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: | March 31 |
Date of reporting period: | March 31, 2014 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/rainiergrowthx1x1.jpg)
A look at performance
Total returns for the period ended March 31, 2014
Average annual total returns (%) | Cumulative total returns (%) | |||||||
with maximum sales charge | with maximum sales charge | |||||||
1-year | 5-year | 10-year | 1-year | 5-year | 10-year | |||
Class A1 | 15.31 | 16.90 | 6.58 | 15.31 | 118.34 | 89.11 | ||
Class B1 | 15.38 | 16.95 | 6.05 | 15.38 | 118.81 | 79.95 | ||
Class C1 | 19.35 | 17.15 | 6.04 | 19.35 | 120.65 | 79.82 | ||
Class I1,2 | 21.71 | 18.54 | 7.48 | 21.71 | 134.08 | 105.80 | ||
Class R11,2 | 20.77 | 17.59 | 6.45 | 20.77 | 124.80 | 86.92 | ||
Class R21,2 | 21.10 | 16.97 | 5.75 | 21.10 | 118.99 | 74.96 | ||
Class R31,2 | 20.87 | 17.72 | 6.56 | 20.87 | 126.03 | 88.85 | ||
Class R41,2 | 21.39 | 18.12 | 6.90 | 21.39 | 129.96 | 94.94 | ||
Class R51,2 | 21.58 | 18.43 | 7.20 | 21.58 | 132.93 | 100.48 | ||
Class R61,2 | 21.82 | 18.60 | 7.53 | 21.82 | 134.68 | 106.77 | ||
Class T1,2 | 15.23 | 16.67 | 6.09 | 15.23 | 116.16 | 80.61 | ||
Class ADV1,2 | 21.40 | 18.25 | 7.22 | 21.40 | 131.23 | 100.75 | ||
Class NAV1,2 | 21.92 | 18.67 | 7.58 | 21.92 | 135.39 | 107.72 | ||
Index 1† | 23.22 | 21.68 | 7.86 | 23.22 | 166.70 | 113.16 | ||
Index 2† | 21.86 | 21.16 | 7.42 | 21.86 | 161.07 | 104.52 | ||
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charge on Class A and Class T 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 ADV, 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 R1, Class R2, Class R3, Class R4, Class R5 and Class ADV shares and at least until 6-30-15 for 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 T | Class ADV | Class NAV | |
Net (%) | 1.25 | 2.06 | 2.07 | 0.91 | 1.70 | 1.45 | 1.60 | 1.20 | 1.00 | 0.79 | 1.33 | 1.14 | 0.79 |
Gross (%) | 1.25 | 2.06 | 2.07 | 0.91 | 5.97 | 20.66 | 15.17 | 14.65 | 14.21 | 1.33 | 1.33 | 1.33 | 0.79 |
* 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 through 6-30-15.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For performance data current to the most recent month end, 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 would increase and results would have been less favorable.
† Index 1 is the Russell 1000 Growth Index; Index 2 is the S&P 500 Index.
See the following page for footnotes.
6 | Select Growth Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/rainiergrowthx3x1.jpg)
With maximum | Without | ||||
Start date | sales charge | sales charge | Index 1 | Index 2 | |
Class B3 | 3-31-04 | $17,995 | $17,995 | $21,316 | $20,452 |
Class C3 | 3-31-04 | 17,982 | 17,982 | 21,316 | 20,452 |
Class I2 | 3-31-04 | 20,580 | 20,580 | 21,316 | 20,452 |
Class R12 | 3-31-04 | 18,692 | 18,692 | 21,316 | 20,452 |
Class R22 | 3-31-04 | 17,496 | 17,496 | 21,316 | 20,452 |
Class R32 | 3-31-04 | 18,885 | 18,885 | 21,316 | 20,452 |
Class R42 | 3-31-04 | 19,494 | 19,494 | 21,316 | 20,452 |
Class R52 | 3-31-04 | 20,048 | 20,048 | 21,316 | 20,452 |
Class R62 | 3-31-04 | 20,677 | 20,677 | 21,316 | 20,452 |
Class T2 | 3-31-04 | 18,061 | 19,011 | 21,316 | 20,452 |
Class ADV2 | 3-31-04 | 20,075 | 20,075 | 21,316 | 20,452 |
Class NAV2 | 3-31-04 | 20,772 | 20,772 | 21,316 | 20,452 |
Russell 1000 Growth Index is an unmanaged index containing those securities in the Russell 1000 Index with a greater-than-average growth orientation.
S&P 500 Index is an unmanaged index that includes 500 widely traded common stocks.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 On 4-25-08, through a reorganization, the fund acquired all of the assets of Rainier Large Cap Growth Equity Portfolio (the predecessor fund). On that date, the predecessor fund’s original class shares and institutional class shares were exchanged for Class A and Class I shares, respectively, of John Hancock Select Growth (formerly, Rainier Growth) Fund. Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5, Class ADV, and Class NAV shares of John Hancock Rainier Growth Fund were first offered on 4-28-08; Class T shares were first offered on 10-6-08; Class R6 shares were first offered on 9-1-11; Class R2 shares were first offered on 3-1-12. The returns prior to these dates are those of the predecessor fund’s original shares that have been recalculated to reflect the gross fees and expenses of Class A, Class B, Class C, Class I, Class R1, Class R3, Class R4, Class R5, Class ADV, Class NAV, Class T, Class R6, and Class R2 shares, as applicable.
2 For certain types of investors, as described in the fund’s prospectuses.
3 The contingent deferred sales charge is not applicable.
Annual report | Select Growth Fund | 7 |
Management’s discussion of
Fund performance
From the Portfolio Management Team
Rainier Investment Management, Inc.
Stocks rose to record highs in the 12 months ended March 31, 2014. Signs of economic improvement in the United States and the low interest-rate environment supported stock prices. Nevertheless, the period was not without bouts of volatility, largely relating to questions about the direction of monetary policy.
In the 12 months ended March 31, 2014, John Hancock Select Growth Fund’s Class A shares had a total return of 21.38%, excluding sales charges. By comparison, the fund’s benchmark, the Russell 1000 Growth Index returned 23.22%.
The fund produced solid gains but trailed its benchmark. Stock selection and a modest underweight position detracted from relative performance in the industrials sector. The leading individual detractor in the sector was railroad Kansas City Southern. Other notable underperformers in the sector were risk assessment service provider Verisk Analytics, Inc. and renewable energy services provider SolarCity Corp. Independent oil and gas exploration and producer Anadarko Petroleum Corp. also underperformed. Several other key individual detractors came from the technology sector, including Citrix Systems, Inc., Yandex NV, Equinix, Inc., and LinkedIn Corp. We eliminated positions in Anadarko and Citrix.
Stock choices and an overweight position made the consumer discretionary sector the leading contributor to relative returns. Gaming company Las Vegas Sands Corp. contributed most. Elsewhere in the sector, online travel company The Priceline Group, Inc., clothing and accessory designer Michael Kors Holdings, Ltd., and entertainment giant The Walt Disney Company were other sources of strength. The leading relative contributor for the 12 months was Facebook, Inc. We took profits and sold Michael Kors.
Effective at the close of business on April 17, 2014, the fund’s investment advisor, Rainier Investment Management, Inc., was replaced as subadvisor by Baillie Gifford & Co. In connection with this change, John Hancock Rainier Growth Fund’s name was changed to John Hancock Select Growth Fund. The fund’s investment objective of seeking to maximize long-term capital appreciation remains the same, and the fund will continue to invest primarily in large-cap growth companies traded in the U.S. The ticker symbol for Class A shares remains RGROX.
This commentary reflects the views of the portfolio management team 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 | Select 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 October 1, 2013, with the same investment held until March 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,087.30 | $6.09 | 1.17% |
Class B | 1,000.00 | 1,082.50 | 10.33 | 1.99% |
Class C | 1,000.00 | 1,082.10 | 10.38 | 2.00% |
Class I | 1,000.00 | 1,088.10 | 4.79 | 0.92% |
Class R1 | 1,000.00 | 1,084.30 | 8.83 | 1.70% |
Class R2 | 1,000.00 | 1,085.40 | 7.49 | 1.43% |
Class R3 | 1,000.00 | 1,084.60 | 8.32 | 1.60% |
Class R4 | 1,000.00 | 1,086.90 | 6.24 | 1.20% |
Class R5 | 1,000.00 | 1,087.70 | 5.20 | 1.00% |
Class R6 | 1,000.00 | 1,088.90 | 4.48 | 0.86% |
Class T | 1,000.00 | 1,086.40 | 6.45 | 1.24% |
Class ADV | 1,000.00 | 1,087.10 | 5.88 | 1.13% |
Class NAV | 1,000.00 | 1,089.50 | 3.96 | 0.76% |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at March 31, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Annual report | Select 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 October 1, 2013, with the same investment held until March 31, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,019.10 | $5.89 | 1.17% |
Class B | 1,000.00 | 1,015.00 | 10.00 | 1.99% |
Class C | 1,000.00 | 1,015.00 | 10.05 | 2.00% |
Class I | 1,000.00 | 1,020.30 | 4.63 | 0.92% |
Class R1 | 1,000.00 | 1,016.50 | 8.55 | 1.70% |
Class R2 | 1,000.00 | 1,017.80 | 7.19 | 1.43% |
Class R3 | 1,000.00 | 1,017.00 | 8.05 | 1.60% |
Class R4 | 1,000.00 | 1,018.90 | 6.04 | 1.20% |
Class R5 | 1,000.00 | 1,019.90 | 5.04 | 1.00% |
Class R6 | 1,000.00 | 1,020.60 | 4.33 | 0.86% |
Class T | 1,000.00 | 1,018.70 | 6.24 | 1.24% |
Class ADV | 1,000.00 | 1,019.30 | 5.69 | 1.13% |
Class NAV | 1,000.00 | 1,021.10 | 3.83 | 0.76% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectuses for details regarding transaction costs.
1 Expenses are equal to the fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
10 | Select Growth Fund | Annual report |
Portfolio summary
Top 10 Holdings (31.6% of Total Net Assets on 3-31-14)1,2 | ||||
Apple, Inc. | 5.0% | Yahoo!, Inc. | 2.9% | |
Google, Inc., Class A | 4.5% | Gilead Sciences, Inc. | 2.6% | |
Visa, Inc., Class A | 3.2% | Salesforce.com, Inc. | 2.5% | |
Facebook, Inc., Class A | 3.1% | The Walt Disney Company | 2.4% | |
Amazon.com, Inc. | 3.0% | Las Vegas Sands Corp. | 2.4% | |
Sector Composition1,3 | ||||
Information Technology | 31.2% | Energy | 5.0% | |
Consumer Discretionary | 21.6% | Consumer Staples | 4.6% | |
Health Care | 11.9% | Materials | 2.3% | |
Industrials | 11.2% | Short-Term Investments & Other | 3.1% | |
Financials | 9.1% | |||
1 As a percentage of net assets on 3-31-14.
2 Cash and cash equivalents not included.
3 Growth stocks may be more susceptible to earning disappointments. Foreign investing has additional risks, such as currency and market volatility and political and social instability. Large company stocks could fall out of favor. 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 | Select Growth Fund | 11 |
Fund’s investments
As of 3-31-14
Shares | Value | |
Common Stocks 96.9% | $980,182,044 | |
(Cost $767,773,115) | ||
Consumer Discretionary 21.6% | 218,749,864 | |
Hotels, Restaurants & Leisure 3.6% | ||
Las Vegas Sands Corp. | 298,980 | 24,151,604 |
Wynn Resorts, Ltd. | 55,410 | 12,309,332 |
Household Durables 1.2% | ||
Jarden Corp. (I) | 199,310 | 11,924,717 |
Internet & Catalog Retail 7.1% | ||
Amazon.com, Inc. (I) | 90,170 | 30,344,008 |
Expedia, Inc. | 298,080 | 21,610,800 |
The Priceline Group, Inc. (I) | 16,560 | 19,737,698 |
Media 6.1% | ||
Discovery Communications, Inc., Class A (I) | 169,630 | 14,028,401 |
Liberty Global PLC, Series C (I) | 568,890 | 23,159,512 |
The Walt Disney Company | 303,820 | 24,326,867 |
Textiles, Apparel & Luxury Goods 3.6% | ||
Kate Spade & Company (I) | 396,180 | 14,694,316 |
Ralph Lauren Corp. | 139,580 | 22,462,609 |
Consumer Staples 4.6% | 46,858,398 | |
Beverages 1.4% | ||
Monster Beverage Corp. (I) | 212,870 | 14,783,822 |
Food & Staples Retailing 1.5% | ||
Costco Wholesale Corp. | 136,050 | 15,194,064 |
Personal Products 1.7% | ||
The Estee Lauder Companies, Inc., Class A | 252,400 | 16,880,512 |
Energy 5.0% | 49,961,409 | |
Energy Equipment & Services 2.6% | ||
FMC Technologies, Inc. (I) | 220,530 | 11,531,514 |
Halliburton Company | 246,340 | 14,506,963 |
Oil, Gas & Consumable Fuels 2.4% | ||
EOG Resources, Inc. | 121,950 | 23,922,932 |
12 | Select Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Financials 9.1% | $92,307,362 | |
Capital Markets 5.3% | ||
Affiliated Managers Group, Inc. (I) | 85,870 | 17,178,294 |
Morgan Stanley | 739,620 | 23,053,955 |
The Goldman Sachs Group, Inc. | 84,690 | 13,876,457 |
Consumer Finance 2.0% | ||
Discover Financial Services | 348,500 | 20,279,215 |
Diversified Financial Services 1.8% | ||
IntercontinentalExchange Group, Inc. | 90,580 | 17,919,441 |
Health Care 11.9% | 120,182,137 | |
Biotechnology 8.3% | ||
Biogen Idec, Inc. (I) | 56,090 | 17,156,248 |
BioMarin Pharmaceutical, Inc. (I) | 178,300 | 12,161,843 |
Celgene Corp. (I) | 120,650 | 16,842,740 |
Gilead Sciences, Inc. (I) | 369,290 | 26,167,889 |
Regeneron Pharmaceuticals, Inc. (I) | 38,940 | 11,692,903 |
Health Care Providers & Services 1.6% | ||
Catamaran Corp. (I) | 365,000 | 16,337,400 |
Pharmaceuticals 2.0% | ||
Allergan, Inc. | 159,735 | 19,823,114 |
Industrials 11.2% | 113,375,593 | |
Aerospace & Defense 4.1% | ||
B/E Aerospace, Inc. (I) | 226,670 | 19,672,689 |
Precision Castparts Corp. | 86,060 | 21,752,526 |
Building Products 1.4% | ||
Fortune Brands Home & Security, Inc. | 329,420 | 13,861,994 |
Electrical Equipment 3.0% | ||
Eaton Corp. PLC | 266,870 | 20,047,274 |
SolarCity Corp. (I) | 171,240 | 10,723,049 |
Professional Services 1.0% | ||
Verisk Analytics, Inc., Class A (I) | 166,490 | 9,982,740 |
Road & Rail 0.7% | ||
Kansas City Southern | 69,370 | 7,079,902 |
Trading Companies & Distributors 1.0% | ||
United Rentals, Inc. (I) | 108,020 | 10,255,419 |
Information Technology 31.2% | 315,353,864 | |
Communications Equipment 0.0% | ||
BancTec, Inc. (I)(S) | 197,026 | 443,309 |
Internet Software & Services 16.1% | ||
eBay, Inc. (I) | 219,360 | 12,117,446 |
Equinix, Inc. (I) | 79,930 | 14,774,261 |
Facebook, Inc., Class A (I) | 518,510 | 31,235,042 |
Google, Inc., Class A (I) | 40,990 | 45,683,765 |
LinkedIn Corp., Class A (I) | 107,050 | 19,797,827 |
Yahoo!, Inc. (I) | 804,390 | 28,877,601 |
Yandex NV, Class A (I) | 329,210 | 9,938,850 |
See notes to financial statements | Annual report | Select Growth Fund | 13 |
Shares | Value | ||
IT Services 6.7% | |||
FleetCor Technologies, Inc. (I) | 103,710 | $11,937,021 | |
MasterCard, Inc., Class A | 307,840 | 22,995,648 | |
Visa, Inc., Class A | 150,255 | 32,434,044 | |
Software 3.4% | |||
Salesforce.com, Inc. (I) | 448,190 | 25,587,167 | |
ServiceNow, Inc. (I) | 155,180 | 9,298,386 | |
Technology Hardware, Storage & Peripherals 5.0% | |||
Apple, Inc. | 93,590 | 50,233,497 | |
Materials 2.3% | 23,393,417 | ||
Chemicals 2.3% | |||
The Sherwin-Williams Company | 118,670 | 23,393,417 | |
Yield (%) | Shares | Value | |
Short-Term Investments 2.3% | $22,965,401 | ||
(Cost $22,965,401) | |||
Money Market Funds 2.3% | 22,965,401 | ||
State Street Institutional U.S. Government | |||
Money Market Fund | 0.0000 (Y) | 22,965,401 | 22,965,401 |
Total investments (Cost $790,738,516)† 99.2% | $1,003,147,445 | ||
Other assets and liabilities, net 0.8% | $7,959,724 | ||
Total net assets 100.0% | $1,011,107,169 | ||
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.
(S) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration.
(Y) The rate shown is the annualized seven-day yield as of 3-31-14.
† At 3-31-14, the aggregate cost of investment securities for federal income tax purposes was $792,932,409. Net unrealized appreciation aggregated $210,215,036, of which $221,458,025 related to appreciated investment securities and $11,242,989 related to depreciated investment securities.
14 | Select Growth Fund | Annual report | See notes to financial statements |
FINANCIAL STATEMENTS
Financial statements
Statement of assets and liabilities 3-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum public offering price per share.
Assets | |
Investments, at value (Cost $790,738,516) | $1,003,147,445 |
Receivable for investments sold | 27,326,666 |
Receivable for fund shares sold | 786,213 |
Dividends and interest receivable | 112,552 |
Receivable for securities lending income | 1,971 |
Receivable due from advisor | 2,115 |
Other receivables and prepaid expenses | 106,545 |
Total assets | 1,031,483,507 |
Liabilities | |
Payable for investments purchased | 19,207,835 |
Payable for fund shares repurchased | 926,923 |
Payable to affiliates | |
Accounting and legal services fees | 50,498 |
Transfer agent fees | 67,122 |
Distribution and service fees | 160 |
Trustees’ fees | 581 |
Other liabilities and accrued expenses | 123,219 |
Total liabilities | 20,376,338 |
Net assets | $1,011,107,169 |
Net assets consist of | |
Paid-in capital | $752,525,500 |
Accumulated net realized gain (loss) on investments | 46,172,740 |
Net unrealized appreciation (depreciation) on investments | 212,408,929 |
Net assets | $1,011,107,169 |
See notes to financial statements | Annual report | Select Growth Fund | 15 |
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 ($356,155,378 ÷ 13,498,264 shares)1 | $26.39 |
Class B ($19,568,114 ÷ 778,878 shares)1 | $25.12 |
Class C ($19,461,650 ÷ 775,232 shares)1 | $25.10 |
Class I ($71,926,533 ÷ 2,660,616 shares) | $27.03 |
Class R1 ($592,725 ÷ 23,030 shares) | $25.74 |
Class R2 ($119,759 ÷ 4,467 shares) | $26.81 |
Class R3 ($123,334 ÷ 4,758 shares) | $25.92 |
Class R4 ($161,154 ÷ 6,083 shares) | $26.49 |
Class R5 ($119,980 ÷ 4,460 shares) | $26.90 |
Class R6 ($7,606,753 ÷ 280,713 shares) | $27.10 |
Class T ($77,860,946 ÷ 2,978,209 shares) | $26.14 |
Class ADV ($18,979,104 ÷ 710,739 shares) | $26.70 |
Class NAV ($438,431,739 ÷ 16,156,345 shares) | $27.14 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $27.78 |
Class T (net asset value per share ÷ 95%)2 | $27.52 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
16 | Select Growth Fund | Annual report | See notes to financial statements |
FINANCIAL STATEMENTS
Statement of operations For the year ended 3-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $6,355,330 |
Securities lending | 160,649 |
Interest | 156 |
Less foreign taxes withheld | (99,252) |
Total investment income | 6,416,883 |
Expenses | |
Investment management fees | 7,677,902 |
Distribution and service fees | 1,572,371 |
Accounting and legal services fees | 182,503 |
Transfer agent fees | 838,762 |
Trustees’ fees | 38,757 |
State registration fees | 193,426 |
Printing and postage | 87,272 |
Professional fees | 71,111 |
Custodian fees | 99,066 |
Registration and filing fees | 46,282 |
Other | 25,781 |
Total expenses | 10,833,233 |
Less expense reductions | (156,904) |
Net expenses | 10,676,329 |
Net investment loss | (4,259,446) |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 192,544,975 |
Investments in affiliated issuers | (3,428) |
192,541,547 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 17,152,517 |
Investments in affiliated issuers | (12,516) |
17,140,001 | |
Net realized and unrealized gain | 209,681,548 |
Increase in net assets from operations | $205,422,102 |
See notes to financial statements | Annual report | Select Growth Fund | 17 |
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 | |
3-31-14 | 3-31-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income (loss) | ($4,259,446) | $1,704,098 |
Net realized gain | 192,541,547 | 157,789,629 |
Change in net unrealized appreciation (depreciation) | 17,140,001 | (99,638,952) |
Increase in net assets resulting from operations | 205,422,102 | 59,854,775 |
Distributions to shareholders | ||
From net investment income | ||
Class I | (64,935) | (133,627) |
Class R5 | (56) | (50) |
Class R6 | (7,092) | (4,078) |
Class NAV | (520,067) | (612,300) |
From net realized gain | ||
Class A | (37,507,368) | — |
Class B | (2,216,885) | — |
Class C | (2,125,586) | — |
Class I | (8,992,315) | — |
Class R1 | (64,246) | — |
Class R2 | (13,688) | — |
Class R3 | (14,056) | — |
Class R4 | (18,019) | — |
Class R5 | (13,704) | — |
Class R6 | (790,768) | — |
Class T | (8,578,092) | — |
Class ADV | (2,113,395) | — |
Class NAV | (45,556,116) | — |
Total distributions | (108,596,388) | (750,055) |
From fund share transactions | (153,179,068) | (250,750,666) |
Total decrease | (56,353,354) | (191,645,946) |
Net assets | ||
Beginning of year | 1,067,460,523 | 1,259,106,469 |
End of year | $1,011,107,169 | $1,067,460,523 |
Undistributed net investment income | — | $540,400 |
18 | Select 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 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.32 | $22.84 | $21.32 | $18.31 | $12.84 |
Net investment loss1 | (0.15) | (0.01) | (0.09) | (0.06) | (0.03) |
Net realized and unrealized gain on investments | 5.29 | 1.49 | 1.61 | 3.07 | 5.50 |
Total from investment operations | 5.14 | 1.48 | 1.52 | 3.01 | 5.47 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Net asset value, end of period | $26.39 | $24.32 | $22.84 | $21.32 | $18.31 |
Total return (%)2,3 | 21.38 | 6.48 | 7.13 | 16.44 | 42.60 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $356 | $356 | $369 | $413 | $384 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.19 | 1.25 | 1.27 | 1.30 | 1.45 |
Expenses net of fee waivers | 1.19 | 1.25 | 1.27 | 1.30 | 1.38 |
Expenses net of fee waivers and credits | 1.19 | 1.25 | 1.27 | 1.30 | 1.34 |
Net investment loss | (0.58) | (0.04) | (0.45) | (0.33) | (0.18) |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
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.
CLASS B SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $23.46 | $22.22 | $20.90 | $18.10 | $12.79 |
Net investment loss1 | (0.35) | (0.19) | (0.25) | (0.21) | (0.15) |
Net realized and unrealized gain on investments | 5.08 | 1.43 | 1.57 | 3.01 | 5.46 |
Total from investment operations | 4.73 | 1.24 | 1.32 | 2.80 | 5.31 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Net asset value, end of period | $25.12 | $23.46 | $22.22 | $20.90 | $18.10 |
Total return (%)2,3 | 20.38 | 5.58 | 6.32 | 15.47 | 41.52 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $20 | $20 | $25 | $31 | $37 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.00 | 2.06 | 2.07 | 2.13 | 2.45 |
Expenses net of fee waivers | 2.00 | 2.06 | 2.07 | 2.10 | 2.11 |
Expenses net of fee waivers and credits | 2.00 | 2.06 | 2.07 | 2.10 | 2.09 |
Net investment loss | (1.39) | (0.86) | (1.24) | (1.13) | (0.94) |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
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.
See notes to financial statements | Annual report | Select Growth Fund | 19 |
CLASS C SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $23.45 | $22.21 | $20.90 | $18.10 | $12.79 |
Net investment loss1 | (0.36) | (0.19) | (0.26) | (0.21) | (0.15) |
Net realized and unrealized gain on investments | 5.08 | 1.43 | 1.57 | 3.01 | 5.46 |
Total from investment operations | 4.72 | 1.24 | 1.31 | 2.80 | 5.31 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Net asset value, end of period | $25.10 | $23.45 | $22.21 | $20.90 | $18.10 |
Total return (%)2,3 | 20.35 | 5.58 | 6.27 | 15.47 | 41.52 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $19 | $17 | $20 | $22 | $24 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.03 | 2.07 | 2.11 | 2.16 | 2.34 |
Expenses net of fee waivers | 2.02 | 2.07 | 2.10 | 2.10 | 2.21 |
Expenses net of fee waivers and credits | 2.02 | 2.07 | 2.10 | 2.10 | 2.09 |
Net investment loss | (1.42) | (0.88) | (1.27) | (1.13) | (0.93) |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
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.
CLASS I SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.80 | $23.24 | $21.61 | $18.50 | $12.92 |
Net investment income (loss)1 | (0.08) | 0.06 | (0.02) | 0.02 | 0.04 |
Net realized and unrealized gain on investments | 5.41 | 1.52 | 1.65 | 3.11 | 5.54 |
Total from investment operations | 5.33 | 1.58 | 1.63 | 3.13 | 5.58 |
Less distributions | |||||
From net investment income | (0.03) | (0.02) | — | (0.02) | —2 |
From net realized gain | (3.07) | — | — | — | — |
Total distributions | (3.10) | (0.02) | — | (0.02) | —2 |
Net asset value, end of period | $27.03 | $24.80 | $23.24 | $21.61 | $18.50 |
Total return (%)3 | 21.71 | 6.81 | 7.54 | 16.93 | 43.20 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $72 | $113 | $256 | $237 | $208 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.91 | 0.91 | 0.91 | 0.86 | 0.90 |
Expenses net of fee waivers | 0.91 | 0.91 | 0.91 | 0.86 | 0.90 |
Net investment income (loss) | (0.28) | 0.25 | (0.08) | 0.10 | 0.26 |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
1 Based on the average daily shares outstanding.
2 Less than $0.005 per share.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
20 | Select Growth Fund | Annual report | See notes to financial statements |
CLASS R1 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $23.90 | $22.55 | $21.14 | $18.23 | $12.84 |
Net investment loss1 | (0.29) | (0.11) | (0.17) | (0.14) | (0.11) |
Net realized and unrealized gain on investments | 5.20 | 1.46 | 1.58 | 3.05 | 5.50 |
Total from investment operations | 4.91 | 1.35 | 1.41 | 2.91 | 5.39 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Total distributions | (3.07) | — | — | — | — |
Net asset value, end of period | $25.74 | $23.90 | $22.55 | $21.14 | $18.23 |
Total return (%)2 | 20.77 | 5.99 | 6.67 | 15.96 | 41.98 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1 | —3 | —3 | —3 | —3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 4.13 | 5.79 | 7.03 | 8.39 | 13.91 |
Expenses net of fee waivers | 1.70 | 1.70 | 1.70 | 1.72 | 1.78 |
Net investment loss | (1.12) | (0.49) | (0.86) | (0.75) | (0.65) |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
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 Less than $500,000.
CLASS R2 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $24.72 | $23.27 | $22.45 | ||
Net investment income (loss)2 | (0.23) | (0.06) | —3 | ||
Net realized and unrealized gain on investments | 5.39 | 1.51 | 0.82 | ||
Total from investment operations | 5.16 | 1.45 | 0.82 | ||
Less distributions | |||||
From net realized gain | (3.07) | — | — | ||
Total distributions | (3.07) | — | — | ||
Net asset value, end of period | $26.81 | $24.72 | $23.27 | ||
Total return (%)4 | 21.10 | 6.23 | 3.655 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —6 | —6 | —6 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 15.50 | 20.41 | 15.967 | ||
Expenses net of fee waivers | 1.45 | 1.45 | 1.457 | ||
Net investment loss | (0.85) | (0.24) | (0.12)7 | ||
Portfolio turnover (%) | 81 | 92 | 908 |
1 The inception date for Class R2 shares is 3-1-12.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
8 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
See notes to financial statements | Annual report | Select Growth Fund | 21 |
CLASS R3 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.03 | $22.65 | $21.21 | $18.27 | $12.85 |
Net investment loss1 | (0.26) | (0.09) | (0.16) | (0.12) | (0.07) |
Net realized and unrealized gain on investments | 5.22 | 1.47 | 1.60 | 3.06 | 5.49 |
Total from investment operations | 4.96 | 1.38 | 1.44 | 2.94 | 5.42 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Net asset value, end of period | $25.92 | $24.03 | $22.65 | $21.21 | $18.27 |
Total return (%)2 | 20.87 | 6.09 | 6.79 | 16.09 | 42.18 |
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 | 12.99 | 15.02 | 15.86 | 16.72 | 13.68 |
Expenses net of fee waivers | 1.60 | 1.60 | 1.59 | 1.61 | 1.62 |
Net investment loss | (1.00) | (0.39) | (0.76) | (0.64) | (0.46) |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
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 Less than $500,000.
CLASS R4 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.40 | $22.91 | $21.40 | $18.38 | $12.88 |
Net investment income (loss)1 | (0.17) | —2 | (0.10) | (0.06) | (0.03) |
Net realized and unrealized gain on investments | 5.33 | 1.49 | 1.61 | 3.08 | 5.53 |
Total from investment operations | 5.16 | 1.49 | 1.51 | 3.02 | 5.50 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Total distributions | (3.07) | — | — | — | — |
Net asset value, end of period | $26.49 | $24.40 | $22.91 | $21.40 | $18.38 |
Total return (%)3 | 21.39 | 6.50 | 7.06 | 16.43 | 42.70 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —4 | —4 | —4 | —4 | —4 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 10.91 | 14.55 | 15.46 | 16.45 | 13.33 |
Expenses net of fee waivers | 1.20 | 1.22 | 1.29 | 1.31 | 1.32 |
Net investment income (loss) | (0.62) | 0.01 | (0.46) | (0.34) | (0.16) |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
1 Based on the average daily shares outstanding.
2 Less than $0.005 per share.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
4 Less than $500,000.
22 | Select Growth Fund | Annual report | See notes to financial statements |
CLASS R5 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.71 | $23.16 | $21.56 | $18.47 | $12.91 |
Net investment income (loss)1 | (0.11) | 0.05 | (0.03) | (0.02) | 0.02 |
Net realized and unrealized gain on investments | 5.39 | 1.51 | 1.63 | 3.12 | 5.54 |
Total from investment operations | 5.28 | 1.56 | 1.60 | 3.10 | 5.56 |
Less distributions | |||||
From net investment income | (0.02) | (0.01) | — | (0.01) | —2 |
From net realized gain | (3.07) | — | — | — | — |
Total distributions | (3.09) | (0.01) | — | (0.01) | —2 |
Net asset value, end of period | $26.90 | $24.71 | $23.16 | $21.56 | $18.47 |
Total return (%)3 | 21.58 | 6.74 | 7.42 | 16.78 | 43.07 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | —4 | —4 | —4 | —4 | —4 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 12.38 | 14.16 | 15.07 | 16.17 | 12.97 |
Expenses net of fee waivers | 1.00 | 1.00 | 0.99 | 1.01 | 1.02 |
Net investment income | (0.40) | 0.21 | (0.16) | (0.03) | 0.14 |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
1 Based on the average daily shares outstanding.
2 Less than $0.005 per share.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
4 Less than $500,000.
CLASS R6 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $24.84 | $23.27 | $20.01 | ||
Net investment income (loss)2 | (0.07) | 0.08 | 0.03 | ||
Net realized and unrealized gain on investments | 5.43 | 1.51 | 3.23 | ||
Total from investment operations | 5.36 | 1.59 | 3.26 | ||
Less distributions | |||||
From net investment income | (0.03) | (0.02) | — | ||
From net realized gain | (3.07) | — | — | ||
Total distributions | (3.10) | (0.02) | — | ||
Net asset value, end of period | $27.10 | $24.84 | $23.27 | ||
Total return (%)3 | 21.82 | 6.86 | 16.294 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $8 | $4 | $4 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.09 | 1.33 | 1.585 | ||
Expenses net of fee waivers | 0.86 | 0.86 | 0.865 | ||
Net investment income (loss) | (0.27) | 0.34 | 0.205 | ||
Portfolio turnover (%) | 81 | 92 | 906 |
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.
4 Not annualized.
5 Annualized.
6 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
See notes to financial statements | Annual report | Select Growth Fund | 23 |
CLASS T SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.13 | $22.69 | $21.20 | $18.24 | $12.86 |
Net investment loss1 | (0.17) | (0.03) | (0.11) | (0.09) | (0.11) |
Net realized and unrealized gain on investments | 5.25 | 1.47 | 1.60 | 3.05 | 5.49 |
Total from investment operations | 5.08 | 1.44 | 1.49 | 2.96 | 5.38 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Total distributions | (3.07) | — | — | — | — |
Net asset value, end of year | $26.14 | $24.13 | $22.69 | $21.20 | $18.24 |
Total return (%)2,3 | 21.29 | 6.35 | 7.03 | 16.23 | 41.84 |
Ratios and supplemental data | |||||
Net assets, end of year (in millions) | $78 | $73 | $77 | $83 | $83 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.27 | 1.33 | 1.37 | 1.47 | 1.84 |
Expenses net of fee waivers | 1.26 | 1.33 | 1.37 | 1.47 | 1.84 |
Net Investment loss | (0.66) | (0.13) | (0.54) | (0.50) | (0.69) |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
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.
CLASS ADV SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.57 | $23.05 | $21.49 | $18.43 | $12.90 |
Net investment income (loss)1 | (0.14) | 0.02 | (0.06) | (0.03) | —2 |
Net realized and unrealized gain on investments | 5.34 | 1.50 | 1.62 | 3.09 | 5.53 |
Total from investment operations | 5.20 | 1.52 | 1.56 | 3.06 | 5.53 |
Less distributions | |||||
From net realized gain | (3.07) | — | — | — | — |
Total distributions | (3.07) | — | — | — | — |
Net asset value, end of period | $26.70 | $24.57 | $23.05 | $21.49 | $18.43 |
Total return (%)3 | 21.40 | 6.59 | 7.26 | 16.60 | 42.87 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $19 | $20 | $20 | $22 | $18 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.26 | 1.33 | 1.35 | 1.37 | 1.25 |
Expenses net of fee waivers | 1.14 | 1.14 | 1.14 | 1.14 | 1.14 |
Net investment income (loss) | (0.53) | 0.08 | (0.31) | (0.17) | 0.01 |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
1 Based on the average daily shares outstanding.
2 Less than $0.005 per share.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
24 | Select Growth Fund | Annual report | See notes to financial statements |
CLASS NAV SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $24.86 | $23.28 | $21.63 | $18.51 | $12.91 |
Net investment income (loss)1 | (0.04) | 0.09 | 0.01 | 0.03 | 0.05 |
Net realized and unrealized gain on investments | 5.43 | 1.52 | 1.64 | 3.11 | 5.55 |
Total from investment operations | 5.39 | 1.61 | 1.65 | 3.14 | 5.60 |
Less distributions | |||||
From net investment income | (0.04) | (0.03) | — | (0.02) | —2 |
From net realized gain | (3.07) | — | — | — | — |
Total distributions | (3.11) | (0.03) | — | (0.02) | —2 |
Net asset value, end of period | $27.14 | $24.86 | $23.28 | $21.63 | $18.51 |
Total return (%)3 | 21.92 | 6.94 | 7.63 | 17.00 | 43.38 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $438 | $463 | $487 | $813 | $708 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.77 | 0.79 | 0.80 | 0.80 | 0.82 |
Expenses net of fee waivers | 0.77 | 0.79 | 0.80 | 0.80 | 0.82 |
Net investment income (loss) | (0.16) | 0.39 | 0.05 | 0.16 | 0.33 |
Portfolio turnover (%) | 81 | 92 | 90 | 90 | 102 |
1 Based on the average daily shares outstanding.
2 Less than $0.005 per share.
3 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
See notes to financial statements | Annual report | Select Growth Fund | 25 |
Notes to financial statements
Note 1 — Organization
John Hancock Select 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 to maximize long-term 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 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 B, Class T and Class ADV shares are closed to new 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.
Effective April 17, 2014, John Hancock Select Growth Fund changed its name from John Hancock Rainier Growth Fund.
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 (ET). 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. 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.
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
26 | Select Growth Fund | Annual report |
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.
LEVEL 3 | |||||
LEVEL 2 | SIGNIFICANT | ||||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | ||
VALUE AT 3-31-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | ||
Common Stocks | |||||
Consumer Discretionary | $218,749,864 | $218,749,864 | — | — | |
Consumer Staples | 46,858,398 | 46,858,398 | — | — | |
Energy | 49,961,409 | 49,961,409 | — | — | |
Financials | 92,307,362 | 92,307,362 | — | — | |
Health Care | 120,182,137 | 120,182,137 | — | — | |
Industrials | 113,375,593 | 113,375,593 | — | — | |
Information Technology | 315,353,864 | 314,910,555 | — | $443,309 | |
Materials | 23,393,417 | 23,393,417 | — | — | |
Short-Term Investments | 22,965,401 | 22,965,401 | — | — | |
Total Investments in | |||||
Securities | $1,003,147,445 | $1,002,704,136 | — | $443,309 |
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 John Hancock Collateral Investment Trust (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.
Annual report | Select Growth Fund | 27 |
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 Statement of assets and liabilities as Payable upon return of securities loaned.
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 March 31, 2014 were $1,129. For the year ended March 31, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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.
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,
28 | Select Growth Fund | Annual report |
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 March 31, 2014, the fund has a capital loss carryfoward of $19,834,897 available to offset future net realized capital gains. The following table details the capital loss carryforward available as of March 31, 2014:
CAPITAL LOSS CARRYFORWARD EXPIRING AT MARCH 31
2016 | 2017 | 2018 | ||
$5,365,684 | $5,342,835 | $9,126,378 |
Availability of a certain amount of the loss carryforward, which was acquired in a merger, may be limited in a given year.
As of March 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended March 31, 2014 and 2013 was as follows:
MARCH 31, 2014 | MARCH 31, 2013 | |||
Ordinary Income | $21,462,352 | $750,055 | ||
Long-Term Capital Gain | $87,134,036 | — | ||
Total | $108,596,388 | $750,055 |
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 March 31, 2014, the components of distributable earnings on a tax basis consisted of $36,005,215 of undistributed ordinary income and $32,196,315 of undistributed long-term capital gain.
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 net operating losses and 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 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 | Select Growth Fund | 29 |
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 contract 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) 0.730% of the first $3,000,000,000 of the fund’s average daily net assets; (b) 0.725% of the next $3,000,000,000 of the fund’s average daily net assets; and (c) 0.700% of the fund’s average daily net assets in excess of $6,000,000,000. The Advisor has a subadvisory agreement with Baille Gifford Overseas Limited. Prior to April 18, 2014, the Advisor had a subadvisory agreement with Rainier Investment Management, Inc. 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.
Prior to July 1, 2013, the Advisor contractually agreed to reduce its management fee or, if necessary, make payment to the fund to the extent necessary to maintain the fund’s total operating expenses at 1.35%, 2.10%, 2.10% and 1.40% for Class A, Class B, Class C, and Class T shares, respectively. This agreement excluded 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 Advisor has contractually agreed to reduce its management fee or, if necessary, make payment to the fund to the extent necessary to maintain the fund’s total operating expenses at 1.70%, 1.45%, 1.60% 1.20%, 1.00%, 0.86% and 1.14% for Class R1, Class R2, Class R3, Class R4, Class R5, Class R6 and Class ADV shares, respectively. 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. For all the classes indicated, this expense limitation shall remain in effect through June 30, 2015, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that is appropriate under the circumstances at that time.
30 | Select Growth Fund | Annual report |
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 from January 1, 2014 to January 31, 2014.
The expense reductions for the year ended March 31, 2014, amounted to the following:
EXPENSE | ||||||
CLASS | REDUCTION | |||||
Class A | $17,632 | |||||
Class B | 964 | |||||
Class C | 911 | |||||
Class I | 4,573 | |||||
Class R1 | 12,781 | |||||
Class R2 | 16,806 | |||||
Class R3 | 13,539 | |||||
Class R4 | 13,554 | |||||
Class R5 | 13,654 | |||||
Class R6 | 12,689 | |||||
Class T | 3,799 | |||||
Class ADV | 24,136 | |||||
Class NAV | 21,725 | |||||
Total | $156,763 |
The investment management fees, including the impact of waivers and reimbursements as described above, incurred for the year ended March 31, 2014 were equivalent to a net annual effective rate of 0.72% 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 March 31, 2014 amounted to an annual rate of 0.02% of the fund’s average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B, Class C, Class R1, Class R2, Class R3, Class R4, Class T and Class ADV 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. Currently, only 0.25% is charged to Class A shares for Rule 12b-1 fees.
