| 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 811-21779 |
| JOHN HANCOCK FUNDS II |
| --------------------------------------------------------- |
| (Exact name of registrant as specified in charter) |
| 601 CONGRESS STREET, BOSTON, MA 02210-2805 |
| ------------------------------------------------------------- |
| (Address of principal executive offices) (Zip code) |
| SALVATORE SCHIAVONE, 601 CONGRESS STREET, BOSTON, MA 02210-2805 |
| ------------------------------------------------------------------------------------------ |
| (Name and address of agent for service) |
| Registrant's telephone number, including area code: (617) 663-4497 |
| ------------------- |
| Date of fiscal year end: 7/31 |
| Date of reporting period: 1/31/13 |
ITEM 1. REPORTS TO STOCKHOLDERS.
The Registrant prepared ten semiannual reports to shareholders for the period ended January 31, 2013. The first report applies to the Technical Opportunities Fund, the second report applies to the Global High Yield Fund, the third report applies to the Multi Sector Bond Fund, the fourth report applies to the Currency Strategies Fund, the fifth report applies to the Fundamental All Cap Core Fund, the sixth report applies to the Fundamental Large Cap Core Fund, the seventh report applies to the Fundamental Large Cap Value Fund, the eighth report applies to the Diversified Strategies Fund, the ninth report applies to the China Emerging Leaders Fund and the tenth report applies to the Global Absolute Return Strategies Fund.
A look at performance
Total returns for the period ended January 31, 2013
| Average annual total returns (%) | Cumulative total returns (%) | |||||||||
| with maximum sales charge | with maximum sales charge | |||||||||
| Since | Since | |||||||||
| 1-year | 5-year | 10-year | inception1 | 6-months | 1-year | 5-year | 10-year | inception1 | ||
| Class A | 13.36 | — | — | 2.64 | 8.56 | 13.36 | — | — | 9.54 | |
| Class I2 | 19.83 | — | — | 4.55 | 14.43 | 19.83 | — | — | 16.86 | |
| Class NAV2 | 20.19 | — | — | 4.73 | 14.68 | 20.19 | — | — | 17.58 | |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 5.00%.
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. For all classes the net expenses equal the gross expenses. The expense ratios are as follows:
| Class A | Class I | Class NAV | |||||||
| Net/Gross (%) | 1.78 | 1.45 | 1.22 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on 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.
See the following page for footnotes.
| 6 | Technical Opportunities Fund | Semiannual report |
| Without | With maximum | |||
| Start date | sales charge | sales charge | Index | |
| Class I2 | 8-3-09 | $11,686 | $11,686 | $14,630 |
| Class NAV2 | 8-3-09 | 11,758 | 11,758 | 14,630 |
MSCI All Country World Index (gross of foreign withholding tax on dividends) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
It is not possible to invest directly in an index. Index figures do not reflect expenses, which would have resulted in lower values if they did.
Footnotes related to performance pages
1 From 8-3-09.
2 For certain types of investors, as described in the Fund’s prospectuses.
| Semiannual report | Technical Opportunities Fund | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012 with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,143.00 | $9.83 |
| Class I | 1,000.00 | 1,144.30 | 8.27 |
| Class NAV | 1,000.00 | 1,146.80 | 6.66 |
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 January 31, 2013, 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:
| 8 | Technical Opportunities Fund | Semiannual report |
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,016.00 | $9.25 |
| Class I | 1,000.00 | 1,017.50 | 7.78 |
| Class NAV | 1,000.00 | 1,019.00 | 6.26 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.82%, 1.53% and 1.23% for Class A, Class I and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| Semiannual report | Technical Opportunities Fund | 9 |
Portfolio summary
| Top 10 Holdings (23.6% of Net Assets on 1-31-13)1,2 | ||||
| Michael Kors Holdings, Ltd. | 2.9% | Salesforce.com, Inc. | 2.1% | |
| Pioneer Natural Resources Company | 2.8% | Hertz Global Holdings, Inc. | 2.0% | |
| Regeneron Pharmaceuticals, Inc. | 2.6% | LinkedIn Corp., Class A | 2.0% | |
| Arena Pharmaceuticals, Inc. | 2.6% | Gilead Sciences, Inc. | 2.0% | |
| Onyx Pharmaceuticals, Inc. | 2.6% | Bank of America Corp. | 2.0% | |
| Sector Composition1,3 | ||||
| Financials | 22.0% | Energy | 10.1% | |
| Health Care | 18.1% | Materials | 4.3% | |
| Information Technology | 16.0% | Consumer Staples | 1.4% | |
| Industrials | 15.0% | Short-Term Investments & Other | 1.8% | |
| Consumer Discretionary | 11.3% | |||
1 As a percentage of net assets on 1-31-13.
2 Cash and cash equivalents not included.
3 International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. These risks are more significant in emerging markets. 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.
| 10 | Technical Opportunities Fund | Semiannual report |
Fund’s investments
As of 1-31-13 (unaudited)
| Shares | Value | |
| Common Stocks 98.2% | $522,643,964 | |
| (Cost $450,567,412) | ||
| Consumer Discretionary 11.3% | 60,079,120 | |
| Hotels, Restaurants & Leisure 2.0% | ||
| Galaxy Entertainment Group, Ltd. (I) | 815,000 | 3,670,165 |
| Sands China, Ltd. | 738,800 | 3,727,697 |
| Sonic Corp. (I) | 306,100 | 3,416,076 |
| Household Durables 1.1% | ||
| PulteGroup, Inc. (I)(L) | 152,700 | 3,166,998 |
| The Ryland Group, Inc. (L) | 65,800 | 2,613,576 |
| Internet & Catalog Retail 2.7% | ||
| Amazon.com, Inc. (I) | 27,930 | 7,415,415 |
| Expedia, Inc. (L) | 103,610 | 6,760,553 |
| Media 0.9% | ||
| Gannett Company, Inc. (L) | 259,900 | 5,101,837 |
| Specialty Retail 0.5% | ||
| Hot Topic, Inc. (L) | 234,700 | 2,605,170 |
| Textiles, Apparel & Luxury Goods 4.1% | ||
| Fifth & Pacific Companies, Inc. (I)(L) | 211,800 | 3,198,180 |
| Michael Kors Holdings, Ltd. (I) | 273,037 | 15,325,567 |
| Prada SpA | 342,300 | 3,077,886 |
| Consumer Staples 1.4% | 7,261,568 | |
| Food Products 0.7% | ||
| General Mills, Inc. | 83,200 | 3,489,408 |
| Tobacco 0.7% | ||
| Altria Group, Inc. | 112,000 | 3,772,160 |
| Energy 10.1% | 53,599,827 | |
| Energy Equipment & Services 2.8% | ||
| Cameron International Corp. (I) | 79,600 | 5,039,476 |
| Ensco PLC, Class A | 73,900 | 4,697,823 |
| Oceaneering International, Inc. | 83,200 | 5,259,072 |
| Oil, Gas & Consumable Fuels 7.3% | ||
| Cabot Oil & Gas Corp. | 130,400 | 6,882,512 |
| Falcon Oil & Gas, Ltd. (I) | 1,489,400 | 418,119 |
| Noble Energy, Inc. | 36,200 | 3,901,998 |
| Pioneer Natural Resources Company | 128,940 | 15,155,608 |
| Tesoro Corp. | 139,800 | 6,806,862 |
| See notes to financial statements | Semiannual report | Technical Opportunities Fund | 11 |
| Shares | Value | |
| Oil, Gas & Consumable Fuels (continued) | ||
| Ultra Petroleum Corp. (I)(L) | 140,300 | $2,556,266 |
| Western Refining, Inc. | 85,700 | 2,882,091 |
| Financials 22.0% | 116,864,044 | |
| Capital Markets 3.2% | ||
| Affiliated Managers Group, Inc. (I)(L) | 35,750 | 5,145,498 |
| Morgan Stanley | 347,500 | 7,940,375 |
| Raymond James Financial, Inc. | 83,300 | 3,717,679 |
| Commercial Banks 7.2% | ||
| Banco Comercial Portugues SA (I)(L) | 27,562,390 | 3,690,180 |
| Credit Agricole SA (I) | 601,203 | 5,952,654 |
| Erste Group Bank AG (I) | 140,118 | 4,719,497 |
| Lloyds Banking Group PLC (I) | 6,528,196 | 5,331,296 |
| Mitsubishi UFJ Financial Group | 492,200 | 2,801,443 |
| Royal Bank of Scotland Group PLC (I) | 844,952 | 4,604,291 |
| Societe Generale SA (I) | 138,920 | 6,285,678 |
| Synovus Financial Corp. (L) | 1,935,200 | 4,992,816 |
| Consumer Finance 0.2% | ||
| Portfolio Recovery Associates, Inc. (I) | 12,385 | 1,324,576 |
| Diversified Financial Services 3.1% | ||
| Bank of America Corp. | 927,700 | 10,501,564 |
| Citigroup, Inc. | 138,900 | 5,856,024 |
| Insurance 5.2% | ||
| Aegon NV | 685,868 | 4,588,955 |
| Allied World Assurance Company Holdings AG | 25,000 | 2,120,750 |
| American International Group, Inc. (I) | 231,800 | 8,768,994 |
| Assured Guaranty, Ltd. | 160,800 | 2,915,304 |
| Old Mutual PLC | 1,493,788 | 4,439,586 |
| Prudential PLC | 314,853 | 4,783,566 |
| Real Estate Investment Trusts 0.9% | ||
| Unibail-Rodamco SE | 20,205 | 4,756,621 |
| Real Estate Management & Development 2.2% | ||
| BR Malls Participacoes SA | 10,600 | 137,228 |
| Jones Lang LaSalle, Inc. | 52,800 | 4,864,992 |
| Longfor Properties Company, Ltd. | 2,128,000 | 4,011,883 |
| Mitsui Fudosan Company, Ltd. | 115,000 | 2,612,594 |
| Health Care 18.1% | 96,554,023 | |
| Biotechnology 14.4% | ||
| Alkermes PLC (I) | 151,900 | 3,501,295 |
| Arena Pharmaceuticals, Inc. (I)(L) | 1,663,400 | 14,039,096 |
| Biogen Idec, Inc. (I) | 34,100 | 5,322,328 |
| BioMarin Pharmaceutical, Inc. (I)(L) | 103,100 | 5,659,159 |
| Cubist Pharmaceuticals, Inc. (I) | 74,700 | 3,215,088 |
| Exelixis, Inc. (I) | 179,000 | 834,140 |
| Gilead Sciences, Inc. (I) | 268,900 | 10,608,105 |
| Onyx Pharmaceuticals, Inc. (I)(L) | 179,870 | 13,943,522 |
| Regeneron Pharmaceuticals, Inc. (I)(L) | 80,730 | 14,042,176 |
| Seattle Genetics, Inc. (I)(L) | 189,230 | 5,572,824 |
| 12 | Technical Opportunities Fund | Semiannual report | See notes to financial statements |
| Shares | Value | |
| Health Care Equipment & Supplies 1.5% | ||
| ICU Medical, Inc. (I) | 54,300 | $3,282,435 |
| Intuitive Surgical, Inc. (I) | 8,600 | 4,939,668 |
| Health Care Providers & Services 1.0% | ||
| Brookdale Senior Living, Inc. (I) | 198,110 | 5,350,951 |
| Life Sciences Tools & Services 0.6% | ||
| Morphosys AG (I) | 73,363 | 3,108,132 |
| Pharmaceuticals 0.6% | ||
| Hisamitsu Pharmaceutical Company, Inc. | 50,300 | 2,691,661 |
| Zoetis, Inc. (I) | 14,300 | 443,443 |
| Industrials 15.0% | 79,782,245 | |
| Aerospace & Defense 4.2% | ||
| Cubic Corp. | 111,243 | 5,228,421 |
| Rolls-Royce Holdings PLC | 523,265 | 7,850,453 |
| Safran SA | 200,230 | 9,194,949 |
| Electrical Equipment 2.1% | ||
| Hubbell, Inc., Class B | 65,400 | 5,954,670 |
| Schneider Electric SA | 68,933 | 5,252,782 |
| Machinery 3.7% | ||
| Fiat Industrial SpA | 214,971 | 2,769,107 |
| Flowserve Corp. | 25,900 | 4,060,343 |
| Valmont Industries, Inc. (L) | 51,600 | 7,519,152 |
| Wabtec Corp. | 56,680 | 5,306,382 |
| Professional Services 1.3% | ||
| On Assignment, Inc. (I) | 277,020 | 6,773,139 |
| Road & Rail 3.1% | ||
| Hertz Global Holdings, Inc. (I)(L) | 593,600 | 10,851,008 |
| J.B. Hunt Transport Services, Inc. (L) | 83,300 | 5,603,591 |
| Trading Companies & Distributors 0.6% | ||
| Wolseley PLC | 73,167 | 3,418,248 |
| Information Technology 16.0% | 85,345,895 | |
| Electronic Equipment, Instruments & Components 1.7% | ||
| FEI Company (L) | 85,140 | 5,190,134 |
| IPG Photonics Corp. (L) | 58,400 | 3,824,032 |
| Internet Software & Services 3.9% | ||
| Equinix, Inc. (I) | 29,610 | 6,378,882 |
| LinkedIn Corp., Class A (I) | 87,570 | 10,840,290 |
| Yandex NV, Class A (I) | 147,700 | 3,575,817 |
| IT Services 0.7% | ||
| Cap Gemini SA | 72,566 | 3,502,960 |
| Semiconductors & Semiconductor Equipment 1.7% | ||
| Maxim Integrated Products, Inc. | 175,200 | 5,510,040 |
| NXP Semiconductor NV (I) | 126,100 | 3,781,739 |
| See notes to financial statements | Semiannual report | Technical Opportunities Fund | 13 |
| Shares | Value | ||
| Software 8.0% | |||
| Adobe Systems, Inc. (I) | 138,500 | $5,239,455 | |
| Aspen Technology, Inc. (I) | 148,570 | 4,546,242 | |
| CommVault Systems, Inc. (I)(L) | 57,800 | 4,434,994 | |
| Guidewire Software, Inc. (I) | 80,200 | 2,656,224 | |
| NetSuite, Inc. (I)(L) | 99,670 | 6,999,824 | |
| Salesforce.com, Inc. (I)(L) | 65,900 | 11,343,367 | |
| ServiceNow, Inc. (I)(L) | 127,790 | 3,542,339 | |
| Symantec Corp. (I) | 182,800 | 3,979,556 | |
| Materials 4.3% | 23,157,242 | ||
| Chemicals 0.5% | |||
| Flotek Industries, Inc. (I) | 101,100 | 1,360,806 | |
| FutureFuel Corp. | 104,400 | 1,331,100 | |
| Construction Materials 3.0% | |||
| Cemex SAB de CV, ADR (I) | 579,700 | 6,289,745 | |
| Siam Cement PCL, NVDR | 226,400 | 3,371,141 | |
| Vulcan Materials Company (L) | 116,500 | 6,589,240 | |
| Metals & Mining 0.8% | |||
| United States Steel Corp. (L) | 188,600 | 4,215,210 | |
| Rights 0.0% | $127,337 | ||
| (Cost $120,001) | |||
| Banco Santander SA (Expiration Date: 2-4-13; Strike Price: EUR 0.152) (I) | 589,823 | 127,337 | |
| Yield (%) | Shares | Value | |
| Securities Lending Collateral 18.7% | $99,273,813 | ||
| (Cost $99,255,095) | |||
| John Hancock Collateral Investment Trust (W) | 0.2611 (Y) | 9,919,049 | 99,273,813 |
| Par value | Value | ||
| Short-Term Investments 2.5% | $13,200,000 | ||
| (Cost $13,200,000) | |||
| Repurchase Agreement 2.5% | 13,200,000 | ||
| JPMorgan Tri-Party Repurchase Agreement dated 1-31-13 at 0.170% to be | |||
| repurchased at $13,200,062 on 2-1-13, collateralized by $12,884,045 | |||
| Federal Home Loan Mortgage Corporation, 3.000%–3.500% due | |||
| 12-1-32 — 11-1-42 (valued at $13,466,071, including interest) | $13,200,000 | 13,200,000 | |
| Total investments (Cost $563,142,508)† 119.4% | $635,245,114 | ||
| Other assets and liabilities, net (19.4%) | ($103,276,407) | ||
| Total net assets 100.0% | $531,968,707 | ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
| 14 | Technical Opportunities Fund | Semiannual report | See notes to financial statements |
Notes to Schedule of Investments
ADR American Depositary Receipts
EUR Euro
NVDR Non-Voting Depositary Receipt
(I) Non-income producing security.
(L) A portion of this security is on loan as of 1-31-13.
(W) Investment is an affiliate of the Fund, the adviser and/or subadviser. This investment represents collateral received for securities lending.
(Y) The rate shown is the annualized seven-day yield as of 1-31-13.
† At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $567,071,000. Net unrealized appreciation aggregated $68,174,114, of which $70,251,453 related to appreciated investment securities and $2,077,339 related to depreciated investment securities.
The Fund has the following country concentration as a percentage of net assets on 1-31-13:
| United States | 71.2% | |||||
| France | 6.6% | |||||
| United Kingdom | 6.0% | |||||
| Hong Kong | 3.6% | |||||
| Netherlands | 2.2% | |||||
| Japan | 1.5% | |||||
| Mexico | 1.2% | |||||
| Italy | 1.1% | |||||
| Switzerland | 1.0% | |||||
| Other Countries | 5.6% |
| See notes to financial statements | Semiannual report | Technical Opportunities Fund | 15 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 1-31-13 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
| Assets | |
| Investments in unaffiliated issuers, at value (Cost $463,887,413) including | |
| $96,304,193 of securities loaned | $535,971,301 |
| Investments in affiliated issuers, at value (Cost $99,255,095) | 99,273,813 |
| Total investments, at value (Cost $563,142,508) | 635,245,114 |
| Foreign currency, at value (Cost $5,432) | 5,441 |
| Receivable for investments sold | 28,089,437 |
| Receivable for fund shares sold | 87,539 |
| Dividends and interest receivable | 40,814 |
| Receivable for securities lending income | 68,602 |
| Other receivables and prepaid expenses | 10,185 |
| Total assets | 663,547,132 |
| Liabilities | |
| Due to custodian | 562,973 |
| Payable for investments purchased | 30,774,886 |
| Payable for fund shares repurchased | 874,026 |
| Payable upon return of securities loaned | 99,308,753 |
| Payable to affiliates | |
| Accounting and legal services fees | 5,254 |
| Transfer agent fees | 8,234 |
| Trustees’ fees | 342 |
| Other liabilities and accrued expenses | 43,957 |
| Total liabilities | 131,578,425 |
| Net assets | 531,968,707 |
| Net assets consist of | |
| Paid-in capital | $491,743,204 |
| Accumulated net investment loss | (1,643,637) |
| Accumulated net realized gain (loss) on investments and foreign | |
| currency transactions | (30,238,328) |
| Net unrealized appreciation (depreciation) on investments and translation | |
| of assets and liabilities in foreign currencies | 72,107,468 |
| Net assets | $531,968,707 |
| 16 | Technical Opportunities Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of assets and liabilities (continued)
| Net asset value per share | |
| Based on net asset values and shares outstanding — the Fund has an | |
| unlimited number of shares authorized with no par value | |
| Class A ($42,019,878 ÷ 3,808,951 shares)1 | $11.03 |
| Class I ($14,878,416 ÷ 1,330,728 shares) | $11.18 |
| Class NAV ($475,070,413 ÷ 42,241,266 shares) | $11.25 |
| Maximum offering price per share | |
| Class A (net asset value per share ÷ 95%)2 | $11.61 |
1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
| See notes to financial statements | Semiannual report | Technical Opportunities Fund | 17 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the six-month period ended 1-31-13
(unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| Investment income | |
| Dividends | $2,790,843 |
| Securities lending | 386,980 |
| Interest | 8,271 |
| Less foreign taxes withheld | (73,770) |
| Total investment income | 3,112,324 |
| Expenses | |
| Investment management fees | 3,035,257 |
| Distribution and service fees | 69,322 |
| Accounting and legal services fees | 33,482 |
| Transfer agent fees | 51,738 |
| Trustees’ fees | 2,832 |
| State registration fees | 25,481 |
| Printing and postage | 11,744 |
| Professional fees | 31,495 |
| Custodian fees | 68,136 |
| Registration and filing fees | 14,085 |
| Other | 6,452 |
| Total expenses | 3,350,024 |
| Less expense reductions | (8,490) |
| Net expenses | 3,341,534 |
| Net investment loss | (229,210) |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Investments in unaffiliated issuers | 45,436,313 |
| Investments in affiliated issuers | 448 |
| Foreign currency transactions | 55,867 |
| 45,492,628 | |
| Change in net unrealized appreciation (depreciation) of | |
| Investments in unaffiliated issuers | 24,637,575 |
| Investments in affiliated issuers | (11,325) |
| Translation of assets and liabilities in foreign currencies | 5,296 |
| 24,631,546 | |
| Net realized and unrealized gain | 70,124,174 |
| Increase in net assets from operations | $69,894,964 |
| 18 | Technical Opportunities Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| Six months | ||
| ended | Year | |
| 1-31-13 | ended | |
| (Unaudited) | 7-31-12 | |
| Increase (decrease) in net assets | ||
| From operations | ||
| Net investment loss | ($229,210) | ($3,104,066) |
| Net realized gain (loss) | 45,492,628 | (71,816,856) |
| Change in net unrealized appreciation (depreciation) | 24,631,546 | (5,977,695) |
| Increase (decrease) in net assets resulting from operations | 69,894,964 | (80,898,617) |
| Distributions to shareholders | ||
| From net realized gain | ||
| Class A | — | (3,359,268) |
| Class I | — | (1,477,257) |
| Class NAV | — | (18,131,169) |
| Total distributions | — | (22,967,694) |
| From Fund share transactions | (38,584,785) | (118,120,569) |
| Total increase (decrease) | 31,310,179 | (221,986,880) |
| Net assets | ||
| Beginning of period | 500,658,528 | 722,645,408 |
| End of period | $531,968,707 | $500,658,528 |
| Accumulated net investment loss | ($1,643,637) | ($1,414,427) |
| See notes to financial statements | Semiannual report | Technical Opportunities Fund | 19 |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
| CLASS A SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | ||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $9.65 | $11.33 | $9.86 | $10.00 | ||
| Net investment loss3 | (0.03) | (0.10) | (0.09) | (0.13) | ||
| Net realized and unrealized gain (loss) on investments | 1.41 | (1.17) | 1.56 | (0.01) | ||
| Total from investment operations | 1.38 | (1.27) | 1.47 | (0.14) | ||
| Less distributions | ||||||
| From net realized gain | — | (0.41) | — | — | ||
| Net asset value, end of period | $11.03 | $9.65 | $11.33 | $9.86 | ||
| Total return (%)4,5 | 14.306 | (10.93) | 14.91 | (1.40)6 | ||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $42 | $51 | $125 | $165 | ||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions | 1.827 | 1.88 | 1.90 | 1.877 | ||
| Expenses including reductions and amounts recaptured | 1.827 | 1.88 | 1.90 | 1.877 | ||
| Net investment loss | (0.63)7 | (1.04) | (0.79) | (1.23)7 | ||
| Portfolio turnover (%) | 202 | 507 | 361 | 389 | ||
1 Six months ended 1-31-13. Unaudited.
2 Period from 8-3-09 (commencement of operations) to 7-31-10.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Does not reflect the effect of sales charges, if any.
6 Not annualized.
7 Annualized.
| CLASS I SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | ||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $9.77 | $11.42 | $9.89 | $10.00 | ||
| Net investment loss3 | (0.02) | (0.07) | (0.04) | (0.09) | ||
| Net realized and unrealized gain (loss) on investments | 1.43 | (1.17) | 1.57 | (0.02) | ||
| Total from investment operations | 1.41 | (1.24) | 1.53 | (0.11) | ||
| Less distributions | ||||||
| From net realized gain | — | (0.41) | — | — | ||
| Net asset value, end of period | $11.18 | $9.77 | $11.42 | $9.89 | ||
| Total return (%)4 | 14.435 | (10.57) | 15.47 | (1.10)5 | ||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $15 | $17 | $63 | $79 | ||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions | 1.536 | 1.55 | 1.49 | 1.526 | ||
| Expenses including reductions and amounts recaptured | 1.536 | 1.51 | 1.49 | 1.526 | ||
| Net investment loss | (0.34)6 | (0.69) | (0.37) | (0.89)6 | ||
| Portfolio turnover (%) | 202 | 507 | 361 | 389 | ||
1 Six months ended 1-31-13. Unaudited.
2 Period from 8-3-09 (commencement of operations) to 7-31-10.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| 20 | Technical Opportunities Fund | Semiannual report | See notes to financial statements |
| CLASS NAV SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | ||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $9.81 | $11.45 | $9.90 | $10.00 | ||
| Net investment income (loss)3 | — | (0.04) | (0.03) | (0.07) | ||
| Net realized and unrealized gain (loss) on investments | 1.44 | (1.19) | 1.58 | (0.03) | ||
| Total from investment operations | 1.44 | (1.23) | 1.55 | (0.10) | ||
| Less distributions | ||||||
| From net realized gain | — | (0.41) | — | — | ||
| Net asset value, end of period | $11.25 | $9.81 | $11.45 | $9.90 | ||
| Total return (%)4 | 14.685 | (10.45) | 15.66 | (1.00)5 | ||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $475 | $433 | $535 | $349 | ||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions | 1.246 | 1.32 | 1.37 | 1.396 | ||
| Expenses including reductions and amounts recaptured | 1.236 | 1.32 | 1.37 | 1.396 | ||
| Net investment loss | (0.03)6 | (0.46) | (0.31) | (0.72)6 | ||
| Portfolio turnover (%) | 202 | 507 | 361 | 389 | ||
1 Six months ended 1-31-13. Unaudited.
2 Period from 8-3-09 (commencement of operations) to 7-31-10.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| See notes to financial statements | Semiannual report | Technical Opportunities Fund | 21 |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock Technical Opportunities Fund (The Fund) is a series of John Hancock Funds II (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 Statements of assets and liabilities. Class A shares are open to all investors. Class I shares are offered to institutions and certain investors. Class NAV shares are offered to John Hancock affiliated funds of funds and 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments by the Fund in open-end mutual funds, including John Hancock Collateral Investment Trust (JHCIT), are valued at their respective net asset values each business day. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of foreign securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value foreign securities in order to adjust for events that may occur between the close of foreign exchanges and the close of the NYSE.
| 22 | Technical Opportunities Fund | Semiannual report |
The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| LEVEL 3 | ||||
| LEVEL 2 | SIGNIFICANT | |||
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
| VALUE AT 1-31-13 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
| Common Stocks | ||||
| Consumer Discretionary | $60,079,120 | $49,603,372 | $10,475,748 | — |
| Consumer Staples | 7,261,568 | 7,261,568 | — | — |
| Energy | 53,599,827 | 53,599,827 | — | — |
| Financials | 116,864,044 | 58,285,800 | 58,578,244 | — |
| Health Care | 96,554,023 | 90,754,230 | 5,799,793 | — |
| Industrials | 79,782,245 | 51,296,706 | 28,485,539 | — |
| Information Technology | 85,345,895 | 81,842,935 | 3,502,960 | — |
| Materials | 23,157,242 | 19,786,101 | 3,371,141 | — |
| Rights | 127,337 | — | — | $127,337 |
| Securities Lending | ||||
| Collateral | 99,273,813 | 99,273,813 | — | — |
| Short-Term Investments | 13,200,000 | — | 13,200,000 | — |
| Total Investments in | ||||
| Securities | $635,245,114 | $511,704,352 | $123,413,425 | $127,337 |
Repurchase agreements. The Fund may enter into repurchase agreements. When the Fund enters into a repurchase agreement, it receives collateral, which 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. 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. Collateral for certain tri-party repurchase agreements is held at a third-party custodian bank in a segregated account for the benefit of the Fund.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the Fund becomes aware of the dividends. Foreign taxes are provided for based on the Fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
| Semiannual report | Technical Opportunities Fund | 23 |
Securities lending. The Fund may lend its securities to earn additional income. It receives cash collateral from the borrower in an amount not less than the market value of the loaned securities. The Fund will invest its collateral in JHCIT, an affiliate of the Fund, which has a floating net asset value (NAV) and invests in short term investments as part of the securities lending program, and as a result, the Fund will receive the benefit of any gains and bear any losses generated by JHCIT. Although risk of the loss of the securities lent is mitigated by holding the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities or if collateral investments decline in value. The Fund may receive compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Net income received from JHCIT is a component of securities lending income as recorded on the Statement of operations.
Foreign currency translation. Assets, including investments and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs), 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 or capital gains or repatriation taxes as imposed by certain countries in which it invests. Taxes are accrued based upon net investment income, net realized gains or net unrealized appreciation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $289. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
| 24 | Technical Opportunities Fund | Semiannual report |
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses for an unlimited period. 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 July 31, 2012 the Fund has $71,802,464 of short-term capital loss carryforward available to offset future net realized capital gains.
As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, at least annually.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to net operating losses and wash sale loss deferrals.
Note 3 — Guarantees and indemnifications
Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
| Semiannual report | Technical Opportunities Fund | 25 |
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 1.20% of the first $250,000,000 of the Fund’s average daily net assets and; b) 1.15% of the Fund’s average daily net assets in excess of $250,000,000.
The Adviser has contractually agreed to waive a portion of its management fee for certain Funds (the Participating Portfolios) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that equals or exceeds $100 billion. The amount of the Reimbursement is calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each Fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the Funds and with the approval of the Board of Trustees.
Prior to December 1, 2012, the Adviser contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Fund excluding certain expenses such as taxes, brokerage commissions, interest expense, acquired fund fees, litigation and indemnification and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or reimbursements were such that these expenses would not exceed 1.95% and 1.59% for Class A and Class I shares, respectively. This contractual expense limitation is no longer in effect for the Fund.
Additionally, the Adviser has voluntarily agreed to waive other fund level expenses excluding advisory fees, 12b-1 fees, service fees, transfer agent fees, printing and postage, blue sky fees, taxes, brokerage commissions, interest expenses, acquired fund fees, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. This voluntary expense reimbursement will continue in effect until terminated at any time by the Adviser on notice to the Fund. The waivers are such that these expenses will not exceed 0.20% of average net assets.
Accordingly, these expense reductions amounted to $746, $330 and $7,414 for Class A, Class I and Class NAV shares, respectively, for the six months ended January 31, 2013.
The investment management fees, including the impact of waivers and reimbursements described above, incurred for the six months ended January 31, 2013 were equivalent to a net effective rate of 1.17% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. There were no expenses waived or reimbursed subject to potential recovery. For the six months ended January 31, 2013, the Fund did not recapture any expenses.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
| 26 | Technical Opportunities Fund | Semiannual report |
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for distribution and service fees, expressed as an annual percentage of average net assets.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $6,279 for the six months ended January 31, 2013. Of this amount, $972 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $5,253 was paid as sales commissions to broker-dealers and $54 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Adviser.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, there were no CDSCs received by the Distributor for Class A shares.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
| CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE FEES |
| A | $69,322 | $44,194 | $12,817 | $9,696 |
| I | — | 7,544 | 12,664 | 2,048 |
| Total | $69,322 | $51,738 | $25,481 | $11,744 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
| Semiannual report | Technical Opportunities Fund | 27 |
Note 5 — Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the year ended July 31, 2012 were as follows:
| Six months ended 1-31-13 | Year ended 7-31-12 | |||
| Shares | Amount | Shares | Amount | |
| Class A shares | ||||
| Sold | 224,194 | $2,257,433 | 574,825 | $5,603,251 |
| Distributions reinvested | — | — | 360,725 | 3,253,738 |
| Repurchased | (1,717,929) | (17,340,208) | (6,664,412) | (64,322,341) |
| Net decrease | (1,493,735) | ($15,082,775) | (5,728,862) | ($55,465,352) |
| Class I shares | ||||
| Sold | 173,680 | $1,799,801 | 546,121 | $5,379,169 |
| Distributions reinvested | — | — | 111,925 | 1,020,757 |
| Repurchased | (549,956) | (5,588,043) | (4,436,239) | (43,097,390) |
| Net decrease | (376,276) | ($3,788,242) | (3,778,193) | ($36,697,464) |
| Class NAV shares | ||||
| Sold | 1,038,530 | $10,574,139 | 7,413,399 | $74,029,581 |
| Distributions reinvested | — | — | 1,983,717 | 18,131,169 |
| Repurchased | (2,897,677) | (30,287,907) | (12,036,455) | (118,118,503) |
| Net decrease | (1,859,147) | ($19,713,768) | (2,639,339) | ($25,957,753) |
| Net decrease | (3,729,158) | ($38,584,785) | (12,146,394) | ($118,120,569) |
Affiliates of the Fund owned 100% of shares of beneficial interest of Class NAV on January 31, 2013.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $1,015,518,507 and $1,052,143,267, respectively, for the six months ended January 31, 2013.
Note 7 — Investment by affiliated funds
Certain investors in the Fund are affiliated funds and are managed by the Adviser 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. For the six months ended January 31, 2013, the following funds had an affiliate ownership concentration of 5% or more of the Fund’s net assets:
| FUND | AFFILIATE CONCENTRATION | ||
| John Hancock Lifestyle Aggressive Portfolio | 16.4% | ||
| John Hancock Lifestyle Balanced Portfolio | 24.4% | ||
| John Hancock Lifestyle Growth Portfolio | 44.1% | ||
| 28 | Technical Opportunities Fund | Semiannual report |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Technical Opportunities Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| Semiannual report | Technical Opportunities Fund | 29 |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management |
| Steven R. Pruchansky, Vice Chairperson | Services, LLC |
| Charles L. Bardelis* | |
| James R. Boyle† | Subadviser |
| Craig Bromley† | Wellington Management Company, LLP |
| Peter S. Burgess* | |
| William H. Cunningham | Principal distributor |
| Grace K. Fey | John Hancock Funds, LLC |
| Theron S. Hoffman* | |
| Deborah C. Jackson | Custodian |
| Hassell H. McClellan | State Street Bank and Trust Company |
| Gregory A. Russo | |
| Warren A. Thomson† | Transfer agent |
| John Hancock Signature Services, Inc. | |
| Officers | |
| Hugh McHaffie | Legal counsel |
| President | K&L Gates LLP |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer | |
| *Member of the Audit Committee | |
| †Non-Independent Trustee | |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 30 | Technical Opportunities Fund | Semiannual report |
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
| This report is for the information of the shareholders of John Hancock Technical Opportunities Fund. | 347SA 1/13 |
| It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 3/13 |
John Hancock Global High Yield Fund
Table of Contents
| Your expenses | Page 3 |
| Portfolio summary | Page 4 |
| Fund's investments | Page 5 |
| Financial statements | Page 21 |
| Financial highlights | Page 24 |
| Notes to financial statements | Page 27 |
| Special Shareholder Meeting | Page 35 |
| More information | Page 36 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding your fund expenses
As a shareholder of the Fund, you incur two types of costs:
• Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
• Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013,
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,053.60 | $6.73 |
| Class I | 1,000.00 | 1,055.30 | 5.13 |
| Class NAV | 1,000.00 | 1,055.80 | 4.61 |
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 January 31, 2013, 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:
Example
[ My account value $8,600.00 / $1,000.00 = 8.6 ] x $[ “expenses paid” from table ] = My actual expenses
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical Example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,018.70 | $6.61 |
| Class I | 1,000.00 | 1,020.20 | 5.04 |
| Class NAV | 1,000.00 | 1,020.70 | 4.53 |
Remember, these examples do not include any transaction costs; therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund's annualized expense ratio of 1.30%, 0.99% and 0.89% for Class A, Class I and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| 3 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Portfolio Summary | |||
| Value as a | |||
| percentage of | |||
| Fund's net | |||
| Portfolio Composition1 | assets | ||
| Corporate Bonds | 59.5% | ||
| Foreign Government Obligations | 32.9% | ||
| Structured Notes | 1.3% | ||
| Term Loans | 1.0% | ||
| Convertible Bonds | 0.4% | ||
| Capital Preferred Securities | 0.1% | ||
| Short-Term Investments & Other | 4.8% | ||
| Value as a | |||
| percentage of | |||
| Fund's net | |||
| Quality Composition2 | assets | ||
| AA | 1.4% | ||
| A | 4.4% | ||
| BBB | 25.3% | ||
| BB | 16.1% | ||
| B | 36.3% | ||
| CCC & Below | 9.2% | ||
| Not Rated | 2.5% | ||
| Short-Term Investments & Other | 4.8% | ||
1 Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if the creditor is unable or unwilling to make principal or interest payments. Investments in higher-yielding, lower-rated securities involve additional risks as these securities include a higher risk of default and loss of principal. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Currency transactions are impacted by fluctuations in exchange rates, which may adversely affect the U.S. dollar value of a fund’s investments. The use of hedging and derivatives transactions could produce disproportionate gains or losses and may increase volatility and costs. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness. If the fund invests in illiquid securities, it may be difficult to sell them at a price approximating their value. Loan participations and assignments involve special types of risks, including credit risk, interest-rate risk, counterparty risk, liquidity risk and the risks of being a lender. For additional information on these and other risk considerations, please see the Fund’s prospectus.
2 Ratings are from Moody’s Investors Service. If not available, we have used ratings from Standard & Poor’s Ratings Services. In the absence of ratings from these agencies, we have used Fitch ratings. “Not Rated” securities are those with no ratings available from these agencies. All ratings are as of 1-31-13 and do not reflect subsequent downgrades or upgrades, if any.
