
Total from investment operations | 3.99 | 2.71 | (0.95) | 3.57 | 4.87 |
Less distributions | |||||
From net investment income | — | (0.28) | (0.05) | — | — |
From net realized gain | (0.72) | (1.16) | — | — | — |
Total distributions | (0.72) | (1.44) | (0.05) | — | — |
Net asset value, end of period | $24.45 | $21.18 | $19.91 | $20.91 | $17.34 |
Total return (%)2,3 | 19.05 | 13.97 | (4.52) | 20.59 | 39.05 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $7 | $2 | $2 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.62 | 3.32 | 3.34 | 3.45 | 3.954 |
Expenses net of fee waivers | 2.30 | 2.30 | 2.33 | 2.40 | 2.414 |
Expenses net of fee waivers and credits | 2.30 | 2.30 | 2.33 | 2.40 | 2.404 |
Net investment income (loss) | 0.32 | 0.48 | 0.52 | 0.03 | (0.06) |
Portfolio turnover (%) | 42 | 61 | 55 | 48 | 37 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $21.31 | $20.01 | $21.04 | $17.40 | $12.48 |
Net investment income1 | 0.31 | 0.43 | 0.37 | 0.23 | 0.14 |
Net realized and unrealized gain (loss) on investments | 3.95 | 2.53 | (1.12) | 3.60 | 4.95 |
Total from investment operations | 4.26 | 2.96 | (0.75) | 3.83 | 5.09 |
Less distributions | |||||
From net investment income | (0.23) | (0.50) | (0.28) | (0.19) | (0.17) |
From net realized gain | (0.72) | (1.16) | — | — | — |
Total distributions | (0.95) | (1.66) | (0.28) | (0.19) | (0.17) |
Net asset value, end of period | $24.62 | $21.31 | $20.01 | $21.04 | $17.40 |
Total return (%)2 | 20.31 | 15.23 | (3.42) | 22.08 | 40.76 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $290 | $79 | $162 | $204 | $134 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.21 | 1.27 | 1.20 | 1.14 | 1.233 |
Expenses net of fee waivers | 1.21 | 1.25 | 1.20 | 1.14 | 1.213 |
Expenses net of fee waivers and credits | 1.21 | 1.25 | 1.20 | 1.14 | 1.213 |
Net investment income | 1.33 | 2.09 | 1.88 | 1.21 | 0.84 |
Portfolio turnover (%) | 42 | 61 | 55 | 48 | 37 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $21.30 | $20.00 | $21.02 | $17.38 | $12.47 |
Net investment income1 | 0.37 | 0.34 | 0.36 | 0.23 | 0.20 |
Net realized and unrealized gain (loss) on investments | 3.92 | 2.63 | (1.09) | 3.60 | 4.89 |
Total from investment operations | 4.29 | 2.97 | (0.73) | 3.83 | 5.09 |
Less distributions | |||||
From net investment income | (0.26) | (0.51) | (0.29) | (0.19) | (0.18) |
From net realized gain | (0.72) | (1.16) | — | — | — |
Total distributions | (0.98) | (1.67) | (0.29) | (0.19) | (0.18) |
Net asset value, end of period | $24.61 | $21.30 | $20.00 | $21.02 | $17.38 |
Total return (%)2 | 20.43 | 15.29 | (3.33) | 22.11 | 40.73 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $16 | $11 | $9 | $8 | $5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.12 | 1.19 | 1.16 | 1.13 | 1.243 |
Expenses net of fee waivers | 1.12 | 1.15 | 1.14 | 1.13 | 1.193 |
Expenses net of fee waivers and credits | 1.12 | 1.15 | 1.14 | 1.13 | 1.193 |
Net investment income | 1.59 | 1.68 | 1.83 | 1.21 | 1.23 |
Portfolio turnover (%) | 42 | 61 | 55 | 48 | 37 |
1 Based on the average daily shares outstanding.
2 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
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 Funds III (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to seek high total return primarily through capital appreciation.
The fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions and certain investors. Class 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, transfer agent fees, printing and postage and state registration fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the exchange where the security was acquired or most likely will be sold. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. 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. Futures contracts are valued at settlement prices, which are the official closing prices published by the exchange on which they trade. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing vendor. Securities that trade only in the over-the-counter (OTC) market are valued using bid prices. Certain short-term securities with maturities of 60 days or less at the time of purchase are valued at amortized cost.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund’s Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed. Trading in foreign securities may be completed before the daily close of trading on the NYSE. Significant events at the issuer or market level may affect the values of securities between the time when the valuation of the securities is generally determined and the close of the NYSE. If a significant event occurs, these securities may be fair valued, as determined in good faith by the fund’s Pricing Committee, following procedures established by the Board of Trustees. The fund uses fair value adjustment factors
30 | International Growth Fund | Annual report |
provided by an independent pricing vendor to value certain foreign securities in order to adjust for events that may occur between the close of foreign exchanges or markets and the close of the NYSE.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the fund’s investments as of February 28, 2014, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $26,378,536 | — | $26,378,536 | — |
Austria | 441,521 | — | 441,521 | — |
Belgium | 5,059,615 | — | 5,059,615 | — |
Bermuda | 888,465 | — | 888,465 | — |
Canada | 8,601,815 | $8,601,815 | — | — |
China | 307,512 | — | 307,512 | — |
Denmark | 15,453,280 | — | 15,453,280 | — |
Finland | 6,882,711 | — | 6,882,711 | — |
France | 31,129,880 | — | 31,129,880 | — |
Germany | 29,580,560 | — | 29,580,560 | — |
Guernsey, Channel | ||||
Islands | 463,294 | — | 463,294 | — |
Hong Kong | 8,417,087 | — | 8,417,087 | — |
Ireland | 4,977,435 | — | 4,977,435 | — |
Isle of Man | 403,934 | — | 403,934 | — |
Israel | 4,291,195 | — | 4,291,195 | — |
Italy | 5,659,235 | — | 5,659,235 | — |
Japan | 69,981,215 | — | 69,981,215 | — |
Luxembourg | 1,597,822 | — | 1,597,822 | — |
Macau | 1,633,673 | — | 1,633,673 | — |
Netherlands | 14,045,748 | — | 14,045,748 | — |
New Zealand | 397,315 | — | 397,315 | — |
Norway | 2,694,469 | — | 2,694,469 | — |
Portugal | 378,361 | — | 378,361 | — |
Singapore | 8,514,438 | — | 8,514,438 | — |
Spain | 12,299,437 | — | 12,299,437 | — |
Sweden | 10,953,325 | — | 10,953,325 | — |
Switzerland | 50,711,460 | — | 50,711,460 | — |
United Kingdom | 98,399,580 | — | 98,399,580 | — |
United States | 3,050,432 | 2,369,829 | 680,603 | — |
Annual report | International Growth Fund | 31 |
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Preferred Securities | ||||
Germany | $3,060,106 | — | $3,060,106 | — |
Securities Lending | ||||
Collateral | 8,838,843 | $8,838,843 | — | — |
Short-Term Investments | 16,114,855 | 16,114,855 | — | — |
Total Investments in | ||||
Securities | $451,607,154 | $35,925,342 | $415,681,812 | — |
Other Financial | ||||
Instruments | ||||
Forward Foreign | ||||
Currency Contracts | ($555,943) | — | ($555,943) | — |
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, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Foreign taxes are provided for based on the fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Securities lending. The fund may lend its securities to earn additional income. The fund 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, which has a floating net asset value (NAV) and is registered with the Securities and Exchange Commission as an investment company. JHCIT invests cash received as collateral as part of the securities lending program in short-term money market investments. The fund will receive the benefit of any gains and bear any losses generated by JHCIT with respect to the cash collateral.
If a borrower fails to return loaned securities when due, then the lending agent is responsible to and indemnifies the fund for the lent securities. The lending agent uses the collateral received from the borrower to purchase replacement securities of the same issue, type, class and series of the loaned securities. If the value of the collateral is less than the purchase cost of replacement securities, the lending agent is responsible for satisfying the shortfall but only to the extent that the shortfall is not due to any decrease in the value of JHCIT.
Although the risk of the loss of the securities lent is mitigated by receiving collateral from the borrower and through lending agent indemnification, the fund could experience a delay in recovering securities or could experience a lower than expected return if the borrower fails to return the securities on a timely basis. 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.
Obligations to repay collateral received by the fund is shown on the Statements of assets and liabilities as Payable upon return of securities loaned.
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
32 | International Growth Fund | Annual report |
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), accounting standards and other factors. 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 withholding tax on income and/or capital gains or repatriation taxes imposed by certain countries in which the fund invests. Taxes are accrued based upon investment income, realized gains or unrealized appreciation.
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund’s custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to potentially participate in a $300 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the year ended February 28, 2014 were $922. For the year ended February 28, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees, state registration fees and printing and postage expenses, for all classes, 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.
As of February 28, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Annual report | International Growth Fund | 33 |
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended February 28, 2014 and 2013 was as follows:
FEBRUARY 28, 2014 | FEBRUARY 28, 2013 | |||
Ordinary Income | $6,097,352 | $3,258,804 | ||
Long-Term Capital Gain | $8,481,006 | $8,045,718 | ||
Total | $14,578,358 | $11,304,522 |
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 28, 2014, the components of distributable earnings on a tax basis consisted of $1,882,400 and $5,914,967 of undistributed ordinary income and undistributed long-term capital gains.
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.
Note 3 — Derivative Instruments
The fund may invest in derivatives in order to meet its investment objective. Derivatives include a variety of different instruments that may be traded in the over-the-counter market, on a regulated exchange or through a clearing facility. The risks in using derivatives vary depending upon the structure of the instruments, including the use of leverage, optionality, the liquidity or lack of liquidity of the contract, the creditworthiness of the counterparty or clearing organization and the volatility of the position. Some derivatives involve risks that are potentially greater than the risks associated with investing directly in the referenced securities or other referenced underlying instrument. Specifically, the fund is exposed to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction.
Forward foreign currency contracts are typically traded through the OTC market. Certain forwards are regulated by the Commodity Futures Trading Commission (the CFTC) as swaps. Derivative counterparty risk is managed through an ongoing evaluation of the creditworthiness of all potential counterparties and, if applicable, designated clearing organizations. The fund attempts to reduce its exposure to counterparty risk for derivatives traded in the OTC market, whenever possible, by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement with each of its OTC counterparties. The ISDA gives each party to the agreement the right to terminate all transactions traded under the agreement if there is certain deterioration in the credit quality or contractual default of the other party, as defined in the ISDA. Upon an event of default or a termination of the ISDA, the non-defaulting party has the right to close out all transactions and to net amounts owed.
34 | International Growth Fund | Annual report |
As defined by the ISDA, the fund may have collateral agreements with certain counterparties to mitigate counterparty risk on OTC derivatives. Subject to established minimum levels, collateral for OTC transactions is generally determined based on the net aggregate unrealized gain or loss on contracts with a particular counterparty. Collateral pledged to the fund is held in a segregated account by a third-party agent or held by the custodian bank for the benefit of the fund and can be in the form of cash or debt securities issued by the U.S. government or related agencies; collateral posted by the fund for OTC transactions is held in a segregated account at the fund’s custodian and is noted in the accompanying Fund’s investments, or if cash is posted, on the Statement of assets and liabilities. The fund’s maximum risk of loss due to counterparty risk is equal to the asset value of outstanding contracts offset by collateral received.
Futures are traded or cleared on an exchange or central clearinghouse. Exchange-traded or cleared transactions generally present less counterparty risk to a fund than OTC transactions. The exchange or clearinghouse stands between the fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the exchange or clearinghouse and the clearing member.
Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the fund to the risk of loss up to the notional value of the futures contracts. Use of short futures contracts subjects the fund to unlimited risk of loss.
Upon entering into a futures contract, the fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures collateral receivable/payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the fund. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the year ended February 28, 2014, the fund used futures contracts to gain exposure to certain securities markets and substitute for securities purchases or to be purchased. During the year ended February 28, 2014, the fund held futures contracts with notional values ranging up to $21.7 million, as measured at each quarter end. There were no open futures contracts as of February 28, 2014.
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell specific currencies at a price that is set on the date of the contract. The forward contract calls for delivery of the currencies 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 if applicable, the risk that currency movements will not favor the fund 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 28, 2014, the fund used forward foreign currency contracts to manage against anticipated changes in currency exchange rates. During the year ended February 28, 2014, the fund held forward foreign currency contracts with U.S. Dollar notional values ranging from $24.3 million to $103.9 million, as measured at each quarter end. The following table summarizes the contracts held at February 28, 2014.
