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 |
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Date of reporting period: | September 30, 2014 |
ITEM 1. REPORTS TO STOCKHOLDERS.
John Hancock
Select Growth Fund(Formerly known as John Hancock Rainier Growth Fund)Semiannual report 9/30/14
A message to shareholders
Dear fellow shareholder,
The economic expansion that began in 2009 continues, with moderate GDP growth in the United States and the unemployment rate down considerably from its peak. However, the scene outside the United States had become decidedly less robust by the end of September. China's economy, a key driver of global demand, was slowing, Japan's GDP contracted in the second quarter, and the International Monetary Fund warned of another eurozone recession unless more is done to stimulate economic growth there. Meanwhile, bond markets around the world have turned in positive performance as investors pursue yield where they can find it, and the risks of rising interest rates and central bank tightening have been pushed out further into the future.
In the absence of pronounced market dislocations, we believe investors are well served by sticking to a commonsense, diversified approach, one that includes a mix of equities, fixed-income, and alternative strategies that can offer added diversification potential. Although events like those taking place in Ukraine and the Middle East serve as reminders that all market environments carry risk, we believe the biggest risk investors face in today's market is not staying invested.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an effort to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of September 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Select Growth Fund
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INVESTMENT OBJECTIVE
The fund seeks maximum long-term capital appreciation.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 (%)
See page 8 for more complete performance information.
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 shares and Institutional shares were exchanged for Class A and Class I shares, respectively, of John Hancock Select Growth (formerly, Rainier Growth) Fund. Class A shares were first offered on 4-28-08. Class A shares' returns shown above are those of the predecessor fund's Original shares that have been recalculated to reflect the gross fees and expenses of Class A shares.
Russell 1000 Growth Index is an unmanaged index containing those securities in the Russell 1000 Index with a greater-than-average growth orientation. It is not possible to invest directly in an index.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
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PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
U.S. stocks advanced on robust economic growth
Signs of robust economic growth in the U.S. provided a favorable backdrop for stocks, propelling the broad equity indexes higher.
Fund performance lagged its benchmark
The fund declined for the period, underperforming the positive return of the Russell 1000 Growth Index.
Technology and financials were key detractors
The information technology and financials sectors contributed the most to the fund's underperformance.
PORTFOLIO COMPOSITION AS OF 9/30/14 (%)
A note about risks
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. 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. The value of a company's equity securities is subject to changes in the company's financial condition, and overall market and economic conditions. The securities of growth companies are subject to greater price fluctuations than other types of stocks because their market prices tend to place greater emphasis on future earnings expectations. Please see the fund's prospectuses for additional risks.
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![](https://capedge.com/proxy/N-CSRS/0001145443-14-001428/ianctabberer.jpg)
Ian C. Tabberer
Portfolio Manager
Baillie Gifford
Baillie Gifford & Co. took over management of the fund on April 17, 2014. What is your investment philosophy?
Our investment approach focuses on the best growth companies in America, as defined by a strong and durable competitive position with exceptional corporate management. We maintain a concentrated portfolio of stocks—typically 35 to 45 companies—because we refuse to dilute the portfolio with inferior stocks. We also look at the investment landscape from a global perspective; U.S. companies operate in an increasingly intertwined global market, and to fully understand their prospects, we must examine this broader context.
It's also important to note that we are long-term investors. We evaluate investment opportunities over a three- to five-year time horizon. Patience is our guiding principle as we seek out superior management teams with long-term strategies that will steer businesses successfully through potential upheaval. Sometimes it takes many years for the full benefits of a capital allocation decision to be recognized, both in a company's financial statements and in the stock market's assessment of the business. But it is this long-term view that allows us to differentiate between the random noise of short-term results and the generation of high returns and profit growth that can be compounded over time.
Turning to the six-month period, the fund underperformed its benchmark index. What factors contributed to this underperformance?
One feature of a concentrated portfolio is that each holding has, for better or worse, an outsized impact on the overall performance of the portfolio. Over the last six months, it was for worse, as we found ourselves out of step with the market's short-term view of several portfolio holdings.
One example was First Republic Bank, which is facing higher costs in the near term because its asset base has grown to the point where it will be subject to a higher degree of regulatory scrutiny. To prepare for this, the company's management team made the sensible decision to slow loan growth temporarily. Once First Republic completes this transition, we expect growth to return to normal, and margins should recover as the bank resumes its growth. We view this as a natural progression
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The market also took a dim view of iconic motorcycle manufacturer Harley-Davidson, Inc., which delivered weaker-than-expected results in its most recent quarterly report. We believe the disappointing numbers resulted from abnormally cold weather, supply constraints on its recently launched Street brand, and the absence of a key model for the selling season. However, our confidence in the long-term growth potential at Harley-Davidson is as strong as ever. As supply constraints on the new brand are resolved and the weather normalizes, sales performance should recover. In addition, the company has plans to target new demographics (younger riders) and newer markets (such as India). Harley-Davidson trades at a discount to the broader market, yet grows earnings at a significantly faster rate, so we remain positive on the company's overall prospects.
Another underperformer in the portfolio for the six months was Watsco, Inc., which distributes air conditioning systems and associated parts. Cooler weather had a negative impact on demand for Watsco's products during the period, and the company's earnings suffered as a result. As with Harley-Davidson and First Republic, however, this is a short-term issue, and we continue to expect favorable results for Watsco going forward.
SECTOR COMPOSITION AS OF 9/30/14 (%)
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Let's shift gears and talk about some positive contributors. What holdings added value?
One of our top contributors was WellPoint, Inc., which is the second-largest health insurer in the U.S. We believe the company is well positioned to navigate the rapidly changing healthcare landscape. In particular, we think the combination of its strong brands (Blue Cross/Blue Shield) and cost advantages should allow the company to profitably take market share on the newly formed healthcare exchanges. We have also been impressed by WellPoint's new CEO, who has re-focused the company on underwriting profitability and cost controls. The stock's valuation suggests that the market is pricing in a fairly limited view of future growth potential, but we are much more optimistic about the company's prospects.
Leading tobacco company Altria Group, Inc. was another strong contributor, benefiting from a July price increase across its strong brand portfolio, featuring names such as Marlboro and Copenhagen. Altria and its two main competitors, Lorillard and Reynolds American, control 90% of the U.S. tobacco market, giving Altria oligopolistic pricing power. Altria has also been reducing costs and gaining momentum in the burgeoning e-cigarette market. In fact, Altria has licensed its e-cigarette brands to Philip Morris internationally, which will help the company's long-term growth prospects as its e-cigarette brands gain recognition around the world while generating royalty income.
Oil exploration and production company Apache Corp. also added value during the period as demand for U.S. petroleum products increased. In addition, activist investment firm JANA Partners
TEN LARGEST HOLDINGS AS OF 9/30/14 (%)
WellPoint, Inc. | 5.2 |
Google, Inc., Class A | 5.1 |
First Republic Bank | 5.1 |
Harley-Davidson, Inc. | 4.3 |
Johnson & Johnson | 4.3 |
Fairfax Financial Holdings, Ltd. | 4.0 |
Altria Group, Inc. | 3.8 |
Martin Marietta Materials, Inc. | 3.7 |
Berkshire Hathaway, Inc., Class B | 3.6 |
O'Reilly Automotive, Inc. | 3.4 |
TOTAL | 42.5 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
6
acquired a $1 billion stake in the company. After disposing of some assets, Apache has refocused its business on North American oil production, particularly its large holdings in the Permian Basin and Central Region in Texas, where oil production from horizontal drilling techniques has surged. The market reacted positively to the management team's strategy, and we took advantage of the outperformance to reduce the fund's position in the stock.
The fund's largest sector weighting is financials, which is unusual for a growth-oriented portfolio. What's behind this positioning?
Individual stock selection drives our sector positioning, not the other way around. If the portfolio has a significant weighting in a particular sector, it's simply a consequence of where we have found exceptional investment opportunities. The fund currently holds a number of exciting companies in the financials sector, including the aforementioned First Republic Bank, that we believe can meet our growth criteria over the long term.
Similarly, the fund holds underweight positions in the information technology and consumer discretionary sectors, as well as owning no utilities or telecommunication services companies. Once again, this is not by design; it is the result of where we are—and are not—finding attractive growth stocks.
Are there any notable themes in the portfolio?
The fund is heavily tilted toward a U.S. economic recovery—the majority of the revenues generated by portfolio companies are derived from the U.S. We view the tapering of quantitative easing measures by the U.S. Federal Reserve as a sign that the economic recovery is on firm footing, and we expect to see significant tailwinds as banks loosen lending standards.
MANAGED BY
![]() | Ian C. Tabberer On the fund since 2014 Investing since 2001 |
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TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||||
1-year | 5-year | 10-year | 6-month | 1-year | 5-year | 10-year | |||
Class A1 | -0.61 | 10.49 | 6.40 | -8.59 | -0.61 | 64.67 | 85.90 | ||
Class B1 | 0.29 | 10.47 | 5.90 | -7.75 | 0.29 | 64.53 | 77.38 | ||
Class C1 | 3.04 | 10.72 | 5.89 | -4.86 | 3.04 | 66.39 | 77.22 | ||
Class I1,2 | 4.87 | 12.03 | 7.30 | -3.62 | 4.87 | 76.45 | 102.30 | ||
Class R11,2 | 4.10 | 11.13 | 6.29 | -3.99 | 4.10 | 69.49 | 84.12 | ||
Class R21,2 | 4.38 | 10.71 | 5.65 | -3.84 | 4.38 | 66.29 | 73.22 | ||
Class R31,2 | 4.22 | 11.25 | 6.41 | -3.90 | 4.22 | 70.40 | 86.11 | ||
Class R41,2 | 4.66 | 11.63 | 6.75 | -3.71 | 4.66 | 73.37 | 92.20 | ||
Class R51,2 | 4.82 | 11.91 | 7.04 | -3.63 | 4.82 | 75.52 | 97.53 | ||
Class R61,2 | 5.02 | 12.10 | 7.35 | -3.55 | 5.02 | 77.02 | 103.33 | ||
Class T1,2 | -0.69 | 10.35 | 5.95 | -8.60 | -0.69 | 63.65 | 78.19 | ||
Class ADV1,2 | 4.72 | 11.77 | 7.04 | -3.67 | 4.72 | 74.46 | 97.47 | ||
Class NAV1,2 | 5.08 | 12.15 | 7.40 | -3.54 | 5.08 | 77.43 | 104.24 | ||
Index 1† | 19.15 | 16.50 | 8.94 | 6.69 | 19.15 | 114.64 | 135.40 | ||
Index 2† | 19.73 | 15.70 | 8.11 | 6.42 | 19.73 | 107.30 | 118.04 |
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 sold within one year of purchase 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. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R1 | Class R2 | Class R3 | Class R4 | Class R5 | Class R6 | Class T | Class ADV | Class NAV | |
Gross (%) | 1.18 | 1.99 | 2.02 | 0.93 | 4.23 | 15.75 | 13.14 | 11.01 | 12.43 | 1.09 | 1.26 | 1.24 | 0.77 |
Net (%) | 1.18 | 1.99 | 2.02 | 0.93 | 1.70 | 1.45 | 1.60 | 1.20 | 1.00 | 0.78 | 1.26 | 1.14 | 0.77 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† | Index 1 is the Russell 1000 Growth Index; Index 2 is the S&P 500 Index. |
See the following page for footnotes.
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This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Select Growth Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in two separate indexes.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index 1 ($) | Index 2 ($) | |
Class B1,3 | 9-30-04 | 17,738 | 17,738 | 23,540 | 21,804 |
Class C1,3 | 9-30-04 | 17,722 | 17,722 | 23,540 | 21,804 |
Class I1,2 | 9-30-04 | 20,230 | 20,230 | 23,540 | 21,804 |
Class R11,2 | 9-30-04 | 18,412 | 18,412 | 23,540 | 21,804 |
Class R21,2 | 9-30-04 | 17,322 | 17,322 | 23,540 | 21,804 |
Class R31,2 | 9-30-04 | 18,611 | 18,611 | 23,540 | 21,804 |
Class R41,2 | 9-30-04 | 19,220 | 19,220 | 23,540 | 21,804 |
Class R51,2 | 9-30-04 | 19,753 | 19,753 | 23,540 | 21,804 |
Class R61,2 | 9-30-04 | 20,333 | 20,333 | 23,540 | 21,804 |
Class T1,2 | 9-30-04 | 17,819 | 18,751 | 23,540 | 21,804 |
Class ADV1,2 | 9-30-04 | 19,747 | 19,747 | 23,540 | 21,804 |
Class NAV1,2 | 9-30-04 | 20,424 | 20,424 | 23,540 | 21,804 |
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 shares and Institutional shares were exchanged for Class A and Class I shares, respectively, of John Hancock Select Growth (formerly, Rainier Growth) Fund, which were first offered on 4-28-08. 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. |
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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 presenting 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 April 1, 2014, with the same investment held until September 30, 2014.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $962.30 | $5.95 | 1.21% |
Class B | 1,000.00 | 958.80 | 9.92 | 2.02% |
Class C | 1,000.00 | 958.70 | 9.97 | 2.03% |
Class I | 1,000.00 | 963.80 | 4.82 | 0.98% |
Class R1 | 1,000.00 | 960.10 | 8.35 | 1.70% |
Class R2 | 1,000.00 | 961.60 | 7.13 | 1.45% |
Class R3 | 1,000.00 | 961.00 | 7.87 | 1.60% |
Class R4 | 1,000.00 | 962.90 | 5.90 | 1.20% |
Class R5 | 1,000.00 | 963.70 | 4.92 | 1.00% |
Class R6 | 1,000.00 | 964.50 | 3.99 | 0.81% |
Class T | 1,000.00 | 962.30 | 6.35 | 1.29% |
Class ADV | 1,000.00 | 963.30 | 5.61 | 1.14% |
Class NAV | 1,000.00 | 964.60 | 3.84 | 0.78% |
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 September 30, 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:
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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 April 1, 2014, with the same investment held until September 30, 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.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.00 | $6.12 | 1.21% |
Class B | 1,000.00 | 1,014.90 | 10.20 | 2.02% |
Class C | 1,000.00 | 1,014.90 | 10.25 | 2.03% |
Class I | 1,000.00 | 1,020.20 | 4.96 | 0.98% |
Class R1 | 1,000.00 | 1,016.50 | 8.59 | 1.70% |
Class R2 | 1,000.00 | 1,017.80 | 7.33 | 1.45% |
Class R3 | 1,000.00 | 1,017.00 | 8.09 | 1.60% |
Class R4 | 1,000.00 | 1,019.10 | 6.07 | 1.20% |
Class R5 | 1,000.00 | 1,020.10 | 5.06 | 1.00% |
Class R6 | 1,000.00 | 1,021.00 | 4.10 | 0.81% |
Class T | 1,000.00 | 1,018.60 | 6.59 | 1.29% |
Class ADV | 1,000.00 | 1,019.40 | 5.77 | 1.14% |
Class NAV | 1,000.00 | 1,021.20 | 3.95 | 0.78% |
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 183/365 (to reflect the one-half year period). |
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Fund's investments
As of 9-30-14 (Unaudited) | |||||||||||||||||
Shares | Value | ||||||||||||||||
Common Stocks 92.9% | $383,053,523 | ||||||||||||||||
(Cost $378,342,328) | |||||||||||||||||
Consumer Discretionary 11.2% | 46,201,685 | ||||||||||||||||
Automobiles 4.3% | |||||||||||||||||
Harley-Davidson, Inc. | 305,448 | 17,777,074 | |||||||||||||||
Internet & Catalog Retail 2.8% | |||||||||||||||||
TripAdvisor, Inc. (I) | 127,760 | 11,679,819 | |||||||||||||||
Specialty Retail 4.1% | |||||||||||||||||
CarMax, Inc. (I) | 61,810 | 2,871,075 | |||||||||||||||
O'Reilly Automotive, Inc. (I) | 92,270 | 13,873,717 | |||||||||||||||
Consumer Staples 10.3% | 42,468,943 | ||||||||||||||||
Beverages 2.5% | |||||||||||||||||
Brown-Forman Corp., Class B | 115,260 | 10,398,757 | |||||||||||||||
Food Products 3.0% | |||||||||||||||||
Kraft Foods Group, Inc. | 221,740 | 12,506,136 | |||||||||||||||
Household Products 1.0% | |||||||||||||||||
Colgate-Palmolive Company | 61,740 | 4,026,683 | |||||||||||||||
Tobacco 3.8% | |||||||||||||||||
Altria Group, Inc. | 338,210 | 15,537,367 | |||||||||||||||
Energy 2.8% | 11,552,654 | ||||||||||||||||
Oil, Gas & Consumable Fuels 2.8% | |||||||||||||||||
Apache Corp. | 52,620 | 4,939,439 | |||||||||||||||
EOG Resources, Inc. | 17,947 | 1,777,112 | |||||||||||||||
Ultra Petroleum Corp. (I) | 207,915 | 4,836,103 | |||||||||||||||
Financials 26.8% | 110,503,808 | ||||||||||||||||
Banks 11.0% | |||||||||||||||||
First Republic Bank | 423,700 | 20,922,307 | |||||||||||||||
M&T Bank Corp. | 106,145 | 13,086,617 | |||||||||||||||
U.S. Bancorp | 266,540 | 11,149,368 | |||||||||||||||
Capital Markets 2.5% | |||||||||||||||||
TD Ameritrade Holding Corp. | 312,390 | 10,424,454 | |||||||||||||||
Consumer Finance 1.0% | |||||||||||||||||
American Express Company | 48,890 | 4,279,831 | |||||||||||||||
Diversified Financial Services 3.6% | |||||||||||||||||
Berkshire Hathaway, Inc., Class B (I) | 108,550 | 14,995,097 | |||||||||||||||
Insurance 8.7% | |||||||||||||||||
Fairfax Financial Holdings, Ltd. | 37,074 | 16,610,887 | |||||||||||||||
Markel Corp. (I) | 19,472 | 12,387,113 | |||||||||||||||
The Progressive Corp. | 262,980 | 6,648,134 |
Shares | Value | ||||||||||||||||
Health Care 13.1% | $53,909,147 | ||||||||||||||||
Biotechnology 2.2% | |||||||||||||||||
Genomic Health, Inc. (I) | 216,793 | 6,137,410 | |||||||||||||||
Seattle Genetics, Inc. (I) | 75,300 | 2,799,654 | |||||||||||||||
Health Care Equipment & Supplies 1.0% | |||||||||||||||||
IDEXX Laboratories, Inc. (I) | 33,952 | 4,000,564 | |||||||||||||||
Health Care Providers & Services 5.2% | |||||||||||||||||
WellPoint, Inc. | 180,667 | 21,611,387 | |||||||||||||||
Pharmaceuticals 4.7% | |||||||||||||||||
Bristol-Myers Squibb Company | 31,081 | 1,590,726 | |||||||||||||||
Johnson & Johnson | 166,708 | 17,769,406 | |||||||||||||||
Industrials 9.6% | 39,712,926 | ||||||||||||||||
Air Freight & Logistics 2.9% | |||||||||||||||||
United Parcel Service, Inc., Class B | 122,740 | 12,064,115 | |||||||||||||||
Construction & Engineering 0.1% | |||||||||||||||||
Pangea Group, Class B (I) | 465 | 418,678 | |||||||||||||||
Electrical Equipment 0.9% | |||||||||||||||||
Rockwell Automation, Inc. | 33,470 | 3,677,684 | |||||||||||||||
Industrial Conglomerates 1.0% | |||||||||||||||||
Danaher Corp. | 54,780 | 4,162,184 | |||||||||||||||
Trading Companies & Distributors 4.7% | |||||||||||||||||
NOW, Inc. (I) | 184,320 | 5,605,171 | |||||||||||||||
Watsco, Inc. | 159,957 | 13,785,094 | |||||||||||||||
Information Technology 11.8% | 48,628,986 | ||||||||||||||||
Communications Equipment 0.5% | |||||||||||||||||
F5 Networks, Inc. (I) | 17,880 | 2,123,071 | |||||||||||||||
Internet Software & Services 8.1% | |||||||||||||||||
eBay, Inc. (I) | 80,488 | 4,558,035 | |||||||||||||||
Facebook, Inc., Class A (I) | 81,990 | 6,480,490 | |||||||||||||||
Google, Inc., Class A (I) | 35,730 | 21,023,889 | |||||||||||||||
Zillow, Inc., Class A (I) | 9,700 | 1,125,103 | |||||||||||||||
Semiconductors & Semiconductor Equipment 1.0% | |||||||||||||||||
Altera Corp. | 62,356 | 2,231,098 | |||||||||||||||
Xilinx, Inc. | 43,358 | 1,836,211 | |||||||||||||||
Software 2.2% | |||||||||||||||||
Oracle Corp. | 241,669 | 9,251,089 | |||||||||||||||
Materials 7.3% | 30,075,374 | ||||||||||||||||
Chemicals 2.4% | |||||||||||||||||
Monsanto Company | 87,770 | 9,875,002 | |||||||||||||||
Construction Materials 4.9% | |||||||||||||||||
Martin Marietta Materials, Inc. | 116,960 | 15,080,822 |
Shares | Value | ||||||||||||||||
Materials (continued) | |||||||||||||||||
Construction Materials (continued) | |||||||||||||||||
Vulcan Materials Company | 85,000 | $5,119,550 | |||||||||||||||
Yield (%) | Shares | Value | |||||||||||||||
Short-Term Investments 7.1% | $29,352,770 | ||||||||||||||||
(Cost $29,352,770) | |||||||||||||||||
Money Market Funds 7.1% | 29,352,770 | ||||||||||||||||
State Street Institutional Liquid Reserves Fund | 0.0853 (Y | ) | 29,352,770 | 29,352,770 | |||||||||||||
Total investments (Cost $407,695,098)† 100.0% | $412,406,293 | ||||||||||||||||
Other assets and liabilities, net 0.0% | ($148,281 | ) | |||||||||||||||
Total net assets 100.0% | $412,258,012 |
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 9-30-14. | ||||
† | At 9-30-14, the aggregate cost of investment securities for federal income tax purposes was $409,888,991. Net unrealized appreciation aggregated $2,517,302, of which $20,342,263 related to appreciated investment securities and $17,824,961 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||
Investments, at value (Cost $407,695,098) | $412,406,293 | |||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 1,450,338 | |||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 120,631 | |||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 294,231 | |||||||||||||||||||||||||||||||||||||
Receivable due from advisor | 468 | |||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 126,842 | |||||||||||||||||||||||||||||||||||||
Total assets | 414,398,803 | |||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 1,516,707 | |||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 439,301 | |||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 39,621 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 88,117 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 92 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 849 | |||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 56,104 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 2,140,791 | |||||||||||||||||||||||||||||||||||||
Net assets | $412,258,012 | |||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||
Paid-in capital | $409,300,170 | |||||||||||||||||||||||||||||||||||||
Accumulated distributions in excess of net investment income | (56,403 | ) | ||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments and futures contracts | (1,696,194 | ) | ||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 4,710,439 | |||||||||||||||||||||||||||||||||||||
Net assets | $412,258,012 | |||||||||||||||||||||||||||||||||||||
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 ($268,424,864 ÷ 13,720,326 shares)1 | $19.56 | |||||||||||||||
Class B ($14,896,850 ÷ 815,327 shares)1 | $18.27 | |||||||||||||||
Class C ($16,923,038 ÷ 927,041 shares)1 | $18.25 | |||||||||||||||
Class I ($19,240,614 ÷ 952,023 shares) | $20.21 | |||||||||||||||
Class R1 ($607,583 ÷ 32,157 shares) | $18.89 | |||||||||||||||
Class R2 ($95,917 ÷ 4,809 shares) | $19.95 | |||||||||||||||
Class R3 ($104,244 ÷ 5,464 shares) | $19.08 | |||||||||||||||
Class R4 ($128,396 ÷ 6,528 shares) | $19.67 | |||||||||||||||
Class R5 ($89,572 ÷ 4,460 shares) | $20.08 | |||||||||||||||
Class R6 ($2,933,042 ÷ 144,544 shares) | $20.29 | |||||||||||||||
Class T ($69,094,045 ÷ 3,575,446 shares) | $19.32 | |||||||||||||||
Class ADV ($8,218,198 ÷ 413,447 shares) | $19.88 | |||||||||||||||
Class NAV ($11,501,649 ÷ 565,733 shares) | $20.33 | |||||||||||||||
Maximum offering price per share | ||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $20.59 | |||||||||||||||
Class T (net asset value per share ÷ 95%)2 | $20.34 |
1 | Redemption price per share 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. |
STATEMENT OF OPERATIONS For the six months ended 9-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||
Dividends | $3,004,260 | |||||||||||||||||||||||||||||||||||||
Interest | 3,603 | |||||||||||||||||||||||||||||||||||||
Total investment income | 3,007,863 | |||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Investment management fees | 1,875,980 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 668,067 | |||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 41,117 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 285,409 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 1,776 | |||||||||||||||||||||||||||||||||||||
State registration fees | 89,987 | |||||||||||||||||||||||||||||||||||||
Printing and postage | 48,730 | |||||||||||||||||||||||||||||||||||||
Professional fees | 62,971 | |||||||||||||||||||||||||||||||||||||
Custodian fees | 28,308 | |||||||||||||||||||||||||||||||||||||
Registration and filing fees | 19,276 | |||||||||||||||||||||||||||||||||||||
Other | 13,830 | |||||||||||||||||||||||||||||||||||||
Total expenses | 3,135,451 | |||||||||||||||||||||||||||||||||||||
Less expense reductions | (71,185 | ) | ||||||||||||||||||||||||||||||||||||
Net expenses | 3,064,266 | |||||||||||||||||||||||||||||||||||||
Net investment loss | (56,403 | ) | ||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||
Investments and foreign currency transactions | 168,542,221 | |||||||||||||||||||||||||||||||||||||
Futures contracts | 2,776,741 | |||||||||||||||||||||||||||||||||||||
171,318,962 | ||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||
Investments and translation of assets and liabilities in foreign currencies | (207,698,490 | ) | ||||||||||||||||||||||||||||||||||||
(207,698,490 | ) | |||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss | (36,379,528 | ) | ||||||||||||||||||||||||||||||||||||
Decrease in net assets from operations | ($36,435,931 | ) |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-14 | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | 3-31-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | ($56,403 | ) | ($4,259,446 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 171,318,962 | 192,541,547 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (207,698,490 | ) | 17,140,001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | (36,435,931 | ) | 205,422,102 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (64,935 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R5 | — | (56 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (7,092 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (520,067 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | (75,242,000 | ) | (37,507,368 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class B | (4,409,045 | ) | (2,216,885 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | (4,470,628 | ) | (2,125,586 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | (15,250,963 | ) | (8,992,315 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R1 | (135,975 | ) | (64,246 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | (26,032 | ) | (13,688 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | (27,762 | ) | (14,056 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R4 | (35,477 | ) | (18,019 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R5 | (25,979 | ) | (13,704 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | (1,578,167 | ) | (790,768 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class T | (17,288,305 | ) | (8,578,092 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class ADV | (4,119,134 | ) | (2,113,395 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | (96,578,429 | ) | (45,556,116 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (219,187,896 | ) | (108,596,388 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | (343,225,330 | ) | (153,179,068 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total decrease | (598,849,157 | ) | (56,353,354 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 1,011,107,169 | 1,067,460,523 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $412,258,012 | $1,011,107,169 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Undistributed (accumulated distributions in excess of) net investment income | ($56,403 | ) | — |
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 | 9-30-14 | 1 | 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 | $26.39 | $24.32 | $22.84 | $21.32 | $18.31 | $12.84 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | — | 3 | (0.15 | ) | (0.01 | ) | (0.09 | ) | (0.06 | ) | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.00 | ) | 5.29 | 1.49 | 1.61 | 3.07 | 5.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.00 | ) | 5.14 | 1.48 | 1.52 | 3.01 | 5.47 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $19.56 | $26.39 | $24.32 | $22.84 | $21.32 | $18.31 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | (3.77 | ) 6 | 21.38 | 6.48 | 7.13 | 16.44 | 42.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $268 | $356 | $356 | $369 | $413 | $384 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.22 | 7 | 1.19 | 1.25 | 1.27 | 1.30 | 1.45 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.21 | 7 | 1.19 | 1.25 | 1.27 | 1.30 | 1.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 1.21 | 7 | 1.19 | 1.25 | 1.27 | 1.30 | 1.34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.02 | 7 | (0.58 | ) | (0.04 | ) | (0.45 | ) | (0.33 | ) | (0.18 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class B Shares Period ended | 9-30-14 | 1 | 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 | $25.12 | $23.46 | $22.22 | $20.90 | $18.10 | $12.79 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss2 | (0.07 | ) | (0.35 | ) | (0.19 | ) | (0.25 | ) | (0.21 | ) | (0.15 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.95 | ) | 5.08 | 1.43 | 1.57 | 3.01 | 5.46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.02 | ) | 4.73 | 1.24 | 1.32 | 2.80 | 5.31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.27 | $25.12 | $23.46 | $22.22 | $20.90 | $18.10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | (4.12 | ) 5 | 20.38 | 5.58 | 6.32 | 15.47 | 41.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $15 | $20 | $20 | $25 | $31 | $37 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 2.03 | 6 | 2.00 | 2.06 | 2.07 | 2.13 | 2.45 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses net including reductions | 2.02 | 6 | 2.00 | 2.06 | 2.07 | 2.10 | 2.11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 2.02 | 6 | 2.00 | 2.06 | 2.07 | 2.10 | 2.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.78 | ) 6 | (1.39 | ) | (0.86 | ) | (1.24 | ) | (1.13 | ) | (0.94 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class C Shares Period ended | 9-30-14 | 1 | 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 | $25.10 | $23.45 | $22.21 | $20.90 | $18.10 | $12.79 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss2 | (0.08 | ) | (0.36 | ) | (0.19 | ) | (0.26 | ) | (0.21 | ) | (0.15 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.94 | ) | 5.08 | 1.43 | 1.57 | 3.01 | 5.46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.02 | ) | 4.72 | 1.24 | 1.31 | 2.80 | 5.31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.25 | $25.10 | $23.45 | $22.21 | $20.90 | $18.10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | (4.13 | ) 5 | 20.35 | 5.58 | 6.27 | 15.47 | 41.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $17 | $19 | $17 | $20 | $22 | $24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 2.04 | 6 | 2.03 | 2.07 | 2.11 | 2.16 | 2.34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 2.03 | 6 | 2.02 | 2.07 | 2.10 | 2.10 | 2.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 2.03 | 6 | 2.02 | 2.07 | 2.10 | 2.10 | 2.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.79 | ) 6 | (1.42 | ) | (0.88 | ) | (1.27 | ) | (1.13 | ) | (0.93 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class I Shares Period ended | 9-30-14 | 1 | 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 | $27.03 | $24.80 | $23.24 | $21.61 | $18.50 | $12.92 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.03 | (0.08 | ) | 0.06 | (0.02 | ) | 0.02 | 0.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.02 | ) | 5.41 | 1.52 | 1.65 | 3.11 | 5.54 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.99 | ) | 5.33 | 1.58 | 1.63 | 3.13 | 5.58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.02 | ) | — | (0.02 | ) | — | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (5.83 | ) | (3.10 | ) | (0.02 | ) | — | (0.02 | ) | — | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.21 | $27.03 | $24.80 | $23.24 | $21.61 | $18.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (3.62 | ) 5 | 21.71 | 6.81 | 7.54 | 16.93 | 43.20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $19 | $72 | $113 | $256 | $237 | $208 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.99 | 6 | 0.91 | 0.91 | 0.91 | 0.86 | 0.90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.98 | 6 | 0.91 | 0.91 | 0.91 | 0.86 | 0.90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.26 | 6 | (0.28 | ) | 0.25 | (0.08 | ) | 0.10 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class R1 Shares Period ended | 9-30-14 | 1 | 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 | $25.74 | $23.90 | $22.55 | $21.14 | $18.23 | $12.84 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss2 | (0.05 | ) | (0.29 | ) | (0.11 | ) | (0.17 | ) | (0.14 | ) | (0.11 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.97 | ) | 5.20 | 1.46 | 1.58 | 3.05 | 5.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.02 | ) | 4.91 | 1.35 | 1.41 | 2.91 | 5.39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.89 | $25.74 | $23.90 | $22.55 | $21.14 | $18.23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | (3.99 | ) 4 | 20.77 | 5.99 | 6.67 | 15.96 | 41.98 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | $1 | — | 5 | — | 5 | — | 5 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 3.79 | 6 | 4.13 | 5.79 | 7.03 | 8.39 | 13.91 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.70 | 6 | 1.70 | 1.70 | 1.70 | 1.72 | 1.78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.47 | ) 6 | (1.12 | ) | (0.49 | ) | (0.86 | ) | (0.75 | ) | (0.65 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class R2 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $26.81 | $24.72 | $23.27 | $22.45 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | (0.02 | ) | (0.23 | ) | (0.06 | ) | — | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.01 | ) | 5.39 | 1.51 | 0.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.03 | ) | 5.16 | 1.45 | 0.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $19.95 | $26.81 | $24.72 | $23.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (3.84 | ) 6 | 21.10 | 6.23 | 3.65 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 7 | — | 7 | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 16.39 | 8 | 15.50 | 20.41 | 15.96 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.45 | 8 | 1.45 | 1.45 | 1.45 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.23 | ) 8 | (0.85 | ) | (0.24 | ) | (0.12 | ) 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-1-12. | |||||||||||||||||||||||||||||||
3 | Based on 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 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class R3 Shares Period ended | 9-30-14 | 1 | 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 | $25.92 | $24.03 | $22.65 | $21.21 | $18.27 | $12.85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss2 | (0.04 | ) | (0.26 | ) | (0.09 | ) | (0.16 | ) | (0.12 | ) | (0.07 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.97 | ) | 5.22 | 1.47 | 1.60 | 3.06 | 5.49 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.01 | ) | 4.96 | 1.38 | 1.44 | 2.94 | 5.42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $19.08 | $25.92 | $24.03 | $22.65 | $21.21 | $18.27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | (3.90 | ) 4 | 20.87 | 6.09 | 6.79 | 16.09 | 42.18 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 5 | — | 5 | — | 5 | — | 5 | — | 5 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 14.43 | 6 | 12.99 | 15.02 | 15.86 | 16.72 | 13.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.60 | 6 | 1.60 | 1.60 | 1.59 | 1.61 | 1.62 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.38 | ) 6 | (1.00 | ) | (0.39 | ) | (0.76 | ) | (0.64 | ) | (0.46 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class R4 Shares Period ended | 9-30-14 | 1 | 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 | $26.49 | $24.40 | $22.91 | $21.40 | $18.38 | $12.88 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | — | 3 | (0.17 | ) | — | 3 | (0.10 | ) | (0.06 | ) | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.99 | ) | 5.33 | 1.49 | 1.61 | 3.08 | 5.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.99 | ) | 5.16 | 1.49 | 1.51 | 3.02 | 5.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $19.67 | $26.49 | $24.40 | $22.91 | $21.40 | $18.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (3.71 | ) 5 | 21.39 | 6.50 | 7.06 | 16.43 | 42.70 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 6 | — | 6 | — | 6 | — | 6 | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 11.05 | 7 | 10.91 | 14.55 | 15.46 | 16.45 | 13.33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.20 | 7 | 1.20 | 1.22 | 1.29 | 1.31 | 1.32 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.03 | 7 | (0.62 | ) | 0.01 | (0.46 | ) | (0.34 | ) | (0.16 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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 R5 Shares Period ended | 9-30-14 | 1 | 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 | $26.90 | $24.71 | $23.16 | $21.56 | $18.47 | $12.91 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.02 | (0.11 | ) | 0.05 | (0.03 | ) | (0.02 | ) | 0.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.01 | ) | 5.39 | 1.51 | 1.63 | 3.12 | 5.54 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.99 | ) | 5.28 | 1.56 | 1.60 | 3.10 | 5.56 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.02 | ) | (0.01 | ) | — | (0.01 | ) | — | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (5.83 | ) | (3.09 | ) | (0.01 | ) | — | (0.01 | ) | — | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.08 | $26.90 | $24.71 | $23.16 | $21.56 | $18.47 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (3.63 | ) 5 | 21.58 | 6.74 | 7.42 | 16.78 | 43.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 6 | — | 6 | — | 6 | — | 6 | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 14.85 | 7 | 12.38 | 14.16 | 15.07 | 16.17 | 12.97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.00 | 7 | 1.00 | 1.00 | 0.99 | 1.01 | 1.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.22 | 7 | (0.40 | ) | 0.21 | (0.16 | ) | (0.03 | ) | 0.14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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 R6 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $27.10 | $24.84 | $23.27 | $20.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | 0.04 | (0.07 | ) | 0.08 | 0.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.02 | ) | 5.43 | 1.51 | 3.23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.98 | ) | 5.36 | 1.59 | 3.26 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.02 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (5.83 | ) | (3.10 | ) | (0.02 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.29 | $27.10 | $24.84 | $23.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (3.55 | ) 5 | 21.82 | 6.86 | 16.29 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $3 | $8 | $4 | $4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.12 | 6 | 1.09 | 1.33 | 1.58 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.81 | 6 | 0.86 | 0.86 | 0.86 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.39 | 6 | (0.27 | ) | 0.34 | 0.20 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 7 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R6 shares is 9-1-11. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||
6 | Annualized. | |||||||||||||||||||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class T Shares Period ended | 9-30-14 | 1 | 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 | $26.14 | $24.13 | $22.69 | $21.20 | $18.24 | $12.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | — | 3 | (0.17 | ) | (0.03 | ) | (0.11 | ) | (0.09 | ) | (0.11 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (6.82 | ) | 5.25 | 1.47 | 1.60 | 3.05 | 5.49 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (6.82 | ) | 5.08 | 1.44 | 1.49 | 2.96 | 5.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $19.32 | $26.14 | $24.13 | $22.69 | $21.20 | $18.24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | (3.77 | ) 6 | 21.29 | 6.35 | 7.03 | 16.23 | 41.84 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $69 | $78 | $73 | $77 | $83 | $83 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.29 | 7 | 1.27 | 1.33 | 1.37 | 1.47 | 1.84 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.29 | 7 | 1.26 | 1.33 | 1.37 | 1.47 | 1.84 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.05 | ) 7 | (0.66 | ) | (0.13 | ) | (0.54 | ) | (0.50 | ) | (0.69 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class ADV Shares Period ended | 9-30-14 | 1 | 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 | $26.70 | $24.57 | $23.05 | $21.49 | $18.43 | $12.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.01 | (0.14 | ) | 0.02 | (0.06 | ) | (0.03 | ) | — | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.00 | ) | 5.34 | 1.50 | 1.62 | 3.09 | 5.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.99 | ) | 5.20 | 1.52 | 1.56 | 3.06 | 5.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $19.88 | $26.70 | $24.57 | $23.05 | $21.49 | $18.43 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (3.67 | ) 5 | 21.40 | 6.59 | 7.26 | 16.60 | 42.87 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $8 | $19 | $20 | $20 | $22 | $18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.33 | 6 | 1.26 | 1.33 | 1.35 | 1.37 | 1.25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.14 | 6 | 1.14 | 1.14 | 1.14 | 1.14 | 1.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.10 | 6 | (0.53 | ) | 0.08 | (0.31 | ) | (0.17 | ) | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class NAV Shares Period ended | 9-30-14 | 1 | 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 | $27.14 | $24.86 | $23.28 | $21.63 | $18.51 | $12.91 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.01 | (0.04 | ) | 0.09 | 0.01 | 0.03 | 0.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.99 | ) | 5.43 | 1.52 | 1.64 | 3.11 | 5.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.98 | ) | 5.39 | 1.61 | 1.65 | 3.14 | 5.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.04 | ) | (0.03 | ) | — | (0.02 | ) | — | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | (5.83 | ) | (3.07 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (5.83 | ) | (3.11 | ) | (0.03 | ) | — | (0.02 | ) | — | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.33 | $27.14 | $24.86 | $23.28 | $21.63 | $18.51 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (3.54 | ) 5 | 21.92 | 6.94 | 7.63 | 17.00 | 43.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $12 | $438 | $463 | $487 | $813 | $708 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.79 | 6 | 0.77 | 0.79 | 0.80 | 0.80 | 0.82 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.78 | 6 | 0.77 | 0.79 | 0.80 | 0.80 | 0.82 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.06 | 6 | (0.16 | ) | 0.39 | 0.05 | 0.16 | 0.33 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 121 | 81 | 92 | 90 | 90 | 102 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
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, and transfer agent fees, state registration fees and printing and postage for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Effective April 17, 2014, John Hancock Rainier Growth Fund changed its name to John Hancock Select 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 (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
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 management investment companies 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 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.
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The following is a summary of the values by input classification of the fund's investments as of September 30, 2014, by major security category or type:
Total market value at 9-30-14 | Level 1 quoted price | Level 2 significant observable inputs | Level 3 significant unobservable inputs | ||
Common Stocks | |||||
Consumer Discretionary | $46,201,685 | $46,201,685 | — | — | |
Consumer Staples | 42,468,943 | 42,468,943 | — | — | |
Energy | 11,552,654 | 11,552,654 | — | — | |
Financials | 110,503,808 | 110,503,808 | — | — | |
Health Care | 53,909,147 | 53,909,147 | — | — | |
Industrials | 39,712,926 | 39,294,248 | — | $418,678 | |
Information Technology | 48,628,986 | 48,628,986 | — | — | |
Materials | 30,075,374 | 30,075,374 | — | — | |
Short-Term Investments | 29,352,770 | 29,352,770 | — | — | |
Total Investments in Securities | $412,406,293 | $411,987,615 | — | $418,678 |
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.
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 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 six months ended September 30, 2014 were $317. For the six months ended September 30, 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, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
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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 $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, at least annually.
Distributions paid by the fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class.
Such distributions on a tax basis are determined in conformity with income tax regulations, which may differ from US GAAP.
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 — 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.
Futures are traded on an exchange. Exchange-traded transactions generally present less counterparty risk to the fund than OTC transactions due to margin requirements of the exchanges where the instruments are traded. The exchange stands between the fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the exchange and the clearing member.
34
Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the fund to the risk of loss up to the notional value of the futures contracts. Use of short futures contracts subjects the fund to unlimited risk of loss.
Upon entering into a futures contract, the fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures margin receivable / payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the fund. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the six months ended September 30, 2014, the fund used futures contracts to gain exposure to certain securities markets and as a substitute for securities purchased. During the six months ended September 30, 2014, the fund held futures contracts with notional values up to $416.3 million. There were no open futures contracts as of September 30, 2014.
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended September 30, 2014:
Risk | Statement of operations location | Futures contracts | Total |
Equity contracts | Net realized gain (loss) | $2,776,741 | $2,776,741 |
Note 4 — Guarantees and idemnifications
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) serves as investment advisor for the fund. 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 $3.0 billion of the fund's average daily net assets; (b) 0.725% of the next $3.0 billion of the fund's average daily net assets; and (c) 0.700% of the fund's average daily net assets in excess of $6.0 billion. 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.
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
35
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 1.70%, 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 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.
The Advisor has contractually agreed to waive and/or reimburse all class-specific expenses for class R6 shares 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.
Effective July 1, 2014, the Advisor has contractually agreed to waive and/or reimburse all class-specific expenses for Class B shares of the fund, including Rule 12b-1 fees, transfer agent fees and service fees, blue sky fees, and printing and postage, as applicable, to the extent they exceed 1.30% of average annual net assets (on an annualized basis) attributable to Class B shares (the Class Expense Waiver). The Class Expense Waiver expires on June 30, 2015, unless renewed by mutual agreement of the Advisor and the fund based upon a determination that this is appropriate under the circumstances at the time.
The expense reductions for the six months ended September 30, 2014, amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $10,276 | Class R4 | $6,460 | |
Class B | 605 | Class R5 | 6,477 | |
Class C | 638 | Class R6 | 8,031 | |
Class I | 1,240 | Class T | 2,569 | |
Class R1 | 6,099 | Class ADV | 13,604 | |
Class R2 | 7,042 | Class NAV | 1,648 | |
Class R3 | 6,430 | Total | $71,119 |
The investment management fees, including the impact of waivers and reimbursements as described above, incurred for the six months ended September 30, 2014 were equivalent to a net annual effective rate of 0.72% 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 share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended September 30, 2014 amounted to an annual rate of 0.01% of the fund's average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B, Class C, Class R1, Class R2, Class R3, Class R4, Class 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
36
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 | Rule 12b-1 fee | Service fee | |
Class A | 0.30% | — | Class R3 | 0.50% | 0.15% | |
Class B | 1.00% | — | Class R4 | 0.25% | 0.10% | |
Class C | 1.00% | — | Class R5 | — | 0.05% | |
Class R1 | 0.50% | 0.25% | Class T | 0.30% | — | |
Class R2 | 0.25% | 0.25% | Class ADV | 0.25% | — |
The Distributor has contractually agreed to waive 0.10% of Rule 12b-1 fees for Class R4 shares to limit the Rule 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 $66 for Class R4 shares for the six months ended September 30, 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 six months ended September 30, 2014:
Class A | Class T | ||
Retained for printing prospectuses, advertising, sales literature and other purposes | $68,630 | $1,885 | |
Sales commissions to broker-dealers | 323,518 | 7,528 | |
Sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor | 12,773 | 2,995 | |
Net sales charges | $404,921 | $12,408 |
Class A, Class B, Class C and Class T shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares 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 six months ended September 30, 2014, CDSCs received by the Distributor amounted to $102, $9,882, $1,987 and $274 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 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.