| 4 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Corporate Bonds 59.5% | $306,481,632 | |||
| (Cost $290,884,411) | ||||
| Argentina 0.1% | 232,380 | |||
| Empresa Distribuidora y Comercializadora Norte (S) | 9.750 | 10/25/22 | 27,000 | 12,420 |
| IRSA Inversiones y Representaciones SA (S) | 11.500 | 07/20/20 | 234,000 | 219,960 |
| Austria 0.0% | 192,984 | |||
| ESAL GmbH (S) | 6.250 | 02/05/23 | 200,000 | 192,984 |
| Azerbaijan 0.1% | 527,560 | |||
| State Oil Company of the Azerbaijan Republic | 5.450 | 02/09/17 | 484,000 | 527,560 |
| Bermuda 0.1% | 231,468 | |||
| Qtel International Finance, Ltd. (S) | 5.000 | 10/19/25 | 209,000 | 231,468 |
| Brazil 0.7% | 3,533,672 | |||
| Banco do Brasil SA | 3.875 | 10/10/22 | 230,000 | 227,700 |
| Banco do Brasil SA (6.250% to 04/15/2024, then 10 Year | ||||
| U.S. Treasury + 4.398%) (Q)(S) | 6.250 | 04/15/24 | 365,000 | 362,263 |
| BM&FBovespa SA (S) | 5.500 | 07/16/20 | 275,000 | 312,125 |
| BM&FBovespa SA | 5.500 | 07/16/20 | 100,000 | 113,500 |
| BR Malls International Finance, Ltd. (Q)(S) | 8.500 | 01/21/16 | 137,000 | 150,700 |
| BR Properties SA (Q)(S) | 9.000 | 10/07/15 | 153,000 | 168,300 |
| Caixa Economica Federal (S) | 2.375 | 11/06/17 | 300,000 | 294,000 |
| Caixa Economica Federal (S) | 3.500 | 11/07/22 | 156,000 | 155,220 |
| Globo Comunicacao e Participacoes SA (Q) | 6.250 | 07/20/15 | 100,000 | 108,750 |
| Hypermarcas SA (S) | 6.500 | 04/20/21 | 284,000 | 305,300 |
| Itau Unibanco Holding SA (S) | 5.650 | 03/19/22 | 204,000 | 216,240 |
| OGX Austria GmbH (S) | 8.500 | 06/01/18 | 200,000 | 186,500 |
| Samarco Mineracao SA (S) | 4.125 | 11/01/22 | 252,000 | 251,244 |
| Telemar Norte Leste SA (S) | 5.500 | 10/23/20 | 106,000 | 111,830 |
| Votorantim Cimentos SA (S) | 7.250 | 04/05/41 | 500,000 | 570,000 |
| Canada 2.2% | 11,294,856 | |||
| Ainsworth Lumber Company, Ltd. (S) | 7.500 | 12/15/17 | 1,270,000 | 1,355,689 |
| Cascades, Inc. | 7.750 | 12/15/17 | 650,000 | 689,000 |
| Cascades, Inc. | 7.875 | 01/15/20 | 600,000 | 639,000 |
| CHC Helicopter SA | 9.250 | 10/15/20 | 930,000 | 995,100 |
| Kodiak Oil & Gas Corp. (S) | 5.500 | 01/15/21 | 375,000 | 377,813 |
| MEG Energy Corp. (S) | 6.500 | 03/15/21 | 750,000 | 787,500 |
| Mercer International, Inc. | 9.500 | 12/01/17 | 920,000 | 995,900 |
| PTTEP Canada International Finance, Ltd. | 5.692 | 04/05/21 | 200,000 | 228,106 |
| Quebecor Media, Inc. (S) | 5.750 | 01/15/23 | 1,275,000 | 1,335,563 |
| Taseko Mines, Ltd. | 7.750 | 04/15/19 | 1,200,000 | 1,173,000 |
| Trinidad Drilling, Ltd. (S) | 7.875 | 01/15/19 | 1,679,000 | 1,788,135 |
| Videotron, Ltd. | 5.000 | 07/15/22 | 890,000 | 930,050 |
| Cayman Islands 1.1% | 5,690,236 | |||
| Braskem Finance, Ltd. (Q)(S) | 7.375 | 10/04/15 | 200,000 | 205,000 |
| China Overseas Finance Cayman II, Ltd. | 5.500 | 11/10/20 | 100,000 | 111,484 |
| Dubai Holding Commercial Operations MTN, Ltd. (GBP) (D) | 6.000 | 02/01/17 | 250,000 | 396,500 |
| Emaar Sukuk, Ltd. | 6.400 | 07/18/19 | 400,000 | 435,000 |
| General Shopping Finance, Ltd. (Q)(S) | 10.000 | 11/09/15 | 233,000 | 233,426 |
| Grupo Aval, Ltd. (S) | 4.750 | 09/26/22 | 409,000 | 416,158 |
| Grupo Aval, Ltd. (S) | 5.250 | 02/01/17 | 200,000 | 214,000 |
| Gruposura Finance (S) | 5.700 | 05/18/21 | 400,000 | 453,000 |
| Odebrecht Drilling Norbe VIII/IX, Ltd. | 6.350 | 06/30/21 | 190,000 | 212,800 |
| 5 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Cayman Islands (continued) | ||||
| Odebrecht Finance, Ltd. (S) | 5.125 | 06/26/22 | 200,000 | $215,500 |
| Offshore Group Investments, Ltd. | 11.500 | 08/01/15 | 1,833,000 | 1,988,805 |
| Pemex Finance, Ltd. | 9.150 | 11/15/18 | 520,000 | 646,582 |
| Petrobras International Finance Company | 2.875 | 02/06/15 | 90,000 | 91,852 |
| Petrobras International Finance Company | 5.375 | 01/27/21 | 64,000 | 70,129 |
| Chile 0.8% | 4,334,495 | |||
| Banco del Estado de Chile (S) | 3.875 | 02/08/22 | 164,000 | 173,091 |
| Cencosud SA (S) | 4.875 | 01/20/23 | 229,000 | 234,634 |
| Cencosud SA (S) | 5.500 | 01/20/21 | 350,000 | 379,199 |
| Corporacion Nacional del Cobre de Chile (S) | 3.000 | 07/17/22 | 632,000 | 622,618 |
| Corporacion Nacional del Cobre de Chile (S) | 4.250 | 07/17/42 | 637,000 | 610,138 |
| Corporacion Nacional del Cobre de Chile | 6.150 | 10/24/36 | 1,251,000 | 1,547,861 |
| Corporacion Nacional del Cobre de Chile (S) | 6.150 | 10/24/36 | 255,000 | 315,511 |
| Corporacion Nacional del Cobre de Chile | 7.500 | 01/15/19 | 197,000 | 250,580 |
| Telefonica Chile SA (S) | 3.875 | 10/12/22 | 201,000 | 200,863 |
| China 0.2% | 1,179,933 | |||
| China Liansu Group Holdings, Ltd. (S) | 7.875 | 05/13/16 | 335,000 | 345,050 |
| Country Garden Holdings Company, Ltd. (S) | 7.500 | 01/10/23 | 202,000 | 205,272 |
| Tencent Holdings, Ltd. (S) | 3.375 | 03/05/18 | 402,000 | 412,088 |
| Tencent Holdings, Ltd. (S) | 4.625 | 12/12/16 | 200,000 | 217,523 |
| Colombia 0.2% | 744,455 | |||
| Bancolombia SA | 5.125 | 09/11/22 | 163,000 | 168,705 |
| Colombia Telecomunicaciones SA ESP (S) | 5.375 | 09/27/22 | 350,000 | 351,750 |
| Transportadora de Gas Internacional SA ESP (S) | 5.700 | 03/20/22 | 200,000 | 224,000 |
| Dominican Republic 0.0% | 99,671 | |||
| Cap Cana SA (H) | 10.000 | 04/30/16 | 675,738 | 99,671 |
| France 0.3% | 1,721,854 | |||
| Albea Beauty Holdings SA (EUR) (D)(S) | 8.750 | 11/01/19 | 1,225,000 | 1,721,854 |
| Germany 0.2% | 1,126,012 | |||
| Unitymedia GmbH (EUR) (D) | 9.500 | 03/15/21 | 725,000 | 1,126,012 |
| Hong Kong 0.1% | 521,726 | |||
| PCCW-HKT Capital No 4, Ltd. | 4.250 | 02/24/16 | 300,000 | 319,638 |
| Yancoal International Resources Development Company, | ||||
| Ltd. (S) | 5.730 | 05/16/22 | 200,000 | 202,088 |
| India 0.1% | 263,849 | |||
| ICICI Bank, Ltd. | 5.750 | 11/16/20 | 100,000 | 108,580 |
| ICICI Bank, Ltd. (S) | 5.750 | 11/16/20 | 143,000 | 155,269 |
| Indonesia 0.0% | 110,000 | |||
| Adaro Indonesia PT | 7.625 | 10/22/19 | 100,000 | 110,000 |
| Ireland 1.1% | 5,733,471 | |||
| Alfa Bank OJSC (S) | 7.500 | 09/26/19 | 250,000 | 271,250 |
| Ardagh Packaging Finance PLC (S) | 9.125 | 10/15/20 | 1,200,000 | 1,317,000 |
| Ardagh Packaging Finance PLC (EUR) (D) | 9.250 | 10/15/20 | 200,000 | 291,982 |
| Metalloinvest Finance, Ltd. (S) | 6.500 | 07/21/16 | 174,000 | 183,048 |
| Nara Cable Funding, Ltd. (S) | 8.875 | 12/01/18 | 2,175,000 | 2,218,500 |
| Novatek Finance, Ltd. | 5.326 | 02/03/16 | 235,000 | 250,393 |
| 6 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Ireland (continued) | ||||
| Novatek Finance, Ltd. (S) | 6.604 | 02/03/21 | 358,000 | $417,535 |
| Rosneft Oil Company (S) | 4.199 | 03/06/22 | 271,000 | 271,000 |
| Sibur Securities, Ltd. (S) | 3.914 | 01/31/18 | 200,000 | 199,033 |
| Vimpel Communications (S) | 7.748 | 02/02/21 | 274,000 | 313,730 |
| Isle of Man 0.1% | 536,250 | |||
| Zhaikmunai LP (S) | 7.125 | 11/13/19 | 500,000 | 536,250 |
| Jamaica 0.1% | 637,780 | |||
| Digicel Group, Ltd. (S) | 8.250 | 09/30/20 | 200,000 | 223,000 |
| Digicel Group, Ltd. | 10.500 | 04/15/18 | 372,000 | 414,780 |
| Kazakhstan 1.1% | 5,776,661 | |||
| KazMunayGas National Company (S) | 6.375 | 04/09/21 | 433,000 | 515,270 |
| KazMunayGas National Company | 7.000 | 05/05/20 | 2,053,000 | 2,499,528 |
| KazMunayGas National Company (S) | 7.000 | 05/05/20 | 325,000 | 395,688 |
| KazMunayGas National Company (S) | 9.125 | 07/02/18 | 710,000 | 916,965 |
| KazMunayGas National Company | 11.750 | 01/23/15 | 1,236,000 | 1,449,210 |
| Luxembourg 2.9% | 15,035,745 | |||
| APERAM (S) | 7.375 | 04/01/16 | 350,000 | 339,500 |
| APERAM (S) | 7.750 | 04/01/18 | 550,000 | 528,000 |
| ARD Finance SA, PIK (S) | 11.125 | 06/01/18 | 831,246 | 895,668 |
| ConvaTec Healthcare E SA (S) | 10.500 | 12/15/18 | 859,000 | 953,490 |
| Evraz Group SA (S) | 6.750 | 04/27/18 | 279,000 | 291,555 |
| Gazprom Neft OAO (S) | 4.375 | 09/19/22 | 300,000 | 301,200 |
| Gazprom OAO (S) | 4.950 | 02/06/28 | 900,000 | 896,967 |
| INEOS Group Holdings SA (S) | 8.500 | 02/15/16 | 1,685,000 | 1,697,638 |
| Intelsat Jackson Holdings SA | 7.250 | 04/01/19 | 1,195,000 | 1,281,638 |
| Matterhorn Midco & Cy SCA (EUR) (D)(S) | 7.750 | 02/15/20 | 325,000 | 452,317 |
| Matterhorn Mobile Holdings SA (EUR) (D) | 8.250 | 02/15/20 | 550,000 | 814,002 |
| Minerva Luxembourg SA (S) | 7.750 | 01/31/23 | 293,000 | 300,325 |
| Sberbank of Russia (S) | 6.125 | 02/07/22 | 200,000 | 228,258 |
| Severstal OAO (S) | 5.900 | 10/17/22 | 300,000 | 308,700 |
| Severstal OAO | 6.700 | 10/25/17 | 101,000 | 110,898 |
| Trinseo Materials Operating SCA (S) | 8.750 | 02/01/19 | 1,715,000 | 1,724,954 |
| VTB Capital SA | 6.250 | 06/30/35 | 172,000 | 185,330 |
| VTB Capital SA | 6.875 | 05/29/18 | 500,000 | 556,250 |
| Wind Acquisition Finance SA (S) | 7.250 | 02/15/18 | 1,000,000 | 1,052,500 |
| Wind Acquisition Finance SA (S) | 11.750 | 07/15/17 | 102,000 | 109,650 |
| Wind Acquisition Holdings Finance SA, PIK (S) | 12.250 | 07/15/17 | 1,902,280 | 2,006,905 |
| Malaysia 0.7% | 3,445,138 | |||
| Petroliam Nasional BHD | 7.625 | 10/15/26 | 223,000 | 322,904 |
| Petronas Capital, Ltd. | 7.875 | 05/22/22 | 2,052,000 | 2,891,916 |
| Petronas Global Sukuk, Ltd. (S) | 4.250 | 08/12/14 | 220,000 | 230,318 |
| Mexico 0.4% | 1,955,925 | |||
| America Movil SAB de CV | 2.375 | 09/08/16 | 200,000 | 206,778 |
| America Movil SAB de CV | 3.125 | 07/16/22 | 200,000 | 198,735 |
| Bank of New York Mellon SA (S) | 9.625 | 05/02/21 | 243,398 | 240,964 |
| Cemex SAB de CV (S) | 9.500 | 06/15/18 | 200,000 | 224,750 |
| Grupo Bimbo SAB de CV (S) | 4.500 | 01/25/22 | 100,000 | 108,581 |
| Grupo Bimbo SAB de CV (S) | 4.875 | 06/30/20 | 200,000 | 224,117 |
| Mexichem SAB de CV (S) | 4.875 | 09/19/22 | 200,000 | 210,750 |
| Mexico Generadora de Energia S de rl (S) | 5.500 | 12/06/32 | 500,000 | 541,250 |
| 7 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Mongolia 0.0% | $207,050 | |||
| Mongolian Mining Corp. (S) | 8.875 | 03/29/17 | 202,000 | 207,050 |
| Netherlands 1.2% | 5,894,625 | |||
| Ajecorp BV (S) | 6.500 | 05/14/22 | 150,000 | 165,000 |
| Indo Energy Finance II BV (S) | 6.375 | 01/24/23 | 208,000 | 212,160 |
| Indosat Palapa Company BV (S) | 7.375 | 07/29/20 | 136,000 | 153,000 |
| Intergas Finance BV | 6.375 | 05/14/17 | 158,000 | 178,540 |
| Listrindo Capital BV (S) | 6.950 | 02/21/19 | 201,000 | 224,169 |
| LyondellBasell Industries NV | 6.000 | 11/15/21 | 1,395,000 | 1,639,125 |
| Metinvest BV (S) | 8.750 | 02/14/18 | 210,000 | 213,056 |
| Nielsen Finance LLC (S) | 4.500 | 10/01/20 | 440,000 | 433,400 |
| UPC Holding BV (EUR) (D)(S) | 6.375 | 09/15/22 | 1,950,000 | 2,676,175 |
| Panama 0.1% | 314,755 | |||
| Banco de Credito del Peru (S) | 4.750 | 03/16/16 | 100,000 | 106,250 |
| Banco de Credito del Peru (S) | 5.375 | 09/16/20 | 187,000 | 208,505 |
| Peru 0.1% | 738,335 | |||
| BBVA Banco Continental SA (S) | 5.000 | 08/26/22 | 250,000 | 268,750 |
| Corporacion Azucarera del Peru SA (S) | 6.375 | 08/02/22 | 112,000 | 120,400 |
| Maestro Peru SA (S) | 6.750 | 09/26/19 | 200,000 | 210,900 |
| Volcan Cia Minera SAA (S) | 5.375 | 02/02/22 | 126,000 | 138,285 |
| Russia 0.1% | 308,250 | |||
| EuroChem Mineral & Chemical Company OJSC (S) | 5.125 | 12/12/17 | 300,000 | 308,250 |
| Singapore 0.2% | 1,067,795 | |||
| DBS Bank, Ltd. (P) | 3.625 | 09/21/22 | 400,000 | 417,930 |
| Oversea-Chinese Banking Corp., Ltd. (P)(S) | 3.150 | 03/11/23 | 200,000 | 202,721 |
| SingTel Group Treasury Pte, Ltd. | 4.500 | 09/08/21 | 400,000 | 447,144 |
| South Korea 0.1% | 682,918 | |||
| Korea East-West Power Company, Ltd. (S) | 2.500 | 07/16/17 | 202,000 | 206,181 |
| Korea Hydro & Nuclear Power Company, Ltd. (S) | 3.000 | 09/19/22 | 261,000 | 254,520 |
| Korea Hydro & Nuclear Power Company, Ltd. | 4.750 | 07/13/21 | 200,000 | 222,217 |
| Spain 0.2% | 819,772 | |||
| Campofrio Food Group SA (EUR) (D) | 8.250 | 10/31/16 | 575,000 | 819,772 |
| Thailand 0.1% | 533,357 | |||
| Bangkok Bank PCL (S) | 3.875 | 09/27/22 | 319,000 | 326,528 |
| PTT Global Chemical PCL (S) | 4.250 | 09/19/22 | 201,000 | 206,829 |
| Turkey 0.2% | 1,183,422 | |||
| Akbank TAS (S) | 3.875 | 10/24/17 | 150,000 | 153,363 |
| Anadolu Efes Biracilik Ve Malt Sanayii AS (S) | 3.375 | 11/01/22 | 450,000 | 431,438 |
| Turkiye Garanti Bankasi AS (S) | 5.250 | 09/13/22 | 410,000 | 435,625 |
| Yuksel Insaat AS | 9.500 | 11/10/15 | 204,000 | 162,996 |
| United Kingdom 1.1% | 5,583,566 | |||
| Afren PLC (S) | 10.250 | 04/08/19 | 200,000 | 236,000 |
| Boparan Finance PLC (EUR) (D) | 9.750 | 04/30/18 | 600,000 | 907,147 |
| Ferrexpo Finance PLC (S) | 7.875 | 04/07/16 | 400,000 | 403,000 |
| Ineos Finance PLC (S) | 8.375 | 02/15/19 | 1,190,000 | 1,303,050 |
| LBG Capital No.1 PLC (EUR) (D) | 6.439 | 05/23/20 | 775,000 | 1,041,773 |
| Ukreximbank Via Biz Finance PLC | 8.375 | 04/27/15 | 881,000 | 887,608 |
| 8 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| United Kingdom (continued) | ||||
| Vedanta Resources PLC (S) | 8.250 | 06/07/21 | 314,000 | $361,100 |
| Virgin Media Finance PLC | 4.875 | 02/15/22 | 445,000 | 443,888 |
| United States 40.6% | 209,316,812 | |||
| Access Midstream Partners LP | 4.875 | 05/15/23 | 940,000 | 935,300 |
| AES Corp. | 7.375 | 07/01/21 | 1,080,000 | 1,204,200 |
| Aircastle, Ltd. | 6.750 | 04/15/17 | 1,225,000 | 1,347,500 |
| Allbritton Communications Company | 8.000 | 05/15/18 | 1,312,000 | 1,420,240 |
| Allison Transmission, Inc. (S) | 7.125 | 05/15/19 | 500,000 | 542,500 |
| Ally Financial, Inc. | 7.500 | 09/15/20 | 275,000 | 330,688 |
| Ally Financial, Inc. | 8.000 | 11/01/31 | 1,200,000 | 1,503,000 |
| Alphabet Holding Company, Inc., PIK (S) | 7.750 | 11/01/17 | 590,000 | 610,650 |
| AMC Entertainment, Inc. | 8.750 | 06/01/19 | 875,000 | 966,875 |
| AMC Networks, Inc. | 7.750 | 07/15/21 | 800,000 | 914,000 |
| American Casino & Entertainment Properties LLC | 11.000 | 06/15/14 | 984,000 | 1,003,680 |
| American Renal Holdings Company, Inc. | 8.375 | 05/15/18 | 1,025,000 | 1,083,938 |
| American Standard Americas (S) | 10.750 | 01/15/16 | 405,000 | 408,038 |
| Amkor Technology, Inc. | 6.375 | 10/01/22 | 540,000 | 542,700 |
| Amsurg Corp. (S) | 5.625 | 11/30/20 | 1,020,000 | 1,065,900 |
| Arch Coal, Inc. | 7.250 | 06/15/21 | 815,000 | 729,425 |
| Armored Autogroup, Inc. | 9.250 | 11/01/18 | 305,000 | 268,400 |
| Atlas Pipeline Partners LP (S) | 6.625 | 10/01/20 | 1,010,000 | 1,060,500 |
| Baker & Taylor Acquisitions Corp. (S) | 15.000 | 04/01/17 | 600,000 | 456,000 |
| Basic Energy Services, Inc. | 7.750 | 02/15/19 | 900,000 | 895,500 |
| Basic Energy Services, Inc. | 7.750 | 10/15/22 | 1,000,000 | 982,500 |
| Biomet, Inc. (S) | 6.500 | 08/01/20 | 1,180,000 | 1,239,000 |
| Boyd Gaming Corp. | 9.125 | 12/01/18 | 1,190,000 | 1,237,600 |
| Brickman Group Holdings, Inc. (S) | 9.125 | 11/01/18 | 1,330,000 | 1,416,450 |
| Cablevision Systems Corp. | 7.750 | 04/15/18 | 850,000 | 954,125 |
| Cablevision Systems Corp. | 8.000 | 04/15/20 | 1,350,000 | 1,525,500 |
| Calpine Corp. (S) | 7.875 | 01/15/23 | 558,000 | 616,590 |
| Calumet Specialty Products Partners LP | 9.375 | 05/01/19 | 545,000 | 598,819 |
| Calumet Specialty Products Partners LP (S) | 9.625 | 08/01/20 | 590,000 | 659,325 |
| CCO Holdings LLC | 5.125 | 02/15/23 | 460,000 | 453,100 |
| CCO Holdings LLC | 6.625 | 01/31/22 | 1,430,000 | 1,558,700 |
| Cemex Finance LLC (S) | 9.375 | 10/12/22 | 200,000 | 226,000 |
| CenturyLink, Inc. | 5.800 | 03/15/22 | 1,495,000 | 1,564,535 |
| CenturyLink, Inc. | 7.650 | 03/15/42 | 985,000 | 1,014,145 |
| Cequel Communications Escrow 1 LLC (S) | 6.375 | 09/15/20 | 550,000 | 576,125 |
| Chiquita Brands International, Inc. (S) | 7.875 | 02/01/21 | 1,100,000 | 1,106,875 |
| Choice Hotels International, Inc. | 5.750 | 07/01/22 | 730,000 | 810,300 |
| Chrysler Group LLC | 8.000 | 06/15/19 | 1,035,000 | 1,133,325 |
| Cincinnati Bell, Inc. | 8.375 | 10/15/20 | 1,350,000 | 1,468,125 |
| Cincinnati Bell, Inc. | 8.750 | 03/15/18 | 970,000 | 1,024,563 |
| Cinemark USA, Inc. (S) | 5.125 | 12/15/22 | 455,000 | 460,688 |
| Cinemark USA, Inc. | 7.375 | 06/15/21 | 675,000 | 747,563 |
| CIT Group, Inc. | 5.000 | 08/15/22 | 830,000 | 876,714 |
| CIT Group, Inc. | 5.250 | 03/15/18 | 1,290,000 | 1,380,300 |
| Claire's Stores, Inc. | 8.875 | 03/15/19 | 250,000 | 245,000 |
| Claire's Stores, Inc. | 9.250 | 06/01/15 | 125,000 | 120,000 |
| Claire's Stores, Inc., PIK | 9.625 | 06/01/15 | 797,070 | 773,158 |
| Clean Harbors, Inc. | 5.250 | 08/01/20 | 1,015,000 | 1,060,675 |
| Cleaver-Brooks, Inc. (S) | 8.750 | 12/15/19 | 405,000 | 433,856 |
| Cloud Peak Energy Resources LLC | 8.500 | 12/15/19 | 1,060,000 | 1,152,750 |
| 9 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| United States (continued) | ||||
| CommScope, Inc. (S) | 8.250 | 01/15/19 | 1,325,000 | $1,447,563 |
| Community Health Systems, Inc. | 8.000 | 11/15/19 | 1,135,000 | 1,245,663 |
| CONSOL Energy, Inc. | 8.250 | 04/01/20 | 1,600,000 | 1,732,000 |
| Copano Energy LLC | 7.125 | 04/01/21 | 1,100,000 | 1,262,250 |
| CPI International, Inc. | 8.000 | 02/15/18 | 850,000 | 850,000 |
| Cricket Communications, Inc. | 7.750 | 10/15/20 | 1,395,000 | 1,447,313 |
| Crown Castle International Corp. (S) | 5.250 | 01/15/23 | 1,060,000 | 1,113,000 |
| CyrusOne LP (S) | 6.375 | 11/15/22 | 1,395,000 | 1,489,163 |
| Dean Foods Company | 9.750 | 12/15/18 | 1,015,000 | 1,154,563 |
| Dean Holding Company | 6.900 | 10/15/17 | 700,000 | 768,250 |
| Del Monte Corp. | 7.625 | 02/15/19 | 2,230,000 | 2,324,775 |
| DISH DBS Corp. (S) | 5.000 | 03/15/23 | 3,140,000 | 3,100,750 |
| DISH DBS Corp. | 5.875 | 07/15/22 | 2,070,000 | 2,199,375 |
| Edison Mission Energy (H) | 7.000 | 05/15/17 | 875,000 | 426,563 |
| Edison Mission Energy (H) | 7.750 | 06/15/16 | 850,000 | 412,250 |
| Elizabeth Arden, Inc. | 7.375 | 03/15/21 | 1,125,000 | 1,251,563 |
| Emergency Medical Services Corp. | 8.125 | 06/01/19 | 1,215,000 | 1,330,425 |
| Entravision Communications Corp. | 8.750 | 08/01/17 | 1,539,000 | 1,673,663 |
| EP Energy LLC | 6.875 | 05/01/19 | 960,000 | 1,039,200 |
| EP Energy LLC | 9.375 | 05/01/20 | 995,000 | 1,114,400 |
| Express LLC | 8.750 | 03/01/18 | 615,000 | 667,275 |
| First Data Corp. (S) | 6.750 | 11/01/20 | 705,000 | 724,388 |
| First Data Corp. (S) | 7.375 | 06/15/19 | 500,000 | 526,250 |
| First Data Corp. | 12.625 | 01/15/21 | 1,100,000 | 1,171,500 |
| Forest Oil Corp. | 7.250 | 06/15/19 | 1,755,000 | 1,759,388 |
| Fresenius Medical Care US Finance II, Inc. (S) | 5.875 | 01/31/22 | 1,160,000 | 1,267,300 |
| Frontier Communications Corp. | 9.000 | 08/15/31 | 3,539,000 | 3,839,815 |
| GenOn Energy, Inc. | 9.500 | 10/15/18 | 1,610,000 | 1,911,875 |
| Genworth Financial, Inc. | 7.625 | 09/24/21 | 1,305,000 | 1,564,768 |
| Gray Television, Inc. | 7.500 | 10/01/20 | 1,410,000 | 1,466,400 |
| GRD Holdings III Corp. (S) | 10.750 | 06/01/19 | 540,000 | 561,600 |
| Griffon Corp. | 7.125 | 04/01/18 | 1,625,000 | 1,759,063 |
| Gulfmark Offshore, Inc. (S) | 6.375 | 03/15/22 | 1,725,000 | 1,781,063 |
| HCA Holdings, Inc. | 7.750 | 05/15/21 | 555,000 | 607,725 |
| HCA, Inc. | 5.875 | 03/15/22 | 1,070,000 | 1,163,625 |
| HD Supply, Inc. (S) | 7.500 | 07/15/20 | 1,475,000 | 1,458,406 |
| HD Supply, Inc. (S) | 10.500 | 01/15/21 | 240,000 | 245,400 |
| Health Management Associates, Inc. | 7.375 | 01/15/20 | 1,170,000 | 1,285,538 |
| HealthSouth Corp. | 8.125 | 02/15/20 | 825,000 | 905,438 |
| Hercules Offshore, Inc. (S) | 10.500 | 10/15/17 | 1,765,000 | 1,915,025 |
| Hexion US Finance Corp. | 6.625 | 04/15/20 | 1,375,000 | 1,354,375 |
| Hexion US Finance Corp. (S) | 6.625 | 04/15/20 | 660,000 | 650,100 |
| Hologic, Inc. (S) | 6.250 | 08/01/20 | 860,000 | 924,500 |
| Hornbeck Offshore Services, Inc. | 5.875 | 04/01/20 | 680,000 | 714,000 |
| IAC/InterActiveCorp. (S) | 4.750 | 12/15/22 | 555,000 | 550,838 |
| IASIS Healthcare LLC | 8.375 | 05/15/19 | 1,535,000 | 1,558,025 |
| iGATE Corp. | 9.000 | 05/01/16 | 1,045,000 | 1,148,194 |
| Infor US, Inc. | 11.500 | 07/15/18 | 1,360,000 | 1,601,400 |
| International Lease Finance Corp. | 8.250 | 12/15/20 | 1,120,000 | 1,372,000 |
| Isle of Capri Casinos, Inc. | 7.750 | 03/15/19 | 1,140,000 | 1,231,200 |
| Isle of Capri Casinos, Inc. | 8.875 | 06/15/20 | 820,000 | 895,850 |
| ITC Deltacom, Inc. | 10.500 | 04/01/16 | 720,000 | 765,900 |
| Kinetic Concepts, Inc. (S) | 10.500 | 11/01/18 | 975,000 | 1,043,250 |
| Kinetic Concepts, Inc. (S) | 12.500 | 11/01/19 | 705,000 | 678,563 |
| Kodiak Oil & Gas Corp. | 8.125 | 12/01/19 | 760,000 | 847,400 |
| 10 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| United States (continued) | ||||
| Landry's, Inc. (S) | 9.375 | 05/01/20 | 1,460,000 | $1,576,800 |
| Laredo Petroleum, Inc. | 7.375 | 05/01/22 | 620,000 | 671,150 |
| Lennar Corp. (S) | 4.750 | 11/15/22 | 980,000 | 960,400 |
| Level 3 Communications, Inc. (S) | 8.875 | 06/01/19 | 95,000 | 103,313 |
| Level 3 Financing, Inc. (S) | 7.000 | 06/01/20 | 1,190,000 | 1,261,400 |
| Level 3 Financing, Inc. | 10.000 | 02/01/18 | 1,575,000 | 1,752,188 |
| Levi Strauss & Company | 6.875 | 05/01/22 | 500,000 | 543,750 |
| Levi Strauss & Company | 7.625 | 05/15/20 | 900,000 | 981,000 |
| Limited Brands, Inc. | 5.625 | 02/15/22 | 300,000 | 322,500 |
| Linn Energy LLC | 7.750 | 02/01/21 | 1,150,000 | 1,230,500 |
| Local TV Finance LLC (S) | 9.250 | 06/15/15 | 810,000 | 816,075 |
| Louisiana-Pacific Corp. | 7.500 | 06/01/20 | 1,450,000 | 1,649,375 |
| MarkWest Energy Partners LP | 6.250 | 06/15/22 | 640,000 | 694,400 |
| Mead Products LLC (S) | 6.750 | 04/30/20 | 972,000 | 1,032,750 |
| Mediacom LLC | 7.250 | 02/15/22 | 1,225,000 | 1,335,250 |
| MGM Resorts International | 6.875 | 04/01/16 | 920,000 | 984,400 |
| MGM Resorts International | 7.500 | 06/01/16 | 1,285,000 | 1,407,075 |
| MGM Resorts International | 8.625 | 02/01/19 | 650,000 | 741,000 |
| Michael Foods, Inc. | 9.750 | 07/15/18 | 950,000 | 1,054,500 |
| Midstates Petroleum Company, Inc. (S) | 10.750 | 10/01/20 | 830,000 | 904,700 |
| Momentive Performance Materials, Inc. | 8.875 | 10/15/20 | 480,000 | 494,400 |
| Momentive Performance Materials, Inc. | 9.000 | 01/15/21 | 510,000 | 395,250 |
| NBTY, Inc. | 9.000 | 10/01/18 | 675,000 | 767,813 |
| NCR Corp. (S) | 5.000 | 07/15/22 | 1,250,000 | 1,265,625 |
| Netflix, Inc. (S) | 5.375 | 02/01/21 | 795,000 | 802,950 |
| New Albertsons, Inc. | 8.000 | 05/01/31 | 2,050,000 | 1,424,750 |
| New Albertsons, Inc. | 8.700 | 05/01/30 | 525,000 | 383,250 |
| NewPage Corp. (H) | 11.375 | 12/31/14 | 610,000 | 268,400 |
| Nexstar Broadcasting, Inc. (S) | 6.875 | 11/15/20 | 1,055,000 | 1,099,838 |
| Norcraft Companies LP | 10.500 | 12/15/15 | 1,255,000 | 1,298,925 |
| Nortek, Inc. | 8.500 | 04/15/21 | 345,000 | 390,713 |
| Novelis, Inc. | 8.375 | 12/15/17 | 1,025,000 | 1,132,625 |
| NRG Energy, Inc. | 7.875 | 05/15/21 | 1,325,000 | 1,484,000 |
| NRG Energy, Inc. | 8.250 | 09/01/20 | 775,000 | 875,750 |
| Oasis Petroleum, Inc. | 6.500 | 11/01/21 | 350,000 | 374,500 |
| Oasis Petroleum, Inc. | 7.250 | 02/01/19 | 1,220,000 | 1,323,700 |
| Park-Ohio Industries, Inc. | 8.125 | 04/01/21 | 600,000 | 642,000 |
| Parker Drilling Company | 9.125 | 04/01/18 | 1,218,000 | 1,315,440 |
| Peabody Energy Corp. | 6.250 | 11/15/21 | 1,670,000 | 1,745,150 |
| Pemex Project Funding Master Trust | 6.625 | 06/15/35 | 777,000 | 938,228 |
| Petco Holdings Inc., PIK (S) | 8.500 | 10/15/17 | 680,000 | 700,400 |
| Pilgrim's Pride Corp. | 7.875 | 12/15/18 | 1,110,000 | 1,147,463 |
| Pinnacle Entertainment, Inc. | 8.750 | 05/15/20 | 1,385,000 | 1,502,725 |
| Plains Exploration & Production Company | 6.500 | 11/15/20 | 775,000 | 857,344 |
| Plains Exploration & Production Company | 6.625 | 05/01/21 | 225,000 | 248,906 |
| Plains Exploration & Production Company | 7.625 | 04/01/20 | 375,000 | 421,875 |
| Post Holdings, Inc. | 7.375 | 02/15/22 | 1,515,000 | 1,681,650 |
| Prospect Medical Holdings, Inc. (S) | 8.375 | 05/01/19 | 1,110,000 | 1,182,150 |
| Provident Funding Associates LP (S) | 10.125 | 02/15/19 | 975,000 | 1,038,375 |
| Provident Funding Associates LP (S) | 10.250 | 04/15/17 | 550,000 | 614,625 |
| PVH Corp. | 4.500 | 12/15/22 | 510,000 | 507,450 |
| QEP Resources, Inc. | 5.375 | 10/01/22 | 1,240,000 | 1,320,600 |
| Quiksilver, Inc. | 6.875 | 04/15/15 | 1,680,000 | 1,675,800 |
| Radiation Therapy Services, Inc. | 9.875 | 04/15/17 | 1,050,000 | 721,875 |
| Radio One, Inc., PIK | 12.500 | 05/24/16 | 1,646,731 | 1,593,212 |
| 11 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| United States (continued) | ||||
| RadioShack Corp. | 6.750 | 05/15/19 | 1,150,000 | $776,250 |
| RBS Global, Inc. | 8.500 | 05/01/18 | 1,650,000 | 1,806,750 |
| Regal Cinemas Corp. | 8.625 | 07/15/19 | 775,000 | 858,313 |
| Regal Entertainment Group | 9.125 | 08/15/18 | 600,000 | 670,500 |
| Reliance Holdings USA, Inc. (S) | 5.400 | 02/14/22 | 250,000 | 277,433 |
| Reynolds Group Issuer, Inc. | 9.875 | 08/15/19 | 2,150,000 | 2,348,875 |
| Sabine Pass Liquefaction LLC (S) | 5.625 | 02/01/21 | 570,000 | 577,125 |
| Sabine Pass LNG LP | 7.500 | 11/30/16 | 890,000 | 987,900 |
| SandRidge Energy, Inc. | 7.500 | 03/15/21 | 1,000,000 | 1,060,000 |
| SandRidge Energy, Inc. | 8.750 | 01/15/20 | 850,000 | 922,250 |
| Sealed Air Corp. (S) | 8.375 | 09/15/21 | 1,390,000 | 1,595,025 |
| ServiceMaster Company (S) | 7.000 | 08/15/20 | 915,000 | 928,725 |
| SESI LLC | 6.375 | 05/01/19 | 909,000 | 972,630 |
| SESI LLC | 7.125 | 12/15/21 | 485,000 | 539,563 |
| Shearer's Foods LLC (S) | 9.000 | 11/01/19 | 990,000 | 1,061,775 |
| Sinclair Television Group, Inc. (S) | 6.125 | 10/01/22 | 1,145,000 | 1,222,288 |
| Smithfield Foods, Inc. | 6.625 | 08/15/22 | 1,365,000 | 1,501,500 |
| Southern Copper Corp. | 5.250 | 11/08/42 | 150,000 | 146,457 |
| Southern Copper Corp. | 6.750 | 04/16/40 | 100,000 | 117,046 |
| Spectrum Brands Escrow Corp. (S) | 6.375 | 11/15/20 | 975,000 | 1,037,156 |
| Sprint Capital Corp. | 8.750 | 03/15/32 | 2,765,000 | 3,262,700 |
| SSI Investments II, Ltd. | 11.125 | 06/01/18 | 775,000 | 868,000 |
| Starz LLC (S) | 5.000 | 09/15/19 | 585,000 | 605,475 |
| Surgical Care Affiliates, Inc. (S) | 10.000 | 07/15/17 | 700,000 | 732,375 |
| Surgical Care Affiliates, Inc., PIK (S) | 8.875 | 07/15/15 | 500,000 | 509,375 |
| Syniverse Holdings, Inc. | 9.125 | 01/15/19 | 950,000 | 1,033,125 |
| The Goodyear Tire & Rubber Company | 7.000 | 05/15/22 | 860,000 | 922,350 |
| The Manitowoc Company, Inc. | 8.500 | 11/01/20 | 500,000 | 562,500 |
| The Manitowoc Company, Inc. | 9.500 | 02/15/18 | 500,000 | 555,000 |
| The ServiceMaster Company | 7.450 | 08/15/27 | 425,000 | 352,750 |
| The ServiceMaster Company | 8.000 | 02/15/20 | 691,000 | 732,460 |
| Tomkins LLC | 9.000 | 10/01/18 | 404,000 | 450,965 |
| TransDigm, Inc. | 7.750 | 12/15/18 | 1,225,000 | 1,361,281 |
| TransUnion Holding Company, Inc. | 9.625 | 06/15/18 | 375,000 | 400,313 |
| TransUnion Holding Company, Inc., PIK (S) | 8.125 | 06/15/18 | 575,000 | 602,313 |
| TransUnion LLC | 11.375 | 06/15/18 | 725,000 | 838,281 |
| Triumph Group, Inc. | 8.625 | 07/15/18 | 575,000 | 635,375 |
| United Surgical Partners International, Inc. | 9.000 | 04/01/20 | 1,235,000 | 1,386,288 |
| Universal Hospital Services, Inc. | 7.625 | 08/15/20 | 1,205,000 | 1,292,363 |
| Univision Communications, Inc. (S) | 7.875 | 11/01/20 | 1,250,000 | 1,353,125 |
| Univision Communications, Inc. (S) | 8.500 | 05/15/21 | 500,000 | 532,500 |
| Venoco, Inc. | 8.875 | 02/15/19 | 575,000 | 559,188 |
| Windstream Corp. | 7.500 | 04/01/23 | 1,893,000 | 2,025,510 |
| Xerium Technologies, Inc. | 8.875 | 06/15/18 | 705,000 | 669,750 |
| Venezuela 2.1% | 10,705,951 | |||
| Petroleos de Venezuela SA | 4.900 | 10/28/14 | 9,342,345 | 8,921,939 |
| Petroleos de Venezuela SA | 5.000 | 10/28/15 | 336,291 | 306,865 |
| Petroleos de Venezuela SA | 5.250 | 04/12/17 | 1,144,700 | 993,027 |
| Petroleos de Venezuela SA | 8.500 | 11/02/17 | 494,000 | 484,120 |
| Virgin Islands 0.8% | 4,198,903 | |||
| Gold Fields Orogen Holding BVI, Ltd. | 4.875 | 10/07/20 | 600,000 | 584,605 |
| Mega Advance Investments, Ltd. (S) | 5.000 | 05/12/21 | 400,000 | 446,297 |
| QGOG Atlantic/Alaskan Rigs, Ltd. (S) | 5.250 | 07/30/18 | 302,864 | 314,979 |
| 12 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Virgin Islands (continued) | ||||
| Sinochem Overseas Capital Company, Ltd. (S) | 4.500 | 11/12/20 | 1,120,000 | $1,189,064 |
| Sinochem Overseas Capital Company, Ltd. | 4.500 | 11/12/20 | 662,000 | 702,822 |
| Sinopec Group Overseas Development 2012, Ltd. | 3.900 | 05/17/22 | 525,000 | 554,165 |
| Sinopec Group Overseas Development 2012, Ltd. (S) | 4.875 | 05/17/42 | 371,000 | 406,971 |
| Foreign Government Obligations 32.9% | $169,313,985 | |||
| (Cost $161,233,739) | ||||
| Argentina 0.8% | 4,143,830 | |||
| Republic of Argentina | ||||
| Bond (EUR) (D) (P) | 7.820 | 12/31/33 | 3,849,802 | 3,057,950 |
| Bond (EUR) (D) | 7.820 | 12/31/33 | 1,367,068 | 1,085,880 |
| Brazil 1.4% | 7,310,050 | |||
| Federative Republic of Brazil | ||||
| Bond | 7.125 | 01/20/37 | 2,103,000 | 3,012,548 |
| Bond | 8.250 | 01/20/34 | 1,103,000 | 1,745,498 |
| Bond | 8.750 | 02/04/25 | 285,000 | 448,875 |
| Bond | 8.875 | 10/14/19 | 242,000 | 344,850 |
| Bond | 8.875 | 04/15/24 | 299,000 | 467,188 |
| Note | 8.000 | 01/15/18 | 1,098,333 | 1,291,091 |
| Chile 0.2% | 1,286,350 | |||
| Republic of Chile | ||||
| Bond | 2.250 | 10/30/22 | 490,000 | 471,625 |
| Bond | 3.250 | 09/14/21 | 765,000 | 814,725 |
| Colombia 2.3% | 11,707,811 | |||
| Bogota Distrito Capital | ||||
| Bond (COP) (D) | 9.750 | 07/26/28 | 2,528,000,000 | 2,065,931 |
| Bond (COP) (D) | 9.750 | 07/26/28 | 200,000,000 | 163,444 |
| Republic of Colombia | ||||
| Bond | 2.625 | 03/15/23 | 515,000 | 494,400 |
| Bond | 7.375 | 09/18/37 | 4,668,000 | 6,791,940 |
| Bond | 10.375 | 01/28/33 | 391,000 | 688,160 |
| Bond | 11.750 | 02/25/20 | 545,000 | 858,375 |
| Bond (COP) (D) | 12.000 | 10/22/15 | 954,000,000 | 645,561 |
| Croatia 0.5% | 2,472,715 | |||
| Republic of Croatia | ||||
| Bond (S) | 6.250 | 04/27/17 | 275,000 | 302,500 |
| Bond | 6.375 | 03/24/21 | 430,000 | 485,900 |
| Bond (S) | 6.375 | 03/24/21 | 762,000 | 861,060 |
| Bond | 6.625 | 07/14/20 | 719,000 | 823,255 |
| Dominican Republic 0.4% | 1,980,321 | |||
| Government of Dominican Republic | ||||
| Bond | 7.500 | 05/06/21 | 956,000 | 1,089,840 |
| Bond | 9.040 | 01/23/18 | 788,036 | 890,481 |
| El Salvador 0.4% | 1,993,983 | |||
| Republic of El Salvador | ||||
| Bond (S) | 7.375 | 12/01/19 | 995,000 | 1,173,603 |
| Bond | 7.750 | 01/24/23 | 154,000 | 187,880 |
| Bond | 8.250 | 04/10/32 | 500,000 | 632,500 |
| 13 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Hungary 1.0% | $5,130,504 | |||
| Republic of Hungary | ||||
| Bond (EUR) (D) | 3.500 | 07/18/16 | 462,000 | 612,876 |
| Bond (EUR) (D) | 4.375 | 07/04/17 | 442,000 | 596,907 |
| Bond (EUR) (D) | 4.500 | 01/29/14 | 370,000 | 510,676 |
| Bond (GBP) (D) | 5.000 | 03/30/16 | 104,000 | 163,295 |
| Bond (GBP) (D) | 5.500 | 05/06/14 | 601,000 | 969,867 |
| Bond (EUR) (D) | 5.750 | 06/11/18 | 455,000 | 646,712 |
| Bond (EUR) (D) | 6.000 | 01/11/19 | 331,000 | 474,771 |
| Bond | 6.375 | 03/29/21 | 1,060,000 | 1,155,400 |
| Indonesia 2.3% | 12,096,715 | |||
| Republic of Indonesia | ||||
| Bond | 4.875 | 05/05/21 | 200,000 | 226,000 |
| Bond | 6.875 | 03/09/17 | 874,000 | 1,029,135 |
| Bond | 7.750 | 01/17/38 | 1,614,000 | 2,320,125 |
| Bond | 8.500 | 10/12/35 | 2,023,000 | 3,105,305 |
| Bond | 11.625 | 03/04/19 | 2,080,000 | 3,099,200 |
| Bond (S) | 11.625 | 03/04/19 | 1,555,000 | 2,316,950 |
| Iraq 0.6% | 2,870,400 | |||
| Republic of Iraq | ||||
| Bond | 5.800 | 01/15/28 | 2,990,000 | 2,870,400 |
| Lithuania 1.2% | 6,229,323 | |||
| Republic of Lithuania | ||||
| Bond | 6.125 | 03/09/21 | 3,175,000 | 3,817,938 |
| Bond (S) | 6.625 | 02/01/22 | 548,000 | 682,260 |
| Bond | 6.625 | 02/01/22 | 460,000 | 572,700 |
| Bond | 7.375 | 02/11/20 | 907,000 | 1,156,425 |
| Malaysia 0.6% | 2,917,568 | |||
| Government of Malaysia | ||||
| Bond (MYR) (D) | 3.197 | 10/15/15 | 7,530,000 | 2,428,581 |
| Bond | 4.646 | 07/06/21 | 430,000 | 488,987 |
| Mexico 3.7% | 18,811,420 | |||
| Government of Mexico | ||||
| Bond (MXN) (D) | 2.000 | 06/09/22 | 7,769,884 | 632,759 |
| Bond (MXN) (D) | 2.500 | 12/10/20 | 23,816,857 | 2,022,798 |
| Bond | 4.750 | 03/08/44 | 814,000 | 855,921 |
| Bond (MXN) (D) | 5.000 | 06/16/16 | 13,225,439 | 1,165,967 |
| Bond | 5.750 | 10/12/2110 | 4,978,000 | 5,562,915 |
| Bond | 6.050 | 01/11/40 | 3,270,000 | 4,095,675 |
| Bond (MXN) (D) | 6.250 | 06/16/16 | 21,158,000 | 1,745,857 |
| Bond (MXN) (D) | 6.500 | 06/09/22 | 2,800,000 | 243,916 |
| Bond | 6.750 | 09/27/34 | 1,536,000 | 2,081,280 |
| Bond (MXN) (D) | 8.000 | 12/17/15 | 4,710,000 | 404,332 |
| Morocco 0.1% | 504,900 | |||
| Kingdom of Morocco | ||||
| Bond (S) | 4.250 | 12/11/22 | 495,000 | 504,900 |
| Panama 1.5% | 7,844,519 | |||
| Republic of Panama | ||||
| Bond | 5.200 | 01/30/20 | 2,838,000 | 3,348,840 |
| Bond | 6.700 | 01/26/36 | 425,000 | 570,563 |
| 14 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Panama (continued) | ||||
| Bond | 7.125 | 01/29/26 | 101,000 | $136,855 |
| Bond | 8.125 | 04/28/34 | 472,000 | 667,880 |
| Bond | 8.875 | 09/30/27 | 357,000 | 552,458 |
| Bond | 9.375 | 04/01/29 | 1,573,000 | 2,567,923 |
| Peru 0.6% | 3,215,548 | |||
| Republic of Peru | ||||
| Bond | 5.625 | 11/18/50 | 784,000 | 921,200 |
| Bond | 7.350 | 07/21/25 | 316,000 | 445,560 |
| Bond | 8.375 | 05/03/16 | 203,000 | 246,138 |
| Bond | 8.750 | 11/21/33 | 964,000 | 1,602,650 |
| Philippines 1.1% | 5,766,167 | |||
| Republic of Philippines | ||||
| Bond | 6.500 | 01/20/20 | 139,000 | 175,488 |
| Bond | 7.750 | 01/14/31 | 2,577,000 | 3,749,535 |
| Bond | 9.500 | 02/02/30 | 1,115,000 | 1,841,144 |
| Poland 1.6% | 8,337,566 | |||
| Republic of Poland | ||||
| Bond | 5.000 | 03/23/22 | 1,979,000 | 2,275,850 |
| Bond | 5.125 | 04/21/21 | 1,476,000 | 1,712,160 |
| Bond (EUR) (D) | 5.250 | 01/20/25 | 247,000 | 399,098 |
| Bond | 6.375 | 07/15/19 | 3,191,000 | 3,950,458 |
| Qatar 0.7% | 3,552,105 | |||
| Government of Qatar | ||||
| Bond | 5.250 | 01/20/20 | 1,260,000 | 1,486,800 |
| Bond (S) | 5.250 | 01/20/20 | 429,000 | 506,220 |
| Bond | 6.400 | 01/20/40 | 258,000 | 348,945 |
| Bond | 6.550 | 04/09/19 | 972,000 | 1,210,140 |
| Romania 0.4% | 1,981,752 | |||
| Government of Romania | ||||
| Bond | 6.750 | 02/07/22 | 1,474,000 | 1,774,667 |
| Bond (S) | 6.750 | 02/07/22 | 172,000 | 207,085 |
| Russia 3.5% | 17,909,957 | |||
| Government of Russia | ||||
| Bond | 7.500 | 03/31/30 | 12,406,214 | 15,507,767 |
| Bond | 11.000 | 07/24/18 | 41,000 | 59,860 |
| Bond | 12.750 | 06/24/28 | 1,189,000 | 2,342,330 |
| Slovakia 0.3% | 1,497,336 | |||
| Government of Slovakia | ||||
| Bond (S) | 4.375 | 05/21/22 | 1,402,000 | 1,497,336 |
| South Africa 1.7% | 8,541,522 | |||
| Republic of South Africa | ||||
| Bond | 4.665 | 01/17/24 | 2,108,000 | 2,271,370 |
| Bond | 5.500 | 03/09/20 | 1,314,000 | 1,512,743 |
| Bond | 5.875 | 05/30/22 | 486,000 | 577,125 |
| Bond | 6.250 | 03/08/41 | 922,000 | 1,135,259 |
| Bond | 6.875 | 05/27/19 | 1,450,000 | 1,783,500 |
| Bond (ZAR) (D) | 8.000 | 12/21/18 | 10,300,000 | 1,261,525 |
| 15 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Turkey 2.9% | $15,057,135 | |||
| Republic of Turkey | ||||
| Bond | 3.250 | 03/23/23 | 2,283,000 | 2,191,223 |
| Bond | 5.125 | 03/25/22 | 1,957,000 | 2,206,518 |
| Bond | 5.625 | 03/30/21 | 161,000 | 187,552 |
| Bond | 6.250 | 09/26/22 | 1,205,000 | 1,470,100 |
| Bond | 6.750 | 04/03/18 | 454,000 | 541,395 |
| Bond | 6.875 | 03/17/36 | 550,000 | 712,250 |
| Bond | 7.000 | 09/26/16 | 416,000 | 484,016 |
| Bond | 7.000 | 06/05/20 | 1,225,000 | 1,537,375 |
| Bond | 7.250 | 03/15/15 | 871,000 | 968,552 |
| Bond | 7.250 | 03/05/38 | 952,000 | 1,299,480 |
| Bond | 7.500 | 07/14/17 | 396,000 | 478,566 |
| Bond | 7.500 | 11/07/19 | 1,967,000 | 2,498,090 |
| Bond | 8.000 | 02/14/34 | 333,000 | 482,018 |
| Ukraine 1.1% | 5,734,948 | |||
| Republic of Ukraine | ||||
| Bond | 6.250 | 06/17/16 | 202,000 | 202,000 |
| Bond | 6.580 | 11/21/16 | 1,540,000 | 1,555,400 |
| Bond | 6.750 | 11/14/17 | 193,000 | 194,448 |
| Bond | 6.875 | 09/23/15 | 1,011,000 | 1,018,583 |
| Bond (S) | 6.875 | 09/23/15 | 657,000 | 661,928 |
| Bond | 7.650 | 06/11/13 | 652,000 | 656,499 |
| Bond | 7.800 | 11/28/22 | 954,000 | 987,390 |
| Bond (S) | 9.000 | 12/07/17 | 440,000 | 458,700 |
| Uruguay 0.4% | 2,319,790 | |||
| Republic of Uruguay | ||||
| Bond | 7.625 | 03/21/36 | 608,267 | 895,673 |
| Bond | 8.000 | 11/18/22 | 1,028,243 | 1,424,117 |
| Venezuela 1.6% | 8,099,750 | |||
| Republic of Venezuela | ||||
| Bond | 6.000 | 12/09/20 | 774,000 | 665,640 |
| Bond | 7.000 | 12/01/18 | 1,000,000 | 958,500 |
| Bond | 8.500 | 10/08/14 | 847,000 | 868,175 |
| Bond | 11.950 | 08/05/31 | 514,000 | 589,815 |
| Bond | 12.750 | 08/23/22 | 3,405,100 | 4,086,120 |
| Bond | 13.625 | 08/15/18 | 810,000 | 931,500 |
| Capital Preferred Securities 0.1% | $327,825 | |||
| (Cost $316,855) | ||||
| Cayman Islands 0.1% | 327,825 | |||
| Hutchison Whampoa International 10, Ltd. (6.000% to | ||||
| 10/28/2015, then reset of 5 Year U.S. Treasury Note Rate | ||||
| + 4.885% until 10/28/2020, then 3 month LIBOR + 5.638%) | ||||
| (Q) | 6.000 | 10/28/15 | 310,000 | 327,825 |
| Convertible Bonds 0.4% | $2,231,316 | |||
| (Cost $2,148,135) | ||||
| Canada 0.0% | 10,423 | |||
| Silver Standard Resources, Inc. (S) | 2.875 | 02/01/33 | 11,000 | 10,423 |
| 16 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| China 0.0% | $20,988 | |||
| Home Inns & Hotels Management, Inc. | 2.000 | 12/15/15 | 23,000 | 20,988 |
| France 0.0% | 33,435 | |||
| Alcatel-Lucent (EUR) (D) | 5.000 | 01/01/15 | 24,548 | 33,435 |
| United Kingdom 0.0% | 116,100 | |||
| Subsea 7 SA | 2.250 | 10/11/13 | 100,000 | 116,100 |
| United States 0.4% | 2,050,370 | |||
| AirTran Holdings, Inc. | 5.250 | 11/01/16 | 66,000 | 88,688 |
| Alcatel-Lucent USA, Inc., Series A | 2.875 | 06/15/23 | 158,000 | 150,100 |
| Altra Holdings, Inc. | 2.750 | 03/01/31 | 133,000 | 150,207 |
| Auxilium Pharmaceuticals, Inc. | 1.500 | 07/15/18 | 5,000 | 5,204 |
| Callidus Software, Inc. | 4.750 | 06/01/16 | 85,000 | 80,887 |
| Ciena Corp. (S) | 4.000 | 03/15/15 | 36,000 | 40,185 |
| Comtech Telecommunications Corp. | 3.000 | 05/01/29 | 23,000 | 23,561 |
| Dendreon Corp. | 2.875 | 01/15/16 | 124,000 | 102,610 |
| Greenbrier Companies, Inc. | 3.500 | 04/01/18 | 160,000 | 154,900 |
| Hornbeck Offshore Services, Inc. (S) | 1.500 | 09/01/19 | 5,000 | 5,191 |
| Hornbeck Offshore Services, Inc. (1.625% Steps down to | ||||
| 1.375% on 11/15/2013) | 1.625 | 11/15/26 | 43,000 | 43,284 |
| Intel Corp. | 2.950 | 12/15/35 | 109,000 | 114,314 |
| Micron Technology, Inc. | 1.500 | 08/01/31 | 90,000 | 91,856 |
| Micron Technology, Inc. | 1.875 | 06/01/27 | 69,000 | 66,542 |
| NetApp, Inc. | 1.750 | 06/01/13 | 63,000 | 73,198 |
| Newpark Resources, Inc. | 4.000 | 10/01/17 | 89,000 | 99,291 |
| ON Semiconductor Corp. | 2.625 | 12/15/26 | 30,000 | 30,994 |
| RadioShack Corp. (S) | 2.500 | 08/01/13 | 34,000 | 32,003 |
| RTI International Metals, Inc. | 3.000 | 12/01/15 | 78,000 | 85,508 |
| Smithfield Foods, Inc. | 4.000 | 06/30/13 | 39,000 | 42,071 |
| Stone Energy Corp. (S) | 1.750 | 03/01/17 | 116,000 | 106,720 |
| Symantec Corp. | 1.000 | 06/15/13 | 51,000 | 59,064 |
| TRW Automotive, Inc. | 3.500 | 12/01/15 | 107,000 | 216,274 |
| Tyson Foods, Inc. | 3.250 | 10/15/13 | 90,000 | 120,600 |
| WebMD Health Corp. | 2.500 | 01/31/18 | 76,000 | 67,118 |
| Structured Notes (K) 1.3% | $6,800,849 | |||
| (Cost $6,636,722) | ||||
| Brazil 0.7% | 3,652,824 | |||
| Federative Republic of Brazil (Barclays Bank PLC) | ||||
| Note (BRL) (D) (S) | 6.000 | 03/28/13 | 880,000 | 1,084,794 |
| Note (BRL) (D) (S) | 10.000 | 05/02/13 | 2,470,000 | 1,271,274 |
| Federative Republic of Brazil (JPMorgan Chase & Company) | ||||
| Note (BRL) (D) | 6.000 | 02/21/13 | 1,070,000 | 1,296,756 |
| Colombia 0.2% | 1,145,621 | |||
| Republic of Colombia (Citigroup Funding, Inc.) | ||||
| Note (COP) (D)(S) | 11.000 | 07/27/20 | 486,000,000 | 374,678 |
| Note (COP) (D) | 11.000 | 07/27/20 | 1,000,000,000 | 770,943 |
| Russia 0.3% | 1,551,604 | |||
| Government of Russia (Credit Suisse) | ||||
| Bond (RUB) (D) | 7.600 | 04/14/21 | 43,500,000 | 1,551,604 |
| 17 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| United Kingdom 0.1% | $450,800 | |||
| Cablevision SA (Deutsche Bank AG London) | ||||
| Bond (S) | 9.375 | 02/13/18 | 644,000 | 450,800 |
| Term Loans (M) 1.0% | $5,184,620 | |||
| (Cost $5,633,792) | ||||
| France 0.2% | 798,888 | |||
| Alcatel-Lucent (T) | TBD | 01/31/19 | 790,000 | 798,888 |
| Indonesia 0.1% | 589,581 | |||
| Bumi Resources Tbk PT | 11.208 | 08/07/13 | 601,000 | 589,581 |
| United States 0.7% | 3,796,151 | |||
| Caesars Entertainment Operating Company, Inc. | 5.454 | 01/26/18 | 1,328,000 | 1,232,089 |
| iStar Financial, Inc. | 5.750 | 09/28/17 | 987,666 | 1,002,481 |
| Texas Competitive Electric Holdings Company LLC | 4.742 | 10/10/17 | 2,378,987 | 1,561,581 |
| Shares | Value | |||
| Preferred Securities 0.0% | $243,874 | |||
| (Cost $292,351) | ||||
| United States 0.0% | 243,874 | |||
| Apache Corp., Series D, 6.000% | 2,380 | 112,645 | ||
| Molycorp, Inc., 5.500% | 439 | 12,994 | ||
| SandRidge Energy, Inc., 8.500% | 1,070 | 118,235 | ||
| Common Stocks 0.0% | $8 | |||
| (Cost $1,078,310) | ||||
| Marshall Islands 0.0% | 8 | |||
| General Maritime Corp. (I) | 816 | 8 | ||
| United States 0.0% | 0 | |||
| NewPage Corp. (I) | 2,440 | 0 | ||
| Warrants 0.0% | $0 | |||
| (Cost $0) | ||||
| Marshall Islands 0.0% | 0 | |||
| General Maritime Corp. (Expiration Date: 05/17/2017, Strike Price: $42.50) (I) | 1,262 | 0 | ||
| Yield | Shares | Value | ||
| Short-Term Investments 4.9% | $25,237,580 | |||
| (Cost $25,237,580) | ||||
| Money Market Funds 4.9% | 25,237,580 | |||
| State Street Institutional Liquid Reserves Fund | 0.1447%(Y) | 25,237,580 | 25,237,580 | |
| 18 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
| Total investments (Cost $493,461,895)† 100.1% | $515,821,689 |
| Other assets and liabilities, net (0.1%) | ($535,386) |
| Total net assets 100.0% | $515,286,303 |
^The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund. All par values are denominated in U.S. Dollars unless otherwise indicated.
