UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21777
John Hancock Funds III
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Salvatore Schiavone
Treasurer
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4497
Date of fiscal year end: | March 31 |
Date of reporting period: | September 30, 2016 |
ITEM 1. REPORT TO SHAREHOLDERS.
John Hancock
Disciplined Value Fund
Semiannual report 9/30/16
A message to shareholders
Dear shareholder,
The past six months were generally positive for U.S. equities, particularly for small-capitalization stocks. Major indexes reached all-time highs this summer, elevated by a mix of low interest rates globally, continued strong earnings here in the United States, and relatively little trading volume.
Although economic growth remains more sluggish than many would like, consumer spending and employment gains have been supportive of the continued stock market advance. Even household incomes have begun to rise in earnest. As stocks notched new highs in July and August, market volatility was surprisingly muted. Choppy markets returned in September, however, as investors speculated when the U.S. Federal Reserve (Fed) would make its next rate increase. The recent U.S. presidential election also affected the markets.
It's prudent to expect that volatility will pick up in the coming months. Indeed, this summer's market milestones have been greeted with more angst than optimism on the part of investors. Lofty stock valuations in the United States have been on investors' minds, coupled with the potential for additional interest-rate increases by the Fed, which are widely expected given the health of the underlying economy. Should markets encounter tougher going this fall, one of your best resources is your financial advisor, who can help ensure your portfolio is sufficiently diversified to meet your long-term objectives and to withstand the inevitable bumps along the way.
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, 2016. They are subject to change at any time. All investments entail risks, including the possible loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Disciplined Value Fund
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 9/30/16 (%)
The 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. Index figures do not reflect expenses or sales charges, which would result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
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 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 shares that have been recalculated to reflect the gross fees and expenses of Class A shares. |
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. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end 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 prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Market shrugs off signs of global stress
Despite spurts of global market volatility during the period, equities continued to advance.
The fund was up, but trailed its benchmark
The fund was outpaced by its benchmark, the Russell 1000 Value Index, due to adverse stock selection.
Stock selection in healthcare, industrials, and energy detracted
The healthcare, industrials, and energy sectors were the top relative detractors; the utilities and information technology sectors were the biggest contributors.
SECTOR COMPOSITION AS OF 9/30/16 (%)
A note about risks
Value stocks may decline in price. Large company stocks could fall out of favor. The value of a company's equity securities is subject to changes in the company's financial condition and overall market and economic conditions. Events in the financial markets have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. Foreign investing has additional risks, such as currency and market volatility and political and social instability. Sector investing is subject to greater risks than the market as a whole. Because the fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors, and investments focused in one sector may fluctuate more widely than investments in a wider variety of sectors. Liquidity—the extent (if at all) to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. Please see the fund's prospectus for additional risks.
![markedonovan.jpg](https://capedge.com/proxy/N-CSRS/0001145443-16-002320/markedonovan.jpg)
Mark E. Donovan, CFA
Portfolio Manager
Boston Partners
Can you describe the market environment over the six months ended September 30, 2016?
U.S. equities advanced for the period, despite a lengthy list of challenges that included high valuations for stocks and concern about rising interest rates. Aside from the recovery in the energy sector, as oil prices have risen from their cycle lows in February, this period's major themes have been investors' flight to yield and low volatility.
In addition, news of the U.K.'s referendum vote to withdraw from the European Union briefly sent shock waves through the markets in the middle of the period before stocks stabilized and regained much of what they lost only days later. As a result, the market initially paid robustly for perceived safety, especially seeking yield in real estate investment trusts (REITs), utilities, and consumer discretionary, before those stocks became expensive, and then sold off in the latter part of the period. In this environment, the fund's benchmark, the Russell 1000 Value Index, was up 8.22%.
What factors caused the fund to underperform its benchmark?
Stock selection primarily drove relative underperformance. The healthcare and industrials sectors were the most significant detractors from relative returns, primarily driven by adverse security selection. The energy and consumer discretionary sectors also detracted from relative returns due to adverse selection in energy and an overweight allocation in consumer discretionary.
Relative to the benchmark, the top individual detractors were Delta Air Lines, Inc. and Gilead Sciences, Inc. Delta dipped as fuel price concerns drove the stock lower. Biotech Gilead Sciences fell
What performed well?
An underweight in utilities and overweight in information technology contributed to relative returns. One of the top individual contributors was gold miner Barrick Gold Corp. Stock selection in the information technology sector also contributed; and solid earnings reports from eBay, Inc., Computer Sciences Corp., and Hewlett Packard Enterprise Company were constructive. In financials, shares of JPMorgan Chase & Co., Discover Financial Services, and Citigroup, Inc. gained.
What were some notable additions and deletions to the portfolio?
During the period, key purchases included Chevron Corp., Marathon Oil Corp., Coca Cola European
TOP 10 HOLDINGS AS OF 9/30/16 (%)
Johnson & Johnson | 4.5 |
JPMorgan Chase & Co. | 4.2 |
Berkshire Hathaway, Inc., Class B | 3.6 |
Bank of America Corp. | 2.7 |
Merck & Company, Inc. | 2.6 |
Chevron Corp. | 2.6 |
Discover Financial Services | 2.1 |
Raytheon Company | 2.0 |
McKesson Corp. | 1.9 |
General Dynamics Corp. | 1.8 |
TOTAL | 28.0 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
Recent sales include Target Corp. (as previously mentioned), Anthem, Inc., The Travelers Companies, Inc., Liberty Media Corp. and Wells Fargo & Company.
How was the portfolio positioned at the end of the period?
We continue to favor healthcare, information technology, and materials given that these are stable industries with solid free cash flow. The fund continued to be underweight in consumer staples, REITs, and utilities.
While we are certainly not calling an inflection point, we are clearly seeing indications that other
COUNTRY COMPOSITION AS OF 9/30/16 (%)
United States | 89.6 |
Switzerland | 3.2 |
United Kingdom | 2.7 |
Canada | 2.0 |
France | 0.9 |
Ireland | 0.9 |
Netherlands | 0.7 |
TOTAL | 100.0 |
As a percentage of net assets. |
investors are beginning to share some of our concerns about these sectors where the fund is underweight, as they are still too expensive on both relative and historical levels. While we view broad equities as fairly valued, we continue to find select opportunities. The fund's valuation edge and quality advantage over the benchmark will remain our focus as we position it for the long term.
MANAGED BY
![]() | Mark E. Donovan, CFA On the fund since inception Investing since 1981 |
![]() | David J. Pyle, CFA On the fund since 2000 Investing since 1995 |
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2016
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 | 5-year | 10-year | Since inception | ||
Class A1 | 4.48 | 14.00 | 6.12 | — | 0.44 | 92.57 | 81.09 | — | |
Class B1 | 4.16 | 14.00 | 5.72 | — | 0.35 | 92.56 | 74.37 | — | |
Class C1 | 8.13 | 14.30 | 5.75 | — | 4.33 | 95.11 | 74.87 | — | |
Class I1,2 | 10.26 | 15.51 | 7.01 | — | 5.83 | 105.65 | 96.81 | — | |
Class I21,2 | 10.26 | 15.51 | 6.95 | — | 5.83 | 105.62 | 95.75 | — | |
Class R11,2 | 9.54 | 14.69 | 6.24 | — | 5.49 | 98.44 | 83.18 | — | |
Class R21,2 | 9.82 | 15.00 | 6.44 | — | 5.66 | 101.12 | 86.67 | — | |
Class R31,2 | 9.66 | 14.80 | 6.35 | — | 5.55 | 99.38 | 85.07 | — | |
Class R41,2 | 10.15 | 15.30 | 6.73 | — | 5.83 | 103.78 | 91.84 | — | |
Class R51,2 | 10.30 | 15.58 | 7.03 | — | 5.89 | 106.23 | 97.23 | — | |
Class R61,2 | 10.38 | 15.61 | 7.06 | — | 5.95 | 106.52 | 97.90 | — | |
Class NAV2,3 | 10.44 | 15.65 | — | 13.71 | 5.94 | 106.88 | — | 156.83 | |
Index 1† | 16.20 | 16.15 | 5.85 | — | 8.22 | 111.40 | 76.62 | — | |
Index 2† | 15.43 | 16.37 | 7.24 | — | 6.40 | 113.44 | 101.14 | — |
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%, and 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 (%) | 1.08 | 1.83 | 1.83 | 0.81 | 0.81 | 1.47 | 1.22 | 1.37 | 1.07 | 0.77 | 0.72 | 0.70 |
Net (%) | 1.08 | 1.83 | 1.83 | 0.81 | 0.81 | 1.47 | 1.22 | 1.37 | 0.97 | 0.77 | 0.70 | 0.70 |
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 and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index 1 is the Russell 1000 Value Index; Index 2 is the S&P 500 Index. |
See the following page for footnotes.
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 | 9-30-06 | 17,437 | 17,437 | 17,662 | 20,114 |
Class C1,4 | 9-30-06 | 17,487 | 17,487 | 17,662 | 20,114 |
Class I1,2 | 9-30-06 | 19,681 | 19,681 | 17,662 | 20,114 |
Class I21,2 | 9-30-06 | 19,575 | 19,575 | 17,662 | 20,114 |
Class R11,2 | 9-30-06 | 18,318 | 18,318 | 17,662 | 20,114 |
Class R21,2 | 9-30-06 | 18,667 | 18,667 | 17,662 | 20,114 |
Class R31,2 | 9-30-06 | 18,507 | 18,507 | 17,662 | 20,114 |
Class R41,2 | 9-30-06 | 19,184 | 19,184 | 17,662 | 20,114 |
Class R51,2 | 9-30-06 | 19,723 | 19,723 | 17,662 | 20,114 |
Class R61,2 | 9-30-06 | 19,790 | 19,790 | 17,662 | 20,114 |
Class NAV2 | 5-29-09 | 25,683 | 25,683 | 17,662 | 20,114 |
The 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.
The 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 result in lower returns.
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 R1 shares were first offered on 7-13-09; Class R2 shares were first offered on 3-1-12; Class R3, Class R4, and Class R5 shares were first offered on 5-22-09; Class R6 shares were first offered on 9-1-11. 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 R1, Class R2, Class R3, Class R4, Class R5, and Class R6 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. |
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, 2016, with the same investment held until September 30, 2016.
Account value on 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,057.30 | $5.52 | 1.07% |
Class B | 1,000.00 | 1,053.50 | 9.37 | 1.82% |
Class C | 1,000.00 | 1,053.30 | 9.37 | 1.82% |
Class I | 1,000.00 | 1,058.30 | 4.18 | 0.81% |
Class I2 | 1,000.00 | 1,058.30 | 4.13 | 0.80% |
Class R1 | 1,000.00 | 1,054.90 | 7.52 | 1.46% |
Class R2 | 1,000.00 | 1,056.60 | 6.24 | 1.21% |
Class R3 | 1,000.00 | 1,055.50 | 6.96 | 1.35% |
Class R4 | 1,000.00 | 1,058.30 | 4.95 | 0.96% |
Class R5 | 1,000.00 | 1,058.90 | 3.92 | 0.76% |
Class R6 | 1,000.00 | 1,059.50 | 3.61 | 0.70% |
Class NAV | 1,000.00 | 1,059.40 | 3.56 | 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, 2016, 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:
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, 2016, with the same investment held until September 30, 2016. 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 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.70 | $5.42 | 1.07% |
Class B | 1,000.00 | 1,015.90 | 9.20 | 1.82% |
Class C | 1,000.00 | 1,015.90 | 9.20 | 1.82% |
Class I | 1,000.00 | 1,021.00 | 4.10 | 0.81% |
Class I2 | 1,000.00 | 1,021.10 | 4.05 | 0.80% |
Class R1 | 1,000.00 | 1,017.70 | 7.38 | 1.46% |
Class R2 | 1,000.00 | 1,019.00 | 6.12 | 1.21% |
Class R3 | 1,000.00 | 1,018.30 | 6.83 | 1.35% |
Class R4 | 1,000.00 | 1,020.30 | 4.86 | 0.96% |
Class R5 | 1,000.00 | 1,021.30 | 3.85 | 0.76% |
Class R6 | 1,000.00 | 1,021.60 | 3.55 | 0.70% |
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). |
Fund's investments
As of 9-30-16 (unaudited) | ||||||||||||||
Shares | Value | |||||||||||||
Common stocks 97.1% | $12,807,857,480 | |||||||||||||
(Cost $11,460,553,024) | ||||||||||||||
Consumer discretionary 7.7% | 1,017,320,987 | |||||||||||||
Hotels, restaurants and leisure 0.3% | ||||||||||||||
Six Flags Entertainment Corp. | 823,557 | 44,150,891 | ||||||||||||
Household durables 1.7% | ||||||||||||||
DR Horton, Inc. | 2,559,220 | 77,288,444 | ||||||||||||
PulteGroup, Inc. | 7,359,870 | 147,491,795 | ||||||||||||
Media 5.2% | ||||||||||||||
CBS Corp., Class B | 2,018,573 | 110,496,686 | ||||||||||||
Comcast Corp., Class A | 1,916,586 | 127,146,315 | ||||||||||||
Liberty Global PLC LiLAC, Series C (I) | 2,085,778 | 58,506,073 | ||||||||||||
Liberty Global PLC, Series C (I) | 3,685,664 | 121,774,339 | ||||||||||||
Omnicom Group, Inc. | 463,823 | 39,424,955 | ||||||||||||
The Interpublic Group of Companies, Inc. | 3,043,059 | 68,012,369 | ||||||||||||
Time Warner, Inc. | 2,070,484 | 164,831,231 | ||||||||||||
Specialty retail 0.5% | ||||||||||||||
Best Buy Company, Inc. | 1,524,303 | 58,197,889 | ||||||||||||
Consumer staples 2.7% | 362,296,493 | |||||||||||||
Beverages 0.5% | ||||||||||||||
Coca-Cola European Partners PLC | 1,737,692 | 69,333,911 | ||||||||||||
Food and staples retailing 1.4% | ||||||||||||||
CVS Health Corp. | 1,058,579 | 94,202,942 | ||||||||||||
Walgreens Boots Alliance, Inc. | 1,163,517 | 93,802,741 | ||||||||||||
Food products 0.8% | ||||||||||||||
Tyson Foods, Inc., Class A | 1,405,610 | 104,956,899 | ||||||||||||
Energy 12.2% | 1,609,605,441 | |||||||||||||
Oil, gas and consumable fuels 12.2% | ||||||||||||||
Canadian Natural Resources, Ltd. | 4,402,298 | 141,049,628 | ||||||||||||
Chevron Corp. | 3,290,949 | 338,704,471 | ||||||||||||
Diamondback Energy, Inc. (I) | 1,713,936 | 165,463,381 | ||||||||||||
Energen Corp. | 1,235,845 | 71,332,973 | ||||||||||||
EOG Resources, Inc. | 1,317,523 | 127,417,649 | ||||||||||||
EQT Corp. | 1,205,908 | 87,573,039 | ||||||||||||
Gulfport Energy Corp. (I) | 2,068,930 | 58,447,273 | ||||||||||||
Marathon Oil Corp. | 7,748,104 | 122,497,524 | ||||||||||||
Marathon Petroleum Corp. | 1,752,595 | 71,137,831 | ||||||||||||
Newfield Exploration Company (I) | 1,214,637 | 52,788,124 | ||||||||||||
Occidental Petroleum Corp. | 2,464,946 | 179,743,862 | ||||||||||||
Phillips 66 | 2,401,610 | 193,449,686 |
Shares | Value | |||||||||||||
Financials 22.3% | $2,940,616,458 | |||||||||||||
Banks 9.9% | ||||||||||||||
Bank of America Corp. | 23,084,201 | 361,267,746 | ||||||||||||
BB&T Corp. | 2,449,136 | 92,381,410 | ||||||||||||
Citigroup, Inc. | 4,656,543 | 219,928,526 | ||||||||||||
Fifth Third Bancorp | 3,917,171 | 80,145,319 | ||||||||||||
JPMorgan Chase & Co. | 8,324,658 | 554,338,976 | ||||||||||||
Consumer finance 4.5% | ||||||||||||||
Ally Financial, Inc. | 8,060,889 | 156,945,509 | ||||||||||||
Capital One Financial Corp. | 1,233,370 | 88,592,967 | ||||||||||||
Discover Financial Services | 4,809,039 | 271,951,155 | ||||||||||||
Navient Corp. | 4,964,934 | 71,842,595 | ||||||||||||
Diversified financial services 3.6% | ||||||||||||||
Berkshire Hathaway, Inc., Class B (I) | 3,260,396 | 471,029,410 | ||||||||||||
Insurance 4.3% | ||||||||||||||
Aon PLC | 962,264 | 108,245,077 | ||||||||||||
Chubb, Ltd. | 1,694,201 | 212,876,356 | ||||||||||||
MetLife, Inc. | 2,528,610 | 112,346,142 | ||||||||||||
The Allstate Corp. | 2,005,280 | 138,725,270 | ||||||||||||
Health care 15.7% | 2,074,015,510 | |||||||||||||
Biotechnology 1.8% | ||||||||||||||
Gilead Sciences, Inc. | 2,996,806 | 237,107,291 | ||||||||||||
Health care providers and services 5.9% | ||||||||||||||
Cigna Corp. | 1,084,101 | 141,280,042 | ||||||||||||
Express Scripts Holding Company (I) | 2,227,886 | 157,132,800 | ||||||||||||
Laboratory Corp. of America Holdings (I) | 505,662 | 69,518,412 | ||||||||||||
McKesson Corp. | 1,471,381 | 245,352,782 | ||||||||||||
UnitedHealth Group, Inc. | 1,151,660 | 161,232,400 | ||||||||||||
Pharmaceuticals 8.0% | ||||||||||||||
Johnson & Johnson | 5,008,529 | 591,657,531 | ||||||||||||
Merck & Company, Inc. | 5,595,002 | 349,184,075 | ||||||||||||
Sanofi, ADR | 3,182,775 | 121,550,177 | ||||||||||||
Industrials 10.8% | 1,421,434,296 | |||||||||||||
Aerospace and defense 6.5% | ||||||||||||||
General Dynamics Corp. | 1,569,373 | 243,503,915 | ||||||||||||
Lockheed Martin Corp. | 397,292 | 95,238,838 | ||||||||||||
Raytheon Company | 1,927,290 | 262,361,988 | ||||||||||||
Textron, Inc. | 2,159,295 | 85,831,976 | ||||||||||||
United Technologies Corp. | 1,726,010 | 175,362,616 | ||||||||||||
Air freight and logistics 0.7% | ||||||||||||||
United Parcel Service, Inc., Class B | 841,682 | 92,046,344 |
Shares | Value | |||||||||||||
Industrials (continued) | ||||||||||||||
Airlines 1.5% | ||||||||||||||
Delta Air Lines, Inc. | 3,563,008 | $140,239,995 | ||||||||||||
United Continental Holdings, Inc. (I) | 1,164,498 | 61,101,210 | ||||||||||||
Construction and engineering 0.6% | ||||||||||||||
Jacobs Engineering Group, Inc. (I) | 1,401,343 | 72,477,460 | ||||||||||||
Industrial conglomerates 1.5% | ||||||||||||||
Honeywell International, Inc. | 843,282 | 98,318,248 | ||||||||||||
Koninklijke Philips NV - NY Shares | 3,208,912 | 94,951,706 | ||||||||||||
Information technology 15.3% | 2,023,023,515 | |||||||||||||
Communications equipment 1.4% | ||||||||||||||
Brocade Communications Systems, Inc. | 4,015,170 | 37,060,019 | ||||||||||||
Harris Corp. | 1,651,438 | 151,288,235 | ||||||||||||
Electronic equipment, instruments and components 2.7% | ||||||||||||||
Flextronics International, Ltd. (I) | 9,910,343 | 134,978,872 | ||||||||||||
TE Connectivity, Ltd. | 3,325,571 | 214,100,261 | ||||||||||||
Internet software and services 3.1% | ||||||||||||||
Alphabet, Inc., Class A (I) | 290,393 | 233,493,396 | ||||||||||||
eBay, Inc. (I) | 5,458,935 | 179,598,962 | ||||||||||||
IT services 1.8% | ||||||||||||||
Computer Sciences Corp. | 3,297,925 | 172,184,664 | ||||||||||||
Leidos Holdings, Inc. | 1,580,965 | 68,424,165 | ||||||||||||
Semiconductors and semiconductor equipment 1.3% | ||||||||||||||
Texas Instruments, Inc. | 2,504,983 | 175,799,707 | ||||||||||||
Software 2.6% | ||||||||||||||
Microsoft Corp. | 2,563,102 | 147,634,675 | ||||||||||||
Oracle Corp. | 4,838,472 | 190,055,180 | ||||||||||||
Technology hardware, storage and peripherals 2.4% | ||||||||||||||
Apple, Inc. | 1,384,116 | 156,474,314 | ||||||||||||
Hewlett Packard Enterprise Company | 7,117,849 | 161,931,065 | ||||||||||||
Materials 7.2% | 944,187,896 | |||||||||||||
Chemicals 3.5% | ||||||||||||||
LyondellBasell Industries NV, Class A | 1,323,386 | 106,744,315 | ||||||||||||
Methanex Corp. | 1,332,410 | 47,540,389 | ||||||||||||
PPG Industries, Inc. | 890,120 | 92,002,803 | ||||||||||||
The Dow Chemical Company | 4,204,900 | 217,939,967 | ||||||||||||
Construction materials 0.8% | ||||||||||||||
CRH PLC, ADR | 3,341,317 | 111,165,617 | ||||||||||||
Containers and packaging 1.2% | ||||||||||||||
Sealed Air Corp. | 1,520,344 | 69,662,162 | ||||||||||||
WestRock Company | 1,681,940 | 81,540,451 |
Shares | Value | |||||||||||||
Materials (continued) | ||||||||||||||
Metals and mining 1.7% | ||||||||||||||
Barrick Gold Corp. | 4,178,774 | $74,047,875 | ||||||||||||
Nucor Corp. | 1,625,562 | 80,384,041 | ||||||||||||
Steel Dynamics, Inc. | 2,527,422 | 63,160,276 | ||||||||||||
Real estate 0.4% | 46,992,679 | |||||||||||||
Equity real estate investment trusts 0.4% | ||||||||||||||
Equity Residential | 730,494 | 46,992,679 | ||||||||||||
Telecommunication services 1.6% | 204,647,495 | |||||||||||||
Diversified telecommunication services 1.6% | ||||||||||||||
Verizon Communications, Inc. | 3,937,043 | 204,647,495 | ||||||||||||
Utilities 1.2% | 163,716,710 | |||||||||||||
Independent power and renewable electricity producers 1.2% | ||||||||||||||
AES Corp. | 12,740,600 | 163,716,710 | ||||||||||||
Yield (%) | Shares | Value | ||||||||||||
Short-term investments 3.1% | $406,188,223 | |||||||||||||
(Cost $406,188,223) | ||||||||||||||
Money market funds 3.1% | 406,188,223 | |||||||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 0.2692(Y | ) | 406,188,223 | 406,188,223 | ||||||||||
Total investments (Cost $11,866,741,247)† 100.2% | $13,214,045,703 | |||||||||||||
Other assets and liabilities, net (0.2%) | ($23,619,464 | ) | ||||||||||||
Total net assets 100.0% | $13,190,426,239 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund. | ||||||||||||||
Key to Security Abbreviations and Legend | ||||||||||||||
ADR | American Depositary Receipts | |||||||||||||
(I) | Non-income producing security. | |||||||||||||
(Y) | The rate shown is the annualized seven-day yield as of 9-30-16. | |||||||||||||
† | At 9-30-16, the aggregate cost of investment securities for federal income tax purposes was $11,947,193,227. Net unrealized appreciation aggregated to $1,266,852,476, of which $1,442,885,800 related to appreciated investment securities and $176,033,324 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-16 (unaudited)
Assets | ||||||||||||||||||||||||||||||
Investments, at value (Cost $11,866,741,247) | $13,214,045,703 | |||||||||||||||||||||||||||||
Foreign currency, at value (Cost $1,545,838) | 1,536,745 | |||||||||||||||||||||||||||||
Receivable for fund shares sold | 22,333,317 | |||||||||||||||||||||||||||||
Dividends and interest receivable | 18,889,235 | |||||||||||||||||||||||||||||
Receivable for securities lending income | 457,365 | |||||||||||||||||||||||||||||
Receivable due from advisor | 1,176 | |||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 270,487 | |||||||||||||||||||||||||||||
Total assets | 13,257,534,028 | |||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||
Payable for investments purchased | 39,704,572 | |||||||||||||||||||||||||||||
Payable for fund shares repurchased | 25,332,568 | |||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||
Accounting and legal services fees | 287,500 | |||||||||||||||||||||||||||||
Transfer agent fees | 941,729 | |||||||||||||||||||||||||||||
Distribution and service fees | 152,928 | |||||||||||||||||||||||||||||
Trustees' fees | 9,741 | |||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 678,751 | |||||||||||||||||||||||||||||
Total liabilities | 67,107,789 | |||||||||||||||||||||||||||||
Net assets | $13,190,426,239 | |||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||
Paid-in capital | $11,985,816,239 | |||||||||||||||||||||||||||||
Undistributed net investment income | 133,293,467 | |||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (275,982,483 | ) | ||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | 1,347,299,016 | |||||||||||||||||||||||||||||
Net assets | $13,190,426,239 | |||||||||||||||||||||||||||||
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 ($1,751,303,163 ÷ 93,903,360 shares)1 | $18.65 | |||||||||||||||||
Class B ($12,923,373 ÷ 737,106 shares)1 | $17.53 | |||||||||||||||||
Class C ($289,515,019 ÷ 16,468,411 shares)1 | $17.58 | |||||||||||||||||
Class I ($7,220,672,098 ÷ 397,959,441 shares) | $18.14 | |||||||||||||||||
Class I2 ($47,915,940 ÷ 2,640,948 shares) | $18.14 | |||||||||||||||||
Class R1 ($26,385,840 ÷ 1,460,049 shares) | $18.07 | |||||||||||||||||
Class R2 ($135,606,902 ÷ 7,492,704 shares) | $18.10 | |||||||||||||||||
Class R3 ($27,826,055 ÷ 1,539,669 shares) | $18.07 | |||||||||||||||||
Class R4 ($277,921,476 ÷ 15,324,198 shares) | $18.14 | |||||||||||||||||
Class R5 ($296,780,733 ÷ 16,333,287 shares) | $18.17 | |||||||||||||||||
Class R6 ($2,309,231,403 ÷ 127,069,201 shares) | $18.17 | |||||||||||||||||
Class NAV ($794,344,237 ÷ 43,695,885 shares) | $18.18 | |||||||||||||||||
Maximum offering price per share | ||||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $19.63 |
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 9-30-16 (unaudited)
Investment income | ||||||||||||||||||||||||
Dividends | $151,636,146 | |||||||||||||||||||||||
Securities lending | 1,237,119 | |||||||||||||||||||||||
Interest | 356,458 | |||||||||||||||||||||||
Less foreign taxes withheld | (454,524 | ) | ||||||||||||||||||||||
Total investment income | 152,775,199 | |||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Investment management fees | 44,526,268 | |||||||||||||||||||||||
Distribution and service fees | 5,554,239 | |||||||||||||||||||||||
Accounting and legal services fees | 940,087 | |||||||||||||||||||||||
Transfer agent fees | 5,850,520 | |||||||||||||||||||||||
Trustees' fees | 131,644 | |||||||||||||||||||||||
State registration fees | 273,118 | |||||||||||||||||||||||
Printing and postage | 502,175 | |||||||||||||||||||||||
Professional fees | 241,616 | |||||||||||||||||||||||
Custodian fees | 737,679 | |||||||||||||||||||||||
Other | 96,635 | |||||||||||||||||||||||
Total expenses | 58,853,981 | |||||||||||||||||||||||
Less expense reductions | (839,694 | ) | ||||||||||||||||||||||
Net expenses | 58,014,287 | |||||||||||||||||||||||
Net investment income | 94,760,912 | |||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||
Unaffiliated investments and foreign currency transactions | 55,351,400 | |||||||||||||||||||||||
Affiliated investments | 6,923 | |||||||||||||||||||||||
55,358,323 | ||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
Unaffiliated investments and translation of assets and liabilities in foreign currencies | 605,153,620 | |||||||||||||||||||||||
Affiliated investments | (2,130 | ) | ||||||||||||||||||||||
605,151,490 | ||||||||||||||||||||||||
Net realized and unrealized gain | 660,509,813 | |||||||||||||||||||||||
Increase in net assets from operations | $755,270,725 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-16 | Year ended 3-31-16 | ||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | |||||||||||||||||||||||||||||||||||||||||||||
From operations | |||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $94,760,912 | $142,864,984 | |||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) | 55,358,323 | (46,969,513 | ) | ||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | 605,151,490 | (877,252,040 | ) | ||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | 755,270,725 | (781,356,569 | ) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||
From net investment income | |||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (27,728,943 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class B | — | (46,278 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class C | — | (972,189 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I | — | (99,117,523 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I2 | — | (856,842 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R1 | — | (162,991 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (1,237,692 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R3 | — | (227,765 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (3,084,295 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R5 | — | (5,356,973 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (26,166,598 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (10,834,910 | ) | ||||||||||||||||||||||||||||||||||||||||||
From net realized gain | |||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (84,699,290 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class B | — | (510,604 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class C | — | (10,725,915 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I | — | (242,069,838 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I2 | — | (2,092,624 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R1 | — | (797,491 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (4,353,601 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R3 | — | (965,781 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (8,517,823 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R5 | — | (12,597,550 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (58,494,746 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (24,221,158 | ) | ||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (625,839,420 | ) | ||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | (551,507,059 | ) | 1,190,687,737 | ||||||||||||||||||||||||||||||||||||||||||
Total increase (decrease) | 203,763,666 | (216,508,252 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net assets | |||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 12,986,662,573 | 13,203,170,825 | |||||||||||||||||||||||||||||||||||||||||||
End of period | $13,190,426,239 | $12,986,662,573 | |||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $133,293,467 | $38,532,555 |
Financial highlights
Class A Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.64 | $19.44 | $18.94 | $15.94 | $14.33 | $13.83 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.11 | 0.16 | 0.20 | 0.12 | 0.14 | 0.11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | (1.18 | ) | 1.19 | 3.85 | 2.09 | 0.77 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.01 | (1.02 | ) | 1.39 | 3.97 | 2.23 | 0.88 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.19 | ) | (0.10 | ) | (0.09 | ) | (0.12 | ) | (0.07 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.78 | ) | (0.89 | ) | (0.97 | ) | (0.62 | ) | (0.38 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.65 | $17.64 | $19.44 | $18.94 | $15.94 | $14.33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 5.73 | 5 | (5.29 | ) | 7.53 | 25.30 | 16.04 | 6.91 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1,751 | $2,375 | $2,705 | $2,702 | $1,481 | $1,068 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.07 | 6 | 1.08 | 1.08 | 1.12 | 1.20 | 1.24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.07 | 6 | 1.07 | 1.08 | 1.11 | 1.20 | 1.24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.18 | 6 | 0.87 | 1.04 | 0.68 | 0.95 | 0.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.64 | $18.38 | $18.00 | $15.24 | $13.73 | $13.30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.04 | 0.02 | 0.04 | (0.03 | ) | 0.01 | — | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.85 | (1.12 | ) | 1.13 | 3.67 | 2.01 | 0.74 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.89 | (1.10 | ) | 1.17 | 3.64 | 2.02 | 0.74 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.05 | ) | — | — | (0.01 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.64 | ) | (0.79 | ) | (0.88 | ) | (0.51 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $17.53 | $16.64 | $18.38 | $18.00 | $15.24 | $13.73 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 5.35 | 6 | (6.02 | ) | 6.68 | 24.21 | 15.09 | 5.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $13 | $14 | $19 | $19 | $14 | $10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.82 | 7 | 1.85 | 1.91 | 1.96 | 2.08 | 2.14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.82 | 7 | 1.84 | 1.90 | 1.96 | 2.05 | 2.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.43 | 7 | 0.09 | 0.20 | (0.17 | ) | 0.10 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $16.69 | $18.43 | $18.03 | $15.26 | $13.74 | $13.30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.04 | 0.02 | 0.07 | (0.02 | ) | 0.02 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.85 | (1.12 | ) | 1.12 | 3.67 | 2.01 | 0.74 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.89 | (1.10 | ) | 1.19 | 3.65 | 2.03 | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.05 | ) | — | — | (0.01 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.64 | ) | (0.79 | ) | (0.88 | ) | (0.51 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $17.58 | $16.69 | $18.43 | $18.03 | $15.26 | $13.74 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 5.33 | 5 | (6.00 | ) | 6.78 | 24.25 | 15.19 | 6.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $290 | $309 | $302 | $171 | $59 | $40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.82 | 6 | 1.83 | 1.84 | 1.88 | 1.98 | 2.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.82 | 6 | 1.82 | 1.83 | 1.88 | 1.98 | 2.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.43 | 6 | 0.12 | 0.35 | (0.09 | ) | 0.17 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.14 | $18.91 | $18.44 | $15.54 | $13.99 | $13.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.13 | 0.20 | 0.25 | 0.17 | 0.18 | 0.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.87 | (1.14 | ) | 1.16 | 3.75 | 2.04 | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.00 | (0.94 | ) | 1.41 | 3.92 | 2.22 | 0.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.24 | ) | (0.15 | ) | (0.14 | ) | (0.17 | ) | (0.12 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.83 | ) | (0.94 | ) | (1.02 | ) | (0.67 | ) | (0.43 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.14 | $17.14 | $18.91 | $18.44 | $15.54 | $13.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 5.83 | 4 | (5.02 | ) | 7.86 | 25.61 | 16.40 | 7.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $7,221 | $6,730 | $7,026 | $3,671 | $1,680 | $711 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.81 | 5 | 0.81 | 0.81 | 0.83 | 0.87 | 0.88 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.81 | 5 | 0.80 | 0.81 | 0.83 | 0.87 | 0.88 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.46 | 5 | 1.13 | 1.34 | 0.96 | 1.26 | 1.18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.14 | $18.92 | $18.45 | $15.55 | $13.99 | $13.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.13 | 0.20 | 0.24 | 0.17 | 0.18 | 0.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.87 | (1.15 | ) | 1.17 | 3.75 | 2.05 | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.00 | (0.95 | ) | 1.41 | 3.92 | 2.23 | 0.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.24 | ) | (0.15 | ) | (0.14 | ) | (0.17 | ) | (0.13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.83 | ) | (0.94 | ) | (1.02 | ) | (0.67 | ) | (0.44 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.14 | $17.14 | $18.92 | $18.45 | $15.55 | $13.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 5.83 | 4 | (5.07 | ) | 7.85 | 25.63 | 16.51 | 7.24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $48 | $49 | $89 | $75 | $34 | $25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.81 | 5 | 0.82 | 0.84 | 0.87 | 0.92 | 0.93 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.80 | 5 | 0.81 | 0.83 | 0.85 | 0.85 | 0.85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.45 | 5 | 1.11 | 1.28 | 0.96 | 1.29 | 1.21 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.13 | $18.90 | $18.43 | $15.54 | $13.99 | $13.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.07 | 0.09 | 0.12 | 0.04 | 0.08 | 0.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.87 | (1.15 | ) | 1.15 | 3.75 | 2.04 | 0.74 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.94 | (1.06 | ) | 1.27 | 3.79 | 2.12 | 0.80 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.12 | ) | (0.01 | ) | (0.02 | ) | (0.07 | ) | (0.02 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.71 | ) | (0.80 | ) | (0.90 | ) | (0.57 | ) | (0.33 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.07 | $17.13 | $18.90 | $18.43 | $15.54 | $13.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 5.49 | 4 | (5.66 | ) | 7.09 | 24.69 | 15.63 | 6.41 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $26 | $26 | $22 | $13 | $6 | $3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.47 | 5 | 1.48 | 1.54 | 1.67 | 1.85 | 2.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.46 | 5 | 1.47 | 1.53 | 1.57 | 1.58 | 1.65 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.79 | 5 | 0.48 | 0.63 | 0.22 | 0.56 | 0.45 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 R2 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.13 | $18.90 | $18.44 | $15.55 | $14.00 | $13.49 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.09 | 0.13 | 0.19 | 0.08 | 0.12 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.88 | (1.14 | ) | 1.14 | 3.75 | 2.04 | 0.51 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.97 | (1.01 | ) | 1.33 | 3.83 | 2.16 | 0.51 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.17 | ) | (0.08 | ) | (0.06 | ) | (0.11 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.76 | ) | (0.87 | ) | (0.94 | ) | (0.61 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.10 | $17.13 | $18.90 | $18.44 | $15.55 | $14.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 5.66 | 6 | (5.42 | ) | 7.39 | 24.98 | 15.90 | 3.78 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $136 | $136 | $120 | $38 | $4 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.22 | 8 | 1.22 | 1.25 | 1.33 | 3.02 | 15.96 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.21 | 8 | 1.21 | 1.24 | 1.32 | 1.32 | 1.40 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.05 | 8 | 0.74 | 0.99 | 0.45 | 0.80 | 0.41 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 | 9 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.12 | $18.89 | $18.43 | $15.54 | $13.99 | $13.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.08 | 0.10 | 0.14 | 0.06 | 0.10 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.87 | (1.14 | ) | 1.15 | 3.74 | 2.04 | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.95 | (1.04 | ) | 1.29 | 3.80 | 2.14 | 0.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.04 | ) | (0.03 | ) | (0.09 | ) | (0.04 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.73 | ) | (0.83 | ) | (0.91 | ) | (0.59 | ) | (0.35 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.07 | $17.12 | $18.89 | $18.43 | $15.54 | $13.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 5.55 | 4 | (5.57 | ) | 7.20 | 24.81 | 15.75 | 6.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $28 | $30 | $28 | $15 | $4 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.36 | 6 | 1.37 | 1.43 | 1.57 | 2.33 | 11.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.35 | 6 | 1.37 | 1.42 | 1.47 | 1.48 | 1.55 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.89 | 6 | 0.57 | 0.73 | 0.35 | 0.67 | 0.54 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.14 | $18.92 | $18.45 | $15.54 | $13.99 | $13.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.11 | 0.18 | 0.25 | 0.13 | 0.16 | 0.11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.89 | (1.16 | ) | 1.12 | 3.76 | 2.03 | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.00 | (0.98 | ) | 1.37 | 3.89 | 2.19 | 0.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.21 | ) | (0.11 | ) | (0.10 | ) | (0.14 | ) | (0.08 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.80 | ) | (0.90 | ) | (0.98 | ) | (0.64 | ) | (0.39 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.14 | $17.14 | $18.92 | $18.45 | $15.54 | $13.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 5.83 | 4 | (5.22 | ) | 7.67 | 25.44 | 16.19 | 6.86 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $278 | $268 | $228 | $75 | $5 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.07 | 5 | 1.06 | 1.08 | 1.11 | 1.63 | 2.35 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.96 | 5 | 0.96 | 0.97 | 1.01 | 1.09 | 1.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.29 | 5 | 1.00 | 1.31 | 0.75 | 1.09 | 0.85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 R5 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.16 | $18.94 | $18.47 | $15.57 | $14.00 | $13.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.13 | 0.21 | 0.24 | 0.18 | 0.20 | 0.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.88 | (1.15 | ) | 1.19 | 3.76 | 2.04 | 0.74 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.01 | (0.94 | ) | 1.43 | 3.94 | 2.24 | 0.89 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.25 | ) | (0.17 | ) | (0.16 | ) | (0.17 | ) | (0.11 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.84 | ) | (0.96 | ) | (1.04 | ) | (0.67 | ) | (0.42 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.17 | $17.16 | $18.94 | $18.47 | $15.57 | $14.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 5.89 | 4 | (5.02 | ) | 7.98 | 25.71 | 16.55 | 7.20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $297 | $275 | $376 | $591 | $415 | $33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.77 | 5 | 0.77 | 0.73 | 0.74 | 0.78 | 0.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.76 | 5 | 0.76 | 0.72 | 0.73 | 0.78 | 0.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.51 | 5 | 1.16 | 1.27 | 1.05 | 1.42 | 1.19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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 R6 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.16 | $18.94 | $18.47 | $15.57 | $14.00 | $12.19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.14 | 0.23 | 0.31 | 0.19 | 0.19 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.87 | (1.15 | ) | 1.12 | 3.75 | 2.06 | 2.15 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.01 | (0.92 | ) | 1.43 | 3.94 | 2.25 | 2.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.27 | ) | (0.17 | ) | (0.16 | ) | (0.18 | ) | (0.13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.86 | ) | (0.96 | ) | (1.04 | ) | (0.68 | ) | (0.44 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.17 | $17.16 | $18.94 | $18.47 | $15.57 | $14.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 5.95 | 5 | (5.00 | ) | 7.99 | 25.72 | 16.60 | 19.09 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $2,309 | $2,024 | $1,444 | $356 | $118 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.72 | 6 | 0.72 | 0.72 | 0.74 | 0.82 | 2.32 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.70 | 6 | 0.69 | 0.69 | 0.73 | 0.82 | 0.86 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.57 | 6 | 1.26 | 1.63 | 1.06 | 1.28 | 1.31 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 | 7 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $17.16 | $18.94 | $18.47 | $15.57 | $14.00 | $13.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.14 | 0.23 | 0.27 | 0.19 | 0.20 | 0.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.88 | (1.15 | ) | 1.16 | 3.75 | 2.05 | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.02 | (0.92 | ) | 1.43 | 3.94 | 2.25 | 0.91 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.27 | ) | (0.17 | ) | (0.16 | ) | (0.18 | ) | (0.13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.59 | ) | (0.79 | ) | (0.88 | ) | (0.50 | ) | (0.31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.86 | ) | (0.96 | ) | (1.04 | ) | (0.68 | ) | (0.44 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $18.18 | $17.16 | $18.94 | $18.47 | $15.57 | $14.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 5.94 | 4 | (4.95 | ) | 7.98 | 25.73 | 16.66 | 7.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $794 | $750 | $844 | $543 | $524 | $338 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.70 | 5 | 0.70 | 0.69 | 0.71 | 0.74 | 0.77 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.69 | 5 | 0.69 | 0.69 | 0.71 | 0.74 | 0.77 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.56 | 5 | 1.25 | 1.45 | 1.09 | 1.40 | 1.28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 34 | 61 | 44 | 45 | 44 | 44 |
1 | Six months ended 9-30-16. 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. |
Note 1 — Organization
John Hancock Disciplined Value Fund (the fund) is a series of John Hancock Funds III (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to provide long-term growth of capital primarily through 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 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 qualifies 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 scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission (SEC) and applicable regulations.