Class level expenses. Class level expenses for the six months ended September 30, 2014 were:
37
Class | Distribution and service fees | Transfer agent fees | State registration fees | Printing and postage |
Class A | $363,167 | $185,847 | $11,955 | $28,851 |
Class B | 85,560 | 10,957 | 6,858 | 935 |
Class C | 90,022 | 11,528 | 6,898 | 2,095 |
Class I | — | 20,860 | 8,079 | 2,989 |
Class R1 | 1,973 | 53 | 6,549 | 112 |
Class R2 | 118 | 9 | 7,209 | 10 |
Class R3 | 259 | 9 | 6,549 | 12 |
Class R4 | 205 | 12 | 6,549 | 15 |
Class R5 | — | 9 | 6,549 | 10 |
Class R6 | — | 464 | 7,161 | 228 |
Class T | 108,631 | 46,365 | 7,257 | 11,753 |
Class ADV | 18,132 | 9,296 | 8,374 | 1,720 |
Total | $668,067 | $285,409 | $89,987 | $48,730 |
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 group of funds complex.
Note 6 — Fund Share Transactions
Transactions in fund shares for the six months ended September 30, 2014 and for the year ended March 31, 2014 were as follows:
Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 927,047 | $19,167,326 | 2,282,983 | $60,333,638 | ||||||||||||||||||||||
Distributions reinvested | 3,709,267 | 72,441,982 | 1,393,162 | 36,096,825 | ||||||||||||||||||||||
Repurchased | (4,414,252 | ) | (91,039,717 | ) | (4,813,552 | ) | (128,874,741 | ) | ||||||||||||||||||
Net increase (decrease) | 222,062 | $569,591 | (1,137,407 | ) | ($32,444,278 | ) | ||||||||||||||||||||
Class B shares | ||||||||||||||||||||||||||
Sold | 2,683 | $55,338 | 72,114 | $1,860,291 | ||||||||||||||||||||||
Distributions reinvested | 237,793 | 4,351,599 | 87,755 | 2,170,185 | ||||||||||||||||||||||
Repurchased | (204,027 | ) | (3,918,825 | ) | (244,375 | ) | (6,136,925 | ) | ||||||||||||||||||
Net increase (decrease) | 36,449 | $488,112 | (84,506 | ) | ($2,106,449 | ) | ||||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 52,633 | $984,422 | 82,458 | $2,116,832 | ||||||||||||||||||||||
Distributions reinvested | 211,304 | 3,864,746 | 74,095 | 1,830,897 | ||||||||||||||||||||||
Repurchased | (112,128 | ) | (2,137,612 | ) | (122,170 | ) | (3,073,186 | ) | ||||||||||||||||||
Net increase | 151,809 | $2,711,556 | 34,383 | $874,543 | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 151,501 | $3,256,396 | 515,753 | $13,908,811 | ||||||||||||||||||||||
Distributions reinvested | 740,532 | 14,921,715 | 334,370 | 8,870,839 | ||||||||||||||||||||||
Repurchased | (2,600,626 | ) | (53,405,457 | ) | (2,731,871 | ) | (74,145,725 | ) | ||||||||||||||||||
Net decrease | (1,708,593 | ) | ($35,227,346 | ) | (1,881,748 | ) | ($51,366,075 | ) |
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Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class R1 shares | ||||||||||||||||||||||||||
Sold | 4,987 | $98,038 | 5,835 | $143,781 | ||||||||||||||||||||||
Distributions reinvested | 4,448 | 84,079 | 1,452 | 36,770 | ||||||||||||||||||||||
Repurchased | (308 | ) | (5,928 | ) | (506 | ) | (13,326 | ) | ||||||||||||||||||
Net increase | 9,127 | $176,189 | 6,781 | $167,225 | ||||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 338 | $6,850 | 13 | $373 | ||||||||||||||||||||||
Distributions reinvested | 4 | 85 | — | — | ||||||||||||||||||||||
Net increase | 342 | $6,935 | 13 | $373 | ||||||||||||||||||||||
Class R3 shares | ||||||||||||||||||||||||||
Sold | 610 | $11,974 | 490 | $13,090 | ||||||||||||||||||||||
Distributions reinvested | 96 | 1,826 | 15 | 374 | ||||||||||||||||||||||
Repurchased | — | — | (199 | ) | (5,432 | ) | ||||||||||||||||||||
Net increase | 706 | $13,800 | 306 | $8,032 | ||||||||||||||||||||||
Class R4 shares | ||||||||||||||||||||||||||
Sold | 123 | $2,508 | 1,439 | $38,950 | ||||||||||||||||||||||
Distributions reinvested | 486 | 9,541 | 167 | 4,338 | ||||||||||||||||||||||
Repurchased | (164 | ) | (3,234 | ) | (1 | ) | (19 | ) | ||||||||||||||||||
Net increase | 445 | $8,815 | 1,605 | $43,269 | ||||||||||||||||||||||
Class R6 Shares | ||||||||||||||||||||||||||
Sold | 35,285 | $742,501 | 139,312 | $3,968,690 | ||||||||||||||||||||||
Distributions reinvested | 78,089 | 1,578,167 | 30,006 | 797,860 | ||||||||||||||||||||||
Repurchased | (249,543 | ) | (5,199,805 | ) | (54,532 | ) | (1,528,395 | ) | ||||||||||||||||||
Net increase (decrease) | (136,169 | ) | ($2,879,137 | ) | 114,786 | $3,238,155 | ||||||||||||||||||||
Class T shares | ||||||||||||||||||||||||||
Sold | 20,760 | $420,670 | 41,771 | $1,095,454 | ||||||||||||||||||||||
Distributions reinvested | 839,004 | 16,184,406 | 310,378 | 7,970,498 | ||||||||||||||||||||||
Repurchased | (262,527 | ) | (5,208,034 | ) | (395,807 | ) | (10,355,540 | ) | ||||||||||||||||||
Net increase (decrease) | 597,237 | $11,397,042 | (43,658 | ) | ($1,289,588 | ) | ||||||||||||||||||||
Class ADV shares | ||||||||||||||||||||||||||
Sold | 49,269 | $1,116,172 | 53,909 | $1,425,182 | ||||||||||||||||||||||
Distributions reinvested | 206,755 | 4,099,958 | 80,558 | 2,112,223 | ||||||||||||||||||||||
Repurchased | (553,316 | ) | (11,303,439 | ) | (253,110 | ) | (6,719,773 | ) | ||||||||||||||||||
Net decrease | (297,292 | ) | ($6,087,309 | ) | (118,643 | ) | ($3,182,368 | ) | ||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 443,565 | $11,547,710 | 231,437 | $6,130,434 | ||||||||||||||||||||||
Distributions reinvested | 4,769,305 | 96,578,429 | 1,730,886 | 46,076,183 | ||||||||||||||||||||||
Repurchased | (20,803,482 | ) | (422,529,717 | ) | (4,431,072 | ) | (119,328,524 | ) | ||||||||||||||||||
Net decrease | (15,590,612 | ) | ($314,403,578 | ) | (2,468,749 | ) | ($67,121,907 | ) | ||||||||||||||||||
Total net decrease | (16,714,489 | ) | ($343,225,330 | ) | (5,576,837 | ) | ($153,179,068 | ) |
For the six months ended September 30, 2014 and for the year ended March 31, 2014 there were no fund share transactions for Class R5.
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Affiliates of the fund owned 31%, 93%, 84%, 76%, 100% and 100% of shares of beneficial interest of Class R1, Class R2, Class R3, Class R4, Class R5 and Class NAV, respectively, on September 30, 2014.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $620,143,749 and $1,178,006,916, respectively, for the six months ended September 30, 2014.
Note 8 — Investment by affiliated funds
Certain investors in the fund are affiliated funds that are managed by the Advisor and its affiliates. The affiliated funds do not invest in the fund for the purpose of exercising management or control; however, this investment may represent a significant portion of the fund's net assets. At September 30, 2014, there were no affiliated funds with an ownership of 5% or more of the fund's net assets.
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Continuation of investment advisory and subadvisory agreements
EVALUATION OF SUBADVISORY AGREEMENT BY THE BOARD OF TRUSTEES
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the subadvisory agreement between John Hancock Advisers, LLC (the Advisor) and Baillie Gifford Overseas Ltd. (Baillie Gifford or the Subadvisor) (Subadvisory Agreement), dated April 17, 2014, for John Hancock Select Growth Fund (the fund). At the March 10-13, 2014 meeting, the Board approved the Subadvisory Agreement and the termination of a subadvisory agreement, dated December 20, 2007, between the Advisor and Rainier Investment Management Inc. (Rainier) for the fund. Baillie Gifford succeeded Rainier as subadvisor to the fund, effective at the close of business on April 17, 2014.
Board Consideration of Subadvisory Agreement
At in-person meetings held on March 10-13, 2014, the Board, including the Independent Trustees, approved the Baillie Gifford Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund, replacing Rainier.
In considering the Subadvisory Agreement, the Board received in advance of the meeting a variety of materials relating to the fund and Baillie Gifford, including comparative performance; performance information for the fund's benchmark index; and comparative information for comparably managed accounts; and other information provided by Baillie Gifford regarding the nature, extent, and quality of services to be provided by Baillie Gifford. The Board also took into account discussions with management and information provided to the Board with respect to the services to be provided by Baillie Gifford to the fund, including an in-person presentation from Baillie Gifford with respect to the fund at the March 10-13, 2014 meeting, during which representatives from Baillie Gifford responded to questions from the Independent Trustees. The Board also took into account management's discussion regarding the fund and Baillie Gifford at the January 31, 2014 telephonic Board meeting.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also discussed the Subadvisory Agreement in private sessions with their independent legal counsel at which no representatives of management were present.
In approving the Subadvisory Agreement, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors.
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board considered:
(1) | information relating to Baillie Gifford's business, including current subadvisory services to another fund in the John Hancock family of funds; | |
(2) | the historical and current performance of the fund under the management of Rainier, which included comparative performance information relating to the fund's benchmark and comparable funds, and the performance of a comparable composite managed by Baillie Gifford; | |
(3) | the subadvisory fee for the fund, including any breakpoints; and | |
(4) | information relating to the nature and scope of any material relationships and their significance to Baillie Gifford, as applicable. |
Nature, extent, and quality of services. With respect to the services to be provided by Baillie Gifford, the Board considered information provided to the Board by Baillie Gifford, as well as took into account information presented during the past year with respect to another fund within the John Hancock family of funds managed by Baillie Gifford. The Board considered Baillie Gifford's current level of staffing and its overall resources. The Board reviewed Baillie Gifford's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of Baillie Gifford's
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investment and compliance personnel who would provide services to the fund. The Board also considered, among other things, Baillie Gifford's compliance program and any disciplinary history. The Board also considered the Baillie Gifford's risk assessment and monitoring process. The Board considered Baillie Gifford's regulatory history, including whether it was currently involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of Baillie Gifford and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with Baillie Gifford and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of Baillie Gifford and procedures reasonably designed by it to assure compliance with the federal securities laws. The Board also took into account the financial condition of Baillie Gifford.
The Board considered Baillie Gifford's investment process and philosophy. The Board took into account that Baillie Gifford's responsibilities include the development and maintenance of an investment program for the fund, that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also considered Baillie Gifford's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by Baillie Gifford and the profitability to Baillie Gifford of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund.
The Board also relied on the ability of the Advisor to negotiate the Subadvisory Agreement with Baillie Gifford, which is not affiliated with the Advisor, and the fees thereunder at arm's length. As a result, the costs of the services to be provided and the profits to be realized by Baillie Gifford from its relationship with the Trust were not a material factor in the Board's consideration of the Subadvisory Agreement.
The Board also considered information regarding the nature and scope (including their significance to the Advisor and its affiliates and to Baillie Gifford) of any material relationships with respect to Baillie Gifford, which includes arrangements in which Baillie Gifford or its affiliates provide advisory, distribution, or management services in connection with financial products sponsored by the Trust's Advisor or its affiliates, and may include other registered investment companies, a 529 education savings plan, managed separate account, and exempt group annuity contracts sold to qualified plans, if any. The Board also considered information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that Baillie Gifford and its affiliates may receive from Baillie Gifford's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to Baillie Gifford. The Board also considered that the subadvisory fee to be paid to Baillie Gifford for managing the fund is the same fee previously paid to Rainier.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and benchmark under the management of Rainier and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style, and risk-adjusted performance of Baillie Gifford. The Board also noted Baillie Gifford's long-term performance for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | Under the subadvisory agreement with Rainier, the fund had consistently underperformed its benchmark index and peer group average over the 1-, 3- and 5-year periods; |
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(2) | A comparable composite managed by Baillie Gifford outperformed the fund's peer group average over the 5- and 10-year periods and outperformed the fund's benchmark index for the 10- year period; | |||||||
(3) | Baillie Gifford has demonstrated experience managing U.S. equities and is qualified to manage the fund, and has a positive long-term performance track record; | |||||||
(4) | The subadvisory fees for the fund are paid by the Advisor, not the fund, and approval of the Subadvisory Agreement will not result in any change in the advisory fees for the fund; | |||||||
(5) | The subadvisory fees rates under the Subadvisory Agreement are the same as the rates under the subadvisory agreement with Rainier; | |||||||
(6) | The subadvisory fees are reasonable in relation to the level and quality of services being provided; and | |||||||
(7) | The subadvisory fees contain breakpoints that are reflected as breakpoints in the fund's advisory fees in order to permit shareholders to benefit from economies of scale as the fund grows. | |||||||
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that approval of the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Subadvisory Agreement.
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Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Baille Gifford Overseas Limited (the Subadvisor), for John Hancock Select Growth Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the
44
Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and other third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that the fund underperformed its benchmark index and its peer group average for the one-, three- and five-year periods ended December 31, 2013. The Board took into account management's discussion of the factors that contributed to the fund's performance and noted that the Subadvisor replaced the fund's prior subadvisor effective April 17, 2014. The Board concluded that the fund's performance is being monitored and reasonably addressed.
45
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees and total expenses for the fund are higher than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee, and that such fees are negotiated at arm's length with respect to the Subadvisor. In addition, the Board took into account that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board also noted that the fund's distributor, an affiliate of the Advisor, has agreed to waive a portion of its Rule 12b-1 fee for a share class of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |
(h) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |
(i) | noted that the subadvisory fee for the fund is paid by the Advisor and is negotiated at arm's length; and | |
(j) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
46
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $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 exceed $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 funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data; and | |
(4) | Information relating to the nature and scope of any material relationships and their significant to the Trust's Advisor and Subadvisor. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any
47
settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund.
The Board also relied on the ability of the Advisor to negotiate the Subadvisory Agreement with the Subadvisor, which is not affiliated with the Advisor, and the fees thereunder at arm's length. As a result, the costs of the services to be provided and the profits to be realized by the Subadvisor from its relationship with the Trust were not a material factor in the Board's consideration of the Subadvisory Agreement.
The Board also received information regarding the nature and scope (including their significance to the Advisor and its affiliates and to the Subadvisor) of any material relationships, if any, with respect to the Subadvisor, which include arrangements in which the Subadvisor or its affiliates provide advisory, distribution, or management services in connection with financial products sponsored by the Advisor or its affiliates, and may include other registered investment companies, a 529 education savings plan, managed separate accounts and exempt group annuity contracts sold to qualified plans. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
48
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the performance of the fund is being monitored and reasonably addressed; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
49
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor Subadvisor Principal distributor Custodian Transfer agent Legal counsel |
*Member of the Audit Committee
†Non-Independent Trustee
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 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
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Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL/INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Income Allocation | INCOME FUNDS (continued) Investment Grade Bond Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE/SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield Fund |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
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John Hancock Investments
A trusted brand
John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
A better way to invest
As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
Results for investors
Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF202367 | 334SA 09/14 11/14 |
John Hancock
Disciplined Value FundSemiannual report 9/30/14
A message to shareholders
Dear fellow shareholder,
The economic expansion that began in 2009 continues, with moderate GDP growth in the United States and the unemployment rate down considerably from its peak. However, the scene outside the United States had become decidedly less robust by the end of September. China's economy, a key driver of global demand, was slowing, Japan's GDP contracted in the second quarter, and the International Monetary Fund warned of another eurozone recession unless more is done to stimulate economic growth there. Meanwhile, bond markets around the world have turned in positive performance as investors pursue yield where they can find it, and the risks of rising interest rates and central bank tightening have been pushed out further into the future.
In the absence of pronounced market dislocations, we believe investors are well served by sticking to a commonsense, diversified approach, one that includes a mix of equities, fixed-income, and alternative strategies that can offer added diversification potential. Although events like those taking place in Ukraine and the Middle East serve as reminders that all market environments carry risk, we believe the biggest risk investors face in today's market is not staying invested.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an effort to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of September 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Disciplined Value Fund
1
INVESTMENT OBJECTIVE
The fund seeks to provide long-term growth of capital primarily through investments in equity securities. Current income is a secondary objective.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 (%)
See page 8 for more complete performance information.
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 of John Hancock Disciplined Value Fund. Class A shares were first offered on 12-22-08. Class A shares' performance shown above for periods prior to this date is that of the predecessor fund's Investor share class that has been recalculated to reflect the gross fees and expenses of Class A shares.
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. It is not possible to invest directly in an index.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
2
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Fund overcame sluggish April
The market's bigger laggards from earlier months were disproportionately rewarded in April, while stronger performers were penalized, detracting from the fund's performance for the period.
Information technology sector weighed on performance
Stock selection in the information technology sector was the most significant detractor to the fund's relative performance for the period.
Market appeared fully valued
Investors seemed to have a more balanced assessment of market risks.
PORTFOLIO COMPOSITION AS OF 9/30/14 (%)
A note about risks
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.
3
![](https://capedge.com/proxy/N-CSRS/0001145443-14-001428/markedonovan.jpg)
Mark E. Donovan, CFA
Portfolio Manager
Robeco Investment Management, Inc.
The fund underperformed its benchmark index. What factors contributed to this?
The U.S. equity market's reversal in April drove the relative performance environment for the six-month period. It disproportionately rewarded the market's bigger laggards from the prior periods, while penalizing stocks that had been stronger performers. This presented a very difficult environment for the fund, given its performance advantage over the market coming into April. After April, the fund generally performed in line with the benchmark index, the Russell 1000 Value Index, as the market found its footing.
The fund's holdings underperformed the benchmark for the period, with information technology, healthcare, and energy positions the main detractors.
Can you discuss some of the stocks that detracted the most from the fund's performance?
Within technology, the main detractor from the fund's overall relative performance was our decision not to invest in semiconductor company Intel Corp. The stock posted a strong return on better-than-expected results but the fund does not hold it because we believe it is expensive on a free cash flow basis and is not well-positioned competitively. It has too much exposure to the declining PC market and too little to growth markets such as mobile technologies.
In the energy sector, holding EQT Corp. was the largest detractor from relative performance. The independent exploration and production business missed production expectations, putting near-term pressure on the share price of a fundamentally well-positioned company.
Within the healthcare sector, pharmacy benefit management business Express Scripts Holding Company was the largest detractor from relative performance, lagging a strong sector. The company appears to be moving past integration issues and the loss of a large contract, which, we believe, should enable management to redouble its focus on the business's longer-term growth prospects.
4
What factors aided the fund's performance?
We manage a prudently diversified fund that is constructed from the bottom up upon valuation, quality, and whether there is a catalyst for growth. The fund's performance was driven by diverse businesses. For example, top contributors for the period included Apple, Inc., media business Time Warner, Inc., aerospace and defense business Lockheed Martin Corp., and credit card company Discover Financial Services.
These results were grounded in stock-specific factors. For instance, Apple reported solid business momentum, which should also benefit from its iPhone 6 products. In the meantime, management astutely returned excess free cash flow to shareholders in the form of stock buybacks and an increase in the dividend. Lockheed Martin raised guidance on stronger operating performance and the resolution of important pension plan issues. Shareholder-friendly management did a good job allocating capital while positioning the business for longer-term growth across key markets. With a very solid balance sheet and strong credit trends, Discover Financial has been unlocking value through share buybacks as growth conditions improve.
SECTOR COMPOSITION AS OF 9/30/14 (%)
5
How was the fund positioned at the end of the period?
We have maintained the fund's overweight in information technology where the fund owns stock-specific opportunities that appear inexpensive relative to their midcycle earnings power and free cash flow characteristics.
The fund's overweight position in credit-sensitive companies is grounded in top-tier banks, whose valuations and earnings power create an attractive risk/return opportunity.
The fund remains underweight in sectors that have bond-like traits, such as real estate investment trusts, utilities, and telecoms for valuation reasons. In addition, utilities often incur adverse interest-rate risk. With declining fundamentals, telecoms face an uphill battle over time.
U.S. equity valuations have become modestly more attractive over the past three months and continue to look appealing relative to U.S. government and corporate bonds. It appears the price-to-earnings multiple expansion phase of the market has run its course, and we would expect equity returns to more or less match earnings growth plus dividends over the near term.
We view the market as fully valued but not overly stretched. Currently, investors seem to have a more balanced assessment of market risks. We remain positive on the U.S. equity market.
TEN LARGEST HOLDINGS AS OF 9/30/14 (%)
Exxon Mobil Corp. | 3.9 |
Wells Fargo & Company | 3.9 |
Berkshire Hathaway, Inc., Class B | 3.9 |
JPMorgan Chase & Company | 3.7 |
Citigroup, Inc. | 3.3 |
Capital One Financial Corp. | 2.9 |
Pfizer, Inc. | 2.8 |
Johnson & Johnson | 2.7 |
Apple, Inc. | 2.4 |
CVS Health Corp. | 2.3 |
TOTAL | 31.8 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
6
MANAGED BY
![]() | Mark E. Donovan, CFA On the fund and its predecessor since inception Investing since 1981 |
![]() | David J. Pyle, CFA On the fund and its predecessor since 2005 Investing since 1995 |
7
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | |||||||||
1-year | 5-year | 10-year | Since inception | 6-month | 1-year | 5-year | 10-year | Since inception | ||
Class A1 | 10.23 | 13.63 | 8.50 | — | -2.64 | 10.23 | 89.44 | 126.09 | — | |
Class B1 | 10.06 | 13.59 | 8.03 | — | -2.94 | 10.06 | 89.12 | 116.59 | — | |
Class C1 | 14.10 | 13.88 | 8.06 | — | 1.11 | 14.10 | 91.57 | 117.09 | — | |
Class I1,2 | 16.37 | 15.18 | 9.44 | — | 2.66 | 16.37 | 102.75 | 146.38 | — | |
Class I21,2 | 16.33 | 15.20 | 9.32 | — | 2.60 | 16.33 | 102.93 | 143.71 | — | |
Class R11,2 | 15.49 | 14.33 | 8.64 | — | 2.28 | 15.49 | 95.32 | 129.05 | — | |
Class R21,2 | 15.82 | 14.52 | 8.82 | — | 2.44 | 15.82 | 96.97 | 132.92 | — | |
Class R31,2 | 15.67 | 14.46 | 8.75 | — | 2.33 | 15.67 | 96.44 | 131.39 | — | |
Class R41,2 | 16.09 | 14.87 | 9.11 | — | 2.49 | 16.09 | 100.01 | 139.11 | — | |
Class R51,2 | 16.47 | 15.23 | 9.44 | — | 2.71 | 16.47 | 103.11 | 146.44 | — | |
Class R61,2 | 16.49 | 15.22 | 9.48 | — | 2.65 | 16.49 | 103.06 | 147.37 | — | |
Class NAV2,3 | 16.42 | 15.28 | — | 18.03 | 2.65 | 16.42 | 103.64 | — | 142.45 | |
Index 1† | 18.89 | 15.26 | 7.84 | — | 4.90 | 18.89 | 103.38 | 112.71 | — | |
Index 2† | 19.73 | 15.70 | 8.11 | — | 6.42 | 19.73 | 107.30 | 118.04 | — |
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 sold within one year of purchase 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 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. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class I2 | Class R1 | Class R2 | Class R3 | Class R4 | Class R5 | Class R6 | Class NAV | |
Gross (%) | 1.11 | 1.95 | 1.87 | 0.84 | 0.88 | 1.66 | 1.38 | 1.59 | 1.12 | 0.79 | 0.74 | 0.71 |
Net (%) | 1.11 | 1.95 | 1.87 | 0.84 | 0.85 | 1.57 | 1.32 | 1.47 | 1.02 | 0.79 | 0.71 | 0.71 |
Please refer to the most recent prospectuses and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† | Index 1 is the Russell 1000 Value Index; Index 2 is the S&P 500 Index. |
See the following page for footnotes.
8
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Disciplined Value Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in two separate indexes.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index 1 ($) | Index 2 ($) | |
Class B1,4 | 9-30-04 | 21,659 | 21,659 | 21,271 | 21,804 |
Class C1,4 | 9-30-04 | 21,709 | 21,709 | 21,271 | 21,804 |
Class I1,2 | 9-30-04 | 24,638 | 24,638 | 21,271 | 21,804 |
Class I21,2 | 9-30-04 | 24,371 | 24,371 | 21,271 | 21,804 |
Class R11,2 | 9-30-04 | 22,905 | 22,905 | 21,271 | 21,804 |
Class R21,2 | 9-30-04 | 23,292 | 23,292 | 21,271 | 21,804 |
Class R31,2 | 9-30-04 | 23,139 | 23,139 | 21,271 | 21,804 |
Class R41,2 | 9-30-04 | 23,911 | 23,911 | 21,271 | 21,804 |
Class R51,2 | 9-30-04 | 24,644 | 24,644 | 21,271 | 21,804 |
Class R61,2 | 9-30-04 | 24,737 | 24,737 | 21,271 | 21,804 |
Class NAV2 | 5-29-09 | 24,245 | 24,245 | 24,174 | 24,339 |
Russell 1000 Value Index - Index 1 - 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 - Index 2 - 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 shares were exchanged for Class A shares and its Institutional shares were exchanged for Class I shares of John Hancock Disciplined Value Fund. 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 I and Class I2 shares were first offered on 12-22-08. The returns prior to this date are those of the predecessor fund's institutional shares that have been recalculated to reflect the gross fees and expenses of Class I and Class I2 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. |
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. |
9
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 presenting 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 April 1, 2014, with the same investment held until September 30, 2014.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,024.80 | $5.43 | 1.07% |
Class B | 1,000.00 | 1,020.60 | 9.57 | 1.89% |
Class C | 1,000.00 | 1,021.10 | 9.27 | 1.83% |
Class I | 1,000.00 | 1,026.60 | 4.12 | 0.81% |
Class I2 | 1,000.00 | 1,026.00 | 4.22 | 0.83% |
Class R1 | 1,000.00 | 1,022.80 | 7.76 | 1.53% |
Class R2 | 1,000.00 | 1,024.40 | 6.24 | 1.23% |
Class R3 | 1,000.00 | 1,023.30 | 7.20 | 1.42% |
Class R4 | 1,000.00 | 1,024.90 | 4.97 | 0.98% |
Class R5 | 1,000.00 | 1,027.10 | 3.61 | 0.71% |
Class R6 | 1,000.00 | 1,026.50 | 3.51 | 0.69% |
Class NAV | 1,000.00 | 1,026.50 | 3.51 | 0.69% |
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 September 30, 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:
10
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 April 1, 2014, with the same investment held until September 30, 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.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.70 | $5.42 | 1.07% |
Class B | 1,000.00 | 1,015.60 | 9.55 | 1.89% |
Class C | 1,000.00 | 1,015.90 | 9.25 | 1.83% |
Class I | 1,000.00 | 1,021.00 | 4.10 | 0.81% |
Class I2 | 1,000.00 | 1,020.90 | 4.20 | 0.83% |
Class R1 | 1,000.00 | 1,017.40 | 7.74 | 1.53% |
Class R2 | 1,000.00 | 1,018.90 | 6.23 | 1.23% |
Class R3 | 1,000.00 | 1,017.90 | 7.18 | 1.42% |
Class R4 | 1,000.00 | 1,020.20 | 4.96 | 0.98% |
Class R5 | 1,000.00 | 1,021.50 | 3.60 | 0.71% |
Class R6 | 1,000.00 | 1,021.60 | 3.50 | 0.69% |
Class NAV | 1,000.00 | 1,021.60 | 3.50 | 0.69% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the 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 183/365 (to reflect the one-half year period). |
11
Fund's investments
As of 9-30-14 (Unaudited) | ||||||||||||||
Shares | Value | |||||||||||||
Common Stocks 96.0% | $11,010,196,267 | |||||||||||||
(Cost $9,626,806,422) | ||||||||||||||
Consumer Discretionary 10.7% | 1,224,651,875 | |||||||||||||
Auto Components 0.6% | ||||||||||||||
Lear Corp. | 739,752 | 63,921,970 | ||||||||||||
Diversified Consumer Services 0.5% | ||||||||||||||
Apollo Education Group, Inc. (I) | 2,136,215 | 53,725,807 | ||||||||||||
Hotels, Restaurants & Leisure 0.4% | ||||||||||||||
Six Flags Entertainment Corp. | 1,300,415 | 44,721,272 | ||||||||||||
Media 7.7% | ||||||||||||||
Comcast Corp., Class A | 4,335,453 | 233,160,662 | ||||||||||||
Liberty Global PLC, Series C (I) | 4,096,346 | 168,011,631 | ||||||||||||
Liberty Media Corp. (I) | 1,991,537 | 93,582,324 | ||||||||||||
Liberty Media Corp., Series A (I) | 995,851 | 46,984,250 | ||||||||||||
News Corp., Class A (I) | 2,346,031 | 38,357,607 | ||||||||||||
Omnicom Group, Inc. | 672,981 | 46,341,472 | ||||||||||||
Scripps Networks Interactive, Inc., Class A | 722,235 | 56,399,331 | ||||||||||||
Time Warner, Inc. | 2,360,661 | 177,545,314 | ||||||||||||
Time, Inc. (I) | 1,229,415 | 28,805,193 | ||||||||||||
Multiline Retail 0.6% | ||||||||||||||
Macy's, Inc. | 1,202,160 | 69,941,669 | ||||||||||||
Specialty Retail 0.9% | ||||||||||||||
The Home Depot, Inc. | 1,124,410 | 103,153,373 | ||||||||||||
Consumer Staples 3.0% | 348,937,945 | |||||||||||||
Food & Staples Retailing 2.2% | ||||||||||||||
CVS Health Corp. | 3,244,529 | 258,232,063 | ||||||||||||
Food Products 0.8% | ||||||||||||||
Tyson Foods, Inc., Class A | 2,303,934 | 90,705,882 | ||||||||||||
Energy 12.9% | 1,476,593,633 | |||||||||||||
Energy Equipment & Services 1.0% | ||||||||||||||
Schlumberger, Ltd. | 1,070,465 | 108,855,586 | ||||||||||||
Oil, Gas & Consumable Fuels 11.9% | ||||||||||||||
Energen Corp. | 641,120 | 46,314,509 | ||||||||||||
EOG Resources, Inc. | 795,316 | 78,752,190 | ||||||||||||
EQT Corp. | 1,109,650 | 101,577,361 | ||||||||||||
Exxon Mobil Corp. | 4,796,671 | 451,126,908 | ||||||||||||
Marathon Petroleum Corp. | 1,128,565 | 95,555,599 | ||||||||||||
Occidental Petroleum Corp. | 1,688,243 | 162,324,564 | ||||||||||||
Phillips 66 | 2,987,525 | 242,915,658 | ||||||||||||
QEP Resources, Inc. | 3,221,525 | 99,158,540 |
Shares | Value | |||||||||||||
Energy (continued) | ||||||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||
Rice Energy, Inc. (I) | 790,799 | $21,035,253 | ||||||||||||
Valero Energy Corp. | 1,490,760 | 68,977,465 | ||||||||||||
Financials 27.5% | 3,154,384,247 | |||||||||||||
Banks 13.0% | ||||||||||||||
BB&T Corp. | 2,356,094 | 87,670,258 | ||||||||||||
Citigroup, Inc. | 7,384,506 | 382,665,101 | ||||||||||||
Fifth Third Bancorp | 7,616,252 | 152,477,365 | ||||||||||||
JPMorgan Chase & Company | 6,980,192 | 420,486,766 | ||||||||||||
Wells Fargo & Company | 8,577,559 | $444,917,985 | ||||||||||||
Consumer Finance 4.3% | ||||||||||||||
Capital One Financial Corp. | 4,083,248 | 333,274,702 | ||||||||||||
Discover Financial Services | 2,416,614 | 155,605,775 | ||||||||||||
Diversified Financial Services 3.9% | ||||||||||||||
Berkshire Hathaway, Inc., Class B (I) | 3,218,442 | 444,595,578 | ||||||||||||
Insurance 6.0% | ||||||||||||||
ACE, Ltd. | 1,542,812 | 161,794,694 | ||||||||||||
MetLife, Inc. | 1,320,548 | 70,939,839 | ||||||||||||
Prudential Financial, Inc. | 1,198,150 | 105,365,311 | ||||||||||||
The Allstate Corp. | 3,165,047 | 194,238,934 | ||||||||||||
The Travelers Companies, Inc. | 1,311,745 | 123,225,325 | ||||||||||||
Validus Holdings, Ltd. | 933,935 | 36,554,216 | ||||||||||||
Real Estate Investment Trusts 0.3% | ||||||||||||||
American Homes 4 Rent, Class A | 2,402,155 | 40,572,398 | ||||||||||||
Health Care 14.5% | 1,666,960,124 | |||||||||||||
Health Care Equipment & Supplies 2.5% | ||||||||||||||
Covidien PLC | 956,899 | 82,781,332 | ||||||||||||
Medtronic, Inc. (L) | 2,105,325 | 130,424,884 | ||||||||||||
Zimmer Holdings, Inc. | 787,310 | 79,164,021 | ||||||||||||
Health Care Providers & Services 3.9% | ||||||||||||||
Express Scripts Holding Company (I) | 2,207,597 | 155,922,576 | ||||||||||||
Laboratory Corp. of America Holdings (I) | 781,475 | 79,515,081 | ||||||||||||
McKesson Corp. | 214,682 | 41,792,145 | ||||||||||||
Omnicare, Inc. (L) | 1,550,565 | 96,538,177 | ||||||||||||
Quest Diagnostics, Inc. | 1,212,455 | 73,571,769 | ||||||||||||
Pharmaceuticals 8.1% | ||||||||||||||
AbbVie, Inc. | 1,695,565 | 97,935,834 | ||||||||||||
Johnson & Johnson | 2,906,487 | 309,802,449 | ||||||||||||
Pfizer, Inc. | 11,031,147 | 326,191,017 | ||||||||||||
Sanofi, ADR | 808,654 | 45,632,345 | ||||||||||||
Shire PLC, ADR | 181,875 | 47,114,719 |
Shares | Value | |||||||||||||
Health Care (continued) | ||||||||||||||
Pharmaceuticals (continued) | ||||||||||||||
Teva Pharmaceutical Industries, Ltd., ADR | 1,871,140 | $100,573,775 | ||||||||||||
Industrials 7.4% | 851,857,080 | |||||||||||||
Aerospace & Defense 4.0% | ||||||||||||||
Honeywell International, Inc. | 793,219 | 73,864,553 | ||||||||||||
Lockheed Martin Corp. | 1,227,317 | 224,329,001 | ||||||||||||
Raytheon Company | 1,555,740 | 158,094,299 | ||||||||||||
Airlines 1.0% | ||||||||||||||
Delta Air Lines, Inc. | 2,212,790 | 79,992,359 | ||||||||||||
United Continental Holdings, Inc. (I) | 804,165 | 37,626,880 | ||||||||||||
Electrical Equipment 0.5% | ||||||||||||||
Emerson Electric Company | 848,145 | 53,076,914 | ||||||||||||
Machinery 1.0% | ||||||||||||||
Crane Company | 1,015,485 | 64,188,807 | ||||||||||||
Dover Corp. | 683,446 | 54,901,217 | ||||||||||||
Parker Hannifin Corp. | 4,980 | 568,467 | ||||||||||||
Road & Rail 0.9% | ||||||||||||||
Norfolk Southern Corp. | 942,783 | 105,214,583 | ||||||||||||
Information Technology 14.8% | 1,695,535,602 | |||||||||||||
Communications Equipment 3.8% | ||||||||||||||
Brocade Communications Systems, Inc. | 7,537,233 | 81,929,723 | ||||||||||||
Cisco Systems, Inc. | 9,514,636 | 239,483,388 | ||||||||||||
QUALCOMM, Inc. | 1,427,949 | $106,767,747 | ||||||||||||
Electronic Equipment, Instruments & Components 0.6% | ||||||||||||||
TE Connectivity, Ltd. | 1,266,822 | 70,042,588 | ||||||||||||
IT Services 0.8% | ||||||||||||||
Fidelity National Information Services, Inc. | 827,340 | 46,579,242 | ||||||||||||
Global Payments, Inc. | 662,999 | 46,330,370 | ||||||||||||
Semiconductors & Semiconductor Equipment 0.3% | ||||||||||||||
ON Semiconductor Corp. (I) | 4,051,874 | 36,223,754 | ||||||||||||
Software 3.8% | ||||||||||||||
Activision Blizzard, Inc. | 2,986,350 | 62,086,217 | ||||||||||||
Microsoft Corp. | 5,286,250 | 245,070,550 | ||||||||||||
Oracle Corp. | 3,392,560 | 129,867,197 | ||||||||||||
Technology Hardware, Storage & Peripherals 5.5% | ||||||||||||||
Apple, Inc. | 2,746,665 | 276,726,499 | ||||||||||||
EMC Corp. | 7,085,870 | 207,332,556 | ||||||||||||
Seagate Technology PLC | 922,946 | 52,857,117 | ||||||||||||
Western Digital Corp. | 968,338 | 94,238,654 |
Shares | Value | |||||||||||||
Materials 3.1% | $357,608,444 | |||||||||||||
Chemicals 0.7% | ||||||||||||||
Huntsman Corp. | 3,076,945 | 79,969,801 | ||||||||||||
Containers & Packaging 1.0% | ||||||||||||||
Avery Dennison Corp. | 1,150,085 | 51,351,295 | ||||||||||||
Crown Holdings, Inc. (I) | 1,590,363 | 70,802,961 | ||||||||||||
Metals & Mining 0.4% | ||||||||||||||
Barrick Gold Corp. | 2,929,385 | 42,944,784 | ||||||||||||
Paper & Forest Products 1.0% | ||||||||||||||
International Paper Company | 2,357,344 | 112,539,603 | ||||||||||||
Telecommunication Services 0.9% | 97,596,477 | |||||||||||||
Diversified Telecommunication Services 0.9% | ||||||||||||||
Verizon Communications, Inc. | 1,952,320 | 97,596,477 | ||||||||||||
Utilities 1.2% | 136,070,840 | |||||||||||||
Independent Power and Renewable Electricity Producers 1.2% | ||||||||||||||
AES Corp. | 9,595,969 | 136,070,840 | ||||||||||||
Yield (%) | Shares | Value | ||||||||||||
Securities Lending Collateral 0.4% | $41,161,358 | |||||||||||||
(Cost $41,158,952) | ||||||||||||||
John Hancock Collateral Investment Trust (W) | 0.1178(Y | ) | 4,113,215 | 41,161,358 | ||||||||||
Short-Term Investments 3.6% | $418,197,265 | |||||||||||||
(Cost $418,197,265) | ||||||||||||||
Money Market Funds 3.6% | 418,197,265 | |||||||||||||
State Street Institutional US Government Money Market Fund | 0.0000(Y | ) | $418,197,265 | 418,197,265 | ||||||||||
Total investments (Cost $10,086,162,639)† 100.0% | $11,469,554,890 | |||||||||||||
Other assets and liabilities, net 0.0% | $3,261,525 | |||||||||||||
Total net assets 100.0% | $11,472,816,415 |
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 9-30-14. | |||
(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 9-30-14. | |||
† | At 9-30-14, the aggregate cost of investment securities for federal income tax purposes was $10,088,578,022. Net unrealized appreciation aggregated $1,380,976,868, of which $1,483,366,575 related to appreciated investment securities and $102,389,707 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers, at value (Cost $10,045,003,687) including $40,304,746 of securities loaned | $11,428,393,532 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers, at value (Cost $41,158,952) | 41,161,358 | |||||||||||||||||||||||||||||||||||||
Total investments, at value (Cost $10,086,162,639) | 11,469,554,890 | |||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 8,734,313 | |||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 65,723,468 | |||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 10,552,611 | |||||||||||||||||||||||||||||||||||||
Receivable for securities lending income | 5,001 | |||||||||||||||||||||||||||||||||||||
Receivable due from advisor | 1,464 | |||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 280,254 | |||||||||||||||||||||||||||||||||||||
Total assets | 11,554,852,001 | |||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 15,448,959 | |||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 22,353,776 | |||||||||||||||||||||||||||||||||||||
Payable upon return of securities loaned | 41,159,690 | |||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 532,383 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 1,884,082 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 34,060 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 7,158 | |||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 615,478 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 82,035,586 | |||||||||||||||||||||||||||||||||||||
Net assets | $11,472,816,415 | |||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||
Paid-in capital | $9,656,585,331 | |||||||||||||||||||||||||||||||||||||
Undistributed net investment income | 65,327,320 | |||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments | 367,511,513 | |||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 1,383,392,251 | |||||||||||||||||||||||||||||||||||||
Net assets | $11,472,816,415 | |||||||||||||||||||||||||||||||||||||
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 ($2,478,613,794 ÷ 127,726,052 shares)1 | $19.41 | |||||||||||||||
Class B ($19,054,289 ÷ 1,037,077 shares)1 | $18.37 | |||||||||||||||
Class C ($234,402,941 ÷ 12,731,048 shares)1 | $18.41 | |||||||||||||||
Class I ($6,209,854,598 ÷ 328,114,473 shares) | $18.93 | |||||||||||||||
Class I2 ($92,117,462 ÷ 4,867,004 shares) | $18.93 | |||||||||||||||
Class R1 ($18,603,967 ÷ 987,181 shares) | $18.85 | |||||||||||||||
Class R2 ($76,441,322 ÷ 4,047,609 shares) | $18.89 | |||||||||||||||
Class R3 ($23,734,420 ÷ 1,258,681 shares) | $18.86 | |||||||||||||||
Class R4 ($127,835,169 ÷ 6,758,869 shares) | $18.91 | |||||||||||||||
Class R5 ($832,868,741 ÷ 43,908,903 shares) | $18.97 | |||||||||||||||
Class R6 ($571,359,780 ÷ 30,134,378 shares) | $18.96 | |||||||||||||||
Class NAV ($787,929,932 ÷ 41,548,570 shares) | $18.96 | |||||||||||||||
Maximum offering price per share | ||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $20.43 |
1 | Redemption price per share 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. |
STATEMENT OF OPERATIONS For the six months ended 9-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||
Dividends | $95,280,328 | |||||||||||||||||||||||||||||||||||||
Securities lending | 182,770 | |||||||||||||||||||||||||||||||||||||
Less foreign taxes withheld | (660,985 | ) | ||||||||||||||||||||||||||||||||||||
Total investment income | 94,802,113 | |||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Investment management fees | 34,076,631 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 4,959,167 | |||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 770,475 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 5,110,395 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 40,725 | |||||||||||||||||||||||||||||||||||||
State registration fees | 173,998 | |||||||||||||||||||||||||||||||||||||
Printing and postage | 170,534 | |||||||||||||||||||||||||||||||||||||
Professional fees | 102,108 | |||||||||||||||||||||||||||||||||||||
Custodian fees | 521,600 | |||||||||||||||||||||||||||||||||||||
Registration and filing fees | 162,344 | |||||||||||||||||||||||||||||||||||||
Other | 54,605 | |||||||||||||||||||||||||||||||||||||
Total expenses | 46,142,582 | |||||||||||||||||||||||||||||||||||||
Less expense reductions | (472,103 | ) | ||||||||||||||||||||||||||||||||||||
Net expenses | 45,670,479 | |||||||||||||||||||||||||||||||||||||
Net investment income | 49,131,634 | |||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | 291,111,484 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | 1,018 | |||||||||||||||||||||||||||||||||||||
291,112,502 | ||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | (60,210,289 | ) | ||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | (1,147 | ) | ||||||||||||||||||||||||||||||||||||
(60,211,436 | ) | |||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain | 230,901,066 | |||||||||||||||||||||||||||||||||||||
Increase in net assets from operations | $280,032,700 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-14 | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | 3-31-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $49,131,634 | $55,528,024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 291,112,502 | 582,513,722 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (60,211,436 | ) | 772,950,701 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase in net assets resulting from operations | 280,032,700 | 1,410,992,447 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (11,464,453 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (22,650,482 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I2 | — | (473,383 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R1 | — | (7,951 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (42,873 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R3 | — | (15,558 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (314,258 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R5 | — | (4,780,156 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (2,064,564 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (4,585,039 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (107,405,752 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class B | — | (881,403 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | — | (5,916,683 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (143,285,296 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I2 | — | (2,920,019 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R1 | — | (471,703 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (637,097 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R3 | — | (420,155 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (2,669,244 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R5 | — | (26,267,192 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (11,281,958 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (24,877,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (373,432,219 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 2,922,834,502 | 2,887,914,251 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total increase | 3,202,867,202 | 3,925,474,479 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 8,269,949,213 | 4,344,474,734 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $11,472,816,415 | $8,269,949,213 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $65,327,320 | $16,195,686 |
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 | 9-30-14 | 1 | 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 | $18.94 | $15.94 | $14.33 | $13.83 | $12.31 | $8.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.08 | 0.12 | 0.14 | 0.11 | 0.05 | 0.08 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.39 | 3.85 | 2.09 | 0.77 | 1.57 | 4.18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.47 | 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 | $19.41 | $18.94 | $15.94 | $14.33 | $13.83 | $12.31 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 2.48 | 5 | 25.30 | 16.04 | 6.91 | 13.20 | 52.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $2,479 | $2,702 | $1,481 | $1,068 | $601 | $162 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.08 | 6 | 1.12 | 1.20 | 1.24 | 1.24 | 1.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.07 | 6 | 1.11 | 1.20 | 1.24 | 1.24 | 1.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 1.07 | 6 | 1.11 | 1.20 | 1.24 | 1.24 | 1.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.78 | 6 | 0.68 | 0.95 | 0.82 | 0.38 | 0.74 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class B Shares Period ended | 9-30-14 | 1 | 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 | $18.00 | $15.24 | $13.73 | $13.30 | $11.91 | $7.88 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | — | 3 | (0.03 | ) | 0.01 | — | 3 | (0.05 | ) | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.37 | 3.67 | 2.01 | 0.74 | 1.51 | 4.06 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.37 | 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 | $18.37 | $18.00 | $15.24 | $13.73 | $13.30 | $11.91 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 2.06 | 6 | 24.21 | 15.09 | 5.99 | 12.28 | 51.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $19 | $19 | $14 | $10 | $8 | $5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.90 | 7 | 1.96 | 2.08 | 2.14 | 2.27 | 2.58 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.89 | 7 | 1.96 | 2.05 | 2.05 | 2.05 | 2.12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 1.89 | 7 | 1.96 | 2.05 | 2.05 | 2.05 | 2.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.04 | ) 7 | (0.17 | ) | 0.10 | 0.01 | (0.45 | ) | (0.25 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class C Shares Period ended | 9-30-14 | 1 | 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 | $18.03 | $15.26 | $13.74 | $13.30 | $11.91 | $7.87 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | — | 3 | (0.02 | ) | 0.02 | 0.01 | (0.05 | ) | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.38 | 3.67 | 2.01 | 0.74 | 1.51 | 4.07 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.38 | 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 | $18.41 | $18.03 | $15.26 | $13.74 | $13.30 | $11.91 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 2.11 | 6 | 24.25 | 15.19 | 6.07 | 12.28 | 51.33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $234 | $171 | $59 | $40 | $30 | $19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | �� | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.84 | 7 | 1.88 | 1.98 | 2.02 | 2.07 | 2.24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 1.83 | 7 | 1.88 | 1.98 | 2.02 | 2.05 | 2.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.02 | 7 | (0.09 | ) | 0.17 | 0.04 | (0.45 | ) | (0.27 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class I Shares Period ended | 9-30-14 | 1 | 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 | $18.44 | $15.54 | $13.99 | $13.52 | $12.03 | $7.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.10 | 0.17 | 0.18 | 0.15 | 0.09 | 0.11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.39 | 3.75 | 2.04 | 0.75 | 1.54 | 4.08 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.49 | 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 | $18.93 | $18.44 | $15.54 | $13.99 | $13.52 | $12.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 2.66 | 4 | 25.61 | 16.40 | 7.27 | 13.66 | 53.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $6,210 | $3,671 | $1,680 | $711 | $399 | $158 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.82 | 5 | 0.83 | 0.87 | 0.88 | 0.86 | 0.88 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 0.81 | 5 | 0.83 | 0.87 | 0.88 | 0.86 | 0.80 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.03 | 5 | 0.96 | 1.26 | 1.18 | 0.75 | 1.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class I2 Shares Period ended | 9-30-14 | 1 | 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 | $18.45 | $15.55 | $13.99 | $13.53 | $12.04 | $7.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.10 | 0.17 | 0.18 | 0.15 | 0.09 | 0.11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.38 | 3.75 | 2.05 | 0.75 | 1.54 | 4.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.48 | 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 | $18.93 | $18.45 | $15.55 | $13.99 | $13.53 | $12.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 2.60 | 4 | 25.63 | 16.51 | 7.24 | 13.65 | 53.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $92 | $75 | $34 | $25 | $23 | $19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.84 | 5 | 0.87 | 0.92 | 0.93 | 0.92 | 1.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 0.83 | 5 | 0.85 | 0.85 | 0.85 | 0.85 | 0.75 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.03 | 5 | 0.96 | 1.29 | 1.21 | 0.74 | 0.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Based on 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. |
Class R1 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.43 | $15.54 | $13.99 | $13.52 | $12.05 | $9.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.03 | 0.04 | 0.08 | 0.06 | — | 4 | 0.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.39 | 3.75 | 2.04 | 0.74 | 1.54 | 3.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.42 | 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 | $18.85 | $18.43 | $15.54 | $13.99 | $13.52 | $12.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 2.28 | 6 | 24.69 | 15.63 | 6.41 | 12.80 | 33.74 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $19 | $13 | $6 | $3 | $1 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.53 | 8 | 1.67 | 1.85 | 2.16 | 3.21 | 2.96 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including redcutions and credits | 1.53 | 8 | 1.57 | 1.58 | 1.65 | 1.61 | 1.50 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.33 | 8 | 0.22 | 0.56 | 0.45 | 0.01 | 0.29 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R1 shares is 7-13-09. | |||||||||||||||||||||||||||||||||||||
3 | Based on 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 | The portfolio turnover is shown for the period from 4-1-09 to 3-31-10. |
Class R2 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.44 | $15.55 | $14.00 | $13.49 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.06 | 0.08 | 0.12 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.39 | 3.75 | 2.04 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.45 | 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 | $18.89 | $18.44 | $15.55 | $14.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 2.44 | 6 | 24.98 | 15.90 | 3.78 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $76 | $38 | $4 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.24 | 8 | 1.33 | 3.02 | 15.96 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.23 | 8 | 1.32 | 1.32 | 1.40 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.61 | 8 | 0.45 | 0.80 | 0.41 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-1-12. | |||||||||||||||||||||||||||||||
3 | Based on 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 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class R3 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.43 | $15.54 | $13.99 | $13.52 | $12.04 | $8.98 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.04 | 0.06 | 0.10 | 0.07 | 0.01 | 0.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.39 | 3.74 | 2.04 | 0.75 | 1.54 | 3.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.43 | 3.80 | 2.14 | 0.82 | 1.55 | 3.06 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.09 | ) | (0.04 | ) | — | 4 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | $18.86 | $18.43 | $15.54 | $13.99 | $13.52 | $12.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 2.33 | 6 | 24.81 | 15.75 | 6.52 | 12.93 | 34.08 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $24 | $15 | $4 | — | 7 | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.42 | 8 | 1.57 | 2.33 | 11.16 | 20.34 | 10.23 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 1.42 | 8 | 1.47 | 1.48 | 1.55 | 1.52 | 1.40 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.43 | 8 | 0.35 | 0.67 | 0.54 | 0.10 | 0.43 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R3 shares is 5-22-09. | |||||||||||||||||||||||||||||||||||||
3 | Based on 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 | The portfolio turnover is shown for the period from 4-1-09 to 3-31-10. |
Class R4 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.45 | $15.54 | $13.99 | $13.52 | $12.04 | $8.98 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.08 | 0.13 | 0.16 | 0.11 | 0.05 | 0.07 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.38 | 3.76 | 2.03 | 0.75 | 1.54 | 3.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.46 | 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 | $18.91 | $18.45 | $15.54 | $13.99 | $13.52 | $12.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 2.49 | 5 | 25.44 | 16.19 | 6.86 | 13.25 | 34.42 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $128 | $75 | $5 | $1 | $1 | $1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.09 | 6 | 1.11 | 1.63 | 2.35 | 2.81 | 2.88 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 0.98 | 6 | 1.01 | 1.09 | 1.25 | 1.20 | 1.10 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.85 | 6 | 0.75 | 1.09 | 0.85 | 0.40 | 0.75 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 | 7 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R4 shares is 5-22-09. | |||||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||||||||
6 | Annualized. | |||||||||||||||||||||||||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-09 to 3-31-10. |
Class R5 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.47 | $15.57 | $14.00 | $13.53 | $12.04 | $8.98 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.11 | 0.18 | 0.20 | 0.15 | 0.08 | 0.10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.39 | 3.76 | 2.04 | 0.74 | 1.55 | 3.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.50 | 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 | $18.97 | $18.47 | $15.57 | $14.00 | $13.53 | $12.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 2.71 | 5 | 25.71 | 16.55 | 7.20 | 13.61 | 34.77 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $833 | $591 | $415 | $33 | $15 | — | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.72 | 7 | 0.74 | 0.78 | 0.90 | 1.23 | 9.54 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions and credits | 0.71 | 7 | 0.73 | 0.78 | 0.90 | 0.94 | 0.80 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.13 | 7 | 1.05 | 1.42 | 1.19 | 0.59 | 1.03 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 | 8 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R5 shares is 5-22-09. | |||||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-09 to 3-31-10. |
Class R6 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.47 | $15.57 | $14.00 | $12.19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.11 | 0.19 | 0.19 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.38 | 3.75 | 2.06 | 2.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.49 | 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 | $18.96 | $18.47 | $15.57 | $14.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 2.65 | 5 | 25.72 | 16.60 | 19.09 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $571 | $356 | $118 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.72 | 6 | 0.74 | 0.82 | 2.32 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.69 | 6 | 0.73 | 0.82 | 0.86 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.16 | 6 | 1.06 | 1.28 | 1.31 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 7 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R6 shares is 9-1-11. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||
6 | Annualized. | |||||||||||||||||||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class NAV Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.47 | $15.57 | $14.00 | $13.53 | $12.04 | $9.18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.11 | 0.19 | 0.20 | 0.16 | 0.10 | 0.10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.38 | 3.75 | 2.05 | 0.75 | 1.54 | 2.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.49 | 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 | $18.96 | $18.47 | $15.57 | $14.00 | $13.53 | $12.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 2.65 | 5 | 25.73 | 16.66 | 7.38 | 13.71 | 31.89 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $788 | $543 | $524 | $338 | $405 | $228 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.70 | 6 | 0.71 | 0.74 | 0.77 | 0.79 | 0.83 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.69 | 6 | 0.71 | 0.74 | 0.77 | 0.79 | 0.75 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.15 | 6 | 1.09 | 1.40 | 1.28 | 0.82 | 1.05 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 21 | 45 | 44 | 44 | 50 | 59 | 7 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | The inception date for Class NAV shares is 5-29-09. | |||||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||||||||
6 | Annualized. | |||||||||||||||||||||||||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-09 to 3-31-10. |
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 thought investments 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, state registration fees and printing and postage 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 (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
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 funds in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their respective net asset values each business day. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing vendor. Securities that trade only in the over-the-counter (OTC) 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 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 September 30, 2014, all investments are categorized as Level 1 under the hierarchy described above.