| Currency Abbreviations | |
| BRL | Brazilian Real |
| COP | Colombian Peso |
| EUR | Euro |
| GBP | Pound Sterling |
| MXN | Mexican Peso |
| MYR | Malaysian Ringgit |
| RUB | Russian Ruble |
| ZAR | South African Rand |
| Notes to Portfolio of Investments | |
| LIBOR | London Interbank Offered Rate |
| PIK | Paid In Kind |
| TBD | To Be Determined |
| (D) | Par value of foreign bonds is expressed in local currency as shown parenthetically. |
| (H) | Non-income producing - Issuer is in default. |
| (I) | Non-income producing security. |
| (K) | Underlying issuer is shown parenthetically in security description. |
| (M) | Term loans are variable rate obligations. The coupon rate shown represents the rate at period end. |
| (P) | Variable rate obligation. The coupon rate shown represents the rate at period end. |
| (Q) | Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date. |
| (S) | These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A |
| securities amounted to $119,948,675 or 23.3% of the Fund's net assets as of 1-31-13. | |
| (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. |
| (Y) | The rate shown is the annualized seven-day yield as of 1-31-13. |
| † | At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $495,637,405. Net unrealized appreciation aggregated $20,184,284, of which $27,059,790 related to appreciated investment |
| securities and $6,875,506 related to depreciated investment securities. | |
| 19 |
Global High Yield Fund
As of 1-31-13 (Unaudited)
The Fund had the following portfolio composition as a percentage of net assets on January 31, 2013:
| Foreign Government Obligations | 32.9% | ||
| Energy | 13.5% | ||
| Consumer Discretionary | 12.8% | ||
| Telecommunication Services | 6.4% | ||
| Materials | 5.7% | ||
| Consumer Staples | 5.1% | ||
| Financials | 4.6% | ||
| Industrials | 4.3% | ||
| Health Care | 4.1% | ||
| Information Technology | 2.6% | ||
| Utilities | 1.9% | ||
| Structured Notes | 1.3% | ||
| Short-Term Investments & Other | 4.8% |
| 20 |
Global High Yield Fund
Statement of Assets and Liabilities — January 31, 2013 (Unaudited)
| Assets | |||
| Investments, at value (Cost $493,461,895) | $515,821,689 | ||
| Foreign currency, at value (Cost $84,561) | 77,637 | ||
| Receivable for investments sold | 3,843,740 | ||
| Receivable for delayed delivery securities sold | 310,875 | ||
| Receivable for fund shares sold | 317,870 | ||
| Receivable for forward foreign currency | |||
| exchange contracts | 377,988 | ||
| Dividends and interest receivable | 8,420,262 | ||
| Other receivables and prepaid expenses | 1,586 | ||
| Total assets | 529,171,647 | ||
| Liabilities | |||
| Payable for investments purchased | 8,254,014 | ||
| Payable for forward foreign currency exchange | |||
| contracts | 455,313 | ||
| Payable for delayed delivery securities | |||
| purchased | 5,081,939 | ||
| Distributions payable | 239 | ||
| Payable to affiliates | |||
| Accounting and legal services fees | 2,833 | ||
| Transfer agent fees | 7 | ||
| Trustees' fees | 78 | ||
| Other liabilities and accrued expenses | 90,921 | ||
| Total liabilities | 13,885,344 | ||
| Net assets | 515,286,303 | ||
| Net assets consist of | |||
| Paid-in capital | $495,643,245 | ||
| Undistributed net investment income | (750,488) | ||
| Accumulated net realized gain (loss) on | |||
| investments and foreign currency transactions | (1,875,886) | ||
| Net unrealized appreciation (depreciation) on | |||
| investments and translation of assets and | |||
| liabilities in foreign currencies | 22,269,432 | ||
| Net assets | $515,286,303 | ||
| 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 ($26,532 ÷ 2,500 shares)1 | $10.61 | ||
| Class I ($26,531 ÷ 2,500 shares) | $10.61 | ||
| Class NAV ($515,233,240 ÷ 48,552,996 shares) | $10.61 | ||
| Maximum offering price per share | |||
| Class A (net asset value per share ÷ 95.5%)2 | $11.11 | ||
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced.
See notes to financial statements.
| 21 |
Global High Yield Fund
Statement of Operations — January 31, 2013 (Unaudited)
| Global High | |||
| Yield Fund | |||
| Investment income | |||
| Interest | $15,903,144 | ||
| Dividends | 10,822 | ||
| Total investment income | 15,913,966 | ||
| Expenses | |||
| Investment management fees | 2,000,248 | ||
| Distribution and service fees | 40 | ||
| Accounting and legal services fees | 32,190 | ||
| Transfer agent fees | 39 | ||
| Trustees' fees | 2,713 | ||
| Professional fees | 38,654 | ||
| Custodian fees | 129,550 | ||
| Registration and filing fees | 9,799 | ||
| Other | 4,535 | ||
| Total expenses | 2,217,768 | ||
| Less expense reductions and amounts | |||
| repcatured | (8,067) | ||
| Net expenses | 2,209,701 | ||
| Net investment income | 13,704,265 | ||
| Realized and unrealized gain (loss) | |||
| Net realized gain (loss) on | |||
| Investments | 6,199,295 | ||
| Foreign currency transactions | (1,577,709) | ||
| 4,621,586 | |||
| Change in net unrealized appreciation | |||
| (depreciation) of | |||
| Investments | 8,507,570 | ||
| Translation of assets and liabilities in foreign | |||
| currencies | (10,200) | ||
| 8,497,370 | |||
| Net realized and unrealized gain | 13,118,956 | ||
| Increase in net assets from operations | $ 26,823,221 | ||
The accompanying notes are an integral part of the financial statements.
| 22 |
Global High Yield Fund
Statements of Changes in Net Assets
| Six months | ||||
| ended | Year ended | |||
| 1/31/13 | 7/31/12 | |||
| (Unaudited) | ||||
| Increase (decrease) in net assets | ||||
| From operations | ||||
| Net investment income | $13,704,265 | $26,600,500 | ||
| Net realized gain | 4,621,586 | 3,134,710 | ||
| Change in net unrealized appreciation | ||||
| (depreciation) | 8,497,370 | 982,392 | ||
| Increase in net assets resulting from | ||||
| operations | 26,823,221 | 30,717,602 | ||
| Distributions to shareholders | ||||
| From net investment income | ||||
| Class A | (751) | (1,786) | ||
| Class I | (792) | (1,864) | ||
| Class NAV | (14,871,475) | (29,872,062) | ||
| From net realized gain | ||||
| Class A | (289) | (354) | ||
| Class I | (289) | (354) | ||
| Class NAV | (5,394,311) | (5,312,235) | ||
| Total distributions | (20,267,907) | (35,188,655) | ||
| From Fund share transactions | 39,919,871 | 96,123,079 | ||
| Total increase | 46,475,185 | 91,652,026 | ||
| Net assets | ||||
| Beginning of period | 468,811,118 | 377,159,092 | ||
| End of period | $515,286,303 | $468,811,118 | ||
| Undistributed (accumulated distributions in | ||||
| excess of) net investment income | ($750,488) | $418,265 | ||
See notes to financial statements.
| 23 |
Global High Yield Fund
Financial Highlights (For a share outstanding throughout the period)
| Class A Shares | ||||
| Period ended | ||||
| 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | |
| Per share operating performance | ||||
| Net asset value, beginning of period | $10.47 | $10.67 | $10.47 | $10.00 |
| Net investment income3 | 0.28 | 0.63 | 0.65 | 0.45 |
| Net realized and unrealized gain on | ||||
| investments | 0.28 | 0.02 | 0.42 | 0.49 |
| Total from investment operations | 0.56 | 0.65 | 1.07 | 0.94 |
| Less distributions | ||||
| From net investment income | (0.30) | (0.71) | (0.68) | (0.47) |
| From net realized gain | (0.12) | (0.14) | (0.19) | — |
| Total distributions | (0.42) | (0.85) | (0.87) | (0.47) |
| Net asset value, end of period | $10.61 | $10.47 | $10.67 | $10.47 |
| Total return (%)4,5 | 5.366 | 6.72 | 10.67 | 9.666 |
| 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 and amounts | ||||
| recaptured | 1.398 | 1.41 | 1.39 | 1.348 |
| Expenses including reductions and amounts | ||||
| recaptured | 1.308 | 1.30 | 1.30 | 1.308 |
| Net investment income | 5.148 | 6.17 | 6.11 | 5.978 |
| Portfolio turnover (%) | 42 | 48 | 68 | 49 |
1 Six months ended 1-31-13. Unaudited.
2 Period from 11-2-09 (commencement of operations) to 7-31-10.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Does not reflect the effect of sales charges, if any.
6 Not annualized.
7 Less than $500,000.
8 Annualized.
See notes to financial statements
| 24 |
Global High Yield Fund
Financial Highlights (For a share outstanding throughout the period)
| Class I Shares | ||||
| Period ended | ||||
| 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | |
| Per share operating performance | ||||
| Net asset value, beginning of period | $10.47 | $10.67 | $10.47 | $10.00 |
| Net investment income3 | 0.29 | 0.66 | 0.68 | 0.47 |
| Net realized and unrealized gain on | ||||
| investments | 0.29 | 0.03 | 0.42 | 0.49 |
| Total from investment operations | 0.58 | 0.69 | 1.10 | 0.96 |
| Less distributions | ||||
| From net investment income | (0.32) | (0.75) | (0.71) | (0.49) |
| From net realized gain | (0.12) | (0.14) | (0.19) | — |
| Total distributions | (0.44) | (0.89) | (0.90) | (0.49) |
| Net asset value, end of period | $10.61 | $10.47 | $10.67 | $10.47 |
| Total return (%)4 | 5.535 | 7.05 | 11.00 | 9.895 |
| Ratios and supplemental data | ||||
| Net assets, end of period (in millions) | — 6 | — 6 | — 6 | — 6 |
| Ratios (as a percentage of average net | ||||
| assets): | ||||
| Expenses before reductions and amounts | ||||
| recaptured | 0.997 | 1.01 | 0.97 | 1.357 |
| Expenses including reductions and amounts | ||||
| recaptured | 0.997 | 1.00 | 1.00 | 1.007 |
| Net investment income | 5.447 | 6.47 | 6.41 | 6.257 |
| Portfolio turnover (%) | 42 | 48 | 68 | 49 |
1 Six months ended 1-31-13. Unaudited.
2 Period from 11-2-09 (commencement of operations) to 7-31-10.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
See notes to financial statements
| 25 |
Global High Yield Fund
Financial Highlights (For a share outstanding throughout the period)
| Class NAV Shares | ||||
| Period ended | ||||
| 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | |
| Per share operating performance | ||||
| Net asset value, beginning of period | $10.47 | $10.67 | $10.47 | $10.00 |
| Net investment income3 | 0.30 | 0.67 | 0.69 | 0.49 |
| Net realized and unrealized gain on | ||||
| investments | 0.28 | 0.03 | 0.42 | 0.48 |
| Total from investment operations | 0.58 | 0.70 | 1.11 | 0.97 |
| Less distributions | ||||
| From net investment income | (0.32) | (0.76) | (0.72) | (0.50) |
| From net realized gain | (0.12) | (0.14) | (0.19) | — |
| Total distributions | (0.44) | (0.90) | (0.91) | (0.50) |
| Net asset value, end of period | $10.61 | $10.47 | $10.67 | $10.47 |
| Total return (%)4 | 5.585 | 7.15 | 11.09 | 9.965 |
| Ratios and supplemental data | ||||
| Net assets, end of period (in millions) | $515 | $469 | $377 | $273 |
| Ratios (as a percentage of average net | ||||
| assets): | ||||
| Expenses before reductions and amounts | ||||
| recaptured | 0.906 | 0.90 | 0.93 | 0.946 |
| Expenses including reductions and amounts | ||||
| recaptured | 0.896 | 0.90 | 0.92 | 0.946 |
| Net investment income | 5.536 | 6.55 | 6.50 | 6.516 |
| Portfolio turnover (%) | 42 | 48 | 68 | 49 |
1 Six months ended 1-31-13. Unaudited.
2 Period from 11-2-09 (commencement of operations) to 7-31-10.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
See notes to financial statements
| 26 |
Global High Yield Fund
Notes to financial statements (unaudited)
Note 1 — Organization
John Hancock Global High Yield Fund (the Fund) is a series of John Hancock Fund II (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 total return, which consists of income on its investments 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 shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class NAV shares are offered to John Hancock affiliated funds of funds and 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Investments by the Funds in open-end mutual funds are valued at their respective net asset values each business day. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, taking 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. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities and forward foreign currency contracts traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of foreign securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value foreign securities in order to adjust for events that may occur between the close of foreign exchanges 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
| 27 |
credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| Level 2 | Level 3 | |||
| Total Market | Level 1 | Significant | Significant | |
| Value at | Quoted | Observable | Unobservable | |
| 1-31-13 | Price | Inputs | Inputs | |
| Corporate Bonds | $306,481,632 | — | $306,481,632 | — |
| Foreign Government Obligations | 169,313,985 | — | 169,313,985 | — |
| Capital Preferred Securities | 327,825 | — | 327,825 | — |
| Convertible Bonds | 2,231,316 | — | 2,231,316 | — |
| Structured Notes | 6,800,849 | — | 5,078,775 | $1,722,074 |
| Term Loans | 5,184,620 | — | 4,595,039 | 589,581 |
| Preferred Securities | 243,874 | $125,639 | 118,235 | — |
| Common Stocks | 8 | — | — | 8 |
| Short-Term Investments | 25,237,580 | 25,237,580 | — | — |
| Total Investments in Securities | $515,821,689 | $25,363,219 | $488,146,807 | $2,311,663 |
| Other Financial Instruments: | ||||
| Foreign Forward Currency Contracts | ($77,325) | — | ($77,325) | — |
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the Fund becomes aware of the dividends. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Foreign currency translation. Assets, including investments and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments.
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.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses.
| 28 |
The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $670. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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 July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are paid 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 and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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, amortization and accretion on debt securities and wash sale loss deferrals.
New accounting pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. ASU 2011-11 may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments.
| 29 |
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral, the risk that currency movements will not occur thereby reducing the Fund’s total return, and the potential for losses in excess of the amounts recognized on the Statement of assets and liabilities.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. Realized gains or losses, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, are recorded upon delivery or receipt of the currency or settlement with the counterparty.
During the six months ended January 31, 2013, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates and for exposure to foreign currency. During the six months ended January 31, 2013, the Fund held forward foreign currency contracts with USD notional values ranging from $18.6 million to $39.9 million as measured at each quarter end. The following table summarizes the contracts held at January 31, 2013.
| Principal | ||||||
| Amount | Principal Amount | Unrealized | ||||
| Covered by | Covered by | Settlement | Appreciation | |||
| Currency | Contract | Contract (USD) | Counterparty | Date | (Depreciation) | |
| Buys | ||||||
| BRL | 4,322,126 | $2,110,949 | Citibank N.A. | 3/4/2013 | $53,198 | |
| BRL | 4,322,126 | 2,059,237 | Citibank N.A. | 2/4/2013 | 111,213 | |
| COP | 1,352,789,096 | 758,077 | Citibank N.A. | 2/28/2013 | 2,504 | |
| EUR | 15,291 | 20,757 | Citibank N.A. | 3/15/2013 | 10 | |
| MXN | 16,100,733 | 1,254,000 | Citibank N.A. | 5/6/2013 | 1,075 | |
| NGN | 201,699,500 | 1,262,000 | Citibank N.A. | 4/17/2013 | (7,681) | |
| RON | 1,799,427 | 521,951 | Citibank N.A. | 3/18/2013 | 32,435 | |
| RUB | 63,661,185 | 2,081,043 | Citibank N.A. | 4/24/2013 | 13,372 | |
| RUB | 44,756,825 | 1,437,324 | Citibank N.A. | 3/18/2013 | 44,062 | |
| RUB | 63,661,185 | 2,005,487 | Citibank N.A. | 2/1/2013 | 115,704 | |
| $13,510,825 | $365,892 | |||||
| Sells | ||||||
| BRL | 2,577,438 | $1,265,000 | Citibank N.A. | 3/4/2013 | ($25,558) | |
| BRL | 4,322,126 | 2,117,651 | Citibank N.A. | 2/4/2013 | (52,799) | |
| COP | 2,221,776,000 | 1,251,000 | Citibank N.A. | 2/19/2013 | 999 | |
| EUR | 13,152,300 | 17,510,710 | Citibank N.A. | 3/15/2013 | (351,331) | |
| GBP | 995,300 | 1,581,611 | Citibank N.A. | 3/15/2013 | 3,416 | |
| RON | 1,799,427 | 551,042 | Citibank N.A. | 3/18/2013 | (3,344) | |
| 30 |
| Principal | ||||||
| Amount | Principal Amount | Unrealized | ||||
| Covered by | Covered by | Settlement | Appreciation | |||
| Currency | Contract | Contract (USD) | Counterparty | Date | (Depreciation) | |
| Sells (continued) | ||||||
| RUB | 63,661,185 | $2,106,591 | Citibank N.A. | 2/1/2013 | ($14,600) | |
| $26,383,605 | ($443,217) | |||||
| Currency Abbreviation | |||||
| BRL | Brazilian Real | MXN | Mexican Peso | ||
| COP | Colombian Peso | NGN | Nigerian Naira | ||
| EUR | Euro | RON | New Romanian Leu | ||
| GBP | Pound Sterling | RUB | New Russian Ruble | ||
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at January 31, 2013, by risk category:
| Assets | Liabilities | ||||
| Statement of Assets and | Financial Instruments | Derivatives | Derivatives | ||
| Risk | Liabilities Location | Location | Fair Value | Fair Value | |
| Foreign | Receivable/Payable for | ||||
| exchange | forward foreign currency | Forward foreign | |||
| contracts | exchange contracts | currency contracts | $377,988 | ($455,313) | |
| Total | $377,988 | ($455,313) | |||
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 January 31, 2013:
| Statement of Operations location – Net Realized Gain (Loss) on: | |
| Foreign currency | |
| Risk | transactions* |
| Foreign currency contracts | ($1,063,329) |
*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 January 31, 2013:
| Statement of Operations location – Change in Unrealized Appreciation (Depreciation) of: | |
| Translation of assets | |
| and liabilities in | |
| Risk | foreign currencies* |
| Foreign currency contracts | $31,958 |
*Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in this caption on the Statement of Operations.
| 31 |
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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.825% of the first $250,000,000 of the Fund’s average daily net assets, b) 0.790% of the next $500,000,000 of the Fund’s average daily net assets and c) 0.770% of the Fund’s average daily net assets in excess of $750,000,000. The Adviser has a subadvisory agreement with Stone Harbor Investment Partners LP. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive a portion of its management fee for certain funds (the Participating Portfolios) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the funds and with the approval of the Board of Trustees.
Effective December 1, 2012, the Adviser has voluntary agreed to waive fees and/or reimburse operating expenses for Class A and Class I 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. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.30% and 1.10% for Class A and Class I shares, respectively. Prior to December 1, 2012, the fee waivers and/or reimbursements for Class A and Class I shares were contractual.
Additionally, the Adviser has voluntarily agreed to waive and/or reimburse other expenses of the Fund, excluding advisory fees, Rule 12b-1 fees, service fees, transfer agent fees, state registration fees, taxes, brokerage commissions, interest expense, printing and postage, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. The waivers are such that these expenses will not exceed 0.15% of average net assets. This voluntary expense reimbursement may be terminated at any time by the Adviser on notice to the Fund.
Accordingly, these expense reductions amounted to $12 and $8,055 Class A and Class NAV shares, respectively, for the six months ended January 31, 2013.
The investment management fees incurred for the six months ended January 31, 2013 were equivalent to a net annual effective rate of 0.81% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. The table below outlines the amounts recovered during the six months ended January 31, 2013, and the amount of waived or reimbursed expenses subject to
| 32 |
potential recovery and the respective expiration dates. Certain reimbursements or waivers are not subject to recapture.
| Amounts Eligible | Amounts Eligible | Amounts Eligible | Amounts Eligible | Amount |
| for recovery | for recovery | for recovery | for recovery | recovered during |
| through | through | through | through | the period ended |
| July 1, 2013 | July 1, 2014 | July 1, 2015 | January 1, 2016 | January 31,2013 |
| $8 | $24 | $26 | $11 | - |
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor. The Fund did not incur Class A shares assessed up-front sales charges at six months period ended January 31, 2013.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 in connection with the sale of these shares. During the six months ended January 31, 2013, CDSCs received by the Distributor for Class A shares, were none.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
| 33 |
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| Distribution and | ||||
| Class | service fees | Transfer agent fees | ||
| A | $40 | $26 | ||
| I | - | $13 | ||
| Total | $40 | $39 | ||
The Fund did not incur printing and postage and state registration fees for the six months ended January 31, 2013.
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
Note 6 — Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the year ended July 31, 2012 were as follows:
| Six months ended | Year ended | |||
| 1/31/13 | 7/31/12 | |||
| Shares | Amount | Shares | Amount | |
| Class NAV shares | ||||
| Sold | 3,517,206 | $37,452,170 | 8,422,198 | $86,135,065 |
| Distributions reinvested | 1,905,981 | 20,265,786 | 3,466,414 | 35,184,198 |
| Repurchased | (1,659,752) | (17,798,085) | (2,441,511) | (25,196,184) |
| Net increase | 3,763,435 | $39,919,871 | 9,447,101 | $96,123,079 |
There were no fund share transactions for Class A and Class I for six months ended January 31, 2013 and for the year ended July 31, 2012.
Affiliates of the Fund owned 100% of shares of beneficial interest of Class A, Class I and Class NAV, respectively, on January 31, 2013.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $226,635,965 and $196,237,861, respectively, for the six months ended January 31, 2013.
Note 8 — Investment by affiliated funds
Certain investors in the Fund are affiliated funds and are managed by the Adviser 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. For the six months ended January 31, 2013, the following funds had an affiliate ownership of 5% or more of the Fund’s net assets:
| Affiliated | |||
| Fund | Concentration | ||
| John Hancock Alternative Asset Allocation Portfolio | 8.2% | ||
| John Hancock Lifestyle Growth Portfolio | 18.7% | ||
| John Hancock Lifestyle Balanced Portfolio | 32.9% | ||
| John Hancock Lifestyle Moderate Portfolio | 14.2% | ||
| John Hancock Lifestyle Conservative Portfolio | 13.6% |
| 34 |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Global High Yield Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| 35 |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management Services, LLC |
| Steven R. Pruchansky, Vice Chairperson | |
| Charles L. Bardelis* | Investment subadviser |
| James R. Boyle† | Stone Harbor Investment Partners LP |
| Craig Bromley† | |
| Peter S. Burgess* | Principal distributor |
| William H. Cunningham | John Hancock Funds, LLC |
| Grace K. Fey | |
| Theron S. Hoffman* | Custodian |
| Deborah C. Jackson | State Street Bank and Trust Company |
| Hassell H. McClellan | |
| Gregory A. Russo | Transfer agent |
| Warren A. Thomson† | John Hancock Signature Services, Inc. |
| Officers | Legal counsel |
| Hugh McHaffie | K&L Gates LLP |
| President | |
| Andew G. Arnot | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer | |
| *Member of the Audit Committee | |
| †Non-Independent Trustee | |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record, if any, for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 36 |
| John Hancock Multi Sector Bond Fund | |
| Table of Contents | |
| Your expenses | Page 3 |
| Portfolio summary | Page 4 |
| Fund's investments | Page 5 |
| Financial statements | Page 30 |
| Financial highlights | Page 33 |
| Notes to financial statements | Page 36 |
| Special Shareholder Meeting | Page 50 |
| More information | Page 51 |
| 2 |
| Your expenses These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds. Understanding fund expenses As a shareholder of the Fund, you incur two types of costs: • Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc. • Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses. We are going to present only your ongoing operating expenses here. Actual expenses/actual returns This example is intended to provide information about your Fund’s actual ongoing operating expenses, and is based on your Fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. |
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,036.30 | $6.36 |
| Class I | 1,000.00 | 1,038.00 | 4.31 |
| Class NAV | 1,000.00 | 1,038.70 | 3.80 |
| 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 January 31, 2013, 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: |
| Example [ My account value $8,600.00 / $1,000.00 = 8.6 ] x $[ “expenses paid” from table ] = My actual expenses Hypothetical example for comparison purposes This table allows you to compare your 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 August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. |
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,019.00 | $6.31 |
| Class I | 1,000.00 | 1,021.00 | 4.28 |
| Class NAV | 1,000.00 | 1,021.50 | 3.77 |
| Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs. 1 Expenses are equal to the Fund's annualized expense ratio of 1.24%, 0.84% and 0.74% for Class A, Class I and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
| 3 |
| Multi Sector Bond Fund As of 1-31-13 (Unaudited) |
| Portfolio Summary | ||
| Value as a | ||
| percentage of | ||
| Fund's net | ||
| Portfolio Composition1 | assets | |
| Corporate Bonds | 44.7% | |
| Term Loans | 19.7% | |
| Collateralized Mortgage Obligations | 18.0% | |
| Foreign Government Obligations | 5.9% | |
| U.S. Government Agency | 3.5% | |
| Asset Backed Securities | 3.2% | |
| Convertible Bonds | 1.3% | |
| Structured Notes | 0.6% | |
| Preferred Securities | 0.2% | |
| Short-Term Investments & Other | 2.9% | |
| Value as a | ||
| percentage of | ||
| Fund's net | ||
| Quality Composition2 | assets | |
| U.S. Government Agency | 3.5% | |
| AAA | 4.2% | |
| AA | 0.3% | |
| A | 14.8% | |
| BBB | 28.6% | |
| BB | 13.6% | |
| B | 17.8% | |
| CCC & Below | 5.4% | |
| Not Rated | 8.7% | |
| Equity | 0.2% | |
| Short-Term Investments & Other | 2.9% | |
| 1 Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if the creditor is unable or unwilling to make principal or interest payments. Investments in higher-yielding, lower-rated securities involve additional risks as these securities include a higher risk of default and loss of principal. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Currency transactions are impacted by fluctuations in exchange rates, which may adversely affect the U.S. dollar value of a fund’s investments. The use of hedging and derivatives transactions could produce disproportionate gains or losses and may increase volatility and costs. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness. If the fund invests in illiquid securities, it may be difficult to sell them at a price approximating their value. Loan participations and assignments involve special types of risks, including credit risk, interest-rate risk, counterparty risk, liquidity risk and the risks of being a lender. Investments concentrated in one sector may fluctuate more widely than investments diversified across sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus. |
| 2 Ratings are from Moody’s Investors Service. If not available, we have used ratings from Standard & Poor’s Ratings Services. In the absence of ratings from these agencies, we have used Fitch ratings. “Not Rated” securities are those with no ratings available from these agencies. All ratings are as of 1-31-13 and do not reflect subsequent downgrades or upgrades, if any. |
| 4 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Corporate Bonds 44.7% | $488,000,271 | |||
| (Cost $467,820,233) | ||||
| Consumer Discretionary 7.9% | 86,524,844 | |||
| Auto Components 0.1% | ||||
| Allison Transmission, Inc. (S) | 7.125 | 05/15/19 | 500,000 | 542,500 |
| The Goodyear Tire & Rubber Company | 7.000 | 05/15/22 | 375,000 | 402,188 |
| Automobiles 0.5% | ||||
| Chrysler Group LLC | 8.000 | 06/15/19 | 465,000 | 509,175 |
| Ford Motor Credit Company LLC | 5.000 | 05/15/18 | 3,175,000 | 3,480,854 |
| Ford Motor Credit Company LLC | 8.125 | 01/15/20 | 1,200,000 | 1,511,380 |
| Beverages 0.2% | ||||
| Anheuser-Busch InBev Worldwide, Inc. | 2.500 | 07/15/22 | 2,350,000 | 2,302,751 |
| Diversified Consumer Services 0.1% | ||||
| SSI Investments II, Ltd. | 11.125 | 06/01/18 | 425,000 | 476,000 |
| The ServiceMaster Company | 7.450 | 08/15/27 | 250,000 | 207,500 |
| The ServiceMaster Company | 8.000 | 02/15/20 | 324,000 | 343,440 |
| Health Care Equipment & Supplies 0.1% | ||||
| Biomet, Inc. (S) | 6.500 | 08/01/20 | 685,000 | 719,250 |
| Hotels, Restaurants & Leisure 0.7% | ||||
| Boyd Gaming Corp. | 9.125 | 12/01/18 | 745,000 | 774,800 |
| Caesars Entertainment Operating Company, Inc. | 11.250 | 06/01/17 | 350,000 | 374,500 |
| Cap Cana SA (H) | 10.000 | 04/30/16 | 575,719 | 84,918 |
| Isle of Capri Casinos, Inc. | 7.750 | 03/15/19 | 347,000 | 374,760 |
| Isle of Capri Casinos, Inc. | 8.875 | 06/15/20 | 310,000 | 338,675 |
| Landry's, Inc. (S) | 9.375 | 05/01/20 | 585,000 | 631,800 |
| Marriott International, Inc. | 3.000 | 03/01/19 | 3,250,000 | 3,374,955 |
| MGM Resorts International | 6.875 | 04/01/16 | 425,000 | 454,750 |
| MGM Resorts International | 7.500 | 06/01/16 | 260,000 | 284,700 |
| MGM Resorts International | 8.625 | 02/01/19 | 305,000 | 347,700 |
| Pinnacle Entertainment, Inc. | 8.750 | 05/15/20 | 625,000 | 678,125 |
| Household Durables 0.1% | ||||
| American Standard Americas (S) | 10.750 | 01/15/16 | 260,000 | 261,950 |
| Lennar Corp. (S) | 4.750 | 11/15/22 | 440,000 | 431,200 |
| Norcraft Companies LP | 10.500 | 12/15/15 | 465,000 | 481,275 |
| Internet & Catalog Retail 0.0% | ||||
| Netflix, Inc. (S) | 5.375 | 02/01/21 | 325,000 | 328,250 |
| Media 4.6% | ||||
| Allbritton Communications Company | 8.000 | 05/15/18 | 480,000 | 519,600 |
| AMC Networks, Inc. | 7.750 | 07/15/21 | 375,000 | 428,438 |
| British Sky Broadcasting Group PLC (S) | 3.125 | 11/26/22 | 2,475,000 | 2,426,057 |
| Cablevision Systems Corp. | 7.750 | 04/15/18 | 615,000 | 690,338 |
| CBS Corp. | 4.850 | 07/01/42 | 3,375,000 | 3,343,511 |
| CCO Holdings LLC | 5.125 | 02/15/23 | 200,000 | 197,000 |
| CCO Holdings LLC | 6.625 | 01/31/22 | 645,000 | 703,050 |
| Comcast Corp. | 4.250 | 01/15/33 | 6,400,000 | 6,240,038 |
| DIRECTV Holdings LLC | 5.150 | 03/15/42 | 4,525,000 | 4,353,236 |
| Discovery Communications LLC | 3.300 | 05/15/22 | 3,250,000 | 3,254,280 |
| DISH DBS Corp. (S) | 5.000 | 03/15/23 | 1,560,000 | 1,540,500 |
| DISH DBS Corp. | 5.875 | 07/15/22 | 340,000 | 361,250 |
| 5 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Consumer Discretionary (continued) | ||||
| Entravision Communications Corp. | 8.750 | 08/01/17 | 695,000 | $755,813 |
| Globo Comunicacao e Participacoes SA (P)(Q) | 6.250 | 07/20/15 | 100,000 | 108,750 |
| Gray Television, Inc. | 7.500 | 10/01/20 | 550,000 | 572,000 |
| Local TV Finance LLC (S) | 9.250 | 06/15/15 | 375,000 | 377,813 |
| Mediacom LLC | 7.250 | 02/15/22 | 570,000 | 621,300 |
| Nara Cable Funding, Ltd. (S) | 8.875 | 12/01/18 | 870,000 | 887,400 |
| NBCUniversal Media LLC | 5.150 | 04/30/20 | 2,800,000 | 3,261,465 |
| News America, Inc. | 6.650 | 11/15/37 | 2,725,000 | 3,422,990 |
| Nexstar Broadcasting, Inc. (S) | 6.875 | 11/15/20 | 470,000 | 489,975 |
| Nielsen Finance LLC (S) | 4.500 | 10/01/20 | 284,000 | 279,740 |
| Omnicom Group, Inc. | 4.450 | 08/15/20 | 2,950,000 | 3,216,981 |
| Pearson Funding Four PLC (S) | 3.750 | 05/08/22 | 1,675,000 | 1,728,283 |
| Quebecor Media, Inc. (S) | 5.750 | 01/15/23 | 555,000 | 581,363 |
| Radio One, Inc., PIK | 12.500 | 05/24/16 | 740,496 | 716,430 |
| Regal Entertainment Group | 9.125 | 08/15/18 | 725,000 | 810,188 |
| Sinclair Television Group, Inc. (S) | 6.125 | 10/01/22 | 220,000 | 234,850 |
| The Interpublic Group of Companies, Inc. | 4.000 | 03/15/22 | 3,250,000 | 3,288,805 |
| Time Warner, Inc. | 7.700 | 05/01/32 | 2,425,000 | 3,335,546 |
| Unitymedia GmbH (EUR) (D) | 9.500 | 03/15/21 | 300,000 | 465,936 |
| Univision Communications, Inc. (S) | 7.875 | 11/01/20 | 445,000 | 481,713 |
| Univision Communications, Inc. (S) | 8.500 | 05/15/21 | 575,000 | 612,375 |
| Virgin Media Finance PLC | 4.875 | 02/15/22 | 200,000 | 199,500 |
| Multiline Retail 0.9% | ||||
| Macy's Retail Holdings, Inc. | 2.875 | 02/15/23 | 1,575,000 | 1,491,969 |
| Macy's Retail Holdings, Inc. | 5.900 | 12/01/16 | 1,138,000 | 1,328,658 |
| Macy's Retail Holdings, Inc. | 6.900 | 04/01/29 | 175,000 | 210,235 |
| Nordstrom, Inc. | 7.000 | 01/15/38 | 2,300,000 | 3,182,584 |
| Target Corp. | 4.000 | 07/01/42 | 3,350,000 | 3,304,239 |
| Specialty Retail 0.5% | ||||
| Armored Autogroup, Inc. | 9.250 | 11/01/18 | 135,000 | 118,800 |
| AutoZone, Inc. | 2.875 | 01/15/23 | 3,525,000 | 3,374,549 |
| Baker & Taylor Acquisitions Corp. (S) | 15.000 | 04/01/17 | 325,000 | 247,000 |
| Claire's Stores, Inc. | 8.875 | 03/15/19 | 525,000 | 514,500 |
| Express LLC | 8.750 | 03/01/18 | 490,000 | 531,650 |
| Limited Brands, Inc. | 6.950 | 03/01/33 | 125,000 | 128,750 |
| Petco Holdings Inc., PIK (S) | 8.500 | 10/15/17 | 275,000 | 283,250 |
| RadioShack Corp. | 6.750 | 05/15/19 | 250,000 | 168,750 |
| Textiles, Apparel & Luxury Goods 0.1% | ||||
| Levi Strauss & Company | 6.875 | 05/01/22 | 500,000 | 543,750 |
| PVH Corp. | 4.500 | 12/15/22 | 225,000 | 223,875 |
| Quiksilver, Inc. | 6.875 | 04/15/15 | 650,000 | 648,375 |
| Consumer Staples 3.2% | 34,734,765 | |||
| Beverages 0.5% | ||||
| Diageo Investment Corp. | 2.875 | 05/11/22 | 1,575,000 | 1,581,598 |
| SABMiller Holdings, Inc. (S) | 3.750 | 01/15/22 | 3,100,000 | 3,292,932 |
| Food & Staples Retailing 0.4% | ||||
| Cencosud SA (S) | 5.500 | 01/20/21 | 150,000 | 162,514 |
| CVS Caremark Corp. | 4.125 | 05/15/21 | 3,250,000 | 3,583,011 |
| New Albertsons, Inc. | 8.000 | 05/01/31 | 1,350,000 | 938,250 |
| Food Products 0.8% | ||||
| Boparan Finance PLC (EUR) (D) | 9.750 | 04/30/18 | 225,000 | 340,180 |
| 6 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Consumer Staples (continued) | ||||
| Brickman Group Holdings, Inc. (S) | 9.125 | 11/01/18 | 450,000 | $479,250 |
| Campofrio Food Group SA (EUR) (D) | 8.250 | 10/31/16 | 150,000 | 213,854 |
| Chiquita Brands International, Inc. (S) | 7.875 | 02/01/21 | 425,000 | 427,656 |
| ConAgra Foods, Inc. | 4.650 | 01/25/43 | 3,225,000 | 3,230,108 |
| Corporacion Azucarera del Peru SA (S) | 6.375 | 08/02/22 | 100,000 | 107,500 |
| Dean Foods Company | 9.750 | 12/15/18 | 635,000 | 722,313 |
| Del Monte Corp. | 7.625 | 02/15/19 | 745,000 | 776,663 |
| Grupo Bimbo SAB de CV (S) | 4.875 | 06/30/20 | 100,000 | 112,058 |
| IOI Investment L BHD | 4.375 | 06/27/22 | 200,000 | 208,246 |
| Pilgrim's Pride Corp. | 7.875 | 12/15/18 | 495,000 | 511,706 |
| Post Holdings, Inc. | 7.375 | 02/15/22 | 700,000 | 777,000 |
| Shearer's Foods LLC (S) | 9.000 | 11/01/19 | 385,000 | 412,913 |
| Smithfield Foods, Inc. | 6.625 | 08/15/22 | 520,000 | 572,000 |
| Household Products 0.2% | ||||
| NBTY, Inc. | 9.000 | 10/01/18 | 325,000 | 369,688 |
| Reynolds Group Issuer, Inc. | 9.875 | 08/15/19 | 635,000 | 693,738 |
| Spectrum Brands Escrow Corp. (S) | 6.375 | 11/15/20 | 440,000 | 468,050 |
| Personal Products 0.1% | ||||
| Albea Beauty Holdings SA (EUR) (D)(S) | 8.750 | 11/01/19 | 575,000 | 808,217 |
| Elizabeth Arden, Inc. | 7.375 | 03/15/21 | 475,000 | 528,438 |
| Hypermarcas SA (S) | 6.500 | 04/20/21 | 179,000 | 192,425 |
| Tobacco 1.2% | ||||
| Altria Group, Inc. | 2.850 | 08/09/22 | 3,450,000 | 3,337,037 |
| Lorillard Tobacco Company | 8.125 | 06/23/19 | 2,400,000 | 3,059,746 |
| Philip Morris International, Inc. | 1.125 | 08/21/17 | 3,400,000 | 3,379,634 |
| Reynolds American, Inc. | 1.050 | 10/30/15 | 3,450,000 | 3,448,040 |
| Energy 5.8% | 62,985,427 | |||
| Energy Equipment & Services 1.4% | ||||
| Basic Energy Services, Inc. | 7.750 | 02/15/19 | 475,000 | 472,625 |
| Basic Energy Services, Inc. | 7.750 | 10/15/22 | 400,000 | 393,000 |
| Gulfmark Offshore, Inc. (S) | 6.375 | 03/15/22 | 794,000 | 819,805 |
| Hercules Offshore, Inc. (S) | 10.500 | 10/15/17 | 666,000 | 722,610 |
| National Oilwell Varco, Inc. | 2.600 | 12/01/22 | 3,225,000 | 3,201,935 |
| Noble Holding International, Ltd. | 3.950 | 03/15/22 | 3,100,000 | 3,199,863 |
| Offshore Group Investments, Ltd. | 11.500 | 08/01/15 | 860,000 | 933,100 |
| Parker Drilling Company | 9.125 | 04/01/18 | 550,000 | 594,000 |
| SESI LLC | 6.375 | 05/01/19 | 409,000 | 437,630 |
| SESI LLC | 7.125 | 12/15/21 | 320,000 | 356,000 |
| Trinidad Drilling, Ltd. (S) | 7.875 | 01/15/19 | 750,000 | 798,750 |
| Weatherford International, Ltd. | 7.000 | 03/15/38 | 2,955,000 | 3,323,146 |
| Oil, Gas & Consumable Fuels 4.4% | ||||
| Access Midstream Partners LP | 4.875 | 05/15/23 | 420,000 | 417,900 |
| Anadarko Petroleum Corp. | 6.375 | 09/15/17 | 2,950,000 | 3,495,564 |
| Apache Corp. | 2.625 | 01/15/23 | 3,375,000 | 3,263,028 |
| Arch Coal, Inc. | 7.250 | 06/15/21 | 370,000 | 331,150 |
| Atlas Pipeline Partners LP (S) | 6.625 | 10/01/20 | 450,000 | 472,500 |
| Calumet Specialty Products Partners LP | 9.375 | 05/01/19 | 205,000 | 225,244 |
| Calumet Specialty Products Partners LP (S) | 9.625 | 08/01/20 | 190,000 | 212,325 |
| Cloud Peak Energy Resources LLC | 8.500 | 12/15/19 | 505,000 | 549,188 |
| CONSOL Energy, Inc. | 8.250 | 04/01/20 | 575,000 | 622,438 |
| Copano Energy LLC | 7.125 | 04/01/21 | 500,000 | 573,750 |
| Ecopetrol SA | 7.625 | 07/23/19 | 25,000 | 31,875 |
| 7 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Energy (continued) | ||||
| El Paso Pipeline Partners Operating Company LLC | 4.700 | 11/01/42 | 1,350,000 | $1,285,560 |
| Encana Corp. | 6.625 | 08/15/37 | 3,175,000 | 3,843,198 |
| Enterprise Products Operating LLC | 1.250 | 08/13/15 | 750,000 | 755,819 |
| EP Energy LLC | 6.875 | 05/01/19 | 385,000 | 416,763 |
| EP Energy LLC | 9.375 | 05/01/20 | 365,000 | 408,800 |
| Forest Oil Corp. | 7.250 | 06/15/19 | 825,000 | 827,063 |
| Gazprom OAO (S) | 4.950 | 02/06/28 | 214,000 | 213,279 |
| Intergas Finance BV | 6.375 | 05/14/17 | 269,000 | 303,970 |
| KazMunayGas National Company | 6.375 | 04/09/21 | 350,000 | 416,500 |
| KazMunayGas National Company (S) | 6.375 | 04/09/21 | 200,000 | 238,000 |
| KazMunayGas National Company (S) | 9.125 | 07/02/18 | 113,000 | 145,940 |
| KazMunayGas National Company | 11.750 | 01/23/15 | 329,000 | 385,753 |
| Kodiak Oil & Gas Corp. | 8.125 | 12/01/19 | 360,000 | 401,400 |
| Laredo Petroleum, Inc. | 7.375 | 05/01/22 | 295,000 | 319,338 |
| Linn Energy LLC | 7.750 | 02/01/21 | 900,000 | 963,000 |
| MarkWest Energy Partners LP | 6.250 | 06/15/22 | 89,000 | 96,565 |
| MEG Energy Corp. (S) | 6.375 | 01/30/23 | 660,000 | 688,050 |