CONTRACTUAL | NET UNREALIZED | |||||||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |||||
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) | ||||
AUD | 1,751,496 | USD | 1,577,007 | Bank of America | 4-4-14 | — | ($17,318) | ($17,318) | ||
N.A. | ||||||||||
AUD | 1,751,496 | USD | 1,565,855 | Bank of New | 4-4-14 | — | (6,166) | (6,166) | ||
York | ||||||||||
CAD | 1,256,338 | USD | 1,143,033 | Bank of America | 4-4-14 | — | (9,283) | (9,283) | ||
N.A. | ||||||||||
CAD | 942,255 | USD | 857,250 | Bank of New | 4-4-14 | — | (6,936) | (6,936) | ||
York | ||||||||||
CAD | 942,255 | USD | 857,198 | Deutsche Bank | 4-4-14 | — | (6,884) | (6,884) | ||
AG London | ||||||||||
CAD | 3,454,935 | USD | 3,142,634 | Morgan Stanley | 4-4-14 | — | (24,816) | (24,816) | ||
and Company | ||||||||||
International PLC | ||||||||||
CAD | 942,255 | USD | 857,235 | Royal Bank of | 4-4-14 | — | (6,922) | (6,922) | ||
Scotland PLC | ||||||||||
EUR | 1,245,343 | USD | 1,682,770 | Bank of New | 4-4-14 | $36,140 | — | 36,140 | ||
York | ||||||||||
EUR | 1,716,249 | USD | 2,319,768 | Brown Brothers | 4-4-14 | 49,120 | — | 49,120 | ||
Harriman & | ||||||||||
Company | ||||||||||
EUR | 170,773 | USD | 230,813 | Deutsche Bank | 4-4-14 | 4,900 | — | 4,900 | ||
AG London | ||||||||||
JPY | 497,000,874 | USD | 4,810,897 | Bank of America | 4-4-14 | 73,460 | — | 73,460 | ||
N.A. | ||||||||||
JPY | 268,529,960 | USD | 2,648,277 | Bank of New | 4-4-14 | — | (9,255) | (9,255) | ||
York | ||||||||||
JPY | 736,581,300 | USD | 7,197,300 | Barclays Bank | 4-4-14 | 41,572 | — | 41,572 | ||
PLC Wholesale | ||||||||||
JPY | 293,529,626 | USD | 2,895,655 | Brown Brothers | 4-4-14 | — | (10,945) | (10,945) | ||
Harriman & | ||||||||||
Company | ||||||||||
JPY | 178,319,337 | USD | 1,759,615 | Deutsche Bank | 4-4-14 | — | (7,152) | (7,152) | ||
AG London | ||||||||||
JPY | 93,751,411 | USD | 925,131 | JPMorgan Chase | 4-4-14 | — | (3,774) | (3,774) | ||
Bank | ||||||||||
JPY | 275,723,104 | USD | 2,718,388 | Morgan Stanley | 4-4-14 | — | (8,674) | (8,674) | ||
and Company | ||||||||||
International PLC | ||||||||||
JPY | 97,221,399 | USD | 958,709 | State Street | 4-4-14 | — | (3,250) | (3,250) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
NOK | 2,081,779 | USD | 329,865 | Bank of New | 4-4-14 | 16,586 | — | 16,586 | ||
York | ||||||||||
NOK | 4,054,691 | USD | 642,348 | Brown Brothers | 4-4-14 | 32,438 | — | 32,438 | ||
Harriman & | ||||||||||
Company | ||||||||||
NOK | 1,874,167 | USD | 296,710 | Deutsche Bank | 4-4-14 | 15,191 | — | 15,191 | ||
AG London | ||||||||||
SGD | 1,989,815 | USD | 1,568,698 | Bank of America | 4-4-14 | 1,015 | — | 1,015 | ||
N.A. |
36 | International Growth Fund | Annual report |
CONTRACTUAL | NET UNREALIZED | |||||||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |||||
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) | ||||
SGD | 751,694 | USD | 592,982 | Bank of New | 4-4-14 | $9 | — | $9 | ||
York | ||||||||||
SGD | 1,424,172 | USD | 1,125,075 | Barclays Bank | 4-4-14 | — | ($1,584) | (1,584) | ||
PLC Wholesale | ||||||||||
SGD | 852,564 | USD | 672,244 | Brown Brothers | 4-4-14 | 321 | — | 321 | ||
Harriman & | ||||||||||
Company | ||||||||||
SGD | 888,343 | USD | 700,649 | Deutsche Bank | 4-4-14 | 141 | — | 141 | ||
AG London | ||||||||||
SGD | 2,856,238 | USD | 2,253,376 | Morgan Stanley | 4-4-14 | — | (165) | (165) | ||
and Company | ||||||||||
International PLC | ||||||||||
SGD | 751,694 | USD | 592,653 | Royal Bank of | 4-4-14 | 338 | — | 338 | ||
Scotland PLC | ||||||||||
SGD | 751,694 | USD | 592,464 | State Street | 4-4-14 | 528 | — | 528 | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 1,633,999 | AUD | 1,841,935 | Bank of America | 4-4-14 | — | (6,225) | (6,225) | ||
N.A. | ||||||||||
USD | 1,253,651 | AUD | 1,413,058 | Bank of New | 4-4-14 | — | (4,662) | (4,662) | ||
York | ||||||||||
USD | 710,637 | AUD | 800,537 | Barclays Bank | 4-4-14 | — | (2,233) | (2,233) | ||
PLC Wholesale | ||||||||||
USD | 2,404,207 | AUD | 2,710,493 | Brown Brothers | 4-4-14 | — | (9,459) | (9,459) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 866,676 | AUD | 978,334 | JPMorgan Chase | 4-4-14 | — | (4,521) | (4,521) | ||
Bank | ||||||||||
USD | 3,240,053 | AUD | 3,653,205 | Morgan Stanley | 4-4-14 | — | (13,088) | (13,088) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 1,038,194 | AUD | 1,170,455 | State Street | 4-4-14 | — | (4,084) | (4,084) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 1,483,322 | CAD | 1,646,176 | Bank of America | 4-4-14 | — | (2,227) | (2,227) | ||
N.A. | ||||||||||
USD | 878,738 | CAD | 974,477 | Bank of New | 4-4-14 | — | (653) | (653) | ||
York | ||||||||||
USD | 440,173 | CAD | 488,456 | Barclays Bank | 4-4-14 | — | (621) | (621) | ||
PLC Wholesale | ||||||||||
USD | 503,757 | CAD | 558,833 | Brown Brothers | 4-4-14 | — | (547) | (547) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 852,899 | CAD | 946,334 | Deutsche Bank | 4-4-14 | — | (1,096) | (1,096) | ||
AG London | ||||||||||
USD | 3,009,099 | CAD | 3,338,216 | Morgan Stanley | 4-4-14 | — | (3,388) | (3,388) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 1,060,629 | CAD | 1,177,436 | Royal Bank of | 4-4-14 | — | (1,918) | (1,918) | ||
Scotland PLC | ||||||||||
USD | 3,580,789 | CHF | 3,238,466 | Bank of America | 4-4-14 | — | (102,299) | (102,299) | ||
N.A. | ||||||||||
USD | 2,101,171 | CHF | 1,899,858 | Barclays Bank | 4-4-14 | — | (59,526) | (59,526) | ||
PLC Wholesale |
Annual report | International Growth Fund | 37 |
CONTRACTUAL | NET UNREALIZED | |||||||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |||||
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) | ||||
USD | 3,102,952 | CHF | 2,804,107 | Brown Brothers | 4-4-14 | — | ($86,142) | ($86,142) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 791,634 | CHF | 715,083 | Deutsche Bank | 4-4-14 | — | (21,626) | (21,626) | ||
AG London | ||||||||||
USD | 2,176,533 | CHF | 1,965,292 | JPMorgan Chase | 4-4-14 | — | (58,582) | (58,582) | ||
Bank | ||||||||||
USD | 1,435,605 | CHF | 1,297,935 | Morgan Stanley | 4-4-14 | — | (40,529) | (40,529) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 2,122,184 | CHF | 1,919,049 | State Street | 4-4-14 | — | (60,339) | (60,339) | ||
Bank and Trust | ||||||||||
Company | ||||||||||
USD | 1,409,192 | EUR | 1,030,759 | Brown Brothers | 4-4-14 | — | (13,534) | (13,534) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 1,007,091 | GBP | 618,272 | Bank of America | 4-4-14 | — | (27,996) | (27,996) | ||
N.A. | ||||||||||
USD | 3,323,144 | GBP | 1,996,554 | Barclays Bank | 4-4-14 | — | (19,409) | (19,409) | ||
PLC Wholesale | ||||||||||
USD | 591,498 | GBP | 362,752 | Brown Brothers | 4-4-14 | — | (15,807) | (15,807) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 1,321,509 | GBP | 794,222 | Deutsche Bank | 4-4-14 | — | (8,146) | (8,146) | ||
AG London | ||||||||||
USD | 1,101,286 | GBP | 674,922 | JPMorgan Chase | 4-4-14 | — | (28,642) | (28,642) | ||
Bank | ||||||||||
USD | 1,085,653 | GBP | 665,996 | Morgan Stanley | 4-4-14 | — | (29,331) | (29,331) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 618,507 | GBP | 379,480 | Royal Bank of | 4-4-14 | — | (16,804) | (16,804) | ||
Scotland PLC | ||||||||||
USD | 3,418,876 | JPY | 348,228,910 | Bank of America | 4-4-14 | — | (3,400) | (3,400) | ||
N.A. | ||||||||||
USD | 1,140,491 | JPY | 116,076,304 | Morgan Stanley | 4-4-14 | — | (268) | (268) | ||
and Company | ||||||||||
International PLC | ||||||||||
USD | 326,401 | SEK | 2,133,324 | Bank of New | 4-4-14 | — | (6,156) | (6,156) | ||
York | ||||||||||
USD | 5,972,572 | SEK | 38,595,358 | Brown Brothers | 4-4-14 | — | (43,927) | (43,927) | ||
Harriman & | ||||||||||
Company | ||||||||||
USD | 422,346 | SEK | 2,756,743 | JPMorgan Chase | 4-4-14 | — | (7,393) | (7,393) | ||
Bank | ||||||||||
$271,759 | ($827,702) | ($555,943) |
Currency Abbreviation | |
AUD | Australian Dollar |
CAD | Canadian Dollar |
CHF | Swiss Franc |
EUR | Euro |
GBP | Pound Sterling |
JPY | Japanese Yen |
NOK | Norwegian Krone |
SEK | Swedish Krona |
SGD | Singapore Dollar |
38 | International Growth Fund | Annual report |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at February 28, 2014 by risk category:
FINANCIAL | ASSET | LIABILITIES | ||
STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
Foreign currency | Receivable-payable for | Forward foreign | $271,759 | ($827,702) |
contracts | forward foreign currency | currency | ||
exchange contracts | exchange | |||
contracts |
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 28, 2014:
FOREIGN | ||||
STATEMENT OF | FUTURES | CURRENCY | ||
RISK | OPERATIONS LOCATION | CONTRACTS | TRANSACTIONS* | TOTAL |
Equity contracts | Net realized gain | $2,548,246 | — | $2,548,246 |
(loss) on | ||||
Foreign currency | Net realized gain | — | $1,115,915 | 1,115,915 |
contracts | (loss) on |
* Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended February 28, 2014:
TRANSACTION | ||||
OF ASSETS | ||||
AND LIABILIITES | ||||
STATEMENT OF | FUTURES | IN FOREIGN | ||
RISK | OPERATIONS LOCATION | CONTRACTS | CURRENCIES* | TOTAL |
Equity contracts | Change in | $46,920 | — | $46,920 |
unrealized | ||||
appreciation | ||||
(depreciation) | ||||
Foreign currency | Change in | — | ($679,403) | ($679,403) |
contracts | unrealized | |||
appreciation | ||||
(depreciation) |
* 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 Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Annual report | International Growth Fund | 39 |
Note 5 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor or JHA) serves as investment advisor for the fund. Prior to January 1, 2014, John Hancock Investment Management Services, LLC (JHIMS) served as investment advisor for the fund. JHIMS and JHA have identical officers, directors and other personnel, and share common facilities and resources. Terms of the investment management contract with JHA are substantially identical to the former contract with JHIMS. In this report, depending on the context, the term “Advisor” shall refer to either JHA in its current capacity as investment advisor, or to JHIMS in its capacity as investment advisor prior to January 1, 2014. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of MFC.
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor equivalent, on an annual basis, to the sum of: (a) 0.920% of the first $100,000,000 of the fund’s average daily net assets; (b) 0.895% of the next $900,000,000 of the fund’s average daily net assets; (c) 0.880% of the next $1,000,000,000 of the fund’s average daily net assets; (d) 0.850% of the next $1,000,000,000 of the fund’s average daily net assets; (e) 0.825% of the next $1,000,000,000 of the fund’s average daily net assets, and (f) 0.800% of the fund’s average daily net assets in excess of $4,000,000,000. The Advisor has a subadvisory agreement with Grantham, Mayo, Van Otterloo & Co. LLC. The fund is not responsible for payment of the subadvisory fees.
Effective June 1, 2013, the Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock complex, including the fund (the participating portfolios). The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the participating portfolios that exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; and 0.015% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
The Advisor has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the fund. This agreement excludes taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund’s business acquired fees and expenses paid indirectly and short dividend expense. 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 current expense limitation agreement will remain in effect through June 30, 2014, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at the time.
Accordingly, these expense reductions amounted to $4,742, $15,334, $13,635, $8,683 and $593 for Class A, Class B, Class C, Class I and Class 1 shares for the year ended February 28, 2014.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended February 28, 2014 were equivalent to a net annual effective rate of 0.89% of the fund’s average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting
40 | International Growth Fund | Annual report |
and legal services fees incurred for the year ended February 28, 2014 amounted to an annual rate of 0.01% of the fund’s average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B, Class C and Class 1 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund’s shares.
CLASS | RULE 12b-1 FEE | ||||
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 $782,005 for the year ended February 28, 2014. Of this amount, $134,530 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $646,904 was paid as sales commissions to broker-dealers and $571 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2014, CDSCs received by the Distributor amounted to $46, $14,748 and $3,105 for Class A, Class B and Class C shares, respectively.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to October 1, 2013, Signature Services Cost were calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Share Classes and all other Retail Share Classes. Within each of these categories, the applicable costs were allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Annual report | International Growth Fund | 41 |
Class level expenses. Class level expenses for the year ended February 28, 2014 were:
DISTRIBUTION AND | TRANSFER AGENTS | STATE REGISTRATION | PRINTING AND | |
CLASS | SERVICE FEES | FEES | FEES | POSTAGE |
Class A | $304,876 | $145,132 | $27,247 | $12,473 |
Class B | 15,507 | 2,223 | 16,314 | 324 |
Class C | 42,928 | 6,104 | 16,314 | 721 |
Class I | — | 202,991 | 19,409 | 7,677 |
Class 1 | 6,562 | — | — | — |
Total | $369,873 | $356,450 | $79,284 | $21,195 |
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each fund based on its net assets relative to other funds within the John Hancock funds complex.
Note 6 — Fund share transactions
Transactions in fund shares for the years ended February 28, 2014 and 2013 were as follows:
Year ended 2-28-14 | Year ended 2-28-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 3,235,096 | $75,156,421 | 1,767,870 | $36,112,556 |
Distributions reinvested | 193,802 | 4,465,193 | 233,886 | 4,738,520 |
Repurchased | (1,562,025) | (35,832,571) | (1,065,421) | (22,127,831) |
Net increase | 1,866,873 | $43,789,043 | 936,335 | $18,723,245 |
Class B shares | ||||
Sold | 21,901 | $505,815 | 20,059 | $411,385 |
Distributions reinvested | 1,775 | 40,800 | 3,222 | 65,178 |
Repurchased | (11,137) | (258,126) | (9,527) | (191,978) |
Net increase | 12,539 | $288,489 | 13,754 | $284,585 |
Class C shares | ||||
Sold | 207,578 | $4,815,191 | 51,637 | $1,066,773 |
Distributions reinvested | 5,905 | 135,452 | 5,639 | 113,904 |
Repurchased | (20,333) | (470,103) | (29,273) | (602,604) |
Net increase | 193,150 | $4,480,540 | 28,003 | $578,073 |
Class I shares | ||||
Sold | 9,271,192 | $215,856,877 | 797,965 | $16,495,650 |
Distributions reinvested | 31,652 | 729,589 | 11,539 | 233,886 |
Repurchased | (1,224,470) | (28,870,886) | (5,181,141) | (103,567,384) |
Net increase (decrease) | 8,078,374 | $187,715,580 | (4,371,637) | ($86,837,848) |
Class 1 shares | ||||
Sold | 250,909 | $5,836,220 | 141,847 | $2,917,529 |
Distributions reinvested | 25,677 | 591,591 | 37,603 | 761,831 |
Repurchased | (138,631) | (3,158,514) | (120,232) | (2,437,200) |
Net increase | 137,955 | $3,269,297 | 59,218 | $1,242,160 |
Total net increase (decrease) | 10,288,891 | $239,542,949 | (3,334,327) | ($66,009,785) |
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $339,643,618 and $115,979,528, respectively, for the year ended February 28, 2014.
42 | International Growth Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Funds III 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 Funds III International Growth Fund (the “Fund”) at February 28, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2014 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 14, 2014
Annual report | International Growth Fund | 43 |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended February 28, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Income derived from foreign sources was $5,912,363. The fund intends to pass through foreign tax credits of $266,872.
The fund paid $8,481,006 in capital gain dividends.
Eligible shareholders will be mailed a 2014 Form 1099-DIV in early 2015. This will reflect the tax character of all distributions paid in calendar year 2014.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
44 | International Growth Fund | Annual report |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
James M. Oates, Born: 1946 | 2012 | 226 |
Managing Director, Wydown Group (financial consulting firm) (since 1994); Chairman and Director, | ||
Emerson Investment Management, Inc. (since 2000); Independent Chairman, Hudson Castle Group, Inc. | ||
(formerly IBEX Capital Markets, Inc.) (financial services company) (1997–2011); Director, Stifel Financial | ||
(since 1996); Director, Investor Financial Services Corporation (1995–2007); Director, Connecticut River | ||
Bancorp (since 1998); Director, Virtus Funds (formerly Phoenix Mutual Funds) (since 1988). | ||
Trustee and Chairperson of the Board, John Hancock retail funds3 (since 2012); Trustee (2005–2006 and | ||
since 2012) and Chairperson of the Board (since 2012), John Hancock Funds III; Trustee (since 2004) and | ||
Chairperson of the Board (since 2005), John Hancock Variable Insurance Trust; Trustee and Chairperson | ||
of the Board, John Hancock Funds II (since 2005). | ||
Charles L. Bardelis,2 Born: 1941 | 2012 | 226 |
Director, Island Commuter Corp. (marine transport). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock | ||
Funds II (since 2005). | ||
Peter S. Burgess,2 Born: 1942 | 2012 | 226 |
Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; | ||
Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln | ||
Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (since 2010); | ||
Director, PMA Capital Corporation (2004–2010). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
William H. Cunningham, Born: 1944 | 2006 | 226 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director, LIN Television (since 2009); | ||
Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, | ||
Resolute Energy Corporation (since 2009); Director, Southwest Airlines (since 2000); former Director, | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); former Director, Hicks Acquisition Company I, | ||
Inc. (until 2007); former Director, Texas Exchange Bank, SSB (formerly Bank of Crowley) (until 2009); | ||
former Advisory Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust | ||
(since 2012); Trustee, John Hancock Funds II (since 2012 and 2005–2006). |
Annual report | International Growth Fund | 45 |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Grace K. Fey, Born: 1946 | 2012 | 226 |
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier | ||
Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Theron S. Hoffman,2 Born: 1947 | 2012 | 226 |
Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd | ||
Organization (consulting firm) (2003–2010); President, Westport Resources Management (investment | ||
management consulting firm) (2006–2008); Senior Managing Director, Partner, and Operating Head, | ||
Putnam Investments (2000–2003); Executive Vice President, The Thomson Corp. (financial and legal | ||
information publishing) (1997–2000). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 226 |
President, Cambridge College, Cambridge, Massachusetts (since 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation | ||
(since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors | ||
of American Student Assistance Corporation (1996–2009); Board of Directors of Boston Stock Exchange | ||
(2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee of John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Hassell H. McClellan, Born: 1945 | 2012 | 226 |
Trustee, Virtus Variable Insurance Trust (formerly Phoenix Edge Series Funds) (since 2008); Director, The | ||
Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston | ||
College (retired 2013). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
Steven R. Pruchansky, Born: 1944 | 2006 | 226 |
Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director | ||
and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First | ||
American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Director, | ||
First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, | ||
Maxwell Building Corp. (until 1991). | ||
Trustee (since 1992) and Chairperson of the Board (2011–2012), John Hancock retail funds3; Trustee and | ||
Vice Chairperson of the Board, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and | ||
John Hancock Funds II (since 2012). |
46 | 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 |
Gregory A. Russo, Born: 1949 | 2008 | 226 |
Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance | ||
Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare | ||
system); Director and Member of Finance Committee, The Moorings, Inc. (nonprofit continuing care | ||
community) (since 2012); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); | ||
Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester County, | ||
New York, Chamber of Commerce (1986–1992); Director, Treasurer, and Chairman of Audit and | ||
Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of Fundraising | ||
Campaign, United Way of Westchester and Putnam Counties, New York (1990–1995). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Non-Independent Trustees4 | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Craig Bromley, Born: 1966 | 2012 | 226 |
President, John Hancock Financial Services (since 2012); Senior Executive Vice President and General | ||
Manager, U.S. Division, John Hancock Financial Services (since 2012); President and Chief Executive | ||
Officer, Manulife Insurance Company (Manulife Japan) (2005–2012, including prior positions). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Warren A. Thomson, Born: 1955 | 2012 | 226 |
Senior Executive Vice President and Chief Investment Officer, Manulife Financial Corporation and The | ||
Manufacturers Life Insurance Company (since 2009); Chairman and Chief Executive Officer, Manulife | ||
Asset Management (since 2001, including prior positions); Director (since 2006), and President and | ||
Chief Executive Officer (since 2013), Manulife Asset Management Limited; Director and Chairman, | ||
Hancock Natural Resources Group, Inc. (since 2013). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Principal officers who are not Trustees | ||
Name, year of birth | Officer | |
Position(s) held with fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Hugh McHaffie, Born: 1959 | 2012 | |
President* | ||
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment Management Services, | ||
LLC, and John Hancock Funds, LLC (since 2010); President, John Hancock Advisers, LLC (since 2012); | ||
President, John Hancock Investment Management Services, LLC (since 2010); President (since 2012) and | ||
former Trustee (2010–2012), John Hancock retail funds,3 President, John Hancock Variable Insurance | ||
Trust and John Hancock Funds II (since 2009). | ||
*Until 3-13-14. |
Annual report | International Growth Fund | 47 |
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 |
Andrew G. Arnott, Born: 1971 | 2009 |
Executive Vice President | |
President** | |
Senior Vice President, John Hancock Financial Services (since 2009); Director and Executive Vice | |
President, John Hancock Advisers, LLC (since 2005, including prior positions); Director and Executive | |
Vice President, John Hancock Investment Management Services, LLC (since 2006, including prior | |
positions); President, John Hancock Funds, LLC (since 2004, including prior positions); President | |
(effective 3-13-14) and Executive Vice President, John Hancock retail funds,3 John Hancock Variable | |
Insurance Trust, and John Hancock Funds II (since 2007, including prior positions). | |
**Effective 3-13-14. | |
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 Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds,3 | |
John Hancock Variable Insurance Trust, and John Hancock Funds II (since 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,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, | |
LLC, and John Hancock Investment Management Services, LLC (since 2005). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock | |
Funds II (since 2007). | |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable | |
Insurance Trust and John Hancock Funds II (since 2010 and 2007–2009, including prior positions). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation, or removal.