In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market 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 Trust (JHCT), are valued at their respective NAVs 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.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
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 and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of September 30, 2016, 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 NAV 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 JHCT, an affiliate of the fund, which has a floating NAV and is registered with the SEC as an investment company. JHCT 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 JHCT with respect to the cash collateral.
The fund has the right to recall loaned securities on demand. 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 JHCT.
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. Securities lending income received by the fund is net of fees retained by the securities lending agent. Net income received from JHCT is a component of securities lending income as recorded on the Statement of operations.
As of September 30, 2016, the fund did not have any securites on loan.
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.
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 extent of any overdraft, and to the maximum extent permitted by law.
Effective June 30, 2016, the fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $1 billion unsecured committed line of credit. Excluding commitments designated for certain funds, the fund can borrow up to an aggregate commitment amount of $750 million, subject to asset coverage and other limitations as specified in the agreement. 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 based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. Prior to June 30, 2016, the fund had a similar agreement that enabled it to participate in a $750 million unsecured committed line of credit. For the six months ended September 30, 2016, the fund had no borrowings under either line of credit. Commitment fees for the six months ended September 30, 2016, were $13,837.
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, for all classes, are calculated daily at the class level based on the 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, 2016, the fund has a capital loss carryforward of $42,613,675 available to offset future net realized capital gains. This carryforward expires on March 31, 2017.
It is estimated that this capital 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, 2016, 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 expiration of capital loss carryforwards, redemptions-in-kind and wash sale loss deferrals.
Note 3 — Guarantees and indemnifications
Under the Trust's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
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) 0.750% 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; (e) 0.650% of the next $10 billion of the fund's average daily net assets; and (f) 0.625% of the fund's average daily net assets in excess of $12.5 billion. The Advisor has a subadvisory agreement with Boston Partners, a division of 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 funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. 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. During the six months ended September 30, 2016, the waiver amounted to 0.01% of the fund's average net assets on an annualized basis. 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/or reimburse or pay operating expenses of the fund to the extent necessary to maintain the fund's total operating expenses at 0.85% for Class I2 shares, excluding certain expenses such as taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund's business, acquired fund fees and short dividend expense. The expense limitation expires on June 30, 2017, 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 Advisor has contractually agreed to waive and/or reimburse all class specific expenses for Class R6 shares of the fund to the extent they exceed 0.00% of average net assets. The expense limitation expires on June 30, 2017, 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 the six months ended September 30, 2016, these expense reductions amounted to the following:
Class | Expense reduction | Class | Expense reduction | |||||||||||
Class A | $86,540 | Class R3 | $1,121 | |||||||||||
Class B | 516 | Class R4 | 10,484 | |||||||||||
Class C | 11,398 | Class R5 | 11,003 | |||||||||||
Class I | 268,759 | Class R6 | 274,086 | |||||||||||
Class I2 | 1,785 | Class NAV | 28,569 |
Class | Expense reduction | Class | Expense reduction | |||||||||||
Class R1 | 1,006 | Total | $700,435 | |||||||||||
Class R2 | 5,168 |
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2016 were equivalent to a net annual effective rate of 0.65% 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, 2016 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% |
Class A shares are currently charged 0.25% for Rule 12b-1 fees.
The fund's Distributor has contractually agreed to waive 0.10% of Rule 12b-1 fees for Class R4 shares. The current waiver agreement expires on June 30, 2017, 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. This contractual waiver amounted to $139,259 for Class R4 shares for the six months ended September 30, 2016.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $1,690,118 for the six months ended September 30, 2016. Of this amount, $265,043 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $1,419,701 was paid as sales commissions to broker-dealers and $5,374 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the six months ended September 30, 2016, CDSCs received by the Distributor amounted to $4,729, $5,145 and $23,168 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. 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, 2016 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $2,880,451 | $1,411,573 |
Class B | 68,607 | 8,412 |
Class C | 1,515,530 | 185,849 |
Class I | — | 3,960,723 |
Class I2 | — | 26,318 |
Class R1 | 100,237 | 2,320 |
Class R2 | 341,897 | 11,919 |
Class R3 | 95,848 | 2,584 |
Class R4 | 484,735 | 24,192 |
Class R5 | 66,934 | 25,413 |
Class R6 | — | 191,217 |
Total | $5,554,239 | $5,850,520 |
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 or its affiliates, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating affiliated funds. Any open loans at period end are presented under the caption Payable for interfund lending in the Statement of assets and liabilities. At period end, no interfund loans were outstanding. The fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or lender | Weighted average loan balance | Days outstanding | Weighted average interest rate | Interest income (expense) |
Borrower | $161,661,868 | 5 | 0.715% | $16,054 |
Lender | $100,348,874 | 1 | 0.700% | $1,951 |
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2016 and for the year ended March 31, 2016 were as follows:
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 11,974,562 | $217,058,398 | 44,301,255 | $815,798,359 | ||||||||||||||||||||||
Distributions reinvested | — | — | 6,158,076 | 110,599,044 | ||||||||||||||||||||||
Repurchased | (52,699,260 | ) | (961,974,916 | ) | (54,962,551 | ) | (993,920,242 | ) | ||||||||||||||||||
Net decrease | (40,724,698 | ) | ($744,916,518 | ) | (4,503,220 | ) | ($67,522,839 | ) |
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class B shares | ||||||||||||||||||||||||||
Sold | 22,426 | $382,183 | 59,738 | $1,047,300 | ||||||||||||||||||||||
Distributions reinvested | — | — | 30,922 | 525,357 | ||||||||||||||||||||||
Repurchased | (135,467 | ) | (2,309,068 | ) | (256,680 | ) | (4,503,364 | ) | ||||||||||||||||||
Net decrease | (113,041 | ) | ($1,926,885 | ) | (166,020 | ) | ($2,930,707 | ) | ||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 1,134,670 | $19,391,841 | 5,528,820 | $97,427,585 | ||||||||||||||||||||||
Distributions reinvested | — | — | 569,548 | 9,699,400 | ||||||||||||||||||||||
Repurchased | (3,167,112 | ) | (54,401,921 | ) | (3,996,905 | ) | (69,093,915 | ) | ||||||||||||||||||
Net increase (decrease) | (2,032,442 | ) | ($35,010,080 | ) | 2,101,463 | $38,033,070 | ||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 74,611,639 | $1,315,054,989 | 190,491,019 | $3,407,661,480 | ||||||||||||||||||||||
Distributions reinvested | — | — | 16,212,130 | 282,739,548 | ||||||||||||||||||||||
Repurchased | (69,371,913 | ) | (1,226,872,053 | ) | (185,473,837 | ) | (3,207,447,590 | ) | ||||||||||||||||||
Net increase | 5,239,726 | $88,182,936 | 21,229,312 | $482,953,438 | ||||||||||||||||||||||
Class I2 shares | ||||||||||||||||||||||||||
Sold | 69,039 | $1,227,269 | 307,430 | $5,381,768 | ||||||||||||||||||||||
Distributions reinvested | — | — | 168,625 | 2,940,817 | ||||||||||||||||||||||
Repurchased | (302,578 | ) | (5,283,932 | ) | (2,314,009 | ) | (39,718,862 | ) | ||||||||||||||||||
Net decrease | (233,539 | ) | ($4,056,663 | ) | (1,837,954 | ) | ($31,396,277 | ) | ||||||||||||||||||
Class R1 shares | ||||||||||||||||||||||||||
Sold | 189,102 | $3,316,007 | 833,092 | $15,071,611 | ||||||||||||||||||||||
Distributions reinvested | — | — | 37,411 | 653,189 | ||||||||||||||||||||||
Repurchased | (264,474 | ) | (4,674,508 | ) | (485,576 | ) | (8,813,049 | ) | ||||||||||||||||||
Net increase (decrease) | (75,372 | ) | ($1,358,501 | ) | 384,927 | $6,911,751 | ||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 694,434 | $12,216,316 | 3,045,759 | $54,867,155 | ||||||||||||||||||||||
Distributions reinvested | — | — | 251,595 | 4,390,340 | ||||||||||||||||||||||
Repurchased | (1,124,472 | ) | (19,786,290 | ) | (1,707,876 | ) | (30,900,304 | ) | ||||||||||||||||||
Net increase (decrease) | (430,038 | ) | ($7,569,974 | ) | 1,589,478 | $28,357,191 | ||||||||||||||||||||
Class R3 shares | ||||||||||||||||||||||||||
Sold | 162,240 | $2,843,779 | 717,928 | $12,779,175 | ||||||||||||||||||||||
Distributions reinvested | — | — | 68,397 | 1,193,531 | ||||||||||||||||||||||
Repurchased | (373,492 | ) | (6,628,320 | ) | (503,038 | ) | (9,017,120 | ) | ||||||||||||||||||
Net increase (decrease) | (211,252 | ) | ($3,784,541 | ) | 283,287 | $4,955,586 | ||||||||||||||||||||
Class R4 shares | ||||||||||||||||||||||||||
Sold | 1,497,572 | $26,180,677 | 6,987,432 | $128,107,381 | ||||||||||||||||||||||
Distributions reinvested | — | — | 664,878 | 11,602,118 | ||||||||||||||||||||||
Repurchased | (1,829,125 | ) | (32,452,270 | ) | (4,055,369 | ) | (73,641,619 | ) | ||||||||||||||||||
Net increase (decrease) | (331,553 | ) | ($6,271,593 | ) | 3,596,941 | $66,067,880 |
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class R5 shares | ||||||||||||||||||||||||||
Sold | 2,604,126 | $46,190,255 | 6,518,206 | $118,337,460 | ||||||||||||||||||||||
Distributions reinvested | — | — | 1,028,324 | 17,954,523 | ||||||||||||||||||||||
Repurchased | (2,281,558 | ) | (40,423,248 | ) | (11,368,179 | ) | (189,153,298 | ) | ||||||||||||||||||
Net increase (decrease) | 322,568 | $5,767,007 | (3,821,649 | ) | ($52,861,315 | ) | ||||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 21,698,051 | $382,621,870 | 51,954,451 | $924,773,229 | ||||||||||||||||||||||
Distributions reinvested | — | — | 4,781,990 | 83,445,718 | ||||||||||||||||||||||
Repurchased | (12,608,968 | ) | (222,686,928 | ) | (15,027,396 | ) | (268,907,175 | ) | ||||||||||||||||||
Net increase | 9,089,083 | $159,934,942 | 41,709,045 | $739,311,772 | ||||||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 2,238,093 | $40,034,111 | 3,426,415 | $60,770,799 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,007,793 | 35,056,068 | ||||||||||||||||||||||
Repurchased | (2,274,855 | ) | (40,531,300 | ) | (6,282,156 | ) | (117,018,680 | ) | ||||||||||||||||||
Net decrease | (36,762 | ) | ($497,189 | ) | (847,948 | ) | ($21,191,813 | ) | ||||||||||||||||||
Total net increase (decrease) | (29,537,320 | ) | ($551,507,059 | ) | 59,717,662 | $1,190,687,737 |
Affiliates of the fund owned 100% of shares of beneficial interest of Class NAV on September 30, 2016. Such concentration of shareholders' capital could have a material effect on the fund if such shareholders redeem from the fund.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $4,491,246,582 and $5,008,376,856, respectively, for the six months ended September 30, 2016.
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, 2016, funds within the John Hancock group of funds complex held 4.88% of the fund's net assets.
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., doing business as Boston Partners (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 20-23, 2016 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 24-25, 2016.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 20-23, 2016, 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 mutual 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 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 John Hancock group of funds complex (the John Hancock Fund 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 for the one- and three-year periods ended December 31, 2015 and outperformed its benchmark index for the five-year period ended December 31, 2015. The Board also noted that
the fund underperformed its peer group average for the one-year period ended December 31, 2015 and outperformed its peer group average for the three- and five-year periods ended December 31, 2015. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the benchmark index for the five-year period and to the peer group for the three- and five-year periods. The Board concluded that the fund's performance has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index.
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 net 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 the fact that the fund's net total expenses had decreased from the previous year. 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 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 reduces 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 John Hancock Fund 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 information 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. |
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 contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. 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; | |
(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 Fund Complex); | |
(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 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 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 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 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 and compared them 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 performance of the fund has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | noted that the subadvisory fees are paid by the Advisor not the fund and that the 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.
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor Robeco Investment Management, Inc. Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund 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. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Balanced Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Small Cap Value Small Company Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Global Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Global Real Estate Natural Resources Redwood Regional Bank Seaport Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Income Allocation Fund Lifestyle Aggressive Portfolio Lifestyle Balanced Portfolio Lifestyle Conservative Portfolio Lifestyle Growth Portfolio Lifestyle Moderate Portfolio Retirement Choices Portfolios Retirement Living Portfolios Retirement Living II Portfolios EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Large Cap Core 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 |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We build funds based on investor needs, then search the world to find proven
portfolio teams with specialized expertise in those strategies. As a manager of
managers, we apply vigorous oversight to ensure that they continue to meet
our uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, 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. | ||
MF322361 | 340SA 9/16 11/16 |
John Hancock
Core High Yield Fund
Semiannual report 9/30/16
A message to shareholders
Dear shareholder,
Fixed-income returns were mostly positive globally over the past six months, with particular strength coming from U.S. high-yield bonds and emerging-market debt. Of note, despite being low compared with historical norms, longer-term bond yields in the United States continued to offer value relative to international markets, many of which are grappling with negative yields as foreign central banks look for ways to spur growth.
While additional interest-rate increases by the U.S. Federal Reserve are expected eventually, the timing has proven hard to predict. Economic growth has been somewhat choppy, with jobs gains slowing in recent months. Political uncertainty has been another factor, with the aftershocks of the U.K.'s vote in late June to leave the European Union and the recent U.S. presidential election still reverberating.
While riskier market segments have performed well in recent months—many equity indexes, for example, hit all-time highs in August—it's prudent to expect the trend to reverse. Should markets encounter more turbulence as we finish out 2016, remember that one of your best resources is your financial advisor, who can help ensure your portfolio is sufficiently diversified to meet your long-term objectives and to withstand the inevitable bumps along the way.
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, 2016. They are subject to change at any time. All investments entail risks, including the possible loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Core High Yield Fund
INVESTMENT OBJECTIVE
The fund seeks total return, consisting of a high level of current income and capital appreciation.
PORTFOLIO COMPOSITION AS OF 9/30/16 (%)
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. Loan participations and assignments involve additional risks, including credit risk, interest-rate risk, counterparty risk, liquidity risk, extended settlement risk, and the risks of being a lender. Hedging, derivatives, and other strategic transactions may increase a fund's volatility and could produce disproportionate losses, potentially more than the fund's principal investment. Liquidity—the extent (if at all) to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. Events in the financial markets have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. Foreign investing has additional risks, such as currency and market volatility and political and social instability. Please see the fund's prospectus for additional risks.
QUALITY COMPOSITION AS OF 9/30/16 (%)
SECTOR COMPOSITION AS OF 9/30/16 (%)
COUNTRY COMPOSITION AS OF 9/30/16 (%)
United States | 84.0 |
Canada | 5.7 |
Luxembourg | 4.2 |
Ireland | 1.4 |
France | 1.0 |
United Kingdom | 1.0 |
Other countries | 2.7 |
TOTAL | 100.0 |
As a percentage of net assets. |
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, 2016, with the same investment held until September 30, 2016.
Account value on 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,107.70 | $6.34 | 1.20% |
Class C | 1,000.00 | 1,103.60 | 10.28 | 1.95% |
Class I | 1,000.00 | 1,109.10 | 4.60 | 0.87% |
Class R6 | 1,000.00 | 1,109.80 | 4.28 | 0.81% |
Class NAV | 1,000.00 | 1,109.70 | 4.39 | 0.83% |
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, 2016, 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:
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, 2016, with the same investment held until September 30, 2016. 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 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.10 | $6.07 | 1.20% |
Class C | 1,000.00 | 1,015.30 | 9.85 | 1.95% |
Class I | 1,000.00 | 1,020.70 | 4.41 | 0.87% |
Class R6 | 1,000.00 | 1,021.00 | 4.10 | 0.81% |
Class NAV | 1,000.00 | 1,020.90 | 4.20 | 0.83% |
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). |
Fund's investments
As of 9-30-16 (unaudited) | ||||||||||||||||||||||||||
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Corporate bonds 93.4% | $427,060,530 | |||||||||||||||||||||||||
(Cost $428,391,055) | ||||||||||||||||||||||||||
Consumer discretionary 17.6% | 80,509,568 | |||||||||||||||||||||||||
Auto components 1.6% | ||||||||||||||||||||||||||
Adient Global Holdings, Ltd. (S) | 4.875 | 08-15-26 | 1,575,000 | 1,575,000 | ||||||||||||||||||||||
Lear Corp. | 5.250 | 01-15-25 | 2,500,000 | 2,712,500 | ||||||||||||||||||||||
ZF North America Capital, Inc. (S) | 4.750 | 04-29-25 | 2,800,000 | 2,940,000 | ||||||||||||||||||||||
Automobiles 0.5% | ||||||||||||||||||||||||||
General Motors Company | 4.000 | 04-01-25 | 2,250,000 | 2,301,397 | ||||||||||||||||||||||
Hotels, restaurants and leisure 3.0% | ||||||||||||||||||||||||||
Eldorado Resorts, Inc. | 7.000 | 08-01-23 | 3,000,000 | 3,183,750 | ||||||||||||||||||||||
GLP Capital LP | 5.375 | 04-15-26 | 1,200,000 | 1,290,000 | ||||||||||||||||||||||
International Game Technology PLC (S) | 6.500 | 02-15-25 | 3,500,000 | 3,771,250 | ||||||||||||||||||||||
KFC Holding Company/Pizza Hut Holdings LLC/Taco Bell of America LLC (S) | 5.000 | 06-01-24 | 865,000 | 903,925 | ||||||||||||||||||||||
KFC Holding Company/Pizza Hut Holdings LLC/Taco Bell of America LLC (S) | 5.250 | 06-01-26 | 1,050,000 | 1,110,375 | ||||||||||||||||||||||
Landry's, Inc. (S) | 6.750 | 10-15-24 | 650,000 | 661,375 | ||||||||||||||||||||||
Mohegan Tribal Gaming Authority (S) | 7.875 | 10-15-24 | 2,515,000 | 2,511,856 | ||||||||||||||||||||||
Mohegan Tribal Gaming Authority | 9.750 | 09-01-21 | �� | 450,000 | 485,438 | |||||||||||||||||||||
Household durables 0.9% | ||||||||||||||||||||||||||
Beazer Homes USA, Inc. | 7.500 | 09-15-21 | 650,000 | 656,500 | ||||||||||||||||||||||
Beazer Homes USA, Inc. (S) | 8.750 | 03-15-22 | 1,240,000 | 1,308,200 | ||||||||||||||||||||||
Modular Space Corp. (H)(S) | 10.250 | 01-31-19 | 4,575,000 | 1,921,500 | ||||||||||||||||||||||
Media 9.5% | ||||||||||||||||||||||||||
Altice Luxembourg SA (S) | 7.625 | 02-15-25 | 1,000,000 | 1,028,750 | ||||||||||||||||||||||
AMC Networks, Inc. | 5.000 | 04-01-24 | 1,000,000 | 1,005,000 | ||||||||||||||||||||||
Cablevision Systems Corp. | 8.000 | 04-15-20 | 2,000,000 | 2,095,000 | ||||||||||||||||||||||
CCO Holdings LLC | 5.125 | 02-15-23 | 3,000,000 | 3,127,500 | ||||||||||||||||||||||
Cengage Learning, Inc. (S) | 9.500 | 06-15-24 | 1,720,000 | 1,745,800 | ||||||||||||||||||||||
Clear Channel Worldwide Holdings, Inc. | 6.500 | 11-15-22 | 2,000,000 | 2,082,500 | ||||||||||||||||||||||
DISH DBS Corp. (S) | 7.750 | 07-01-26 | 1,000,000 | 1,062,500 | ||||||||||||||||||||||
EMI Music Publishing Group North America Holdings, Inc. (S) | 7.625 | 06-15-24 | 875,000 | 946,094 | ||||||||||||||||||||||
Gray Television, Inc. (S) | 5.125 | 10-15-24 | 910,000 | 892,938 | ||||||||||||||||||||||
McGraw-Hill Global Education Holdings LLC (S) | 7.875 | 05-15-24 | 1,772,000 | 1,913,760 | ||||||||||||||||||||||
MDC Partners, Inc. (S) | 6.500 | 05-01-24 | 4,750,000 | 4,358,125 | ||||||||||||||||||||||
Outfront Media Capital LLC | 5.875 | 03-15-25 | 2,200,000 | 2,310,000 | ||||||||||||||||||||||
Radio One, Inc. (S) | 9.250 | 02-15-20 | 1,235,000 | 1,151,638 | ||||||||||||||||||||||
Sirius XM Radio, Inc. (S) | 5.375 | 04-15-25 | 2,250,000 | 2,323,125 | ||||||||||||||||||||||
Sirius XM Radio, Inc. (S) | 5.375 | 07-15-26 | 1,460,000 | 1,500,150 | ||||||||||||||||||||||
Sirius XM Radio, Inc. (S) | 6.000 | 07-15-24 | 3,000,000 | 3,198,750 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Consumer discretionary (continued) | ||||||||||||||||||||||||||
Media (continued) | ||||||||||||||||||||||||||
Time, Inc. (S) | 5.750 | 04-15-22 | 2,500,000 | $2,456,250 | ||||||||||||||||||||||
Viacom, Inc. | 4.375 | 03-15-43 | 4,900,000 | 4,516,772 | ||||||||||||||||||||||
Virgin Media Finance PLC (S) | 6.375 | 04-15-23 | 2,500,000 | 2,625,000 | ||||||||||||||||||||||
WMG Acquisition Corp. (S) | 5.000 | 08-01-23 | 680,000 | 690,200 | ||||||||||||||||||||||
WMG Acquisition Corp. (S) | 6.750 | 04-15-22 | 2,250,000 | 2,385,000 | ||||||||||||||||||||||
Multiline retail 0.2% | ||||||||||||||||||||||||||
Neiman Marcus Group, Ltd., LLC (S) | 8.000 | 10-15-21 | 1,355,000 | 1,124,650 | ||||||||||||||||||||||
Specialty retail 1.6% | ||||||||||||||||||||||||||
GameStop Corp. (S) | 6.750 | 03-15-21 | 1,500,000 | 1,548,750 | ||||||||||||||||||||||
Jo-Ann Stores Holdings, Inc., PIK (S) | 9.750 | 10-15-19 | 2,000,000 | 1,950,000 | ||||||||||||||||||||||
L Brands, Inc. | 6.950 | 03-01-33 | 3,500,000 | 3,666,250 | ||||||||||||||||||||||
Textiles, apparel and luxury goods 0.3% | ||||||||||||||||||||||||||
Hanesbrands, Inc. (S) | 4.875 | 05-15-26 | 600,000 | 613,500 | ||||||||||||||||||||||
Wolverine World Wide, Inc. (S) | 5.000 | 09-01-26 | 850,000 | 858,500 | ||||||||||||||||||||||
Consumer staples 6.0% | 27,491,688 | |||||||||||||||||||||||||
Food and staples retailing 1.7% | ||||||||||||||||||||||||||
Performance Food Group, Inc. (S) | 5.500 | 06-01-24 | 1,750,000 | 1,806,875 | ||||||||||||||||||||||
Simmons Foods, Inc. (S) | 7.875 | 10-01-21 | 1,500,000 | 1,496,250 | ||||||||||||||||||||||
SUPERVALU, Inc. | 7.750 | 11-15-22 | 2,500,000 | 2,387,500 | ||||||||||||||||||||||
Tops Holding LLC (S) | 8.000 | 06-15-22 | 2,245,000 | 2,020,500 | ||||||||||||||||||||||
Food products 0.9% | ||||||||||||||||||||||||||
FAGE International SA (S) | 5.625 | 08-15-26 | 850,000 | 875,500 | ||||||||||||||||||||||
Southern States Cooperative, Inc. (S) | 10.000 | 08-15-21 | 1,845,000 | 1,448,325 | ||||||||||||||||||||||
TreeHouse Foods, Inc. (S) | 6.000 | 02-15-24 | 1,800,000 | 1,937,250 | ||||||||||||||||||||||
Household products 1.5% | ||||||||||||||||||||||||||
Central Garden & Pet Company | 6.125 | 11-15-23 | 2,500,000 | 2,681,250 | ||||||||||||||||||||||
Kronos Acquisition Holdings, Inc. (S) | 9.000 | 08-15-23 | 2,500,000 | 2,576,550 | ||||||||||||||||||||||
Spectrum Brands, Inc. | 6.625 | 11-15-22 | 1,500,000 | 1,623,750 | ||||||||||||||||||||||
Personal products 0.9% | ||||||||||||||||||||||||||
Revlon Consumer Products Corp. | 5.750 | 02-15-21 | 3,500,000 | 3,570,000 | ||||||||||||||||||||||
Revlon Consumer Products Corp. (S) | 6.250 | 08-01-24 | 655,000 | 676,288 | ||||||||||||||||||||||
Tobacco 1.0% | ||||||||||||||||||||||||||
Alliance One International, Inc. | 9.875 | 07-15-21 | 2,685,000 | 2,282,250 | ||||||||||||||||||||||
Vector Group, Ltd. | 7.750 | 02-15-21 | 2,000,000 | 2,109,400 | ||||||||||||||||||||||
Energy 13.2% | 60,201,314 | |||||||||||||||||||||||||
Energy equipment and services 2.8% | ||||||||||||||||||||||||||
Antero Midstream Partners LP (S) | 5.375 | 09-15-24 | 1,600,000 | 1,620,000 | ||||||||||||||||||||||
CSI Compressco LP | 7.250 | 08-15-22 | 2,865,000 | 2,707,425 | ||||||||||||||||||||||
Parsley Energy LLC (S) | 6.250 | 06-01-24 | 650,000 | 671,125 | ||||||||||||||||||||||
Sabine Pass Liquefaction LLC (S) | 5.875 | 06-30-26 | 1,225,000 | 1,331,422 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Energy (continued) | ||||||||||||||||||||||||||
Energy equipment and services (continued) | ||||||||||||||||||||||||||
Summit Midstream Holdings LLC | 5.500 | 08-15-22 | 5,000,000 | $4,762,500 | ||||||||||||||||||||||
Weatherford International, Ltd. | 8.250 | 06-15-23 | 1,800,000 | 1,782,000 | ||||||||||||||||||||||
Oil, gas and consumable fuels 10.4% | ||||||||||||||||||||||||||
Antero Resources Corp. | 5.125 | 12-01-22 | 1,870,000 | 1,884,025 | ||||||||||||||||||||||
Callon Petroleum Company (S) | 6.125 | 10-01-24 | 625,000 | 646,875 | ||||||||||||||||||||||
Calumet Specialty Products Partners LP | 6.500 | 04-15-21 | 1,800,000 | 1,471,500 | ||||||||||||||||||||||
Cheniere Corpus Christi Holdings LLC (S) | 7.000 | 06-30-24 | 1,625,000 | 1,755,000 | ||||||||||||||||||||||
Citgo Holding, Inc. (S) | 10.750 | 02-15-20 | 1,500,000 | 1,503,750 | ||||||||||||||||||||||
Denbury Resources, Inc. | 4.625 | 07-15-23 | 1,575,000 | 1,047,375 | ||||||||||||||||||||||
Energy XXI Gulf Coast, Inc. (H)(S) | 11.000 | 03-15-20 | 3,000,000 | 1,200,000 | ||||||||||||||||||||||
Freeport-McMoran Oil & Gas LLC | 6.875 | 02-15-23 | 4,800,000 | 4,932,000 | ||||||||||||||||||||||
Halcon Resources Corp. (S) | 8.625 | 02-01-20 | 2,000,000 | 2,010,000 | ||||||||||||||||||||||
Halcon Resources Corp. (S) | 12.000 | 02-15-22 | 2,301,000 | 2,301,000 | ||||||||||||||||||||||
Kinder Morgan, Inc. | 5.550 | 06-01-45 | 2,000,000 | 2,056,324 | ||||||||||||||||||||||
Murphy Oil Corp. | 6.875 | 08-15-24 | 610,000 | 630,793 | ||||||||||||||||||||||
Newfield Exploration Company | 5.375 | 01-01-26 | 1,300,000 | 1,303,250 | ||||||||||||||||||||||
Oasis Petroleum, Inc. | 6.875 | 03-15-22 | 1,395,000 | 1,335,713 | ||||||||||||||||||||||
PBF Holding Company LLC (S) | 7.000 | 11-15-23 | 1,500,000 | 1,413,750 | ||||||||||||||||||||||
Sanchez Energy Corp. | 6.125 | 01-15-23 | 2,500,000 | 2,006,250 | ||||||||||||||||||||||
SandRidge Energy, Inc. (H)(S) | 8.750 | 06-01-20 | 4,000,000 | 1,440,000 | ||||||||||||||||||||||
SM Energy Company | 5.625 | 06-01-25 | 3,000,000 | 2,820,000 | ||||||||||||||||||||||
SM Energy Company | 6.750 | 09-15-26 | 1,015,000 | 1,025,150 | ||||||||||||||||||||||
Tallgrass Energy Partners LP (S) | 5.500 | 09-15-24 | 1,050,000 | 1,057,875 | ||||||||||||||||||||||
Teekay Offshore Partners LP | 6.000 | 07-30-19 | 4,040,000 | 3,333,000 | ||||||||||||||||||||||
Tesoro Logistics LP | 6.375 | 05-01-24 | 2,250,000 | 2,413,125 | ||||||||||||||||||||||
Whiting Petroleum Corp. | 6.250 | 04-01-23 | 2,000,000 | 1,830,000 | ||||||||||||||||||||||
Williams Partners LP | 4.875 | 03-15-24 | 4,750,000 | 4,802,649 | ||||||||||||||||||||||
WPX Energy, Inc. | 5.250 | 09-15-24 | 1,175,000 | 1,107,438 | ||||||||||||||||||||||
Financials 9.5% | 43,504,714 | |||||||||||||||||||||||||
Banks 4.2% | ||||||||||||||||||||||||||
Citigroup, Inc. (5.800% to 11-15-19, then 3 month LIBOR + 4.093%) (Q) | 5.800 | 11-15-19 | 5,000,000 | 5,031,250 | ||||||||||||||||||||||
Credit Agricole SA (8.125% to 12-23-25, then 5 Year U.S. Swap Rate + 6.185%) (Q)(S) | 8.125 | 12-23-25 | 1,190,000 | 1,261,400 | ||||||||||||||||||||||
ING Groep NV (6.500% to 4-16-25, then 5 Year U.S. Swap Rate + 4.446%) (Q) | 6.500 | 04-16-25 | 3,835,000 | 3,717,553 | ||||||||||||||||||||||
JPMorgan Chase & Co. (5.300% to 05-01-2020, then 3 month LIBOR + 3.800%) (Q) | 5.300 | 05-01-20 | 3,000,000 | 3,041,250 | ||||||||||||||||||||||
Societe Generale SA (7.375% to 9-13-21, then 5 Year U.S. Swap Rate + 6.238%) (Q)(S) | 7.375 | 09-13-21 | 1,510,000 | 1,479,800 | ||||||||||||||||||||||
Wells Fargo & Company (5.900% to 6-15-24, then 3 month LIBOR + 3.110%) (Q) | 5.900 | 06-15-24 | 4,400,000 | 4,559,500 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Financials (continued) | ||||||||||||||||||||||||||
Capital markets 1.1% | ||||||||||||||||||||||||||
Morgan Stanley (5.550% to 7-15-20, then 3 month LIBOR + 3.810%) (Q) | 5.550 | 07-15-20 | 5,000,000 | $5,106,250 | ||||||||||||||||||||||
Consumer finance 1.3% | ||||||||||||||||||||||||||
Credit Acceptance Corp. | 6.125 | 02-15-21 | 3,271,000 | 3,287,355 | ||||||||||||||||||||||
Enova International, Inc. | 9.750 | 06-01-21 | 3,000,000 | 2,685,000 | ||||||||||||||||||||||
Diversified financial services 0.6% | ||||||||||||||||||||||||||
ARD Finance SA, PIK (S) | 7.125 | 09-15-23 | 1,500,000 | 1,492,500 | ||||||||||||||||||||||
Nationstar Mortgage LLC | 6.500 | 08-01-18 | 1,385,000 | 1,407,506 | ||||||||||||||||||||||
Thrifts and mortgage finance 2.3% | ||||||||||||||||||||||||||
Ladder Capital Finance Holdings LLLP (S) | 5.875 | 08-01-21 | 2,225,000 | 2,113,750 | ||||||||||||||||||||||
Ladder Capital Finance Holdings LLLP | 7.375 | 10-01-17 | 2,000,000 | 2,015,000 | ||||||||||||||||||||||
MGIC Investment Corp. | 5.750 | 08-15-23 | 1,090,000 | 1,133,600 | ||||||||||||||||||||||
Nationstar Mortgage LLC | 6.500 | 06-01-22 | 1,300,000 | 1,248,000 | ||||||||||||||||||||||
Quicken Loans, Inc. (S) | 5.750 | 05-01-25 | 2,000,000 | 1,985,000 | ||||||||||||||||||||||
Stearns Holdings LLC (S) | 9.375 | 08-15-20 | 2,000,000 | 1,940,000 | ||||||||||||||||||||||
Health care 7.7% | 35,169,921 | |||||||||||||||||||||||||
Health care providers and services 6.2% | ||||||||||||||||||||||||||
Centene Corp. | 6.125 | 02-15-24 | 1,400,000 | 1,519,000 | ||||||||||||||||||||||
Community Health Systems, Inc. | 6.875 | 02-01-22 | 2,000,000 | 1,720,000 | ||||||||||||||||||||||
Covenant Surgical Partners, Inc. (S) | 8.750 | 08-01-19 | 380,000 | 364,800 | ||||||||||||||||||||||
DaVita, Inc. | 5.125 | 07-15-24 | 2,000,000 | 2,040,000 | ||||||||||||||||||||||
HCA, Inc. | 5.375 | 02-01-25 | 4,480,000 | 4,625,600 | ||||||||||||||||||||||
HealthSouth Corp. | 5.750 | 11-01-24 | 2,600,000 | 2,692,612 | ||||||||||||||||||||||
LifePoint Health, Inc. | 5.875 | 12-01-23 | 3,000,000 | 3,105,000 | ||||||||||||||||||||||
MEDNAX, Inc. (S) | 5.250 | 12-01-23 | 2,000,000 | 2,102,500 | ||||||||||||||||||||||
Molina Healthcare, Inc. | 5.375 | 11-15-22 | 2,500,000 | 2,581,250 | ||||||||||||||||||||||
Quorum Health Corp. (S) | 11.625 | 04-15-23 | 2,500,000 | 2,075,000 | ||||||||||||||||||||||
Select Medical Corp. | 6.375 | 06-01-21 | 5,750,000 | 5,656,563 | ||||||||||||||||||||||
Pharmaceuticals 1.5% | ||||||||||||||||||||||||||
Mallinckrodt International Finance SA (S) | 5.500 | 04-15-25 | 1,475,000 | 1,401,250 | ||||||||||||||||||||||
Mallinckrodt International Finance SA (S) | 5.750 | 08-01-22 | 3,000,000 | 2,958,750 | ||||||||||||||||||||||
Valeant Pharmaceuticals International, Inc. (S) | 5.500 | 03-01-23 | 675,000 | 577,125 | ||||||||||||||||||||||
Valeant Pharmaceuticals International, Inc. (S) | 5.875 | 05-15-23 | 2,025,000 | 1,750,471 | ||||||||||||||||||||||
Industrials 8.0% | 36,362,955 | |||||||||||||||||||||||||
Aerospace and defense 0.8% | ||||||||||||||||||||||||||
Huntington Ingalls Industries, Inc. (S) | 5.000 | 11-15-25 | 1,500,000 | 1,586,250 | ||||||||||||||||||||||
LMI Aerospace, Inc. | 7.375 | 07-15-19 | 806,000 | 810,030 | ||||||||||||||||||||||
StandardAero Aviation Holdings, Inc. (S) | 10.000 | 07-15-23 | 580,000 | 622,050 | ||||||||||||||||||||||
Textron Financial Corp. (6.000% to 2-15-17, then 3 month LIBOR + 1.735%) (S) | 6.000 | 02-15-67 | 1,100,000 | 782,375 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Industrials (continued) | ||||||||||||||||||||||||||
Air freight and logistics 0.8% | ||||||||||||||||||||||||||
XPO Logistics, Inc. (S) | 6.500 | 06-15-22 | 3,345,000 | $3,499,706 | ||||||||||||||||||||||
Airlines 0.5% | ||||||||||||||||||||||||||
Air Canada 2013-1 Class C Pass Through Trust (S) | 6.625 | 05-15-18 | 2,000,000 | 2,080,000 | ||||||||||||||||||||||
Building products 0.7% | ||||||||||||||||||||||||||
Builders FirstSource, Inc. (S) | 5.625 | 09-01-24 | 740,000 | 758,500 | ||||||||||||||||||||||
Builders FirstSource, Inc. (S) | 10.750 | 08-15-23 | 2,000,000 | 2,295,000 | ||||||||||||||||||||||
Commercial services and supplies 0.2% | ||||||||||||||||||||||||||
LSC Communications, Inc. (S) | 8.750 | 10-15-23 | 810,000 | 807,975 | ||||||||||||||||||||||
Construction and engineering 0.6% | ||||||||||||||||||||||||||
AECOM | 5.750 | 10-15-22 | 2,800,000 | 2,940,868 | ||||||||||||||||||||||
Electrical equipment 0.3% | ||||||||||||||||||||||||||
Cortes NP Acquisition Corp. (S) | 9.250 | 10-15-24 | 1,305,000 | 1,305,000 | ||||||||||||||||||||||
Machinery 0.3% | ||||||||||||||||||||||||||
Trinity Industries, Inc. | 4.550 | 10-01-24 | 1,230,000 | 1,223,838 | ||||||||||||||||||||||
Professional services 0.3% | ||||||||||||||||||||||||||
IMS Health, Inc. (S) | 5.000 | 10-15-26 | 1,250,000 | 1,300,000 | ||||||||||||||||||||||
Road and rail 0.6% | ||||||||||||||||||||||||||
OPE KAG Finance Sub, Inc. (S) | 7.875 | 07-31-23 | 3,000,000 | 2,842,500 | ||||||||||||||||||||||
Trading companies and distributors 2.9% | ||||||||||||||||||||||||||
AerCap Ireland Capital, Ltd. | 4.500 | 05-15-21 | 5,000,000 | 5,231,250 | ||||||||||||||||||||||
Ahern Rentals, Inc. (S) | 7.375 | 05-15-23 | 2,000,000 | 1,295,000 | ||||||||||||||||||||||
Aircastle, Ltd. | 5.000 | 04-01-23 | 2,215,000 | 2,314,675 | ||||||||||||||||||||||
Aircastle, Ltd. | 5.125 | 03-15-21 | 1,970,000 | 2,105,438 | ||||||||||||||||||||||
United Rentals North America, Inc. | 5.500 | 07-15-25 | 2,500,000 | 2,562,500 | ||||||||||||||||||||||
Information technology 3.9% | 17,727,670 | |||||||||||||||||||||||||
Communications equipment 0.2% | ||||||||||||||||||||||||||
Hughes Satellite Systems Corp. (S) | 6.625 | 08-01-26 | 660,000 | 636,900 | ||||||||||||||||||||||
Internet software and services 0.8% | ||||||||||||||||||||||||||
InterActiveCorp | 4.875 | 11-30-18 | 1,775,000 | 1,817,156 | ||||||||||||||||||||||
Match Group, Inc. | 6.375 | 06-01-24 | 1,677,000 | 1,819,545 | ||||||||||||||||||||||
Semiconductors and semiconductor equipment 2.3% | ||||||||||||||||||||||||||
Micron Technology, Inc. (S) | 5.250 | 08-01-23 | 4,750,000 | 4,655,000 | ||||||||||||||||||||||
Micron Technology, Inc. (S) | 5.250 | 01-15-24 | 2,000,000 | 1,945,000 | ||||||||||||||||||||||
Micron Technology, Inc. (S) | 5.625 | 01-15-26 | 2,800,000 | 2,695,000 | ||||||||||||||||||||||
Micron Technology, Inc. (S) | 7.500 | 09-15-23 | 1,140,000 | 1,266,244 | ||||||||||||||||||||||
Software 0.6% | ||||||||||||||||||||||||||
JDA Escrow LLC (S) | 7.375 | 10-15-24 | 830,000 | 852,825 | ||||||||||||||||||||||
Open Text Corp. (S) | 5.625 | 01-15-23 | 2,000,000 | 2,040,000 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Materials 10.7% | $49,067,151 | |||||||||||||||||||||||||
Chemicals 4.6% | ||||||||||||||||||||||||||
Ashland, Inc. | 6.875 | 05-15-43 | 2,500,000 | 2,725,000 | ||||||||||||||||||||||
Axalta Coating Systems LLC (S) | 4.875 | 08-15-24 | 1,170,000 | 1,198,519 | ||||||||||||||||||||||
CVR Partners LP (S) | 9.250 | 06-15-23 | 1,450,000 | 1,401,063 | ||||||||||||||||||||||
NOVA Chemicals Corp. (S) | 5.250 | 08-01-23 | 3,000,000 | 3,067,500 | ||||||||||||||||||||||
Platform Specialty Products Corp. (S) | 6.500 | 02-01-22 | 5,125,000 | 4,984,063 | ||||||||||||||||||||||