Annual report | Select Growth Fund | 31 |
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 R4 | 0.25% | 0.10% | |||||
Class R5 | — | 0.05% | |||||
Class T | 0.30% | — | |||||
Class ADV | 0.25% | — |
The fund’s 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, 2015, 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. Reimbursements related to this contractual waiver amounted to $141 for Class R4 shares for the period ended March 31, 2014.
Sales charges. Class A and Class T shares are assessed up-front sales charges of up to 5% of net asset value of such shares. The following summarizes the net up-front sales charges received by the Distributor during the year ended March 31, 2014:
CLASS A | CLASS T | |
Retained for printing prospectuses, advertising, sales | $139,072 | $4,417 |
literature and other purposes | ||
Sales commissions to broker-dealers | 655,031 | 15,904 |
Sales commissions to sales personnel of Signator | 24,945 | 8,235 |
Investors, Inc., a broker-dealer affiliate of the Advisor | ||
Net sales charges | 819,048 | 28,556 |
Class A, Class B, Class C and Class T shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A and Class T 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 March 31, 2014, CDSCs received by the Distributor amounted to $1,036, $25,117, $2,955 and $204 for Class A, Class B, Class C and Class T 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
32 | Select Growth Fund | Annual report |
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 March 31, 2014 were:
DISTRIBUTION | STATE | |||
SHARE CLASS | AND SERVICE FEES | TRANSFER AGENT FEES | REGISTRATION FEES | PRINTING AND POSTAGE |
A | $903,885 | $528,834 | $25,127 | $54,009 |
B | 198,506 | 29,036 | 15,003 | 1,425 |
C | 184,447 | 26,917 | 14,677 | 5,416 |
I | — | 110,914 | 18,012 | 5,030 |
R1 | 3,413 | 117 | 13,870 | 255 |
R2 | 299 | 27 | 17,261 | 28 |
R3 | 597 | 26 | 13,870 | 28 |
R4 | 359 | 31 | 13,870 | 38 |
R5 | — | 27 | 13,870 | 29 |
R6 | — | 1,228 | 15,831 | 301 |
T | 231,088 | 112,471 | 16,293 | 18,571 |
ADV | 49,777 | 29,134 | 15,742 | 2,142 |
Total | $1,572,371 | $838,762 | $193,426 | $87,272 |
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 the 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 funds 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:
WEIGHTED AVERAGE | DAYS | WEIGHTED AVERAGE | INTEREST | |
BORROWER OR LENDER | LOAN BALANCE | OUTSTANDING | INTEREST RATE | EXPENSE |
Borrower | $13,511,234 | 1 | 0.43% | ($161) |
Note 5 — Fund share transactions
Transactions in fund shares for the years ended March 31, 2014 and 2013 were as follows:
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 2,282,983 | $60,333,638 | 2,459,590 | $55,505,262 |
Distributions reinvested | 1,393,162 | 36,096,825 | — | — |
Repurchased | (4,813,552) | (128,874,741) | (3,962,238) | (89,534,415) |
Net decrease | (1,137,407) | ($32,444,278) | (1,502,648) | ($34,029,153) |
Annual report | Select Growth Fund | 33 |
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class B shares | ||||
Sold | 72,114 | $1,860,291 | 100,853 | $2,195,177 |
Distributions reinvested | 87,755 | 2,170,185 | — | — |
Repurchased | (244,375) | (6,136,925) | (368,746) | (8,048,812) |
Net decrease | (84,506) | ($2,106,449) | (267,893) | ($5,853,635) |
Class C shares | ||||
Sold | 82,458 | $2,116,832 | 34,781 | $764,812 |
Distributions reinvested | 74,095 | 1,830,897 | — | — |
Repurchased | (122,170) | (3,073,186) | (181,088) | (3,932,366) |
Net increase (decrease) | 34,383 | $874,543 | (146,307) | ($3,167,554) |
Class I shares | ||||
Sold | 515,753 | $13,908,811 | 1,284,922 | $29,260,470 |
Distributions reinvested | 334,370 | 8,870,839 | 5,669 | 130,574 |
Repurchased | (2,731,871) | (74,145,725) | (7,763,269) | (179,262,056) |
Net decrease | (1,881,748) | ($51,366,075) | (6,472,678) | ($149,871,012) |
Class R1 shares | ||||
Sold | 5,835 | $143,781 | 4,312 | $97,671 |
Distributions reinvested | 1,452 | 36,770 | — | — |
Repurchased | (506) | (13,326) | (479) | (11,060) |
Net increase | 6,781 | $167,225 | 3,833 | $86,611 |
Class R2 shares | ||||
Sold | 13 | $373 | — | — |
Net increase | 13 | $373 | — | — |
Class R3 shares | ||||
Sold | 490 | $13,090 | — | — |
Distributions reinvested | 15 | 374 | — | — |
Repurchased | (199) | (5,432) | — | — |
Net increase | 306 | $8,032 | — | — |
Class R4 shares | ||||
Sold | 1,439 | $38,950 | 26 | $577 |
Distributions reinvested | 167 | 4,338 | — | — |
Repurchased | (1) | (19) | — | — |
Net increase | 1,605 | $43,269 | 26 | $577 |
Class R5 shares | ||||
Distributions reinvested | — | — | 2 | $50 |
Net increase | — | — | 2 | $50 |
Class R6 shares | ||||
Sold | 139,312 | $3,968,690 | 5,445 | $124,800 |
Distributions reinvested | 30,006 | 797,860 | 177 | 4,078 |
Repurchased | (54,532) | (1,528,395) | (19,869) | (459,000) |
Net increase (decrease) | 114,786 | $3,238,155 | (14,247) | ($330,122) |
34 | Select Growth Fund | Annual report |
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class T shares | ||||
Sold | 41,771 | $1,095,454 | 46,822 | $1,041,302 |
Distributions reinvested | 310,378 | 7,970,498 | — | — |
Repurchased | (395,807) | (10,355,540) | (424,692) | (9,484,303) |
Net decrease | (43,658) | ($1,289,588) | (377,870) | ($8,443,001) |
Class ADV shares | ||||
Sold | 53,909 | $1,425,182 | 200,655 | $4,623,049 |
Distributions reinvested | 80,558 | 2,112,223 | — | — |
Repurchased | (253,110) | (6,719,773) | (258,405) | (5,908,494) |
Net decrease | (118,643) | ($3,182,368) | (57,750) | ($1,285,445) |
Class NAV shares | ||||
Sold | 231,437 | $6,130,434 | 4,043,108 | $92,780,115 |
Distributions reinvested | 1,730,886 | 46,076,183 | 26,529 | 612,300 |
Repurchased | (4,431,072) | (119,328,524) | (6,377,748) | (141,250,397) |
Net decrease | (2,468,749) | ($67,121,907) | (2,308,111) | ($47,857,982) |
Total net decrease | (5,576,837) | ($153,179,068) | (11,143,643) | ($250,750,666) |
Affiliates of the fund owned 43%, 100%, 97%, 82%, 100% and 100% of shares of beneficial interest of Class R1, Class R2, Class R3, Class R4, Class R5 and Class NAV, respectively, on March 31, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $841,107,456 and $1,134,004,898, respectively, for the year ended March 31, 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 March 31, 2014, funds within the John Hancock group of funds complex held 43.4% of the fund. The following funds had an affiliate ownership of 5% or more of the fund’s net assets:
AFFILIATED | |||
FUND | CONCENTRATION | ||
John Hancock Lifestyle Growth Fund | 18.3% | ||
John Hancock Lifestyle Balanced Fund | 14.4% | ||
John Hancock Lifestyle Aggressive Fund | 6.9% |
Note 8 — Subsequent events
On April 17, 2014, the fund recorded cash redemptions of approximately $422 million. In advance of these redemptions, the fund paid short-term and long-term capital gain distributions of $1.5889 and $4.2362, respectively.
Annual report | Select Growth Fund | 35 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock Select Growth Fund (formerly John Hancock Rainier 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 Select Growth Fund (formerly John Hancock Rainier Growth Fund) (the “Fund”) at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2014 by correspondence with the custodian, transfer agent and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 19, 2014
36 | Select Growth Fund | Annual report |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended March 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $87,134,036 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 | Select Growth Fund | 37 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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). |
38 | Select 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 |
Grace K. Fey, Born: 1946 | 2012 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | Select Growth Fund | 39 |
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 | 228 |
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 | 228 |
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 | 228 |
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. |
40 | Select Growth Fund | Annual report |
Principal officers who are not Trustees (continued) | |
Name, Year of Birth | Officer |
Position(s) held with Fund | of the |
Principal occupation(s) and other | Trust |
directorships during past 5 years | since |
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 | Select Growth Fund | 41 |
More information
Trustees | Investment advisor |
James M. Oates, Chairperson | John Hancock Advisers, LLC |
Steven R. Pruchansky, Vice Chairperson | |
Charles L. Bardelis* | Subadvisor |
Craig Bromley† | Rainier Investment Management, 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 | |
**Until 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 |
42 | Select Growth Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/rainiergrowthx39x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/rainiergrowthx39x2.jpg)
This report is for the information of the shareholders of John Hancock Select Growth Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 334A 3/14 |
MF181849 | 5/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/disciplinedvaluex1x1.jpg)
A look at performance
Total returns for the period ended March 31, 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 | 19.03 | 20.61 | 8.42 | — | 19.03 | 155.23 | 124.47 | — |
Class B1 | 19.21 | 20.60 | 7.94 | — | 19.21 | 155.14 | 114.69 | — |
Class C1 | 23.25 | 20.87 | 7.96 | — | 23.25 | 157.94 | 115.09 | — |
Class I1,2 | 25.61 | 22.25 | 9.35 | — | 25.61 | 173.00 | 144.49 | — |
Class I21,2 | 25.63 | 22.28 | 9.22 | — | 25.63 | 173.39 | 141.64 | — |
Class R11,2 | 24.69 | 21.36 | 8.56 | — | 24.69 | 163.23 | 127.32 | — |
Class R21,2 | 24.98 | 21.54 | 8.73 | — | 24.98 | 165.23 | 131.00 | — |
Class R31,2 | 24.81 | 21.48 | 8.67 | — | 24.81 | 164.60 | 129.64 | — |
Class R41,2 | 25.44 | 21.92 | 9.03 | — | 25.44 | 169.34 | 137.28 | — |
Class R51,2 | 25.71 | 22.27 | 9.35 | — | 25.71 | 173.31 | 144.41 | — |
Class R61,2 | 25.72 | 22.29 | 9.40 | — | 25.72 | 173.49 | 145.54 | — |
Class NAV2,3 | 25.73 | — | — | 19.43 | 25.73 | — | — | 136.19 |
Index 1† | 21.57 | 21.75 | 7.58 | — | 21.57 | 167.53 | 107.71 | — |
Index 2† | 21.86 | 21.16 | 7.42 | — | 21.86 | 161.07 | 104.52 | — |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charge 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 I2, Class R1, Class R2, Class R3, Class R4, Class R5, Class R6, and Class NAV shares.
The expense ratios of the fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers or expense limitations are contractual at least until 6-30-14 for Class B shares and until 6-30-15 for Class I2, Class R1, Class R2, Class R3, Class R4 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.
Class A | Class B | Class C | Class I | Class I2 | Class R1 | Class R2 | Class R3 | Class R4* | Class R5 | Class R6 | Class NAV | |
Net (%) | 1.20 | 2.05 | 1.98 | 0.87 | 0.85 | 1.57 | 1.32 | 1.47 | 1.07 | 0.83 | 0.75 | 0.74 |
Gross (%) | 1.20 | 2.08 | 1.98 | 0.87 | 0.92 | 1.86 | 3.27 | 2.39 | 1.65 | 0.83 | 0.82 | 0.74 |
* 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 through 6-30-15.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For performance data current to the most recent month end, 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 would increase and results would have been less favorable.
† Index 1 is the Russell 1000 Value Index; Index 2 is the S&P 500 Index.
See the following page for footnotes.
6 | Disciplined Value Fund | Annual report |
With maximum | Without | ||||
Start date | sales charge | sales charge | Index 1 | Index 2 | |
Class B4 | 3-31-04 | $21,469 | $21,469 | $20,771 | $20,452 |
Class C4 | 3-31-04 | 21,509 | 21,509 | 20,771 | 20,452 |
Class I2 | 3-31-04 | 24,449 | 24,449 | 20,771 | 20,452 |
Class I22 | 3-31-04 | 24,164 | 24,164 | 20,771 | 20,452 |
Class R12 | 3-31-04 | 22,732 | 22,732 | 20,771 | 20,452 |
Class R22 | 3-31-04 | 23,100 | 23,100 | 20,771 | 20,452 |
Class R32 | 3-31-04 | 22,964 | 22,964 | 20,771 | 20,452 |
Class R42 | 3-31-04 | 23,728 | 23,728 | 20,771 | 20,452 |
Class R52 | 3-31-04 | 24,441 | 24,441 | 20,771 | 20,452 |
Class R62 | 3-31-04 | 24,554 | 24,554 | 20,771 | 20,452 |
Class NAV2 | 5-29-09 | 23,619 | 23,619 | 23,045 | 22,870 |
Russell 1000 Value Index is an unmanaged index containing those securities in the Russell 1000 Index with a lower price-to-book ratio and less-than-average growth orientation.
S&P 500 Index is an unmanaged index that includes 500 widely traded common stocks.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would have resulted in lower values.
Footnotes related to performance pages
1 On 12-19-08, through a reorganization, the fund acquired all of the assets of Robeco Boston Partners Large Cap Value Fund (the predecessor fund). On that date, the predecessor fund’s Investor class shares were exchanged for Class A shares and its Institutional class shares were exchanged for Class I shares. Class A, Class B, and Class C shares were first offered on 12-22-08. The returns prior to this date are those of the predecessor fund’s Investor shares that have been recalculated to reflect the gross fees and expenses of Class A, Class B, and Class C shares, as applicable. Class R3, Class R4, and Class R5 shares were first offered on 5-22-09; Class R1 shares were first offered on 7-13-09; Class R6 shares were first offered on 9-1-11; and Class R2 shares were first offered on 3-1-12. 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 R3, Class R4, Class R5, Class R1, Class R6, and Class R2 shares, as applicable. The predecessor fund’s Institutional share class returns have been recalculated to reflect the gross fees and expenses of Class I shares. Class I2 shares were first offered on 12-22-08; returns prior to that date are those of Class I shares recalculated to apply the gross fees and expenses of Class I2 shares.
2 For certain types of investors, as described in the fund’s prospectuses.
3 From 5-29-09.
4 The contingent deferred sales charge is not applicable.
Annual report | Disciplined Value Fund | 7 |
Management’s discussion of
Fund performance
By Robeco Boston Partners, a division of Robeco Investment Management, Inc.
U.S. equities produced strong returns for the 12 months ended March 31, 2014, finishing the period as the top-performing global asset class. Despite a variety of potential impediments to equity market growth—including worries about political impasses in the U.S. Congress, uncertainty over the future direction of interest rates, growing geopolitical tensions, and a still slow economic recovery—investors found reasons for optimism, pushing major U.S. equity indexes to record highs as year-end 2013 approached. Come January, however, equity markets sold off deeply on concerns about mixed economic data, a weather-related economic slowdown, and volatility in the emerging markets. Those concerns proved short-lived, as stocks managed to claw their way back into positive territory by the end of the first quarter. Value stocks narrowed the gap between their returns and those of growth stocks, especially during the opening quarter of 2014, likely in response to the elevated prices of the growth universe.
For the 12-month period, John Hancock Disciplined Value Fund’s Class A shares produced a total return of 25.30%, excluding sales charges, outperforming the benchmark Russell 1000 Value Index, which posted a return of 21.57%. The majority of the fund’s relative outperformance came from favorable security selection, with the strongest gains in the energy, consumer staples, and financials sectors. Opportune sector allocation also contributed, with underweights in the relatively weak-performing utilities and telecommunication services sectors, and an overweight in the stronger information technology sector providing the biggest lifts. The top contributor to relative performance was McKesson Corp., a leading distributor of pharmaceuticals and healthcare services and a name that is not represented in the benchmark index. IAC/InterActiveCorp., a media and Internet company, and consumer goods distributor Tyson Foods, Inc. also contributed to the fund’s performance. The fund’s relative performance was negatively affected by inopportune stock selection in the materials, consumer discretionary, and utilities sectors, as well as an underweight position in industrials. Detractors included consumer electronics giant Apple, Inc., a strong-performing index component that the fund sold early in the period, and French pharmaceuticals company Sanofi.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance does not guarantee future results.
8 | Disciplined Value 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 October 1, 2013, with the same investment held until March 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-13 | on 3-31-14 | ended 3-31-141 | expense ratio | |
Class A | $1,000.00 | $1,132.20 | $5.85 | 1.10% |
Class B | 1,000.00 | 1,127.50 | 10.29 | 1.94% |
Class C | 1,000.00 | 1,127.20 | 9.92 | 1.87% |
Class I | 1,000.00 | 1,133.60 | 4.42 | 0.83% |
Class I2 | 1,000.00 | 1,133.80 | 4.42 | 0.83% |
Class R1 | 1,000.00 | 1,129.20 | 8.33 | 1.57% |
Class R2 | 1,000.00 | 1,130.60 | 7.01 | 1.32% |
Class R3 | 1,000.00 | 1,130.30 | 7.81 | 1.47% |
Class R4 | 1,000.00 | 1,132.60 | 5.26 | 0.99% |
Class R5 | 1,000.00 | 1,134.00 | 3.67 | 0.69% |
Class R6 | 1,000.00 | 1,134.80 | 3.78 | 0.71% |
Class NAV | 1,000.00 | 1,134.20 | 3.72 | 0.70% |
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 March 31, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Annual report | Disciplined Value Fund | 9 |
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 October 1, 2013, with the same investment held until March 31, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-13 | on 3-31-14 | ended 3-31-141 | expense ratio | |
Class A | $1,000.00 | $1,019.40 | $5.54 | 1.10% |
Class B | 1,000.00 | 1,015.30 | 9.75 | 1.94% |
Class C | 1,000.00 | 1,015.60 | 9.40 | 1.87% |
Class I | 1,000.00 | 1,020.80 | 4.18 | 0.83% |
Class I2 | 1,000.00 | 1,020.80 | 4.18 | 0.83% |
Class R1 | 1,000.00 | 1,017.10 | 7.90 | 1.57% |
Class R2 | 1,000.00 | 1,018.30 | 6.64 | 1.32% |
Class R3 | 1,000.00 | 1,017.60 | 7.39 | 1.47% |
Class R4 | 1,000.00 | 1,020.00 | 4.99 | 0.99% |
Class R5 | 1,000.00 | 1,021.50 | 3.48 | 0.69% |
Class R6 | 1,000.00 | 1,021.40 | 3.58 | 0.71% |
Class NAV | 1,000.00 | 1,021.40 | 3.53 | 0.70% |
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 182/365 (to reflect the one-half year period).
10 | Disciplined Value Fund | Annual report |
Portfolio summary
Top 10 Holdings (31.2% of Net Assets on 3-31-14)1,2 | ||||
Exxon Mobil Corp. | 4.7% | Citigroup, Inc. | 2.8% | |
Wells Fargo & Company | 3.9% | Bank of America Corp. | 2.7% | |
Berkshire Hathaway, Inc., Class B | 3.8% | Johnson & Johnson | 2.6% | |
Pfizer, Inc. | 3.2% | Capital One Financial Corp. | 2.2% | |
JPMorgan Chase & Company | 3.1% | CVS Caremark Corp. | 2.2% | |
Sector Composition1,3 | ||||
Financials | 29.2% | Industrials | 7.4% | |
Health Care | 17.2% | Consumer Staples | 4.0% | |
Information Technology | 12.8% | Materials | 2.3% | |
Energy | 11.9% | Utilities | 2.0% | |
Consumer Discretionary | 11.3% | Short-Term Investments & Other | 1.9% | |
1 As a percentage of net assets on 3-31-14.
2 Cash and cash equivalents not included.
3 Value stocks may decline in price. Foreign investing has additional risks, such as currency and market volatility and political and social instability. Large company stocks could fall out of favor, and illiquid securities may be difficult to sell at a price approximating their value. 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 | Disciplined Value Fund | 11 |
Fund’s investments
As of 3-31-14
Shares | Value | |
Common Stocks 98.1% | $8,110,542,112 | |
(Cost $6,666,941,978) | ||
Consumer Discretionary 11.3% | 933,321,499 | |
Auto Components 1.0% | ||
Lear Corp. | 958,607 | 80,254,578 |
Diversified Consumer Services 0.5% | ||
Apollo Group, Inc., Class A (I) | 1,255,100 | 42,974,624 |
Hotels, Restaurants & Leisure 0.5% | ||
Six Flags Entertainment Corp. | 970,985 | 38,985,048 |
Media 8.1% | ||
CBS Corp., Class B | 738,785 | 45,656,913 |
Comcast Corp., Class A | 3,242,373 | 162,183,497 |
Gannett Company, Inc. | 1,904,321 | 52,559,260 |
Liberty Global PLC, Series C (I) | 2,648,961 | 107,839,202 |
Liberty Media Corp., Series A (I) | 743,601 | 97,210,959 |
News Corp., Class A (I) | 2,141,199 | 36,871,447 |
Omnicom Group, Inc. | 502,476 | 36,479,758 |
Time Warner, Inc. | 2,022,221 | 132,111,698 |
Multiline Retail 0.6% | ||
Macy’s, Inc. | 897,745 | 53,227,301 |
Specialty Retail 0.6% | ||
Bed Bath & Beyond, Inc. (I)(L) | 682,663 | 46,967,214 |
Consumer Staples 4.0% | 327,968,190 | |
Food & Staples Retailing 2.2% | ||
CVS Caremark Corp. | 2,422,634 | 181,358,381 |
Food Products 1.8% | ||
Tyson Foods, Inc., Class A | 3,331,284 | 146,609,809 |
Energy 11.9% | 981,261,194 | |
Energy Equipment & Services 1.0% | ||
Schlumberger, Ltd. | 799,255 | 77,927,363 |
Oil, Gas & Consumable Fuels 10.9% | ||
EOG Resources, Inc. | 296,908 | 58,244,442 |
Exxon Mobil Corp. | 4,004,931 | 391,201,660 |
Marathon Oil Corp. | 1,451,998 | 51,574,969 |
Occidental Petroleum Corp. | 1,688,998 | 160,944,619 |
Phillips 66 | 1,819,640 | 140,221,458 |
12 | Disciplined Value Fund | Annual report | See notes to financial statements |
Shares | Value | |
Oil, Gas & Consumable Fuels (continued) | ||
QEP Resources, Inc. | 1,382,510 | $40,701,094 |
Valero Energy Corp. | 1,138,335 | 60,445,589 |
Financials 29.2% | 2,413,050,170 | |
Banks 14.6% | ||
Bank of America Corp. | 12,759,912 | 219,470,486 |
BB&T Corp. | 1,759,349 | 70,673,049 |
Citigroup, Inc. | 4,841,616 | 230,460,922 |
Fifth Third Bancorp | 4,888,782 | 112,197,547 |
JPMorgan Chase & Company | 4,203,697 | 255,206,445 |
Wells Fargo & Company | 6,405,274 | 318,598,329 |
Capital Markets 1.7% | ||
State Street Corp. | 958,576 | 66,668,961 |
The Goldman Sachs Group, Inc. | 427,151 | 69,988,691 |
Consumer Finance 3.2% | ||
Capital One Financial Corp. | 2,373,783 | 183,161,096 |
Discover Financial Services | 1,368,864 | 79,654,196 |
Diversified Financial Services 3.8% | ||
Berkshire Hathaway, Inc., Class B (I) | 2,535,537 | 316,866,059 |
Insurance 4.3% | ||
ACE, Ltd. | 1,151,937 | 114,110,879 |
MetLife, Inc. | 986,078 | 52,064,918 |
The Allstate Corp. | 1,500,037 | 84,872,093 |
The Travelers Companies, Inc. | 602,880 | 51,305,088 |
Validus Holdings, Ltd. | 1,363,005 | 51,398,919 |
Real Estate Investment Trusts 1.6% | ||
American Capital Agency Corp. | 1,812,395 | 38,948,369 |
American Homes 4 Rent | 2,324,004 | 38,834,107 |
Equity Residential | 1,010,002 | 58,570,016 |
Health Care 17.2% | 1,424,839,676 | |
Biotechnology 0.9% | ||
Amgen, Inc. | 635,602 | 78,395,151 |
Health Care Equipment & Supplies 2.5% | ||
Covidien PLC | 1,128,559 | 83,129,656 |
Medtronic, Inc. | 1,152,415 | 70,919,619 |
Zimmer Holdings, Inc. | 587,920 | 55,605,474 |
Health Care Providers & Services 5.9% | ||
Cigna Corp. | 584,114 | 48,907,865 |
Express Scripts Holding Company (I) | 1,683,217 | 126,392,765 |
Laboratory Corp. of America Holdings (I) | 219,910 | 21,597,361 |
McKesson Corp. | 862,432 | 152,279,618 |
Omnicare, Inc. (L) | 1,157,805 | 69,086,224 |
Quest Diagnostics, Inc. (L) | 1,184,520 | 68,607,398 |
Pharmaceuticals 7.9% | ||
AbbVie, Inc. | 955,375 | 49,106,275 |
Johnson & Johnson | 2,170,292 | 213,187,783 |
See notes to financial statements | Annual report | Disciplined Value Fund | 13 |
Shares | Value | |
Pharmaceuticals (continued) | ||
Pfizer, Inc. | 8,235,852 | $264,535,566 |
Sanofi, ADR | 2,354,417 | 123,088,921 |
Industrials 7.4% | 609,315,866 | |
Aerospace & Defense 3.3% | ||
Honeywell International, Inc. | 592,299 | 54,941,655 |
Lockheed Martin Corp. (L) | 739,797 | 120,764,462 |
Raytheon Company | 1,011,965 | 99,972,022 |
Commercial Services & Supplies 0.4% | ||
Tyco International, Ltd. | 659,249 | 27,952,158 |
Industrial Conglomerates 0.8% | ||
Siemens AG, ADR (L) | 459,995 | 62,168,324 |
Machinery 1.8% | ||
Crane Company | 352,845 | 25,104,922 |
Dover Corp. | 797,656 | 65,208,378 |
Parker Hannifin Corp. | 508,672 | 60,893,125 |
Road & Rail 1.1% | ||
Norfolk Southern Corp. | 949,993 | 92,310,820 |
Information Technology 12.8% | 1,061,240,356 | |
Communications Equipment 4.1% | ||
Brocade Communications Systems, Inc. (I) | 9,262,094 | 98,270,817 |
Cisco Systems, Inc. | 7,104,316 | 159,207,722 |
QUALCOMM, Inc. | 1,066,304 | 84,088,733 |
Electronic Equipment, Instruments & Components 0.8% | ||
Knowles Corp. (I) | 398,833 | 12,591,158 |
TE Connectivity, Ltd. | 945,982 | 56,957,576 |
Internet Software & Services 0.5% | ||
IAC/InterActiveCorp | 532,289 | 38,000,112 |
IT Services 0.6% | ||
Fidelity National Information Services, Inc. | 249,785 | 13,351,008 |
Global Payments, Inc. | 494,989 | 35,198,668 |
Semiconductors & Semiconductor Equipment 1.5% | ||
Avago Technologies, Ltd. | 386,520 | 24,895,753 |
LSI Corp. | 5,755,576 | 63,714,226 |
ON Semiconductor Corp. (I) | 3,988,134 | 37,488,460 |
Software 2.5% | ||
Microsoft Corp. | 3,340,970 | 136,946,360 |
Oracle Corp. | 1,625,875 | 66,514,546 |
Technology Hardware, Storage & Peripherals 2.8% | ||
EMC Corp. | 2,936,715 | 80,495,358 |
NetApp, Inc. | 1,085,431 | 40,052,404 |
Seagate Technology PLC | 1,004,096 | 56,390,031 |
Western Digital Corp. | 621,623 | 57,077,424 |
14 | Disciplined Value Fund | Annual report | See notes to financial statements |
Shares | Value | ||
Materials 2.3% | $193,905,130 | ||
Containers & Packaging 1.5% | |||
Crown Holdings, Inc. (I) | 1,525,203 | 68,237,582 | |
Rock-Tenn Company, Class A | 583,628 | 61,613,608 | |
Paper & Forest Products 0.8% | |||
International Paper Company | 1,396,119 | 64,053,940 | |
Utilities 2.0% | 165,640,031 | ||
Electric Utilities 0.8% | |||
FirstEnergy Corp. | 1,860,908 | 63,326,699 | |
Independent Power and Renewable Electricity Producers 1.2% | |||
AES Corp. | 7,164,799 | 102,313,332 | |
Yield (%) | Shares | Value | |
Securities Lending Collateral 1.4% | $116,012,447 | ||
(Cost $116,008,894) | |||
John Hancock Collateral Investment Trust (W) | 0.1476 (Y) | 11,593,129 | 116,012,447 |
Short-Term Investments 3.2% | $269,567,579 | ||
(Cost $269,567,579) | |||
Money Market Funds 3.2% | 269,567,579 | ||
State Street Institutional US Government | |||
Money Market Fund | 0.0000 (Y) | 269,567,579 | 269,567,579 |
Total investments (Cost $7,052,518,451)† 102.7% | $8,496,122,138 | ||
Other assets and liabilities, net (2.7%) | ($226,172,925) | ||
Total net assets 100.0% | $8,269,949,213 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund.
ADR American Depositary Receipts
(I) Non-income producing security.
(L) A portion of this security is on loan as of 3-31-14.
(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 3-31-14.
† At 3-31-14, the aggregate cost of investment securities for federal income tax purposes was $7,054,933,834. Net unrealized appreciation aggregated $1,441,188,304, of which $1,448,993,029 related to appreciated investment securities and $7,804,725 related to depreciated investment securities.
See notes to financial statements | Annual report | Disciplined Value 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 3-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $6,936,509,557) | |
including $113,675,857 of securities loaned) | $8,380,109,691 |
Investments in affiliated issuers, at value (Cost $116,008,894) | 116,012,447 |
Total investments, at value (Cost $7,052,518,451) | 8,496,122,138 |
Receivable for investments sold | 42,630,101 |
Receivable for fund shares sold | 32,544,077 |
Dividends and interest receivable | 8,235,442 |
Receivable for securities lending income | 12,411 |
Receivable due from advisor | 1,791 |
Other receivables and prepaid expenses | 219,182 |
Total assets | 8,579,765,142 |
Liabilities | |
Payable for investments purchased | 174,391,012 |
Payable for fund shares repurchased | 17,561,587 |
Payable upon return of securities loaned | 116,027,330 |
Payable to affiliates | |
Accounting and legal services fees | 309,761 |
Transfer agent fees | 716,885 |
Distribution and service fees | 26,956 |
Trustees’ fees | 3,229 |
Other liabilities and accrued expenses | 779,169 |
Total liabilities | 309,815,929 |
Net assets | $8,269,949,213 |
Net assets consist of | |
Paid-in capital | $6,733,750,829 |
Undistributed net investment income | 16,195,686 |
Accumulated net realized gain (loss) on investments | 76,399,011 |
Net unrealized appreciation (depreciation) on investments | 1,443,603,687 |
Net assets | $8,269,949,213 |
16 | Disciplined Value 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 ($2,701,654,114 ÷ 142,674,384 shares)1 | $18.94 |
Class B ($19,135,274 ÷ 1,062,919 shares)1 | $18.00 |
Class C ($171,471,304 ÷ 9,507,945 shares)1 | $18.03 |
Class I ($3,670,918,701 ÷ 199,029,642 shares) | $18.44 |
Class I2 ($75,333,020 ÷ 4,083,923 shares) | $18.45 |
Class R1 ($13,228,178 ÷ 717,723 shares) | $18.43 |
Class R2 ($37,633,930 ÷ 2,040,632 shares) | $18.44 |
Class R3 ($15,338,847 ÷ 832,185 shares) | $18.43 |
Class R4 ($74,868,838 ÷ 4,058,500 shares) | $18.45 |
Class R5 ($590,869,424 ÷ 31,982,642 shares) | $18.47 |
Class R6 ($356,349,521 ÷ 19,297,714 shares) | $18.47 |
Class NAV ($543,148,062 ÷ 29,407,235 shares) | $18.47 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $19.94 |
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 | Disciplined Value 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 3-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $115,006,585 |
Securities lending | 661,375 |
Interest | 3,256 |
Less foreign taxes withheld | (1,008,000) |
Total investment income | 114,663,216 |
Expenses | |
Investment management fees | 43,045,287 |
Distribution and service fees | 6,651,882 |
Accounting and legal services fees | 955,979 |
Transfer agent fees | 6,696,329 |
Trustees’ fees | 205,380 |
State registration fees | 304,870 |
Printing and postage | 296,454 |
Professional fees | 199,739 |
Custodian fees | 641,081 |
Registration and filing fees | 475,078 |
Other | 88,165 |
Total expenses | 59,560,244 |
Less expense reductions | (425,052) |
Net expenses | 59,135,192 |
Net investment income | 55,528,024 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 369,758,029 |
Investments in affiliated issuers | 5,318 |
Redemption in kind | 212,750,375 |
582,513,722 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 772,976,581 |
Investments in affiliated issuers | (25,880) |
772,950,701 | |
Net realized and unrealized gain | 1,355,464,423 |
Increase in net assets from operations | $1,410,992,447 |
18 | Disciplined Value 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 | |
3-31-14 | 3-31-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $55,528,024 | $35,173,080 |
Net realized gain | 582,513,722 | 171,631,695 |
Change in net unrealized appreciation (depreciation) | 772,950,701 | 335,340,438 |
Increase in net assets resulting from operations | 1,410,992,447 | 542,145,213 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (11,464,453) | (9,945,154) |
Class B | — | (5,328) |
Class C | — | (35,133) |
Class I | (22,650,482) | (10,989,962) |
Class I2 | (473,383) | (294,140) |
Class R1 | (7,951) | (26,428) |
Class R2 | (42,873) | (9,561) |
Class R3 | (15,558) | (9,738) |
Class R4 | (314,258) | (32,076) |
Class R5 | (4,780,156) | (4,180,836) |
Class R6 | (2,064,564) | (1,063,428) |
Class NAV | (4,585,039) | (6,229,386) |
From net realized gain | ||
Class A | (107,405,752) | (41,946,165) |
Class B | (881,403) | (405,720) |
Class C | (5,916,683) | (1,659,469) |
Class I | (143,285,296) | (32,645,943) |
Class I2 | (2,920,019) | (852,754) |
Class R1 | (471,703) | (181,195) |
Class R2 | (637,097) | (44,472) |
Class R3 | (420,155) | (56,128) |
Class R4 | (2,669,244) | (112,906) |
Class R5 | (26,267,192) | (12,317,929) |
Class R6 | (11,281,958) | (3,010,506) |
Class NAV | (24,877,000) | (16,971,618) |
Total distributions | (373,432,219) | (143,025,975) |
From fund share transactions | 2,887,914,251 | 1,715,423,426 |
Total increase | 3,925,474,479 | 2,114,542,664 |
Net assets | ||
Beginning of year | 4,344,474,734 | 2,229,932,070 |
End of year | $8,269,949,213 | $4,344,474,734 |
Undistributed net investment income | $16,195,686 | $7,033,674 |
See notes to financial statements | Annual report | Disciplined Value 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 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.94 | $14.33 | $13.83 | $12.31 | $8.09 |
Net investment income1 | 0.12 | 0.14 | 0.11 | 0.05 | 0.08 |
Net realized and unrealized gain on investments | 3.85 | 2.09 | 0.77 | 1.57 | 4.18 |
Total from investment operations | 3.97 | 2.23 | 0.88 | 1.62 | 4.26 |
Less distributions | |||||
From net investment income | (0.09) | (0.12) | (0.07) | (0.03) | (0.04) |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (0.97) | (0.62) | (0.38) | (0.10) | (0.04) |
Net asset value, end of period | $18.94 | $15.94 | $14.33 | $13.83 | $12.31 |
Total return (%)2,3 | 25.30 | 16.04 | 6.91 | 13.20 | 52.68 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2,702 | $1,481 | $1,068 | $601 | $162 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.12 | 1.20 | 1.24 | 1.24 | 1.26 |
Expenses net of fee waivers | 1.11 | 1.20 | 1.24 | 1.24 | 1.06 |
Expenses net of fee waivers and credits | 1.11 | 1.20 | 1.24 | 1.24 | 1.05 |
Net investment income | 0.68 | 0.95 | 0.82 | 0.38 | 0.74 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 59 |
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.
CLASS B SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.24 | $13.73 | $13.30 | $11.91 | $7.88 |
Net investment income (loss)1 | (0.03) | 0.01 | —2 | (0.05) | (0.03) |
Net realized and unrealized gain on investments | 3.67 | 2.01 | 0.74 | 1.51 | 4.06 |
Total from investment operations | 3.64 | 2.02 | 0.74 | 1.46 | 4.03 |
Less distributions | |||||
From net investment income | — | (0.01) | — | — | — |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (0.88) | (0.51) | (0.31) | (0.07) | — |
Net asset value, end of period | $18.00 | $15.24 | $13.73 | $13.30 | $11.91 |
Total return (%)3,4 | 24.21 | 15.09 | 5.99 | 12.28 | 51.14 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $19 | $14 | $10 | $8 | $5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.96 | 2.08 | 2.14 | 2.27 | 2.58 |
Expenses net of fee waivers | 1.96 | 2.05 | 2.05 | 2.05 | 2.12 |
Expenses net of fee waivers and credits | 1.96 | 2.05 | 2.05 | 2.05 | 2.05 |
Net investment income (loss) | (0.17) | 0.10 | 0.01 | (0.45) | (0.25) |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 59 |
1 Based on the average daily shares outstanding.
2 Less than $0.005 per share.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
20 | Disciplined Value Fund | Annual report | See notes to financial statements |
CLASS C SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.26 | $13.74 | $13.30 | $11.91 | $7.87 |
Net investment income (loss)1 | (0.02) | 0.02 | 0.01 | (0.05) | (0.03) |
Net realized and unrealized gain on investments | 3.67 | 2.01 | 0.74 | 1.51 | 4.07 |
Total from investment operations | 3.65 | 2.03 | 0.75 | 1.46 | 4.04 |
Less distributions | |||||
From net investment income | — | (0.01) | — | — | — |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (0.88) | (0.51) | (0.31) | (0.07) | — |
Net asset value, end of period | $18.03 | $15.26 | $13.74 | $13.30 | $11.91 |
Total return (%)2,3 | 24.25 | 15.19 | 6.07 | 12.28 | 51.33 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $171 | $59 | $40 | $30 | $19 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.88 | 1.98 | 2.02 | 2.07 | 2.24 |
Expenses net of fee waivers and credits | 1.88 | 1.98 | 2.02 | 2.05 | 2.05 |
Net investment income (loss) | (0.09) | 0.17 | 0.04 | (0.45) | (0.27) |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 59 |
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.
CLASS I SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.54 | $13.99 | $13.52 | $12.03 | $7.90 |
Net investment income1 | 0.17 | 0.18 | 0.15 | 0.09 | 0.11 |
Net realized and unrealized gain on investments | 3.75 | 2.04 | 0.75 | 1.54 | 4.08 |
Total from investment operations | 3.92 | 2.22 | 0.90 | 1.63 | 4.19 |
Less distributions | |||||
From net investment income | (0.14) | (0.17) | (0.12) | (0.07) | (0.06) |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (1.02) | (0.67) | (0.43) | (0.14) | (0.06) |
Net asset value, end of period | $18.44 | $15.54 | $13.99 | $13.52 | $12.03 |
Total return (%)2 | 25.61 | 16.40 | 7.27 | 13.66 | 53.14 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $3,671 | $1,680 | $711 | $399 | $158 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.83 | 0.87 | 0.88 | 0.86 | 0.88 |
Expenses net of fee waivers and credits | 0.83 | 0.87 | 0.88 | 0.86 | 0.80 |
Net investment income | 0.96 | 1.26 | 1.18 | 0.75 | 1.01 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 59 |
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.
See notes to financial statements | Annual report | Disciplined Value Fund | 21 |
CLASS I2 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.55 | $13.99 | $13.53 | $12.04 | $7.90 |
Net investment income1 | 0.17 | 0.18 | 0.15 | 0.09 | 0.11 |
Net realized and unrealized gain on investments | 3.75 | 2.05 | 0.75 | 1.54 | 4.09 |
Total from investment operations | 3.92 | 2.23 | 0.90 | 1.63 | 4.20 |
Less distributions | |||||
From net investment income | (0.14) | (0.17) | (0.13) | (0.07) | (0.06) |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (1.02) | (0.67) | (0.44) | (0.14) | (0.06) |
Net asset value, end of period | $18.45 | $15.55 | $13.99 | $13.53 | $12.04 |
Total return (%)2 | 25.63 | 16.51 | 7.24 | 13.65 | 53.27 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $75 | $34 | $25 | $23 | $19 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.87 | 0.92 | 0.93 | 0.92 | 1.13 |
Expenses net of fee waivers and credits | 0.85 | 0.85 | 0.85 | 0.85 | 0.75 |
Net investment income | 0.96 | 1.29 | 1.21 | 0.74 | 0.99 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 59 |
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.