2 Member of the Audit Committee.
3 “John Hancock retail funds” comprises John Hancock Funds III and 36 other John Hancock funds consisting of 26 series of other John Hancock trusts and 10 closed-end funds.
4 Because Messrs. Bromley and Thomson are senior executives or directors of the advisor and/or its affiliates, each of them is considered an “interested person of the fund,” as defined in the Investment Company Act of 1940.
48 | International Growth Fund | Annual report |
More information
Trustees | Investment advisor |
James M. Oates, Chairperson | John Hancock Advisers, LLC |
Steven R. Pruchansky, Vice Chairperson | |
Charles L. Bardelis* | Subadvisor |
Craig Bromley† | Grantham, Mayo, Van Otterloo & Co. LLC |
Peter S. Burgess* | |
William H. Cunningham | Principal distributor |
Grace K. Fey | John Hancock Funds, LLC |
Theron S. Hoffman* | |
Deborah C. Jackson | Custodian |
Hassell H. McClellan | State Street Bank and Trust Company |
Gregory A. Russo | |
Warren A. Thomson† | Transfer agent |
John Hancock Signature Services, Inc. | |
Officers | |
Andrew G. Arnott# | Legal counsel |
President | 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 | |
Hugh McHaffie** | |
President | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 3-13-14 | |
**Through 3-13-14 |
The fund’s proxy voting policies and procedures, as well as the fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund’s Form N-Q is available on our website and the SEC’s website, sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | ||
800-225-5291 | Regular mail: | Express mail: |
jhinvestments.com | Investment Operations | Investment Operations |
John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. | |
P.O. Box 55913 | 30 Dan Road | |
Boston, MA 02205-5913 | Canton, MA 02021 |
Annual report | International Growth Fund | 49 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internatlgrowthx46x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/internatlgrowthx46x2.jpg)
This report is for the information of the shareholders of John Hancock International Growth Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 87A 2/14 |
MF155708 | 4/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/intlallocportx1x1.jpg)
A look at performance
Total returns for the period ended February 28, 2014
Average annual total returns (%) | Cumulative total returns (%) | |||||||
with maximum sales charge | with maximum sales charge | |||||||
1-year | 5-year | 10-year | Since inception1 | 1-year | 5-year | 10-year | Since inception1 | |
Class A | 10.52 | 16.17 | — | 0.65 | 10.52 | 111.60 | — | 4.73 |
Class B | 10.48 | 16.35 | — | 0.65 | 10.48 | 113.24 | — | 4.79 |
Class C | 14.34 | 16.57 | — | 0.65 | 14.34 | 115.24 | — | 4.78 |
Class I2 | 16.59 | 17.88 | — | 1.78 | 16.59 | 127.59 | — | 13.51 |
index† | 19.78 | 18.14 | — | 2.40 | 19.78 | 130.16 | — | 18.52 |
Performance figures assume all distributions 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 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 to Class I shares.
The expense ratios of the portfolio, both net (including any fee waivers and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectuses for the portfolio and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and/or expense limitations are contractual at least until 6-30-14 for all classes. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The following expense ratios included 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 (%) | 1.62 | 2.32 | 2.32 | 1.26 | |
Gross (%) | 2.49 | 3.63 | 3.27 | 5.67 |
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 800-225-5291 or visit the portfolio’s website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The portfolio’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† Index is the MSCI EAFE Index.
See the following page for footnotes.
Annual report | International Allocation Portfolio | 5 |
A look at performance
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/intlallocportx3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class B3 | 12-29-06 | $10,479 | $10,479 | $11,852 |
Class C3 | 12-29-06 | 10,478 | 10,478 | 11,852 |
Class I2 | 12-29-06 | 11,351 | 11,351 | 11,852 |
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 expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 From 12-29-06.
2 For certain types of investors, as described in the portfolio’s prospectus.
3 The contingent deferred sales charge is not applicable.
6 | International Allocation Portfolio | Annual report |
Management’s discussion of
Portfolio performance
By John Hancock Asset Management
Please note: Effective April 11, 2014, the John Hancock International Allocation Portfolio is liquidating its assets.
For the 12 months ended February 28, 2014, foreign stocks in developed markets posted solid gains. For the most part, aggressively stimulative central bank policy kept the markets on an upward trajectory, as did a global economic recovery that remained intact, if somewhat fragile. However, global share prices retreated following the U.S. Federal Reserve’s May 22 announcement that it might reduce its stimulative bond-buying later in the year. Although developed-market stocks collapsed in the immediate aftermath of this announcement, by the end of June they had begun a recovery that carried them through the end of the period and took many markets to fresh highs.
During the 12-month period, John Hancock International Allocation Portfolio’s Class A shares posted a total return of 16.33%, excluding sales charges. The portfolio under-performed its benchmark, the MSCI EAFE Index, which advanced 19.78%. The portfolio’s underperformance was largely attributable to our decision to diversify into emerging-market equities, an asset class that lost 5.67% over the 12-month period, as measured by the MSCI Emerging Markets Index. Conversely, the strong performance of the portfolio’s underlying funds helped offset most of the drag created by its emerging-market equity exposure. The portfolio’s results were especially aided by its allocations to the international large-cap equity space. Here, International Value Fund (Templeton) and International Core Fund (GMO) were noteworthy contributors. In the international small-cap category, International Small Company Fund (DFA) also recorded strong results. Finally, the portfolio’s tactical allocations to Germany, France, and Italy all outperformed the benchmark index and added value.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance is no guarantee of future results.
Annual report | International Allocation Portfolio | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
■ Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the fund’s actual ongoing operating expenses and is based on the fund’s actual return. It assumes an account value of $1,000.00 on September 1, 2013, with the same investment held until February 28, 2014.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1000.00 | $1,137.60 | $3.34 | 0.63% |
Class B | 1000.00 | 1,133.50 | 7.04 | 1.33% |
Class C | 1000.00 | 1,132.00 | 7.03 | 1.33% |
Class I | 1000.00 | 1,138.90 | 1.43 | 0.27% |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 28, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/intlallocportx5x1.jpg)
8 | International Allocation Portfolio | Annual report |
Hypothetical example for comparison purposes
This table allows you to compare the fund’s ongoing operating expenses with those of any other fund. It provides an example of the fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the fund’s actual return). It assumes an account value of $1,000.00 on September 1, 2013, with the same investment held until February 28, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1000.00 | $1,021.70 | $3.16 | 0.63% |
Class B | 1000.00 | 1,018.20 | 6.66 | 1.33% |
Class C | 1000.00 | 1,018.20 | 6.66 | 1.33% |
Class I | 1000.00 | 1,023.50 | 1.35 | 0.27% |
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 portfolio’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annual report | International Allocation Portfolio | 9 |
Portfolio summary
Asset Allocation1,2 | ||||
International Large Cap | 74.2% | International Small Cap | 9.5% | |
Emerging Markets | 16.3% | |||
1 As a percentage of net assets on 2-28-14.
2 The portfolio’s performance depends on the Advisor’s skill in determining the strategic asset class allocations, the mix of underlying funds and the performance of those underlying funds. The underlying funds’ performance may be lower than the performance of the asset class which they were selected to represent. The portfolio is subject to the same risks as the underlying funds in which it invests, which include the following: stocks and bonds can decline due to adverse issuer, market, regulatory or economic developments; foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability; and the securities of small capitalization companies are subject to higher volatility than larger, more established companies. Please see the portfolio’s prospectuses for additional risks.
10 | International Allocation Portfolio | Annual report |
Portfolio’s investments
As of 2-28-14
(in liquidation)
Shares | Value | |
Affiliated Investment Companies (G) 95.2% | $15,637,777 | |
(Cost $11,843,132) | ||
EQUITY 95.2% | 15,637,777 | |
International Large Cap 70.7% | ||
International Core, Class NAV (GMO) | 45,606 | 1,621,305 |
International Growth Opportunities, Class NAV (Baillie Gifford) | 121,383 | 1,706,644 |
International Growth Stock, Class NAV (Invesco) | 189,487 | 2,559,965 |
International Value, Class NAV (Templeton) | 226,715 | 4,010,593 |
International Value Equity, Class NAV (John Hancock1) (A) | 183,116 | 1,706,644 |
Emerging Markets 16.3% | ||
Emerging Markets, Class NAV (DFA) | 201,766 | 1,997,482 |
Greater China Opportunities, Class NAV (John Hancock2) (A) | 29,820 | 684,073 |
International Small Cap 8.2% | ||
International Small Company, Class NAV (DFA) | 124,638 | 1,351,071 |
Unaffiliated Investment Companies 4.8% | $783,837 | |
(Cost $695,449) | ||
EQUITY 4.8% | 783,837 | |
International Large Cap 3.5% | ||
iShares MSCI Germany Index Fund | 10,481 | 332,352 |
iShares MSCI Malaysia Index Fund | 2,667 | 40,885 |
iShares MSCI Taiwan Index Fund | 8,779 | 123,433 |
Market Vectors Vietnam ETF | 3,723 | 81,383 |
See notes to financial statements | Annual report | International Allocation Portfolio | 11 |
Unaffiliated Investment Companies (continued)
International Small Cap 1.3% | ||
Guggenheim China Small Cap ETF | 7,930 | $205,784 |
Total investments (Cost $12,538,581)† 100.0% | $16,421,614 | |
Other assets and liabilities, net 0.0% | ($9,011) | |
Total net assets 100.0% | $16,412,603 | |
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 subadvisor is an affiliate of the advisor.
(G) The portfolio’s subadvisor is shown parenthetically.
(1) Manulife Asset Management (US) LLC is doing business as John Hancock Asset Management.
(2) Manulife Asset Management (North America) Limited is doing business as John Hancock Asset Management.
† At 2-28-14, the aggregate cost of investment securities for federal income tax purposes was $14,287,403. Net unrealized appreciation aggregated $2,134,211, of which $2,135,643 related to appreciated investment securities and $1,432 related to depreciated investment securities.
* On April 11, 2014 the portfolio distributed its remaining net assets to shareholders and all outstanding shares were redeemed and cancelled.
Investment companies | ||
Underlying Funds’ Subadvisors | ||
Baillie Gifford Overseas, Ltd. | (Baillie Gifford) | |
Dimensional Fund Advisors, Inc. | (DFA) | |
Templeton Investment Counsel, Inc. | (Templeton) | |
Grantham, Mayo, Van Otterloo & Co. LLC | (GMO) | |
Invesco Advisers, Inc. | (Invesco) | |
John Hancock Asset Management | (John Hancock) |
12 | International Allocation Portfolio | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 2-28-14
(in liquidation)
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 $695,449) | $783,837 |
Investments in affiliated funds, at value (Cost $11,843,132) | 15,637,777 |
Total investments, at value (Cost $12,538,581) | 16,421,614 |
Cash | 8,401 |
Receivable for investments sold | 122,843 |
Receivable for portfolio shares sold | 1,677 |
Dividends receivable | 1,125 |
Receivable due from advisor | 76,465 |
Total assets | 16,632,125 |
Liabilities | |
Payable for portfolio shares repurchased | 128,626 |
Payable to affiliates | |
Accounting and legal services fees | 873 |
Transfer agent fees | 6,710 |
Trustees’ fees | 136 |
Other liabilities and accrued expenses | 83,177 |
Total liabilities | 219,522 |
Net assets | $16,412,603 |
Net assets consist of | |
Paid-in capital | $27,949,168 |
Accumulated distributions in excess of net investment income | (29,047) |
Accumulated net realized gain (loss) on investments | (15,390,551) |
Net unrealized appreciation (depreciation) on investments | 3,883,033 |
Net assets | $16,412,603 |
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 ($8,620,468 ÷ 948,619 shares)1 | $9.09 |
Class B ($1,798,247 ÷ 199,085 shares)1 | $9.03 |
Class C ($5,014,905 ÷ 555,204 shares)1 | $9.03 |
Class I ($978,983 ÷ 107,220 shares) | $9.13 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $9.57 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | International Allocation Portfolio | 13 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-28-14
(in liquidation)
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 | $355,666 |
Dividends | 33,207 |
Total investment income | 388,873 |
Expenses | |
Investment management fees | 18,866 |
Distribution and service fees | 109,634 |
Accounting and legal services fees | 3,115 |
Transfer agent fees | 29,219 |
Trustees’ fees | 804 |
State registration fees | 109,765 |
Printing and postage | 6,391 |
Professional fees | 55,204 |
Custodian fees | 12,399 |
Registration and filing fees | 29,306 |
Other | 6,446 |
Total expenses | 381,149 |
Less expense reductions | (209,898) |
Net expenses | 171,251 |
Net investment income | 217,622 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 109,279 |
Investments in affiliated issuers | 238,250 |
Capital gain distributions received from unaffiliated underlying funds | 8,753 |
Capital gain distributions received from affiliated underlying funds | 135,136 |
491,418 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 77,160 |
Investments in affiliated issuers | 1,926,132 |
2,003,292 | |
Net realized and unrealized gain | 2,494,710 |
Increase in net assets from operations | $2,712,332 |
14 | International Allocation Portfolio | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
(in liquidation)
These Statements of changes in net assets show how the value of the portfolio’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of portfolio share transactions.