The Chemours Company | 6.625 | 05-15-23 | 6,002,000 | 5,866,955 | ||||||||||||||||||||||
Tronox Finance LLC | 6.375 | 08-15-20 | 500,000 | 461,250 | ||||||||||||||||||||||
Tronox Finance LLC (S) | 7.500 | 03-15-22 | 1,525,000 | 1,391,563 | ||||||||||||||||||||||
Construction materials 0.6% | ||||||||||||||||||||||||||
Standard Industries, Inc. (S) | 5.375 | 11-15-24 | 2,845,000 | 2,930,350 | ||||||||||||||||||||||
Containers and packaging 1.8% | ||||||||||||||||||||||||||
Ardagh Packaging Finance PLC (S) | 4.625 | 05-15-23 | 1,000,000 | 1,006,250 | ||||||||||||||||||||||
Cascades, Inc. (S) | 5.500 | 07-15-22 | 1,632,000 | 1,658,520 | ||||||||||||||||||||||
Graphic Packaging International, Inc. | 4.750 | 04-15-21 | 500,000 | 533,750 | ||||||||||||||||||||||
Reynolds Group Issuer, Inc. | 5.750 | 10-15-20 | 2,350,000 | 2,423,438 | ||||||||||||||||||||||
Reynolds Group Issuer, Inc. (S) | 7.000 | 07-15-24 | 2,250,000 | 2,413,125 | ||||||||||||||||||||||
Metals and mining 2.7% | ||||||||||||||||||||||||||
Alcoa Nederland Holding BV (S) | 7.000 | 09-30-26 | 475,000 | 491,031 | ||||||||||||||||||||||
Essar Steel Algoma, Inc. (H)(S) | 9.500 | 11-15-19 | 4,000,000 | 540,000 | ||||||||||||||||||||||
First Quantum Minerals, Ltd. (S) | 7.250 | 05-15-22 | 2,750,000 | 2,447,500 | ||||||||||||||||||||||
FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 04-01-22 | 700,000 | 724,360 | ||||||||||||||||||||||
Lundin Mining Corp. (S) | 7.500 | 11-01-20 | 1,365,000 | 1,450,313 | ||||||||||||||||||||||
Novelis Corp. (S) | 5.875 | 09-30-26 | 770,000 | 788,288 | ||||||||||||||||||||||
Novelis Corp. (S) | 6.250 | 08-15-24 | 855,000 | 908,438 | ||||||||||||||||||||||
Signode Industrial Group Lux SA (S) | 6.375 | 05-01-22 | 2,410,000 | 2,440,125 | ||||||||||||||||||||||
Teck Resources, Ltd. | 6.250 | 07-15-41 | 1,000,000 | 957,500 | ||||||||||||||||||||||
Teck Resources, Ltd. (S) | 8.500 | 06-01-24 | 1,405,000 | 1,608,725 | ||||||||||||||||||||||
Paper and forest products 1.0% | ||||||||||||||||||||||||||
Boise Cascade Company (S) | 5.625 | 09-01-24 | 760,000 | 771,400 | ||||||||||||||||||||||
Norbord, Inc. (S) | 6.250 | 04-15-23 | 3,650,000 | 3,878,125 | ||||||||||||||||||||||
Real estate 1.0% | 4,591,168 | |||||||||||||||||||||||||
Equity real estate investment trusts 0.5% | ||||||||||||||||||||||||||
Communications Sales & Leasing, Inc. | 8.250 | 10-15-23 | 2,000,000 | 2,098,980 | ||||||||||||||||||||||
Real estate management and development 0.5% | ||||||||||||||||||||||||||
Mattamy Group Corp. (S) | 6.500 | 11-15-20 | 2,500,000 | 2,492,188 | ||||||||||||||||||||||
Telecommunication services 11.7% | 53,713,891 | |||||||||||||||||||||||||
Diversified telecommunication services 9.1% | ||||||||||||||||||||||||||
Altice Financing SA (S) | 7.500 | 05-15-26 | 3,195,000 | 3,326,794 | ||||||||||||||||||||||
CenturyLink, Inc. | 7.500 | 04-01-24 | 2,300,000 | 2,455,250 | ||||||||||||||||||||||
Frontier Communications Corp. | 6.250 | 09-15-21 | 1,130,000 | 1,086,213 | ||||||||||||||||||||||
Frontier Communications Corp. | 7.125 | 01-15-23 | 4,500,000 | 4,196,250 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Telecommunication services (continued) | ||||||||||||||||||||||||||
Diversified telecommunication services (continued) | ||||||||||||||||||||||||||
Frontier Communications Corp. | 11.000 | 09-15-25 | 1,930,000 | $2,012,025 | ||||||||||||||||||||||
GCI, Inc. | 6.875 | 04-15-25 | 3,600,000 | 3,690,000 | ||||||||||||||||||||||
Inmarsat Finance PLC (S) | 4.875 | 05-15-22 | 2,225,000 | 2,113,750 | ||||||||||||||||||||||
Intelsat Jackson Holdings SA | 7.500 | 04-01-21 | 6,000,000 | 4,530,000 | ||||||||||||||||||||||
SBA Communications Corp. | 4.875 | 07-15-22 | 3,000,000 | 3,105,000 | ||||||||||||||||||||||
SFR Group SA (S) | 7.375 | 05-01-26 | 2,000,000 | 2,044,380 | ||||||||||||||||||||||
T-Mobile USA, Inc. | 6.000 | 03-01-23 | 6,000,000 | 6,409,860 | ||||||||||||||||||||||
T-Mobile USA, Inc. | 6.000 | 04-15-24 | 2,100,000 | 2,247,000 | ||||||||||||||||||||||
Wind Acquisition Finance SA (S) | 7.375 | 04-23-21 | 3,335,000 | 3,489,244 | ||||||||||||||||||||||
Windstream Services LLC | 7.750 | 10-01-21 | 1,000,000 | 995,000 | ||||||||||||||||||||||
Wireless telecommunication services 2.6% | ||||||||||||||||||||||||||
Digicel, Ltd. (S) | 6.000 | 04-15-21 | 3,500,000 | 3,115,000 | ||||||||||||||||||||||
Sprint Communications, Inc. | 6.000 | 11-15-22 | 2,000,000 | 1,872,500 | ||||||||||||||||||||||
Sprint Communications, Inc. | 8.375 | 08-15-17 | 2,000,000 | 2,077,500 | ||||||||||||||||||||||
Sprint Corp. | 7.125 | 06-15-24 | 5,075,000 | 4,948,125 | ||||||||||||||||||||||
Utilities 4.1% | 18,720,490 | |||||||||||||||||||||||||
Electric utilities 1.2% | ||||||||||||||||||||||||||
Talen Energy Supply LLC | 4.600 | 12-15-21 | 3,500,000 | 2,598,750 | ||||||||||||||||||||||
Talen Energy Supply LLC (S) | 4.625 | 07-15-19 | 2,900,000 | 2,726,000 | ||||||||||||||||||||||
Gas utilities 0.4% | ||||||||||||||||||||||||||
AmeriGas Partners LP | 5.625 | 05-20-24 | 1,750,000 | 1,855,000 | ||||||||||||||||||||||
Independent power and renewable electricity producers 2.5% | ||||||||||||||||||||||||||
Dynegy, Inc. | 5.875 | 06-01-23 | 4,322,000 | 3,922,215 | ||||||||||||||||||||||
NRG Energy, Inc. (S) | 6.625 | 01-15-27 | 2,300,000 | 2,254,000 | ||||||||||||||||||||||
NRG Energy, Inc. (S) | 7.250 | 05-15-26 | 930,000 | 946,275 | ||||||||||||||||||||||
NRG Yield Operating LLC | 5.375 | 08-15-24 | 4,300,000 | 4,418,250 | ||||||||||||||||||||||
Term loans (M) 3.1% | $14,138,131 | |||||||||||||||||||||||||
(Cost $16,297,427) | ||||||||||||||||||||||||||
Consumer discretionary 0.7% | 3,168,675 | |||||||||||||||||||||||||
Media 0.4% | ||||||||||||||||||||||||||
Lions Gate Entertainment Corp. (T) | TBD | 06-27-17 | 2,025,000 | 2,025,000 | ||||||||||||||||||||||
Specialty retail 0.3% | ||||||||||||||||||||||||||
Payless, Inc. | 5.000 | 03-11-21 | 1,955,000 | 1,143,675 | ||||||||||||||||||||||
Industrials 1.4% | 6,431,103 | |||||||||||||||||||||||||
Aerospace and defense 0.7% | ||||||||||||||||||||||||||
WP CPP Holdings LLC | 4.500 | 12-28-19 | 3,183,463 | 3,115,814 | ||||||||||||||||||||||
Machinery 0.5% | ||||||||||||||||||||||||||
Gardner Denver, Inc. | 4.250 | 07-30-20 | 2,188,718 | 2,117,585 | ||||||||||||||||||||||
Road and rail 0.2% | ||||||||||||||||||||||||||
Livingston International, Inc. | 9.500 | 04-18-20 | 1,330,783 | 1,197,704 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Telecommunication services 1.0% | $4,538,353 | |||||||||||||||||||||||||
Diversified telecommunication services 1.0% | ||||||||||||||||||||||||||
Birch Communications, Inc. | 7.750 | 07-17-20 | 5,932,488 | 4,538,353 | ||||||||||||||||||||||
Shares | Value | |||||||||||||||||||||||||
Common stocks 0.5% | $2,141,649 | |||||||||||||||||||||||||
(Cost $2,743,647) | ||||||||||||||||||||||||||
Energy 0.3% | 1,249,649 | |||||||||||||||||||||||||
Energy equipment and services 0.0% | ||||||||||||||||||||||||||
TPT Acquisition, Inc. (I) | 2,560 | 0 | ||||||||||||||||||||||||
Oil, gas and consumable fuels 0.3% | ||||||||||||||||||||||||||
Halcon Resources Corp. (I) | 123,230 | 1,155,897 | ||||||||||||||||||||||||
Seventy Seven Energy, Inc. (I) | 4,974 | 93,752 | ||||||||||||||||||||||||
Financials 0.2% | 892,000 | |||||||||||||||||||||||||
Diversified financial services 0.2% | ||||||||||||||||||||||||||
iPayment, Inc. (I) | 223,000 | 892,000 | ||||||||||||||||||||||||
Preferred securities 1.2% | $5,351,434 | |||||||||||||||||||||||||
(Cost $5,380,070) | ||||||||||||||||||||||||||
Health care 0.2% | 813,309 | |||||||||||||||||||||||||
Teva Pharmaceutical Industries, Ltd., 7.000% | 1,000 | 813,309 | ||||||||||||||||||||||||
Utilities 1.0% | 4,538,125 | |||||||||||||||||||||||||
Dominion Resources, Inc., 6.750% | 44,000 | 2,195,600 | ||||||||||||||||||||||||
DTE Energy Co., 6.500% (I) | 22,040 | 1,146,080 | ||||||||||||||||||||||||
NextEra Energy, Inc., 6.123% | 24,025 | 1,196,445 | ||||||||||||||||||||||||
Warrants 0.0% | $63,456 | |||||||||||||||||||||||||
(Cost $1,747,023) | ||||||||||||||||||||||||||
Seventy Seven Energy, Inc. (Expiration Date: 8-1-21) (I)(N) | 27,003 | 63,456 | ||||||||||||||||||||||||
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||||||||
Escrow certificates 0.0% | $180 | |||||||||||||||||||||||||
(Cost $290,749) | ||||||||||||||||||||||||||
Energy 0.0% | 180 | |||||||||||||||||||||||||
Seventy Seven Energy, Inc. (I) | 6.500 | 07-15-22 | 3,130,000 | 180 | ||||||||||||||||||||||
Par value^ | Value | |||||||||||||||||||||||||
Short-term investments 0.7% | $3,438,000 | |||||||||||||||||||||||||
(Cost $3,438,000) | ||||||||||||||||||||||||||
Repurchase agreement 0.7% | 3,438,000 | |||||||||||||||||||||||||
Repurchase Agreement with State Street Corp. dated 9-30-16 at 0.030% to be repurchased at $3,438,009 on 10-3-16, collateralized by $3,185,000 U.S. Treasury Notes, 3.500% due 5-15-20 (valued at $3,511,463, including interest) | 3,438,000 | 3,438,000 |
Par value^ | Value | |||||||||||||||||||||||||
Repurchase agreement (continued) | ||||||||||||||||||||||||||
Total investments (Cost $458,287,971)† 98.9% | $452,193,380 | |||||||||||||||||||||||||
Other assets and liabilities, net 1.1% | $5,013,746 | |||||||||||||||||||||||||
Total net assets 100.0% | $457,207,126 |
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. | ||||||||||||||||||||||||||
Key to Security Abbreviations and Legend | ||||||||||||||||||||||||||
LIBOR | London Interbank Offered Rate | |||||||||||||||||||||||||
(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. | |||||||||||||||||||||||||
(N) | Strike price and/or expiration date not available. | |||||||||||||||||||||||||
(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 $194,239,856 or 42.5% of the fund's net assets as of 9-30-16. | |||||||||||||||||||||||||
(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, which is disclosed as TBD (To Be Determined). | |||||||||||||||||||||||||
† | At 9-30-16, the aggregate cost of investment securities for federal income tax purposes was $458,547,806. Net unrealized depreciation aggregated to $6,354,426, of which $15,549,164 related to appreciated investment securities and $21,903,590 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-16 (unaudited)
Assets | ||||||||||||||||||||||||||||||
Investments, at value (Cost $458,287,971) | $452,193,380 | |||||||||||||||||||||||||||||
Cash | 6,724,629 | |||||||||||||||||||||||||||||
Foreign currency, at value (Cost $429,106) | 422,879 | |||||||||||||||||||||||||||||
Receivable for investments sold | 1,450,777 | |||||||||||||||||||||||||||||
Receivable for fund shares sold | 893,080 | |||||||||||||||||||||||||||||
Unrealized appreciation on forward foreign currency contracts | 44,117 | |||||||||||||||||||||||||||||
Interest receivable | 7,776,210 | |||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 60,196 | |||||||||||||||||||||||||||||
Total assets | 469,565,268 | |||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||
Payable for investments purchased | 9,964,185 | |||||||||||||||||||||||||||||
Unrealized depreciation on forward foreign currency contracts | 33,681 | |||||||||||||||||||||||||||||
Payable for fund shares repurchased | 1,967,936 | |||||||||||||||||||||||||||||
Distributions payable | 64,997 | |||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||
Accounting and legal services fees | 12,979 | |||||||||||||||||||||||||||||
Transfer agent fees | 38,824 | |||||||||||||||||||||||||||||
Trustees' fees | 837 | |||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 274,703 | |||||||||||||||||||||||||||||
Total liabilities | 12,358,142 | |||||||||||||||||||||||||||||
Net assets | $457,207,126 | |||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||
Paid-in capital | $577,813,288 | |||||||||||||||||||||||||||||
Accumulated distributions in excess of net investment income | (4,030,666 | ) | ||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (110,485,113 | ) | ||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | (6,090,383 | ) | ||||||||||||||||||||||||||||
Net assets | $457,207,126 | |||||||||||||||||||||||||||||
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 ($235,655,622 ÷ 24,648,893 shares)1 | $9.56 | |||||||||||||||||||||||||||||
Class C ($50,848,179 ÷ 5,319,732 shares)1 | $9.56 | |||||||||||||||||||||||||||||
Class I ($102,624,031 ÷ 10,727,739 shares) | $9.57 | |||||||||||||||||||||||||||||
Class R6 ($97,450 ÷ 10,196 shares) | $9.56 | |||||||||||||||||||||||||||||
Class NAV ($67,981,844 ÷ 7,107,830 shares) | $9.56 | |||||||||||||||||||||||||||||
Maximum offering price per share | ||||||||||||||||||||||||||||||
Class A (net asset value per share ÷ 96%)2 | $9.96 |
1 | 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. | ||||||||||||||||
2 | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
STATEMENT OF OPERATIONS For the six months ended 9-30-16 (unaudited)
Investment income | ||||||||||||||||||||||||
Interest | $16,071,681 | |||||||||||||||||||||||
Dividends | 23,348 | |||||||||||||||||||||||
Less foreign taxes withheld | (2,625 | ) | ||||||||||||||||||||||
Total investment income | 16,092,404 | |||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Investment management fees | 1,522,501 | |||||||||||||||||||||||
Distribution and service fees | 574,298 | |||||||||||||||||||||||
Accounting and legal services fees | 35,595 | |||||||||||||||||||||||
Transfer agent fees | 244,860 | |||||||||||||||||||||||
Trustees' fees | 5,203 | |||||||||||||||||||||||
State registration fees | 117,211 | |||||||||||||||||||||||
Printing and postage | 113,161 | |||||||||||||||||||||||
Professional fees | 143,209 | |||||||||||||||||||||||
Custodian fees | 40,348 | |||||||||||||||||||||||
Other | 11,343 | |||||||||||||||||||||||
Total expenses | 2,807,729 | |||||||||||||||||||||||
Less expense reductions | (51,068 | ) | ||||||||||||||||||||||
Net expenses | 2,756,661 | |||||||||||||||||||||||
Net investment income | 13,335,743 | |||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||
Investments and foreign currency transactions | (54,417,849 | ) | ||||||||||||||||||||||
(54,417,849 | ) | |||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
Investments and translation of assets and liabilities in foreign currencies | 89,565,728 | |||||||||||||||||||||||
89,565,728 | ||||||||||||||||||||||||
Net realized and unrealized gain | 35,147,879 | |||||||||||||||||||||||
Increase in net assets from operations | $48,483,622 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-16 | Year ended 3-31-16 | ||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | |||||||||||||||||||||||||||||||||||||||||||||
From operations | |||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $13,335,743 | $46,738,588 | |||||||||||||||||||||||||||||||||||||||||||
Net realized loss | (54,417,849 | ) | (46,959,989 | ) | |||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | 89,565,728 | (61,051,997 | ) | ||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | 48,483,622 | (61,273,398 | ) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||
From net investment income | |||||||||||||||||||||||||||||||||||||||||||||
Class A | (7,761,811 | ) | (22,694,766 | ) | |||||||||||||||||||||||||||||||||||||||||
Class C | (1,431,172 | ) | (3,808,119 | ) | |||||||||||||||||||||||||||||||||||||||||
Class I | (3,478,430 | ) | (16,415,472 | ) | |||||||||||||||||||||||||||||||||||||||||
Class R21 | (1,822 | ) | (6,632 | ) | |||||||||||||||||||||||||||||||||||||||||
Class R41 | (1,848 | ) | (6,816 | ) | |||||||||||||||||||||||||||||||||||||||||
Class R6 | (3,690 | ) | (7,983 | ) | |||||||||||||||||||||||||||||||||||||||||
Class NAV | (2,239,236 | ) | (6,628,140 | ) | |||||||||||||||||||||||||||||||||||||||||
Total distributions | (14,918,009 | ) | (49,567,928 | ) | |||||||||||||||||||||||||||||||||||||||||
From fund share transactions | (59,675,516 | ) | (233,564,053 | ) | |||||||||||||||||||||||||||||||||||||||||
Total decrease | (26,109,903 | ) | (344,405,379 | ) | |||||||||||||||||||||||||||||||||||||||||
Net assets | |||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 483,317,029 | 827,722,408 | |||||||||||||||||||||||||||||||||||||||||||
End of period | $457,207,126 | $483,317,029 | |||||||||||||||||||||||||||||||||||||||||||
Accumulated distribution in excess of net investment income | ($4,030,666 | ) | ($2,448,400 | ) |
1Class R2 and Class R4 shares liquidated on 7-19-16.
Financial highlights
Class A Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $8.91 | $10.37 | $11.03 | $11.02 | $10.52 | $11.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.26 | 0.65 | 0.63 | 0.71 | 0.74 | 1.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.68 | (1.42 | ) | (0.63 | ) | 0.10 | 0.53 | (0.25 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.94 | (0.77 | ) | — | 0.81 | 1.27 | 0.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.29 | ) | (0.69 | ) | (0.66 | ) | (0.74 | ) | (0.76 | ) | (1.04 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | — | — | (0.06 | ) | (0.01 | ) | (0.61 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.29 | ) | (0.69 | ) | (0.66 | ) | (0.80 | ) | (0.77 | ) | (1.65 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.56 | $8.91 | $10.37 | $11.03 | $11.02 | $10.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 10.77 | 5 | (7.54 | ) | (0.03 | ) | 7.62 | 12.59 | 8.12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $236 | $252 | $373 | $313 | $208 | $16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.17 | 6,7 | 1.09 | 1.08 | 1.15 | 1.30 | 1.68 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.16 | 6,7 | 1.08 | 1.07 | 1.15 | 1.18 | 1.24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 5.54 | 6 | 6.71 | 5.87 | 6.45 | 6.83 | 9.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 81 | 41 | 28 | 26 | 15 | 64 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Certain expenses are presented unannualized due to one time merger expense. |
Class C Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $8.91 | $10.36 | $11.03 | $11.02 | $11.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.22 | 0.58 | 0.55 | 0.61 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.68 | (1.41 | ) | (0.64 | ) | 0.10 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.90 | (0.83 | ) | (0.09 | ) | 0.71 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.62 | ) | (0.58 | ) | (0.64 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | — | — | (0.06 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.25 | ) | (0.62 | ) | (0.58 | ) | (0.70 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.56 | $8.91 | $10.36 | $11.03 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5,6 | 10.36 | 7 | (8.15 | ) | (0.86 | ) | 6.73 | 0.09 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $51 | $52 | $64 | $28 | — | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.92 | 9,10 | 1.85 | 1.83 | 2.22 | 16.98 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.91 | 9,10 | 1.84 | 1.82 | 1.93 | 1.93 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 4.78 | 9 | 5.99 | 5.12 | 5.58 | 5.54 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 81 | 41 | 28 | 26 | 15 | 11 |
1 | Six months ended 9-30-16. 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 | Certain expenses are presented unannualized due to one time merger expense. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11 | The portfolio turnover is shown for the period from 4-1-12 to 3-31-13. |
Class I Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $8.92 | $10.37 | $11.04 | $11.02 | $10.52 | $11.36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.27 | 0.67 | 0.66 | 0.73 | 0.77 | 1.10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.68 | (1.40 | ) | (0.64 | ) | 0.12 | 0.53 | (0.26 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.95 | (0.73 | ) | 0.02 | 0.85 | 1.30 | 0.84 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.30 | ) | (0.72 | ) | (0.69 | ) | (0.77 | ) | (0.79 | ) | (1.07 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | — | — | (0.06 | ) | (0.01 | ) | (0.61 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | (0.30 | ) | (0.72 | ) | (0.69 | ) | (0.83 | ) | (0.80 | ) | (1.68 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.57 | $8.92 | $10.37 | $11.04 | $11.02 | $10.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 10.91 | 4 | (7.19 | ) | 0.14 | 8.01 | 12.90 | 8.39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $103 | $112 | $277 | $119 | $40 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.91 | 6,7 | 0.83 | 0.81 | 0.89 | 1.07 | 4.23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.84 | 6,7 | 0.82 | 0.80 | 0.87 | 0.87 | 0.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 5.87 | 6 | 6.91 | 6.13 | 6.71 | 7.06 | 10.17 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 81 | 41 | 28 | 26 | 15 | 64 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Certain expenses are presented unannualized due to one time merger expense. |
Class R6 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $8.91 | $10.37 | $10.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.28 | 0.69 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.68 | (1.41 | ) | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.96 | (0.72 | ) | 0.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.74 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.56 | $8.91 | $10.37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 10.98 | 5 | (7.10 | ) | 0.19 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 6 | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.80 | 7,8 | 4.51 | 15.86 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.78 | 7,8 | 0.70 | 0.67 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 6.09 | 7 | 7.26 | 8.24 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 81 | 41 | 28 | 9 |
1 | Six months ended 9-30-16. Unaudited. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R6 shares is 3-27-15. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | Certain expenses are presented unannualized due to one time merger expense. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | The portfolio turnover is shown for the period from 4-1-14 to 3-31-15. |
Class NAV Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $8.92 | $10.37 | $11.08 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.28 | 0.68 | 0.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.67 | (1.40 | ) | (0.69 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.95 | (0.72 | ) | (0.29 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.73 | ) | (0.42 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $9.56 | $8.92 | $10.37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 10.97 | 5 | (7.08 | ) | (2.58 | ) 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $68 | $67 | $113 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.80 | 6,7 | 0.71 | 0.67 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.79 | 6,7 | 0.70 | 0.67 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 5.89 | 6 | 7.06 | 6.40 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 81 | 41 | 28 | 8 |
1 | Six months ended 9-30-16. 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 | Certain expenses are presented unannualized due to one time merger expense. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | The portfolio turnover is shown for the period from 4-1-14 to 3-31-15. |
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 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 for each class may differ. Class R2 and Class R4 shares were liquidated on July 19, 2016.
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 qualifies 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 scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission (SEC) and applicable regulations.
In order to value the securities, the fund uses the following valuation techniques: Debt obligations are valued based on the evaluated prices provided by an independent pricing vendor or from broker-dealers. Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market 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. 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.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
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 scheduled 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 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 and related inputs 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, 2016, by major security category or type:
Total value at 9-30-16 | Level 1 quoted price | Level 2 significant observable inputs | Level 3 significant unobservable inputs | ||
Corporate bonds | |||||
Consumer discretionary | $80,509,568 | — | $80,509,568 | — | |
Consumer staples | 27,491,688 | — | 27,491,688 | — | |
Energy | 60,201,314 | — | 60,201,314 | — | |
Financials | 43,504,714 | — | 43,504,714 | — | |
Health care | 35,169,921 | — | 35,169,921 | — | |
Industrials | 36,362,955 | — | 36,362,955 | — | |
Information technology | 17,727,670 | — | 17,727,670 | — | |
Materials | 49,067,151 | — | 49,067,151 | — | |
Real estate | 4,591,168 | — | 4,591,168 | — | |
Telecommunication services | 53,713,891 | — | 53,713,891 | — | |
Utilities | 18,720,490 | — | 18,720,490 | — | |
Term loans | |||||
Consumer discretionary | 3,168,675 | — | 1,143,675 | $2,025,000 | |
Industrials | 6,431,103 | — | 6,431,103 | — | |
Telecommunication services | 4,538,353 | — | 4,538,353 | — | |
Common stocks | |||||
Energy | 1,249,649 | $1,249,649 | — | — | |
Financials | 892,000 | 892,000 | — | — | |
Preferred securities | |||||
Health care | 813,309 | 813,309 | — | — | |
Utilities | 4,538,125 | 4,538,125 | — | — | |
Warrants | 63,456 | 63,456 | — | — | |
Escrow certificates | 180 | — | — | 180 | |
Short-term investments | 3,438,000 | — | 3,438,000 | — | |
Total investments in securities | $452,193,380 | $7,556,539 | $442,611,661 | $2,025,180 | |
Other financial instruments | |||||
Forward foreign currency contracts | $10,436 | — | $10,436 | — |
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.
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, assets and liabilities resulting from repurchase agreements are not offset 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 and generally have longer settlement periods than conventional debt securities. Term loans involve special types of risk, including credit risk, interest-rate risk, counterparty risk, risk associated with extended settlement, and the risks of being a lender. 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. Transactions in loan investments typically take a significant amount of time (i.e., seven days or longer) to settle. This could pose a liquidity risk to the fund and, if the fund's exposure to such investments is substantial, could impair the fund's ability to meet redemptions. Because term loans may not be 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. There is greater risk that the fund may have limited rights to enforce the terms of an underlying loan than for other types of debt instruments.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily NAV 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. Foreign taxes are provided for based on the fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Foreign currency translation. Assets, including investments and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. 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 extent of any overdraft, and to the maximum extent permitted by law.
Effective June 30, 2016, the fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $1 billion unsecured committed line of credit. Excluding commitments designated for certain funds, the fund can borrow up to an aggregate commitment amount of $750 million, subject to asset coverage and other limitations as specified in the agreement. 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 based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. Prior to June 30, 2016, the fund had a similar agreement that enabled it to participate in a $750 million unsecured committed line of credit. For the six months ended September 30, 2016, the fund had no borrowings under either line of credit. Commitment fees for the six months ended September 30, 2016, were $2,008.
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, for all classes, are calculated daily at the class level based on the net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, as of March 31, 2016, the fund has a short-term capital loss carryforward of $7,393,376 and a long-term capital loss carryforward of $47,914,735 available to offset future net realized capital gains. These carryforwards do not expire.
As of March 31, 2016, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are 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, characterization of distributions, derivative 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 over-the-counter (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 funds are 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.
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell specific currencies at a price that is set on the date of the contract. The forward contract calls for delivery of the currencies on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral if applicable, the risk that currency movements will not favor the fund thereby reducing the fund's total return, and the potential for losses in excess of the amounts recognized on the Statement of assets and liabilities.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by the fund as an unrealized gain or loss. Realized gains or losses, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, are recorded upon delivery or receipt of the currency or settlement with the counterparty.
During the six months ended September 30, 2016, the fund used forward foreign currency contracts to gain exposure to foreign currencies. The fund held forward foreign currency contracts with U.S. Dollar notional values ranging from $6.7 million to $20.3 million, as measured at each quarter end. The following table summarizes the contracts held at September 30, 2016:
Contract to buy | Contract to sell | Counterparty | Contractual settlement date | Unrealized appreciation | Unrealized depreciation | Net unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||||
CAD | 8,000,000 | USD | 6,057,164 | Royal Bank of Canada | 12/21/2016 | $44,117 | — | $44,117 | ||||||||||||||||||||||||
USD | 6,494,522 | CAD | 8,559,780 | Royal Bank of Canada | 12/21/2016 | — | ($33,681 | ) | (33,681 | ) | ||||||||||||||||||||||
$44,117 | ($33,681 | ) | $10,436 |
Currency abbreviation | |||
CAD | Canadian Dollar | USD | United States Dollar |
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at September 30, 2016 by risk category:
Risk | Statement of assets and liabilities location | Financial instruments location | Asset derivatives fair value | Liabilities derivatives fair value | ||||||||||
Foreign currency | Unrealized appreciation/depreciation on forward foreign currency contracts | Forward foreign currency contracts | $44,117 | ($33,681 | ) |
For financial reporting purposes, the fund does not offset OTC derivative assets or liabilities that are subject to master netting arrangements, as defined by the ISDAs, in the Statement of assets and liabilities. In the event of default by the counterparty or a termination of the agreement, the ISDA allows an offset of amounts across the various transactions between the fund and the applicable counterparty.
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, 2016:
Risk | Statement of operations location | Investments and foreign currency transactions* | ||||||
Foreign currency | Net realized gain (loss) on: | ($298,382 | ) |
*Realized gain/loss associated with forward foreign currency contracts is included in this caption on the Statement of operations.
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended September 30, 2016:
Risk | Statement of operations location | Investments and translation of assets and liabilities in foreign currencies* |
Foreign currency | Change in unrealized appreciation (depreciation) | $413,343 |
*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 aggregate daily net assets; (b) 0.625% of the next $250 million of the fund's aggregate daily net assets; (c) 0.600% of the next $500 million of the fund's aggregate daily net assets; (d) 0.550% of the next $1.5 billion of the fund's aggregate
daily net assets; (e) 0.525% of the fund's aggregate daily net assets in excess of $2.5 billion. Aggregate net assets generally include the net assets of the fund and other funds identified in the management agreement. 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 group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. 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. During the six months ended September 30, 2016, this waiver amounted to 0.01% of the fund's average net assets on an annualized basis. 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 and/or reimburse all class-specific expenses for Class R6 shares of the fund to the extent they exceed 0.00% of average net assets attributable to Class R6 shares. This waiver expires on August 31, 2017, 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.
Prior to the Class R4 liquidation, the Advisor contractually agreed to reduce its management fee or, if necessary, make payment to Class R4 shares in an amount equal to the amount by which all class level expenses of Class R4 shares exceed 1.07% of average net assets attributable to the class, excluding: taxes, fund brokerage commissions, interest and litigation and indemnification expenses, 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.
Prior to July 1, 2016, the Advisor 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 0.87% and1.32% of average net assets for Class I and Class R2 shares, respectively.
For the six months ended September 30, 2016, the expense reductions amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $9,398 | Class R4 | $2 | |
Class C | 1,974 | Class R6 | 14 | |
Class I | 37,088 | Class NAV | 2,563 | |
Class R2 | 2 | Total | $51,041 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2016 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 accounting and legal services fees incurred for the six months ended September 30, 2016 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 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. In addition, under a service plan for Class R2 and Class R4 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 A | 0.30% | — |
Class C | 1.00% | — |
Class R2 | 0.25% | 0.25% |
Class R4 | 0.25% | 0.10% |
Class A shares are currently charged 0.25% for Rule 12-1 fees.
The fund's Distributor has agreed to waive 0.10% of Rule12b-1 fees for Class R4 shares. The current waiver agreement expires on August 31, 2017, 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. This contractual waiver amounted to $27 for Class R4 shares for the six months ended September 30, 2016.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $308,871 for the six months ended September 30, 2016. Of this amount, $59,176 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $248,665 was paid as sales commissions to broker-dealers and $1,030 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, 2016, CDSCs received by the Distributor amounted to $46 and $3,281 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. 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, 2016 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $312,262 | $153,194 |
Class C | 261,902 | 32,132 |
Class I | — | 59,516 |
Class R2 | 67 | 4 |
Class R4 | 67 | 4 |
Class R6 | — | 10 |
Total | $574,298 | $244,860 |
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, 2016 and for the year ended March 31, 2016 were as follows:
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 2,641,347 | $24,434,608 | 8,238,328 | $79,682,372 | ||||||||||||||||||||||
Distributions reinvested | 785,628 | 7,366,171 | 2,283,743 | 21,677,352 | ||||||||||||||||||||||
Repurchased | (7,074,724 | ) | (65,986,413 | ) | (18,233,718 | ) | (172,858,434 | ) | ||||||||||||||||||
Net decrease | (3,647,749 | ) | ($34,185,634 | ) | (7,711,647 | ) | ($71,498,710 | ) | ||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 428,673 | $3,968,089 | 1,639,390 | $15,897,798 | ||||||||||||||||||||||
Distributions reinvested | 146,788 | 1,375,188 | 391,305 | 3,697,636 | ||||||||||||||||||||||
Repurchased | (1,052,993 | ) | (9,811,067 | ) | (2,408,134 | ) | (22,793,426 | ) | ||||||||||||||||||
Net decrease | (477,532 | ) | ($4,467,790 | ) | (377,439 | ) | ($3,197,992 | ) | ||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 2,890,017 | $27,068,102 | 12,609,508 | $124,812,848 | ||||||||||||||||||||||
Distributions reinvested | 370,698 | 3,476,275 | 1,716,341 | 16,390,711 | ||||||||||||||||||||||
Repurchased | (5,109,083 | ) | (47,601,083 | ) | (28,483,388 | ) | (267,210,065 | ) | ||||||||||||||||||
Net decrease | (1,848,368 | ) | ($17,056,706 | ) | (14,157,539 | ) | ($126,006,506 | ) | ||||||||||||||||||
Class R2 shares1 | ||||||||||||||||||||||||||
Repurchased | (9,662 | ) | ($91,389 | ) | — | — | ||||||||||||||||||||
Net increase (decrease) | (9,662 | ) | ($91,389 | ) | — | — | ||||||||||||||||||||
Class R4 shares1 | ||||||||||||||||||||||||||
Repurchased | (9,662 | ) | ($91,388 | ) | — | — | ||||||||||||||||||||
Net increase (decrease) | (9,662 | ) | ($91,388 | ) | — | — | ||||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 2,203 | $20,102 | 6,500 | $56,186 | ||||||||||||||||||||||
Distributions reinvested | 71 | 655 | 96 | 831 | ||||||||||||||||||||||
Repurchased | (7,196 | ) | (66,269 | ) | (1,140 | ) | (10,181 | ) | ||||||||||||||||||
Net increase (decrease) | (4,922 | ) | ($45,512 | ) | 5,456 | $46,836 | ||||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 37,849 | $357,555 | 210,393 | $2,100,332 | ||||||||||||||||||||||
Distributions reinvested | 238,703 | 2,239,236 | 695,135 | 6,628,140 | ||||||||||||||||||||||
Repurchased | (677,684 | ) | (6,333,888 | ) | (4,298,480 | ) | (41,636,153 | ) | ||||||||||||||||||
Net decrease | (401,132 | ) | ($3,737,097 | ) | (3,392,952 | ) | ($32,907,681 | ) | ||||||||||||||||||
Total net decrease | (6,399,027 | ) | ($59,675,516 | ) | (25,634,121 | ) | ($233,564,053 | ) |
1Class R2 and Class R4 shares liquidated on 7-19-16.