CLASS R1 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.54 | $13.99 | $13.52 | $12.05 | $9.01 |
Net investment income2 | 0.04 | 0.08 | 0.06 | —3 | 0.02 |
Net realized and unrealized gain on investments | 3.75 | 2.04 | 0.74 | 1.54 | 3.02 |
Total from investment operations | 3.79 | 2.12 | 0.80 | 1.54 | 3.04 |
Less distributions | |||||
From net investment income | (0.02) | (0.07) | (0.02) | — | — |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (0.90) | (0.57) | (0.33) | (0.07) | — |
Net asset value, end of period | $18.43 | $15.54 | $13.99 | $13.52 | $12.05 |
Total return (%)4 | 24.69 | 15.63 | 6.41 | 12.80 | 33.745 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $13 | $6 | $3 | $1 | —6 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.67 | 1.85 | 2.16 | 3.21 | 2.967 |
Expenses net of fee waivers and credits | 1.57 | 1.58 | 1.65 | 1.61 | 1.507 |
Net investment income | 0.22 | 0.56 | 0.45 | 0.01 | 0.297 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 598 |
1 The inception date for Class R1 shares is 7-13-09.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
8 Portfolio turnover is shown for the period from 4-1-09 to 3-31-10.
22 | Disciplined Value Fund | Annual report | See notes to financial statements |
CLASS R2 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $15.55 | $14.00 | $13.49 | ||
Net investment income2 | 0.08 | 0.12 | —3 | ||
Net realized and unrealized gain on investments | 3.75 | 2.04 | 0.51 | ||
Total from investment operations | 3.83 | 2.16 | 0.51 | ||
Less distributions | |||||
From net investment income | (0.06) | (0.11) | — | ||
From net realized gain | (0.88) | (0.50) | — | ||
Total distributions | (0.94) | (0.61) | — | ||
Net asset value, end of period | $18.44 | $15.55 | $14.00 | ||
Total return (%)4 | 24.98 | 15.90 | 3.785 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $38 | $4 | —6 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.33 | 3.02 | 15.967 | ||
Expenses including reductions | 1.32 | 1.32 | 1.407 | ||
Net investment income | 0.45 | 0.80 | 0.417 | ||
Portfolio turnover (%) | 45 | 44 | 448 | ||
1 The inception date for Class R2 shares is 3-1-12.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
8 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
CLASS R3 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.54 | $13.99 | $13.52 | $12.04 | $8.98 |
Net investment income2 | 0.06 | 0.10 | 0.07 | 0.01 | 0.04 |
Net realized and unrealized gain on investments | 3.74 | 2.04 | 0.75 | 1.54 | 3.02 |
Total from investment operations | 3.80 | 2.14 | 0.82 | 1.55 | 3.06 |
Less distributions | |||||
From net investment income | (0.03) | (0.09) | (0.04) | —3 | — |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (0.91) | (0.59) | (0.35) | (0.07) | — |
Net asset value, end of period | $18.43 | $15.54 | $13.99 | $13.52 | $12.04 |
Total return (%)4 | 24.81 | 15.75 | 6.52 | 12.93 | 34.085 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $15 | $4 | —6 | —6 | —6 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.57 | 2.33 | 11.16 | 20.34 | 10.237 |
Expenses net of fee waivers and credits | 1.47 | 1.48 | 1.55 | 1.52 | 1.407 |
Net investment income | 0.35 | 0.67 | 0.54 | 0.10 | 0.437 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 598 |
1 The inception date for Class R3 shares is 5-22-09.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
8 Portfolio turnover is shown for the period from 4-1-09 to 3-31-10.
See notes to financial statements | Annual report | Disciplined Value Fund | 23 |
CLASS R4 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.54 | $13.99 | $13.52 | $12.04 | $8.98 |
Net investment income2 | 0.13 | 0.16 | 0.11 | 0.05 | 0.07 |
Net realized and unrealized gain on investments | 3.76 | 2.03 | 0.75 | 1.54 | 3.02 |
Total from investment operations | 3.89 | 2.19 | 0.86 | 1.59 | 3.09 |
Less distributions | |||||
From net investment income | (0.10) | (0.14) | (0.08) | (0.04) | (0.03) |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (0.98) | (0.64) | (0.39) | (0.11) | (0.03) |
Net asset value, end of period | $18.45 | $15.54 | $13.99 | $13.52 | $12.04 |
Total return (%)3 | 25.44 | 16.19 | 6.86 | 13.25 | 34.424 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $75 | $5 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.11 | 1.63 | 2.35 | 2.81 | 2.885 |
Expenses net of fee waivers and credits | 1.01 | 1.09 | 1.25 | 1.20 | 1.105 |
Net investment income | 0.75 | 1.09 | 0.85 | 0.40 | 0.755 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 596 |
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.
4 Not annualized.
5 Annualized.
6 Portfolio turnover is shown for the period from 4-1-09 to 3-31-10.
CLASS R5 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.57 | $14.00 | $13.53 | $12.04 | $8.98 |
Net investment income2 | 0.18 | 0.20 | 0.15 | 0.08 | 0.10 |
Net realized and unrealized gain on investments | 3.76 | 2.04 | 0.74 | 1.55 | 3.02 |
Total from investment operations | 3.94 | 2.24 | 0.89 | 1.63 | 3.12 |
Less distributions | |||||
From net investment income | (0.16) | (0.17) | (0.11) | (0.07) | (0.06) |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (1.04) | (0.67) | (0.42) | (0.14) | (0.06) |
Net asset value, end of period | $18.47 | $15.57 | $14.00 | $13.53 | $12.04 |
Total return (%)3 | 25.71 | 16.55 | 7.20 | 13.61 | 34.774 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $591 | $415 | $33 | $15 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.74 | 0.78 | 0.90 | 1.23 | 9.546 |
Expenses net of fee waivers and credits | 0.73 | 0.78 | 0.90 | 0.94 | 0.806 |
Net investment income | 1.05 | 1.42 | 1.19 | 0.59 | 1.036 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 597 |
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.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 4-1-09 to 3-31-10.
24 | Disciplined Value Fund | Annual report | See notes to financial statements |
CLASS R6 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $15.57 | $14.00 | $12.19 | ||
Net investment income2 | 0.19 | 0.19 | 0.10 | ||
Net realized and unrealized gain on investments | 3.75 | 2.06 | 2.15 | ||
Total from investment operations | 3.94 | 2.25 | 2.25 | ||
Less distributions | |||||
From net investment income | (0.16) | (0.18) | (0.13) | ||
From net realized gain | (0.88) | (0.50) | (0.31) | ||
Total distributions | (1.04) | (0.68) | (0.44) | ||
Net asset value, end of period | $18.47 | $15.57 | $14.00 | ||
Total return (%)3 | 25.72 | 16.60 | 19.094 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $356 | $118 | $1 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.74 | 0.82 | 2.325 | ||
Expenses including reductions | 0.73 | 0.82 | 0.865 | ||
Net investment income | 1.06 | 1.28 | 1.315 | ||
Portfolio turnover (%) | 45 | 44 | 446 | ||
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.
4 Not annualized.
5 Annualized.
6 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
CLASS NAV SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $15.57 | $14.00 | $13.53 | $12.04 | $9.18 |
Net investment income2 | 0.19 | 0.20 | 0.16 | 0.10 | 0.10 |
Net realized and unrealized gain on investments | 3.75 | 2.05 | 0.75 | 1.54 | 2.82 |
Total from investment operations | 3.94 | 2.25 | 0.91 | 1.64 | 2.92 |
Less distributions | |||||
From net investment income | (0.16) | (0.18) | (0.13) | (0.08) | (0.06) |
From net realized gain | (0.88) | (0.50) | (0.31) | (0.07) | — |
Total distributions | (1.04) | (0.68) | (0.44) | (0.15) | (0.06) |
Net asset value, end of period | $18.47 | $15.57 | $14.00 | $13.53 | $12.04 |
Total return (%)3 | 25.73 | 16.66 | 7.38 | 13.71 | 31.894 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $543 | $524 | $338 | $405 | $228 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.71 | 0.74 | 0.77 | 0.79 | 0.835 |
Expenses including reductions | 0.71 | 0.74 | 0.77 | 0.79 | 0.755 |
Net investment income | 1.09 | 1.40 | 1.28 | 0.82 | 1.055 |
Portfolio turnover (%) | 45 | 44 | 44 | 50 | 596 |
1 The inception date for Class NAV shares is 5-29-09.
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.
4 Not annualized.
5 Annualized.
6 Portfolio turnover is shown for the period from 4-1-09 to 3-31-10.
See notes to financial statements | Annual report | Disciplined Value Fund | 25 |
Notes to financial statements
Note 1 — Organization
John Hancock Disciplined Value 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 provide long-term growth of capital primarily through investment in equity securities. Current income 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 I shares are offered to institutions and certain investors. Class B and Class I2 shares are closed to new 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 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, and 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. 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 market are valued using bid prices. Other fund securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund’s Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
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
26 | Disciplined Value Fund | Annual report |
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.
As of March 31, 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. 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.
Real estate investment trusts. The fund may invest in real estate investment trusts (REITs). Distributions from REITs may be recorded as income and subsequently characterized by the REIT at the end of the fiscal year as a reduction of cost of investments and/or as a realized gain. As a result, the fund will estimate the components of distributions from these securities. Such estimates are revised when the actual components of the distributions are known.
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 Statement of assets and liabilities as Payable upon return of securities loaned.
Annual report | Disciplined Value Fund | 27 |
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 March 31, 2014 were $4,317. For the year ended March 31, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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.
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 March 31, 2014, the fund has a capital loss carryforward of $54,599,625 available to offset future net realized capital gains. These carryforwards expire as follows: March 31, 2016 — $11,985,950 and March 31, 2017 — $42,613,675.
It is estimated that $50,300,349 of the loss carryforward, which was acquired on July 10, 2009, in a merger with John Hancock Classic Value Fund II, will likely expire unused because of limitations of its use under tax rules.
28 | Disciplined Value Fund | Annual report |
As of March 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually.
The tax character of distributions for the years ended March 31, 2014 and 2013 was as follows:
MARCH 31, 2014 | MARCH 31, 2013 | ||
Ordinary Income | $123,594,138 | $41,435,621 | |
Long-Term Capital Gain | $249,838,081 | $101,590,354 | |
Total | $373,432,219 | $143,025,975 |
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 March 31, 2014, the components of distributable earnings on a tax basis consisted of $54,021,335 of undistributed ordinary income and $95,588,370 of long-term capital gain.
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 in-kind transactions.
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 contract 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) 0.750% of the first $500,000,000 of the fund’s average daily net assets; (b) 0.725% of
Annual report | Disciplined Value Fund | 29 |
the next $500,000,000 of the fund’s average daily net assets; (c) 0.700% of the next $500,000,000 of the fund’s average daily net assets; (d) 0.675% of the next $1,000,000,000 of the fund’s average daily net assets; and (e) 0.650% of the fund’s average daily net assets in excess of $2,500,000,000. The Advisor has a subadvisory agreement with Robeco Investment Management, Inc. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to reimburse or limit certain expenses for certain share classes of the fund. This agreement excludes certain expenses such as taxes, portfolio brokerage commissions, interest expense, litigation and indemnification expenses, and other extraordinary expenses not incurred in the ordinary course of the fund’s business, acquired fund fees and expenses paid indirectly and short dividend expense. The reimbursements and limits are such that these expenses will not exceed 2.05%, 0.85%, 1.57%, 1.32%, 1.47%, 1.07% and 0.82% for Class B, Class I2, Class R1, Class R2, Class R3, Class R4 and Class R6 shares, respectively. The fee waivers and/or expense reimbursements will continue in effect until June 30, 2014 for Class B and Class R6 shares and until June 30, 2015 for Class I2, Class R1, Class R2, Class R3 and Class R4 shares, 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, the fee waivers and/or reimbursements were such that these expenses would not exceed 2.05% and 0.87% for Class C and Class R5 shares, respectively.
Effective February 1, 2014, for Class R6 shares, the Advisor has contractually agreed to waive and/or reimburse all class-specific expenses 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 agreement expires on 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 that time. This waiver was in effect on a voluntary basis from January 1, 2014 to January 31, 2014.
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.
For the year ended March 31, 2014 these expense reductions amounted to the following:
EXPENSE | ||||
CLASS | REDUCTION | |||
Class A | $105,756 | |||
Class B | 836 | |||
Class C | 5,427 | |||
Class I | 147,442 | |||
Class I2 | 10,747 | |||
Class R1 | 8,581 | |||
Class R2 | 1,129 | |||
Class R3 | 7,230 | |||
Class R4 | 2,507 | |||
Class R5 | 25,851 | |||
Class R6 | 38,494 | |||
Class NAV | 25,563 | |||
Total | $379,563 |
30 | Disciplined Value Fund | Annual report |
The investment management fees, including the impact of the waivers and reimbursements as described on the previous page, incurred for the year ended March 31, 2014 were equivalent to a net annual effective rate of 0.67% 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 March 31, 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 and Class R4 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 pays up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund’s shares.
CLASS | RULE 12b-1 FEE | SERVICE FEE | |
Class A | 0.30% | — | |
Class B | 1.00% | — | |
Class C | 1.00% | — | |
Class R1 | 0.50% | 0.25% | |
Class R2 | 0.25% | 0.25% | |
Class R3 | 0.50% | 0.15% | |
Class R4 | 0.25% | 0.10% | |
Class R5 | — | 0.05% |
Currently, only 0.25% is charged to Class A shares for Rule 12b-1 fees.
The fund’s 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, 2015, 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. Reimbursements related to this contractual waiver amounted to $45,489 for Class R4 shares for the year ended March 31, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $5,385,460 for the year ended March 31, 2014. Of this amount, $882,728 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $4,484,120 was paid as sales commissions to broker-dealers and $18,612 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
Annual report | Disciplined Value Fund | 31 |
year ended March 31, 2014, CDSCs received by the Distributor amounted to $2,576, $23,013 and $14,904 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.
Class level expenses. Class level expenses for the year ended March 31, 2014 were:
DISTRIBUTION | TRANSFER AGENT | STATE | PRINTING AND | |
SHARE CLASS | AND SERVICE FEES | FEES | REGISTRATION | POSTAGE |
Class A | $5,128,648 | $2,976,533 | $53,976 | $152,452 |
Class B | 166,203 | 24,207 | 15,906 | 1,277 |
Class C | 1,017,481 | 146,726 | 20,889 | 6,294 |
Class I | — | 3,306,057 | 96,485 | 122,264 |
Class I2 | — | 65,995 | 21,537 | 1,645 |
Class R1 | 68,847 | 1,985 | 14,696 | 397 |
Class R2 | 57,683 | 2,790 | 18,179 | 195 |
Class R3 | 47,422 | 1,643 | 14,858 | 221 |
Class R4 | 154,350 | 10,013 | 14,796 | 2,349 |
Class R5 | 11,248 | 113,436 | 16,124 | 4,944 |
Class R6 | — | 46,944 | 17,424 | 4,416 |
Total | $6,651,882 | $6,696,329 | $304,870 | $296,454 |
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:
WEIGHTED AVERAGE | DAYS | WEIGHTED AVERAGE | INTEREST | |
BORROWER OR LENDER | LOAN BALANCE | OUTSTANDING | INTEREST RATE | INCOME |
Lender | $18,298,396 | 4 | 0.44% | $888 |
32 | Disciplined Value Fund | Annual report |
Note 5 — Fund share transactions
Transactions in fund shares for the years ended March 31, 2014 and 2013 were as follows:
Year ended 3-31-14 | Year ended 3-31-13 | ||||
Shares | Amount | Shares | Amount | ||
Class A shares | |||||
Sold | 66,468,713 | $1,184,749,184 | 36,888,832 | $540,482,322 | |
Distributions reinvested | 6,584,301 | 117,266,393 | 3,578,949 | 51,429,497 | |
Repurchased | (23,301,466) | (412,475,664) | (22,072,197) | (320,089,687) | |
Net increase | 49,751,548 | $889,539,913 | 18,395,584 | $271,822,132 | |
Class B shares | |||||
Sold | 299,991 | $5,048,977 | 313,325 | $4,378,530 | |
Distributions reinvested | 47,326 | 803,124 | 26,894 | 370,603 | |
Repurchased | (187,971) | (3,146,399) | (156,060) | (2,175,999) | |
Net increase | 159,346 | $2,705,702 | 184,159 | $2,573,134 | |
Class C shares | |||||
Sold | 6,130,668 | $105,059,369 | 1,551,485 | $21,743,882 | |
Distributions reinvested | 291,483 | 4,955,207 | 106,836 | 1,473,263 | |
Repurchased | (763,651) | (12,969,431) | (704,556) | (9,662,876) | |
Net increase | 5,658,500 | $97,045,145 | 953,765 | $13,554,269 | |
Class I shares | |||||
Sold | 157,732,340 | $2,694,195,154 | 77,544,716 | $1,126,556,218 | |
Distributions reinvested | 8,290,598 | 143,676,056 | 2,833,011 | 39,662,157 | |
Repurchased | (75,045,001) | (1,302,744,499) | (23,137,782) | (322,706,743) | |
Net increase | 90,977,937 | $1,535,126,711 | 57,239,945 | $843,511,632 | |
Class I2 shares | |||||
Sold | 2,574,220 | $43,632,873 | 514,968 | $7,873,719 | |
Distributions reinvested | 195,555 | 3,388,966 | 81,680 | 1,144,331 | |
Repurchased | (880,136) | (15,317,752) | (169,614) | (2,416,300) | |
Net increase | 1,889,639 | $31,704,087 | 427,034 | $6,601,750 | |
Class R1 shares | |||||
Sold | 576,595 | $9,969,871 | 311,505 | $4,411,938 | |
Distributions reinvested | 20,136 | 349,360 | 13,567 | 190,349 | |
Repurchased | (240,894) | (4,145,634) | (191,762) | (2,802,951) | |
Net increase | 355,837 | $6,173,597 | 133,310 | $1,799,336 | |
Class R2 shares | |||||
Sold | 1,928,799 | $34,271,275 | 275,831 | $4,062,117 | |
Distributions reinvested | 35,013 | 607,469 | 3,532 | 49,513 | |
Repurchased | (206,368) | (3,669,309) | (3,588) | (54,248) | |
Net increase | 1,757,444 | $31,209,435 | 275,775 | $4,057,382 | |
Class R3 shares | |||||
Sold | 616,053 | $10,858,653 | 282,399 | $4,111,488 | |
Distributions reinvested | 25,112 | 435,694 | 4,698 | 65,866 | |
Repurchased | (87,994) | (1,516,936) | (26,086) | (369,596) | |
Net increase | 553,171 | $9,777,411 | 261,011 | $3,807,758 |
Annual report | Disciplined Value Fund | 33 |
Year ended 3-31-14 | Year ended 3-31-13 | ||||
Shares | Amount | Shares | Amount | ||
Class R4 shares | |||||
Sold | 3,965,095 | $66,564,803 | 291,031 | $4,211,461 | |
Distributions reinvested | 172,059 | 2,983,502 | 10,348 | 144,982 | |
Repurchased | (419,640) | (7,305,850) | (61,859) | (895,035) | |
Net increase | 3,717,514 | $62,242,455 | 239,520 | $3,461,408 | |
Class R5 shares | |||||
Sold | 6,759,505 | $117,417,509 | 25,502,790 | $352,551,353 | |
Distributions reinvested | 1,789,472 | 31,047,348 | 1,176,802 | 16,498,765 | |
Repurchased | (3,235,655) | (57,063,767) | (2,356,806) | (33,390,435) | |
Net increase | 5,313,322 | $91,401,090 | 24,322,786 | $335,659,683 | |
Class R6 shares | |||||
Sold | 13,376,512 | $233,137,306 | 7,992,583 | $112,118,701 | |
Distributions reinvested | 769,696 | 13,346,522 | 290,580 | 4,073,934 | |
Repurchased | (2,434,397) | (42,833,354) | (793,339) | (11,647,888) | |
Net increase | 11,711,811 | $203,650,474 | 7,489,824 | $104,544,747 | |
Class NAV shares | |||||
Sold | 208,369 | $3,641,852 | 11,947,301 | $160,226,538 | |
Distributions reinvested | 1,698,100 | 29,462,039 | 1,654,850 | 23,201,004 | |
Repurchased | (6,139,985) | (105,765,660) | (4,099,746) | (59,397,347) | |
Net increase (decrease) | (4,233,516) | ($72,661,769) | 9,502,405 | $124,030,195 | |
Total net increase | 167,612,553 | $2,887,914,251 | 119,425,118 | $1,715,423,426 | |
During the period, the fund had a redemption in kind in the amount of $666,435,244.
Affiliates of the fund owned 100% of shares of beneficial interest for Class NAV on March 31, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $5,355,702,168 and $2,811,424,758, respectively, for the year ended March 31, 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 March 31, 2014, funds within the John Hancock group of funds complex held 6.6% of the fund.
34 | Disciplined Value Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock Disciplined Value 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 Disciplined Value Fund (the “Fund”) at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2014 by correspondence with the custodian, transfer agents and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 15, 2014
Annual report | Disciplined Value Fund | 35 |
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 March 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $249,838,081 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.
36 | Disciplined Value 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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | Disciplined Value Fund | 37 |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Grace K. Fey, Born: 1946 | 2012 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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). |
38 | Disciplined Value 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 | 228 |
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 | 228 |
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 | 228 |
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 | Disciplined Value Fund | 39 |
Principal officers who are not Trustees (continued)
Name, Year of Birth | Officer | |
Position(s) held with Fund | of the | |
Principal occupation(s) and other | Trust | |
directorships during past 5 years | since | |
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.
40 | Disciplined Value 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† | Robeco Investment Management, 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 | |
**Until 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 | Disciplined Value Fund | 41 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/disciplinedvaluex38x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/disciplinedvaluex38x2.jpg)
This report is for the information of the shareholders of John Hancock Disciplined Value Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 340A 3/14 |
MF181821 | 5/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/corehighyieldx1x1.jpg)
A look at performance
Total returns for the period ended March 31, 2014
SEC 30-day | SEC 30-day | |||||||||||||
Average annual total returns (%) | Cumulative total returns (%) | yield (%) | yield (%) | |||||||||||
with maximum sales charge | with maximum sales charge | subsidized | unsubsidized1 | |||||||||||
Since | Since | as of | as of | |||||||||||
1-year | 5-year | 10-year | inception2 | 1-year | 5-year | 10-year | inception2 | 3-31-14 | 3-31-14 | |||||
Class A | 3.31 | — | — | 15.21 | 3.31 | — | — | 100.70 | 4.80 | 4.79 | ||||
Class C3 | 5.73 | — | — | 14.78 | 5.73 | — | — | 97.06 | 4.27 | 4.05 | ||||
Class I4 | 8.01 | — | — | 16.55 | 8.01 | — | — | 112.44 | 5.35 | 5.25 | ||||
Index† | 7.56 | — | — | 16.28 | 7.56 | — | — | 110.03 | — | — | ||||
Performance figures assume all distributions are reinvested. Figures reflect maximum sales charge on Class A shares of 4% and the applicable contingent deferred sales charge (CDSC) on Class C shares. The returns for Class A shares have been adjusted to reflect the reduction in the maximum sales charge from 4.5% to 4.0%, effective 2-3-14. 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 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 A, Class C, and Class I shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class C | Class I | |||
Net (%) | 1.18 | 1.93 | 0.87 | ||
Gross (%) | 1.30 | 2.12 | 1.07 |
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 performance data current to the most recent month end, 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 would increase and results would have been less favorable.
† Index is the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index.
See the following page for footnotes.
6 | Core High Yield Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/corehighyieldx3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class C5 | 4-30-09 | $19,706 | $19,706 | $21,003 |
Class I4 | 4-30-09 | 21,244 | 21,244 | 21,003 |
The values shown in the chart for “Class A shares with maximum sales charge” have been adjusted to reflect the reduction in the Class A maximum sales charge from 4.5% to 4.0%, which became effective on 2-3-14.
Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index is an unmanaged index composed of U.S. currency high-yield bonds issued by U.S. and non-U.S. issuers.
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 yields would have been without the effect of reimbursements and waivers.
2 From 4-30-09.
3 Class C shares were first offered on 3-27-13. The returns prior to this date are those of Class A shares that have been recalculated to reflect the gross fees and expenses of Class C shares.
4 For certain types of investors, as described in the fund’s prospectuses.
5 The contingent deferred sales charge is not applicable.
Annual report | Core High Yield Fund | 7 |
Management’s discussion of
Fund performance
By John Hancock Asset Management a division of Manulife Asset Management (North America) Limited
High-yield bonds posted solid total returns over what was a volatile year for the bond markets. Within the high-yield sector, returns across sectors were mixed. Higher-yielding, more economically sensitive B- and CCC-rated securities outperformed higher-rated, more interest-rate-sensitive BB bonds on average. As has been the case for some time, the combination of strong investor demand for yield and steadily improving economic and corporate credit conditions generally helped support fundamentals in corporate credit and led to a continued high supply of new bond issuance. That dynamic is significant because much of the proceeds from the sale of those newly minted bonds went to refinance older, higher-yielding debt. As a result of these conditions, the default rate among high-yield bonds remained in the neighborhood of 2% throughout the fund’s fiscal year.
For the twelve months ended March 31, 2014, the fund returned 7.62%, excluding sales charges, beating its benchmark, the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, which returned 7.56%. The fund enjoyed positive contributions to return from securities in a broad range of sectors and industries, particularly positions in consumer companies (both staples and discretionary), financials, and industrials.
The fund enjoyed positive contributions to returns from securities in a broad range of sectors and industries, particularly positions in consumer companies (both staples and discretionary), financials, and industrials.
Among the leading contributors was a position in Reddy Ice Corp., which began to improve on a number of business metrics after emerging from bankruptcy last year. Great Canadian Gaming Corp., a Canadian casino operator, was another notable contributor, benefiting from improving consumer conditions in North America. Another Canadian company, miner Thompson Creek Metals Company, Inc., helped relative results. The company is a leading producer of molybdenum, which has a number of industrial applications, and it opened a much-anticipated mine in September.
One of the leading detractors was the fund’s stake in electronic payment processor iPayment Inc., which reported disappointing revenues and flat transaction volumes. Another notable detractor was Canadian oil sands producer Southern Pacific Resource Corp., which faced delays and slower-than-expected production at a big new project. Sherritt International Corp., another underperforming Canadian natural resource company, struggled with poor pricing for coal during the period. Southern Pacific and Sherritt were sold prior to period end.
This commentary reflects the views of the portfolio managers through the end of the period discussed in this report. The managers’ statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.
Past performance does not guarantee future results.
8 | Core High 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 October 1, 2013, with the same investment held until March 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,060.60 | $5.81 | 1.13% |
Class C | 1,000.00 | 1,056.30 | 9.89 | 1.93% |
Class I | 1,000.00 | 1,061.90 | 4.47 | 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 March 31, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/corehighyieldx5x1.jpg)
Annual report | Core High 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 October 1, 2013, with the same investment held until March 31, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,019.30 | $5.69 | 1.13% |
Class C | 1,000.00 | 1,015.30 | 9.70 | 1.93% |
Class I | 1,000.00 | 1,020.60 | 4.38 | 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 prospectuses for details regarding transaction costs.
1 Expenses are equal to the fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
10 | Core High Yield Fund | Annual report |
Portfolio summary
Top 10 Issuers (15.0% of Net Assets on 3-31-14)1,2 | ||||
Thompson Creek Metals Company, Inc. | 1.9% | Calumet Specialty Products Partners LP | 1.4% | |
Centric Health Corp. | 1.8% | Modular Space Corp. | 1.4% | |
Rockies Express Pipeline LLC | 1.6% | National Mentor Holdings, Inc. | 1.4% | |
Southern States Cooperative, Inc. | 1.5% | Vantage Oncology LLC | 1.3% | |
Midstates Petroleum Company, Inc. | 1.4% | The Sun Products Corp. | 1.3% | |
Sector Composition1,3 | ||||
Energy | 16.9% | Health Care | 7.2% | |
Consumer Discretionary | 14.8% | Telecommunication Services | 4.0% | |
Materials | 11.9% | Information Technology | 3.0% | |
Financials | 11.6% | Utilities | 1.7% | |
Industrials | 10.7% | Short-Term Investments & Other | 10.2% | |
Consumer Staples | 8.0% | |||
Quality Composition1,4 | ||||
BBB | 1.8% | CCC & Below | 23.3% | |
BB | 9.1% | Not Rated | 3.2% | |
B | 52.4% | Short-Term Investments & Other | 10.2% | |
1 As a percentage of net assets on 3-31-14.
2 Cash and cash equivalents not included.
3 Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if a creditor, grantor, or counterparty is unable or unwilling to make principal, interest, or settlement payments. Investments in higher-yielding, lower-rated securities include a higher risk of default. Frequent trading may increase fund transaction costs and increase taxable distributions. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. 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.
4 Ratings are from Moody’s Investors Service, Inc. If not available, we have used ratings from Standard & Poor’s Ratings Services. In the absence of ratings from these agencies, we have used Fitch Ratings, Inc. “Not Rated” securities are those with no ratings available from these agencies. All are as of 3-31-14 and do not reflect subsequent downgrades or upgrades, if any.