32
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 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 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.
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 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 six months ended September 30, 2014 were $1,475. For the six months ended September 30, 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
33
assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
For federal income tax purposes, 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.
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.
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.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
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.
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Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor or JHA) serves as investment advisor for the fund. 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) 0.750% of the first $500 million of the fund's average daily net assets; (b) 0.725% of the next $500 million of the fund's average daily net assets; (c) 0.700% of the next $500 million of the fund's average daily net assets; (d) 0.675% of the next $1 billion of the fund's average daily net assets; and (e) 0.650% of the fund's average daily net assets in excess of $2.5 billion. The Advisor has a subadvisory agreement with Robeco Investment Management, Inc. The fund is not responsible for payment of subadvisory fees.
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 reimburse or limit certain expenses for certain share classes of the fund. This agreement excludes certain expenses such as taxes, brokerage commissions, interest expense, acquired fund fees and expenses paid indirectly, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund's business and short dividend expense. These reimbursements and limits are such that these expenses will not exceed 0.85%, 1.57%, 1.32%, 1.47% and 1.07% for Class I2, Class R1, Class R2, Class R3 and Class R4 shares, respectively. The fee waivers and/or expense 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.
Prior to July 1, 2014, the Advisor had contractually agreed to reimburse or limit certain expenses for Class B and Class R6 shares of the fund. This agreement excludes certain expenses such as taxes, brokerage commissions, interest expense, acquired fund fees and expenses paid indirectly, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund's business and short dividend expense. These reimbursements and limits were such that these expenses would not exceed 2.05% and 0.82% for Class B and Class R6 shares, respectively.
Effective July 1, 2014, the Advisor has contractually agreed to waive and/or reimburse all class-specific expenses for Class B shares of the fund, including Rule 12b-1 fees, transfer agent fees and service fees, blue sky fees, and printing and postage, as applicable, to the extent they exceed 1.30% of average annual net assets (on an annualized basis) attributable to Class B shares (the Class Expense Waiver). The Class Expense Waiver expires on June 30, 2015, unless renewed by mutual agreement of the Advisor and the fund based upon a determination that this is appropriate under the circumstances at the time.
The Advisor has contractually agreed to waive and/or reimburse all class-specific expenses for Class R6 shares of the fund, including transfer agent 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 (on an annualized basis) attributable to Class R6 shares (the Class Expense Waiver). The Class Expense Waiver expires on June 30, 2015, unless renewed by mutual agreement of the Advisor and the fund based upon a determination that this is appropriate under the circumstances at the time.
For the six months ended September 30, 2014, these expense reductions amounted to the following:
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Class | Expense reductions | Class | Expense reductions | |
Class A | $92,747 | Class R3 | $719 | |
Class B | 669 | Class R4 | 3,604 | |
Class C | 7,271 | Class R5 | 25,655 | |
Class I | 184,184 | Class R6 | 76,623 | |
Class I2 | 3,062 | Class NAV | 23,577 | |
Class R1 | 557 | Total | $420,972 | |
Class R2 | 2,304 |
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2014 were equivalent to a net annual effective rate of 0.66% 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 six months ended September 30, 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 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 | Rule 12b-1 fee | Service fee | |
Class A | 0.30% | — | Class R2 | 0.25% | 0.25% | |
Class B | 1.00% | — | Class R3 | 0.50% | 0.15% | |
Class C | 1.00% | — | Class R4 | 0.25% | 0.10% | |
Class R1 | 0.50% | 0.25% | 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 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 $51,131 for Class R4 shares for the six months ended September 30, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $3,221,438 for the six months ended September 30, 2014. Of this amount, $529,903 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $2,681,858 was paid as sales commissions to broker-dealers and $9,677 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
36
redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the six months ended September 30, 2014, CDSCs received by the Distributor amounted to $693, $4,983 and $19,184 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.
Class level expenses. Class level expenses for the six months ended September 30, 2014 were:
Share class | Distribution and service fees | Transfer agent fees | State registration fees | Printing and postage |
Class A | $3,347,514 | $1,715,964 | $51,196 | $84,948 |
Class B | 96,228 | 12,329 | 6,976 | 631 |
Class C | 1,037,820 | 132,994 | 12,260 | 4,048 |
Class I | — | 3,069,120 | 38,881 | 71,676 |
Class I2 | — | 51,469 | 10,170 | 503 |
Class R1 | 58,977 | 1,470 | 5,899 | 229 |
Class R2 | 159,783 | 6,021 | 9,775 | 360 |
Class R3 | 65,583 | 1,889 | 6,514 | 147 |
Class R4 | 181,070 | 9,397 | 10,417 | 1,386 |
Class R5 | 12,192 | 67,524 | 7,370 | 2,874 |
Class R6 | — | 42,218 | 14,540 | 3,732 |
Total | $4,959,167 | $5,110,395 | $173,998 | $170,534 |
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 group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2014 and for the year ended March 31, 2014 were as follows:
Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 30,134,134 | $576,653,124 | 66,468,713 | $1,184,749,184 | ||||||||||||||||||||||
Distributions reinvested | — | — | 6,584,301 | 117,266,393 | ||||||||||||||||||||||
Repurchased | (45,082,466 | ) | (878,412,045 | ) | (23,301,466 | ) | (412,475,664 | ) | ||||||||||||||||||
Net increase (decrease) | (14,948,332 | ) | $(301,758,921 | ) | 49,751,548 | $889,539,913 |
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Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class B shares | ||||||||||||||||||||||||||
Sold | 78,866 | $1,438,387 | 299,991 | $5,048,977 | ||||||||||||||||||||||
Distributions reinvested | — | — | 47,326 | 803,124 | ||||||||||||||||||||||
Repurchased | (104,708 | ) | (1,912,802 | ) | (187,971 | ) | (3,146,399 | ) | ||||||||||||||||||
Net increase (decrease) | (25,842 | ) | $(474,415 | ) | 159,346 | $2,705,702 | ||||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 3,832,563 | $69,737,872 | 6,130,668 | $105,059,369 | ||||||||||||||||||||||
Distributions reinvested | — | — | 291,483 | 4,955,207 | ||||||||||||||||||||||
Repurchased | (609,460 | ) | (11,121,042 | ) | (763,651 | ) | (12,969,431 | ) | ||||||||||||||||||
Net increase | 3,223,103 | $58,616,830 | 5,658,500 | $97,045,145 | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 165,514,053 | $3,083,169,515 | 157,732,340 | $2,694,195,154 | ||||||||||||||||||||||
Distributions reinvested | — | — | 8,290,598 | 143,676,056 | ||||||||||||||||||||||
Repurchased | (36,429,222 | ) | (686,581,711 | ) | (75,045,001 | ) | (1,302,744,499 | ) | ||||||||||||||||||
Net increase | 129,084,831 | $2,396,587,804 | 90,977,937 | $1,535,126,711 | ||||||||||||||||||||||
Class I2 shares | ||||||||||||||||||||||||||
Sold | 1,179,327 | $21,868,159 | 2,574,220 | $43,632,873 | ||||||||||||||||||||||
Distributions reinvested | — | — | 195,555 | 3,388,966 | ||||||||||||||||||||||
Repurchased | (396,246 | ) | (7,452,636 | ) | (880,136 | ) | (15,317,752 | ) | ||||||||||||||||||
Net increase | 783,081 | $14,415,523 | 1,889,639 | $31,704,087 | ||||||||||||||||||||||
Class R1 shares | ||||||||||||||||||||||||||
Sold | 388,671 | $7,278,655 | 576,595 | $9,969,871 | ||||||||||||||||||||||
Distributions reinvested | — | — | 20,136 | 349,360 | ||||||||||||||||||||||
Repurchased | (119,213 | ) | (2,242,344 | ) | (240,894 | ) | (4,145,634 | ) | ||||||||||||||||||
Net increase | 269,458 | $5,036,311 | 355,837 | $6,173,597 | ||||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 2,955,313 | $55,150,897 | 1,928,799 | $34,271,275 | ||||||||||||||||||||||
Distributions reinvested | — | — | 35,013 | 607,469 | ||||||||||||||||||||||
Repurchased | (948,336 | ) | (17,906,341 | ) | (206,368 | ) | (3,669,309 | ) | ||||||||||||||||||
Net increase | 2,006,977 | $37,244,556 | 1,757,444 | $31,209,435 | ||||||||||||||||||||||
Class R3 shares | ||||||||||||||||||||||||||
Sold | 671,707 | $12,573,663 | 616,053 | $10,858,653 | ||||||||||||||||||||||
Distributions reinvested | — | — | 25,112 | 435,694 | ||||||||||||||||||||||
Repurchased | (245,211 | ) | (4,591,889 | ) | (87,994 | ) | (1,516,936 | ) | ||||||||||||||||||
Net increase | 426,496 | $7,981,774 | 553,171 | $9,777,411 | ||||||||||||||||||||||
Class R4 shares | ||||||||||||||||||||||||||
Sold | 3,078,361 | $57,663,452 | 3,965,095 | $66,564,803 | ||||||||||||||||||||||
Distributions reinvested | — | — | 172,059 | 2,983,502 | ||||||||||||||||||||||
Repurchased | (377,992 | ) | (7,108,141 | ) | (419,640 | ) | (7,305,850 | ) | ||||||||||||||||||
Net increase | 2,700,369 | $50,555,311 | 3,717,514 | $62,242,455 |
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Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class R5 shares | ||||||||||||||||||||||||||
Sold | 13,420,941 | $251,427,390 | 6,759,505 | $117,417,510 | ||||||||||||||||||||||
Distributions reinvested | — | — | 1,789,472 | 31,047,347 | ||||||||||||||||||||||
Repurchased | (1,494,680 | ) | (28,146,155 | ) | (3,235,655 | ) | (57,063,767 | ) | ||||||||||||||||||
Net increase | 11,926,261 | $223,281,235 | 5,313,322 | $91,401,090 | ||||||||||||||||||||||
Class R6 Shares | ||||||||||||||||||||||||||
Sold | 12,647,885 | $237,824,935 | 13,376,512 | $233,137,306 | ||||||||||||||||||||||
Distributions reinvested | — | — | 769,696 | 13,346,522 | ||||||||||||||||||||||
Repurchased | (1,811,221 | ) | (34,153,868 | ) | (2,434,397 | ) | (42,833,354 | ) | ||||||||||||||||||
Net increase | 10,836,664 | $203,671,067 | 11,711,811 | $203,650,474 | ||||||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 12,871,277 | $241,489,976 | 208,369 | $3,641,852 | ||||||||||||||||||||||
Distributions reinvested | — | — | 1,698,100 | 29,462,039 | ||||||||||||||||||||||
Repurchased | (729,942 | ) | (13,812,549 | ) | (6,139,985 | ) | (105,765,660 | ) | ||||||||||||||||||
Net increase (decrease) | 12,141,335 | $227,677,427 | (4,233,516 | ) | $(72,661,769 | ) | ||||||||||||||||||||
Total net increase | 158,424,401 | $2,922,834,502 | 167,612,553 | $2,887,914,251 |
Affiliates of the fund owned 100% of shares of beneficial interest of Class NAV shares on September 30, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $4,819,236,345 and $2,086,220,592, respectively, for the six months ended September 30, 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 September 30, 2014, funds within the John Hancock group of funds complex held 5.7% of the fund's net assets.
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Continuation of investment advisory and subadvisory agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Robeco Investment Management, Inc. (the Subadvisor), for John Hancock Disciplined Value Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
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Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and other third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that the fund outperformed its benchmark index and peer group average for the one-, three- and five-year periods ended December 31, 2013. The Board noted the favorable performance of the fund relative to the benchmark index
41
and the peer group over all periods. The Board concluded that the fund's performance has outperformed the historical performance of comparable funds and the fund's benchmark.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs.
The Board noted that net management fees and total expenses for the fund are higher than the peer group median. The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee, and that such fees are negotiated at arm's length with respect to the Subadvisor. In addition, the Board took into account that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board also noted that the fund's distributor, an affiliate of the Advisor, has agreed to waive a portion of its Rule 12b-1 fee for a share class of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |||||||
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |||||||
(h) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |||||||
(i) | noted that the subadvisory fee for the fund is paid by the Advisor and is negotiated at arm's length; and |
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(j) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $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 exceed $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 funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data; and | |
(4) | information relating to the nature and scope of any material relationships and their significance to the Trust's Advisor and Subadvisor. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also
43
considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund.
The Board also relied on the ability of the Advisor to negotiate the Subadvisory Agreement with the Subadvisor, which is not affiliated with the Advisor, and the fees thereunder at arm's length. As a result, the costs of the services to be provided and the profits to be realized by the Subadvisor from its relationship with the Trust were not a material factor in the Board's consideration of the Subadvisory Agreement.
The Board also received information regarding the nature and scope (including their significance to the Advisor and its affiliates and to the Subadvisor) of any material relationships, if any, with respect to the Subadvisor, which include arrangements in which the Subadvisor or its affiliates provide advisory, distribution, or management services in connection with financial products sponsored by the Advisor or its affiliates, and may include other registered investment companies, a 529 education savings plan, managed separate accounts and exempt group annuity contracts sold to qualified plans. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fee. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fee paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
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The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the performance of the fund has outperformed the historical performance of comparable funds and the fund's benchmark; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
45
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor Subadvisor Principal distributor Custodian Transfer agent Legal counsel |
*Member of the Audit Committee
†Non-Independent Trustee
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 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
46
Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL/INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Income Allocation | INCOME FUNDS (continued) Investment Grade Bond Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE/SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield Fund |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
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John Hancock Investments
A trusted brand
John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
A better way to invest
As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
Results for investors
Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF202362 | 340SA 09/14 11/14 |
John Hancock
Core High Yield FundSemiannual report 9/30/14
A message to shareholders
Dear fellow shareholder,
The economic expansion that began in 2009 continues, with moderate GDP growth in the United States and the unemployment rate down considerably from its peak. However, the scene outside the United States had become decidedly less robust by the end of September. China's economy, a key driver of global demand, was slowing, Japan's GDP contracted in the second quarter, and the International Monetary Fund warned of another eurozone recession unless more is done to stimulate economic growth there. Meanwhile, bond markets around the world have turned in positive performance as investors pursue yield where they can find it, and the risks of rising interest rates and central bank tightening have been pushed out further into the future.
In the absence of pronounced market dislocations, we believe investors are well served by sticking to a commonsense, diversified approach, one that includes a mix of equities, fixed-income, and alternative strategies that can offer added diversification potential. Although events like those taking place in Ukraine and the Middle East serve as reminders that all market environments carry risk, we believe the biggest risk investors face in today's market is not staying invested.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an effort to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of September 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Core High Yield Fund
1
INVESTMENT OBJECTIVE
The fund seeks a total return, consisting of a high level of current income and capital appreciation.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 (%)
See page 8 for more complete performance information.
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.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
2
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
High-yield market notched gains
Despite recent volatility and a significant downturn in September, the high-yield market finished the six-month period in positive territory.
Fund outperformed benchmark index
Solid security selection and sector positioning helped the fund to outpace its benchmark as well as the average return for its Morningstar peer group.
Volatility may persist
While the fundamentals in the corporate debt market remain solid, there is still uncertainty surrounding U.S. monetary policy and the prospects for global economic growth.
PORTFOLIO COMPOSITION AS OF 9/30/14 (%)
A note about risks
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. Reduced liquidity in credit and fixed-income markets may adversely affect issuers worldwide. Please see the fund's prospectuses for additional risks.
3
![](https://capedge.com/proxy/N-CSRS/0001145443-14-001428/terrycarr.jpg)
Terry Carr, CFA
Portfolio Manager
John Hancock Asset Management
High yield has been one of the better-performing asset classes in recent years. Can you tell us about the market environment during the past six months?
The six-month period ended September 30, 2014, was generally a positive one for high-yield bonds. Fundamentals in the market continued to be strong, with very healthy corporate balance sheets and a low default rate. But valuations had become more of a concern in recent months: For much of the past few years, spreads in the high-yield market (which measure the asset class's yield advantage over U.S. Treasuries) were wider than average, reflecting a potentially undervalued market. Over the past several months, spreads have moved more in line with their long-term average, and investors' outlook for the market was generally more cautious as a result.
With that as a backdrop, comments by some board members of the U.S. Federal Reserve (Fed) suggested that the central bank might raise short-term interest rates sooner or more aggressively than many investors had anticipated. Investor worries over the Fed's late summer posture, combined with a spike in new supply as corporations issued a higher-than-usual volume of debt toward the end of the period, sent prices sharply lower in the month of September. The Fed's more recent statements have been more accommodating in tone, clarifying that any rate hikes would be dependent on certain labor and inflation targets being met. Nonetheless, high-yield bonds—as measured by the fund's benchmark, the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index—eked out a positive total return for the reporting period.
What do you view as having been driving the recent market volatility?
The environment of incredibly low yields in the government debt markets has pushed many yield-hungry investors into riskier segments of the fixed-income markets, including high-yield corporate debt. Many of these investors are not using high yield as a long-term allocation in their portfolios, but rather are buying into the asset class for income and selling at the first sign of turbulence. In addition, high yield has historically had a high correlation to equities, and with the recent weakness in the stock market, it's not surprising that there has been an accompanying downturn in high yield.
4
In terms of sectors and industries, what opportunities are you finding most attractive?
Given signs of heightened market volatility, we repositioned the portfolio somewhat more defensively during the period by increasing the fund's exposure to the basic industries and consumer services segments of the market, both of which contributed positively to the fund's relative returns versus the benchmark index. We also maintained a relatively high position in cash and cash equivalents, which has served as a buffer against some of the recent market volatility, but was a slight drag on performance over the period as a whole.
We also moved the fund to a more neutral position in terms of credit quality, having reduced its exposure to the CCC-rated segment of the market and slightly increased its cash weighting. This stance generally helped performance in recent months.
What decisions contributed positively to fund performance during the period?
In addition to the fund's exposure to the basic industries and consumer services segments—which, as we mentioned earlier, both provided strong contributions to returns—among the best-performing segments for the period were financial services and capital goods.
QUALITY COMPOSITION AS OF 9/30/14 (%)
5
As for specific holdings, some of the biggest contributors to returns were diversified mining firm Thompson Creek Metals Company, Inc., natural gas pipeline operator Rockies Express Pipeline LLC, and payday and pawn loan company Cash America International, Inc.
What positions detracted from fund returns?
The banking, utilities, and automotive industries detracted most from returns relative to the benchmark index. Regarding individual holdings, furniture and appliance retailer Conn's, Inc., Canadian integrated healthcare provider Centric Health Corp., and shipping firm Navios Maritime Holdings, Inc. were among the largest detractors.
What are the risks facing high-yield investors today, and how have you positioned the fund in response?
We believe the high-yield market remains underpinned by several important positives: improving economic and credit conditions, corporate America's comparatively healthy balance sheet, and strong investor demand for yield. First, a healthier economy has historically benefited credit-sensitive bonds. Even if steady economic improvement leads to a gradual increase in interest rates as the Fed reduces liquidity, improving economic conditions would represent a favorable environment for high-yield bond issuers. Second, the record new bond issuance in recent years has allowed many companies to lower the cost of their debt service and repair their balance sheets. This trend has led to a very positive outlook for the fundamentals in corporate debt over the foreseeable future. The default rate currently sits at around 2%, well below the longer-term average of around 4%, and we believe that even in a lackluster economic environment, that rate should remain fairly stable.
That said, we believe it is unlikely that high-yield bonds will experience substantial capital
TOP 10 ISSUERS AS OF 9/30/14 (%)
Tembec Industries, Inc. | 1.6 |
Thompson Creek Metals Company, Inc. | 1.4 |
Frontier Communications Corp. | 1.3 |
Birch Communications, Inc. | 1.2 |
Sirius XM Radio, Inc. | 1.2 |
Rockies Express Pipeline LLC | 1.2 |
Harbinger Group, Inc. | 1.2 |
Calumet Specialty Products Partners LP | 1.1 |
First Quantum Minerals, Ltd. | 1.1 |
Associated Materials LLC | 1.1 |
TOTAL | 12.4 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
6
appreciation, and that the bulk of returns will be driven by the interest income the asset class offers. All told, we believe a strategy of bottom-up security selection driven by fundamental research, such as the one we employ in managing your fund, remains a prudent way to pursue returns in today's fixed-income market environment.
MANAGED BY
![]() | Terry Carr, CFA On the fund since inception Investing since 1986 |
![]() | Konstantin Kizunov, CFA On the fund since inception Investing since 1996 |
![]() | Richard Kos, CFA On the fund since inception Investing since 1993 |
SECTOR COMPOSITION AS OF 9/30/14 (%)
7
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | SEC 30-day yield (%) subsidized | SEC 30-day yield (%) unsubsidized1 | |||||||||
1-year | 5-year | Since inception2 | 6-month | 1-year | 5-year | Since inception2 | as of 9-30-14 | as of 9-30-14 | ||||
Class A | 3.00 | 11.65 | 13.95 | -2.89 | 3.00 | 73.46 | 103.02 | 4.91 | 4.90 | |||
Class C3 | 5.48 | 11.27 | 13.49 | -0.18 | 5.48 | 70.56 | 98.64 | 4.31 | 4.30 | |||
Class I4 | 7.46 | 12.90 | 15.16 | 1.20 | 7.46 | 83.39 | 114.98 | 5.37 | 5.36 | |||
Index† | 7.23 | 10.37 | 14.79 | 0.60 | 7.23 | 63.74 | 111.28 | — | — |
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 sold within one year of purchase 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. 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 | |
Gross (%) | 1.14 | 2.20 | 0.90 |
Net (%) | 1.14 | 1.93 | 0.87 |
Please refer to the most recent prospectuses and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† | Index is the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index. |
See the following page for footnotes.