| Midstates Petroleum Company, Inc. (S) | 10.750 | 10/01/20 | 335,000 | 365,150 |
| Novatek Finance, Ltd. (S) | 6.604 | 02/03/21 | 218,000 | 254,253 |
| Oasis Petroleum, Inc. | 7.250 | 02/01/19 | 590,000 | 640,150 |
| Peabody Energy Corp. | 6.250 | 11/15/21 | 765,000 | 799,425 |
| Pemex Project Funding Master Trust | 6.625 | 06/15/35 | 596,000 | 719,670 |
| Pertamina Persero PT | 6.000 | 05/03/42 | 200,000 | 216,000 |
| Petrobras International Finance Company | 2.875 | 02/06/15 | 42,000 | 42,864 |
| Petroleos de Venezuela SA | 4.900 | 10/28/14 | 2,238,498 | 2,137,766 |
| Petroleos de Venezuela SA | 5.000 | 10/28/15 | 107,629 | 98,211 |
| Petroleos de Venezuela SA | 5.250 | 04/12/17 | 154,400 | 133,942 |
| Petroleos de Venezuela SA | 8.500 | 11/02/17 | 131,000 | 128,380 |
| Petroleos Mexicanos (MXN) (D)(S) | 7.650 | 11/24/21 | 5,250,000 | 444,416 |
| Petroliam Nasional BHD | 7.625 | 10/15/26 | 100,000 | 144,800 |
| Petronas Capital, Ltd. | 7.875 | 05/22/22 | 413,000 | 582,048 |
| Phillips 66 | 5.875 | 05/01/42 | 2,825,000 | 3,329,274 |
| Pioneer Natural Resources Company | 7.500 | 01/15/20 | 2,650,000 | 3,335,086 |
| Plains Exploration & Production Company | 6.500 | 11/15/20 | 375,000 | 414,844 |
| Plains Exploration & Production Company | 6.625 | 05/01/21 | 350,000 | 387,188 |
| QEP Resources, Inc. | 5.375 | 10/01/22 | 485,000 | 516,525 |
| Rosneft Oil Company (S) | 4.199 | 03/06/22 | 200,000 | 200,000 |
| Sabine Pass Liquefaction LLC (S) | 5.625 | 02/01/21 | 230,000 | 232,875 |
| Sabine Pass LNG LP | 7.500 | 11/30/16 | 450,000 | 499,500 |
| SandRidge Energy, Inc. | 8.750 | 01/15/20 | 850,000 | 922,250 |
| Sibur Securities, Ltd. (S) | 3.914 | 01/31/18 | 200,000 | 199,033 |
| Sinopec Group Overseas Development 2012, Ltd. | 3.900 | 05/17/22 | 200,000 | 211,110 |
| Sinopec Group Overseas Development 2012, Ltd. (S) | 4.875 | 05/17/42 | 200,000 | 219,391 |
| TransCanada Pipelines, Ltd. | 7.250 | 08/15/38 | 3,471,000 | 4,870,816 |
| Valero Energy Corp. | 6.625 | 06/15/37 | 2,750,000 | 3,253,473 |
| Venoco, Inc. | 8.875 | 02/15/19 | 325,000 | 316,063 |
| Zhaikmunai LP (S) | 7.125 | 11/13/19 | 200,000 | 214,500 |
| Financials 13.2% | 144,364,031 | |||
| Capital Markets 0.6% | ||||
| Alphabet Holding Company, Inc., PIK (S) | 7.750 | 11/01/17 | 255,000 | 263,925 |
| Morgan Stanley | 4.875 | 11/01/22 | 3,200,000 | 3,280,077 |
| The Goldman Sachs Group, Inc. | 5.250 | 07/27/21 | 3,100,000 | 3,501,521 |
| 8 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Financials (continued) | ||||
| Commercial Banks 3.8% | ||||
| Abbey National Treasury Services PLC | 4.000 | 04/27/16 | 4,825,000 | $5,132,237 |
| Banco de Credito del Peru (S) | 4.750 | 03/16/16 | 40,000 | 42,500 |
| Banco de Credito del Peru | 5.375 | 09/16/20 | 60,000 | 66,900 |
| Banco do Brasil SA (6.250% to 04/15/2024, then 10 Year | ||||
| U.S. Treasury + 4.398%) (Q)(S) | 6.250 | 04/15/24 | 200,000 | 198,500 |
| Bancolombia SA | 5.125 | 09/11/22 | 98,000 | 101,430 |
| Barclays Bank PLC | 5.140 | 10/14/20 | 3,425,000 | 3,560,767 |
| BBVA Banco Continental SA (S) | 5.000 | 08/26/22 | 50,000 | 53,750 |
| CIT Group, Inc. | 5.000 | 08/15/22 | 310,000 | 327,447 |
| CIT Group, Inc. | 5.250 | 03/15/18 | 520,000 | 556,400 |
| Fifth Third Bancorp | 3.625 | 01/25/16 | 3,200,000 | 3,411,965 |
| HSBC Holdings PLC | 6.500 | 09/15/37 | 3,750,000 | 4,677,199 |
| Intesa Sanpaolo SpA | 3.125 | 01/15/16 | 8,100,000 | 8,039,339 |
| LBG Capital No.1 PLC (EUR) (D) | 6.439 | 05/23/20 | 400,000 | 537,689 |
| PNC Bank NA | 4.875 | 09/21/17 | 2,700,000 | 3,075,905 |
| PNC Funding Corp. | 5.125 | 02/08/20 | 1,625,000 | 1,908,733 |
| Santander Holdings USA, Inc. | 3.000 | 09/24/15 | 2,925,000 | 2,995,302 |
| Societe Generale SA | 2.750 | 10/12/17 | 3,150,000 | 3,219,480 |
| Standard Chartered PLC (6.409% to 01/30/2017, then 3 | ||||
| month LIBOR + 1.510%) (Q)(S) | 6.409 | 01/30/17 | 3,500,000 | 3,544,121 |
| VTB Capital SA | 6.875 | 05/29/18 | 234,000 | 260,325 |
| Consumer Finance 1.0% | ||||
| Ally Financial, Inc. | 7.500 | 09/15/20 | 400,000 | 481,000 |
| Ally Financial, Inc. | 8.000 | 11/01/31 | 490,000 | 613,725 |
| Capital One Financial Corp. | 4.750 | 07/15/21 | 500,000 | 569,517 |
| Capital One Financial Corp. | 6.150 | 09/01/16 | 3,635,000 | 4,185,910 |
| Discover Financial Services (S) | 3.850 | 11/21/22 | 1,984,000 | 2,015,857 |
| SLM Corp. | 6.250 | 01/25/16 | 2,950,000 | 3,245,906 |
| Diversified Financial Services 3.7% | ||||
| Aviation Capital Group Corp. (S) | 6.750 | 04/06/21 | 2,925,000 | 3,176,755 |
| Bank of America Corp. | 5.750 | 12/01/17 | 2,450,000 | 2,828,670 |
| BM&FBovespa SA (S) | 5.500 | 07/16/20 | 150,000 | 170,250 |
| Citigroup, Inc. | 5.000 | 09/15/14 | 4,950,000 | 5,213,464 |
| Citigroup, Inc. | 5.500 | 02/15/17 | 1,950,000 | 2,169,568 |
| Citigroup, Inc. | 8.500 | 05/22/19 | 1,075,000 | 1,433,703 |
| Countrywide Financial Corp. | 6.250 | 05/15/16 | 1,325,000 | 1,467,410 |
| Dubai Holding Commercial Operations MTN, Ltd. (GBP) (D) | 6.000 | 02/01/17 | 100,000 | 158,600 |
| European Investment Bank (ZAR) (D)(Z) | Zero | 12/31/18 | 1,480,000 | 114,579 |
| European Investment Bank (RUB) (D) | 6.500 | 12/15/15 | 1,350,000 | 45,999 |
| General Electric Capital Corp. | 6.750 | 03/15/32 | 3,625,000 | 4,581,790 |
| Gruposura Finance (S) | 5.700 | 05/18/21 | 201,000 | 227,633 |
| Inter-American Development Bank (IDR) (D)(Z) | Zero | 08/20/15 | 7,970,000,000 | 712,953 |
| International Lease Finance Corp. (S) | 6.500 | 09/01/14 | 2,850,000 | 3,042,375 |
| International Lease Finance Corp. | 8.250 | 12/15/20 | 501,000 | 613,725 |
| JPMorgan Chase & Company | 6.125 | 06/27/17 | 2,900,000 | 3,372,764 |
| Merrill Lynch & Company, Inc. | 6.050 | 05/16/16 | 3,530,000 | 3,921,714 |
| ORIX Corp. | 5.000 | 01/12/16 | 2,625,000 | 2,836,410 |
| Pemex Finance, Ltd. | 9.150 | 11/15/18 | 255,000 | 317,074 |
| Provident Funding Associates LP (S) | 10.125 | 02/15/19 | 350,000 | 372,750 |
| Provident Funding Associates LP (S) | 10.250 | 04/15/17 | 200,000 | 223,500 |
| Rabobank NV | 3.950 | 11/09/22 | 2,775,000 | 2,776,429 |
| Sinochem Overseas Capital Company, Ltd. (S) | 4.500 | 11/12/20 | 279,000 | 296,204 |
| 9 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Financials (continued) | ||||
| Insurance 2.4% | ||||
| Aegon NV | 4.625 | 12/01/15 | 3,025,000 | $3,299,434 |
| AXA SA | 8.600 | 12/15/30 | 3,000,000 | 3,851,271 |
| Boardwalk Pipelines LP | 3.375 | 02/01/23 | 2,225,000 | 2,156,964 |
| Burlington Northern Santa Fe LLC | 4.400 | 03/15/42 | 3,200,000 | 3,215,459 |
| Fairfax Financial Holdings, Ltd. (S) | 5.800 | 05/15/21 | 3,075,000 | 3,239,180 |
| Fidelity National Financial, Inc. | 6.600 | 05/15/17 | 2,550,000 | 2,892,692 |
| Genworth Financial, Inc. | 7.625 | 09/24/21 | 3,270,000 | 3,920,913 |
| Hartford Financial Services Group, Inc. | 6.000 | 01/15/19 | 2,950,000 | 3,452,839 |
| Real Estate Investment Trusts 1.7% | ||||
| Boston Properties LP | 3.700 | 11/15/18 | 3,100,000 | 3,372,620 |
| DDR Corp. | 7.500 | 04/01/17 | 2,650,000 | 3,166,178 |
| Kimco Realty Corp. | 4.300 | 02/01/18 | 2,975,000 | 3,296,705 |
| Simon Property Group LP | 3.375 | 03/15/22 | 3,225,000 | 3,361,137 |
| WEA Finance LLC (S) | 6.750 | 09/02/19 | 3,950,000 | 4,872,653 |
| Real Estate Management & Development 0.0% | ||||
| BR Malls International Finance, Ltd. (Q) | 8.500 | 01/21/16 | 60,000 | 66,000 |
| BR Malls International Finance, Ltd. (Q)(S) | 8.500 | 01/21/16 | 50,000 | 55,000 |
| Country Garden Holdings Company, Ltd. (S) | 7.500 | 01/10/23 | 200,000 | 203,240 |
| Health Care 3.3% | 36,087,396 | |||
| Health Care Equipment & Supplies 0.2% | ||||
| ConvaTec Healthcare E SA (S) | 10.500 | 12/15/18 | 385,000 | 427,350 |
| Hologic, Inc. (S) | 6.250 | 08/01/20 | 450,000 | 483,750 |
| Kinetic Concepts, Inc. (S) | 10.500 | 11/01/18 | 465,000 | 497,550 |
| Kinetic Concepts, Inc. (S) | 12.500 | 11/01/19 | 265,000 | 255,063 |
| Surgical Care Affiliates, Inc., PIK (S) | 8.875 | 07/15/15 | 600,000 | 611,250 |
| Universal Hospital Services, Inc. | 7.625 | 08/15/20 | 455,000 | 487,988 |
| Health Care Providers & Services 1.6% | ||||
| Community Health Systems, Inc. | 8.000 | 11/15/19 | 445,000 | 488,388 |
| Emergency Medical Services Corp. | 8.125 | 06/01/19 | 575,000 | 629,625 |
| Fresenius Medical Care US Finance II, Inc. (S) | 5.875 | 01/31/22 | 550,000 | 600,875 |
| HCA Holdings, Inc. | 7.750 | 05/15/21 | 250,000 | 273,750 |
| HCA, Inc. | 7.500 | 02/15/22 | 650,000 | 750,750 |
| Health Management Associates, Inc. | 7.375 | 01/15/20 | 410,000 | 450,488 |
| HealthSouth Corp. | 8.125 | 02/15/20 | 375,000 | 411,563 |
| Humana, Inc. | 8.150 | 06/15/38 | 2,500,000 | 3,523,180 |
| IASIS Healthcare LLC | 8.375 | 05/15/19 | 685,000 | 695,275 |
| McKesson Corp. | 4.750 | 03/01/21 | 2,775,000 | 3,167,146 |
| Prospect Medical Holdings, Inc. (S) | 8.375 | 05/01/19 | 495,000 | 527,175 |
| Radiation Therapy Services, Inc. | 9.875 | 04/15/17 | 475,000 | 326,563 |
| United Surgical Partners International, Inc. | 9.000 | 04/01/20 | 555,000 | 622,988 |
| UnitedHealth Group, Inc. | 5.800 | 03/15/36 | 4,030,000 | 4,771,258 |
| Health Care Technology 0.3% | ||||
| Agilent Technologies, Inc. | 6.500 | 11/01/17 | 2,715,000 | 3,256,357 |
| Pharmaceuticals 1.2% | ||||
| AbbVie, Inc. (S) | 1.750 | 11/06/17 | 3,200,000 | 3,207,101 |
| Actavis, Inc. | 3.250 | 10/01/22 | 3,325,000 | 3,318,619 |
| Allergan, Inc. | 3.375 | 09/15/20 | 3,050,000 | 3,250,656 |
| Teva Pharmaceutical Finance IV BV | 3.650 | 11/10/21 | 2,900,000 | 3,052,688 |
| 10 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Industrials 2.3% | $25,365,566 | |||
| Aerospace & Defense 0.4% | ||||
| L-3 Communications Corp. | 4.750 | 07/15/20 | 3,125,000 | 3,436,375 |
| TransDigm, Inc. (S) | 5.500 | 10/15/20 | 375,000 | 390,938 |
| Triumph Group, Inc. | 8.625 | 07/15/18 | 325,000 | 359,125 |
| Air Freight & Logistics 0.0% | ||||
| Park-Ohio Industries, Inc. | 8.125 | 04/01/21 | 275,000 | 294,250 |
| Building Products 0.3% | ||||
| Cleaver-Brooks, Inc. (S) | 8.750 | 12/15/19 | 180,000 | 192,825 |
| Griffon Corp. | 7.125 | 04/01/18 | 700,000 | 757,750 |
| Nortek, Inc. | 8.500 | 04/15/21 | 155,000 | 175,538 |
| Owens Corning | 7.000 | 12/01/36 | 2,225,000 | 2,535,748 |
| Commercial Services & Supplies 0.4% | ||||
| Clean Harbors, Inc. | 5.250 | 08/01/20 | 160,000 | 167,200 |
| Mead Products LLC (S) | 6.750 | 04/30/20 | 475,000 | 504,688 |
| ServiceMaster Company (S) | 7.000 | 08/15/20 | 175,000 | 177,625 |
| TransUnion Holding Company, Inc. | 9.625 | 06/15/18 | 170,000 | 181,475 |
| Waste Management, Inc. | 6.100 | 03/15/18 | 2,350,000 | 2,809,413 |
| Construction & Engineering 0.0% | ||||
| Yuksel Insaat AS | 9.500 | 11/10/15 | 100,000 | 79,900 |
| Containers & Packaging 0.1% | ||||
| Ardagh Packaging Finance PLC (S) | 9.125 | 10/15/20 | 500,000 | 548,750 |
| Ardagh Packaging Finance PLC (EUR) (D) | 9.250 | 10/15/20 | 200,000 | 291,982 |
| Electrical Equipment 0.2% | ||||
| ABB Finance USA, Inc. | 2.875 | 05/08/22 | 2,500,000 | 2,504,385 |
| Industrial Conglomerates 0.0% | ||||
| Odebrecht Finance, Ltd. (S) | 5.125 | 06/26/22 | 200,000 | 215,500 |
| Machinery 0.1% | ||||
| RBS Global, Inc. | 8.500 | 05/01/18 | 425,000 | 465,375 |
| The Manitowoc Company, Inc. | 8.500 | 11/01/20 | 175,000 | 196,875 |
| Xerium Technologies, Inc. | 8.875 | 06/15/18 | 350,000 | 332,500 |
| Professional Services 0.1% | ||||
| TransUnion LLC | 11.375 | 06/15/18 | 450,000 | 520,313 |
| Road & Rail 0.6% | ||||
| Canadian National Railway Company | 2.850 | 12/15/21 | 4,850,000 | 4,986,814 |
| Penske Truck Leasing Company LP (S) | 4.250 | 01/17/23 | 1,775,000 | 1,770,259 |
| Trading Companies & Distributors 0.1% | ||||
| Aircastle, Ltd. | 6.750 | 04/15/17 | 500,000 | 550,000 |
| HD Supply, Inc. (S) | 7.500 | 07/15/20 | 600,000 | 593,250 |
| HD Supply, Inc. (S) | 10.500 | 01/15/21 | 105,000 | 107,363 |
| Transportation Infrastructure 0.0% | ||||
| CHC Helicopter SA | 9.250 | 10/15/20 | 205,000 | 219,350 |
| Information Technology 1.6% | 17,422,430 | |||
| Communications Equipment 0.3% | ||||
| Cisco Systems, Inc. | 5.500 | 01/15/40 | 2,600,000 | 3,170,892 |
| CommScope, Inc. (S) | 8.250 | 01/15/19 | 535,000 | 584,488 |
| Computers & Peripherals 0.1% | ||||
| NCR Corp. (S) | 5.000 | 07/15/22 | 510,000 | 516,375 |
| 11 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Information Technology (continued) | ||||
| NetApp, Inc. | 3.250 | 12/15/22 | 625,000 | $608,326 |
| Electronic Equipment, Instruments & Components 0.1% | ||||
| CPI International, Inc. | 8.000 | 02/15/18 | 490,000 | 490,000 |
| Internet Software & Services 0.1% | ||||
| CyrusOne LP (S) | 6.375 | 11/15/22 | 600,000 | 640,500 |
| IAC/InterActiveCorp. (S) | 4.750 | 12/15/22 | 250,000 | 248,125 |
| Tencent Holdings, Ltd. (S) | 3.375 | 03/05/18 | 200,000 | 205,019 |
| IT Services 0.3% | ||||
| iGATE Corp. | 9.000 | 05/01/16 | 355,000 | 390,056 |
| Western Union Company | 2.875 | 12/10/17 | 3,175,000 | 3,162,684 |
| Semiconductors & Semiconductor Equipment 0.5% | ||||
| Altera Corp. | 1.750 | 05/15/17 | 4,950,000 | 5,031,789 |
| Amkor Technology, Inc. | 6.375 | 10/01/22 | 200,000 | 201,000 |
| Software 0.2% | ||||
| First Data Corp. (S) | 6.750 | 11/01/20 | 265,000 | 272,288 |
| First Data Corp. (S) | 7.375 | 06/15/19 | 225,000 | 236,813 |
| First Data Corp. | 12.625 | 01/15/21 | 600,000 | 639,000 |
| Infor US, Inc. | 11.500 | 07/15/18 | 630,000 | 741,825 |
| Nuance Communications, Inc. (S) | 5.375 | 08/15/20 | 275,000 | 283,250 |
| Materials 2.3% | 25,145,960 | |||
| Chemicals 1.0% | ||||
| Braskem Finance, Ltd. (Q)(S) | 7.375 | 10/04/15 | 100,000 | 102,500 |
| Cabot Corp. | 3.700 | 07/15/22 | 3,425,000 | 3,443,153 |
| Eastman Chemical Company | 3.600 | 08/15/22 | 3,300,000 | 3,407,158 |
| Hexion US Finance Corp. (S) | 6.625 | 04/15/20 | 270,000 | 265,950 |
| Hexion US Finance Corp. | 6.625 | 04/15/20 | 590,000 | 581,150 |
| Ineos Finance PLC (S) | 8.375 | 02/15/19 | 410,000 | 448,950 |
| INEOS Group Holdings SA (S) | 8.500 | 02/15/16 | 785,000 | 790,888 |
| LyondellBasell Industries NV | 6.000 | 11/15/21 | 585,000 | 687,375 |
| Mexichem SAB de CV (S) | 4.875 | 09/19/22 | 200,000 | 210,750 |
| Momentive Performance Materials, Inc. | 8.875 | 10/15/20 | 205,000 | 211,150 |
| Momentive Performance Materials, Inc. | 9.000 | 01/15/21 | 210,000 | 162,750 |
| Trinseo Materials Operating SCA (S) | 8.750 | 02/01/19 | 695,000 | 699,034 |
| Construction Materials 0.0% | ||||
| Cemex Finance LLC (S) | 9.375 | 10/12/22 | 200,000 | 226,000 |
| Votorantim Cimentos SA (S) | 7.250 | 04/05/41 | 200,000 | 228,000 |
| Containers & Packaging 0.2% | ||||
| ARD Finance SA, PIK (S) | 11.125 | 06/01/18 | 310,254 | 334,299 |
| Cascades, Inc. | 7.750 | 12/15/17 | 450,000 | 477,000 |
| Sealed Air Corp. (S) | 8.375 | 09/15/21 | 645,000 | 740,138 |
| Metals & Mining 0.9% | ||||
| APERAM (S) | 7.375 | 04/01/16 | 200,000 | 194,000 |
| APERAM (S) | 7.750 | 04/01/18 | 250,000 | 240,000 |
| Corporacion Nacional del Cobre de Chile (S) | 3.000 | 07/17/22 | 469,000 | 462,038 |
| Corporacion Nacional del Cobre de Chile (S) | 4.250 | 07/17/42 | 200,000 | 191,566 |
| Corporacion Nacional del Cobre de Chile | 6.150 | 10/24/36 | 385,000 | 476,360 |
| Gold Fields Orogen Holding BVI, Ltd. | 4.875 | 10/07/20 | 200,000 | 194,868 |
| Metalloinvest Finance, Ltd. (S) | 6.500 | 07/21/16 | 203,000 | 213,556 |
| Newmont Mining Corp. | 6.250 | 10/01/39 | 2,850,000 | 3,371,242 |
| Novelis, Inc. | 8.375 | 12/15/17 | 325,000 | 359,125 |
| 12 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Materials (continued) | ||||
| Samarco Mineracao SA (S) | 4.125 | 11/01/22 | 200,000 | $199,400 |
| Severstal OAO (S) | 5.900 | 10/17/22 | 200,000 | 205,800 |
| Southern Copper Corp. | 5.250 | 11/08/42 | 100,000 | 97,638 |
| Taseko Mines, Ltd. | 7.750 | 04/15/19 | 625,000 | 610,938 |
| Vale Overseas, Ltd. | 5.625 | 09/15/19 | 2,775,000 | 3,153,366 |
| Vedanta Resources PLC (S) | 8.250 | 06/07/21 | 204,000 | 234,600 |
| Volcan Cia Minera SAA (S) | 5.375 | 02/02/22 | 58,000 | 63,655 |
| Paper & Forest Products 0.2% | ||||
| Ainsworth Lumber Company, Ltd. (S) | 7.500 | 12/15/17 | 570,000 | 608,475 |
| Louisiana-Pacific Corp. | 7.500 | 06/01/20 | 600,000 | 682,500 |
| Mercer International, Inc. | 9.500 | 12/01/17 | 395,000 | 427,588 |
| NewPage Corp. (H) | 11.375 | 12/31/14 | 325,000 | 143,000 |
| Telecommunication Services 2.4% | 26,102,962 | |||
| Diversified Telecommunication Services 1.9% | ||||
| CenturyLink, Inc. | 5.800 | 03/15/22 | 590,000 | 617,442 |
| CenturyLink, Inc. | 7.650 | 03/15/42 | 3,520,000 | 3,624,153 |
| Cincinnati Bell, Inc. | 8.375 | 10/15/20 | 610,000 | 663,375 |
| Cincinnati Bell, Inc. | 8.750 | 03/15/18 | 470,000 | 496,438 |
| Crown Castle International Corp. (S) | 5.250 | 01/15/23 | 205,000 | 215,250 |
| Frontier Communications Corp. | 9.000 | 08/15/31 | 1,259,000 | 1,366,015 |
| Intelsat Jackson Holdings SA | 7.250 | 04/01/19 | 545,000 | 584,513 |
| ITC Deltacom, Inc. | 10.500 | 04/01/16 | 405,000 | 430,819 |
| Level 3 Communications, Inc. (S) | 8.875 | 06/01/19 | 40,000 | 43,500 |
| Level 3 Financing, Inc. (S) | 7.000 | 06/01/20 | 470,000 | 498,200 |
| Level 3 Financing, Inc. | 10.000 | 02/01/18 | 375,000 | 417,188 |
| Telecom Italia Capital SA | 5.250 | 10/01/15 | 2,775,000 | 2,969,208 |
| Telefonica Emisiones SAU | 4.949 | 01/15/15 | 1,700,000 | 1,791,853 |
| UPC Holding BV (EUR) (D)(S) | 6.375 | 09/15/22 | 850,000 | 1,166,538 |
| Verizon Wireless Capital LLC | 8.500 | 11/15/18 | 2,400,000 | 3,253,193 |
| Wind Acquisition Finance SA (S) | 7.250 | 02/15/18 | 445,000 | 468,363 |
| Wind Acquisition Finance SA (S) | 11.750 | 07/15/17 | 100,000 | 107,500 |
| Wind Acquisition Holdings Finance SA, PIK (S) | 12.250 | 07/15/17 | 749,933 | 791,179 |
| Windstream Corp. | 7.500 | 04/01/23 | 835,000 | 893,450 |
| Wireless Telecommunication Services 0.5% | ||||
| America Movil SAB de CV | 3.125 | 07/16/22 | 3,100,000 | 3,080,386 |
| Cricket Communications, Inc. | 7.750 | 10/15/20 | 565,000 | 586,188 |
| Digicel Group, Ltd. | 10.500 | 04/15/18 | 134,000 | 149,410 |
| Matterhorn Midco & Cy SCA (EUR) (D)(S) | 7.750 | 02/15/20 | 150,000 | 208,762 |
| Matterhorn Mobile Holdings SA (EUR) (D) | 8.250 | 02/15/20 | 250,000 | 370,001 |
| Sprint Capital Corp. | 8.750 | 03/15/32 | 995,000 | 1,174,100 |
| Syniverse Holdings, Inc. | 9.125 | 01/15/19 | 125,000 | 135,938 |
| Utilities 2.7% | 29,266,890 | |||
| Electric Utilities 1.8% | ||||
| Edison Mission Energy (H) | 7.000 | 05/15/17 | 1,275,000 | 621,563 |
| Edison Mission Energy (H) | 7.625 | 05/15/27 | 100,000 | 48,750 |
| Emgesa SA ESP (COP) (D) | 8.750 | 01/25/21 | 129,000,000 | 86,290 |
| Emgesa SA ESP (COP) (D)(S) | 8.750 | 01/25/21 | 176,000,000 | 117,729 |
| Empresa Distribuidora y Comercializadora Norte (S) | 9.750 | 10/25/22 | 16,000 | 7,360 |
| Exelon Generation Company LLC | 4.000 | 10/01/20 | 3,065,000 | 3,181,013 |
| Georgia Power Company | 4.300 | 03/15/42 | 4,850,000 | 4,988,720 |
| Oncor Electric Delivery Company LLC | 6.800 | 09/01/18 | 2,750,000 | 3,408,133 |
| 13 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Utilities (continued) | ||||
| PacifiCorp | 4.100 | 02/01/42 | 3,075,000 | $3,122,171 |
| PPL Energy Supply LLC | 4.600 | 12/15/21 | 3,200,000 | 3,432,522 |
| Gas Utilities 0.3% | ||||
| Empresa de Energia de Bogota SA (S) | 6.125 | 11/10/21 | 200,000 | 227,000 |
| EQT Corp. | 8.125 | 06/01/19 | 2,725,000 | 3,371,084 |
| Independent Power Producers & Energy Traders 0.3% | ||||
| AES Corp. | 7.375 | 07/01/21 | 375,000 | 418,125 |
| Calpine Corp. (S) | 7.500 | 02/15/21 | 202,000 | 219,170 |
| Calpine Corp. (S) | 7.875 | 01/15/23 | 212,000 | 234,260 |
| Empresas Publicas de Medellin ESP (COP) (D) | 8.375 | 02/01/21 | 48,000,000 | 31,578 |
| Empresas Publicas de Medellin ESP (COP) (D)(S) | 8.375 | 02/01/21 | 220,000,000 | 144,733 |
| GenOn Energy, Inc. | 9.500 | 10/15/18 | 695,000 | 825,313 |
| NRG Energy, Inc. | 8.500 | 06/15/19 | 900,000 | 996,750 |
| The AES Corp. | 8.000 | 06/01/20 | 300,000 | 345,000 |
| Multi-Utilities 0.3% | ||||
| MidAmerican Energy Holdings Company | 5.750 | 04/01/18 | 2,870,000 | 3,439,626 |
| U.S. Government & Agency Obligations 3.5% | $37,746,630 | |||
| (Cost $37,757,589) | ||||
| U.S. Government Agency 3.5% | 37,746,630 | |||
| Federal Home Loan Mortgage Corp. | ||||
| Freddie Mac Pool (C) | 4.500 | TBA | 1,000,000 | 1,064,407 |
| Freddie Mac Pool (P) | 2.752 | 11/01/36 | 459,664 | 494,282 |
| Freddie Mac Pool (P) | 3.573 | 07/01/38 | 2,575,238 | 2,743,019 |
| Freddie Mac Pool (P) | 5.502 | 01/01/37 | 416,070 | 446,513 |
| Federal National Mortgage Association | ||||
| Fannie Mae Pool (P) | 2.719 | 04/01/37 | 1,774,101 | 1,904,054 |
| Fannie Mae Pool (P) | 2.832 | 11/01/35 | 549,773 | 582,011 |
| Fannie Mae Pool (C) | 3.000 | TBA | 1,675,000 | 1,729,917 |
| Fannie Mae Pool (C) | 3.000 | TBA | 1,125,000 | 1,181,074 |
| Fannie Mae Pool (C) | 3.500 | TBA | 900,000 | 951,997 |
| Fannie Mae Pool (C) | 3.500 | TBA | 5,050,000 | 5,326,961 |
| Fannie Mae Pool (C) | 4.000 | TBA | 3,300,000 | 3,509,086 |
| Fannie Mae Pool | 4.000 | 08/01/25 | 633,719 | 675,702 |
| Fannie Mae Pool (C) | 4.500 | TBA | 600,000 | 644,992 |
| Fannie Mae Pool (C) | 4.500 | TBA | 6,175,000 | 6,627,711 |
| Fannie Mae Pool (P) | 4.853 | 10/01/38 | 853,083 | 917,204 |
| Fannie Mae Pool (C) | 5.000 | TBA | 650,000 | 701,994 |
| Fannie Mae Pool (C) | 5.000 | TBA | 1,750,000 | 1,889,537 |
| Fannie Mae Pool (C) | 5.500 | TBA | 1,800,000 | 1,953,246 |
| Fannie Mae Pool (P) | 5.849 | 01/01/37 | 444,320 | 476,217 |
| Fannie Mae Pool | 6.500 | 01/01/37 | 1,129,482 | 1,254,495 |
| Government National Mortgage Association | ||||
| Ginnie Mae Pool (C) | 4.000 | TBA | 2,000,000 | 2,175,781 |
| Ginnie Mae Pool | 6.000 | 08/15/35 | 441,199 | 496,430 |
| 14 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Foreign Government Obligations 5.9% | $63,758,944 | |||
| (Cost $60,356,344) | ||||
| Argentina 0.1% | 962,728 | |||
| Republic of Argentina | ||||
| Bond (EUR) (D) | 7.820 | 12/31/33 | 1,212,026 | 962,728 |
| Brazil 0.5% | 5,728,138 | |||
| Federative Republic of Brazil | ||||
| Bond (BRL) (D) | 6.000 | 08/15/20 | 120,000 | 162,913 |
| Bond | 7.125 | 01/20/37 | 466,000 | 667,545 |
| Bond | 8.250 | 01/20/34 | 472,000 | 746,940 |
| Note | 5.875 | 01/15/19 | 439,000 | 533,385 |
| Note (BRL) (D) | 6.000 | 05/15/15 | 805,000 | 992,340 |
| Note (BRL) (D) | 6.000 | 08/15/16 | 271,000 | 346,400 |
| Note (BRL) (D) | 6.000 | 08/15/22 | 88,000 | 121,637 |
| Note (BRL) (D) | 10.000 | 01/01/14 | 786,000 | 407,026 |
| Note (BRL) (D) | 10.000 | 01/01/17 | 2,704,000 | 1,422,802 |
| Note (BRL) (D) | 10.000 | 01/01/21 | 427,000 | 223,002 |
| Note (BRL) (D) | 10.000 | 01/01/23 | 200,000 | 104,148 |
| Chile 0.0% | 121,410 | |||
| Republic of Chile | ||||
| Bond | 3.250 | 09/14/21 | 114,000 | 121,410 |
| Colombia 0.4% | 4,080,017 | |||
| Bogota Distrito Capital | ||||
| Note (COP) (D) | 9.750 | 07/26/28 | 400,000,000 | 326,888 |
| Note (COP) (D) | 9.750 | 07/26/28 | 2,065,000,000 | 1,687,559 |
| Republic of Colombia | ||||
| Bond | 7.375 | 09/18/37 | 942,000 | 1,370,610 |
| Bond | 8.125 | 05/21/24 | 476,000 | 694,960 |
| Croatia 0.0% | 494,615 | |||
| Republic of Croatia | ||||
| Bond (S) | 6.250 | 04/27/17 | 255,000 | 280,500 |
| Bond | 6.625 | 07/14/20 | 187,000 | 214,115 |
| Dominican Republic 0.0% | 411,067 | |||
| Government of Dominican Republic | ||||
| Bond | 7.500 | 05/06/21 | 327,000 | 372,780 |
| Bond | 9.040 | 01/23/18 | 33,882 | 38,287 |
| El Salvador 0.0% | 451,395 | |||
| Republic of El Salvador | ||||
| Bond (S) | 7.375 | 12/01/19 | 180,000 | 212,310 |
| Bond | 8.250 | 04/10/32 | 189,000 | 239,085 |
| Hungary 0.2% | 2,233,559 | |||
| Government of Hungary | ||||
| Bond (HUF) (D) | 5.500 | 02/12/14 | 7,190,000 | 33,483 |
| Bond (HUF) (D) | 6.750 | 02/24/17 | 15,210,000 | 73,185 |
| Bond (HUF) (D) | 6.750 | 11/24/17 | 32,570,000 | 157,262 |
| Bond (HUF) (D) | 7.000 | 06/24/22 | 35,660,000 | 173,226 |
| Bond (HUF) (D) | 7.500 | 10/24/13 | 29,080,000 | 137,042 |
| Bond (HUF) (D) | 7.750 | 08/24/15 | 65,410,000 | 320,191 |
| 15 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Hungary (continued) | ||||
| Republic of Hungary | ||||
| Bond (EUR) (D) | 3.500 | 07/18/16 | 272,000 | $360,827 |
| Bond (EUR) (D) | 4.375 | 07/04/17 | 158,000 | 213,374 |
| Bond (EUR) (D) | 4.500 | 01/29/14 | 131,000 | 180,807 |
| Bond (GBP) (D) | 5.000 | 03/30/16 | 37,000 | 58,095 |
| Bond (GBP) (D) | 5.500 | 05/06/14 | 11,000 | 17,751 |
| Bond (EUR) (D) | 5.750 | 06/11/18 | 53,000 | 75,331 |
| Bond | 6.375 | 03/29/21 | 228,000 | 248,520 |
| Bond | 7.625 | 03/29/41 | 158,000 | 184,465 |
| Indonesia 0.2% | 2,307,826 | |||
| Republic of Indonesia | ||||
| Bond (IDR) (D) | 5.250 | 05/15/18 | 400,000,000 | 42,071 |
| Bond | 5.875 | 03/13/20 | 104,000 | 123,760 |
| Bond (IDR) (D) | 7.000 | 05/15/22 | 600,000,000 | 69,197 |
| Bond | 7.750 | 01/17/38 | 123,000 | 176,813 |
| Bond | 8.500 | 10/12/35 | 115,000 | 176,525 |
| Bond (S) | 11.625 | 03/04/19 | 575,000 | 856,750 |
| Bond | 11.625 | 03/04/19 | 579,000 | 862,710 |
| Iraq 0.1% | 588,480 | |||
| Republic of Iraq | ||||
| Bond | 5.800 | 01/15/28 | 613,000 | 588,480 |
| Lithuania 0.1% | 1,466,615 | |||
| Republic of Lithuania | ||||
| Bond | 6.125 | 03/09/21 | 434,000 | 521,885 |
| Bond (S) | 6.625 | 02/01/22 | 554,000 | 689,730 |
| Bond | 7.375 | 02/11/20 | 200,000 | 255,000 |
| Malaysia 0.4% | 4,255,715 | |||
| Government of Malaysia | ||||
| Bond (MYR) (D) | 3.197 | 10/15/15 | 2,030,000 | 654,717 |
| Bond (MYR) (D) | 3.314 | 10/31/17 | 470,000 | 151,733 |
| Bond (MYR) (D) | 3.418 | 08/15/22 | 610,000 | 194,843 |
| Bond (MYR) (D) | 3.835 | 08/12/15 | 3,170,000 | 1,038,145 |
| Bond (MYR) (D) | 4.012 | 09/15/17 | 3,170,000 | 1,054,077 |
| Bond (MYR) (D) | 4.160 | 07/15/21 | 220,000 | 73,838 |
| Bond (MYR) (D) | 4.262 | 09/15/16 | 2,035,000 | 679,423 |
| Bond (MYR) (D) | 4.392 | 04/15/26 | 360,000 | 124,644 |
| Bond | 4.646 | 07/06/21 | 250,000 | 284,295 |
| Mexico 0.7% | 7,205,280 | |||
| Government of Mexico | ||||
| Bond (MXN) (D) | 2.000 | 06/09/22 | 2,201,624 | 179,294 |
| Bond (MXN) (D) | 2.500 | 12/10/20 | 23,953,791 | 2,034,428 |
| Bond (MXN) (D) | 3.500 | 12/14/17 | 1,662,779 | 144,199 |
| Bond (MXN) (D) | 4.000 | 06/13/19 | 1,613,873 | 147,332 |
| Bond (MXN) (D) | 5.000 | 06/16/16 | 3,146,118 | 277,365 |
| Bond (MXN) (D) | 5.000 | 06/15/17 | 1,040,000 | 82,812 |
| Bond | 5.125 | 01/15/20 | 14,000 | 16,380 |
| Bond | 5.750 | 10/12/2010 | 862,000 | 963,285 |
| Bond (MXN) (D) | 6.000 | 06/18/15 | 900,000 | 73,216 |
| Bond | 6.050 | 01/11/40 | 794,000 | 994,485 |
| Bond (MXN) (D) | 6.250 | 06/16/16 | 2,710,000 | 223,616 |
| Bond (MXN) (D) | 6.500 | 06/10/21 | 3,731,000 | 322,301 |
| 16 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Mexico (continued) | ||||
| Bond (MXN) (D) | 6.500 | 06/09/22 | 2,631,000 | $229,194 |
| Bond | 6.750 | 09/27/34 | 323,000 | 437,665 |
| Bond (MXN) (D) | 7.750 | 12/14/17 | 3,010,000 | 267,940 |
| Bond (MXN) (D) | 7.750 | 05/29/31 | 5,113,000 | 484,697 |
| Bond (MXN) (D) | 8.000 | 12/17/15 | 3,810,000 | 327,071 |
| Morocco 0.0% | 204,000 | |||
| Kingdom of Morocco | ||||
| Bond (S) | 4.250 | 12/11/22 | 200,000 | 204,000 |
| Panama 0.2% | 1,924,769 | |||
| Republic of Panama | ||||
| Bond | 5.200 | 01/30/20 | 655,000 | 772,900 |
| Bond | 6.700 | 01/26/36 | 451,000 | 605,468 |
| Bond | 8.875 | 09/30/27 | 217,000 | 335,808 |
| Bond | 9.375 | 04/01/29 | 129,000 | 210,593 |
| Peru 0.1% | 794,288 | |||
| Republic of Peru | ||||
| Bond | 5.625 | 11/18/50 | 271,000 | 318,425 |
| Bond | 7.350 | 07/21/25 | 275,000 | 387,750 |
| Bond | 8.750 | 11/21/33 | 53,000 | 88,113 |
| Philippines 0.1% | 1,542,300 | |||
| Republic of Philippines | ||||
| Bond | 7.750 | 01/14/31 | 1,060,000 | 1,542,300 |
| Poland 0.5% | 5,160,025 | |||
| Republic of Poland | ||||
| Bond (PLN) (D) (Z) | Zero | 07/25/13 | 1,300,000 | 414,177 |
| Bond (PLN) (D) (Z) | Zero | 01/25/14 | 4,200,000 | 1,317,038 |
| Bond (PLN) (D) (Z) | Zero | 07/25/14 | 70,000 | 21,610 |
| Bond (PLN) (D) | 3.000 | 08/24/16 | 2,530,705 | 872,304 |
| Bond (PLN) (D) | 5.000 | 10/24/13 | 510,000 | 166,832 |
| Bond | 5.000 | 03/23/22 | 54,000 | 62,100 |
| Bond | 5.125 | 04/21/21 | 569,000 | 660,040 |
| Bond (PLN) (D) | 5.750 | 04/25/14 | 250,000 | 83,228 |
| Bond (PLN) (D) | 6.250 | 10/24/15 | 90,000 | 31,290 |
| Bond | 6.375 | 07/15/19 | 1,237,000 | 1,531,406 |
| Qatar 0.1% | 605,443 | |||
| Government of Qatar | ||||
| Bond | 5.750 | 01/20/42 | 229,000 | 287,968 |
| Bond | 6.550 | 04/09/19 | 255,000 | 317,475 |
| Romania 0.0% | 543,640 | |||
| Government of Romania | ||||
| Bond (RON) (D) | 5.850 | 07/28/14 | 170,000 | 52,707 |
| Bond (RON) (D) | 6.000 | 10/19/13 | 100,000 | 31,013 |
| Bond | 6.750 | 02/07/22 | 382,000 | 459,920 |
| Russia 0.4% | 4,416,987 | |||
| Government of Russia | ||||
| Eurobond | 7.500 | 03/31/30 | 2,506,121 | 3,132,651 |
| Eurobond (RUB) (D) | 7.850 | 03/10/18 | 5,000,000 | 181,136 |
| Eurobond | 12.750 | 06/24/28 | 560,000 | 1,103,200 |
| 17 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Slovakia 0.0% | $278,748 | |||
| Government of Slovakia | ||||
| Bond (S) | 4.375 | 05/21/22 | 261,000 | 278,748 |
| South Africa 0.5% | 5,307,373 | |||
| Republic of South Africa | ||||
| Bond | 4.665 | 01/17/24 | 191,000 | 205,803 |
| Bond | 5.500 | 03/09/20 | 561,000 | 645,851 |
| Bond | 6.250 | 03/08/41 | 496,000 | 610,725 |
| Bond (ZAR) (D) | 6.750 | 03/31/21 | 10,940,000 | 1,242,108 |
| Bond | 6.875 | 05/27/19 | 183,000 | 225,090 |
| Bond (ZAR) (D) | 7.000 | 02/28/31 | 2,930,000 | 299,777 |
| Bond (ZAR) (D) | 8.000 | 12/21/18 | 9,510,000 | 1,164,767 |
| Bond (ZAR) (D) | 8.250 | 09/15/17 | 390,000 | 47,915 |
| Bond (ZAR) (D) | 10.500 | 12/21/26 | 400,000 | 56,880 |
| Bond (ZAR) (D) | 13.500 | 09/15/15 | 6,045,000 | 808,457 |
| Thailand 0.2% | 2,017,743 | |||
| Kingdom of Thailand | ||||
| Bond (THB) (D) | 1.200 | 07/14/21 | 13,721,302 | 470,792 |
| Bond (THB) (D) | 2.800 | 10/10/17 | 2,320,000 | 76,480 |
| Bond (THB) (D) | 3.125 | 12/11/15 | 15,300,000 | 514,939 |
| Bond (THB) (D) | 3.250 | 06/16/17 | 12,220,000 | 411,360 |
| Bond (THB) (D) | 3.625 | 05/22/15 | 9,900,000 | 336,900 |
| Bond (THB) (D) | 3.650 | 12/17/21 | 6,140,000 | 207,272 |
| Turkey 0.6% | 6,391,031 | |||
| Republic of Turkey | ||||
| Bond (TRY) (D) (Z) | Zero | 07/17/13 | 220,000 | 121,937 |
| Bond | 3.250 | 03/23/23 | 860,000 | 825,428 |
| Bond (TRY) (D) | 4.000 | 04/29/15 | 636,981 | 394,593 |
| Bond (TRY) (D) | 4.500 | 02/11/15 | 983,977 | 611,506 |
| Bond | 5.125 | 03/25/22 | 226,000 | 254,815 |
| Bond | 5.625 | 03/30/21 | 175,000 | 203,861 |
| Bond | 6.250 | 09/26/22 | 485,000 | 591,700 |
| Bond | 6.750 | 04/03/18 | 317,000 | 378,023 |
| Bond | 7.000 | 09/26/16 | 108,000 | 125,658 |
| Bond | 7.000 | 06/05/20 | 83,000 | 104,165 |
| Bond | 7.250 | 03/05/38 | 493,000 | 672,945 |
| Bond (TRY) (D) | 7.500 | 09/24/14 | 1,050,000 | 613,015 |
| Bond | 7.500 | 07/14/17 | 103,000 | 124,476 |
| Bond (TRY) (D) | 8.000 | 01/29/14 | 160,000 | 93,066 |
| Bond | 8.000 | 02/14/34 | 143,000 | 206,993 |
| Bond (TRY) (D) | 9.000 | 03/05/14 | 960,000 | 564,537 |
| Bond (TRY) (D) | 9.000 | 01/27/16 | 670,000 | 410,667 |
| Bond (TRY) (D) | 9.000 | 03/08/17 | 150,000 | 93,646 |
| Ukraine 0.2% | 1,686,876 | |||
| Republic of Ukraine | ||||
| Bond | 6.580 | 11/21/16 | 544,000 | 549,440 |
| Bond (S) | 6.875 | 09/23/15 | 100,000 | 100,750 |
| Bond | 7.650 | 06/11/13 | 824,000 | 829,686 |
| Bond (S) | 7.800 | 11/28/22 | 200,000 | 207,000 |
| Uruguay 0.1% | 638,791 | |||
| Republic of Uruguay | ||||
| Bond | 7.625 | 03/21/36 | 219,981 | 323,922 |
| 18 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Uruguay (continued) | ||||
| Bond | 7.875 | 01/15/33 | 54,580 | $80,506 |
| Bond | 8.000 | 11/18/22 | 169,215 | 234,363 |
| Venezuela 0.2% | 1,940,085 | |||
| Republic of Venezuela | ||||
| Bond | 6.000 | 12/09/20 | 161,000 | 138,460 |
| Bond | 8.500 | 10/08/14 | 509,000 | 521,725 |
| Bond | 11.950 | 08/05/31 | 136,000 | 156,060 |
| Bond | 12.750 | 08/23/22 | 553,200 | 663,840 |
| Bond | 13.625 | 08/15/18 | 400,000 | 460,000 |
| Capital Preferred Securities 0.0% | $157,568 | |||
| (Cost $147,514) | ||||
| Industrials 0.0% | 157,568 | |||
| Hutchison Whampoa International 10, Ltd. (6.000% to | ||||
| 10/28/2015, then reset of 5 Year U.S. Treasury Note Rate | ||||
| + 4.885% until 10/28/2020, then 3 month LIBOR + 5.638%) | ||||
| (Q) | 6.000 | 10/28/15 | 149,000 | 157,568 |
| Convertible Bonds 1.3% | $14,322,487 | |||
| (Cost $13,830,116) | ||||
| Consumer Discretionary 0.1% | 1,411,030 | |||
| Auto Components 0.1% | ||||
| TRW Automotive, Inc. | 3.500 | 12/01/15 | 523,000 | 1,057,114 |
| Hotels, Restaurants & Leisure 0.0% | ||||
| Home Inns & Hotels Management, Inc. | 2.000 | 12/15/15 | 98,000 | 89,425 |
| Specialty Retail 0.0% | ||||
| RadioShack Corp. (S) | 2.500 | 08/01/13 | 281,000 | 264,491 |
| Consumer Staples 0.1% | 904,639 | |||
| Food Products 0.1% | ||||
| Smithfield Foods, Inc. | 4.000 | 06/30/13 | 497,000 | 536,139 |
| Tyson Foods, Inc. | 3.250 | 10/15/13 | 275,000 | 368,500 |
| Energy 0.2% | 2,271,945 | |||
| Energy Equipment & Services 0.2% | ||||
| Hornbeck Offshore Services, Inc. (S) | 1.500 | 09/01/19 | 431,000 | 447,432 |
| Hornbeck Offshore Services, Inc. (1.625% Steps down to | ||||
| 1.375% on 11/15/2013) | 1.625 | 11/15/26 | 325,000 | 327,145 |
| Newpark Resources, Inc. | 4.000 | 10/01/17 | 364,000 | 406,088 |
| Subsea 7 SA | 2.250 | 10/11/13 | 600,000 | 696,600 |
| Oil, Gas & Consumable Fuels 0.0% | ||||
| Stone Energy Corp. (S) | 1.750 | 03/01/17 | 429,000 | 394,680 |
| Health Care 0.1% | 448,873 | |||
| Biotechnology 0.1% | ||||
| Dendreon Corp. | 2.875 | 01/15/16 | 511,000 | 422,853 |
| Pharmaceuticals 0.0% | ||||
| Auxilium Pharmaceuticals, Inc. | 1.500 | 07/15/18 | 25,000 | 26,020 |
| 19 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Industrials 0.2% | $1,963,555 | |||
| Airlines 0.0% | ||||
| AirTran Holdings, Inc. | 5.250 | 11/01/16 | 322,000 | 432,688 |
| Machinery 0.2% | ||||
| Altra Holdings, Inc. | 2.750 | 03/01/31 | 596,000 | 673,108 |
| Greenbrier Companies, Inc. | 3.500 | 04/01/18 | 886,000 | 857,759 |
| Information Technology 0.6% | 6,885,086 | |||
| Communications Equipment 0.2% | ||||
| Alcatel-Lucent (EUR) (D) | 5.000 | 01/01/15 | 135,660 | 184,770 |
| Alcatel-Lucent USA, Inc., Series A | 2.875 | 06/15/23 | 880,000 | 836,000 |
| Ciena Corp. (S) | 4.000 | 03/15/15 | 465,000 | 519,056 |
| Comtech Telecommunications Corp. | 3.000 | 05/01/29 | 513,000 | 525,504 |
| Computers & Peripherals 0.1% | ||||
| NetApp, Inc. | 1.750 | 06/01/13 | 505,000 | 586,747 |
| Internet Software & Services 0.0% | ||||
| WebMD Health Corp. | 2.500 | 01/31/18 | 483,000 | 426,549 |
| Semiconductors & Semiconductor Equipment 0.2% | ||||
| Intel Corp. | 2.950 | 12/15/35 | 846,000 | 887,243 |
| Micron Technology, Inc. | 1.500 | 08/01/31 | 450,000 | 459,281 |
| Micron Technology, Inc. | 1.875 | 06/01/27 | 307,000 | 296,063 |
| ON Semiconductor Corp. | 2.625 | 12/15/26 | 513,000 | 529,993 |
| Software 0.1% | ||||
| Callidus Software, Inc. | 4.750 | 06/01/16 | 461,000 | 438,695 |
| Symantec Corp. | 1.000 | 06/15/13 | 1,032,000 | 1,195,185 |
| Materials 0.0% | 437,359 | |||
| Metals & Mining 0.0% | ||||
| RTI International Metals, Inc. | 3.000 | 12/01/15 | 335,000 | 367,244 |
| Silver Standard Resources, Inc. (S) | 2.875 | 02/01/33 | 74,000 | 70,115 |
| Structured Notes (K) 0.6% | $6,714,526 | |||
| (Cost $6,551,207) | ||||
| Brazil 0.1% | 1,185,224 | |||
| Federative Republic of Brazil (Barclays Bank PLC) | ||||
| Note (BRL) (D) (S) | 10.000 | 05/02/13 | 890,000 | 458,071 |
| Federative Republic of Brazil (JPMorgan Chase & Company) | ||||
| Note (BRL) (D) | 6.000 | 02/21/13 | 600,000 | 727,153 |
| Colombia 0.0% | 385,472 | |||
| Republic of Colombia (Citigroup Funding, Inc.) | ||||
| Note (COP) (D) | 11.000 | 07/27/20 | 500,000,000 | 385,472 |
| Indonesia 0.2% | 2,148,173 | |||
| Republic of Indonesia (Barclays Bank PLC) | ||||
| Note (IDR) (D) | 11.500 | 09/18/19 | 4,670,000,000 | 649,303 |
| Republic of Indonesia (Deutsche Bank AG) | ||||
| Note (IDR) (D) (S) | 5.625 | 05/17/23 | 1,000,000,000 | 104,888 |
| Note (IDR) (D) (S) | 7.000 | 05/17/22 | 1,400,000,000 | 161,293 |
| Republic of Indonesia (JPMorgan Chase & Company) | ||||
| Note (IDR) (D) (S) | 5.250 | 05/17/18 | 2,100,000,000 | 221,554 |
| 20 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Indonesia (continued) | ||||
| Note (IDR) (D) (S) | 5.625 | 05/17/23 | 4,000,000,000 | $419,552 |
| Note (IDR) (D) | 8.250 | 06/17/32 | 4,820,000,000 | 591,583 |
| Russia 0.3% | 2,722,657 | |||
| Government of Russia (Credit Suisse) | ||||
| Bond (RUB) (D) (S) | 7.000 | 06/03/15 | 19,200,000 | 654,778 |
| Bond (RUB) (D) | 7.500 | 03/15/18 | 5,100,000 | 180,553 |
| Bond (RUB) (D) | 7.500 | 04/14/21 | 5,000,000 | 176,596 |
| Bond (RUB) (D) | 7.600 | 04/14/21 | 14,000,000 | 499,367 |
| Government of Russia (Deutsche Bank AG) | ||||
| Bond (RUB) (D) | 7.350 | 01/20/16 | 10,000,000 | 345,718 |
| Note (RUB) (D) (S) | 7.600 | 07/22/22 | 5,000,000 | 178,935 |
| Government of Russia (HSBC Bank PLC) | ||||
| Bond (RUB) (D) (S) | 7.350 | 01/21/16 | 9,000,000 | 311,135 |
| Government of Russia (JPMorgan Chase Bank NA) | ||||
| Bond (RUB) (D) (S) | 7.600 | 04/16/21 | 10,500,000 | 375,575 |
| United Kingdom 0.0% | 273,000 | |||
| Cablevision SA (Deutsche Bank AG London) | ||||
| Bond (S) | 9.375 | 02/13/18 | 390,000 | 273,000 |
| Term Loans (M) 19.7% | $215,168,474 | |||
| (Cost $213,072,412) | ||||
| Consumer Discretionary 6.1% | 66,721,025 | |||
| Auto Components 0.5% | ||||
| Allison Transmission, Inc. | 4.250 | 08/23/19 | 2,993,974 | 3,028,593 |
| The Goodyear Tire & Rubber Company | 4.750 | 04/30/19 | 2,250,000 | 2,276,116 |
| Automobiles 0.2% | ||||
| Chrysler Group LLC | 6.000 | 05/24/17 | 2,015,738 | 2,057,313 |
| Health Care Providers & Services 0.3% | ||||
| United Surgical Partners International, Inc. | 6.000 | 04/03/19 | 3,549,933 | 3,578,038 |
| Hotels, Restaurants & Leisure 0.9% | ||||
| Boyd Gaming Corp. | 6.000 | 12/17/15 | 1,306,250 | 1,319,313 |
| Caesars Entertainment Operating Company, Inc. | 5.454 | 01/26/18 | 3,428,800 | 3,181,165 |
| CCM Merger, Inc. | 6.000 | 03/01/17 | 1,444,772 | 1,457,414 |
| MGM Resorts International | 4.250 | 12/20/19 | 1,795,000 | 1,821,552 |
| Wendy's International, Inc. | 4.750 | 05/15/19 | 1,967,070 | 1,990,942 |
| Household Durables 0.1% | ||||
| Alliance Laundry Systems LLC | 5.500 | 12/10/18 | 1,190,000 | 1,207,850 |
| Media 3.8% | ||||
| Acosta, Inc. | 5.000 | 03/02/18 | 1,755,000 | 1,774,744 |
| Advantage Sales & Marketing LLC | 5.250 | 12/18/17 | 1,802,353 | 1,817,673 |
| Advantage Sales & Marketing LLC | 9.250 | 06/18/18 | 710,000 | 714,881 |
| Atlantic Broadband Penn LLC | 4.500 | 11/29/19 | 1,167,075 | 1,180,205 |
| Bragg Communications, Inc. | 4.000 | 02/28/18 | 1,903,889 | 1,918,168 |
| Charter Communications Operating LLC | 4.000 | 05/15/19 | 2,304,033 | 2,333,985 |
| Cumulus Media Holdings, Inc. | 4.500 | 09/17/18 | 2,794,543 | 2,799,034 |
| Fox Acquisition Sub LLC | 5.500 | 07/14/17 | 5,721,325 | 5,799,993 |
| Getty Images, Inc. | 4.750 | 10/18/19 | 2,946,000 | 2,979,143 |
| Hubbard Broadcasting, Inc. | 5.250 | 04/28/17 | 964,524 | 969,346 |
| Interactive Data Corp. | 4.500 | 02/12/18 | 2,484,432 | 2,490,643 |
| 21 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Consumer Discretionary (continued) | ||||
| Lin Television Corp. | 4.000 | 12/21/18 | 975,150 | $978,807 |
| MCC Georgia LLC | 4.500 | 10/23/17 | 1,931,749 | 1,941,408 |
| Mission Broadcasting, Inc. | 4.500 | 12/03/19 | 376,183 | 381,355 |
| Nexstar Broadcasting, Inc. | 4.500 | 12/03/19 | 889,817 | 902,052 |
| Sinclair Television Group, Inc. | 4.000 | 10/28/16 | 2,315,521 | 2,325,623 |