Affiliates of the fund owned 95% and 100% of shares of beneficial interest of Class R6 and Class NAV, respectively, on September 30, 2016. Such concentration of shareholders' capital could have a material effect on the fund if such shareholders redeem from the fund.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $367,390,195 and $419,314,135, respectively, for the six months ended September 30. 2016.
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, 2016, funds within the John Hancock group of funds complex held 14.9% of the fund's net assets. John Hancock Funds II Lifestyle Conservative Fund had an affiliate ownership of 9.9% of the fund's net assets.
Note 9 — Interfund trading
The fund is permitted to purchase or sell securities from or to certain other affiliated funds, as set forth in Rule 17a-7 of the 1940 Act, under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the fund from or to another fund that is or could be considered an affiliate complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the period) ended September 30, 2016, the fund engaged in sales amounting to $10,524,479.
Note 10 — Subsequent event
At the close of business on October 28, 2016, the fund merged into John Hancock Focused High Yield Fund. This merger was approved by the Board of Trustees on June 23, 2016 and Shareholders of the fund approved the merger on September 30, 2016. In addition, John Hancock Focused High Yield Fund changed its name to John Hancock High Yield Fund.
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 20-23, 2016 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 24-25, 2016.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 20-23, 2016, 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 mutual 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.
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 John Hancock group of funds complex (the John Hancock Fund 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 for the one-, three- and five-year periods ended December 31, 2015. The Board also noted that the fund underperformed its peer group average for the one- and three-year
periods ended December 31, 2015 and outperformed its peer group average for the five-year period ended December 31, 2015. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the peer group for the five-year period. The Board took into account management's proposal to merge the fund into another fund in the complex and 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 and net 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. In addition, the Board took into account that management had agreed 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 reduces 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 John Hancock Fund 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 information 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 | |||||||
(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 contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. 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; | |
(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 Fund Complex); | |
(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 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 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 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 and compared them 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 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) | noted that the subadvisory fees are paid by the Advisor not the fund and that the 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.
The fund held a Special Meeting of Shareholders on September 30, 2016. The following proposal was considered by the shareholders:
Proposal: Approve an Agreement and Plan of Reorganization between John Hancock Core High Yield Fund and John Hancock Focused High Yield Fund.
FOR | AGAINST | ABSTAIN |
24,195,683.962 | 1,167,095,645 | 1,036,315.627 |
As a result of the shareholders' approval of the proposal, the reorganization occurred as of the close of business on October 28, 2016.
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor John Hancock Asset Management a division of Manulife Asset Management (North America) Limited Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund 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. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Balanced Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Small Cap Value Small Company Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Global Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Global Real Estate Natural Resources Redwood Regional Bank Seaport Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Income Allocation Fund Lifestyle Aggressive Portfolio Lifestyle Balanced Portfolio Lifestyle Conservative Portfolio Lifestyle Growth Portfolio Lifestyle Moderate Portfolio Retirement Choices Portfolios Retirement Living Portfolios Retirement Living II Portfolios EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Large Cap Core 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 |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We build funds based on investor needs, then search the world to find proven
portfolio teams with specialized expertise in those strategies. As a manager of
managers, we apply vigorous oversight to ensure that they continue to meet
our uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, 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. | ||
MF322360 | 346SA 9/16 11/16 |
John Hancock
Small Company Fund
Semiannual report 9/30/16
A message to shareholders
Dear shareholder,
The past six months were generally positive for U.S. equities, particularly for small-capitalization stocks. Major indexes reached all-time highs this summer, elevated by a mix of low interest rates globally, continued strong earnings here in the United States, and relatively little trading volume.
Although economic growth remains more sluggish than many would like, consumer spending and employment gains have been supportive of the continued stock market advance. Even household incomes have begun to rise in earnest. As stocks notched new highs in July and August, market volatility was surprisingly muted. Choppy markets returned in September, however, as investors speculated when the U.S. Federal Reserve (Fed) would make its next rate increase. The recent U.S. presidential election also affected the markets.
It's prudent to expect that volatility will pick up in the coming months. Indeed, this summer's market milestones have been greeted with more angst than optimism on the part of investors. Lofty stock valuations in the United States have been on investors' minds, coupled with the potential for additional interest-rate increases by the Fed, which are widely expected given the health of the underlying economy. Should markets encounter tougher going this fall, one of your best resources is your financial advisor, who can help ensure your portfolio is sufficiently diversified to meet your long-term objectives and to withstand the inevitable bumps along the way.
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, 2016. They are subject to change at any time. All investments entail risks, including the possible loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Small Company Fund
INVESTMENT OBJECTIVE
The fund seeks maximum long-term total return.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/16 (%)
The Russell 2000 Index is an index that measures performance of the 2,000 smallest companies in 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 result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
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 in exchange for Class A 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. |
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. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end 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 prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Relative underperformance
The fund generated a good absolute return that nevertheless fell considerably short of its benchmark, the Russell 2000 Index, due to a challenging market backdrop for our investment philosophy.
Weak stock picking
Our stock selection hampered results, especially in the healthcare and materials sectors.
Sector allocation further detracted
An underweight in the healthcare sector hurt results, although security selection in real estate and consumer staples partly offset that negative impact.
SECTOR COMPOSITION AS OF 9/30/16 (%)
A note about risks
The stock prices of small companies can change more frequently and dramatically than those of large companies. The value of a company's equity securities is subject to changes in the company's financial condition and overall market and economic conditions. Frequent trading may increase fund transaction costs. Sector investing is subject to greater risks than the market as a whole. Investments focused in one sector may fluctuate more than investments in a wider variety of sectors. Owning an exchange-traded fund generally reflects the risks of owning the underlying securities it is designed to track. Please see the fund's prospectus for additional risks.
![kathrynvorisek.jpg](https://capedge.com/proxy/N-CSRS/0001145443-16-002320/kathrynvorisek.jpg)
Kathryn Vorisek
Portfolio Manager
Mesirow Financial
How did the fund perform compared with the benchmark for the six months ended September 30, 2016?
Although it produced a positive absolute return, the fund underperformed its benchmark, the Russell 2000 Index, partly due to an inhospitable backdrop for our style of investing. During the period, concerns about sluggish global growth led global central banks, including the U.S. Federal Reserve, to maintain economically stimulative policies and delay expected interest-rate increases. As investors came to anticipate low rates to last for a longer-than-expected period, small-cap stocks enjoyed strong results. This was especially true for lower-quality companies with few profits and small market capitalizations. The market also favored companies with significant exposure to international markets, including emerging markets, or commodity prices.
Both of these trends hampered the fund's results, given that our management philosophy emphasizes higher-quality, lower-risk small caps, which were less likely to benefit from market conditions. Also, to the fund's detriment this period, we emphasized domestically focused companies rather than their internationally focused counterparts.
Looking more specifically at the fund's portfolio, it was hampered by subpar stock selection in a variety of sectors, especially healthcare and materials, and to a lesser extent in industrials, information technology, and financials. The fund did, however, see moderately favorable performance from stock selection in real estate and consumer staples.
Which stocks detracted from performance relative to the benchmark?
In the materials sector, Headwaters, Inc., a manufacturer of construction materials, was a particularly big detractor. Headwaters makes fly ash, a substance used in concrete mixtures and derived from the burning of coal at power plants. Unfortunately, unfavorable weather conditions led to reduced demand for coal-fueled electricity, which in turn resulted in less supply of fly ash and difficulty for Headwaters in meeting its revenue target. At period end, we still held this stock in the portfolio, as we believed these were temporary challenges and saw favorable longer-term prospects for the company.
Another detractor in the materials category was Commercial Metals Company. Among other products, this metals fabricator makes rebar, steel bars widely used in the construction industry. As the price of rebar failed to increase to the same extent as that of other steel products, Commercial Metals' stock languished. We saw better opportunities elsewhere in the market and, in August, sold this holding from the fund.
TOP 10 HOLDINGS AS OF 9/30/16 (%)
Capitol Federal Financial, Inc. | 1.9 |
EMCOR Group, Inc. | 1.8 |
Western Alliance Bancorp | 1.7 |
Physicians Realty Trust | 1.6 |
Barnes Group, Inc. | 1.6 |
Wintrust Financial Corp. | 1.6 |
QTS Realty Trust, Inc., Class A | 1.6 |
John Bean Technologies Corp. | 1.6 |
Curtiss-Wright Corp. | 1.6 |
IDACORP, Inc. | 1.5 |
TOTAL | 16.5 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
Meanwhile, in healthcare, drug manufacturer Impax Laboratories, Inc. hampered results. Impax reported weaker-than-expected financial results in April and again in July due to weaker-than-expected revenue from sales of some of the company's key products. We were concerned about this shortfall as well as the firm's ability to address it, which led us to sell the fund's stake in August.
Prestige Brands Holdings, Inc., which owns primarily well-known over-the-counter health and wellness products, also weighed on relative performance. Despite delivering solid business fundamentals, shares of Prestige Brands fell from a relatively high valuation coming into the period; slower growth related to few recent brand acquisitions also hurt. In light of the company's track record of identifying and acquiring good businesses, we saw this slowing growth as a temporary phenomenon, and at period end we continued to hold the fund's position in the stock.
Which stocks contributed to relative performance?
The fund's top individual contributor was B&G Foods, Inc. Shares of this food producer were up strongly during the period, due to a combination of strong financial results as well as optimism about the company's growth prospects following its acquisition of the well-known Green Giant food brand. At period end, we remained confident in the stock and still held B&G in the fund.
Another strong relative performer was LogMeIn, Inc., which provides cloud computing services. LogMeIn shares rose sharply this period, especially in July, after the company announced plans to merge with a division of Citrix Corp. This move is expected to create significant revenue and cost synergies for the combined entity. Shortly after the acquisition was announced, we sold the fund's LogMeIn shares, given the stock's limited upside based on its higher valuation and the fact that the market capitalization of the combined company was expected to be too large for a small-cap fund.
Also adding value was the fund's position in Nexstar Broadcasting Group, Inc., a television broadcaster and media company. At period end, Nexstar was close to acquiring Media General, pending final regulatory approval. Assuming the merger goes through, as we expect, we think the combination should increase Nexstar's earnings capacity.
How did you manage the fund this period?
Regardless of the market backdrop, we follow a consistent management strategy, emphasizing high-quality small-cap companies with good earnings power.
Within that framework, we made some modest changes to the fund's positioning, so as to take advantage of individual opportunities we were seeing in the marketplace. These changes stemmed from our bottom-up (meaning stock-by-stock) investment approach, rather than a top-down effort to overweight or underweight certain sectors.
In the industrials sector, for example, we made some new investments that added exposure to international markets. We also purchased certain stocks tied to the health of the housing market, which continues to improve, as well as in the technology and energy areas, where we saw various compelling prospects.
In contrast, we saw relatively fewer opportunities among utilities, which we saw as more vulnerable to potential higher interest rates down the road. Challenges in the retail industry also led us to reduce the fund's exposure to the consumer discretionary sector.
MANAGED BY
![]() | Kathryn Vorisek On the fund since 1996 Investing since 1984 |
![]() | Leo Harmon, CFA On the fund since 2003 Investing since 1993 |
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2016
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||
1-year | 5-year | 10-year | 6-month | 5-year | 10-year | ||
Class A1 | 0.14 | 12.06 | 5.36 | -0.47 | 76.74 | 68.51 | |
Class I1,2 | 5.69 | 13.61 | 6.25 | 4.91 | 89.25 | 83.43 | |
Class R11,2 | 5.00 | 12.84 | 5.49 | 4.54 | 82.93 | 70.67 | |
Class R21,2 | 5.34 | 12.98 | 4.98 | 4.76 | 84.12 | 62.63 | |
Class R31,2 | 5.14 | 12.95 | 5.60 | 4.64 | 83.82 | 72.43 | |
Class R41,2 | 5.59 | 13.40 | 5.96 | 4.89 | 87.55 | 78.47 | |
Class R51,2 | 5.76 | 13.64 | 6.23 | 4.94 | 89.53 | 83.08 | |
Class R61,2 | 5.86 | 13.74 | 6.34 | 5.00 | 90.35 | 84.83 | |
Class ADV1,2 | 5.48 | 13.36 | 5.90 | 4.82 | 87.21 | 77.38 | |
Index† | 15.47 | 15.82 | 7.07 | 13.18 | 108.44 | 98.06 |
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 prospectus 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 R1 | Class R2 | Class R3 | Class R4 | Class R5 | Class R6 | Class ADV | |
Gross (%) | 1.49 | 1.17 | 1.83 | 1.58 | 1.73 | 1.43 | 1.13 | 1.08 | 1.44 |
Net (%) | 1.43 | 1.13 | 1.80 | 1.55 | 1.70 | 1.30 | 1.10 | 1.06 | 1.34 |
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 and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index is the Russell 2000 Index. |
See the following page for footnotes.
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 | 9-30-06 | 18,343 | 18,343 | 19,806 |
Class R11,2 | 9-30-06 | 17,067 | 17,067 | 19,806 |
Class R21,2 | 9-30-06 | 16,263 | 16,263 | 19,806 |
Class R31,2 | 9-30-06 | 17,243 | 17,243 | 19,806 |
Class R41,2 | 9-30-06 | 17,847 | 17,847 | 19,806 |
Class R51,2 | 9-30-06 | 18,308 | 18,308 | 19,806 |
Class R61,2 | 9-30-06 | 18,483 | 18,483 | 19,806 |
Class ADV1,2 | 9-30-06 | 17,738 | 17,738 | 19,806 |
The Russell 2000 Index is an index that measures performance of the 2,000 smallest companies in 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 result in lower returns.
Footnotes related to performance pages
1 | On 12-11-09, through a reorganization, the fund acquired all of the assets of FMA Small Company Portfolio (the predecessor fund). On that date, the predecessor fund offered its Investor shares 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 I, and Class ADV shares prior to this date are those of the predecessor fund's Investor shares that have been recalculated to apply the gross fees and expenses of Class A, Class I, and Class ADV shares, as applicable. Class R1, Class R3, Class R4, and Class R5 shares were first offered on 4-30-10; Class R2 shares were first offered on 3-1-12; Class R6 shares were first offered on 9-1-11. 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 R2, and Class R6 shares, as applicable. |
2 | For certain types of investors, as described in the fund's prospectus. |
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, 2016, with the same investment held until September 30, 2016.
Account value on 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,047.70 | $7.29 | 1.42% |
Class I | 1,000.00 | 1,049.10 | 5.75 | 1.12% |
Class R1 | 1,000.00 | 1,045.40 | 9.13 | 1.78% |
Class R2 | 1,000.00 | 1,047.60 | 7.49 | 1.46% |
Class R3 | 1,000.00 | 1,046.40 | 8.57 | 1.67% |
Class R4 | 1,000.00 | 1,048.90 | 6.21 | 1.21% |
Class R5 | 1,000.00 | 1,049.40 | 5.55 | 1.08% |
Class R6 | 1,000.00 | 1,050.00 | 5.24 | 1.02% |
Class ADV | 1,000.00 | 1,048.20 | 6.83 | 1.33% |
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, 2016, 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:
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, 2016, with the same investment held until September 30, 2016. 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 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,017.90 | $7.18 | 1.42% |
Class I | 1,000.00 | 1,019.50 | 5.67 | 1.12% |
Class R1 | 1,000.00 | 1,016.10 | 9.00 | 1.78% |
Class R2 | 1,000.00 | 1,017.70 | 7.38 | 1.46% |
Class R3 | 1,000.00 | 1,016.70 | 8.44 | 1.67% |
Class R4 | 1,000.00 | 1,019.00 | 6.12 | 1.21% |
Class R5 | 1,000.00 | 1,019.70 | 5.47 | 1.08% |
Class R6 | 1,000.00 | 1,020.00 | 5.17 | 1.02% |
Class ADV | 1,000.00 | 1,018.40 | 6.73 | 1.33% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 | Expenses are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
Fund's investments
As of 9-30-16 (unaudited) | ||||||||||||||
Shares | Value | |||||||||||||
Common stocks 95.9% | $281,857,971 | |||||||||||||
(Cost $251,010,637) | ||||||||||||||
Consumer discretionary 11.5% | 33,761,561 | |||||||||||||
Auto components 1.1% | ||||||||||||||
Visteon Corp. | 46,555 | 3,336,131 | ||||||||||||
Distributors 1.2% | ||||||||||||||
Pool Corp. | 38,462 | 3,635,428 | ||||||||||||
Diversified consumer services 1.2% | ||||||||||||||
Bright Horizons Family Solutions, Inc. (I) | 54,405 | 3,639,150 | ||||||||||||
Hotels, restaurants and leisure 2.4% | ||||||||||||||
Marriott Vacations Worldwide Corp. | 52,915 | 3,879,728 | ||||||||||||
Texas Roadhouse, Inc. | 78,545 | 3,065,611 | ||||||||||||
Household durables 1.0% | ||||||||||||||
Installed Building Products, Inc. (I) | 80,645 | 2,892,736 | ||||||||||||
Media 1.3% | ||||||||||||||
Nexstar Broadcasting Group, Inc., Class A | 67,425 | 3,891,097 | ||||||||||||
Specialty retail 1.0% | ||||||||||||||
Select Comfort Corp. (I) | 131,055 | 2,830,788 | ||||||||||||
Textiles, apparel and luxury goods 2.3% | ||||||||||||||
Steven Madden, Ltd. (I) | 84,355 | 2,915,304 | ||||||||||||
Wolverine World Wide, Inc. | 159,600 | 3,675,588 | ||||||||||||
Consumer staples 5.1% | 14,982,928 | |||||||||||||
Food and staples retailing 1.2% | ||||||||||||||
Performance Food Group Company (I) | 138,440 | 3,433,312 | ||||||||||||
Food products 2.6% | ||||||||||||||
B&G Foods, Inc. | 86,887 | 4,273,103 | ||||||||||||
Snyder's-Lance, Inc. | 105,535 | 3,543,865 | ||||||||||||
Household products 1.3% | ||||||||||||||
Central Garden & Pet Company, Class A (I) | 150,510 | 3,732,648 | ||||||||||||
Energy 4.9% | 14,419,535 | |||||||||||||
Energy equipment and services 2.7% | ||||||||||||||
Oil States International, Inc. (I) | 88,110 | 2,781,633 | ||||||||||||
Patterson-UTI Energy, Inc. | 150,985 | 3,377,534 | ||||||||||||
Superior Energy Services, Inc. | 92,520 | 1,656,108 | ||||||||||||
Oil, gas and consumable fuels 2.2% | ||||||||||||||
Callon Petroleum Company (I) | 194,695 | 3,056,712 | ||||||||||||
Carrizo Oil & Gas, Inc. (I) | 87,335 | 3,547,548 |
Shares | Value | |||||||||||||
Financials 16.8% | $49,332,966 | |||||||||||||
Banks 11.2% | ||||||||||||||
Banc of California, Inc. | 173,340 | 3,026,516 | ||||||||||||
Chemical Financial Corp. | 97,850 | 4,318,120 | ||||||||||||
FNB Corp. | 290,725 | 3,575,918 | ||||||||||||
Great Western Bancorp, Inc. | 89,610 | 2,985,805 | ||||||||||||
IBERIABANK Corp. | 49,155 | 3,299,284 | ||||||||||||
Old National Bancorp | 208,365 | 2,929,612 | ||||||||||||
Webster Financial Corp. | 85,585 | 3,253,086 | ||||||||||||
Western Alliance Bancorp (I) | 129,445 | 4,859,365 | ||||||||||||
Wintrust Financial Corp. | 84,880 | 4,716,782 | ||||||||||||
Insurance 3.7% | ||||||||||||||
American Equity Investment Life Holding Company | 162,150 | 2,874,920 | ||||||||||||
Argo Group International Holdings, Ltd. | 65,550 | 3,698,331 | ||||||||||||
ProAssurance Corp. | 78,780 | 4,134,374 | ||||||||||||
Thrifts and mortgage finance 1.9% | ||||||||||||||
Capitol Federal Financial, Inc. | 402,335 | 5,660,853 | ||||||||||||
Health care 7.4% | 21,720,739 | |||||||||||||
Biotechnology 2.6% | ||||||||||||||
Emergent BioSolutions, Inc. (I) | 66,725 | 2,103,839 | ||||||||||||
Ligand Pharmaceuticals, Inc. (I) | 35,625 | 3,635,888 | ||||||||||||
MiMedx Group, Inc. (I) | 219,115 | 1,880,007 | ||||||||||||
Health care equipment and supplies 1.3% | ||||||||||||||
Integra LifeSciences Holdings Corp. (I) | 47,070 | 3,885,629 | ||||||||||||
Health care providers and services 1.0% | ||||||||||||||
The Ensign Group, Inc. | 150,550 | 3,030,572 | ||||||||||||
Health care technology 1.0% | ||||||||||||||
Omnicell, Inc. (I) | 76,200 | 2,918,460 | ||||||||||||
Pharmaceuticals 1.5% | ||||||||||||||
Prestige Brands Holdings, Inc. (I) | 88,385 | 4,266,344 | ||||||||||||
Industrials 13.9% | 40,795,290 | |||||||||||||
Aerospace and defense 1.6% | ||||||||||||||
Curtiss-Wright Corp. | 50,070 | 4,561,878 | ||||||||||||
Air freight and logistics 1.3% | ||||||||||||||
XPO Logistics, Inc. (I) | 106,360 | 3,900,221 | ||||||||||||
Commercial services and supplies 1.2% | ||||||||||||||
MSA Safety, Inc. | 57,960 | 3,363,998 | ||||||||||||
Construction and engineering 1.8% | ||||||||||||||
EMCOR Group, Inc. | 90,070 | 5,369,973 | ||||||||||||
Machinery 8.0% | ||||||||||||||
Barnes Group, Inc. | 118,330 | 4,798,282 | ||||||||||||
CIRCOR International, Inc. | 59,565 | 3,547,691 |
Shares | Value | |||||||||||||
Industrials (continued) | ||||||||||||||
Machinery (continued) | ||||||||||||||
Franklin Electric Company, Inc. | 95,480 | $3,886,991 | ||||||||||||
ITT, Inc. | 103,525 | 3,710,336 | ||||||||||||
John Bean Technologies Corp. | 64,690 | 4,563,880 | ||||||||||||
Oshkosh Corp. | 55,215 | 3,092,040 | ||||||||||||
Information technology 18.0% | 52,960,189 | |||||||||||||
Electronic equipment, instruments and components 2.4% | ||||||||||||||
Littelfuse, Inc. | 31,155 | 4,013,076 | ||||||||||||
Sanmina Corp. (I) | 104,235 | 2,967,570 | ||||||||||||
IT services 3.3% | ||||||||||||||
Blackhawk Network Holdings, Inc. (I) | 94,235 | 2,843,070 | ||||||||||||
CACI International, Inc., Class A (I) | 31,330 | 3,161,197 | ||||||||||||
ExlService Holdings, Inc. (I) | 73,500 | 3,663,240 | ||||||||||||
Semiconductors and semiconductor equipment 4.5% | ||||||||||||||
Inphi Corp. (I) | 87,705 | 3,816,045 | ||||||||||||
MaxLinear, Inc., Class A (I) | 137,045 | 2,777,902 | ||||||||||||
MKS Instruments, Inc. | 76,100 | 3,784,453 | ||||||||||||
Monolithic Power Systems, Inc. | 36,630 | 2,948,715 | ||||||||||||
Software 6.3% | ||||||||||||||
Aspen Technology, Inc. (I) | 80,760 | 3,778,760 | ||||||||||||
Blackbaud, Inc. | 59,775 | 3,965,474 | ||||||||||||
Bottomline Technologies (de), Inc. (I) | 130,705 | 3,046,734 | ||||||||||||
CommVault Systems, Inc. (I) | 81,135 | 4,310,703 | ||||||||||||
Take-Two Interactive Software, Inc. (I) | 78,530 | 3,540,132 | ||||||||||||
Technology hardware, storage and peripherals 1.5% | ||||||||||||||
Electronics For Imaging, Inc. (I) | 88,780 | 4,343,118 | ||||||||||||
Materials 5.8% | 17,112,616 | |||||||||||||
Chemicals 2.4% | ||||||||||||||
Ingevity Corp. (I) | 74,445 | 3,431,915 | ||||||||||||
Sensient Technologies Corp. | 50,210 | 3,805,918 | ||||||||||||
Construction materials 2.4% | ||||||||||||||
Eagle Materials, Inc. | 46,225 | 3,573,193 | ||||||||||||
Headwaters, Inc. (I) | 204,110 | 3,453,541 | ||||||||||||
Metals and mining 1.0% | ||||||||||||||
United States Steel Corp. | 151,010 | 2,848,049 | ||||||||||||
Real estate 8.1% | 23,955,899 | |||||||||||||
Equity real estate investment trusts 8.1% | ||||||||||||||
Agree Realty Corp. | 64,755 | 3,201,487 | ||||||||||||
Brandywine Realty Trust | 265,534 | 4,147,641 | ||||||||||||
Colony Starwood Homes | 152,980 | 4,390,526 | ||||||||||||
DiamondRock Hospitality Company | 311,955 | 2,838,791 |
Shares | Value | |||||||||||||
Real estate (continued) | ||||||||||||||
Equity real estate investment trusts (continued) | ||||||||||||||
Physicians Realty Trust | 223,325 | $4,810,421 | ||||||||||||
QTS Realty Trust, Inc., Class A | 86,415 | 4,567,033 | ||||||||||||
Utilities 4.4% | 12,816,248 | |||||||||||||
Electric utilities 3.0% | ||||||||||||||
IDACORP, Inc. | 57,450 | 4,497,186 | ||||||||||||
PNM Resources, Inc. | 128,085 | 4,190,941 | ||||||||||||
Gas utilities 1.4% | ||||||||||||||
Spire, Inc. | 64,765 | 4,128,121 | ||||||||||||
Yield (%) | Shares | Value | ||||||||||||
Short-term investments 3.5% | $10,229,962 | |||||||||||||
(Cost $10,229,962) | ||||||||||||||
Money market funds 3.5% | 10,229,962 | |||||||||||||
State Street Institutional Liquid Reserves Fund, Premier Class | 0.3969(Y | ) | 10,229,962 | 10,229,962 | ||||||||||
Total investments (Cost $261,240,599)† 99.4% | $292,087,933 | |||||||||||||
Other assets and liabilities, net 0.6% | $1,713,300 | |||||||||||||
Total net assets 100.0% | $293,801,233 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund. | ||||||||||||||
Key to Security Abbreviations and Legend | ||||||||||||||
(I) | Non-income producing security. | |||||||||||||
(Y) | The rate shown is the annualized seven-day yield as of 9-30-16. | |||||||||||||
† | At 9-30-16, the aggregate cost of investment securities for federal income tax purposes was $262,210,541. Net unrealized appreciation aggregated to $29,877,392, of which $32,742,252 related to appreciated investment securities and $2,864,860 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-16 (unaudited)
Assets | ||||||||||||||||||||||||||||||
Investments, at value (Cost $261,240,599) | $292,087,933 | |||||||||||||||||||||||||||||
Receivable for investments sold | 7,288,448 | |||||||||||||||||||||||||||||
Receivable for fund shares sold | 1,981,949 | |||||||||||||||||||||||||||||
Dividends and interest receivable | 321,874 | |||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 81,698 | |||||||||||||||||||||||||||||
Total assets | 301,761,902 | |||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||
Payable for investments purchased | 6,845,102 | |||||||||||||||||||||||||||||
Payable for fund shares repurchased | 1,043,922 | |||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||
Accounting and legal services fees | 7,373 | |||||||||||||||||||||||||||||
Transfer agent fees | 28,342 | |||||||||||||||||||||||||||||
Distribution and service fees | 698 | |||||||||||||||||||||||||||||
Investment management fees | 179 | |||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 35,053 | |||||||||||||||||||||||||||||
Total liabilities | 7,960,669 | |||||||||||||||||||||||||||||
Net assets | $293,801,233 | |||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||
Paid-in capital | $272,880,805 | |||||||||||||||||||||||||||||
Accumulated net investment loss | (131,412 | ) | ||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments | (9,795,494 | ) | ||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 30,847,334 | |||||||||||||||||||||||||||||
Net assets | $293,801,233 | |||||||||||||||||||||||||||||
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 ($228,200,532 ÷ 9,026,319 shares)1 | $25.28 | |||||||||||||||||||||||||||||
Class I ($58,622,140 ÷ 2,266,631 shares) | $25.86 | |||||||||||||||||||||||||||||
Class R1 ($654,307 ÷ 26,561 shares) | $24.63 | |||||||||||||||||||||||||||||
Class R2 ($723,877 ÷ 28,590 shares) | $25.32 | |||||||||||||||||||||||||||||
Class R3 ($208,174 ÷ 8,389 shares) | $24.82 | |||||||||||||||||||||||||||||
Class R4 ($133,272 ÷ 5,225 shares) | $25.51 | |||||||||||||||||||||||||||||
Class R5 ($81,295 ÷ 3,139 shares) | $25.90 | |||||||||||||||||||||||||||||
Class R6 ($5,119,056 ÷ 196,696 shares) | $26.03 | |||||||||||||||||||||||||||||
Class ADV ($58,580 ÷ 2,301 shares) | $25.46 | |||||||||||||||||||||||||||||
Maximum offering price per share | ||||||||||||||||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $26.61 |
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 9-30-16 (unaudited)
Investment income | ||||||||||||||||||||||||
Dividends | $1,768,597 | |||||||||||||||||||||||
Interest | 21,103 | |||||||||||||||||||||||
Total investment income | 1,789,700 | |||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Investment management fees | 1,267,126 | |||||||||||||||||||||||
Distribution and service fees | 349,690 | |||||||||||||||||||||||
Accounting and legal services fees | 20,556 | |||||||||||||||||||||||
Transfer agent fees | 166,492 | |||||||||||||||||||||||
Trustees' fees | 2,827 | |||||||||||||||||||||||
State registration fees | 90,772 | |||||||||||||||||||||||
Printing and postage | 22,211 | |||||||||||||||||||||||
Professional fees | 29,748 | |||||||||||||||||||||||
Custodian fees | (1,323 | ) | ||||||||||||||||||||||
Other | 11,529 | |||||||||||||||||||||||
Total expenses | 1,959,628 | |||||||||||||||||||||||
Less expense reductions | (38,516 | ) | ||||||||||||||||||||||
Net expenses | 1,921,112 | |||||||||||||||||||||||
Net investment loss | (131,412 | ) | ||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||
Investments | 2,792,772 | |||||||||||||||||||||||
2,792,772 | ||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
Investments | 10,269,562 | |||||||||||||||||||||||
10,269,562 | ||||||||||||||||||||||||
Net realized and unrealized gain | 13,062,334 | |||||||||||||||||||||||
Increase in net assets from operations | $12,930,922 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-16 | Year ended 3-31-16 | ||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | |||||||||||||||||||||||||||||||||||||||||||||
From operations | |||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | ($131,412 | ) | ($212,810 | ) | |||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) | 2,792,772 | (1,844,412 | ) | ||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | 10,269,562 | (13,995,380 | ) | ||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | 12,930,922 | (16,052,602 | ) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | |||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (13,629,651 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I | — | (2,785,011 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R1 | — | (52,347 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (55,274 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R3 | — | (19,705 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (5,111 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R5 | — | (5,405 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (337,695 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class ADV | — | (39,750 | ) | ||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (16,929,949 | ) | ||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 20,011,539 | 66,902,529 | |||||||||||||||||||||||||||||||||||||||||||
Total increase | 32,942,461 | 33,919,978 | |||||||||||||||||||||||||||||||||||||||||||
Net assets | |||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 260,858,772 | 226,938,794 | |||||||||||||||||||||||||||||||||||||||||||
End of period | $293,801,233 | $260,858,772 | |||||||||||||||||||||||||||||||||||||||||||
Accumulated net investment loss | ($131,412 | ) | — |
Financial highlights
Class A Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $24.13 | $27.75 | $28.67 | $24.10 | $20.86 | $21.44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss2 | (0.02 | ) | (0.04 | ) | (0.05 | ) | (0.13 | ) | (0.07 | ) | (0.01 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.17 | (1.77 | ) | 1.87 | 5.23 | 3.31 | (0.57 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.15 | (1.81 | ) | 1.82 | 5.10 | 3.24 | (0.58 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $25.28 | $24.13 | $27.75 | $28.67 | $24.10 | $20.86 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 4.77 | 5 | (6.69 | ) | 7.28 | 21.26 | 15.53 | (2.71 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $228 | $214 | $180 | $162 | $120 | $129 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.45 | 6,7 | 1.46 | 1.43 | 1.47 | 1.54 | 1.54 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.42 | 6,7 | 1.43 | 1.43 | 1.47 | 1.50 | 1.44 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.15 | ) 6 | (0.14 | ) | (0.17 | ) | (0.47 | ) | (0.36 | ) | (0.07 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class I Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $24.65 | $28.22 | $29.02 | $24.32 | $20.96 | $21.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.02 | 0.04 | 0.03 | (0.04 | ) | — | 3 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.19 | (1.80 | ) | 1.91 | 5.27 | 3.36 | (0.58 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.21 | (1.76 | ) | 1.94 | 5.23 | 3.36 | (0.51 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.04 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | (0.04 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $25.86 | $24.65 | $28.22 | $29.02 | $24.32 | $20.96 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 4.91 | 5 | (6.40 | ) | 7.61 | 21.61 | 16.03 | (2.34 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $59 | $39 | $43 | $50 | $49 | $69 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.14 | 6,7 | 1.15 | 1.14 | 1.15 | 1.18 | 1.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.12 | 6,7 | 1.13 | 1.13 | 1.14 | 1.11 | 1.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.17 | 6 | 0.13 | 0.12 | (0.15 | ) | 0.02 | 0.34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class R1 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $23.56 | $27.23 | $28.29 | $23.87 | $20.71 | $21.37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss2 | �� | (0.06 | ) | (0.15 | ) | (0.15 | ) | (0.21 | ) | (0.13 | ) | (0.08 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.13 | (1.71 | ) | 1.83 | 5.16 | 3.29 | (0.58 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.07 | (1.86 | ) | 1.68 | 4.95 | 3.16 | (0.66 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $24.63 | $23.56 | $27.23 | $28.29 | $23.87 | $20.71 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 4.54 | 4 | (7.01 | ) | 6.86 | 20.84 | 15.26 | (3.09 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | $1 | $1 | $1 | $1 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.79 | 6,7 | 1.95 | 2.84 | 2.94 | 4.37 | 13.34 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.78 | 6,7 | 1.80 | 1.80 | 1.80 | 1.80 | 1.80 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.52 | ) 6 | (0.56 | ) | (0.55 | ) | (0.82 | ) | (0.60 | ) | (0.40 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class R2 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $24.17 | $27.83 | $28.77 | $24.21 | $20.96 | $20.56 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | (0.02 | ) | (0.05 | ) | (0.08 | ) | (0.14 | ) | (0.08 | ) | 0.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.17 | (1.80 | ) | 1.88 | 5.23 | 3.33 | 0.38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.15 | (1.85 | ) | 1.80 | 5.09 | 3.25 | 0.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $25.32 | $24.17 | $27.83 | $28.77 | $24.21 | $20.96 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 4.76 | 5 | (6.82 | ) | 7.18 | 21.12 | 15.51 | 1.95 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | $1 | $1 | — | 6 | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.47 | 7,9 | 2.21 | 4.66 | 7.99 | 20.22 | 16.31 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.46 | 7,9 | 1.55 | 1.55 | 1.55 | 1.55 | 1.55 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.20 | ) 7 | (0.20 | ) | (0.29 | ) | (0.54 | ) | (0.39 | ) | 1.31 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 | 8 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class R3 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $23.72 | $27.38 | $28.39 | $23.94 | $20.76 | $21.39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss2 | (0.05 | ) | (0.11 | ) | (0.12 | ) | (0.19 | ) | (0.12 | ) | (0.06 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.15 | (1.74 | ) | 1.85 | 5.17 | 3.30 | (0.57 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.10 | (1.85 | ) | 1.73 | 4.98 | 3.18 | (0.63 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $24.82 | $23.72 | $27.38 | $28.39 | $23.94 | $20.76 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 4.64 | 4 | (6.93 | ) | 7.02 | 20.90 | 15.32 | (2.95 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 1.67 | 6,7 | 2.54 | 9.06 | 10.89 | 5.15 | 4.65 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.66 | 6,7 | 1.70 | 1.70 | 1.70 | 1.70 | 1.70 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.41 | ) 6 | (0.42 | ) | (0.43 | ) | (0.75 | ) | (0.56 | ) | (0.32 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class R4 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $24.32 | $27.92 | $28.79 | $24.17 | $20.87 | $21.44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.01 | — | 3 | (0.01 | ) | (0.08 | ) | (0.03 | ) | (0.01 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.18 | (1.79 | ) | 1.88 | 5.23 | 3.33 | (0.56 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.19 | (1.79 | ) | 1.87 | 5.15 | 3.30 | (0.57 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $25.51 | $24.32 | $27.92 | $28.79 | $24.17 | $20.87 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 4.89 | 5 | (6.58 | ) | 7.42 | 21.41 | 15.81 | (2.66 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 1.32 | 7,8 | 4.26 | 19.97 | 18.99 | 18.82 | 28.72 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.21 | 7,8 | 1.30 | 1.30 | 1.30 | 1.31 | 1.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.07 | 7 | (0.01 | ) | (0.05 | ) | (0.31 | ) | (0.17 | ) | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class R5 Shares Period ended | 9-30-16 | 1 | �� | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $24.68 | $28.24 | $29.03 | $24.32 | $20.96 | $21.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | 0.02 | 0.03 | 0.04 | (0.03 | ) | 0.01 | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.20 | (1.78 | ) | 1.91 | 5.27 | 3.35 | (0.56 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.22 | (1.75 | ) | 1.95 | 5.24 | 3.36 | (0.51 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $25.90 | $24.68 | $28.24 | $29.03 | $24.32 | $20.96 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 4.94 | 4 | (6.36 | ) | 7.64 | 21.65 | 16.03 | (2.34 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 1.08 | 6,7 | 2.53 | 5.61 | 6.05 | 7.78 | 8.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.08 | 6,7 | 1.10 | 1.10 | 1.10 | 1.10 | 1.10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.19 | 6 | 0.11 | 0.16 | (0.11 | ) | 0.05 | 0.28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class R6 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $24.79 | $28.34 | $29.08 | $24.34 | $20.97 | $18.69 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | 0.03 | 0.09 | 0.09 | (0.02 | ) | 0.02 | 0.06 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.21 | (1.83 | ) | 1.91 | 5.29 | 3.35 | 2.26 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.24 | (1.74 | ) | 2.00 | 5.27 | 3.37 | 2.32 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.04 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | (0.04 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $26.03 | $24.79 | $28.34 | $29.08 | $24.34 | $20.97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 5.00 | 5 | (6.30 | ) | 7.80 | 21.75 | 16.07 | 12.45 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $5 | $5 | $1 | $1 | — | 6 | — | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.04 | 7,9 | 1.17 | 4.54 | 7.66 | 18.63 | 15.46 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.02 | 7,9 | 1.04 | 0.97 | 1.04 | 1.04 | 1.04 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.24 | 7 | 0.34 | 0.32 | (0.06 | ) | 0.11 | 0.55 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 | 8 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
Class ADV Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $24.29 | $27.90 | $28.78 | $24.17 | $20.88 | $21.44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)2 | (0.04 | ) | (0.02 | ) | (0.03 | ) | (0.09 | ) | (0.04 | ) | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.21 | (1.78 | ) | 1.89 | 5.23 | 3.33 | (0.57 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.17 | (1.80 | ) | 1.86 | 5.14 | 3.29 | (0.56 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.81 | ) | (2.74 | ) | (0.53 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $25.46 | $24.29 | $27.90 | $28.78 | $24.17 | $20.88 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 4.82 | 4 | (6.62 | ) | 7.39 | 21.37 | 15.76 | (2.61 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 5 | $1 | $1 | $1 | — | 5 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.38 | 6,7 | 2.05 | 4.17 | 4.51 | 4.91 | 4.34 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.33 | 6,7 | 1.34 | 1.34 | 1.34 | 1.34 | 1.34 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.30 | ) 6 | (0.07 | ) | (0.09 | ) | (0.35 | ) | (0.20 | ) | 0.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 69 | 108 | 79 | 85 | 97 | 133 |
1 | Six months ended 9-30-16. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Includes reimbursement of overbilling of custody expenses in prior years of 0.01%. |
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 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 qualifies 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 scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission (SEC) and applicable regulations.