Year | Year | |
ended | ended | |
2-28-14 | 2-28-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $217,622 | $99,288 |
Net realized gain | 491,418 | 377,219 |
Change in net unrealized appreciation (depreciation) | 2,003,292 | 311,910 |
Increase in net assets resulting from operations | 2,712,332 | 788,417 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (208,447) | (74,313) |
Class B | (34,965) | (6,253) |
Class C | (99,197) | (11,336) |
Class I | (59,555) | (8,285) |
From net realized gain | ||
Class A | (36,710) | (21,071) |
Class B | (8,881) | (6,762) |
Class C | (25,197) | (12,258) |
Class I | (9,060) | (1,703) |
Total distributions | (482,012) | (141,981) |
From fund share transactions | (2,810,267) | (65,399) |
Total increase (decrease) | (579,947) | 581,037 |
Net assets | ||
Beginning of year | 16,992,550 | 16,411,513 |
End of year | $16,412,603 | $16,992,550 |
Undistributed (accumulated distributions in excess of) net | ||
investment income | ($29,047) | $140,651 |
See notes to financial statements | Annual report | International Allocation Portfolio | 15 |
Financial highlights
The Financial highlights show how the portfolio’s net asset value for a share has changed during the period.
CLASS A SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $7.99 | $7.64 | $8.35 | $6.82 | $4.31 |
Net investment income1,2 | 0.11 | 0.07 | 0.08 | 0.05 | 0.02 |
Net realized and unrealized gain (loss) on investments | 1.19 | 0.37 | (0.70) | 1.48 | 2.55 |
Total from investment operations | 1.30 | 0.44 | (0.62) | 1.53 | 2.57 |
Less distributions | |||||
From net investment income | (0.17) | (0.07) | (0.09) | — | (0.06) |
From net realized gain | (0.03) | (0.02) | —3 | — | —3 |
Total distributions | (0.20) | (0.09) | (0.09) | — | (0.06) |
Net asset value, end of period | $9.09 | $7.99 | $7.64 | $8.35 | $6.82 |
Total return (%)4,5 | 16.33 | 5.83 | (7.34) | 22.43 | 59.59 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $9 | $9 | $8 | $11 | $10 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.436 | 1.506 | 1.286 | 1.156 | 1.066,7 |
Expenses net of fee waivers | 0.636 | 0.636 | 0.636 | 0.656 | 0.676,7 |
Expenses net of fee waivers and credits | 0.636 | 0.636 | 0.636 | 0.656 | 0.666,7 |
Net investment income2 | 1.30 | 0.93 | 1.01 | 0.62 | 0.29 |
Portfolio turnover (%) | 51 | 52 | 18 | 64 | 41 |
1 Based on the average daily shares outstanding.
2 Recognition of net investment income by the portfolio is affected by the timing and frequency 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 applicable periods.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.51% to
1.27%, 0.64% to 1.28%, 0.48% to 1.35%, 0.91% to 1.11% and 0.91% to 1.17% for the years ended 2-28-14,
2-28-13, 2-29-12, 2-28-11 and 2-28-10, 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.
16 | International Allocation Portfolio | Annual report | See notes to financial statements |
CLASS B SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $7.95 | $7.60 | $8.30 | $6.84 | $4.32 |
Net investment income1,2 | 0.04 | 0.03 | 0.03 | — | 0.03 |
Net realized and unrealized gain (loss) on investments | 1.19 | 0.36 | (0.70) | 1.46 | 2.51 |
Total from investment operations | 1.23 | 0.39 | (0.67) | 1.46 | 2.54 |
Less distributions | |||||
From net investment income | (0.12) | (0.02) | (0.03) | — | (0.02) |
From net realized gain | (0.03) | (0.02) | —3 | — | —3 |
Total distributions | (0.15) | (0.04) | (0.03) | — | (0.02) |
Net asset value, end of period | $9.03 | $7.95 | $7.60 | $8.30 | $6.84 |
Total return (%)4,5 | 15.48 | 5.14 | (7.96) | 21.35 | 58.73 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | $3 | $2 | $2 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.926 | 2.646 | 2.486 | 2.336 | 3.066,7 |
Expenses net of fee waivers | 1.336 | 1.336 | 1.336 | 1.346 | 1.446,7 |
Expenses net of fee waivers and credits | 1.336 | 1.336 | 1.336 | 1.346 | 1.376,7 |
Net investment income2 | 0.42 | 0.37 | 0.43 | 0.05 | 0.48 |
Portfolio turnover (%) | 51 | 52 | 18 | 64 | 41 |
1 Based on the average daily shares outstanding.
2 Recognition of net investment income by the portfolio is affected by the timing and frequency 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 applicable periods.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.51% to
1.27%, 0.64% to 1.28%, 0.48% to 1.35%, 0.91% to 1.11% and 0.91% to 1.17% for the years ended 2-28-14,
2-28-13, 2-29-12, 2-28-11 and 2-28-10, 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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $7.96 | $7.60 | $8.31 | $6.84 | $4.32 |
Net investment income1,2 | 0.07 | 0.01 | 0.04 | —3 | 0.03 |
Net realized and unrealized gain (loss) on investments | 1.15 | 0.39 | (0.72) | 1.47 | 2.51 |
Total from investment operations | 1.22 | 0.40 | (0.68) | 1.47 | 2.54 |
Less distributions | |||||
From net investment income | (0.12) | (0.02) | (0.03) | — | (0.02) |
From net realized gain | (0.03) | (0.02) | —3 | — | —3 |
Total distributions | (0.15) | (0.04) | (0.03) | — | (0.02) |
Net asset value, end of period | $9.03 | $7.96 | $7.60 | $8.31 | $6.84 |
Total return (%)4,5 | 15.34 | 5.27 | (8.07) | 21.49 | 58.73 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $5 | $5 | $6 | $6 | $5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.356 | 2.286 | 2.066 | 1.966 | 2.116,7 |
Expenses net of fee waivers | 1.336 | 1.336 | 1.336 | 1.356 | 1.406,7 |
Expenses net of fee waivers and credits | 1.336 | 1.336 | 1.336 | 1.356 | 1.376,7 |
Net investment income (loss)2 | 0.83 | 0.17 | 0.52 | (0.06) | 0.44 |
Portfolio turnover (%) | 51 | 52 | 18 | 64 | 41 |
1 Based on the average daily shares outstanding.
2 Recognition of net investment income by the portfolio is affected by the timing and frequency 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 applicable periods.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.51% to
1.27%, 0.64% to 1.28%, 0.48% to 1.35%, 0.91% to 1.11% and 0.91% to 1.17% for the years ended 2-28-14,
2-28-13, 2-29-12, 2-28-11 and 2-28-10, 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 I SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $8.03 | $7.67 | $8.38 | $6.82 | $4.30 |
Net investment income1,2 | 0.24 | 0.13 | 0.13 | 0.07 | 0.09 |
Net realized and unrealized gain (loss) on investments | 1.09 | 0.35 | (0.73) | 1.49 | 2.52 |
Total from investment operations | 1.33 | 0.48 | (0.60) | 1.56 | 2.61 |
Less distributions | |||||
From net investment income | (0.20) | (0.10) | (0.11) | — | (0.09) |
From net realized gain | (0.03) | (0.02) | —3 | — | —3 |
Total distributions | (0.23) | (0.12) | (0.11) | — | (0.09) |
Net asset value, end of period | $9.13 | $8.03 | $7.67 | $8.38 | $6.82 |
Total return (%)4 | 16.59 | 6.31 | (6.96) | 22.87 | 60.62 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1 | $1 | —5 | —5 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.886 | 4.686 | 6.586 | 5.696 | 4.686,7 |
Expenses net of fee waivers | 0.276 | 0.276 | 0.236 | 0.186 | 0.196,7 |
Expenses net of fee waivers and credits | 0.276 | 0.276 | 0.236 | 0.186 | 0.196,7 |
Net investment income2 | 2.72 | 1.72 | 1.63 | 0.91 | 1.46 |
Portfolio turnover (%) | 51 | 52 | 18 | 64 | 41 |
1 Based on the average daily shares outstanding.
2 Recognition of net investment income by the portfolio is affected by the timing and frequency 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 applicable periods.
5 Less than $500,000.
6 Ratios do not include expenses incurred from underlying funds whose annualized expense ratios were 0.51% to
1.27%, 0.64% to 1.28%, 0.48% to 1.35%, 0.91% to 1.11% and 0.91% to 1.17% for the years ended 2-28-14,
2-28-13, 2-29-12, 2-28-11 and 2-28-10, 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 |
Notes to financial statements
Note 1 — Organization
John Hancock International Allocation Portfolio (the portfolio) 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 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, John Hancock Funds II (JHF II), other affiliated John Hancock funds and other permitted investments, including exchange-traded funds.
As of February 28, 2014, the portfolio offered multiple classes of shares as detailed in the Statement of assets and liabilities. 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.
On December 18, 2013, the Board of Trustees approved a plan of liquidation for the portfolio. On April 11, 2014, the portfolio distributed its remaining net assets to shareholders and all outstanding shares were redeemed and cancelled.
The accounting policies of the John Hancock underlying funds in which the portfolio invests are outlined in the underlying funds’ shareholder reports, which include the underlying funds’ financial statements, available without charge by calling 800-344-1029 or visiting jhinvestments.com, on the Securities and Exchange Commission (SEC) website at 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 portfolio has adopted a liquidation basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Under the liquidation basis of accounting, assets are stated at their estimated net realizable values, and liabilities are stated at their anticipated settlement amounts. Portfolio assets and liabilities historically were carried at values that approximated fair value. Accordingly, the use of the liquidation basis of accounting is substantially similar to the basis of accounting that the portfolio had applied prior to the use of the liquidation basis of accounting.
The financial statements have been prepared in conformity with GAAP, which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. 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. In order to value the securities, the portfolio uses the following valuation techniques: Equity securities, including exchange-traded
Annual report | International Allocation Portfolio | 19 |
funds, held by the portfolio are valued at the last sale price or official closing price on the exchange where the security was acquired or most likely will be sold. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. 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. Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the portfolio’s Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The 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 other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the portfolio’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. As of February 28, 2014, all investments are categorized as Level 1 under the hierarchy described above.
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. 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 portfolio’s 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, the portfolio and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to potentially participate in a $300 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Prior to March 27, 2013, the portfolio participated in a $100 million unsecured line of credit, also with Citibank N.A., with terms otherwise similar to the existing agreement. Commitment fees for the year ended February 28, 2014 were $849. For the year ended February 28, 2014, the portfolio had no borrowings under either line of credit.
Expenses. Within the John Hancock funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a
20 | International Allocation Portfolio | Annual report |
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 expenses, 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.
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, as of February 28, 2014, the portfolio has a capital loss carryforward of $13,641,729 available to offset future net realized capital gains. The following table details the capital loss carryforward available as of February 28, 2014.
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 | — | $252,599 |
As of February 28, 2014, 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 28, 2014 and 2013 was as follows:
FEBRUARY 28, 2014 | FEBRUARY 28, 2013 | |||
Ordinary Income | $482,012 | $141,981 |
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.
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. Short-term gains from underlying funds are treated as ordinary income for tax purposes.
Annual report | International Allocation Portfolio | 21 |
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.
Note 3 — Guarantees and indemnifications
Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the 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 Advisers, LLC (the Advisor or JHA) serves as investment advisor for the fund. Prior to January 1, 2014, John Hancock Investment Management Services, LLC (JHIMS) served as investment advisor for the fund. JHIMS and JHA have identical officers, directors and other personnel, and share common facilities and resources. Terms of the investment management contract with JHA are substantially identical to the former contract with JHIMS. In this report, depending on the context, the term “Advisor” shall refer to either JHA in its current capacity as investment advisor, or to JHIMS in its capacity as investment advisor prior to January 1, 2014 John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The portfolio has an investment management agreement with the Advisor under which the portfolio pays the Advisor 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 Advisor 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 Advisor 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 Advisor. The portfolio is not responsible for payment of the subadvisory fees.
The Advisor 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, acquired fund fees, 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 Advisor has voluntarily agreed to waive fees and/or reimburse certain other expenses of the portfolio excluding advisory fees, Rule 12b-1 fees, transfer agent fees, service fees, blue sky fees, taxes, portfolio brokerage commissions, interest expense, printing and postage, acquired fund fees, short dividend expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. This voluntary expense reimbursement
22 | International Allocation Portfolio | Annual report |
will continue in effect until terminated at any time by the Advisor 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.
In addition, the Advisor has voluntarily agreed to waive its advisory fees for the portfolio so that the amount retained by the Advisor after payment of the subadvisory fees, including Advisor fees collected on the underlying investments after payment of the subadvisory fees, does not exceed 0.50% of the portfolio’s average annual net assets.
The expense reductions described above amounted to the following for the year ended February 28, 2014.
CLASS | REIMBURSEMENT | ||
A | $85,892 | ||
B | 35,286 | ||
C | 59,771 | ||
I | 28,949 |
The investment management fees, including the impact of the waivers and reimbursements described above, incurred for the year ended February 28, 2014 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 Advisor 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 28, 2014 amounted to an annual rate of 0.01% of the portfolio’s average daily net assets.
Distribution and service plans. The portfolio has a distribution agreement with the Distributor. The portfolio has adopted distribution and service plans with respect to Class A, Class B and Class C shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the portfolio. The portfolio may pay up to the following 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 | RULE 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 $43,273 for the year ended February 28, 2014. Of this amount, $7,123 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $35,618 was paid as sales commissions to broker-dealers and $532 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are
Annual report | International Allocation Portfolio | 23 |
applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2014, CDSCs received by the Distributor amounted to $0, $145 and $0 for Class A, 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 Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the portfolio and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to October 1, 2013, Signature Services Cost were calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Share Classes and all other Retail Share Classes. Within each of these categories, the applicable costs were allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the year ended February 28, 2014 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $27,939 | $14,681 | $27,403 | $1,373 |
Class B | 25,343 | 3,879 | 26,338 | 1,280 |
Class C | 56,352 | 8,847 | 26,776 | 2,667 |
Class I | — | 1,812 | 29,248 | 1,071 |
Total | $109,634 | $29,219 | $109,765 | $6,391 |
Trustee expenses. The portfolio compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to the portfolio based on its net assets relative to other funds within the John Hancock funds complex.
Note 5 — Portfolio share transactions
Transactions in the portfolio shares for the years ended February 28, 2014 and 2013 were as follows:
Year ended 2-28-14 | Year ended 2-28-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 419,109 | $3,630,768 | 343,665 | $2,574,609 |
Distributions reinvested | 26,970 | 242,463 | 12,021 | 94,127 |
Repurchased | (597,215) | (5,153,817) | (357,362) | (2,634,090) |
Net decrease | (151,136) | ($1,280,586) | (1,676) | $34,646 |
24 | International Allocation Portfolio | Annual report |
Year ended 2-28-14 | Year ended 2-28-13 | |||
Shares | Amount | Shares | Amount | |
Class B shares | ||||
Sold | 5,266 | $43,425 | 75,225 | $558,093 |
Distributions reinvested | 4,766 | 42,609 | 1,628 | 12,696 |
Repurchased | (145,449) | (1,236,119) | (31,907) | (231,859) |
Net increase (decrease) | (135,417) | ($1,150,085) | 44,946 | $338,930 |
Class C shares | ||||
Sold | 354,421 | $3,059,797 | 68,714 | $523,106 |
Distributions reinvested | 13,594 | 121,668 | 2,870 | 22,416 |
Repurchased | (422,253) | (3,693,064) | (195,322) | (1,413,303) |
Net decrease | (54,238) | ($511,599) | (123,738) | ($867,781) |
Class I shares | ||||
Sold | 256,216 | $2,214,254 | 72,964 | $551,189 |
Distributions reinvested | 7,390 | 66,734 | 1,214 | 9,547 |
Repurchased | (242,925) | (2,148,985) | (17,090) | (131,930) |
Net increase | 20,681 | $132,003 | 57,088 | $428,806 |
Total net decrease | (320,110) | ($2,810,267) | (23,380) | ($65,399) |
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $9,511,793 and $12,447,296, respectively, for the year ended February 28, 2014.
Note 7 — Investment in affiliated underlying funds
International Allocation Portfolio invests primarily in affiliated underlying funds that are managed by the Advisor and its 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 28, 2014, the portfolio did not hold 5% or more of any underlying fund’s net assets.