Annual report | Core High Yield Fund | 11 |
Fund’s investments
As of 3-31-14
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Corporate Bonds 75.2% | $346,257,017 | ||||
(Cost $337,013,814) | |||||
Consumer Discretionary 9.3% | 43,038,711 | ||||
Auto Components 1.3% | |||||
Icahn Enterprises LP (S) | 5.875 | 02-01-22 | 5,000,000 | 5,075,000 | |
Stackpole International Intermediate | |||||
Company SA (S) | 7.750 | 10-15-21 | 840,000 | 899,850 | |
Diversified Consumer Services 0.2% | |||||
Speedy Cash Intermediate Holdings Corp. (S) | 10.750 | 05-15-18 | 1,000,000 | 1,030,000 | |
Hotels, Restaurants & Leisure 1.3% | |||||
Caesars Entertainment Operating | |||||
Company, Inc. | 11.250 | 06-01-17 | 250,000 | 240,625 | |
Great Canadian Gaming Corp. | 6.625 | 07-25-22 | CAD 2,000,000 | 1,926,730 | |
Landry’s, Inc. (S) | 9.375 | 05-01-20 | 3,485,000 | 3,837,856 | |
Household Durables 3.0% | |||||
Beazer Homes USA, Inc. | 7.250 | 02-01-23 | 200,000 | 209,000 | |
Beazer Homes USA, Inc. | 9.125 | 05-15-19 | 3,000,000 | 3,232,500 | |
Brookfield Residential Properties, Inc. (S) | 6.500 | 12-15-20 | 1,340,000 | 1,427,100 | |
Meritage Homes Corp. | 7.000 | 04-01-22 | 1,000,000 | 1,102,500 | |
Modular Space Corp. (S) | 10.250 | 01-31-19 | 6,125,000 | 6,370,000 | |
The Ryland Group, Inc. | 5.375 | 10-01-22 | 1,000,000 | 992,500 | |
William Lyon Homes, Inc. (S) | 5.750 | 04-15-19 | 640,000 | 646,400 | |
Internet & Catalog Retail 0.3% | |||||
Netflix, Inc. (S) | 5.750 | 03-01-24 | 1,125,000 | 1,164,375 | |
Media 2.5% | |||||
American Media, Inc. | 11.500 | 12-15-17 | 2,094,000 | 2,277,225 | |
Columbus International, Inc. (S) | 11.500 | 11-20-14 | 750,000 | 797,813 | |
Gibson Brands, Inc. (S) | 8.875 | 08-01-18 | 490,000 | 521,850 | |
Postmedia Network, Inc. | 12.500 | 07-15-18 | 2,000,000 | 2,185,000 | |
Quebecor Media, Inc. (S) | 6.625 | 01-15-23 | CAD 3,000,000 | 2,754,410 | |
Videotron, Ltd. (C)(S) | 5.375 | 06-15-24 | 3,055,000 | 3,047,977 | |
Specialty Retail 0.7% | |||||
GRD Holdings III Corp. (S) | 10.750 | 06-01-19 | 3,000,000 | 3,300,000 | |
Consumer Staples 6.9% | 31,977,763 | ||||
Beverages 0.1% | |||||
Pinnacle Operating Corp. (S) | 9.000 | 11-15-20 | 675,000 | 729,000 |
12 | Core High Yield Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Food Products 2.9% | |||||
Alliance Grain Traders, Inc. (S) | 9.000 | 02-14-18 | CAD 2,000,000 | $1,878,372 | |
Big Heart Pet Brands | 7.625 | 02-15-19 | 865,000 | 901,222 | |
Post Holdings, Inc. (S) | 6.750 | 12-01-21 | 775,000 | 820,531 | |
Post Holdings, Inc. (S) | 7.375 | 02-15-22 | 1,100,000 | 1,182,500 | |
Simmons Foods, Inc. (S) | 10.500 | 11-01-17 | 1,250,000 | 1,354,688 | |
Southern States Cooperative, Inc. (S) | 10.000 | 08-15-21 | 7,000,000 | 7,026,250 | |
Household Products 2.8% | |||||
Harbinger Group, Inc. (S) | 7.750 | 01-15-22 | 1,530,000 | 1,556,775 | |
Harbinger Group, Inc. | 7.875 | 07-15-19 | 2,830,000 | 3,105,925 | |
Reynolds Group Issuer, Inc. | 9.000 | 04-15-19 | 3,000,000 | 3,210,000 | |
The Sun Products Corp. (S) | 7.750 | 03-15-21 | 6,000,000 | 5,100,000 | |
Tobacco 1.1% | |||||
Alliance One International, Inc. | 9.875 | 07-15-21 | 5,000,000 | 5,112,500 | |
Energy 14.7% | 67,659,605 | ||||
Energy Equipment & Services 2.7% | |||||
Forbes Energy Services, Ltd. | 9.000 | 06-15-19 | 3,750,000 | 3,759,375 | |
Offshore Group Investment, Ltd. | 7.125 | 04-01-23 | 2,000,000 | 2,035,000 | |
Parker Drilling Company (S) | 6.750 | 07-15-22 | 290,000 | 298,700 | |
Permian Holdings, Inc. (S) | 10.500 | 01-15-18 | 4,303,000 | 4,378,303 | |
PHI, Inc. (S) | 5.250 | 03-15-19 | 1,340,000 | 1,353,400 | |
Pioneer Energy Services Corp. (S) | 6.125 | 03-15-22 | 440,000 | 447,700 | |
Oil, Gas & Consumable Fuels 12.0% | |||||
Arch Coal, Inc. (S) | 8.000 | 01-15-19 | 560,000 | 560,000 | |
Atlas Pipeline Partners LP | 5.875 | 08-01-23 | 4,500,000 | 4,443,750 | |
Bill Barrett Corp. | 7.625 | 10-01-19 | 1,000,000 | 1,083,750 | |
BreitBurn Energy Partners LP | 7.875 | 04-15-22 | 3,000,000 | 3,247,500 | |
Calumet Specialty Products Partners LP (S) | 6.500 | 04-15-21 | 5,000,000 | 5,000,000 | |
Calumet Specialty Products Partners LP | 7.625 | 01-15-22 | 1,450,000 | 1,537,000 | |
Carrizo Oil & Gas, Inc. | 7.500 | 09-15-20 | 2,750,000 | 3,025,000 | |
EPL Oil & Gas, Inc. | 8.250 | 02-15-18 | 1,500,000 | 1,623,750 | |
Green Field Energy Services, Inc. (H)(S) | 13.000 | 11-15-16 | 256,000 | 17,920 | |
Halcon Resources Corp. | 8.875 | 05-15-21 | 400,000 | 415,000 | |
Halcon Resources Corp. (S) | 9.250 | 02-15-22 | 3,500,000 | 3,648,750 | |
Jones Energy Holdings LLC (S) | 6.750 | 04-01-22 | 805,000 | 820,094 | |
Legacy Reserves LP | 8.000 | 12-01-20 | 4,000,000 | 4,280,000 | |
Midstates Petroleum Company, Inc. | 10.750 | 10-01-20 | 6,000,000 | 6,630,000 | |
Penn Virginia Corp. | 8.500 | 05-01-20 | 550,000 | 611,875 | |
Rockies Express Pipeline LLC (S) | 6.850 | 07-15-18 | 7,000,000 | 7,227,500 | |
Sabine Pass Liquefaction LLC | 5.625 | 02-01-21 | 2,000,000 | 2,062,500 | |
Sidewinder Drilling, Inc. (S) | 9.750 | 11-15-19 | 2,500,000 | 2,462,500 | |
Trilogy Energy Corp. (S) | 7.250 | 12-13-19 | CAD 3,500,000 | 3,324,288 | |
Tullow Oil PLC (S) | 6.000 | 11-01-20 | 730,000 | 740,950 | |
Ultra Petroleum Corp. (S) | 5.750 | 12-15-18 | 2,500,000 | 2,625,000 |
See notes to financial statements | Annual report | Core High Yield Fund | 13 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Financials 11.4% | $52,654,726 | ||||
Banks 2.2% | |||||
Barclays Bank PLC | 7.625 | 11-21-22 | 3,000,000 | 3,307,500 | |
Credit Agricole SA (8.125% to 9-19-18, then | |||||
5 year U.S. Swap Rate + 6.283%) (S) | 8.125 | 09-19-33 | 3,000,000 | 3,435,000 | |
Societe Generale SA (8.250% to 11-29-18, | |||||
then 5 Year U.S. Swap Rate + 6.394%) (Q) | 8.250 | 11-29-18 | 3,000,000 | 3,232,500 | |
Capital Markets 1.2% | |||||
Credit Suisse Group AG (7.500% to 12-11-23, | |||||
then 5 year U.S. Swap Rate + 4.598%) (Q)(S) | 7.500 | 12-11-23 | 1,120,000 | 1,216,600 | |
GFI Group, Inc. | 10.375 | 07-19-18 | 2,000,000 | 2,130,000 | |
KCG Holdings, Inc. (S) | 8.250 | 06-15-18 | 2,000,000 | 2,140,000 | |
Consumer Finance 1.9% | |||||
Cash America International, Inc. | 5.750 | 05-15-18 | 5,000,000 | 4,925,000 | |
Credit Acceptance Corp. (S) | 6.125 | 02-15-21 | 2,160,000 | 2,246,400 | |
First Cash Financial Services, Inc. (S) | 6.750 | 04-01-21 | 1,605,000 | 1,643,119 | |
Diversified Financial Services 3.8% | |||||
General Electric Capital Corp. (6.250% | |||||
to 12-15-22, then 3 month LIBOR + | |||||
4.704%) (Q) | 6.250 | 12-15-22 | 1,500,000 | 1,605,000 | |
iPayment, Inc. | 10.250 | 05-15-18 | 5,000,000 | 3,687,500 | |
Jefferies Finance LLC (S) | 6.875 | 04-15-22 | 3,000,000 | 3,015,000 | |
Milestone Aviation Group LLC (S) | 8.625 | 12-15-17 | 4,000,000 | 4,295,000 | |
Nationstar Mortgage LLC | 6.500 | 06-01-22 | 3,000,000 | 2,782,500 | |
Reliance Intermediate Holdings LP (S) | 9.500 | 12-15-19 | 500,000 | 545,000 | |
TMX Finance LLC (S) | 8.500 | 09-15-18 | 1,615,000 | 1,768,425 | |
Real Estate Investment Trusts 0.4% | |||||
CNL Lifestyle Properties, Inc. | 7.250 | 04-15-19 | 750,000 | 787,500 | |
DuPont Fabros Technology LP | 5.875 | 09-15-21 | 1,100,000 | 1,163,250 | |
Real Estate Management & Development 1.9% | |||||
Crescent Resources LLC (S) | 10.250 | 08-15-17 | 3,000,000 | 3,367,500 | |
Mattamy Group Corp. (S) | 6.500 | 11-15-20 | 3,500,000 | 3,543,750 | |
Mattamy Group Corp. (S) | 6.875 | 11-15-20 | CAD 2,000,000 | 1,818,182 | |
Health Care 6.8% | 31,257,761 | ||||
Health Care Equipment & Supplies 2.4% | |||||
Alere, Inc. | 7.250 | 07-01-18 | 2,500,000 | 2,750,000 | |
Centric Health Corp. | 8.625 | 04-18-18 | CAD 10,000,000 | 8,322,026 | |
Health Care Providers & Services 3.7% | |||||
BioScrip, Inc. (S) | 8.875 | 02-15-21 | 4,125,000 | 4,300,313 | |
National Mentor Holdings, Inc. (S) | 12.500 | 02-15-18 | 5,936,000 | 6,321,840 | |
OnCure Holdings, Inc. (H) | 11.750 | 01-15-17 | 62,499 | 67,499 | |
OnCure Holdings, Inc. (H) | 11.750 | 05-15-17 | 175,000 | 3,420 | |
Vantage Oncology LLC (S) | 9.500 | 06-15-17 | 6,000,000 | 6,105,000 | |
Pharmaceuticals 0.7% | |||||
Forest Laboratories, Inc. (S) | 5.000 | 12-15-21 | 1,125,000 | 1,189,688 | |
JLL/Delta Dutch Newco BV (S) | 7.500 | 02-01-22 | 545,000 | 561,350 | |
Salix Pharmaceuticals, Ltd. (S) | 6.000 | 01-15-21 | 750,000 | 800,625 | |
Valeant Pharmaceuticals International, Inc. (S) | 6.750 | 08-15-18 | 760,000 | 836,000 |
14 | Core High Yield Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Industrials 8.1% | $37,188,463 | ||||
Aerospace & Defense 0.3% | |||||
Kratos Defense & Security Solutions, Inc. | 10.000 | 06-01-17 | 1,350,000 | 1,427,625 | |
Building Products 0.7% | |||||
Nortek, Inc. | 8.500 | 04-15-21 | 1,000,000 | 1,117,500 | |
Summit Materials LLC (S) | 10.500 | 01-31-20 | 1,530,000 | 1,725,075 | |
Summit Materials LLC | 10.500 | 01-31-20 | 250,000 | 281,875 | |
Commercial Services & Supplies 1.4% | |||||
Ahern Rentals, Inc. (S) | 9.500 | 06-15-18 | 650,000 | 719,063 | |
Casella Waste Systems, Inc. | 7.750 | 02-15-19 | 2,600,000 | 2,697,500 | |
EnergySolutions, Inc. | 10.750 | 08-15-18 | 1,935,000 | 2,058,356 | |
Garda World Security Corp. (S) | 7.250 | 11-15-21 | 110,000 | 117,425 | |
Safway Group Holding LLC (S) | 7.000 | 05-15-18 | 480,000 | 511,200 | |
Tervita Corp. (S) | 10.875 | 02-15-18 | 450,000 | 452,250 | |
Construction & Engineering 0.2% | |||||
Michael Baker International, Inc. (S) | 8.250 | 10-15-18 | 900,000 | 960,750 | |
Electrical Equipment 0.5% | |||||
Artesyn Escrow, Inc. (S) | 9.750 | 10-15-20 | 2,250,000 | 2,126,250 | |
Machinery 0.2% | |||||
BlueLine Rental Finance Corp. (S) | 7.000 | 02-01-19 | 440,000 | 465,300 | |
Waterjet Holdings, Inc. (S) | 7.625 | 02-01-20 | 440,000 | 466,400 | |
Marine 1.1% | |||||
Navios Maritime Holdings, Inc. (S) | 7.375 | 01-15-22 | 4,810,000 | 4,918,225 | |
Professional Services 0.7% | |||||
Mustang Merger Corp. (S) | 8.500 | 08-15-21 | 3,000,000 | 3,285,000 | |
Road & Rail 0.5% | |||||
The Hertz Corp. | 5.875 | 10-15-20 | 2,000,000 | 2,132,506 | |
Trading Companies & Distributors 1.2% | |||||
HD Supply, Inc. | 7.500 | 07-15-20 | 5,000,000 | 5,456,250 | |
WESCO Distribution, Inc. (S) | 5.375 | 12-15-21 | 335,000 | 342,538 | |
Transportation Infrastructure 1.3% | |||||
CHC Helicopter SA | 9.250 | 10-15-20 | 2,700,000 | 2,932,875 | |
CHC Helicopter SA | 9.375 | 06-01-21 | 2,825,000 | 2,994,500 | |
Information Technology 1.6% | 7,226,683 | ||||
Communications Equipment 1.0% | |||||
Altice Financing SA (S) | 6.500 | 01-15-22 | 1,520,000 | 1,603,600 | |
Altice Finco SA (S) | 8.125 | 01-15-24 | 2,700,000 | 2,909,250 | |
Electronic Equipment, Instruments & Components 0.2% | |||||
Kemet Corp. | 10.500 | 05-01-18 | 1,000,000 | 1,047,500 | |
Semiconductors & Semiconductor Equipment 0.4% | |||||
Entegris, Inc. (C)(S) | 6.000 | 04-01-22 | 961,000 | 980,220 | |
Micron Technology, Inc. (S) | 5.875 | 02-15-22 | 655,000 | 686,113 |
See notes to financial statements | Annual report | Core High Yield Fund | 15 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Materials 10.8% | $49,803,802 | ||||
Chemicals 2.1% | |||||
Ferro Corp. | 7.875 | 08-15-18 | 4,000,000 | 4,220,000 | |
Momentive Performance Materials, Inc. | 8.875 | 10-15-20 | 2,000,000 | 2,170,000 | |
Rain CII Carbon LLC (S) | 8.250 | 01-15-21 | 3,375,000 | 3,476,250 | |
Construction Materials 0.7% | |||||
Headwaters, Inc. (S) | 7.250 | 01-15-19 | 750,000 | 781,875 | |
U.S. Concrete, Inc. (S) | 8.500 | 12-01-18 | 2,250,000 | 2,441,250 | |
Containers & Packaging 1.1% | |||||
Ardagh Packaging Finance PLC (S) | 6.250 | 01-31-19 | 1,530,000 | 1,598,850 | |
Ardagh Packaging Finance PLC (S) | 7.000 | 11-15-20 | 135,882 | 143,016 | |
Pretium Packaging LLC | 11.500 | 04-01-16 | 2,890,000 | 3,092,300 | |
Metals & Mining 5.0% | |||||
AuRico Gold, Inc. (S) | 7.750 | 04-01-20 | 655,000 | 650,088 | |
Edgen Murray Corp. (S) | 8.750 | 11-01-20 | 1,950,000 | 2,252,250 | |
Essar Steel Algoma, Inc. (S) | 9.375 | 03-15-15 | 2,000,000 | 1,980,000 | |
First Quantum Minerals, Ltd. (S) | 7.250 | 10-15-19 | 2,000,000 | 2,055,000 | |
Hecla Mining Company | 6.875 | 05-01-21 | 1,800,000 | 1,746,000 | |
HudBay Minerals, Inc. | 9.500 | 10-01-20 | 4,000,000 | 4,280,000 | |
HudBay Minerals, Inc. (S) | 9.500 | 10-01-20 | 290,000 | 310,300 | |
Optima Specialty Steel, Inc. (S) | 12.500 | 12-15-16 | 250,000 | 275,625 | |
Taseko Mines, Ltd. | 7.750 | 04-15-19 | 750,000 | 765,000 | |
Thompson Creek Metals Company, Inc. | 9.750 | 12-01-17 | 3,000,000 | 3,322,500 | |
Thompson Creek Metals Company, Inc. | 12.500 | 05-01-19 | 5,000,000 | 5,375,000 | |
Paper & Forest Products 1.9% | |||||
Mercer International, Inc. | 9.500 | 12-01-17 | 1,670,000 | 1,803,600 | |
Resolute Forest Products, Inc. (S) | 5.875 | 05-15-23 | 3,858,000 | 3,761,550 | |
Tembec Industries, Inc. | 11.250 | 12-15-18 | 2,447,000 | 2,673,348 | |
UPM-Kymmene OYJ (S) | 7.450 | 11-26-27 | 600,000 | 630,000 | |
Telecommunication Services 4.0% | 18,192,000 | ||||
Diversified Telecommunication Services 2.0% | |||||
Cincinnati Bell, Inc. | 8.375 | 10-15-20 | 1,000,000 | 1,095,000 | |
Columbus International, Inc. (S) | 7.375 | 03-30-21 | 200,000 | 205,500 | |
Frontier Communications Corp. | 7.125 | 01-15-23 | 4,500,000 | 4,668,750 | |
Frontier Communications Corp. | 8.500 | 04-15-20 | 1,000,000 | 1,162,500 | |
Goodman Networks, Inc. | 12.125 | 07-01-18 | 600,000 | 639,000 | |
Satelites Mexicanos SA de CV | 9.500 | 05-15-17 | 1,250,000 | 1,325,000 | |
Wireless Telecommunication Services 2.0% | |||||
Goodman Networks, Inc. (S) | 12.375 | 07-01-18 | 3,000,000 | 3,195,000 | |
Sprint Capital Corp. | 6.900 | 05-01-19 | 1,000,000 | 1,097,500 | |
Sprint Corp. (S) | 7.125 | 06-15-24 | 4,575,000 | 4,803,750 | |
Utilities 1.6% | 7,257,503 | ||||
Independent Power and Renewable Electricity Producers 1.6% | |||||
Dynegy, Inc. (S) | 5.875 | 06-01-23 | 3,585,000 | 3,522,263 | |
GenOn Energy, Inc. | 7.875 | 06-15-17 | 2,000,000 | 2,010,000 | |
NRG Energy, Inc. (S) | 6.250 | 07-15-22 | 1,675,000 | 1,725,240 |
16 | Core High Yield Fund | Annual report | See notes to financial statements |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Term Loans (M) 14.5% | $66,744,068 | ||||
(Cost $66,011,156) | |||||
Consumer Discretionary 5.5% | 25,310,828 | ||||
Diversified Consumer Services 0.5% | |||||
Orchard Acquisition Company | 7.000 | 02-07-19 | 2,345,217 | 2,392,122 | |
Hotels, Restaurants & Leisure 0.4% | |||||
Marina District Finance Company, Inc. | 6.750 | 08-15-18 | 1,955,100 | 1,981,949 | |
Household Durables 0.9% | |||||
Norcraft Companies LP | 5.250 | 11-12-20 | 3,990,000 | 4,009,950 | |
Internet & Catalog Retail 0.3% | |||||
Orbitz Worldwide, Inc. | 4.500 | 09-25-17 | 1,233,333 | 1,235,389 | |
Media 1.2% | |||||
ASP NEP | 9.500 | 07-22-20 | 22,857 | 23,371 | |
Getty Images, Inc. | 4.750 | 10-18-19 | 2,996,983 | 2,870,549 | |
SESAC Holdco II LLC | 5.000 | 02-08-19 | 1,975,000 | 1,989,813 | |
SESAC Holdco II LLC | 10.000 | 07-12-19 | 500,000 | 509,375 | |
Multiline Retail 0.5% | |||||
Collective Brands Finance, Inc. (T) | TBD | 03-11-21 | 2,000,000 | 1,997,084 | |
Collective Brands Finance, Inc. (T) | TBD | 03-11-22 | 210,000 | 210,525 | |
Specialty Retail 0.7% | |||||
Toys R Us Property Company I LLC | 6.000 | 08-21-19 | 3,441,375 | 3,286,513 | |
Textiles, Apparel & Luxury Goods 1.0% | |||||
Charlotte Russe, Inc. | 6.750 | 05-21-19 | 3,980,000 | 3,930,250 | |
Charlotte Russe, Inc. | 6.750 | 05-22-19 | 885,000 | 873,938 | |
Consumer Staples 1.1% | 4,848,788 | ||||
Food & Staples Retailing 0.9% | |||||
Reddy Ice Corp. | 6.751 | 05-01-19 | 3,465,000 | 3,430,350 | |
Reddy Ice Corp. | 10.750 | 11-01-19 | 500,000 | 470,000 | |
Household Products 0.2% | |||||
The Sun Products Corp. (T) | TBD | 03-23-20 | 997,481 | 948,438 | |
Energy 2.2% | 10,309,155 | ||||
Arch Coal, Inc. | 6.250 | 05-16-18 | 4,979,793 | 4,904,319 | |
Fieldwood Energy LLC | 8.125 | 09-30-20 | 5,205,000 | 5,404,836 | |
Financials 0.2% | 1,013,731 | ||||
Capital Markets 0.2% | |||||
KCG Holdings, Inc. | 5.750 | 12-05-17 | 186,916 | 187,617 | |
Walter Investment Management Corp. | 4.750 | 12-11-20 | 831,571 | 826,114 | |
Health Care 0.4% | 1,945,117 | ||||
Health Care Equipment & Supplies 0.1% | |||||
Accellent, Inc. (T) | TBD | 02-21-22 | 260,000 | 259,350 | |
Health Care Providers & Services 0.2% | |||||
Western Dental Services, Inc. | 6.000 | 11-01-18 | 987,527 | 989,996 | |
Life Sciences Tools & Services 0.1% | |||||
Patheon, Inc. (T) | TBD | 03-11-21 | 700,000 | 695,771 |
See notes to financial statements | Annual report | Core High Yield Fund | 17 |
Maturity | |||||
Rate (%) | date | Par value^ | Value | ||
Industrials 2.6% | $12,090,824 | ||||
Airlines 0.6% | |||||
Air Canada | 5.500 | 09-20-19 | 2,675,000 | 2,721,813 | |
Building Products 0.1% | |||||
Ply Gem Industries, Inc. | 4.000 | 02-01-21 | 360,000 | 359,888 | |
Machinery 0.6% | |||||
CPM Holdings, Inc. | 10.250 | 03-01-18 | 3,000,000 | 3,037,500 | |
Road & Rail 0.9% | |||||
Livingston International, Inc. | 5.000 | 04-16-19 | 1,985,000 | 1,982,519 | |
Livingston International, Inc. | 9.000 | 04-20-20 | 1,954,783 | 1,984,104 | |
Transportation Infrastructure 0.4% | |||||
Riverboat Corporation of Mississippi, Inc. | 10.000 | 11-29-16 | 2,000,000 | 2,005,000 | |
Information Technology 1.4% | 6,191,250 | ||||
Electronic Equipment, Instruments & Components 1.2% | |||||
Blue Coat Systems, Inc. | 9.500 | 06-26-20 | 5,000,000 | 5,175,000 | |
IT Services 0.2% | |||||
Deltek, Inc. | 10.000 | 10-10-19 | 1,000,000 | 1,016,250 | |
Materials 1.1% | 5,034,375 | ||||
Construction Materials 1.1% | |||||
American Pacific Corp. | 7.000 | 01-09-19 | 5,000,000 | 5,034,375 | |
Shares | Value | ||||
Common Stocks 0.1% | $153,531 | ||||
(Cost $209,046) | |||||
Utilities 0.1% | 153,531 | ||||
Independent Power and Renewable Electricity Producers 0.1% | |||||
Dynegy, Inc. (I) | 6,156 | 153,531 | |||
Warrants 0.0% | $3 | ||||
(Cost $17,500) | |||||
Green Field Energy Services, Inc. (Expiration Date: 11-15-21; | |||||
Strike Price: $0.01) (I)(S) | 250 | 3 |
18 | Core High Yield Fund | Annual report | See notes to financial statements |
Par value | Value | ||||
Short-Term Investments 10.9% | $50,190,000 | ||||
(Cost $50,190,000) | |||||
Repurchase Agreement 10.9% | 50,190,000 | ||||
Repurchase Agreement with State Street Corp. dated 3-31-14 | |||||
at 0.000% to be repurchased at $50,190,000 on 4-1-14, | |||||
collateralized by $53,960,000 U.S. Treasury Notes, 1.125% | |||||
due 4-30-20 (valued at $51,194,550, including interest) | 50,190,000 | 50,190,000 | |||
Total investments (Cost $453,441,516)† 100.7% | $463,344,619 | ||||
Other assets and liabilities, net (0.7%) | ($3,033,442) | ||||
Total net assets 100.0% | $460,311,177 | ||||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund.
^ All par values are denominated in U.S. dollars unless otherwise indicated.
CAD Canadian Dollar
LIBOR London Interbank Offered Rate
TBD To Be Determined
(C) Security purchased on a when-issued or delayed delivery basis.
(H) Non-income producing — Issuer is in default.
(I) Non-income producing security.
(M) Term loans are variable rate obligations. The coupon rate shown represents the rate at period end.
(Q) Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date.
(S) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $188,651,113 or 41.0% of the fund’s net assets as of 3-31-14.
(T) This position represents an unsettled loan commitment at period end. Certain details associated with this purchase are not known prior to the settlement date, including coupon rate.
† At 3-31-14, the aggregate cost of investment securities for federal income tax purposes was $453,863,314. Net unrealized appreciation aggregated $9,481,305, of which $14,766,391 related to appreciated investment securities and $5,285,086 related to depreciated investment securities.
The fund had the following country concentration as a percentage of net assets on 3-31-14. | ||||||
United States | 79.0% | |||||
Canada | 13.7% | |||||
France | 1.4% | |||||
Ireland | 1.3% | |||||
Luxembourg | 1.2% | |||||
Greece | 1.1% | |||||
United Kingdom | 0.9% | |||||
Cayman Islands | 0.4% | |||||
Mexico | 0.3% | |||||
Switzerland | 0.3% | |||||
Other Countries | 0.4% | |||||
Total | 100.0% |
See notes to financial statements | Annual report | Core High Yield 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 3-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
Investments, at value (Cost $403,251,516) | $413,154,619 |
Repurchase agreements, at value (Cost $50,190,000) | 50,190,000 |
Total investments, at value (Cost $453,441,516) | 463,344,619 |
Cash | 945 |
Foreign currency, at value (Cost $44,986) | 45,749 |
Receivable for investments sold | 43,855 |
Receivable for fund shares sold | 4,931,421 |
Interest receivable | 8,113,468 |
Receivable due from advisor | 1,947 |
Other receivables and prepaid expenses | 27,704 |
Total assets | 476,509,708 |
Liabilities | |
Payable for investments purchased | 10,220,028 |
Payable for delayed delivery securities purchased | 4,016,000 |
Payable for forward foreign currency exchange contracts | 26,627 |
Payable for fund shares repurchased | 1,608,466 |
Distributions payable | 125,813 |
Payable to affiliates | |
Accounting and legal services fees | 15,829 |
Transfer agent fees | 50,207 |
Trustees’ fees | 268 |
Other liabilities and accrued expenses | 135,293 |
Total liabilities | 16,198,531 |
Net assets | $460,311,177 |
Net assets consist of | |
Paid-in capital | $450,509,119 |
Undistributed net investment income | 596,995 |
Accumulated net realized gain (loss) on investments and foreign | |
currency transactions | (661,849) |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 9,866,912 |
Net assets | $460,311,177 |
20 | Core High Yield Fund | Annual report | See notes to financial statements |
FINANCIAL STATEMENTS
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 ($313,488,914 ÷ 28,415,276 shares)1 | $11.03 |
Class C ($28,061,284 ÷ 2,544,064 shares)1 | $11.03 |
Class I ($118,760,979 ÷ 10,761,243 shares) | $11.04 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 96%)2 | $11.49 |
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 $100,000. On sales of $100,000 or more and on group sales the offering price is reduced.
See notes to financial statements | Annual report | Core High Yield 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 3-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Interest | $25,284,894 |
Total investment income | 25,284,894 |
Expenses | |
Investment management fees | 2,143,532 |
Distribution and service fees | 740,814 |
Accounting and legal services fees | 47,320 |
Transfer agent fees | 465,736 |
Trustees’ fees | 10,623 |
State registration fees | 87,797 |
Printing and postage | 37,188 |
Professional fees | 74,999 |
Custodian fees | 81,080 |
Registration and filing fees | 69,199 |
Other | 10,792 |
Total expenses | 3,769,080 |
Less expense reductions | (56,939) |
Net expenses | 3,712,141 |
Net investment income | 21,572,753 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 1,508,204 |
Foreign currency transactions | 976,221 |
2,484,425 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 2,372,490 |
Translation of assets and liabilities in foreign currencies | (33,180) |
2,339,310 | |
Net realized and unrealized gain | 4,823,735 |
Increase in net assets from operations | $26,396,488 |
22 | Core High 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 | |
3-31-14 | 3-31-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $21,572,753 | $8,062,308 |
Net realized gain | 2,484,425 | 325,206 |
Change in net unrealized appreciation (depreciation) | 2,339,310 | 6,913,390 |
Increase in net assets resulting from operations | 26,396,488 | 15,300,904 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (17,157,660) | (6,743,134) |
Class C | (609,633) | (62) |
Class I | (4,729,965) | (1,346,182) |
From net realized gain | ||
Class A | (1,434,267) | (143,623) |
Class C | (77,571) | — |
Class I | (413,673) | (29,611) |
Total distributions | (24,422,769) | (8,262,612) |
From fund share transactions | 210,110,747 | 225,072,159 |
Total increase | 212,084,466 | 232,110,451 |
Net assets | ||
Beginning of year | 248,226,711 | 16,116,260 |
End of year | $460,311,177 | $248,226,711 |
Undistributed net investment income | $596,995 | $140,962 |
See notes to financial statements | Annual report | Core High Yield 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 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $11.02 | $10.52 | $11.35 | $11.59 | $10.00 |
Net investment income2 | 0.71 | 0.74 | 1.07 | 1.16 | 0.99 |
Net realized and unrealized gain (loss) on investments | 0.10 | 0.53 | (0.25) | 0.92 | 2.21 |
Total from investment operations | 0.81 | 1.27 | 0.82 | 2.08 | 3.20 |
Less distributions | |||||
From net investment income | (0.74) | (0.76) | (1.04) | (1.20) | (0.98) |
From net realized gain | (0.06) | (0.01) | (0.61) | (1.12) | (0.63) |
Total distributions | (0.80) | (0.77) | (1.65) | (2.32) | (1.61) |
Net asset value, end of period | $11.03 | $11.02 | $10.52 | $11.35 | $11.59 |
Total return (%)3,4 | 7.62 | 12.59 | 8.12 | 19.34 | 33.755 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $313 | $208 | $16 | $17 | $17 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.15 | 1.30 | 1.68 | 1.55 | 1.366 |
Expenses net of fee waivers | 1.15 | 1.18 | 1.24 | 1.21 | 1.136 |
Net investment income | 6.45 | 6.83 | 9.82 | 9.99 | 9.826 |
Portfolio turnover (%) | 26 | 15 | 64 | 207 | 389 |
1 Period from 4-30-09 (commencement of operations) to 3-31-10.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
24 | Core High Yield Fund | Annual report | See notes to financial statements |
CLASS C SHARES Period ended | 3-31-14 | 3-31-131 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $11.02 | $11.01 | |||
Net investment income2 | 0.61 | 0.01 | |||
Net realized and unrealized gain on investments | 0.10 | —3 | |||
Total from investment operations | 0.71 | 0.01 | |||
Less distributions | |||||
From net investment income | (0.64) | — | |||
From net realized gain | (0.06) | — | |||
Total distributions | (0.70) | — | |||
Net asset value, end of period | $11.03 | $11.02 | |||
Total return (%)4,5 | 6.73 | 0.096 | |||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $28 | —7 | |||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.22 | 16.988 | |||
Expenses net of fee waivers | 1.93 | 1.938 | |||
Net investment income | 5.58 | 5.548 | |||
Portfolio turnover (%) | 26 | 159 |
1 The inception date for Class C shares is 3-27-13.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Does not reflect the effect of sales charges, if any.
5 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
6 Not annualized.
7 Less than $500,000.
8 Annualized.
9 Portfolio turnover is shown for the period from 4-1-13 to 3-31-13.
CLASS I SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 |
Per share operating performance | |||||
Net asset value, beginning of period | $11.02 | $10.52 | $11.36 | $11.59 | $10.00 |
Net investment income2 | 0.73 | 0.77 | 1.10 | 1.21 | 1.02 |
Net realized and unrealized gain (loss) on investments | 0.12 | 0.53 | (0.26) | 0.92 | 2.20 |
Total from investment operations | 0.85 | 1.30 | 0.84 | 2.13 | 3.22 |
Less distributions | |||||
From net investment income | (0.77) | (0.79) | (1.07) | (1.24) | (1.00) |
From net realized gain | (0.06) | (0.01) | (0.61) | (1.12) | (0.63) |
Total distributions | (0.83) | (0.80) | (1.68) | (2.36) | (1.63) |
Net asset value, end of period | $11.04 | $11.02 | $10.52 | $11.36 | $11.59 |
Total return (%)3 | 8.01 | 12.90 | 8.39 | 19.87 | 34.084 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $119 | $40 | —5 | —5 | —5 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.89 | 1.07 | 4.23 | 1.35 | 3.526 |
Expenses net of fee waivers and credits | 0.87 | 0.87 | 0.90 | 0.85 | 0.856 |
Net investment income | 6.71 | 7.06 | 10.17 | 10.35 | 10.106 |
Portfolio turnover (%) | 26 | 15 | 64 | 207 | 389 |
1 Period from 4-30-09 (commencement of operations) to 3-31-10.
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.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
See notes to financial statements | Annual report | Core High Yield Fund | 25 |
Notes to financial statements
Note 1 — Organization
John Hancock Core High 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 investment objective of the fund is to seek total return, consisting of a high level of current income and 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 I shares are offered to institutions and certain investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the exchange where the security was acquired or most likely will be sold. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. Debt obligations are valued based on the evaluated prices provided by an independent pricing vendor or from broker-dealers. Independent pricing vendors utilize matrix pricing which takes into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, as well as broker supplied prices. 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.
26 | Core High Yield Fund | Annual report |
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 March 31, 2014, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 3-31-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Corporate Bonds | ||||
Consumer Discretionary | $43,038,711 | — | $43,038,711 | — |
Consumer Staples | 31,977,763 | — | 31,977,763 | — |
Energy | 67,659,605 | — | 67,659,605 | — |
Financials | 52,654,726 | — | 52,654,726 | — |
Health Care | 31,257,761 | — | 31,254,341 | $3,420 |
Industrials | 37,188,463 | — | 37,188,463 | — |
Information Technology | 7,226,683 | — | 7,226,683 | — |
Materials | 49,803,802 | — | 49,803,802 | — |
Telecommunication | ||||
Services | 18,192,000 | — | 18,192,000 | — |
Utilities | 7,257,503 | — | 7,257,503 | — |
Term Loans | ||||
Consumer Discretionary | 25,310,828 | — | 25,310,828 | — |
Consumer Staples | 4,848,788 | — | 4,848,788 | — |
Energy | 10,309,155 | — | 10,309,155 | — |
Financials | 1,013,731 | — | 1,013,731 | — |
Health Care | 1,945,117 | — | 1,945,117 | — |
Industrials | 12,090,824 | — | 12,090,824 | — |
Information Technology | 6,191,250 | — | 6,191,250 | — |
Materials | 5,034,375 | — | 5,034,375 | — |
Common Stocks | ||||
Utilities | 153,531 | $153,531 | — | — |
Warrants | 3 | — | 3 | — |
Short-Term Investments | 50,190,000 | — | 50,190,000 | — |
Total Investments in | ||||
Securities | $463,344,619 | $153,531 | $463,187,668 | $3,420 |
Other Financial | ||||
Instruments | ||||
Forward Foreign | ||||
Currency Contracts | ($26,627) | — | ($26,627) | — |
Annual report | Core High Yield Fund | 27 |
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund’s custodian. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, the MRA does not result in an offset of the reported amounts of assets and liabilities in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay back claims resulting from close-out of the transactions. Collateral received by the fund for repurchase agreements is disclosed in the Fund’s investments as part of the caption related to the repurchase agreement.
Term loans (Floating rate loans). The fund may invest in term loans, which often include debt securities that are rated below investment grade at the time of purchase. Term loans are generally subject to legal or contractual restrictions on resale. The liquidity of term loans, including the volume and frequency of secondary market trading in such loans, varies significantly over time and among individual loans. During periods of infrequent trading, valuing a term loan can be more difficult and buying and selling a term loan at an acceptable price can be more difficult and delayed, which could result in a loss.
The fund’s ability to receive payments of principal, interest and other amounts in connection with term loans will depend primarily on the financial condition of the borrower. The fund’s failure to receive scheduled payments on a term loan due to a default, bankruptcy or other reason, would adversely affect the fund’s income and would likely reduce the value of its assets. Because many term loans are not rated by independent credit rating agencies, a decision to invest in a particular loan could depend exclusively on the subadvisor’s credit analysis of the borrower and/or term loan agents. The fund may have limited rights to enforce the terms of an underlying loan.
At March 31, 2014, the fund had $1,983,750 in unfunded loan commitments outstanding.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
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.
28 | Core High Yield Fund | Annual report |
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the 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 March 31, 2014 were $929. For the year ended March 31, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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.
Net capital losses of $240,051 that are the result of security transactions occurring after October 31, 2013, are treated as occurring on April 1, 2014, the first day of the fund’s next taxable year.
As of March 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are typically distributed annually.
The tax character of distributions for the years ended March 31, 2014 and 2013 was as follows:
MARCH 31, 2014 | MARCH 31, 2013 | |||
Ordinary Income | $23,544,725 | $8,178,836 | ||
Long-Term Capital Gain | 878,044 | 83,776 | ||
Total | $24,422,769 | $8,262,612 |
Annual report | Core High Yield Fund | 29 |
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 March 31, 2014, the components of distributable earnings on a tax basis consisted of $696,181 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 and amortization and accretion on debt securities.
Note 3 — Derivative Instruments
The fund may invest in derivatives in order to meet its investment objective. Derivatives include a variety of different instruments that may be traded in the OTC market, on a regulated exchange or through a clearing facility. The risks in using derivatives vary depending upon the structure of the instruments, including the use of leverage, optionality, the liquidity or lack of liquidity of the contract, the creditworthiness of the counterparty or clearing organization and the volatility of the position. Some derivatives involve risks that are potentially greater than the risks associated with investing directly in the referenced securities or other referenced underlying instrument. Specifically, the fund is exposed to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction.
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 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.
30 | Core High Yield Fund | Annual report |
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.
The fund used forward foreign currency contracts to manage against anticipated changes in currency exchange rates, gain exposure to foreign currencies, and to maintain diversity and liquidity of the portfolio. During the year ended March 31, 2014 the fund held forward foreign currency contracts with USD notional values ranging up to $15.6 million as measured at each quarter end. The following table summarizes the contracts held at March 31, 2014.
CONTRACTUAL | NET UNREALIZED | |||||
CONTRACT | CONTRACT | SETTLEMENT | UNREALIZED | UNREALIZED | APPRECIATION/ | |
TO BUY | TO SELL | COUNTERPARTY | DATE | APPRECIATION | DEPRECIATION | (DEPRECIATION) |
USD 14,436,850 | CAD 16,000,000 | Toronto Dominion Bank | 4-30-14 | — | ($26,627) | ($26,627) |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at March 31, 2014 by risk category:
ASSET | LIABILITY | |||
STATEMENT OF ASSETS AND | FINANCIAL | DERIVATIVES | DERIVATIVES | |
RISK | LIABILITIES LOCATION | INSTRUMENTS LOCATION | FAIR VALUE | FAIR VALUE |
Foreign currency | Payable for forward foreign | Forward foreign | — | ($26,627) |
contracts | currency exchange contracts | currency contracts |
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 March 31, 2014:
STATEMENT OF | FOREIGN CURRENCY | |
RISK | OPERATIONS LOCATION | TRANSACTIONS* |
Foreign currency contracts | Net realized gain (loss) on: | $1,553,985 |
*Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
Annual report | Core High Yield Fund | 31 |
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 March 31, 2014:
TRANSLATION OF ASSETS | |||
STATEMENT OF | AND LIABILITIES IN | ||
RISK | OPERATIONS LOCATION | FOREIGN CURRENCIES* | |
Foreign currency contracts | Change in unrealized | ($26,627) | |
appreciation (depreciation) of: |
*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 Trust, including 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) 0.650% of the first $250,000,000 of the fund’s average daily net assets; (b) 0.625% of the next $250,000,000 of the fund’s average daily net assets; (c) 0.600% of the next $500,000,000 of the fund’s average daily net assets; (d) 0.550% of the next $1,500,000,000 of the fund’s average daily net assets; and (e) 0.525% of the fund’s average daily net assets in excess of $2,500,000,000. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (North America) Limited, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. 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.
32 | Core High Yield Fund | Annual report |
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 1.18%, 1.93% and 0.87% for Class A shares, Class C shares and Class I shares, respectively. The fee waivers and/or reimbursements will continue in effect until 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.
The expense reductions described above amounted to $12,785, $29,670 and $14,484 for Class A, Class C and Class I shares, respectively, for the year ended March 31, 2014.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended March 31, 2014 were equivalent to a net annual effective rate of 0.63% 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 March 31, 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 and Class C 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 0.30% and 1.00% of average daily net assets for distribution and service fees of Class A and Class C, respectively. Currently only 0.25% is charged to Class A shares for distribution and service fees.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $1,632,814 for the year ended March 31, 2014. Of this amount, $202,628 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $1,378,959 was paid as sales commissions to broker-dealers and $51,227 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A 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 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 March 31, 2014, CDSCs received by the Distributor amounted to $23,659 and $14,155 for Class A 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
Annual report | Core High Yield Fund | 33 |
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.
Class level expenses. Class level expenses for the year ended March 31, 2014 were:
DISTRIBUTION | TRANSFER | PRINTING | STATE | |
CLASS | AND SERVICE FEES | AGENT FEES | EXPENSE | REGISTRATION FEES |
Class A | $637,379 | $371,522 | $29,487 | $30,190 |
Class C | 103,435 | 14,666 | 811 | 35,363 |
Class I | — | 79,548 | 6,890 | 22,244 |
Total | $740,814 | $465,736 | $37,188 | $87,797 |
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 funds 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:
WEIGHTED AVERAGE | DAYS | WEIGHTED AVERAGE | INTEREST | |
BORROWER OR LENDER | LOAN BALANCE | OUTSTANDING | INTEREST RATE | INCOME |
Lender | $13,990,700 | 5 | 0.45% | $873 |
Note 6 — Fund share transactions
Transactions in fund shares for the year ended March 31, 2014 and 2013 were as follows:
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 19,301,582 | $211,075,579 | 20,038,776 | $214,735,204 |
Distributions reinvested | 1,616,342 | 17,648,347 | 547,564 | 5,933,105 |
Repurchased | (11,401,812) | (124,433,850) | (3,207,284) | (34,338,658) |
Net increase | 9,516,112 | $104,290,076 | 17,379,056 | $186,329,651 |
34 | Core High Yield Fund | Annual report |
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class C shares1 | ||||
Sold | 2,648,097 | $28,987,094 | 9,083 | $100,000 |
Distributions reinvested | 59,918 | 654,590 | — | — |
Repurchased | (173,034) | (1,888,225) | — | — |
Net increase | 2,534,981 | $27,753,459 | 9,083 | $100,000 |
Class I shares | ||||
Sold | 8,609,064 | $94,175,596 | 4,193,044 | $44,904,753 |
Distributions reinvested | 451,962 | 4,937,845 | 126,950 | 1,375,050 |
Repurchased | (1,925,517) | (21,046,229) | (706,242) | (7,637,295) |
Net increase | 7,135,509 | $78,067,212 | 3,613,752 | $38,642,508 |
Total net increase | 19,186,602 | $210,110,747 | 21,001,891 | $225,072,159 |
1 The inception date for Class C shares is 3-27-13.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $270,451,860 and $79,939,847, respectively, for the year ended March 31, 2014.
Annual report | Core High Yield Fund | 35 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock Core High 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 Core High Yield Fund (the “Fund”) at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2014 by correspondence with the custodian, agent banks and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 15, 2014
36 | Core High 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 March 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $878,044 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 | Core High Yield Fund | 37 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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). |
38 | Core High 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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | Core High Yield Fund | 39 |
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 | 228 |
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 | 228 |
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 | 228 |
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.
40 | Core High 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 | Core High Yield Fund | 41 |
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 |
Peter S. Burgess* | a division of Manulife Asset Management |
William H. Cunningham | (North America) Limited |
Grace K. Fey | |
Theron S. Hoffman* | Principal distributor |
Deborah C. Jackson | John Hancock Funds, LLC |
Hassell H. McClellan | |
Gregory A. Russo | Custodian |
Warren A. Thomson† | State Street Bank and Trust Company |
Officers | Transfer agent |
Andrew G. Arnott# | John Hancock Signature Services, Inc. |
President | |
Legal counsel | |
Thomas M. Kinzler | K&L Gates LLP |
Secretary and Chief Legal Officer | |
Independent registered | |
Francis V. Knox, Jr. | public accounting firm |
Chief Compliance Officer | PricewaterhouseCoopers LLP |
Hugh McHaffie** | |
President | |
Charles A. Rizzo | |
Chief Financial Officer | |
Salvatore Schiavone | |
Treasurer | |
*Member of the Audit Committee | |
†Non-Independent Trustee | |
#Effective 3-13-14 | |
**Until 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 |
42 | Core High Yield Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/corehighyieldx39x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/corehighyieldx39x2.jpg)
This report is for the information of the shareholders of John Hancock Core High Yield Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 346A 3/14 |
MF181846 | 5/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/smallcompanyx1x1.jpg)
A look at performance
Total returns for the period ended March 31, 2014
Average annual total returns (%) | Cumulative total returns (%) | ||||||
with maximum sales charge | with maximum sales charge | ||||||
1-year | 5-year | 10-year | 1-year | 5-year | 10-year | ||
Class A1 | 15.19 | 20.00 | 8.14 | 15.19 | 148.85 | 118.73 | |
Class I1,2 | 21.61 | 21.64 | 9.08 | 21.61 | 166.29 | 138.54 | |
Class R11,2 | 20.84 | 20.79 | 8.27 | 20.84 | 157.17 | 121.28 | |
Class R21,2 | 21.12 | 20.11 | 7.38 | 21.12 | 149.98 | 103.83 | |
Class R31,2 | 20.90 | 20.90 | 8.37 | 20.90 | 158.34 | 123.39 | |
Class R41,2 | 21.41 | 21.31 | 8.72 | 21.41 | 162.76 | 130.63 | |
Class R51,2 | 21.65 | 21.63 | 9.02 | 21.65 | 166.23 | 137.19 | |
Class R61,2 | 21.75 | 21.73 | 9.13 | 21.75 | 167.25 | 139.52 | |
Class ADV1,2 | 21.37 | 21.30 | 8.62 | 21.37 | 162.66 | 128.59 | |
Index† | 24.90 | 24.31 | 8.53 | 24.90 | 196.87 | 126.78 | |
Performance figures assume all distributions are reinvested. Figures reflect maximum sales charge on Class A shares of 5%. Sales charges are not applicable to Class I, Class R1, Class R2, Class R3, Class R4, Class R5, Class R6, and Class ADV shares.
The expense ratios of the fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers or expense limitations are contractual at least until 6-30-14 for Class A, Class I, Class R1, Class R2, Class R3, Class R4, Class R5, and Class ADV shares and until 6-30-15 for Class R6 shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class I | Class R1 | Class R2 | Class R3 | Class R4* | Class R5 | Class R6 | Class ADV | |||
Net (%) | 1.50 | 1.14 | 1.80 | 1.55 | 1.70 | 1.30 | 1.10 | 1.02 | 1.34 | ||
Gross (%) | 1.54 | 1.18 | 4.45 | 20.47 | 5.15 | 18.86 | 7.81 | 18.63 | 4.91 |
* The fund’s distributor has contractually agreed to waive 0.10% of Rule 12b-1 fees for Class R4 shares. The current waiver agreement expires on 6-30-15.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For performance data current to the most recent month end, 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 would increase and results would have been less favorable.
† Index is the Russell 2000 Index.
See the following page for footnotes.
6 | Small Company Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/smallcompanyx3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class I2 | 3-31-04 | $23,854 | $23,854 | $22,678 |
Class R12 | 3-31-04 | 22,128 | 22,128 | 22,678 |
Class R22 | 3-31-04 | 20,383 | 20,383 | 22,678 |
Class R32 | 3-31-04 | 22,339 | 22,339 | 22,678 |
Class R42 | 3-31-04 | 23,063 | 23,063 | 22,678 |
Class R52 | 3-31-04 | 23,719 | 23,719 | 22,678 |
Class R62 | 3-31-04 | 23,952 | 23,952 | 22,678 |
Class ADV2 | 3-31-04 | 22,859 | 22,859 | 22,678 |
Russell 2000 Index is an index that measures performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of total market capitalization of the Russell 3000 Index.
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 On 12-11-09, through a reorganization, the fund acquired all of the assets of the FMA Small Company Portfolio (the predecessor fund). On that date, the predecessor fund offered its investor share class in exchange for Class A shares and the institutional share class in exchange for Class I shares. Class A, Class I, and Class ADV shares were first offered on 12-14-09. The returns of Class A and Class ADV shares prior to this date are those of the predecessor fund’s investor shares that have been recalculated to apply the gross fees and expenses of Class A and Class ADV shares, as applicable. The predecessor fund’s institutional share class returns have been recalculated to reflect the gross fees and expenses of Class I shares. The returns of Class I shares prior to 5-1-08 are those of the predecessor fund’s investor shares that have been recalculated to apply the gross fees and expenses of Class I shares. Class R1, Class R3, Class R4, and Class R5 shares were first offered on 4-30-10; 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 recalculated to apply the gross fees and expenses of Class R1, Class R3, Class R4, Class R5, Class R6, and Class R2 shares, as applicable.
2 For certain types of investors, as described in the fund’s prospectuses.
Annual report | Small Company Fund | 7 |
Management’s discussion of
Fund performance
By Fiduciary Management Associates, LLC
The U.S. stock market performed very well during the 12 months ended March 31, 2014. During the period, the U.S. economy continued to generate solid if unspectacular growth, while the employment picture gradually improved. Within the marketplace, stock prices accelerated rapidly, with growth stocks significantly outpacing their value counterparts, despite a late-period reversal of this trend.
For the 12-month period ended March 31, 2014, John Hancock Small Company Fund’s Class A shares had a total return of 21.26%, excluding sales charges, lagging the 24.90% return of its benchmark, the Russell 2000 Index.
A major factor contributing to the fund’s relative underperformance was not owning various strong-performing biotechnology and pharmaceutical stocks found in the benchmark. The fund was also hampered by its modest overweighting in struggling real estate investment trusts. Individual detractors included Halcon Resources Corp., an energy exploration and production company; OSI Systems, Inc., a manufacturer of security and inspection systems; and Ixia, a telecommunications equipment company. We sold these three stocks from the fund’s portfolio. Also, the fund maintained a modest cash allocation, which hurt relative performance in a rising market.