| Tribune Company | 4.000 | 12/17/19 | 1,795,000 | 1,808,463 |
| Univision Communications, Inc. | 4.452 | 03/31/17 | 3,516,456 | 3,525,230 |
| UPC Financing Partnership | 4.000 | 01/29/21 | 1,900,000 | 1,908,313 |
| Visant Corp. | 5.250 | 12/22/16 | 2,089,697 | 2,005,237 |
| WideOpenWest Finance LLC | 6.250 | 07/17/18 | 987,298 | 997,537 |
| Multiline Retail 0.3% | ||||
| BJ's Wholesale Club, Inc. | 5.750 | 09/26/19 | 2,359,088 | 2,395,785 |
| Lord & Taylor LLC | 5.750 | 01/11/19 | 848,037 | 855,104 |
| Consumer Staples 1.4% | 15,432,028 | |||
| Food & Staples Retailing 0.3% | ||||
| AdvancePierre Foods | 5.750 | 07/10/17 | 1,765,000 | 1,792,578 |
| SUPERVALU, Inc. | 8.000 | 08/30/18 | 1,453,259 | 1,477,783 |
| Food Products 0.6% | ||||
| Del Monte Corp. | 4.500 | 03/08/18 | 2,454,863 | 2,462,534 |
| Dole Food Company, Inc. | 5.018 | 07/06/18 | 1,260,303 | 1,263,104 |
| Dole Food Company, Inc. | 5.033 | 07/06/18 | 704,286 | 705,851 |
| Pinnacle Foods Finance LLC | 4.750 | 10/17/18 | 2,323,325 | 2,349,878 |
| Household Products 0.2% | ||||
| Reynolds Group Holdings, Inc. | 4.750 | 09/28/18 | 2,334,150 | 2,365,953 |
| Personal Products 0.3% | ||||
| Revlon Consumer Products Corp. | 4.750 | 11/17/17 | 2,993,022 | 3,014,347 |
| Energy 1.0% | 10,331,110 | |||
| Energy Equipment & Services 0.4% | ||||
| Offshore Group Investment, Ltd. | 6.250 | 10/26/17 | 3,570,900 | 3,597,682 |
| Oil, Gas & Consumable Fuels 0.6% | ||||
| Arch Coal, Inc. | 5.750 | 05/16/18 | 1,261,831 | 1,294,053 |
| EP Energy LLC | 5.000 | 05/24/18 | 2,931,000 | 2,961,532 |
| Plains Exploration & Production Company | 4.000 | 11/30/19 | 1,272,000 | 1,274,952 |
| Samson Investment Company | 6.000 | 09/25/18 | 1,190,000 | 1,202,891 |
| Financials 1.9% | 20,780,879 | |||
| Capital Markets 0.6% | ||||
| GCA Services Group, Inc. | 5.250 | 11/01/19 | 1,768,000 | 1,766,895 |
| Sequa Corp. | 5.250 | 05/29/17 | 4,893,425 | 4,962,750 |
| Consumer Finance 0.2% | ||||
| Ocwen Financial Corp. (T) | TBD | 01/22/18 | 2,355,000 | 2,383,703 |
| Diversified Financial Services 0.5% | ||||
| Compass Investors, Inc. | 5.250 | 12/27/19 | 2,390,000 | 2,410,913 |
| GMACM Borrower LLC | 6.000 | 11/18/13 | 2,576,333 | 2,576,333 |
| GMACM Borrower LLC | 7.750 | 11/18/13 | 515,000 | 517,575 |
| Insurance 0.3% | ||||
| CNO Financial Group, Inc. | 5.000 | 09/20/18 | 2,744,582 | 2,768,597 |
| 22 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Financials (continued) | ||||
| Real Estate Investment Trusts 0.3% | ||||
| iStar Financial, Inc. | 5.750 | 09/28/17 | 3,343,954 | $3,394,113 |
| Health Care 2.6% | 28,818,729 | |||
| Biotechnology 0.2% | ||||
| Par Pharmaceutical Companies, Inc. | 5.000 | 09/30/19 | 2,054,850 | 2,079,251 |
| Health Care Equipment & Supplies 0.6% | ||||
| Air Medical Group Holdings, Inc. (T) | TBD | 06/30/18 | 465,000 | 473,138 |
| Air Medical Group Holdings, Inc. | 6.500 | 11/29/13 | 1,860,000 | 1,892,550 |
| Biomet, Inc. | 4.004 | 07/25/17 | 1,192,013 | 1,203,924 |
| Hologic, Inc. | 4.500 | 08/01/19 | 1,573,385 | 1,593,052 |
| US Renal Care, Inc. | 6.250 | 07/02/19 | 1,244,059 | 1,262,719 |
| Health Care Providers & Services 1.0% | ||||
| DaVita, Inc. | 4.000 | 11/01/19 | 1,230,000 | 1,242,080 |
| DaVita, Inc. | 4.500 | 10/20/16 | 2,188,566 | 2,211,820 |
| Emergency Medical Services Corp. | 5.250 | 05/25/18 | 2,531,971 | 2,537,035 |
| Golden Gate National Senior Care LLC | 5.000 | 05/04/18 | 1,501,903 | 1,438,072 |
| IASIS Healthcare LLC | 5.000 | 05/03/18 | 1,381,120 | 1,391,910 |
| Vanguard Health Holding Company II LLC | 5.000 | 01/29/16 | 1,921,494 | 1,936,482 |
| Health Care Technology 0.3% | ||||
| IMS Health, Inc. | 4.500 | 08/25/17 | 586,504 | 589,436 |
| Kinetic Concepts, Inc. | 5.500 | 05/04/18 | 2,551,143 | 2,588,773 |
| Life Sciences Tools & Services 0.1% | ||||
| Pharmaceutical Product Development, Inc. (T) | TBD | 12/05/18 | 1,687,000 | 1,695,435 |
| Pharmaceuticals 0.4% | ||||
| Valeant Pharmaceuticals International, Inc. | 4.250 | 02/13/19 | 2,202,000 | 2,229,869 |
| Warner Chilcott Company LLC | 4.250 | 03/15/18 | 2,431,403 | 2,453,183 |
| Industrials 1.6% | 17,893,337 | |||
| Aerospace & Defense 0.5% | ||||
| DAE Aviation Holdings, Inc. | 6.250 | 10/29/18 | 1,415,260 | 1,440,027 |
| DAE Aviation Holdings, Inc. | 6.250 | 11/02/18 | 641,585 | 652,812 |
| Silver II Borrower SCA | 5.000 | 12/13/19 | 1,785,000 | 1,801,958 |
| TransDigm, Inc. | 4.000 | 02/14/17 | 1,764,000 | 1,778,112 |
| Building Products 0.3% | ||||
| Air Distribution Technologies, Inc. | 5.000 | 11/01/18 | 3,170,000 | 3,217,550 |
| Commercial Services & Supplies 0.1% | ||||
| ADS Waste Holdings, Inc. | 5.250 | 10/09/19 | 1,150,000 | 1,159,344 |
| Industrial Conglomerates 0.2% | ||||
| Tomkins, Ltd. | 3.750 | 09/30/16 | 2,118,296 | 2,136,831 |
| Machinery 0.5% | ||||
| Mirror Bidco Corp. | 5.250 | 12/11/19 | 1,830,000 | 1,844,488 |
| Navistar, Inc. | 7.000 | 07/16/14 | 1,176,053 | 1,191,341 |
| Rexnord LLC | 4.500 | 04/02/18 | 2,648,363 | 2,670,874 |
| 23 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Information Technology 2.0% | $21,959,299 | |||
| Communications Equipment 0.3% | ||||
| Alcatel-Lucent (T) | TBD | 01/13/19 | 3,515,000 | 3,554,544 |
| Internet Software & Services 0.4% | ||||
| Fibertech Networks LLC | 5.750 | 11/26/19 | 1,985,000 | 2,004,850 |
| SkillSoft Corp. | 5.000 | 05/26/17 | 2,238,772 | 2,272,354 |
| Semiconductors & Semiconductor Equipment 0.5% | ||||
| NXP BV | 4.750 | 01/11/20 | 1,000,000 | 1,012,188 |
| NXP Funding LLC | 4.500 | 03/03/17 | 2,495,550 | 2,526,744 |
| NXP Funding LLC | 5.500 | 03/03/17 | 2,215,950 | 2,256,808 |
| Software 0.8% | ||||
| First Data Corp. | 4.205 | 03/23/18 | 3,971,632 | 3,935,641 |
| First Data Corp. | 5.205 | 09/24/18 | 1,175,000 | 1,174,510 |
| Infor US, Inc. | 5.250 | 04/05/18 | 3,179,531 | 3,221,660 |
| Materials 1.1% | 11,763,696 | |||
| Chemicals 0.6% | ||||
| Chemtura Corp. | 5.500 | 08/27/16 | 3,413,518 | 3,449,787 |
| INEOS US Finance LLC | 6.500 | 05/04/18 | 2,294,265 | 2,344,438 |
| OM Group, Inc. | 5.750 | 08/02/17 | 812,713 | 816,776 |
| Construction Materials 0.3% | ||||
| Apex Tool Group (T) | TBD | 01/28/20 | 930,000 | 938,719 |
| S.T. Dupont SA (T) | TBD | 01/17/20 | 1,845,000 | 1,871,896 |
| Metals & Mining 0.2% | ||||
| Novelis, Inc. | 4.000 | 03/10/17 | 2,315,548 | 2,342,080 |
| Telecommunication Services 1.2% | 12,645,772 | |||
| Diversified Telecommunication Services 1.1% | ||||
| Intelsat Jackson Holdings SA | 4.500 | 04/02/18 | 2,304,225 | 2,331,876 |
| Level 3 Financing, Inc. | 4.750 | 08/01/19 | 2,585,000 | 2,610,204 |
| Level 3 Financing, Inc. | 5.250 | 08/01/19 | 1,973,000 | 1,993,717 |
| Syniverse Holdings, Inc. | 5.000 | 04/23/19 | 2,810,875 | 2,831,957 |
| Telesat Canada | 4.250 | 03/28/19 | 1,687,200 | 1,701,437 |
| Wireless Telecommunication Services 0.1% | ||||
| Cricket Communications, Inc. | 4.750 | 10/10/19 | 1,170,000 | 1,176,581 |
| Utilities 0.8% | 8,822,599 | |||
| Electric Utilities 0.6% | ||||
| Texas Competitive Electric Holdings Company LLC | 4.742 | 10/10/17 | 9,988,544 | 6,556,540 |
| Independent Power Producers & Energy Traders 0.2% | ||||
| Calpine Corp. | 4.500 | 04/02/18 | 2,245,013 | 2,266,059 |
| Collateralized Mortgage Obligations 18.0% | $196,287,790 | |||
| (Cost $180,798,136) | ||||
| Commercial & Residential 17.8% | 194,685,397 | |||
| 7 WTC Depositor LLC Trust | ||||
| Series 2012-7WTC, Class A (S) | 4.082 | 03/13/31 | 1,500,000 | 1,580,132 |
| American General Mortgage Loan Trust | ||||
| Series 2010-1A, Class A2 (P) (S) | 5.650 | 03/25/58 | 7,000,000 | 7,408,345 |
| 24 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Commercial & Residential (continued) | ||||
| American Home Mortgage Assets | ||||
| Series 2007-1, Class A1 (P) | 0.871 | 02/25/47 | 5,629,410 | $3,448,166 |
| BAMLL-DB Trust | ||||
| Series 2012-OSI , Class A1 (S) | 2.343 | 04/13/29 | 3,418,863 | 3,468,273 |
| BCAP LLC Trust | ||||
| Series 2009, Class 7A1 (P) (S) | 6.120 | 08/26/36 | 2,290,316 | 2,347,996 |
| Series 2011, Class 21A5 (P) (S) | 3.105 | 06/26/34 | 3,561,694 | 3,575,161 |
| Series 2012-RR9, Class 2A5 (P) (S) | 0.374 | 08/26/46 | 4,645,354 | 4,506,774 |
| BCRR Trust | ||||
| Series 2009-1, Class 2A1 (P) (S) | 5.858 | 07/17/40 | 3,200,000 | 3,790,397 |
| Bear Stearns Commercial Mortgage Securities | ||||
| Series 2005-T20, Class A4A (P) | 5.149 | 10/12/42 | 2,240,000 | 2,470,066 |
| Citigroup Mortgage Loan Trust, Inc. | ||||
| Series 2010-8, Class 5A6 (S) | 4.000 | 11/25/36 | 5,693,241 | 5,908,929 |
| Series 2010-8, Class 6A6 (S) | 4.500 | 12/25/36 | 5,521,649 | 5,846,466 |
| Series 2012-1, Class 1A1 (P) (S) | 0.574 | 06/25/35 | 5,014,947 | 4,874,835 |
| Commercial Mortgage Pass Through Certificates | ||||
| Series 2006, Class C8 | 5.377 | 12/10/46 | 2,075,000 | 1,826,840 |
| Series 2007-C9, Class A4 (P) | 5.800 | 12/10/49 | 2,475,000 | 2,909,437 |
| Countrywide Home Loan Mortgage Pass Through Trust | ||||
| Series 2004-25, Class 1A1 (P) | 0.534 | 02/25/35 | 4,150,937 | 3,686,173 |
| Series 2004-25, Class 2A1 (P) | 0.544 | 02/25/35 | 5,865,235 | 5,282,788 |
| Series 2006-3, Class 3A1 (P) | 0.454 | 02/25/36 | 2,892,495 | 2,181,346 |
| Credit Suisse Mortgage Capital Certificates | ||||
| Series 2010-16, Class A3 (P) (S) | 4.091 | 06/25/50 | 2,450,000 | 2,390,433 |
| Series 2010-20R, Class 5A6 (P) (S) | 3.500 | 09/27/35 | 3,536,003 | 3,549,987 |
| Deutsche ALT-A Securities, Inc. Alternate Loan Trust | ||||
| Series 2007-OA2, Class A1 (P) | 0.942 | 04/25/47 | 2,813,485 | 2,197,419 |
| First Horizon Alternative Mortgage Securities | ||||
| Series 2005-AA12, Class 1A1 (P) | 2.494 | 02/25/36 | 2,925,015 | 2,256,254 |
| FREMF Mortgage Trust | ||||
| Series 2011-K701, Class C (P) (S) | 4.286 | 07/25/48 | 6,125,000 | 6,293,866 |
| Series 2012-K710, Class C (P) (S) | 3.819 | 06/25/47 | 4,500,000 | 4,455,896 |
| GS Mortgage Securities Corp. II | ||||
| Series 2007, Class G10 (P) | 5.791 | 08/10/45 | 5,325,000 | 5,251,238 |
| Harborview Mortgage Loan Trust | ||||
| Series 2007-3, Class 2A1A (P) | 0.405 | 05/19/47 | 4,099,908 | 3,189,716 |
| Indymac INDA Mortgage Loan Trust | ||||
| Series 2005-AR2, Class 1A1 (P) | 2.540 | 01/25/36 | 1,637,247 | 1,537,454 |
| Indymac Index Mortgage Loan Trust | ||||
| Series 2005-16IP, Class A1 (P) | 0.524 | 07/25/45 | 2,785,743 | 2,289,959 |
| Jefferies & Company, Inc. | ||||
| Series 2008-R1, Class A (P) (S) | 7.537 | 06/25/47 | 3,114,959 | 2,293,096 |
| Series 2009-R2, Class 4A (P) (S) | 2.865 | 05/26/37 | 2,026,110 | 2,028,752 |
| Series 2009-R9, Class 1A1 (P) (S) | 2.690 | 08/26/46 | 1,771,593 | 1,795,237 |
| Series 2010-R8, Class 1A1 (P) (S) | 0.410 | 02/26/47 | 1,242,398 | 1,221,303 |
| JPMorgan Chase Commercial Mortgage Securities Corp. | ||||
| Series 2005-CB13, Class A2FX (S) | 5.130 | 01/12/43 | 111,939 | 112,669 |
| Series 2006-LDP9, Class AJ | 5.411 | 05/15/47 | 2,800,000 | 2,224,334 |
| Series 2010-C1, Class A1 (S) | 3.853 | 06/15/43 | 2,694,876 | 2,861,109 |
| Series 2011-CCHP, Class A (P) (S) | 2.600 | 07/15/28 | 599,976 | 600,344 |
| JPMorgan Re-REMIC | ||||
| Series 2009-12, Class 1A1 (P) (S) | 5.790 | 07/26/37 | 550,909 | 567,722 |
| Series 2011-2 , Class 1A3 (P) (S) | 0.854 | 08/26/37 | 3,906,601 | 3,788,781 |
| 25 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Commercial & Residential (continued) | ||||
| LB-UBS Commercial Mortgage Trust | ||||
| Series 2006-C6, Class A4 | 5.372 | 09/15/39 | 526,000 | $599,962 |
| Lehman XS Trust | ||||
| Series 2007-4N, Class 3A2A (P) | 0.922 | 03/25/47 | 849,333 | 670,648 |
| Merrill Lynch/Countrywide Commercial Mortgage Trust | ||||
| Series 2006-4, Class A (P) | 0.326 | 12/12/49 | 846,398 | 841,906 |
| Morgan Stanley Re-REMIC Trust | ||||
| Series 2011-KEYA, Class 1A (S) | 4.250 | 12/19/40 | 3,764,080 | 3,809,283 |
| MortgageIT Trust | ||||
| Series 2004-2, Class A1 (P) | 0.574 | 12/25/34 | 2,398,642 | 2,353,080 |
| Nomura Resecuritization Trust | ||||
| Series 2011-1RA, Class 1A5 (P) (S) | 2.520 | 03/26/36 | 3,903,163 | 3,915,302 |
| OBP Depositor LLC Trust | ||||
| Series 2010-OBP, Class A (S) | 4.646 | 07/15/45 | 2,500,000 | 2,892,438 |
| RBSSP Resecuritization Trust | ||||
| Series 2012-6, Class 4A1 (P) (S) | 0.540 | 01/26/36 | 4,220,851 | 3,604,704 |
| Series 2012-6, Class 5A1 (P) (S) | 0.670 | 12/26/35 | 2,897,257 | 2,622,857 |
| Series 2012-6, Class 6A1 (P) (S) | 0.544 | 11/26/35 | 4,742,611 | 4,286,434 |
| Series 2012-6, Class 7A1 (P) (S) | 0.404 | 02/26/37 | 3,324,893 | 3,071,650 |
| Series 2012-6, Class 9A1 (P) (S) | 0.554 | 11/26/35 | 2,413,205 | 2,324,515 |
| Series 2012-6, Class 10A1 (P) (S) | 0.354 | 08/26/36 | 3,158,063 | 2,859,416 |
| Series 2013-1, Class 4A1 (P) (S) | 0.374 | 01/26/37 | 2,082,900 | 1,869,403 |
| Structured Asset Mortgage Investments, Inc. | ||||
| Series 2005-AR5, Class A3 (P) | 0.455 | 07/19/35 | 2,685,373 | 2,641,566 |
| Series 2005-AR6, Class 2A1 (P) | 0.514 | 09/25/45 | 4,081,207 | 2,974,902 |
| WaMu Mortgage Pass Through Certificates | ||||
| Series 2004-AR8, Class A1 (P) | 0.670 | 06/25/44 | 2,120,462 | 1,875,623 |
| Series 2005-11, Class A1 (P) | 0.524 | 08/25/45 | 4,442,709 | 4,160,375 |
| Series 2005-AR1, Class A1A (P) | 0.524 | 01/25/45 | 1,982,667 | 1,883,222 |
| Series 2005-AR6, Class 2A1A (P) | 0.434 | 04/25/45 | 5,437,263 | 5,083,352 |
| Series 2005-AR8, Class 1A (P) | 0.474 | 07/25/45 | 3,806,498 | 3,544,672 |
| Series 2005-AR9, Class A1A (P) | 0.524 | 07/25/45 | 2,538,267 | 2,439,117 |
| Series 2005-AR13, Class A1A1 (P) | 0.494 | 10/25/45 | 4,223,643 | 3,966,166 |
| Series 2005-AR13, Class A1B2 (P) | 0.634 | 10/25/45 | 2,366,993 | 2,109,045 |
| Series 2005-AR17, Class A1A2 (P) | 0.494 | 12/25/45 | 3,422,859 | 3,080,135 |
| Series 2005-AR19, Class A1A1 (P) | 0.474 | 12/25/45 | 3,845,406 | 3,582,499 |
| Wells Fargo Mortgage Backed Securities Trust | ||||
| Series 2005-AR4, Class 2A2 (P) | 2.698 | 04/25/35 | 2,947,607 | 2,982,368 |
| Series 2005-AR9, Class 3A1 (P) | 2.679 | 06/25/34 | 858,042 | 870,217 |
| Series 2005-AR12, Class 2A6 (P) | 2.626 | 06/25/35 | 1,742,223 | 1,752,847 |
| U.S. Government Agency 0.2% | 1,602,393 | |||
| Federal Home Loan Mortgage Corp. | ||||
| Freddie Mac Series 3733, Class A | 4.000 | 04/15/28 | 585,796 | 598,811 |
| Freddie Mac Series 3829 IO | 4.500 | 08/15/39 | 7,710,722 | 1,003,582 |
| Asset Backed Securities 3.2% | $35,318,776 | |||
| (Cost $34,035,769) | ||||
| Cabela's Master Credit Card Trust | ||||
| Series 2010-2A, Class A1 (S) | 2.290 | 09/17/18 | 3,000,000 | 3,117,789 |
| Carrington Mortgage Loan Trust | ||||
| Series 2006-FRE1, Class A2 (P) | 0.314 | 07/25/36 | 3,493,262 | 3,388,265 |
| GSAMP Trust | ||||
| Series 2007-HE2, Class A2A (P) | 0.324 | 03/25/47 | 959,691 | 946,887 |
| 26 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Asset Backed Securities (continued) | ||||
| Long Beach Mortgage Loan Trust | ||||
| Series 2005-WL2, Class M1 (P) | 0.674 | 08/25/35 | 3,446,785 | $3,371,190 |
| Morgan Stanley ABS Capital I | ||||
| Series 2004-WMC3, Class M2 (P) | 0.999 | 01/25/35 | 3,950,000 | 3,845,570 |
| Nationstar Home Equity Loan Trust | ||||
| Series 2007-A, Class AV2 (P) | 0.304 | 03/25/37 | 960,637 | 959,921 |
| SLC Student Loan Trust | ||||
| Series 2010-B, Class A1 (P) (S) | 4.000 | 07/15/42 | 1,708,845 | 1,806,470 |
| SLM Student Loan Trust | ||||
| Series 20011-1, Class A1 (P) | 0.724 | 03/25/26 | 3,905,551 | 3,936,991 |
| Series 2012-C, Class A1 (P) (S) | 1.306 | 08/15/23 | 1,556,136 | 1,571,131 |
| Soundview Home Equity Loan Trust | ||||
| Series 2005-OPT3, Class A4 (P) | 0.504 | 11/25/35 | 1,673,723 | 1,645,372 |
| Structured Asset Securities Corp. | ||||
| Series 2007-BC3, Class 2A1 (P) | 0.264 | 05/25/47 | 2,612,438 | 2,559,873 |
| Series 2008-BC4, Class A3 (P) | 0.454 | 11/25/37 | 3,638,732 | 3,519,458 |
| TAL Advantage LLC | ||||
| Series 2010-2A, Class A (S) | 4.300 | 10/20/25 | 2,402,500 | 2,455,994 |
| Series 2011-1A, Class A (S) | 4.600 | 01/20/26 | 2,120,000 | 2,193,865 |
| Shares | Value | |||
| Common Stocks 0.0% | $4 | |||
| (Cost $607,055) | ||||
| Industrials 0.0% | 4 | |||
| Air Freight & Logistics 0.0% | ||||
| General Maritime Corp. (I) | 417 | 4 | ||
| Materials 0.0% | 0 | |||
| Paper & Forest Products 0.0% | ||||
| NewPage Corp. (I) | 1,300 | 0 | ||
| Preferred Securities 0.2% | $1,527,844 | |||
| (Cost $1,749,403) | ||||
| Energy 0.2% | 1,474,327 | |||
| Oil, Gas & Consumable Fuels 0.2% | ||||
| Apache Corp., Series D, 6.000% | 13,780 | 652,207 | ||
| SandRidge Energy, Inc., 8.500% | 7,440 | 822,120 | ||
| Materials 0.0% | 53,517 | |||
| Metals & Mining 0.0% | ||||
| Molycorp, Inc., 5.500% | 1,808 | 53,517 | ||
| Warrants 0.0% | $0 | |||
| (Cost $0) | ||||
| General Maritime Corp. (Expiration Date: 05/17/2017, Strike Price: $42.50) (I) | 646 | 0 | ||
| 27 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Yield | Shares | Value | ||
| Short-Term Investments 5.4% | $59,072,820 | |||
| (Cost $59,072,820) | ||||
| Money Market Funds 5.0% | 54,766,343 | |||
| State Street Institutional Liquid Reserves Fund | 0.1447% (Y) | 54,766,343 | 54,766,343 | |
| Par value^ | Value | |||
| Repurchase Agreement 0.4% | 4,306,477 | |||
| Repurchase Agreement with State Street Corp., dated 1-31-13 at | ||||
| 0.010% to be repurchased at $4,306,478 on 2-1-13, collateralized | ||||
| by $4,585,000 Federal National Mortgage Association, 2.080% due | ||||
| 11-2-22 (valued at $4,501,484, including interest) | 4,306,477 | 4,306,477 | ||
| Total investments (Cost $1,075,798,598)† 102.5% | $1,118,076,134 | |||
| Other assets and liabilities, net (2.5%) | ($26,822,326) | |||
| Total net assets 100.0% | $1,091,253,808 | |||
| ^The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund. All par values are denominated in U.S. Dollars unless otherwise indicated. |
| Currency Abbreviations | |
| BRL | Brazilian Real |
| COP | Colombian Peso |
| EUR | Euro |
| GBP | Pound Sterling |
| HUF | Hungarian Forint |
| IDR | Indonesian Rupiah |
| MXN | Mexican Peso |
| MYR | Malaysian Ringgit |
| PLN | Polish Zloty |
| RON | Romanian New Leu |
| RUB | Russian Ruble |
| THB | Thai Baht |
| TRY | Turkish Lira |
| ZAR | South African Rand |
| 28 |
| Multi Sector Bond Fund Fund’s investments As of 1-31-13 (Unaudited) |
| Notes to Portfolio of Investments IO Interest-Only Security - (Interest Tranche of Stripped Mortgage Pool). Rate shown is the annualized yield at the end of the period. LIBOR London Interbank Offered Rate PIK Paid In Kind TBA To Be Announced. A forward mortgage-backed securities trade issued by a U.S. Government Agency, to be delivered at an agreed-upon future settlement date. TBD To Be Determined (C) Security purchased on a when-issued or delayed delivery. (D) Par value of foreign bonds is expressed in local currency as shown parenthetically. (H) Non-income producing - Issuer is in default. (I) Non-income producing security. (K) Underlying issuer is shown parenthetically in security description. (M) Term loans are variable rate obligations. The coupon rate shown represents the rate at period end. (P) Variable rate obligation. The coupon rate shown represents the rate at period end. (Q) Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date. (S) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $198,547,264 or 18.2% of the Fund's net assets as of 1-31-13. (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. (Y) The rate shown is the annualized seven-day yield as of 1-31-13. (Z) Zero coupon bonds are issued at a discount from their principal amount in lieu of paying interest periodically. † At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $1,078,816,681. Net unrealized appreciation aggregated $39,259,453, of which $47,457,132 related to appreciated investment securities and $8,197,679 related to depreciated investment securities. |
| The Fund had the following country concentration as a percentage of net assets on 1-31-13: |
| United States | 80.7% | |
| Canada | 2.5% | |
| United Kingdom | 2.2% | |
| Netherlands | 1.3% | |
| Luxembourg | 1.3% | |
| France | 1.1% | |
| Brazil | 1.0% | |
| Mexico | 1.0% | |
| Cayman Islands | 0.8% | |
| Italy | 0.7% | |
| Other Countries | 7.4% |
| 29 |
| Multi Sector Bond Fund Statement of Assets and Liabilities — January 31, 2013 (Unaudited) |
| Assets | |
| Investments, at value (Cost $1,075,798,598) | $ 1,118,076,134 |
| Foreign currency, at value (Cost $54,130) | 51,248 |
| Cash held at broker for futures contracts | 2,809,385 |
| Cash collateral for swap contracts | 8,333,000 |
| Receivable for investments sold | 79,653,531 |
| Receivable for delayed delivery securities sold | 6,672,380 |
| Receivable for forward foreign currency | |
| exchange contracts | 227,648 |
| Dividends and interest receivable | 8,959,141 |
| Other receivables and prepaid expenses | 3,622 |
| Total assets | 1,224,786,089 |
| Liabilities | |
| Payable for investments purchased | 93,843,750 |
| Payable for forward foreign currency exchange | |
| contracts | 197,294 |
| Payable for delayed delivery securities | |
| purchased | 33,644,969 |
| Payable for fund shares repurchased | 72,989 |
| Swap contracts, at value (includes net | |
| unamortized upfront payments of $100,352) | 5,290,511 |
| Payable for futures variation margin | 324,711 |
| Distributions payable | 143 |
| Payable to affiliates | |
| Accounting and legal services fees | 6,879 |
| Transfer agent fees | 7 |
| Trustees' fees | 395 |
| Other liabilities and accrued expenses | 150,633 |
| Total liabilities | 133,532,281 |
| Net assets | 1,091,253,808 |
| Net assets consist of | |
| Paid-in capital | $ 1,054,092,391 |
| Undistributed net investment income | 3,058,922 |
| Accumulated net realized gain (loss) on | |
| investments, futures contracts, foreign currency | |
| transactions and swap agreements | (9,080,021) |
| Net unrealized appreciation (depreciation) on | |
| investments, futures contracts, translation of | |
| assets and liabilities in foreign currencies and | |
| swap agreements | 43,182,516 |
| Net assets | $ 1,091,253,808 |
| 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 ($26,247 ÷ 2,500 shares)1 | $ 10.50 |
| Class I ($26,250 ÷ 2,500 shares) | $ 10.50 |
| Class NAV ($1,091,201,311 ÷ 103,927,189 | |
| shares) | $ 10.50 |
| Maximum offering price per share | |
| Class A (net asset value per share ÷ 95.5%)2 | $ 10.99 |
| 1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charges. 2 On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced. |
| See notes to financial statements. | |
| 30 |
| Multi Sector Bond Fund Statement of Operations — For the six months ended January 31, 2013 (Unaudited) |
| Investment income | ||
| Interest | $ 25,258,675 | |
| Dividends | 60,002 | |
| Total investment income | 25,318,677 | |
| Expenses | ||
| Investment management fees | 3,929,481 | |
| Distribution and service fees | 39 | |
| Accounting and legal services fees | 72,888 | |
| Transfer agent fees | 38 | |
| Trustees' fees | 6,182 | |
| Professional fees | 43,480 | |
| Custodian fees | 121,205 | |
| Registration and filing fees | 11,330 | |
| Other | 8,928 | |
| Total expenses | 4,193,571 | |
| Less expense reductions and amounts | ||
| recaptured | (18,226) | |
| Net expenses | 4,175,345 | |
| Net investment income | 21,143,332 | |
| Realized and unrealized gain (loss) | ||
| Net realized gain (loss) on | ||
| Investments | 13,119,985 | |
| Futures contracts | (1,005,586) | |
| Swap contracts | (8,003,050) | |
| Foreign currency transactions | (767,957) | |
| 3,343,392 | ||
| Change in net unrealized appreciation | ||
| (depreciation) of | ||
| Investments | 12,936,431 | |
| Futures contracts | 5,955,458 | |
| Swap contracts | (919,447) | |
| Translation of assets and liabilities in foreign | ||
| currencies | 105,837 | |
| 18,078,279 | ||
| Net realized and unrealized gain | 21,421,671 | |
| Increase in net assets from operations | $ 42,565,003 | |
| See notes to financial statements. | |
| 31 |
| Multi Sector Bond Fund Statements of Changes in Net Assets |
| Six months | ||||
| ended | Year ended | |||
| 1/31/13 | 7/31/12 | |||
| (Unaudited) | ||||
| Increase (decrease) in net assets | ||||
| From operations | ||||
| Net investment income | $ 21,143,332 | $ 44,883,578 | ||
| Net realized gain (loss) | 3,343,392 | (10,452,527) | ||
| Change in net unrealized appreciation | ||||
| (depreciation) | 18,078,279 | 5,977,353 | ||
| Increase in net assets resulting from | ||||
| operations | 42,565,003 | 40,408,404 | ||
| Distributions to shareholders | ||||
| From net investment income | ||||
| Class A | (429) | (964) | ||
| Class I | (472) | (1,054) | ||
| Class NAV | (20,848,961) | (45,112,792) | ||
| From net realized gain | ||||
| Class A | — | (114) | ||
| Class I | — | (114) | ||
| Class NAV | — | (4,647,740) | ||
| Total distributions | (20,849,862) | (49,762,778) | ||
| From Fund share transactions | (56,442) | 55,637,380 | ||
| Total increase | 21,658,699 | 46,283,006 | ||
| Net assets | ||||
| Beginning of period | 1,069,595,109 | 1,023,312,103 | ||
| End of period | $ 1,091,253,808 | $ 1,069,595,109 | ||
| Undistributed net investment income | $ 3,058,922 | $ 2,765,452 | ||
| See notes to financial statements. | |
| 32 |
| Multi Sector Bond Fund Financial Highlights (For a share outstanding throughout the period) |
| Class A Shares | ||||
| Period ended | ||||
| 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | |
| Per share operating performance | ||||
| Net asset value, beginning of period | $10.30 | $10.41 | $10.25 | $10.00 |
| Net investment income3 | 0.17 | 0.38 | 0.39 | 0.25 |
| Net realized and unrealized gain (loss) on | ||||
| investments | 0.20 | (0.05) | 0.26 | 0.25 |
| Total from investment operations | 0.37 | 0.33 | 0.65 | 0.50 |
| Less distributions | ||||
| From net investment income | (0.17) | (0.39) | (0.46) | (0.25) |
| From net realized gain | — | (0.05) | (0.03) | — |
| Total distributions | (0.17) | (0.44) | (0.49) | (0.25) |
| Net asset value, end of period | $10.50 | $10.30 | $10.41 | $10.25 |
| Total return (%)4,5 | 3.636 | 3.27 | 6.37 | 5.066 |
| 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 and amounts | ||||
| recaptured | 1.248 | 1.25 | 1.24 | 1.198 |
| Expenses including reductions and amounts | ||||
| recaptured | 1.248 | 1.25 | 1.24 | 1.198 |
| Net investment income | 3.328 | 3.81 | 3.75 | 3.268 |
| Portfolio turnover (%) | 39 | 60 | 80 | 68 |
| 1 Six months ended 1-31-13. Unaudited. 2 Period from 11-2-09 (commencement of operations) to 7-31-10. 3 Based on the 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 shown. 6 Not annualized. 7 Less than $500,000. 8 Annualized. |
| See notes to financial statements. | |
| 33 |
| Multi Sector Bond Fund Financial Highlights (For a share outstanding throughout the period) |
| Class I Shares | ||||
| Period ended | ||||
| 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | |
| Per share operating performance | ||||
| Net asset value, beginning of period | $10.30 | $10.41 | $10.24 | $10.00 |
| Net investment income3 | 0.19 | 0.42 | 0.42 | 0.26 |
| Net realized and unrealized gain (loss) on | ||||
| investments | 0.20 | (0.06) | 0.26 | 0.25 |
| Total from investment operations | 0.39 | 0.36 | 0.68 | 0.51 |
| Less distributions | ||||
| From net investment income | (0.19) | (0.42) | (0.48) | (0.27) |
| From net realized gain | — | (0.05) | (0.03) | — |
| Total distributions | (0.19) | (0.47) | (0.51) | (0.27) |
| Net asset value, end of period | $10.50 | $10.30 | $10.41 | $10.24 |
| Total return (%)4 | 3.805 | 3.64 | 6.70 | 5.185 |
| Ratios and supplemental data | ||||
| Net assets, end of period (in millions) | $— 6 | $— 6 | $— 6 | $— 6 |
| Ratios (as a percentage of average net | ||||
| assets): | ||||
| Expenses before reductions and amounts | ||||
| recaptured | 0.847 | 0.85 | 0.81 | 1.207 |
| Expenses including reductions and amounts | ||||
| recaptured | 0.847 | 0.88 | 0.95 | 0.957 |
| Net investment income | 3.657 | 4.16 | 4.01 | 3.487 |
| Portfolio turnover (%) | 39 | 60 | 80 | 68 |
| 1 Six months ended 1-31-13. Unaudited. 2 Period from 11-2-09 (commencement of operations) to 7-31-10. 3 Based on the average daily shares outstanding. 4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown. 5 Not annualized. 6 Less than $500,000. 7 Annualized. |
| See notes to financial statements. | |
| 34 |
| Multi Sector Bond Fund Financial Highlights (For a share outstanding throughout the period) |
| Class NAV Shares | ||||
| Period ended | ||||
| 1-31-131 | 7-31-12 | 7-31-11 | 7-31-102 | |
| Per share operating performance | ||||
| Net asset value, beginning of period | $10.30 | $10.41 | $10.24 | $10.00 |
| Net investment income3 | 0.20 | 0.43 | 0.44 | 0.29 |
| Net realized and unrealized gain (loss) on | ||||
| investments | 0.20 | (0.05) | 0.26 | 0.24 |
| Total from investment operations | 0.40 | 0.38 | 0.70 | 0.53 |
| Less distributions | ||||
| From net investment income | (0.20) | (0.44) | (0.50) | (0.29) |
| From net realized gain | — | (0.05) | (0.03) | — |
| Total distributions | (0.20) | (0.49) | (0.53) | (0.29) |
| Net asset value, end of period | $10.50 | $10.30 | $10.41 | $10.24 |
| Total return (%)4 | 3.875 | 3.78 | 6.92 | 5.325 |
| Ratios and supplemental data | ||||
| Net assets, end of period (in millions) | $1,091 | $1,070 | $1,023 | $684 |
| Ratios (as a percentage of average net | ||||
| assets): | ||||
| Expenses before reductions and amounts | ||||
| recaptured | 0.756 | 0.75 | 0.77 | 0.786 |
| Expenses including reductions and amounts | ||||
| recaptured | 0.746 | 0.75 | 0.77 | 0.776 |
| Net investment income | 3.776 | 4.29 | 4.21 | 3.906 |
| Portfolio turnover (%) | 39 | 60 | 80 | 68 |
| 1 Six months ended 1-31-13. Unaudited. 2 Period from 11-2-09 (commencement of operations) to 7-31-10. 3 Based on the average daily shares outstanding. 4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown. 5 Not annualized. 6 Annualized. |
| See notes to financial statements. | |
| 35 |
| Notes to financial statements (unaudited) Note 1 — Organization John Hancock Multi Sector Bond Fund (the Fund) is a series of John Hancock Funds II (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 total return, which consists of income on its investments 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 shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class NAV shares are sold to John Hancock affiliated funds of funds and 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and registration fees for each class may differ. Note 2 - Significant accounting policies The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund: Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Investments by the Fund in other open-end management investment companies are valued at their respective net asset values each business day. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, taking 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. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. Swaps are marked-to-market daily based upon values from third party vendors, which may include a registered commodities exchange, or broker quotations. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities and forward foreign currency contracts traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost. Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of foreign securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value |
| 36 |
| foreign securities in order to adjust for events that may occur between the close of foreign exchanges and the close of the NYSE. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type: |
| Level 2 | Level 3 | |||
| Total Market | Level 1 | Significant | Significant | |
| Value at | Quoted | Observable | Unobservable | |
| 1-31-13 | Price | Inputs | Inputs | |
| Corporate Bonds | $488,000,271 | — | $488,000,271 | — |
| U.S. Government & Agency Obligations | 37,746,630 | — | 37,746,630 | — |
| Foreign Government Obligations | 63,758,944 | — | 63,758,944 | — |
| Capital Preferred Securities | 157,568 | — | 157,568 | — |
| Convertible Bonds | 14,322,487 | — | 14,322,487 | — |
| Structured Notes | 6,714,526 | — | 5,983,455 | $731,071 |
| Term Loans | 215,168,474 | — | 215,168,474 | — |
| Collateralized Mortgage | ||||
| Obligations | 196,287,790 | — | 194,418,387 | 1,869,403 |
| Asset Backed Securities | 35,318,776 | — | 35,318,776 | — |
| Common Stocks | 4 | — | — | 4 |
| Preferred Securities | 1,527,844 | $705,724 | 822,120 | — |
| Warrants | — | — | — | — |
| Short-Term Investments | 59,072,820 | 54,766,343 | 4,306,477 | — |
| Total Investments in Securities | $1,118,076,134 | $55,472,067 | $1,060,003,589 | $2,600,478 |
| Other Financial Instruments: | ||||
| Futures | $6,275,151 | $6,275,151 | — | — |
| Forward Foreign Currency Contracts | $30,354 | — | $30,354 | — |
| Interest Rate Swaps | ($1,476,898) | — | ($1,476,898) | — |
| Credit Default Swaps | ($3,813,613) | — | ($3,813,613) | — |
| When-issued/delayed delivery securities. The Fund may purchase or sell debt securities on a when-issued or delayed-delivery basis, or in a “To Be Announced” (TBA) or “forward commitment” transaction, with delivery or payment to occur at a later date beyond the normal settlement period. TBA securities resulting from these transactions are included in the Portfolio of Investments or in a schedule to the Portfolio of Investments (Sale Commitments Outstanding). At the time that the Fund enters into a commitment to purchase or sell a security, |
| 37 |
| the transaction is recorded and the value of the security is reflected in the Fund’s net asset value. The price of such security and the date that the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time that the Fund enters into this type of transaction, the Fund is required to have sufficient cash and/or liquid securities to cover its commitments. Certain risks may arise upon entering into when-issued or delayed-delivery securities transactions, including the potential inability of counterparties to meet the terms of their contracts, and the issuer’s failure to issue the securities due to political, economic or other factors. Additionally, losses may arise due to declines in the value of the securities prior to settlement date. 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. 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. Term loans (Floating rate loans). The Fund may invest in term loans, which often include debt securities that are rated below investment grade at the time of purchase. Term loans are generally subject to legal or contractual restrictions on resale. The liquidity of term loans, including the volume and frequency of secondary market trading in such loans, varies significantly over time and among individual loans. During periods of infrequent trading, valuing a term loan can be more difficult and buying and selling a term loan at an acceptable price can be more difficult and delayed, which could result in a loss. The Fund’s ability to receive payments of principal, interest and other amounts in connection with term loans will depend primarily on the financial condition of the borrower. The Fund’s failure to receive scheduled payments on a term loan due to a default, bankruptcy or other reason, would adversely affect the Fund’s income and would likely reduce the value of its assets. Because many term loans are not rated by independent credit rating agencies, a decision to invest in a particular loan could depend exclusively on the subadviser’s credit analysis of the borrower and/or term loan agents. The Fund may have limited rights to enforce the terms of an underlying loan. Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the Fund becomes aware of the dividends. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. Foreign currency translation. Assets, including investments and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments. |
| 38 |
| 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. Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft. In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $391. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit. Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known. Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class. Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required. Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses for an unlimited period. 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 July 31, 2012, the Fund has $6,904,134 of capital loss carryforward available to offset future net realized capital gains. The following table details the capital loss carryforward available as of July 31, 2012: |
| CAPITAL LOSS CARRYFORWARD | |||
| SHORT-TERM | LONG-TERM | ||
| $3,175,894 | $3,728,240 | ||
| 39 |
| As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years. Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are paid 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 accounting principles generally accepted in the United States of America. Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to foreign currency transactions, derivative transactions and amortization and accretion on debt securities. New accounting pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. ASU 2011-11 may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments. Note 3 — Derivative instruments The Fund may invest in derivatives in order to meet its investment objective. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them. The Fund has entered into collateral agreements with certain counterparties to mitigate counterparty risk on over-the-counter derivatives. Subject to established minimum levels, collateral is generally determined based on the net aggregate unrealized gain or loss on contracts with a particular counterparty. Collateral pledged to the Fund is held by the custodian bank for the benefit of the Fund and can be in the form of cash or debt securities issued by the U.S. government or related agencies; collateral posted by the Fund is held in a segregated account at the Fund's custodian and is noted in the accompanying portfolio of investments, or if cash is posted, on the Statement of assets and liabilities. As of January 31, 2013, $8,333,000 was posted by the Fund for the benefit of counterparties. |
| 40 |
| Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the Fund to the risk of loss of up to the notional value of the futures contracts. Use of short futures contracts subjects the Fund to unlimited risk of loss. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures collateral receivable / payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. During the six months ended January 31, 2013, the Fund used futures contracts to manage the duration of the portfolio. During the six months ended January 31, 2013, the Fund held futures contracts with aggregate settlement values ranging from $298.0 million to $333.6 million as measured at each quarter end. The following table summarizes the contracts held at January 31, 2013. |
| Aggregate | Unrealized | ||||
| Number of | Expiration | Settlement | Appreciation | ||
| Open Contracts | Contracts | Position | Date | Value | (Depreciation) |
| U.S. Treasury 10-Year Note Futures | 1,616 | Short | Mar 2013 | ($212,150,500) | $3,733,896 |
| U.S. Treasury 30-Year Bond Futures | 403 | Short | Mar 2013 | (57,817,906) | 2,397,586 |
| U.S. Treasury Ultra Long Bond | |||||
| Futures | 30 | Short | Mar 2013 | (4,695,938) | 275,980 |
| U.S. Treasury 2-Year Note Futures | 170 | Long | Mar 2013 | 37,471,719 | (13,909) |
| U.S. Treasury 5-Year Note Futures | 129 | Long | Mar 2013 | 15,961,734 | (118,402) |
| $6,275,151 | |||||
| Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral, the risk that currency movements will not occur thereby reducing the Fund’s total return, and the potential for losses in excess of the amounts recognized on the Statement of assets and liabilities. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. Realized gains or losses, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, are recorded upon delivery or receipt of the currency or settlement with the counterparty. |
| 41 |
| During the six months ended January 31, 2013, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates and gain exposure to foreign currency. During the six months ended January 31, 2013, the Fund held forward foreign currency contracts with USD notional values ranging from $9.5 million to $17.9 million as measured at each quarter end. The following table summarizes the contracts held at January 31, 2013. |
| Principal Amount | Principal Amount | Unrealized | |||
| Covered by | Covered by | Appreciation | |||
| Currency | Contract | Contract (USD) | Counterparty | Settlement Date | (Depreciation) |
| Buys | |||||
| BRL | 2,085,189 | $993,511 | Citibank N.A. | 2/4/2013 | $53,612 |
| BRL | 1,465,210 | 715,616 | Citibank N.A. | 3/4/2013 | 18,034 |
| CLP | 23,950,002 | 50,533 | Citibank N.A. | 3/19/2013 | (42) |
| EUR | 8,825 | 11,979 | Citibank N.A. | 3/15/2013 | 6 |
| MXN | 3,826,171 | 298,000 | Citibank N.A. | 5/6/2013 | 256 |
| NGN | 41,075,630 | 258,000 | Citibank N.A. | 3/21/2013 | (466) |
| NGN | 47,947,500 | 300,000 | Citibank N.A. | 4/17/2013 | (1,827) |
| RON | 550,845 | 159,781 | Citibank N.A. | 3/18/2013 | 9,929 |
| RON | 136,770 | 40,000 | Citibank N.A. | 3/19/2013 | 2,132 |
| RON | 397,070 | 119,276 | Citibank N.A. | 4/25/2013 | 2,495 |
| RUB | 62,497,210 | 1,968,819 | Citibank N.A. | 2/1/2013 | 113,589 |
| RUB | 9,742,075 | 312,858 | Citibank N.A. | 3/18/2013 | 9,591 |
| RUB | 9,174,983 | 295,622 | Citibank N.A. | 3/19/2013 | 8,008 |
| RUB | 43,242,430 | 1,413,567 | Citibank N.A. | 4/24/2013 | 9,083 |
| $6,937,562 | $224,400 | ||||
| Sells | |||||
| BRL | 2,085,190 | $1,020,888 | Citibank N.A. | 2/4/2013 | ($26,236) |
| BRL | 939,288 | 461,000 | Citibank N.A. | 3/4/2013 | (9,314) |
| COP | 850,704,000 | 479,000 | Citibank N.A. | 2/19/2013 | 382 |
| EUR | 4,858,400 | 6,468,377 | Citibank N.A. | 3/15/2013 | (129,780) |
| GBP | 154,600 | 245,672 | Citibank N.A. | 3/15/2013 | 531 |
| RON | 550,845 | 168,686 | Citibank N.A. | 3/18/2013 | (1,024) |
| RON | 136,770 | 41,464 | Citibank N.A. | 3/19/2013 | (668) |
| RUB | 62,497,210 | 2,054,921 | Citibank N.A. | 2/1/2013 | (27,486) |
| RUB | 1,312,790 | 43,000 | Citibank N.A. | 3/18/2013 | (451) |
| $10,983,008 | ($194,046) | ||||
| |
| Currency Abbreviations | |
| BRL | Brazilian Real |
| CLP | Chilean Peso |
| COP | Colombian Peso |
| EUR | Euro |
| GBP | Pound Sterling |
| MXN | Mexican Peso |
| 42 |
| NGN | Nigerian Naira |
| RON | Romanian New Leu |
| RUB | Russian Ruble |
| Swaps. Swap agreements are agreements between a Fund and counterparty to exchange cash flows, assets, foreign currencies or market-linked returns at specified intervals. Swap agreements are privately negotiated in the over-the-counter market (OTC swaps) or may be executed on a registered commodities exchange (centrally cleared swaps). Swaps are marked-to-market daily and the change in value is recorded as a component of unrealized appreciation/depreciation of swap contracts. The value of the swap will typically impose collateral posting obligations on the party that is considered out-of-the-money on the swap. Upfront payments made/received by the Fund are amortized/accreted for financial reporting purposes, with the unamortized/unaccreted portion included in the Statement of assets and liabilities. A termination payment by the counterparty or the Fund is recorded as realized gain or loss, as well as the net periodic payments received or paid by the Fund. Entering into swap agreements involves, to varying degrees, elements of credit, market and documentation risk that may amount to values that are in excess of the amounts recognized on the Statement of assets and liabilities. Such risks involve the possibility that there will be no liquid market for the swap, or that a counterparty may default on its obligation or delay payment under the swap terms. The counterparty may disagree or contest the terms of the swap. Market risks may also accompany the swap, including interest rate risk. The Fund may also suffer losses if it is unable to terminate or assign outstanding swaps or reduce its exposure through offsetting transactions. Interest rate swaps. Interest rate swaps represent an agreement between a Fund and counterparty to exchange cash flows based on the difference between two interest rates applied to a notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. The Fund settles accrued net interest receivable or payable under the swap contracts at specified, future intervals. During the six months ended January 31, 2013, the Fund used interest rate swaps to manage the duration of the portfolio. The following table summarizes the interest rate swap contracts held as of January 31, 2013. |
| USD Notional | Payments Made | Payments Received | Maturity | ||
| Counterparty | Amount | by Fund | by Fund | Date | Market Value |
| Citibank N.A. | $10,160,000 | Fixed 3.5825% | 3 Month LIBOR (a) | Dec 2019 | ($1,476,898) |
| (a) At 1-31-13, the 3 Month LIBOR rate was 0.29800% |
| Credit default swaps. Credit default swaps (CDS) involve the exchange of a fixed rate premium (paid by the Buyer), for protection against the loss in value of an underlying debt instrument, referenced entity or index, in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a “guarantor” (the Seller), receiving the premium and agreeing to contingent payments that are specified within the credit default agreement. The Fund may enter into CDS in which it may act as either Buyer or Seller. By acting as the Seller, the Fund may incur economic leverage since it would be obligated to pay the Buyer the notional amount of the contract in the event of a default. The amount of loss in such case could be significant, but would typically be reduced by any recovery value on the underlying credit. |
| 43 |
| During the six months ended January 31, 2013, the Fund used CDS as a Buyer of protection to manage against potential credit events. During the six months ended January 31, 2013, the Fund held credit default swap contracts with total USD notional amounts ranging from $165.3 million to $231.6 million as measured at each quarter end. The following table summarizes the credit default swap contracts the Fund held as of January 31, 2013 as a Buyer of protection. |
| Unamortized | |||||||
| Upfront | Unrealized | ||||||
| Reference | USD Notional | (Pay)/Received | Maturity | Payment Paid | Appreciation | Market | |
| Counterparty | Obligation | Amount | Fixed Rate | Date | (Received) | (Depreciation) | Value |
| Citibank N.A. | CDX.NA.IG.18 | $110,400,000 | (1.000%) | Jun 2017 | ($332,958) | ($867,779) | ($1,200,737) |
| Credit Suisse | |||||||
| International | LCDX.NA.18 | 24,750,000 | (2.500%) | Jun 2017 | 1,238,174 | (1,864,183) | (626,009) |
| JP Morgan Chase | |||||||
| Bank | LCDX.NA.18 | 30,195,000 | (2.500%) | Jun 2017 | 1,510,571 | (2,274,303) | (763,732) |
| $165,345,000 | $2,415,787 | ($5,006,265) | ($2,590,478) | ||||
| Implied credit spreads are utilized in determining the market value of CDS agreements in which the Fund is the Seller at period end. The implied credit spread generally represents the yield of the instrument above a credit-risk free rate, such as the U.S. Treasury Bond Yield, and may include upfront payments required to be made to enter into the agreement. It also serves as an indicator of the current status of the payment/performance risk and represents the likelihood or risk of default for the credit derivative. Wider credit spreads represent a deterioration of the referenced entity’s creditworthiness and an increased risk of default or other credit event occurring as defined under the terms of the agreement. For CDS agreements where implied credit spreads are not reported or available, the average credit rating on the underlying index is shown. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s creditworthiness and a greater likelihood of a credit event occurring. This is also represented by a decrease in the average credit rating of the underlying index. The maximum potential amount of future payments (undiscounted) that a Fund as the Seller could be required to make under any CDS agreement would be an amount equal to the notional amount of the agreement. The Fund used CDS as a Seller of protection during the six months ended January 31, 2013 to take a long exposure to the reference credit indices. During the six months ended January 31, 2013, the Fund acted as Seller on credit default swap contracts with total USD notional amounts ranging up to $13.8 million as measured at each quarter end. The following table summarizes the credit default swap contracts the Fund held as of January 31, 2013 where the Fund acted as a Seller of protection. |
| Unamortized | ||||||||
| Implied | USD | Upfront | Unrealized | |||||
| Reference | Credit | Notional | (Pay)/Received | Maturity | Payment Paid | Appreciation | Market | |
| Counterparty | Obligation | Spread | Amount | Fixed Rate | Date | (Received) | (Depreciation) | Value |
| CMBX NA | ||||||||
| Citibank N.A. | AAA 4 | 4.06% | $4,000,000 | 0.350 % | Feb 2051 | ($770,547) | $626,757 | ($143,790) |
| Citibank N.A. | CMBX NA | 3.86% | 0.500 % | Feb 2051 | (287,973) | 161,315 | (126,658) | |
| 44 |
| AM 4 | 1,150,000 | |||||||
| CMBX NA | ||||||||
| Citibank N.A. | AM 4 | 3.86% | 4,000,000 | 0.500 % | Feb 2051 | (401,728) | (38,821) | (440,549) |
| CMBX NA | ||||||||
| Citibank N.A. | AM 4 | 3.86% | 3,000,000 | 0.500 % | Feb 2051 | (517,469) | 187,057 | (330,412) |
| CMBX NA | ||||||||
| Citibank N.A. | AM 4 | 3.86% | 1,650,000 | 0.500 % | Feb 2051 | (337,718) | 155,992 | (181,726) |
| $13,800,000 | ($2,315,435) | $1,092,300 | ($1,223,135) | |||||
| Fair value of derivative instruments by risk category The table below summarizes the fair value of derivatives held by the Fund at January 31, 2013 by risk category: |
| FINANCIAL | ASSET | LIABILITY | ||
| RISK | STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES |
| LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE | |
| Interest rate contracts | Payable for futures | Futures | $6,407,462 † | ($132,311) † |
| Swap contracts, at value | Interest rate swaps | - | (1,476,898) | |
| Credit contracts | Swap contracts, at value | Credit default swaps | - | (3,813,613) |
| Foreign currency | Receivable/Payable for foreign | Foreign forward | ||
| contracts | currency exchange contracts | currency contracts | 227,648 | (197,294) |
| Total | $6,635,110 | ($5,620,116) | ||
| † Reflects cumulative appreciation/depreciation on futures as disclosed above. Only the year end variation margin is separately disclosed in the Statement of assets and liabilities. |
| Effect of derivative instruments on the Statement of operations The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended January 31, 2013: |
| Statement of Operations Location - Net Realized Gain (Loss) on: | ||||
| Foreign Currency | ||||
| Risk | Futures Contracts | Swap Contracts | Transactions* | Total |
| Interest rate contracts | ($1,005,586) | ($158,477) | - | ($1,164,063) |
| Credit contracts | - | (7,844,573) | - | (7,844,573) |
| Foreign currency contracts | - | - | ($339,213) | (339,213) |
| Total | ($1,005,586) | ($8,003,050) | ($339,213) | ($9,347,849) |
| * Realized gain/loss associated with 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 January 31, 2013: |
| 45 |
| Statement of Operations Location - Change in Unrealized Appreciation (Depreciation) of: | ||||
| Translation of assets | ||||
| and liabilities in | ||||
| Risk | Futures Contracts | Swap Contracts | foreign currencies* | Total |
| Interest rate contracts | $5,955,458 | $279,804 | - | $6,235,262 |
| Credit contracts | - | (1,199,251) | - | (1,199,251) |
| Foreign currency contracts | - | - | $113,268 | 113,268 |
| Total | $5,955,458 | ($919,447) | $113,268 | $5,149,279 |
| *Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in this caption on the Statements 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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC). Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.740% of the first $250,000,000 of the Fund’s average daily net assets, b) 0.700% of the next $500,000,000 of the Fund’s average daily net assets and c) 0.675% of the Fund’s average daily net assets in excess of $750,000,000. The Adviser has a subadvisory agreement with Stone Harbor Investment Partners LP. The Fund is not responsible for payment of the subadvisory fees. The Adviser has contractually agreed to waive a portion of its management fee for certain funds (the Participating Funds) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Funds that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Funds that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Funds in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the funds and with the approval of the Board of Trustees. The Adviser has voluntarily agreed to waive fees and/or reimburse operating expenses for Class A and Class I 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. The fee waivers and/or expense reimbursements are such that these expenses will not exceed 1.25% and 1.05% for Class A and Class I shares, respectively. The fee waivers and/or reimbursements will continue in effect until terminated at any time by the Adviser on notice to the Fund. Prior to December 1, 2012, these fee waivers and/or expense reimbursements were contractual. |
| 46 |
| Additionally, the Adviser has voluntarily agreed to waive and/or reimburse other expenses of the Fund excluding advisory fees, Rule 12b-1 fees, service fees, transfer agent fees, blue sky fees, taxes, brokerage commissions, interest expense, printing and postage, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. The waivers are such that these expenses will not exceed 0.15% of average net assets. This voluntary expense reimbursement will continue in effect until terminated at any time by the Adviser on notice to the Fund. Accordingly, these expense reductions described above amounted to $18,226 for Class NAV shares for the six months ended January 31, 2013. The investment management fees, including the impact of the waivers and reimbursements described above, incurred for the six months ended January 31, 2013 were equivalent to the net effective rate of 0.70% of the Fund’s average daily net assets. Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements, for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred. There were no expenses waived or reimbursed subject to potential recovery. For the six months ended January 31, 2013 the Fund did not recapture any expenses. Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 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 pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for distribution and service fees, expressed as an annual percentage of average daily net assets. Sales charges. Class A shares are assessed up-front sales charges. During the six months ended January 31, 2013, there were no up-front sales charges received by the Distributor with regard to sales of Class A shares. Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, there were no CDSCs received by the Distributor for Class A shares. Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by |
| 47 |
| certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets. Class level expenses. Class level expenses for the six months ended January 31, 2013 were: |
| Distribution and | Transfer agent | |||
| Class | service fees | fees | ||
| A | $39 | $25 | ||
| I | - | 13 | ||
| Total | $39 | $38 | ||
| The Fund did not incur printing and postage and state registration fees for the six months ended January 31, 2013. Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets. Note 6 - Fund share transactions Transactions in Fund shares for the six months ended January 31, 2013 and for the year ended July 31, 2012 were as follows: |
| Six months ended | Year ended | |||
| 1/31/13 | 7/31/12 | |||
| Shares | Amount | Shares | Amount | |
| Class NAV shares | ||||
| Sold | 7,085,325 | $73,840,375 | 11,100,561 | $112,124,293 |
| Distributions reinvested | 1,998,649 | 20,848,961 | 4,945,978 | 49,759,698 |
| Repurchased | (9,009,790) | (94,745,778) | (10,488,234) | (106,246,611) |
| Net increase | 74,184 | ($56,442) | 5,558,305 | $55,637,380 |
| There were no fund share transactions for Class A and Class I for the six months ended January 31, 2013 and for the year ended July 31, 2012. Affiliates of the Fund owned 100% of shares of beneficial interest of each of Class A, Class I and Class NAV on January 31, 2013. Note 7 - Purchase and sale of securities Purchases and sales of securities, other than short-term securities, aggregated $423,532,229 and $417,079,651, respectively, for the six months ended January 31, 2013. Note 8 - Investment by affiliated funds Certain investors in the Fund are affiliated funds and are managed by the Adviser and its affiliates. The affiliated funds do not invest in the Fund for the purpose of exercising management or control; however, this investment |
| 48 |
| may represent a significant portion of the Fund’s net assets. For the six months ended January 31, 2013, the following funds had an affiliate ownership of 5% or more of the Fund’s net assets: |
| Fund | Affiliated Concentration |
| John Hancock Lifestyle Balanced Fund | 38.9% |
| John Hancock Lifestyle Conservative Fund | 16.8% |
| John Hancock Lifestyle Moderate Fund | 15.9% |
| John Hancock Lifestyle Growth Fund | 14.0% |
| 49 |
| Special Shareholder Meeting Unaudited On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Multi Sector Bond Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal: Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II. |
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| 50 |
| More information |
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management Services, LLC |
| Steven R. Pruchansky, Vice Chairperson | |
| Charles L. Bardelis* | Investment subadviser |
| James R. Boyle† | Stone Harbor Investment Partners LP |
| Craig Bromley† | |
| Peter S. Burgess* | Principal distributor |
| William H. Cunningham | John Hancock Funds, LLC |
| Grace K. Fey | |
| Theron S. Hoffman* | Custodian |
| Deborah C Jackson | State Street Bank and Trust Company |
| Hassell H. McClellan | |
| Gregory A. Russo | Transfer agent |
| Warren A. Thomson† | John Hancock Signature Services, Inc. |
| *Member of the Audit Committee | |
| †Non-Independent Trustee | Legal counsel |
| K&L Gates LLP | |
| Officers | |
| Hugh McHaffie | |
| President | |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer | |
| The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record, if any, for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site. The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC's Public Reference Room. We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291. |
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 51 |
A look at performance
Total returns for the period ended January 31, 2013
| Average annual total returns (%) | Cumulative total returns (%) | ||||||||
| with maximum sales charge | with maximum sales charge | ||||||||
| Since1 | Since1 | ||||||||
| 1-year | 5-year | 10-year | inception | 6-months | 1-year | 5-year | 10-year | inception | |
| Class A | 3.98 | — | — | –2.19 | 3.32 | 3.98 | — | — | –5.40 |
| Class I2 | 7.57 | — | — | –0.55 | 6.75 | 7.57 | — | — | –1.36 |
| Class R62,3 | 7.77 | — | — | –0.40 | 6.84 | 7.77 | — | — | –1.00 |
| Class NAV2 | 7.76 | — | — | –0.35 | 6.83 | 7.76 | — | — | –0.86 |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 3.00%.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 11-30-13 for Class A and Class R6 shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. For all other classes the net expenses equal the gross expenses. The expense ratios are as follows:
| Class A | Class I | Class R6 | Class NAV | |
| Net (%) | 1.60 | 1.17 | 1.05 | 0.94 |
| Gross (%) | 1.74 | 1.17 | 1.40 | 0.94 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on 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.
See the following page for footnotes.
| 6 | Currency Strategies Fund | Semiannual report |
| Without | With maximum | |||
| Start date | sales charge | sales charge | Index | |
| Class I2 | 8-2-10 | $9,864 | $9,864 | $10,017 |
| Class R62,3 | 8-2-10 | 9,900 | 9,900 | 10,017 |
| Class NAV2 | 8-2-10 | 9,914 | 9,914 | 10,017 |
Citigroup 1-Month U.S. Treasury Bill Index is a market value-weighted index of public obligators of the U.S. Treasury with maturities of one month.
It is not possible to invest directly in an index. Index figures do not reflect expenses, which would have resulted in lower values if they did.
Footnotes related to performance pages
1 From 8-2-10.
2 For certain types of investors as described in the Fund’s prospectuses.
3Class R6 shares were first offered on 11-1-11. The returns prior to this date are those of Class A shares that have been recalculated to apply the gross fees and expenses of Class R6 shares.
| Semiannual report | Currency Strategies Fund | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012 with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,064.80 | $8.33 |
| Class I | 1,000.00 | 1,067.50 | 5.94 |
| Class R6 | 1,000.00 | 1,068.40 | 5.47 |
| Class NAV | 1,000.00 | 1,068.30 | 4.85 |
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 January 31, 2013, 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:
| 8 | Currency Strategies Fund | Semiannual report |
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,017.10 | $8.13 |
| Class I | 1,000.00 | 1,019.50 | 5.80 |
| Class R6 | 1,000.00 | 1,019.90 | 5.35 |
| Class NAV | 1,000.00 | 1,020.50 | 4.74 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.60%, 1.14%, 1.05% and 0.93% for Class A, Class I, Class R6 and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| Semiannual report | Currency Strategies Fund | 9 |
Currency allocation1
1 As a percentage of net assets on 1-31-13. The Fund’s assets are exposed to both short (unfavored) and long (favored) currency positions.
2 Less than 0.05% of net assets.
The Fund will use currency transactions to seek to achieve gains in the Fund. If currencies do not perform as expected, the Fund could have significant losses that exceed the amount invested in the currency instruments. Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if the creditor is unable or unwilling to make principal or interest payments. International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. These risks are more significant in emerging markets. The use of hedging and derivatives transactions could produce disproportionate gains or losses and may increase volatility and costs.
| 10 | Currency Strategies Fund | Semiannual report |
Fund’s investments
As of 1-31-13 (unaudited)
| Short-Term Investments 96.6% | $1,082,638,355 | ||||
| (Cost $1,082,638,355) | |||||
| Maturity | |||||
| Yield (%)* | date | Par value | Value | ||
| U.S. Government 91.9% | $1,030,617,597 | ||||
| U.S. Treasury Bill | 0.085 | 06-27-13 | $386,000,000 | 385,866,934 | |
| U.S. Treasury Bill | 0.090 | 05-23-13 | 25,000,000 | 24,993,066 | |
| U.S. Treasury Bill | 0.100 | 06-20-13 | 520,000,000 | 519,799,222 | |
| U.S. Treasury Bill | 0.135 | 05-23-13 | 100,000,000 | 99,958,375 | |
| Yield (%) | Shares | Value | |||
| Money Market Funds 4.7% | $52,020,758 | ||||
| State Street Institutional Liquid Reserves Fund | 0.145 (Y) | 52,020,758 | 52,020,758 | ||
| Total investments (Cost $1,082,638,355)† 96.6% | $1,082,638,355 | ||||
| Other assets and liabilities, net 3.4% | $38,426,838 | ||||
| Total net assets 100.0% | $1,121,065,193 | ||||
The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund.
* Yield represents the annualized yield at the date of purchase.
(Y) The rate shown is the annualized seven-day yield as of 1-31-13.
† At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $1,082,638,355. There was no unrealized appreciation or depreciation on investment securities as of 1-31-13.
The following table summarizes the forward foreign currency contracts held by the Fund at 1-31-13 :
| PRINCIPAL AMOUNT | PRINCIPAL AMOUNT | UNREALIZED | ||||
| COVERED BY | COVERED BY | SETTLEMENT | APPRECIATION | |||
| CURRENCY | CONTRACT | CONTRACT (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
| Buys | ||||||
| AUD | 20,362,966 | $21,325,523 | Barclays Bank PLC | 3-20-13 | ($161,691) | |
| AUD | 20,362,966 | 21,340,185 | J. Aron & Company | 3-20-13 | (176,353) | |
| EUR | 234,578,207 | 307,361,791 | Barclays Bank PLC | 3-20-13 | 11,225,817 | |
| EUR | 234,578,207 | 306,904,630 | J. Aron & Company | 3-20-13 | 11,682,977 | |
| EUR | 184,708,723 | 244,216,155 | Morgan Stanley | 3-20-13 | 6,642,230 | |
| Capital Services, Inc. | ||||||
| GBP | 68,081,765 | 109,267,001 | Barclays Bank PLC | 3-20-13 | (1,316,156) | |
| GBP | 68,081,765 | 109,297,440 | J. Aron & Company | 3-20-13 | (1,346,595) | |
| GBP | 68,081,765 | 109,278,444 | Morgan Stanley | 3-20-13 | (1,327,599) | |
| Capital Services, Inc. | ||||||
| JPY | 4,202,720,831 | 48,951,505 | Barclays Bank PLC | 3-21-13 | (2,978,301) | |
| See notes to financial statements | Semiannual report | Currency Strategies Fund | 11 |
| PRINCIPAL AMOUNT | PRINCIPAL AMOUNT | UNREALIZED | ||||
| COVERED BY | COVERED BY | SETTLEMENT | APPRECIATION | |||
| CURRENCY | CONTRACT | CONTRACT (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
| Buys (continued) | ||||||
| JPY | 4,202,720,831 | $48,892,444 | J. Aron & Company | 3-21-13 | ($2,919,240) | |
| NOK | 693,229,330 | 123,095,659 | Barclays Bank PLC | 3-20-13 | 3,577,633 | |
| NOK | 873,493,627 | 155,087,705 | J. Aron & Company | 3-20-13 | 4,525,154 | |
| NOK | 269,559,036 | 47,992,473 | Morgan Stanley | 3-20-13 | 1,263,855 | |
| Capital Services, Inc. | ||||||
| NZD | 14,115,581 | 11,555,057 | Barclays Bank PLC | 3-20-13 | 255,961 | |
| NZD | 14,115,581 | 11,602,302 | J. Aron & Company | 3-20-13 | 208,716 | |
| NZD | 27,441,452 | 22,579,101 | Morgan Stanley | 3-20-13 | 382,156 | |
| Capital Services, Inc. | ||||||
| SEK | 279,609,278 | 42,996,637 | J. Aron & Company | 3-20-13 | 940,712 | |
| SEK | 204,167,655 | 30,888,628 | Morgan Stanley | 3-20-13 | 1,193,946 | |
| Capital Services, Inc. | ||||||
| SGD | 14,328,739 | 11,659,761 | Barclays Bank PLC | 3-20-13 | (82,808) | |
| SGD | 26,931,896 | 21,918,125 | J. Aron & Company | 3-20-13 | (158,408) | |
| $1,806,210,566 | $31,432,006 | |||||
| Sells | ||||||
| AUD | 187,506,631 | 194,862,183 | Barclays Bank PLC | 3-20-13 | (18,996) | |
| AUD | 187,506,631 | 195,184,508 | J. Aron & Company | 3-20-13 | 303,329 | |
| AUD | 167,143,665 | 173,516,062 | Morgan Stanley | 3-20-13 | (201,285) | |
| Capital Services, Inc. | ||||||
| CAD | 150,353,212 | 151,463,886 | Barclays Bank PLC | 3-20-13 | 871,329 | |
| CAD | 176,818,074 | 178,244,030 | J. Aron & Company | 3-20-13 | 1,144,482 | |
| CAD | 150,353,212 | 150,720,259 | Morgan Stanley | 3-20-13 | 127,702 | |
| Capital Services, Inc. | ||||||
| EUR | 50,815,725 | 66,472,051 | Barclays Bank PLC | 3-20-13 | (2,542,290) | |
| EUR | 49,869,484 | 65,171,703 | J. Aron & Company | 3-20-13 | (2,557,518) | |
| EUR | 6,166,566 | 8,365,903 | Morgan Stanley | 3-20-13 | (9,093) | |
| Capital Services, Inc. | ||||||
| JPY | 10,022,142,846 | 118,680,066 | Barclays Bank PLC | 3-21-13 | 9,048,702 | |
| JPY | 10,022,142,846 | 118,886,887 | J. Aron & Company | 3-21-13 | 9,255,523 | |
| JPY | 5,819,422,015 | 69,245,699 | Morgan Stanley | 3-21-13 | 5,587,539 | |
| Capital Services, Inc. | ||||||
| NOK | 373,891,305 | 66,769,254 | Barclays Bank PLC | 3-20-13 | (1,551,634) | |
| NOK | 373,891,305 | 66,750,728 | J. Aron & Company | 3-20-13 | (1,570,160) | |
| NZD | 236,853,479 | 195,032,054 | Barclays Bank PLC | 3-20-13 | (3,151,837) | |
| NZD | 236,853,479 | 195,013,191 | J. Aron & Company | 3-20-13 | (3,170,700) | |
| NZD | 47,927,633 | 40,159,666 | Morgan Stanley | 3-20-13 | 56,878 | |
| Capital Services, Inc. | ||||||
| SEK | 626,185,707 | 95,066,447 | Barclays Bank PLC | 3-20-13 | (3,331,360) | |
| SEK | 626,185,707 | 94,907,438 | J. Aron & Company | 3-20-13 | (3,490,369) | |
| SGD | 119,349,241 | 97,961,341 | Barclays Bank PLC | 3-20-13 | 1,532,718 | |
| SGD | 131,952,398 | 108,278,851 | J. Aron & Company | 3-20-13 | 1,667,464 | |
| SGD | 41,294,621 | 33,889,440 | Morgan Stanley | 3-20-13 | 525,311 | |
| Capital Services, Inc. | ||||||
| $2,484,641,647 | $8,525,735 | |||||
Currency Abbreviations
| AUD | Australian Dollar | NOK | Norwegian Krone | |
| CAD | Canadian Dollar | NZD | New Zealand Dollar | |
| EUR | Euro | SEK | Swedish Krona | |
| GBP | Pound Sterling | SGD | Singapore Dollar | |
| JPY | Japanese Yen |
| 12 | Currency Strategies Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 1-31-13 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
| Assets | |
| Investments, at value (Cost $1,082,638,355) | $1,082,638,355 |
| Receivable for fund shares sold | 366,476 |
| Receivable for forward foreign currency exchange contracts | 72,020,134 |
| Interest receivable | 6,022 |
| Receivable due from adviser | 590 |
| Other receivables and prepaid expenses | 28,730 |
| Total assets | 1,155,060,307 |
| Liabilities | |
| Payable for forward foreign currency exchange contracts | 32,062,393 |
| Payable for fund shares repurchased | 1,826,081 |
| Payable to affiliates | |
| Accounting and legal services fees | 6,375 |
| Transfer agent fees | 8,583 |
| Trustees’ fees | 386 |
| Other liabilities and accrued expenses | 91,296 |
| Total liabilities | 33,995,114 |
| Net assets | 1,121,065,193 |
| Net assets consist of | |
| Paid-in capital | $1,090,217,987 |
| Accumulated net investment loss | (9,178,766) |
| Accumulated net realized gain (loss) on foreign currency transactions | 68,231 |
| Net unrealized appreciation (depreciation) on investments and translation | |
| of assets and liabilities in foreign currencies | 39,957,741 |
| Net assets | $1,121,065,193 |
| 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 A1 ($19,516,435 ÷ 2,028,865 shares) | $9.62 |
| Class I ($65,161,020 ÷ 6,697,586 shares) | $9.73 |
| Class R6 ($3,931,860 ÷ 402,475 shares) | $9.77 |
| Class NAV ($1,032,455,878 ÷ 105,544,412 shares) | $9.78 |
| Maximum offering price per share | |
| Class A (net asset value per share ÷ 97%)2 | $9.92 |
1 Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced.
| See notes to financial statements | Semiannual report | Currency Strategies Fund | 13 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the six-month period ended 1-31-13 (unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| Investment income | |
| Interest | $586,795 |
| Expenses | |
| Investment management fees | 4,622,885 |
| Distribution and service fees | 22,809 |
| Accounting and legal services fees | 67,812 |
| Transfer agent fees | 42,624 |
| Trustees’ fees | 5,727 |
| State registration fees | 35,454 |
| Printing and postage | 19,079 |
| Professional fees | 47,913 |
| Custodian fees | 71,070 |
| Registration and filing fees | 26,605 |
| Other | 8,163 |
| Total expenses | 4,970,141 |
| Less expense reductions | (27,096) |
| Net expenses | 4,943,045 |
| Net investment loss | (4,356,250) |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Foreign currency transactions | (11,086,942) |
| (11,086,942) | |
| Change in net unrealized appreciation (depreciation) of | |
| Translation of assets and liabilities in foreign currencies | 85,885,771 |
| 85,885,771 | |
| Net realized and unrealized gain | 74,798,829 |
| Increase in net assets from operations | $70,442,579 |
| 14 | Currency Strategies Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| Six months | ||
| ended | Year | |
| 1-31-13 | ended | |
| (Unaudited) | 7-31-12 | |
| Increase (decrease) in net assets | ||
| From operations | ||
| Net investment loss | ($4,356,250) | ($8,193,951) |
| Net realized gain (loss) | (11,086,942) | 63,776,497 |
| Change in net unrealized appreciation (depreciation) | 85,885,771 | 13,616,959 |
| Increase (decrease) in net assets resulting from operations | 70,442,579 | 69,199,505 |
| Distributions to shareholders | ||
| From net realized gain | ||
| Class A | (242,826) | — |
| Class I | (841,400) | — |
| Class R6 | (52,774) | — |
| Class NAV | (13,441,057) | — |
| Total distributions | (14,578,057) | — |
| From Fund share transactions | 107,258,424 | (21,577,247) |
| Total increase | 163,122,946 | 47,622,258 |
| Net assets | ||
| Beginning of period | 957,942,247 | 910,319,989 |
| End of period | $1,121,065,193 | $957,942,247 |
| Accumulated net investment loss | ($9,178,766) | ($4,822,516) |
| See notes to financial statements | Semiannual report | Currency Strategies Fund | 15 |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
| CLASS A SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 |
| Per share operating performance | |||
| Net asset value, beginning of period | $9.16 | $8.58 | $10.00 |
| Net investment loss3 | (0.07) | (0.14) | (0.14) |
| Net realized and unrealized gain (loss) on investments | 0.66 | 0.72 | (1.28) |
| Total from investment operations | 0.59 | 0.58 | (1.42) |
| Less distributions | |||
| From net realized gain | (0.13) | — | — |
| Net asset value, end of period | $9.62 | $9.16 | $8.58 |
| Total return (%)4,5 | 6.486 | 6.76 | (14.20)6 |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $20 | $11 | $6 |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions | 1.627 | 1.74 | 1.567 |
| Expenses including reductions and amounts recaptured | 1.607 | 1.60 | 1.567 |
| Net investment loss | (1.49)7 | (1.53) | (1.48)7 |
| Portfolio turnover (%) | — | — | — |
| 1 Six months ended 1-31-13. Unaudited 2 The inception date for Class A shares is 8-2-10. 3 Based on the 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 shown. 6 Not annualized. 7 Annualized. |
| CLASS I SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 |
| Per share operating performance | |||
| Net asset value, beginning of period | $9.24 | $8.61 | $10.00 |
| Net investment loss3 | (0.05) | (0.10) | (0.09) |
| Net realized and unrealized gain (loss) on investments | 0.67 | 0.73 | (1.30) |
| Total from investment operations | 0.62 | 0.63 | (1.39) |
| Less distributions | |||
| From net realized gain | (0.13) | — | — |
| Net asset value, end of period | $9.73 | $9.24 | $8.61 |
| Total return (%)4 | 6.755 | 7.32 | (13.90)5 |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $65 | $43 | $26 |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions | 1.146 | 1.17 | 1.056 |
| Expenses including reductions and amounts recaptured | 1.146 | 1.17 | 1.056 |
| Net investment loss | (1.02)6 | (1.10) | (0.98)6 |
| Portfolio turnover (%) | — | — | — |
| 1 Six months ended 1-31-13. Unaudited 2 The inception date for Class I shares is 8-2-10. 3 Based on the average daily shares outstanding. 4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown. 5 Not annualized. 6 Annualized. |
| 16 | Currency Strategies Fund | Semiannual report | See notes to financial statements |
| CLASS R6 SHARES Period ended | 1-31-131 | 7-31-122 | ||
| Per share operating performance | ||||
| Net asset value, beginning of period | $9.27 | $9.29 | ||
| Net investment income (loss)3 | (0.04) | (0.07) | ||
| Net realized and unrealized gain on investments | 0.67 | 0.05 | ||
| Total from investment operations | 0.63 | (0.02) | ||
| Less distributions | ||||
| From net realized gain | (0.13) | — | ||
| Net asset value, end of period | $9.77 | $9.27 | ||
| Total return (%)4 | 6.845 | (0.22)5 | ||
| Ratios and supplemental data | ||||
| Net assets, end of period (in millions) | $4 | $3 | ||
| Ratios (as a percentage of average net assets): | ||||
| Expenses before reductions | 1.566 | 1.406 | ||
| Expenses including reductions and amounts recaptured | 1.056 | 1.056 | ||
| Net investment income (loss) | (0.94)6 | (0.97)6 | ||
| Portfolio turnover (%) | — | — | ||
| 1 Six months ended 1-31-13. Unaudited |
| 2 The inception date for Class R6 shares is 11-1-11. |
| 3 Based on the average daily shares outstanding. |
| 4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown. |
| 5 Not annualized. |
| 6 Annualized. |
| CLASS NAV SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 |
| Per share operating performance | |||
| Net asset value, beginning of period | $9.28 | $8.63 | $10.00 |
| Net investment loss3 | (0.04) | (0.08) | (0.08) |
| Net realized and unrealized gain (loss) on investments | 0.67 | 0.73 | (1.29) |
| Total from investment operations | 0.63 | 0.65 | (1.37) |
| Less distributions | |||
| From net realized gain | (0.13) | — | — |
| Net asset value, end of period | $9.78 | $9.28 | $8.63 |
| Total return (%)4 | 6.835 | 7.53 | (13.70)5 |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $1,032 | $901 | $878 |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions | 0.936 | 0.94 | 0.956 |
| Expenses including reductions and amounts recaptured | 0.936 | 0.93 | 0.956 |
| Net investment loss | (0.81)6 | (0.86) | (0.86)6 |
| Portfolio turnover (%) | — | — | — |
| 1 Six months ended 1-31-13. Unaudited 2 The inception date for Class NAV shares is 8-2-10. 3 Based on the average daily shares outstanding. 4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown. 5 Not annualized. 6 Annualized. |
| See notes to financial statements | Semiannual report | Currency Strategies Fund | 17 |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock Currency Strategies Fund (the Fund) is a series of John Hancock Funds II (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 achieve total return from investments in currency markets.
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 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 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Investments by the Fund in open-end management investment companies are valued at their respective net asset values each business day. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, taking 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. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities and forward foreign currency contracts traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost. Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted.
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
| 18 | Currency Strategies Fund | Semiannual report |
when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of January 31, 2013, all investments are categorized as Level 2 (including forward currency contracts) under the hierarchy described above, except for money market funds, which are categorized as Level 1.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. 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.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $369. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense
| Semiannual report | Currency Strategies Fund | 19 |
estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
For federal income tax purposes, the Fund has a capital loss carryforward of $17,929,230 available to offset future net realized capital gains as of July 31, 2012. The following table details the capital loss carryforward available as of July 31, 2012:
| CAPITAL LOSS CARRYFORWARD | ||||
| EXPIRING | NO EXPIRATION DATE | |||
| JULY 31, 2019 | SHORT TERM | LONG TERM | ||
| $8,170,692 | $3,651,244 | $6,107,294 | ||
As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually.