8
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Core High Yield Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index ($) | |
Class C3,5 | 4-30-09 | 19,864 | 19,864 | 21,128 |
Class I4 | 4-30-09 | 21,498 | 21,498 | 21,128 |
The values shown in the chart for Class A 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 yield reflects what the yield 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. |
9
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 presenting 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 April 1, 2014, with the same investment held until September 30, 2014.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,011.60 | $5.40 | 1.07% |
Class C | 1,000.00 | 1,008.00 | 8.96 | 1.78% |
Class I | 1,000.00 | 1,012.00 | 4.09 | 0.81% |
Class NAV2 | 1,000.00 | 984.60 | 0.58 | 0.65% |
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 September 30, 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:
10
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 April 1, 2014, with the same investment held until September 30, 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.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.70 | $5.42 | 1.07% |
Class C | 1,000.00 | 1,016.10 | 9.00 | 1.78% |
Class I | 1,000.00 | 1,021.00 | 4.10 | 0.81% |
Class NAV | 1,000.00 | 1,021.80 | 3.29 | 0.65% |
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 183/365 (to reflect the one-half year period). |
2 | The inception date for Class NAV shares is 8-28-14. Expenses are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 33/365 (to reflect the period). |
11
Fund's investments
As of 9-30-14 (Unaudited) | |||||||||||||||||||||||
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Corporate Bonds 78.6% | $620,517,949 | ||||||||||||||||||||||
(Cost $624,605,739) | |||||||||||||||||||||||
Consumer Discretionary 12.2% | 96,680,033 | ||||||||||||||||||||||
Auto Components 1.3% | |||||||||||||||||||||||
Icahn Enterprises LP | 5.875 | 02/01/22 | 5,000,000 | 4,987,490 | |||||||||||||||||||
Stackpole International Intermediate Company SA (S) | 7.750 | 10/15/21 | 4,840,000 | 4,876,300 | |||||||||||||||||||
Diversified Consumer Services 0.1% | |||||||||||||||||||||||
Speedy Cash Intermediate Holdings Corp. (S) | 10.750 | 05/15/18 | 1,000,000 | 1,010,000 | |||||||||||||||||||
Hotels, Restaurants & Leisure 0.7% | |||||||||||||||||||||||
Caesars Entertainment Operating Company, Inc. | 11.250 | 06/01/17 | 250,000 | 192,813 | |||||||||||||||||||
Great Canadian Gaming Corp. | 6.625 | 07/25/22 | CAD | 2,000,000 | 1,875,084 | ||||||||||||||||||
Landry's, Inc. (S) | 9.375 | 05/01/20 | 3,485,000 | 3,685,388 | |||||||||||||||||||
Household Durables 3.3% | |||||||||||||||||||||||
Beazer Homes USA, Inc. | 7.250 | 02/01/23 | 200,000 | 199,000 | |||||||||||||||||||
Beazer Homes USA, Inc. | 9.125 | 05/15/19 | 3,000,000 | 3,142,500 | |||||||||||||||||||
Brookfield Residential Properties, Inc. (S) | 6.500 | 12/15/20 | 3,340,000 | 3,465,250 | |||||||||||||||||||
Century Communities, Inc. (S) | 6.875 | 05/15/22 | 945,000 | 952,088 | |||||||||||||||||||
Meritage Homes Corp. | 7.000 | 04/01/22 | 1,000,000 | 1,080,000 | |||||||||||||||||||
Modular Space Corp. (S) | 10.250 | 01/31/19 | 6,125,000 | 6,186,250 | |||||||||||||||||||
Summit Materials LLC (S) | 10.500 | 01/31/20 | 3,000,000 | 3,315,000 | |||||||||||||||||||
The Ryland Group, Inc. | 5.375 | 10/01/22 | 1,000,000 | 975,000 | |||||||||||||||||||
William Lyon Homes, Inc. | 5.750 | 04/15/19 | 640,000 | 628,800 | |||||||||||||||||||
WLH PNW Finance Corp. (S) | 7.000 | 08/15/22 | 6,210,000 | 6,287,625 | |||||||||||||||||||
Internet & Catalog Retail 0.1% | |||||||||||||||||||||||
Netflix, Inc. (S) | 5.750 | 03/01/24 | 1,125,000 | 1,158,750 | |||||||||||||||||||
Media 4.4% | |||||||||||||||||||||||
Altice SA (S) | 7.750 | 05/15/22 | 2,500,000 | 2,581,250 | |||||||||||||||||||
American Media, Inc. | 11.500 | 12/15/17 | 2,094,000 | 2,209,170 | |||||||||||||||||||
Gannett Company, Inc. (S) | 4.875 | 09/15/21 | 5,000,000 | 4,837,500 | |||||||||||||||||||
Gibson Brands, Inc. (S) | 8.875 | 08/01/18 | 490,000 | 478,975 | |||||||||||||||||||
Postmedia Network, Inc. | 12.500 | 07/15/18 | 2,000,000 | 2,105,000 | |||||||||||||||||||
Quebecor Media, Inc. (S) | 6.625 | 01/15/23 | CAD | 3,000,000 | 2,789,187 | ||||||||||||||||||
Sinclair Television Group, Inc. (S) | 5.625 | 08/01/24 | 5,000,000 | 4,812,500 | |||||||||||||||||||
Sirius XM Radio, Inc. (S) | 6.000 | 07/15/24 | 9,500,000 | 9,642,500 | |||||||||||||||||||
SiTV LLC (S) | 10.375 | 07/01/19 | 2,250,000 | 2,221,875 | |||||||||||||||||||
Videotron, Ltd. (S) | 5.375 | 06/15/24 | 3,055,000 | 3,024,450 | |||||||||||||||||||
Specialty Retail 2.3% | |||||||||||||||||||||||
Conn's, Inc. (S) | 7.250 | 07/15/22 | 6,000,000 | 5,107,500 | |||||||||||||||||||
DriveTime Automotive Group, Inc. (S) | 8.000 | 06/01/21 | 4,000,000 | 3,810,000 | |||||||||||||||||||
GRD Holdings III Corp. (S) | 10.750 | 06/01/19 | 3,000,000 | 3,307,500 | |||||||||||||||||||
Group 1 Automotive, Inc. (S) | 5.000 | 06/01/22 | 2,500,000 | 2,418,750 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Consumer Discretionary (continued) | |||||||||||||||||||||||
Specialty Retail (continued) | |||||||||||||||||||||||
The Hillman Group, Inc. (S) | 6.375 | 07/15/22 | 625,000 | $604,688 | |||||||||||||||||||
The Men's Wearhouse, Inc. (S) | 7.000 | 07/01/22 | 2,685,000 | 2,711,850 | |||||||||||||||||||
Consumer Staples 6.2% | 48,659,150 | ||||||||||||||||||||||
Beverages 0.1% | |||||||||||||||||||||||
Pinnacle Operating Corp. (S) | 9.000 | 11/15/20 | 675,000 | 720,563 | |||||||||||||||||||
Commercial Services & Supplies 0.4% | |||||||||||||||||||||||
Ceridian LLC (S) | 8.125 | 11/15/17 | 3,150,000 | 3,153,938 | |||||||||||||||||||
Food & Staples Retailing 0.2% | |||||||||||||||||||||||
Simmons Foods, Inc. (C)(S) | 7.875 | 10/01/21 | 1,500,000 | 1,485,000 | |||||||||||||||||||
Food Products 2.2% | |||||||||||||||||||||||
Alliance Grain Traders, Inc. (S) | 9.000 | 02/14/18 | CAD | 2,000,000 | 1,873,655 | ||||||||||||||||||
Big Heart Pet Brands | 7.625 | 02/15/19 | 865,000 | 857,431 | |||||||||||||||||||
Post Holdings, Inc. (S) | 6.000 | 12/15/22 | 580,000 | 532,150 | |||||||||||||||||||
Post Holdings, Inc. (S) | 6.750 | 12/01/21 | 4,775,000 | 4,524,313 | |||||||||||||||||||
Post Holdings, Inc. | 7.375 | 02/15/22 | 1,100,000 | 1,089,000 | |||||||||||||||||||
Simmons Foods, Inc. (S) | 10.500 | 11/01/17 | 1,250,000 | 1,321,875 | |||||||||||||||||||
Southern States Cooperative, Inc. (S) | 10.000 | 08/15/21 | 7,000,000 | 6,860,000 | |||||||||||||||||||
Household Products 1.8% | |||||||||||||||||||||||
Harbinger Group, Inc. (S) | 7.750 | 01/15/22 | 5,000,000 | 4,962,500 | |||||||||||||||||||
Harbinger Group, Inc. | 7.750 | 01/15/22 | 1,530,000 | 1,518,525 | |||||||||||||||||||
Harbinger Group, Inc. | 7.875 | 07/15/19 | 2,830,000 | 3,013,950 | |||||||||||||||||||
Reynolds Group Issuer, Inc. | 9.000 | 04/15/19 | 3,000,000 | 3,123,750 | |||||||||||||||||||
The Sun Products Corp. (S) | 7.750 | 03/15/21 | 2,000,000 | 1,535,000 | |||||||||||||||||||
Tobacco 1.5% | |||||||||||||||||||||||
Alliance One International, Inc. | 9.875 | 07/15/21 | 7,000,000 | 6,825,000 | |||||||||||||||||||
Vector Group, Ltd. | 7.750 | 02/15/21 | 5,000,000 | 5,262,500 | |||||||||||||||||||
Energy 13.5% | 106,647,346 | ||||||||||||||||||||||
Energy Equipment & Services 2.5% | |||||||||||||||||||||||
Forbes Energy Services, Ltd. | 9.000 | 06/15/19 | 3,750,000 | 3,703,125 | |||||||||||||||||||
Halcon Resources Corp. | 9.250 | 02/15/22 | 5,500,000 | 5,431,250 | |||||||||||||||||||
Offshore Group Investment, Ltd. | 7.125 | 04/01/23 | 2,000,000 | 1,762,500 | |||||||||||||||||||
Parker Drilling Company (S) | 6.750 | 07/15/22 | 290,000 | 291,450 | |||||||||||||||||||
Permian Holdings, Inc. (S) | 10.500 | 01/15/18 | 4,303,000 | 4,389,060 | |||||||||||||||||||
PHI, Inc. | 5.250 | 03/15/19 | 1,340,000 | 1,345,025 | |||||||||||||||||||
Pioneer Energy Services Corp. (S) | 6.125 | 03/15/22 | 440,000 | 435,600 | |||||||||||||||||||
Teine Energy Ltd. (S) | 6.875 | 09/30/22 | 2,185,000 | 2,144,031 | |||||||||||||||||||
Oil, Gas & Consumable Fuels 11.0% | |||||||||||||||||||||||
Arch Coal, Inc. (S) | 8.000 | 01/15/19 | 560,000 | 480,200 | |||||||||||||||||||
Atlas Pipeline Partners LP | 5.875 | 08/01/23 | 4,500,000 | 4,398,750 | |||||||||||||||||||
Bill Barrett Corp. | 7.625 | 10/01/19 | 1,000,000 | 1,032,500 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Energy (continued) | |||||||||||||||||||||||
Oil, Gas & Consumable Fuels (continued) | |||||||||||||||||||||||
BreitBurn Energy Partners LP | 7.875 | 04/15/22 | 3,000,000 | $3,037,500 | |||||||||||||||||||
California Resources Corp. (C)(S) | 5.500 | 09/15/21 | 6,000,000 | 6,090,000 | |||||||||||||||||||
Calumet Specialty Products Partners LP (S) | 6.500 | 04/15/21 | 8,000,000 | 7,600,000 | |||||||||||||||||||
Calumet Specialty Products Partners LP | 7.625 | 01/15/22 | 1,450,000 | 1,471,750 | |||||||||||||||||||
Carrizo Oil & Gas, Inc. | 7.500 | 09/15/20 | 2,750,000 | 2,860,000 | |||||||||||||||||||
Compressco Partners LP (S) | 7.250 | 08/15/22 | 2,865,000 | 2,872,163 | |||||||||||||||||||
EPL Oil & Gas, Inc. | 8.250 | 02/15/18 | 1,500,000 | 1,533,750 | |||||||||||||||||||
FTS International, Inc. (S) | 6.250 | 05/01/22 | 3,000,000 | 2,947,500 | |||||||||||||||||||
Halcon Resources Corp. | 8.875 | 05/15/21 | 3,400,000 | 3,349,000 | |||||||||||||||||||
Jones Energy Holdings LLC (S) | 6.750 | 04/01/22 | 805,000 | 805,000 | |||||||||||||||||||
Legacy Reserves LP | 8.000 | 12/01/20 | 4,000,000 | 4,160,000 | |||||||||||||||||||
Linn Energy LLC | 6.500 | 05/15/19 | 5,000,000 | 4,900,000 | |||||||||||||||||||
Memorial Resource Development Corp. (S) | 5.875 | 07/01/22 | 870,000 | 850,425 | |||||||||||||||||||
Midstates Petroleum Company, Inc. | 10.750 | 10/01/20 | 7,000,000 | 7,262,500 | |||||||||||||||||||
Penn Virginia Corp. | 8.500 | 05/01/20 | 550,000 | 577,500 | |||||||||||||||||||
Rockies Express Pipeline LLC (S) | 6.850 | 07/15/18 | 9,000,000 | 9,630,000 | |||||||||||||||||||
Sabine Pass Liquefaction LLC | 5.625 | 02/01/21 | 2,000,000 | 2,055,000 | |||||||||||||||||||
Sanchez Energy Corp. (S) | 6.125 | 01/15/23 | 540,000 | 535,356 | |||||||||||||||||||
Seventy Seven Energy, Inc. (S) | 6.500 | 07/15/22 | 5,130,000 | 5,040,225 | |||||||||||||||||||
Sidewinder Drilling, Inc. (S) | 9.750 | 11/15/19 | 2,500,000 | 2,500,000 | |||||||||||||||||||
Trilogy Energy Corp. (S) | 7.250 | 12/13/19 | CAD | 3,500,000 | 3,312,648 | ||||||||||||||||||
Tullow Oil PLC (S) | 6.000 | 11/01/20 | 730,000 | 730,000 | |||||||||||||||||||
Tullow Oil PLC (S) | 6.250 | 04/15/22 | 1,590,000 | 1,554,225 | |||||||||||||||||||
Ultra Petroleum Corp. (S) | 5.750 | 12/15/18 | 2,500,000 | 2,512,500 | |||||||||||||||||||
Ultra Petroleum Corp. (S) | 6.125 | 10/01/24 | 2,000,000 | 1,910,000 | |||||||||||||||||||
WPX Energy, Inc. | 5.250 | 09/15/24 | 1,175,000 | 1,136,813 | |||||||||||||||||||
Financials 11.5% | 90,587,493 | ||||||||||||||||||||||
Banks 1.7% | |||||||||||||||||||||||
Barclays Bank PLC | 7.625 | 11/21/22 | 3,000,000 | 3,223,875 | |||||||||||||||||||
Credit Agricole SA (8.125% to 09/19/2018, then 5 year U.S. Swap Rate + 6.283%) (S) | 8.125 | 09/19/33 | 4,000,000 | 4,439,100 | |||||||||||||||||||
HSBC Holdings PLC (P)(Q) | 5.625 | 01/17/20 | 1,630,000 | 1,618,590 | |||||||||||||||||||
Societe Generale SA (8.250% to 11/29/2018, then 5 Year U.S. Swap Rate + 6.394%) (Q) | 8.250 | 11/29/18 | 4,000,000 | 4,112,000 | |||||||||||||||||||
Capital Markets 0.9% | |||||||||||||||||||||||
Credit Suisse Group AG (7.500% to 12/11/2023, then 5 year U.S. Swap Rate + 4.598%) (Q)(S) | 7.500 | 12/11/23 | 2,120,000 | 2,226,000 | |||||||||||||||||||
GFI Group, Inc. | 10.375 | 07/19/18 | 2,000,000 | 2,370,000 | |||||||||||||||||||
KCG Holdings, Inc. (S) | 8.250 | 06/15/18 | 2,000,000 | 2,080,000 | |||||||||||||||||||
Consumer Finance 2.4% | |||||||||||||||||||||||
Cash America International, Inc. | 5.750 | 05/15/18 | 5,000,000 | 5,187,500 | |||||||||||||||||||
Credit Acceptance Corp. (S) | 6.125 | 02/15/21 | 5,160,000 | 5,250,300 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Financials (continued) | |||||||||||||||||||||||
Consumer Finance (continued) | |||||||||||||||||||||||
DFC Finance Corp. (S) | 10.500 | 06/15/20 | 4,000,000 | $3,880,000 | |||||||||||||||||||
Enova International, Inc. (S) | 9.750 | 06/01/21 | 2,000,000 | 2,000,000 | |||||||||||||||||||
First Cash Financial Services, Inc. | 6.750 | 04/01/21 | 2,605,000 | 2,709,200 | |||||||||||||||||||
Diversified Financial Services 3.6% | |||||||||||||||||||||||
General Electric Capital Corp. (6.250% to 12/15/2022, then 3 month LIBOR + 4.704%) (Q) | 6.250 | 12/15/22 | 1,500,000 | 1,616,250 | |||||||||||||||||||
iPayment, Inc. | 10.250 | 05/15/18 | 5,000,000 | 4,412,500 | |||||||||||||||||||
Jefferies Finance LLC (S) | 6.875 | 04/15/22 | 3,000,000 | 2,955,000 | |||||||||||||||||||
Milestone Aviation Group LLC (S) | 8.625 | 12/15/17 | 4,000,000 | 4,300,000 | |||||||||||||||||||
Nationstar Mortgage LLC | 6.500 | 06/01/22 | 7,000,000 | 6,650,000 | |||||||||||||||||||
Reliance Intermediate Holdings LP (S) | 9.500 | 12/15/19 | 500,000 | 522,500 | |||||||||||||||||||
TMX Finance LLC (S) | 8.500 | 09/15/18 | 7,948,000 | 7,908,260 | |||||||||||||||||||
Real Estate Investment Trusts 0.8% | |||||||||||||||||||||||
CNL Lifestyle Properties, Inc. | 7.250 | 04/15/19 | 750,000 | 770,625 | |||||||||||||||||||
DuPont Fabros Technology LP | 5.875 | 09/15/21 | 1,100,000 | 1,126,125 | |||||||||||||||||||
iStar Financial, Inc. | 5.000 | 07/01/19 | 4,890,000 | 4,706,625 | |||||||||||||||||||
Real Estate Management & Development 1.3% | |||||||||||||||||||||||
Crescent Resources LLC (S) | 10.250 | 08/15/17 | 3,000,000 | 3,255,000 | |||||||||||||||||||
Forestar USA Real Estate Group, Inc. (S) | 8.500 | 06/01/22 | 1,665,000 | 1,706,625 | |||||||||||||||||||
Mattamy Group Corp. (S) | 6.500 | 11/15/20 | 3,500,000 | 3,491,250 | |||||||||||||||||||
Mattamy Group Corp. (S) | 6.875 | 11/15/20 | CAD | 2,000,000 | 1,839,368 | ||||||||||||||||||
Thrifts & Mortgage Finance 0.8% | |||||||||||||||||||||||
Ladder Capital Finance Holdings LLLP (S) | 5.875 | 08/01/21 | 1,420,000 | 1,405,800 | |||||||||||||||||||
Ocwen Financial Corp. (S) | 6.625 | 05/15/19 | 5,000,000 | 4,825,000 | |||||||||||||||||||
Health Care 3.9% | 30,476,813 | ||||||||||||||||||||||
Health Care Equipment & Supplies 1.3% | |||||||||||||||||||||||
Alere, Inc. | 7.250 | 07/01/18 | 2,500,000 | 2,618,750 | |||||||||||||||||||
Centric Health Corp. | 8.625 | 04/18/18 | CAD | 10,000,000 | 7,665,521 | ||||||||||||||||||
Health Care Providers & Services 2.4% | |||||||||||||||||||||||
BioScrip, Inc. (S) | 8.875 | 02/15/21 | 6,125,000 | 6,270,469 | |||||||||||||||||||
National Mentor Holdings, Inc. (S) | 12.500 | 02/15/18 | 5,936,000 | 6,277,320 | |||||||||||||||||||
OnCure Holdings, Inc. | 11.750 | 01/15/17 | 62,499 | 68,124 | |||||||||||||||||||
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 | 5,820,000 | |||||||||||||||||||
Pharmaceuticals 0.2% | |||||||||||||||||||||||
Forest Laboratories, Inc. (S) | 5.000 | 12/15/21 | 1,125,000 | 1,202,759 | |||||||||||||||||||
JLL/Delta Dutch Newco BV (S) | 7.500 | 02/01/22 | 545,000 | 550,450 | |||||||||||||||||||
Industrials 9.6% | 75,846,710 | ||||||||||||||||||||||
Aerospace & Defense 1.7% | |||||||||||||||||||||||
LMI Aerospace, Inc. (S) | 7.375 | 07/15/19 | 8,040,000 | 8,040,000 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Industrials (continued) | |||||||||||||||||||||||
Aerospace & Defense (continued) | |||||||||||||||||||||||
TransDigm, Inc. (S) | 6.000 | 07/15/22 | 5,670,000 | $5,599,125 | |||||||||||||||||||
Building Products 1.5% | |||||||||||||||||||||||
Associated Materials LLC | 9.125 | 11/01/17 | 9,000,000 | 8,820,000 | |||||||||||||||||||
Nortek, Inc. | 8.500 | 04/15/21 | 1,000,000 | 1,075,000 | |||||||||||||||||||
Summit Materials LLC | 10.500 | 01/31/20 | 1,780,000 | 1,966,900 | |||||||||||||||||||
Commercial Services & Supplies 0.6% | |||||||||||||||||||||||
Casella Waste Systems, Inc. | 7.750 | 02/15/19 | 2,600,000 | 2,606,500 | |||||||||||||||||||
Garda World Security Corp. (S) | 7.250 | 11/15/21 | 110,000 | 109,450 | |||||||||||||||||||
GFL Environmental Corp. (S) | 7.500 | 06/18/18 | CAD | 1,500,000 | 1,367,472 | ||||||||||||||||||
Safway Group Holding LLC (S) | 7.000 | 05/15/18 | 480,000 | 488,400 | |||||||||||||||||||
Tervita Corp. (S) | 10.875 | 02/15/18 | 450,000 | 450,000 | |||||||||||||||||||
Construction & Engineering 1.1% | |||||||||||||||||||||||
Aecom Technology Corp. (C)(S) | 5.750 | 10/15/22 | 7,500,000 | 7,575,000 | |||||||||||||||||||
Michael Baker International, Inc. (S) | 8.250 | 10/15/18 | 900,000 | 909,000 | |||||||||||||||||||
Construction Materials 0.3% | |||||||||||||||||||||||
Weekley Homes LLC | 6.000 | 02/01/23 | 2,500,000 | 2,418,750 | |||||||||||||||||||
Machinery 0.1% | |||||||||||||||||||||||
BlueLine Rental Finance Corp. (S) | 7.000 | 02/01/19 | 440,000 | 452,100 | |||||||||||||||||||
Waterjet Holdings, Inc. (S) | 7.625 | 02/01/20 | 440,000 | 455,400 | |||||||||||||||||||
Marine 1.1% | |||||||||||||||||||||||
Navios Maritime Holdings, Inc. (S) | 7.375 | 01/15/22 | 8,810,000 | 8,369,500 | |||||||||||||||||||
Oil, Gas & Consumable Fuels 0.6% | |||||||||||||||||||||||
Teekay Offshore Partners LP | 6.000 | 07/30/19 | 5,040,000 | 4,914,000 | |||||||||||||||||||
Professional Services 0.4% | |||||||||||||||||||||||
Mustang Merger Corp. (S) | 8.500 | 08/15/21 | 3,000,000 | 3,105,000 | |||||||||||||||||||
Road & Rail 0.3% | |||||||||||||||||||||||
The Hertz Corp. | 5.875 | 10/15/20 | 2,000,000 | 2,030,000 | |||||||||||||||||||
Trading Companies & Distributors 0.7% | |||||||||||||||||||||||
HD Supply, Inc. | 7.500 | 07/15/20 | 5,000,000 | 5,187,500 | |||||||||||||||||||
WESCO Distribution, Inc. | 5.375 | 12/15/21 | 335,000 | 332,488 | |||||||||||||||||||
Transportation Infrastructure 1.2% | |||||||||||||||||||||||
CHC Helicopter SA | 9.250 | 10/15/20 | 3,600,000 | 3,834,000 | |||||||||||||||||||
CHC Helicopter SA | 9.375 | 06/01/21 | 2,825,000 | 2,980,375 | |||||||||||||||||||
Florida East Coast Holdings Corp. (S) | 6.750 | 05/01/19 | 2,700,000 | 2,760,750 | |||||||||||||||||||
Information Technology 2.0% | 16,155,365 | ||||||||||||||||||||||
Communications Equipment 0.6% | |||||||||||||||||||||||
Altice Financing SA (S) | 6.500 | 01/15/22 | 1,520,000 | 1,558,000 | |||||||||||||||||||
Altice Finco SA (S) | 8.125 | 01/15/24 | 2,700,000 | 2,889,000 | |||||||||||||||||||
Electronic Equipment, Instruments & Components 0.7% | |||||||||||||||||||||||
Kemet Corp. | 10.500 | 05/01/18 | 1,000,000 | 1,048,750 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Information Technology (continued) | |||||||||||||||||||||||
Electronic Equipment, Instruments & Components (continued) | |||||||||||||||||||||||
Zebra Technologies Corp. (C)(S) | 7.250 | 10/15/22 | 4,740,000 | $4,740,000 | |||||||||||||||||||
Semiconductors & Semiconductor Equipment 0.7% | |||||||||||||||||||||||
Entegris, Inc. (S) | 6.000 | 04/01/22 | 961,000 | 975,415 | |||||||||||||||||||
Micron Technology, Inc. (S) | 5.500 | 02/01/25 | 4,350,000 | 4,263,000 | |||||||||||||||||||
Micron Technology, Inc. (S) | 5.875 | 02/15/22 | 655,000 | 681,200 | |||||||||||||||||||
Materials 12.9% | 101,613,560 | ||||||||||||||||||||||
Chemicals 0.7% | |||||||||||||||||||||||
Momentive Performance Materials, Inc. (H) | 8.875 | 10/15/20 | 2,000,000 | 1,785,000 | |||||||||||||||||||
Rain CII Carbon LLC (S) | 8.250 | 01/15/21 | 3,375,000 | 3,510,000 | |||||||||||||||||||
Construction Materials 2.3% | |||||||||||||||||||||||
American Gilsonite Company (S) | 11.500 | 09/01/17 | 7,500,000 | 8,100,000 | |||||||||||||||||||
Hardwoods Acquisition, Inc. (S) | 7.500 | 08/01/21 | 7,800,000 | 7,683,000 | |||||||||||||||||||
US Concrete, Inc. | 8.500 | 12/01/18 | 2,250,000 | 2,407,500 | |||||||||||||||||||
Containers & Packaging 1.4% | |||||||||||||||||||||||
Ardagh Packaging Finance PLC (S) | 6.000 | 06/30/21 | 930,000 | 892,800 | |||||||||||||||||||
Ardagh Packaging Finance PLC (S) | 6.250 | 01/31/19 | 1,530,000 | 1,514,700 | |||||||||||||||||||
Ardagh Packaging Finance PLC (S) | 7.000 | 11/15/20 | 135,882 | 137,241 | |||||||||||||||||||
Cascades, Inc. (S) | 5.500 | 07/15/22 | 7,460,000 | 7,236,200 | |||||||||||||||||||
Paperworks Industries, Inc. (S) | 9.500 | 08/15/19 | 890,000 | 905,575 | |||||||||||||||||||
Metals & Mining 5.9% | |||||||||||||||||||||||
AuRico Gold, Inc. (S) | 7.750 | 04/01/20 | 3,655,000 | 3,655,000 | |||||||||||||||||||
Edgen Murray Corp. (S) | 8.750 | 11/01/20 | 1,950,000 | 2,145,000 | |||||||||||||||||||
Essar Steel Algoma, Inc. (S) | 9.375 | 03/15/15 | 2,000,000 | 1,997,500 | |||||||||||||||||||
First Quantum Minerals, Ltd. (S) | 7.250 | 10/15/19 | 6,000,000 | 6,180,000 | |||||||||||||||||||
First Quantum Minerals, Ltd. (S) | 7.250 | 05/15/22 | 2,750,000 | 2,811,875 | |||||||||||||||||||
Hecla Mining Company | 6.875 | 05/01/21 | 1,800,000 | 1,692,000 | |||||||||||||||||||
HudBay Minerals, Inc. | 9.500 | 10/01/20 | 5,290,000 | 5,673,525 | |||||||||||||||||||
Optima Specialty Steel, Inc. (S) | 12.500 | 12/15/16 | 250,000 | 268,125 | |||||||||||||||||||
Signode Industrial Group Lux SA (S) | 6.375 | 05/01/22 | 3,910,000 | 3,753,600 | |||||||||||||||||||
Steel Dynamics, Inc. (S) | 5.125 | 10/01/21 | 4,000,000 | 4,060,000 | |||||||||||||||||||
Taseko Mines, Ltd. | 7.750 | 04/15/19 | 3,750,000 | 3,731,250 | |||||||||||||||||||
Thompson Creek Metals Company, Inc. | 9.750 | 12/01/17 | 3,000,000 | 3,262,500 | |||||||||||||||||||
Thompson Creek Metals Company, Inc. | 12.500 | 05/01/19 | 7,000,000 | 7,682,500 | |||||||||||||||||||
Paper & Forest Products 2.6% | |||||||||||||||||||||||
Mercer International, Inc. | 9.500 | 12/01/17 | 1,670,000 | 1,749,325 | |||||||||||||||||||
Resolute Forest Products, Inc. | 5.875 | 05/15/23 | 5,858,000 | 5,414,989 | |||||||||||||||||||
Tembec Industries, Inc. (C)(S) | 9.000 | 12/15/19 | 10,000,000 | 10,075,000 | |||||||||||||||||||
Tembec Industries, Inc. | 11.250 | 12/15/18 | 2,447,000 | 2,638,355 | |||||||||||||||||||
UPM-Kymmene OYJ (S) | 7.450 | 11/26/27 | 600,000 | 651,000 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Telecommunication Services 3.8% | $30,153,294 | ||||||||||||||||||||||
Diversified Telecommunication Services 2.8% | |||||||||||||||||||||||
Cincinnati Bell, Inc. | 8.375 | 10/15/20 | 1,000,000 | 1,055,000 | |||||||||||||||||||
Columbus International, Inc. (S) | 7.375 | 03/30/21 | 1,200,000 | 1,248,000 | |||||||||||||||||||
Frontier Communications Corp. | 6.250 | 09/15/21 | 1,130,000 | 1,122,231 | |||||||||||||||||||
Frontier Communications Corp. | 7.125 | 01/15/23 | 7,500,000 | 7,650,000 | |||||||||||||||||||
Frontier Communications Corp. | 8.500 | 04/15/20 | 1,000,000 | 1,110,000 | |||||||||||||||||||
Goodman Networks, Inc. | 12.125 | 07/01/18 | 3,600,000 | 3,780,000 | |||||||||||||||||||
T-Mobile USA, Inc. | 6.000 | 03/01/23 | 4,000,000 | 4,000,000 | |||||||||||||||||||
Wind Acquisition Finance SA (S) | 7.375 | 04/23/21 | 2,500,000 | 2,512,500 | |||||||||||||||||||
Wireless Telecommunication Services 1.0% | |||||||||||||||||||||||
Sprint Capital Corp. | 6.900 | 05/01/19 | 1,000,000 | 1,051,250 | |||||||||||||||||||
Sprint Corp. (S) | 7.125 | 06/15/24 | 6,575,000 | 6,624,313 | |||||||||||||||||||
Utilities 3.0% | 23,698,185 | ||||||||||||||||||||||
Electric Utilities 1.1% | |||||||||||||||||||||||
RJS Power Holdings LLC (S) | 5.125 | 07/15/19 | 8,900,000 | 8,811,000 | |||||||||||||||||||
Gas Utilities 0.3% | |||||||||||||||||||||||
Southern Star Central Corp. (S) | 5.125 | 07/15/22 | 2,500,000 | 2,487,500 | |||||||||||||||||||
Independent Power and Renewable Electricity Producers 1.6% | |||||||||||||||||||||||
Dynegy, Inc. | 5.875 | 06/01/23 | 6,585,000 | 6,140,513 | |||||||||||||||||||
GenOn Energy, Inc. | 7.875 | 06/15/17 | 2,000,000 | 2,035,000 | |||||||||||||||||||
NRG Energy, Inc. (S) | 6.250 | 07/15/22 | 1,675,000 | 1,717,922 | |||||||||||||||||||
NRG Energy, Inc. (S) | 6.250 | 05/01/24 | 2,500,000 | 2,506,250 | |||||||||||||||||||
Term Loans (M) 12.3% | $97,151,965 | ||||||||||||||||||||||
(Cost $98,450,008) | |||||||||||||||||||||||
Consumer Discretionary 3.3% | 26,463,167 | ||||||||||||||||||||||
Diversified Consumer Services 0.3% | |||||||||||||||||||||||
Orchard Acquisition Company | 7.000 | 02/07/19 | 2,345,217 | 2,333,491 | |||||||||||||||||||
Hotels, Restaurants & Leisure 0.2% | |||||||||||||||||||||||
Marina District Finance Company, Inc. | 6.750 | 08/15/18 | 1,945,300 | 1,940,437 | |||||||||||||||||||
Household Durables 0.8% | |||||||||||||||||||||||
Norcraft Companies LP | 5.250 | 12/13/20 | 3,970,000 | 3,950,150 | |||||||||||||||||||
William Lyon Homes, Inc. | 7.250 | 08/12/15 | 2,506,154 | 2,506,154 | |||||||||||||||||||
Media 0.6% | |||||||||||||||||||||||
Getty Images, Inc. | 4.750 | 10/18/19 | 2,977,273 | 2,716,761 | |||||||||||||||||||
SESAC Holdco II LLC | 5.000 | 02/08/19 | 1,953,820 | 1,941,608 | |||||||||||||||||||
Specialty Retail 0.8% | |||||||||||||||||||||||
Payless, Inc. | 5.000 | 03/11/21 | 1,995,000 | 1,915,200 | |||||||||||||||||||
Payless, Inc. | 8.500 | 03/11/22 | 210,000 | 195,300 | |||||||||||||||||||
Toys R Us Property Company I LLC | 6.000 | 08/21/19 | 4,419,112 | 4,242,348 | |||||||||||||||||||
Textiles, Apparel & Luxury Goods 0.6% | |||||||||||||||||||||||
Charlotte Russe, Inc. | 6.750 | 05/21/19 | 3,960,000 | 3,861,000 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Consumer Discretionary (continued) | |||||||||||||||||||||||
Textiles, Apparel & Luxury Goods (continued) | |||||||||||||||||||||||
Charlotte Russe, Inc. | 6.750 | 05/22/19 | 882,788 | $860,718 | |||||||||||||||||||
Consumer Staples 1.2% | 9,310,386 | ||||||||||||||||||||||
Food & Staples Retailing 0.5% | |||||||||||||||||||||||
Reddy Ice Corp. | 6.000 | 11/01/19 | 500,000 | 440,000 | |||||||||||||||||||
Reddy Ice Corp. | 6.751 | 05/01/19 | 3,447,500 | 3,257,888 | |||||||||||||||||||
Household Products 0.7% | |||||||||||||||||||||||
The Sun Products Corp. | 5.500 | 03/23/20 | 5,960,172 | 5,612,498 | |||||||||||||||||||
Energy 2.0% | 15,474,194 | ||||||||||||||||||||||
Energy Equipment & Services 0.5% | |||||||||||||||||||||||
Preferred Proppants LLC | 6.750 | 08/12/20 | 4,000,000 | 3,930,000 | |||||||||||||||||||
Oil, Gas & Consumable Fuels 1.5% | |||||||||||||||||||||||
Arch Coal, Inc. | 6.250 | 05/16/18 | 6,941,834 | 6,332,688 | |||||||||||||||||||
Fieldwood Energy LLC | 8.375 | 09/30/20 | 5,205,000 | 5,211,506 | |||||||||||||||||||
Financials 1.3% | 9,917,500 | ||||||||||||||||||||||
Diversified Financial Services 1.3% | |||||||||||||||||||||||
iPayment, Inc. | 6.750 | 05/08/17 | 4,000,000 | 3,947,500 | |||||||||||||||||||
PGX Holdings, Inc. (T) | TBD | 09/18/20 | 6,000,000 | 5,970,000 | |||||||||||||||||||
Health Care 0.7% | 5,639,051 | ||||||||||||||||||||||
Health Care Providers & Services 0.4% | |||||||||||||||||||||||
CRC Health Corp. | 9.000 | 09/28/21 | 1,000,000 | 996,250 | |||||||||||||||||||
Western Dental Services, Inc. | 6.000 | 11/01/18 | 2,471,327 | 2,446,613 | |||||||||||||||||||
Pharmaceuticals 0.3% | |||||||||||||||||||||||
Qol Meds LLC | 5.500 | 07/15/20 | 2,210,000 | 2,196,188 | |||||||||||||||||||
Industrials 1.2% | 9,607,729 | ||||||||||||||||||||||
Airlines 0.3% | |||||||||||||||||||||||
Air Canada | 5.500 | 09/20/19 | 2,668,313 | 2,686,657 | |||||||||||||||||||
Machinery 0.4% | |||||||||||||||||||||||
CPM Holdings, Inc. | 10.250 | 03/01/18 | 3,000,000 | 3,035,625 | |||||||||||||||||||
Road & Rail 0.5% | |||||||||||||||||||||||
Livingston International, Inc. | 5.000 | 04/16/19 | 1,975,000 | 1,940,438 | |||||||||||||||||||
Livingston International, Inc. | 9.000 | 04/20/20 | 1,954,783 | 1,945,009 | |||||||||||||||||||
Information Technology 0.8% | 6,002,500 | ||||||||||||||||||||||
Electronic Equipment, Instruments & Components 0.7% | |||||||||||||||||||||||
Blue Coat Systems, Inc. | 9.500 | 06/28/20 | 5,000,000 | 5,000,000 | |||||||||||||||||||
IT Services 0.1% | |||||||||||||||||||||||
Deltek, Inc. | 10.000 | 10/10/19 | 1,000,000 | 1,002,500 |
Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
Materials 0.6% | $4,987,438 | ||||||||||||||||||||||
Chemicals 0.6% | |||||||||||||||||||||||
American Pacific Corp. | 7.000 | 02/27/19 | 4,975,000 | 4,987,438 | |||||||||||||||||||
Telecommunication Services 1.2% | 9,750,000 | ||||||||||||||||||||||
Diversified Telecommunication Services 1.2% | |||||||||||||||||||||||
Birch Communications, Inc. | 7.750 | 07/17/20 | 10,000,000 | 9,750,000 | |||||||||||||||||||
Shares | Value | ||||||||||||||||||||||
Common Stocks 0.0% | $218,622 | ||||||||||||||||||||||
(Cost $250,006) | |||||||||||||||||||||||
Energy 0.0% | 40,960 | ||||||||||||||||||||||
Energy Equipment & Services 0.0% | |||||||||||||||||||||||
TPT Acquisition, Inc. (I) | 2,560 | 40,960 | |||||||||||||||||||||
Utilities 0.0% | 177,662 | ||||||||||||||||||||||
Independent Power and Renewable Electricity Producers 0.0% | |||||||||||||||||||||||
Dynegy, Inc. (I) | 6,156 | 177,662 | |||||||||||||||||||||
Preferred Securities 0.1% | $1,138,718 | ||||||||||||||||||||||
(Cost $1,141,000) | |||||||||||||||||||||||
Utilities 0.1% | 1,138,718 | ||||||||||||||||||||||
Dominion Resources, Inc. | 22,820 | 1,138,718 | |||||||||||||||||||||
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 | |||||||||||||||||||||
Par value | Value | ||||||||||||||||||||||
Short-Term Investments 4.7% | $36,783,000 | ||||||||||||||||||||||
(Cost $36,783,000) | |||||||||||||||||||||||
Repurchase Agreement 4.7% | 36,783,000 | ||||||||||||||||||||||
Repurchase Agreement with State Street Corp. dated 9-30-14 at 0.000% to be repurchased at $36,783,000 on 10-1-14, collateralized by $37,755,000 U.S. Treasury Notes, 1.250% due 10-31-18 (valued at $37,519,031, including interest) | 36,783,000 | 36,783,000 | |||||||||||||||||||||
Total investments (Cost $761,247,253)† 95.7% | $755,810,257 | ||||||||||||||||||||||
Other assets and liabilities, net 4.3% | $33,752,683 | ||||||||||||||||||||||
Total net assets 100.0% | $789,562,940 |
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. | ||||||
(P) | Variable rate obligation. 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 $381,361,670 or 48.3% of the fund's net assets as of 9-30-14. | ||||||
(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 9-30-14, the aggregate cost of investment securities for federal income tax purposes was $761,974,310. Net unrealized depreciation aggregated $6,164,053, of which $8,055,522 related to appreciated investment securities and $14,219,575 related to depreciated investment securities. |
The fund had the following country concentration as a percentage of net assets on 9-30-14.
United States | 80.5% |
Canada | 12.3% |
Luxembourg | 1.8% |
France | 1.1% |
Greece | 1.1% |
United Kingdom | 0.9% |
Ireland | 0.9% |
Marshall Islands | 0.6% |
Switzerland | 0.3% |
Cayman Islands | 0.2% |
Other Countries | 0.3% |
Total | 100.0% |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||
Investments, at value (Cost $761,247,253) | $755,810,257 | |||||||||||||||||||||||||||||||||||||
Cash | 47,189,609 | |||||||||||||||||||||||||||||||||||||
Foreign currency, at value (Cost $150,184) | 145,361 | |||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 4,569,540 | |||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 6,483,822 | |||||||||||||||||||||||||||||||||||||
Receivable for forward foreign currency exchange contracts | 1,235,670 | |||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 13,572,874 | |||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 47,735 | |||||||||||||||||||||||||||||||||||||
Total assets | 829,054,868 | |||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 5,965,500 | |||||||||||||||||||||||||||||||||||||
Payable for delayed delivery securities purchased | 29,740,000 | |||||||||||||||||||||||||||||||||||||
Payable for forward foreign currency exchange contracts | 207,083 | |||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 3,216,346 | |||||||||||||||||||||||||||||||||||||
Distributions payable | 108,779 | |||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 30,184 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 134,846 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 392 | |||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 88,798 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 39,491,928 | |||||||||||||||||||||||||||||||||||||
Net assets | $789,562,940 | |||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||
Paid-in capital | $794,741,622 | |||||||||||||||||||||||||||||||||||||
Undistributed net investment income | 468,328 | |||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (1,216,554 | ) | ||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | (4,430,456 | ) | ||||||||||||||||||||||||||||||||||||
Net assets | $789,562,940 | |||||||||||||||||||||||||||||||||||||
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 ($376,984,064 ÷ 34,772,833 shares)1 | $10.84 | |||||||||||||||
Class C ($53,774,121 ÷ 4,961,011 shares)1 | $10.84 | |||||||||||||||
Class I ($240,564,624 ÷ 22,184,432 shares) | $10.84 | |||||||||||||||
Class NAV ($118,240,131 ÷ 10,901,274 shares) | $10.85 | |||||||||||||||
Maximum offering price per share | ||||||||||||||||
Class A (net asset value per share ÷ 96%)2 | $11.29 |
1 | Redemption price per share is equal to 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. |
STATEMENT OF OPERATIONS For the six months ended 9-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||
Interest | $19,771,302 | |||||||||||||||||||||||||||||||||||||
Dividends | 18,185 | |||||||||||||||||||||||||||||||||||||
Total investment income | 19,789,487 | |||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Investment management fees | 1,855,386 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 641,159 | |||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 44,052 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 353,453 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 2,419 | |||||||||||||||||||||||||||||||||||||
State registration fees | 20,428 | |||||||||||||||||||||||||||||||||||||
Printing and postage | 17,087 | |||||||||||||||||||||||||||||||||||||
Professional fees | 37,905 | |||||||||||||||||||||||||||||||||||||
Custodian fees | 41,746 | |||||||||||||||||||||||||||||||||||||
Registration and filing fees | 16,203 | |||||||||||||||||||||||||||||||||||||
Other | 5,202 | |||||||||||||||||||||||||||||||||||||
Total expenses | 3,035,040 | |||||||||||||||||||||||||||||||||||||
Less expense reductions | (20,658 | ) | ||||||||||||||||||||||||||||||||||||
Net expenses | 3,014,382 | |||||||||||||||||||||||||||||||||||||
Net investment income | 16,775,105 | |||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers and foreign currency transactions | (554,705 | ) | ||||||||||||||||||||||||||||||||||||
(554,705 | ) | |||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers and translation of assets and liabilities in foreign currencies | (14,297,368 | ) | ||||||||||||||||||||||||||||||||||||
(14,297,368 | ) | |||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss | (14,852,073 | ) | ||||||||||||||||||||||||||||||||||||
Increase in net assets from operations | $1,923,032 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-14 | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | 9-30-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $16,775,105 | $21,572,753 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) | (554,705 | ) | 2,484,425 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (14,297,368 | ) | 2,339,310 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase in net assets resulting from operations | 1,923,032 | 26,396,488 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | (9,974,055 | ) | (17,157,660 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | (1,027,231 | ) | (609,633 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | (5,258,339 | ) | (4,729,965 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | (644,147 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (1,434,267 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | — | (77,571 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (413,673 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (16,903,772 | ) | (24,422,769 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 344,232,503 | 210,110,747 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total increase | 329,251,763 | 212,084,466 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 460,311,177 | 248,226,711 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $789,562,940 | $460,311,177 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $468,328 | $596,995 |
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 | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $11.03 | $11.02 | $10.52 | $11.35 | $11.59 | $10.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.32 | 0.71 | 0.74 | 1.07 | 1.16 | 0.99 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.19 | ) | 0.10 | 0.53 | (0.25 | ) | 0.92 | 2.21 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.13 | 0.81 | 1.27 | 0.82 | 2.08 | 3.20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.32 | ) | (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 | (0.32 | ) | (0.80 | ) | (0.77 | ) | (1.65 | ) | (2.32 | ) | (1.61 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $10.84 | $11.03 | $11.02 | $10.52 | $11.35 | $11.59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 1.16 | 6 | 7.62 | 12.59 | 8.12 | 19.34 | 33.75 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $377 | $313 | $208 | $16 | $17 | $17 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.08 | 7 | 1.15 | 1.30 | 1.68 | 1.55 | 1.36 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.07 | 7 | 1.15 | 1.18 | 1.24 | 1.21 | 1.13 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 5.71 | 7 | 6.45 | 6.83 | 9.82 | 9.99 | 9.82 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 6 | 26 | 15 | 64 | 207 | 389 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Period from 4-30-09 (commencement of operations) to 3-31-10. | |||||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
4 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||
5 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||||||||||||||||||
7 | Annualized. |
Class C Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $11.03 | $11.02 | $11.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.27 | 0.61 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.18 | ) | 0.10 | — | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.09 | 0.71 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.28 | ) | (0.64 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.06 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.28 | ) | (0.70 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $10.84 | $11.03 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5,6 | 0.80 | 7 | 6.73 | 0.09 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $54 | $28 | — | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.79 | 9 | 2.22 | 16.98 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.78 | 9 | 1.93 | 1.93 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 4.94 | 9 | 5.58 | 5.54 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 6 | 26 | 15 | 10 |
1 | Six months ended 9-30-14. Unaudited. | ||||||||||||||||||||||||||||
2 | The inception date for Class C shares is 3-27-13. | ||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||
4 | Less than $0.005 per share. | ||||||||||||||||||||||||||||
5 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||
6 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||
7 | Not annualized. | ||||||||||||||||||||||||||||
8 | Less than $500,000. | ||||||||||||||||||||||||||||
9 | Annualized. | ||||||||||||||||||||||||||||
10 | The portfolio turnover is shown for the period from 4-1-12 to 3-31-13. |
Class I Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $11.04 | $11.02 | $10.52 | $11.36 | $11.59 | $10.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.33 | 0.73 | 0.77 | 1.10 | 1.21 | 1.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.20 | ) | 0.12 | 0.53 | (0.26 | ) | 0.92 | 2.20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.13 | 0.85 | 1.30 | 0.84 | 2.13 | 3.22 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.33 | ) | (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 | (0.33 | ) | (0.83 | ) | (0.80 | ) | (1.68 | ) | (2.36 | ) | (1.63 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $10.84 | $11.04 | $11.02 | $10.52 | $11.36 | $11.59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 1.20 | 5 | 8.01 | 12.90 | 8.39 | 19.87 | 34.08 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $241 | $119 | $40 | — | 6 | — | 6 | — | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.81 | 7 | 0.89 | 1.07 | 4.23 | 1.35 | 3.52 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.81 | 7 | 0.87 | 0.87 | 0.90 | 0.85 | 0.85 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 5.92 | 7 | 6.71 | 7.06 | 10.17 | 10.35 | 10.10 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 6 | 26 | 15 | 64 | 207 | 389 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | Period from 4-30-09 (commencement of operations) to 3-31-10. | |||||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
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 | 9-30-14 | 1,2 | |||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $11.08 | ||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.06 | ||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss on investments | (0.23 | ) | |||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.17 | ) | |||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.06 | ) | |||||||||||||||||||||||||||||||||||||||
Total distributions | (0.06 | ) | |||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $10.85 | ||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (1.54 | ) 5 | |||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $118 | ||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.66 | 6 | |||||||||||||||||||||||||||||||||||||||
Expenses including reductions and amounts recaptured | 0.65 | 6 | |||||||||||||||||||||||||||||||||||||||
Net investment income | 5.58 | 6 | |||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 6 | 7 |
1 | Period ended 9-30-14. Unaudited. | ||||||||||||||
2 | The inception date for Class NAV shares is 8-28-14. | ||||||||||||||
3 | Based on average daily shares outstanding. | ||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||
5 | Not annualized. | ||||||||||||||
6 | Annualized. | ||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-14 to 9-30-14. |
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. 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, state registration fees and printing and postage 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 (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
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. The fund uses fair value adjustment factors provided by an independent pricing vendor to value certain foreign securities in order to adjust for events that may occur between the close of foreign exchanges or markets and the close of the NYSE.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund's
30
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 September 30, 2014, by major security category or type:
Total Market Value at 9-30-14 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||
Corporate Bonds | |||||
Consumer Discretionary | $96,680,033 | — | $96,680,033 | — | |
Consumer Staples | 48,659,150 | — | 48,659,150 | — | |
Energy | 106,647,346 | — | 106,647,346 | — | |
Financials | 90,587,493 | — | 90,587,493 | — | |
Health Care | 30,476,813 | — | 30,473,393 | $3,420 | |
Industrials | 75,846,710 | — | 75,846,710 | — | |
Information Technology | 16,155,365 | — | 16,155,365 | — | |
Materials | 101,613,560 | — | 101,613,560 | — | |
Telecommunication Services | 30,153,294 | — | 30,153,294 | — | |
Utilities | 23,698,185 | — | 23,698,185 | — | |
Term Loans | |||||
Consumer Discretionary | 26,463,167 | — | 26,463,167 | — | |
Consumer Staples | 9,310,386 | — | 9,310,386 | — | |
Energy | 15,474,194 | — | 15,474,194 | — | |
Financials | 9,917,500 | — | 9,917,500 | — | |
Health Care | 5,639,051 | — | 5,639,051 | — | |
Industrials | 9,607,729 | — | 9,607,729 | — | |
Information Technology | 6,002,500 | — | 6,002,500 | — | |
Materials | 4,987,438 | — | 4,987,438 | — | |
Telecommunication Services | 9,750,000 | — | 9,750,000 | — | |
Common Stocks | |||||
Energy | 40,960 | — | — | 40,960 | |
Utilities | 177,662 | $177,662 | — | — | |
Preferred Securities | |||||
Utilities | 1,138,718 | 1,138,718 | — | — | |
Warrants | 3 | 3 | — | — | |
Short-Term Investments | 36,783,000 | — | 36,783,000 | — | |
Total Investments in Securities | 755,810,257 | $1,316,383 | $754,449,494 | $44,380 | |
Other Financial Instruments | |||||
Forward Foreign Currency Contracts | $1,028,587 | — | $1,028,587 | — |
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 received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
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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.
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 September 30, 2014, the fund had $20,174,500 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.
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 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 six months ended September 30, 2014 were $254. For the six months ended September 30, 2014, the fund had no borrowings under the line of credit.
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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, and transfer agent fees, state registration fees and printing and postage are calculated daily for all classes, based on the net asset value of the class and the applicable specific expense rates.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of 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.
Distributions 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.
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.
Such distributions, on a tax basis are determined in conformity with income tax regulations, which may differ from US GAAP.
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.
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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 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 six months ended September 30, 2014, the fund held forward foreign currency contracts with USD notional values ranging from approximately $14.4 million to $64.3 million, as measured at each quarter end. The following table summarizes the contracts held at September 30, 2014.
Contract to buy | Contract to sell | Counterparty | Contractual settlement date | Unrealized appreciation | Unrealized depreciation | Net unrealized appreciation/ (depreciation) | ||||||||||||||
CAD 23,488,834 | USD 21,180,193 | Toronto Dominion Bank | 10/1/2014 | — | ($207,083 | ) | ($207,083 | ) | ||||||||||||
USD 22,004,209 | CAD 23,488,834 | Toronto Dominion Bank | 10/1/2014 | $1,031,101 | — | 1,031,101 | ||||||||||||||
USD 21,143,587 | CAD 23,488,834 | Toronto Dominion Bank | 12/10/2014 | 204,569 | — | 204,569 | ||||||||||||||
$1,235,670 | ($207,083 | ) | $1,028,587 |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at September 30, 2014 by risk category:
Risk | Statement of assets and liabilities location | Financial instruments location | Asset derivatives fair value | Liability derivatives fair value | ||||||||||
Foreign currency contracts | Receivable/payable for forward foreign currency exchange contracts | Forward foreign currency contracts | $1,235,670 | ($207,083 | ) |
Effect of derivative instruments on Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended September 30, 2014:
Risk | Statement of operations location | Investments in unaffiliated issuers and foreign currency transactions* | ||||||
Foreign currency contracts | Net realized gain (loss) on: | ($687,471 | ) |
*Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, the six months ended September 30, 2014:
Risk | Statement of operations location | Investments in unaffiliated issuers and translation of assets and liabilities in foreign currencies* |
Foreign currency contracts | Change in unrealized appreciation (depreciation) of: | $1,055,214 |
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*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) serves as investment advisor for the fund. 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 million of the fund's average daily net assets; (b) 0.625% of the next $250 million of the fund's average daily net assets; (c) 0.600% of the next $500 million of the fund's average daily net assets; (d) 0.550% of the next $1.5 billion of the fund's average daily net assets; and (e) 0.525% of the fund's average daily net assets in excess of $2.5 billion. 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.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock complex, including the fund (the participating portfolios). The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the participating portfolios that exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; and 0.015% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
The Advisor has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the fund. This agreement excludes 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, Class C 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 $12,172, $1,450, $6,232 and $804 for Class A, Class C, Class I and Class NAV shares, respectively for the six months ended September 30, 2014.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2014 were equivalent to a net annual effective rate of 0.62% 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
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accounting and legal services fees incurred for the six months ended September 30, 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. Class A shares are currently charged 0.25% 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 $780,305 for the six months ended September 30, 2014. Of this amount, $105,528 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $650,849 was paid as sales commissions to broker-dealers and $23,928 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 six months ended September 30, 2014, CDSCs received by the Distributor amounted to $242 and $10,358 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.
Class level expenses. Class level expenses for the six months ended September 30, 2014 were:
Class | Distribution and service fees | Transfer agent fees | State registration fees | Printing and postage |
Class A | $434,473 | $222,757 | $9,958 | $12,600 |
Class C | 206,686 | 26,489 | — | 737 |
Class I | — | 104,207 | 10,470 | 3,750 |
Total | $641,159 | $353,453 | $20,428 | $17,087 |
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 group of 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:
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Borrower or lender | Weighted average loan balance | Days outstanding | Weighted average interest rate | Interest income |
Lender | $15,181,789 | 4 | 0.45% | $759 |
Note 6 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2014 and for the year ended March 31, 2014 were as follows:
Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 11,646,187 | $128,769,047 | 19,301,582 | $211,075,579 | ||||||||||||||||||||||
Distributions reinvested | 861,423 | 9,507,334 | 1,616,342 | 17,648,347 | ||||||||||||||||||||||
Repurchased | (6,150,053 | ) | (68,041,872 | ) | (11,401,812 | ) | (124,433,850 | ) | ||||||||||||||||||
Net increase | 6,357,557 | $70,234,509 | 9,516,112 | $104,290,076 | ||||||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 2,638,497 | $29,173,313 | 2,648,097 | $28,987,094 | ||||||||||||||||||||||
Distributions reinvested | 88,650 | 977,561 | 59,918 | 654,590 | ||||||||||||||||||||||
Repurchased | (310,200 | ) | (3,420,136 | ) | (173,034 | ) | (1,888,225 | ) | ||||||||||||||||||
Net increase | 2,416,947 | $26,730,738 | 2,534,981 | $27,753,459 | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 16,081,109 | $177,886,895 | 8,609,064 | $94,175,596 | ||||||||||||||||||||||
Distributions reinvested | 457,357 | 5,042,939 | 451,962 | 4,937,845 | ||||||||||||||||||||||
Repurchased | (5,115,277 | ) | (56,435,536 | ) | (1,925,517 | ) | (21,046,229 | ) | ||||||||||||||||||
Net increase | 11,423,189 | $126,494,298 | 7,135,509 | $78,067,212 | ||||||||||||||||||||||
Class NAV shares1 | ||||||||||||||||||||||||||
Sold | 10,842,003 | $120,128,811 | — | — | ||||||||||||||||||||||
Distributions reinvested | 59,271 | 644,147 | — | — | ||||||||||||||||||||||
Net increase | 10,901,274 | $120,772,958 | — | — | ||||||||||||||||||||||
Total net increase | 31,098,967 | $344,232,503 | 19,186,602 | $210,110,747 |
1 The inception date for Class NAV shares is 8-28-14.
Affiliates of the fund owned 100% of shares of beneficial interest of Class NAV on September 30, 2014.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $373,116,484 and $32,224,666, respectively, for the six months ended September 30, 2014.