In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market 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.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
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 and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of September 30, 2016, 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 NAV 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.
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 extent of any overdraft, and to the maximum extent permitted by law.
Effective June 30, 2016, the fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $1 billion unsecured committed line of credit. Excluding commitments designated for certain funds, the fund can borrow up to an aggregate commitment amount of $750 million, subject to asset coverage and other limitations as specified in the agreement. 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 based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. Prior to June 30, 2016, the fund had a similar agreement that enabled it to participate in a $750 million unsecured committed line of credit. For the six months ended September 30, 2016, the fund had no borrowings under either line of credit. Commitment fees for the six months ended September 30, 2016, were $1,541.
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.
During the six months ended September 30, 2016, the fund received reimbursement from State Street Bank for overbilling of custody out-of-pocket fees from prior years. As a result of the reimbursement, the fund reflects negative custodian fees in the current reporting period. Custodian fees incurred by the fund for the six months ended September 30, 2016 prior to this reimbursement were $14,684.
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, for all classes, are calculated daily at the class level based on the 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, 2016, 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, net operating losses and late year ordinary loss deferral.
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, on an annual basis, equal to the sum of: (a) 0.90% of the first $500 million of the fund's average daily net assets; (b) 0.85% of the next $500 million of the fund's average daily net assets; and (c) 0.80% of the fund's average daily net assets in excess of $1 billion. The Advisor has a subadvisory agreement with Mesirow Financial Investment Management, formerly 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 funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. 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. During the six months ended September 30, 2016, this waiver amounted to 0.01% of the fund's average net assets on an annualized basis. 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 1.43%, 1.13%, 1.80%, 1.55%, 1.70%, 1.30%,1.10%, and 1.34% for Class A, Class I, Class R1, Class R2, Class R3, Class R4, Class R5, and Class ADV shares, respectively, of average net assets (on an annualized basis) 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, 2017, 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, to the extent they exceed 0.00% of average net assets. The fee waiver and/or reimbursement will continue in effect until June 30, 2017, unless renewed by mutual agreement of the fund and Advisor based upon a determination that this is appropriate under the circumstances at the time.
For the six months ended September 30, 2016, these expense reductions amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $33,113 | Class R4 | $5 | |
Class I | 4,590 | Class R5 | 3 | |
Class R1 | 29 | Class R6 | 617 | |
Class R2 | 32 | Class ADV | 49 | |
Class R3 | 9 | Total | $38,447 |
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2016 were equivalent to a net annual effective rate of 0.87% of the fund's average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended September 30, 2016 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 Rule 12b-1 fees for Class R4 shares to limit the Rule 12b-1 fees on Class R4 to 0.15% of the average daily net assets of Class R4 shares, until at least June 30, 2017, 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. This contractual waiver amounted to $69 for Class R4 shares for the six months ended September 30, 2016.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $721,423 for the six months ended September 30, 2016. Of this amount, $123,399 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $597,038 was paid as sales commissions to broker-dealers and $986 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, 2016, CDSCs received by the Distributor amounted to $1,453 for Class A shares.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. 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, 2016 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $343,754 | $140,670 |
Class I | — | 25,072 |
Class R1 | 2,842 | 66 |
Class R2 | 1,807 | 74 |
Class R3 | 792 | 22 |
Class R4 | 191 | 12 |
Class R5 | 18 | 7 |
Class R6 | — | 431 |
Class ADV | 286 | 138 |
Total | $349,690 | $166,492 |
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 or its affiliates, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating affiliated funds. Any open loans at period end are presented under the caption Payable for interfund lending in the Statement of assets and liabilities. At period end, no interfund loans were outstanding. The fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or lender | Weighted average loan balance | Days outstanding | Weighted average interest rate | Interest income (expense) |
Lender | $11,000,000 | 1 | 0.715% | $218 |
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2016 and for the year ended March 31, 2016 were as follows:
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 1,356,106 | $33,502,494 | 3,037,876 | $77,883,439 | ||||||||||||||||||||||
Distributions reinvested | — | — | 543,417 | 13,498,483 | ||||||||||||||||||||||
Repurchased | (1,207,964 | ) | (30,121,528 | ) | (1,181,047 | ) | (30,454,452 | ) | ||||||||||||||||||
Net increase | 148,142 | $3,380,966 | 2,400,246 | $60,927,470 | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 998,348 | $25,623,103 | 363,685 | $9,845,616 | ||||||||||||||||||||||
Distributions reinvested | — | — | 109,806 | 2,783,592 | ||||||||||||||||||||||
Repurchased | (324,579 | ) | (8,270,782 | ) | (413,755 | ) | (10,987,061 | ) | ||||||||||||||||||
Net increase | 673,769 | $17,352,321 | 59,736 | $1,642,147 | ||||||||||||||||||||||
Class R1 shares | ||||||||||||||||||||||||||
Sold | 3,512 | $83,724 | 10,830 | $280,665 | ||||||||||||||||||||||
Distributions reinvested | — | — | 1,502 | 36,475 | ||||||||||||||||||||||
Repurchased | (9,456 | ) | (233,918 | ) | (29,848 | ) | (771,336 | ) | ||||||||||||||||||
Net decrease | (5,944 | ) | ($150,194 | ) | (17,516 | ) | ($454,196 | ) | ||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 3,263 | $80,934 | 22,743 | $612,600 | ||||||||||||||||||||||
Distributions reinvested | — | — | 1,606 | 39,988 | ||||||||||||||||||||||
Repurchased | (9,354 | ) | (234,953 | ) | (10,192 | ) | (279,303 | ) | ||||||||||||||||||
Net increase (decrease) | (6,091 | ) | ($154,019 | ) | 14,157 | $373,285 | ||||||||||||||||||||
Class R3 shares | ||||||||||||||||||||||||||
Sold | 756 | $18,416 | 3,898 | $102,088 | ||||||||||||||||||||||
Distributions reinvested | — | — | 806 | 19,705 | ||||||||||||||||||||||
Repurchased | (3,299 | ) | (81,476 | ) | (2,421 | ) | (59,287 | ) | ||||||||||||||||||
Net increase (decrease) | (2,543 | ) | ($63,060 | ) | 2,283 | $62,506 | ||||||||||||||||||||
Class R4 shares | ||||||||||||||||||||||||||
Sold | 2,008 | $49,924 | 3,663 | $86,767 | ||||||||||||||||||||||
Distributions reinvested | — | — | 111 | 2,770 | ||||||||||||||||||||||
Repurchased | (806 | ) | (20,664 | ) | (2,371 | ) | (56,921 | ) | ||||||||||||||||||
Net increase | 1,202 | $29,260 | 1,403 | $32,616 | ||||||||||||||||||||||
Class R5 shares | ||||||||||||||||||||||||||
Sold | 59 | $1,513 | 613 | $17,345 | ||||||||||||||||||||||
Distributions reinvested | — | — | 213 | 5,405 | ||||||||||||||||||||||
Repurchased | (25 | ) | (656 | ) | (9,406 | ) | (265,975 | ) | ||||||||||||||||||
Net increase (decrease) | 34 | $857 | (8,580 | ) | ($243,225 | ) | ||||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 21,856 | $553,125 | 179,541 | $4,857,547 | ||||||||||||||||||||||
Distributions reinvested | — | — | 13,248 | 337,695 | ||||||||||||||||||||||
Repurchased | (16,733 | ) | (423,761 | ) | (29,082 | ) | (724,893 | ) | ||||||||||||||||||
Net increase | 5,123 | $129,364 | 163,707 | $4,470,349 |
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class ADV shares | ||||||||||||||||||||||||||
Sold | 1,250 | $31,296 | 2,155 | $59,907 | ||||||||||||||||||||||
Distributions reinvested | — | — | 1,590 | 39,750 | ||||||||||||||||||||||
Repurchased | (22,442 | ) | (545,252 | ) | (359 | ) | (8,080 | ) | ||||||||||||||||||
Net increase (decrease) | (21,192 | ) | ($513,956 | ) | 3,386 | $91,577 | ||||||||||||||||||||
Total net increase | 792,500 | $20,011,539 | 2,618,822 | $66,902,529 |
Affiliates of the Trust owned 25% of shares of beneficial interest of Class R4 on September 30, 2016.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $204,789,778 and $188,424,902, respectively, for the six months ended September 30, 2016.
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 Mesirow Financial Investment Management, Inc. (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 20-23, 2016 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 24-25, 2016.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 20-23, 2016, 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 mutual 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 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 John Hancock group of funds complex (the John Hancock Fund 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, 2015 and underperformed its benchmark index and its peer group average for the five-year
period ended December 31, 2015. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the benchmark index and to the peer group for the one- and three-year periods. The Board concluded that the fund's performance has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index.
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 net 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 the fact that the fund's net total expenses had decreased from the previous year. 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 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 reduces 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 John Hancock Fund 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 information 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. |
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 contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. 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; | |
(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 Fund Complex); | |
(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 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 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 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 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 and compared them 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 performance of the fund has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index; | |||||||
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |||||||
(4) | noted that the subadvisory fees are paid by the Advisor not the fund and that the 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.
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor Mesirow Financial Investment Management, Inc. Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund 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. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Balanced Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Small Cap Value Small Company Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Global Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Global Real Estate Natural Resources Redwood Regional Bank Seaport Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Income Allocation Fund Lifestyle Aggressive Portfolio Lifestyle Balanced Portfolio Lifestyle Conservative Portfolio Lifestyle Growth Portfolio Lifestyle Moderate Portfolio Retirement Choices Portfolios Retirement Living Portfolios Retirement Living II Portfolios EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Large Cap Core 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 |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We build funds based on investor needs, then search the world to find proven
portfolio teams with specialized expertise in those strategies. As a manager of
managers, we apply vigorous oversight to ensure that they continue to meet
our uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, 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. | ||
MF322365 | 348SA 9/16 11/16 |
John Hancock
Disciplined Value Mid Cap Fund
Semiannual report 9/30/16
A message to shareholders
Dear shareholder,
The past six months were generally positive for U.S. equities, particularly for small-capitalization stocks. Major indexes reached all-time highs this summer, elevated by a mix of low interest rates globally, continued strong earnings here in the United States, and relatively little trading volume.
Although economic growth remains more sluggish than many would like, consumer spending and employment gains have been supportive of the continued stock market advance. Even household incomes have begun to rise in earnest. As stocks notched new highs in July and August, market volatility was surprisingly muted. Choppy markets returned in September, however, as investors speculated when the U.S. Federal Reserve (Fed) would make its next rate increase. The recent U.S. presidential election also affected the markets.
It's prudent to expect that volatility will pick up in the coming months. Indeed, this summer's market milestones have been greeted with more angst than optimism on the part of investors. Lofty stock valuations in the United States have been on investors' minds, coupled with the potential for additional interest-rate increases by the Fed, which are widely expected given the health of the underlying economy. Should markets encounter tougher going this fall, one of your best resources is your financial advisor, who can help ensure your portfolio is sufficiently diversified to meet your long-term objectives and to withstand the inevitable bumps along the way.
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, 2016. They are subject to change at any time. All investments entail risks, including the possible loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Disciplined Value Mid Cap Fund
INVESTMENT OBJECTIVE
The fund seeks long-term growth of capital with current income as a secondary objective.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/16 (%)
The Russell Midcap Value Index is an unmanaged index that measures the performance of those Russell Midcap Index 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 result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
1 | After the close of business on 7-9-10, holders of Investor 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 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 shares that have been recalculated to reflect the gross fees and expenses of Class A shares. |
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. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end 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 prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Market shrugs off signs of global stress
Despite spurts of global market volatility during the period, equities continued to advance.
The fund narrowly trailed its benchmark
The fund narrowly trailed its benchmark, the Russell Midcap Value Index, due to disappointing stock selection.
Industrials detracted, consumer discretionary helped
The industrials and materials sectors were the biggest detractors relative to the benchmark; consumer discretionary, financials, and utilities were the top relative contributors.
SECTOR COMPOSITION AS OF 9/30/16 (%)
A note about risks
The stock prices of midsize companies can change more frequently and dramatically than those of large companies. Value stocks may decline in price. The value of a company's equity securities is subject to changes in the company's financial condition and overall market and economic conditions. Foreign investing has additional risks, such as currency and market volatility and political and social instability. Liquidity—the extent (if at all) to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. 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 than investments in a wider variety of sectors. Please see the fund's prospectus for additional risks.
![stevenlpollack.jpg](https://capedge.com/proxy/N-CSRS/0001145443-16-002320/stevenlpollack.jpg)
Steven L. Pollack, CFA
Portfolio Manager
Boston Partners
Can you briefly describe the market environment over the six months ended September 30, 2016?
U.S. equities advanced, despite a lengthy list of challenges that included high valuations for stocks and concern about rising interest rates. Aside from the recovery in the energy sector, as oil prices have risen from their cycle lows in February, this period's major themes have been investors' flight to yield and relatively low volatility.
In addition, news of the U.K.'s referendum vote to withdraw from the European Union momentarily sent shock waves through the markets in the middle of the period before stocks stabilized and regained much of what they lost only days later. As a result, the market initially paid robustly for perceived safety, especially seeking yield in real estate investment trusts (REITs), utilities, and consumer discretionary, before those stocks became expensive and then sold off in the latter part of the period. In this environment, the fund's benchmark, the Russell Midcap Value Index, was up 9.43%.
What detracted from relative performance?
Overweights and security selection in the industrials sector detracted from relative returns. Top individual detractors in the period included Robert Half International, Inc. and ManpowerGroup, Inc. In industrials, Robert Half missed earnings estimates and then guided projections lower for future periods due to slowing growth in the staffing industry. Manpower reported lower revenues and growth, and the stock declined. Equity Residential's stock decline also hurt relative performance.
What factors contributed to performance relative to the benchmark?
The consumer discretionary and financials sectors were the most significant contributors to relative returns, primarily driven by positive security selection.
Relative to the benchmark, the top individual contributors were Energen Corp. and NetEase, Inc. We had built positions in some high-quality exploration and production companies, which had been driven down on lower oil prices despite having strong balance sheets and leading production capabilities. Those positions were rewarded during the period as the price of oil rebounded and the high-quality companies we had purchased benefited. In particular, the fund had a large active weight in Energen.
In information technology, owning Internet company NetEase, Inc., with its strong growth profile, and avoiding the slow growth, defensive telecommunication service companies, helped relative returns.
TOP 10 HOLDINGS AS OF 9/30/16 (%)
Activision Blizzard, Inc. | 1.7 |
Aon PLC | 1.6 |
Fifth Third Bancorp | 1.6 |
Fidelity National Information Services, Inc. | 1.6 |
TD Ameritrade Holding Corp. | 1.5 |
SL Green Realty Corp. | 1.5 |
Harris Corp. | 1.5 |
Discover Financial Services | 1.5 |
Edison International | 1.5 |
Unum Group | 1.5 |
TOTAL | 15.5 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
What were some notable additions and deletions to the portfolio?
During the period, we added to the fund's exposure in the consumer discretionary sector by initiating a position in PulteGroup, Inc. The home-building company trades at a discount to its peers, has revitalized its balance sheet, and has seen strong business momentum with the improvement of the housing market.
In the energy sector, we have been finding attractive opportunities in the higher-quality exploration and production companies. We initiated positions in Marathon Oil Corp. and Newfield Exploration Company, as these companies trade at a discount and have done a good job of reducing costs, which should lead to improving returns on capital in the years ahead. We also added over-the-counter store brand pharmaceutical manufacturer Perrigo Company PLC, a market leader that is currently out of favor with momentum investors.
In addition, we took advantage of dislocations between stock price and fair value to add some attractive opportunities to the strategy. In the technology segment, we added Qorvo, Inc., a manufacturer of radio frequency chips that has strong business momentum with the majority of their revenues driven by fast-growing mobile devices. In the energy sector, we continued to build the fund's positions in high-quality exploration and production companies such as Rice Energy, Inc., Gulfport Energy Corp., and QEP Resources, Inc. These companies appear to trade at a steep discount to their net asset values and we think that they will be able to generate significant returns over time.
Conversely, we exited positions in a few commodity chemical companies from the basic industries segment. We sold CF Industries Holdings, Inc. due to slowing business momentum on uncertain overseas demand and recent earnings disappointments. We also sold Methanex Corp. on slowing momentum concerns, as the demand for methanol has decreased, putting pressure on prices and earnings.
How was the portfolio positioned at the end of the period?
We continue to favor healthcare, information technology, and financials, given that these are stable industries with solid free cash flow, and continue to hold the fund underweight in consumer discretionary, REITs, and utilities. Our process remains focused on stocks with attractive valuations, strong business fundamentals, and positive business momentum.
MANAGED BY
![]() | Steven L. Pollack, CFA On the fund since 2000 Investing since 1984 |
![]() | Joseph F. Feeney, Jr., CFA On the fund since 2010 Investing since 1985 |
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2016
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||
1-year | 5-year | 10-year | 6-month | 5-year | 10-year | ||
Class A1 | 8.74 | 17.41 | 10.25 | 3.80 | 123.09 | 165.43 | |
Class C1 | 12.57 | 17.71 | 9.97 | 7.79 | 126.01 | 158.63 | |
Class I1,2 | 14.76 | 18.96 | 11.19 | 9.40 | 138.27 | 188.82 | |
Class R21,2 | 14.31 | 18.46 | 10.65 | 9.17 | 133.23 | 175.12 | |
Class R41,2 | 14.60 | 18.72 | 11.01 | 9.30 | 135.85 | 184.11 | |
Class R61,2 | 14.87 | 19.05 | 11.27 | 9.46 | 139.18 | 191.03 | |
Class ADV1,2 | 14.44 | 18.58 | 10.79 | 9.21 | 134.49 | 178.65 | |
Index† | 17.26 | 17.38 | 7.89 | 9.43 | 122.78 | 113.62 |
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 (%) | 1.13 | 1.88 | 0.86 | 1.27 | 1.12 | 0.77 | 1.13 |
Net (%) | 1.13 | 1.88 | 0.86 | 1.27 | 1.02 | 0.77 | 1.13 |
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 and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index is the Russell Midcap Value Index. |
See the following page for footnotes.
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 | 9-30-06 | 25,863 | 25,863 | 21,362 |
Class I1,2 | 9-30-06 | 28,882 | 28,882 | 21,362 |
Class R21,2 | 9-30-06 | 27,512 | 27,512 | 21,362 |
Class R41,2 | 9-30-06 | 28,411 | 28,411 | 21,362 |
Class R61,2 | 9-30-06 | 29,103 | 29,103 | 21,362 |
Class ADV1,2 | 9-30-06 | 27,865 | 27,865 | 21,362 |
The 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 result in lower returns.
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 R2, Class R4, and Class R6 shares were first offered on 8-15-11, 3-1-12, 7-2-13, and 9-1-11, 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 R2, Class R4, and Class R6 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. |
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, 2016, with the same investment held until September 30, 2016.
Account value on 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,092.50 | $5.88 | 1.12% |
Class C | 1,000.00 | 1,087.90 | 9.79 | 1.87% |
Class I | 1,000.00 | 1,094.00 | 4.46 | 0.85% |
Class R2 | 1,000.00 | 1,091.70 | 6.55 | 1.25% |
Class R4 | 1,000.00 | 1,093.00 | 5.30 | 1.01% |
Class R6 | 1,000.00 | 1,094.60 | 3.99 | 0.76% |
Class ADV | 1,000.00 | 1,092.10 | 5.87 | 1.12% |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at September 30, 2016, 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:
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, 2016, with the same investment held until September 30, 2016. 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 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.50 | $5.67 | 1.12% |
Class C | 1,000.00 | 1,015.70 | 9.45 | 1.87% |
Class I | 1,000.00 | 1,020.80 | 4.31 | 0.85% |
Class R2 | 1,000.00 | 1,018.80 | 6.33 | 1.25% |
Class R4 | 1,000.00 | 1,020.00 | 5.11 | 1.01% |
Class R6 | 1,000.00 | 1,021.30 | 3.85 | 0.76% |
Class ADV | 1,000.00 | 1,019.50 | 5.67 | 1.12% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 | Expenses are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
Fund's investments
As of 9-30-16 (unaudited) | ||||||||||||||
Shares | Value | |||||||||||||
Common stocks 97.9% | $12,495,605,146 | |||||||||||||
(Cost $9,848,909,842) | ||||||||||||||
Consumer discretionary 6.9% | 879,301,176 | |||||||||||||
Auto components 0.9% | ||||||||||||||
Lear Corp. | 266,535 | 32,309,370 | ||||||||||||
Tenneco, Inc. (I) | 1,366,355 | 79,617,506 | ||||||||||||
Automobiles 0.5% | ||||||||||||||
Harley-Davidson, Inc. (L) | 1,168,399 | 61,446,103 | ||||||||||||
Household durables 1.6% | ||||||||||||||
Newell Brands, Inc. | 2,919,380 | 153,734,551 | ||||||||||||
PulteGroup, Inc. | 2,824,115 | 56,595,265 | ||||||||||||
Internet and direct marketing retail 0.5% | ||||||||||||||
Expedia, Inc. | 582,984 | 68,045,892 | ||||||||||||
Leisure products 1.1% | ||||||||||||||
Brunswick Corp. | 2,880,887 | 140,529,668 | ||||||||||||
Media 1.5% | ||||||||||||||
Omnicom Group, Inc. | 900,405 | 76,534,425 | ||||||||||||
TEGNA, Inc. | 1,285,362 | 28,098,013 | ||||||||||||
The Interpublic Group of Companies, Inc. | 3,648,224 | 81,537,806 | ||||||||||||
Specialty retail 0.8% | ||||||||||||||
Advance Auto Parts, Inc. | 287,031 | 42,802,063 | ||||||||||||
Best Buy Company, Inc. | 1,520,443 | 58,050,514 | ||||||||||||
Consumer staples 0.8% | 104,692,612 | |||||||||||||
Beverages 0.8% | ||||||||||||||
Coca-Cola European Partners PLC | 1,647,263 | 65,725,794 | ||||||||||||
Constellation Brands, Inc., Class A | 234,049 | 38,966,818 | ||||||||||||
Energy 9.3% | 1,186,177,644 | |||||||||||||
Oil, gas and consumable fuels 9.3% | ||||||||||||||
Anadarko Petroleum Corp. | 691,758 | 43,829,787 | ||||||||||||
Cimarex Energy Company | 241,613 | 32,465,539 | ||||||||||||
Diamondback Energy, Inc. (I) | 1,464,801 | 141,411,889 | ||||||||||||
Energen Corp. | 2,997,627 | 173,023,030 | ||||||||||||
EQT Corp. | 1,630,035 | 118,373,142 | ||||||||||||
Gulfport Energy Corp. (I) | 1,807,135 | 51,051,564 | ||||||||||||
Marathon Oil Corp. | 7,290,733 | 115,266,489 | ||||||||||||
Marathon Petroleum Corp. | 1,746,222 | 70,879,151 | ||||||||||||
Newfield Exploration Company (I) | 2,693,706 | 117,068,463 | ||||||||||||
Parsley Energy, Inc., Class A (I) | 4,958,643 | 166,164,127 | ||||||||||||
QEP Resources, Inc. | 1,687,721 | 32,961,191 | ||||||||||||
Rice Energy, Inc. (I) | 1,301,630 | 33,985,559 |
Shares | Value | |||||||||||||
Energy (continued) | ||||||||||||||
Oil, gas and consumable fuels (continued) | ||||||||||||||
RSP Permian, Inc. (I) | 2,312,989 | $89,697,713 | ||||||||||||
Financials 23.0% | 2,939,610,702 | |||||||||||||
Banks 5.6% | ||||||||||||||
BB&T Corp. | 2,041,185 | 76,993,498 | ||||||||||||
East West Bancorp, Inc. | 2,667,012 | 97,906,011 | ||||||||||||
Fifth Third Bancorp | 9,980,887 | 204,208,948 | ||||||||||||
Huntington Bancshares, Inc. | 18,408,468 | 181,507,494 | ||||||||||||
SunTrust Banks, Inc. | 3,690,678 | 161,651,696 | ||||||||||||
Capital markets 4.8% | ||||||||||||||
Moody's Corp. | 426,385 | 46,168,968 | ||||||||||||
Raymond James Financial, Inc. | 2,753,273 | 160,268,021 | ||||||||||||
SEI Investments Company | 2,132,642 | 97,269,802 | ||||||||||||
State Street Corp. | 1,050,120 | 73,119,856 | ||||||||||||
TD Ameritrade Holding Corp. | 5,581,699 | 196,699,073 | ||||||||||||
�� | The Charles Schwab Corp. | 1,185,816 | 37,436,211 | |||||||||||
Consumer finance 2.6% | ||||||||||||||
Ally Financial, Inc. | 1,963,807 | 38,235,322 | ||||||||||||
Discover Financial Services | 3,341,085 | 188,938,357 | ||||||||||||
Navient Corp. | 3,785,287 | 54,773,103 | ||||||||||||
SLM Corp. (I) | 6,687,869 | 49,958,381 | ||||||||||||
Insurance 10.0% | ||||||||||||||
Alleghany Corp. (I) | 314,717 | 165,232,719 | ||||||||||||
Aon PLC | 1,829,367 | 205,785,494 | ||||||||||||
Loews Corp. | 2,292,112 | 94,320,409 | ||||||||||||
Marsh & McLennan Companies, Inc. | 2,111,327 | 141,986,741 | ||||||||||||
Reinsurance Group of America, Inc. | 1,278,143 | 137,962,755 | ||||||||||||
The Allstate Corp. | 2,009,093 | 138,989,054 | ||||||||||||
Torchmark Corp. | 1,140,810 | 72,886,351 | ||||||||||||
Unum Group | 5,301,444 | 187,193,988 | ||||||||||||
W.R. Berkley Corp. | 1,668,068 | 96,347,608 | ||||||||||||
XL Group, Ltd. | 1,004,188 | 33,770,842 | ||||||||||||
Health care 8.1% | 1,033,372,578 | |||||||||||||
Health care equipment and supplies 4.4% | ||||||||||||||
Becton, Dickinson and Company | 685,085 | 123,130,327 | ||||||||||||
Boston Scientific Corp. (I) | 6,313,157 | 150,253,137 | ||||||||||||
St. Jude Medical, Inc. | 1,500,038 | 119,643,031 | ||||||||||||
Zimmer Biomet Holdings, Inc. | 1,312,544 | 170,656,971 | ||||||||||||
Health care providers and services 2.7% | ||||||||||||||
Cardinal Health, Inc. | 1,460,702 | 113,496,545 | ||||||||||||
DaVita, Inc. (I) | 1,190,076 | 78,628,321 | ||||||||||||
Laboratory Corp. of America Holdings (I) | 801,857 | 110,239,300 |
Shares | Value | |||||||||||||
Health care (continued) | ||||||||||||||
Health care providers and services (continued) | ||||||||||||||
Universal Health Services, Inc., Class B | 307,857 | $37,934,140 | ||||||||||||
Life sciences tools and services 0.7% | ||||||||||||||
Bruker Corp. | 1,464,891 | 33,179,781 | ||||||||||||
ICON PLC (I) | 723,468 | 55,974,719 | ||||||||||||
Pharmaceuticals 0.3% | ||||||||||||||
Perrigo Company PLC | 435,788 | 40,236,306 | ||||||||||||
Industrials 11.4% | 1,449,323,227 | |||||||||||||
Aerospace and defense 1.8% | ||||||||||||||
Curtiss-Wright Corp. | 528,234 | 48,127,400 | ||||||||||||
Huntington Ingalls Industries, Inc. | 679,469 | 104,244,134 | ||||||||||||
Textron, Inc. | 2,049,045 | 81,449,539 | ||||||||||||
Building products 1.4% | ||||||||||||||
Masco Corp. | 5,219,912 | 179,095,181 | ||||||||||||
Construction and engineering 0.4% | ||||||||||||||
Fluor Corp. | 897,613 | 46,065,499 | ||||||||||||
Electrical equipment 0.5% | ||||||||||||||
Hubbell, Inc. | 600,894 | 64,740,320 | ||||||||||||
Machinery 3.5% | ||||||||||||||
Ingersoll-Rand PLC | 2,101,403 | 142,769,320 | ||||||||||||
Stanley Black & Decker, Inc. | 1,483,254 | 182,410,577 | ||||||||||||
The Timken Company | 1,583,799 | 55,654,697 | ||||||||||||
WABCO Holdings, Inc. (I) | 581,213 | 65,985,112 | ||||||||||||
Professional services 2.5% | ||||||||||||||
Equifax, Inc. | 465,822 | 62,690,325 | ||||||||||||
ManpowerGroup, Inc. | 1,516,607 | 109,590,022 | ||||||||||||
Robert Half International, Inc. | 3,757,885 | 142,273,526 | ||||||||||||
Trading companies and distributors 1.3% | ||||||||||||||
HD Supply Holdings, Inc. (I) | 1,624,100 | 51,938,718 | ||||||||||||
WESCO International, Inc. (I) | 1,826,132 | 112,288,857 | ||||||||||||
Information technology 15.7% | 2,003,659,614 | |||||||||||||
Communications equipment 1.5% | ||||||||||||||
Harris Corp. | 2,109,610 | 193,261,372 | ||||||||||||
Electronic equipment, instruments and components 3.0% | ||||||||||||||
Arrow Electronics, Inc. (I) | 2,066,308 | 132,181,723 | ||||||||||||
Flex, Ltd. (I) | 7,759,762 | 105,687,958 | ||||||||||||
Jabil Circuit, Inc. | 2,462,888 | 53,740,216 | ||||||||||||
TE Connectivity, Ltd. | 1,358,912 | 87,486,755 | ||||||||||||
Internet software and services 2.4% | ||||||||||||||
eBay, Inc. (I) | 3,611,843 | 118,829,635 | ||||||||||||
InterActiveCorp | 1,105,469 | 69,058,648 |
Shares | Value | |||||||||||||
Information technology (continued) | ||||||||||||||
Internet software and services (continued) | ||||||||||||||
NetEase, Inc., ADR | 479,368 | $115,422,227 | ||||||||||||
IT services 4.6% | ||||||||||||||
Alliance Data Systems Corp. (I) | 305,209 | 65,476,487 | ||||||||||||
Amdocs, Ltd. | 3,097,385 | 179,183,722 | ||||||||||||
Fidelity National Information Services, Inc. | 2,603,326 | 200,534,202 | ||||||||||||
Leidos Holdings, Inc. | 1,080,149 | 46,748,849 | ||||||||||||
Total System Services, Inc. | 2,073,588 | 97,769,674 | ||||||||||||
Semiconductors and semiconductor equipment 2.1% | ||||||||||||||
Broadcom, Ltd. | 351,473 | 60,636,122 | ||||||||||||
Microsemi Corp. (I) | 2,577,971 | 108,223,223 | ||||||||||||
ON Semiconductor Corp. (I) | 3,045,613 | 37,521,952 | ||||||||||||
Qorvo, Inc. (I) | 1,033,361 | 57,599,542 | ||||||||||||
Software 1.7% | ||||||||||||||
Activision Blizzard, Inc. | 4,877,068 | 216,054,112 | ||||||||||||
Technology hardware, storage and peripherals 0.4% | ||||||||||||||
Western Digital Corp. | 996,121 | 58,243,195 | ||||||||||||
Materials 6.9% | 886,259,503 | |||||||||||||
Chemicals 1.5% | ||||||||||||||
PPG Industries, Inc. | 792,645 | 81,927,787 | ||||||||||||
The Mosaic Company | 1,073,172 | 26,249,787 | ||||||||||||
The Valspar Corp. | 830,049 | 88,043,297 | ||||||||||||
Containers and packaging 4.8% | ||||||||||||||
Avery Dennison Corp. | 405,737 | 31,562,281 | ||||||||||||
Berry Plastics Group, Inc. (I) | 2,413,160 | 105,817,066 | ||||||||||||
Crown Holdings, Inc. (I) | 774,527 | 44,217,746 | ||||||||||||
Graphic Packaging Holding Company | 11,820,104 | 165,363,255 | ||||||||||||
Packaging Corp. of America | 1,170,700 | 95,131,082 | ||||||||||||
Sealed Air Corp. | 2,197,678 | 100,697,606 | ||||||||||||
WestRock Company | 1,493,423 | 72,401,147 | ||||||||||||
Metals and mining 0.6% | ||||||||||||||
Steel Dynamics, Inc. | 2,995,136 | 74,848,449 | ||||||||||||
Real estate 9.3% | 1,189,124,153 | |||||||||||||
Equity real estate investment trusts 9.3% | ||||||||||||||
American Assets Trust, Inc. | 1,185,216 | 51,414,670 | ||||||||||||
American Homes 4 Rent, Class A | 2,574,466 | 55,711,444 | ||||||||||||
Boston Properties, Inc. | 1,260,978 | 171,858,692 | ||||||||||||
Douglas Emmett, Inc. | 2,138,942 | 78,349,445 | ||||||||||||
Equity Residential | 1,630,607 | 104,896,948 | ||||||||||||
Essex Property Trust, Inc. | 290,770 | 64,754,479 | ||||||||||||
General Growth Properties, Inc. | 2,083,236 | 57,497,314 |
Shares | Value | |||||||||||||
Real estate (continued) | ||||||||||||||
Equity real estate investment trusts (continued) | ||||||||||||||
Kilroy Realty Corp. | 755,004 | $52,359,527 | ||||||||||||
Kimco Realty Corp. | 4,145,967 | 120,025,745 | ||||||||||||
Regency Centers Corp. | 2,207,744 | 171,078,083 | ||||||||||||
SL Green Realty Corp. | 1,800,935 | 194,681,074 | ||||||||||||
The Macerich Company | 822,267 | 66,496,732 | ||||||||||||
Utilities 6.5% | 824,083,937 | |||||||||||||
Electric utilities 6.0% | ||||||||||||||
Alliant Energy Corp. | 2,022,167 | 77,469,218 | ||||||||||||
American Electric Power Company, Inc. | 2,655,628 | 170,517,874 | ||||||||||||
Edison International | 2,613,676 | 188,838,091 | ||||||||||||
FirstEnergy Corp. | 899,687 | 29,761,646 | ||||||||||||
Great Plains Energy, Inc. | 3,126,120 | 85,311,815 | ||||||||||||
PG&E Corp. | 2,089,951 | 127,842,303 | ||||||||||||
Portland General Electric Company | 1,840,073 | 78,368,709 | ||||||||||||
Multi-utilities 0.5% | ||||||||||||||
Ameren Corp. | 1,341,486 | 65,974,281 | ||||||||||||
Yield (%) | Shares | Value | ||||||||||||
Securities lending collateral 0.1% | $11,587,358 | |||||||||||||
(Cost $11,585,283) | ||||||||||||||
John Hancock Collateral Trust (W) | 0.6548(Y | ) | 1,157,972 | 11,587,358 | ||||||||||
Short-term investments 2.0% | $250,792,979 | |||||||||||||
(Cost $250,792,979) | ||||||||||||||
Money market funds 2.0% | 250,792,979 | |||||||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 0.2692(Y | ) | 250,792,979 | 250,792,979 | ||||||||||
Total investments (Cost $10,111,288,104)† 100.0% | $12,757,985,483 | |||||||||||||
Other assets and liabilities, net 0.0% | $5,390,005 | |||||||||||||
Total net assets 100.0% | $12,763,375,488 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund. | ||||||||||||||
Key to Security Abbreviations and Legend | ||||||||||||||
ADR | American Depositary Receipts | |||||||||||||
(I) | Non-income producing security. | |||||||||||||
(L) | A portion of this security is on loan as of 9-30-16. | |||||||||||||
(W) | Investment is an affiliate of the fund, the advisor and/or subadvisor. This security represents the investment of cash collateral received for securities lending. | |||||||||||||
(Y) | The rate shown is the annualized seven-day yield as of 9-30-16. | |||||||||||||
† | At 9-30-16, the aggregate cost of investment securities for federal income tax purposes was $10,178,433,262. Net unrealized appreciation aggregated to $2,579,552,221, of which $2,632,634,874 related to appreciated investment securities and $53,082,653 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-16 (unaudited)
Assets | |||||||||||||||||||
Unaffiliated investments, at value (Cost $10,099,702,821) including $11,317,368 of securities loaned | $12,746,398,125 | ||||||||||||||||||
Affiliated investments, at value (Cost $11,585,283) | 11,587,358 | ||||||||||||||||||
Total investments, at value (Cost $10,111,288,104) | 12,757,985,483 | ||||||||||||||||||
Receivable for fund shares sold | 30,808,105 | ||||||||||||||||||
Dividends and interest receivable | 23,321,895 | ||||||||||||||||||
Receivable for securities lending income | 6,034 | ||||||||||||||||||
Other receivables and prepaid expenses | 213,879 | ||||||||||||||||||
Total assets | 12,812,335,396 | ||||||||||||||||||
Liabilities | |||||||||||||||||||
Payable for investments purchased | 9,214,746 | ||||||||||||||||||
Payable for fund shares repurchased | 26,272,879 | ||||||||||||||||||
Payable upon return of securities loaned | 11,567,000 | ||||||||||||||||||
Payable to affiliates | |||||||||||||||||||
Accounting and legal services fees | 258,144 | ||||||||||||||||||
Transfer agent fees | 1,010,295 | ||||||||||||||||||
Distribution and service fees | 110,644 | ||||||||||||||||||
Trustees' fees | 6,702 | ||||||||||||||||||
Other liabilities and accrued expenses | 519,498 | ||||||||||||||||||
Total liabilities | 48,959,908 | ||||||||||||||||||
Net assets | $12,763,375,488 | ||||||||||||||||||
Net assets consist of | |||||||||||||||||||
Paid-in capital | $9,901,485,860 | ||||||||||||||||||
Undistributed net investment income | 97,108,061 | ||||||||||||||||||
Accumulated net realized gain (loss) on investments | 118,084,188 | ||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 2,646,697,379 | ||||||||||||||||||
Net assets | $12,763,375,488 | ||||||||||||||||||
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 ($2,314,172,118 ÷ 114,561,084 shares)1 | $20.20 | ||||||||||||||||||
Class C ($331,387,069 ÷ 16,330,916 shares) 1 | $20.29 | ||||||||||||||||||
Class I ($8,377,656,278 ÷ 400,123,918 shares) | $20.94 | ||||||||||||||||||
Class R2 ($223,031,245 ÷ 10,701,247 shares) | $20.84 | ||||||||||||||||||
Class R4 ($80,426,897 ÷ 3,846,781 shares) | $20.91 | ||||||||||||||||||
Class R6 ($1,434,666,439 ÷ 68,525,854 shares) | $20.94 | ||||||||||||||||||
Class ADV ($2,035,442 ÷ 100,972 shares) | $20.16 | ||||||||||||||||||
Maximum offering price per share | |||||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $21.26 |
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 9-30-16 (unaudited)
Investment income | ||||||||||||||||||||||||
Dividends | $115,333,477 | |||||||||||||||||||||||
Securities lending | 720,117 | |||||||||||||||||||||||
Interest | 330,973 | |||||||||||||||||||||||
Less foreign taxes withheld | (43,469 | ) | ||||||||||||||||||||||
Total investment income | 116,341,098 | |||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Investment management fees | 42,556,241 | |||||||||||||||||||||||
Distribution and service fees | 4,913,695 | |||||||||||||||||||||||
Accounting and legal services fees | 825,375 | |||||||||||||||||||||||
Transfer agent fees | 6,049,013 | |||||||||||||||||||||||
Trustees' fees | 111,733 | |||||||||||||||||||||||
State registration fees | 160,229 | |||||||||||||||||||||||
Printing and postage | 337,811 | |||||||||||||||||||||||
Professional fees | 205,176 | |||||||||||||||||||||||
Custodian fees | 628,693 | |||||||||||||||||||||||
Other | 79,471 | |||||||||||||||||||||||
Total expenses | 55,867,437 | |||||||||||||||||||||||
Less expense reductions | (496,256 | ) | ||||||||||||||||||||||
Net expenses | 55,371,181 | |||||||||||||||||||||||
Net investment income | 60,969,917 | |||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||
Unaffiliated investments | 169,557,760 | |||||||||||||||||||||||
Affiliated investments | 20,068 | |||||||||||||||||||||||
169,577,828 | ||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
Unaffiliated investments | 837,954,490 | |||||||||||||||||||||||
Affiliated investments | (16,662 | ) | ||||||||||||||||||||||
837,937,828 | ||||||||||||||||||||||||
Net realized and unrealized gain | 1,007,515,656 | |||||||||||||||||||||||
Increase in net assets from operations | $1,068,485,573 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-16 | Year ended 3-31-16 | ||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | |||||||||||||||||||||||||||||||||||||||||||||
From operations | |||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $60,969,917 | $100,220,069 | |||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 169,577,828 | 377,903,769 | |||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | 837,937,828 | (750,835,194 | ) | ||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | 1,068,485,573 | (272,711,356 | ) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||
From net investment income | |||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (6,909,198 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I | — | (44,367,788 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (449,251 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (516,113 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (6,282,487 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class ADV | — | (2,444 | ) | ||||||||||||||||||||||||||||||||||||||||||
From net realized gain | |||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (118,530,557 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class C | — | (19,552,094 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I | — | (426,532,269 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (13,446,594 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (6,646,956 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (51,664,209 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class ADV | — | (50,644 | ) | ||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (694,950,604 | ) | ||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 201,276,802 | 1,654,438,937 | |||||||||||||||||||||||||||||||||||||||||||
Total increase | 1,269,762,375 | 686,776,977 | |||||||||||||||||||||||||||||||||||||||||||
Net assets | |||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 11,493,613,113 | 10,806,836,136 | |||||||||||||||||||||||||||||||||||||||||||
End of period | $12,763,375,488 | $11,493,613,113 | |||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $97,108,061 | $36,138,144 |
Financial highlights
Class A Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.49 | $20.19 | $18.23 | $14.51 | $12.41 | $11.98 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.08 | 0.13 | 0.05 | 0.05 | 0.05 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.63 | (0.63 | ) | 2.42 | 4.03 | 2.09 | 0.42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.71 | (0.50 | ) | 2.47 | 4.08 | 2.14 | 0.46 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.07 | ) | (0.06 | ) | (0.04 | ) | (0.04 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.20 | ) | (0.51 | ) | (0.36 | ) | (0.04 | ) | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.20 | $18.49 | $20.19 | $18.23 | $14.51 | $12.41 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | 9.25 | 5 | (2.59 | ) | 13.78 | 28.30 | 17.31 | 3.92 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $2,314 | $1,971 | $2,148 | $3,086 | $1,169 | $517 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.12 | 6 | 1.13 | 1.13 | 1.18 | 1.27 | 1.33 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.12 | 6 | 1.12 | 1.13 | 1.17 | 1.27 | 1.29 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.84 | 6 | 0.70 | 0.28 | 0.32 | 0.38 | 0.32 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 23 | 47 | 35 | 39 | 55 | 41 |
1 | Six months ended 9-30-16. 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 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Annualized. |
Class C Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.65 | $20.43 | $18.53 | $14.82 | $12.74 | $10.63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | 0.01 | (0.01 | ) | (0.08 | ) | (0.07 | ) | (0.05 | ) | (0.02 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.63 | (0.64 | ) | 2.43 | 4.10 | 2.13 | 2.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.64 | (0.65 | ) | 2.35 | 4.03 | 2.08 | 2.14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.29 | $18.65 | $20.43 | $18.53 | $14.82 | $12.74 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 8.79 | 6 | (3.27 | ) | 12.90 | 27.32 | 16.33 | 20.22 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $331 | $329 | $366 | $329 | $90 | $20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.87 | 7 | 1.88 | 1.89 | 1.94 | 2.08 | 2.10 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.87 | 7 | 1.87 | 1.88 | 1.93 | 2.08 | 2.10 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.06 | 7 | (0.06 | ) | (0.42 | ) | (0.43 | ) | (0.39 | ) | (0.26 | ) 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 23 | 47 | 35 | 39 | 55 | 41 | 8 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $19.14 | $20.86 | $18.81 | $14.95 | $12.79 | $12.33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.11 | 0.20 | 0.12 | 0.10 | 0.09 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.69 | (0.67 | ) | 2.49 | 4.16 | 2.15 | 0.45 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.80 | (0.47 | ) | 2.61 | 4.26 | 2.24 | 0.52 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.12 | ) | (0.11 | ) | (0.08 | ) | (0.08 | ) | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.25 | ) | (0.56 | ) | (0.40 | ) | (0.08 | ) | (0.06 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.94 | $19.14 | $20.86 | $18.81 | $14.95 | $12.79 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 9.40 | 4 | (2.35 | ) | 14.13 | 28.67 | 17.64 | 4.28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $8,378 | $7,802 | $7,116 | $4,168 | $1,762 | $948 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.86 | 5 | 0.87 | 0.87 | 0.89 | 0.93 | 0.98 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.85 | 5 | 0.86 | 0.86 | 0.89 | 0.93 | 0.98 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.08 | 5 | 0.99 | 0.63 | 0.59 | 0.71 | 0.63 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 23 | 47 | 35 | 39 | 55 | 41 |
1 | Six months ended 9-30-16. 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 R2 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $19.09 | $20.81 | $18.77 | $14.94 | $12.78 | $12.43 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.07 | 0.11 | 0.04 | 0.04 | 0.05 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.68 | (0.66 | ) | 2.48 | 4.14 | 2.14 | 0.34 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.75 | (0.55 | ) | 2.52 | 4.18 | 2.19 | 0.35 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.17 | ) | (0.48 | ) | (0.35 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.84 | $19.09 | $20.81 | $18.77 | $14.94 | $12.78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 9.17 | 5 | (2.74 | ) | 13.66 | 28.15 | 17.15 | 2.82 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $223 | $234 | $250 | $205 | $15 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.26 | 7 | 1.27 | 1.29 | 1.28 | 2.15 | 16.13 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.25 | 7 | 1.27 | 1.28 | 1.27 | 1.40 | 1.45 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.67 | 7 | 0.56 | 0.19 | 0.25 | 0.33 | 1.00 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 23 | 47 | 35 | 39 | 55 | 41 | 8 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $19.13 | $20.85 | $18.81 | $15.63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.09 | 0.16 | 0.10 | 0.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.69 | (0.66 | ) | 2.47 | 3.49 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.78 | (0.50 | ) | 2.57 | 3.55 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.09 | ) | (0.08 | ) | (0.05 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.22 | ) | (0.53 | ) | (0.37 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.91 | $19.13 | $20.85 | $18.81 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 9.30 | 5 | (2.50 | ) | 13.93 | �� | 22.85 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $80 | $104 | $118 | $44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.12 | 6 | 1.12 | 1.15 | 1.30 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.01 | 6 | 1.02 | 1.04 | 1.14 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.89 | 6 | 0.81 | 0.49 | 0.44 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 23 | 47 | 35 | 39 | 7 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $19.13 | $20.85 | $18.81 | $14.95 | $12.79 | $10.95 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.12 | 0.22 | 0.14 | 0.12 | 0.11 | 0.08 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.69 | (0.67 | ) | 2.48 | 4.16 | 2.14 | 1.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.81 | (0.45 | ) | 2.62 | 4.28 | 2.25 | 1.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.13 | ) | (0.10 | ) | (0.09 | ) | (0.03 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.27 | ) | (0.58 | ) | (0.42 | ) | (0.09 | ) | (0.06 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.94 | $19.13 | $20.85 | $18.81 | $14.95 | $12.79 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4 | 9.46 | 5 | (2.25 | ) | 14.21 | 28.81 | 17.68 | 17.45 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1,435 | $1,053 | $807 | $444 | $100 | $2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.77 | 6 | 0.77 | 0.78 | 0.81 | 0.89 | 4.22 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.76 | 6 | 0.76 | 0.77 | 0.80 | 0.89 | 0.99 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.22 | 6 | 1.13 | 0.73 | 0.71 | 0.84 | 1.25 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 23 | 47 | 35 | 39 | 55 | 41 | 7 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $18.46 | $20.15 | $18.20 | $14.49 | $12.40 | $11.97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.10 | 0.12 | 0.04 | 0.03 | 0.04 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.60 | (0.63 | ) | 2.40 | 4.03 | 2.10 | 0.43 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 1.70 | (0.51 | ) | 2.44 | 4.06 | 2.14 | 0.47 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.05 | ) | (0.04 | ) | (0.03 | ) | (0.05 | ) | (0.01 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (1.13 | ) | (0.45 | ) | (0.32 | ) | — | (0.03 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (1.18 | ) | (0.49 | ) | (0.35 | ) | (0.05 | ) | (0.04 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $20.16 | $18.46 | $20.15 | $18.20 | $14.49 | $12.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3 | 9.21 | 4 | (2.59 | ) | 13.67 | 28.19 | 17.33 | 3.94 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $2 | $1 | $1 | $1 | $1 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.13 | 5 | 1.42 | 3.12 | 3.46 | 3.74 | 4.18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.12 | 5 | 1.16 | 1.25 | 1.25 | 1.25 | 1.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.07 | 5 | 0.63 | 0.21 | 0.19 | 0.35 | 0.37 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 23 | 47 | 35 | 39 | 55 | 41 |
1 | Six months ended 9-30-16. 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. |
Note 1 — Organization
John Hancock Disciplined Value Mid Cap Fund (the fund) is a series of John Hancock Funds III (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to seek long-term growth of capital with current income as a secondary objective.
The fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class R2 and Class R4 shares are available only to certain retirement plans. Class R6 shares are available only to certain retirement plans, institutions and other investors. Class ADV shares are available only to investors who acquired Class A shares as a result of the reorganization of the Robeco Boston Partners Mid Cap Value Fund 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 for each class may differ.
Effective January 31, 2014, the fund was closed to new investors, subject to certain exceptions described in the fund's prospectus.
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 qualifies 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 scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission (SEC) and applicable regulations.
In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market 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 Trust (JHCT), 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.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
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 and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of September 30, 2016, 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 NAV 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 JHCT, an affiliate of the fund, which has a floating NAV and is registered with the SEC as an investment company. JHCT 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 JHCT with respect to the cash collateral.
The fund has the right to recall loaned securities on demand. 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 JHCT.
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. Securities lending income received by the fund is net of fees retained by the securities lending agent. Net income received from JHCT is a component of securities lending income as recorded on the Statement of operations.
Obligations to repay collateral received by the fund are shown on the Statement of assets and liabilities as Payable upon return of securities loaned and are secured by the loaned securities. As of September 30, 2016, the fund loaned common stocks valued at $11,317,368 and received $11,567,000 of cash collateral.
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 extent of any overdraft, and to the maximum extent permitted by law.
Effective June 30, 2016, the fund and other affiliated funds entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $1 billion unsecured committed line of credit. Excluding commitments designated for certain funds, the fund can borrow up to an aggregate commitment amount of $750 million, subject to asset coverage and other limitations as specified in the agreement. 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 based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. Prior to June 30, 2016, the fund had a similar agreement that enabled it to participate in a $750 million unsecured committed line of credit. For the six months ended September 30, 2016, the fund had no borrowings under either line of credit. Commitment fees for the six months ended September 30, 2016 were $11,430.
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, for all classes, are calculated daily at the class level based on the 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, 2016, 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 characterization of distributions.
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) 0.800% 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 Boston Partners, a division of 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 group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. 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. During the six months ended September 30, 2016, this waiver amounted to 0.01% of the fund's average net assets (on an annualized basis). This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
For the six months ended September 30, 2016, these expense reductions amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $75,853 | Class R4 | $3,443 | |
Class C | 12,521 | Class R6 | 46,500 | |
Class I | 303,320 | Class ADV | 50 | |
Class R2 | 8,695 | Total | $450,382 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2016 were equivalent to a net annual effective rate of 0.70% of the fund's average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended September 30, 2016 amounted to an annual rate of 0.01% of the fund's average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class C, Class R2, Class R4 and Class ADV pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. In addition, under a service plan for Class R2 and Class R4, the fund pays for certain other services. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund's shares:
Class | Rule 12b-1 fee | Service fee | ||||||
Class A | 0.30% | — | ||||||
Class C | 1.00% | — | ||||||
Class R2 | 0.25% | 0.25% |
Class | Rule 12b-1 fee | Service fee | ||||||
Class R4 | 0.25% | 0.10% | ||||||
Class ADV | 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 Rule12b-1 fees for Class R4 shares. The current waiver agreement expires on June 30, 2017, 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. This contractual waiver amounted to $45,874 for Class R4 shares for the six months ended September 30, 2016.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $283,714 for the six months ended September 30, 2016. Of this amount, $15,225 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $267,900 was paid as sales commissions to broker-dealers and $589 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, 2016, CDSCs received by the Distributor amounted to $660 and $4,918 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. 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, 2016 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $2,518,671 | $1,236,012 |
Class C | 1,664,403 | 204,187 |
Class I | — | 4,472,454 |
Class R2 | 568,824 | 20,060 |
Class R4 | 160,145 | 7,913 |
Class R6 | — | 107,576 |
Class ADV | 1,652 | 811 |
Total | $4,913,695 | $6,049,013 |
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 or its affiliates, may participate in an interfund lending program. This program provides an alternative
credit facility allowing the funds to borrow from, or lend money to, other participating affiliated funds. At period end, no interfund loans were outstanding. The fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or lender | Weighted average loan balance | Days outstanding | Weighted average interest rate | Interest income |
Lender | $15,000,000 | 1 | 0.72% | $298 |
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended September 30, 2016 and for the year ended March 31, 2016 were as follows:
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 23,435,972 | $460,256,286 | 21,552,676 | $412,766,577 | ||||||||||||||||||||||
Distributions reinvested | — | — | 6,034,797 | 112,911,059 | ||||||||||||||||||||||
Repurchased | (15,455,524 | ) | (299,109,441 | ) | (27,405,721 | ) | (516,146,241 | ) | ||||||||||||||||||
Net increase | 7,980,448 | $161,146,845 | 181,752 | $9,531,395 | ||||||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 366,653 | $7,183,169 | 1,462,579 | $28,488,911 | ||||||||||||||||||||||
Distributions reinvested | — | — | 779,448 | 14,731,558 | ||||||||||||||||||||||
Repurchased | (1,684,973 | ) | (32,993,587 | ) | (2,507,649 | ) | (47,704,933 | ) | ||||||||||||||||||
Net decrease | (1,318,320 | ) | ($25,810,418 | ) | (265,622 | ) | ($4,484,464 | ) | ||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 54,173,049 | $1,088,123,255 | 135,576,524 | $2,682,776,608 | ||||||||||||||||||||||
Distributions reinvested | — | — | 20,560,074 | 397,837,424 | ||||||||||||||||||||||
Repurchased | (61,649,760 | ) | (1,231,873,454 | ) | (89,741,468 | ) | (1,747,523,008 | ) | ||||||||||||||||||
Net increase (decrease) | (7,476,711 | ) | ($143,750,199 | ) | 66,395,130 | $1,333,091,024 | ||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 1,173,806 | $23,428,263 | 4,196,078 | $82,483,640 | ||||||||||||||||||||||
Distributions reinvested | — | — | 579,958 | 11,204,789 | ||||||||||||||||||||||
Repurchased | (2,713,006 | ) | (53,975,409 | ) | (4,536,126 | ) | (88,402,820 | ) | ||||||||||||||||||
Net increase (decrease) | (1,539,200 | ) | ($30,547,146 | ) | 239,910 | $5,285,609 | ||||||||||||||||||||
Class R4 shares | ||||||||||||||||||||||||||
Sold | 518,395 | $10,358,633 | 2,262,975 | $44,142,313 | ||||||||||||||||||||||
Distributions reinvested | — | — | 370,181 | 7,163,001 | ||||||||||||||||||||||
Repurchased | (2,111,688 | ) | (40,987,938 | ) | (2,860,512 | ) | (54,855,218 | ) | ||||||||||||||||||
Net decrease | (1,593,293 | ) | ($30,629,305 | ) | (227,356 | ) | ($3,549,904 | ) | ||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 18,920,805 | $378,399,757 | 21,727,749 | $420,412,366 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,997,760 | 57,946,695 | ||||||||||||||||||||||
Repurchased | (5,433,551 | ) | (108,683,030 | ) | (8,408,365 | ) | (163,716,912 | ) | ||||||||||||||||||
Net increase | 13,487,254 | $269,716,727 | 16,317,144 | $314,642,149 |
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class ADV shares | ||||||||||||||||||||||||||
Sold | 71,634 | $1,404,876 | 1,872 | $33,000 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,844 | 53,088 | ||||||||||||||||||||||
Repurchased | (12,770 | ) | (254,578 | ) | (8,980 | ) | (162,960 | ) | ||||||||||||||||||
Net increase | 58,864 | $1,150,298 | (4,264 | ) | ($76,872 | ) | ||||||||||||||||||||
Total net increase | 9,599,042 | $201,276,802 | 82,636,694 | $1,654,438,937 |
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $3,038,342,202 and $2,712,633,564, respectively, for the six months ended September 30, 2016.
Note 7 — Industry or sector risk
The fund may invest a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the fund's assets are economically tied to a single or small number of industries or sectors of the economy, the fund will be less diversified than a more broadly diversified fund, and it may cause the fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the fund's NAV more volatile. Further, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors.
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., doing business as Boston Partners (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 20-23, 2016 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 24-25, 2016.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 20-23, 2016, 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 mutual 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 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 John Hancock group of funds complex (the John Hancock Fund 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-, three- and five-year periods ended December 31, 2015. The Board took into account management's discussion of the fund's performance,
including the favorable performance relative to the benchmark index and to the peer group for the one-, three- and five-year periods. The Board concluded that the fund's performance has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index.
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 net total expenses for the fund are equal to the peer group median.
The Board 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 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 fund has breakpoints in its contractual management fee schedule that reduces 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 John Hancock Fund 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 information 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. |
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 contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. 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; | |
(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 Fund Complex); | |
(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 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 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 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 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 and compared them 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 performance of the fund has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index; |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |||||||
(4) | noted that the subadvisory fees are paid by the Advisor not the fund and that the 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.
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor Robeco Investment Management, Inc. Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund 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. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Balanced Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Small Cap Value Small Company Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Global Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Global Real Estate Natural Resources Redwood Regional Bank Seaport Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Income Allocation Fund Lifestyle Aggressive Portfolio Lifestyle Balanced Portfolio Lifestyle Conservative Portfolio Lifestyle Growth Portfolio Lifestyle Moderate Portfolio Retirement Choices Portfolios Retirement Living Portfolios Retirement Living II Portfolios EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Large Cap Core 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 |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We build funds based on investor needs, then search the world to find proven
portfolio teams with specialized expertise in those strategies. As a manager of
managers, we apply vigorous oversight to ensure that they continue to meet
our uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, 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. | ||
MF322362 | 363SA 9/16 11/16 |
John Hancock
International Value Equity Fund
Semiannual report 9/30/16
A message to shareholders
Dear shareholder,
Investors in most international equities experienced gains over the past six months, as fears over slowing global growth dissipated. Emerging markets generally delivered the most robust returns, continuing a rally that began early in the year. China's economy and equity markets stabilized after a period of heightened volatility. While Brexit initially triggered a sharp decline in global equities, investor sentiment improved in July as the U.K. government completed an intraparty leadership transition and the Bank of England cut its benchmark interest rate. In Japan, weak consumption and low inflation continued to challenge the nation's slow economic recovery.
With continuing fallout over Brexit and the recent U.S. presidential election, it's prudent to expect that volatility will pick up in the coming months. Should markets encounter tougher going this fall, one of your best resources is your financial advisor, who can help ensure your portfolio is sufficiently diversified to meet your long-term objectives and to withstand the inevitable bumps along the way.
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, 2016. They are subject to change at any time. All investments entail risks, including the possible loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
International Value Equity Fund
INVESTMENT OBJECTIVE
The fund seeks long-term capital appreciation.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/16 (%)
The 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.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
1 | After the close of business on 2-11-11, holders of the former Optique International Value Fund became owners of an equal number of full and fractional Class A 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. |
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. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end 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 prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Global markets rose amid a challenging economic environment
Most developed-market stocks outside the United States posted gains as key central banks expanded stimulative monetary policies, helping to offset the negative impact from voters' approval of a U.K. referendum to exit the European Union.
The fund lagged its benchmark
The fund posted a positive absolute return but slightly trailed its benchmark, the MSCI World ex-USA Index, as our security selection in the United Kingdom weighed on relative performance.
Stock picking in Japan and selected sectors offset some of the shortfall
Our security selection in Japan and in the consumer staples, healthcare, and utilities sectors aided performance relative to the benchmark.
SECTOR COMPOSITION AS OF 9/30/16 (%)
A note about risks
Foreign investing has additional risks, such as currency and market volatility and political and social instability. Value stocks may decline in price. The stock prices of midsize companies can change more frequently and dramatically than those of large companies. The value of a company's equity securities is subject to changes in the company's financial condition and overall market and economic conditions. Hedging, derivatives, and other strategic transactions could produce disproportionate gains or losses and may increase costs. Please see the fund's prospectus for additional risks.
An interview with Portfolio Manager Wendell Perkins, CFA, John Hancock Asset Management a division of Manulife Asset Management (US) LLC
![wendellperkins.jpg](https://capedge.com/proxy/N-CSRS/0001145443-16-002320/wendellperkins.jpg)
Wendell Perkins, CFA
Portfolio Manager
John Hancock Asset Management
Can you describe the factors behind the positive returns that most non-U.S. developed-market equities posted during the six-month period?
Further expansion of stimulative monetary policies from central banks in China, Japan, and Europe provided support for equities, and concerns about the ability of China's government to manage its economy through a period of slower growth and elevated credit stress eased somewhat. Recoveries in the prices of oil and other commodities also helped to drive many stocks higher.
Equity prices continued on a generally upward trend until June, when U.K. voters approved a referendum to leave the European Union (Brexit). Stocks fell sharply in the vote's immediate aftermath, as the outcome threatened to unwind a decades-long trend toward greater economic integration across Europe and the United Kingdom. However, stocks recovered their positive momentum later in the summer as the U.K. government completed an intraparty leadership transition and the Bank of England cut its benchmark interest rate. In Japan, weak consumption and low inflation continued to weigh on the economy as the nation's government and central bank expanded their efforts to generate a prolonged and sustainable recovery. Uncertainty about the pace of increases in U.S. interest rates also weighed on global investment sentiment.
Relative to the benchmark, the MSCI World ex-USA Index, Japanese equities posted strong results, led by Japanese value-oriented equities, which outperformed their growth stock counterparts by a wide margin. Most stocks in Europe and the United Kingdom underperformed relative to the benchmark. At the sector level, materials, energy, and information technology were the strongest performers, while telecommunication services, consumer discretionary, and utilities were some of the weakest.
How did this environment affect your team's management of the fund?
We positioned the fund fairly defensively, as we have been skeptical about the long-term sustainability of a global economic recovery that can be traced as much to central bank stimulus as it can to strong economic fundamentals and solid earnings growth, in our view. Some of our concerns were borne out as economic indicators and consensus expectations continued to point to a slow global growth environment. While we maintained a cautious investment approach based on our views about the global economy, we continued to evaluate stocks primarily based on a value-oriented, bottom-up basis, aligned with our assessment of the risks and opportunities specific to each stock.
The fund trailed its benchmark during the period. At the regional and sector levels, what factors had the most significant impact on this result?
From a regional perspective, our stock picking in the United Kingdom had a negative impact on relative results. At the sector level, our security selection in industrials and energy weighed on relative performance.
Which positions had the biggest negative impact on performance?
The top detractors were positions in two U.K.-based stocks: easyJet PLC, a low-cost airline with
TOP 10 HOLDINGS AS OF 9/30/16 (%)
Novartis AG | 1.3 |
Nestle SA | 1.2 |
Unilever PLC | 1.1 |
Merck KGaA | 1.1 |
HSBC Holdings PLC | 1.1 |
Siemens AG | 1.0 |
Hang Lung Group, Ltd. | 1.0 |
SAP SE | 1.0 |
Fujitsu, Ltd. | 1.0 |
Nippon Telegraph & Telephone Corp. | 1.0 |
TOTAL | 10.8 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
Another position that had a significantly negative impact on relative results was Telefonaktiebolaget LM Ericsson (Sweden). Shares of the telecommunications equipment maker were pressured by a sluggish global environment for capital spending, especially in the United States and Europe.
What had the biggest positive impact on performance?
Our stock picking in Japan contributed to relative results, as did the fund's modest weighting in emerging-market equities. At the sector level, our stock picking in consumer staples, healthcare, and utilities added value on a relative basis.
At the individual security level, a position in Fujitsu, Ltd., a Japanese provider of information technology equipment and services, was the most significant contributor. Fujitsu's shares rose after the company reported stronger-than-expected quarterly results. The stock was also supported by
TOP 10 COUNTRIES AS OF 9/30/16 (%)
Japan | 20.8 |
United Kingdom | 14.3 |
Germany | 9.8 |
France | 9.3 |
Switzerland | 8.1 |
Canada | 5.7 |
Australia | 5.5 |
Netherlands | 4.2 |
Hong Kong | 3.6 |
Spain | 2.6 |
TOTAL | 83.9 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
growing expectations that Fujitsu would reform its business model, including restructuring its consumer electronics business.
Another key contributor was a position in Bandai Namco Holdings, Inc., a Japanese toy and game maker. The company's shares rose sharply as a result of better-than-expected earnings and sales results. A position in Ebara Corp. (Japan), a manufacturer of industrial turbines and pumps, also significantly contributed.
How was the fund positioned at the end of the period?
At the sector level, the fund's most significant overweight was in consumer discretionary, while its most significant underweight was in industrials. At the regional level, the fund was modestly overweight in the Pacific Rim and modestly underweight in North America and Europe, and held a modest weighting in emerging-market equities.
MANAGED BY
![]() | Wendell Perkins, CFA On the fund since 1998 Investing since 1985 |
![]() | Edward Maraccini, CFA On the fund since 2007 Investing since 1995 |
![]() | Margaret McKay, CFA On the fund since 2001 Investing since 1992 |
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2016
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | |||||||
1-year | 5-year | 10-year | 6-month | 5-year | 10-year | |||
Class A1,2 | -1.35 | 4.53 | 0.91 | 0.01 | 24.83 | 9.51 | ||
Class C1,2 | 2.01 | 4.86 | 0.73 | 3.95 | 26.76 | 7.56 | ||
Class I1,2,3 | 4.03 | 5.91 | 1.60 | 5.42 | 33.23 | 17.22 | ||
Class R21,2,3 | 3.58 | 5.53 | 1.37 | 5.12 | 30.90 | 14.62 | ||
Class R41,2,3 | 4.09 | 5.82 | 1.64 | 5.41 | 32.69 | 17.64 | ||
Class R61,2,3 | 4.13 | 6.09 | 1.89 | 5.28 | 34.39 | 20.65 | ||
Class NAV1,2,3 | 4.13 | 6.11 | 1.92 | 5.42 | 34.52 | 20.95 | ||
Index 1† | 7.73 | 7.41 | 2.37 | 5.54 | 42.94 | 26.44 | ||
Index 2† | 5.56 | 6.27 | 1.27 | 5.82 | 35.54 | 13.45 |
Performance figures assume all distributions are reinvested. Figures reflect the maximum sales charge 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 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 C | Class I | Class R2 | Class R4 | Class R6 | Class NAV | |
Gross (%) | 1.35 | 2.10 | 1.08 | 1.49 | 1.34 | 0.99 | 0.97 |
Net (%) | 1.35 | 2.10 | 1.08 | 1.49 | 1.24 | 0.97 | 0.97 |
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 and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index 1 is the MSCI World ex-USA Index; Index 2 is the MSCI World ex-USA Value Index. |
See the following page for footnotes.
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 C1,2,4 | 9-30-06 | 10,756 | 10,756 | 12,644 | 11,345 |
Class I1,2,3 | 9-30-06 | 11,722 | 11,722 | 12,644 | 11,345 |
Class R21,2,3 | 9-30-06 | 11,462 | 11,462 | 12,644 | 11,345 |
Class R41,2,3 | 9-30-06 | 11,764 | 11,764 | 12,644 | 11,345 |
Class R61,2,3 | 9-30-06 | 12,065 | 12,065 | 12,644 | 11,345 |
Class NAV1,2,3 | 9-30-06 | 12,095 | 12,095 | 12,644 | 11,345 |
The 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.
The MSCI World ex-USA Value Index (gross of foreign withholding taxes on dividends) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States of America, that have higher than average value characteristics.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would result in lower returns.
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 C shares were first offered on 8-28-14; Class R2, Class R4, and Class R6 shares were first offered on 7-2-13; Class NAV shares were first offered on 12-16-11. The returns prior to these dates are that of Class A shares recalculated to reflect the gross fees and expenses of Class C, Class R2, Class R4, Class R6, and Class NAV shares, as applicable. |
2 | In October 2011, the advisor 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. |
4 | The contingent deferred sales charge is not applicable. |
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, 2016, with the same investment held until September 30, 2016.