Conversely, the fund’s performance was supported by stocks that were positioned to benefit from continued economic improvement, including industrials sector holdings such as Curtiss-Wright Corp., a diversified manufacturer with interests in the aerospace and energy industries, and H&E Equipment Services, Inc., a provider of used and rental construction equipment. The fund’s technology holdings also helped, led by InvenSense Inc., a maker of motion-sensing products for mobile devices, and Tangoe, Inc., a provider of telecommunication management software and services. We sold the position in Tangoe prior to period end, as we believed it was fully valued. In the consumer discretionary sector, a significant contributor was Gentherm Inc., a maker of heated seats and other thermal-related products for automobiles.
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 | Small Company 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 October 1, 2013, with the same investment held until March 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,099.90 | $7.59 | 1.45% |
Class I | 1,000.00 | 1,101.50 | 5.97 | 1.14% |
Class R1 | 1,000.00 | 1,098.00 | 9.42 | 1.80% |
Class R2 | 1,000.00 | 1,099.50 | 8.11 | 1.55% |
Class R3 | 1,000.00 | 1,098.40 | 8.89 | 1.70% |
Class R4 | 1,000.00 | 1,100.70 | 6.81 | 1.30% |
Class R5 | 1,000.00 | 1,101.80 | 5.76 | 1.10% |
Class R6 | 1,000.00 | 1,102.10 | 5.45 | 1.04% |
Class ADV | 1,000.00 | 1,100.30 | 7.02 | 1.34% |
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 March 31, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Annual report | Small Company Fund | 9 |
Your expenses
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/smallcompanyx6x1.jpg)
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 October 1, 2013, with the same investment held until March 31, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,017.70 | $7.29 | 1.45% |
Class I | 1,000.00 | 1,019.20 | 5.74 | 1.14% |
Class R1 | 1,000.00 | 1,016.00 | 9.05 | 1.80% |
Class R2 | 1,000.00 | 1,017.20 | 7.80 | 1.55% |
Class R3 | 1,000.00 | 1,016.50 | 8.55 | 1.70% |
Class R4 | 1,000.00 | 1,018.40 | 6.54 | 1.30% |
Class R5 | 1,000.00 | 1,019.40 | 5.54 | 1.10% |
Class R6 | 1,000.00 | 1,019.70 | 5.24 | 1.04% |
Class ADV | 1,000.00 | 1,018.40 | 6.74 | 1.34% |
Remember, these examples do not include any transaction costs; therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectuses for details regarding transaction costs.
1 Expenses are equal to the fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
10 | Small Company Fund | Annual report |
Portfolio summary
Top 10 Holdings (15.6% of Net Assets on 3-31-14)1,2 | ||||
Verint Systems, Inc. | 1.7% | MasTec, Inc. | 1.5% | |
Iberiabank Corp. | 1.7% | Wintrust Financial Corp. | 1.5% | |
Gentherm, Inc. | 1.6% | PNM Resources, Inc. | 1.5% | |
ALLETE, Inc. | 1.6% | Webster Financial Corp. | 1.5% | |
UIL Holdings Corp. | 1.5% | Fulton Financial Corp. | 1.5% | |
Sector Composition1,3 | ||||
Financials | 24.0% | Utilities | 4.6% | |
Information Technology | 19.6% | Materials | 2.6% | |
Industrials | 16.9% | Consumer Staples | 1.0% | |
Consumer Discretionary | 11.5% | Exchange-Traded Funds | 1.0% | |
Health Care | 10.4% | Short-Term Investments & Other | 3.0% | |
Energy | 5.4% | |||
1 As a percentage of net assets on 3-31-14.
2 Excludes cash and cash equivalents.
3 The stock prices of midsize and small companies can change more frequently and dramatically than those of large companies. Value stocks may decline in price. Frequent trading may increase fund transaction costs. Sector investing is subject to greater risks than the market as a whole. Because the fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors and investments focused in one sector may fluctuate more widely than investments diversified across sectors. Please see the fund’s prospectuses for additional risks.
Annual report | Small Company Fund | 11 |
Fund’s investments
As of 3-31-14
Shares | Value | |
Common Stocks 96.0% | $207,107,796 | |
(Cost $172,770,626) | ||
Consumer Discretionary 11.5% | 24,799,895 | |
Auto Components 3.0% | ||
Dorman Products, Inc. (I) | 53,290 | 3,147,307 |
Gentherm, Inc. (I) | 98,100 | 3,406,032 |
Distributors 1.4% | ||
Pool Corp. | 47,810 | 2,931,709 |
Hotels, Restaurants & Leisure 2.3% | ||
Popeyes Louisiana Kitchen, Inc. (I) | 63,190 | 2,568,042 |
Vail Resorts, Inc. | 33,590 | 2,341,223 |
Household Durables 1.0% | ||
Meritage Homes Corp. (I) | 52,150 | 2,184,042 |
Media 1.2% | ||
Meredith Corp. | 57,200 | 2,655,796 |
Textiles, Apparel & Luxury Goods 2.6% | ||
G-III Apparel Group, Ltd. (I) | 38,340 | 2,744,377 |
Movado Group, Inc. | 61,940 | 2,821,367 |
Consumer Staples 1.0% | 2,189,799 | |
Food Products 1.0% | ||
Snyders-Lance, Inc. | 77,680 | 2,189,799 |
Energy 5.4% | 11,711,003 | |
Energy Equipment & Services 3.3% | ||
Bristow Group, Inc. | 33,040 | 2,495,181 |
Forum Energy Technologies, Inc. (I) | 80,990 | 2,509,070 |
Helix Energy Solutions Group, Inc. (I) | 92,932 | 2,135,577 |
Oil, Gas & Consumable Fuels 2.1% | ||
PDC Energy, Inc. (I) | 39,290 | 2,446,195 |
Rosetta Resources, Inc. (I) | 45,620 | 2,124,980 |
Financials 24.0% | 51,713,900 | |
Banks 10.1% | ||
BBCN Bancorp, Inc. | 73,430 | 1,258,590 |
Columbia Banking System, Inc. | 100,020 | 2,852,570 |
Fulton Financial Corp. | 255,620 | 3,215,700 |
Iberiabank Corp. | 51,080 | 3,583,260 |
TCF Financial Corp. | 129,970 | 2,165,300 |
12 | Small Company Fund | Annual report | See notes to financial statements |
Shares | Value | |
Banks (continued) | ||
Texas Capital Bancshares, Inc. (I) | 34,772 | $2,258,094 |
Webster Financial Corp. | 103,980 | 3,229,619 |
Wintrust Financial Corp. | 67,710 | 3,294,769 |
Capital Markets 2.0% | ||
Evercore Partners, Inc., Class A | 37,640 | 2,079,610 |
Stifel Financial Corp. (I) | 43,390 | 2,159,086 |
Insurance 2.9% | ||
StanCorp Financial Group, Inc. | 45,900 | 3,066,120 |
The Hanover Insurance Group, Inc. | 50,740 | 3,117,466 |
Real Estate Investment Trusts 6.5% | ||
Associated Estates Realty Corp. | 128,430 | 2,175,604 |
Brandywine Realty Trust | 213,340 | 3,084,896 |
DiamondRock Hospitality Company | 254,140 | 2,986,145 |
DuPont Fabros Technology, Inc. | 116,480 | 2,803,674 |
Medical Properties Trust, Inc. | 227,370 | 2,908,062 |
Thrifts & Mortgage Finance 2.5% | ||
Capitol Federal Financial, Inc. | 251,590 | 3,157,455 |
EverBank Financial Corp. | 117,480 | 2,317,880 |
Health Care 10.4% | 22,476,984 | |
Health Care Equipment & Supplies 3.5% | ||
Analogic Corp. | 26,860 | 2,205,475 |
Globus Medical, Inc., Class A (I) | 105,950 | 2,817,211 |
Masimo Corp. (I) | 92,320 | 2,521,259 |
Health Care Providers & Services 3.4% | ||
Amsurg Corp. (I) | 58,639 | 2,760,724 |
Health Net, Inc. (I) | 64,190 | 2,183,102 |
Team Health Holdings, Inc. (I) | 55,590 | 2,487,653 |
Life Sciences Tools & Services 1.4% | ||
Charles River Laboratories International, Inc. (I) | 49,640 | 2,995,278 |
Pharmaceuticals 2.1% | ||
Akorn, Inc. (I) | 112,181 | 2,467,982 |
Prestige Brands Holdings, Inc. (I) | 74,800 | 2,038,300 |
Industrials 16.9% | 36,399,867 | |
Aerospace & Defense 3.9% | ||
Curtiss-Wright Corp. | 41,520 | 2,638,181 |
Esterline Technologies Corp. (I) | 27,160 | 2,893,626 |
Orbital Sciences Corp. (I) | 103,320 | 2,882,628 |
Building Products 1.1% | ||
Apogee Enterprises, Inc. | 71,480 | 2,375,280 |
Construction & Engineering 1.5% | ||
MasTec, Inc. (I) | 76,660 | 3,330,110 |
Electrical Equipment 1.4% | ||
EnerSys, Inc. | 43,260 | 2,997,485 |
See notes to financial statements | Annual report | Small Company Fund | 13 |
Shares | Value | |
Machinery 3.1% | ||
Chart Industries, Inc. (I) | 28,360 | $2,256,038 |
Rexnord Corp. (I) | 77,100 | 2,234,358 |
TriMas Corp. (I) | 66,270 | 2,200,164 |
Professional Services 2.2% | ||
Korn/Ferry International (I) | 82,510 | 2,456,323 |
On Assignment, Inc. (I) | 58,720 | 2,266,005 |
Road & Rail 1.1% | ||
Swift Transportation Company (I) | 92,730 | 2,295,068 |
Trading Companies & Distributors 2.6% | ||
H&E Equipment Services, Inc. (I) | 58,430 | 2,363,494 |
Watsco, Inc. | 32,140 | 3,211,107 |
Information Technology 19.6% | 42,285,029 | |
Electronic Equipment, Instruments & Components 6.6% | ||
Belden, Inc. | 34,070 | 2,371,272 |
Cognex Corp. (I) | 64,340 | 2,178,552 |
InvenSense, Inc. (I) | 91,640 | 2,169,119 |
Knowles Corp. (I) | 81,340 | 2,567,904 |
Littelfuse, Inc. | 25,770 | 2,413,103 |
Zebra Technologies Corp., Class A (I) | 36,860 | 2,558,453 |
Internet Software & Services 1.0% | ||
Web.com Group, Inc. (I) | 64,140 | 2,182,684 |
IT Services 3.1% | ||
CACI International, Inc., Class A (I) | 28,630 | 2,112,894 |
Cardtronics, Inc. (I) | 75,850 | 2,946,773 |
EPAM Systems, Inc. (I) | 47,230 | 1,553,867 |
Semiconductors & Semiconductor Equipment 2.5% | ||
Entegris, Inc. (I) | 215,700 | 2,612,127 |
International Rectifier Corp. (I) | 100,880 | 2,764,112 |
Software 5.1% | ||
ACI Worldwide, Inc. (I) | 41,820 | 2,475,326 |
BroadSoft, Inc. (I) | 81,820 | 2,187,049 |
Mentor Graphics Corp. | 124,190 | 2,734,664 |
Verint Systems, Inc. (I) | 77,180 | 3,622,057 |
Technology Hardware, Storage & Peripherals 1.3% | ||
Electronics for Imaging, Inc. (I) | 65,460 | 2,835,073 |
Materials 2.6% | 5,572,645 | |
Chemicals 2.0% | ||
PolyOne Corp. | 57,010 | 2,089,987 |
Sensient Technologies Corp. | 39,170 | 2,209,580 |
Metals & Mining 0.6% | ||
Commercial Metals Company | 67,430 | 1,273,078 |
14 | Small Company Fund | Annual report | See notes to financial statements |
Shares | Value | ||
Utilities 4.6% | $9,958,674 | ||
Electric Utilities 4.6% | |||
ALLETE, Inc. | 64,560 | 3,384,235 | |
PNM Resources, Inc. | 120,010 | 3,243,870 | |
UIL Holdings Corp. | 90,480 | 3,330,569 | |
Exchange-Traded Funds 1.0% | $2,138,118 | ||
(Cost $1,488,996) | |||
iShares Russell Microcap Index Fund | 27,660 | 2,138,118 | |
Yield (%) | Shares | Value | |
Short-Term Investments 3.7% | $8,096,402 | ||
(Cost $8,096,402) | |||
Money Market Funds 3.7% | 8,096,402 | ||
State Street Institutional Liquid Reserves Fund | 0.0774% (Y) | 8,096,402 | 8,096,402 |
Total investments (Cost $182,356,024)† 100.7% | $217,342,316 | ||
Other assets and liabilities, net (0.7%) | ($1,591,470) | ||
Total net assets 100.0% | $215,750,846 | ||
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.
(Y) The rate shown is the annualized seven-day yield as of 3-31-14.
† At 3-31-14, the aggregate cost of investment securities for federal income tax purposes was $182,756,354. Net unrealized appreciation aggregated $34,585,962, of which $37,078,396 related to appreciated investment securities and $2,492,434 related to depreciated investment securities.
See notes to financial statements | Annual report | Small Company 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 3-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
Investments, at value (Cost $182,356,024) | $217,342,316 |
Receivable for investments sold | 1,081,043 |
Receivable for fund shares sold | 496,916 |
Dividends and interest receivable | 175,232 |
Receivable due from advisor | 3,550 |
Other receivables and prepaid expenses | 69,908 |
Total assets | 219,168,965 |
Liabilities | |
Payable for investments purchased | 2,979,096 |
Payable for fund shares repurchased | 333,118 |
Payable to affiliates | |
Accounting and legal services fees | 9,644 |
Transfer agent fees | 23,950 |
Distribution and service fees | 671 |
Trustees’ fees | 111 |
Other liabilities and accrued expenses | 71,529 |
Total liabilities | 3,418,119 |
Net assets | $215,750,846 |
Net assets consist of | |
Paid-in capital | $170,601,580 |
Accumulated net investment loss | (339,231) |
Accumulated net realized gain (loss) on investments | 10,502,205 |
Net unrealized appreciation (depreciation) on investments | 34,986,292 |
Net assets | $215,750,846 |
16 | Small Company 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 ($162,367,666 ÷ 5,664,254 shares)1 | $28.67 |
Class I ($49,908,051 ÷ 1,719,592 shares) | $29.02 |
Class R1 ($1,374,945 ÷ 48,603 shares) | $28.29 |
Class R2 ($399,803 ÷ 13,896 shares) | $28.77 |
Class R3 ($172,106 ÷ 6,062 shares) | $28.39 |
Class R4 ($89,486 ÷ 3,108 shares) | $28.79 |
Class R5 ($322,597 ÷ 11,111 shares) | $29.03 |
Class R6 ($536,453 ÷ 18,445 shares) | $29.08 |
Class ADV ($579,739 ÷ 20,143 shares) | $28.78 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $30.18 |
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 | Small Company 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 3-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $1,885,438 |
Interest | 4,907 |
Total investment income | 1,890,345 |
Expenses | |
Investment management fees | 1,717,956 |
Distribution and service fees | 431,251 |
Accounting and legal services fees | 33,762 |
Transfer agent fees | 260,062 |
Trustees’ fees | 6,613 |
State registration fees | 148,243 |
Printing and postage | 31,730 |
Professional fees | 52,874 |
Custodian fees | 23,348 |
Registration and filing fees | 44,130 |
Other | 12,377 |
Total expenses | 2,762,346 |
Less expense reductions | (120,657) |
Net expenses | 2,641,689 |
Net investment loss | (751,344) |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 30,397,868 |
Realized gain on investments not meeting investment restrictions | 8,128 |
30,405,996 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 7,354,143 |
7,354,143 | |
Net realized and unrealized gain | 37,760,139 |
Increase in net assets from operations | $37,008,795 |
18 | Small Company 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 | |
3-31-14 | 3-31-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment loss | ($751,344) | ($404,857) |
Net realized gain | 30,405,996 | 19,083,415 |
Change in net unrealized appreciation (depreciation) | 7,354,143 | 3,577,682 |
Increase in net assets resulting from operations | 37,008,795 | 22,256,240 |
Distributions to shareholders | ||
From net realized gain | ||
Class A | (2,829,841) | — |
Class I | (906,306) | — |
Class R1 | (24,020) | — |
Class R2 | (5,689) | — |
Class R3 | (2,815) | — |
Class R4 | (1,609) | — |
Class R5 | (5,888) | — |
Class R6 | (7,401) | — |
Class ADV | (10,404) | — |
Total distributions | (3,793,973) | — |
From fund share transactions | 10,957,047 | (49,470,021) |
Total increase (decrease) | 44,171,869 | (27,213,781) |
Net assets | ||
Beginning of year | 171,578,977 | 198,792,758 |
End of year | $215,750,846 | $171,578,977 |
Accumulated net investment loss | ($339,231) | ($8,270) |
See notes to financial statements | Annual report | Small Company 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 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101,2 | 10-31-09 |
Per share operating performance | ||||||
Net asset value, beginning of period | $24.10 | $20.86 | $21.44 | $17.82 | $14.68 | $13.83 |
Net investment income (loss)3 | (0.13) | (0.07) | (0.01) | (0.03) | (0.02) | —4 |
Net realized and unrealized gain (loss) | ||||||
on investments | 5.23 | 3.31 | (0.57) | 3.62 | 3.18 | 0.87 |
Total from investment operations | 5.10 | 3.24 | (0.58) | 3.59 | 3.16 | 0.87 |
Less distributions | ||||||
From net investment income | — | — | — | — | (0.02) | (0.02) |
From net realized gain | (0.53) | — | — | — | — | — |
Total distributions | (0.53) | — | — | — | (0.02) | (0.02) |
Non-recurring reimbursement | — | — | — | 0.035 | — | — |
Net asset value, end of period | $28.67 | $24.10 | $20.86 | $21.44 | $17.82 | $14.68 |
Total return (%)6,7 | 21.26 | 15.53 | (2.71) | 20.31 | 21.518 | 6.34 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $162 | $120 | $129 | $88 | $92 | $87 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.47 | 1.54 | 1.54 | 1.49 | 1.669 | 1.42 |
Expenses net of fee waivers | 1.47 | 1.50 | 1.44 | 1.34 | 1.399 | 1.39 |
Net investment loss | (0.47) | (0.36) | (0.07) | (0.17) | (0.23)9 | (0.01) |
Portfolio turnover (%) | 85 | 97 | 133 | 159 | 4210 | 155 |
1 For the five month period ended 3-31-10. The fund changed its fiscal year end from October 31 to March 31.
2 After the close of business on 12-11-09, holders of Investor Shares of the former FMA Small Company Portfolio (the
predecessor fund) became owners of an equal number of full and fractional Class A shares of John Hancock Small
Company Fund. These shares were first offered on 12-14-09. Additionally, the accounting and performance history
of the Investor Shares of the predecessor fund was redesignated as that of John Hancock Small Company Fund
Class A.
3 Based on the average daily shares outstanding.
4 Less than $0.005 per share.
5 Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P.,
Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03
per share.
6 Does not reflect the effect of sales charges, if any.
7 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
8 Not annualized.
9 Annualized.
10 Portfolio turnover is shown for the period from 11-1-09 to 3-31-10.
20 | Small Company Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101,2 | 10-31-09 |
Per share operating performance | ||||||
Net asset value, beginning of period | $24.32 | $20.96 | $21.51 | $17.84 | $14.71 | $13.84 |
Net investment income3 | (0.04) | —4 | 0.07 | 0.02 | —4 | 0.03 |
Net realized and unrealized gain (loss) | ||||||
on investments | 5.27 | 3.36 | (0.58) | 3.62 | 3.18 | 0.87 |
Total from investment operations | 5.23 | 3.36 | (0.51) | 3.64 | 3.18 | 0.90 |
Less distributions | ||||||
From net investment income | — | — | (0.04) | — | (0.05) | (0.03) |
From net realized gain | (0.53) | — | — | — | — | — |
Total distributions | (0.53) | — | (0.04) | — | (0.05) | (0.03) |
Non-recurring reimbursement | — | — | — | 0.035 | — | — |
Net asset value, end of period | $29.02 | $24.32 | $20.96 | $21.51 | $17.84 | $14.71 |
Total return (%)6 | 21.61 | 16.03 | (2.34) | 20.57 | 21.677 | 6.56 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $50 | $49 | $69 | $67 | $36 | $23 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.15 | 1.18 | 1.16 | 1.12 | 1.188 | 1.17 |
Expenses net of fee waivers | 1.14 | 1.11 | 1.04 | 1.11 | 1.148 | 1.14 |
Net investment income (loss) | (0.15) | 0.02 | 0.34 | 0.09 | 0.018 | 0.24 |
Portfolio turnover (%) | 85 | 97 | 133 | 159 | 429 | 155 |
1 For the five month period ended 3-31-10. The fund changed its fiscal year end from October 31 to March 31.
2 After the close of business on 12-11-09, holders of Institutional Shares of the former FMA Small Company Portfolio
(the predecessor fund) became owners of an equal number of full and fractional Class I shares of John Hancock
Small Company Fund. These shares were first offered on 12-14-09. Additionally, the accounting and performance
history of the Institutional Shares of the predecessor fund was redesignated as that of John Hancock Small Company
Fund Class I.
3 Based on the average daily shares outstanding.
4 Less than $0.005 per share.
5 Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P.,
Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03
per share.
6 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
7 Not annualized.
8 Annualized.
9 Portfolio turnover is shown for the period from 11-1-09 to 3-31-10.
See notes to financial statements | Annual report | Small Company Fund | 21 |
CLASS R1 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | ||
Per share operating performance | ||||||
Net asset value, beginning of period | $23.87 | $20.71 | $21.37 | $19.38 | ||
Net investment loss2 | (0.21) | (0.13) | (0.08) | (0.07) | ||
Net realized and unrealized gain (loss) on investments | 5.16 | 3.29 | (0.58) | 2.03 | ||
Total from investment operations | 4.95 | 3.16 | (0.66) | 1.96 | ||
Less distributions | ||||||
From net realized gain | (0.53) | — | — | — | ||
Total distributions | (0.53) | — | — | — | ||
Non-recurring reimbursement | — | — | — | 0.033 | ||
Net asset value, end of period | $28.29 | $23.87 | $20.71 | $21.37 | ||
Total return (%)4 | 20.84 | 15.26 | (3.09) | 10.275 | ||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $1 | $1 | —6 | —6 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 2.94 | 4.37 | 13.34 | 7.227 | ||
Expenses net of fee waivers | 1.80 | 1.80 | 1.80 | 1.807 | ||
Net investment loss | (0.82) | (0.60) | (0.40) | (0.42)7 | ||
Portfolio turnover (%) | 85 | 97 | 133 | 1598 |
1 The inception date for Class R1 shares is 4-30-10.
2 Based on the average daily shares outstanding.
3 Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P.,
Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03
per share.
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 4-1-10 to 3-31-11.
CLASS R2 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | |||
Per share operating performance | ||||||
Net asset value, beginning of period | $24.21 | $20.96 | $20.56 | |||
Net investment income (loss)2 | (0.14) | (0.08) | 0.02 | |||
Net realized and unrealized gain on investments | 5.23 | 3.33 | 0.38 | |||
Total from investment operations | 5.09 | 3.25 | 0.40 | |||
Less distributions | ||||||
From net realized gain | (0.53) | — | — | |||
Total distributions | (0.53) | — | — | |||
Net asset value, end of period | $28.77 | $24.21 | $20.96 | |||
Total return (%)3 | 21.12 | 15.51 | 1.954 | |||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | —5 | —5 | —5 | |||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 7.99 | 20.22 | 16.316 | |||
Expenses net of fee waivers | 1.55 | 1.55 | 1.556 | |||
Net investment income (loss) | (0.54) | (0.39) | 1.316 | |||
Portfolio turnover (%) | 85 | 97 | 1337 |
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.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
22 | Small Company Fund | Annual report | See notes to financial statements |
CLASS R3 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | ||
Per share operating performance | ||||||
Net asset value, beginning of period | $23.94 | $20.76 | $21.39 | $19.38 | ||
Net investment loss2 | (0.19) | (0.12) | (0.06) | (0.10) | ||
Net realized and unrealized gain (loss) on investments | 5.17 | 3.30 | (0.57) | 2.08 | ||
Total from investment operations | 4.98 | 3.18 | (0.63) | 1.98 | ||
Less distributions | ||||||
From net investment income | — | — | — | — | ||
From net realized gain | (0.53) | — | — | — | ||
Total distributions | (0.53) | — | — | — | ||
Non-recurring reimbursement | — | — | — | 0.033 | ||
Net asset value, end of period | $28.39 | $23.94 | $20.76 | $21.39 | ||
Total return (%)4 | 20.90 | 15.32 | (2.95) | 10.375 | ||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | —6 | —6 | —6 | —6 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 10.89 | 5.15 | 4.65 | 3.007 | ||
Expenses net of fee waivers | 1.70 | 1.70 | 1.70 | 1.707 | ||
Net investment loss | (0.75) | (0.56) | (0.32) | (0.52)7 | ||
Portfolio turnover (%) | 85 | 97 | 133 | 1598 |
1 The inception date for Class R3 shares is 4-30-10.
2 Based on the average daily shares outstanding.
3 Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P.,
Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03
per share.
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 4-1-10 to 3-31-11.
CLASS R4 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | ||
Per share operating performance | ||||||
Net asset value, beginning of period | $24.17 | $20.87 | $21.44 | $19.38 | ||
Net investment loss2 | (0.08) | (0.03) | (0.01) | (0.03) | ||
Net realized and unrealized gain (loss) on investments | 5.23 | 3.33 | (0.56) | 2.06 | ||
Total from investment operations | 5.15 | 3.30 | (0.57) | 2.03 | ||
Less distributions | ||||||
From net realized gain | (0.53) | — | — | — | ||
Total distributions | (0.53) | — | — | — | ||
Non-recurring reimbursement | — | — | — | 0.033 | ||
Net asset value, end of period | $28.79 | $24.17 | $20.87 | $21.44 | ||
Total return (%)4 | 21.41 | 15.81 | (2.66) | 10.635 | ||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | —6 | —6 | —6 | —6 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 18.99 | 18.82 | 28.72 | 7.407 | ||
Expenses net of fee waivers | 1.30 | 1.31 | 1.40 | 1.407 | ||
Net investment loss | (0.31) | (0.17) | (0.03) | (0.16)7 | ||
Portfolio turnover (%) | 85 | 97 | 133 | 1598 |
1 The inception date for Class R4 shares is 4-30-10.
2 Based on the average daily shares outstanding.
3 Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P.,
Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03
per share.
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 4-1-10 to 3-31-11.
See notes to financial statements | Annual report | Small Company Fund | 23 |
CLASS R5 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | ||
Per share operating performance | ||||||
Net asset value, beginning of period | $24.32 | $20.96 | $21.50 | $19.38 | ||
Net investment income2 | (0.03) | 0.01 | 0.05 | 0.01 | ||
Net realized and unrealized gain (loss) on investments | 5.27 | 3.35 | (0.56) | 2.08 | ||
Total from investment operations | 5.24 | 3.36 | (0.51) | 2.09 | ||
Less distributions | ||||||
From net investment income | — | — | (0.03) | — | ||
From net realized gain | (0.53) | — | — | — | ||
Total distributions | (0.53) | — | (0.03) | — | ||
Non-recurring reimbursement | — | — | — | 0.033 | ||
Net asset value, end of period | $29.03 | $24.32 | $20.96 | $21.50 | ||
Total return (%)4 | 21.65 | 16.03 | (2.34) | 10.945 | ||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | —6 | —6 | —6 | —6 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 6.05 | 7.78 | 8.75 | 3.667 | ||
Expenses net of fee waivers | 1.10 | 1.10 | 1.10 | 1.107 | ||
Net investment income | (0.11) | 0.05 | 0.28 | 0.057 | ||
Portfolio turnover (%) | 85 | 97 | 133 | 1598 |
1 The inception date for Class R5 shares is 4-30-10.
2 Based on the average daily shares outstanding.
3 Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P.,
Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03
per share.
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 4-1-10 to 3-31-11.
CLASS R6 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | |||
Per share operating performance | ||||||
Net asset value, beginning of period | $24.34 | $20.97 | $18.69 | |||
Net investment income2 | (0.02) | 0.02 | 0.06 | |||
Net realized and unrealized gain on investments | 5.29 | 3.35 | 2.26 | |||
Total from investment operations | 5.27 | 3.37 | 2.32 | |||
Less distributions | ||||||
From net investment income | — | — | (0.04) | |||
From net realized gain | (0.53) | — | — | |||
Total distributions | (0.53) | — | (0.04) | |||
Net asset value, end of period | $29.08 | $24.34 | $20.97 | |||
Total return (%)3 | 21.75 | 16.07 | 12.454 | |||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $1 | —5 | —5 | |||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 7.66 | 18.63 | 15.466 | |||
Expenses net of fee waivers | 1.04 | 1.04 | 1.046 | |||
Net investment income | (0.06) | 0.11 | 0.556 | |||
Portfolio turnover (%) | 85 | 97 | 1337 |
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.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
24 | Small Company Fund | Annual report | See notes to financial statements |
CLASS ADV SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-101 | |
Per share operating performance | ||||||
Net asset value, beginning of period | $24.17 | $20.88 | $21.44 | $17.82 | $15.71 | |
Net investment income (loss)2 | (0.09) | (0.04) | 0.01 | (0.01) | (0.01) | |
Net realized and unrealized gain (loss) on investments | 5.23 | 3.33 | (0.57) | 3.60 | 2.12 | |
Total from investment operations | 5.14 | 3.29 | (0.56) | 3.59 | 2.11 | |
Less distributions | ||||||
From net realized gain | (0.53) | — | — | — | — | |
Total distributions | (0.53) | — | — | — | — | |
Non-recurring reimbursement | — | — | — | 0.033 | — | |
Net asset value, end of year | $28.78 | $24.17 | $20.88 | $21.44 | $17.82 | |
Total return (%)4 | 21.37 | 15.76 | (2.61) | 20.31 | 13.435 | |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $1 | —6 | $1 | $1 | —6 | |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 4.51 | 4.91 | 4.34 | 4.99 | 2.767 | |
Expenses net of fee waivers | 1.34 | 1.34 | 1.34 | 1.34 | 1.337 | |
Net investment income (loss) | (0.35) | (0.20) | 0.03 | (0.07) | (0.17)7 | |
Portfolio turnover (%) | 85 | 97 | 133 | 159 | 428 |
1 The inception date for Class ADV shares is 12-14-09.
2 Based on the average daily shares outstanding.
3 Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P.,
Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03
per share.
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 11-1-09 to 3-31-10.
See notes to financial statements | Annual report | Small Company Fund | 25 |
Notes to financial statements
Note 1 — Organization
John Hancock Small Company 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 maximum long-term 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 shares are offered to all 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 ADV shares are available to investors who acquired Class A as a result of the reorganization of the FMA Small Company Portfolio into the fund and are closed to new investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage, and state registration fees for each class may differ.
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, including exchange-traded funds, 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. Securities that trade only in the over-the-counter 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.
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
26 | Small Company Fund | Annual report |
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 March 31, 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. Interest income is accrued as earned. Dividend income is recorded on the ex-date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
During the year ended March 31, 2014, the fund realized gains of $8,128 on the disposal of investments not meeting the fund’s respective investment guidelines.
Real estate investment trusts. The fund may invest in real estate investment trusts (REITs). Distributions from REITs may be recorded as income and subsequently characterized by the REIT at the end of the fiscal year as a reduction of cost of investments and/or as a realized gain. As a result, the fund will estimate the components of distributions from these securities. Such estimates are revised when the actual components of the distributions are known.
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 March 31, 2014 were $744. For the year ended March 31, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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
Annual report | Small Company Fund | 27 |
to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
For federal income tax purposes, as of March 31, 2014, the fund has a capital loss carryforward of $2,112,610 available to offset future net realized capital gains, which expires March 31, 2017.
As of March 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Qualified late year ordinary losses of $339,231 are treated as occurring on April 1, 2014.
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 year ended March 31, 2014 was $3,793,973 and $0 for the year ended March 31, 2013 of long-term capital gains.
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 March 31, 2014, the components of distributable earnings on a tax basis consisted of $13,015,145 of undistributed long-term capital gain.
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, net operating losses and litigation proceeds.
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,
28 | Small Company Fund | Annual report |
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) 0.90% of the first $500,000,000 of the fund’s average daily net assets; (b) 0.85% of the next $500,000,000 of the fund’s average daily net assets; and (c) 0.80% of the fund’s average daily net assets in excess of $1,000,000,000. The Advisor has a subadvisory agreement with Fiduciary Management Associates, 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 reduce its management fee or, if necessary, make payment to the fund to the extent necessary to maintain the fund’s total operating expenses at 1.50%, 1.14%, 1.80%, 1.55%, 1.70%, 1.30%, 1.10%, 1.04%, and 1.34% for Class A, Class I, Class R1, Class R2, Class R3, Class R4, Class R5, Class R6, and Class ADV 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 expenses paid indirectly and short dividend expense. The current expense limitation agreement expires on 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 that time.
Effective February 1, 2014, for Class R6 shares, the Advisor has contractually agreed to waive and/ or reimburse all class specific expenses 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 from January 1, 2014 to January 31, 2014.
For the year ended March 31, 2014, these expense reductions amounted to the following:
EXPENSE | |||||
CLASS | REDUCTIONS | ||||
Class A | $7,007 | ||||
Class I | 6,680 | ||||
Class R1 | 13,877 | ||||
Class R2 | 17,219 | ||||
Class R3 | 14,236 | ||||
Class R4 | 14,205 | ||||
Class R5 | 14,227 | ||||
Class R6 | 16,436 | ||||
Class ADV | 16,689 | ||||
Total | $120,576 |
Annual report | Small Company Fund | 29 |
The investment management fees, including the impact of the waivers and reimbursements as described on the previous page, incurred for the year ended March 31, 2014 were equivalent to a net annual effective rate of 0.84% 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 March 31, 2014 amounted to an annual rate of 0.02% of the fund’s average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class R1, Class R2, Class R3, Class R4 and Class ADV 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 shares, the fund pays for certain other services. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund’s shares.
CLASS | 12b–1 FEE | SERVICE FEE | ||
Class A | 0.30% | — | ||
Class R1 | 0.50% | 0.25% | ||
Class R2 | 0.25% | 0.25% | ||
Class R3 | 0.50% | 0.15% | ||
Class R4 | 0.25% | 0.10% | ||
Class R5 | — | 0.05% | ||
Class ADV | 0.25% | — |
The fund’s 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, 2015, 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. Reimbursements related to this contractual waiver amounted to $81 for Class R4 shares for the year ended March 31, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $848,773 for the year ended March 31, 2014. Of this amount, $143,381 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $698,511 was paid as sales commissions to broker-dealers and $6,881 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A 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. 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 March 31, 2014, CDSCs received by the Distributor amounted to $55 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)
30 | Small Company Fund | Annual report |
of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the 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.
Class level expenses. Class level expenses for the year ended March 31, 2014 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $418,550 | $203,124 | $24,658 | $23,905 |
Class I | — | 55,672 | 16,837 | 6,572 |
Class R1 | 8,923 | 271 | 14,233 | 323 |
Class R2 | 985 | 59 | 17,623 | 42 |
Class R3 | 1,043 | 34 | 14,233 | 34 |
Class R4 | 248 | 18 | 14,233 | 37 |
Class R5 | 187 | 64 | 14,233 | 59 |
Class R6 | — | 53 | 16,094 | 412 |
Class ADV | 1,315 | 767 | 16,099 | 346 |
Total | $431,251 | $260,062 | $148,243 | $31,730 |
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 5 — Fund share transactions
Transactions in fund shares for the years ended March 31, 2014 and 2013 were as follows:
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 1,552,359 | $41,079,484 | 648,171 | $13,996,105 |
Distributions reinvested | 102,300 | 2,786,664 | — | — |
Repurchased | (960,191) | (25,436,592) | (1,849,095) | (38,523,453) |
Net increase (decrease) | 694,468 | $18,429,556 | (1,200,924) | ($24,527,348) |
Class I shares | ||||
Sold | 193,388 | $5,151,488 | 363,132 | $7,645,212 |
Distributions reinvested | 32,858 | 905,580 | — | — |
Repurchased | (535,308) | (14,085,302) | (1,604,409) | (33,154,811) |
Net decrease | (309,062) | ($8,028,234) | (1,241,277) | ($25,509,599) |
Annual report | Small Company Fund | 31 |
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class R1 shares | ||||
Sold | 29,686 | $738,827 | 47,491 | $991,428 |
Distributions reinvested | 403 | 10,853 | — | — |
Repurchased | (20,611) | (529,775) | (15,819) | (322,300) |
Net increase | 9,478 | $219,905 | 31,672 | $669,128 |
Class R2 shares | ||||
Sold | 10,063 | $267,926 | — | — |
Distributions reinvested | 13 | 347 | — | — |
Repurchased | (1,044) | (30,046) | — | — |
Net increase | 9,032 | $238,227 | — | — |
Class R3 shares | ||||
Sold | 2,952 | $75,875 | 4,475 | $92,681 |
Distributions reinvested | 104 | 2,815 | — | — |
Repurchased | (15,649) | (367,890) | (7,140) | (146,770) |
Net decrease | (12,593) | ($289,200) | (2,665) | ($54,089) |
Class R4 shares | ||||
Sold | 210 | $5,535 | 1,685 | $34,269 |
Distributions reinvested | 34 | 930 | — | — |
Repurchased | (638) | (15,038) | (799) | (18,743) |
Net increase (decrease) | (394) | ($8,573) | 886 | $15,526 |
Class R5 shares | ||||
Sold | 2,823 | $74,455 | 2,226 | $47,492 |
Distributions reinvested | 214 | 5,888 | — | — |
Repurchased | (2,372) | (62,424) | (871) | (18,207) |
Net increase | 665 | $17,919 | 1,355 | $29,285 |
Class R6 shares | ||||
Sold | 14,968 | $422,603 | 99 | $2,224 |
Distributions reinvested | 166 | 4,584 | — | — |
Repurchased | (2,233) | (59,675) | (46) | (919) |
Net increase | 12,901 | $367,512 | 53 | $1,305 |
Class ADV shares | ||||
Sold | — | — | 119 | $2,527 |
Distributions reinvested | 381 | $10,404 | — | — |
Repurchased | (20) | (469) | (4,396) | (96,756) |
Net increase (decrease) | 361 | $9,935 | (4,277) | ($94,229) |
Total net increase (decrease) | 404,856 | $10,957,047 | (2,415,177) | ($49,470,021) |
Affiliates of the fund owned 35%, 42% and 29% of shares of beneficial interest of Class R2, Class R4 and Class R6, respectively, on March 31, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $164,248,536 and $158,547,817, respectively, for the year ended March 31, 2014.
32 | Small Company Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock Small Company 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 Small Company Fund (the “Fund”) at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2014 by correspondence with the custodian, transfer agent and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 19, 2014
Annual report | Small Company Fund | 33 |
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 March 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $3,793,973 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.
34 | Small Company 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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | Small Company 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 |
Grace K. Fey, Born: 1946 | 2012 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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). |
36 | Small Company 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 | 228 |
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 | 228 |
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 | 228 |
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 | Small Company Fund | 37 |
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.
38 | Small Company 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† | Fiduciary Management Associates, 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 | |
**Until 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 | Small Company Fund | 39 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/smallcompanyx36x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/smallcompanyx36x2.jpg)
This report is for the information of the shareholders of John Hancock Small Company Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 348A 3/14 |
MF181825 | 5/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/discvaluemidcapx1x1.jpg)
A look at performance
Total returns for the period ended March 31, 2014
Average annual total returns (%) | Cumulative total returns (%) | |||||
with maximum sales charge | with maximum sales charge | |||||
1-year | 5-year | 10-year | 1-year | 5-year | 10-year | |
Class A1 | 21.91 | 24.79 | 11.18 | 21.91 | 202.60 | 188.69 |
Class C1 | 26.32 | 25.09 | 10.89 | 26.32 | 206.33 | 181.21 |
Class I1,2 | 28.67 | 26.46 | 12.16 | 28.67 | 223.41 | 215.14 |
Class R21,2 | 28.15 | 25.87 | 11.57 | 28.15 | 215.96 | 198.99 |
Class R41,2 | 28.30 | 26.26 | 11.98 | 28.30 | 220.90 | 210.08 |
Class R61,2 | 28.81 | 26.58 | 12.24 | 28.81 | 224.91 | 217.25 |
Class ADV1,2 | 28.19 | 26.04 | 11.74 | 28.19 | 218.04 | 203.51 |
Index† | 22.95 | 26.35 | 10.24 | 22.95 | 222.02 | 165.13 |
Performance figures assume all distributions are reinvested. Figures reflect maximum sales charges on Class A shares of 5% and the applicable contingent deferred sales charge (CDSC) on Class C shares. 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 R4, Class R6, and Class ADV shares.
The expense ratios of the fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers or expense limitations are contractual at least until 6-30-14 for Class R2 shares and until 6-30-15 for Class R4 and Class ADV 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 C | Class I | Class R2 | Class R4*^ | Class R6 | Class ADV | |
Net (%) | 1.27 | 2.08 | 0.93 | 1.40 | 1.15 | 0.89 | 1.25 |
Gross (%) | 1.27 | 2.08 | 0.93 | 2.36 | 1.28 | 0.89 | 3.74 |
* Expenses have been estimated for the class’s first full year of operations.