Note 8 — Investment by affiliated funds
Certain investors in the fund are affiliated funds that are managed by the Advisor and its affiliates. The affiliated funds do not invest in the fund for the purpose of exercising management or control; however, this investment may represent a significant portion of the fund's net assets. At September 30, 2014, funds within the John Hancock group of funds complex held 15.0% of the fund's net assets. The following fund had an affiliate ownership of 5% or more of the fund's net assets: John Hancock Lifestyle Conservative Portfolio (9.9%).
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Continuation of investment advisory and subadvisory agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (North America) Limited (the Subadvisor), for John Hancock Core High Yield Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
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Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that the fund outperformed its benchmark index and its peer group average for the one- and three-year periods ended December 31, 2013. The Board noted the fund's favorable performance relative to the benchmark index and
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the peer group for the one- and three-year periods. The Board concluded that the fund's performance has outperformed the historical performance of comparable funds and the fund's benchmark.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs.The Board noted that net management fees for the fund are lower than the peer group median and total expenses for the fund are higher than the peer group median. The Board took into account management's discussion of the fund's expenses. The Board also noted that the fund is subject to a contractual expense cap until June 2015, which reduces certain expenses of the fund.
The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board also noted that the fund's distributor, an affiliate of the Advisor, has agreed to waive a portion of its Rule 12b-1 fee for a share class of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |||||||
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |||||||
(h) | noted that the fund's Subadvisor is an affiliate of the Advisor; |
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(i) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |||||||
(j) | noted that the subadvisory fee for the fund is paid by the Advisor; and | |||||||
(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $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 exceed $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 funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and
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responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also considered any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fees as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the subadvisory fees for this fund are lower than the peer group median.
The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |||||||
(2) | the fund has outperformed the historical performance of comparable funds and the fund's benchmark; | |||||||
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and |
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(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |||||||
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
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Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor Subadvisor Principal distributor Custodian Transfer agent Legal counsel |
*Member of the Audit Committee
†Non-Independent Trustee
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 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
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Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL/INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Income Allocation | INCOME FUNDS (continued) Investment Grade Bond Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE/SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield Fund |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
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John Hancock Investments
A trusted brand
John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
A better way to invest
As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
Results for investors
Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF202361 | 346SA 09/14 11/14 |
John Hancock
Small Company FundSemiannual report 9/30/14
A message to shareholders
Dear fellow shareholder,
The economic expansion that began in 2009 continues, with moderate GDP growth in the United States and the unemployment rate down considerably from its peak. However, the scene outside the United States had become decidedly less robust by the end of September. China's economy, a key driver of global demand, was slowing, Japan's GDP contracted in the second quarter, and the International Monetary Fund warned of another eurozone recession unless more is done to stimulate economic growth there. Meanwhile, bond markets around the world have turned in positive performance as investors pursue yield where they can find it, and the risks of rising interest rates and central bank tightening have been pushed out further into the future.
In the absence of pronounced market dislocations, we believe investors are well served by sticking to a commonsense, diversified approach, one that includes a mix of equities, fixed-income, and alternative strategies that can offer added diversification potential. Although events like those taking place in Ukraine and the Middle East serve as reminders that all market environments carry risk, we believe the biggest risk investors face in today's market is not staying invested.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an effort to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of September 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Small Company Fund
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INVESTMENT OBJECTIVE
The fund seeks maximum long-term total return.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 (%)
See page 8 for more complete performance information.
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 shares (class inception 8-1-91) in exchange for Class A shares and its Institutional shares in exchange for Class I shares of John Hancock Small Company Fund, which were first offered on 12-14-09. Class A shares' returns shown above for periods 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 shares.
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.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
2
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Strong relative results in a difficult market
The fund's emphasis on high-quality, attractively valued equities served it well relative to the benchmark during the six-month reporting period.
Favorable stock selection made the difference
Stock selection was particularly strong in the healthcare, information technology, and consumer discretionary sectors, while financials and utilities hurt modestly.
Sticking to our approach
Amid increased market volatility, we made relatively few changes and maintained the fund's bias toward economically sensitive stocks.
PORTFOLIO COMPOSITION AS OF 9/30/14 (%)
A note about risks
The stock prices of 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 wildly than investments diversified across sectors. Please see the fund's prospectuses for additional risks.
3
![](https://capedge.com/proxy/N-CSRS/0001145443-14-001428/kathrynavorisek.jpg)
Kathryn A. Vorisek
Portfolio Manager
FMA
The past six months were challenging for small-cap stocks. How did the fund perform during the reporting period?
During a challenging six months for investors in small-cap stocks, the fund lost ground in absolute terms. We are pleased, however, that the fund significantly beat its benchmark, the Russell 2000 Index. The fund benefited from strong overall stock selection, especially in the healthcare, information technology, and consumer discretionary sectors. Even those few sectors that detracted, notably financials and utilities, did so only modestly.
Our portfolio management strategy tends to favor high-quality small-cap companies with relatively attractive valuations. As a result, the fund typically carries less risk than the overall small-cap stock market. This often means the fund will lag the benchmark during periods in which the market is quickly rising. But the reverse is also true: We look for the fund to do well on a relative basis when conditions turn more challenging. In fact, this exactly describes the situation over the past six months, as the benchmark declined 5.46% in a difficult small-cap market environment.
What were some of the holdings that did well in this environment?
As mentioned, the fund did well in the healthcare sector. Within this group, Akorn, Inc., a maker of ophthalmologic drugs, did particularly well. Shares of Akorn benefited after the company received regulatory approval for some forthcoming products, as well as from a corporate acquisition that was well received by the market for its potential to add to future earnings. We ultimately sold Akorn from the fund, as the company's market capitalization exceeded our limit.
The fund also benefited from investments in Health Net, Inc., a managed-care organization, and Team Health Holdings, Inc., a provider of hospital staffing solutions. We originally purchased both of these stocks based on an expected improvement in their fundamentals, as well as their ability to further benefit from exposure to the Affordable Care Act, the federal health reform legislation. Health Net has seen increased usage as a result of more people being insured. That was also a factor behind Team Health's outperformance, as was the expectation for a decline in the company's bad-debt expenses when fewer uninsured individuals use emergency room services. Eventually,
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In information technology, the fund benefited from a position in International Rectifier Corp., a manufacturer of power management semiconductors. Shares of the stock soared in August after the company agreed to be acquired for a premium of almost 50% over its previous stock price. We immediately sold some of the the fund's stake, selling the rest later in the period once we were able to find a suitable replacement.
Another notable individual contributor was Gentherm, Inc., which makes heated seats and other temperature-controlled automotive accessories. Gentherm's earnings continued to outpace expectations, as the company benefited from favorable auto sales trends, continued to show strength in emerging product categories, and further expanded into new markets.
Let's talk about some examples of holdings that disappointed during the period.
Dorman Products, Inc. was one example. The maker and reseller of auto parts was hurt by slower sales and increased competition. We eventually saw better opportunities elsewhere and decided to sell the fund's stake in this stock.
Another notable source of disappointment was Web.com Group, Inc., which provides domain name
SECTOR COMPOSITION AS OF 9/30/14 (%)
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registration and other Internet services. The company's shares fell sharply in June, after Internet giant Google, Inc. announced plans to introduce a competitive product. Initially, we maintained the fund's position in this company because we saw value in some of Web.com's other service offerings. About a month later, however, the company issued a disappointing earnings report. We concluded there was too much uncertainty surrounding Web.com's business, and we sold the fund's position.
MasTec, Inc., a construction engineering company that serves utility and telecommunication services providers, also detracted. When two of MasTec's large clients, AT&T and DIRECTV, announced plans to merge, it led to delayed capital investment in MasTec's telecom services business. Still, we maintained the fund's investment because we anticipated improving conditions in the future, once the dust surrounding the merger settles.
Given the difficult environment for small caps, what is your thinking on the positioning of the fund?
We kept the fund positioned consistently throughout the year, maintaining a bias toward more economically sensitive stocks. Despite a lack of robust economic growth, we have seen some
TEN LARGEST HOLDINGS AS OF 9/30/14 (%)
Marriott Vacations Worldwide Corp. | 1.7 |
Verint Systems, Inc. | 1.6 |
Bright Horizons Family Solutions, Inc. | 1.6 |
Wintrust Financial Corp. | 1.6 |
Charles River Laboratories International, Inc. | 1.6 |
UIL Holdings Corp. | 1.5 |
Capitol Federal Financial, Inc. | 1.5 |
STERIS Corp. | 1.5 |
TCF Financial Corp. | 1.5 |
DuPont Fabros Technology, Inc. | 1.5 |
TOTAL | 15.6 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
6
genuine pockets of strength, including in healthcare and information technology, as well as in selected industrial groups, particularly among automotive- and aerospace-related names.
Another focus has been on consumer discretionary stocks that we believe are positioned to benefit from strength in spending from affluent consumers. For example, the fund benefited from positions in luxury ski resort operator Vail Resorts, Inc. and vacation ownership company Marriott Vacations Worldwide Corp.
Toward period end, as market conditions became more challenging, we stuck to our emphasis on finding high-quality, attractively valued stocks. But we were especially intent on identifying potential catalysts to drive individual share prices higher, a particularly meaningful factor when momentum is lacking in the market.
The recent increase in market volatility certainly poses challenges for absolute performance. That said, we think the fund's strategy of closely managing risk will help position it well as long as conditions remain volatile. After multiple years of the growth investment style outperforming value, we are watching to see if the market could once again be trending in favor of value—a situation that, if it comes to pass, could provide a potential tailwind for the fund's relative performance.
MANAGED BY
![]() | Kathryn A. Vorisek On the fund since 1996 Investing since 1984 |
![]() | Leo Harmon, CFA On the fund since 2003 Investing since 1993 |
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TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||||
1-year | 5-year | 10-year | 6-month | 1-year | 5-year | 10-year | |||
Class A1 | 0.29 | 11.90 | 7.39 | -8.81 | 0.29 | 75.43 | 103.93 | ||
Class I1,2 | 5.90 | 13.41 | 8.32 | -3.86 | 5.90 | 87.62 | 122.36 | ||
Class R11,2 | 5.22 | 12.64 | 7.52 | -4.17 | 5.22 | 81.33 | 106.42 | ||
Class R21,2 | 5.48 | 12.15 | 6.71 | -4.07 | 5.48 | 77.39 | 91.38 | ||
Class R31,2 | 5.32 | 12.74 | 7.62 | -4.12 | 5.32 | 82.15 | 108.40 | ||
Class R41,2 | 5.71 | 13.13 | 7.97 | -3.96 | 5.71 | 85.31 | 115.20 | ||
Class R51,2 | 5.97 | 13.43 | 8.27 | -3.82 | 5.97 | 87.74 | 121.30 | ||
Class R61,2 | 6.08 | 13.52 | 8.38 | -3.75 | 6.08 | 88.50 | 123.52 | ||
Class ADV1,2 | 5.67 | 13.14 | 7.88 | -3.96 | 5.67 | 85.39 | 113.47 | ||
Index† | 3.93 | 14.29 | 8.19 | -5.46 | 3.93 | 94.96 | 119.66 |
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, 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 expense ratios are as follows:
Class A | Class I | Class R1 | Class R2 | Class R3 | Class R4 | Class R5 | Class R6 | Class ADV | |
Gross (%) | 1.46 | 1.17 | 2.96 | 8.12 | 10.87 | 19.03 | 6.04 | 7.66 | 4.50 |
Net (%) | 1.46 | 1.15 | 1.81 | 1.56 | 1.71 | 1.31 | 1.11 | 0.99 | 1.35 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† | Index is the Russell 2000 Index. |
See the following page for footnotes.
8
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Small Company Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in the Russell 2000 Index.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index ($) | |
Class I1,2 | 9-30-04 | 22,236 | 22,236 | 21,966 |
Class R11,2 | 9-30-04 | 20,642 | 20,642 | 21,966 |
Class R21,2 | 9-30-04 | 19,138 | 19,138 | 21,966 |
Class R31,2 | 9-30-04 | 20,840 | 20,840 | 21,966 |
Class R41,2 | 9-30-04 | 21,520 | 21,520 | 21,966 |
Class R51,2 | 9-30-04 | 22,130 | 22,130 | 21,966 |
Class R61,2 | 9-30-04 | 22,352 | 22,352 | 21,966 |
Class ADV1,2 | 9-30-04 | 21,347 | 21,347 | 21,966 |
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 shares (class inception 8-1-91) in exchange for Class A shares and the Institutional shares in exchange for Class I shares of John Hancock Small Company Fund, which were first offered on 12-14-09. Class A, Class I, and Class ADV shares were first offered on 12-14-09. The returns of Class A, Class ADV, and Class I 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, Class ADV, and Class I shares, as applicable. 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. |
9
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 presenting 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 April 1, 2014, with the same investment held until September 30, 2014.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $959.90 | $7.03 | 1.43% |
Class I | 1,000.00 | 961.40 | 5.61 | 1.14% |
Class R1 | 1,000.00 | 958.30 | 8.84 | 1.80% |
Class R2 | 1,000.00 | 959.30 | 7.61 | 1.55% |
Class R3 | 1,000.00 | 958.80 | 8.35 | 1.70% |
Class R4 | 1,000.00 | 960.40 | 6.39 | 1.30% |
Class R5 | 1,000.00 | 961.80 | 5.41 | 1.10% |
Class R6 | 1,000.00 | 962.50 | 4.77 | 0.97% |
Class ADV | 1,000.00 | 960.40 | 6.59 | 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 September 30, 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:
10
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 April 1, 2014, with the same investment held until September 30, 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.
Account value on 4-1-14 | Ending value on 9-30-14 | Expenses paid during period ended 9-30-141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,017.90 | $7.23 | 1.43% |
Class I | 1,000.00 | 1,019.40 | 5.77 | 1.14% |
Class R1 | 1,000.00 | 1,016.00 | 9.10 | 1.80% |
Class R2 | 1,000.00 | 1,017.30 | 7.84 | 1.55% |
Class R3 | 1,000.00 | 1,016.50 | 8.59 | 1.70% |
Class R4 | 1,000.00 | 1,018.60 | 6.58 | 1.30% |
Class R5 | 1,000.00 | 1,019.60 | 5.57 | 1.10% |
Class R6 | 1,000.00 | 1,020.20 | 4.91 | 0.97% |
Class ADV | 1,000.00 | 1,018.40 | 6.78 | 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 183/365 (to reflect the one-half year period). |
11
Fund's investments
As of 9-30-14 (Unaudited) | |||||||||||||||||
Shares | Value | ||||||||||||||||
Common Stocks 96.6% | $200,288,840 | ||||||||||||||||
(Cost $182,612,172) | |||||||||||||||||
Consumer Discretionary 11.6% | 24,015,273 | ||||||||||||||||
Auto Components 1.2% | |||||||||||||||||
Gentherm, Inc. (I) | 57,530 | 2,429,492 | |||||||||||||||
Distributors 1.5% | |||||||||||||||||
Pool Corp. | 57,640 | 3,107,949 | |||||||||||||||
Diversified Consumer Services 1.6% | |||||||||||||||||
Bright Horizons Family Solutions, Inc. (I) | 77,530 | 3,260,913 | |||||||||||||||
Hotels, Restaurants & Leisure 5.2% | |||||||||||||||||
La Quinta Holdings, Inc. (I) | 107,170 | 2,035,158 | |||||||||||||||
Marriott Vacations Worldwide Corp. (I) | 54,780 | 3,473,600 | |||||||||||||||
Popeyes Louisiana Kitchen, Inc. (I) | 63,190 | 2,559,195 | |||||||||||||||
Vail Resorts, Inc. | 31,650 | 2,745,954 | |||||||||||||||
Textiles, Apparel & Luxury Goods 2.1% | |||||||||||||||||
G-III Apparel Group, Ltd. (I) | 29,510 | 2,445,199 | |||||||||||||||
Movado Group, Inc. | 59,220 | 1,957,813 | |||||||||||||||
Consumer Staples 1.0% | 2,058,520 | ||||||||||||||||
Food Products 1.0% | |||||||||||||||||
Snyder's-Lance, Inc. | 77,680 | 2,058,520 | |||||||||||||||
Energy 5.6% | 11,625,565 | ||||||||||||||||
Energy Equipment & Services 3.7% | |||||||||||||||||
Forum Energy Technologies, Inc. (I) | 79,250 | 2,425,843 | |||||||||||||||
Helix Energy Solutions Group, Inc. (I) | 104,402 | 2,303,108 | |||||||||||||||
Oil States International, Inc. (I) | 46,340 | 2,868,446 | |||||||||||||||
Oil, Gas & Consumable Fuels 1.9% | |||||||||||||||||
PDC Energy, Inc. (I) | 38,640 | 1,943,206 | |||||||||||||||
Rosetta Resources, Inc. (I) | 46,790 | 2,084,962 | |||||||||||||||
Financials 26.5% | 54,934,146 | ||||||||||||||||
Banks 10.8% | |||||||||||||||||
BBCN Bancorp, Inc. | 148,340 | 2,164,282 | |||||||||||||||
Columbia Banking System, Inc. | 100,020 | 2,481,496 | |||||||||||||||
Fulton Financial Corp. | 255,620 | 2,832,270 | |||||||||||||||
Iberiabank Corp. | 49,030 | 3,064,865 | |||||||||||||||
TCF Financial Corp. | 203,140 | 3,154,764 | |||||||||||||||
Texas Capital Bancshares, Inc. (I) | 42,902 | 2,474,587 | |||||||||||||||
Webster Financial Corp. | 103,980 | 3,029,977 | |||||||||||||||
Wintrust Financial Corp. | 72,270 | 3,228,301 |
Shares | Value | ||||||||||||||||
Financials (continued) | |||||||||||||||||
Capital Markets 2.1% | |||||||||||||||||
Evercore Partners, Inc., Class A | 46,850 | $2,201,950 | |||||||||||||||
Stifel Financial Corp. (I) | 45,840 | 2,149,438 | |||||||||||||||
Insurance 2.6% | |||||||||||||||||
StanCorp Financial Group, Inc. | 35,360 | 2,234,045 | |||||||||||||||
The Hanover Insurance Group, Inc. | 50,740 | 3,116,451 | |||||||||||||||
Real Estate Investment Trusts 8.5% | |||||||||||||||||
Associated Estates Realty Corp. | 128,430 | 2,248,809 | |||||||||||||||
Brandywine Realty Trust | 191,450 | 2,693,702 | |||||||||||||||
Chesapeake Lodging Trust | 62,620 | 1,825,373 | |||||||||||||||
DiamondRock Hospitality Company | 165,190 | 2,094,609 | |||||||||||||||
DuPont Fabros Technology, Inc. | 116,480 | 3,149,619 | |||||||||||||||
Lexington Realty Trust | 278,450 | 2,726,026 | |||||||||||||||
Medical Properties Trust, Inc. | 227,370 | 2,787,556 | |||||||||||||||
Thrifts & Mortgage Finance 2.5% | |||||||||||||||||
Capitol Federal Financial, Inc. | 270,840 | 3,201,329 | |||||||||||||||
EverBank Financial Corp. | 117,480 | 2,074,697 | |||||||||||||||
Health Care 10.6% | 22,058,934 | ||||||||||||||||
Biotechnology 1.0% | |||||||||||||||||
Emergent Biosolutions, Inc. (I) | 95,830 | 2,042,137 | |||||||||||||||
Health Care Equipment & Supplies 2.6% | |||||||||||||||||
Globus Medical, Inc., Class A (I) | 115,710 | 2,276,016 | |||||||||||||||
STERIS Corp. | 58,850 | 3,175,546 | |||||||||||||||
Health Care Providers & Services 4.0% | |||||||||||||||||
Amsurg Corp. (I) | 62,179 | 3,112,059 | |||||||||||||||
Health Net, Inc. (I) | 64,190 | 2,959,801 | |||||||||||||||
MWI Veterinary Supply, Inc. (I) | 15,320 | 2,273,488 | |||||||||||||||
Life Sciences Tools & Services 1.6% | |||||||||||||||||
Charles River Laboratories International, Inc. (I) | 53,930 | 3,221,778 | |||||||||||||||
Pharmaceuticals 1.4% | |||||||||||||||||
Prestige Brands Holdings, Inc. (I) | 92,620 | 2,998,109 | |||||||||||||||
Industrials 17.7% | 36,748,017 | ||||||||||||||||
Aerospace & Defense 3.8% | |||||||||||||||||
Astronics Corp. (I) | 40,930 | 1,951,542 | |||||||||||||||
Astronics Corp., Class B (I) | 8,186 | 388,835 | |||||||||||||||
Curtiss-Wright Corp. | 45,420 | 2,994,086 | |||||||||||||||
Orbital Sciences Corp. (I) | 89,960 | 2,500,888 | |||||||||||||||
Building Products 1.4% | |||||||||||||||||
Apogee Enterprises, Inc. | 71,480 | 2,844,904 | |||||||||||||||
Commercial Services & Supplies 1.0% | |||||||||||||||||
Healthcare Services Group, Inc. | 74,210 | 2,123,148 |
Shares | Value | ||||||||||||||||
Industrials (continued) | |||||||||||||||||
Construction & Engineering 1.1% | |||||||||||||||||
MasTec, Inc. (I) | 76,660 | $2,347,329 | |||||||||||||||
Electrical Equipment 1.3% | |||||||||||||||||
EnerSys | 45,680 | 2,678,675 | |||||||||||||||
Machinery 4.4% | |||||||||||||||||
Barnes Group, Inc. | 68,460 | 2,077,761 | |||||||||||||||
Chart Industries, Inc. (I) | 33,350 | 2,038,686 | |||||||||||||||
John Bean Technologies Corp. | 75,845 | 2,133,520 | |||||||||||||||
Rexnord Corp. (I) | 102,380 | 2,912,711 | |||||||||||||||
Professional Services 2.3% | |||||||||||||||||
Huron Consulting Group, Inc. (I) | 43,070 | 2,625,978 | |||||||||||||||
Korn/Ferry International (I) | 90,140 | 2,244,486 | |||||||||||||||
Trading Companies & Distributors 2.4% | |||||||||||||||||
H&E Equipment Services, Inc. | 64,250 | 2,587,990 | |||||||||||||||
Kaman Corp. | 58,460 | 2,297,478 | |||||||||||||||
Information Technology 14.5% | 30,033,644 | ||||||||||||||||
Electronic Equipment, Instruments & Components 2.6% | |||||||||||||||||
Belden, Inc. | 5,920 | 378,998 | |||||||||||||||
InvenSense, Inc. (I) | 127,440 | 2,514,391 | |||||||||||||||
Littelfuse, Inc. | 28,780 | 2,451,480 | |||||||||||||||
Internet Software & Services 1.3% | |||||||||||||||||
Dealertrack Technologies, Inc. (I) | 63,080 | 2,738,303 | |||||||||||||||
IT Services 1.1% | |||||||||||||||||
CACI International, Inc., Class A (I) | 31,490 | 2,244,292 | |||||||||||||||
Semiconductors & Semiconductor Equipment 2.6% | |||||||||||||||||
Entegris, Inc. (I) | 266,060 | 3,059,690 | |||||||||||||||
Intersil Corp., Class A | 160,030 | 2,274,026 | |||||||||||||||
Software 4.1% | |||||||||||||||||
ACI Worldwide, Inc. (I) | 139,780 | 2,622,273 | |||||||||||||||
Mentor Graphics Corp. | 124,190 | 2,545,274 | |||||||||||||||
Verint Systems, Inc. (I) | 59,420 | 3,304,346 | |||||||||||||||
Technology Hardware, Storage & Peripherals 2.8% | |||||||||||||||||
Cray, Inc. (I) | 114,680 | 3,009,203 | |||||||||||||||
Electronics For Imaging, Inc. (I) | 65,460 | 2,891,368 | |||||||||||||||
Materials 4.7% | 9,756,482 | ||||||||||||||||
Chemicals 2.4% | |||||||||||||||||
Balchem Corp. | 43,970 | 2,487,383 | |||||||||||||||
Sensient Technologies Corp. | 46,920 | 2,456,262 | |||||||||||||||
Containers & Packaging 1.3% | |||||||||||||||||
Berry Plastics Group, Inc. (I) | 106,530 | 2,688,817 |
Shares | Value | ||||||||||||||||
Materials (continued) | |||||||||||||||||
Metals & Mining 1.0% | |||||||||||||||||
Commercial Metals Company | 124,430 | $2,124,020 | |||||||||||||||
Utilities 4.4% | 9,058,259 | ||||||||||||||||
Electric Utilities 4.4% | |||||||||||||||||
ALLETE, Inc. | 64,560 | 2,865,818 | |||||||||||||||
PNM Resources, Inc. | 120,010 | 2,989,449 | |||||||||||||||
UIL Holdings Corp. | 90,480 | 3,202,992 | |||||||||||||||
Yield (%) | Shares | Value | |||||||||||||||
Short-Term Investments 3.5% | $7,344,191 | ||||||||||||||||
(Cost $7,344,191) | |||||||||||||||||
Money Market Funds 3.5% | 7,344,191 | ||||||||||||||||
State Street Institutional Liquid Reserves Fund | 0.0853(Y | ) | 7,344,191 | 7,344,191 | |||||||||||||
Total investments (Cost $189,956,363)† 100.1% | $207,633,031 | ||||||||||||||||
Other assets and liabilities, net (0.1%) | ($235,959 | ) | |||||||||||||||
Total net assets 100.0% | $207,397,072 |
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 9-30-14. | ||||
† | At 9-30-14, the aggregate cost of investment securities for federal income tax purposes was $190,356,693. Net unrealized appreciation aggregated $17,276,338, of which $22,277,028 related to appreciated investment securities and $5,000,690 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||
Investments, at value (Cost $189,956,363) | $207,633,031 | |||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 1,064,866 | |||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 267,470 | |||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 210,648 | |||||||||||||||||||||||||||||||||||||
Receivable due from advisor | 380 | |||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 68,282 | |||||||||||||||||||||||||||||||||||||
Total assets | 209,244,677 | |||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 1,597,400 | |||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 146,927 | |||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 12,182 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 44,670 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 377 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 73 | |||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 45,976 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 1,847,605 | |||||||||||||||||||||||||||||||||||||
Net assets | $207,397,072 | |||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||
Paid-in capital | $170,813,291 | |||||||||||||||||||||||||||||||||||||
Accumulated net investment loss | (432,134 | ) | ||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments | 19,339,247 | |||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 17,676,668 | |||||||||||||||||||||||||||||||||||||
Net assets | $207,397,072 | |||||||||||||||||||||||||||||||||||||
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 ($159,027,182 ÷ 5,779,321 shares)1 | $27.52 | |||||||||||||||
Class I ($45,196,150 ÷ 1,619,877 shares) | $27.90 | |||||||||||||||
Class R1 ($1,312,135 ÷ 48,408 shares) | $27.11 | |||||||||||||||
Class R2 ($426,992 ÷ 15,469 shares) | $27.60 | |||||||||||||||
Class R3 ($200,543 ÷ 7,367 shares) | $27.22 | |||||||||||||||
Class R4 ($85,777 ÷ 3,102 shares) | $27.65 | |||||||||||||||
Class R5 ($321,382 ÷ 11,512 shares) | $27.92 | |||||||||||||||
Class R6 ($290,142 ÷ 10,367 shares) | $27.99 | |||||||||||||||
Class ADV ($536,769 ÷ 19,420 shares) | $27.64 | |||||||||||||||
Maximum offering price per share | ||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $28.97 |
1 | Redemption price per share 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. |
STATEMENT OF OPERATIONS For the six months ended 9-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||
Dividends | $1,369,726 | |||||||||||||||||||||||||||||||||||||
Interest | 2,421 | |||||||||||||||||||||||||||||||||||||
Total investment income | 1,372,147 | |||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Investment management fees | 963,832 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 251,419 | |||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 17,135 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 133,036 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 772 | |||||||||||||||||||||||||||||||||||||
State registration fees | 67,309 | |||||||||||||||||||||||||||||||||||||
Printing and postage | 20,470 | |||||||||||||||||||||||||||||||||||||
Professional fees | 27,482 | |||||||||||||||||||||||||||||||||||||
Custodian fees | 14,868 | |||||||||||||||||||||||||||||||||||||
Registration and filing fees | 16,944 | |||||||||||||||||||||||||||||||||||||
Other | 6,194 | |||||||||||||||||||||||||||||||||||||
Total expenses | 1,519,461 | |||||||||||||||||||||||||||||||||||||
Less expense reductions | (54,411 | ) | ||||||||||||||||||||||||||||||||||||
Net expenses | 1,465,050 | |||||||||||||||||||||||||||||||||||||
Net investment loss | (92,903 | ) | ||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | 8,837,042 | |||||||||||||||||||||||||||||||||||||
8,837,042 | ||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | (17,309,624 | ) | ||||||||||||||||||||||||||||||||||||
(17,309,624 | ) | |||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss | (8,472,582 | ) | ||||||||||||||||||||||||||||||||||||
Decrease in net assets from operations | ($8,565,485 | ) |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-14 | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | 3-31-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | ($92,903 | ) | ($751,344 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 8,837,042 | �� | 30,405,996 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (17,309,624 | ) | 7,354,143 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | (8,565,485 | ) | 37,008,795 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 211,711 | 10,957,047 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total increase (decrease) | (8,353,774 | ) | 44,171,869 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 215,750,846 | 171,578,977 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $207,397,072 | $215,750,846 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated net investment loss | ($432,134 | ) | ($339,231 | ) |
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 | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2,3 | 10-31-09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $28.67 | $24.10 | $20.86 | $21.44 | $17.82 | $14.68 | $13.83 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)4 | (0.02 | ) | (0.13 | ) | (0.07 | ) | (0.01 | ) | (0.03 | ) | (0.02 | ) | — | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.13 | ) | 5.23 | 3.31 | (0.57 | ) | 3.62 | 3.18 | 0.87 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.15 | ) | 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 | — | — | — | — | 0.03 | 6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.52 | $28.67 | $24.10 | $20.86 | $21.44 | $17.82 | $14.68 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)7,8 | (4.01 | ) 9 | 21.26 | 15.53 | (2.71 | ) | 20.31 | 21.51 | 9 | 6.34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $159 | $162 | $120 | $129 | $88 | $92 | $87 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.44 | 10 | 1.47 | 1.54 | 1.54 | 1.49 | 1.66 | 10 | 1.42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.43 | 10 | 1.47 | 1.50 | 1.44 | 1.34 | 1.39 | 10 | 1.39 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.15 | ) 10 | (0.47 | ) | (0.36 | ) | (0.07 | ) | (0.17 | ) | (0.23 | ) 10 | (0.01 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 159 | 42 | 11 | 155 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | For the five month period ended 3-31-10. The fund changed its fiscal year end from October 31 to March 31. | |||||||||||||||||||||||||||||||||||||
3 | 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. | |||||||||||||||||||||||||||||||||||||
4 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
5 | Less than $0.005 per share. | |||||||||||||||||||||||||||||||||||||
6 | 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. | |||||||||||||||||||||||||||||||||||||
7 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||
8 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
9 | Not annualized. | |||||||||||||||||||||||||||||||||||||
10 | Annualized. | |||||||||||||||||||||||||||||||||||||
11 | The portfolio turnover is shown for the period from 11-1-09 to 3-31-10. |
Class I Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2,3 | 10-31-09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $29.02 | $24.32 | $20.96 | $21.51 | $17.84 | $14.71 | $13.84 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)4 | 0.02 | (0.04 | ) | — | 5 | 0.07 | 0.02 | — | 5 | 0.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.14 | ) | 5.27 | 3.36 | (0.58 | ) | 3.62 | 3.18 | 0.87 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.12 | ) | 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 | — | — | — | — | 0.03 | 6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.90 | $29.02 | $24.32 | $20.96 | $21.51 | $17.84 | $14.71 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)7 | (3.86 | ) 8 | 21.61 | 16.03 | (2.34 | ) | 20.57 | 21.67 | 8 | 6.56 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $45 | $50 | $49 | $69 | $67 | $36 | $23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.15 | 9 | 1.15 | 1.18 | 1.16 | 1.12 | 1.18 | 9 | 1.17 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.14 | 9 | 1.14 | 1.11 | 1.04 | 1.11 | 1.14 | 9 | 1.14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.14 | 9 | (0.15 | ) | 0.02 | 0.34 | 0.09 | 0.01 | 9 | 0.24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 159 | 42 | 10 | 155 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | For the five month period ended 3-31-10. The fund changed its fiscal year end from October 31 to March 31. | |||||||||||||||||||||||||||||||||||||
3 | 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. | |||||||||||||||||||||||||||||||||||||
4 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
5 | Less than $0.005 per share. | |||||||||||||||||||||||||||||||||||||
6 | 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. | |||||||||||||||||||||||||||||||||||||
7 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
8 | Not annualized. | |||||||||||||||||||||||||||||||||||||
9 | Annualized. | |||||||||||||||||||||||||||||||||||||
10 | The portfolio turnover is shown for the period from 11-1-09 to 3-31-10. |
Class R1 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $28.29 | $23.87 | $20.71 | $21.37 | $19.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss3 | (0.07 | ) | (0.21 | ) | (0.13 | ) | (0.08 | ) | (0.07 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.11 | ) | 5.16 | 3.29 | (0.58 | ) | 2.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.18 | ) | 4.95 | 3.16 | (0.66 | ) | 1.96 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.53 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.53 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-recurring reimbursement | — | — | — | — | 0.03 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.11 | $28.29 | $23.87 | $20.71 | $21.37 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (4.17 | ) 6 | 20.84 | 15.26 | (3.09 | ) | 10.27 | 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 | 2.73 | 8 | 2.94 | 4.37 | 13.34 | 7.22 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.80 | 8 | 1.80 | 1.80 | 1.80 | 1.80 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.52 | ) 8 | (0.82 | ) | (0.60 | ) | (0.40 | ) | (0.42 | ) 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 159 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||
2 | The inception date for Class R1 shares is 4-30-10. | |||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||
4 | 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. | |||||||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-10 to 3-31-11. |
Class R2 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $28.77 | $24.21 | $20.96 | $20.56 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | (0.04 | ) | (0.14 | ) | (0.08 | ) | 0.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.13 | ) | 5.23 | 3.33 | 0.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.17 | ) | 5.09 | 3.25 | 0.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.60 | $28.77 | $24.21 | $20.96 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (4.07 | ) 5 | 21.12 | 15.51 | 1.95 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 4.75 | 7 | 7.99 | 20.22 | 16.31 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.55 | 7 | 1.55 | 1.55 | 1.55 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.27 | ) 7 | (0.54 | ) | (0.39 | ) | 1.31 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 8 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-1-12. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class R3 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $28.39 | $23.94 | $20.76 | $21.39 | $19.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss3 | (0.06 | ) | (0.19 | ) | (0.12 | ) | (0.06 | ) | (0.10 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.11 | ) | 5.17 | 3.30 | (0.57 | ) | 2.08 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.17 | ) | 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 | — | — | — | — | 0.03 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.22 | $28.39 | $23.94 | $20.76 | $21.39 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (4.12 | ) 6 | 20.90 | 15.32 | (2.95 | ) | 10.37 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 7 | — | 7 | — | 7 | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 8.71 | 8 | 10.89 | 5.15 | 4.65 | 3.00 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.70 | 8 | 1.70 | 1.70 | 1.70 | 1.70 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.41 | ) 8 | (0.75 | ) | (0.56 | ) | (0.32 | ) | (0.52 | ) 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 159 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||
2 | The inception date for Class R3 shares is 4-30-10. | |||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||
4 | 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. | |||||||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-10 to 3-31-11. |
Class R4 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $28.79 | $24.17 | $20.87 | $21.44 | $19.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | — | 4 | (0.08 | ) | (0.03 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.14 | ) | 5.23 | 3.33 | (0.56 | ) | 2.06 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.14 | ) | 5.15 | 3.30 | (0.57 | ) | 2.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.53 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.53 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-recurring reimbursement | — | — | — | — | 0.03 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.65 | $28.79 | $24.17 | $20.87 | $21.44 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)6 | (3.96 | ) 7 | 21.41 | 15.81 | (2.66 | ) | 10.63 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 8 | — | 8 | — | 8 | — | 8 | — | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 16.04 | 9 | 18.99 | 18.82 | 28.72 | 7.40 | 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.30 | 9 | 1.30 | 1.31 | 1.40 | 1.40 | 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.02 | ) 9 | (0.31 | ) | (0.17 | ) | (0.03 | ) | (0.16 | ) 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 159 | 10 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||
2 | The inception date for Class R4 shares is 4-30-10. | |||||||||||||||||||||||||||||||||||
3 | Based on 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 | Less than $500,000. | |||||||||||||||||||||||||||||||||||
9 | Annualized. | |||||||||||||||||||||||||||||||||||
10 | The portfolio turnover is shown for the period from 4-1-10 to 3-31-11. |
Class R5 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $29.03 | $24.32 | $20.96 | $21.50 | $19.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | 0.03 | (0.03 | ) | 0.01 | 0.05 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.14 | ) | 5.27 | 3.35 | (0.56 | ) | 2.08 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.11 | ) | 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 | — | — | — | — | 0.03 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.92 | $29.03 | $24.32 | $20.96 | $21.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (3.82 | ) 6 | 21.65 | 16.03 | (2.34 | ) | 10.94 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 7 | — | 7 | — | 7 | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 5.08 | 8 | 6.05 | 7.78 | 8.75 | 3.66 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.10 | 8 | 1.10 | 1.10 | 1.10 | 1.10 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.18 | 8 | (0.11 | ) | 0.05 | 0.28 | 0.05 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 159 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||
2 | The inception date for Class R5 shares is 4-30-10. | |||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||
4 | 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. | |||||||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-10 to 3-31-11. |
Class R6 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $29.08 | $24.34 | $20.97 | $18.69 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | 0.05 | (0.02 | ) | 0.02 | 0.06 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.14 | ) | 5.29 | 3.35 | 2.26 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.09 | ) | 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 | $27.99 | $29.08 | $24.34 | $20.97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | (3.75 | ) 5 | 21.75 | 16.07 | 12.45 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 6 | $1 | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 4.20 | 7 | 7.66 | 18.63 | 15.46 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.97 | 7 | 1.04 | 1.04 | 1.04 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.33 | 7 | (0.06 | ) | 0.11 | 0.55 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 8 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R6 shares is 9-1-11. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class ADV Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 3-31-10 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $28.78 | $24.17 | $20.88 | $21.44 | $17.82 | $15.71 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | (0.01 | ) | (0.09 | ) | (0.04 | ) | 0.01 | (0.01 | ) | (0.01 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.13 | ) | 5.23 | 3.33 | (0.57 | ) | 3.60 | 2.12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (1.14 | ) | 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 | — | — | — | — | 0.03 | 4 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $27.64 | $28.78 | $24.17 | $20.88 | $21.44 | $17.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (3.96 | ) 6 | 21.37 | 15.76 | (2.61 | ) | 20.31 | 13.43 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | $1 | — | 7 | $1 | $1 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 3.99 | 8 | 4.51 | 4.91 | 4.34 | 4.99 | 2.76 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.34 | 8 | 1.34 | 1.34 | 1.34 | 1.34 | 1.33 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.06 | ) 8 | (0.35 | ) | (0.20 | ) | 0.03 | (0.07 | ) | (0.17 | ) 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 85 | 97 | 133 | 159 | 42 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | The inception date for Class ADV shares is 12-14-09. | |||||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
4 | 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. | |||||||||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 11-1-09 to 3-31-10. |
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 shares 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, and transfer agent fees, state registration fees and printing and postage 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 (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the exchange where the security was acquired or most likely will be sold. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. Investments by the fund in open-end mutual funds are valued at their respective net asset values each business day. 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 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 September 30, 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.
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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 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 six months ended September 30, 2014 were $222. For the six months ended September 30, 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, 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 had a capital loss carryforward of $2,112,610 available to offset future net realized capital gains, which expires on 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.
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.
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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.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
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 idemnifications
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) serves as investment advisor for the fund. 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) 0.900% of the first $500 million of the fund's average daily net assets; (b) 0.850% of the next $500 million of the fund's average daily net assets; and (c) 0.800% of the fund's average daily net assets in excess of $1 billion. The Advisor has a subadvisory agreement with Fiduciary Management Associates, LLC. The fund is not responsible for payment of the subadvisory fees.
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.
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.
For the six months ended September 30, 2014, these expense reductions amounted to the following:
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Class | Expense reductions | Class | Expense reductions | |
Class A | $5,676 | Class R4 | $6,432 | |
Class I | 1,705 | Class R5 | 6,401 | |
Class R1 | 6,192 | Class R6 | 7,197 | |
Class R2 | 6,778 | Class ADV | 7,559 | |
Class R3 | 6,427 | Total | $54,367 |
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2014 were equivalent to a net annual effective rate of 0.85% 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 six months ended September 30, 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 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 | Rule 12b-1 fee | Service fee | Class | Rule 12b-1 fee | Service fee | |
Class A | 0.30% | — | Class R4 | 0.25% | 0.10% | |
Class R1 | 0.50% | 0.25% | Class R5 | — | 0.05% | |
Class R2 | 0.25% | 0.25% | Class ADV | 0.25% | — | |
Class R3 | 0.50% | 0.15% |
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 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 $44 for Class R4 shares for the six months ended September 30, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $398,886 for the six months ended September 30, 2014. Of this amount, $67,530 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $329,384 was paid as sales commissions to broker-dealers and $1,972 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 six months ended September 30, 2014, there were no CDSCs received by the distributor 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
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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.
Class level expenses. Class level expenses for the six months ended September 30, 2014 were:
Class | Distribution and service fees | Transfer agent fees | State registration fees | Printing and postage |
Class A | $244,051 | $104,203 | $12,522 | $14,919 |
Class I | — | 28,209 | 7,613 | 4,969 |
Class R1 | 4,961 | 123 | 6,453 | 140 |
Class R2 | 865 | 39 | 7,054 | 31 |
Class R3 | 595 | 17 | 6,453 | 23 |
Class R4 | 143 | 8 | 6,453 | 15 |
Class R5 | 89 | 30 | 6,453 | 26 |
Class R6 | — | 41 | 6,955 | 185 |
Class ADV | 715 | 366 | 7,353 | 162 |
Total | $251,419 | $133,036 | $67,309 | $20,470 |
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 group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2014 and for the year ended March 31, 2014 were as follows:
Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 582,197 | $16,415,956 | 1,552,359 | $41,079,484 | ||||||||||||||||||||||
Distributions reinvested | — | — | 102,300 | 2,786,664 | ||||||||||||||||||||||
Repurchased | (467,130 | ) | (13,179,029 | ) | (960,191 | ) | (25,436,592 | ) | ||||||||||||||||||
Net increase | 115,067 | $3,236,927 | 694,468 | $18,429,556 | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 64,846 | $1,862,080 | 193,388 | $5,151,488 | ||||||||||||||||||||||
Distributions reinvested | — | — | 32,858 | 905,580 | ||||||||||||||||||||||
Repurchased | (164,561 | ) | (4,723,594 | ) | (535,308 | ) | (14,085,302 | ) | ||||||||||||||||||
Net decrease | (99,715 | ) | ($2,861,514 | ) | (309,062 | ) | ($8,028,234 | ) | ||||||||||||||||||
Class R1 shares | ||||||||||||||||||||||||||
Sold | 4,955 | $137,803 | 29,686 | $738,827 | ||||||||||||||||||||||
Distributions reinvested | — | — | 403 | 10,853 | ||||||||||||||||||||||
Repurchased | (5,150 | ) | (142,105 | ) | (20,611 | ) | (529,775 | ) | ||||||||||||||||||
Net increase (decrease) | (195 | ) | ($4,302 | ) | 9,478 | $219,905 |
33
Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 1,683 | $47,549 | 10,063 | $267,926 | ||||||||||||||||||||||
Distributions reinvested | — | — | 13 | 347 | ||||||||||||||||||||||
Repurchased | (110 | ) | (3,079 | ) | (1,044 | ) | (30,046 | ) | ||||||||||||||||||
Net increase | 1,573 | $44,470 | 9,032 | $238,227 | ||||||||||||||||||||||
Class R3 shares | ||||||||||||||||||||||||||
Sold | 1,393 | $38,938 | 2,952 | $75,875 | ||||||||||||||||||||||
Distributions reinvested | — | — | 104 | 2,815 | ||||||||||||||||||||||
Repurchased | (88 | ) | (2,491 | ) | (15,649 | ) | (367,890 | ) | ||||||||||||||||||
Net increase (decrease) | 1,305 | $36,447 | (12,593 | ) | ($289,200 | ) | ||||||||||||||||||||
Class R4 shares | ||||||||||||||||||||||||||
Sold | 100 | $2,818 | 210 | $5,535 | ||||||||||||||||||||||
Distributions reinvested | — | — | 34 | 930 | ||||||||||||||||||||||
Repurchased | (106 | ) | (2,975 | ) | (638 | ) | (15,038 | ) | ||||||||||||||||||
Net decrease | (6 | ) | ($157 | ) | (394 | ) | ($8,573 | ) | ||||||||||||||||||
Class R5 shares | ||||||||||||||||||||||||||
Sold | 1,005 | $28,971 | 2,823 | $74,455 | ||||||||||||||||||||||
Distributions reinvested | — | — | 214 | 5,888 | ||||||||||||||||||||||
Repurchased | (604 | ) | (17,337 | ) | (2,372 | ) | (62,424 | ) | ||||||||||||||||||
Net increase | 401 | $11,634 | 665 | $17,919 | ||||||||||||||||||||||
Class R6 Shares | ||||||||||||||||||||||||||
Sold | 750 | $21,455 | 14,968 | $422,603 | ||||||||||||||||||||||
Distributions reinvested | — | — | 166 | 4,584 | ||||||||||||||||||||||
Repurchased | (8,828 | ) | (252,738 | ) | (2,233 | ) | (59,675 | ) | ||||||||||||||||||
Net increase (decrease) | (8,078 | ) | ($231,283 | ) | 12,901 | $367,512 | ||||||||||||||||||||
Class ADV shares | ||||||||||||||||||||||||||
Distributions reinvested | — | — | 381 | $10,404 | ||||||||||||||||||||||
Repurchased | (723 | ) | (20,511 | ) | (20 | ) | (469 | ) | ||||||||||||||||||
Net increase (decrease) | (723 | ) | ($20,511 | ) | 361 | $9,935 | ||||||||||||||||||||
Total net increase | 9,629 | $211,711 | 404,856 | $10,957,047 |
Affiliates of the fund owned 31%, 42% and 52% of shares of beneficial interest of Class R2, Class R4 and Class R6, respectively, on September 30, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $69,669,040 and $70,126,257, respectively, for the six months ended September 30, 2014.