Account value on 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,052.80 | $6.90 | 1.34% |
Class C | 1,000.00 | 1,049.50 | 10.74 | 2.09% |
Class I | 1,000.00 | 1,054.20 | 5.56 | 1.08% |
Class R2 | 1,000.00 | 1,051.20 | 7.35 | 1.43% |
Class R4 | 1,000.00 | 1,054.10 | 5.82 | 1.14% |
Class R6 | 1,000.00 | 1,052.80 | 4.94 | 0.96% |
Class NAV | 1,000.00 | 1,054.20 | 5.00 | 0.97% |
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, 2016, 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:
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, 2016, with the same investment held until September 30, 2016. 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 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,018.40 | $6.78 | 1.34% |
Class C | 1,000.00 | 1,014.60 | 10.56 | 2.09% |
Class I | 1,000.00 | 1,019.70 | 5.47 | 1.08% |
Class R2 | 1,000.00 | 1,017.90 | 7.23 | 1.43% |
Class R4 | 1,000.00 | 1,019.40 | 5.72 | 1.14% |
Class R6 | 1,000.00 | 1,020.30 | 4.86 | 0.96% |
Class NAV | 1,000.00 | 1,020.20 | 4.91 | 0.97% |
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). |
Fund's investments
As of 9-30-16 (unaudited) | ||||||||||||||||||||
Shares | Value | |||||||||||||||||||
Common stocks 95.1% | $519,653,943 | |||||||||||||||||||
(Cost $538,622,081) | ||||||||||||||||||||
Australia 5.5% | 30,140,644 | |||||||||||||||||||
AGL Energy, Ltd. | 308,954 | 4,523,190 | ||||||||||||||||||
Australia & New Zealand Banking Group, Ltd. | 245,595 | 5,231,563 | ||||||||||||||||||
BHP Billiton, Ltd. | 287,089 | 4,973,104 | ||||||||||||||||||
Coca-Cola Amatil, Ltd. | 640,129 | 5,047,517 | ||||||||||||||||||
National Australia Bank, Ltd. | 230,488 | 4,954,573 | ||||||||||||||||||
QBE Insurance Group, Ltd. | 464,013 | 3,320,253 | ||||||||||||||||||
Santos, Ltd. | 741,691 | 2,090,444 | ||||||||||||||||||
Canada 5.7% | 31,170,356 | |||||||||||||||||||
Bank of Montreal | 73,813 | 4,836,849 | ||||||||||||||||||
Barrick Gold Corp. | 238,209 | 4,217,840 | ||||||||||||||||||
Husky Energy, Inc. (I) | 328,359 | 4,022,050 | ||||||||||||||||||
IGM Financial, Inc. (L) | 157,559 | 4,253,775 | ||||||||||||||||||
Magna International, Inc. | 113,129 | 4,856,454 | ||||||||||||||||||
Suncor Energy, Inc. | 145,730 | 4,045,495 | ||||||||||||||||||
The Toronto-Dominion Bank | 111,234 | 4,937,893 | ||||||||||||||||||
Chile 0.6% | 3,354,258 | |||||||||||||||||||
Antofagasta PLC (L) | 495,175 | 3,354,258 | ||||||||||||||||||
China 1.1% | 5,877,634 | |||||||||||||||||||
China Petroleum & Chemical Corp., H Shares | 2,934,279 | 2,166,261 | ||||||||||||||||||
CNOOC, Ltd. | 2,942,000 | 3,711,373 | ||||||||||||||||||
Denmark 0.9% | 4,689,238 | |||||||||||||||||||
Carlsberg A/S, B Shares | 49,064 | 4,689,238 | ||||||||||||||||||
France 9.3% | 50,630,818 | |||||||||||||||||||
AXA SA | 193,684 | 4,118,165 | ||||||||||||||||||
BNP Paribas SA | 82,074 | 4,221,382 | ||||||||||||||||||
Christian Dior SE | 27,505 | 4,932,959 | ||||||||||||||||||
Engie SA | 206,022 | 3,194,328 | ||||||||||||||||||
Kering | 26,673 | 5,382,186 | ||||||||||||||||||
Lagardere SCA | 176,877 | 4,504,426 | ||||||||||||||||||
Orange SA | 312,283 | 4,892,735 | ||||||||||||||||||
Publicis Groupe SA | 69,489 | 5,258,105 | ||||||||||||||||||
Sanofi | 59,317 | 4,517,068 | ||||||||||||||||||
Schneider Electric SE | 74,304 | 5,168,900 | ||||||||||||||||||
TOTAL SA | 93,366 | 4,440,564 | ||||||||||||||||||
Germany 8.8% | 48,323,572 | |||||||||||||||||||
Allianz SE | 30,265 | 4,497,711 | ||||||||||||||||||
BASF SE | 59,587 | 5,102,181 |
Shares | Value | |||||||||||||||||||
Germany (continued) | ||||||||||||||||||||
Bayer AG | 44,515 | $4,470,677 | ||||||||||||||||||
Bayerische Motoren Werke AG | 59,240 | 4,987,752 | ||||||||||||||||||
E.ON SE | 326,199 | 2,318,469 | ||||||||||||||||||
Gerresheimer AG | 57,038 | 4,849,568 | ||||||||||||||||||
Merck KGaA | 54,017 | 5,826,568 | ||||||||||||||||||
Muenchener Rueckversicherungs-Gesellschaft AG (Munich Re) | 25,427 | 4,748,923 | ||||||||||||||||||
SAP SE | 60,582 | 5,540,397 | ||||||||||||||||||
Siemens AG | 47,601 | 5,581,737 | ||||||||||||||||||
Uniper SE (I) | 32,619 | 399,589 | ||||||||||||||||||
Hong Kong 3.6% | 19,861,163 | |||||||||||||||||||
China Mobile, Ltd. | 373,582 | 4,589,219 | ||||||||||||||||||
Guangdong Investment, Ltd. | 3,168,098 | 5,060,871 | ||||||||||||||||||
Hang Lung Group, Ltd. | 1,452,538 | 5,554,588 | ||||||||||||||||||
Yue Yuen Industrial Holdings, Ltd. | 1,126,702 | 4,656,485 | ||||||||||||||||||
Ireland 2.6% | 13,972,489 | |||||||||||||||||||
ICON PLC (I) | 58,480 | 4,524,598 | ||||||||||||||||||
Shire PLC | 84,371 | 5,455,668 | ||||||||||||||||||
Smurfit Kappa Group PLC | 178,601 | 3,992,223 | ||||||||||||||||||
Israel 0.8% | 4,235,035 | |||||||||||||||||||
Teva Pharmaceutical Industries, Ltd. | 91,243 | 4,235,035 | ||||||||||||||||||
Japan 20.8% | 113,796,414 | |||||||||||||||||||
Bandai Namco Holdings, Inc. | 165,531 | 5,066,587 | ||||||||||||||||||
Bridgestone Corp. | 131,686 | 4,851,810 | ||||||||||||||||||
East Japan Railway Company | 51,163 | 4,618,180 | ||||||||||||||||||
Ebara Corp. | 136,142 | 4,030,726 | ||||||||||||||||||
Fujitsu, Ltd. | 1,028,003 | 5,532,332 | ||||||||||||||||||
Honda Motor Company, Ltd. | 172,927 | 4,990,725 | ||||||||||||||||||
Inpex Corp. | 463,219 | 4,211,806 | ||||||||||||||||||
Kyocera Corp. | 101,425 | 4,873,803 | ||||||||||||||||||
Mitsubishi Chemical Holdings Corp. | 783,547 | 4,912,372 | ||||||||||||||||||
Mitsubishi Corp. | 221,509 | 5,049,535 | ||||||||||||||||||
Mitsubishi Electric Corp. | 333,018 | 4,268,195 | ||||||||||||||||||
Mitsubishi UFJ Financial Group, Inc. | 845,810 | 4,284,947 | ||||||||||||||||||
Mitsui Fudosan Company, Ltd. | 216,185 | 4,599,209 | ||||||||||||||||||
Mizuho Financial Group, Inc. | 2,458,484 | 4,143,624 | ||||||||||||||||||
MS&AD Insurance Group Holdings, Inc. | 168,659 | 4,700,731 | ||||||||||||||||||
Nippon Telegraph & Telephone Corp. | 120,647 | 5,517,910 | ||||||||||||||||||
Nippon Television Holdings, Inc. | 253,468 | 4,302,932 | ||||||||||||||||||
Nissan Motor Company, Ltd. | 477,225 | 4,681,040 | ||||||||||||||||||
Rohm Company, Ltd. | 103,291 | 5,444,515 | ||||||||||||||||||
Seven & i Holdings Company, Ltd. | 109,548 | 5,178,914 | ||||||||||||||||||
Sumitomo Chemical Company, Ltd. | 967,000 | 4,296,778 | ||||||||||||||||||
Taiheiyo Cement Corp. | 1,503,467 | 4,326,170 |
Shares | Value | |||||||||||||||||||
Japan (continued) | ||||||||||||||||||||
Toyo Suisan Kaisha, Ltd. | 114,661 | $4,864,286 | ||||||||||||||||||
Toyota Motor Corp. | 87,047 | 5,049,287 | ||||||||||||||||||
Netherlands 4.2% | 22,726,120 | |||||||||||||||||||
Aegon NV | 777,780 | 2,966,797 | ||||||||||||||||||
Akzo Nobel NV | 67,904 | 4,593,045 | ||||||||||||||||||
Heineken Holding NV | 63,329 | 5,073,673 | ||||||||||||||||||
ING Groep NV (I) | 372,392 | 4,597,432 | ||||||||||||||||||
Royal Dutch Shell PLC, A Shares | 220,205 | 5,495,173 | ||||||||||||||||||
Norway 0.9% | 4,907,393 | |||||||||||||||||||
DNB ASA | 373,278 | 4,907,393 | ||||||||||||||||||
Singapore 2.4% | 12,845,528 | |||||||||||||||||||
DBS Group Holdings, Ltd. (L) | 382,193 | 4,336,688 | ||||||||||||||||||
Sembcorp Industries, Ltd. | 1,933,116 | 3,699,499 | ||||||||||||||||||
Singapore Telecommunications, Ltd. | 1,645,118 | 4,809,341 | ||||||||||||||||||
South Africa 0.6% | 3,215,897 | |||||||||||||||||||
Tiger Brands, Ltd. | 115,986 | 3,215,897 | ||||||||||||||||||
Spain 2.6% | 14,417,787 | |||||||||||||||||||
Banco Santander SA | 873,711 | 3,876,103 | ||||||||||||||||||
Bolsas y Mercados Espanoles SHMSF SA (L) | 91,718 | 2,726,229 | ||||||||||||||||||
CaixaBank SA (L) | 1,401,850 | 3,542,510 | ||||||||||||||||||
Telefonica SA | 422,516 | 4,272,945 | ||||||||||||||||||
Sweden 2.3% | 12,695,847 | |||||||||||||||||||
Modern Times Group MTG AB, B Shares | 161,462 | 4,136,207 | ||||||||||||||||||
SKF AB, B Shares | 245,904 | 4,246,603 | ||||||||||||||||||
Telefonaktiebolaget LM Ericsson, B Shares | 597,350 | 4,313,037 | ||||||||||||||||||
Switzerland 8.1% | 44,505,397 | |||||||||||||||||||
Adecco Group AG | 75,804 | 4,272,746 | ||||||||||||||||||
Aryzta AG (I) | 121,437 | 5,401,730 | ||||||||||||||||||
Credit Suisse Group AG (I) | 217,854 | 2,863,176 | ||||||||||||||||||
Julius Baer Group, Ltd. (I) | 105,454 | 4,298,513 | ||||||||||||||||||
LafargeHolcim, Ltd. (I) | 95,275 | 5,160,580 | ||||||||||||||||||
Nestle SA | 80,210 | 6,333,709 | ||||||||||||||||||
Novartis AG | 87,800 | 6,929,205 | ||||||||||||||||||
Roche Holding AG | 20,040 | 4,979,912 | ||||||||||||||||||
Zurich Insurance Group AG (I) | 16,541 | 4,265,826 | ||||||||||||||||||
United Kingdom 14.3% | 78,288,353 | |||||||||||||||||||
AstraZeneca PLC | 83,496 | 5,406,492 | ||||||||||||||||||
Barclays PLC | 1,763,687 | 3,823,690 | ||||||||||||||||||
BP PLC | 763,458 | 4,449,972 | ||||||||||||||||||
Debenhams PLC | 3,729,426 | 2,693,925 | ||||||||||||||||||
Diageo PLC | 182,118 | 5,216,482 |
Shares | Value | |||||||||||||||||||
United Kingdom (continued) | ||||||||||||||||||||
easyJet PLC | 249,054 | $3,247,402 | ||||||||||||||||||
GlaxoSmithKline PLC | 250,678 | 5,339,047 | ||||||||||||||||||
HSBC Holdings PLC | 770,753 | 5,793,540 | ||||||||||||||||||
Imperial Brands PLC | 91,516 | 4,710,361 | ||||||||||||||||||
Informa PLC | 550,462 | 5,078,475 | ||||||||||||||||||
Kingfisher PLC | 863,133 | 4,211,257 | ||||||||||||||||||
Meggitt PLC | 820,051 | 4,786,371 | ||||||||||||||||||
Sky PLC | 370,105 | 4,289,535 | ||||||||||||||||||
Smith & Nephew PLC | 316,924 | 5,111,443 | ||||||||||||||||||
Standard Chartered PLC (I) | 492,763 | 4,009,964 | ||||||||||||||||||
Unilever PLC | 128,345 | 6,073,265 | ||||||||||||||||||
Vodafone Group PLC | 1,411,178 | 4,047,132 | ||||||||||||||||||
Preferred securities 1.0% | $5,477,416 | |||||||||||||||||||
(Cost $4,841,142) | ||||||||||||||||||||
Germany 1.0% | 5,477,416 | |||||||||||||||||||
Henkel AG & Company KGaA | 40,245 | 5,477,416 | ||||||||||||||||||
Yield (%) | Shares | Value | ||||||||||||||||||
Securities lending collateral 2.2% | $11,936,194 | |||||||||||||||||||
(Cost $11,936,246) | ||||||||||||||||||||
John Hancock Collateral Trust (W) | 0.6548(Y | ) | 1,192,832 | 11,936,194 | ||||||||||||||||
Yield* (%) | Maturity date | Par value^ | Value | |||||||||||||||||
Short-term investments 4.1% | $22,053,906 | |||||||||||||||||||
(Cost $22,053,888) | ||||||||||||||||||||
U.S. Government Agency 0.5% | 2,452,000 | |||||||||||||||||||
Federal Agricultural Mortgage Corp. Discount Note | 0.200 | 10-03-16 | 608,000 | 608,000 | ||||||||||||||||
Federal Home Loan Bank Discount Note | 0.100 | 10-03-16 | 1,844,000 | 1,844,000 | ||||||||||||||||
Yield (%) | Shares | Value | ||||||||||||||||||
Money market funds 2.9% | 15,792,906 | |||||||||||||||||||
JPMorgan U.S. Treasury Plus Money Market Fund, Institutional Class | 0.1943(Y | ) | 15,792,906 | 15,792,906 | ||||||||||||||||
Par value^ | Value | |||||||||||||||||||
Repurchase agreement 0.7% | 3,809,000 | |||||||||||||||||||
Barclays Capital Tri-Party Repurchase Agreement dated 9-30-16 at 0.420% to be repurchased at $3,809,133 on 10-3-16, collateralized by $3,745,100 U.S. Treasury Inflation Indexed Notes, 0.125% due 4-15-21 (valued at $3,885,319, including interest) | 3,809,000 | 3,809,000 | ||||||||||||||||||
Total investments (Cost $577,453,357)† 102.4% | $559,121,459 | |||||||||||||||||||
Other assets and liabilities, net (2.4%) | ($12,907,762 | ) | ||||||||||||||||||
Total net assets 100.0% | $546,213,697 |
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. | ||||||||||||||||||||
Key to Security Abbreviations and Legend | ||||||||||||||||||||
(I) | Non-income producing security. | |||||||||||||||||||
(L) | A portion of this security is on loan as of 9-30-16. | |||||||||||||||||||
(W) | Investment is an affiliate of the fund, the advisor and/or subadvisor. This security represents the investment of cash collateral received for securities lending. | |||||||||||||||||||
(Y) | The rate shown is the annualized seven-day yield as of 9-30-16. | |||||||||||||||||||
* | Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end. | |||||||||||||||||||
† | At 9-30-16, the aggregate cost of investment securities for federal income tax purposes was $578,013,651. Net unrealized depreciation aggregated to $18,892,192, of which $45,022,123 related to appreciated investment securities and $63,914,315 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-16 (unaudited)
Assets | |||||||||||||||||||||||||||||||||
Unaffiliated investments, at value (Cost $565,517,111) including $11,354,242 of securities loaned | 547,185,265 | ||||||||||||||||||||||||||||||||
Affiliated investments, at value (Cost $11,936,246) | 11,936,194 | ||||||||||||||||||||||||||||||||
Total investments, at value (Cost $577,453,357) | 559,121,459 | ||||||||||||||||||||||||||||||||
Foreign currency, at value (Cost $213,507) | 213,355 | ||||||||||||||||||||||||||||||||
Receivable for investments sold | 3,848,678 | ||||||||||||||||||||||||||||||||
Receivable for fund shares sold | 42,370 | ||||||||||||||||||||||||||||||||
Dividends and interest receivable | 2,128,651 | ||||||||||||||||||||||||||||||||
Receivable for securities lending income | 30,099 | ||||||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 66,662 | ||||||||||||||||||||||||||||||||
Total assets | 565,451,274 | ||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||
Due to custodian | 2,451,975 | ||||||||||||||||||||||||||||||||
Payable for investments purchased | 3,848,674 | ||||||||||||||||||||||||||||||||
Payable for fund shares repurchased | 863,090 | ||||||||||||||||||||||||||||||||
Payable upon return of securities loaned | 11,935,565 | ||||||||||||||||||||||||||||||||
Payable to affiliates | |||||||||||||||||||||||||||||||||
Accounting and legal services fees | 14,875 | ||||||||||||||||||||||||||||||||
Transfer agent fees | 2,410 | ||||||||||||||||||||||||||||||||
Distribution and service fees | 101 | ||||||||||||||||||||||||||||||||
Trustees' fees | 259 | ||||||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 120,628 | ||||||||||||||||||||||||||||||||
Total liabilities | 19,237,577 | ||||||||||||||||||||||||||||||||
Net assets | $546,213,697 | ||||||||||||||||||||||||||||||||
Net assets consist of | |||||||||||||||||||||||||||||||||
Paid-in capital | $562,815,643 | ||||||||||||||||||||||||||||||||
Undistributed net investment income | 9,766,006 | ||||||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (8,030,392 | ) | |||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies | (18,337,560 | ) | |||||||||||||||||||||||||||||||
Net assets | $546,213,697 | ||||||||||||||||||||||||||||||||
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 ($20,743,542 ÷ 2,737,829 shares)1 | $7.58 | ||||||||||||||||||||
Class C ($588,370 ÷ 77,143 shares)1 | $7.63 | ||||||||||||||||||||
Class I ($2,500,846 ÷ 329,424 shares) | $7.59 | ||||||||||||||||||||
Class R2 ($777,704 ÷ 102,327 shares) | $7.60 | ||||||||||||||||||||
Class R4 ($89,070 ÷ 11,723 shares) | $7.60 | ||||||||||||||||||||
Class R6 ($489,434 ÷ 64,528 shares) | $7.58 | ||||||||||||||||||||
Class NAV ($521,024,731 ÷ 68,614,279 shares) | $7.59 | ||||||||||||||||||||
Maximum offering price per share | |||||||||||||||||||||
Class A (net assets value per share ÷ 95%)2 | $7.98 |
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 9-30-16 (unaudited)
Investment income | ||||||||||||||||||||||||
Dividends | $11,249,372 | |||||||||||||||||||||||
Securities lending | 250,250 | |||||||||||||||||||||||
Interest | 34,561 | |||||||||||||||||||||||
Less foreign taxes withheld | (908,749 | ) | ||||||||||||||||||||||
Total investment income | 10,625,434 | |||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Investment management fees | 2,334,887 | |||||||||||||||||||||||
Distribution and service fees | 31,599 | |||||||||||||||||||||||
Accounting and legal services fees | 39,812 | |||||||||||||||||||||||
Transfer agent fees | 14,927 | |||||||||||||||||||||||
Trustees' fees | 4,436 | |||||||||||||||||||||||
State registration fees | 48,870 | |||||||||||||||||||||||
Printing and postage | 11,471 | |||||||||||||||||||||||
Professional fees | 36,033 | |||||||||||||||||||||||
Custodian fees | 106,189 | |||||||||||||||||||||||
Other | 11,038 | |||||||||||||||||||||||
Total expenses | 2,639,262 | |||||||||||||||||||||||
Less expense reductions | (20,075 | ) | ||||||||||||||||||||||
Net expenses | 2,619,187 | |||||||||||||||||||||||
Net investment income | 8,006,247 | |||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||
Unaffiliated investments and foreign currency transactions | 732,909 | |||||||||||||||||||||||
Affiliated investments | 2,248 | |||||||||||||||||||||||
735,157 | ||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
Unaffiliated investments and translation of assets and liabilities in foreign currencies | 19,810,317 | |||||||||||||||||||||||
Affiliated investments | (529 | ) | ||||||||||||||||||||||
19,809,788 | ||||||||||||||||||||||||
Net realized and unrealized gain | 20,544,945 | |||||||||||||||||||||||
Increase in net assets from operations | $28,551,192 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||
From operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $8,006,247 | $10,381,824 | ||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 735,157 | 2,208,141 | ||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | 19,809,788 | (65,986,338 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | 28,551,192 | (53,396,373 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (339,258 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class C | — | (1,537 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (41,309 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (14,968 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (1,350 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (6,549 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (8,722,583 | ) | |||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | ||||||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (665,493 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class C | — | (11,674 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class I | — | (71,479 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (35,430 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (2,438 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (9,907 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (13,194,256 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (23,118,231 | ) | |||||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | 13,263,405 | 132,393,210 | ||||||||||||||||||||||||||||||||||||||||||||||
Total increase | 41,814,597 | 55,878,606 | ||||||||||||||||||||||||||||||||||||||||||||||
Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 504,399,100 | 448,520,494 | ||||||||||||||||||||||||||||||||||||||||||||||
End of period | $546,213,697 | $504,399,100 | ||||||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $9,766,006 | $1,759,759 |
Financial highlights
Class A Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.20 | $8.29 | $9.33 | $8.66 | $8.22 | $9.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.10 | 0.12 | 0.13 | 0.17 | 3 | 0.12 | 0.14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | (0.89 | ) | (0.41 | ) | 0.97 | 0.54 | (0.92 | ) 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.38 | (0.77 | ) | (0.28 | ) | 1.14 | 0.66 | (0.78 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.11 | ) | (0.19 | ) | (0.09 | ) | (0.08 | ) | (0.06 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.21 | ) | (0.57 | ) | (0.38 | ) | (0.14 | ) | (0.05 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.32 | ) | (0.76 | ) | (0.47 | ) | (0.22 | ) | (0.11 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contribution from adviser | — | — | — | — | — | 0.02 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $7.58 | $7.20 | $8.29 | $9.33 | $8.66 | $8.22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)6,7 | 5.28 | 8 | (9.46 | ) | (2.45 | ) | 13.51 | 8.16 | (8.20 | ) 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $21 | $25 | $22 | $18 | $7 | $3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.35 | 9 | 1.39 | 1.53 | 1.63 | 1.99 | 3.73 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.34 | 9 | 1.38 | 1.52 | 1.60 | 1.60 | 1.60 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.73 | 9 | 1.57 | 1.50 | 1.85 | 3 | 1.52 | 1.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 18 | 25 | 38 | 27 | 21 |
1 | Six months ended 9-30-16. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.04 and 0.41%, respectively. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | The amount shown for a share outstanding does not correspond with the aggregate 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | In October 2011, the advisor made a voluntary payment to the fund of $6,950. Without this payment, performance would have been lower. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | Annualized. |
Class C Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.27 | $8.35 | $9.63 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.07 | 0.06 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.29 | (0.90 | ) | (0.60 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.36 | (0.84 | ) | (0.59 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.12 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.21 | ) | (0.57 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.24 | ) | (0.69 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $7.63 | $7.27 | $8.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 4.95 | 6 | (10.19 | ) | (5.72 | ) 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 2.10 | 8 | 3.23 | 13.81 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 2.09 | 8 | 2.21 | 2.35 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 1.80 | 8 | 0.70 | 0.11 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 18 | 25 | 9 |
1 | Six months ended 9-30-16. Unaudited. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | The inception date for Class C 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 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Less than $500,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | Annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | The portfolio turnover is shown for the period from 4-1-14 to 3-31-15. |
Class I Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.20 | $8.29 | $9.33 | $8.66 | $8.21 | $9.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.11 | 0.15 | 0.18 | 0.20 | 3 | 0.13 | 0.19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | (0.91 | ) | (0.44 | ) | 0.97 | 0.57 | (0.95 | ) 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.39 | (0.76 | ) | (0.26 | ) | 1.17 | 0.70 | (0.76 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.12 | ) | (0.21 | ) | (0.12 | ) | (0.11 | ) | (0.09 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.21 | ) | (0.57 | ) | (0.38 | ) | (0.14 | ) | (0.05 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.33 | ) | (0.78 | ) | (0.50 | ) | (0.25 | ) | (0.14 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contribution from adviser | — | — | — | — | — | 0.02 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $7.59 | $7.20 | $8.29 | $9.33 | $8.66 | $8.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)6 | 5.42 | 7 | (9.29 | ) | (2.20 | ) | 13.87 | 8.61 | (7.87 | ) 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $3 | $2 | $3 | $8 | $6 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.08 | 8 | 1.28 | 1.41 | 1.46 | 2.08 | 7.59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.08 | 8 | 1.14 | 1.29 | 1.29 | 1.28 | 1.18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.00 | 8 | 1.87 | 1.93 | 2.20 | 3 | 1.52 | 2.36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 18 | 25 | 38 | 27 | 21 |
1 | Six months ended 9-30-16. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflect a special dividend received by the fund which amounted to $0.04 and 0.41%, respectively. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | The amount shown for a share outstanding does not correspond with the aggregate 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | In October 2011, the advisor made a voluntary payment to the fund of $6,950. Without this payment, performance would have been lower. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | Annualized. |
Class R2 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.23 | $8.31 | $9.35 | $8.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.10 | 0.11 | 0.11 | 0.19 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.27 | (0.89 | ) | (0.40 | ) | 1.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.37 | (0.78 | ) | (0.29 | ) | 1.28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.09 | ) | (0.18 | ) | (0.08 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.21 | ) | (0.57 | ) | (0.38 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.30 | ) | (0.75 | ) | (0.46 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $7.60 | $7.23 | $8.31 | $9.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 5.12 | 6 | (9.53 | ) | (2.63 | ) | 15.38 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | $1 | $2 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.44 | 7 | 1.68 | 2.76 | 5.96 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.43 | 7 | 1.55 | 1.68 | 1.68 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.64 | 7 | 1.41 | 1.20 | 2.84 | 4,7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 18 | 25 | 38 | 8 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.21 | $8.30 | $9.34 | $8.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.11 | 0.14 | 0.15 | 0.10 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | (0.90 | ) | (0.42 | ) | 1.20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.39 | (0.76 | ) | (0.27 | ) | 1.30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.12 | ) | (0.20 | ) | (0.11 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.21 | ) | (0.57 | ) | (0.38 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.33 | ) | (0.77 | ) | (0.49 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $7.60 | $7.21 | $8.30 | $9.34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 5.41 | 6 | (9.34 | ) | (2.36 | ) | 15.55 | 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 | 1.24 | 8 | 3.82 | 18.12 | 15.49 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.14 | 8 | 1.22 | 1.43 | 1.43 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.92 | 8 | 1.78 | 1.67 | 1.43 | 4,8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 18 | 25 | 38 | 9 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.20 | $8.28 | $9.33 | $8.53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.10 | 0.25 | 0.10 | 0.12 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | (0.98 | ) | (0.34 | ) | 1.20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.38 | (0.73 | ) | (0.24 | ) | 1.32 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.24 | ) | (0.14 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.21 | ) | (0.57 | ) | (0.38 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.35 | ) | (0.81 | ) | (0.52 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $7.58 | $7.20 | $8.28 | $9.33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 5.28 | 6 | (8.97 | ) | (2.04 | ) | 15.83 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 7 | — | 7 | $4 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.99 | 8 | 1.16 | 2.32 | 16.37 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.96 | 8 | 0.97 | 1.04 | 1.10 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.02 | 8 | 2.95 | 1.15 | 1.76 | 4,8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 18 | 25 | 38 | 9 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $7.20 | $8.29 | $9.34 | $8.66 | $8.22 | $7.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.11 | 0.16 | 0.18 | 0.21 | 4 | 0.15 | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | (0.90 | ) | (0.42 | ) | 0.99 | 0.55 | 0.96 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.39 | (0.74 | ) | (0.24 | ) | 1.20 | 0.70 | 1.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.24 | ) | (0.14 | ) | (0.12 | ) | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.21 | ) | (0.57 | ) | (0.38 | ) | (0.14 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.35 | ) | (0.81 | ) | (0.52 | ) | (0.26 | ) | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $7.59 | $7.20 | $8.29 | $9.34 | $8.66 | $8.22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)6 | 5.42 | 7 | (9.09 | ) | (2.03 | ) | 14.23 | 8.69 | 14.05 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $521 | $476 | $417 | $433 | $307 | $114 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.98 | 8 | 0.99 | 1.04 | 1.03 | 1.08 | 1.08 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.97 | 8 | 0.98 | 1.03 | 1.03 | 1.08 | 1.08 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.03 | 8 | 2.00 | 2.05 | 2.37 | 4 | 1.78 | 2.21 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 13 | 18 | 25 | 38 | 27 | 21 | 9 |
1 | Six months ended 9-30-16. 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, and transfer agent fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (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 qualifies 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 scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission (SEC) and applicable regulations.
In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market 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 Trust (JHCT), are valued at their respective NAVs 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.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
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 scheduled 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 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 and related inputs 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, 2016, by major security category or type:
Total value at 9-30-16 | Level 1 quoted price | Level 2 significant observable inputs | Level 3 significant unobservable inputs | ||
Common stocks | |||||
Australia | $30,140,644 | — | $30,140,644 | — | |
Canada | 31,170,356 | $31,170,356 | — | — | |
Chile | 3,354,258 | — | 3,354,258 | — | |
China | 5,877,634 | — | 5,877,634 | — | |
Denmark | 4,689,238 | — | 4,689,238 | — | |
France | 50,630,818 | — | 50,630,818 | — | |
Germany | 48,323,572 | — | 48,323,572 | — | |
Hong Kong | 19,861,163 | — | 19,861,163 | — | |
Ireland | 13,972,489 | 4,524,598 | 9,447,891 | — | |
Israel | 4,235,035 | — | 4,235,035 | — | |
Japan | 113,796,414 | — | 113,796,414 | — | |
Netherlands | 22,726,120 | — | 22,726,120 | — | |
Norway | 4,907,393 | — | 4,907,393 | — | |
Singapore | 12,845,528 | — | 12,845,528 | — | |
South Africa | 3,215,897 | — | 3,215,897 | — | |
Spain | 14,417,787 | — | 14,417,787 | — | |
Sweden | 12,695,847 | — | 12,695,847 | — | |
Switzerland | 44,505,397 | — | 44,505,397 | — | |
United Kingdom | 78,288,353 | — | 78,288,353 | — | |
Preferred securities | 5,477,416 | — | 5,477,416 | — | |
Securities lending collateral | 11,936,194 | 11,936,194 | — | — | |
Short-term investments | 22,053,906 | 15,792,906 | 6,261,000 | — | |
Total investments in securities | $559,121,459 | $63,424,054 | $495,697,405 | — |
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, assets and liabilities resulting from repurchase agreements are not offset 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 NAV 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 JHCT, an affiliate of the fund, which has a floating NAV and is registered with the SEC as an investment company. JHCT 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 JHCT with respect to the cash collateral.
The fund has the right to recall loaned securities on demand. 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 JHCT.
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. Securities lending income received by the fund is net of fees retained by the securities lending agent. Net income received from JHCT is a component of securities lending income as recorded on the Statement of operations.
Obligations to repay collateral received by the fund are shown on the Statement of assets and liabilities as Payable upon return of securities loaned and are secured by the loaned securities. As of September 30, 2016, the fund loaned common stocks valued at $11,354,242 and received $11,935,565 of cash collateral.
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 extent of any overdraft, and to the maximum extent permitted by law.
Effective June 30, 2016, the fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. (Citibank) as the administrative agent that enables it to participate in a $1 billion unsecured committed line of credit. Excluding commitments designated for certain funds, the fund can borrow up to an aggregate commitment amount of $750 million, subject to asset coverage and other limitations as specified in the agreement. 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 based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. Prior to June 30, 2016, the fund had a similar agreement that enabled it to participate in a $750 million unsecured committed line of credit. For the six months ended September 30, 2016, the fund had no borrowings under either line of credit. Commitment fees for the six months ended September 30, 2016, were $1,817.
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, for all classes, are calculated daily at the class level based on the 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, 2016, 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 typically 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).
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 group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. 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. During the six months ended September 30, 2016, this waiver amounted to 0.01% of the fund's average net assets on an annualized basis. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
Prior to July 1, 2016, the Advisor had 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 2.35% of average annual net assets for Class C shares. This agreement excluded certain expenses such as taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund's business, acquired fund fees and expenses paid indirectly and short dividend expense.
The Advisor has contractually agreed to waive and/or reimburse all class-specific expenses for Class R6 shares of the fund to the extent they exceed 0.00% of average net assets attributable to Class R6 shares (the Class Expense Waiver). The Class Expense Waiver expires on June 30, 2017, 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.
The expense reductions described above amounted to the following for the six months ended September 30, 2016:
Class | Expense reduction | Class | Expense reduction | |
Class A | $815 | Class R4 | $3 | |
Class C | 33 | Class R6 | 44 | |
Class I | 82 | Class NAV | 19,026 | |
Class R2 | 29 | Total | $20,032 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2016 were equivalent to a net annual effective rate of 0.87% of the fund's average daily net assets.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended September 30, 2016 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 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. In addition, under a service plan for Class R2 and Class R4 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 R2 | 0.25% | 0.25% | |
Class C | 1.00% | — | Class R4 | 0.25% | 0.10% |
Class A shares are currently charged 0.25% for Rule 12b-1 fees.
The fund's Distributor has contractually agreed to waive 0.10% of Rule12b-1 fees for Class R4 shares. The current waiver agreement expires on June 30, 2017, 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. This contractual waiver amounted to $43 for Class R4 shares for the six months ended September 30, 2016.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $29,821 for the six months ended September 30, 2016. Of this amount, $5,691 was retained and used for printing prospectuses, advertising, sales literature and other purposes, and $24,130 was paid as sales commissions to broker-dealers.
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, 2016, CDSCs received by the Distributor amounted to $1,345 and $53 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. 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, 2016 were:
Distribution and service fees | Transfer agent fees | |||||||
Class A | $27,139 | $13,295 | ||||||
Class C | 2,667 | 327 |
Distribution and service fees | Transfer agent fees | |||||||
Class I | — | 1,201 | ||||||
Class R2 | 1,686 | 66 | ||||||
Class R4 | 107 | 7 | ||||||
Class R6 | — | 31 | ||||||
Total | $31,599 | $14,927 |
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, 2016 and for the year ended March 31, 2016 were as follows:
�� | ||||||||||||||||||||||||||
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 257,827 | $1,889,676 | 1,083,193 | $8,562,305 | ||||||||||||||||||||||
Distributions reinvested | — | — | 135,930 | 1,004,523 | ||||||||||||||||||||||
Repurchased | (947,508 | ) | (6,817,143 | ) | (482,641 | ) | (3,695,925 | ) | ||||||||||||||||||
Net increase (decrease) | (689,681 | ) | ($4,927,467 | ) | 736,482 | $5,870,903 | ||||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 23,959 | $174,247 | 51,939 | $432,836 | ||||||||||||||||||||||
Distributions reinvested | — | — | 1,748 | 13,077 | ||||||||||||||||||||||
Repurchased | (7,955 | ) | (57,870 | ) | (26,012 | ) | (208,290 | ) | ||||||||||||||||||
Net increase | 16,004 | $116,377 | 27,675 | $237,623 | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 162,229 | $1,212,498 | 94,277 | $709,420 | ||||||||||||||||||||||
Distributions reinvested | — | — | 15,262 | 112,787 | ||||||||||||||||||||||
Repurchased | (120,803 | ) | (896,955 | ) | (163,927 | ) | (1,220,872 | ) | ||||||||||||||||||
Net increase (decrease) | 41,426 | $315,543 | (54,388 | ) | ($398,665 | ) | ||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 6,140 | $45,217 | 21,907 | $171,343 | ||||||||||||||||||||||
Distributions reinvested | — | — | 6,792 | 50,399 | ||||||||||||||||||||||
Repurchased | (10,209 | ) | (75,432 | ) | (110,506 | ) | (806,649 | ) | ||||||||||||||||||
Net decrease | (4,069 | ) | ($30,215 | ) | (81,807 | ) | ($584,907 | ) | ||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 59,922 | $429,541 | 31,318 | $262,895 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,230 | 16,456 | ||||||||||||||||||||||
Repurchased | (19,436 | ) | (140,810 | ) | (525,820 | ) | (4,449,258 | ) | ||||||||||||||||||
Net increase (decrease) | 40,486 | $288,731 | (492,272 | ) | ($4,169,907 | ) | ||||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 6,000,944 | $43,810,799 | 13,922,125 | $117,421,574 | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,965,743 | 21,916,839 | ||||||||||||||||||||||
Repurchased | (3,502,869 | ) | (26,310,363 | ) | (1,093,231 | ) | (7,900,250 | ) | ||||||||||||||||||
Net increase | 2,498,075 | $17,500,436 | 15,794,637 | $131,438,163 |
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Total net increase | 1,902,241 | $13,263,405 | 15,930,327 | $132,393,210 |
There were no fund share transactions during the six months ended September 30, 2016 and the year ended March 31, 2016 for Class R4 shares.
Affiliates of the Trust owned 100% of shares of beneficial interest of Class R4 and Class NAV, respectively, on September 30, 2016. Such concentration of shareholders' capital could have a material effect on the fund if such shareholders redeem from the fund.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $87,303,484 and $64,027,722, respectively, for the six months ended September 30, 2016.
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, 2016, funds within the John Hancock group of funds complex held 95.3% 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 |
John Hancock Funds II Lifestyle Growth Portfolio | 39.21% |
John Hancock Funds II Lifestyle Balanced Portfolio | 28.45% |
John Hancock Funds II Lifestyle Aggressive Portfolio | 15.96% |
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 20-23, 2016 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 24-25, 2016.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 20-23, 2016, 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 mutual 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.
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 John Hancock group of funds complex (the John Hancock Fund 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 for the one-, three- and five-year periods ended December 31, 2015. The Board also noted that the fund underperformed its peer group average for the one-, three- and five-year periods ended December 31, 2015. The Board took into account management's discussion of the fund's performance. The Board also noted that the fund outperformed its peer group average over the ten-year period ended December 31, 2015. 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 and net 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 the fact that the fund's net total expenses had decreased from the previous year. 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 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 reduces 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 also noted that the fund has a voluntary fee waiver and/or expense reimbursement, which reduces certain expenses 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 John Hancock Fund 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 information 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 | |||||||
(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 contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. 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; | |
(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 Fund Complex); | |
(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 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 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 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 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 and compared them 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 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) | noted that the subadvisory fees are paid by the Advisor not the fund and that the 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.
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor John Hancock Asset Management a division of Manulife Asset Management (US) LLC Principal distributor John Hancock Funds, LLC Custodian Citibank, N.A. Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund 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. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Balanced Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Small Cap Value Small Company Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Global Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Global Real Estate Natural Resources Redwood Regional Bank Seaport Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Income Allocation Fund Lifestyle Aggressive Portfolio Lifestyle Balanced Portfolio Lifestyle Conservative Portfolio Lifestyle Growth Portfolio Lifestyle Moderate Portfolio Retirement Choices Portfolios Retirement Living Portfolios Retirement Living II Portfolios EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Large Cap Core 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 |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We build funds based on investor needs, then search the world to find proven
portfolio teams with specialized expertise in those strategies. As a manager of
managers, we apply vigorous oversight to ensure that they continue to meet
our uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, 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. | ||
MF322363 | 366SA 9/16 11/16 |
John Hancock
Strategic Growth Fund
Semiannual report 9/30/16
A message to shareholders
Dear shareholder,
The past six months were generally positive for U.S. equities, particularly for small-capitalization stocks. Major indexes reached all-time highs this summer, elevated by a mix of low interest rates globally, continued strong earnings here in the United States, and relatively little trading volume.
Although economic growth remains more sluggish than many would like, consumer spending and employment gains have been supportive of the continued stock market advance. Even household incomes have begun to rise in earnest. As stocks notched new highs in July and August, market volatility was surprisingly muted. Choppy markets returned in September, however, as investors speculated when the U.S. Federal Reserve (Fed) would make its next rate increase. The recent U.S. presidential election also affected the markets.
It's prudent to expect that volatility will pick up in the coming months. Indeed, this summer's market milestones have been greeted with more angst than optimism on the part of investors. Lofty stock valuations in the United States have been on investors' minds, coupled with the potential for additional interest-rate increases by the Fed, which are widely expected given the health of the underlying economy. Should markets encounter tougher going this fall, one of your best resources is your financial advisor, who can help ensure your portfolio is sufficiently diversified to meet your long-term objectives and to withstand the inevitable bumps along the way.
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, 2016. They are subject to change at any time. All investments entail risks, including the possible loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Strategic Growth Fund
INVESTMENT OBJECTIVE
The fund seeks long-term capital appreciation.
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/16 (%)
The Russell 1000 Growth Index is an unmanaged index that measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 1000 Index 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 result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower. Since inception returns for the Morningstar fund category average are not available.
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. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end 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 prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Solid performance despite economic challenges
The U.S. stock market gained ground in the face of economic uncertainty, including sluggish global growth and weaker corporate profits.
Results trailed the benchmark
The fund's underperformance compared to its benchmark, the Russell 1000 Growth Index, was shaped the most by poor stock picking in the financials sector.
Relative contributors
The fund benefited on a relative basis from security selection in information technology and healthcare.
SECTOR COMPOSITION AS OF 9/30/16 (%)
A note about risks
Growth stocks may be more susceptible to earnings disappointments. The value of a company's equity securities is subject to changes in the company's financial condition and overall market and economic conditions. 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 in a wider variety of sectors. Liquidity—the extent (if at all) to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. Hedging, derivatives, and other strategic transactions may increase a fund's volatility and could produce disproportionate losses, potentially more than the fund's principal investment. Please see the fund's prospectus for additional risks.
An interview with Portfolio Manager W. Shannon Reid, CFA, John Hancock Asset Management a division of Manulife Asset Management (US) LLC
![wshannonreid.jpg](https://capedge.com/proxy/N-CSRS/0001145443-16-002320/wshannonreid.jpg)
W. Shannon Reid, CFA
Portfolio Manager
John Hancock Asset Management
Why did the fund lag its benchmark, the Russell 1000 Growth Index, for the six-month period ended September 30, 2016?
The solid performance of large-cap U.S. growth stocks came despite several big macroeconomic challenges this period, including a slowing global economy, weaker corporate profits, and concerns about the U.K. vote to leave the European Union, known as Brexit. Against this backdrop, the world's major central banks opted to maintain their economically stimulative policies, providing a tailwind for stock valuations.
In this environment, the fund's relative underperformance was driven the most by poor stock picking in the financials sector and, to a lesser extent, in materials and industrials. On the positive side, security selection in information technology and health care added significant value.
Which stocks detracted from performance relative to the benchmark?
In the financials sector, nearly all of the negative performance impact came from three stocks: Signature Bank, KKR & Company LP, and The Blackstone Group LP.
Signature Bank, a longtime holding for the fund, struggled recently, as investors appeared to develop a variety of concerns about the company. These included a possible peak in the commercial real estate market, to which Signature has substantial exposure, the credit quality of the company's taxi-medallion loans in New York and Chicago, and the ongoing pressure of low interest rates on Signature's lending margins. We saw some merit in these concerns and, late in the period, sold the fund's stake.
Asset managers KKR and Blackstone struggled, as recent market forces have limited both companies' ability to sell private equity investments, which in turn has cut into their performance fees. Although we were optimistic about the long-term trends for KKR and Blackstone, we also acknowledged the short-term headwinds the firms are facing and opted to sell the fund's positions in both names.
What else hampered results?
The fund's biggest individual detractor was Tractor Supply Company, a farm-supply retail chain. Much of the stock's decline came in September, after the company issued a disappointing business forecast. At period end, the fund continued to hold Tractor Supply, as we liked its growth potential and competitive position.
CVS Health Corp. was another source of difficulty for the fund. This consumer retailer and pharmacy benefits management company struggled amid concern that slowing growth of drug prices could reduce its earnings. Against this backdrop, we increased the fund's position, as we thought the stock was attractively valued and continued to offer good long-term potential.
Which stocks were relative contributors?
The biggest individual contributor was online retail giant Amazon.com, Inc., whose shares were up more than 40% for the period. Amazon continued to generate very strong earnings, driven most by Amazon Web Services, the company's cloud computing division.
In the information technology (IT) sector, where we mentioned that stock selection was strong, the fund was helped by its position in QUALCOMM, Inc. Various factors lifted this maker of chips used in mobile-communication devices, including strong earnings and sales growth as well as resolution of a long-standing dispute with Chinese customers surrounding the company's licensing revenues. In addition, late in the period, QUALCOMM's shares rose on rumors that the company might acquire chip producer NXP Semiconductors NV, a Dutch manufacturer and fund holding that itself gained ground on the rumors and added to the fund's relative performance.
What else added value?
Also in the tech sector, the fund benefited from a timely purchase of Palo Alto Networks, Inc. The fund acquired shares of this emerging leader in the IT security market in the summertime at a low point for the stock, amid apparent investor concerns about the company's growth prospects. As the
period went on, however, investors seemed to become more comfortable with Palo Alto's improving competitive position and large potential market opportunity.
The fund also did very well with its investment in Facebook, Inc. The social networking company continued to produce robust profits, especially from mobile advertising, which has become the largest percentage of Facebook's revenue.
Also adding value was our position in ServiceNow, Inc., a provider of enterprise cloud computing services. ServiceNow has enhanced its product offerings for clients looking to make the shift to cloud-based computing solutions, and during the period, its shares gained ground as investors became more optimistic about the company's prospects.
Where were you investing during the six-month timeframe?
Throughout this relatively volatile period, our strategy was to invest opportunistically by taking advantage of periodic sell-offs in the marketplace to add stocks we saw as offering good growth prospects at a newly more attractive valuation. Palo Alto Networks provided a good example of this theme in action, as we were able to invest in this stock at close to its lowest price since early 2015.
Applying this opportunistic approach, we reduced the fund's holdings in consumer-related sectors, becoming less overweighted, and reinvested the proceeds to other market areas that we believed offered a better risk/reward balance. Most notably, we added meaningfully to the fund's exposure to the information technology and industrials sectors.
TOP 10 HOLDINGS AS OF 9/30/16 (%)
Apple, Inc. | 6.4 |
Amazon.com, Inc. | 4.4 |
Facebook, Inc., Class A | 4.3 |
Microsoft Corp. | 4.2 |
Alphabet, Inc., Class C | 3.4 |
UnitedHealth Group, Inc. | 2.8 |
Comcast Corp., Class A | 2.5 |
The Walt Disney Company | 2.4 |
Alphabet, Inc., Class A | 2.4 |
CVS Health Corp. | 2.4 |
TOTAL | 35.2 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
As of period end, how were you positioning the fund?
We were content with the fund's positioning, given our expectation for market volatility amid continued global economic challenges, albeit in a period of modest growth. Even in a low-return environment with subdued gains, however, portfolio managers can find individual opportunities. Accordingly, we'll continue looking for stocks offering good growth potential and valuation characteristics while providing a favorable risk/reward trade-off for the fund's shareholders.
At the end of the period, following our stock-by-stock investment approach, the fund's largest sector overweightings were in information technology and consumer discretionary, while its largest relative underweightings were in healthcare, industrials, and materials.