^ The fund’s distributor has contractually agreed to waive 0.10% of Rule 12b-1 fees for Class R4 shares. The current waiver will remain in effect through 6-30-15.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund’s website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder 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 would increase and results would have been less favorable.
† Index is the Russell Midcap Value Index.
See the following page for footnotes.
6 | Disciplined Value Mid Cap Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/discvaluemidcapx3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class C3 | 3-31-04 | $28,121 | $28,121 | $26,513 |
Class I2 | 3-31-04 | 31,514 | 31,514 | 26,513 |
Class R22 | 3-31-04 | 29,899 | 29,899 | 26,513 |
Class R42 | 3-31-04 | 31,008 | 31,008 | 26,513 |
Class R62 | 3-31-04 | 31,725 | 31,725 | 26,513 |
Class ADV2 | 3-31-04 | 30,351 | 30,351 | 26,513 |
Russell Midcap Value Index is an unmanaged index that measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values.
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 After the close of business on 7-9-10, holders of Investor Class Shares and Institutional Class Shares of the former Robeco Boston Partners Mid Cap Value Fund (the predecessor fund) became owners of an equal number of full and fractional Class A and Class I shares, respectively, of John Hancock Disciplined Value Mid Cap Fund. Class A, Class I, and Class ADV shares were first offered on 7-12-10. The returns prior to this date for Class A and Class ADV shares are those of the predecessor fund’s Investor Class Shares recalculated to reflect the gross fees and expenses of the fund’s Class A and Class ADV shares. For Class I shares, the returns prior to this date are those of the predecessor fund’s Institutional Class Shares recalculated to reflect the gross fees and expenses of the fund’s Class I shares. Class C, Class R6, Class R2, and Class R4 shares were first offered on 8-15-11, 9-1-11, 3-1-12, and 7-2-13, 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 C, Class R6, Class R2, and Class R4 shares, as applicable.
2 For certain types of investors, as described in the fund’s prospectuses.
3 The contingent deferred sales charge is not applicable.
Annual report | Disciplined Value Mid Cap Fund | 7 |
Management’s discussion of
Fund performance
By Robeco Boston Partners, a division of Robeco Investment
Management, Inc.
The stock market gained significant ground during the 12-month reporting period ended March 31, 2014. The U.S. economy continued its sluggish but steady growth pace. In addition, company fundamentals continued to improve. The bigger factor during the reporting period was multiple expansion, however, meaning that investors became less risk averse and bid up prices relative to expected earnings.
For the 12-month period ended March 31, 2014, John Hancock Disciplined Value Mid Cap Fund’s Class A shares had a total return of 28.30%, excluding sales charges. That performance beat the 22.95% return of the benchmark Russell Midcap Value Index.
Relative to the benchmark, the fund benefited from good stock picking, especially in the financials, consumer staples, and consumer discretionary sectors. Within financials, securities brokerage company TD Ameritrade Holding Corp. was the strongest individual contributor. In consumer staples, the fund’s position in beverage company Constellation Brands, Inc. was especially productive, while in consumer discretionary, Lear Corp., a maker of automotive seating and electrical power management systems, added value.
Despite the fund’s favorable results, certain stocks failed to meet our expectations. In industrials, for example, employment agency Robert Half International, Inc. lagged. Another notable detractor was Taubman Centers, Inc., a real estate investment trust that we sold before period end. Also, the fund was hurt by its modest cash allocation, which hindered results in a rising market, and by lacking exposure to the strong-performing telecommunication services sector.
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.
8 | Disciplined Value Mid Cap 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 October 1, 2013, with the same investment held until March 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,153.40 | $6.23 | 1.16% |
Class C | 1,000.00 | 1,148.50 | 10.28 | 1.92% |
Class I | 1,000.00 | 1,154.70 | 4.78 | 0.89% |
Class R2 | 1,000.00 | 1,152.00 | 6.87 | 1.28% |
Class R4 | 1,000.00 | 1,153.20 | 6.17 | 1.15% |
Class R6 | 1,000.00 | 1,155.20 | 4.30 | 0.80% |
Class ADV | 1,000.00 | 1,152.30 | 6.71 | 1.25% |
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 March 31, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Annual report | Disciplined Value Mid Cap Fund | 9 |
Your expenses
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/discvaluemidcapx6x1.jpg)
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 October 1, 2013, with the same investment held until March 31, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,019.10 | $5.84 | 1.16% |
Class C | 1,000.00 | 1,015.40 | 9.65 | 1.92% |
Class I | 1,000.00 | 1,020.50 | 4.48 | 0.89% |
Class R2 | 1,000.00 | 1,018.50 | 6.44 | 1.28% |
Class R4 | 1,000.00 | 1,019.40 | 5.79 | 1.15% |
Class R6 | 1,000.00 | 1,020.90 | 4.03 | 0.80% |
Class ADV | 1,000.00 | 1,018.90 | 6.29 | 1.25% |
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 182/365 (to reflect the one-half year period).
10 | Disciplined Value Mid Cap Fund | Annual report |
Portfolio summary
Top 10 Holdings (15.5% of Net Assets on 3-31-14)1,2 | ||||
TD Ameritrade Holding Corp. | 2.0% | Raymond James Financial, Inc. | 1.5% | |
Lear Corp. | 2.0% | Omnicare, Inc. | 1.4% | |
Western Digital Corp. | 1.6% | Macy’s, Inc. | 1.4% | |
BB&T Corp. | 1.5% | Constellation Brands, Inc., Class A | 1.3% | |
Graphic Packaging Holding Company | 1.5% | Arrow Electronics, Inc. | 1.3% | |
Sector Composition1,3 | ||||
Financials | 28.2% | Materials | 6.7% | |
Information Technology | 15.3% | Energy | 6.3% | |
Industrials | 13.1% | Utilities | 5.0% | |
Consumer Discretionary | 10.6% | Consumer Staples | 3.6% | |
Health Care | 7.9% | Short-Term Investments & Other | 3.3% | |
1 As a percentage of net assets on 3-31-14.
2 Cash and cash equivalents not included.
3 The stock prices of midsize and small companies can change more frequently and dramatically than those of large companies. Value stocks may decline in price. Foreign investing has additional risks, such as currency and market volatility and political and social instability. Large company stocks could fall out of favor, and illiquid securities may be difficult to sell at a price approximating their value. 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 | Disciplined Value Mid Cap Fund | 11 |
Fund’s investments
As of 3-31-14
Shares | Value | |
Common Stocks 96.7% | $8,003,931,933 | |
(Cost $6,289,793,018) | ||
Consumer Discretionary 10.6% | 879,780,795 | |
Auto Components 3.0% | ||
Lear Corp. | 1,986,109 | 166,277,045 |
TRW Automotive Holdings Corp. (I) | 1,046,005 | 85,374,928 |
Diversified Consumer Services 0.5% | ||
Apollo Education Group, Inc. (I) | 1,244,900 | 42,625,376 |
Household Durables 1.1% | ||
Newell Rubbermaid, Inc. | 3,032,404 | 90,668,880 |
Internet & Catalog Retail 0.7% | ||
Expedia, Inc. | 750,250 | 54,393,125 |
Leisure Products 0.9% | ||
Brunswick Corp. | 1,684,039 | 76,270,126 |
Media 1.8% | ||
CBS Corp., Class B | 1,478,415 | 91,366,047 |
Omnicom Group, Inc. | 811,075 | 58,884,045 |
Multiline Retail 1.4% | ||
Macy’s, Inc. | 1,918,285 | 113,735,118 |
Specialty Retail 1.2% | ||
Foot Locker, Inc. | 1,413,175 | 66,390,962 |
Williams-Sonoma, Inc. | 507,130 | 33,795,143 |
Consumer Staples 3.6% | 293,910,945 | |
Beverages 2.1% | ||
Coca-Cola Enterprises, Inc. | 876,945 | 41,882,893 |
Constellation Brands, Inc., Class A (I) | 1,307,010 | 111,056,640 |
Dr. Pepper Snapple Group, Inc. | 412,075 | 22,441,605 |
Food Products 1.0% | ||
Tyson Foods, Inc., Class A | 1,823,525 | 80,253,335 |
Tobacco 0.5% | ||
Lorillard, Inc. | 707,775 | 38,276,472 |
Energy 6.3% | 520,603,259 | |
Energy Equipment & Services 0.7% | ||
Cameron International Corp. (I) | 515,955 | 31,870,540 |
Ensco PLC, Class A | 463,610 | 24,469,336 |
12 | Disciplined Value Mid Cap Fund | Annual report | See notes to financial statements |
Shares | Value | |
Oil, Gas & Consumable Fuels 5.6% | ||
Energen Corp. | 993,500 | $80,284,735 |
EQT Corp. | 726,135 | 70,413,311 |
Kosmos Energy, Ltd. (I) | 2,336,467 | 25,701,137 |
Marathon Oil Corp. | 1,110,661 | 39,450,679 |
Marathon Petroleum Corp. | 640,220 | 55,724,749 |
Noble Energy, Inc. | 771,325 | 54,794,928 |
QEP Resources, Inc. | 1,128,885 | 33,234,374 |
Rosetta Resources, Inc. (I) | 604,793 | 28,171,258 |
Tesoro Corp. | 649,450 | 32,855,676 |
Valero Energy Corp. | 821,705 | 43,632,536 |
Financials 28.2% | 2,336,511,336 | |
Banks 6.8% | ||
BB&T Corp. | 3,136,095 | 125,976,936 |
Comerica, Inc. | 1,534,450 | 79,484,510 |
East West Bancorp, Inc. | 2,474,985 | 90,336,953 |
Fifth Third Bancorp | 4,625,310 | 106,150,865 |
Huntington Bancshares, Inc. | 7,384,465 | 73,623,116 |
SunTrust Banks, Inc. | 2,190,710 | 87,168,351 |
Capital Markets 5.1% | ||
Raymond James Financial, Inc. | 2,239,070 | 125,231,179 |
SEI Investments Company | 1,549,516 | 52,079,233 |
State Street Corp. | 468,770 | 32,602,954 |
TD Ameritrade Holding Corp. | 4,907,790 | 166,619,471 |
The Charles Schwab Corp. | 1,852,310 | 50,623,632 |
Consumer Finance 1.4% | ||
Discover Financial Services | 1,315,940 | 76,574,549 |
SLM Corp. | 1,518,475 | 37,172,268 |
Diversified Financial Services 0.8% | ||
McGraw-Hill Financial, Inc. | 579,304 | 44,200,895 |
Moody’s Corp. | 324,945 | 25,774,637 |
Insurance 7.3% | ||
Alleghany Corp. (I) | 204,038 | 83,121,000 |
Arch Capital Group, Ltd. (I) | 430,520 | 24,772,121 |
Axis Capital Holdings, Ltd. | 1,028,000 | 47,133,800 |
Loews Corp. | 1,083,680 | 47,736,104 |
Marsh & McLennan Companies, Inc. | 2,213,715 | 109,136,150 |
Reinsurance Group of America, Inc. | 990,210 | 78,850,422 |
Symetra Financial Corp. | 1,294,371 | 25,654,433 |
The Allstate Corp. | 1,462,550 | 82,751,079 |
Torchmark Corp. | 1,305,434 | 102,737,656 |
Real Estate Investment Trusts 6.8% | ||
American Assets Trust, Inc. | 796,627 | 26,878,195 |
Boston Properties, Inc. | 870,255 | 99,670,305 |
BRE Properties, Inc. | 878,440 | 55,148,463 |
Equity Residential | 1,700,425 | 98,607,646 |
Kimco Realty Corp. | 2,319,375 | 50,747,925 |
Regency Centers Corp. | 1,166,139 | 59,543,057 |
See notes to financial statements | Annual report | Disciplined Value Mid Cap Fund | 13 |
Shares | Value | |
Real Estate Investment Trusts (continued) | ||
SL Green Realty Corp. | 684,760 | $68,900,551 |
The Macerich Company | 983,045 | 61,273,195 |
Ventas, Inc. | 664,185 | 40,229,685 |
Health Care 7.9% | 654,935,132 | |
Health Care Equipment & Supplies 2.0% | ||
Boston Scientific Corp. (I) | 2,739,355 | 37,036,080 |
CareFusion Corp. (I) | 2,582,635 | 103,873,580 |
Teleflex, Inc. | 229,570 | 24,619,087 |
Health Care Providers & Services 5.4% | ||
AmerisourceBergen Corp. | 1,196,170 | 78,456,790 |
Cardinal Health, Inc. | 788,070 | 55,149,139 |
Cigna Corp. | 973,190 | 81,485,199 |
DaVita HealthCare Partners, Inc. (I) | 438,740 | 30,207,249 |
McKesson Corp. | 484,095 | 85,476,654 |
Omnicare, Inc. | 1,954,410 | 116,619,645 |
Life Sciences Tools & Services 0.5% | ||
ICON PLC (I) | 883,527 | 42,011,709 |
Industrials 13.1% | 1,088,006,278 | |
Aerospace & Defense 1.5% | ||
Cubic Corp. | 444,425 | 22,696,785 |
Curtiss-Wright Corp. | 531,742 | 33,786,887 |
Huntington Ingalls Industries, Inc. | 683,982 | 69,943,999 |
Building Products 0.7% | ||
Masco Corp. | 2,753,955 | 61,165,341 |
Construction & Engineering 0.7% | ||
Fluor Corp. | 724,760 | 56,335,595 |
Electrical Equipment 0.3% | ||
Hubbell, Inc., Class B | 221,402 | 26,539,458 |
Industrial Conglomerates 0.4% | ||
Carlisle Companies, Inc. | 428,930 | 34,031,306 |
Machinery 4.3% | ||
Dover Corp. | 1,111,374 | 90,854,825 |
Flowserve Corp. | 1,294,760 | 101,431,498 |
Parker Hannifin Corp. | 888,780 | 106,395,854 |
Stanley Black & Decker, Inc. | 292,550 | 23,766,762 |
Timken Company | 571,535 | 33,594,827 |
Professional Services 4.5% | ||
Equifax, Inc. | 946,055 | 64,360,122 |
FTI Consulting, Inc. (I) | 438,393 | 14,616,023 |
ManpowerGroup, Inc. | 1,244,380 | 98,094,475 |
Robert Half International, Inc. | 2,605,171 | 109,286,923 |
Towers Watson & Company, Class A | 770,081 | 87,827,738 |
Trading Companies & Distributors 0.7% | ||
WESCO International, Inc. (I)(L) | 640,205 | 53,277,860 |
14 | Disciplined Value Mid Cap Fund | Annual report | See notes to financial statements |
Shares | Value | |
Information Technology 15.3% | $1,265,633,556 | |
Communications Equipment 1.3% | ||
Brocade Communications Systems, Inc. (I) | 5,513,395 | 58,497,121 |
Harris Corp. | 708,650 | 51,844,834 |
Electronic Equipment, Instruments & Components 3.9% | ||
Arrow Electronics, Inc. (I) | 1,846,757 | 109,623,496 |
Avnet, Inc. | 1,763,859 | 82,072,359 |
Flextronics International, Ltd. (I) | 3,042,738 | 28,114,899 |
Jabil Circuit, Inc. | 2,321,970 | 41,795,460 |
Knowles Corp. (I) | 555,689 | 17,543,102 |
TE Connectivity, Ltd. | 685,124 | 41,251,316 |
Internet Software & Services 0.6% | ||
IAC/InterActiveCorp | 336,979 | 24,056,931 |
NetEase.com, Inc., ADR | 348,305 | 23,440,927 |
IT Services 3.0% | ||
Alliance Data Systems Corp. (I) | 123,700 | 33,702,065 |
Amdocs, Ltd. | 1,958,095 | 90,973,094 |
Fidelity National Information Services, Inc. | 454,645 | 24,300,775 |
Global Payments, Inc. | 365,675 | 26,003,149 |
Total System Services, Inc. | 757,420 | 23,033,142 |
Vantiv, Inc., Class A (I) | 1,635,575 | 49,427,077 |
Semiconductors & Semiconductor Equipment 3.3% | ||
Analog Devices, Inc. | 1,294,560 | 68,792,918 |
Avago Technologies, Ltd. | 1,121,555 | 72,239,358 |
LSI Corp. | 6,224,860 | 68,909,200 |
ON Semiconductor Corp. (I) | 7,223,744 | 67,903,194 |
Software 0.7% | ||
Activision Blizzard, Inc. | 2,734,705 | 55,897,370 |
Technology Hardware, Storage & Peripherals 2.5% | ||
Seagate Technology PLC | 1,259,110 | 70,711,618 |
Western Digital Corp. | 1,475,715 | 135,500,151 |
Materials 6.7% | 552,299,056 | |
Chemicals 1.8% | ||
H.B. Fuller Company | 1,339,502 | 64,671,157 |
Minerals Technologies, Inc. | 530,447 | 34,245,658 |
Valspar Corp. | 679,465 | 49,003,016 |
Containers & Packaging 4.1% | ||
Crown Holdings, Inc. (I) | 2,178,655 | 97,473,025 |
Graphic Packaging Holding Company (I) | 12,341,787 | 125,392,556 |
Owens-Illinois, Inc. (I) | 2,231,925 | 75,506,023 |
Rock-Tenn Company, Class A | 355,565 | 37,536,997 |
Paper & Forest Products 0.8% | ||
International Paper Company | 1,492,385 | 68,470,624 |
See notes to financial statements | Annual report | Disciplined Value Mid Cap Fund | 15 |
Shares | Value | ||
Utilities 5.0% | $412,251,576 | ||
Electric Utilities 3.0% | |||
American Electric Power Company, Inc. | 1,449,355 | 73,424,324 | |
Edison International | 1,279,385 | 72,425,985 | |
FirstEnergy Corp. | 619,580 | 21,084,307 | |
Great Plains Energy, Inc. | 1,636,055 | 44,238,927 | |
Westar Energy, Inc. (L) | 949,125 | 33,371,235 | |
Independent Power and Renewable Electricity Producers 0.7% | |||
AES Corp. | 4,084,384 | 58,325,004 | |
Multi-Utilities 1.3% | |||
Alliant Energy Corp. | 889,129 | 50,511,418 | |
Ameren Corp. | 811,400 | 33,429,680 | |
PG&E Corp. | 588,905 | 25,440,696 | |
Yield (%) | Shares | Value | |
Securities Lending Collateral 0.6% | $46,634,527 | ||
(Cost $46,629,664) | |||
John Hancock Collateral Investment Trust (W) | 0.1476 (Y) | 4,660,191 | 46,634,527 |
Short-Term Investments 1.6% | $131,155,867 | ||
(Cost $131,155,867) | |||
Money Market Funds 1.6% | 131,155,867 | ||
State Street Institutional US Government | |||
Money Market Fund | 0.0000 (Y) | 131,155,867 | 131,155,867 |
Total investments (Cost $6,467,578,549)† 98.9% | $8,181,722,327 | ||
Other assets and liabilities, net 1.1% | $94,878,235 | ||
Total net assets 100.0% | $8,276,600,562 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund.
ADR American Depositary Receipts
(I) Non-income producing security.
(L) A portion of this security is on loan as of 3-31-14.
(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 3-31-14.
† At 3-31-14, the aggregate cost of investment securities for federal income tax purposes was $6,486,674,062. Net unrealized appreciation aggregated $1,695,048,265, of which $1,701,122,610 related to appreciated investment securities and $6,074,345 related to depreciated investment securities.
16 | Disciplined Value Mid Cap Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 3-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $6,420,948,885) | |
including $46,328,508 of securities loaned | $8,135,087,800 |
Investments in affiliated issuers, at value (Cost $46,629,664) | 46,634,527 |
Total investments, at value (Cost $6,467,578,549) | 8,181,722,327 |
Receivable for fund shares sold | 150,649,065 |
Dividends and interest receivable | 8,547,749 |
Receivable for securities lending income | 6,355 |
Receivable due from advisor | 726 |
Other receivables and prepaid expenses | 244,080 |
Total assets | 8,341,170,302 |
Liabilities | |
Payable for investments purchased | 4,968,845 |
Payable for fund shares repurchased | 10,949,217 |
Payable upon return of securities loaned | 46,629,850 |
Payable to affiliates | |
Accounting and legal services fees | 224,458 |
Transfer agent fees | 814,952 |
Distribution and service fees | 63,745 |
Trustees’ fees | 3,579 |
Other liabilities and accrued expenses | 915,094 |
Total liabilities | 64,569,740 |
Net assets | $8,276,600,562 |
Net assets consist of | |
Paid-in capital | $6,514,401,526 |
Undistributed net investment income | 4,106,624 |
Accumulated net realized gain (loss) on investments and investments | 43,948,634 |
Net unrealized appreciation (depreciation) on investments | 1,714,143,778 |
Net assets | $8,276,600,562 |
See notes to financial statements | Annual report | Disciplined Value Mid Cap Fund | 17 |
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 ($3,085,704,094 ÷ 169,286,137 shares)1 | $18.23 |
Class C ($328,759,329 ÷ 17,744,658 shares)1 | $18.53 |
Class I ($4,168,070,628 ÷ 221,563,145 shares) | $18.81 |
Class R2 ($205,429,296 ÷ 10,941,719 shares) | $18.77 |
Class R4 ($43,708,751 ÷ 2,323,694 shares) | $18.81 |
Class R6 ($444,085,182 ÷ 23,610,124 shares) | $18.81 |
Class ADV ($843,282 ÷ 46,330 shares) | $18.20 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $19.19 |
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.
18 | Disciplined Value Mid Cap Fund | Annual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the year ended 3-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $78,001,164 |
Securities lending | 249,948 |
Interest | 2,021 |
Total investment income | 78,253,133 |
Expenses | |
Investment management fees | 38,300,444 |
Distribution and service fees | 7,471,929 |
Accounting and legal services fees | 714,583 |
Transfer agent fees | 6,496,643 |
Trustees’ fees | 150,065 |
State registration fees | 265,215 |
Printing and postage | 369,877 |
Professional fees | 155,232 |
Custodian fees | 527,506 |
Registration and filing fees | 598,862 |
Other | 69,515 |
Total expenses | 55,119,871 |
Less expense reductions | (305,692) |
Net expenses | 54,814,179 |
Net investment income | 23,438,954 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 133,768,439 |
Investments in affiliated issuers | 13,753 |
133,782,192 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 1,183,080,437 |
Investments in affiliated issuers | (39,633) |
1,183,040,804 | |
Net realized and unrealized gain | 1,316,822,996 |
Increase in net assets from operations | $1,340,261,950 |
See notes to financial statements | Annual report | Disciplined Value Mid Cap Fund | 19 |
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 | |
3-31-14 | 3-31-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $23,438,954 | $11,243,225 |
Net realized gain | 133,782,192 | 30,985,395 |
Change in net unrealized appreciation (depreciation) | 1,183,040,804 | 384,304,783 |
Increase in net assets resulting from operations | 1,340,261,950 | 426,533,403 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (6,093,145) | (2,921,623) |
Class I | (14,534,231) | (7,726,525) |
Class R2 | (209,855) | (4,135) |
Class R4 | (24,622) | — |
Class R6 | (1,302,378) | (455,223) |
Class ADV | (1,510) | (2,703) |
From net realized gain | ||
Class A | (45,165,032) | — |
Class C | (4,668,972) | — |
Class I | (57,231,207) | — |
Class R2 | (1,998,367) | — |
Class R4 | (163,136) | — |
Class R6 | (4,161,455) | — |
Class ADV | (14,505) | — |
Total distributions | (135,568,415) | (11,110,209) |
From fund share transactions | 3,934,879,351 | 1,233,265,665 |
Total increase | 5,139,572,886 | 1,648,688,859 |
Net assets | ||
Beginning of year | 3,137,027,676 | 1,488,338,817 |
End of year | $8,276,600,562 | $3,137,027,676 |
Undistributed net investment income | $4,106,624 | $2,833,411 |
20 | Disciplined Value Mid Cap 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 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | 8-31-102 | 8-31-093 |
Per share operating performance | ||||||
Net asset value, beginning of period | $14.51 | $12.41 | $11.98 | $8.66 | $8.10 | $9.08 |
Net investment income4 | 0.05 | 0.05 | 0.04 | 0.01 | 0.015 | 0.07 |
Net realized and unrealized gain (loss) | ||||||
on investments | 4.03 | 2.09 | 0.42 | 3.32 | 0.60 | (0.98)6 |
Total from investment operations | 4.08 | 2.14 | 0.46 | 3.33 | 0.61 | (0.91) |
Less distributions | ||||||
From net investment income | (0.04) | (0.04) | — | (0.01) | (0.05) | (0.07) |
From net realized gain | (0.32) | — | (0.03) | — | — | —7 |
Total distributions | (0.36) | (0.04) | (0.03) | (0.01) | (0.05) | (0.07) |
Net asset value, end of period | $18.23 | $14.51 | $12.41 | $11.98 | $8.66 | $8.10 |
Total return (%)8,9 | 28.30 | 17.31 | 3.92 | 38.4710 | 7.54 | (9.79)6 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $3,086 | $1,169 | $517 | $171 | $75 | $14 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.18 | 1.27 | 1.33 | 1.3511 | 1.56 | 1.93 |
Expenses net of fee waivers and credits | 1.17 | 1.27 | 1.29 | 1.2511 | 1.25 | 1.25 |
Net investment income | 0.32 | 0.38 | 0.32 | 0.1011 | 0.09 | 1.09 |
Portfolio turnover (%) | 39 | 55 | 41 | 27 | 38 | 58 |
1 For the seven month period ended 3-31-11. The fund changed its fiscal year end from August 31 to March 31.
2 After the close of business on 7-9-10, holders of Investor Class Shares of the former Robeco Boston Partners
Mid Cap Value Fund (the predecessor fund) became owners of an equal number of full and fractional Class A shares
of the John Hancock Disciplined Value Mid Cap Fund. These shares were first offered on 7-12-10. Additionally, the
accounting and performance history of the Investor Class Shares of the predecessor fund was redesignated as that
of John Hancock Disciplined Value Mid Cap Fund Class A.
3 Audited by previous independent registered public accounting firm.
4 Based on the average daily shares outstanding.
5 The amount shown for a share outstanding may differ with the distributions from net investment income for the
period due to the timing of distributions in relations to fluctuations of shares outstanding during the period.
6 In 2009, the investment advisor fully reimbursed the fund for a loss on a transaction not meeting the fund’s
investment guidelines, which otherwise would have reduced total return by 0.11% and net realized and unrealized
gain/(loss) on investment by $0.01 per share.
7 Less than $0.01 per share.
8 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
9 Does not reflect the effect of sales charges, if any.
10 Not annualized.
11 Annualized.
See notes to financial statements | Annual report | Disciplined Value Mid Cap Fund | 21 |
CLASS C SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | ||||||
Per share operating performance | |||||||||
Net asset value, beginning of period | $14.82 | $12.74 | $10.63 | ||||||
Net investment loss2 | (0.07) | (0.05) | (0.02) | ||||||
Net realized and unrealized gain on investments | 4.10 | 2.13 | 2.16 | ||||||
Total from investment operations | 4.03 | 2.08 | 2.14 | ||||||
Less distributions | |||||||||
From net realized gain | (0.32) | — | (0.03) | ||||||
Net asset value, end of period | $18.53 | $14.82 | $12.74 | ||||||
Total return (%)3,4 | 27.32 | 16.33 | 20.225 | ||||||
Ratios and supplemental data | |||||||||
Net assets, end of period (in millions) | $329 | $90 | $20 | ||||||
Ratios (as a percentage of average net assets): | |||||||||
Expenses before reductions | 1.94 | 2.08 | 2.106 | ||||||
Expenses net of fee waivers and credits | 1.93 | 2.08 | 2.106 | ||||||
Net investment loss | (0.43) | (0.39) | (0.26)6 | ||||||
Portfolio turnover (%) | 39 | 55 | 417 | ||||||
1 The inception date for Class C shares is 8-15-11.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Annualized.
7 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
CLASS I SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | 8-31-102 | 8-31-093 |
Per share operating performance | ||||||
Net asset value, beginning of period | $14.95 | $12.79 | $12.33 | $8.92 | $8.34 | $9.35 |
Net investment income4 | 0.10 | 0.09 | 0.07 | 0.03 | 0.045 | 0.09 |
Net realized and unrealized gain (loss) | ||||||
on investments | 4.16 | 2.15 | 0.45 | 3.41 | 0.61 | (1.01)6 |
Total from investment operations | 4.26 | 2.24 | 0.52 | 3.44 | 0.65 | (0.92) |
Less distributions | ||||||
From net investment income | (0.08) | (0.08) | (0.03) | (0.03) | (0.07) | (0.09) |
From net realized gain | (0.32) | — | (0.03) | — | — | —7 |
Total distributions | (0.40) | (0.08) | (0.06) | (0.03) | (0.07) | (0.09) |
Net asset value, end of period | $18.81 | $14.95 | $12.79 | $12.33 | $8.92 | $8.34 |
Total return (%)9 | 28.67 | 17.64 | 4.28 | 38.648 | 7.76 | (9.50)6 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $4,168 | $1,762 | $948 | $254 | $87 | $33 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 0.89 | 0.93 | 0.98 | 0.9910 | 1.28 | 1.69 |
Expenses net of fee waivers and credits | 0.89 | 0.93 | 0.98 | 0.9910 | 1.00 | 1.00 |
Net investment income | 0.59 | 0.71 | 0.63 | 0.3710 | 0.41 | 1.33 |
Portfolio turnover (%) | 39 | 55 | 41 | 27 | 38 | 58 |
1 For the seven month period ended 3-31-11. The fund changed its fiscal year end from August 31 to March 31.
2 After the close of business on 7-9-10, holders of Institutional Class Shares of the former Robeco Boston Partners
Mid Cap Value Fund (the predecessor fund) became owners of an equal number of full and fractional Class I shares
of the John Hancock Disciplined Value Mid Cap Fund. These shares were first offered on 7-12-10. Additionally, the
accounting and performance history of the Institutional Class Shares of the predecessor fund was redesignated as
that of John Hancock Disciplined Value Mid Cap Fund Class I.
3 Audited by previous independent registered public accounting firm.
4 Based on the average daily shares outstanding.
5 The amount shown for a share outstanding may differ with the distributions from net investment income for the
period due to the timing of distributions in relations to fluctuations of shares outstanding during the period.
6 In 2009, the investment advisor fully reimbursed the fund for a loss on a transaction not meeting the fund’s
investment guidelines, which otherwise would have reduced total return by 0.11% and net realized and unrealized
gain/(loss) on investment by $0.01 per share.
7 Less than $0.01 per share.
8 Not annualized.
9 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
10 Annualized.
22 | Disciplined Value Mid Cap Fund | Annual report | See notes to financial statements |
CLASS R2 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | |||
Per share operating performance | ||||||
Net asset value, beginning of period | $14.94 | $12.78 | $12.43 | |||
Net investment income2 | 0.04 | 0.05 | 0.01 | |||
Net realized and unrealized gain on investments | 4.14 | 2.14 | 0.34 | |||
Total from investment operations | 4.18 | 2.19 | 0.35 | |||
Less distributions | ||||||
From net investment income | (0.03) | (0.03) | — | |||
From net realized gain | (0.32) | — | — | |||
Total distributions | (0.35) | (0.03) | — | |||
Net asset value, end of period | $18.77 | $14.94 | $12.78 | |||
Total return (%)3 | 28.15 | 17.15 | 2.824 | |||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $205 | $15 | —5 | |||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.28 | 2.15 | 16.136 | |||
Expenses net of fee waivers and credits | 1.27 | 1.40 | 1.456 | |||
Net investment income | 0.25 | 0.33 | 1.006 | |||
Portfolio turnover (%) | 39 | 55 | 417 | |||
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.
4 Not annualized.
5 Less than $500,000.
6 Annualized.
7 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
CLASS R4 SHARES Period ended | 3-31-141 | |||||
Per share operating performance | ||||||
Net asset value, beginning of period | $15.63 | |||||
Net investment income2 | 0.06 | |||||
Net realized and unrealized gain on investments | 3.49 | |||||
Total from investment operations | 3.55 | |||||
Less distributions | ||||||
From net investment income | (0.05) | |||||
From net realized gain | (0.32) | |||||
Total distributions | (0.37) | |||||
Net asset value, end of period | $18.81 | |||||
Total return (%)3 | 22.854 | |||||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $44 | |||||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.305 | |||||
Expenses net of fee waivers and credits | 1.145 | |||||
Net investment income | 0.445 | |||||
Portfolio turnover (%) | 396 | |||||
1 The inception date for Class R4 shares is 7-2-13.
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.
4 Not annualized.
5 Annualized.
6 Portfolio turnover is shown for the period from 4-1-13 to 3-31-14.
See notes to financial statements | Annual report | Disciplined Value Mid Cap Fund | 23 |
CLASS R6 SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | |||
Per share operating performance | ||||||
Net asset value, beginning of period | $14.95 | $12.79 | $10.95 | |||
Net investment income2 | 0.12 | 0.11 | 0.08 | |||
Net realized and unrealized gain on investments | 4.16 | 2.14 | 1.82 | |||
Total from investment operations | 4.28 | 2.25 | 1.90 | |||
Less distributions | ||||||
From net investment income | (0.10) | (0.09) | (0.03) | |||
From net realized gain | (0.32) | — | (0.03) | |||
Total distributions | (0.42) | (0.09) | (0.06) | |||
Net asset value, end of period | $18.81 | $14.95 | $12.79 | |||
Total return (%)3 | 28.81 | 17.68 | 17.454 | |||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $444 | $100 | $2 | |||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 0.81 | 0.89 | 4.225 | |||
Expenses including reductions | 0.80 | 0.89 | 0.995 | |||
Net investment income | 0.71 | 0.84 | 1.255 | |||
Portfolio turnover (%) | 39 | 55 | 416 | |||
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.
4 Not annualized.
5 Annualized.
6 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
CLASS ADV SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | 8-31-102 | ||
Per share operating performance | |||||||
Net asset value, beginning of period | $14.49 | $12.40 | $11.97 | $8.65 | $8.86 | ||
Net investment income3 | 0.03 | 0.04 | 0.04 | 0.01 | —4 | ||
Net realized and unrealized gain (loss) on investments | 4.03 | 2.10 | 0.43 | 3.32 | (0.21) | ||
Total from investment operations | 4.06 | 2.14 | 0.47 | 3.33 | (0.21) | ||
Less distributions | |||||||
From net investment income | (0.03) | (0.05) | (0.01) | (0.01) | — | ||
From net realized gain | (0.32) | — | (0.03) | — | — | ||
Total distributions | (0.35) | (0.05) | (0.04) | (0.01) | — | ||
Net asset value, end of period | $18.20 | $14.49 | $12.40 | $11.97 | $8.65 | ||
Total return (%)5 | 28.19 | 17.33 | 3.94 | 38.506 | (2.37)6 | ||
Ratios and supplemental data | |||||||
Net assets, end of period (in millions) | $1 | $1 | $1 | —7 | —7 | ||
Ratios (as a percentage of average net assets): | |||||||
Expenses before reductions | 3.46 | 3.74 | 4.18 | 5.788 | 1.428 | ||
Expenses net of fee waivers and credits | 1.25 | 1.25 | 1.25 | 1.258 | 1.258 | ||
Net investment income (loss) | 0.19 | 0.35 | 0.37 | 0.158 | (0.37)8 | ||
Portfolio turnover (%) | 39 | 55 | 41 | 27 | 389 | ||
1 For the seven month period ended 3-31-11. The fund changed its fiscal year end from August 31 to March 31.
2 The inception date for Class ADV shares is 7-12-10.
3 Based on the average daily shares outstanding.
4 Less than $0.005 per share.
5 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
6 Not annualized.
7 Less than $500,000.
8 Annualized.
9 Portfolio turnover is shown for the period from 9-1-09 to 8-31-10.
24 | Disciplined Value Mid Cap Fund | Annual report | See notes to financial statements |
Notes to financial statements
Note 1 — Organization
John Hancock Disciplined Value Mid Cap 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 long-term growth of capital with current income as 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 I shares are offered to institutions and certain investors. Class R2 and Class R4 shares are available only to certain retirement plans. Class R6 shares are available only to certain retirement plans, institutions and other investors. Class ADV shares are available only to investors who acquired Class A shares as a result of the reorganization of the Robeco Boston Partners Mid Cap Value Fund (the predecessor fund) into the fund and is closed to new investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees, printing and postage and state registration fees for each class may differ.
Effective January 31, 2014, the fund was closed to new investors as described in the fund’s prospectuses.
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. Securities that trade only in the over-the-counter market are valued using bid prices. 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.
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,
Annual report | Disciplined Value Mid Cap Fund | 25 |
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.
As of March 31, 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. 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.
Real estate investment trusts. The fund may invest in real estate investment trusts (REITs). Distributions from REITs may be recorded as income and subsequently characterized by the REIT at the end of the fiscal year as a reduction of cost of investments and/or as a realized gain. As a result, the fund will estimate the components of distributions from these securities. Such estimates are revised when the actual components of the distributions are known.
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 Statement of assets and liabilities as Payable upon return of securities loaned.
26 | Disciplined Value Mid Cap Fund | Annual report |
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the 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 Statements of operations. Commitment fees for the year ended March 31, 2014 were $3,485. For the year ended March 31, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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.
As of March 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually.
The tax character of distributions for the years ended March 31, 2014 and 2013 was as follows:
MARCH 31, 2014 | MARCH 31, 2013 | |||
Ordinary Income | $97,122,777 | $11,110,209 | ||
Long-Term Capital Gain | $38,445,637 | — | ||
Total | $135,568,414 | $11,110,209 |
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 March 31, 2014, the components of distributable earnings on a tax basis consisted of $34,189,784 of undistributed ordinary income and $32,960,988 of long-term capital gains.
Annual report | Disciplined Value Mid Cap Fund | 27 |
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.
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 the sum of: (a) 0.800% of the first $500,000,000 of the fund’s average daily net assets; (b) 0.775% of the next $500,000,000 of the fund’s average daily net assets; (c) 0.750% of the next $500,000,000 of the fund’s average daily net assets; (d) 0.725% of the next $1,000,000,000 of the fund’s average daily net assets; and (e) 0.700% of the fund’s average daily net assets in excess of $2,500,000,000. The Advisor has a subadvisory agreement with Robeco Investment Management, Inc. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive fees and/or reimburse certain expenses for certain share classes 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 and short dividend expense. The reimbursements are such that these expenses will not exceed 1.40%, 1.15% and 1.25% for Class R2, Class R4 and Class ADV shares, respectively. The fee waivers and/or expense reimbursements will continue in effect until June 30, 2014 for Class R2 shares and until June 30, 2015 for Class R4 and Class ADV shares, 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, the fee waivers and/or reimbursements were such that these expenses would not exceed 1.35%, 2.10% and 1.04% for Class A, Class C and Class I shares, respectively. Prior to September 30, 2013, the fee waivers and/or reimbursements were such that these expenses would not exceed 0.95% for Class R6 shares.
28 | Disciplined Value Mid Cap Fund | Annual report |
Effective June 1, 2013, the Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock complex, including the fund (the participating portfolios). The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the participating portfolios that exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; and 0.015% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
Accordingly, for the year ended March 31, 2014 these expense reductions amounted to the following:
EXPENSE | |||
CLASS | REDUCTIONS | ||
Class A | $107,685 | ||
Class C | 10,907 | ||
Class I | 144,954 | ||
Class R2 | 5,153 | ||
Class R4 | 3,578 | ||
Class R6 | 10,704 | ||
Class ADV | 16,728 | ||
Total | $299,709 |
The investment management fees incurred for the year ended March 31, 2014 were equivalent to a net annual effective rate of 0.72% 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 March 31, 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 C, Class R2, Class R4 and Class ADV 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 and Class R4, the fund pays for certain other services. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund’s shares.
CLASS | RULE 12b-1 FEE | SERVICE FEE | |
Class A | 0.30% | — | |
Class C | 1.00% | — | |
Class R2 | 0.25% | 0.25% | |
Class R4 | 0.25% | 0.10% | |
Class ADV | 0.25% | — |
Annual report | Disciplined Value Mid Cap Fund | 29 |
Currently, only 0.25% is charged to Class A shares for Rule 12b-1 fees. 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, 2015, 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 $5,983 for Class R4 shares for the year ended March 31, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $7,143,148 for the year ended March 31, 2014. Of this amount, $1,106,533 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $6,018,299 was paid as sales commissions to broker-dealers and $18,316 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A 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 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 March 31, 2014, CDSCs received by the Distributor amounted to $8,587 and $44,959 for Class A 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.