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Continuation of investment advisory and subadvisory agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Fiduciary Management Associates, LLC (the Subadvisor), for John Hancock Small Company Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
35
Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and other third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
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The Board noted that the fund underperformed its benchmark index for the one-, three- and five-year periods ended December 31, 2013. The Board noted that the fund outperformed the peer group average for the one-year period and underperformed the average for the three- and five-year periods.
The Board took into account management's discussion of the fund's performance and potential options with respect to the future of the fund. The Board concluded that the fund's performance is being monitored and reasonably addressed.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees for the fund are lower than the peer group median and total expenses for the fund are higher than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee, and that such fees are negotiated at arm's length with respect to the Subadvisor. In addition, the Board took into account that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board also noted that the fund's distributor, an affiliate of the Advisor, has agreed to waive a portion of its Rule 12b-1 fee for a share class of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |||||||
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; |
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(h) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |||||||
(i) | noted that the subadvisory fee for the fund is paid by the Advisor and is negotiated at arm's length; and | |||||||
(j) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $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 exceed $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 funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data; and | |
(4) | Information relating to the nature and scope of any material relationships and their significance to the Trust's Advisor and Subadvisor. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account
38
information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund.
The Board also relied on the ability of the Advisor to negotiate the Subadvisory Agreement with the Subadvisor, which is not affiliated with the Advisor, and the fees thereunder at arm's length. As a result, the costs of the services to be provided and the profits to be realized by the Subadvisor from its relationship with the Trust were not a material factor in the Board's consideration of the Subadvisory Agreement.
The Board also received information regarding the nature and scope (including their significance to the Advisor and its affiliates and to the Subadvisor) of any material relationships, if any, with respect to the Subadvisor, which include arrangements in which the Subadvisor or its affiliates provide advisory, distribution, or management services in connection with financial products sponsored by the Advisor or its affiliates, and may include other registered investment companies, a 529 education savings plan, managed separate accounts and exempt group annuity contracts sold to qualified plans. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its
39
regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the performance of the fund is being monitored and reasonably addressed; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
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Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor Subadvisor Principal distributor Custodian Transfer agent Legal counsel |
*Member of the Audit Committee
†Non-Independent Trustee
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 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
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Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL/INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Income Allocation | INCOME FUNDS (continued) Investment Grade Bond Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE/SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield Fund |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
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John Hancock Investments
A trusted brand
John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
A better way to invest
As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
Results for investors
Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF202368 | 348SA 09/14 11/14 |
John Hancock
Disciplined Value Mid Cap FundSemiannual report 9/30/14
A message to shareholders
Dear fellow shareholder,
The economic expansion that began in 2009 continues, with moderate GDP growth in the United States and the unemployment rate down considerably from its peak. However, the scene outside the United States had become decidedly less robust by the end of September. China's economy, a key driver of global demand, was slowing, Japan's GDP contracted in the second quarter, and the International Monetary Fund warned of another eurozone recession unless more is done to stimulate economic growth there. Meanwhile, bond markets around the world have turned in positive performance as investors pursue yield where they can find it, and the risks of rising interest rates and central bank tightening have been pushed out further into the future.
In the absence of pronounced market dislocations, we believe investors are well served by sticking to a commonsense, diversified approach, one that includes a mix of equities, fixed-income, and alternative strategies that can offer added diversification potential. Although events like those taking place in Ukraine and the Middle East serve as reminders that all market environments carry risk, we believe the biggest risk investors face in today's market is not staying invested.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an effort to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of September 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Disciplined Value Mid Cap Fund
1
INVESTMENT OBJECTIVE
The fund seeks to provide long-term growth of capital with current income as a secondary objective.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 (%)
See page 8 for more complete performance information.
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, which were first offered on 7-12-10. Class A shares' performance shown above for periods prior to this date is that of the predecessor fund's Investor share class that has been recalculated to reflect the gross fees and expenses of Class A shares.
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.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
2
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Fund overcomes rocky April
The market's bigger laggards were disproportionately rewarded in April, while stronger performers were penalized, detracting from the fund's performance for the period.
Diverse individual holdings aided performance
Strong performance from various kinds of businesses helped returns for the period.
Markets appeared fairly valued
At the end of the period, investors seemed to have a more balanced assessment of market risks.
PORTFOLIO COMPOSITION AS OF 9/30/14 (%)
A note about risks
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. 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 wildly than investments diversified across sectors. Please see the fund's prospectuses for additional risks.
3
![](https://capedge.com/proxy/N-CSRS/0001145443-14-001428/stephenlpollack.jpg)
Stephen L. Pollack, CFA
Portfolio Manager
Robeco Investment Management, Inc.
The fund underperformed its benchmark index. What were some of the factors that contributed to this?
The U.S. equity market's reversal in April drove the relative performance environment for the period. It disproportionately rewarded the market's bigger laggards of the prior periods while penalizing stronger performers. This presented a no-win environment for the fund, given its performance advantage over the market coming into April. After April, the fund generally performed in line with the index as the market found its footing.
The fund's stock selection underperformed its benchmark, the Russell Midcap Value Index, for the six-month period, with the information technology and consumer staples areas the main detractors.
What were some of the holdings that detracted most from the fund's performance?
Within technology, the biggest detractor from the fund's overall relative performance was our decision not to buy shares in semiconductor company Micron Technology, Inc., due to valuation concerns. The stock posted strong results upon high expectations. It has significant weight in the index, which negatively affected the fund's relative performance. The fund's positions in electronic components distributors Arrow Electronics, Inc. and Avnet, Inc. were noteworthy detractors from relative return. Despite ongoing operational execution, industry consolidation, and shareholder-friendly buybacks, the share price performance of these economically sensitive businesses underperformed the sector amid investor uncertainty about near-term demand.
Within the consumer area, which includes business services, the portfolio's holding CBS Corporation reported disappointing advertising results. However, the business has achieved a sizable increase in retransmission fees and has worked to diversify its earnings stream across more stable sources than advertising. Global staffing company ManpowerGroup, Inc. disappointed amid weaker investor expectations for Europe's recovery. The business has been posting good operational execution and continued market share gains.
The utilities sector moderately outperformed the index average for the period. The fund's stock selection and relative underweight in the utilities sector detracted from relative performance. We
4
What factors added to the fund's performance?
We manage a prudently diversified fund that is constructed from the bottom up upon valuation, quality, and catalytic criteria. The fund's performance strength was driven by diverse businesses. For example, among the fund's top contributors for the period were semiconductor business Avago Technologies Ltd., online travel business Expedia, Inc., containerboard business Graphic Packaging Holding Company, staffing business Robert Half International, Inc., and auto safety products company TRW Automotive Holdings Corp.
These results were wedded to stock-specific factors. For instance, Avago's leading share in key smartphone technologies resulted in strong business momentum during the period and favorable earnings power as the cycle gathered steam. Well positioned for online travel growth, Expedia posted stronger bookings during the period. Graphic Packaging improved its balance sheet and has been executing on productivity initiatives for stronger results as product volumes normalize.
SECTOR COMPOSITION AS OF 9/30/14 (%)
5
What is your thinking on positioning the fund?
We maintained the fund's overweight in technology, owning stock-specific opportunities that appear inexpensive relative to their mid-cycle earnings power and free cash flow characteristics. The fund also had significant exposure to industrial-related businesses, which, through restructuring initiatives and industry consolidation, have strengthened their earnings power as cyclical conditions improve. Within the financials sector, some of the the fund's largest overall positions were in brokerage holdings such as TD Ameritrade Holding Corp. and Raymond James Financial, Inc., which provide upside potential from an eventual rise in interest rates. The fund remained underweight in real estate investment trusts due to generally unattractive valuations. Utilities continued to seem expensive, with mediocre earnings outlooks and adverse interest-rate risk.
TEN LARGEST HOLDINGS AS OF 9/30/14 (%)
TD Ameritrade Holding Corp. | 2.1 |
Western Digital Corp. | 1.9 |
Robert Half International, Inc. | 1.7 |
Lear Corp. | 1.7 |
Graphic Packaging Holding Company | 1.6 |
Omnicare, Inc. | 1.6 |
Marsh & McLennan Companies, Inc. | 1.5 |
Macy's, Inc. | 1.5 |
Equity Residential | 1.4 |
Newell Rubbermaid, Inc. | 1.4 |
TOTAL | 16.4 |
As a percentage of net assets. |
6
MANAGED BY
![]() | Stephen L. Pollack, CFA On the fund since 2000 Investing since 1984 |
![]() | Joseph F. Feeney, Jr., CFA On the fund since 2010 Investing since 1985 |
7
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||||
1-year | 5-year | 10-year | 6-month | 1-year | 5-year | 10-year | |||
Class A1 | 10.53 | 16.46 | 11.24 | -4.17 | 10.53 | 114.25 | 190.05 | ||
Class C1 | 14.40 | 16.74 | 10.94 | -0.51 | 14.40 | 116.82 | 182.45 | ||
Class I1,2 | 16.63 | 18.03 | 12.20 | 1.01 | 16.63 | 129.11 | 216.26 | ||
Class R21,2 | 16.18 | 17.48 | 11.63 | 0.85 | 16.18 | 123.78 | 200.50 | ||
Class R41,2 | 16.37 | 17.81 | 12.02 | 0.90 | 16.37 | 126.93 | 211.15 | ||
Class R61,2 | 16.75 | 18.12 | 12.28 | 1.06 | 16.75 | 129.89 | 218.52 | ||
Class ADV1,2 | 16.18 | 17.61 | 11.79 | 0.82 | 16.18 | 125.00 | 204.70 | ||
Index† | 17.46 | 17.24 | 10.17 | 2.83 | 17.46 | 121.49 | 163.43 |
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 sold within one year of purchase 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 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. 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 | Class R2 | Class R4 | Class R6 | Class ADV | |
Gross (%) | 1.18 | 1.94 | 0.90 | 1.32 | 1.32 | 0.81 | 3.45 |
Net (%) | 1.18 | 1.94 | 0.90 | 1.32 | 1.15 | 0.77 | 1.25 |
Please refer to the most recent prospectuses and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† | Index is the Russell Midcap Value Index. |
See the following page for footnotes.
8
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Disciplined Value Mid Cap Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in the Russell Midcap Value Index.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index ($) | |
Class C1,3 | 9-30-04 | 28,245 | 28,245 | 26,343 |
Class I1,2 | 9-30-04 | 31,626 | 31,626 | 26,343 |
Class R21,2 | 9-30-04 | 30,050 | 30,050 | 26,343 |
Class R41,2 | 9-30-04 | 31,115 | 31,115 | 26,343 |
Class R61,2 | 9-30-04 | 31,852 | 31,852 | 26,343 |
Class ADV1,2 | 9-30-04 | 30,470 | 30,470 | 26,343 |
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 shares and Institutional 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 shares that have been 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 shares that have been 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. |
9
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 presenting 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 April 1, 2014, with the same investment held until September 30, 2014.
Account value on 4-1-14 | Ending value on 9-30-14 | Expenses paid during period ended 9-30-141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,008.80 | $5.69 | 1.13% |
Class C | 1,000.00 | 1,004.90 | 9.45 | 1.88% |
Class I | 1,000.00 | 1,010.10 | 4.33 | 0.86% |
Class R2 | 1,000.00 | 1,008.50 | 6.44 | 1.28% |
Class R4 | 1,000.00 | 1,009.00 | 5.24 | 1.04% |
Class R6 | 1,000.00 | 1,010.60 | 3.88 | 0.77% |
Class ADV | 1,000.00 | 1,008.20 | 6.29 | 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 September 30, 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:
10
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 April 1, 2014, with the same investment held until September 30, 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.
Account value on 4-1-14 | Ending value on 9-30-14 | Expenses paid during period ended 9-30-141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.40 | $5.72 | 1.13% |
Class C | 1,000.00 | 1,015.60 | 9.50 | 1.88% |
Class I | 1,000.00 | 1,020.80 | 4.36 | 0.86% |
Class R2 | 1,000.00 | 1,018.70 | 6.48 | 1.28% |
Class R4 | 1,000.00 | 1,019.90 | 5.27 | 1.04% |
Class R6 | 1,000.00 | 1,021.20 | 3.90 | 0.77% |
Class ADV | 1,000.00 | 1,018.80 | 6.33 | 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 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 183/365 (to reflect the one-half year period). |
11
Fund's investments
As of 9-30-14 (Unaudited) | ||||||||||||||
Shares | Value | |||||||||||||
Common Stocks 98.0% | $8,853,585,374 | |||||||||||||
(Cost $7,232,028,343) | ||||||||||||||
Consumer Discretionary 10.1% | 917,041,313 | |||||||||||||
Auto Components 2.7% | ||||||||||||||
Lear Corp. | 1,739,029 | 150,269,490 | ||||||||||||
Tenneco, Inc. (I) | 632,650 | 33,093,922 | ||||||||||||
TRW Automotive Holdings Corp. (I) | 623,657 | 63,145,271 | ||||||||||||
Household Durables 1.4% | ||||||||||||||
Newell Rubbermaid, Inc. | 3,576,364 | 123,062,685 | ||||||||||||
Internet & Catalog Retail 1.1% | ||||||||||||||
Expedia, Inc. | 1,095,255 | 95,966,243 | ||||||||||||
Leisure Products 0.9% | ||||||||||||||
Brunswick Corp. | 1,986,244 | 83,700,322 | ||||||||||||
Media 1.8% | ||||||||||||||
CBS Corp., Class B | 1,743,735 | 93,289,823 | ||||||||||||
Omnicom Group, Inc. | 956,635 | 65,873,886 | ||||||||||||
Multiline Retail 1.4% | ||||||||||||||
Macy's, Inc. | 2,262,525 | 131,633,705 | ||||||||||||
Specialty Retail 0.8% | ||||||||||||||
Foot Locker, Inc. | 1,383,755 | 77,005,966 | ||||||||||||
Consumer Staples 2.9% | 265,242,784 | |||||||||||||
Beverages 1.6% | ||||||||||||||
Coca-Cola Enterprises, Inc. | 779,375 | 34,573,075 | ||||||||||||
Constellation Brands, Inc., Class A (I) | 1,276,970 | 111,300,705 | ||||||||||||
Food & Staples Retailing 0.2% | ||||||||||||||
Rite Aid Corp. (I) | 4,415,495 | 21,370,996 | ||||||||||||
Food Products 0.5% | ||||||||||||||
Tyson Foods, Inc., Class A | 1,218,825 | 47,985,140 | ||||||||||||
Tobacco 0.6% | ||||||||||||||
Lorillard, Inc. | 834,800 | 50,012,868 | ||||||||||||
Energy 6.0% | 539,526,660 | |||||||||||||
Oil, Gas & Consumable Fuels 6.0% | ||||||||||||||
Diamondback Energy, Inc. (I) | 116,515 | 8,712,992 | ||||||||||||
Energen Corp. | 1,221,565 | 88,245,856 | ||||||||||||
EQT Corp. | 856,450 | 78,399,433 | ||||||||||||
Kosmos Energy, Ltd. (I) | 2,336,467 | 23,271,211 | ||||||||||||
Marathon Petroleum Corp. | 1,008,065 | 85,352,864 | ||||||||||||
Noble Energy, Inc. | 687,535 | 46,999,893 | ||||||||||||
QEP Resources, Inc. | 1,958,295 | 60,276,320 |
Shares | Value | |||||||||||||
Energy (continued) | ||||||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||
Rice Energy, Inc. (I) | 1,129,560 | $30,046,296 | ||||||||||||
Tesoro Corp. | 665,450 | 40,579,141 | ||||||||||||
Valero Energy Corp. | 723,100 | 33,457,837 | ||||||||||||
Western Refining, Inc. | 1,052,270 | 44,184,817 | ||||||||||||
Financials 29.2% | 2,634,619,741 | |||||||||||||
Banks 6.5% | ||||||||||||||
BB&T Corp. | 3,061,825 | 113,930,508 | ||||||||||||
Comerica, Inc. | 1,809,820 | 90,237,625 | ||||||||||||
East West Bancorp, Inc. | 2,543,080 | 86,464,720 | ||||||||||||
Fifth Third Bancorp | 5,455,360 | 109,216,307 | ||||||||||||
Huntington Bancshares, Inc. | 8,709,670 | 84,745,089 | ||||||||||||
SunTrust Banks, Inc. | 2,583,845 | 98,263,625 | ||||||||||||
Capital Markets 5.4% | ||||||||||||||
Raymond James Financial, Inc. | 2,255,215 | 120,834,420 | ||||||||||||
SEI Investments Company | 1,827,586 | 66,085,510 | ||||||||||||
State Street Corp. | 543,690 | 40,021,021 | ||||||||||||
TD Ameritrade Holding Corp. | 5,788,455 | 193,160,743 | ||||||||||||
The Charles Schwab Corp. | 2,184,705 | 64,208,480 | ||||||||||||
Consumer Finance 1.8% | ||||||||||||||
Discover Financial Services | 1,552,095 | 99,939,397 | ||||||||||||
Navient Corp. | 1,790,975 | 31,718,167 | ||||||||||||
SLM Corp. | 3,164,275 | 27,086,194 | ||||||||||||
Diversified Financial Services 1.0% | ||||||||||||||
McGraw-Hill Financial, Inc. | 683,269 | 57,702,067 | ||||||||||||
Moody's Corp. | 383,280 | 36,219,960 | ||||||||||||
Insurance 7.7% | ||||||||||||||
Alleghany Corp. (I) | 187,108 | 78,239,210 | ||||||||||||
Loews Corp. | 1,084,490 | 45,179,853 | ||||||||||||
Marsh & McLennan Companies, Inc. | 2,610,985 | 136,658,955 | ||||||||||||
Reinsurance Group of America, Inc. | 1,167,905 | 93,584,228 | ||||||||||||
Symetra Financial Corp. | 1,526,651 | 35,616,768 | ||||||||||||
The Allstate Corp. | 1,725,020 | 105,864,477 | ||||||||||||
Torchmark Corp. | 2,309,546 | 120,950,924 | ||||||||||||
W.R. Berkley Corp. | 789,215 | 37,724,477 | ||||||||||||
XL Group PLC | 1,291,095 | 42,825,621 | ||||||||||||
Real Estate Investment Trusts 6.8% | ||||||||||||||
American Assets Trust, Inc. | 939,587 | 30,978,183 | ||||||||||||
Boston Properties, Inc. | 1,026,430 | 118,819,537 | ||||||||||||
Equity Residential | 2,005,575 | 123,503,309 | ||||||||||||
Essex Property Trust, Inc. | 307,833 | 55,025,149 | ||||||||||||
Kimco Realty Corp. | 2,735,590 | 59,936,777 |
Shares | Value | |||||||||||||
Financials (continued) | ||||||||||||||
Real Estate Investment Trusts (continued) | ||||||||||||||
Regency Centers Corp. | 1,375,404 | $74,037,997 | ||||||||||||
SL Green Realty Corp. | 807,660 | 81,832,111 | ||||||||||||
The Macerich Company | 1,159,460 | 74,008,332 | ||||||||||||
Health Care 9.1% | 822,120,198 | |||||||||||||
Health Care Equipment & Supplies 2.7% | ||||||||||||||
Boston Scientific Corp. (I) | 3,230,955 | 38,157,579 | ||||||||||||
CareFusion Corp. (I) | 2,643,435 | 119,615,434 | ||||||||||||
Teleflex, Inc. | 270,795 | 28,444,307 | ||||||||||||
Zimmer Holdings, Inc. | 542,750 | 54,573,513 | ||||||||||||
Health Care Providers & Services 5.5% | ||||||||||||||
AmerisourceBergen Corp. | 754,290 | 58,306,617 | ||||||||||||
Cardinal Health, Inc. | 929,500 | 69,638,140 | ||||||||||||
DaVita HealthCare Partners, Inc. (I) | 517,490 | 37,849,219 | ||||||||||||
Laboratory Corp. of America Holdings (I) | 901,905 | 91,768,834 | ||||||||||||
McKesson Corp. | 484,095 | 94,238,774 | ||||||||||||
Omnicare, Inc. | 2,305,145 | 143,518,328 | ||||||||||||
Life Sciences Tools & Services 0.9% | ||||||||||||||
Bruker Corp. (I) | 1,424,310 | 26,371,100 | ||||||||||||
ICON PLC (I) | 1,042,082 | 59,638,353 | ||||||||||||
Industrials 13.2% | 1,189,531,564 | |||||||||||||
Aerospace & Defense 1.2% | ||||||||||||||
Curtiss-Wright Corp. | 531,742 | 35,052,433 | ||||||||||||
Huntington Ingalls Industries, Inc. | 683,982 | 71,277,764 | ||||||||||||
Building Products 0.9% | ||||||||||||||
Masco Corp. | 3,248,160 | 77,695,987 | ||||||||||||
Construction & Engineering 0.6% | ||||||||||||||
Fluor Corp. | 854,830 | 57,094,096 | ||||||||||||
Electrical Equipment 0.3% | ||||||||||||||
Hubbell, Inc., Class B | 193,427 | 23,313,756 | ||||||||||||
Industrial Conglomerates 0.4% | ||||||||||||||
Carlisle Companies, Inc. | 505,920 | 40,665,850 | ||||||||||||
Machinery 4.3% | ||||||||||||||
Dover Corp. | 1,310,829 | 105,298,894 | ||||||||||||
Flowserve Corp. | 1,527,115 | 107,692,150 | ||||||||||||
Parker Hannifin Corp. | 1,048,285 | 119,661,733 | ||||||||||||
Stanley Black & Decker, Inc. | 345,070 | 30,638,765 | ||||||||||||
Timken Company | 674,115 | 28,575,735 | ||||||||||||
Professional Services 4.8% | ||||||||||||||
Equifax, Inc. | 1,115,840 | 83,397,882 | ||||||||||||
FTI Consulting, Inc. (I) | 517,078 | 18,077,047 |
Shares | Value | |||||||||||||
Industrials (continued) | ||||||||||||||
Professional Services (continued) | ||||||||||||||
ManpowerGroup, Inc. | 1,467,700 | $102,885,770 | ||||||||||||
Robert Half International, Inc. | 3,072,586 | 150,556,714 | ||||||||||||
Towers Watson & Company, Class A | 789,476 | 78,552,862 | ||||||||||||
Trading Companies & Distributors 0.7% | ||||||||||||||
WESCO International, Inc. (I) | 755,100 | 59,094,126 | ||||||||||||
Information Technology 14.9% | 1,347,324,857 | |||||||||||||
Communications Equipment 1.5% | ||||||||||||||
Brocade Communications Systems, Inc. | 4,350,285 | 47,287,598 | ||||||||||||
Harris Corp. | 528,150 | 35,069,160 | ||||||||||||
Motorola Solutions, Inc. | 874,545 | 55,341,208 | ||||||||||||
Electronic Equipment, Instruments & Components 4.0% | ||||||||||||||
Arrow Electronics, Inc. (I) | 1,946,722 | 107,751,063 | ||||||||||||
Avnet, Inc. | 2,080,394 | 86,336,351 | ||||||||||||
Flextronics International, Ltd. (I) | 3,588,778 | 37,036,189 | ||||||||||||
Jabil Circuit, Inc. | 2,192,620 | 44,225,145 | ||||||||||||
Knowles Corp. (I) | 655,419 | 17,368,604 | ||||||||||||
TE Connectivity, Ltd. | 1,156,504 | 63,943,106 | ||||||||||||
Internet Software & Services 0.7% | ||||||||||||||
InterActiveCorp | 397,474 | 26,193,537 | ||||||||||||
NetEase.com, Inc., ADR (L) | 410,830 | 35,191,698 | ||||||||||||
IT Services 3.3% | ||||||||||||||
Alliance Data Systems Corp. (I) | 219,730 | 54,552,367 | ||||||||||||
Amdocs, Ltd. | 2,309,495 | 105,959,631 | ||||||||||||
Fidelity National Information Services, Inc. | 1,231,740 | 69,346,962 | ||||||||||||
Global Payments, Inc. | 431,315 | 30,140,292 | ||||||||||||
Total System Services, Inc. | 1,339,215 | 41,462,096 | ||||||||||||
Semiconductors & Semiconductor Equipment 1.9% | ||||||||||||||
Analog Devices, Inc. | 639,495 | 31,648,608 | ||||||||||||
Avago Technologies, Ltd. | 677,780 | 58,966,860 | ||||||||||||
Microsemi Corp. (I) | 72,330 | 1,837,905 | ||||||||||||
ON Semiconductor Corp. (I) | 8,520,139 | 76,170,043 | ||||||||||||
Software 0.7% | ||||||||||||||
Activision Blizzard, Inc. | 3,225,455 | 67,057,209 | ||||||||||||
Technology Hardware, Storage & Peripherals 2.8% | ||||||||||||||
Seagate Technology PLC | 1,485,060 | 85,049,386 | ||||||||||||
Western Digital Corp. | 1,740,545 | 169,389,839 | ||||||||||||
Materials 7.3% | 660,803,493 | |||||||||||||
Chemicals 1.9% | ||||||||||||||
HB Fuller Company | 851,852 | 33,818,524 | ||||||||||||
Huntsman Corp. | 1,441,485 | 37,464,195 |
Shares | Value | |||||||||||||
Materials (continued) | ||||||||||||||
Chemicals (continued) | ||||||||||||||
Minerals Technologies, Inc. | 625,652 | $38,608,985 | ||||||||||||
Valspar Corp. | 801,405 | 63,302,981 | ||||||||||||
Containers & Packaging 4.5% | ||||||||||||||
Avery Dennison Corp. | 747,305 | 33,367,168 | ||||||||||||
Crown Holdings, Inc. (I) | 2,679,685 | 119,299,576 | ||||||||||||
Graphic Packaging Holding Company (I) | 11,732,786 | 145,838,530 | ||||||||||||
Owens-Illinois, Inc. (I) | 2,632,450 | 68,575,323 | ||||||||||||
Packaging Corp. of America | 571,855 | 36,495,786 | ||||||||||||
Paper & Forest Products 0.9% | ||||||||||||||
International Paper Company | 1,760,210 | 84,032,425 | ||||||||||||
Utilities 5.3% | 477,374,764 | |||||||||||||
Electric Utilities 3.1% | ||||||||||||||
American Electric Power Company, Inc. | 1,709,455 | 89,250,646 | ||||||||||||
Edison International | 1,508,970 | 84,381,602 | ||||||||||||
FirstEnergy Corp. | 730,775 | 24,532,117 | ||||||||||||
Great Plains Energy, Inc. | 1,929,234 | 46,629,586 | ||||||||||||
Westar Energy, Inc. (L) | 1,119,450 | 38,195,634 | ||||||||||||
Independent Power and Renewable Electricity Producers 0.8% | ||||||||||||||
AES Corp. | 4,817,369 | 68,310,292 | ||||||||||||
Multi-Utilities 1.4% | ||||||||||||||
Alliant Energy Corp. | 1,048,694 | 58,108,135 | ||||||||||||
Ameren Corp. | 957,010 | 36,682,193 | ||||||||||||
PG&E Corp. | 694,595 | 31,284,559 | ||||||||||||
Yield (%) | Shares | Value | ||||||||||||
Securities Lending Collateral 0.3% | $25,597,078 | |||||||||||||
(Cost $25,595,532) | ||||||||||||||
John Hancock Collateral Investment Trust (W) | 0.1178(Y | ) | 2,557,892 | 25,597,078 | ||||||||||
Short-Term Investments 1.9% | $171,403,759 | |||||||||||||
(Cost $171,403,759) | ||||||||||||||
Money Market Funds 1.9% | 171,403,759 | |||||||||||||
State Street Institutional US Government Money Market Fund | 0.0000(Y | ) | 171,403,759 | 171,403,759 | ||||||||||
Total investments (Cost $7,429,027,634)† 100.2% | $9,050,586,211 | |||||||||||||
Other assets and liabilities, net (0.2%) | ($16,832,243 | ) | ||||||||||||
Total net assets 100.0% | $9,033,753,968 |
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 9-30-14. | |||
(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 9-30-14. | |||
† | At 9-30-14, the aggregate cost of investment securities for federal income tax purposes was $7,448,123,147. Net unrealized appreciation aggregated $1,602,463,064, of which $1,637,255,279 related to appreciated investment securities and $34,792,215 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers, at value (Cost $7,403,432,102) including $25,165,838 of securities loaned | $9,024,989,133 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers, at value (Cost $25,595,532) | 25,597,078 | |||||||||||||||||||||||||||||||||||||
Total investments, at value (Cost $7,429,027,634) | 9,050,586,211 | |||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 50,914,456 | |||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 19,742,177 | |||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 9,720,433 | |||||||||||||||||||||||||||||||||||||
Receivable for securities lending income | 4,719 | |||||||||||||||||||||||||||||||||||||
Receivable due from advisor | 57 | |||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 277,831 | |||||||||||||||||||||||||||||||||||||
Total assets | 9,131,245,884 | |||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 60,364,245 | |||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 8,946,364 | |||||||||||||||||||||||||||||||||||||
Payable upon return of securities loaned | 25,597,025 | |||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 384,819 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 1,721,401 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 54,952 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 6,823 | |||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 416,287 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 97,491,916 | |||||||||||||||||||||||||||||||||||||
Net assets | $9,033,753,968 | |||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||
Paid-in capital | $7,194,487,627 | |||||||||||||||||||||||||||||||||||||
Undistributed net investment income | 22,953,837 | |||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments | 194,753,927 | |||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 1,621,558,577 | |||||||||||||||||||||||||||||||||||||
Net assets | $9,033,753,968 | |||||||||||||||||||||||||||||||||||||
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 ($1,906,221,193 ÷ 103,667,076 shares)1 | $18.39 | |||||||||||||||
Class C ($327,177,396 ÷ 17,571,804 shares)1 | $18.62 | |||||||||||||||
Class I ($5,903,618,312 ÷ 310,676,028 shares) | $19.00 | |||||||||||||||
Class R2 ($224,580,293 ÷ 11,866,251 shares) | $18.93 | |||||||||||||||
Class R4 ($86,964,122 ÷ 4,580,733 shares) | $18.98 | |||||||||||||||
Class R6 ($584,345,626 ÷ 30,741,071 shares) | $19.01 | |||||||||||||||
Class ADV ($847,026 ÷ 46,159 shares) | $18.35 | |||||||||||||||
Maximum offering price per share | ||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $19.36 |
1 | Redemption price per share 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. |
STATEMENT OF OPERATIONS For the six months ended 9-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||
Dividends | $62,084,763 | |||||||||||||||||||||||||||||||||||||
Securities lending | 238,659 | |||||||||||||||||||||||||||||||||||||
Total investment income | 62,323,422 | |||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Investment management fees | 31,648,167 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 5,487,006 | |||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 663,402 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 4,935,841 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 50,339 | |||||||||||||||||||||||||||||||||||||
State registration fees | 194,747 | |||||||||||||||||||||||||||||||||||||
Printing and postage | 217,764 | |||||||||||||||||||||||||||||||||||||
Professional fees | 84,052 | |||||||||||||||||||||||||||||||||||||
Custodian fees | 448,209 | |||||||||||||||||||||||||||||||||||||
Registration and filing fees | 51,911 | |||||||||||||||||||||||||||||||||||||
Other | 46,725 | |||||||||||||||||||||||||||||||||||||
Total expenses | 43,828,163 | |||||||||||||||||||||||||||||||||||||
Less expense reductions | (351,954 | ) | ||||||||||||||||||||||||||||||||||||
Net expenses | 43,476,209 | |||||||||||||||||||||||||||||||||||||
Net investment income | 18,847,213 | |||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | 150,806,601 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | (1,308 | ) | ||||||||||||||||||||||||||||||||||||
150,805,293 | ||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | (92,581,884 | ) | ||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | (3,317 | ) | ||||||||||||||||||||||||||||||||||||
(92,585,201 | ) | |||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain | 58,220,092 | |||||||||||||||||||||||||||||||||||||
Increase in net assets from operations | $77,067,305 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-14 | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | 3-31-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $18,847,213 | $23,438,954 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 150,805,293 | 133,782,192 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (92,585,201 | ) | 1,183,040,804 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase in net assets resulting from operations | 77,067,305 | 1,340,261,950 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (6,093,145 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (14,534,231 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (209,855 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (24,622 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (1,302,378 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class ADV | — | (1,510 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 680,086,101 | 3,934,879,351 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total increase | 757,153,406 | 5,139,572,886 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 8,276,600,562 | 3,137,027,676 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $9,033,753,968 | $8,276,600,562 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $22,953,837 | $4,106,624 |
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 | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | 8-31-10 | 3 | 8-31-09 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.23 | $14.51 | $12.41 | $11.98 | $8.66 | $8.10 | $9.08 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income5 | 0.02 | 0.05 | 0.05 | 0.04 | 0.01 | 0.01 | 6 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.14 | 4.03 | 2.09 | 0.42 | 3.32 | 0.60 | (0.98 | ) 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.16 | 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 | ) | — | — | — | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.36 | ) | (0.04 | ) | (0.03 | ) | (0.01 | ) | (0.05 | ) | (0.07 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.39 | $18.23 | $14.51 | $12.41 | $11.98 | $8.66 | $8.10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)9,10 | 0.88 | 11 | 28.30 | 17.31 | 3.92 | 38.47 | 11 | 7.54 | (9.79 | ) 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1,906 | $3,086 | $1,169 | $517 | $171 | $75 | $14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.14 | 12 | 1.18 | 1.27 | 1.33 | 1.35 | 12 | 1.56 | 1.93 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.13 | 12 | 1.17 | 1.27 | 1.29 | 1.25 | 12 | 1.25 | 1.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.22 | 12 | 0.32 | 0.38 | 0.32 | 0.10 | 12 | 0.09 | 1.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 16 | 39 | 55 | 41 | 27 | 38 | 58 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | For the seven month fiscal period ended 3-31-11. The fund changed its fiscal year end from August 31 to March 31. | |||||||||||||||||||||||||||||||||||||
3 | 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 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. | |||||||||||||||||||||||||||||||||||||
4 | Audited by previous independent registered public accounting firm. | |||||||||||||||||||||||||||||||||||||
5 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
6 | 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. | |||||||||||||||||||||||||||||||||||||
7 | 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. | |||||||||||||||||||||||||||||||||||||
8 | Less than $0.005 per share. | |||||||||||||||||||||||||||||||||||||
9 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
10 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||
11 | Not annualized. | |||||||||||||||||||||||||||||||||||||
12 | Annualized. |
Class C Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.53 | $14.82 | $12.74 | $10.63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss3 | (0.05 | ) | (0.07 | ) | (0.05 | ) | (0.02 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.14 | 4.10 | 2.13 | 2.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.09 | 4.03 | 2.08 | 2.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.32 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.62 | $18.53 | $14.82 | $12.74 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 0.49 | 6 | 27.32 | 16.33 | 20.22 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $327 | $329 | $90 | $20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.89 | 7 | 1.94 | 2.08 | 2.10 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.88 | 7 | 1.93 | 2.08 | 2.10 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.48 | ) 7 | (0.43 | ) | (0.39 | ) | (0.26 | ) 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 16 | 39 | 55 | 41 | 8 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class C shares is 8-15-11. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||
5 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||||||||||||
7 | Annualized. | |||||||||||||||||||||||||||||||
8 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
�� | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | 8-31-10 | 3 | 8-31-09 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.81 | $14.95 | $12.79 | $12.33 | $8.92 | $8.34 | $9.35 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income5 | 0.06 | 0.10 | 0.09 | 0.07 | 0.03 | 0.04 | 6 | 0.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.13 | 4.16 | 2.15 | 0.45 | 3.41 | 0.61 | (1.01 | ) 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.19 | 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 | ) | — | — | — | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.40 | ) | (0.08 | ) | (0.06 | ) | (0.03 | ) | (0.07 | ) | (0.09 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $19.00 | $18.81 | $14.95 | $12.79 | $12.33 | $8.92 | $8.34 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)9 | 1.01 | 10 | 28.67 | 17.64 | 4.28 | 38.64 | 10 | 7.76 | (9.50 | ) 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $5,904 | $4,168 | $1,762 | $948 | $254 | $87 | $33 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.87 | 11 | 0.89 | 0.93 | 0.98 | 0.99 | 11 | 1.28 | 1.69 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.86 | 11 | 0.89 | 0.93 | 0.98 | 0.99 | 11 | 1.00 | 1.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.57 | 11 | 0.59 | 0.71 | 0.63 | 0.37 | 11 | 0.41 | 1.33 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 16 | 39 | 55 | 41 | 27 | 38 | 58 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | For the seven month fiscal period ended 3-31-11. The fund changed its fiscal year end from August 31 to March 31. | |||||||||||||||||||||||||||||||||||||
3 | 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 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. | |||||||||||||||||||||||||||||||||||||
4 | Audited by previous independent registered public accounting firm. | |||||||||||||||||||||||||||||||||||||
5 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
6 | 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. | |||||||||||||||||||||||||||||||||||||
7 | 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. | |||||||||||||||||||||||||||||||||||||
8 | Less than $0.005 per share. | |||||||||||||||||||||||||||||||||||||
9 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
10 | Not annualized. | |||||||||||||||||||||||||||||||||||||
11 | Annualized. |
�� | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R2 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.77 | $14.94 | $12.78 | $12.43 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.01 | 0.04 | 0.05 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.15 | 4.14 | 2.14 | 0.34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.16 | 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 | $18.93 | $18.77 | $14.94 | $12.78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 0.85 | 5 | 28.15 | 17.15 | 2.82 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $225 | $205 | $15 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.28 | 7 | 1.28 | 2.15 | 16.13 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.28 | 7 | 1.27 | 1.40 | 1.45 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.13 | 7 | 0.25 | 0.33 | 1.00 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 16 | 39 | 55 | 41 | 8 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-1-12. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class R4 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.81 | $15.63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.04 | 0.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.13 | 3.49 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.17 | 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 | $18.98 | $18.81 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 0.90 | 5 | 22.85 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $87 | $44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.15 | 6 | 1.30 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.04 | 6 | 1.14 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.43 | 6 | 0.44 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 16 | 39 | 7 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||
2 | The inception date for Class R4 shares is 7-2-13. | |||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||
6 | Annualized. | |||||||||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-13 to 3-31-14. |
Class R6 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.81 | $14.95 | $12.79 | $10.95 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.06 | 0.12 | 0.11 | 0.08 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.14 | 4.16 | 2.14 | 1.82 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.20 | 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 | $19.01 | $18.81 | $14.95 | $12.79 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 1.06 | 5 | 28.81 | 17.68 | 17.45 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $584 | $444 | $100 | $2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.78 | 6 | 0.81 | 0.89 | 4.22 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.77 | 6 | 0.80 | 0.89 | 0.99 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.65 | 6 | 0.71 | 0.84 | 1.25 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 16 | 39 | 55 | 41 | 7 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class R6 shares is 9-1-11. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||
5 | Not annualized. | |||||||||||||||||||||||||||||||
6 | Annualized. | |||||||||||||||||||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
Class ADV Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | 8-31-10 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.20 | $14.49 | $12.40 | $11.97 | $8.65 | $8.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income4 | 0.01 | 0.03 | 0.04 | 0.04 | 0.01 | — | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.14 | 4.03 | 2.10 | 0.43 | 3.32 | (0.21 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.15 | 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 | $18.35 | $18.20 | $14.49 | $12.40 | $11.97 | $8.65 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)6 | 0.82 | 7 | 28.19 | 17.33 | 3.94 | 38.50 | 7 | (2.37 | ) 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | $1 | $1 | $1 | — | 8 | — | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 2.73 | 9 | 3.46 | 3.74 | 4.18 | 5.78 | 9 | 1.42 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.25 | 9 | 1.25 | 1.25 | 1.25 | 1.25 | 9 | 1.25 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.15 | 9 | 0.19 | 0.35 | 0.37 | 0.15 | 9 | (0.37 | ) 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 16 | 39 | 55 | 41 | 27 | 38 | 10 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | For the seven month fiscal period ended 3-31-11. The fund changed its fiscal year end from August 31 to March 31. | |||||||||||||||||||||||||||||||||||||
3 | The inception date for Class ADV shares is 7-12-10. | |||||||||||||||||||||||||||||||||||||
4 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
5 | Less than $0.005 per share. | |||||||||||||||||||||||||||||||||||||
6 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
7 | Not annualized. | |||||||||||||||||||||||||||||||||||||
8 | Less than $500,000. | |||||||||||||||||||||||||||||||||||||
9 | Annualized. | |||||||||||||||||||||||||||||||||||||
10 | The portfolio turnover is shown for the period from 9-1-09 to 8-31-10. |
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 B shares are closed to new 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. 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, state registration fees and printing and postage for each class may differ.
Effective January 31, 2014, the fund was closed to new investors.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
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 (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 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 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 September 30, 2014, all investments are categorized as Level 1 under the hierarchy described above.
29
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 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 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.
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 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(s) of operations. Commitment fees for the six months ended September 30, 2014 were $1,398. For the six months ended September 30, 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
30
assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
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.
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.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
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. 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 million of the fund's average daily net assets; (b) 0.775% of the next $500 million of the fund's average daily net assets; (c) 0.750% of the next $500 million of the fund's average daily net assets; (d) 0.725% of the next $1 billion of the fund's average daily net assets; and (e) 0.700% of the fund's average daily net assets in excess of $2.5 billion. 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 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
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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 reimburse or limit certain expenses for certain share classes of the fund. This agreement excludes certain expenses such as taxes, brokerage commissions, interest expense, acquired fund fees and expenses paid indirectly, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund's business and short dividend expense. These reimbursements and limits are such that these expenses will not exceed 1.15% and 1.25% for Class R4 and Class ADV shares, respectively. The fee waivers and/or expense 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. Prior to July 1, 2014, the fee waivers and/or reimbursements were such that these expenses would not exceed 1.40% for Class R2 shares.
The Advisor has contractually agreed to waive and/or reimburse all class-specific expenses for Class R6 shares of the fund, including transfer agent 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 (on an annualized basis) attributable to Class R6 shares (the Class Expense Waiver). The Class Expense Waiver expires on June 30, 2015, unless renewed by mutual agreement of the Advisor and the fund based upon a determination that this is appropriate under the circumstances at the time.
For the six months ended September 30, 2014, these expense reductions amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $85,872 | Class R4 | $2,596 | |
Class C | 11,603 | Class R6 | 18,819 | |
Class I | 182,352 | Class ADV | 6,325 | |
Class R2 | 7,846 | Total | $315,413 |
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2014 were equivalent to a net annual effective rate of 0.71% 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 six months ended September 30, 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 | Rule 12b-1 fee | Service fee | |
Class A | 0.30% | — | Class R4 | 0.25% | 0.10% | |
Class C | 1.00% | — | Class ADV | 0.25% | — | |
Class R2 | 0.25% | 0.25% |
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 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
32
upon a determination that this is appropriate under the circumstances at the time. Reimbursements related to this contractual waiver amounted to $36,541 for Class R4 shares for the six months ended September 30, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $664,804 for the six months ended September 30, 2014. Of this amount, $92,840 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $568,783 was paid as sales commissions to broker-dealers and $3,181 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 six months ended September 30, 2014, CDSCs received by the Distributor amounted to $1,088 and $26,521 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.