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 2011 Investing since 1996 |
![]() | Jay Zelko On the fund since 2011 Investing since 1987 |
TOTAL RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 2016
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||
1-year | Since inception1 | 6-month | Since inception1 | ||||
Class A | 5.66 | 13.19 | -0.54 | 81.05 | |||
Class C2 | 9.39 | 14.04 | 3.37 | 87.69 | |||
Class I3 | 11.54 | 14.80 | 4.87 | 93.77 | |||
Class R22,3 | 11.15 | 14.37 | 4.66 | 90.28 | |||
Class R42,3 | 11.40 | 14.45 | 4.86 | 90.97 | |||
Class R62,3 | 11.60 | 14.56 | 4.93 | 91.82 | |||
Class NAV3 | 11.60 | 14.99 | 4.93 | 95.28 | |||
Index† | 13.76 | 15.57 | 5.22 | 99.93 |
Performance figures assume all distributions are reinvested. Figures reflect the maximum sales charge 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 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 C | Class I | Class R2 | Class R4 | Class R6 | Class NAV | |
Gross (%) | 1.12 | 1.87 | 0.85 | 1.26 | 1.11 | 0.76 | 0.74 |
Net (%) | 1.12 | 1.87 | 0.85 | 1.26 | 1.01 | 0.74 | 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 and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index is the Russell 1000 Growth Index. |
See the following page for footnotes.
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 C2,4 | 12-19-11 | 18,769 | 18,769 | 19,993 |
Class I3 | 12-19-11 | 19,377 | 19,377 | 19,993 |
Class R22,3 | 12-19-11 | 19,028 | 19,028 | 19,993 |
Class R42,3 | 12-19-11 | 19,097 | 19,097 | 19,993 |
Class R62,3 | 12-19-11 | 19,182 | 19,182 | 19,993 |
Class NAV3 | 12-19-11 | 19,528 | 19,528 | 19,993 |
The Russell 1000 Growth Index is an unmanaged index that 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 result in lower returns.
Footnotes related to performance pages
1 | From 12-19-11. |
2 | Class C shares were first offered on 8-28-14. The returns prior to this date are those of Class A shares, which have lower expenses than Class C. Had the returns reflected Class C expenses, returns would be lower. Class R2, Class R4, and Class R6 shares were first offered on 3-27-15. The returns prior to these dates are those of Class A shares and may be higher or lower than if adjusted to reflect the expenses of any other share classes. |
3 | For certain types of investors, as described in the fund's prospectuses. |
4 | The contingent deferred sales charge is not applicable. |
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, 2016, with the same investment held until September 30, 2016.
Account value on 4-1-2016 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,047.00 | $5.64 | 1.10% |
Class C | 1,000.00 | 1,043.70 | 9.48 | 1.85% |
Class I | 1,000.00 | 1,048.70 | 4.31 | 0.84% |
Class R2 | 1,000.00 | 1,046.60 | 6.11 | 1.19% |
Class R4 | 1,000.00 | 1,048.60 | 4.67 | 0.91% |
Class R6 | 1,000.00 | 1,049.30 | 3.80 | 0.74% |
Class NAV | 1,000.00 | 1,049.30 | 3.75 | 0.73% |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at September 30, 2016, 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:
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, 2016, with the same investment held until September 30, 2016. 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 4-1-20165 | Ending value on 9-30-2016 | Expenses paid during period ended 9-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,019.60 | $5.57 | 1.10% |
Class C | 1,000.00 | 1,015.80 | 9.35 | 1.85% |
Class I | 1,000.00 | 1,020.90 | 4.26 | 0.84% |
Class R2 | 1,000.00 | 1,019.10 | 6.02 | 1.19% |
Class R4 | 1,000.00 | 1,020.50 | 4.61 | 0.91% |
Class R6 | 1,000.00 | 1,021.40 | 3.75 | 0.74% |
Class NAV | 1,000.00 | 1,021.40 | 3.70 | 0.73% |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the 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 183/366 (to reflect the one-half year period). |
Fund's investments
As of 9-30-16 (unaudited) | |||||||||||||||||
Shares | Value | ||||||||||||||||
Common stocks 96.0% | $1,962,922,302 | ||||||||||||||||
(Cost $1,543,979,932) | |||||||||||||||||
Consumer discretionary 24.2% | 495,091,533 | ||||||||||||||||
Auto components 0.3% | |||||||||||||||||
Tenneco, Inc. (I) | 115,059 | 6,704,488 | |||||||||||||||
Hotels, restaurants and leisure 3.8% | |||||||||||||||||
McDonald's Corp. | 365,790 | 42,197,534 | |||||||||||||||
Starbucks Corp. | 671,475 | 36,353,657 | |||||||||||||||
Household durables 0.4% | |||||||||||||||||
Harman International Industries, Inc. | 84,391 | 7,126,820 | |||||||||||||||
Internet and direct marketing retail 5.6% | |||||||||||||||||
Amazon.com, Inc. (I) | 107,017 | 89,606,404 | |||||||||||||||
The Priceline Group, Inc. (I) | 16,377 | 24,098,592 | |||||||||||||||
Media 4.9% | |||||||||||||||||
Comcast Corp., Class A | 775,274 | 51,431,677 | |||||||||||||||
The Walt Disney Company | 535,069 | 49,686,507 | |||||||||||||||
Specialty retail 8.6% | |||||||||||||||||
AutoZone, Inc. (I) | 32,393 | 24,888,838 | |||||||||||||||
Lowe's Companies, Inc. | 448,721 | 32,402,143 | |||||||||||||||
O'Reilly Automotive, Inc. (I) | 129,986 | 36,410,378 | |||||||||||||||
The Home Depot, Inc. | 318,657 | 41,004,783 | |||||||||||||||
The TJX Companies, Inc. | 257,068 | 19,223,545 | |||||||||||||||
Tractor Supply Company | 309,734 | 20,860,585 | |||||||||||||||
Textiles, apparel and luxury goods 0.6% | |||||||||||||||||
NIKE, Inc., Class B | 248,729 | 13,095,582 | |||||||||||||||
Consumer staples 10.1% | 205,295,119 | ||||||||||||||||
Beverages 2.9% | |||||||||||||||||
Constellation Brands, Inc., Class A | 164,529 | 27,392,433 | |||||||||||||||
Monster Beverage Corp. (I) | 85,461 | 12,546,529 | |||||||||||||||
The Coca-Cola Company | 466,065 | 19,723,871 | |||||||||||||||
Food and staples retailing 3.0% | |||||||||||||||||
Costco Wholesale Corp. | 83,015 | 12,660,618 | |||||||||||||||
CVS Health Corp. | 547,077 | 48,684,382 | |||||||||||||||
Tobacco 4.2% | |||||||||||||||||
Altria Group, Inc. | 558,111 | 35,289,359 | |||||||||||||||
Philip Morris International, Inc. | 247,223 | 24,035,020 | |||||||||||||||
Reynolds American, Inc. | 529,436 | 24,962,907 | |||||||||||||||
Energy 1.0% | 20,664,494 | ||||||||||||||||
Oil, gas and consumable fuels 1.0% | |||||||||||||||||
Devon Energy Corp. | 319,345 | 14,086,308 | |||||||||||||||
Occidental Petroleum Corp. | 90,211 | 6,578,186 |
Shares | Value | ||||||||||||||||
Financials 1.3% | $26,119,555 | ||||||||||||||||
Banks 0.8% | |||||||||||||||||
First Republic Bank | 202,435 | 15,609,763 | |||||||||||||||
Capital markets 0.5% | |||||||||||||||||
MSCI, Inc. | 125,206 | 10,509,792 | |||||||||||||||
Health care 12.9% | 263,607,166 | ||||||||||||||||
Biotechnology 7.2% | |||||||||||||||||
Amgen, Inc. | 288,074 | 48,053,624 | |||||||||||||||
Biogen, Inc. (I) | 75,158 | 23,526,709 | |||||||||||||||
Celgene Corp. (I) | 433,259 | 45,288,563 | |||||||||||||||
Gilead Sciences, Inc. | 236,699 | 18,727,625 | |||||||||||||||
Vertex Pharmaceuticals, Inc. (I) | 121,416 | 10,588,689 | |||||||||||||||
Health care providers and services 2.8% | |||||||||||||||||
UnitedHealth Group, Inc. | 408,955 | 57,253,700 | |||||||||||||||
Pharmaceuticals 2.9% | |||||||||||||||||
Allergan PLC (I) | 172,263 | 39,673,892 | |||||||||||||||
Pfizer, Inc. | 605,089 | 20,494,364 | |||||||||||||||
Industrials 8.2% | 168,353,674 | ||||||||||||||||
Aerospace and defense 2.1% | |||||||||||||||||
Northrop Grumman Corp. | 131,263 | 28,083,719 | |||||||||||||||
TransDigm Group, Inc. (I) | 49,754 | 14,384,876 | |||||||||||||||
Air freight and logistics 1.1% | |||||||||||||||||
FedEx Corp. | 124,430 | 21,735,432 | |||||||||||||||
Building products 1.0% | |||||||||||||||||
Fortune Brands Home & Security, Inc. | 370,638 | 21,534,068 | |||||||||||||||
Industrial conglomerates 1.8% | |||||||||||||||||
General Electric Company | 650,362 | 19,263,722 | |||||||||||||||
Honeywell International, Inc. | 149,784 | 17,463,317 | |||||||||||||||
Machinery 1.1% | |||||||||||||||||
Ingersoll-Rand PLC | 343,887 | 23,363,683 | |||||||||||||||
Trading companies and distributors 1.1% | |||||||||||||||||
HD Supply Holdings, Inc. (I) | 704,342 | 22,524,857 | |||||||||||||||
Information technology 35.1% | 718,616,966 | ||||||||||||||||
Communications equipment 2.0% | |||||||||||||||||
Cisco Systems, Inc. | 685,508 | 21,744,314 | |||||||||||||||
Palo Alto Networks, Inc. (I) | 124,255 | 19,797,549 | |||||||||||||||
Internet software and services 10.7% | |||||||||||||||||
Alphabet, Inc., Class A (I) | 61,664 | 49,581,556 | |||||||||||||||
Alphabet, Inc., Class C (I) | 90,638 | 70,452,011 | |||||||||||||||
CoStar Group, Inc. (I) | 46,935 | 10,162,836 | |||||||||||||||
Facebook, Inc., Class A (I) | 682,200 | 87,505,794 | |||||||||||||||
Shopify, Inc., Class A (I) | 36,974 | 1,586,924 |
Shares | Value | ||||||||||||||||
Information technology (continued) | |||||||||||||||||
IT services 2.0% | |||||||||||||||||
Mastercard, Inc. | 138,058 | $14,050,163 | |||||||||||||||
SourceHOV LLC (I)(R) | 510 | 395,469 | |||||||||||||||
Visa, Inc., Class A | 312,637 | 25,855,080 | |||||||||||||||
Semiconductors and semiconductor equipment 3.9% | |||||||||||||||||
Broadcom, Ltd. | 194,684 | 33,586,884 | |||||||||||||||
NXP Semiconductors NV (I) | 240,595 | 24,543,096 | |||||||||||||||
QUALCOMM, Inc. | 322,888 | 22,117,828 | |||||||||||||||
Software 10.1% | |||||||||||||||||
Adobe Systems, Inc. (I) | 341,451 | 37,061,092 | |||||||||||||||
Electronic Arts, Inc. (I) | 331,802 | 28,335,891 | |||||||||||||||
Microsoft Corp. | 1,502,129 | 86,522,630 | |||||||||||||||
salesforce.com, Inc. (I) | 433,294 | 30,906,860 | |||||||||||||||
ServiceNow, Inc. (I) | 295,202 | 23,365,238 | |||||||||||||||
Technology hardware, storage and peripherals 6.4% | |||||||||||||||||
Apple, Inc. | 1,159,184 | 131,045,751 | |||||||||||||||
Materials 1.1% | 22,405,864 | ||||||||||||||||
Chemicals 1.1% | |||||||||||||||||
PPG Industries, Inc. | 216,775 | 22,405,864 | |||||||||||||||
Real estate 2.1% | 42,767,931 | ||||||||||||||||
Equity real estate investment trusts 2.1% | |||||||||||||||||
Equinix, Inc. | 74,838 | 26,960,390 | |||||||||||||||
QTS Realty Trust, Inc., Class A | 299,102 | 15,807,541 | |||||||||||||||
Yield* (%) | Maturity date | Par value^ | Value | ||||||||||||||
Short-term investments 1.6% | $33,112,857 | ||||||||||||||||
(Cost $33,112,857) | |||||||||||||||||
U.S. Government Agency 1.0% | 21,530,857 | ||||||||||||||||
Federal Farm Credit Bank Discount Note | 0.150 | 10-03-16 | 8,346,000 | 8,345,930 | |||||||||||||
Federal Home Loan Bank Discount Note | 0.100 | 10-03-16 | 13,185,000 | 13,184,927 | |||||||||||||
Par value^ | Value | ||||||||||||||||
Repurchase agreement 0.6% | 11,582,000 | ||||||||||||||||
Repurchase Agreement with State Street Corp. dated 9-30-16 at 0.030% to be repurchased at $11,582,029 on 10-3-16, collateralized by $10,720,000 U.S. Treasury Notes, 3.500% due 5-15-20 (valued at $11,818,800, including interest) | 11,582,000 | 11,582,000 | |||||||||||||||
Total investments (Cost $1,577,092,789)† 97.6% | $1,996,035,159 | ||||||||||||||||
Other assets and liabilities, net 2.4% | $49,239,625 | ||||||||||||||||
Total net assets 100.0% | $2,045,274,784 |
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. | |||||||||||||||||
Key to Security Abbreviations and Legend | |||||||||||||||||
(I) | Non-income producing security. | ||||||||||||||||
(R) | Direct placement securities are restricted as to resale and the fund has limited rights to registration under the Securities Act of 1933. For more information on this security refer to the Notes to financial statements. | ||||||||||||||||
* | Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end. | ||||||||||||||||
† | At 9-30-16, the aggregate cost of investment securities for federal income tax purposes was $1,578,823,533. Net unrealized appreciation aggregated to $417,211,626, of which $433,654,691 related to appreciated investment securities and $16,443,065 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 9-30-16 (unaudited)
Assets | |||||||||||||||||||
Investments, at value (Cost $1,577,092,789) | $1,996,035,159 | ||||||||||||||||||
Cash | 22,463,047 | ||||||||||||||||||
Receivable for investments sold | 33,109,192 | ||||||||||||||||||
Receivable for fund shares sold | 222,561 | ||||||||||||||||||
Dividends and interest receivable | 1,487,014 | ||||||||||||||||||
Other receivables and prepaid expenses | 52,214 | ||||||||||||||||||
Total assets | 2,053,369,187 | ||||||||||||||||||
Liabilities | |||||||||||||||||||
Payable for investments purchased | 4,089,807 | ||||||||||||||||||
Payable for fund shares repurchased | 3,808,428 | ||||||||||||||||||
Payable to affiliates | |||||||||||||||||||
Accounting and legal services fees | 56,776 | ||||||||||||||||||
Transfer agent fees | 38,840 | ||||||||||||||||||
Distribution and service fees | 346 | ||||||||||||||||||
Trustees' fees | 2,558 | ||||||||||||||||||
Other liabilities and accrued expenses | 97,648 | ||||||||||||||||||
Total liabilities | 8,094,403 | ||||||||||||||||||
Net assets | $2,045,274,784 | ||||||||||||||||||
Net assets consist of | |||||||||||||||||||
Paid-in capital | $1,568,953,243 | ||||||||||||||||||
Undistributed net investment income | 6,486,777 | ||||||||||||||||||
Accumulated net realized gain (loss) on investments | 50,892,394 | ||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 418,942,370 | ||||||||||||||||||
Net assets | $2,045,274,784 | ||||||||||||||||||
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 ($342,525,518 ÷ 21,340,836 shares)1 | $16.05 | ||||||||||||||||||
Class C ($16,769,306 ÷ 1,049,006 shares)1 | $15.99 | ||||||||||||||||||
Class I ($9,845,705 ÷ 609,393 shares) | $16.16 | ||||||||||||||||||
Class R2 ($1,050,490 ÷ 65,004 shares) | $16.16 | ||||||||||||||||||
Class R4 ($238,030 ÷ 14,716.8 shares) | $16.18 | ||||||||||||||||||
Class R6 ($596,996 ÷ 36,890 shares) | $16.18 | ||||||||||||||||||
Class NAV ($1,674,248,739 ÷ 103,479,414 shares) | $16.18 | ||||||||||||||||||
Maximum offering price per share | |||||||||||||||||||
Class A (net asset value per share ÷ 95%)2 | $16.89 |
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 9-30-16 (unaudited)
Investment income | ||||||||||||||||||||||||
Dividends | $13,761,399 | |||||||||||||||||||||||
Interest | 75,550 | |||||||||||||||||||||||
Securities lending | 2,295 | |||||||||||||||||||||||
Total investment income | 13,839,244 | |||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Investment management fees | 6,857,195 | |||||||||||||||||||||||
Distribution and service fees | 461,859 | |||||||||||||||||||||||
Accounting and legal services fees | 150,563 | |||||||||||||||||||||||
Transfer agent fees | 200,862 | |||||||||||||||||||||||
Trustees' fees | 18,749 | |||||||||||||||||||||||
State registration fees | 73,413 | |||||||||||||||||||||||
Printing and postage | 36,443 | |||||||||||||||||||||||
Professional fees | 62,301 | |||||||||||||||||||||||
Custodian fees | 120,039 | |||||||||||||||||||||||
Other | 20,275 | |||||||||||||||||||||||
Total expenses | 8,001,699 | |||||||||||||||||||||||
Less expense reductions | (75,228 | ) | ||||||||||||||||||||||
Net expenses | 7,926,471 | |||||||||||||||||||||||
Net investment income | 5,912,773 | |||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||
Unaffiliated investments | 34,797,825 | |||||||||||||||||||||||
Affiliated investments | 509 | |||||||||||||||||||||||
34,798,334 | ||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
Unaffiliated investments | 53,188,455 | |||||||||||||||||||||||
Affiliated investments | (328 | ) | ||||||||||||||||||||||
53,188,127 | ||||||||||||||||||||||||
Net realized and unrealized gain | 87,986,461 | |||||||||||||||||||||||
Increase in net assets from operations | $93,899,234 |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 9-30-16 | Year ended 3-31-16 | ||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | |||||||||||||||||||||||||||||||||||||||||||||
From operations | |||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $5,912,773 | $11,887,127 | |||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 34,798,334 | 45,484,685 | |||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | 53,188,127 | (76,310,354 | ) | ||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | 93,899,234 | (18,938,542 | ) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||
From net investment income | |||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (53,812 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I | — | (77,682 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (111 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (344 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (790 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (14,002,668 | ) | ||||||||||||||||||||||||||||||||||||||||||
From net realized gain | |||||||||||||||||||||||||||||||||||||||||||||
Class A | — | (905,789 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class C | — | (41,821 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class I | — | (613,676 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R2 | — | (5,142 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R4 | — | (5,142 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class R6 | — | (5,142 | ) | ||||||||||||||||||||||||||||||||||||||||||
Class NAV | — | (91,112,925 | ) | ||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (106,825,044 | ) | ||||||||||||||||||||||||||||||||||||||||||
From fund share transactions | (102,863,941 | ) | (288,801,728 | ) | |||||||||||||||||||||||||||||||||||||||||
Issued in reorganization | 359,345,631 | — | |||||||||||||||||||||||||||||||||||||||||||
Total from fund share transactions | 256,481,690 | (288,801,728 | ) | ||||||||||||||||||||||||||||||||||||||||||
Total increase (decrease) | 350,380,924 | (414,565,314 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net assets | |||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 1,694,893,860 | 2,109,459,174 | |||||||||||||||||||||||||||||||||||||||||||
End of period | $2,045,274,784 | $1,694,893,860 | |||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $6,486,777 | $574,004 |
Financial highlights
Class A Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.33 | $16.44 | $15.50 | $12.62 | $12.14 | $10.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)3 | 0.03 | 0.03 | 0.03 | (0.04 | ) | 0.02 | (0.01 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.69 | (0.24 | ) | 2.14 | 3.46 | 0.49 | 2.15 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.72 | (0.21 | ) | 2.17 | 3.42 | 0.51 | 2.14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.05 | ) | — | — | — | — | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.85 | ) | (1.23 | ) | (0.54 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.90 | ) | (1.23 | ) | (0.54 | ) | (0.03 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.05 | $15.33 | $16.44 | $15.50 | $12.62 | $12.14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5,6 | 4.70 | 7 | (1.45 | ) | 14.68 | 27.27 | 4.25 | 21.41 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $343 | $18 | $18 | $10 | $5 | $3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.11 | 8 | 1.19 | 1.33 | 1.51 | 2.01 | 2.05 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.10 | 8 | 1.18 | 1.30 | 1.30 | 1.30 | 1.30 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.35 | 8 | 0.20 | 0.16 | (0.29 | ) | 0.18 | (0.32 | ) 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 44 | 90 | 109 | 91 | 100 | 26 |
1 | Six months ended 9-30-16. 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 | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.32 | $16.51 | $16.49 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss3 | (0.03 | ) | (0.09 | ) | (0.04 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.70 | (0.25 | ) | 1.29 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.67 | (0.34 | ) | 1.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.85 | ) | (1.23 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.85 | ) | (1.23 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $15.99 | $15.32 | $16.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)4,5 | 4.37 | 6 | (2.24 | ) | 8.20 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $17 | $1 | $1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.86 | 7 | 2.50 | 7.03 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.85 | 7 | 1.94 | 2.05 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (0.40 | ) 7 | (0.54 | ) | (0.42 | ) 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 44 | 90 | 109 | 8 |
1 | Six months ended 9-30-16. Unaudited. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | The inception date for Class C 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 period. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | Does not reflect the effect of sales charges, if any. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | The portfolio turnover is shown for the period from 4-1-14 to 3-31-15. |
Class I Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.41 | $16.53 | $15.58 | $12.67 | $12.16 | $10.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.04 | 0.08 | 0.10 | 0.01 | 0.06 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.71 | (0.24 | ) | 2.14 | 3.47 | 0.50 | 2.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.75 | (0.16 | ) | 2.24 | 3.48 | 0.56 | 2.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.11 | ) | (0.06 | ) | (0.03 | ) | (0.02 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.85 | ) | (1.23 | ) | (0.54 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.96 | ) | (1.29 | ) | (0.57 | ) | (0.05 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.16 | $15.41 | $16.53 | $15.58 | $12.67 | $12.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 4.87 | 6 | (1.17 | ) | 15.07 | 27.68 | 4.62 | 21.63 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $10 | $10 | $12 | $2 | $1 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.85 | 8 | 0.90 | 1.50 | 2.62 | 5.88 | 11.44 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.84 | 8 | 0.88 | 0.94 | 0.94 | 0.94 | 0.94 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.51 | 8 | 0.50 | 0.62 | 0.09 | 0.51 | 0.14 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 44 | 90 | 109 | 91 | 100 | 26 |
1 | Six months ended 9-30-16. 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 R2 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.44 | $16.55 | $16.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.02 | 0.01 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.70 | (0.25 | ) | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.72 | (0.24 | ) | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.02 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.85 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.87 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.16 | $15.44 | $16.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 4.66 | 6 | (1.63 | ) | 0.30 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.19 | 8 | 4.73 | 15.09 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.19 | 8 | 1.32 | 13.96 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.25 | 8 | 0.06 | — | 8,9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 44 | 90 | 109 | 10 |
1 | Six months ended 9-30-16. Unaudited. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-27-15. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 period. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Less than $500,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | Annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | Less than 0.005%. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10 | The portfolio turnover is shown for the period from 4-1-14 to 3-31-15. |
Class R4 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.43 | $16.55 | $16.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.04 | 0.04 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.71 | (0.25 | ) | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.75 | (0.21 | ) | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.06 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.85 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.91 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.18 | $15.43 | $16.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 4.86 | 6 | (1.47 | ) | 0.30 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | — | 7 | — | 7 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.02 | 8 | 4.73 | 15.09 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.91 | 8 | 1.13 | 1.18 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.51 | 8 | 0.25 | 0.18 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 44 | 90 | 109 | 9 |
1 | Six months ended 9-30-16. Unaudited. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-27-15. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 period. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Less than $500,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | Annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | The portfolio turnover is shown for the period from 4-1-14 to 3-31-15. |
Class R6 Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.42 | $16.55 | $16.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.05 | 0.10 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.71 | (0.25 | ) | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.76 | (0.15 | ) | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.13 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.85 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.98 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.18 | $15.42 | $16.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 4.93 | 6 | (1.09 | ) | 0.30 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.77 | 8 | 4.75 | 15.91 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.74 | 8 | 0.73 | 0.81 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.66 | 8 | 0.65 | 0.63 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 44 | 90 | 109 | 9 |
1 | Six months ended 9-30-16. Unaudited. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | The inception date for Class R2 shares is 3-27-15. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 period. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Not annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Less than $500,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | Annualized. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9 | The portfolio turnover is shown for the period from 4-1-14 to 3-31-15. |
Class NAV Shares Period ended | 9-30-16 | 1 | 3-31-16 | 3-31-15 | 3-31-14 | 3-31-13 | 3-31-12 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $15.42 | $16.55 | $15.58 | $12.67 | $12.16 | $10.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income3 | 0.05 | 0.10 | 0.12 | 0.04 | 0.08 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.71 | (0.25 | ) | 2.17 | 3.47 | 0.50 | 2.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 0.76 | (0.15 | ) | 2.29 | 3.51 | 0.58 | 2.16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | — | (0.13 | ) | (0.09 | ) | (0.06 | ) | (0.04 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net realized gain | — | (0.85 | ) | (1.23 | ) | (0.54 | ) | (0.03 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total distributions | — | (0.98 | ) | (1.32 | ) | (0.60 | ) | (0.07 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $16.18 | $15.42 | $16.55 | $15.58 | $12.67 | $12.16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)5 | 4.93 | 6 | (1.09 | ) | 15.43 | 27.88 | 4.80 | 21.63 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1,674 | $1,666 | $2,078 | $1,452 | $1,013 | $336 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.74 | 7 | 0.74 | 0.72 | 0.74 | 0.78 | 0.85 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.73 | 7 | 0.74 | 0.72 | 0.73 | 0.78 | 0.85 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.65 | 7 | 0.64 | 0.72 | 0.26 | 0.71 | 0.15 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 44 | 90 | 109 | 91 | 100 | 26 |
1 | Six months ended 9-30-16. 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 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, and transfer agent fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (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 qualifies 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 scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission (SEC) and applicable regulations.
In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market 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 Trust (JHCT), 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.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
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 and related inputs 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, 2016, by major security category or type:
Total value at 9-30-16 | Level 1 quoted price | Level 2 significant observable inputs | Level 3 significant unobservable inputs | ||
Common stocks | |||||
Consumer discretionary | $495,091,533 | $495,091,533 | — | — | |
Consumer staples | 205,295,119 | 205,295,119 | — | — | |
Energy | 20,664,494 | 20,664,494 | — | — | |
Financials | 26,119,555 | 26,119,555 | — | — | |
Health care | 263,607,166 | 263,607,166 | — | — | |
Industrials | 168,353,674 | 168,353,674 | — | — | |
Information technology | 718,616,966 | 718,221,497 | — | $395,469 | |
Materials | 22,405,864 | 22,405,864 | — | — | |
Real estate | 42,767,931 | 42,767,931 | — | — | |
Short-term investments | 33,112,857 | — | $33,112,857 | — | |
Total investments in securities | $1,996,035,159 | $1,962,526,833 | $33,112,857 | $395,469 |
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.
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, assets and liabilities resulting from repurchase agreements are not offset 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 NAV 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 JHCT, an affiliate of the fund, which has a floating NAV and is registered with the SEC as an investment company. JHCT 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 JHCT with respect to the cash collateral.
The fund has the right to recall loaned securities on demand. 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 JHCT.
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. Securities lending income received by the fund is net of fees retained by the securities lending agent. Net income received from JHCT is a component of securities lending income as recorded on the Statement of operations.
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the 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 extent of any overdraft, and to the maximum extent permitted by law.
Effective June 30, 2016, the fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $1 billion unsecured committed line of credit. Excluding commitments designated for certain funds, the fund can borrow up to an aggregate commitment amount of $750 million, subject to asset coverage and other limitations as specified in the agreement. 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 based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. Prior to June 30, 2016, the fund had a similar agreement that enabled it to participate in a $750 million unsecured committed line of credit. For the six months ended September 30, 2016, the fund had no borrowings under either line of credit. Commitment fees for the six months ended September 30, 2016 were $2,913.
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, for all classes, are calculated daily at the class level based on the 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, 2016, 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 fund's average daily net assets; (c) 0.675% of the next $500 million of the fund's 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 group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. 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. During the six months ended September 30, 2016, this waiver amounted to 0.01% of the fund's average net assets on an annualized basis. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
Prior to July 1, 2016, the Advisor had contractually agreed to waive all or a portion of its management fee and/or reimburse or pay operating expenses of the fund to the extent necessary to maintain the fund's total operating expenses at 2.05%, 1.43%, and 1.18% for Class C, Class R2, and Class R4 shares, respectively, excluding certain expenses such as taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the fund's business, acquired fund fees and short dividend expense.
The Advisor has contractually agreed to waive and/or reimburse all class specific expenses for Class R6 shares of the fund to the extent they exceed 0.00% of average net assets. The expense limitation expires on June 30, 2017, 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 the six months ended September 30, 2016, these expense reductions amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $11,602 | Class R4 | $8 | |
Class C | 565 | Class R6 | 46 | |
Class I | 334 | Class NAV | 62,530 | |
Class R2 | 35 | Total | $75,120 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended September 30, 2016 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, 2016 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 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 fees | Class | Rule 12b-1 fee | Service fees | |
Class A | 0.25% | — | Class R2 | 0.25% | 0.25% | |
Class C | 1.00% | — | Class R4 | 0.25% | 0.10% |
The fund's Distributor has contractually agreed to waive 0.10% of Rule12b-1 fees for Class R4 shares. The current waiver agreement expires on June 30, 2017, 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. This contractual waiver amounted to $108 for Class R4 shares for the six months ended September 30, 2016.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $85,326 for the six months ended September 30, 2016. Of this amount, $23,355 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $56,409 was paid as sales commissions to broker-dealers and $5,562 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, 2016, CDSCs received by the Distributor amounted to $636 and $858 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. 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, 2016 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $384,587 | $186,735 |
Class C | 74,945 | 9,095 |
Class I | — | 4,901 |
Class R2 | 2,043 | 80 |
Class R4 | 284 | 19 |
Class R6 | — | 32 |
Class NAV | — | — |
Total | $461,859 | $200,862 |
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, 2016 and for the year ended March 31, 2016 were as follows:
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 369,374 | $5,781,890 | 527,971 | $8,398,745 | ||||||||||||||||||||||
Issued in reorganization (Note 10) | 21,468,382 | 331,978,464 | — | — | ||||||||||||||||||||||
Distributions reinvested | — | — | 60,658 | 959,600 | ||||||||||||||||||||||
Repurchased | (1,682,296 | ) | (26,486,288 | ) | (480,948 | ) | (7,650,606 | ) | ||||||||||||||||||
Net increase | 20,155,460 | $311,274,066 | 107,681 | $1,707,739 | ||||||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 28,757 | $447,044 | 48,784 | $771,679 | ||||||||||||||||||||||
Issued in reorganization (Note 10) | 1,055,831 | 16,315,435 | — | — | ||||||||||||||||||||||
Distributions reinvested | — | — | 2,596 | 41,145 | ||||||||||||||||||||||
Repurchased | (91,904 | ) | (1,433,646 | ) | (44,509 | ) | (699,509 | ) | ||||||||||||||||||
Net increase | 992,684 | $15,328,833 | 6,871 | $113,315 | ||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 326,010 | $5,204,147 | 98,491 | $1,567,114 | ||||||||||||||||||||||
Issued in reorganization (Note 10) | 281,166 | 4,371,431 | — | — | ||||||||||||||||||||||
Distributions reinvested | — | — | 43,509 | 691,359 | ||||||||||||||||||||||
Repurchased | (637,024 | ) | (9,917,692 | ) | (245,410 | ) | (3,856,027 | ) | ||||||||||||||||||
Net decrease | (29,848 | ) | ($342,114 | ) | (103,410 | ) | ($1,597,554 | ) |
Six months ended 9-30-16 | Year ended 3-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 7,374 | $117,765 | — | — | ||||||||||||||||||||||
Issued in reorganization (Note 10) | 58,403 | 909,678 | — | — | ||||||||||||||||||||||
Repurchased | (6,834 | ) | (110,522 | ) | — | — | ||||||||||||||||||||
Net increase | 58,943 | $916,921 | — | — | ||||||||||||||||||||||
Class R4 shares | ||||||||||||||||||||||||||
Sold | 120 | $1,892 | — | — | ||||||||||||||||||||||
Issued in reorganization (Note 10) | 8,608 | 134,034 | — | — | ||||||||||||||||||||||
Repurchased | (73 | ) | (1,146 | ) | — | — | ||||||||||||||||||||
Net increase | 8,655 | $134,780 | — | — | ||||||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 27,237 | $433,041 | — | — | ||||||||||||||||||||||
Issued in reorganization (Note 10) | 362,123 | 5,636,589 | — | — | ||||||||||||||||||||||
Repurchased | (358,531 | ) | (5,580,988 | ) | — | — | ||||||||||||||||||||
Net increase | 30,829 | $488,642 | — | — | ||||||||||||||||||||||
Class NAV shares | ||||||||||||||||||||||||||
Sold | 1,554,681 | $24,804,265 | 345,929 | $5,468,712 | ||||||||||||||||||||||
Distributions reinvested | — | — | 6,611,043 | 105,115,593 | ||||||||||||||||||||||
Repurchased | (6,086,734 | ) | (96,123,703 | ) | (24,558,115 | ) | (399,609,533 | ) | ||||||||||||||||||
Net decrease | (4,532,053 | ) | ($71,319,438 | ) | (17,601,143 | ) | ($289,025,228 | ) | ||||||||||||||||||
Total net increase (decrease) | 16,684,670 | $256,481,690 | (17,590,001 | ) | ($288,801,728 | ) |
Affiliates of the fund owned 26%, 79%, 16% and 100% of shares of beneficial interest of Class R2, Class R4, Class R6 and Class NAV, respectively, on September 30, 2016.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $845,649,686 and $926,142,295, respectively, for the six months ended September 30, 2016.
Note 7 — Industry or sector risk
The fund may invest a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the fund's assets are economically tied to a single or small number of industries or sectors of the economy, the fund will be less diversified than a more broadly diversified fund, and it may cause the fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the fund's NAV more volatile. Further, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors.
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, 2016, funds within the John Hancock group of funds complex held 81.9% 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 | ||||
John Hancock Lifestyle Growth Portfolio | 22.7% |
Fund | Affiliated concentration | ||||
John Hancock Lifestyle Balanced Portfolio | 16.2% | ||||
John Hancock Lifestyle Growth MVP | 13.2% | ||||
John Hancock Lifestyle Aggressive Portfolio | 8.8% | ||||
John Hancock Lifestyle Balanced MVP | 7.3% |
Note 9 — Direct placement securities
The fund may hold private placement securities which are restricted as to resale and the fund has limited rights to registration under the Securities Act of 1933. The following table summarizes the direct placement securities held at September 30, 2016:
Issuer, description | Original acquisition date* | Acquisition cost | Beginning share amount | Ending share amount | Value as a percentage of fund's net assets | Value as of 9-30-16 |
SourceHOV LLC | 10-31-14 | $4,726,919 | 510 | 510 | 0.02% | $395,469 |
*Original acquisition date represents date security was acquired by John Hancock Select Growth Fund. On April 22, 2016, the security was acquired at value in connection with acquisition of John Hancock Select Growth Fund. See Note 10.
Note 10 — Reorganization
On March 30, 2016, the shareholders of John Hancock Select Growth Fund (the Acquired Portfolio) voted to approve an Agreement and Plan of Reorganization (the Agreement) which provided for an exchange of shares of the fund (the Acquiring Portfolio) with a value equal to the net assets transferred.
The Agreement provided for (a) the acquisition of all the assets, subject to all of the liabilities, of the Acquired Portfolio in exchange for shares of the Acquiring Portfolio with a value equal to the net assets transferred; (b) the liquidation of the Acquired Portfolio; and (c) the distribution to Acquired Portfolio's shareholders of such Acquiring Portfolio's shares. The reorganization was intended to consolidate the Acquired Portfolio with a portfolio with similar objectives and achieve economies of scale. As a result of the reorganization, the Acquiring Portfolio is the legal and accounting survivor.
Based on the opinion of tax counsel, the reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized by the Acquired Portfolio or its shareholders. Thus, the investments were transferred to the Acquiring Portfolio at the Acquired Portfolio's identified cost. All distributable amounts of net income and realized gains from the Acquired Portfolio were distributed prior to the reorganization. In addition, the expenses of the reorganization were borne by the Acquired Portfolio. The effective time of the reorganization occurred immediately after the close of regularly scheduled trading on the New York Stock Exchange (NYSE) on April 22, 2016. The following outlines the reorganization:
Acquiring portfolio | Acquired portfolio | Net asset value of the acquired portfolio | Appreciation of the acquired portfolio investment | Shares redeemed by the acquired portfolio | Shares issued by the acquiring portfolio | Acquiring portfolio net assets prior to combination | Acquiring portfolio total net assets after combination |
Strategic Growth Fund | Select Growth Fund | $359,345,631 | $15,546,164 | 18,553,593 | 23,234,512 | $1,692,096,430 | $2,051,442,061 |
Because the combined portfolio has been managed as a single integrated portfolio since the reorganization was completed, it is not practicable to separate the amounts of net investment income and gains attributable to the Acquired Portfolio that have been included in the Acquiring Portfolio's Statement of operations at September 30, 2016. See Note 5 for capital shares issued in connection with the above referenced reorganization.
Assuming the acquisition had been completed on April 1, 2016, the beginning of the reporting period, the Acquiring Portfolio's pro forma results of operations for the year ended September 30, 2016 are as follows:
Net investment income | $5,789,454 |
Net realized and unrealized gain (loss) | 106,954,735 |
Increase (decrease) in net assets from operations | 112,744,189 |
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 20-23, 2016 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 24-25, 2016.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 20-23, 2016, 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 mutual 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.
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 John Hancock group of funds complex (the John Hancock Fund 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 for the one- and three-year periods ended December 31, 2015. The Board also noted that the fund outperformed its peer group average for the three-year period ended December
31, 2015 and underperformed its peer group average for the one-year period ended December 31, 2015. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the peer group for the three-year period. 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 net 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. In addition, the Board took into account that management had agreed 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 reduces 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 noted that the fund has a voluntary fee waiver and/or expense reimbursement, which reduces certain expenses 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 John Hancock Fund 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 information 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 | |||||||
(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 contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. 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; | |
(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 Fund Complex); | |
(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 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 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 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 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 and compared them 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 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) | noted that the subadvisory fees are paid by the Advisor not the fund and that the 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.
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor John Hancock Asset Management a division of Manulife Asset Management (US) LLC Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund 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. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Balanced Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Small Cap Value Small Company Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Global Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Global Real Estate Natural Resources Redwood Regional Bank Seaport Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Income Allocation Fund Lifestyle Aggressive Portfolio Lifestyle Balanced Portfolio Lifestyle Conservative Portfolio Lifestyle Growth Portfolio Lifestyle Moderate Portfolio Retirement Choices Portfolios Retirement Living Portfolios Retirement Living II Portfolios EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Large Cap Core 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 |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We build funds based on investor needs, then search the world to find proven
portfolio teams with specialized expertise in those strategies. As a manager of
managers, we apply vigorous oversight to ensure that they continue to meet
our uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, 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. | ||
MF322366 | 393SA 9/16 11/16 |
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
By: | /s/ Andrew Arnott |
Andrew Arnott | |
President | |
Date: | November 11, 2016 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Andrew Arnott |
Andrew Arnott | |
President | |
Date: | November 11, 2016 |
By: | /s/ Charles A. Rizzo |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | November 11, 2016 |