Annual report | International Allocation Portfolio | 25 |
Information regarding the portfolio’s fiscal year to date purchases and sales of the affiliated underlying funds as well as income and capital gains earned by the portfolio from its investment in affiliated underlying funds is as follows:
DIVIDENDS AND DISTRIBUTIONS | ||||||||
CAPTIAL | ||||||||
BEGINNING | ENDING | INCOME | GAINS | |||||
SHARE | SHARES | SHARES | SHARE | DISTRIBUTIONS | DISTRIBUTIONS | REALIZED | ENDING | |
SECURITY | AMOUNT | PURCHASED | SOLD | AMOUNT | RECEIVED | RECEIVED | GAIN (LOSS) | VALUE |
China | 40,589 | 20,973 | (61,562) | — | $1,329 | $7,690 | ($51,506) | — |
Emerging | ||||||||
Leaders | ||||||||
Emerging | 193,455 | 123,473 | (115,162) | 201,766 | 55,487 | — | (75,152) | $1,997,482 |
Markets | ||||||||
Greater China | 35,458 | 15,454 | (21,092) | 29,820 | 12,022 | 7,444 | 37,000 | $684,073 |
Opportunities | ||||||||
International | 56,029 | 18,598 | (29,021) | 45,606 | 71,811 | — | 53,902 | $1,621,305 |
Core | ||||||||
International | 146,019 | 43,616 | (68,252) | 121,383 | 19,176 | 26,591 | 69,648 | $1,706,644 |
Growth | ||||||||
Opportunities | ||||||||
International | 216,933 | 73,680 | (101,126) | 189,487 | 55,861 | — | 58,512 | $2,559,965 |
Growth Stock | ||||||||
International | 131,706 | 68,048 | (75,116) | 124,638 | 20,376 | — | 19,281 | $1,351,071 |
Small | ||||||||
Company | ||||||||
International | 290,747 | 104,502 | (168,534) | 226,715 | 85,678 | — | 130,027 | $4,010,593 |
Value | ||||||||
International | 198,459 | 85,470 | (100,813) | 183,116 | 33,926 | 93,411 | (3,462) | $1,706,644 |
Value Equity | ||||||||
$355,666 | $135,136 | $238,250 | $15,637,777 |
26 | International Allocation Portfolio | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Funds III 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 Funds III International Allocation Portfolio (the “Portfolio”) at February 28, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2014 by correspondence with the custodian and transfer agents, provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Board of Trustees approved a plan of liquidation on December 18, 2013, and the Funds were liquidated on April 11, 2014. As a result, the Funds have changed their basis of accounting for the year-ended February 28, 2014 from the going-concern basis to the liquidation basis.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 14, 2014
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 fund, if any, paid during its taxable year ended February 28, 2014.
The portfolio reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The portfolio reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Income derived from foreign sources was $276,784. The portfolio intends to pass through foreign tax credits of $36,489.
Eligible shareholders will be mailed a 2014 Form 1099-DIV in early 2015. This will reflect the tax character of all distributions paid in calendar year 2014.
Please consult a tax advisor regarding the tax consequences of your investment in the portfolio.
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 |
James M. Oates, Born: 1946 | 2012 | 226 |
Managing Director, Wydown Group (financial consulting firm) (since 1994); Chairman and Director, | ||
Emerson Investment Management, Inc. (since 2000); Independent Chairman, Hudson Castle Group, Inc. | ||
(formerly IBEX Capital Markets, Inc.) (financial services company) (1997–2011); Director, Stifel Financial | ||
(since 1996); Director, Investor Financial Services Corporation (1995–2007); Director, Connecticut River | ||
Bancorp (since 1998); Director, Virtus Funds (formerly Phoenix Mutual Funds) (since 1988). | ||
Trustee and Chairperson of the Board, John Hancock retail funds3 (since 2012); Trustee (2005–2006 and | ||
since 2012) and Chairperson of the Board (since 2012), John Hancock Funds III; Trustee (since 2004) and | ||
Chairperson of the Board (since 2005), John Hancock Variable Insurance Trust; Trustee and Chairperson | ||
of the Board, John Hancock Funds II (since 2005). | ||
Charles L. Bardelis,2 Born: 1941 | 2012 | 226 |
Director, Island Commuter Corp. (marine transport). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock | ||
Funds II (since 2005). | ||
Peter S. Burgess,2 Born: 1942 | 2012 | 226 |
Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; | ||
Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln | ||
Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (since 2010); | ||
Director, PMA Capital Corporation (2004–2010). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
William H. Cunningham, Born: 1944 | 2006 | 226 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director, LIN Television (since 2009); | ||
Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, | ||
Resolute Energy Corporation (since 2009); Director, Southwest Airlines (since 2000); former Director, | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); former Director, Hicks Acquisition Company I, | ||
Inc. (until 2007); former Director, Texas Exchange Bank, SSB (formerly Bank of Crowley) (until 2009); | ||
former Advisory Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust | ||
(since 2012); Trustee, John Hancock Funds II (since 2012 and 2005–2006). |
Annual report | 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 |
Grace K. Fey, Born: 1946 | 2012 | 226 |
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier | ||
Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Theron S. Hoffman,2 Born: 1947 | 2012 | 226 |
Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd | ||
Organization (consulting firm) (2003–2010); President, Westport Resources Management (investment | ||
management consulting firm) (2006–2008); Senior Managing Director, Partner, and Operating Head, | ||
Putnam Investments (2000–2003); Executive Vice President, The Thomson Corp. (financial and legal | ||
information publishing) (1997–2000). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 226 |
President, Cambridge College, Cambridge, Massachusetts (since 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation | ||
(since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors | ||
of American Student Assistance Corporation (1996–2009); Board of Directors of Boston Stock Exchange | ||
(2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee of John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Hassell H. McClellan, Born: 1945 | 2012 | 226 |
Trustee, Virtus Variable Insurance Trust (formerly Phoenix Edge Series Funds) (since 2008); Director, The | ||
Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston | ||
College (retired 2013). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
Steven R. Pruchansky, Born: 1944 | 2006 | 226 |
Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director | ||
and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First | ||
American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Director, | ||
First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, | ||
Maxwell Building Corp. (until 1991). | ||
Trustee (since 1992) and Chairperson of the Board (2011–2012), John Hancock retail funds3; Trustee and | ||
Vice Chairperson of the Board, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and | ||
John Hancock Funds II (since 2012). |
30 | International Allocation Portfolio | Annual report |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Gregory A. Russo, Born: 1949 | 2008 | 226 |
Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance | ||
Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare | ||
system); Director and Member of Finance Committee, The Moorings, Inc. (nonprofit continuing care | ||
community) (since 2012); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); | ||
Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester County, | ||
New York, Chamber of Commerce (1986–1992); Director, Treasurer, and Chairman of Audit and | ||
Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of Fundraising | ||
Campaign, United Way of Westchester and Putnam Counties, New York (1990–1995). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Non-Independent Trustees4 | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Craig Bromley, Born: 1966 | 2012 | 226 |
President, John Hancock Financial Services (since 2012); Senior Executive Vice President and General | ||
Manager, U.S. Division, John Hancock Financial Services (since 2012); President and Chief Executive | ||
Officer, Manulife Insurance Company (Manulife Japan) (2005–2012, including prior positions). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Warren A. Thomson, Born: 1955 | 2012 | 226 |
Senior Executive Vice President and Chief Investment Officer, Manulife Financial Corporation and The | ||
Manufacturers Life Insurance Company (since 2009); Chairman and Chief Executive Officer, Manulife | ||
Asset Management (since 2001, including prior positions); Director (since 2006), and President and | ||
Chief Executive Officer (since 2013), Manulife Asset Management Limited; Director and Chairman, | ||
Hancock Natural Resources Group, Inc. (since 2013). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Principal officers who are not Trustees | ||
Name, year of birth | Officer | |
Position(s) held with fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Hugh McHaffie, Born: 1959 | 2012 | |
President* | ||
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment Management Services, | ||
LLC, and John Hancock Funds, LLC (since 2010); President, John Hancock Advisers, LLC (since 2012); | ||
President, John Hancock Investment Management Services, LLC (since 2010); President (since 2012) and | ||
former Trustee (2010–2012), John Hancock retail funds,3 President, John Hancock Variable Insurance | ||
Trust and John Hancock Funds II (since 2009). | ||
*Until 3-13-14. |
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 |
Andrew G. Arnott, Born: 1971 | 2009 |
Executive Vice President | |
President** | |
Senior Vice President, John Hancock Financial Services (since 2009); Director and Executive Vice | |
President, John Hancock Advisers, LLC (since 2005, including prior positions); Director and Executive | |
Vice President, John Hancock Investment Management Services, LLC (since 2006, including prior | |
positions); President, John Hancock Funds, LLC (since 2004, including prior positions); President | |
(effective 3-13-14) and Executive Vice President, John Hancock retail funds,3 John Hancock Variable | |
Insurance Trust, and John Hancock Funds II (since 2007, including prior positions). | |
**Effective 3-13-14. | |
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 Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds,3 | |
John Hancock Variable Insurance Trust, and John Hancock Funds II (since 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,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, | |
LLC, and John Hancock Investment Management Services, LLC (since 2005). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock | |
Funds II (since 2007). | |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable | |
Insurance Trust and John Hancock Funds II (since 2010 and 2007–2009, including prior positions). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation, or removal.
2 Member of the Audit Committee.
3 “John Hancock retail funds” comprises John Hancock Funds III and 36 other John Hancock funds consisting of 26 series of other John Hancock trusts and 10 closed-end funds.
4 Because Messrs. Bromley and Thomson are senior executives or directors of the advisor and/or its affiliates, each of them is considered an “interested person of the fund,” as defined in the Investment Company Act of 1940.
32 | International Allocation Portfolio | Annual report |
More information
Trustees | Investment advisor |
James M. Oates, Chairperson | John Hancock Advisers, LLC |
Steven R. Pruchansky, Vice Chairperson | |
Charles L. Bardelis* | Subadvisor |
Craig Bromley† | John Hancock Asset Management a division of |
Peter S. Burgess* | Manulife Asset Management (US) LLC |
William H. Cunningham | |
Grace K. Fey | Principal distributor |
Theron S. Hoffman* | John Hancock Funds, LLC |
Deborah C. Jackson | |
Hassell H. McClellan | Custodian |
Gregory A. Russo | State Street Bank and Trust Company |
Warren A. Thomson† | |
Transfer agent | |
Officers | John Hancock Signature Services, Inc. |
Andrew G. Arnott# | |
President | Legal counsel |
K&L Gates LLP | |
Thomas M. Kinzler | |
Secretary and Chief Legal Officer | Independent registered |
public accounting firm | |
Francis V. Knox, Jr. | PricewaterhouseCoopers LLP |
Chief Compliance Officer | |
Hugh McHaffie** | |
President | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 3-13-14 | |
**Through 3-13-14 |
The fund’s proxy voting policies and procedures, as well as the fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund’s Form N-Q is available on our website and the SEC’s website, sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | ||
800-225-5291 | Regular mail: | Express mail: |
jhinvestments.com | Investment Operations | Investment Operations |
John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. | |
P.O. Box 55913 | 30 Dan Road | |
Boston, MA 02205-5913 | Canton, MA 02021 |
Annual report | International Allocation Portfolio | 33 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/intlallocportx31x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/intlallocportx31x2.jpg)
This report is for the information of the shareholders of John Hancock International Allocation Portfolio. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 318A 2/14 |
MF177826 | 4/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/globalshyieldx1x1.jpg)
A look at performance
Total returns for the period ended February 28, 2014
SEC 30-day | SEC 30-day | ||||||||||||
Average annual total returns (%) | Cumulative total returns (%) | yield (%) | yield (%) | ||||||||||
with maximum sales charge | with maximum sales charge | subsidized | unsubsidized1 | ||||||||||
Since | Since | as of | as of | ||||||||||
1-year | 5-year | 10-year | inception | 1-year | 5-year | 10-year | inception | 2-28-14 | 2-28-14 | ||||
Class A2 | 13.87 | 16.98 | — | 5.07 | 13.87 | 119.04 | — | 41.39 | 2.34 | 2.34 | |||
Class B2 | 13.95 | 17.17 | — | 5.11 | 13.95 | 120.84 | — | 41.76 | 1.73 | 1.62 | |||
Class C2 | 17.97 | 17.35 | — | 5.11 | 17.97 | 122.51 | — | 41.79 | 1.77 | 1.77 | |||
Class I2,3 | 20.28 | 18.70 | — | 6.32 | 20.28 | 135.65 | — | 53.60 | 2.79 | 2.78 | |||
Class R23,4 | 19.78 | 17.20 | — | 4.77 | 19.78 | 121.12 | — | 38.60 | 2.36 | –3.16 | |||
Class R63,4 | 20.29 | 18.72 | — | 6.30 | 20.29 | 135.88 | — | 53.38 | 2.84 | –7.76 | |||
Class NAV3,5 | 20.47 | 18.81 | — | 7.57 | 20.47 | 136.74 | — | 53.13 | 2.94 | 2.94 | |||
Index2,† | 22.34 | 20.65 | — | 4.50 | 22.34 | 155.66 | — | 36.06 | — | — | |||
Performance figures assume all distributions 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 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 to Class I, Class R2, Class R6, and Class NAV shares.
The expense ratios of the fund, both net (including any fee waivers and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and/or expense limitations are contractual at least until 6-30-14 for Class B, Class C, Class R2 and Class R6 shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. For all other classes, the net expenses equal the gross expenses. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R2 | Class R6 | Class NAV | |||
Net (%) | 1.42 | 2.12 | 2.12 | 1.04 | 1.47 | 0.89 | 0.90 | ||
Gross (%) | 1.42 | 2.28 | 2.14 | 1.04 | 19.66 | 10.37 | 0.90 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund’s website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund’s performance results reflect any fee waivers or applicable expense reductions, without which the expenses increase and results would have been less favorable.
† Index is the MSCI World Index.
See the following page for footnotes.
6 | Global Shareholder Yield Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/globalshyieldx3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class B6 | 3-1-07 | $14,176 | $14,176 | $13,606 |
Class C6 | 3-1-07 | 14,179 | 14,179 | 13,606 |
Class I3 | 3-1-07 | 15,360 | 15,360 | 13,606 |
Class R23 | 3-1-07 | 13,860 | 13,860 | 13,606 |
Class R63 | 3-1-07 | 15,338 | 15,338 | 13,606 |
Class NAV3 | 4-28-08 | 15,313 | 15,313 | 12,965 |
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 expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 Unsubsidized yields reflect what the yield would have been without the effect of reimbursements and waivers.
2 From 3-1-07.
3 For certain types of investors, as described in the fund’s prospectuses.
4 Class R6 and Class R2 shares were first offered 9-1-11 and 3-1-12, respectively. The returns prior to these dates are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class R6 and Class R2 shares, as applicable.
5 From 4-28-08.
6 The contingent deferred sales charge is not applicable.
Annual report | Global Shareholder Yield Fund | 7 |
Management’s discussion of
Fund performance
By Epoch Investment Partners, Inc.
Stocks in the globe’s developed markets generated strong performance during the 12 months ended February 28, 2014. Key catalysts included improvement in the U.S. economic outlook, the eurozone’s return to growth following a recession, and the continuing economic recovery in the United Kingdom. Japan also made progress in reviving its long-stagnant economy. Many of the globe’s key central banks continued to embrace accommodative monetary policies, providing further support for equities.
During the period, John Hancock Global Shareholder Yield Fund’s Class A shares returned 19.85%, excluding sales charges, trailing the 22.34% return of the fund’s benchmark, the MSCI World Index.
Key factors that weighed on the fund’s performance relative to its benchmark included our stock selection in the United States and stock-picking in the telecommunication services and consumer discretionary sectors. The fund’s modest cash position also detracted from relative results amid a fast-rising equity market.
At the individual security level, the U.S. position that had the most significant negative impact was oil driller Diamond Offshore Drilling, Inc. Among other U.S. holdings, an out-of-benchmark position in pipeline owner Kinder Morgan Energy Partners LP significantly detracted, as did positions in regional telecommunications provider CenturyLink, Inc., real estate investment trust Health Care REIT, Inc., and toy maker Mattel, Inc.
Defense contractor Lockheed Martin Corp. was a notable exception among U.S. holdings, as the stock was the most significant contributor to performance among all the fund’s individual positions.
Our stock selection in France, Germany, and the United Kingdom significantly contributed, as the fund’s overall holdings in these countries generated markedly stronger returns than did each country’s benchmark components. The most notable position in this regard was Vinci SA (France), an infrastructure construction and operations company.
At the sector level, our selection among industrials stocks significantly contributed. Relative performance also was aided by the fund’s lack of positions in any Japanese stocks during the period.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance does not guarantee future results.