Class level expenses. Class level expenses for the six months ended September 30, 2014 were:
Class | Distribution and service fees | Transfer agent fees | State registration fees | Printing and postage |
Class A | $3,124,722 | $1,600,660 | $86,762 | $102,738 |
Class C | 1,664,103 | 213,203 | 18,534 | 9,988 |
Class I | — | 3,044,228 | 43,742 | 93,392 |
Class R2 | 570,774 | 20,776 | 8,293 | 4,117 |
Class R4 | 126,336 | 6,809 | 9,338 | 1,553 |
Class R6 | — | 49,616 | 21,263 | 5,922 |
Class ADV | 1,071 | 549 | 6,815 | 54 |
Total | $5,487,006 | $4,935,841 | $194,747 | $217,764 |
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 group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2014 and for the year ended March 31, 2014 were as follows:
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Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 16,340,381 | $300,363,246 | 112,071,109 | $1,839,347,952 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,821,616 | 48,051,850 | ||||||||||||||||||||||
Repurchased | (81,959,442 | ) | (1,517,622,419 | ) | (26,206,076 | ) | (433,557,584 | ) | ||||||||||||||||||
Net increase (decrease) | (65,619,061 | ) | ($1,217,259,173 | ) | 88,686,649 | $1,453,842,218 | ||||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 844,031 | $15,807,205 | 12,392,250 | $206,888,537 | ||||||||||||||||||||||
Distributions reinvested | — | — | 207,929 | 3,607,565 | ||||||||||||||||||||||
Repurchased | (1,016,885 | ) | (19,051,136 | ) | (909,781 | ) | (15,444,379 | ) | ||||||||||||||||||
Net increase (decrease) | (172,854 | ) | ($3,243,931 | ) | 11,690,398 | $195,051,723 | ||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 116,682,210 | $2,232,860,854 | 141,646,631 | $2,421,566,726 | ||||||||||||||||||||||
Distributions reinvested | — | — | 3,115,082 | 54,700,838 | ||||||||||||||||||||||
Repurchased | (27,569,327 | ) | (527,530,493 | ) | (41,066,594 | ) | (701,790,233 | ) | ||||||||||||||||||
Net increase | 89,112,883 | $1,705,330,361 | 103,695,119 | $1,774,477,331 | ||||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 2,822,710 | $53,658,023 | 11,612,161 | $199,320,000 | ||||||||||||||||||||||
Distributions reinvested | — | — | 90,769 | 1,593,002 | ||||||||||||||||||||||
Repurchased | (1,898,178 | ) | (36,438,438 | ) | (1,786,411 | ) | (31,002,655 | ) | ||||||||||||||||||
Net increase | 924,532 | $17,219,585 | 9,916,519 | $169,910,347 | ||||||||||||||||||||||
Class R4 shares1 | ||||||||||||||||||||||||||
Sold | 2,589,975 | $48,989,347 | 2,386,534 | $43,658,507 | ||||||||||||||||||||||
Distributions reinvested | — | — | 10,553 | 185,418 | ||||||||||||||||||||||
Repurchased | (332,936 | ) | (6,391,306 | ) | (73,393 | ) | (1,340,621 | ) | ||||||||||||||||||
Net increase | 2,257,039 | $42,598,041 | 2,323,694 | $42,503,304 | ||||||||||||||||||||||
Class R6 Shares | ||||||||||||||||||||||||||
Sold | 9,341,537 | $177,613,730 | 18,629,374 | $327,775,557 | ||||||||||||||||||||||
Distributions reinvested | — | — | 311,330 | 5,463,834 | ||||||||||||||||||||||
Repurchased | (2,210,590 | ) | (42,169,414 | ) | (1,990,057 | ) | (34,122,943 | ) | ||||||||||||||||||
Net increase | 7,130,947 | $135,444,316 | 16,950,647 | $299,116,448 | ||||||||||||||||||||||
Class ADV shares | ||||||||||||||||||||||||||
Sold | — | — | 1,353 | $21,000 | ||||||||||||||||||||||
Distributions reinvested | — | — | 941 | 16,015 | ||||||||||||||||||||||
Repurchased | (171 | ) | ($3,098 | ) | (3,754 | ) | (59,035 | ) | ||||||||||||||||||
Net decrease | (171 | ) | ($3,098 | ) | (1,460 | ) | ($22,020 | ) | ||||||||||||||||||
Total net increase | 33,633,315 | $680,086,101 | 233,261,566 | $3,934,879,351 |
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 investments, amounted to $2,153,160,756 and $1,361,732,032, respectively, for the six months ended September 30, 2014.
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Continuation of investment advisory and subadvisory agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Robeco Investment Management, Inc. (the Subadvisor), for John Hancock Disciplined Value Mid Cap Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
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Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and other third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that the fund outperformed its benchmark index and peer group average for the one-, three- and five-year periods ended December 31, 2013. The Board noted the favorable performance of the fund relative to the benchmark index
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and the peer group over all periods. The Board concluded that the fund's performance has outperformed the historical performance of comparable funds and the fund's benchmark.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees and total expenses for the fund are higher than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee, and that such fees are negotiated at arm's length with respect to the Subadvisor. In addition, the Board took into account that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board also noted that the fund's distributor, an affiliate of the Advisor, has agreed to waive a portion of its Rule 12b-1 fee for a share class of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |||||||
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |||||||
(h) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |||||||
(i) | noted that the subadvisory fee for the fund is paid by the Advisor and is negotiated at arm's length; and |
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(j) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $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 exceed $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 funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data; and | |
(4) | Information relating to the nature and scope of any material relationships and their significant to the Trust's Advisor and Subadvisor. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also
38
considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund.
The Board also relied on the ability of the Advisor to negotiate the Subadvisory Agreement with the Subadvisor, which is not affiliated with the Advisor, and the fees thereunder at arm's length. As a result, the costs of the services to be provided and the profits to be realized by the Subadvisor from its relationship with the Trust were not a material factor in the Board's consideration of the Subadvisory Agreement.
The Board also received information regarding the nature and scope (including their significance to the Advisor and its affiliates and to the Subadvisor) of any material relationships, if any, with respect to the Subadvisor, which include arrangements in which the Subadvisor or its affiliates provide advisory, distribution, or management services in connection with financial products sponsored by the Advisor or its affiliates, and may include other registered investment companies, a 529 education savings plan, managed separate accounts and exempt group annuity contracts sold to qualified plans. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
39
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the performance of the fund has outperformed the historical performance of comparable funds and the fund's benchmark; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
40
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor Subadvisor Principal distributor Custodian Transfer agent Legal counsel |
*Member of the Audit Committee
†Non-Independent Trustee
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 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
41
Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL/INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Income Allocation | INCOME FUNDS (continued) Investment Grade Bond Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE/SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield Fund |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
John Hancock Investments
A trusted brand
John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
A better way to invest
As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
Results for investors
Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF202363 | 363SA 09/14 11/14 |
John Hancock
International Value Equity FundSemiannual report 9/30/14
A message to shareholders
Dear fellow shareholder,
The economic expansion that began in 2009 continues, with moderate GDP growth in the United States and the unemployment rate down considerably from its peak. However, the scene outside the United States had become decidedly less robust by the end of September. China's economy, a key driver of global demand, was slowing, Japan's GDP contracted in the second quarter, and the International Monetary Fund warned of another eurozone recession unless more is done to stimulate economic growth there. Meanwhile, bond markets around the world have turned in positive performance as investors pursue yield where they can find it, and the risks of rising interest rates and central bank tightening have been pushed out further into the future.
In the absence of pronounced market dislocations, we believe investors are well served by sticking to a commonsense, diversified approach, one that includes a mix of equities, fixed-income, and alternative strategies that can offer added diversification potential. Although events like those taking place in Ukraine and the Middle East serve as reminders that all market environments carry risk, we believe the biggest risk investors face in today's market is not staying invested.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an effort to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of September 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
International Value Equity Fund
1
INVESTMENT OBJECTIVE
The fund seeks long-term capital appreciation.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 (%)
See page 8 for more complete performance information.
After the close of business on 2-11-11, holders of the former Optique International Value Fund (the predecessor fund, first offered on 4-1-98) became owners of an equal number of full and fractional Class A shares or Class I shares of John Hancock International Value Equity Fund, which were first offered on 2-14-11. Class A shares' performance shown above for periods prior to this date reflects the historical performance of Optique International Value Fund.
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. It is not possible to invest directly in an index.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
2
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Stocks in global developed markets were slightly negative
Stocks in developed markets outside the United States posted slightly negative returns, recording gains early in the period but subsequently declining as economic prospects in Europe and Japan worsened.
Stock selection hampered results
The fund underperformed versus its benchmark, primarily because of our stock selection in the industrials, information technology, and consumer staples sectors.
Fund got help from emerging markets
Within the fund's out-of-benchmark weighting in emerging-market equities, our stock selection significantly aided relative performance.
SECTOR COMPOSITION AS OF 9/30/14 (%)
A note about risks
Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Value stocks may decline in price. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. The stock prices of midsize companies can change more frequently and dramatically than those of large companies. Please see the fund's prospectuses for additional risks.
3
![](https://capedge.com/proxy/N-CSRS/0001145443-14-001428/wendellperkins.jpg)
Wendell Perkins, CFA
Portfolio Manager
John Hancock Asset Management
The past six months were challenging for many developed global markets. What factors drove them?
Equities in developed markets outside the United States posted slightly negative returns during the past six months. Stocks rallied over the first half of the period, extending a positive trend dating to mid-2013, as an economic recovery in Europe initially appeared to be sustainable. But investor sentiment turned negative in the latter half of the period as fresh data indicated this recovery was stalling. Japanese stocks followed a similar trajectory, although the Japanese component of the fund's benchmark, the MSCI World ex-USA Index, outperformed the European component.
The instability in the eurozone's peripheral nations that had fueled a debt crisis in recent years largely eased during the period, providing support for equities. However, this support withered as growth across the 18-member currency union slowed, particularly in key Western European countries. Data released in August showed that the eurozone's gross domestic product growth was flat in the second quarter. Germany and France posted dismal quarterly figures while Italy fell into a recession.
Actions by the European Central Bank (ECB) helped to dampen the negative sentiment resulting from the disappointment over economic data. In June, the ECB expanded stimulus programs and cut benchmark lending rates to record lows, then followed up with another rate cut in September.
Although the United Kingdom's economy continued to recover, the slowdown affecting many of that nation's eurozone trading partners weighed on U.K. equities.
Japan's economy appeared to make measured progress toward a recovery following a long period of stagnation. In June, Prime Minister Shinzo Abe followed up on his previous monetary and fiscal stimulus initiatives by proposing economic reforms. While this announcement at first sent Japanese stocks higher, investor enthusiasm waned as data showed that an April 1, 2014, increase in the nation's sales tax had a more damaging effect on retail sales and the broader economy than had been expected.
4
How did this environment affect the portfolio team's management of the fund?
TOP 10 COUNTRIES AS OF 9/30/14 (%)
5
positions within emerging-market equities. This factor can often result in significant performance differences versus the benchmark.
What factors at the sector and geographic levels affected the fund's performance?
Our stock selection in the industrials, information technology, and consumer staples sectors was a significant factor in the fund's relative underperformance. Stock picking in Europe and Canada also detracted.
On the positive side, our stock selection within the fund's out-of-benchmark weighting in emerging-market equities strongly contributed to relative results. To a lesser degree, the fund's modest underweight in the eurozone countries contributed, as did our stock selection in the telecommunication services, energy, and materials sectors.
Which holdings had the largest impact on the fund's relative performance?
Several of the fund's positions in European stocks underperformed, in part because the weakened economic outlook in the eurozone had a negative impact on the prospects of these companies. Positions in cyclical stocks that are unusually sensitive to changes in the economic environment were hit particularly hard. Chief among these was TNT Express NV, a Netherlands-based freight shipping company. Its shares fell as the outlook for trading activity within the eurozone worsened.
TEN LARGEST HOLDINGS AS OF 9/30/14 (%)
Novartis AG | 1.3 |
HSBC Holdings PLC | 1.3 |
Royal Dutch Shell PLC, A Shares | 1.1 |
Merck KGaA | 1.1 |
Sanofi | 1.0 |
Bank of Montreal | 1.0 |
China Petroleum & Chemical Corp., H Shares | 1.0 |
SAP SE | 1.0 |
DBS Group Holdings, Ltd. | 1.0 |
China Mobile, Ltd. | 1.0 |
TOTAL | 10.8 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
6
Other European positions that detracted included two German stocks, enterprise software supplier Software AG and industrial components maker Rheinmetall AG.
Another position that weighed on relative results was Modern Times Group AB, a Sweden-based television and radio broadcasting company with services across Europe. Modern Times' stake in a broadcast property in Russia was a negative factor for the stock, as Russia's government moved to tighten restrictions on foreign ownership of media assets.
On the positive side, positions in four emerging-market stocks aided relative performance. These included two Hong Kong-listed stocks, China Mobile, Ltd. and Guangdong Investment, Ltd., and a pair of state-controlled oil and gas companies, Petroleo Brasileiro SA (Brazil) and CNOOC Ltd. (China). Shares of the two energy companies both rebounded from recent periods of underperformance. We sold the fund's position in Petroleo Brasileiro prior to the end of the period. Another position that contributed was Lonza Group AG (Switzerland). Shares of the maker of biopharmaceutical ingredients rose sharply as a result of a successful restructuring of the company's business.
How was the fund positioned at the end of the period?
Our cautious views on prospects in the eurozone countries and Japan were factors in the fund's modest underweights in those markets. At the sector level, the fund was signficantly underweight in financials and consumer staples, while it was overweight in telecommunication services.
MANAGED BY
![]() | Wendell Perkins, CFA On the fund and its predecessor since inception Investing since 1985 |
![]() | Edward Maraccini, CFA On the fund and its predecessor since 2007 Investing since 1995 |
![]() | Margaret McKay, CFA On the fund and its predecessor since 2001 Investing since 1992 |
7
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||||
1-year | 5-year | 10-year | 6-month | 1-year | 5-year | 10-year | |||
Class A1,2 | -1.74 | 5.03 | 5.22 | -7.04 | -1.74 | 27.82 | 66.28 | ||
Class I1,2,3 | 3.65 | 6.36 | 5.88 | -2.04 | 3.65 | 36.13 | 77.09 | ||
Class R21,2,3 | 3.34 | 6.16 | 5.69 | -2.14 | 3.34 | 34.86 | 73.88 | ||
Class R41,2,3 | 3.50 | 6.39 | 5.93 | -2.14 | 3.50 | 36.33 | 77.98 | ||
Class R61,2,3 | 3.86 | 6.69 | 6.21 | -1.93 | 3.86 | 38.24 | 82.74 | ||
Class NAV1,2,3 | 3.99 | 6.72 | 6.25 | -1.93 | 3.99 | 38.44 | 83.27 | ||
Index 1† | 5.34 | 7.02 | 7.03 | -1.10 | 5.34 | 40.41 | 97.28 | ||
Index 2† | 6.31 | 6.41 | 6.88 | -0.99 | 6.31 | 36.42 | 94.55 |
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. 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 R2 | Class R4 | Class R6 | Class NAV | |
Gross (%) | 1.62 | 1.47 | 6.21 | 15.59 | 16.37 | 1.03 |
Net (%) | 1.60 | 1.29 | 1.68 | 1.43 | 1.03 | 1.03 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† | Index 1 is the MSCI World ex-USA Index; Index 2 is the MSCI World ex-USA Value Index. |
See the following page for footnotes.
8
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock International Value Equity Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in two separate indexes.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index 1 ($) | Index 2 ($) | |
Class I1,2,3 | 9-30-04 | 17,709 | 17,709 | 19,728 | 19,455 |
Class R21,2,3 | 9-30-04 | 17,388 | 17,388 | 19,728 | 19,455 |
Class R41,2,3 | 9-30-04 | 17,798 | 17,798 | 19,728 | 19,455 |
Class R61,2,3 | 9-30-04 | 18,274 | 18,274 | 19,728 | 19,455 |
Class NAV1,2,3 | 9-30-04 | 18,327 | 18,327 | 19,728 | 19,455 |
MSCI World ex-USA Index (gross of foreign withholding taxes on dividends) — Index 1 — 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) — Index 2 — 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 the former Optique International Value Fund (the predecessor fund, first offered on 4-1-98) became owners of an equal number of full and fractional Class A shares or Class I shares of John Hancock International Value Equity Fund, which were first offered on 2-14-11. The performance shown for Class A and Class I shares for periods prior to this date reflects the historical performance of Optique International Value Fund. 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 NAV, Class R2, Class R4, and Class R6 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. |
9
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 presenting 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 April 1, 2014, with the same investment held until September 30, 2014.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $978.60 | $7.44 | 1.50% |
Class C2 | 1,000.00 | 950.20 | 2.07 | 2.35% |
Class I | 1,000.00 | 979.60 | 6.40 | 1.29% |
Class R2 | 1,000.00 | 978.60 | 8.33 | 1.68% |
Class R4 | 1,000.00 | 978.60 | 7.09 | 1.43% |
Class R6 | 1,000.00 | 980.70 | 5.06 | 1.02% |
Class NAV | 1,000.00 | 980.70 | 5.06 | 1.02% |
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 September 30, 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:
10
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 April 1, 2014, with the same investment held until September 30, 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.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,017.50 | $7.59 | 1.50% |
Class C | 1,000.00 | 1,002.40 | 11.68 | 2.35% |
Class I | 1,000.00 | 1,018.60 | 6.53 | 1.29% |
Class R2 | 1,000.00 | 1,016.60 | 8.49 | 1.68% |
Class R4 | 1,000.00 | 1,017.90 | 7.23 | 1.43% |
Class R6 | 1,000.00 | 1,020.00 | 5.17 | 1.02% |
Class NAV | 1,000.00 | 1,020.00 | 5.17 | 1.02% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the 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 183/365 (to reflect the one-half year period). |
2 | The inception date for Class C is 8-28-14. Expenses are equal to the class's annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (34) and divided by 365 (to reflect the period). |
11
Fund's investments
As of 9-30-14 (Unaudited) | |||||||||||||||||
Shares | Value | ||||||||||||||||
Common Stocks 95.7% | $422,632,034 | ||||||||||||||||
(Cost $391,356,560) | |||||||||||||||||
Australia 5.2% | 23,129,961 | ||||||||||||||||
AGL Energy, Ltd. | 286,363 | 3,392,242 | |||||||||||||||
Australia & New Zealand Banking Group, Ltd. | 136,709 | 3,695,543 | |||||||||||||||
BHP Billiton, Ltd. | 104,467 | 3,079,007 | |||||||||||||||
Incitec Pivot, Ltd. | 1,091,111 | 2,584,638 | |||||||||||||||
National Australia Bank, Ltd. | 122,194 | 3,475,640 | |||||||||||||||
QBE Insurance Group, Ltd. | 340,651 | 3,469,118 | |||||||||||||||
Santos, Ltd. | 287,089 | 3,433,773 | |||||||||||||||
Canada 7.7% | 34,131,035 | ||||||||||||||||
Agrium, Inc. (L) | 38,033 | 3,381,013 | |||||||||||||||
Bank of Montreal | 60,919 | 4,483,730 | |||||||||||||||
Barrick Gold Corp. | 219,465 | 3,227,455 | |||||||||||||||
Bombardier, Inc., Class B | 885,659 | 2,981,325 | |||||||||||||||
Husky Energy, Inc. | 131,196 | 3,601,022 | |||||||||||||||
Magna International, Inc. | 38,426 | 3,647,202 | |||||||||||||||
Suncor Energy, Inc. | 117,469 | 4,251,099 | |||||||||||||||
The Bank of Nova Scotia | 68,743 | 4,251,822 | |||||||||||||||
The Toronto-Dominion Bank | 87,261 | 4,306,367 | |||||||||||||||
China 2.0% | 8,737,051 | ||||||||||||||||
China Petroleum & Chemical Corp., H Shares | 5,100,800 | 4,461,375 | |||||||||||||||
CNOOC, Ltd. | 2,483,000 | 4,275,676 | |||||||||||||||
Denmark 0.8% | 3,731,161 | ||||||||||||||||
Danske Bank A/S | 137,642 | 3,731,161 | |||||||||||||||
Finland 0.8% | 3,317,627 | ||||||||||||||||
Kesko OYJ, B Shares | 92,948 | 3,317,627 | |||||||||||||||
France 9.1% | 40,412,952 | ||||||||||||||||
AXA SA | 146,110 | 3,599,062 | |||||||||||||||
BNP Paribas SA | 53,630 | 3,559,325 | |||||||||||||||
Cie de Saint-Gobain | 67,323 | 3,076,088 | |||||||||||||||
GDF Suez | 155,519 | 3,900,486 | |||||||||||||||
Kering | 16,735 | 3,374,107 | |||||||||||||||
Orange SA | 212,406 | 3,169,651 | |||||||||||||||
Sanofi | 39,847 | 4,505,525 | |||||||||||||||
Societe BIC SA | 30,352 | 3,912,559 | |||||||||||||||
Total SA | 64,622 | 4,184,539 | |||||||||||||||
Vinci SA | 54,971 | 3,190,015 | |||||||||||||||
Vivendi SA (I) | 163,228 | 3,941,595 |
Shares | Value | ||||||||||||||||
Germany 11.2% | $49,435,964 | ||||||||||||||||
Allianz SE | 23,027 | 3,717,290 | |||||||||||||||
BASF SE | 33,142 | 3,023,125 | |||||||||||||||
Bayerische Motoren Werke AG | 35,386 | 3,781,853 | |||||||||||||||
Deutsche Bank AG | 101,283 | 3,536,549 | |||||||||||||||
Deutsche Boerse AG | 50,631 | 3,399,906 | |||||||||||||||
E.ON SE | 184,983 | 3,378,098 | |||||||||||||||
Fresenius SE & Company KGaA | 85,785 | 4,235,118 | |||||||||||||||
Kion Group AG | 57,023 | 2,105,086 | |||||||||||||||
Merck KGaA | 54,170 | 4,979,059 | |||||||||||||||
Muenchener Rueckversicherungs AG | 18,801 | 3,708,826 | |||||||||||||||
Rheinmetall AG | 62,155 | 2,973,650 | |||||||||||||||
SAP SE | 61,299 | 4,423,928 | |||||||||||||||
Siemens AG | 29,837 | 3,550,365 | |||||||||||||||
Software AG | 106,321 | 2,623,111 | |||||||||||||||
Hong Kong 3.7% | 16,375,276 | ||||||||||||||||
China Mobile, Ltd. | 377,000 | 4,406,924 | |||||||||||||||
Guangdong Investment, Ltd. | 3,699,385 | 4,324,547 | |||||||||||||||
Hang Lung Group, Ltd. | 803,000 | 3,957,916 | |||||||||||||||
Yue Yuen Industrial Holdings, Ltd. | 1,212,385 | 3,685,889 | |||||||||||||||
Ireland 0.7% | 3,072,368 | ||||||||||||||||
C&C Group PLC | 578,257 | 3,072,368 | |||||||||||||||
Israel 0.9% | 4,034,036 | ||||||||||||||||
Teva Pharmaceutical Industries, Ltd. | 74,954 | 4,034,036 | |||||||||||||||
Japan 17.9% | 78,911,149 | ||||||||||||||||
Asahi Kasei Corp. | 502,944 | 4,090,108 | |||||||||||||||
Bridgestone Corp. | 103,700 | 3,429,872 | |||||||||||||||
Canon, Inc. | 121,000 | 3,936,845 | |||||||||||||||
East Japan Railway Company | 46,000 | 3,445,524 | |||||||||||||||
Fujitsu, Ltd. | 568,106 | 3,496,446 | |||||||||||||||
Honda Motor Company, Ltd. | 97,100 | 3,331,485 | |||||||||||||||
Inpex Corp. | 279,611 | 3,953,159 | |||||||||||||||
Komatsu, Ltd. | 181,400 | 4,192,361 | |||||||||||||||
Kyocera Corp. | 91,800 | 4,287,700 | |||||||||||||||
Marubeni Corp. | 498,000 | 3,407,761 | |||||||||||||||
Mitsubishi Corp. | 190,000 | 3,891,246 | |||||||||||||||
Mitsubishi UFJ Financial Group, Inc. | 703,500 | 3,964,725 | |||||||||||||||
Mitsui Fudosan Company, Ltd. | 118,000 | 3,621,233 | |||||||||||||||
Mizuho Financial Group, Inc. | 1,837,400 | 3,280,111 | |||||||||||||||
MS&AD Insurance Group Holdings | 159,890 | 3,487,539 | |||||||||||||||
Nippon Telegraph & Telephone Corp. | 67,100 | 4,161,159 | |||||||||||||||
Nippon Television Network Corp. | 253,468 | 3,866,946 | |||||||||||||||
Nissan Motor Company, Ltd. | 408,989 | 3,959,073 |
Shares | Value | ||||||||||||||||
Japan (continued) | |||||||||||||||||
Sumitomo Chemical Company, Ltd. | 889,000 | $3,175,234 | |||||||||||||||
Toyo Suisan Kaisha, Ltd. (L) | 114,000 | 3,785,404 | |||||||||||||||
Toyota Motor Corp. | 70,484 | 4,147,218 | |||||||||||||||
Netherlands 6.2% | 27,477,941 | ||||||||||||||||
Aegon NV | 429,085 | 3,533,174 | |||||||||||||||
Heineken Holding NV | 54,680 | 3,610,227 | |||||||||||||||
Koninklijke Ahold NV | 180,114 | 2,913,463 | |||||||||||||||
Koninklijke KPN NV (I) | 1,018,965 | 3,262,343 | |||||||||||||||
Nutreco NV | 91,352 | 3,319,741 | |||||||||||||||
Royal Dutch Shell PLC, A Shares | 132,038 | 5,040,247 | |||||||||||||||
TNT Express NV | 390,746 | 2,465,037 | |||||||||||||||
Wolters Kluwer NV | 125,011 | 3,333,709 | |||||||||||||||
Norway 1.0% | 4,306,150 | ||||||||||||||||
DNB ASA | 230,102 | 4,306,150 | |||||||||||||||
Singapore 2.6% | 11,579,617 | ||||||||||||||||
DBS Group Holdings, Ltd. (L) | 306,500 | 4,420,504 | |||||||||||||||
Sembcorp Industries, Ltd. | 845,000 | 3,428,802 | |||||||||||||||
Singapore Telecommunications, Ltd. | 1,243,000 | 3,730,311 | |||||||||||||||
South Africa 0.8% | 3,358,144 | ||||||||||||||||
Tiger Brands, Ltd. | 120,249 | 3,358,144 | |||||||||||||||
Spain 0.8% | 3,414,434 | ||||||||||||||||
Telefonica SA | 221,082 | 3,414,434 | |||||||||||||||
Sweden 2.8% | 12,432,987 | ||||||||||||||||
Getinge AB, B Shares | 139,031 | 3,490,706 | |||||||||||||||
Meda AB, Series A | 234,745 | 3,289,699 | |||||||||||||||
Modern Times Group AB, B Shares | 85,221 | 2,689,659 | |||||||||||||||
SKF AB, B Shares | 142,323 | 2,962,923 | |||||||||||||||
Switzerland 5.7% | 25,156,293 | ||||||||||||||||
Credit Suisse Group AG (I) | 128,881 | 3,565,577 | |||||||||||||||
Glencore Xstrata PLC (I) | 663,759 | 3,676,122 | |||||||||||||||
Lonza Group AG (I) | 34,930 | 4,208,917 | |||||||||||||||
Nestle SA | 56,597 | 4,159,369 | |||||||||||||||
Novartis AG | 61,283 | 5,770,920 | |||||||||||||||
Zurich Insurance Group AG (I) | 12,686 | 3,775,388 | |||||||||||||||
United Kingdom 15.8% | 69,617,888 | ||||||||||||||||
Anglo American PLC | 155,286 | 3,463,150 | |||||||||||||||
AstraZeneca PLC | 55,871 | 4,003,873 | |||||||||||||||
Barclays PLC | 1,054,206 | 3,877,558 | |||||||||||||||
BP PLC | 385,976 | 2,823,544 | |||||||||||||||
British Sky Broadcasting Group PLC | 260,712 | 3,718,572 |
Shares | Value | ||||||||||||||||
United Kingdom (continued) | |||||||||||||||||
Debenhams PLC | 3,346,299 | $3,155,263 | |||||||||||||||
Diageo PLC | 124,570 | 3,592,863 | |||||||||||||||
GlaxoSmithKline PLC | 167,267 | 3,821,070 | |||||||||||||||
HSBC Holdings PLC | 551,373 | 5,602,659 | |||||||||||||||
Imperial Tobacco Group PLC | 90,490 | 3,896,132 | |||||||||||||||
Informa PLC | 447,519 | 3,535,611 | |||||||||||||||
Meggitt PLC | 471,374 | 3,438,213 | |||||||||||||||
Rexam PLC | 409,213 | 3,252,991 | |||||||||||||||
RSA Insurance Group PLC (I) | 440,705 | 3,455,230 | |||||||||||||||
Smith & Nephew PLC | 235,331 | 3,958,653 | |||||||||||||||
Standard Chartered PLC | 190,787 | 3,519,040 | |||||||||||||||
Subsea 7 SA | 164,904 | 2,356,569 | |||||||||||||||
Unilever PLC | 97,353 | 4,074,993 | |||||||||||||||
Vodafone Group PLC | 1,235,699 | 4,071,904 | |||||||||||||||
Yield (%) | Shares | Value | |||||||||||||||
Securities Lending Collateral 1.6% | $6,982,103 | ||||||||||||||||
(Cost $6,982,003) | |||||||||||||||||
John Hancock Collateral Investment Trust (W) | 0.1178(Y) | 697,715 | 6,982,103 | ||||||||||||||
Par value | Value | ||||||||||||||||
Short-Term Investments 3.1% | $13,988,000 | ||||||||||||||||
(Cost $13,988,000) | |||||||||||||||||
Repurchase Agreement 3.1% | 13,988,000 | ||||||||||||||||
Barclays Capital Tri-Party Repurchase Agreement dated 9-30-14 at 0.000% to be repurchased at $10,943,000 on 10-1-14, collateralized by $5,370,300 Treasury Inflation Index Bonds, 3.875% due 4-15-29 (valued at $11,162,061, including interest) | 10,943,000 | 10,943,000 | |||||||||||||||
Repurchase Agreement with State Street Corp. dated 9-30-14 at 0.000% to be repurchased at $3,045,000 on 10-1-14, collateralized by $3,080,000 Federal Home Loan Mortgage Corporation, 1.680% due 11-19-18, (valued at $3,106,950, including interest) | 3,045,000 | 3,045,000 | |||||||||||||||
Total investments (Cost $412,326,563)† 100.4% | $443,602,137 | ||||||||||||||||
Other assets and liabilities, net (0.4%) | ($1,835,770 | ) | |||||||||||||||
Total net assets 100.0% | $441,766,367 |
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 9-30-14. | ||||
(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 9-30-14. | ||||
† | At 9-30-14, the aggregate cost of investment securities for federal income tax purposes was $412,681,064. Net unrealized appreciation aggregated $30,921,073, of which $51,511,064 related to appreciated investment securities and $20,589,991 related to depreciated investment securities. |
The fund had the following sector composition of net assets on 9-30-14:
Financials | 23.4% |
Consumer discretionary | 11.2% |
Industrials | 11.1% |
Health care | 10.5% |
Consumer staples | 8.9% |
Energy | 8.7% |
Materials | 7.5% |
Telecommunication services | 6.8% |
Information technology | 4.2% |
Utilities | 3.4% |
Short-Term Investments and Other | 4.3% |
Total | 100.0% |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers, at value (Cost $405,344,560) including$6,646,617 of securities loaned | $436,620,034 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers, at value (Cost $6,982,003) | 6,982,103 | |||||||||||||||||||||||||||||||||||||
Total investments, at value (Cost $412,326,563) | 443,602,137 | |||||||||||||||||||||||||||||||||||||
Cash | 3,908,626 | |||||||||||||||||||||||||||||||||||||
Foreign currency, at value (Cost $3,299,248) | 3,245,058 | |||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 3,786,912 | |||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 24,861 | |||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 1,486,874 | |||||||||||||||||||||||||||||||||||||
Receivable for securities lending income | 7,256 | |||||||||||||||||||||||||||||||||||||
Receivable due from advisor | 256 | |||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 68,457 | |||||||||||||||||||||||||||||||||||||
Total assets | 456,130,437 | |||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 7,132,142 | |||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 32,814 | |||||||||||||||||||||||||||||||||||||
Payable upon return of securities loaned | 6,980,351 | |||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 27,207 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 6,136 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 136 | |||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 185,284 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 14,364,070 | |||||||||||||||||||||||||||||||||||||
Net assets | $441,766,367 | |||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||
Paid-in capital | $370,467,853 | |||||||||||||||||||||||||||||||||||||
Undistributed net investment income | 10,824,019 | |||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 29,290,700 | |||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 31,183,795 | |||||||||||||||||||||||||||||||||||||
Net assets | $441,766,367 | |||||||||||||||||||||||||||||||||||||
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 ($19,861,494 ÷ 2,175,237 shares)1 | $9.13 | |||||||||||||||
Class C ($94,996 ÷ 10,384 shares)1 | $9.15 | |||||||||||||||
Class I ($8,165,738 ÷ 893,226 shares) | $9.14 | |||||||||||||||
Class R2 ($1,600,965 ÷ 175,062 shares) | $9.15 | |||||||||||||||
Class R4 ($107,208 ÷ 11,723.33 shares) | $9.14 | |||||||||||||||
Class R6 ($107,323 ÷ 11,723 shares) | $9.15 | |||||||||||||||
Class NAV ($411,828,643 ÷ 44,957,085 shares) | $9.16 | |||||||||||||||
Maximum offering price per share | ||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $9.61 |
1 | Redemption price per share 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. |
STATEMENT OF OPERATIONS For the six months ended 9-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||
Dividends | $10,017,789 | |||||||||||||||||||||||||||||||||||||
Securities lending | 269,770 | |||||||||||||||||||||||||||||||||||||
Interest | 3,470 | |||||||||||||||||||||||||||||||||||||
Less foreign taxes withheld | (844,045 | ) | ||||||||||||||||||||||||||||||||||||
Total investment income | 9,446,984 | |||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Investment management fees | 2,037,500 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 27,609 | |||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 34,714 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 17,735 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 1,597 | |||||||||||||||||||||||||||||||||||||
State registration fees | 44,132 | |||||||||||||||||||||||||||||||||||||
Printing and postage | 3,538 | |||||||||||||||||||||||||||||||||||||
Professional fees | 28,320 | |||||||||||||||||||||||||||||||||||||
Custodian fees | 244,423 | |||||||||||||||||||||||||||||||||||||
Registration and filing fees | 19,297 | |||||||||||||||||||||||||||||||||||||
Other | 7,210 | |||||||||||||||||||||||||||||||||||||
Total expenses | 2,466,075 | |||||||||||||||||||||||||||||||||||||
Less expense reductions | (44,543 | ) | ||||||||||||||||||||||||||||||||||||
Net expenses | 2,421,532 | |||||||||||||||||||||||||||||||||||||
Net investment income | 7,025,452 | |||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers and foreign currency transactions | 16,358,461 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | 1,483 | |||||||||||||||||||||||||||||||||||||
16,359,944 | ||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers and translation of assets and liabilities in foreign currencies | (31,757,153 | ) | ||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | 6 | |||||||||||||||||||||||||||||||||||||
(31,757,147 | ) | |||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss | (15,397,203 | ) | ||||||||||||||||||||||||||||||||||||
Decrease in net assets from operations | $(8,371,751 | ) |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-14 | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | 3-31-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $7,025,452 | $9,724,045 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 16,359,944 | 22,196,283 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (31,757,147 | ) | 25,835,599 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | (8,371,751 | ) | 57,755,927 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (138,050 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (87,399 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (962 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (1,240 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (1,608 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (6,214,133 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (589,399 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (280,932 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (4,488 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (4,488 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (4,488 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (17,109,762 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (24,436,949 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | (9,839,646 | ) | 105,809,113 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total increase (decrease) | (18,211,397 | ) | 139,128,091 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 459,977,764 | 320,849,673 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $441,766,367 | $459,977,764 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $10,824,019 | $3,798,567 |
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 | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2,3 | 10-31-10 | 4 | 10-31-09 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $9.33 | $8.66 | $8.22 | $9.09 | $11.26 | $9.90 | $7.97 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income5 | 0.12 | 0.17 | 6 | 0.12 | 0.14 | 0.02 | 0.03 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.32 | ) | 0.97 | 0.54 | (0.92 | ) 7 | 0.79 | 1.39 | 8 | 2.54 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.20 | ) | 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 | — | — | — | 0.02 | 9 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.13 | $9.33 | $8.66 | $8.22 | $9.09 | $11.26 | $9.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)10,11 | (2.14 | ) 12 | 13.51 | 8.16 | (8.20 | ) 9 | 9.13 | 12 | 14.46 | 35.61 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $20 | $18 | $7 | $3 | $3 | $3 | $30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.51 | 13 | 1.63 | 1.99 | 3.73 | 16.05 | 13 | 6.71 | 2.68 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.50 | 13 | 1.60 | 1.60 | 1.60 | 1.77 | 13 | 1.85 | 1.85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.52 | 13 | 1.85 | 6 | 1.52 | 1.68 | 0.48 | 13 | 0.33 | 0.88 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 38 | 27 | 21 | 12 | 14 | 80 | 123 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||||
2 | For the five month period ended 3-31-11. The fund changed its fiscal year end from October 31 to March 31. | |||||||||||||||||||||||||||||||||||||
3 | 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. | |||||||||||||||||||||||||||||||||||||
4 | Audited by previous independent registered public accounting firm. | |||||||||||||||||||||||||||||||||||||
5 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
6 | 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. | |||||||||||||||||||||||||||||||||||||
7 | The amount shown for a share outstanding does not correspond with the aggregate net 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. | |||||||||||||||||||||||||||||||||||||
8 | Includes redemption fees retained by the fund. Such redemption fees represent less than $0.01 per share. | |||||||||||||||||||||||||||||||||||||
9 | In October 2011, the advisor made a voluntary payment to the fund of $6,950. Without this payment, performance would have been lower. | |||||||||||||||||||||||||||||||||||||
10 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||
11 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||||
12 | Not annualized. | |||||||||||||||||||||||||||||||||||||
13 | Annualized. | |||||||||||||||||||||||||||||||||||||
14 | The portfolio turnover is shown for the period from 11-1-10 to 3-31-11. |
Class C Shares Period ended | 9-30-14 | 1 | |||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $9.63 | ||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.01 | ||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss on investments | (0.49 | ) | |||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.48 | ) | |||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.15 | ||||||||||||||||||||||||||||||||||||||||
Total return (%) | (4.98 | ) 3,4 | |||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 5 | |||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 17.67 | 6 | |||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 2.35 | 6 | |||||||||||||||||||||||||||||||||||||||
Net investment income | 0.86 | 6 | |||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 7 |
1 | Period from inception date, 8-28-14, to 9-30-14. Unaudited. | ||||||||||||||
2 | Based on average daily shares outstanding. | ||||||||||||||
3 | Total returns would have been lower had certain expenses not been reduced during the period. | ||||||||||||||
4 | Not annualized. | ||||||||||||||
5 | Less than $500,000. | ||||||||||||||
6 | Annualized. | ||||||||||||||
7 | The portfolio turnover is shown for the period from 4-01-14 to 9-30-14. |
Class I Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 3-31-11 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $9.33 | $8.66 | $8.21 | $9.09 | $8.98 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.13 | 0.20 | 4 | 0.13 | 0.19 | 0.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.32 | ) | 0.97 | 0.57 | (0.95 | ) 5 | 0.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.19 | ) | 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 | — | — | — | 0.02 | 6 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.14 | $9.33 | $8.66 | $8.21 | $9.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)7 | (2.04 | ) 8 | 13.87 | 8.61 | (7.87 | ) 6 | 1.22 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $8 | $8 | $6 | $1 | — | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.34 | 10 | 1.46 | 2.08 | 7.59 | 12.90 | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.29 | 10 | 1.29 | 1.28 | 1.18 | 1.18 | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.74 | 10 | 2.20 | 4 | 1.52 | 2.36 | 1.89 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 38 | 27 | 21 | 12 | 11 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||||||
2 | The inception date for Class I shares is 2-14-11. | |||||||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||
4 | Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.04 and 0.41%, respectively. | |||||||||||||||||||||||||||||||||||
5 | The amount shown for a share outstanding does not correspond with the aggregate net 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. | |||||||||||||||||||||||||||||||||||
6 | In October 2011, the advisor made a voluntary payment to the fund of $6,950. Without this payment, performance would have been lower. | |||||||||||||||||||||||||||||||||||
7 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||||||
8 | Not annualized. | |||||||||||||||||||||||||||||||||||
9 | Less than $500,000. | |||||||||||||||||||||||||||||||||||
10 | Annualized. | |||||||||||||||||||||||||||||||||||
11 | The portfolio turnover is shown for the period from 11-1-10 to 3-31-11. |
Class R2 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $9.35 | $8.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.10 | 0.19 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.30 | ) | 1.09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.20 | ) | 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 | $9.15 | $9.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (2.14 | ) 6 | 15.38 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $2 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 2.59 | 7 | 5.96 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.68 | 7 | 1.68 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.11 | 7 | 2.84 | 4,7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 38 | 8 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||
2 | The inception date for Class R2 shares is 7-2-13. | |||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||
4 | Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.04 and 0.41%, respectively. | |||||||||||||||||||||
5 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||
7 | Annualized. | |||||||||||||||||||||
8 | The portfolio turnover is shown for the period from 4-1-13 to 3-31-14. |
Class R4 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $9.34 | $8.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.13 | 0.10 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.33 | ) | 1.20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.20 | ) | 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 | $9.14 | $9.34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (2.14 | ) 6 | 15.55 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 17.10 | 8 | 15.49 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.43 | 8 | 1.43 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.65 | 8 | 1.43 | 4,8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 38 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||
2 | The inception date for Class R4 shares is 7-2-13. | |||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||
4 | Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.04 and 0.41%, respectively. | |||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-13 to 3-31-14. |
�� | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class R6 Shares Period ended | 9-30-14 | 1 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $9.33 | $8.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.15 | 0.12 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.33 | ) | 1.20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.18 | ) | 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 | $9.15 | $9.33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | (1.93 | ) 6 | 15.83 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 18.07 | 8 | 16.37 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.02 | 8 | 1.10 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.06 | 8 | 1.76 | 4,8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 38 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||
2 | The inception date for Class R6 shares is 7-2-13. | |||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||
4 | Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.04 and 0.41%, respectively. | |||||||||||||||||||||
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 | The portfolio turnover is shown for the period from 4-1-13 to 3-31-14. |
Class NAV Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $9.34 | $8.66 | $8.22 | $7.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.15 | 0.21 | 4 | 0.15 | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.33 | ) | 0.99 | 0.55 | 0.96 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.18 | ) | 1.20 | 0.70 | 1.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.12 | ) | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.38 | ) | (0.14 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.52 | ) | (0.26 | ) | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.16 | $9.34 | $8.66 | $8.22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)6 | (1.93 | ) 7 | 14.23 | 8.69 | 14.05 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $412 | $433 | $307 | $114 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.03 | 8 | 1.03 | 1.08 | 1.08 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.02 | 8 | 1.03 | 1.08 | 1.08 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.07 | 8 | 2.37 | 4 | 1.78 | 2.21 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 38 | 27 | 21 | 9 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | The inception date for Class NAV shares is 12-16-11. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.04 and 0.41%, respectively. | |||||||||||||||||||||||||||||||
5 | Less than $0.005 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 | The portfolio turnover is shown for the period from 4-1-11 to 3-31-12. |
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 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 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, state registration fees and printing and postage 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 (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
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. Certain short-term securities with maturities of 60 days or less at the time of purchase are valued at amortized cost.
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. 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 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
28
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 September 30, 2014, by major security category or type:
Total market value at 9-30-14 | Level 1 quoted price | Level 2 significant observable inputs | Level 3 significant unobservable inputs | ||
Common Stocks | |||||
Australia | $23,129,961 | — | $23,129,961 | — | |
Canada | 34,131,035 | $34,131,035 | — | — | |
China | 8,737,051 | — | 8,737,051 | — | |
Denmark | 3,731,161 | — | 3,731,161 | — | |
Finland | 3,317,627 | — | 3,317,627 | — | |
France | 40,412,952 | — | 40,412,952 | — | |
Germany | 49,435,964 | — | 49,435,964 | — | |
Hong Kong | 16,375,276 | — | 16,375,276 | — | |
Ireland | 3,072,368 | — | 3,072,368 | — | |
Israel | 4,034,036 | — | 4,034,036 | — | |
Japan | 78,911,149 | — | 78,911,149 | — | |
Netherlands | 27,477,941 | — | 27,477,941 | — | |
Norway | 4,306,150 | — | 4,306,150 | — | |
Singapore | 11,579,617 | — | 11,579,617 | — | |
South Africa | 3,358,144 | — | 3,358,144 | — | |
Spain | 3,414,434 | — | 3,414,434 | — | |
Sweden | 12,432,987 | — | 12,432,987 | — | |
Switzerland | 25,156,293 | — | 25,156,293 | — | |
United Kingdom | 69,617,888 | — | 69,617,888 | — | |
Securities Lending Collateral | 6,982,103 | 6,982,103 | — | — | |
Short-Term Investments | 13,988,000 | — | 13,988,000 | — | |
Total Investments in Securities | $443,602,137 | $41,113,138 | $402,488,999 | — |
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, or for tri-party repurchase agreements, collateral is held at a third-party custodian bank in a segregated account for the benefit of the fund. 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 received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
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.