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 and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to net operating losses and derivative transactions.
| 20 | Currency Strategies Fund | Semiannual report |
New accounting pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. ASU 2011-11 may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral, the risk that currency movements will not occur thereby reducing the Fund’s total return, and the potential for losses in excess of the amounts recognized on the Statement of assets and liabilities.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. Realized gains or losses, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, are recorded upon delivery or receipt of the currency or settlement with the counterparty.
During the six months ended January 31, 2013, the Fund used forward foreign currency contracts to gain and manage currency exposure. During the six months ended January 31, 2013, the Fund held forward foreign currency contracts with USD notional values ranging from $4.3 to $5.0 billion, as measured at each quarter end. Forward currency contracts are presented in a table at the end of the Fund’s investments.
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at January 31, 2013 by risk category:
| FINANCIAL | ASSET | LIABILITY | ||
| STATEMENT OF ASSETS AND | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
| RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
| Foreign Currency | Receivable/payable for | Forward foreign | $72,020,134 | ($32,062,393) |
| Contracts | forward foreign currency | currency | ||
| exchange contracts | contracts | |||
| Semiannual report | Currency Strategies Fund | 21 |
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 January 31, 2013:
| STATEMENT OF | FOREIGN CURRENCY | |
| RISK | OPERATION LOCATION | TRANSACTIONS* |
| Foreign Currency Contracts | Net realized gain (loss) on | ($11,086,942) |
*Realized gain/loss associated with forward 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 January 31, 2013:
| STATEMENT OF | TRANSLATION OF ASSETS AND | |
| RISK | OPERATION LOCATION | LIABILITIES IN FOREIGN CURRENCIES* |
| Foreign Currency Contracts | Change in unrealized | $85,885,771 |
| appreciation (depreciation) of | ||
*Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in this caption on the Statement of operations.
Note 4 — Guarantees and indemnifications
Under the Fund’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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.95% of the first $250,000,000 of the Fund’s average daily net assets, b) 0.90% of the next $250,000,000 of the Fund’s average daily net assets and c) 0.85% of the Fund’s average daily net assets in excess of $500,000,000. The Adviser has a subadvisory agreement with First Quadrant, L.P. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive a portion of its management fee for certain Funds (the Participating Portfolios) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each Fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the Funds and with the approval of the Board of Trustees.
| 22 | Currency Strategies Fund | Semiannual report |
The Adviser has contractually agreed to waive fees and/or reimburse certain expenses for each share class of the Fund 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. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.60% and 1.05% for Class A and Class R6 shares, respectively. The fee waiver and/or reimbursement will continue in effect until November 30, 2013, unless renewed by mutual agreement of the Fund and Adviser based upon a determination of that this is appropriate under the circumstances at the time. Prior to December 1, 2012 the fee waivers and/or reimbursements were such that these expense limitations did not exceed 1.60%, 1.24% and 1.05% for Class A, Class I and Class R6 shares, respectively.
Additionally, the Adviser has voluntarily agreed to waive other Fund level expenses excluding advisory fees, 12b-1 fees, service fees, transfer agent fees, printing and postage, blue sky fees, taxes, brokerage commissions, interest expenses, acquired fund fees, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. This voluntary expense reimbursement may be terminated at any time by the Adviser on notice to the Fund. The waivers are such that these expenses will not exceed 0.15% of the Fund’s average annual net assets.
Accordingly, these expense reductions amounted to $4,008, $888, $8,752 and $15,788 for Class A, Class I, Class R6 and Class NAV shares, respectively, for the six months ended January 31, 2013.
The investment management fees incurred for the six months ended January 31, 2013 were equivalent to a net annual effective rate of 0.88% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. The table below outlines the amounts recovered during the six months ended January 31, 2013, and the amount of waived or reimbursed expenses subject to potential recovery and the respective expiration dates. Certain reimbursements or waivers are not subject to recapture.
| AMOUNTS | |||||
| AMOUNTS ELIGIBLE | AMOUNTS ELIGIBLE | AMOUNTS ELIGIBLE | AMOUNTS ELIGIBLE | RECOVERED | |
| FOR RECOVERY | FOR RECOVERY | FOR RECOVERY | FOR RECOVERY | DURING THE | |
| THROUGH | THROUGH | THROUGH | THROUGH | PERIOD ENDED | |
| FUND | JULY 1, 2013 | JULY 1, 2014 | JULY 1, 2015 | JANUARY 1, 2016 | JANUARY 31, 2013 |
| Currency | — | — | $20,523 | $12,454 | $2,340 |
| Strategies | |||||
Amounts recovered by class
| FUND | CLASS A | |||
| Currency Strategies | $2,340 | |||
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
| Semiannual report | Currency Strategies Fund | 23 |
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 pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $7,787 for the six months ended January 31, 2013. Of this amount, $1,314 was retained and used for printing prospectuses, advertising, sales literature and other purposes and $6,473 was paid as sales commissions to broker-dealers.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, CDSCs received by the Distributor amounted to $1 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 Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
| CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
| A | $22,809 | $14,690 | $12,670 | $2,180 |
| I | — | 27,479 | 13,049 | 16,277 |
| R6 | — | 455 | 9,735 | 622 |
| Total | $22,809 | $42,624 | $35,454 | $19,079 |
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
| 24 | Currency Strategies Fund | Semiannual report |
Note 6 — Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the year ended July 31, 2012 were as follows:
| Six months ended 1-31-13 | Year ended 7-31-12 | |||
| Shares | Amount | Shares | Amount | |
| Class A shares | ||||
| Sold | 1,009,517 | $9,430,603 | 1,086,324 | $10,070,544 |
| Distributions reinvested | 25,805 | 242,826 | — | — |
| Repurchased | (202,411) | (1,889,583) | (594,882) | (5,444,349) |
| Net increase | 832,911 | $7,783,846 | 491,442 | $4,626,195 |
| Class I shares | ||||
| Sold | 3,102,634 | $29,319,531 | 4,047,716 | $37,829,410 |
| Distributions reinvested | 88,141 | 838,218 | — | — |
| Repurchased | (1,133,639) | (10,710,448) | (2,435,917) | (22,284,404) |
| Net increase | 2,057,136 | $19,447,301 | 1,611,799 | $15,545,006 |
| Class R6 shares1 | ||||
| Sold | 126,186 | $1,190,043 | 544,454 | $5,124,419 |
| Distributions reinvested | 5,526 | 52,774 | — | — |
| Repurchased | (53,981) | (510,418) | (219,710) | (2,094,427) |
| Net increase | 77,731 | $732,399 | 324,744 | $3,029,992 |
| Class NAV shares | ||||
| Sold | 10,955,062 | $103,318,386 | 19,606,407 | $180,330,637 |
| Distributions reinvested | 1,405,968 | 13,441,057 | — | — |
| Repurchased | (3,915,856) | (37,464,565) | (24,259,863) | (225,109,077) |
| Net increase (decrease) | 8,445,174 | $79,294,878 | (4,653,456) | ($44,778,440) |
| Net increase (decrease) | 11,412,952 | $107,258,424 | (2,225,471) | ($21,577,247) |
1 Prior period presented is from 11-1-11 (inception date) to 7-31-12.
Affiliates of the Fund owned 100% of shares of beneficial interest of Class NAV on January 31, 2013.
Note 7 — Purchase and sale of securities
All purchases and sales of the Fund were of short-term investments for the six months ended January 31, 2013.
Note 8 — Investment by affiliated funds
Certain investors in the Fund are affiliated funds and are managed by the Adviser 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. For the six months ended January 31, 2013, the following funds had an affiliate ownership of 5% or more of the Fund’s net assets:
| AFFILIATE | ||
| FUND | CONCENTRATION | |
| John Hancock Lifestyle Aggressive portfolio | 7.4% | |
| John Hancock Lifestyle growth portfolio | 23.2% | |
| John Hancock Lifestyle Balanced portfolio | 28.4% | |
| John Hancock Lifestyle Moderate portfolio | 10.0% | |
| John Hancock Lifestyle Conservative portfolio | 9.7% | |
| Semiannual report | Currency Strategies Fund | 25 |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Currency Strategies Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| 26 | Currency Strategies Fund | Semiannual report |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management |
| Steven R. Pruchansky, Vice Chairperson | Services, LLC |
| Charles L. Bardelis* | |
| James R. Boyle† | Subadviser |
| Craig Bromley† | First Quadrant, L.P. |
| Peter S. Burgess* | |
| William H. Cunningham | Principal distributor |
| Grace K. Fey | John Hancock Funds, LLC |
| Theron S. Hoffman* | |
| Deborah C. Jackson | Custodian |
| Hassell H. McClellan | State Street Bank and Trust Company |
| Gregory A. Russo | |
| Warren A. Thomson† | Transfer agent |
| John Hancock Signature Services, Inc. | |
| Officers | |
| Hugh McHaffie | Legal counsel |
| President | K&L Gates LLP |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer |
| *Member of the Audit Committee †Non-Independent Trustee |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| Semiannual report | Currency Strategies Fund | 27 |
| 1-800-225-5291 1-800-554-6713 TDD 1-800-338-8080 EASI-Line www.jhfunds.com |
| 364SA 1/13 | |
| This report is for the information of the shareholders of John Hancock Currency Strategies Fund. | 3/13 |
| It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. |
A look at performance
Total returns for the period ended January 31, 2013
| Average annual total returns (%) | Cumulative total returns (%) | ||||||||
| with maximum sales charge | with maximum sales charge | ||||||||
| Since | Since | ||||||||
| 1-year | 5-year | 10-year | inception 1 | 6-months | 1-year | 5-year | 10-year | inception 1 | |
| Class A | 16.48 | — | — | 7.74 | 12.86 | 16.48 | — | — | 13.27 |
| Class I2 | 23.09 | — | — | 11.61 | 19.03 | 23.09 | — | — | 20.15 |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 5.00%.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 11-30-13 for Class A and Class I shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
| Class A | Class I | |||
| Net (%) | 1.30 | 0.94 | ||
| Gross (%) | 5.62 | 7.00 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on 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.
See the following page for footnotes.
| 6 | Fundamental All Cap Core Fund | Semiannual report |
| Without | With maximum | |||
| Start date | sales charge | sales charge | Index | |
| Class I2 | 6-1-11 | $12,015 | $12,015 | $11,555 |
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, which would have resulted in lower values if they did.
Footnotes related to performance pages
1 From 6-1-11.
2 For certain types of investors, as described in the Fund’s prospectus.
| Semiannual report | Fundamental All Cap Core Fund | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012 with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,187.90 | $7.17 |
| Class I | 1,000.00 | 1,190.30 | 4.75 |
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 January 31, 2013, 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:
| 8 | Fundamental All Cap Core Fund | Semiannual report |
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,018.70 | $6.61 |
| Class I | 1,000.00 | 1,020.90 | 4.38 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.30% and 0.86% for Class A and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| Semiannual report | Fundamental All Cap Core Fund | 9 |
Portfolio summary
| Top 10 Holdings (44.3% of Net Assets on 1-31-13)1,2 | ||||
| Amazon.com, Inc. | 6.5% | Avery Dennison Corp. | 4.2% | |
| QUALCOMM, Inc. | 5.2% | The Goldman Sachs Group, Inc. | 4.2% | |
| JPMorgan Chase & Company | 4.7% | Bank of America Corp. | 4.0% | |
| Apple, Inc. | 4.6% | FactSet Research Systems, Inc. | 3.5% | |
| Lowe’s Companies, Inc. | 4.2% | Sensata Technologies Holding NV | 3.2% | |
| Sector Composition1,3 | ||||
| Financials | 26.5% | Energy | 7.8% | |
| Information Technology | 24.5% | Health Care | 5.6% | |
| Consumer Discretionary | 18.0% | Consumer Staples | 4.9% | |
| Industrials | 10.9% | Other | 1.8% | |
1 As a percentage of net assets on 1-31-13.
2 Cash and cash equivalents not included.
3 Large company stocks as a group could fall out of favor with the market, causing the Fund to underperform. The prices of medium and small company stocks can change more frequently and dramatically than those of large company stocks. Foreign investing, especially in emerging markets, has additional risks such as currency and market volatility and political and social instability. Hedging and other strategic transactions may increase volatility of a fund and, if the transaction is not successful, could result in a significant loss. If the Fund invests in illiquid securities, it may be difficult to sell them at a price approximating their value. For additional information on these and other risk considerations, please see the Fund’s prospectus. 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.
| 10 | Fundamental All Cap Core Fund | Semiannual report |
Fund’s investments
As of 1-31-13 (unaudited)
| Shares | Value | |
| Common Stocks 98.2% | $6,619,989 | |
| (Cost $5,837,918) | ||
| Consumer Discretionary 18.0% | 1,213,335 | |
| Hotels, Restaurants & Leisure 3.4% | ||
| Carnival Corp. | 3,953 | 153,060 |
| Starbucks Corp. | 1,317 | 73,910 |
| Household Durables 1.2% | ||
| Lennar Corp., Class A | 2,020 | 83,911 |
| Internet & Catalog Retail 7.2% | ||
| Amazon.com, Inc. (I) | 1,656 | 439,667 |
| Blue Nile, Inc. (I) | 1,316 | 44,073 |
| Media 2.0% | ||
| Corus Entertainment, Inc., B Shares | 2,702 | 67,564 |
| Omnicom Group, Inc. | 1,267 | 68,773 |
| Specialty Retail 4.2% | ||
| Lowe’s Companies, Inc. | 7,394 | 282,377 |
| Consumer Staples 4.9% | 327,354 | |
| Beverages 3.6% | ||
| Diageo PLC, ADR | 557 | 66,450 |
| SABMiller PLC | 1,558 | 77,776 |
| Tsingtao Brewery Company, Ltd., H Shares | 16,740 | 96,971 |
| Personal Products 1.3% | ||
| Avon Products, Inc. | 5,074 | 86,157 |
| Energy 7.8% | 529,427 | |
| Energy Equipment & Services 2.5% | ||
| National Oilwell Varco, Inc. | 855 | 63,390 |
| Schlumberger, Ltd. | 1,352 | 105,524 |
| Oil, Gas & Consumable Fuels 5.3% | ||
| Apache Corp. | 2,024 | 169,530 |
| Occidental Petroleum Corp. | 1,416 | 124,990 |
| Ultra Petroleum Corp. (I) | 3,622 | 65,993 |
| See notes to financial statements | Semiannual report | Fundamental All Cap Core Fund | 11 |
| Shares | Value | |
| Financials 26.5% | $1,786,493 | |
| Capital Markets 16.2% | ||
| AllianceBernstein Holding LP | 10,568 | 215,164 |
| Morgan Stanley | 8,335 | 190,455 |
| Northern Trust Corp. | 2,327 | 119,771 |
| State Street Corp. | 2,050 | 114,083 |
| T. Rowe Price Group, Inc. | 2,364 | 168,908 |
| The Goldman Sachs Group, Inc. | 1,897 | 280,490 |
| Diversified Financial Services 8.7% | ||
| Bank of America Corp. | 24,108 | 272,903 |
| JPMorgan Chase & Company | 6,713 | 315,847 |
| Insurance 1.6% | ||
| Prudential Financial, Inc. | 1,881 | 108,872 |
| Health Care 5.6% | 376,920 | |
| Health Care Equipment & Supplies 1.0% | ||
| Medtronic, Inc. | 1,473 | 68,642 |
| Health Care Providers & Services 4.6% | ||
| AMN Healthcare Services, Inc. (I) | 13,251 | 161,000 |
| Amsurg Corp. (I) | 1,916 | 59,798 |
| VCA Antech, Inc. (I) | 4,050 | 87,480 |
| Industrials 10.9% | 734,925 | |
| Aerospace & Defense 3.2% | ||
| American Science & Engineering, Inc. | 2,305 | 155,772 |
| L-3 Communications Holdings, Inc. | 840 | 63,773 |
| Commercial Services & Supplies 4.2% | ||
| Avery Dennison Corp. | 7,322 | 281,970 |
| Electrical Equipment 3.2% | ||
| Sensata Technologies Holding NV (I) | 6,403 | 216,037 |
| Professional Services 0.3% | ||
| Robert Half International, Inc. | 493 | 17,373 |
| Information Technology 24.5% | 1,651,535 | |
| Communications Equipment 6.4% | ||
| Cisco Systems, Inc. | 4,021 | 82,712 |
| QUALCOMM, Inc. | 5,303 | 350,157 |
| Computers & Peripherals 8.0% | ||
| Apple, Inc. | 680 | 309,611 |
| EMC Corp. (I) | 3,541 | 87,144 |
| NetApp, Inc. (I) | 4,016 | 144,576 |
| Internet Software & Services 4.6% | ||
| Bankrate, Inc. (I) | 8,483 | 104,935 |
| Google, Inc., Class A (I) | 145 | 109,575 |
| VistaPrint NV (I) | 2,638 | 94,572 |
| 12 | Fundamental All Cap Core Fund | Semiannual report | See notes to financial statements |
| Shares | Value | |
| IT Services 2.0% | ||
| Broadridge Financial Solutions, Inc. | 5,732 | $135,103 |
| Software 3.5% | ||
| FactSet Research Systems, Inc. | 2,520 | 233,150 |
| Total investments (Cost $5,837,918)† 98.2% | $6,619,989 | |
| Other assets and liabilities, net 1.8% | $120,788 | |
| Total net assets 100.0% | $6,740,777 | |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
ADR American Depositary Receipts
(I) Non-income producing security.
† At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $5,884,132. Net unrealized appreciation aggregated $735,857, of which $906,020 related to appreciated investment securities and $170,163 related to depreciated investment securities.
| See notes to financial statements | Semiannual report | Fundamental All Cap Core Fund | 13 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 1-31-13 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
| Assets | |
| Investments, at value (Cost $5,837,918) | $6,619,989 |
| Cash | 159,235 |
| Foreign currency, at value (Cost $2,036) | 2,038 |
| Receivable for fund shares sold | 48,325 |
| Dividends receivable | 1,547 |
| Receivable due from adviser | 2,723 |
| Other receivables and prepaid expenses | 14,214 |
| Total assets | 6,848,071 |
| Liabilities | |
| Payable for investments purchased | 74,559 |
| Payable to affiliates | |
| Transfer agent fees | 958 |
| Other liabilities and accrued expenses | 31,777 |
| Total liabilities | 107,294 |
| Net assets | 6,740,777 |
| Net assets consist of | |
| Paid-in capital | $5,933,621 |
| Accumulated distributions in excess of net investment income | (3,299) |
| Accumulated net realized gain (loss) on investments and foreign | |
| currency transactions | 28,382 |
| Net unrealized appreciation (depreciation) on investments and translation | |
| of assets and liabilities in foreign currencies | 782,073 |
| Net assets | $6,740,777 |
| 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 A1 ($5,422,711 ÷ 471,118 shares) | $11.51 |
| Class I ($1,318,066 ÷ 114,285 shares) | $11.53 |
| Maximum offering price per share | |
| Class A (net asset value per share ÷ 95%)2 | $12.12 |
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.
| 14 | Fundamental All Cap Core Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the six-month period ended 1-31-13 (unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| Investment income | |
| Dividends | $65,134 |
| Less foreign taxes withheld | (61) |
| Total investment income | 65,073 |
| Expenses | |
| Investment management fees | 18,962 |
| Distribution and service fees | 6,685 |
| Accounting and legal services fees | 370 |
| Transfer agent fees | 4,874 |
| Trustees’ fees | 30 |
| State registration fees | 14,687 |
| Printing and postage | 2,158 |
| Professional fees | 23,135 |
| Custodian fees | 6,052 |
| Registration and filing fees | 13,739 |
| Other | 1,682 |
| Total expenses | 92,374 |
| Less expense reductions and amounts recaptured | (58,421) |
| Net expenses | 33,953 |
| Net investment income | 31,120 |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Investments | 208,870 |
| Foreign currency transactions | (27) |
| 208,843 | |
| Change in net unrealized appreciation (depreciation) of | |
| Investments | 722,821 |
| Translation of assets and liabilities in foreign currencies | 3 |
| 722,824 | |
| Net realized and unrealized gain | 931,667 |
| Increase in net assets from operations | $962,787 |
| See notes to financial statements | Semiannual report | Fundamental All Cap Core Fund | 15 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| Six months | ||
| ended | Year | |
| 1-31-13 | ended | |
| (Unaudited) | 7-31-12 | |
| Increase (decrease) in net assets | ||
| From operations | ||
| Net investment income | $31,120 | $13,942 |
| Net realized gain (loss) | 208,843 | (48,218) |
| Change in net unrealized appreciation (depreciation) | 722,824 | 157,874 |
| Increase in net assets resulting from operations | 962,787 | 123,598 |
| Distributions to shareholders | ||
| From net investment income | ||
| Class A | (26,317) | (5,690) |
| Class I | (10,376) | (5,560) |
| From net realized gain | ||
| Class A | (104,544) | (11,479) |
| Class I | (25,779) | (5,456) |
| Total distributions | (167,016) | (28,185) |
| From Fund share transactions | 1,120,346 | 1,550,539 |
| Total increase | 1,916,117 | 1,645,952 |
| Net assets | ||
| Beginning of period | 4,824,660 | 3,178,708 |
| End of period | $6,740,777 | $4,824,660 |
| Undistributed (accumulated distributions in excess of) | ||
| net investment income | ($3,299) | $2,274 |
| 16 | Fundamental All Cap Core Fund | Semiannual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
| CLASS A SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 |
| Per share operating performance | |||
| Net asset value, beginning of period | $9.96 | $9.73 | $10.00 |
| Net investment income (loss)3 | 0.06 | 0.02 | (0.01) |
| Net realized and unrealized gain (loss) on investments | 1.79 | 0.28 | (0.26) |
| Total from investment operations | 1.85 | 0.30 | (0.27) |
| Less distributions | |||
| From net investment income | (0.06) | (0.02) | — |
| From net realized gain | (0.24) | (0.05) | — |
| Total distributions | (0.30) | (0.07) | — |
| Net asset value, end of period | $11.51 | $9.96 | $9.73 |
| Total return (%)4,5 | 18.796 | 3.15 | (2.70)6 |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $5 | $4 | $2 |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions and amounts recaptured | 3.187 | 5.62 | 5.777 |
| Expenses including reductions and amounts recaptured | 1.307 | 1.30 | 1.307 |
| Net investment income (loss) | 1.027 | 0.24 | (0.33)7 |
| Portfolio turnover (%) | 26 | 47 | 8 |
| 1 Six months ended 1-31-13. Unaudited. 2 The inception date for Class A shares is 6-1-11. 3 Based on the 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 shown. 6 Not annualized. 7 Annualized. |
| See notes to financial statements | Semiannual report | Fundamental All Cap Core Fund | 17 |
| CLASS I SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 |
| Per share operating performance | |||
| Net asset value, beginning of period | $9.99 | $9.74 | $10.00 |
| Net investment income3 | 0.08 | 0.07 | —4 |
| Net realized and unrealized gain (loss) on investments | 1.80 | 0.28 | (0.26) |
| Total from investment operations | 1.88 | 0.35 | (0.26) |
| Less distributions | |||
| From net investment income | (0.10) | (0.05) | — |
| From net realized gain | (0.24) | (0.05) | — |
| Total distributions | (0.34) | (0.10) | — |
| Net asset value, end of period | $11.53 | $9.99 | $9.74 |
| Total return (%)5 | 19.036 | 3.63 | (2.60)6 |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $1 | $1 | $1 |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions and amounts recaptured | 3.727 | 7.00 | 5.457 |
| Expenses including reductions and amounts recaptured | 0.867 | 0.84 | 0.847 |
| Net investment income | 1.457 | 0.75 | 0.147 |
| Portfolio turnover (%) | 26 | 47 | 8 |
| 1 Six months ended 1-31-13. Unaudited. 2 The inception date for Class I shares is 6-1-11. 3 Based on the average daily shares outstanding. 4 Less than $0.005 per share. 5 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown. 6 Not annualized. 7 Annualized. |
| 18 | Fundamental All Cap Core Fund | Semiannual report | See notes to financial statements |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock Fundamental All Cap Core Fund (the Fund) is a series of John Hancock Funds II (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek long-term capital appreciation.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A shares are offered to all investors. Class I shares are offered to institutions and certain investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted.
The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
| Semiannual report | Fundamental All Cap Core Fund | 19 |
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| LEVEL 3 | ||||
| LEVEL 2 | SIGNIFICANT | |||
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
| VALUE AT 1-31-13 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
| Common Stocks | ||||
| Consumer Discretionary | $1,213,335 | $1,213,335 | — | — |
| Consumer Staples | 327,354 | 152,607 | $174,747 | — |
| Energy | 529,427 | 529,427 | — | — |
| Financials | 1,786,493 | 1,786,493 | — | — |
| Health Care | 376,920 | 376,920 | — | — |
| Industrials | 734,925 | 734,925 | — | — |
| Information Technology | 1,651,535 | 1,651,535 | — | — |
| Total Investments in | ||||
| Securities | $6,619,989 | $6,445,242 | $174,747 | — |
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Dividend income is recorded on the ex-date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $190. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject
| 20 | Fundamental All Cap Core Fund | Semiannual report |
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 for an unlimited period. 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 July 31, 2012, the Fund had $3,924 of long-term capital loss carryforward available to offset future net realized capital gains.
As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually.
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 accounting principles generally accepted in the United States of America.
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 Fund’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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.675% of the first $2,500,000,000 of the Fund’s aggregate average daily net assets together with the assets of Fundamental All Cap Core Trust, a series of John Hancock Variable Insurance Trust (combined aggregate average daily net assets); and b) 0.650% of the combined aggregate average daily net assets in excess of $2,500,000,000. The Adviser 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 Adviser. The Fund is not responsible for payment of the subadvisory fees.
| Semiannual report | Fundamental All Cap Core Fund | 21 |
The Adviser has contractually agreed to waive a portion of its management fee for certain funds (the Participating Portfolios) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Funds that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the funds and with the approval of the Board of Trustees.
The Adviser has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the Fund to the extent necessary to maintain the Fund’s total operating expenses at 1.30% and 0.94% for Class A and Class I 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. The current expense limitation agreement expires on November 30, 2013, unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at that time. Prior to January 1, 2013, the fee waivers and/or reimbursements were such that these expenses would not exceed 0.84% for Class I shares.
Additionally, the Adviser has voluntarily agreed to waive other Fund level expenses excluding advisory fees, Rule 12b-1 fees, service fees, transfer agent fees, blue sky fees, taxes, printing and postage, brokerage commissions, interest expenses, acquired fund fees, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. The waivers are such that these expenses will not exceed 0.20% of average net assets. This voluntary expense reimbursement may be terminated at any time by the Adviser on notice to the Fund.
Accordingly, these expense reductions described above amounted to $41,793 and $16,628 for Class A and Class I shares, respectively, for the six months ended January 31, 2013.
The investment management fees incurred for the six months ended January 31, 2013 were equivalent to a net annual effective rate of 0.00% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. The table below outlines the amounts recovered during the six months ended January 31, 2013, and the amount of waived or reimbursed expenses subject to potential recovery and the respective expiration dates. Certain reimbursements or waivers are not subject to recapture.
| AMOUNTS | AMOUNTS | AMOUNTS | AMOUNTS | AMOUNTS | |
| ELIGIBLE FOR | ELIGIBLE FOR | ELIGIBLE FOR | ELIGIBLE FOR | RECOVERED | |
| RECOVERY | RECOVERY | RECOVERY | RECOVERY | DURING THE | |
| THROUGH | THROUGH | THROUGH | THROUGH | PERIOD ENDED | |
| FUND | JULY 1, 2013 | JULY 1, 2014 | JULY 1, 2015 | JULY 1, 2016 | JANUARY 31, 2013 |
| Fundamental All Cap Core | — | $22,705 | $145,558 | $50,888 | — |
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting
| 22 | Fundamental All Cap Core Fund | Semiannual report |
and legal services fees incurred for the six months ended January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for 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.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $13,695 for the six months ended January 31, 2013. Of this amount, $2,290 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $11,112 was paid as sales commissions to broker-dealers and $293 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Adviser.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, CDSCs received by the Distributor amounted to $306 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 Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
| CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
| A | $6,685 | $4,287 | $7,344 | $1,642 |
| I | — | 587 | 7,343 | 516 |
| Total | $6,685 | $4,874 | $14,687 | $2,158 |
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
| Semiannual report | Fundamental All Cap Core Fund | 23 |
Note 5 — Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the year ended July 31, 2012 were as follows:
| Six months ended 1-31-13 | Year ended 7-31-12 | |||
| Shares | Amount | Shares | Amount | |
| Class A shares | ||||
| Sold | 120,142 | $1,318,859 | 199,274 | $1,931,654 |
| Distributions reinvested | 6,647 | 72,454 | 416 | 3,789 |
| Repurchased | (34,596) | (371,446) | (31,202) | (299,324) |
| Net increase | 92,193 | $1,019,867 | 168,488 | $1,636,119 |
| Class I shares | ||||
| Sold | 5,611 | $64,325 | 25,743 | $266,173 |
| Distributions reinvested | 3,311 | 36,154 | 1,106 | 10,068 |
| Repurchased | — | — | (37,736) | (361,821) |
| Net increase (decrease) | 8,922 | $100,479 | (10,887) | ($85,580) |
| Net increase | 101,115 | $1,120,346 | 157,601 | $1,550,539 |
Affiliates of the Fund owned 40% of shares of beneficial interest of Class A shares on January 31, 2013.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $2,362,271 and $1,431,619, respectively, for the six months ended January 31, 2013.
| 24 | Fundamental All Cap Core Fund | Semiannual report |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Fundamental All Cap Core Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| Semiannual report | Fundamental All Cap Core Fund | 25 |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management |
| Steven R. Pruchansky, Vice Chairperson | Services, LLC |
| Charles L. Bardelis* | |
| James R. Boyle† | Subadviser |
| Craig Bromley† | John Hancock Asset Management a division of |
| Peter S. Burgess* | Manulife Asset Management (US) LLC |
| William H. Cunningham | |
| Grace K. Fey | Principal distributor |
| Theron S. Hoffman* | John Hancock Funds, LLC |
| Deborah C. Jackson | |
| Hassell H. McClellan | Custodian |
| Gregory A. Russo | State Street Bank and Trust Company |
| Warren A. Thomson† | |
| Transfer agent | |
| Officers | John Hancock Signature Services, Inc. |
| Hugh McHaffie | |
| President | Legal counsel |
| K&L Gates LLP | |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer |
| *Member of the Audit Committee †Non-Independent Trustee |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 26 | Fundamental All Cap Core Fund | Semiannual report |
| 1-800-225-5291 1-800-554-6713 TDD 1-800-338-8080 EASI-Line www.jhfunds.com |
| 376SA 1/13 | |
| This report is for the information of the shareholders of John Hancock Fundamental All Cap Core Fund. | 3/13 |
| It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. |
A look at performance
Total returns for the period ended January 31, 2013
| Average annual total returns (%) | Cumulative total returns (%) | |||||||||
| with maximum sales charge | with maximum sales charge | |||||||||
| Since | Since | |||||||||
| 1-year | 5-year | 10-year | inception 1 | 6-months | 1-year | 5-year | 10-year | inception 1 | ||
| Class A | 13.52 | — | — | 7.35 | 8.04 | 13.52 | — | — | 12.58 | |
| Class I2 | 20.11 | — | — | 11.20 | 13.97 | 20.11 | — | — | 19.42 | |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 5.00%.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 11-30-13 for Class A and Class I shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
| Class A | Class I | ||||||||
| Net (%) | 1.30 | 0.94 | |||||||
| Gross (%) | 6.29 | 7.53 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on 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.
See the following page for footnotes.
| 6 | Fundamental Large Cap Core Fund | Semiannual report |
| Without | With maximum | |||
| Start date | sales charge | sales charge | Index | |
| Class I2 | 6-1-11 | $11,942 | $11,942 | $11,555 |
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, which would have resulted in lower values if they did.
Footnotes related to performance
1 From 6-1-11.
2 For certain types of investors as described in the Fund’s prospectus.
| Semiannual report | Fundamental Large Cap Core Fund | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012 with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,137.30 | $7.00 |
| Class I | 1,000.00 | 1,139.70 | 4.69 |
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 January 31, 2013, 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:
| 8 | Fundamental Large Cap Core Fund | Semiannual report |
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,018.70 | $6.61 |
| Class I | 1,000.00 | 1,020.80 | 4.43 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.30% and 0.87% for Class A and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| Semiannual report | Fundamental Large Cap Core Fund | 9 |
Portfolio summary
| Top 10 Holdings (40.3% of Net Assets on 1-31-13)1,2 | ||||
| QUALCOMM, Inc. | 5.0% | Bank of America Corp. | 4.0% | |
| JPMorgan Chase & Company | 4.8% | The Goldman Sachs Group, Inc. | 3.5% | |
| Amazon.com, Inc. | 4.7% | Google, Inc., Class A | 3.2% | |
| Lowe’s Companies, Inc. | 4.6% | Apache Corp. | 3.1% | |
| Apple, Inc. | 4.5% | Cisco Systems, Inc. | 2.9% | |
| Sector Composition1,3 | ||||
| Information Technology | 25.2% | Consumer Staples | 6.3% | |
| Financials | 23.2% | Industrials | 6.1% | |
| Consumer Discretionary | 13.9% | Materials | 0.7% | |
| Energy | 12.4% | Other | 3.0% | |
| Health Care | 9.2% | |||
1 As a percentage of net assets on 1-31-13.
2 Cash and cash equivalents not included.
3 Large company stocks as a group could fall out of favor with the market, causing the Fund to underperform. The prices of medium and small company stocks can change more frequently and dramatically than those of large company stocks. Foreign investing, especially in emerging markets, has additional risks such as currency and market volatility and political and social instability. Hedging and other strategic transactions may increase volatility of a fund and, if the transaction is not successful, could result in a significant loss. If the Fund invests in illiquid securities, it may be difficult to sell them at a price approximating their value. For additional information on these and other risk considerations, please see the Fund’s prospectus. 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.
| 10 | Fundamental Large Cap Core Fund | Semiannual report |
Fund’s investments
As of 1-31-13 (unaudited)
| Shares | Value | |
| Common Stocks 97.0% | $13,235,094 | |
| (Cost $12,281,506) | ||
| Consumer Discretionary 13.9% | 1,899,837 | |
| Household Durables 1.4% | ||
| Lennar Corp., Class A | 4,486 | 186,348 |
| Internet & Catalog Retail 5.0% | ||
| Amazon.com, Inc. (I) | 2,438 | 647,289 |
| Blue Nile, Inc. (I) | 1,047 | 35,064 |
| Media 3.0% | ||
| Omnicom Group, Inc. | 5,004 | 271,617 |
| The Walt Disney Company | 2,575 | 138,741 |
| Specialty Retail 4.5% | ||
| Lowe’s Companies, Inc. | 16,255 | 620,778 |
| Consumer Staples 6.3% | 858,516 | |
| Beverages 5.4% | ||
| Diageo PLC, ADR | 2,074 | 247,428 |
| PepsiCo, Inc. | 4,224 | 307,718 |
| SABMiller PLC | 3,534 | 176,420 |
| Tobacco 0.9% | ||
| Philip Morris International, Inc. | 1,440 | 126,950 |
| Energy 12.4% | 1,693,518 | |
| Energy Equipment & Services 4.1% | ||
| National Oilwell Varco, Inc. | 2,765 | 204,997 |
| Schlumberger, Ltd. | 4,599 | 358,952 |
| Oil, Gas & Consumable Fuels 8.3% | ||
| Apache Corp. | 5,073 | 424,914 |
| Chevron Corp. | 1,199 | 138,065 |
| Exxon Mobil Corp. | 1,446 | 130,097 |
| Occidental Petroleum Corp. | 3,626 | 320,067 |
| Ultra Petroleum Corp. (I) | 6,390 | 116,426 |
| Financials 23.2% | 3,164,074 | |
| Capital Markets 10.0% | ||
| Morgan Stanley | 15,277 | 349,079 |
| State Street Corp. | 4,955 | 275,746 |
| T. Rowe Price Group, Inc. | 3,719 | 265,723 |
| The Goldman Sachs Group, Inc. | 3,244 | 479,658 |
| See notes to financial statements | Semiannual report | Fundamental Large Cap Core Fund | 11 |
| Shares | Value | |
| Commercial Banks 1.5% | ||
| Wells Fargo & Company | 5,784 | $201,457 |
| Consumer Finance 1.1% | ||
| American Express Company | 2,531 | 148,848 |
| Diversified Financial Services 8.8% | ||
| Bank of America Corp. | 47,714 | 540,122 |
| JPMorgan Chase & Company | 13,955 | 656,583 |
| Insurance 1.8% | ||
| Prudential Financial, Inc. | 4,265 | 246,858 |
| Health Care 9.2% | 1,250,660 | |
| Biotechnology 0.9% | ||
| Amgen, Inc. | 1,451 | 124,002 |
| Health Care Equipment & Supplies 1.7% | ||
| Medtronic, Inc. | 4,929 | 229,691 |
| Health Care Providers & Services 1.0% | ||
| Amsurg Corp. (I) | 4,284 | 133,704 |
| Pharmaceuticals 5.6% | ||
| Merck & Company, Inc. | 6,628 | 286,661 |
| Novartis AG, ADR | 5,044 | 342,084 |
| Pfizer, Inc. | 4,931 | 134,518 |
| Industrials 6.1% | 829,061 | |
| Aerospace & Defense 1.4% | ||
| L-3 Communications Holdings, Inc. | 2,554 | 193,900 |
| Air Freight & Logistics 1.9% | ||
| United Parcel Service, Inc., Class B | 3,293 | 261,102 |
| Industrial Conglomerates 2.0% | ||
| General Electric Company | 12,161 | 270,947 |
| Professional Services 0.8% | ||
| Robert Half International, Inc. | 2,926 | 103,112 |
| Information Technology 25.2% | 3,439,758 | |
| Communications Equipment 7.9% | ||
| Cisco Systems, Inc. | 19,214 | 395,232 |
| QUALCOMM, Inc. | 10,283 | 678,986 |
| Computers & Peripherals 6.5% | ||
| Apple, Inc. | 1,362 | 620,134 |
| EMC Corp. (I) | 11,077 | 272,605 |
| Internet Software & Services 3.1% | ||
| Google, Inc., Class A (I) | 569 | 429,988 |
| IT Services 1.4% | ||
| Broadridge Financial Solutions, Inc. | 7,907 | 186,368 |
| Semiconductors & Semiconductor Equipment 2.9% | ||
| Intel Corp. | 18,588 | 391,092 |
| Software 3.4% | ||
| FactSet Research Systems, Inc. | 2,829 | 261,739 |
| Oracle Corp. | 5,734 | 203,614 |
| 12 | Fundamental Large Cap Core Fund | Semiannual report | See notes to financial statements |
| Shares | Value | |
| Materials 0.7% | $99,670 | |
| Chemicals 0.7% | ||
| Air Products & Chemicals, Inc. | 1,140 | 99,670 |
| Total investments (Cost $12,281,506)† 97.0% | $13,235,094 | |
| Other assets and liabilities, net 3.0% | $403,820 | |
| Total net assets 100.0% | $13,638,914 | |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
ADR American Depositary Receipts
(I) Non-income producing security.
† At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $12,311,291. Net unrealized appreciation aggregated $923,803 of which $1,133,421 related to appreciated investment securities and $209,618 related to depreciated investment securities.
| See notes to financial statements | Semiannual report | Fundamental Large Cap Core Fund | 13 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 1-31-13 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
| Assets | |
| Investments, at value (Cost $12,281,506) | $13,235,094 |
| Cash | 527,318 |
| Foreign currency, at value (Cost $1,303) | 1,303 |
| Receivable for investments sold | 4,465 |
| Receivable for fund shares sold | 168,518 |
| Dividends receivable | 7,853 |
| Receivable due from adviser | 4,034 |
| Other receivables and prepaid expenses | 15,141 |
| Total assets | 13,963,726 |
| Liabilities | |
| Payable for investments purchased | 292,803 |
| Payable to affiliates | |
| Accounting and legal services fees | 98 |
| Transfer agent fees | 1,366 |
| Trustees’ fees | 2 |
| Other liabilities and accrued expenses | 30,543 |
| Total liabilities | 324,812 |
| Net assets | 13,638,914 |
| Net assets consist of | |
| Paid-in capital | $12,543,292 |
| Accumulated distributions in excess of net investment income | (812) |
| Accumulated net realized gain (loss) on investments and foreign | |
| currency transactions | 142,844 |
| Net unrealized appreciation (depreciation) on investments and translation | |
| of assets and liabilities in foreign currencies | 953,590 |
| Net assets | $13,638,914 |
| 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 A1 ($3,990,668 ÷ 342,932 shares) | $11.64 |
| Class I ($9,648,246 ÷ 827,584 shares) | $11.66 |
| Maximum offering price per share | |
| Class A (net asset value per share ÷ 95%)2 | $12.25 |
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.
| 14 | Fundamental Large Cap Core Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the six-month period ended 1-31-13
(unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| Investment income | |
| Dividends | $70,911 |
| Total investment income | 70,911 |
| Expenses | |
| Investment management fees | 27,924 |
| Distribution and service fees | 4,958 |
| Accounting and legal services fees | 501 |
| Transfer agent fees | 5,433 |
| Trustees’ fees | 40 |
| State registration fees | 14,707 |
| Printing and postage | 3,857 |
| Professional fees | 23,274 |
| Custodian fees | 6,052 |
| Registration and filing fees | 15,036 |
| Other | 1,682 |
| Total expenses | 103,464 |
| Less expense reductions and amounts recaptured | (62,786) |
| Net expenses | 40,678 |
| Net investment income | 30,233 |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Investments | 261,890 |
| Foreign currency transactions | (28) |
| 261,862 | |
| Change in net unrealized appreciation (depreciation) of | |
| Investments | 783,307 |
| 783,307 | |
| Net realized and unrealized gain | 1,045,169 |
| Increase in net assets from operations | $1,075,402 |
| See notes to financial statements | Semiannual report | Fundamental Large Cap Core Fund | 15 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| Six months | ||
| ended | Year | |
| 1-31-13 | ended | |
| (Unaudited) | 7-31-12 | |
| Increase (decrease) in net assets | ||
| From operations | ||
| Net investment income | $30,233 | $20,880 |
| Net realized gain (loss) | 261,862 | (14,043) |
| Change in net unrealized appreciation (depreciation) | 783,307 | 263,704 |
| Increase (decrease) in net assets resulting from operations | 1,075,402 | 270,541 |
| Distributions to shareholders | ||
| From net investment income | ||
| Class A | (4,589) | (7,730) |
| Class I | (34,650) | (6,671) |
| From net realized gain | ||
| Class A | (32,865) | (7,947) |
| Class I | (71,193) | (3,824) |
| Total distributions | (143,297) | (26,172) |
| From Fund share transactions | 8,655,849 | 710,675 |
| Total increase | 9,587,954 | 955,044 |
| Net assets | ||
| Beginning of period | 4,050,960 | 3,095,916 |
| End of period | $13,638,914 | $4,050,960 |
| Undistributed (accumulated distributions in excess of) | ||
| net investment income | ($812) | $8,194 |
| 16 | Fundamental Large Cap Core Fund | Semiannual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
| CLASS A SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 | |||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.35 | $9.73 | $10.00 | |||
| Net investment income3 | 0.03 | 0.04 | —4 | |||
| Net realized and unrealized gain (loss) on investments | 1.39 | 0.64 | (0.27) | |||
| Total from investment operations | 1.42 | 0.68 | (0.27) | |||
| Less distributions | ||||||
| From net investment income | (0.02) | (0.03) | — | |||
| From net realized gain | (0.11) | (0.03) | — | |||
| Total distributions | (0.13) | (0.06) | — | |||
| Net asset value, end of period | $11.64 | $10.35 | $9.73 | |||
| Total return (%)5,6 | 13.737 | 7.09 | (2.70)7 | |||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $4 | $3 | $2 | |||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions and amounts recaptured | 2.998 | 6.29 | 5.958 | |||
| Expenses including reductions and amounts recaptured | 1.308 | 1.30 | 1.308 | |||
| Net investment income (loss) | 0.568 | 0.46 | (0.12)8 | |||
| Portfolio turnover (%) | 21 | 40 | 4 | |||
1 Six months ended 1-31-13. Unaudited.
2 The inception date for Class A shares is 6-1-11.
3 Based on the 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 shown.
7 Not annualized.
8 Annualized.
| See notes to financial statements | Semiannual report | Fundamental Large Cap Core Fund | 17 |
| CLASS I SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 | |||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.38 | $9.74 | $10.00 | |||
| Net investment income3 | 0.05 | 0.09 | 0.01 | |||
| Net realized and unrealized gain (loss) on investments | 1.39 | 0.64 | (0.27) | |||
| Total from investment operations | 1.44 | 0.73 | (0.26) | |||
| Less distributions | ||||||
| From net investment income | (0.05) | (0.06) | — | |||
| From net realized gain | (0.11) | (0.03) | — | |||
| Total distributions | (0.16) | (0.09) | — | |||
| Net asset value, end of period | $11.66 | $10.38 | $9.74 | |||
| Total return (%)4 | 13.975 | 7.58 | (2.60)5 | |||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $10 | $1 | $1 | |||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions and amounts recaptured | 2.466 | 7.53 | 5.616 | |||
| Expenses including reductions and amounts recaptured | 0.876 | 0.84 | 0.846 | |||
| Net investment income | 0.966 | 0.93 | 0.366 | |||
| Portfolio turnover (%) | 21 | 40 | 4 | |||
1 Six months ended 1-31-13. Unaudited.
2 The inception date for Class I shares is 6-1-11.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| 18 | Fundamental Large Cap Core Fund | Semiannual report | See notes to financial statements |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock Fundamental Large Cap Core Fund (the Fund) is a series of John Hancock Funds II (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek long-term capital appreciation.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A shares are offered to all investors. Class I shares are offered to institutions and certain investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted.
The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
| Semiannual report | Fundamental Large Cap Core Fund | 19 |
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| LEVEL 3 | ||||
| LEVEL 2 | SIGNIFICANT | |||
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
| VALUE AT 1-31-13 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
| Common Stocks | ||||
| Consumer Discretionary | $1,899,837 | $1,899,837 | — | — |
| Consumer Staples | 858,516 | 682,096 | $176,420 | — |
| Energy | 1,693,518 | 1,693,518 | — | — |
| Financials | 3,164,074 | 3,164,074 | — | — |
| Health Care | 1,250,660 | 1,250,660 | — | — |
| Industrials | 829,061 | 829,061 | — | — |
| Information Technology | 3,439,758 | 3,439,758 | — | — |
| Materials | 99,670 | 99,670 | — | — |
| Total Investments in | ||||
| Securities | $13,235,094 | $13,058,674 | $176,420 | — |
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Dividend income is recorded on the ex-date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $190. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
| 20 | Fundamental Large Cap Core Fund | Semiannual report |
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 July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually.
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 accounting principles generally accepted in the United States of America.
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 Fund’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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.725% of the first $500,000,000 of the Fund’s average daily net assets; b) 0.700% of the next $500,000,000 of the Fund’s average daily net assets; c) 0.675% of the next $500,000,000 of the Fund’s average daily net assets; and d) 0.650% of the Fund’s average daily net assets in excess of $1,500,000,000. The Adviser 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 Adviser. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive a portion of its management fee for certain funds (the Participating Portfolios) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Funds that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Portfolios
| Semiannual report | Fundamental Large Cap Core Fund | 21 |
in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the funds and with the approval of the Board of Trustees.