8 | Global Shareholder Yield Fund | Annual report |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
▪ Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the fund’s actual ongoing operating expenses and is based on the fund’s actual return. It assumes an account value of $1,000.00 on September 1, 2013, with the same investment held until February 28, 2014.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1,000.00 | $1,124.90 | $7.01 | 1.33% |
Class B | 1,000.00 | 1,121.60 | 11.15 | 2.12% |
Class C | 1,000.00 | 1,120.70 | 10.67 | 2.03% |
Class I | 1,000.00 | 1,127.20 | 5.33 | 1.01% |
Class R2 | 1,000.00 | 1,124.80 | 7.74 | 1.47% |
Class R6 | 1,000.00 | 1,127.80 | 5.12 | 0.97% |
Class NAV | 1,000.00 | 1,128.10 | 4.59 | 0.87% |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at February 28, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/globalshyieldx5x1.jpg)
Annual report | Global Shareholder Yield Fund | 9 |
Your expenses
Hypothetical example for comparison purposes
This table allows you to compare the fund’s ongoing operating expenses with those of any other fund. It provides an example of the fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the fund’s actual return). It assumes an account value of $1,000.00 on September 1, 2013, with the same investment held until February 28, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Beginning | Expenses paid | |||
Account value | Ending value | during period | Annualized | |
on 9-1-2013 | on 2-28-2014 | ended 2-28-20141 | expense ratio | |
Class A | $1,000.00 | $1,018.20 | $6.66 | 1.33% |
Class B | 1,000.00 | 1,014.30 | 10.59 | 2.12% |
Class C | 1,000.00 | 1,014.70 | 10.14 | 2.03% |
Class I | 1,000.00 | 1,019.80 | 5.06 | 1.01% |
Class R2 | 1,000.00 | 1,017.50 | 7.35 | 1.47% |
Class R6 | 1,000.00 | 1,020.00 | 4.86 | 0.97% |
Class NAV | 1,000.00 | 1,020.50 | 4.36 | 0.87% |
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 multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
10 | Global Shareholder Yield Fund | Annual report |
Portfolio summary
Top 10 Holdings (18.2% of Net Assets on 2-28-14)1,2 | ||||
GlaxoSmithKline PLC | 2.0% | National Grid PLC | 1.9% | |
Vinci SA | 2.0% | Deutsche Telekom AG | 1.7% | |
Imperial Tobacco Group PLC | 1.9% | BCE, Inc. | 1.7% | |
Total SA | 1.9% | Terna Rete Elettrica Nazionale SpA | 1.6% | |
Swisscom AG | 1.9% | Lockheed Martin Corp. | 1.6% | |
Sector Composition1,3 | ||||
Utilities | 17.5% | Health Care | 8.8% | |
Telecommunication Services | 14.3% | Consumer Discretionary | 6.4% | |
Consumer Staples | 13.4% | Materials | 5.8% | |
Financials | 9.4% | Information Technology | 3.5% | |
Energy | 9.1% | Short-Term Investments & Other | 2.9% | |
Industrials | 8.9% | |||
Country Composition1,3 | ||||
United States | 46.8% | Australia | 3.3% | |
United Kingdom | 17.8% | Norway | 2.9% | |
France | 8.6% | Italy | 1.7% | |
Germany | 6.7% | Netherlands | 1.5% | |
Switzerland | 4.8% | Other Countries | 1.9% | |
Canada | 4.0% | |||
1 As a percentage of net assets on 2-28-14.
2 Cash and cash equivalents not included.
3 Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. If the fund invests in illiquid securities, it may be difficult to sell them at a price approximating their value. Hedging and other strategic transactions may increase volatility of a fund and, if the transaction is not successful, could result in a significant loss. Sector investing is subject to greater risks than the market as a whole. Because the fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors and investments focused in one sector may fluctuate more widely than investments diversified across sectors. Therefore, distribution rates and income amounts can change at any time. Please see the fund’s prospectuses for additional risks.
Annual report | Global Shareholder Yield Fund | 11 |
Fund’s investments
As of 2-28-14
Shares | Value | |
Common Stocks 97.1% | $2,178,778,580 | |
(Cost $1,779,241,644) | ||
Australia 3.3% | 75,052,757 | |
BHP Billiton, Ltd. | 473,030 | 16,224,259 |
Commonwealth Bank of Australia | 171,270 | 11,439,222 |
Telstra Corp., Ltd. | 7,107,230 | 32,062,430 |
Westpac Banking Corp. | 510,691 | 15,326,846 |
Belgium 0.6% | 12,791,853 | |
Anheuser-Busch InBev NV | 122,300 | 12,791,853 |
Canada 4.0% | 88,920,606 | |
BCE, Inc. | 898,080 | 39,173,904 |
Potash Corp. of Saskatchewan, Inc. | 508,690 | 16,934,290 |
Rogers Communications, Inc., Class B | 360,910 | 13,950,102 |
Shaw Communications, Inc., Class B | 815,550 | 18,862,310 |
France 8.6% | 193,322,265 | |
Electricite de France SA | 917,460 | 36,400,768 |
Sanofi | 166,170 | 17,283,315 |
SCOR SE | 777,600 | 27,188,081 |
Total SA | 653,480 | 42,397,199 |
Vinci SA | 604,510 | 45,081,675 |
Vivendi SA | 875,703 | 24,971,227 |
Germany 6.7% | 150,264,795 | |
BASF SE | 290,560 | 33,398,116 |
Daimler AG | 355,720 | 33,091,548 |
Deutsche Post AG | 369,010 | 13,835,402 |
Deutsche Telekom AG | 2,316,050 | 39,181,273 |
Muenchener Rueckversicherungs AG | 140,680 | 30,758,456 |
Italy 1.7% | 36,946,439 | |
Terna Rete Elettrica Nazionale SpA | 7,242,810 | 36,946,439 |
Netherlands 1.5% | 34,243,070 | |
Royal Dutch Shell PLC, ADR | 469,920 | 34,243,070 |
Norway 2.9% | 65,136,972 | |
Orkla ASA | 2,341,530 | 18,472,525 |
Statoil ASA | 711,530 | 18,767,335 |
Yara International ASA | 688,060 | 27,897,112 |
Philippines 0.6% | 12,397,648 | |
Philippine Long Distance Telephone Company, ADR | 205,941 | 12,397,648 |
12 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Shares | Value | |
Sweden 0.7% | $16,371,646 | |
Svenska Handelsbanken AB, Class A | 313,732 | 16,371,646 |
Switzerland 4.8% | 108,686,674 | |
Nestle SA | 179,460 | 13,557,332 |
Novartis AG | 310,548 | 25,846,935 |
Roche Holding AG | 87,863 | 27,053,016 |
Swisscom AG | 71,350 | 42,229,391 |
United Kingdom 17.8% | 399,334,062 | |
AstraZeneca PLC, ADR | 526,150 | 35,651,924 |
BAE Systems PLC | 4,791,170 | 32,887,624 |
British American Tobacco PLC | 465,980 | 25,401,222 |
Centrica PLC | 4,056,160 | 21,661,847 |
Compass Group PLC | 804,260 | 12,712,244 |
Diageo PLC, ADR | 82,540 | 10,376,103 |
GlaxoSmithKline PLC | 1,609,610 | 45,084,578 |
Imperial Tobacco Group PLC | 1,043,870 | 42,579,069 |
National Grid PLC | 2,967,430 | 41,523,970 |
Pearson PLC | 1,036,770 | 17,557,603 |
Severn Trent PLC | 523,980 | 16,234,750 |
SSE PLC | 1,167,762 | 27,416,439 |
United Utilities Group PLC | 2,588,223 | 33,779,770 |
Vodafone Group PLC | 6,314,913 | 26,314,006 |
WM Morrison Supermarkets PLC | 2,580,140 | 10,152,913 |
United States 43.9% | 985,309,793 | |
AbbVie, Inc. | 326,240 | 16,608,878 |
Altria Group, Inc. | 1,008,200 | 36,557,332 |
Ameren Corp. | 702,340 | 28,381,559 |
Apple, Inc. | 33,675 | 17,721,132 |
Arthur J. Gallagher & Company | 275,280 | 12,717,936 |
AT&T, Inc. | 724,830 | 23,143,822 |
Automatic Data Processing, Inc. | 173,270 | 13,476,941 |
CenturyLink, Inc. | 892,990 | 27,914,867 |
CME Group, Inc. | 318,040 | 23,477,713 |
ConocoPhillips | 294,570 | 19,588,905 |
Corrections Corp. of America | 644,285 | 21,486,905 |
Deere & Company | 128,400 | 11,033,412 |
Diamond Offshore Drilling, Inc. | 370,010 | 17,501,473 |
Dominion Resources, Inc. | 180,450 | 12,523,230 |
Duke Energy Corp. | 499,498 | 35,404,418 |
E.I. du Pont de Nemours & Company | 203,840 | 13,579,821 |
Emerson Electric Company | 244,700 | 15,969,122 |
Enterprise Products Partners LP | 258,890 | 17,374,108 |
Health Care REIT, Inc. | 579,040 | 34,012,810 |
Honeywell International, Inc. | 148,880 | 14,060,227 |
Integrys Energy Group, Inc. | 233,420 | 13,367,963 |
Johnson & Johnson | 138,590 | 12,766,911 |
Kimberly-Clark Corp. | 196,790 | 21,715,777 |
Kinder Morgan Energy Partners LP | 363,910 | 27,027,596 |
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 13 |
Shares | Value | ||
United States (continued) | |||
KLA–Tencor Corp. | 274,180 | $17,862,827 | |
Lockheed Martin Corp. | 227,320 | 36,894,036 | |
Lorillard, Inc. | 702,340 | 34,456,800 | |
MarkWest Energy Partners LP | 216,130 | 13,799,901 | |
Mattel, Inc. | 522,980 | 19,512,384 | |
McDonald’s Corp. | 144,790 | 13,776,769 | |
Merck & Company, Inc. | 306,860 | 17,487,951 | |
Microchip Technology, Inc. | 362,910 | 16,530,551 | |
Microsoft Corp. | 354,720 | 13,589,323 | |
PepsiCo, Inc. | 135,590 | 10,856,691 | |
Philip Morris International, Inc. | 276,280 | 22,353,815 | |
PPL Corp. | 1,052,050 | 33,970,695 | |
R.R. Donnelley & Sons Company | 986,810 | 18,877,675 | |
Regal Entertainment Group, Class A | 846,130 | 15,568,792 | |
Reynolds American, Inc. | 637,090 | 32,383,285 | |
Targa Resources Partners LP | 252,800 | 13,572,832 | |
TECO Energy, Inc. | 1,511,790 | 25,367,836 | |
The Coca-Cola Company | 251,800 | 9,618,760 | |
The Dow Chemical Company | 441,350 | 21,498,159 | |
The Southern Company | 687,050 | 29,096,568 | |
Time Warner, Inc. | 191,650 | 12,865,465 | |
Verizon Communications, Inc. | 512,790 | 24,398,548 | |
Verizon Communications, Inc. (European Exchange) | 304,485 | 14,401,220 | |
Waste Management, Inc. | 287,460 | 11,929,590 | |
Wells Fargo & Company | 371,100 | 17,226,462 | |
Yield (%) | Shares | Value | |
Short-Term Investments 1.9% | $42,066,258 | ||
(Cost $42,066,258) | |||
Money Market Funds 1.9% | $42,066,258 | ||
State Street Institutional Treasury Money | |||
Market Fund | 0.0000 (Y) | 42,066,258 | 42,066,258 |
Total investments (Cost $1,821,307,902)† 99.0% | $2,220,844,838 | ||
Other assets and liabilities, net 1.0% | $22,488,708 | ||
Total net assets 100.0% | $2,243,333,546 | ||
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 2-28-14.
† At 2-28-14, the aggregate cost of investment securities for federal income tax purposes was $1,822,687,909. Net unrealized appreciation aggregated $398,156,929, of which $422,491,522 related to appreciated investment securities and $24,334,593 related to depreciated investment securities.
14 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
Notes to Schedule of Investments
The fund has the following sector composition as a percentage of net assets on 2-28-14.
Utilities | 17.5% | |
Telecommunication Services | 14.3% | |
Consumer Staples | 13.4% | |
Financials | 9.4% | |
Energy | 9.1% | |
Industrials | 8.9% | |
Health Care | 8.8% | |
Consumer Discretionary | 6.4% | |
Materials | 5.8% | |
Information Technology | 3.5% | |
Short-Term Investments & Other | 2.9% | |
Total | 100.0% |
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 15 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 2-28-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
Assets | |
Investments, at value (Cost $1,821,307,902) | $2,220,844,838 |
Foreign currency, at value (Cost $85) | 85 |
Receivable for investments sold | 24,220,636 |
Receivable for fund shares sold | 6,685,910 |
Dividends and interest receivable | 16,929,057 |
Other receivables and prepaid expenses | 93,240 |
Total assets | 2,268,773,766 |
Liabilities | |
Payable for investments purchased | 22,272,611 |
Payable for fund shares repurchased | 2,389,443 |
Payable to affiliates | |
Accounting and legal services fees | 36,304 |
Transfer agent fees | 318,935 |
Distribution and service fees | 85 |
Trustees’ fees | 1,864 |
Investment management fees | 174 |
Other liabilities and accrued expenses | 420,804 |
Total liabilities | 25,440,220 |
Net assets | $2,243,333,546 |
Net assets consist of | |
Paid-in capital | $1,780,724,546 |
Undistributed net investment income | 26,682,066 |
Accumulated net realized gain (loss) on investments and foreign | |
currency transactions | 36,237,999 |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 399,688,935 |
Net assets | $2,243,333,546 |
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 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 ($552,939,188 ÷ 47,082,302 shares)1 | $11.74 |
Class B ($16,528,961 ÷ 1,408,388 shares)1 | $11.74 |
Class C ($127,275,617 ÷ 10,837,700 shares)1 | $11.74 |
Class I ($892,970,232 ÷ 75,790,368 shares) | $11.78 |
Class R2 ($533,064 ÷ 45,266 shares) | $11.78 |
Class R6 ($224,669 ÷ 19,087 shares) | $11.77 |
Class NAV ($652,861,815 ÷ 55,425,654 shares) | $11.78 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $12.36 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 17 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 2-28-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $109,426,561 |
Less foreign taxes withheld | (4,142,856) |
Total investment income | 105,283,705 |
Expenses | |
Investment management fees | 16,083,312 |
Distribution and service fees | 2,290,539 |
Accounting and legal services fees | 222,418 |
Transfer agent fees | 1,600,590 |
Trustees’ fees | 73,392 |
State registration fees | 190,580 |
Printing and postage | 128,364 |
Professional fees | 101,634 |
Custodian fees | 1,045,203 |
Registration and filing fees | 39,373 |
Other | 52,737 |
Total expenses | 21,828,142 |
Less expense reductions | (126,033) |
Net expenses | 21,702,109 |
Net investment income | 83,581,596 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments | 130,233,014 |
Foreign currency transactions | (21,569) |
130,211,445 | |
Change in net unrealized appreciation (depreciation) of | |
Investments | 153,524,077 |
Translation of assets and liabilities in foreign currencies | 203,180 |
153,727,257 | |
Net realized and unrealized gain | 283,938,702 |
Increase in net assets from operations | $367,520,298 |
18 | 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
Statements of changes in net assets
These Statements of changes in net assets show how the value of the fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of fund share transactions.
Year | Year | |
ended | ended | |
2-28-14 | 2-28-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $83,581,596 | $56,336,267 |
Net realized gain | 130,211,445 | 1,335,059 |
Change in net unrealized appreciation (depreciation) | 153,727,257 | 116,681,679 |
Increase in net assets resulting from operations | 367,520,298 | 174,353,005 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (10,212,966) | (6,537,708) |
Class B | (270,722) | (189,434) |
Class C | (1,816,114) | (1,056,210) |
Class I | (22,747,665) | (14,320,551) |
Class R2 | (6,285) | (2,785) |
Class R6 | (5,672) | (4,432) |
Class NAV | (24,197,018) | (30,896,355) |
From net realized gain | ||
Class A | (17,733,684) | — |
Class B | (544,804) | — |
Class C | (4,176,825) | — |
Class I | (30,180,114) | — |
Class R2 | (11,950) | — |
Class R6 | (7,398) | — |
Class NAV | (23,183,742) | — |
Total distributions | (135,094,959) | (53,007,475) |
From fund share transactions | 73,530,102 | 279,874,516 |
Total increase | 305,955,441 | 401,220,046 |
Net assets | ||
Beginning of year | 1,937,378,105 | 1,536,158,059 |
End of year | $2,243,333,546 | $1,937,378,105 |
Undistributed net investment income | $26,682,066 | $5,246,247 |
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 19 |
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 | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $10.46 | $9.81 | $9.50 | $8.10 | $6.10 |
Net investment income1 | 0.452 | 0.29 | 0.26 | 0.24 | 0.25 |
Net realized and unrealized gain on investments | 1.57 | 0.63 | 0.29 | 1.40 | 1.99 |
Total from investment operations | 2.02 | 0.92 | 0.55 | 1.64 | 2.24 |
Less distributions | |||||
From net investment income | (0.31) | (0.27) | (0.24) | (0.24) | (0.24) |
From net realized gain | (0.43) | — | — | — | — |
Total distributions | (0.74) | (0.27) | (0.24) | (0.24) | (0.24) |
Net asset value, end of period | $11.74 | $10.46 | $9.81 | $9.50 | $8.10 |
Total return (%)3,4 | 19.85 | 9.66 | 5.98 | 20.64 | 37.19 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $553 | $276 | $215 | $56 | $22 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.34 | 1.43 | 1.53 | 1.55 | 1.665 |
Expenses net of fee waivers | 1.34 | 1.42 | 1.42 | 1.55 | 1.565 |
Expenses net of fee waivers and credits | 1.34 | 1.42 | 1.42 | 1.55 | 1.555 |
Net investment income | 4.012 | 2.92 | 2.78 | 2.80 | 3.34 |
Portfolio turnover (%) | 40 | 21 | 19 | 39 | 53 |
1 Based on the average daily shares outstanding.
2 Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.08 and 0.72%, respectively.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
20 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
CLASS B SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $10.46 | $9.81 | $9.49 | $8.10 | $6.09 |
Net investment income1 | 0.352 | 0.22 | 0.20 | 0.19 | 0.20 |
Net realized and unrealized gain on investments | 1.58 | 0.64 | 0.29 | 1.38 | 2.00 |
Total from investment operations | 1.93 | 0.86 | 0.49 | 1.57 | 2.20 |
Less distributions | |||||
From net investment income | (0.22) | (0.21) | (0.17) | (0.18) | (0.19) |
From net realized gain | (0.43) | — | — | — | — |
Total distributions | (0.65) | (0.21) | (0.17) | (0.18) | (0.19) |
Net asset value, end of period | $11.74 | $10.46 | $9.81 | $9.49 | $8.10 |
Total return (%)3,4 | 18.95 | 8.90 | 5.33 | 19.65 | 36.49 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $17 | $11 | $8 | $2 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.15 | 2.29 | 2.54 | 2.91 | 3.545 |
Expenses net of fee waivers | 2.12 | 2.12 | 2.11 | 2.25 | 2.295 |
Expenses net of fee waivers and credits | 2.12 | 2.12 | 2.11 | 2.25 | 2.255 |
Net investment income | 3.112 | 2.21 | 2.17 | 2.18 | 2.68 |
Portfolio turnover (%) | 40 | 21 | 19 | 39 | 53 |
1 Based on the average daily shares outstanding.
2 Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.08 and 0.72%, respectively.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Includes the impact of proxy expenses, which amounted to 0.02% of average net assets.