29
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 and is registered with the Securities and Exchange Commission (SEC) 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 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.
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.
30
In addition, the fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to 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 six months ended September 30, 2014, were $259. For the six months ended September 30, 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, 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.
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.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
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) serves as investment advisor for the fund. 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).
31
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 million of the fund's average daily net assets; (b) 0.875% of the next $900 million of the fund's average daily net assets; (c) 0.850% of the next $1 billion of the fund's average daily net assets; (d) 0.825% of the next $1 billion of the fund's average daily net assets; (e) 0.800% of the next $1 billion of the fund's average daily net assets and (f) 0.775% of the fund's average daily net assets in excess of $4 billion. 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.
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%, 2.35%, 1.29%, 1.68%, 1.43% and 1.10% of average annual net assets for Class A, Class C, 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 for all classes except for Class C shares which shall remain in effect until at least June 30, 2016, 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.
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 that this is appropriate under the circumstances at the time.
The expense reductions amounted to $692, $1,360, $2,161, $6,822, $8,766, $9,600, and $15,086 for Class A, Class C, Class I, Class R2, Class R4, Class R6 and Class NAV shares, respectively, for the six months ended September 30, 2014.
The investment management fees, including the impact of waivers and reimbursements as described above, incurred for the six months ended September 30, 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 share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended September 30, 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, 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
32
distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund's share
Class | Rule 12b-1 fee | Service fee | Class | Rule 12b-1 fee | Service fee | |
Class A | 0.30% | — | Class R2 | 0.25% | 0.25% | |
Class C | 1.00% | — | Class R4 | 0.25% | 0.10% |
Currently, Class A shares are charged 0.25% 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 $56 for Class R4 shares for the six months ended September 30, 2014.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $72,254 for the six months ended September 30, 2014. Of this amount, $12,187 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $60,022 was paid as sales commissions to broker-dealers and $45 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 six months ended September 30, 2014, there were no CDSCs received by the Distributor for Class A or Class C 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 Share 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.
Class level expenses. Class level expenses for the six months ended September 30, 2014 were:
Class | Distribution and service fees | Transfer agent fees | State registration fees | Printing and postage |
Class A | $24,741 | $12,684 | $8,163 | $2,406 |
Class C | 89 | 11 | 1,375 | 3 |
Class I | — | 4,880 | 7,355 | 914 |
Class R2 | 2,638 | 140 | 8,861 | 109 |
Class R4 | 141 | 10 | 8,861 | 37 |
Class R6 | — | 10 | 9,517 | 69 |
Total | $27,609 | $17,735 | $44,132 | $3,538 |
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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 group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2014 and for the year ended March 31, 2014 were as follows:
Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 396,234 | $3,784,687 | 1,185,406 | $10,582,199 | ||||||||||||||||||||||
Distributions reinvested | — | — | 82,431 | 727,044 | ||||||||||||||||||||||
Repurchased | (123,257 | ) | (1,177,872 | ) | (220,373 | ) | (1,999,433 | ) | ||||||||||||||||||
Net increase | 272,977 | $2,606,815 | 1,047,464 | $9,309,810 | ||||||||||||||||||||||
Class C shares1 | ||||||||||||||||||||||||||
Sold | 10,384 | $100,000 | — | — | ||||||||||||||||||||||
Net increase | 10,384 | $100,000 | — | — | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 76,163 | $733,951 | 144,124 | $1,307,769 | ||||||||||||||||||||||
Distributions reinvested | — | — | 41,127 | 362,742 | ||||||||||||||||||||||
Repurchased | (17,743 | ) | (168,317 | ) | (51,387 | ) | (476,315 | ) | ||||||||||||||||||
Net increase | 58,420 | $565,634 | 133,864 | $1,194,196 | ||||||||||||||||||||||
Class R2 shares2 | ||||||||||||||||||||||||||
Sold | 57,982 | $563,650 | 127,696 | $1,132,865 | ||||||||||||||||||||||
Repurchased | (7,438 | ) | (71,423 | ) | (3,178 | ) | (29,319 | ) | ||||||||||||||||||
Net increase | 50,544 | $492,227 | 124,518 | $1,103,546 | ||||||||||||||||||||||
Class R4 shares2 | ||||||||||||||||||||||||||
Sold | — | — | 11,723 | $100,000 | ||||||||||||||||||||||
Net increase | — | — | 11,723 | $100,000 | ||||||||||||||||||||||
Class R6 shares2 | ||||||||||||||||||||||||||
Sold | — | — | 11,723 | $100,000 | ||||||||||||||||||||||
Net increase | — | — | 11,723 | $100,000 | ||||||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 806,652 | $7,681,541 | 10,079,797 | $87,417,169 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,638,142 | 23,268,405 | ||||||||||||||||||||||
Repurchased | (2,236,478 | ) | (21,285,863 | ) | (1,823,021 | ) | (16,684,013 | ) | ||||||||||||||||||
Net increase (decrease) | (1,429,826 | ) | ($13,604,322 | ) | 10,894,918 | $94,001,561 | ||||||||||||||||||||
Total net increase (decrease) | (1,037,501 | ) | ($9,839,646 | ) | 12,224,210 | $105,809,113 |
1 The inception date for Class C shares is 8-28-14.
2 The inception date for Class R2, Class R4, and Class R6 shares is 7-2-13.
Affiliates of the fund owned 100%, 1%, 7%, 100%, 100% and 100% of shares of beneficial interest of Class C, Class I, Class R2, Class R4, Class R6 and Class NAV, respectively, on September 30, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $57,160,600 and $59,750,630, respectively, for the six months ended September 30, 2014.
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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 September 30, 2014, funds within the John Hancock group of funds complex held 93.2% of the fund's net assets. The following funds had an affiliate ownership of 5% or more of the fund's net assets:
Fund | Affiliated Concentration |
Lifestyle Growth Fund | 36.0% |
Lifestyle Balanced Fund | 29.8% |
Lifestyle Aggressive Fund | 14.9% |
Lifestyle Moderate Fund | 5.8% |
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Continuation of investment advisory and subadvisory agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (US) LLC (the Subadvisor), for John Hancock International Value Equity Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
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Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
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The Board noted that the fund underperformed its benchmark index for the one-year period and outperformed for the three- and five-year periods ended December 31, 2013 and the fund underperformed its peer group average for the one- and three-year periods and outperformed the average for the five-year period ended December 31, 2013. The Board took into account management's discussion of the fund's performance, noting the fund's favorable performance relative to the benchmark index for the three- and five-year periods and relative to the peer group for the five-year period. The Board concluded that the fund's performance has generally been in line with the historical performance of comparable funds and the fund's benchmark.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs.
The Board noted that net management fees for the fund are lower than the peer group median and total expenses for the fund are higher than the peer group median. The Board took into account management's discussion of the fund's expenses, including action taken that will further reduce certain fund expenses. The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that the fund is subject to an expense cap until June 30, 2015 and that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board also noted that the fund's distributor, an affiliate of the Advisor, has agreed to waive a portion of its Rule 12b-1 fee for a share class of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; |
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(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |||||||
(h) | noted that the fund's Subadvisor is an affiliate of the Advisor; | |||||||
(i) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |||||||
(j) | noted that the subadvisory fee for the fund is paid by the Advisor; and | |||||||
(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $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 exceed $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 funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
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Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also considered any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fee. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fee paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; |
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(2) | the performance of the fund has generally been in line with the historical performance of comparable funds and the fund's benchmark; | |||||||
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |||||||
(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |||||||
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
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Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor Subadvisor Principal distributor Custodian Transfer agent Legal counsel |
*Member of the Audit Committee
†Non-Independent Trustee
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 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
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Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL/INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Income Allocation | INCOME FUNDS (continued) Investment Grade Bond Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE/SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield Fund |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
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John Hancock Investments
A trusted brand
John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
A better way to invest
As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
Results for investors
Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF202364 | 366SA 09/14 11/14 |
John Hancock
Strategic Growth FundSemiannual report 9/30/14
A message to shareholders
Dear fellow shareholder,
The economic expansion that began in 2009 continues, with moderate GDP growth in the United States and the unemployment rate down considerably from its peak. However, the scene outside the United States had become decidedly less robust by the end of September. China's economy, a key driver of global demand, was slowing, Japan's GDP contracted in the second quarter, and the International Monetary Fund warned of another eurozone recession unless more is done to stimulate economic growth there. Meanwhile, bond markets around the world have turned in positive performance as investors pursue yield where they can find it, and the risks of rising interest rates and central bank tightening have been pushed out further into the future.
In the absence of pronounced market dislocations, we believe investors are well served by sticking to a commonsense, diversified approach, one that includes a mix of equities, fixed-income, and alternative strategies that can offer added diversification potential. Although events like those taking place in Ukraine and the Middle East serve as reminders that all market environments carry risk, we believe the biggest risk investors face in today's market is not staying invested.
A new look
I am pleased to introduce you to our redesigned shareholder reports. As part of an effort to elevate the educational substance in our communications, we undertook an effort to make our reports more engaging and easier to navigate. Included in the changes are a performance snapshot that shows your fund's performance against that of its benchmark, and a Q&A with your fund's lead portfolio manager. We hope these enhancements give you better insight into your fund's activity and performance.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views as of September 30, 2014. They are subject to change at any time. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Strategic Growth Fund
1
INVESTMENT OBJECTIVE
The fund seeks long-term capital appreciation.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/14 (%)
See page 8 for more complete performance information.
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.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectuses.
2
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Certain sector strategies hampered performance
Stock selection in the consumer discretionary and healthcare sectors was a factor in the fund's relative underperformance.
Other strategies performed well
The fund benefited from stock selection in the information technology group.
Focus on making the fund less aggressive
During the period, we reduced the fund's risk profile by taking profits in some small-cap holdings and adding to larger, less-volatile positions.
PORTFOLIO COMPOSITION AS OF 9/30/14 (%)
A note about risks
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 on one sector may fluctuate more widely than investments diversified across sectors. Illiquid securities may be difficult to sell at a price approximating their value. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. Please see the fund's prospectuses for additional risks.
3
![](https://capedge.com/proxy/N-CSRS/0001145443-14-001428/wshannonreid.jpg)
W. Shannon Reid, CFA
Portfolio Manager
John Hancock Asset Management
The fund underperformed its benchmark, the Russell 1000 Growth Index. What factors caused this?
Based on our bottom-up investment approach, meaning that our investment decisions are made one stock at a time, rather than based on a top-down view of macroeconomic conditions, the fund was hurt by stock selection in the consumer discretionary and healthcare sectors, and by its overall positioning in consumer staples.
Can you discuss some of the individual stocks that were key detractors?
In the consumer discretionary sector, Las Vegas Sands Corp. posed particular challenges. This casino gaming company struggled in light of weaker-than-expected results in the Chinese territory of Macau, one of the world's most important gaming destinations. At period end, the fund continued to hold Las Vegas Sands because we still liked the outlook for this company in particular and Macau in general.
Another detractor in this sector was Tractor Supply Company, a retailer of farm products. Disappointing same-store sales and earnings growth weighed on the stock. Nevertheless, at period end we believe the recent sales shortfall is temporary and have retained the fund's position in the stock.
In consumer staples, natural foods retailer Whole Foods Market, Inc. hurt results. Whole Foods' struggles continued during the six months, as the company faced slowing profit growth and increased competition. Our concerns about weaker earnings and new business rivals led us to sell the fund's stake in this longtime holding in July.
In the healthcare sector, the fund was hurt relative to the benchmark both by poor-performing stocks it owned and outperforming benchmark components it either did not own or owned at inopportune times. As an example of these latter situations, the fund sold biotechnology company Gilead Sciences, Inc. in May based on our concerns about pricing of their Hepatitis C drug, Sovaldi. In subsequent months, however, Gilead's shares gained steadily, and in retrospect, it would have been helpful for the fund to have held this stock throughout the period.
4
Meanwhile, the fund did hold a position in Allscripts Healthcare Solutions Inc., a provider of information services for healthcare providers. When Allscripts failed to meet investors' projections for financial performance, the stock struggled in response. We continued to hold Allscripts in the fund at period end, however, as we thought the company's challenges would likely be temporary.
Other meaningful relative detractors for the six months included entertainment company AMC Networks, Inc. and Guidewire Software, Inc., both of which we sold from the fund during the period.
What holdings added to performance?
Despite some difficulty in the healthcare sector, the fund's top individual contributor, Celgene Corp., came from this group. The fund purchased this biotech stock at what we viewed as an attractive price, due to the market's concern about potential competition from a generic alternative to Revlimid, a specialized cancer treatment and Celgene's top-selling drug. A favorable legal outcome, however, gave investors more confidence in the strength of Celgene's patent protection, which provided a catalyst for the stock during the six months.
Within information technology, where the fund's stock picking was strongest, Facebook, Inc. did particularly well. The social networking leader continued to successfully execute its business strategy. This entailed increasing advertising revenue from mobile devices, a fast-growing market in
SECTOR COMPOSITION AS OF 9/30/14 (%)
5
which the company has a dominant share, and finding attractive new potential income streams, such as video.
Another strong performer in the information technology sector was Concur Technologies, Inc., a provider of corporate travel and expense-management software. The fund's timing was very good with this stock. We originally added Concur to the fund in July following a dip in its price. The fund subsequently benefited in September, when Concur agreed to be acquired by European software manufacturer SAP SE for a large premium. We sold the fund's stake in Concur shortly afterwards.
Another notable contributor was Anadarko Petroleum Corp., whose shares rose following a favorable legal settlement that lifted some uncertainty about the company's potential liability. We ultimately sold the fund's Anadarko stake, partly because the stock achieved our price target.
Other stocks adding meaningfully to performance on a relative basis were media company Time Warner Inc., biotechnology firm AbbVie, Inc., and Avago Technologies, Ltd., a maker of semiconductor devices.
TEN LARGEST HOLDINGS AS OF 9/30/14 (%)
Apple, Inc. | 7.0 |
Microsoft Corp. | 3.7 |
Facebook, Inc., Class A | 3.1 |
Google, Inc., Class C | 2.6 |
Google, Inc., Class A | 2.4 |
Amazon.com, Inc. | 2.4 |
Celgene Corp. | 2.4 |
Amgen, Inc. | 2.3 |
AbbVie, Inc. | 2.3 |
Biogen Idec, Inc. | 2.3 |
TOTAL | 30.5 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
6
What is your thinking on positioning the fund?
As the period progressed and the stock market advanced, we took steps to reduce exposure to some of the fund's higher-valuation, higher-volatility, smaller-cap investments. Some of these were in the information technology sector. For example, we decided to eliminate the fund's stake in Guidewire Software Inc. and FireEye, Inc.
Meanwhile, we increased the fund's exposure to more conservative, larger-cap stocks characterized by stronger free cash flow and balance sheets, establishing a new position in Cisco Systems, Inc., and also adding to holdings in Microsoft Corp., Apple, Inc., and Google, Inc. These increases more than offset the other technology sales we mentioned, and, overall, the fund's exposure to this group rose. Other sector-related changes included cutting the fund's allocation to more cyclical market segments, such as industrials, while adding exposure to healthcare.
It's worth emphasizing, however, that most of these shifts were relatively modest. They were designed to make the fund less aggressive given what we saw as a modestly riskier investment environment, particularly in light of economic weakness in Europe as well as in China and other emerging markets.
MANAGED BY
![]() | W. Shannon Reid, CFA On the fund since 2011 Investing since 1981 |
![]() | David M. Chow, CFA On the fund since 2011 Investing since 1992 |
![]() | Curtis Ifill, CFA On the fund since 2001 Investing since 1996 |
![]() | Jay Zelko On the fund since 2011 Investing since 1987 |
7
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2014
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||
1-year | Since inception1 | 6-month | 1-year | Since inception1 | |||
Class A | 10.22 | 18.27 | -0.83 | 10.22 | 59.73 | ||
Class I2 | 16.41 | 20.90 | 4.56 | 16.41 | 69.88 | ||
Class NAV2 | 16.65 | 21.10 | 4.69 | 16.65 | 70.64 | ||
Index† | 19.15 | 21.07 | 6.69 | 19.15 | 70.34 |
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 expense ratios are as follows:
Class A | Class I | Class NAV | |
Gross (%) | 1.51 | 2.63 | 0.74 |
Net (%) | 1.30 | 0.94 | 0.74 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses increase and results would have been less favorable.
† | Index is the Russell 1000 Growth Index. |
See the following page for footnotes.
8
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Strategic Growth Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in the Russell 1000 Growth Index.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index ($) | |
Class I2 | 12-19-11 | 16,988 | 16,988 | 17,034 |
Class NAV2 | 12-19-11 | 17,064 | 17,064 | 17,034 |
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. |
9
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 presenting 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 April 1, 2014, with the same investment held until September 30, 2014.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,043.90 | $6.66 | 1.30% |
Class C2 | 1,000.00 | 987.90 | 1.84 | 2.05% |
Class I | 1,000.00 | 1,045.60 | 4.82 | 0.94% |
Class NAV | 1,000.00 | 1,046.90 | 3.69 | 0.72% |
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 September 30, 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:
10
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 April 1, 2014, with the same investment held until September 30, 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.
Account value on 4-1-2014 | Ending value on 9-30-2014 | Expenses paid during period ended 9-30-20141 | Annualized expense ratio | |
Class A | $1,000.00 | $1,018.60 | $6.58 | 1.30% |
Class C | 1,000.00 | 1,014.80 | 10.35 | 2.05% |
Class I | 1,000.00 | 1,020.40 | 4.76 | 0.94% |
Class NAV | 1,000.00 | 1,021.50 | 3.65 | 0.72% |
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 183/365 (to reflect the one-half year period). |
2 | The inception date for Class C shares is 8-28-14. Expenses are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 33/365 (to reflect the period). |
11
Fund's investments
As of 9-30-14 (Unaudited) | ||||||||||||||
Shares | Value | |||||||||||||
Common Stocks 97.4% | $2,087,499,376 | |||||||||||||
(Cost $1,804,398,640) | ||||||||||||||
Consumer Discretionary 18.9% | 404,046,146 | |||||||||||||
Hotels, Restaurants & Leisure 2.4% | ||||||||||||||
Las Vegas Sands Corp. | 336,817 | 20,953,386 | ||||||||||||
Starbucks Corp. | 409,898 | 30,930,903 | ||||||||||||
Household Durables 0.7% | ||||||||||||||
Mohawk Industries, Inc. (I) | 107,733 | 14,524,563 | ||||||||||||
Internet & Catalog Retail 4.9% | ||||||||||||||
Amazon.com, Inc. (I) | 159,288 | 51,360,823 | ||||||||||||
The Priceline Group, Inc. (I) | 29,975 | 34,728,436 | ||||||||||||
TripAdvisor, Inc. (I) | 197,208 | 18,028,755 | ||||||||||||
Media 5.4% | ||||||||||||||
Comcast Corp., Class A | 872,340 | 46,914,445 | ||||||||||||
The Walt Disney Company | 468,241 | 41,687,496 | ||||||||||||
Time Warner, Inc. | 355,964 | 26,772,052 | ||||||||||||
Specialty Retail 5.5% | ||||||||||||||
Lowe's Companies, Inc. | 915,421 | 48,444,079 | ||||||||||||
The Home Depot, Inc. | 496,098 | 45,512,031 | ||||||||||||
Tractor Supply Company | 393,256 | 24,189,177 | ||||||||||||
Consumer Staples 4.3% | 91,521,544 | |||||||||||||
Food & Staples Retailing 1.5% | ||||||||||||||
Costco Wholesale Corp. | 259,603 | 32,533,448 | ||||||||||||
Tobacco 2.8% | ||||||||||||||
Altria Group, Inc. | 455,854 | 20,941,933 | ||||||||||||
Philip Morris International, Inc. | 456,189 | 38,046,163 | ||||||||||||
Energy 5.5% | 118,785,166 | |||||||||||||
Energy Equipment & Services 1.9% | ||||||||||||||
Halliburton Company | 255,120 | 16,457,791 | ||||||||||||
Schlumberger, Ltd. | 246,363 | 25,052,653 | ||||||||||||
Oil, Gas & Consumable Fuels 3.6% | ||||||||||||||
ConocoPhillips | 278,559 | 21,315,335 | ||||||||||||
Hess Corp. | 225,176 | 21,238,600 | ||||||||||||
Occidental Petroleum Corp. | 221,881 | 21,333,858 | ||||||||||||
Valero Energy Corp. | 289,322 | 13,386,929 | ||||||||||||
Financials 4.1% | 88,125,755 | |||||||||||||
Banks 2.5% | ||||||||||||||
Citigroup, Inc. | 497,141 | 25,761,847 | ||||||||||||
Signature Bank (I) | 250,479 | 28,068,677 |
Shares | Value | |||||||||||||
Financials (continued) | ||||||||||||||
Real Estate Investment Trusts 1.6% | ||||||||||||||
Crown Castle International Corp. | 425,869 | $34,295,231 | ||||||||||||
Health Care 19.8% | 424,430,336 | |||||||||||||
Biotechnology 9.9% | ||||||||||||||
Alexion Pharmaceuticals, Inc. (I) | 153,880 | 25,516,382 | ||||||||||||
Amgen, Inc. | 356,745 | 50,108,403 | ||||||||||||
Biogen Idec, Inc. (I) | 149,768 | 49,544,752 | ||||||||||||
Celgene Corp. (I) | 541,259 | 51,300,528 | ||||||||||||
Gilead Sciences, Inc. (I) | 328,881 | 35,009,382 | ||||||||||||
Health Care Providers & Services 1.5% | ||||||||||||||
AmerisourceBergen Corp. | 200,309 | 15,483,886 | ||||||||||||
Catamaran Corp. (I) | 431,117 | 18,171,582 | ||||||||||||
Health Care Technology 0.8% | ||||||||||||||
Allscripts Healthcare Solutions, Inc. (I) | 1,257,105 | 16,864,064 | ||||||||||||
Life Sciences Tools & Services 1.0% | ||||||||||||||
Thermo Fisher Scientific, Inc. | 175,559 | 21,365,530 | ||||||||||||
Pharmaceuticals 6.6% | ||||||||||||||
AbbVie, Inc. | 861,888 | 49,782,651 | ||||||||||||
Bristol-Myers Squibb Company | 776,612 | 39,747,002 | ||||||||||||
Johnson & Johnson | 216,604 | 23,087,820 | ||||||||||||
Mylan, Inc. (I) | 625,376 | 28,448,354 | ||||||||||||
Industrials 10.3% | 219,607,817 | |||||||||||||
Aerospace & Defense 2.1% | ||||||||||||||
The Boeing Company | 354,861 | 45,202,194 | ||||||||||||
Air Freight & Logistics 1.5% | ||||||||||||||
FedEx Corp. | 195,628 | 31,584,141 | ||||||||||||
Electrical Equipment 0.6% | ||||||||||||||
Eaton Corp. PLC | 206,658 | 13,095,917 | ||||||||||||
Machinery 2.6% | ||||||||||||||
Cummins, Inc. | 201,250 | 26,560,975 | ||||||||||||
Wabtec Corp. | 359,553 | 29,138,175 | ||||||||||||
Road & Rail 3.5% | ||||||||||||||
Kansas City Southern | 100,409 | 12,169,571 | ||||||||||||
Norfolk Southern Corp. | 286,864 | 32,014,022 | ||||||||||||
Union Pacific Corp. | 275,252 | 29,842,822 | ||||||||||||
Information Technology 31.0% | 665,002,279 | |||||||||||||
Communications Equipment 1.9% | ||||||||||||||
Cisco Systems, Inc. | 1,034,147 | 26,029,480 | ||||||||||||
QUALCOMM, Inc. | 194,354 | 14,531,849 |
Shares | Value | |||||||||||||
Information Technology (continued) | ||||||||||||||
Electronic Equipment, Instruments & Components 1.0% | ||||||||||||||
TE Connectivity, Ltd. | 370,776 | $20,500,205 | ||||||||||||
Internet Software & Services 9.2% | ||||||||||||||
Demandware, Inc. (I) | 196,140 | 9,987,449 | ||||||||||||
Facebook, Inc., Class A (I) | 853,274 | 67,442,777 | ||||||||||||
Google, Inc., Class A (I) | 88,731 | 52,210,208 | ||||||||||||
Google, Inc., Class C (I) | 96,535 | 55,735,448 | ||||||||||||
Twitter, Inc. (I) | 243,006 | 12,534,249 | ||||||||||||
IT Services 3.4% | ||||||||||||||
Alliance Data Systems Corp. (I) | 125,826 | 31,238,821 | ||||||||||||
Visa, Inc., Class A | 198,834 | 42,425,211 | ||||||||||||
Semiconductors & Semiconductor Equipment 1.0% | ||||||||||||||
Avago Technologies, Ltd. | 249,266 | 21,686,142 | ||||||||||||
Software 7.5% | ||||||||||||||
Microsoft Corp. | 1,697,062 | 78,675,794 | ||||||||||||
Oracle Corp. | 666,532 | 25,514,845 | ||||||||||||
ServiceNow, Inc. (I) | 219,006 | 12,873,173 | ||||||||||||
Tableau Software, Inc., Class A (I) | 214,670 | 15,595,776 | ||||||||||||
VMware, Inc., Class A (I) | 292,884 | 27,484,235 | ||||||||||||
Technology Hardware, Storage & Peripherals 7.0% | ||||||||||||||
Apple, Inc. | 1,494,160 | 150,536,617 | ||||||||||||
Materials 3.5% | 75,980,333 | |||||||||||||
Chemicals 2.4% | ||||||||||||||
PPG Industries, Inc. | 134,533 | 26,468,022 | ||||||||||||
The Sherwin-Williams Company | 114,653 | 25,107,860 | ||||||||||||
Metals & Mining 1.1% | ||||||||||||||
Nucor Corp. | 449,603 | 24,404,451 | ||||||||||||
Par value | Value | |||||||||||||
Short-Term Investments 0.7% | $14,802,000 | |||||||||||||
(Cost $14,802,000) | ||||||||||||||
Repurchase Agreement 0.7% | 14,802,000 | |||||||||||||
Repurchase Agreement with State Street Corp. dated 9-30-14 at 0.000% to be repurchased at $14,802,000 on 10-1-14, collateralized by $15,195,000 U.S. Treasury Notes, 1.250% due 10-31-18 (valued at $15,100,031, including interest) | $14,802,000 | 14,802,000 | ||||||||||||
Total investments (Cost $1,819,200,640)† 98.1% | $2,102,301,376 | |||||||||||||
Other assets and liabilities, net 1.9% | $40,074,422 | |||||||||||||
Total net assets 100.0% | $2,142,375,798 |
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. | |||
† | At 9-30-14, the aggregate cost of investment securities for federal income tax purposes was $1,820,889,271. Net unrealized appreciation aggregated $281,412,105, of which $305,991,386 related to appreciated investment securities and $24,579,281 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-14 (unaudited)
Assets | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers, at value (Cost $1,819,200,640) | $2,102,301,376 | |||||||||||||||||||||||||||||||||||||
Total investments, at value (Cost $1,819,200,640) | 2,102,301,376 | |||||||||||||||||||||||||||||||||||||
Cash | 18,989,284 | |||||||||||||||||||||||||||||||||||||
Receivable for investments sold | 57,425,081 | |||||||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 578 | |||||||||||||||||||||||||||||||||||||
Dividends and interest receivable | 1,868,289 | |||||||||||||||||||||||||||||||||||||
Receivable for securities lending income | 1,392 | |||||||||||||||||||||||||||||||||||||
Receivable due from advisor | 208 | |||||||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 41,874 | |||||||||||||||||||||||||||||||||||||
Total assets | 2,180,628,082 | |||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Payable for investments purchased | 26,489,843 | |||||||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 11,490,897 | |||||||||||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 99,065 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 2,837 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 2,369 | |||||||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 167,273 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 38,252,284 | |||||||||||||||||||||||||||||||||||||
Net assets | $2,142,375,798 | |||||||||||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||||||||||
Paid-in capital | $1,696,561,503 | |||||||||||||||||||||||||||||||||||||
Undistributed net investment income | 7,231,004 | |||||||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments | 155,482,555 | |||||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 283,100,736 | |||||||||||||||||||||||||||||||||||||
Net assets | $2,142,375,798 | |||||||||||||||||||||||||||||||||||||
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 ($11,247,173 ÷ 695,322 shares)1 | $16.18 | |||||||||||||||
Class C ($140,648 ÷ 8,632 shares) | $16.29 | |||||||||||||||
Class I ($2,223,506 ÷ 136,522 shares) | $16.29 | |||||||||||||||
Class NAV ($2,128,764,471 ÷ 130,507,490 shares) | $16.31 | |||||||||||||||
Maximum offering price per share | ||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $17.03 |
1 | Redemption price per share 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. |
STATEMENT OF OPERATIONS For the six months ended 9-30-14 (unaudited)
Investment income | ||||||||||||||||||||||||||||||||||||||
Dividends | $12,852,232 | |||||||||||||||||||||||||||||||||||||
Securities lending | 21,261 | |||||||||||||||||||||||||||||||||||||
Total investment income | 12,873,493 | |||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Investment management fees | 6,649,172 | |||||||||||||||||||||||||||||||||||||
Distribution and service fees | 16,164 | |||||||||||||||||||||||||||||||||||||
Accounting and legal services fees | 144,785 | |||||||||||||||||||||||||||||||||||||
Transfer agent fees | 8,138 | |||||||||||||||||||||||||||||||||||||
Trustees' fees | 10,133 | |||||||||||||||||||||||||||||||||||||
State registration fees | 19,138 | |||||||||||||||||||||||||||||||||||||
Printing and postage | 1,718 | |||||||||||||||||||||||||||||||||||||
Professional fees | 32,032 | |||||||||||||||||||||||||||||||||||||
Custodian fees | 129,468 | |||||||||||||||||||||||||||||||||||||
Registration and filing fees | 52,407 | |||||||||||||||||||||||||||||||||||||
Other | 14,836 | |||||||||||||||||||||||||||||||||||||
Total expenses | 7,077,991 | |||||||||||||||||||||||||||||||||||||
Less expense reductions | (79,535 | ) | ||||||||||||||||||||||||||||||||||||
Net expenses | 6,998,456 | |||||||||||||||||||||||||||||||||||||
Net investment income | 5,875,037 | |||||||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | 82,382,489 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | (517 | ) | ||||||||||||||||||||||||||||||||||||
82,381,972 | ||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||||||||||||||||
Investments in unaffiliated issuers | 1,838,015 | |||||||||||||||||||||||||||||||||||||
Investments in affiliated issuers | (892 | ) | ||||||||||||||||||||||||||||||||||||
1,837,123 | ||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain | 84,219,095 | |||||||||||||||||||||||||||||||||||||
Increase in net assets from operations | $90,094,132 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-14 | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | 3-31-14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $5,875,037 | $3,262,930 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 82,381,972 | 129,670,522 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | 1,837,123 | 169,983,842 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase in net assets resulting from operations | 90,094,132 | 302,917,294 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (2,416 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (5,281,030 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (287,371 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (38,354 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (49,131,097 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (54,740,268 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 588,396,082 | 196,795,714 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total increase | 678,490,214 | 444,972,740 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 1,463,885,584 | 1,018,912,844 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $2,142,375,798 | $1,463,885,584 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $7,231,004 | $1,355,967 |
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 | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.50 | $12.62 | $12.14 | $10.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | — | 4 | (0.04 | ) | 0.02 | (0.01 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.68 | 3.46 | 0.49 | 2.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.68 | 3.42 | 0.51 | 2.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | — | — | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.54 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.54 | ) | (0.03 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.18 | $15.50 | $12.62 | $12.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5,6 | 4.39 | 7 | 27.27 | 4.25 | 21.41 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $11 | $10 | $5 | $3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.35 | 8 | 1.51 | 2.01 | 2.05 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.30 | 8 | 1.30 | 1.30 | 1.30 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.03 | 8 | (0.29 | ) | 0.18 | (0.32 | ) 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 55 | 91 | 100 | 26 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | Period from 12-19-11 (commencement of operations) to 3-31-12. | |||||||||||||||||||||||||||||||
3 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||
4 | Less than $0.005 per share. | |||||||||||||||||||||||||||||||
5 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||
6 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | |||||||||||||||||||||||||||||||
7 | Not annualized. | |||||||||||||||||||||||||||||||
8 | Annualized. |
Class C Shares Period ended | 9-30-14 | 1 | |||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.49 | ||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.01 | ||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized loss on investments | (0.21 | ) | |||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.20 | ) | |||||||||||||||||||||||||||||||||||||||
From net investment income | — | ||||||||||||||||||||||||||||||||||||||||
Total distributions | — | ||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.29 | ||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | (1.21 | ) 4 | |||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 5 | |||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 16.88 | 6 | |||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 2.05 | 6 | |||||||||||||||||||||||||||||||||||||||
Net investment loss | 0.64 | 6 | |||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 55 | 7 |
1 | The inception date for Class C shares is 8-28-14. | ||||||||||||||
2 | Based on average daily shares outstanding. | ||||||||||||||
3 | Total returns would have been lower had certain expenses not been reduced during the period. | ||||||||||||||
4 | Not annualized. | ||||||||||||||
5 | Less than $500,000. | ||||||||||||||
6 | Annualized. | ||||||||||||||
7 | The portfolio turnover is shown for the period from 4-1-14 to 9-30-14. |
Class I Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.58 | $12.67 | $12.16 | $10.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.03 | 0.01 | 0.06 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.68 | 3.47 | 0.50 | 2.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.71 | 3.48 | 0.56 | 2.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.02 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.54 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.57 | ) | (0.05 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.29 | $15.58 | $12.67 | $12.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 4.56 | 6 | 27.68 | 4.62 | 21.63 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $2 | $2 | $1 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.67 | 8 | 2.62 | 5.88 | 11.44 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.94 | 8 | 0.94 | 0.94 | 0.94 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.39 | 8 | 0.09 | 0.51 | 0.14 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 55 | 91 | 100 | 26 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | Period from 12-19-11 (commencement of operations) to 3-31-12. | |||||||||||||||||||||||||||||||
3 | Based on 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. |
Class NAV Shares Period ended | 9-30-14 | 1 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.58 | $12.67 | $12.16 | $10.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.05 | 0.04 | 0.08 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain on investments | 0.68 | 3.47 | 0.50 | 2.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.73 | 3.51 | 0.58 | 2.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.06 | ) | (0.04 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.54 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.60 | ) | (0.07 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.31 | $15.58 | $12.67 | $12.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 4.69 | 6 | 27.88 | 4.80 | 21.63 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $2,129 | $1,452 | $1,013 | $336 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.73 | 7 | 0.74 | 0.78 | 0.85 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.72 | 7 | 0.73 | 0.78 | 0.85 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.61 | 7 | 0.26 | 0.71 | 0.15 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 55 | 91 | 100 | 26 |
1 | Six months ended 9-30-14. Unaudited. | |||||||||||||||||||||||||||||||
2 | Period from 12-19-11 (commencement of operations) to 3-31-12. | |||||||||||||||||||||||||||||||
3 | Based on 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 | Annualized. |
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 and Class C 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, state registration fees and printing and postage 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 (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund intends to qualify as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
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 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 September 30, 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 received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
24
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.
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 fund, which has a floating net asset value 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 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.
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 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 six months ended September 30, 2014 were $442. For the six months ended September 30, 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
25
equitable manner, taking into consideration, among other things, the nature and type of expense and the fund's relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
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.
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.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
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) serves as investment advisor for the fund. 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 million of the fund's average daily net assets; (b) 0.700% of the next $500 million of the funds average daily net assets; (c) 0.675% of the next $500 million of the funds average daily net assets; and (d) 0.650% of the fund's average daily net assets in excess of $1.5 billion. 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.
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
26
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 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%, 2.05% and 0.94% for Class A, Class C 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. The current expense limitation agreement expires on June 30, 2015 for Class A and Class I shares, and June 30, 2016 for Class C shares, unless renewed by the 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 $2,858, $1,361, $7,810 and $67,506 for Class A, Class C, Class I and Class NAV shares, respectively, for the six months ended September 30, 2014.
The investment management fees incurred for the six months ended September 30, 2014 were equivalent to a net annual effective rate of 0.68% 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 six months ended September 30, 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 shares, pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. The fund may pay up to the following contractual rates of distribution and service fees under the arrangements, expressed as an annual percentage of average daily net assets for each class of the fund's shares.
Class | Rule 12b-1 Fee |
Class A | 0.30% |
Class C | 1.00% |
Sales Charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $15,593 for the six months ended September 30, 2014. Of this amount, $2,489 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $12,901 was paid as sales commissions to broker-dealers and $203 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. Certain 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 six months ended September 30, 2014, there were no CDSCs received by the Distributor for Class A and Class C shares.
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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.
Class Level Expenses. Class level expenses for the six months ended September 30, 2014 were:
Share class | Distribution and service fees | Transfer agent fees | State registration fees | Printing and postage |
Class A | $16,072 | $6,863 | $9,322 | $1,318 |
Class C | 92 | 12 | 1,375 | 3 |
Class I | — | 1,263 | 8,441 | 397 |
Total | $16,164 | $8,138 | $19,138 | $1,718 |
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 group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2014 and for the year ended March 31, 2014 were as follows:
Six months ended 9-30-14 | Year ended 3-31-14 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 104,928 | $1,649,017 | 294,034 | $4,371,215 | ||||||||||||||||||||||
Distributions reinvested | — | — | 12,334 | 184,513 | ||||||||||||||||||||||
Repurchased | (59,597 | ) | (933,873 | ) | (52,908 | ) | (762,600 | ) | ||||||||||||||||||
Net increase | 45,331 | $715,144 | 253,460 | $3,793,128 | ||||||||||||||||||||||
Class C shares1 | ||||||||||||||||||||||||||
Sold | 8,632 | $142,000 | — | — | ||||||||||||||||||||||
Net increase | 8,632 | $142,000 | — | — | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 6,759 | $107,000 | 69,453 | $1,090,446 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,331 | 35,016 | ||||||||||||||||||||||
Repurchased | (1,733 | ) | (27,452 | ) | (3,167 | ) | (45,530 | ) | ||||||||||||||||||
Net increase | 5,026 | $79,548 | 68,617 | $1,079,932 | ||||||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 43,537,763 | $688,770,798 | 18,773,217 | $272,807,361 | ||||||||||||||||||||||
Distributions reinvested | — | — | 3,625,058 | 54,412,127 | ||||||||||||||||||||||
Repurchased | (6,191,020 | ) | (101,311,408 | ) | (9,225,312 | ) | (135,296,834 | ) | ||||||||||||||||||
Net increase | 37,346,743 | $587,459,390 | 13,172,963 | $191,922,654 | ||||||||||||||||||||||
Total net increase | 37,405,732 | $588,396,082 | 13,495,040 | $196,795,714 |
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1 The inception date for Class C shares is 8-28-14.
Affiliates of the fund owned 27%, 70%, 7% and 100% of shares of beneficial interest of Class A, Class C, Class I and Class NAV shares, respectively, on September 30, 2014.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, amounted to $1,591,712,535 and $1,026,818,438 respectively, for the six months ended September 30, 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 September 30, 2014, funds within the John Hancock group of funds complex held 99.4% of the fund's net assets. The following funds had an affiliate ownership of 5% or more of the fund's net assets:
Fund | Affiliated Concentration |
Lifestyle Growth Fund | 28.3% |
Lifestyle Balanced Fund | 20.8% |
Lifestyle Growth MVP | 16.8% |
Lifestyle Aggressive Fund | 10.7% |
Lifestyle Balanced MVP | 8.4% |
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Continuation of investment advisory and subadvisory agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Funds III (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (US) LLC (the Subadvisor), for John Hancock Strategic Growth Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-25, 2014 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 27-29, 2014.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 23-25, 2014, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
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Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the complex.
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that the fund outperformed its benchmark index and its peer group average for the one-year period ended December 31, 2013. The Board noted the fund's favorable performance relative to the benchmark index and the peer group.
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The Board concluded that the fund's performance has outperformed the historical performance of comparable funds and the fund's benchmark.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees and total expenses for the fund are lower than the peer group median. The Board noted that the fund is subject to an expense cap until June 2015, which reduces certain expenses of the fund.
The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had agreed, effective July 1, 2014, to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock fund complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability analysis reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |||||||
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |||||||
(h) | noted that the fund's Subadvisor is an affiliate of the Advisor; | |||||||
(i) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |||||||
(j) | noted that the subadvisory fee for the fund is paid by the Advisor; and |
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(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has agreed, effective July 1, 2014, to waive a portion of its management fee for the fund and each of the other John Hancock funds in the complex (except for those discussed below) (the Participating Portfolios) or otherwise reimburse the expenses of the Participating Portfolios as follows (the Reimbursement): | ||
The Reimbursement shall equal, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceed $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 exceed $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 funds that are not Participating Portfolios are the funds of funds in the complex, which benefit from such overall management fee waiver through their investment in underlying portfolios that include Participating Portfolios, which are subject to the Reimbursement.) | |||
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | ||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock family of funds); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory
33
history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also considered any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock fund complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the fund has outperformed the historical performance of comparable funds and the fund's benchmark; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory
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35
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor Subadvisor Principal distributor Custodian Transfer agent Legal counsel |
*Member of the Audit Committee
†Non-Independent Trustee
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 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
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Family of funds
DOMESTIC EQUITY FUNDS Balanced Classic Value Disciplined Value Disciplined Value Mid Cap Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Large Cap Equity Select Growth Small Cap Equity Small Cap Value Small Company Strategic Growth U.S. Equity U.S. Global Leaders Growth Value Equity GLOBAL/INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Global Equity Global Opportunities Global Shareholder Yield Greater China Opportunities International Core International Growth International Growth Equity International Small Company International Value Equity INCOME FUNDS Bond California Tax-Free Income Core High Yield Emerging Markets Debt Floating Rate Income Focused High Yield Global Income Government Income High Yield Municipal Bond Income Income Allocation | INCOME FUNDS (continued) Investment Grade Bond Massachusetts Tax-Free Income Money Market New York Tax-Free Income Short Duration Credit Opportunities Strategic Income Opportunities Tax-Free Bond ALTERNATIVE/SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Equity Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Natural Resources Redwood Regional Bank Seaport Technical Opportunities ASSET ALLOCATION PORTFOLIOS Lifestyle Aggressive Lifestyle Balanced Lifestyle Conservative Lifestyle Growth Lifestyle Moderate Retirement Choices (2010-2055) Retirement Living (2010-2055) Retirement Living II (2010-2055) CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield Fund |
The fund's investment objective, risks, charges, and expenses are included in the prospectuses and should be considered carefully before investing. For a prospectus, call your financial professional, call John Hancock Investments at 800-225-5291, or visit the fund's website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
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John Hancock Investments
A trusted brand
John Hancock has helped individuals and institutions build and protect wealth since 1862. Today, we are one of America's strongest and most-recognized brands.
A better way to invest
As a manager of managers, we search the world to find proven portfolio teams with specialized expertise for every fund we offer, then apply vigorous investment oversight to ensure they continue to meet our uncompromising standards.
Results for investors
Our unique approach to asset management has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjusted returns across asset classes.
![]() | John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
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. | ||
MF202369 | 393SA 09/14 11/14 |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
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.
(a) 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 and Governance Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in this Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Such disclosure and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Within 90 days prior to the filing date of this Form N-CSR, the registrant had carried out an evaluation, under the supervision and with the participation of the registrant’s management, including the registrant’s principal executive officer and the registrant’s principal financial officer, of the effectiveness of the design and operation of the registrant’s disclosure controls and
procedures relating to information required to be disclosed on Form N-CSR. Based on such evaluation, the registrant’s principal executive officer and principal financial officer concluded that the registrant’s disclosure controls and procedures are operating effectively to ensure that:
(i) information required to be disclosed in this Form N-CSR is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission, and
(ii) information is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) CHANGE IN REGISTRANT’S INTERNAL CONTROL: Not applicable.
ITEM 12. EXHIBITS.
(a)(1)(i) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER.
(a)(1)(ii) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER.
(b) CERTIFICATION PURSUANT TO Rule 30a-2(b) OF THE INVESTMENT COMPANY ACT OF 1940.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating and Governance Committee Charter”.
(c)(2) Contact person at the registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Funds III | |
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By: | /s/ Andrew Arnott |
| Andrew Arnott |
| President |
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Date: | November 12, 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 |
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Date: | November 12, 2014 |
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By: | /s/ Charles A. Rizzo |
| Charles A. Rizzo |
| Chief Financial Officer |
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Date: | November 12, 2014 |