30 | Disciplined Value Mid Cap Fund | Annual report |
Class level expenses. Class level expenses for the year ended March 31, 2014 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $5,050,010 | $2,910,368 | $95,760 | $186,065 |
Class C | 1,994,979 | 286,362 | 32,450 | 16,393 |
Class I | — | 3,235,777 | 66,662 | 158,836 |
Class R2 | 405,361 | 19,187 | 20,490 | 3,798 |
Class R4 | 19,690 | 1,232 | 10,942 | 16 |
Class R6 | — | 42,615 | 21,656 | 4,639 |
Class ADV | 1,889 | 1,102 | 17,255 | 130 |
Total | $7,471,929 | $6,496,643 | $265,215 | $369,877 |
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 funds to borrow from, or lend money to, other participating affiliated funds. Any open loans at period end are presented under the caption Payable for interfund lending in the Statement of assets and liabilities. 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:
WEIGHTED AVERAGE | DAYS | WEIGHTED AVERAGE | INTEREST | |
BORROWER OR LENDER | LOAN BALANCE | OUTSTANDING | INTEREST RATE | EXPENSE |
Lender | $18,328,427 | 2 | 0.44% | $447 |
Note 5 — Fund share transactions
Transactions in fund shares for the years ended March 31, 2014 and 2013 were as follows:
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 112,071,109 | $1,839,347,952 | 56,469,128 | $711,395,855 |
Distributions reinvested | 2,821,616 | 48,051,850 | 207,363 | 2,635,578 |
Repurchased | (26,206,076) | (433,557,584) | (17,712,702) | (224,518,358) |
Net increase | 88,686,649 | $1,453,842,218 | 38,963,789 | $489,513,075 |
Class C shares | ||||
Sold | 12,392,250 | $206,888,537 | 4,948,361 | $64,502,527 |
Distributions reinvested | 207,929 | 3,607,565 | — | — |
Repurchased | (909,781) | (15,444,379) | (487,904) | (6,303,855) |
Net increase | 11,690,398 | $195,051,723 | 4,460,457 | $58,198,672 |
Class I shares | ||||
Sold | 141,646,631 | $2,421,566,726 | 78,343,767 | $1,035,883,636 |
Distributions reinvested | 3,115,082 | 54,700,838 | 397,873 | 5,208,153 |
Repurchased | (41,066,594) | (701,790,233) | (35,018,145) | (451,367,677) |
Net increase | 103,695,119 | $1,774,477,331 | 43,723,495 | $589,724,112 |
Annual report | Disciplined Value Mid Cap Fund | 31 |
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class R2 shares | ||||
Sold | 11,612,161 | $199,320,000 | 1,158,514 | $16,418,697 |
Distributions reinvested | 90,769 | 1,593,002 | 221 | 2,891 |
Repurchased | (1,786,411) | (31,002,655) | (141,580) | (2,063,617) |
Net increase | 9,916,519 | $169,910,347 | 1,017,155 | $14,357,971 |
Class R4 shares1 | ||||
Sold | 2,386,534 | $43,658,507 | — | — |
Distributions reinvested | 10,553 | 185,418 | — | — |
Repurchased | (73,393) | (1,340,621) | — | — |
Net increase | 2,323,694 | $42,503,304 | — | — |
Class R6 shares | ||||
Sold | 18,629,374 | $327,775,557 | 6,859,308 | $86,493,579 |
Distributions reinvested | 311,330 | 5,463,834 | 34,776 | 455,223 |
Repurchased | (1,990,057) | (34,122,943) | (397,409) | (5,208,065) |
Net increase | 16,950,647 | $299,116,448 | 6,496,675 | $81,740,737 |
Class ADV shares | ||||
Sold | 1,353 | $21,000 | 797 | $10,312 |
Distributions reinvested | 941 | 16,015 | 213 | 2,703 |
Repurchased | (3,754) | (59,035) | (22,653) | (281,917) |
Net increase | (1,460) | ($22,020) | (21,643) | ($268,902) |
Total net increase | 233,261,566 | $3,934,879,351 | 94,639,928 | $1,233,265,665 |
1 The inception date for Class R4 shares is 7-2-13. | ||||
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $5,726,681,435 and $2,031,998,296, respectively, for the year ended March 31, 2014.
32 | Disciplined Value Mid Cap Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock Disciplined Value Mid Cap Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock Disciplined Value Mid Cap Fund (the “Fund”) at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods ended March 31, 2014, 2013, 2012, 2011, and August 31, 2010, 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 March 31, 2014 by correspondence with the custodian, transfer agents and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
The financial highlights of the Fund for periods ending August 31, 2009 were audited by another independent registered public accounting firm, whose report dated October 27, 2009 expressed an unqualified opinion thereon.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 19, 2014
Annual report | Disciplined Value Mid Cap Fund | 33 |
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 March 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $38,445,637 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.
34 | Disciplined Value Mid Cap 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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | Disciplined Value Mid Cap 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 |
Grace K. Fey, Born: 1946 | 2012 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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). |
36 | Disciplined Value Mid Cap Fund | Annual report |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Gregory A. Russo, Born: 1949 | 2008 | 228 |
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 | 228 |
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 | 228 |
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 | Disciplined Value Mid Cap Fund | 37 |
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.
38 | Disciplined Value Mid Cap Fund | Annual report |
More information
Trustees | |
James M. Oates, Chairperson | Investment advisor |
Steven R. Pruchansky, Vice Chairperson | John Hancock Advisers, LLC |
Charles L. Bardelis* | |
Craig Bromley† | Subadvisor |
Peter S. Burgess* | Robeco Investment Management, Inc. |
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 | |
**Until 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 | Disciplined Value Mid Cap Fund | 39 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/discvaluemidcapx36x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/discvaluemidcapx36x2.jpg)
This report is for the information of the shareholders of John Hancock Disciplined Value Mid Cap Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 363A 3/14 |
MF181826 | 5/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/internatnlvaleqx1x1.jpg)
A look at performance
Total returns for the period ended March 31, 2014
Average annual total returns (%) | Cumulative total returns (%) | ||||||
with maximum sales charge | with maximum sales charge | ||||||
1-year | 5-year | 10-year | 1-year | 5-year | 10-year | ||
Class A1,2 | 7.83 | 14.90 | 5.71 | 7.83 | 100.24 | 74.32 | |
Class I1,2,3 | 13.87 | 16.34 | 6.38 | 13.87 | 113.16 | 85.55 | |
Class R21,2,3 | 13.48 | 16.17 | 6.20 | 13.48 | 111.55 | 82.54 | |
Class R41,2,3 | 13.73 | 16.45 | 6.46 | 13.73 | 114.13 | 87.07 | |
Class R61,2,3 | 14.08 | 16.75 | 6.73 | 14.08 | 116.93 | 91.89 | |
Class NAV1,2,3 | 14.23 | 16.79 | 6.77 | 14.23 | 117.26 | 92.48 | |
Index 1† | 16.98 | 16.44 | 7.21 | 16.98 | 114.07 | 100.59 | |
Index 2† | 19.66 | 17.12 | 7.35 | 19.66 | 120.41 | 103.21 | |
Performance figures assume all distributions are reinvested. Figures reflect maximum sales charge on Class A shares of 5%. Sales charges are not applicable to Class I, Class R2, Class R4, 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 A, Class I, Class R2, and Class R4 shares and until 6-30-15 for Class R6 shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. For Class NAV shares, the net expenses equal the gross expenses. The expense ratios are as follows:
Class A | Class I | Class R2 | Class R4* | Class R6 | Class NAV | |||
Net (%) | 1.60 | 1.29 | 1.68 | 1.43 | 1.08 | 1.08 | ||
Gross (%) | 1.99 | 2.08 | 1.70 | 1.55 | 1.20 | 1.08 |
* 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 6-30-15.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund’s current performance may be higher or lower than the performance shown. For performance data current to the most recent month end, 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 would increase and results would have been less favorable.
† Index 1 is the MSCI World ex-USA Index; Index 2 is the MSCI World ex-USA Value Index.
See the following page for footnotes.
6 | International Value Equity Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/internatnlvaleqx3x1.jpg)
With maximum | Without | ||||
Start date | sales charge | sales charge | Index 1 | Index 2 | |
Class I3 | 3-31-04 | $18,555 | $18,555 | $20,059 | $20,321 |
Class R23 | 3-31-04 | 18,254 | 18,254 | 20,059 | 20,321 |
Class R43 | 3-31-04 | 18,707 | 18,707 | 20,059 | 20,321 |
Class R63 | 3-31-04 | 19,189 | 19,189 | 20,059 | 20,321 |
Class NAV3 | 3-31-04 | 19,248 | 19,248 | 20,059 | 20,321 |
MSCI World ex-USA Index (gross of foreign withholding taxes on dividends) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States of America.
MSCI World ex-USA Value Index (gross of foreign withholding taxes on dividends) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States of America, that have higher than average value characteristics.
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 After the close of business on 2-11-11, holders of Class A shares of the former Optique International Value Fund (the predecessor fund) became owners of an equal number of full and fractional Class A shares of John Hancock International Value Equity Fund. These shares were first offered on 2-14-11. Additionally, the accounting and performance history of the Class A shares of the predecessor fund was redesignated as that of John Hancock International Value Equity Fund Class A. Class I shares were first offered on 2-14-11; Class NAV shares were first offered on 12-16-11; Class R2, Class R4, and Class R6 shares were first offered on 7-2-13. Performance prior to these dates is that of Class A shares recalculated to reflect the gross fees and expenses of Class I, Class R2, Class R4, Class R6, and Class NAV shares, as applicable.
2 In October 2011, the adviser made a voluntary payment to the fund of $6,950, or approximately $0.018 per share. Without this payment, performance would have been lower.
3 For certain types of investors, as described in the fund’s prospectuses.
Annual report | International Value Equity Fund | 7 |
Management’s discussion of
Fund performance
By John Hancock Asset Management
a division of Manulife Asset Management (US) LLC
Stocks in developed markets outside the United States posted strong gains during the 12 months ended March 31, 2014. Key catalysts included the eurozone’s return to modest economic growth following a lengthy recession, Japan’s initiation of monetary and stimulus policies to revive its long-stagnant economy, and the United Kingdom’s progress in extending its economic recovery. Many of the globe’s key central banks continued to embrace accommodative monetary policies, providing further support for equities.
During the period, John Hancock International Value Equity Fund’s Class A shares returned 13.51%, excluding sales charges. That result trailed the 16.98% return of the fund’s benchmark, the MSCI World ex-USA Index.
Key detractors from relative performance included our stock selection in the consumer discretionary sector and the fund’s out-of-benchmark holdings in emerging markets, which underperformed the broader market.
In consumer discretionary, electronics retailer Yamada Denki Company, Ltd. and camera and video equipment maker Nikon Corp. significantly weighed on performance. Both of these Japanese stocks fell sharply. We sold the fund’s positions in these two companies during the period. Emerging-market holdings that significantly detracted included state-controlled oil and gas companies CNOOC Ltd. (China) and Petroleo Brasileiro SA (Brazil). At the individual security level, the holding that had the largest negative impact was Barrick Gold Corp. (Canada). Declining precious metals prices sent shares of the mining company down sharply.
On the positive side, our stock selection in Europe and in the healthcare and industrials sectors benefited relative performance. Among European positions, Lonza Group AG (Switzerland) was the most significant contributor. Shares of the biopharmaceutical company rose sharply as a result of a successful restructuring of its business. Other European holdings that aided relative results included insurance company Aegon NV (Netherlands) and industrial components maker Rheinmetall AG (Germany). At the individual security level, pharmaceutical maker Shire PLC (Ireland) and insurer Aviva PLC (U.K.) were the most significant contributors. We sold the fund’s position in Shire 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 | International Value Equity 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 October 1, 2013, with the same investment held until March 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,057.00 | $8.21 | 1.60% |
Class I | 1,000.00 | 1,058.00 | 6.62 | 1.29% |
Class R2 | 1,000.00 | 1,056.00 | 8.56 | 1.67% |
Class R4 | 1,000.00 | 1,057.60 | 7.28 | 1.42% |
Class R6 | 1,000.00 | 1,059.00 | 5.65 | 1.10% |
Class NAV | 1,000.00 | 1,060.30 | 5.29 | 1.03% |
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 March 31, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/internatnlvaleqx5x1.jpg)
Annual report | International Value Equity 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 October 1, 2013, with the same investment held until March 31, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,017.00 | $8.05 | 1.60% |
Class I | 1,000.00 | 1,018.50 | 6.49 | 1.29% |
Class R2 | 1,000.00 | 1,016.60 | 8.40 | 1.67% |
Class R4 | 1,000.00 | 1,017.90 | 7.14 | 1.42% |
Class R6 | 1,000.00 | 1,019.40 | 5.54 | 1.10% |
Class NAV | 1,000.00 | 1,019.80 | 5.19 | 1.03% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectuses for details regarding transaction costs.
1 Expenses are equal to the fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
10 | International Value Equity Fund | Annual report |
Portfolio summary
Top 10 Holdings (11.4% of Net Assets on 3-31-14)1,2 | ||||
The Toronto-Dominion Bank | 1.8% | Royal Dutch Shell PLC, A Shares | 1.0% | |
Toyota Motor Corp. | 1.3% | China Petroleum & Chemical | ||
Corp., H Shares | 1.0% | |||
Novartis AG | 1.1% | |||
HSBC Holdings PLC | 1.0% | |||
SAP AG | 1.1% | |||
Merck KGaA | 1.0% | |||
Total SA | 1.1% | |||
Vodafone Group PLC | 1.0% | |||
Sector Composition1,3 | ||||
Financials | 23.0% | Materials | 7.8% | |
Consumer Staples | 10.5% | Telecommunication Services | 6.8% | |
Consumer Discretionary | 10.2% | Information Technology | 5.5% | |
Industrials | 10.1% | Utilities | 4.1% | |
Health Care | 9.0% | Short-Term Investments & Other | 4.3% | |
Energy | 8.7% | |||
1 As a percentage of net assets on 3-31-14.
2 Cash and cash equivalents not included.
3 Foreign investing has, especially in emerging markets, additional risks, such as currency and market volatility and political and social instability. Value stocks may not increase in price as anticipated or may decline further in 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. The prices of medium company stocks can change more frequently and dramatically than those of large company stocks. 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 Value Equity Fund | 11 |
Fund’s investments
As of 3-31-14
Shares | Value | |
Common Stocks 94.9% | $436,568,715 | |
(Cost $373,088,864) | ||
Australia 4.7% | 21,740,120 | |
AGL Energy, Ltd. | 238,636 | 3,365,106 |
Australia & New Zealand Banking Group, Ltd. | 136,709 | 4,205,570 |
BHP Billiton, Ltd. | 104,467 | 3,540,934 |
Incitec Pivot, Ltd. | 1,091,111 | 3,000,629 |
National Australia Bank, Ltd. | 122,194 | 4,028,752 |
Santos, Ltd. | 287,089 | 3,599,129 |
Canada 7.6% | 34,962,623 | |
Agrium, Inc. | 38,033 | 3,706,282 |
Bank of Montreal | 60,919 | 4,075,594 |
Barrick Gold Corp. | 219,465 | 3,906,894 |
Bombardier, Inc., Class B | 885,659 | 3,292,681 |
Husky Energy, Inc. | 131,196 | 3,935,287 |
Magna International, Inc. | 38,426 | 3,694,179 |
Suncor Energy, Inc. | 117,469 | 4,102,649 |
The Toronto-Dominion Bank | 175,947 | 8,249,057 |
China 1.8% | 8,334,937 | |
China Petroleum & Chemical Corp., H Shares | 5,100,800 | 4,575,622 |
CNOOC, Ltd. | 2,483,000 | 3,759,315 |
Denmark 0.8% | 3,829,862 | |
Danske Bank A/S | 137,642 | 3,829,862 |
Finland 0.9% | 4,052,980 | |
Kesko OYJ, B Shares | 92,948 | 4,052,980 |
France 9.1% | 41,723,913 | |
Cie de Saint-Gobain | 67,323 | 4,064,570 |
GDF Suez | 155,519 | 4,254,219 |
Kering | 16,735 | 3,412,182 |
Lafarge SA | 49,298 | 3,847,705 |
Orange SA | 299,860 | 4,429,454 |
Sanofi | 39,847 | 4,163,974 |
Societe BIC SA | 30,352 | 3,986,937 |
Total SA (L) | 75,068 | 4,941,315 |
Vinci SA | 54,971 | 4,080,458 |
Vivendi SA | 163,228 | 4,543,099 |
12 | International Value Equity Fund | Annual report | See notes to financial statements |
Shares | Value | |
Germany 11.4% | $52,629,948 | |
Allianz SE | 25,778 | 4,356,963 |
BASF SE | 33,142 | 3,687,800 |
Bayerische Motoren Werke AG | 35,386 | 4,471,589 |
Deutsche Bank AG | 79,265 | 3,552,541 |
Deutsche Boerse AG | 50,631 | 4,030,910 |
E.ON SE | 184,983 | 3,612,733 |
Fresenius SE & Company KGaA | 28,595 | 4,488,518 |
Merck KGaA | 27,085 | 4,561,282 |
Muenchener Rueckversicherungs AG | 18,801 | 4,108,339 |
Rheinmetall AG | 41,266 | 2,905,392 |
SAP AG | 61,299 | 4,972,304 |
Siemens AG | 29,837 | 4,023,895 |
Software AG | 106,321 | 3,857,682 |
Hong Kong 4.4% | 20,318,730 | |
China Mobile, Ltd. | 471,500 | 4,329,045 |
Guangdong Investment, Ltd. | 4,358,000 | 4,189,309 |
Hang Lung Group, Ltd. | 803,000 | 4,042,689 |
Swire Pacific, Ltd., Class A | 325,632 | 3,799,191 |
Yue Yuen Industrial Holdings, Ltd. | 1,212,385 | 3,958,496 |
Ireland 0.8% | 3,772,861 | |
C&C Group PLC | 578,257 | 3,772,861 |
Israel 0.9% | 3,950,124 | |
Teva Pharmaceutical Industries, Ltd. | 74,954 | 3,950,124 |
Japan 16.2% | 74,695,992 | |
Bridgestone Corp. | 103,700 | 3,675,198 |
Canon, Inc. | 121,000 | 3,755,334 |
East Japan Railway Company | 46,000 | 3,388,246 |
Fujitsu, Ltd. | 684,000 | 4,134,456 |
Honda Motor Company, Ltd. | 97,100 | 3,416,624 |
Inpex Corp. | 323,300 | 4,198,138 |
Kobayashi Pharmaceutical Company, Ltd. | 47,000 | 2,710,913 |
Komatsu, Ltd. | 181,400 | 3,802,971 |
Kyocera Corp. | 91,800 | 4,137,208 |
Marubeni Corp. | 498,000 | 3,343,147 |
Mitsubishi Corp. | 190,000 | 3,524,464 |
Mitsubishi UFJ Financial Group, Inc. | 703,500 | 3,874,020 |
Mitsui Fudosan Company, Ltd. | 118,000 | 3,599,970 |
Mizuho Financial Group, Inc. | 1,837,400 | 3,641,456 |
MS&AD Insurance Group Holdings | 129,900 | 2,973,568 |
Nippon Telegraph & Telephone Corp. | 67,100 | 3,646,322 |
Sumitomo Chemical Company, Ltd. | 889,000 | 3,277,649 |
Toyo Suisan Kaisha, Ltd. | 114,000 | 3,809,186 |
Toyota Motor Corp. | 107,863 | 6,082,805 |
Tsuruha Holdings, Inc. | 37,600 | 3,704,317 |
Netherlands 5.0% | 22,924,260 | |
Aegon NV | 429,085 | 3,952,350 |
Heineken Holding NV | 62,034 | 4,005,552 |
See notes to financial statements | Annual report | International Value Equity Fund | 13 |
Shares | Value | |
Netherlands (continued) | ||
Koninklijke KPN NV | 788,660 | $2,784,033 |
Royal Dutch Shell PLC, A Shares | 132,038 | 4,824,497 |
TNT Express NV | 390,746 | 3,833,613 |
Wolters Kluwer NV | 125,011 | 3,524,215 |
Norway 0.9%�� | 3,998,336 | |
DNB ASA | 230,102 | 3,998,336 |
Singapore 2.4% | 11,249,086 | |
DBS Group Holdings, Ltd. | 306,500 | 3,948,959 |
Sembcorp Industries, Ltd. | 845,000 | 3,696,226 |
Singapore Telecommunications, Ltd. | 1,243,000 | 3,603,901 |
South Africa 0.5% | 2,422,950 | |
Tiger Brands, Ltd. | 93,777 | 2,422,950 |
Spain 1.5% | 6,829,937 | |
Banco Bilbao Vizcaya Argentaria SA | 276,651 | 3,326,509 |
Telefonica SA | 221,082 | 3,503,428 |
Sweden 2.2% | 9,933,284 | |
Meda AB, Series A | 234,745 | 3,612,020 |
Modern Times Group AB, B Shares | 85,221 | 3,979,575 |
Saab AB | 76,606 | 2,341,689 |
Switzerland 6.3% | 28,755,397 | |
Aryzta AG (I) | 47,909 | 4,236,364 |
Credit Suisse Group AG (I) | 128,881 | 4,171,628 |
Glencore Xstrata PLC | 663,759 | 3,423,851 |
Lonza Group AG (I) | 34,930 | 3,564,052 |
Nestle SA | 56,597 | 4,260,033 |
Novartis AG | 61,283 | 5,203,412 |
Zurich Insurance Group AG (I) | 12,686 | 3,896,057 |
Taiwan 1.0% | 4,399,531 | |
Asustek Computer, Inc. | 444,000 | 4,399,531 |
United Kingdom 16.5% | 76,043,844 | |
Anglo American PLC | 155,286 | 3,968,289 |
AstraZeneca PLC | 55,871 | 3,621,947 |
Aviva PLC | 431,207 | 3,440,464 |
Barclays PLC | 1,054,206 | 4,102,424 |
British Sky Broadcasting Group PLC | 260,712 | 3,966,374 |
Debenhams PLC | 2,256,292 | 3,008,081 |
Diageo PLC | 124,570 | 3,869,029 |
GlaxoSmithKline PLC | 167,267 | 4,460,230 |
HSBC Holdings PLC | 450,772 | 4,564,253 |
Imperial Tobacco Group PLC | 90,490 | 3,659,197 |
Koninklijke Ahold NV (I) | 180,114 | 3,617,803 |
National Grid PLC | 273,363 | 3,756,442 |
Reed Elsevier PLC | 238,309 | 3,641,717 |
Rexam PLC | 460,365 | 3,740,990 |
RSA Insurance Group PLC (I) | 2,203,525 | 3,294,803 |
Smith & Nephew PLC | 235,331 | 3,574,180 |
14 | International Value Equity Fund | Annual report | See notes to financial statements |
Shares | Value | ||
United Kingdom (continued) | |||
Standard Chartered PLC | 190,787 | $3,989,475 | |
Subsea 7 SA | 164,904 | 3,060,337 | |
Unilever PLC | 97,353 | 4,163,747 | |
Vodafone Group PLC | 1,235,699 | 4,544,062 | |
Preferred Securities 0.7% | $3,319,642 | ||
(Cost $4,335,808) | |||
Brazil 0.7% | 3,319,642 | ||
Petroleo Brasileiro SA | 477,330 | 3,319,642 | |
Rights 0.1% | $526,289 | ||
(Cost $64,057) | |||
Spain 0.0% | 64,792 | ||
Banco Bilbao Vizcaya Argentaria SA (Expiration Date: 4-22-14; Strike | |||
Price: EUR 0.17) (I) | 276,651 | 64,792 | |
United Kingdom 0.1% | 461,497 | ||
RSA Insurance Group PLC (Expiration Date: 4-9-14; Strike Price: GBP 0.56) (I) | 826,322 | 461,497 | |
Yield (%) | Shares | Value | |
Securities Lending Collateral 1.0% | $4,684,763 | ||
(Cost $4,684,669) | |||
John Hancock Collateral Investment Trust (W) | 0.1476 (Y) | 468,149 | 4,684,763 |
Par value | Value | ||
Short-Term Investments 4.6% | $20,820,000 | ||
(Cost $20,820,000) | |||
Repurchase Agreement 4.6% | 20,820,000 | ||
Barclays Capital Tri-Party Repurchase Agreement dated 3-31-14 at | |||
0.060% to be repurchased at $15,295,025 on 4-1-14, collateralized | |||
by $15,747,400 U.S. Treasury Notes, 1.375% due 9-30-18 (valued | |||
at $15,600,949, including interest) | 15,295,000 | 15,295,000 | |
Repurchase Agreement with State Street Corp. dated 3-31-14 at | |||
0.000% to be repurchased at $5,525,000 on 4-1-14, collateralized | |||
by $5,875,000 U.S. Treasury Notes, 1.375% due 5-31-20, (valued at | |||
$5,640,000, including interest) | 5,525,000 | 5,525,000 | |
Total investments (Cost $402,993,398)† 101.3% | $465,919,409 | ||
Other assets and liabilities, net (1.3%) | ($5,941,645) | ||
Total net assets 100.0% | $459,977,764 | ||
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 3-31-14.
(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 3-31-14.
See notes to financial statements | Annual report | International Value Equity Fund | 15 |
Notes to Schedule of Investments
† At 3-31-14, the aggregate cost of investment securities for federal income tax purposes was $403,347,899. Net unrealized appreciation aggregated $62,571,510, of which $72,812,569 related to appreciated investment securities and $10,241,059 related to depreciated investment securities.
The fund had the following sector composition as a percentage of net assets on 3-31-14:
Financials | 23.0% | |
Consumer Staples | 10.5% | |
Consumer Discretionary | 10.2% | |
Industrials | 10.1% | |
Health Care | 9.0% | |
Energy | 8.7% | |
Materials | 7.8% | |
Telecommunication Services | 6.8% | |
Information Technology | 5.5% | |
Utilities | 4.1% | |
Short-Term Investments & Other | 4.3% | |
Total | 100.0% |
16 | International Value Equity 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 3-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $398,308,729) including | |
$4,458,595 of securities loaned | $461,234,646 |
Investments in affiliated issuers, at value (Cost $4,684,669) | 4,684,763 |
Total investments, at value (Cost $402,993,398) | 465,919,409 |
Foreign currency, at value (Cost $1,675,827) | 1,688,661 |
Receivable for investment sold | 3,107,880 |
Receivable for fund shares sold | 141,484 |
Dividends and interest receivable | 1,710,504 |
Receivable for securities lending income | 9,511 |
Receivable due from advisor | 2,355 |
Other receivables and prepaid expenses | 40,373 |
Total assets | 472,620,177 |
Liabilities | |
Due to custodian | 3,107,466 |
Payable for fund shares repurchased | 4,644,923 |
Payable upon return of securities loaned | 4,684,500 |
Payable to affiliates | |
Accounting and legal services fees | 20,409 |
Transfer agent fees | 2,791 |
Trustees’ fees | 248 |
Other liabilities and accrued expenses | 182,076 |
Total liabilities | 12,642,413 |
Net assets | $459,977,764 |
Net assets consist of | |
Paid-in capital | $380,307,499 |
Undistributed net investment income | 3,798,567 |
Accumulated net realized gain (loss) on investments and foreign | |
currency transactions | 12,930,756 |
Net unrealized appreciation (depreciation) on investments and translation | |
of assets and liabilities in foreign currencies | 62,940,942 |
Net assets | $459,977,764 |
See notes to financial statements | Annual report | International Value Equity Fund | 17 |
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 ($17,744,696 ÷ 1,902,260 shares)1 | $9.33 |
Class I ($7,788,294 ÷ 834,806 shares) | $9.33 |
Class R2 ($1,164,287 ÷ 124,518 shares) | $9.35 |
Class R4 ($109,487 ÷ 11,723 shares) | $9.34 |
Class R6 ($109,377 ÷ 11,723 shares) | $9.33 |
Class NAV ($433,061,623 ÷ 46,386,911 shares) | $9.34 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $9.82 |
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.
18 | International Value Equity 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 3-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $14,702,345 |
Securities lending | 384,945 |
Interest | 6,793 |
Less foreign taxes withheld | (1,009,916) |
Total investment income | 14,084,167 |
Expenses | |
Investment management fees | 3,650,609 |
Distribution and service fees | 33,733 |
Accounting and legal services fees | 51,869 |
Transfer agent fees | 26,989 |
Trustees’ fees | 14,316 |
State registration fees | 74,471 |
Printing and postage | 8,093 |
Professional fees | 61,308 |
Custodian fees | 427,933 |
Registration and filing fees | 65,545 |
Other | 15,124 |
Total expenses | 4,429,990 |
Less expense reductions | (69,868) |
Net expenses | 4,360,122 |
Net investment income | 9,724,045 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 22,494,989 |
Investments in affiliated issuers | (1,711) |
Foreign currency transactions | (296,995) |
22,196,283 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 25,827,487 |
Investments in affiliated issuers | (102) |
Translation of assets and liabilities in foreign currencies | 8,214 |
25,835,599 | |
Net realized and unrealized gain | 48,031,882 |
Increase in net assets from operations | $57,755,927 |
See notes to financial statements | Annual report | International Value Equity Fund | 19 |
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 | |
3-31-14 | 3-31-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $9,724,045 | $4,618,103 |
Net realized gain | 22,196,283 | 12,266,852 |
Change in net unrealized appreciation (depreciation) | 25,835,599 | 24,913,688 |
Increase in net assets resulting from operations | 57,755,927 | 41,798,643 |
Distributions to shareholders | ||
From net investment income | ||
Class A | (138,050) | (47,358) |
Class I | (87,399) | (63,687) |
Class R2 | (962) | — |
Class R4 | (1,240) | — |
Class R6 | (1,608) | — |
Class NAV | (6,214,133) | (4,286,345) |
From net realized gain | ||
Class A | (589,399) | (79,058) |
Class I | (280,932) | (82,016) |
Class R2 | (4,488) | — |
Class R4 | (4,488) | — |
Class R6 | (4,488) | — |
Class NAV | (17,109,762) | (4,779,603) |
Total distributions | (24,436,949) | (9,338,067) |
From fund share transactions | 105,809,113 | 170,679,513 |
Total increase | 139,128,091 | 203,140,089 |
Net assets | ||
Beginning of year | 320,849,673 | 117,709,584 |
End of year | $459,977,764 | $320,849,673 |
Undistributed net investment income | $3,798,567 | $796,020 |
20 | International Value Equity 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 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111,2 | 10-31-103 | 10-31-093 |
Per share operating performance | ||||||
Net asset value, beginning of period | $8.66 | $8.22 | $9.09 | $11.26 | $9.90 | $7.97 |
Net investment income4 | 0.175 | 0.12 | 0.14 | 0.02 | 0.03 | 0.07 |
Net realized and unrealized gain (loss) | ||||||
on investments | 0.97 | 0.54 | (0.92)6 | 0.79 | 1.397 | 2.547 |
Total from investment operations | 1.14 | 0.66 | (0.78) | 0.81 | 1.42 | 2.61 |
Less distributions | ||||||
From net investment income | (0.09) | (0.08) | (0.06) | (0.28) | (0.06) | (0.68) |
From net realized gain | (0.38) | (0.14) | (0.05) | (2.70) | — | — |
Total distributions | (0.47) | (0.22) | (0.11) | (2.98) | (0.06) | (0.68) |
Contribution from adviser | — | — | 0.028 | — | — | — |
Net asset value, end of period | $9.33 | $8.66 | $8.22 | $9.09 | $11.26 | $9.90 |
Total return (%)9,10 | 13.51 | 8.16 | (8.20)8 | 9.1311 | 14.46 | 35.61 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $18 | $7 | $3 | $3 | $3 | $30 |
Ratios (as a percentage of average | ||||||
net assets): | ||||||
Expenses before reductions | 1.63 | 1.99 | 3.73 | 16.0512 | 6.71 | 2.68 |
Expenses net of fee waivers and credits | 1.60 | 1.60 | 1.60 | 1.7712 | 1.85 | 1.85 |
Net investment income | 1.855 | 1.52 | 1.68 | 0.4812 | 0.33 | 0.88 |
Portfolio turnover (%) | 38 | 27 | 21 | 1213 | 80 | 123 |
1 For the five month period ended 3-31-11. The fund changed its fiscal year end from October 31 to March 31.
2 After the close of business on 2-11-11, holders of Class A shares of the former Optique International Value Fund (the predecessor fund) became owners of an equal number of full and fractional Class A shares of the John Hancock International Value Equity Fund. These shares were first offered on 2-14-11. Additionally, the accounting and performance history of the Class A shares of the predecessor fund was redesignated as that of John Hancock International Value Equity Fund Class A.
3 Audited by previous independent registered public accounting firm.
4 Based on the average daily shares outstanding.
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 $0.04 and 0.41%, respectively.
6 The amount shown for a share outstanding does not correspond with the aggregate gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
7 Includes redemption fees retained by the fund. Such redemption fees represent less than $0.01 per share.
8 In October 2011, the advisor made a voluntary payment to the fund of $6,950. Without this payment, performance would have been lower.
9 Does not reflect the effect of sales charges, if any.
10 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
11 Not annualized.
12 Annualized.
13 Portfolio turnover is shown for the period from 11-1-10 to 3-31-11.
See notes to financial statements | Annual report | International Value Equity Fund | 21 |
CLASS I SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-111 | ||
Per share operating performance | ||||||
Net asset value, beginning of period | $8.66 | $8.21 | $9.09 | $8.98 | ||
Net investment income2 | 0.203 | 0.13 | 0.19 | 0.02 | ||
Net realized and unrealized gain (loss) on investments | 0.97 | 0.57 | (0.95)4 | 0.09 | ||
Total from investment operations | 1.17 | 0.70 | (0.76) | 0.11 | ||
Less distributions | ||||||
From net investment income | (0.12) | (0.11) | (0.09) | — | ||
From net realized gain | (0.38) | (0.14) | (0.05) | — | ||
Total distributions | (0.50) | (0.25) | (0.14) | — | ||
Contribution from adviser | — | — | 0.025 | — | ||
Net asset value, end of period | $9.33 | $8.66 | $8.21 | $9.09 | ||
Total return (%)6 | 13.87 | 8.61 | (7.87)5 | 1.227 | ||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $8 | $6 | $1 | —8 | ||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.46 | 2.08 | 7.59 | 12.909 | ||
Expenses net of fee waivers and credits | 1.29 | 1.28 | 1.18 | 1.189 | ||
Net investment income | 2.203 | 1.52 | 2.36 | 1.899 | ||
Portfolio turnover (%) | 38 | 27 | 21 | 1210 |
1 The inception date for Class I shares is 2-14-11.
2 Based on the average daily shares outstanding.
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 $0.04 and 0.41%, respectively.
4 The amount shown for a share outstanding does not correspond with the aggregate gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
5 In October 2011, the advisor made a voluntary payment to the fund of $6,950. Without this payment, performance would have been lower.
6 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
7 Not annualized.
8 Less than $500,000.
9 Annualized.
10 Portfolio turnover is shown for the period from 11-1-10 to 3-31-11.
CLASS R2 SHARES Period ended | 3-31-141 |
Per share operating performance | |
Net asset value, beginning of period | $8.53 |
Net investment income2 | 0.193 |
Net realized and unrealized gain on investments | 1.09 |
Total from investment operations | 1.28 |
Less distributions | |
From net investment income | (0.08) |
From net realized gain | (0.38) |
Total distributions | (0.46) |
Net asset value, end of period | $9.35 |
Total return (%)4 | 15.385 |
Ratios and supplemental data | |
Net assets, end of period (in millions) | $1 |
Ratios (as a percentage of average net assets): | |
Expenses before reductions | 5.966 |
Expenses net of fee waivers and credits | 1.686 |
Net investment income | 2.843,6 |
Portfolio turnover (%) | 387 |
1 The inception date for Class R2 shares is 7-2-13.
2 Based on the average daily shares outstanding.
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 $0.04 and 0.41%, respectively.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
7 Portfolio turnover is shown for the period from 4-1-13 to 3-31-14.
22 | International Value Equity Fund | Annual report | See notes to financial statements |
CLASS R4 SHARES Period ended | 3-31-141 |
Per share operating performance | |
Net asset value, beginning of period | $8.53 |
Net investment income2 | 0.103 |
Net realized and unrealized gain on investments | 1.20 |
Total from investment operations | 1.30 |
Less distributions | |
From net investment income | (0.11) |
From net realized gain | (0.38) |
Total distributions | (0.49) |
Net asset value, end of period | $9.34 |
Total return (%)4 | 15.555 |
Ratios and supplemental data | |
Net assets, end of period (in millions) | —6 |
Ratios (as a percentage of average net assets): | |
Expenses before reductions | 15.497 |
Expenses net of fee waivers and credits | 1.437 |
Net investment income | 1.433,7 |
Portfolio turnover (%) | 388 |
1 The inception date for Class R4 shares is 7-2-13.
2 Based on the average daily shares outstanding.
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 $0.04 and 0.41%, 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 4-1-13 to 3-31-14.
CLASS R6 SHARES Period ended | 3-31-141 |
Per share operating performance | |
Net asset value, beginning of period | $8.53 |
Net investment income2 | 0.123 |
Net realized and unrealized gain on investments | 1.20 |
Total from investment operations | 1.32 |
Less distributions | |
From net investment income | (0.14) |
From net realized gain | (0.38) |
Total distributions | (0.52) |
Net asset value, end of period | $9.33 |
Total return (%)4 | 15.835 |
Ratios and supplemental data | |
Net assets, end of period (in millions) | —6 |
Ratios (as a percentage of average net assets): | |
Expenses before reductions | 16.377 |
Expenses net of fee waivers and credits | 1.107 |
Net investment income | 1.763,7 |
Portfolio turnover (%) | 388 |
1 The inception date for Class R6 shares is 7-2-13.
2 Based on the average daily shares outstanding.
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 $0.04 and 0.41%, 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 4-1-13 to 3-31-14.
See notes to financial statements | Annual report | International Value Equity Fund | 23 |
CLASS NAV SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | |||
Per share operating performance | ||||||
Net asset value, beginning of period | $8.66 | $8.22 | $7.21 | |||
Net investment income2 | 0.213 | 0.15 | 0.05 | |||
Net realized and unrealized gain on investments | 0.99 | 0.55 | 0.96 | |||
Total from investment operations | 1.20 | 0.70 | 1.01 | |||
Less distributions | ||||||
From net investment income | (0.14) | (0.12) | —4 | |||
From net realized gain | (0.38) | (0.14) | — | |||
Total distributions | (0.52) | (0.26) | —4 | |||
Net asset value, end of period | $9.34 | $8.66 | $8.22 | |||
Total return (%)5 | 14.23 | 8.69 | 14.056 | |||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $433 | $307 | $114 | |||
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 1.03 | 1.08 | 1.087 | |||
Expenses net of fee waivers and credits | 1.03 | 1.08 | 1.087 | |||
Net investment income | 2.373 | 1.78 | 2.217 | |||
Portfolio turnover (%) | 38 | 27 | 218 |
1 The inception date for Class NAV shares is 12-16-11.
2 Based on the average daily shares outstanding.
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 $0.04 and 0.41%, respectively.
4 Less than $0.005 per share.
5 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
6 Not annualized.
7 Annualized.
8 Portfolio turnover is shown for the period from 4-1-11 to 3-31-12.
24 | International Value Equity Fund | Annual report | See notes to financial statements |
Notes to financial statements
Note 1 — Organization
John Hancock International Value Equity 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 long-term 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 shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class R2 and Class R4 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.
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 (ET). 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. 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 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 provided by an independent pricing vendor to value certain foreign securities in order
Annual report | International Value Equity Fund | 25 |
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 March 31, 2014, by major security category or type:
LEVEL 3 | ||||
LEVEL 2 | SIGNIFICANT | |||
TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
VALUE AT 3-31-14 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
Common Stocks | ||||
Australia | $21,740,120 | — | $21,740,120 | — |
Canada | 34,962,623 | $34,962,623 | — | — |
China | 8,334,937 | — | 8,334,937 | — |
Denmark | 3,829,862 | — | 3,829,862 | — |
Finland | 4,052,980 | — | 4,052,980 | — |
France | 41,723,913 | — | 41,723,913 | — |
Germany | 52,629,948 | — | 52,629,948 | — |
Hong Kong | 20,318,730 | — | 20,318,730 | — |
Ireland | 3,772,861 | — | 3,772,861 | — |
Israel | 3,950,124 | — | 3,950,124 | — |
Japan | 74,695,992 | — | 74,695,992 | — |
Netherlands | 22,924,260 | — | 22,924,260 | — |
Norway | 3,998,336 | — | 3,998,336 | — |
Singapore | 11,249,086 | — | 11,249,086 | — |
South Africa | 2,422,950 | — | 2,422,950 | — |
Spain | 6,829,937 | — | 6,829,937 | — |
Sweden | 9,933,284 | — | 9,933,284 | — |
Switzerland | 28,755,397 | — | 28,755,397 | — |
Taiwan | 4,399,531 | — | 4,399,531 | — |
United Kingdom | 76,043,844 | — | 76,043,844 | — |
Preferred Securities | ||||
Brazil | 3,319,642 | 3,319,642 | — | — |
Rights | ||||
Spain | 64,792 | 64,792 | — | — |
United Kingdom | 461,497 | 461,497 | — | — |
Securities Lending | ||||
Collateral | 4,684,763 | 4,684,763 | — | — |
Short-Term Investments | 20,820,000 | — | 20,820,000 | |
Total Investments | ||||
in Securities | $465,919,409 | $43,493,317 | $422,426,092 | — |
26 | International Value Equity Fund | Annual report |
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund’s custodian. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. Collateral for certain tri-party repurchase agreements is held at a third-party custodian bank in a segregated account for the benefit of the fund.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, the MRA does not result in an offset of the reported amounts of assets and liabilities in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay back claims resulting from close-out of the transactions. Collateral received by the fund for repurchase agreements is disclosed in the Fund’s investments as part of the caption related to the repurchase agreement.
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.