CLASS C SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $10.46 | $9.81 | $9.50 | $8.10 | $6.10 |
Net investment income1 | 0.362 | 0.22 | 0.20 | 0.18 | 0.20 |
Net realized and unrealized gain on investments | 1.58 | 0.64 | 0.28 | 1.40 | 1.99 |
Total from investment operations | 1.94 | 0.86 | 0.48 | 1.58 | 2.19 |
Less distributions | |||||
From net investment income | (0.23) | (0.21) | (0.17) | (0.18) | (0.19) |
From net realized gain | (0.43) | — | — | — | — |
Total distributions | (0.66) | (0.21) | (0.17) | (0.18) | (0.19) |
Net asset value, end of period | $11.74 | $10.46 | $9.81 | $9.50 | $8.10 |
Total return (%)3,4 | 18.97 | 8.90 | 5.22 | 19.78 | 36.27 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $127 | $65 | $45 | $11 | $4 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.05 | 2.15 | 2.29 | 2.39 | 2.635 |
Expenses net of fee waivers | 2.05 | 2.12 | 2.11 | 2.25 | 2.275 |
Expenses net of fee waivers and credits | 2.05 | 2.12 | 2.11 | 2.25 | 2.255 |
Net investment income | 3.222 | 2.22 | 2.13 | 2.10 | 2.66 |
Portfolio turnover (%) | 40 | 21 | 19 | 39 | 53 |
1 Based on the average daily shares outstanding.
2 Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.08 and 0.72%, respectively.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
See notes to financial statements | Annual report | Global Shareholder Yield Fund | 21 |
CLASS I SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $10.49 | $9.84 | $9.53 | $8.13 | $6.11 |
Net investment income1 | 0.472 | 0.31 | 0.32 | 0.29 | 0.30 |
Net realized and unrealized gain on investments | 1.59 | 0.65 | 0.27 | 1.38 | 2.00 |
Total from investment operations | 2.06 | 0.96 | 0.59 | 1.67 | 2.30 |
Less distributions | |||||
From net investment income | (0.34) | (0.31) | (0.28) | (0.27) | (0.28) |
From net realized gain | (0.43) | — | — | — | — |
Total distributions | (0.77) | (0.31) | (0.28) | (0.27) | (0.28) |
Net asset value, end of period | $11.78 | $10.49 | $9.84 | $9.53 | $8.13 |
Total return (%)3 | 20.28 | 10.07 | 6.45 | 21.09 | 38.08 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $893 | $641 | $249 | $123 | $86 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.01 | 1.05 | 1.12 | 1.09 | 1.194 |
Expenses net of fee waivers | 1.01 | 1.03 | 0.97 | 1.08 | 1.084 |
Expenses net of fee waivers and credits | 1.01 | 1.03 | 0.97 | 1.08 | 1.084 |
Net investment income | 4.192 | 3.10 | 3.43 | 3.40 | 3.96 |
Portfolio turnover (%) | 40 | 21 | 19 | 39 | 53 |
1 Based on the average daily shares outstanding.
2 Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.08 and 0.72%, respectively.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
4 Includes the impact of proxy expenses, which amounted to 0.03% of average net assets.
CLASS R2 SHARES Period ended | 2-28-14 | 2-28-131 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $10.49 | $9.84 | |||
Net investment income2 | 0.503 | 0.29 | |||
Net realized and unrealized gain on investments | 1.52 | 0.63 | |||
Total from investment operations | 2.02 | 0.92 | |||
Less distributions | |||||
From net investment income | (0.30) | (0.27) | |||
From net realized gain | (0.43) | — | |||
Total distributions | (0.73) | (0.27) | |||
Net asset value, end of period | $11.78 | $10.49 | |||
Total return (%)4 | 19.78 | 9.58 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1 | —5 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 8.52 | 19.42 | |||
Expenses net of fee waivers | 1.47 | 1.47 | |||
Expenses net of fee waivers and credits | 1.47 | 1.47 | |||
Net investment income | 4.383 | 2.91 | |||
Portfolio turnover (%) | 40 | 21 |
1 The inception date for Class R2 shares is 3-1-12.
2 Based on the average daily shares outstanding.
3 Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.08 and 0.72%, respectively.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Less than $500,000.
22 | Global Shareholder Yield Fund | Annual report | See notes to financial statements |
CLASS R6 SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $10.49 | $9.84 | $9.29 | ||
Net investment income2 | 0.483 | 0.33 | 0.13 | ||
Net realized and unrealized gain on investments | 1.58 | 0.64 | 0.52 | ||
Total from investment operations | 2.06 | 0.97 | 0.65 | ||
Less distributions | |||||
From net investment income | (0.35) | (0.32) | (0.10) | ||
From net realized gain | (0.43) | — | — | ||
Total distributions | (0.78) | (0.32) | (0.10) | ||
Net asset value, end of period | $11.77 | $10.49 | $9.84 | ||
Total return (%)4 | 20.29 | 10.12 | 7.125 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —6 | —6 | —6 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 10.30 | 10.38 | 15.937 | ||
Expenses net of fee waivers | 0.97 | 0.97 | 0.977 | ||
Expense net of fee waivers and credits | 0.97 | 0.97 | 0.977 | ||
Net investment income | 4.263 | 3.29 | 2.827 | ||
Portfolio turnover (%) | 40 | 21 | 198 |
1 The inception date for Class R6 shares is 9-1-11.
2 Based on the average daily shares outstanding.
3 Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.08 and 0.72%, respectively.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
8 Portfolio turnover is shown for the period from 3-1-11 to 2-29-12.
CLASS NAV SHARES Period ended | 2-28-14 | 2-28-13 | 2-29-12 | 2-28-11 | 2-28-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $10.49 | $9.84 | $9.53 | $8.13 | $6.11 |
Net investment income1 | 0.492 | 0.35 | 0.29 | 0.30 | 0.29 |
Net realized and unrealized gain on investments | 1.59 | 0.62 | 0.31 | 1.38 | 2.01 |
Total from investment operations | 2.08 | 0.97 | 0.60 | 1.68 | 2.30 |
Less distributions | |||||
From net investment income | (0.36) | (0.32) | (0.29) | (0.28) | (0.28) |
From net realized gain | (0.43) | — | — | — | — |
Total distributions | (0.79) | (0.32) | (0.29) | (0.28) | (0.28) |
Net asset value, end of period | $11.78 | $10.49 | $9.84 | $9.53 | $8.13 |
Total return (%)3 | 20.47 | 10.17 | 6.53 | 21.19 | 38.16 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $653 | $944 | $1,019 | $162 | $129 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.88 | 0.90 | 0.99 | 0.99 | 1.054 |
Expenses net of fee waivers | 0.87 | 0.89 | 0.94 | 0.99 | 1.004 |
Expenses net of fee waivers and credits | 0.87 | 0.89 | 0.94 | 0.99 | 1.004 |
Net investment income | 4.352 | 3.56 | 3.11 | 3.49 | 3.84 |
Portfolio turnover (%) | 40 | 21 | 19 | 39 | 53 |
1 Based on the average daily shares outstanding.
2 Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.08 and 0.72%, respectively.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
4 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 | 23 |
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 and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions and certain investors. Class R2 shares are available only to certain retirement plans. Class R6 shares are available only to certain retirement plans, institutions and other investors. Class NAV shares are offered to John Hancock affiliated funds of funds and certain 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the exchange where the security was acquired or most likely will be sold. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. 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 vendor. Securities that trade only in the over-the-counter (OTC) market are valued using bid prices. Certain short-term securities with maturities of 60 days or less at the time of purchase are valued at amortized cost.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund’s Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed. Trading in foreign securities may be completed before the daily close of trading on the NYSE. Significant events at the issuer or market level may affect the values of securities between the time when the valuation of the securities is generally determined and the close of the NYSE. If a significant event occurs, these securities may be fair valued, as determined in good faith by the fund’s Pricing Committee, following procedures established by the Board of Trustees. The fund uses fair value adjustment
24 | Global Shareholder Yield Fund | Annual report |
factors provided by an independent pricing vendor to value certain foreign securities in order to adjust for events that may occur between the close of foreign exchanges or markets and the close of the NYSE.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the fund’s investments as of February 28, 2014, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 2-28-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $75,052,757 | — | $75,052,757 | — |
Belgium | 12,791,853 | — | 12,791,853 | — |
Canada | 88,920,606 | $88,920,606 | — | — |
France | 193,322,265 | — | 193,322,265 | — |
Germany | 150,264,795 | — | 150,264,795 | — |
Italy | 36,946,439 | — | 36,946,439 | — |
Netherlands | 34,243,070 | 34,243,070 | — | — |
Norway | 65,136,972 | — | 65,136,972 | — |
Philippines | 12,397,648 | 12,397,648 | — | — |
Sweden | 16,371,646 | — | 16,371,646 | — |
Switzerland | 108,686,674 | — | 108,686,674 | — |
United Kingdom | 399,334,062 | 46,028,027 | 353,306,035 | — |
United States | 985,309,793 | 970,908,573 | 14,401,220 | — |
Short-Term Investments | 42,066,258 | 42,066,258 | — | — |
Total Investments in | ||||
Securities | $2,220,844,838 | $1,194,564,182 | $1,026,280,656 | — |
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, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain if amounts are estimable. 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.
Annual report | Global Shareholder Yield Fund | 25 |
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), accounting standards and other factors. 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 withholding tax on income and/or capital gains or repatriation taxes imposed by certain countries in which the fund invests. Taxes are accrued based upon investment income, realized gains or unrealized appreciation.
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund’s custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to potentially participate in a $300 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Prior to March 27, 2013, the fund participated in a $100 million unsecured line of credit, also with Citibank N.A., with terms otherwise similar to the existing agreement. Commitment fees for the year ended February 28, 2014 were $2,083. For the year ended February 28, 2014, the fund had no borrowings under either line of credit.
Expenses. Within the John Hancock funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage expenses, 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.
26 | Global Shareholder Yield Fund | Annual report |
As of February 28, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends quarterly. Capital gain distributions, if any, are paid annually.
The tax character of distributions for the years ended February 28, 2014 and 2013 was as follows:
FEBRUARY 28, 2014 | FEBRUARY 28, 2013 | |||
Ordinary Income | $59,256,442 | $53,007,475 | ||
Long-term Capital gains | $75,838,517 | — |
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 28, 2014, the components of distributable earnings on a tax basis consisted of $26,674,270 and $37,618,007 of undistributed ordinary income and undistributed long-term capital gain, respectively.
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.
Note 3 — Guarantees and indemnifications
Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor or JHA) serves as investment advisor for the fund. Prior to January 1, 2014, John Hancock Investment Management Services, LLC (JHIMS) served as investment advisor for the fund. JHIMS and JHA have identical officers, directors and other personnel, and share common facilities and resources. Terms of the investment management contract with JHA are substantially identical to the former contract with JHIMS. In this report, depending on the context, the term “Advisor” shall refer to either JHA in its current capacity as investment advisor, or to JHIMS in its capacity as investment advisor prior to January 1, 2014. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor equivalent, on an annual basis, to 0.800% of average daily net assets. The Advisor has a subadvisory agreement with Epoch Investment Partners, Inc. The fund is not responsible for payment of the subadvisory fees.
Annual report | Global Shareholder Yield Fund | 27 |
Effective June 1, 2013, the Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock complex, including the fund (the participating portfolios). The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the participating portfolios that exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; and 0.015% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
The Advisor has contractually agreed to waive all or a portion of its management fees and/or reimburse or pay operating expenses of the fund to the extent necessary to maintain the fund’s total operating expenses at 2.12%, 2.12%, 1.47% and 0.97% for Class B, Class C, Class R2 and Class R6 shares, respectively, excluding certain expenses such as taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund’s business, acquired fund fees and short dividend expense. These expense limitations shall remain in effect until June 30, 2014, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at the time. Prior to July 1, 2013, Class A and Class I shares had fee waivers and/or reimbursements such that the expenses would not exceed 1.42% and 1.06% for Class A and Class I shares, respectively.
Effective February 1, 2014, for Class R6 shares, the Advisor has contractually agreed to waive and/or reimburse all class specific expense of the fund, including transfer agency fees and service fees, blue sky fees, and printing and postage, as applicable, to the extent they exceed 0.00% of average annual net assets. The fee waiver and/or reimbursement will continue in effect until June 30, 2015, unless renewed by mutual agreement of the fund and Advisor based upon a determination of that this is appropriate under the circumstances at the time. This waiver was in effect on a voluntary basis as of January 1, 2014.
The expense reductions described above amounted to $18,732, $4,578, $4,535, $34,187, $18,171, $17,360 and $28,470 for Class A, Class B, Class C, Class I, Class R2, Class R6 and Class NAV shares, respectively, for the year ended February 28, 2014.
The investment management fees, including the impact of the waivers and reimbursements described above, incurred for the year ended February 28, 2014 were equivalent to a net annual effective rate of 0.79% of the fund’s average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended February 28, 2014 amounted to an annual rate of 0.01% of the fund’s average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B, Class C and Class R2 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. In addition, under a service plan for Class R2 shares, the fund pays for certain other services. The fund pays up to the following contractual rates
28 | Global Shareholder Yield Fund | Annual report |
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 R2 | 0.25% | 0.25% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $3,584,469 for the year ended February 28, 2014. Of this amount, $607,413 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $2,953,224 was paid as sales commissions to broker-dealers and $23,832 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended February 28, 2014, CDSCs received by the Distributor amounted to $16,956 and $11,127 for Class B and Class C shares, respectively. There were no CDSCs received for Class A shares.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Prior to October 1, 2013, Signature Services Cost were calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Share Classes and all other Retail Share Classes. Within each of these categories, the applicable costs were allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Annual report | Global Shareholder Yield Fund | 29 |
Class level expenses. Class level expenses for the year ended February 28, 2014 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $1,190,389 | $565,964 | $49,947 | $32,453 |
Class B | 138,817 | 19,918 | 17,344 | 1,163 |
Class C | 960,466 | 137,321 | 22,044 | 7,567 |
Class I | — | 877,285 | 65,587 | 86,583 |
Class R2 | 867 | 59 | 18,459 | 307 |
Class R6 | — | 43 | 17,199 | 291 |
Total | $2,290,539 | $1,600,590 | $190,580 | $128,364 |
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each fund based on its net assets relative to other funds within the John Hancock funds complex.
Interfund Lending Program: Pursuant to an Exemptive Order issued by the SEC, the fund, along with certain other funds advised by the Advisor, may be allowed to participate in an interfund lending program. This program provides an alternative credit facility allowing the fund to borrow from, or lend money to, other participating affiliated funds. At period end, no interfund loans were outstanding. The fund’s activity in this program during the period for which loans were outstanding was as follows:
AVERAGE LOAN | DAYS | WEIGHTED AVERAGE | ||
BORROWER OR LENDER | BALANCE | OUTSTANDING | INTEREST RATE | INTEREST |
Borrower | $16,054,854 | 30 | 0.45% | $6,038 |
Note 5 — Fund share transactions
Transactions in fund shares for the years ended February 28, 2014 and 2013 were as follows:
Year ended 2-28-14 | Year ended 2-28-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 26,838,217 | $304,344,103 | 15,669,201 | $155,358,732 |
Distributions reinvested | 2,481,890 | 27,502,699 | 663,208 | 6,439,490 |
Repurchased | (8,581,850) | (96,647,752) | (11,924,145) | (117,263,582) |
Net increase | 20,738,257 | $235,199,050 | 4,408,264 | $44,534,640 |
Class B shares | ||||
Sold | 403,444 | $4,516,790 | 403,386 | $3,993,369 |
Distributions reinvested | 54,763 | 606,948 | 12,717 | 123,106 |
Repurchased | (141,166) | (1,576,956) | (160,580) | (1,581,789) |
Net increase | 317,041 | $3,546,782 | 255,523 | $2,534,686 |
Class C shares | ||||
Sold | 5,196,683 | $58,389,022 | 2,470,863 | $24,558,880 |
Distributions reinvested | 477,452 | 5,299,994 | 91,535 | 886,020 |
Repurchased | (1,027,271) | (11,556,924) | (928,504) | (9,120,364) |
Net increase | 4,646,864 | $52,132,092 | 1,633,894 | $16,324,536 |
30 | Global Shareholder Yield Fund | Annual report |
Year ended 2-28-14 | Year ended 2-28-13 | |||
Shares | Amount | Shares | Amount | |
Class I shares | ||||
Sold | 31,298,034 | $354,437,329 | 47,431,648 | $461,972,978 |
Distributions reinvested | 4,604,700 | 51,029,333 | 1,400,880 | 13,641,460 |
Repurchased | (21,258,484) | (240,965,660) | (12,975,975) | (128,113,677) |
Net increase | 14,644,250 | $164,501,002 | 35,856,553 | $347,500,761 |
Class R2 shares1 | ||||
Sold | 38,678 | $439,671 | 11,593 | $114,476 |
Distributions reinvested | 958 | 10,700 | — | — |
Repurchased | (5,963) | (68,252) | — | — |
Net increase | 33,673 | $382,119 | 11,593 | $114,476 |
Class R6 shares | ||||
Sold | 5,745 | $63,944 | 6,168 | $59,632 |
Distributions reinvested | 420 | 4,662 | 105 | 1,020 |
Repurchased | (66) | (759) | (4,049) | (40,764) |
Net increase | 6,099 | $67,847 | 2,224 | $19,888 |
Class NAV shares | ||||
Sold | 650,283 | $7,367,511 | 3,327,918 | $32,345,438 |
Distributions reinvested | 4,299,515 | 47,380,760 | 3,176,278 | 30,896,355 |
Repurchased | (39,517,738) | (437,047,061) | (20,096,481) | (194,396,264) |
Net decrease | (34,567,940) | ($382,298,790) | (13,592,285) | ($131,154,471) |
Total net increase | 5,818,244 | $73,530,102 | 28,575,766 | $279,874,516 |
1 The inception date for Class R2 shares is 3-1-12.
Affiliates of the fund owned 22%, 56% and 100% of shares of beneficial interest of Class R2, Class R6 and Class NAV, respectively, on February 28, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $790,890,300 and $770,195,872, respectively, for the year ended February 28, 2014.
Note 7 — Investment by affiliated funds
Certain investors in the fund are affiliated funds that are managed by the Advisor and its affiliates. The affiliated funds do not invest in the fund for the purpose of exercising management or control; however, this investment may represent a significant portion of the fund’s net assets. At February 28, 2014, funds within the John Hancock funds complex held 29.0% of the fund. The following funds had an affiliate ownership of 5% or more of the fund’s net assets:
AFFILIATE | |||
FUND | CONCENTRATION | ||
John Hancock Lifestyle Balanced Portfolio | 9.4% | ||
John Hancock Lifestyle Growth Portfolio | 9.2% |
Annual report | Global Shareholder Yield Fund | 31 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Funds III 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 Funds III Global Shareholder Yield Fund (the “Fund”) at February 28, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 14, 2014
32 | Global Shareholder Yield Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended February 28, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Income derived from foreign sources was $55,322,057. The fund intends to pass through foreign tax credits of $4,092,073.
The fund paid $75,838,517 in capital gain dividends.
Eligible shareholders will be mailed a 2014 Form 1099-DIV in early 2015. This will reflect the tax character of all distributions paid in calendar year 2014.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
Annual report | Global Shareholder Yield Fund | 33 |
Trustees and Officers
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
James M. Oates, Born: 1946 | 2012 | 226 |
Managing Director, Wydown Group (financial consulting firm) (since 1994); Chairman and Director, | ||
Emerson Investment Management, Inc. (since 2000); Independent Chairman, Hudson Castle Group, Inc. | ||
(formerly IBEX Capital Markets, Inc.) (financial services company) (1997–2011); Director, Stifel Financial | ||
(since 1996); Director, Investor Financial Services Corporation (1995–2007); Director, Connecticut River | ||
Bancorp (since 1998); Director, Virtus Funds (formerly Phoenix Mutual Funds) (since 1988). | ||
Trustee and Chairperson of the Board, John Hancock retail funds3 (since 2012); Trustee (2005–2006 and | ||
since 2012) and Chairperson of the Board (since 2012), John Hancock Funds III; Trustee (since 2004) and | ||
Chairperson of the Board (since 2005), John Hancock Variable Insurance Trust; Trustee and Chairperson | ||
of the Board, John Hancock Funds II (since 2005). | ||
Charles L. Bardelis,2 Born: 1941 | 2012 | 226 |
Director, Island Commuter Corp. (marine transport). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock | ||
Funds II (since 2005). | ||
Peter S. Burgess,2 Born: 1942 | 2012 | 226 |
Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; | ||
Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln | ||
Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (since 2010); | ||
Director, PMA Capital Corporation (2004–2010). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
William H. Cunningham, Born: 1944 | 2006 | 226 |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System | ||
and former President of the University of Texas, Austin, Texas; Director, LIN Television (since 2009); | ||
Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, | ||
Resolute Energy Corporation (since 2009); Director, Southwest Airlines (since 2000); former Director, | ||
Introgen (manufacturer of biopharmaceuticals) (until 2008); former Director, Hicks Acquisition Company I, | ||
Inc. (until 2007); former Director, Texas Exchange Bank, SSB (formerly Bank of Crowley) (until 2009); | ||
former Advisory Director, JP Morgan Chase Bank (formerly Texas Commerce Bank–Austin) (until 2009). | ||
Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust | ||
(since 2012); Trustee, John Hancock Funds II (since 2012 and 2005–2006). |
34 | Global Shareholder Yield 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 |
Grace K. Fey, Born: 1946 | 2012 | 226 |
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier | ||
Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Theron S. Hoffman,2 Born: 1947 | 2012 | 226 |
Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd | ||
Organization (consulting firm) (2003–2010); President, Westport Resources Management (investment | ||
management consulting firm) (2006–2008); Senior Managing Director, Partner, and Operating Head, | ||
Putnam Investments (2000–2003); Executive Vice President, The Thomson Corp. (financial and legal | ||
information publishing) (1997–2000). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2008). | ||
Deborah C. Jackson, Born: 1952 | 2008 | 226 |
President, Cambridge College, Cambridge, Massachusetts (since 2011); Chief Executive Officer, | ||
American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation | ||
(since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors | ||
of American Student Assistance Corporation (1996–2009); Board of Directors of Boston Stock Exchange | ||
(2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee of John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Hassell H. McClellan, Born: 1945 | 2012 | 226 |
Trustee, Virtus Variable Insurance Trust (formerly Phoenix Edge Series Funds) (since 2008); Director, The | ||
Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston | ||
College (retired 2013). | ||
Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005–2006 and | ||
since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
Steven R. Pruchansky, Born: 1944 | 2006 | 226 |
Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director | ||
and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First | ||
American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Director, | ||
First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, | ||
Maxwell Building Corp. (until 1991). | ||
Trustee (since 1992) and Chairperson of the Board (2011–2012), John Hancock retail funds3; Trustee and | ||
Vice Chairperson of the Board, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and | ||
John Hancock Funds II (since 2012). |
Annual report | Global Shareholder Yield Fund | 35 |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Gregory A. Russo, Born: 1949 | 2008 | 226 |
Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance | ||
Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare | ||
system); Director and Member of Finance Committee, The Moorings, Inc. (nonprofit continuing care | ||
community) (since 2012); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); | ||
Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester County, | ||
New York, Chamber of Commerce (1986–1992); Director, Treasurer, and Chairman of Audit and | ||
Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of Fundraising | ||
Campaign, United Way of Westchester and Putnam Counties, New York (1990–1995). | ||
Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and | ||
John Hancock Funds II (since 2012). | ||
Non-Independent Trustees4 | ||
Name, year of birth | Trustee | Number of John |
Position(s) held with fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Craig Bromley, Born: 1966 | 2012 | 226 |
President, John Hancock Financial Services (since 2012); Senior Executive Vice President and General | ||
Manager, U.S. Division, John Hancock Financial Services (since 2012); President and Chief Executive | ||
Officer, Manulife Insurance Company (Manulife Japan) (2005–2012, including prior positions). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Warren A. Thomson, Born: 1955 | 2012 | 226 |
Senior Executive Vice President and Chief Investment Officer, Manulife Financial Corporation and The | ||
Manufacturers Life Insurance Company (since 2009); Chairman and Chief Executive Officer, Manulife | ||
Asset Management (since 2001, including prior positions); Director (since 2006), and President and | ||
Chief Executive Officer (since 2013), Manulife Asset Management Limited; Director and Chairman, | ||
Hancock Natural Resources Group, Inc. (since 2013). | ||
Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock | ||
Funds II (since 2012). | ||
Principal officers who are not Trustees | ||
Name, year of birth | Officer | |
Position(s) held with fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
Hugh McHaffie, Born: 1959 | 2012 | |
President* | ||
Executive Vice President, John Hancock Financial Services (since 2006, including prior positions); | ||
Chairman and Director, John Hancock Advisers, LLC, John Hancock Investment Management Services, | ||
LLC, and John Hancock Funds, LLC (since 2010); President, John Hancock Advisers, LLC (since 2012); | ||
President, John Hancock Investment Management Services, LLC (since 2010); President (since 2012) and | ||
former Trustee (2010–2012), John Hancock retail funds,3 President, John Hancock Variable Insurance | ||
Trust and John Hancock Funds II (since 2009). | ||
*Until 3-13-14. |
36 | Global Shareholder Yield 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 |
Andrew G. Arnott, Born: 1971 | 2009 |
Executive Vice President | |
President** | |
Senior Vice President, John Hancock Financial Services (since 2009); Director and Executive Vice | |
President, John Hancock Advisers, LLC (since 2005, including prior positions); Director and Executive | |
Vice President, John Hancock Investment Management Services, LLC (since 2006, including prior | |
positions); President, John Hancock Funds, LLC (since 2004, including prior positions); President | |
(effective 3-13-14) and Executive Vice President, John Hancock retail funds,3 John Hancock Variable | |
Insurance Trust, and John Hancock Funds II (since 2007, including prior positions). | |
**Effective 3-13-14. | |
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 Funds, LLC (since 2007); Secretary and Chief Legal Officer, John Hancock retail funds,3 | |
John Hancock Variable Insurance Trust, and John Hancock Funds II (since 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,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, | |
LLC, and John Hancock Investment Management Services, LLC (since 2005). | |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer | |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial | |
Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock | |
Funds II (since 2007). | |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer | |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock | |
Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, | |
John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable | |
Insurance Trust and John Hancock Funds II (since 2010 and 2007–2009, including prior positions). |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
1 Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death, retirement, resignation, or removal.
2 Member of the Audit Committee.
3 “John Hancock retail funds” comprises John Hancock Funds III and 36 other John Hancock funds consisting of 26 series of other John Hancock trusts and 10 closed-end funds.
4 Because Messrs. Bromley and Thomson are senior executives or directors of the advisor and/or its affiliates, each of them is considered an “interested person of the fund,” as defined in the Investment Company Act of 1940.
Annual report | Global Shareholder Yield Fund | 37 |
More information
Trustees | Investment advisor |
James M. Oates, Chairperson | John Hancock Advisers, LLC |
Steven R. Pruchansky, Vice Chairperson | |
Charles L. Bardelis* | Subadvisor |
Craig Bromley† | Epoch Investment Partners, Inc. |
Peter S. Burgess* | |
William H. Cunningham | Principal distributor |
Grace K. Fey | John Hancock Funds, LLC |
Theron S. Hoffman* | |
Deborah C. Jackson | Custodian |
Hassell H. McClellan | State Street Bank and Trust Company |
Gregory A. Russo | |
Warren A. Thomson† | Transfer agent |
John Hancock Signature Services, Inc. | |
Officers | |
Andrew G. Arnott# | Legal counsel |
President | 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 | |
Hugh McHaffie** | |
President | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 3-13-14 | |
**Through 3-13-14 |
The fund’s proxy voting policies and procedures, as well as the fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund’s Form N-Q is available on our website and the SEC’s website, sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | ||
800-225-5291 | Regular mail: | Express mail: |
jhinvestments.com | Investment Operations | Investment Operations |
John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. | |
P.O. Box 55913 | 30 Dan Road | |
Boston, MA 02205-5913 | Canton, MA 02021 |
38 | Global Shareholder Yield Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/globalshyieldx35x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000738/globalshyieldx35x2.jpg)
This report is for the information of the shareholders of John Hancock Global Shareholder Yield Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 320A 2/14 |
MF155704 | 4/14 |
ITEM 2. CODE OF ETHICS.
As of the end of the year, February 28, 2014, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “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.
Peter S. Burgess is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant, for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to the following for the fiscal years ended February 28, 2014 and February 28, 2013. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | February 28, 2014 | February 28, 2013 | ||
John Hancock Global Shareholder Yield Fund | $ | 30,621 | $ | 31,547 |
John Hancock International Growth Fund | 34,178 | 36,703 | ||
John Hancock International Core Fund | 41,689 | 43,414 | ||
John Hancock International Allocation Fund | 25,038 | 25,963 | ||
Total | $ | 131,526 | $ | 137,627 |
(b) Audit-Related Services
Audit-related fees amounted to the following for the fiscal years ended February 28, 2014 and February 28, 2013 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.
Fund | February 28, 2014 | February 28, 2013 | ||
John Hancock Global Shareholder Yield Fund | $ | 1,692 | $ | 2,225 |
John Hancock International Growth Fund | 1,692 | 2,225 | ||
John Hancock International Core Fund | 1,692 | 2,225 | ||
John Hancock International Allocation Fund | 7,698 | 8,231 | ||
Total | $ | 12,774 | $ | 14,906 |
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to the following for the fiscal years ended February 28, 2014 and February 28 , 2013. The nature of the services comprising the tax
fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | February 28, 2014 | February 28, 2013 | ||
John Hancock Global Shareholder Yield Fund | $ | 3,164 | $ | 3,164 |
John Hancock International Growth Fund | 4,017 | 4,017 | ||
John Hancock International Core Fund | 4,930 | 4,930 | ||
John Hancock International Allocation Fund | 2,783 | 2,783 | ||
Total | $ | 14,894 | $ | 14,894 |
(d) All Other Fees
Other fees amounted to the following for the fiscal years ended February 28, 2014 and February 28, 2013 billed to the registrant or to the control affiliates.
Fund | February 28, 2014 | February 28, 2013 | ||
John Hancock Global Shareholder Yield Fund | $ | 408 | $ | 415 |
John Hancock International Growth Fund | 408 | 415 | ||
John Hancock International Core Fund | 408 | 415 | ||
John Hancock International Allocation Fund | 148 | 167 | ||
Total | $ | 1,372 | $ | 1,412 |
(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 28, 2014, the percentage of hours spent on the audit of the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and rendered to the registrant's control affiliates were $5,874,702 for the fiscal year ended February 28, 2014 and $2,866,638 for the fiscal year ended February 28, 2013.
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:
Peter S. Burgess - Chairman
Charles L. Bardelis
Theron S. Hoffman
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for 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/ Andrew Arnott |
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Andrew Arnott | |
President | |
Date: | April 24, 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Andrew Arnott |
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Andrew Arnott | |
President | |
Date: | April 24, 2014 |
By: | /s/ Charles A. Rizzo |
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Charles A. Rizzo | |
Chief Financial Officer | |
Date: | April 24, 2014 |