Annual report | International Value Equity Fund | 27 |
Obligations to repay collateral received by the fund is shown on the Statement 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 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. These risks are heightened for investments in emerging markets. 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 March 31, 2014 were $882. For the year ended March 31, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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
28 | International Value Equity Fund | Annual report |
to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of March 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually. The tax character of distributions for the years ended March 31, 2014 and 2013 was as follows:
MARCH 31, 2014 | MARCH 31, 2013 | ||||
Ordinary Income | $18,005,709 | $9,338,067 | |||
Long-term Capital Gains | $6,431,240 | — | |||
Total | $24,436,949 | $9,338,067 |
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 March 31, 2014, the components of distributable earnings on a tax basis consisted of $6,914,615 of undistributed ordinary income and $10,169,209 of undistributed long-term capital gain.
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 and investments in passive foreign investment companies.
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).
Annual report | International Value Equity Fund | 29 |
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) 0.900% of the first $100,000,000 of the fund’s average daily net assets; (b) 0.875% of the next $900,000,000 of the fund’s average daily net assets; (c) 0.850% of the next $1,000,000,000 of the fund’s average daily net assets; (d) 0.825% of the next $1,000,000,000 of the fund’s average daily net assets; (e) 0.800% of the next $1,000,000,000 of the fund’s average daily net assets and (f) 0.775% of the fund’s average daily net assets in excess of $4,000,000,000. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
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 fee and reimburse or pay operating expenses of the fund to the extent necessary to maintain the fund’s total operating expenses at 1.60%, 1.29%, 1.68%, 1.43% and 1.10% for Class A, Class I, Class R2, Class R4 and Class R6 shares respectively. 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. These expense limitations shall remain in effect until at least 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.
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 from January 1, 2014 to January 31, 2014.
The expense reductions amounted to $4,436, $11,427, $10,487, $11,180, $12,227 and $20,031 for Class A, Class I, Class R2, Class R4, Class R6 and Class NAV shares, respectively, for the year ended March 31, 2014.
The investment management fees, including the impact of waivers and reimbursements as described above, incurred for the year ended March 31, 2014 were equivalent to a net annual effective rate of 0.86% of the fund’s average daily net asset.
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
30 | International Value Equity Fund | Annual report |
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 March 31, 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 R2 and Class R4 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 and Class R4, the fund pays for certain other services. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund’s shares.
CLASS | RULE 12b-1 FEE | SERVICE FEE | |||
Class A | 0.30% | — | |||
Class R2 | 0.25% | 0.25% | |||
Class R4 | 0.25% | 0.10% |
Currently only 0.25% is charged to Class A shares for Rule 12b-1 fees.
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, 2015, 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 $80 for Class R4 shares for the year ended March 31, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $90,532 for the year ended March 31, 2014. Of this amount, $15,209 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $74,999 was paid as sales commissions to broker-dealers and $324 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A 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. 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 March 31, 2014, CDSCs received by the Distributor amounted to $49 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.
Annual report | International Value Equity Fund | 31 |
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 March 31, 2014 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $32,921 | $19,102 | $21,530 | $5,148 |
Class I | — | 7,800 | 18,232 | 2,665 |
Class R2 | 612 | 51 | 11,292 | 70 |
Class R4 | 200 | 18 | 11,292 | 70 |
Class R6 | — | 18 | 12,125 | 140 |
Total | $33,733 | $26,989 | $74,471 | $8,093 |
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 the 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 funds 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:
WEIGHTED AVERAGE | DAYS | WEIGHTED AVERAGE | ||
BORROWER OR LENDER | LOAN BALANCE | OUTSTANDING | INTEREST RATE | INTEREST INCOME |
Lender | $15,626,831 | 3 | 0.46% | $593 |
Note 5 — Fund share transactions
Transactions in fund shares for the years ended March 31, 2014 and March 31, 2013 were as follows:
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 1,185,406 | $10,582,199 | 681,430 | $5,618,151 |
Distributions reinvested | 82,431 | 727,044 | 14,621 | 122,084 |
Repurchased | (220,373) | (1,999,433) | (197,404) | (1,628,179) |
Net increase | 1,047,464 | $9,309,810 | 498,647 | $4,112,056 |
Class I shares | ||||
Sold | 144,124 | $1,307,769 | 604,155 | $5,156,332 |
Distributions reinvested | 41,127 | 362,742 | 17,140 | 142,946 |
Repurchased | (51,387) | (476,315) | (10,943) | (92,922) |
Net increase | 133,864 | $1,194,196 | 610,352 | $5,206,356 |
Class R2 shares1 | ||||
Sold | 127,696 | $1,132,865 | — | — |
Repurchased | (3,178) | (29,319) | — | — |
Net increase | 124,518 | $1,103,546 | — | — |
32 | International Value Equity Fund | Annual report |
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class R4 shares1 | ||||
Sold | 11,723 | $100,000 | — | — |
Net increase | 11,723 | $100,000 | — | — |
Class R6 shares1 | ||||
Sold | 11,723 | $100,000 | — | — |
Net increase | 11,723 | $100,000 | — | — |
Class NAV shares | ||||
Sold | 10,079,797 | $87,417,169 | 21,601,965 | $160,986,341 |
Distributions reinvested | 2,638,142 | 23,268,405 | 1,087,044 | 9,065,948 |
Repurchased | (1,823,021) | (16,684,013) | (1,071,284) | (8,691,188) |
Net increase | 10,894,918 | $94,001,561 | 21,617,725 | $161,361,101 |
Total net increase | 12,224,210 | $105,809,113 | 22,726,724 | $170,679,513 |
1 The inception date for Class R2, Class R4 and Class R6 shares is 7-2-13.
Affiliates of the fund owned 1%, 9%, 100%, 100% and 100% of shares of beneficial interest of Class I, Class R2, Class R4, Class R6 and Class NAV, respectively, on March 31, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $236,559,768 and $149,379,534, respectively, for the year ended March 31, 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 March 31, 2014, funds within the John Hancock group of funds complex held 94.2% of the fund. The following funds had an affiliate ownership of 5% or more of the fund’s net assets:
AFFILIATE | |||
FUND | CONCENTRATION | ||
Lifestyle Growth Portfolio | 35.5% | ||
Lifestyle Balanced Portfolio | 29.4% | ||
Lifestyle Aggressive Portfolio | 15.4% | ||
Lifestyle Moderate Portfolio | 6.0% |
Annual report | International Value Equity Fund | 33 |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock International Value Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of John Hancock International Value Equity Fund (the “Fund”) at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for the periods ended March 31, 2014, 2013, 2012 and 2011, 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 March 31, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
The financial highlights of the Fund for periods on and before October 31, 2010 were audited by another independent registered public accounting firm, whose report dated December 21, 2010 expressed an unqualified opinion on those financial statements and included an explanatory paragraph relating to the Fund’s ability to continue as a going concern, which was further discussed in Note 12 to those financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 15, 2014
34 | International Value Equity 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 March 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Income derived from foreign sources was $9,684,964. The fund intends to pass through foreign tax credits of $512,055.
The fund paid $6,431,240 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 | International Value Equity Fund | 35 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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). |
36 | International Value Equity 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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 | 228 |
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 Value Equity Fund | 37 |
Independent Trustees (continued) | ||
Name, Year of Birth | Trustee | Number of John |
Position(s) held with Fund | of the | Hancock funds |
Principal occupation(s) and other | Trust | overseen by |
directorships during past 5 years | since1 | Trustee |
Gregory A. Russo, Born: 1949 | 2008 | 228 |
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 | 228 |
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 | 228 |
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.
38 | International Value Equity 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 Value Equity Fund | 39 |
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 | |
**Until 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 |
40 | International Value Equity Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/internatnlvaleqx37x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/internatnlvaleqx37x2.jpg)
This report is for the information of the shareholders of John Hancock International Value Equity Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 366A 3/14 |
MF181822 | 5/14 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/strategicgrowthx1x1.jpg)
A look at performance
Total returns for the period ended March 31, 2014
Average annual total returns (%) | Cumulative total returns (%) | |||||||
with maximum sales charge | with maximum sales charge | |||||||
Since | Since | |||||||
1-year | 5-year | 10-year | inception1 | 1-year | 5-year | 10-year | inception1 | |
Class A | 20.90 | — | — | 20.41 | 20.90 | — | — | 53.02 |
Class I2 | 27.68 | — | — | 23.60 | 27.68 | — | — | 62.47 |
Class NAV2 | 27.88 | — | — | 23.78 | 27.88 | — | — | 63.00 |
Index† | 23.22 | — | — | 22.72 | 23.22 | — | — | 59.66 |
Performance figures assume all distributions are reinvested. Figures reflect maximum sales charge on Class A shares of 5%. Sales charges are not applicable to Class I and Class NAV shares.
The expense ratios of the fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 6-30-15 for Class A and Class I shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. For Class NAV shares, the net expenses equal the gross expenses. The expense ratios are as follows:
Class A | Class I | Class NAV | |
Net (%) | 1.30 | 0.94 | 0.78 |
Gross (%) | 2.01 | 5.88 | 0.78 |
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 performance data current to the most recent month end, 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 would increase and results would have been less favorable.
† Index is the Russell 1000 Growth Index.
See the following page for footnotes.
6 | Strategic Growth Fund | Annual report |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/strategicgrowthx3x1.jpg)
With maximum | Without | |||
Start date | sales charge | sales charge | Index | |
Class I2 | 12-19-11 | $16,247 | $16,247 | $15,966 |
Class NAV2 | 12-19-11 | 16,300 | 16,300 | 15,966 |
Russell 1000 Growth Index is an unmanaged index which measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
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 12-19-11.
2 For certain types of investors, as described in the fund’s prospectuses.
Annual report | Strategic Growth Fund | 7 |
Management’s discussion of
Fund performance
By John Hancock Asset Management a division of Manulife Asset Management (US) LLC
U.S. stock prices enjoyed favorable gains during the 12-month period ended March 31, 2014. Solid if unspectacular economic growth and strong corporate earnings helped drive equities higher, while improvement in the unemployment picture provided an additional boost to stock values. These factors, along with manageable inflation, gave the U.S. Federal Reserve confidence to begin tapering its quantitative easing program, which consists of billions of dollars worth of monthly bond purchases designed to lower long-term interest rates and stimulate economic growth.
For the 12 months ended March 31, 2014, John Hancock Strategic Growth Fund’s Class A shares had a total return of 27.27% excluding sales charges, outpacing the 23.22% return of the benchmark Russell 1000 Growth Index.
The fund’s outperformance relative to the index was generally due to good stock selection, especially in the information technology, consumer discretionary, and healthcare sectors. In technology, the biggest individual contributor on a relative basis was social networking leader Facebook, Inc., while in the consumer discretionary sector, Internet travel-related companies TripAdvisor, Inc. and The Priceline Group, Inc. significantly added to the fund’s performance. Among biotechnology stocks, Alexion Pharmaceuticals, Inc.; Gilead Sciences, Inc.; and Biogen Idec, Inc. were standout performers.
On the other hand, the fund was hampered by its considerable underweight in software manufacturer and benchmark component Microsoft Corp., the second-largest component of the Russell 1000 Growth Index, which rose 47% during the period. In addition, for the full 12 months, the fund did not own positions in aerospace and defense manufacturer The Boeing Company or biotechnology company Celgene Corp., both of which are index components that produced very positive returns during the period. Of final note, an overweight position in data center operator Equinix Inc. was detrimental, and we sold the stock prior to period end.
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 | Strategic 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 October 1, 2013, with the same investment held until March 31, 2014.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,111.50 | $6.84 | 1.30% |
Class I | 1,000.00 | 1,113.30 | 4.95 | 0.94% |
Class NAV | 1,000.00 | 1,114.30 | 3.85 | 0.73% |
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 March 31, 2014, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/strategicgrowthx5x1.jpg)
Annual report | Strategic 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 October 1, 2013, with the same investment held until March 31, 2014. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Expenses paid | ||||
Account value | Ending value | during period | Annualized | |
on 10-1-2013 | on 3-31-2014 | ended 3-31-20141 | expense ratio | |
Class A | $1,000.00 | $1,018.40 | $6.54 | 1.30% |
Class I | 1,000.00 | 1,020.20 | 4.73 | 0.94% |
Class NAV | 1,000.00 | 1,021.30 | 3.68 | 0.73% |
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 182/365 (to reflect the one-half year period).
10 | Strategic Growth Fund | Annual report |
Portfolio summary
Top 10 Holdings (30.5% of Net Assets on 3-31-14)1,2 | ||||
Google, Inc., Class A | 4.5% | Amazon.com, Inc. | 2.7% | |
Apple, Inc. | 4.0% | The Home Depot, Inc. | 2.7% | |
Philip Morris International, Inc. | 3.0% | Amgen, Inc. | 2.6% | |
Comcast Corp., Class A | 3.0% | The Boeing Company | 2.6% | |
Microsoft Corp. | 2.9% | Visa, Inc., Class A | 2.5% | |
Sector Composition1,3 | ||||
Information Technology | 23.6% | Consumer Staples | 6.0% | |
Consumer Discretionary | 23.0% | Energy | 4.7% | |
Health Care | 17.6% | Materials | 4.2% | |
Industrials | 13.1% | Short-Term Investments & Other | 1.8% | |
Financials | 6.0% | |||
1 As a percentage of net assets on 3-31-14.
2 Cash and cash equivalents not included.
3 Growth stocks may be more susceptible to earnings disappointments. Foreign investing has additional risks, such as currency and market volatility and political and social instability. 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 | Strategic Growth Fund | 11 |
Fund’s investments
As of 3-31-14
Shares | Value | |
Common Stocks 98.2% | $1,438,384,775 | |
(Cost $1,157,122,054) | ||
Consumer Discretionary 23.0% | 336,812,630 | |
Auto Components 0.4% | ||
Johnson Controls, Inc. | 117,801 | 5,574,343 |
Hotels, Restaurants & Leisure 3.5% | ||
Las Vegas Sands Corp. | 259,855 | 20,991,087 |
Starbucks Corp. | 406,018 | 29,793,601 |
Household Durables 1.4% | ||
Mohawk Industries, Inc. (I) | 145,418 | 19,773,940 |
Internet & Catalog Retail 5.2% | ||
Amazon.com, Inc. (I) | 116,371 | 39,161,169 |
The Priceline Group, Inc. (I) | 23,579 | 28,103,574 |
TripAdvisor, Inc. (I) | 99,634 | 9,025,844 |
Leisure Products 0.8% | ||
Polaris Industries, Inc. | 87,709 | 12,253,824 |
Media 5.6% | ||
AMC Networks, Inc., Class A (I) | 269,005 | 19,661,575 |
Comcast Corp., Class A | 865,447 | 43,289,659 |
Time Warner, Inc. | 301,255 | 19,680,989 |
Specialty Retail 4.7% | ||
Lowe’s Companies, Inc. | 234,965 | 11,489,789 |
The Home Depot, Inc. | 493,889 | 39,081,437 |
Tractor Supply Company | 267,201 | 18,872,407 |
Textiles, Apparel & Luxury Goods 1.4% | ||
Michael Kors Holdings, Ltd. (I) | 215,068 | 20,059,392 |
Consumer Staples 6.0% | 87,604,066 | |
Food & Staples Retailing 3.0% | ||
Costco Wholesale Corp. | 204,247 | 22,810,305 |
Whole Foods Market, Inc. | 415,192 | 21,054,386 |
Tobacco 3.0% | ||
Philip Morris International, Inc. | 534,254 | 43,739,375 |
Energy 4.7% | 69,570,724 | |
Energy Equipment & Services 3.4% | ||
Halliburton Company | 501,261 | 29,519,260 |
Schlumberger, Ltd. | 215,259 | 20,987,753 |
12 | Strategic Growth Fund | Annual report | See notes to financial statements |
Shares | Value | |
Oil, Gas & Consumable Fuels 1.3% | ||
Anadarko Petroleum Corp. | 224,914 | $19,063,711 |
Financials 6.0% | 88,090,127 | |
Banks 2.6% | ||
Citigroup, Inc. | 395,648 | 18,832,846 |
First Republic Bank | 364,824 | 19,696,848 |
Insurance 1.4% | ||
Aon PLC | 246,008 | 20,733,554 |
Real Estate Investment Trusts 2.0% | ||
Crown Castle International Corp. | 390,714 | 28,826,879 |
Health Care 17.6% | 258,506,498 | |
Biotechnology 10.2% | ||
Alexion Pharmaceuticals, Inc. (I) | 132,412 | 20,143,838 |
Amgen, Inc. | 305,183 | 37,641,271 |
Biogen Idec, Inc. (I) | 92,357 | 28,249,236 |
Celgene Corp. (I) | 211,750 | 29,560,300 |
Gilead Sciences, Inc. (I) | 485,305 | 34,388,712 |
Health Care Providers & Services 1.4% | ||
Express Scripts Holding Company (I) | 267,006 | 20,049,481 |
Health Care Technology 1.7% | ||
Allscripts Healthcare Solutions, Inc. (I) | 1,192,032 | 21,492,337 |
Medidata Solutions, Inc. (I) | 75,344 | 4,094,193 |
Pharmaceuticals 4.3% | ||
AbbVie, Inc. | 651,254 | 33,474,456 |
Bristol-Myers Squibb Company | 221,598 | 11,512,016 |
Perrigo Company PLC | 115,742 | 17,900,658 |
Industrials 13.1% | 191,193,358 | |
Aerospace & Defense 5.9% | ||
B/E Aerospace, Inc. (I) | 106,955 | 9,282,624 |
Precision Castparts Corp. | 96,318 | 24,345,338 |
The Boeing Company | 298,057 | 37,403,173 |
United Technologies Corp. | 135,368 | 15,816,397 |
Building Products 2.3% | ||
Fortune Brands Home & Security, Inc. | 500,531 | 21,062,344 |
USG Corp. (I)(L) | 368,001 | 12,040,993 |
Electrical Equipment 0.8% | ||
Eaton Corp. PLC | 162,692 | 12,221,423 |
Machinery 2.4% | ||
Cummins, Inc. | 83,166 | 12,390,902 |
WABCO Holdings, Inc. (I) | 210,383 | 22,208,029 |
Road & Rail 1.0% | ||
Union Pacific Corp. | 73,533 | 13,799,203 |
Trading Companies & Distributors 0.7% | ||
United Rentals, Inc. (I) | 111,891 | 10,622,932 |
See notes to financial statements | Annual report | Strategic Growth Fund | 13 |
Shares | Value | ||
Information Technology 23.6% | $345,517,591 | ||
Internet Software & Services 8.0% | |||
Demandware, Inc. (I) | 55,567 | 3,559,622 | |
Facebook, Inc., Class A (I) | 608,349 | 36,646,944 | |
Google, Inc., Class A (I) | 58,664 | 65,381,615 | |
Twitter, Inc. (I)(L) | 234,384 | 10,938,701 | |
IT Services 4.6% | |||
FleetCor Technologies, Inc. (I) | 162,732 | 18,730,453 | |
Vantiv, Inc., Class A (I) | 389,375 | 11,766,913 | |
Visa, Inc., Class A | 171,497 | 37,019,342 | |
Software 7.1% | |||
FireEye, Inc. (I)(L) | 61,637 | 3,794,990 | |
Guidewire Software, Inc. (I) | 206,018 | 10,105,183 | |
Microsoft Corp. | 1,018,884 | 41,764,055 | |
ServiceNow, Inc. (I) | 131,908 | 7,903,927 | |
Tableau Software, Inc., Class A (I) | 194,253 | 14,778,768 | |
VMware, Inc., Class A (I)(L) | 233,717 | 25,246,110 | |
Technology Hardware, Storage & Peripherals 3.9% | |||
Apple, Inc. | 107,838 | 57,880,968 | |
Materials 4.2% | 61,089,781 | ||
Chemicals 3.3% | |||
PPG Industries, Inc. | 123,016 | 23,798,675 | |
The Sherwin-Williams Company | 122,378 | 24,124,375 | |
Metals & Mining 0.9% | |||
Nucor Corp. | 260,521 | 13,166,731 | |
Yield (%) | Shares | Value | |
Securities Lending Collateral 3.0% | $43,721,780 | ||
(Cost $43,720,888) | |||
John Hancock Collateral Investment Trust (W) | 0.1476 (Y) | 4,369,120 | 43,721,780 |
Par value | Value | ||
Short-Term Investments 2.6% | $37,791,000 | ||
(Cost $37,791,000) | |||
Repurchase Agreement 2.6% | 37,791,000 | ||
Repurchase Agreement with State Street Corp. dated 3-31-14 at | |||
0.000% to be repurchased at $37,791,000 on 4-1-14, collateralized | |||
by $40,155,000 U.S. Treasury Note, 1.375% due 5-31-20 (valued at | |||
$38,548,800, including interest) | $37,791,000 | 37,791,000 | |
Total investments (Cost $1,238,633,942)† 103.8% | $1,519,897,555 | ||
Other assets and liabilities, net (3.8%) | ($56,011,971) | ||
Total net assets 100.0% | $1,463,885,584 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund.
14 | Strategic Growth Fund | Annual report | See notes to financial statements |
Notes to Schedule of Investments
(I) Non-income producing security.
(L) A portion of this security is on loan as of 3-31-14.
(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 3-31-14.
† At 3-31-14, the aggregate cost of investment securities for federal income tax purposes was $1,240,322,573. Net unrealized appreciation aggregated $279,574,982, of which $288,241,569 related to appreciated investment securities and $8,666,587 related to depreciated investment securities.
See notes to financial statements | Annual report | Strategic Growth 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 3-31-14
This Statement of assets and liabilities is the fund’s balance sheet. It shows the value of what the fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
Assets | |
Investments in unaffiliated issuers, at value (Cost $1,194,913,054) | |
including $43,163,538 of securities loaned | $1,476,175,775 |
Investments in affiliated issuers, at value (Cost $43,720,888) | 43,721,780 |
Total investments, at value (Cost $1,238,633,942) | 1,519,897,555 |
Cash | 29 |
Receivable for investments sold | 1,934,176 |
Receivable for fund shares sold | 10,322 |
Dividends and interest receivable | 972,252 |
Receivable for securities lending income | 38,864 |
Receivable due from advisor | 1,609 |
Other receivables and prepaid expenses | 27,667 |
Total assets | 1,522,882,474 |
Liabilities | |
Payable for investments purchased | 15,102,271 |
Payable upon return of securities loaned | 43,729,250 |
Payable to affiliates | |
Accounting and legal services fees | 55,460 |
Transfer agent fees | 1,361 |
Trustees’ fees | 773 |
Other liabilities and accrued expenses | 107,775 |
Total liabilities | 58,996,890 |
Net assets | $1,463,885,584 |
Net assets consist of | |
Paid-in capital | $1,108,165,421 |
Undistributed net investment income | 1,355,967 |
Accumulated net realized gain (loss) on investments | 73,100,583 |
Net unrealized appreciation (depreciation) on investments | 281,263,613 |
Net assets | $1,463,885,584 |
16 | Strategic 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 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 ($10,074,176 ÷ 649,991 shares)1 | $15.50 |
Class I ($2,048,393 ÷ 131,496 shares) | $15.58 |
Class NAV ($1,451,763,015 ÷ 93,160,747 shares) | $15.58 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $16.32 |
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 | Strategic Growth 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 3-31-14
This Statement of operations summarizes the fund’s investment income earned and expenses incurred in operating the fund. It also shows net gains (losses) for the period stated.
Investment income | |
Dividends | $12,327,857 |
Securities lending | 219,426 |
Interest | 2,811 |
Total investment income | 12,550,094 |
Expenses | |
Investment management fees | 8,865,491 |
Distribution and service fees | 21,049 |
Accounting and legal services fees | 162,475 |
Transfer agent fees | 11,456 |
Trustees’ fees | 41,971 |
State registration fees | 37,296 |
Printing and postage | 4,902 |
Professional fees | 68,809 |
Custodian fees | 125,789 |
Registration and filing fees | 23,394 |
Other | 21,260 |
Total expenses | 9,383,892 |
Less expense reductions | (96,728) |
Net expenses | 9,287,164 |
Net investment income | 3,262,930 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Investments in unaffiliated issuers | 129,674,830 |
Investments in affiliated issuers | (4,308) |
129,670,522 | |
Change in net unrealized appreciation (depreciation) of | |
Investments in unaffiliated issuers | 169,984,674 |
Investments in affiliated issuers | (832) |
169,983,842 | |
Net realized and unrealized gain | 299,654,364 |
Increase in net assets from operations | $302,917,294 |
18 | Strategic 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
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 | |
3-31-14 | 3-31-13 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $3,262,930 | $6,098,580 |
Net realized gain (loss) | 129,670,522 | (7,090,053) |
Change in net unrealized appreciation (depreciation) | 169,983,842 | 69,801,172 |
Increase in net assets resulting from operations | 302,917,294 | 68,809,699 |
Distributions to shareholders | ||
From net investment income | ||
Class I | (2,416) | (687) |
Class NAV | (5,281,030) | (2,794,360) |
From net realized gain | ||
Class A | (287,371) | (11,944) |
Class I | (38,354) | (1,468) |
Class NAV | (49,131,097) | (2,610,928) |
Total distributions | (54,740,268) | (5,419,387) |
From fund share transactions | 196,795,714 | 616,312,525 |
Total increase | 444,972,740 | 679,702,837 |
Net assets | ||
Beginning of year | 1,018,912,844 | 339,210,007 |
End of year | $1,463,885,584 | $1,018,912,844 |
Undistributed net investment income | $1,355,967 | $3,376,483 |
See notes to financial statements | Annual report | Strategic Growth 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 | 3-31-14 | 3-31-13 | 3-31-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $12.62 | $12.14 | $10.00 | ||
Net investment income (loss)2 | (0.04) | 0.02 | (0.01) | ||
Net realized and unrealized gain on investments | 3.46 | 0.49 | 2.15 | ||
Total from investment operations | 3.42 | 0.51 | 2.14 | ||
Less distributions | |||||
From net investment income | — | — | —3 | ||
From net realized gain | (0.54) | (0.03) | — | ||
Total distributions | (0.54) | (0.03) | —3 | ||
Net asset value, end of period | $15.50 | $12.62 | $12.14 | ||
Total return (%)4,5 | 27.27 | 4.25 | 21.416 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $10 | $5 | $3 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.51 | 2.01 | 2.057 | ||
Expenses net of fee waivers | 1.30 | 1.30 | 1.307 | ||
Net investment income (loss) | (0.29) | 0.18 | (0.32)7 | ||
Portfolio turnover (%) | 91 | 100 | 26 | ||
1 Period from 12-19-11 (commencement of operations) to 3-31-12.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Does not reflect the effect of sales charges, if any.
5 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
6 Not annualized.
7 Annualized.
20 | Strategic Growth Fund | Annual report | See notes to financial statements |
CLASS I SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | ||
Per share operating performance | |||||
Net asset value, beginning of period | $12.67 | $12.16 | $10.00 | ||
Net investment income2 | 0.01 | 0.06 | —3 | ||
Net realized and unrealized gain on investments | 3.47 | 0.50 | 2.16 | ||
Total from investment operations | 3.48 | 0.56 | 2.16 | ||
Less distributions | |||||
From net investment income | (0.03) | (0.02) | —3 | ||
From net realized gain | (0.54) | (0.03) | — | ||
Total distributions | (0.57) | (0.05) | —3 | ||
Net asset value, end of period | $15.58 | $12.67 | $12.16 | ||
Total return (%)4 | 27.68 | 4.62 | 21.635 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | $1 | —6 | ||
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.62 | 5.88 | 11.447 | ||
Expenses net of fee waivers | 0.94 | 0.94 | 0.947 | ||
Net investment income | 0.09 | 0.51 | 0.147 | ||
Portfolio turnover (%) | 91 | 100 | 26 | ||
1 Period from 12-19-11 (commencement of operations) to 3-31-12.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
CLASS NAV SHARES Period ended | 3-31-14 | 3-31-13 | 3-31-121 | ||||
Per share operating performance | |||||||
Net asset value, beginning of period | $12.67 | $12.16 | $10.00 | ||||
Net investment income2 | 0.04 | 0.08 | —3 | ||||
Net realized and unrealized gain on investments | 3.47 | 0.50 | 2.16 | ||||
Total from investment operations | 3.51 | 0.58 | 2.16 | ||||
Less distributions | |||||||
From net investment income | (0.06) | (0.04) | —3 | ||||
From net realized gain | (0.54) | (0.03) | — | ||||
Total distributions | (0.60) | (0.07) | —3 | ||||
Net asset value, end of period | $15.58 | $12.67 | $12.16 | ||||
Total return (%)4 | 27.88 | 4.80 | 21.635 | ||||
Ratios and supplemental data | |||||||
Net assets, end of period (in millions) | $1,452 | $1,013 | $336 | ||||
Ratios (as a percentage of average net assets): | |||||||
Expenses before reductions | 0.74 | 0.78 | 0.856 | ||||
Expenses net of fee waivers | 0.73 | 0.78 | 0.856 | ||||
Net investment income | 0.26 | 0.71 | 0.156 | ||||
Portfolio turnover (%) | 91 | 100 | 26 | ||||
1 Period from 12-19-11 (commencement of operations) to 3-31-12.
2 Based on the average daily shares outstanding.
3 Less than $0.005 per share.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5 Not annualized.
6 Annualized.
See notes to financial statements | Annual report | Strategic Growth Fund | 21 |
Notes to financial statements
Note 1 — Organization
John Hancock Strategic 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 long-term 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 shares are offered to all investors. Class I shares are offered to institutions and certain 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, and transfer agent fees, printing and postage and state registration fees for each class may differ.
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. 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.
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
22 | Strategic Growth Fund | Annual report |
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 March 31, 2014, all investments are categorized as Level 1 under the hierarchy described above except repurchase agreements, which are categorized as Level 2.
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund’s custodian. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. Collateral for certain tri-party repurchase agreements is held at a third-party custodian bank in a segregated account for the benefit of the fund.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, the MRA does not result in an offset of the reported amounts of assets and liabilities in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay back claims resulting from close-out of the transactions. Collateral received by the fund for repurchase agreements is disclosed in the Fund’s investments as part of the caption related to the repurchase agreement.
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. 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 portfolio, 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
Annual report | Strategic Growth Fund | 23 |
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 Statement of assets and liabilities as Payable upon return of securities loaned.
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 March 31, 2014 were $1,275. For the year ended March 31, 2014, the fund had no borrowings under the line of credit.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, 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.
As of March 31, 2014, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital distributions, if any, annually. The tax character of distributions for the years ended March 31, 2014 and 2013 was as follows:
MARCH 31, 2014 | MARCH 31, 2013 | ||
Ordinary Income | $41,180,204 | $5,419,387 | |
Long-Term Capital Gain | $13,560,064 | — | |
Total | $54,740,268 | $5,419,387 |
24 | Strategic Growth Fund | Annual report |
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 March 31, 2014, the components of distributable earnings on a tax basis consisted of $44,325,818 of undistributed ordinary income and $31,819,363 of long-term capital gain.
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.
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 the sum of: (a) 0.725% of the first $500,000,000 of the fund’s average daily net assets; (b) 0.700% of the next $500,000,000 of the fund’s average daily net assets; (c) 0.675% of the next $500,000,000 of the fund’s average daily net assets; and (d) 0.650% of the fund’s average daily net assets in excess of $1,500,000,000. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
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.
Annual report | Strategic Growth Fund | 25 |
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 of a portion of its management fee and reimburse or pay operating expenses of the fund to the extent necessary to maintain the fund’s total operating expenses at 1.30% and 0.94% for Class A and Class I shares, respectively. 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. For Class A and Class I shares, this expense limitation shall remain in effect through at least June 30, 2015, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that is appropriate under the circumstances at the time.
The expense reductions described above amounted to $14,798, $18,510 and $63,420 for Class A, Class I and Class NAV shares, respectively, for the year ended March 31, 2014.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended March 31, 2014 were equivalent to a net annual effective rate of 0.70% 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 March 31, 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 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 pays 0.30% for Class A shares of distribution and service fees under the arrangements, expressed as an annual percentage of average daily net assets.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $41,301 for the year ended March 31, 2014. Of this amount, $6,777 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $33,557 was paid as sales commissions to broker-dealers and $967 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A 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. 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 March 31, 2014, there were no CDSCs received by the Distributor for Class A.
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
26 | Strategic Growth Fund | Annual report |
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.
Class level expenses. Class level expenses for the year ended March 31, 2014 were:
DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
Class A | $21,049 | $10,162 | $18,947 | $3,855 |
Class I | — | 1,294 | 18,349 | 1,047 |
Total | $21,049 | $11,456 | $37,296 | $4,902 |
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:
WEIGHTED AVERAGE | DAYS | WEIGHTED AVERAGE | INTEREST | |
BORROWER OR LENDER | LOAN BALANCE | OUTSTANDING | INTEREST RATE | INCOME |
Lender | $20,589,470 | 8 | 0.45% | $2,060 |
Note 5 — Fund share transactions
Transactions in fund shares for the years ended March 31, 2014 and 2013 were as follows:
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class A shares | ||||
Sold | 294,034 | $4,371,215 | 202,152 | $2,399,453 |
Distributions reinvested | 12,334 | 184,513 | 478 | 5,596 |
Repurchased | (52,908) | (762,600) | (56,936) | (671,858) |
Net increase | 253,460 | $3,793,128 | 145,694 | $1,733,191 |
Annual report | Strategic Growth Fund | 27 |
Year ended 3-31-14 | Year ended 3-31-13 | |||
Shares | Amount | Shares | Amount | |
Class I shares | ||||
Sold | 69,453 | $1,090,446 | 38,731 | $471,183 |
Distributions reinvested | 2,331 | 35,016 | 142 | 1,672 |
Repurchased | (3,167) | (45,530) | (12,930) | (148,049) |
Net increase | 68,617 | $1,079,932 | 25,943 | $324,806 |
Class NAV shares | ||||
Sold | 18,773,217 | $272,807,361 | 53,490,022 | $627,632,168 |
Distributions reinvested | 3,625,058 | 54,412,127 | 460,809 | 5,405,288 |
Repurchased | (9,225,312) | (135,296,834) | (1,572,659) | (18,782,928) |
Net increase | 13,172,963 | $191,922,654 | 52,378,172 | $614,254,528 |
Total net increase | 13,495,040 | $196,795,714 | 52,549,809 | $616,312,525 |
Affiliates of the Trust owned 29%, 8% and 100% of shares of beneficial interest of Class A, Class I and Class NAV, respectively, on March 31, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $1,228,907,844 and $1,099,422,824, respectively, for the year ended March 31, 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 March 31, 2014, funds within the John Hancock group of funds complex held 99.3% of the fund’s net assets. The following funds had an affiliate ownership of 5% or more of the fund’s net assets:
AFFILIATED | |||
FUND | CONCENTRATION | ||
John Hancock Lifestyle Growth Portfolio | 31.0% | ||
John Hancock Lifestyle Balanced Portfolio | 24.1% | ||
John Hancock Lifestyle Growth Managed Volatility Portfolio | 12.2% | ||
John Hancock Lifestyle Aggressive Portfolio | 11.6% | ||
John Hancock Lifestyle Balanced Managed Volatility Portfolio | 5.6% | ||
John Hancock Lifestyle Moderate Portfolio | 5.0% |
28 | Strategic Growth Fund | Annual report |
Auditor’s report
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of John Hancock Funds III and Shareholders of
John Hancock Strategic 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 Strategic Growth Fund (the “Fund”) at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2014 by correspondence with the custodian, transfer agent and brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 15, 2014
Annual report | Strategic Growth Fund | 29 |
Tax information
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended March 31, 2014.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $13,560,064 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.
30 | Strategic 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 | 228 | ||
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 | 228 | ||
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 | 228 | ||
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); | ||||
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 | 228 | ||
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 | Strategic Growth Fund | 31 |
Independent Trustees (continued)
Name, Year of Birth | Trustee | Number of John | ||
Position(s) held with Fund | of the | Hancock funds | ||
Principal occupation(s) and other | Trust | overseen by | ||
directorships during past 5 years | since1 | Trustee | ||
Grace K. Fey, Born: 1946 | 2012 | 228 | ||
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 | 228 | ||
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 | 228 | ||
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 | 228 | ||
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 | 228 | ||
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). |
32 | Strategic 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 | 228 |
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 | 228 | ||
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 | 228 | ||
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 | Strategic Growth Fund | 33 |
Principal officers who are not Trustees (continued)
Name, Year of Birth | Officer | |||
Position(s) held with Fund | of the | |||
Principal occupation(s) and other | Trust | |||
directorships during past 5 years | since | |||
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.
34 | Strategic 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† | 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 | |
**Until 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 | Strategic Growth Fund | 35 |
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/strategicgrowthx32x1.jpg)
800-225-5291
800-231-5469 TDD
800-338-8080 EASI-Line
jhinvestments.com
![](https://capedge.com/proxy/N-CSR/0000928816-14-000777/strategicgrowthx32x2.jpg)
This report is for the information of the shareholders of John Hancock Strategic Growth Fund. | |
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 393A 3/14 |
MF181847 | 5/14 |
ITEM 2. CODE OF ETHICS.
As of the end of the year, March 31, 2014, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Covered Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Peter S. Burgess is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to the following for the fiscal years ended March 31, 2014 and 2013. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | March 31, 2014 | March 31, 2013 | ||
Core High Yield Fund | $ | 57,759 | $ | 57,334 |
Disciplined Value Fund | 31,949 | 32,825 | ||
Disciplined Value Mid Cap Fund | 40,439 | 34,515 | ||
International Value Equity Fund | 37,934 | 33,759 | ||
Leveraged Companies Fund | ||||
(liquidated 9-5-13) | - | 39,887 | ||
Select Growth Fund (formerly | ||||
Rainier Growth Fund) | 36,568 | 37,444 | ||
Small Cap Opportunities Fund | ||||
(liquidated 8-8-13) | - | 31,439 | ||
Small Company Fund | 39,586 | 40,511 | ||
Strategic Growth Fund | 28,642 | 29,518 | ||
Total | $ | 272,877 | $ | 337,232 |
(b) Audit-Related Services
Audit-related fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser ("control affiliates") that provides ongoing services to the registrant. The nature of the services provided was affiliated service provider internal controls reviews. Amounts billed to the registrant were as follows:
Fund | March 31, 2014 | March 31, 2013 | ||
Core High Yield Fund | $ | 558 | $ | 738 |
Disciplined Value Fund | 558 | 738 | ||
Disciplined Value Mid Cap Fund | 558 | 738 | ||
International Value Equity Fund | 558 | 738 | ||
Leveraged Companies Fund | ||||
(liquidated 9-5-13) | - | 738 | ||
Select Growth Fund (formerly | ||||
Rainier Growth Fund) | 558 | 738 | ||
Small Cap Opportunities Fund | ||||
(liquidated 8-8-13) | - | 738 | ||
Small Company Fund | 558 | 738 | ||
Strategic Growth Fund | 558 | 738 | ||
Total | $ | 3,906 | $ | 6,642 |
Amounts billed to control affiliates were $98,642 and $99,637 for the fiscal years ended March 31, 2014 and 2013, respectively.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to the following for the fiscal years ended March 31, 2014 and 2013. The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | March 31, 2014 | March 31, 2013 | ||
Core High Yield Fund | $ | 4,300 | $ | 4,300 |
Disciplined Value Fund | 2,380 | 2,380 | ||
Disciplined Value Mid Cap Fund | 2,675 | 2,675 | ||
International Value Equity Fund | 4,018 | 4,018 | ||
Leveraged Companies Fund | ||||
(liquidated 9-5-13) | - | 1,138 | ||
Select Growth Fund (formerly | ||||
Rainier Growth Fund) | 1,879 | 1,879 | ||
Small Cap Opportunities Fund | ||||
(liquidated 8-8-13) | - | 2,590 | ||
Small Company Fund | 2,590 | 2,590 | ||
Strategic Growth Fund | 3,502 | 3,502 | ||
Total | $ | 21,344 | $ | 25,072 |
(d) All Other Fees
Other fees billed for professional services rendered by the principal accountant to the registrant or to the control affiliates amounted to the following:
Fund | March 31, 2014 | March 31, 2013 | ||
Core High Yield Fund | $ | 382 | $ | 414 |
Disciplined Value Fund | 122 | 167 | ||
Disciplined Value Mid Cap Fund | 122 | 167 | ||
International Value Equity Fund | 382 | 414 | ||
Leveraged Companies Fund | ||||
(liquidated 9-5-13) | - | 271 | ||
Select Growth Fund (formerly | ||||
Rainier Growth Fund) | 122 | 167 | ||
Small Cap Opportunities Fund | ||||
(liquidated 8-8-13) | - | 271 | ||
Small Company Fund | 122 | 167 | ||
Strategic Growth Fund | 122 | 167 | ||
Total | $ | 1,374 | $ | 2,205 |
(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 March 31, 2014, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and rendered to the registrant's control affiliates were $5,510,826 for the fiscal year ended March 31, 2014 and $2,730,499 for the fiscal year ended March 31, 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
Charles L. Bardelis
Theron S. Hoffman
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Covered Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
(c)(2) Contact person at the registrant.
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Funds III | |
By: | /s/ Andrew Arnott |
------------------------------ | |
Andrew Arnott | |
President | |
Date: | May 13, 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Andrew Arnott |
------------------------------- | |
Andrew Arnott | |
President | |
Date: | May 13, 2014 |
By: | /s/ Charles A. Rizzo |
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Charles A. Rizzo | |
Chief Financial Officer | |
Date: | May 13, 2014 |