The Adviser has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the Fund to the extent necessary to maintain the Fund’s total operating expenses at 1.30% and 0.94% for Class A and Class I 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. The current expense limitation agreement expires on November 30, 2013, unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at that time. Prior to January 1, 2013, the fee waivers and/or reimbursements were such that these expenses would not exceed 0.84% for Class I shares.
Additionally, the Adviser has voluntarily agreed to waive other Fund level expenses excluding advisory fees, Rule 12b-1 fees, service fees, transfer agent fees, blue sky fees, taxes, printing and postage, brokerage commissions, interest expenses, acquired fund fees, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. The waivers are such that these expenses will not exceed 0.20% of average net assets. This voluntary expense reimbursement may be terminated at any time by the Adviser on notice to the Fund.
Accordingly, these expense reductions described above amounted to $27,963 and $34,823 for Class A and Class I shares, respectively, for the six months ended January 31, 2013.
The investment management fees incurred for the six months ended January 31, 2013 were equivalent to a net annual effective rate of 0.00% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. The table below outlines the amounts recovered during the six months ended January 31, 2013, and the amount of waived or reimbursed expenses subject to potential recovery and the respective expiration dates. Certain reimbursements or waivers are not subject to recapture.
| AMOUNTS ELIGIBLE | AMOUNTS ELIGIBLE | AMOUNTS ELIGIBLE | AMOUNTS ELIGIBLE | AMOUNTS RECOVERED | |
| FOR RECOVERY | FOR RECOVERY | FOR RECOVERY | FOR RECOVERY | DURING THE | |
| THROUGH | THROUGH | THROUGH | THROUGH | PERIOD ENDED | |
| FUND | JULY 1, 2013 | JULY 1, 2014 | JULY 1, 2015 | JANUARY 1, 2016 | JANUARY 31, 2013 |
| Fundamental | — | $22,880 | $160,314 | $52,981 | — |
| Large Cap Core | |||||
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
| 22 | Fundamental Large Cap Core Fund | Semiannual report |
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for 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.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $2,803 for the six months ended January 31, 2013. Of this amount, $469 was retained and used for printing prospectuses, advertising, sales literature and other purposes and $2,334 was paid as sales commissions to broker-dealers.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, there were no CDSCs received by the Distributor for Class A shares.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
| CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
| A | $4,958 | $3,176 | $7,352 | $2,182 |
| I | — | 2,257 | 7,355 | 1,675 |
| Total | $4,958 | $5,433 | $14,707 | $3,857 |
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
| Semiannual report | Fundamental Large Cap Core Fund | 23 |
Note 5 — Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the year ended July 31, 2012 were as follows:
| Six months ended 1-31-13 | Year ended 7-31-12 | |||
| Shares | Amount | Shares | Amount | |
| Class A shares | ||||
| Sold | 78,464 | $878,837 | 138,949 | $1,350,466 |
| Distributions reinvested | 1,250 | 13,835 | 383 | 3,593 |
| Repurchased | (18,727) | (202,468) | (59,942) | (593,022) |
| Net increase | 60,987 | $690,204 | 79,390 | $761,037 |
| Class I shares | ||||
| Sold | 731,185 | $8,104,201 | 31,664 | $323,806 |
| Distributions reinvested | 9,544 | 105,843 | 1,018 | 9,546 |
| Repurchased | (22,166) | (244,399) | (39,151) | (383,714) |
| Net increase (decrease) | 718,563 | $7,965,645 | (6,469) | ($50,362) |
| Net increase | 779,550 | $8,655,849 | 72,921 | $710,675 |
Affiliates of the Fund owned 56% of shares of beneficial interest of Class A shares on January 31, 2013.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $9,825,021 and $1,617,801, respectively, for the six months ended January 31, 2013.
| 24 | Fundamental Large Cap Core Fund | Semiannual report |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Fundamental Large Cap Core Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| Semiannual report | Fundamental Large Cap Core Fund | 25 |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management |
| Steven R. Pruchansky, Vice Chairperson | Services, LLC |
| Charles L. Bardelis* | |
| James R. Boyle† | Subadviser |
| Craig Bromley† | John Hancock Asset Management a division of |
| Peter S. Burgess* | Manulife Asset Management (US) LLC |
| William H. Cunningham | |
| Grace K. Fey | Principal distributor |
| Theron S. Hoffman* | John Hancock Funds, LLC |
| Deborah C. Jackson | |
| Hassell H. McClellan | Custodian |
| Gregory A. Russo | State Street Bank and Trust Company |
| Warren A. Thomson† | |
| Transfer agent | |
| Officers | John Hancock Signature Services, Inc. |
| Hugh McHaffie | |
| President | Legal counsel |
| K&L Gates LLP | |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer | |
| *Member of the Audit Committee | |
| †Non-Independent Trustee | |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 26 | Fundamental Large Cap Core Fund | Semiannual report |
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
| This report is for the information of the shareholders of John Hancock Fundamental Large Cap Core Fund. | 372SA 1/13 |
| It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 3/13 |
A look at performance
Total returns for the period ended January 31, 2013
| Average annual total returns (%) | Cumulative total returns (%) | |||||||||
| with maximum sales charge | with maximum sales charge | |||||||||
| Since | Since | |||||||||
| 1-year | 5-year | 10-year | inception | 6-months | 1-year | 5-year | 10-year | inception | ||
| Class A | 19.08 | — | — | 10.381 | 14.09 | 19.08 | — | — | 17.951 | |
| Class I2 | 25.96 | — | — | 14.331 | 20.34 | 25.96 | — | — | 25.081 | |
| Class NAV2 | 26.05 | — | — | 34.843 | 20.42 | 26.05 | — | — | 53.973 | |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 5.00%.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 11-30-13 for Class A and Class I shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. For Class NAV the net expenses equal the gross expenses. The expense ratios are as follows:
| Class A | Class I | Class NAV | |||
| Net (%) | 1.30 | 0.94 | 0.74 | ||
| Gross (%) | 2.79 | 4.02 | 0.74 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on 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.
See the following page for footnotes.
| 6 | Fundamental Large Cap Value Fund | Semiannual report |
| Without | With maximum | |||
| Start date | sales charge | sales charge | Index | |
| Class I2 | 6-1-11 | $12,508 | $12,508 | $11,618 |
| Class NAV2,3 | 8-23-11 | 15,397�� | 15,397 | 14,180 |
Russell 1000 Value Index is an unmanaged index containing those securities in the Russell 1000 Index with a less-than-average growth orientation.
It is not possible to invest directly in an index. Index figures do not reflect expenses, which would have resulted in lower values if they did.
Footnotes related to performance pages
1 From 6-1-11.
2 For certain types of investors, as described in the Fund’s prospectuses.
3 From 8-23-11.
| Semiannual report | Fundamental Large Cap Value Fund | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
■ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
■ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012 with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,201.00 | $7.21 |
| Class I | 1,000.00 | 1,203.40 | 4.94 |
| Class NAV | 1,000.00 | 1,204.20 | 3.89 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at January 31, 2013, 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:
| 8 | Fundamental Large Cap Value Fund | Semiannual report |
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,018.70 | $6.61 |
| Class I | 1,000.00 | 1,020.70 | 4.53 |
| Class NAV | 1,000.00 | 1,021.70 | 3.57 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.30%, 0.89%, and 0.70% for Class A, Class I and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| Semiannual report | Fundamental Large Cap Value Fund | 9 |
Portfolio summary
| Top 10 Holdings (36.6% of Net Assets on 1-31-13)1,2 | ||||
| JPMorgan Chase & Company | 4.7% | Bank of America Corp. | 3.5% | |
| Lowe’s Companies, Inc. | 4.5% | Wells Fargo & Company | 3.3% | |
| The Goldman Sachs Group, Inc. | 4.1% | Apache Corp. | 3.1% | |
| Cisco Systems, Inc. | 3.9% | AllianceBernstein Holding LP | 3.0% | |
| Avery Dennison Corp. | 3.6% | Occidental Petroleum Corp. | 2.9% | |
| Sector Composition1,3 | ||||
| Financials | 29.4% | Consumer Staples | 11.2% | |
| Industrials | 12.8% | Energy | 10.9% | |
| Information Technology | 12.7% | Health Care | 10.1% | |
| Consumer Discretionary | 11.8% | Short-Term Investments & Other | 1.1% | |
1 As a percentage of net assets on 1-31-13.
2 Cash and cash equivalents not included.
3 Large company stocks as a group could fall out of favor with the market, causing the Fund to underperform. The prices of medium and small company stocks can change more frequently and dramatically than those of large company stocks. Foreign investing, especially in emerging markets, has additional risks such as currency and market volatility and political and social instability. Hedging and other strategic transactions may increase volatility of a fund and, if the transaction is not successful, could result in a significant loss. If the Fund invests in illiquid securities, it may be difficult to sell them at a price approximating their value. For additional information on these and other risk considerations, please see the Fund’s prospectus. 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.
| 10 | Fundamental Large Cap Value Fund | Semiannual report |
Fund’s investments
As of 1-31-13 (unaudited)
| Shares | Value | |
| Common Stocks 98.9% | $852,534,884 | |
| (Cost $703,190,850) | ||
| Consumer Discretionary 11.8% | 101,383,483 | |
| Hotels, Restaurants & Leisure 2.0% | ||
| Carnival Corp. | 449,433 | 17,402,043 |
| Household Durables 2.4% | ||
| Dorel Industries, Inc., Class B | 241,584 | 9,635,263 |
| Lennar Corp., Class A | 265,415 | 11,025,339 |
| Media 1.5% | ||
| Omnicom Group, Inc. | 228,857 | 12,422,358 |
| Specialty Retail 4.5% | ||
| Lowe’s Companies, Inc. | 1,017,405 | 38,854,697 |
| Textiles, Apparel & Luxury Goods 1.4% | ||
| Adidas AG | 129,550 | 12,043,783 |
| Consumer Staples 11.2% | 96,616,975 | |
| Beverages 6.2% | ||
| Diageo PLC, ADR | 142,777 | 17,033,296 |
| PepsiCo, Inc. | 249,348 | 18,165,002 |
| SABMiller PLC | 361,287 | 18,035,694 |
| Food Products 1.0% | ||
| Danone SA | 128,228 | 8,890,574 |
| Household Products 1.6% | ||
| The Procter & Gamble Company | 180,793 | 13,588,402 |
| Personal Products 1.7% | ||
| Avon Products, Inc. | 856,177 | 14,537,885 |
| Tobacco 0.7% | ||
| Philip Morris International, Inc. | 72,211 | 6,366,122 |
| Energy 10.9% | 93,781,807 | |
| Energy Equipment & Services 1.2% | ||
| National Oilwell Varco, Inc. | 143,012 | 10,602,910 |
| Oil, Gas & Consumable Fuels 9.7% | ||
| Apache Corp. | 319,406 | 26,753,447 |
| Chevron Corp. | 185,334 | 21,341,210 |
| Exxon Mobil Corp. | 107,692 | 9,689,049 |
| Occidental Petroleum Corp. | 287,699 | 25,395,191 |
| See notes to financial statements | Semiannual report | Fundamental Large Cap Value Fund | 11 |
| Shares | Value | |
| Financials 29.4% | $253,190,410 | |
| Capital Markets 14.7% | ||
| AllianceBernstein Holding LP | 1,283,054 | 26,122,979 |
| Morgan Stanley | 1,007,411 | 23,019,341 |
| Northern Trust Corp. | 466,515 | 24,011,527 |
| State Street Corp. | 331,747 | 18,461,721 |
| The Goldman Sachs Group, Inc. | 238,928 | 35,327,894 |
| Commercial Banks 3.4% | ||
| Wells Fargo & Company | 828,224 | 28,847,042 |
| Diversified Financial Services 8.2% | ||
| Bank of America Corp. | 2,649,720 | 29,994,830 |
| JPMorgan Chase & Company | 862,616 | 40,586,083 |
| Insurance 3.1% | ||
| Prudential Financial, Inc. | 149,792 | 8,669,961 |
| Stewart Information Services Corp. | 683,322 | 18,149,032 |
| Health Care 10.1% | 87,403,047 | |
| Biotechnology 0.9% | ||
| Amgen, Inc. | 92,575 | 7,911,460 |
| Health Care Equipment & Supplies 2.0% | ||
| Medtronic, Inc. | 368,911 | 17,191,253 |
| Health Care Providers & Services 2.5% | ||
| Amsurg Corp. (I) | 275,833 | 8,608,748 |
| VCA Antech, Inc. (I) | 594,937 | 12,850,639 |
| Pharmaceuticals 4.7% | ||
| Merck & Company, Inc. | 529,887 | 22,917,613 |
| Novartis AG, ADR | 264,278 | 17,923,334 |
| Industrials 12.8% | 110,197,235 | |
| Air Freight & Logistics 2.0% | ||
| FedEx Corp. | 169,959 | 17,242,341 |
| Commercial Services & Supplies 3.6% | ||
| Avery Dennison Corp. | 802,368 | 30,899,192 |
| Electrical Equipment 2.0% | ||
| Sensata Technologies Holding NV (I) | 501,500 | 16,920,610 |
| Industrial Conglomerates 2.3% | ||
| General Electric Company | 910,489 | 20,285,695 |
| Machinery 1.6% | ||
| Deere & Company | 146,713 | 13,799,825 |
| Professional Services 1.3% | ||
| Robert Half International, Inc. | 313,552 | 11,049,572 |
| Information Technology 12.7% | 109,961,927 | |
| Communications Equipment 6.1% | ||
| Cisco Systems, Inc. | 1,634,755 | 33,626,910 |
| QUALCOMM, Inc. | 292,718 | 19,328,170 |
| Computers & Peripherals 1.5% | ||
| Apple, Inc. | 28,150 | 12,816,977 |
| 12 | Fundamental Large Cap Value Fund | Semiannual report | See notes to financial statements |
| Shares | Value | |
| IT Services 1.7% | ||
| Broadridge Financial Solutions, Inc. | 613,958 | $14,470,990 |
| Semiconductors & Semiconductor Equipment 2.2% | ||
| Intel Corp. | 895,946 | 18,850,704 |
| Software 1.2% | ||
| Microsoft Corp. | 395,638 | 10,868,176 |
| Par value | Value | |
| Short-Term Investments 1.3% | $11,138,000 | |
| (Cost $11,138,000) | ||
| Repurchase Agreement with State Street Corp. dated 1-31-13 at | ||
| 0.010% to be repurchased at $11,138,003 on 2-1-13, collateralized | ||
| by $10,980,000 United States Treasury Notes, 1.500% due 6-30-16 | ||
| (valued at $11,364,684, including interest) | $11,138,000 | 11,138,000 |
| Total investments (Cost $714,328,850)† 100.2% | $863,672,884 | |
| Other assets and liabilities, net (0.2%) | ($1,959,690) | |
| Total net assets 100.0% | $861,713,194 | |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
ADR American Depositary Receipts
(I) Non-income producing security.
† At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $714,392,695. Net unrealized appreciation aggregated $149,280,189, of which $153,886,268 related to appreciated investment securities and $4,606,079 related to depreciated investment securities.
| See notes to financial statements | Semiannual report | Fundamental Large Cap Value Fund | 13 |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 1-31-13 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
| Assets | |
| Investments, at value (Cost $714,328,850) | $863,672,884 |
| Cash | 588 |
| Foreign currency, at value (Cost $290,943) | 287,793 |
| Receivable for investments sold | 4,497,950 |
| Receivable for fund shares sold | 132,709 |
| Dividends and interest receivable | 648,043 |
| Receivable due from adviser | 920 |
| Other receivables and prepaid expenses | 16,650 |
| Total assets | 869,257,537 |
| Liabilities | |
| Payable for fund shares repurchased | 7,492,022 |
| Payable to affiliates | |
| Transfer agent fees | 1,948 |
| Other liabilities and accrued expenses | 50,373 |
| Total liabilities | 7,544,343 |
| Net assets | 861,713,194 |
| Net assets consist of | |
| Paid-in capital | $679,679,789 |
| Undistributed net investment income | 273,779 |
| Accumulated net realized gain (loss) on investments and foreign | |
| currency transactions | 32,418,742 |
| Net unrealized appreciation (depreciation) on investments and translation | |
| of assets and liabilities in foreign currencies | 149,340,884 |
| Net assets | $861,713,194 |
| 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 ($5,503,749 ÷ 470,164 shares)1 | $11.71 |
| Class I ($14,629,206 ÷ 1,247,051 shares) | $11.73 |
| Class NAV ($841,580,239 ÷ 71,867,257 shares) | $11.71 |
| Maximum offering price per share | |
| Class A (net asset value per share ÷ 95%)2 | $12.33 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge.
2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.
| 14 | Fundamental Large Cap Value Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the six-month period ended 1-31-13
(unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| Investment income | |
| Dividends | $10,842,512 |
| Interest | 701 |
| Less foreign taxes withheld | (19,450) |
| Total investment income | 10,823,763 |
| Expenses | |
| Investment management fees | 2,719,143 |
| Distribution and service fees | 5,265 |
| Accounting and legal services fees | 54,293 |
| Transfer agent fees | 5,826 |
| Trustees’ fees | 4,604 |
| State registration fees | 14,685 |
| Printing and postage | 3,034 |
| Professional fees | 27,764 |
| Custodian fees | 70,312 |
| Registration and filing fees | 24,338 |
| Other | 3,313 |
| Total expenses | 2,932,577 |
| Less expense reductions and amounts recaptured | (27,846) |
| Net expenses | 2,904,731 |
| Net investment income | 7,919,032 |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Investments | 57,024,228 |
| Foreign currency transactions | (1,890) |
| 57,022,338 | |
| Change in net unrealized appreciation (depreciation) of | |
| Investments | 88,686,803 |
| Translation of assets and liabilities in foreign currencies | (3,150) |
| 88,683,653 | |
| Net realized and unrealized gain | 145,705,991 |
| Increase in net assets from operations | $153,625,023 |
| See notes to financial statements | Semiannual report | Fundamental Large Cap Value Fund | 15 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| Six months | ||
| ended | Year | |
| 1-31-13 | ended | |
| (Unaudited) | 7-31-12 | |
| Increase (decrease) in net assets | ||
| From operations | ||
| Net investment income | $7,919,032 | $6,254,174 |
| Net realized gain | 57,022,338 | 10,970,069 |
| Change in net unrealized appreciation (depreciation) | 88,683,653 | 60,832,734 |
| Increase in net assets resulting from operations | 153,625,023 | 78,056,977 |
| Distributions to shareholders | ||
| From net investment income | ||
| Class A | (35,015) | (7,223) |
| Class I | (110,922) | (6,741) |
| Class NAV | (11,378,017) | (2,351,019) |
| From net realized gain | ||
| Class A | (172,906) | (5,698) |
| Class I | (394,916) | (3,154) |
| Class NAV | (33,936,142) | (1,081,097) |
| Total distributions | (46,027,918) | (3,454,932) |
| From Fund share transactions | (38,045,287) | 714,615,382 |
| Total increase | 69,551,818 | 789,217,427 |
| Net assets | ||
| Beginning of period | 792,161,376 | 2,943,949 |
| End of period | $861,713,194 | $792,161,376 |
| Undistributed net investment income | $273,779 | $3,878,701 |
| 16 | Fundamental Large Cap Value Fund | Semiannual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
| CLASS A SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 |
| Per share operating performance | |||
| Net asset value, beginning of period | $10.27 | $9.46 | $10.00 |
| Net investment income3 | 0.07 | 0.09 | —4 |
| Net realized and unrealized gain (loss) on investments | 1.96 | 0.78 | (0.54) |
| Total from investment operations | 2.03 | 0.87 | (0.54) |
| Less distributions | |||
| From net investment income | (0.10) | (0.03) | — |
| From net realized gain | (0.49) | (0.03) | — |
| Total distributions | (0.59) | (0.06) | — |
| Net asset value, end of period | $11.71 | $10.27 | $9.46 |
| Total return (%)5,6 | 20.107 | 9.28 | (5.40)7 |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $6 | $3 | $2 |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions and amounts recaptured | 1.748 | 2.79 | 5.958 |
| Expenses Including reductions and amounts recaptured | 1.308 | 1.30 | 1.308 |
| Net investment income | 1.308 | 0.94 | 0.268 |
| Portfolio turnover (%) | 20 | 26 | 5 |
1 Six months ended 1-31-13. Unaudited
2 The inception date for Class A shares is 6-1-11.
3 Based on the 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 shown.
7 Not annualized.
8 Annualized.
| See notes to financial statements | Semiannual report | Fundamental Large Cap Value Fund | 17 |
| CLASS I SHARES Period ended | 1-31-131 | 7-31-12 | 7-31-112 |
| Per share operating performance | |||
| Net asset value, beginning of period | $10.30 | $9.46 | $10.00 |
| Net investment income3 | 0.10 | 0.14 | 0.01 |
| Net realized and unrealized gain (loss) on investments | 1.96 | 0.79 | (0.55) |
| Total from investment operations | 2.06 | 0.93 | (0.54) |
| Less distributions | |||
| From net investment income | (0.14) | (0.06) | — |
| From net realized gain | (0.49) | (0.03) | — |
| Total distributions | (0.63) | (0.09) | — |
| Net asset value, end of period | $11.73 | $10.30 | $9.46 |
| Total return (%)4 | 20.345 | 9.87 | (5.40)5 |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $15 | $1 | $1 |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions and amounts recaptured | 1.186 | 4.02 | 5.616 |
| Expenses including reductions and amounts recaptured | 0.896 | 0.84 | 0.846 |
| Net investment income | 1.716 | 1.44 | 0.746 |
| Portfolio turnover (%) | 20 | 26 | 5 |
1 Six months ended 1-31-13. Unaudited
2 The inception date for Class I shares is 6-1-11.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| CLASS NAV SHARES Period ended | 1-31-131 | 7-31-122 | |
| Per share operating performance | |||
| Net asset value, beginning of period | $10.30 | $8.13 | |
| Net investment income3 | 0.11 | 0.13 | |
| Net realized and unrealized gain on investments | 1.95 | 2.13 | |
| Total from investment operations | 2.06 | 2.26 | |
| Less distributions | |||
| From net investment income | (0.16) | (0.06) | |
| From net realized gain | (0.49) | (0.03) | |
| Total distributions | (0.65) | (0.09) | |
| Net asset value, end of period | $11.71 | $10.30 | |
| Total return (%)4 | 20.425 | 27.865 | |
| Ratios and supplemental data | |||
| Net assets, end of period (in millions) | $842 | $789 | |
| Ratios (as a percentage of average net assets): | |||
| Expenses before reductions and amounts recaptured | 0.706 | 0.746 | |
| Expenses including reductions and amounts recaptured | 0.706 | 0.756 | |
| Net investment income | 1.916 | 1.406 | |
| Portfolio turnover (%) | 20 | 267 | |
1 Six months ended 1-31-13. Unaudited
2 The inception date for Class NAV shares is 8-23-11.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
7 Portfolio turnover is shown for period from 8-1-11 to 7-31-12.
| 18 | Fundamental Large Cap Value Fund | Semiannual report | See notes to financial statements |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock Fundamental Large Cap Value Fund (the Fund) is a series of John Hancock Fund II (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek long-term capital appreciation.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class NAV shares are offered to John Hancock affiliated funds of funds and 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those deficiencies could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost. Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted.
The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
| Semiannual report | Fundamental Large Cap Value Fund | 19 |
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| LEVEL 3 | ||||
| LEVEL 2 | SIGNIFICANT | |||
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
| VALUE AT 1-31-13 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
| Common Stocks | ||||
| Consumer Discretionary | $101,383,483 | $89,339,700 | $12,043,783 | — |
| Consumer Staples | 96,616,975 | 69,690,707 | 26,926,268 | — |
| Energy | 93,781,807 | 93,781,807 | — | — |
| Financials | 253,190,410 | 253,190,410 | — | — |
| Health Care | 87,403,047 | 87,403,047 | — | — |
| Industrials | 110,197,235 | 110,197,235 | — | — |
| Information Technology | 109,961,927 | 109,961,927 | — | — |
| Short-Term Investments | 11,138,000 | — | 11,138,000 | — |
| Total Investments | ||||
| in Securities | $863,672,884 | $813,564,833 | $50,108,051 | — |
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. 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
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the Fund becomes aware of the dividends. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. 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 taxes. The Fund may be subject to withholding tax on income or capital gains or repatriation taxes as imposed by certain countries in which it invests. Taxes are accrued based upon net investment income, net realized gains or net unrealized appreciation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. that enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended
| 20 | Fundamental Large Cap Value Fund | Semiannual report |
January 31, 2013 were $312. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, annually.
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 and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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.
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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
| Semiannual report | Fundamental Large Cap Value Fund | 21 |
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 0.70% of the first $500,000,000 of the Fund’s aggregate average daily net assets together with assets of Fundamental Large Cap Value Trust, a series of John Hancock Variable Insurance Trust (combined aggregate average daily net assets); b) 0.65% of the next $500,000,000 of the combined aggregate average daily net assets; and c) 0.60% of the combined aggregate average daily net assets in excess of $1,000,000,000. The Adviser 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 Adviser. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive a portion of its management fee for certain funds (the Participating Portfolios) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the funds and with the approval of the Board of Trustees.
The Adviser has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the Fund to the extent necessary to maintain the total operating expenses at 1.30% and 0.94% for Class A and Class I 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. The current expense limitation agreement expires on November 30, 2013, unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at that time. Prior to January 1, 2013, the fee waivers and/or reimbursements for Class I shares were such that the expenses would not exceed 0.84%. Prior to December 1, 2012, the fee waivers and/or reimbursements for Class NAV shares were such that the expenses would not exceed 0.82%.
Additionally, the Adviser has voluntarily agreed to waive other Fund level expenses excluding advisory fees, Rule 12b-1 fees, service fees, transfer agent fees, blue sky fees, taxes, printing and postage, brokerage commissions, interest expenses, acquired fund fees, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. The waivers are such that these expenses will not exceed 0.20% of average net assets. This voluntary expense reimbursement may be terminated at any time by the Adviser on notice to the Fund.
Accordingly, these expense reductions amounted to $7,672, $6,830 and $13,344 for Class A, Class I and Class NAV shares, respectively, for the six months ended January 31, 2013.
The investment management fees incurred for the six months ended January 31, 2013 were equivalent to a net annual effective rate of 0.65% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. The table below outlines the amounts recovered during the six months ended January 31, 2013, and the amount of waived or reimbursed expenses subject to potential recovery and the respective expiration dates. Certain reimbursements or waivers are not subject to recapture.
| 22 | Fundamental Large Cap Value Fund | Semiannual report |
| AMOUNTS | AMOUNTS | AMOUNTS | AMOUNTS | AMOUNTS | |
| ELIGIBLE FOR | ELIGIBLE FOR | ELIGIBLE FOR | ELIGIBLE FOR | RECOVERED | |
| RECOVERY | RECOVERY | RECOVERY | RECOVERY | DURING THE | |
| THROUGH | THROUGH | THROUGH | THROUGH | PERIOD ENDED | |
| FUND | JULY 1, 2013 | JULY 1, 2014 | JULY 1, 2015 | JULY 1, 2016 | JANUARY 31, 2013 |
| Fundamental | — | $390 | $28,986 | $7,813 | — |
| Large Cap Value | |||||
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for 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.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $4,268 for the six months ended January 31, 2013. Of this amount, $717 was retained and used for printing prospectuses, advertising, sales literature and other purposes and $3,551 was paid as sales commissions to broker-dealers.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, there were no CDSCs received by the Distributor for Class A shares.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| DISTRIBUTION | TRANSFER | PRINTING AND | STATE | |
| CLASS | AND SERVICE FEES | AGENT FEES | POSTAGE | REGISTRATION FEES |
| A | $5,265 | $3,396 | $2,100 | $7,342 |
| I | — | 2,430 | 934 | 7,343 |
| Total | $5,265 | $5,826 | $3,034 | $14,685 |
| Semiannual report | Fundamental Large Cap Value Fund | 23 |
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
Note 5 — Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the year ended July 31, 2012 were as follows:
| Six months ended 1-31-13 | Year ended 7-31-12 | |||
| Shares | Amount | Shares | Amount | |
| Class A shares | ||||
| Sold | 224,810 | $2,522,246 | 85,071 | $846,464 |
| Distributions reinvested | 8,863 | 97,048 | 123 | 1,153 |
| Repurchased | (20,420) | (227,011) | (23,993) | (239,863) |
| Net increase | 213,253 | $2,392,283 | 61,201 | $607,754 |
| Class I shares | ||||
| Sold | 1,108,031 | $12,524,094 | 19,226 | $204,790 |
| Distributions reinvested | 46,111 | 505,838 | 964 | 9,038 |
| Repurchased | (5,276) | (58,515) | (37,505) | (368,974) |
| Net increase (decrease) | 1,148,866 | $12,971,417 | (17,315) | ($155,146) |
| Class NAV shares1 | ||||
| Sold | 61,868 | $682,343 | 77,067,336 | $719,456,567 |
| Distributions reinvested | 4,138,279 | 45,314,159 | 366,288 | 3,432,117 |
| Repurchased | (8,917,073) | (99,405,489) | (849,441) | (8,725,910) |
| Net increase (decrease) | (4,716,926) | ($53,408,987) | 76,584,183 | $714,162,774 |
| Net increase (decrease) | (3,354,807) | ($38,045,287) | 76,628,069 | $714,615,382 |
1 The inception date for Class NAV shares is 8-23-11.
Affiliates of the Fund owned 41% and 100% of shares of beneficial interest of Class A and Class NAV shares, respectively, on January 31, 2013.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $162,274,272 and $233,673,140, respectively, for the six months ended January 31, 2013.
Note 7 — Investment by affiliated funds
Certain investors in the Fund are affiliated funds and are managed by the Adviser 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. For the six months ended January 31, 2013, the following funds had an affiliate ownership of 5% or more of the Fund’s net assets:
| FUND | AFFILIATE CONCENTRATION | ||
| John Hancock Lifestyle Aggressive Portfolio | 13.7% | ||
| John Hancock Lifestyle Growth Portfolio | 36.5% | ||
| John Hancock Lifestyle Balanced Portfolio | 29.1% | ||
| John Hancock Lifestyle Moderate Portfolio | 9.1% | ||
| 24 | Fundamental Large Cap Value Fund | Semiannual report |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Fundamental Large Cap Value Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| Semiannual report | Fundamental Large Cap Value Fund | 25 |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management |
| Steven R. Pruchansky, Vice Chairperson | Services, LLC |
| Charles L. Bardelis* | |
| James R. Boyle† | Subadviser |
| Craig Bromley† | John Hancock Asset Management a division of |
| Peter S. Burgess* | Manulife Asset Management (US) LLC |
| William H. Cunningham | |
| Grace K. Fey | Principal distributor |
| Theron S. Hoffman* | John Hancock Funds, LLC |
| Deborah C. Jackson | |
| Hassell H. McClellan | Custodian |
| Gregory A. Russo | State Street Bank and Trust Company |
| Warren A. Thomson† | |
| Transfer agent | |
| Officers | John Hancock Signature Services, Inc. |
| Hugh McHaffie | |
| President | Legal counsel |
| K&L Gates LLP | |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer | |
| *Member of the Audit Committee | |
| †Non-Independent Trustee | |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 26 | Fundamental Large Cap Value Fund | Semiannual report |
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
| 374SA 1/13 | |
| This report is for the information of the shareholders of John Hancock Fundamental Large Cap Value Fund. | 3/13 |
| It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. |
| John Hancock Diversified Strategies Fund | |
| Table of Contents | |
| Your expenses | Page 3 |
| Portfolio summary | Page 4 |
| Fund's investments | Page 5 |
| Financial statements | Page 16 |
| Financial highlights | Page 19 |
| Notes to financial statements | Page 21 |
| Special Shareholder Meeting | Page 27 |
| More information | Page 28 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
• Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
• Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012 with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131,2 | |
| Class A | $1,000.00 | $1,047.60 | $6.04 |
| Class I | 1,000.00 | 1,050.50 | 4.03 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at January 31, 2013 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:
Example
[ My account value $8,600.00 / $1,000.00 = 8.6 ] x $[ “expenses paid” from table ] = My actual expenses
Hypothetical example for comparison purposes
This table allows you to compare your 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 your fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131,2 | |
| Class A | $1,000.00 | $1,019.30 | $5.95 |
| Class I | 1,000.00 | 1,021.30 | 3.97 |
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 prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund's annualized expense ratio of 1.17% and 0.78% for Class A and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2 The Fund's expense ratios do not include fees and expenses indirectly incurred by the underlying funds, whose expense ratios can vary based on the underlying funds held by the Fund. The range of expense ratios of the underlying funds held by the Fund were 0.74% to 1.89% for the six months ended January 31, 2013.
| 3 |
Diversified Strategies Fund
Portfolio summary
As of 1-31-13
| Portfolio Composition1 | ||
| Fixed Income (60.8%) | ||
| Corporate Bonds | 50.2% | |
| Collateralized Mortgage Obligations | 4.2% | |
| Term Loans | 1.7% | |
| U.S. Government & Agency Obligations | 1.6% | |
| Asset Backed Securities | 1.4% | |
| Capital Preferred Securities | 1.0% | |
| Preferred Securities | 0.6% | |
| Municipal Bonds | 0.1% | |
| Affiliated Investment Companies (32.1%) | ||
| Alternative | ||
| Currency Strategies, Class NAV (First Quadrant) | 5.1% | |
| Global Absolute Return Strategies, Class NAV (Standard Life) | 3.0% | |
| Equity | ||
| Redwood, Class NAV (RCM) | 5.0% | |
| Global Shareholder Yield, Class NAV (Epoch) | 4.0% | |
| Capital Appreciation Value, Class NAV (T.Rowe Price) | 4.0% | |
| Global Real Estate, Class NAV (Deutsche) | 1.0% | |
| Fixed Income | ||
| Asia Total Return Bond, Class NAV (John Hancock) | 6.0% | |
| Multi Sector Bond, Class NAV (Stone Harbor) | 4.0% | |
| Unaffiliated Investment Companies (6.1%) | ||
| Alternative | ||
| AQR Managed Futures Strategy Fund, Class I | 3.1% | |
| Equity | ||
| Turner Spectrum Fund Institutional Class I | 3.0% | |
| Other assets and Liabilities | 1.0% | |
| Fixed Income Quality Composition2,3 | ||
| AAA | 1.5% | |
| AA | 0.9% | |
| A | 4.5% | |
| BBB | 34.0% | |
| BB | 19.3% | |
| B | 23.1% | |
| CCC | 11.8% | |
| U.S. Government | 2.5% | |
| U.S. Government Agency | 1.2% | |
| Not Rated | 1.2% | |
1 As a percentage of net assets on 1-31-13.
2 Ratings are from Moody's Investors Service, Inc. If not available, we have used ratings from Standard & Poor's Ratings Services. In the absence of ratings from these agencies, we have used Fitch, Inc. ratings. "Not Rated" securities are those with no ratings available from these agencies. All ratings are as of 1-31-13 and do not reflect subsequent downgrades or upgrades, if any.
3 Composition based on fixed income securities which represent $26,023,476 and 60.8% of the Fund's net assets at 1-31-13. Percentages shown are based on total fixed income securities.
| 4 |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Corporate Bonds 50.2% | $21,493,563 | |||
| (Cost $19,503,578) | ||||
| Consumer Discretionary 6.8% | 2,897,812 | |||
| Auto Components 0.8% | ||||
| Allison Transmission, Inc. (S) | 7.125 | 05/15/19 | 125,000 | 135,614 |
| Exide Technologies | 8.625 | 02/01/18 | 35,000 | 30,188 |
| Visteon Corp. | 6.750 | 04/15/19 | 144,000 | 154,080 |
| Automobiles 0.1% | ||||
| Ford Motor Company | 4.750 | 01/15/43 | 65,000 | 61,050 |
| Hotels, Restaurants & Leisure 2.5% | ||||
| Caesars Entertainment Operating Company, Inc. | 11.250 | 06/01/17 | 100,000 | 107,000 |
| CCM Merger, Inc. (S) | 9.125 | 05/01/19 | 150,000 | 150,375 |
| Downstream Development Authority of the Quapaw Tribe of | ||||
| Oklahoma (S) | 10.500 | 07/01/19 | 100,000 | 110,750 |
| Greektown Superholdings, Inc. | 13.000 | 07/01/15 | 100,000 | 107,375 |
| Landry's, Inc. (S) | 9.375 | 05/01/20 | 30,000 | 32,400 |
| Marina District Finance Company, Inc. | 9.500 | 10/15/15 | 75,000 | 76,313 |
| MGM Resorts International | 8.625 | 02/01/19 | 100,000 | 114,000 |
| MGM Resorts International (S) | 6.750 | 10/01/20 | 30,000 | 31,500 |
| Seminole Indian Tribe of Florida (S) | 7.750 | 10/01/17 | 200,000 | 216,500 |
| Sugarhouse HSP Gaming Property Mezzanine LP (S) | 8.625 | 04/15/16 | 100,000 | 107,000 |
| Wok Acquisition Corp. (S) | 10.250 | 06/30/20 | 25,000 | 26,781 |
| Household Durables 0.1% | ||||
| American Standard Americas (S) | 10.750 | 01/15/16 | 30,000 | 30,225 |
| Media 1.1% | ||||
| DISH DBS Corp. | 6.750 | 06/01/21 | 125,000 | 140,000 |
| Regal Entertainment Group | 9.125 | 08/15/18 | 100,000 | 111,750 |
| WMG Acquisition Corp. (S) | 6.000 | 01/15/21 | 35,000 | 37,188 |
| XM Satellite Radio, Inc. (S) | 7.625 | 11/01/18 | 150,000 | 166,500 |
| Multiline Retail 0.4% | ||||
| Macy's Retail Holdings, Inc. | 7.875 | 08/15/36 | 175,000 | 190,960 |
| Specialty Retail 1.5% | ||||
| Automotores Gildemeister SA (S) | 8.250 | 05/24/21 | 150,000 | 166,500 |
| AutoNation, Inc. | 5.500 | 02/01/20 | 65,000 | 69,875 |
| Hillman Group, Inc. | 10.875 | 06/01/18 | 100,000 | 108,875 |
| Jo-Ann Stores Holdings, Inc., PIK (S) | 9.750 | 10/15/19 | 50,000 | 51,000 |
| Limited Brands, Inc. | 6.625 | 04/01/21 | 50,000 | 56,875 |
| Petco Holdings Inc., PIK (S) | 8.500 | 10/15/17 | 15,000 | 15,450 |
| Toys R Us Property Company II LLC | 8.500 | 12/01/17 | 100,000 | 105,250 |
| Toys R Us, Inc. | 10.375 | 08/15/17 | 50,000 | 50,500 |
| Textiles, Apparel & Luxury Goods 0.3% | ||||
| Burlington Coat Factory Warehouse Corp. | 10.000 | 02/15/19 | 125,000 | 135,938 |
| Consumer Staples 2.3% | 992,528 | |||
| Beverages 0.2% | ||||
| Ajecorp BV (S) | 6.500 | 05/14/22 | 40,000 | 44,000 |
| Corporacion Lindley SA (S) | 6.750 | 11/23/21 | 25,000 | 28,938 |
| Food & Staples Retailing 0.6% | ||||
| Rite Aid Corp. | 9.250 | 03/15/20 | 150,000 | 166,875 |
| See notes to financial statements | |
| 5 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Consumer Staples (continued) | ||||
| Safeway, Inc. | 7.250 | 02/01/31 | 20,000 | $21,226 |
| Safeway, Inc. | 5.000 | 08/15/19 | 60,000 | 64,375 |
| Tops Holding Corp. (S) | 8.875 | 12/15/17 | 16,000 | 17,200 |
| Food Products 0.4% | ||||
| Corporacion Pesquera Inca SAC (S) | 9.000 | 02/10/17 | 78,000 | 82,290 |
| Simmons Foods, Inc. (S) | 10.500 | 11/01/17 | 100,000 | 96,500 |
| Household Products 0.5% | ||||
| Harbinger Group, Inc. (S) | 7.875 | 07/15/19 | 45,000 | 46,238 |
| Reynolds Group Issuer, Inc. | 9.000 | 04/15/19 | 100,000 | 105,500 |
| Yankee Candle Company, Inc. | 8.500 | 02/15/15 | 4,000 | 4,010 |
| YCC Holdings LLC, PIK | 10.250 | 02/15/16 | 75,000 | 77,251 |
| Personal Products 0.3% | ||||
| Revlon Consumer Products Corp. | 9.750 | 11/15/15 | 125,000 | 131,875 |
| Tobacco 0.3% | ||||
| Alliance One International, Inc. | 10.000 | 07/15/16 | 100,000 | 106,250 |
| Energy 3.7% | 1,584,045 | |||
| Energy Equipment & Services 0.8% | ||||
| Offshore Group Investments, Ltd. | 11.500 | 08/01/15 | 21,000 | 22,785 |
| Trinidad Drilling, Ltd. (S) | 7.875 | 01/15/19 | 100,000 | 106,500 |
| Weatherford International, Inc. | 6.800 | 06/15/37 | 200,000 | 218,158 |
| Oil, Gas & Consumable Fuels 2.9% | ||||
| Afren PLC (S) | 10.250 | 04/08/19 | 200,000 | 236,000 |
| Arch Coal, Inc. | 7.250 | 06/15/21 | 125,000 | 111,875 |
| BreitBurn Energy Partners LP (S) | 7.875 | 04/15/22 | 20,000 | 21,150 |
| EP Energy LLC | 7.750 | 09/01/22 | 20,000 | 21,500 |
| EV Energy Partners LP | 8.000 | 04/15/19 | 100,000 | 106,750 |
| Halcon Resources Corp. (S) | 8.875 | 05/15/21 | 30,000 | 32,025 |
| Kinder Morgan Energy Partners LP | 5.800 | 03/15/35 | 200,000 | 220,965 |
| Linn Energy LLC | 8.625 | 04/15/20 | 150,000 | 165,375 |
| Petroleos de Venezuela SA | 5.375 | 04/12/27 | 50,000 | 36,000 |
| Rex Energy Corp. (S) | 8.875 | 12/01/20 | 15,000 | 15,113 |
| Targa Resources Partners LP | 6.375 | 08/01/22 | 100,000 | 109,500 |
| TransCanada Pipelines, Ltd. (6.350% to 05/15/2017, then 3 | ||||
| month LIBOR + 2.210%) | 6.350 | 05/15/67 | 100,000 | 106,599 |
| WPX Energy, Inc. | 6.000 | 01/15/22 | 50,000 | 53,750 |
| Financials 16.4% | 7,009,872 | |||
| Capital Markets 1.5% | ||||
| Jefferies Group, Inc. | 6.875 | 04/15/21 | 200,000 | 228,000 |
| Morgan Stanley | 5.750 | 01/25/21 | 300,000 | 340,946 |
| The Goldman Sachs Group, Inc. | 6.750 | 10/01/37 | 65,000 | 73,410 |
| Commercial Banks 2.7% | ||||
| Abbey National Treasury Services PLC | 4.000 | 04/27/16 | 200,000 | 212,735 |
| Banco de Credito del Peru (S) | 4.750 | 03/16/16 | 100,000 | 106,250 |
| Barclays Bank PLC (S) | 6.050 | 12/04/17 | 200,000 | 223,312 |
| HBOS PLC (S) | 6.000 | 11/01/33 | 95,000 | 89,775 |
| ICICI Bank, Ltd. (S) | 5.750 | 11/16/20 | 200,000 | 217,159 |
| Royal Bank of Scotland Group PLC | 6.125 | 12/15/22 | 215,000 | 221,418 |
| Synovus Financial Corp. | 7.875 | 02/15/19 | 20,000 | 22,750 |
| See notes to financial statements | |
| 6 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Financials (continued) | ||||
| Wells Fargo & Company, Series K (7.980% to 03/15/2018, | ||||
| then 3 month LIBOR + 3.770%) (Q) | 7.980 | 03/15/18 | 40,000 | $46,000 |
| Consumer Finance 0.6% | ||||
| Discover Bank | 7.000 | 04/15/20 | 200,000 | 245,840 |
| Diversified Financial Services 4.1% | ||||
| Bank of America NA | 6.000 | 10/15/36 | 200,000 | 242,100 |
| Citigroup, Inc. | 5.850 | 12/11/34 | 71,000 | 82,714 |
| General Electric Capital Corp. | 5.300 | 02/11/21 | 250,000 | 284,344 |
| General Electric Capital Corp. (7.125% until 06/15/2022, then | ||||
| 3 month LIBOR + 5.296%) (Q) | 7.125 | 06/15/22 | 100,000 | 114,675 |
| International Lease Finance Corp. (S) | 7.125 | 09/01/18 | 100,000 | 117,000 |
| iPayment, Inc. | 10.250 | 05/15/18 | 50,000 | 45,250 |
| JPMorgan Chase & Company (7.900% to 04/30/2018, then 3 | ||||
| month LIBOR + 3.470%) (Q) | 7.900 | 04/30/18 | 200,000 | 230,080 |
| Legend Acquisition Sub, Inc. (S) | 10.750 | 08/15/20 | 35,000 | 30,800 |
| Merrill Lynch & Company, Inc. | 7.750 | 05/14/38 | 200,000 | 267,783 |
| Rabobank Nederland NV (11.000% to 06/30/2019, then 3 | ||||
| month LIBOR + 10.868%) (Q)(S) | 11.000 | 06/30/19 | 200,000 | 268,000 |
| Rivers Pittsburgh Borrower LP (S) | 9.500 | 06/15/19 | 15,000 | 16,200 |
| SPL Logistics Escrow LLC (S) | 8.875 | 08/01/20 | 24,000 | 25,680 |
| UBS AG | 7.625 | 08/17/22 | 50,000 | 54,945 |
| Insurance 3.6% | ||||
| AXA SA | 8.600 | 12/15/30 | 200,000 | 256,751 |
| CNA Financial Corp. | 7.250 | 11/15/23 | 200,000 | 248,817 |
| CNO Financial Group, Inc. (S) | 6.375 | 10/01/20 | 15,000 | 15,900 |
| Glen Meadow Pass-Through Trust (6.505% to 02/15/2017, | ||||
| then 3 month LIBOR + 2.125%) (S) | 6.505 | 02/12/67 | 200,000 | 184,500 |
| Liberty Mutual Group, Inc. (S) | 7.800 | 03/15/37 | 200,000 | 227,000 |
| Liberty Mutual Group, Inc. (S) | 6.500 | 03/15/35 | 50,000 | 54,260 |
| Lincoln National Corp. (6.050% to 04/20/2017, then 3 month | ||||
| LIBOR + 2.040%) | 6.050 | 04/20/67 | 150,000 | 150,375 |
| MetLife, Inc. | 6.400 | 12/15/36 | 30,000 | 32,494 |
| Nippon Life Insurance Company (P)(S) | 5.000 | 10/18/42 | 200,000 | 204,009 |
| Onex USI Aquisition Corp. (S) | 7.750 | 01/15/21 | 40,000 | 39,200 |
| Pacific LifeCorp. (S) | 6.000 | 02/10/20 | 15,000 | 17,131 |
| Prudential Financial, Inc. (5.875% to 09/15/2022, then 3 | ||||
| month LIBOR + 4.175%) | 5.875 | 09/15/42 | 45,000 | 47,194 |
| White Mountains Re Group, Ltd. (7.506% to 06/30/2017, then | ||||
| 3 month LIBOR + 3.200%) (Q)(S) | 7.506 | 06/30/17 | 50,000 | 53,011 |
| Real Estate Investment Trusts 3.1% | ||||
| DDR Corp. | 7.500 | 04/01/17 | 200,000 | 238,957 |
| Highwoods Realty LP | 5.850 | 03/15/17 | 70,000 | 78,724 |
| Host Hotels & Resorts LP | 5.250 | 03/15/22 | 200,000 | 218,000 |
| MPT Operating Partnership LP | 6.875 | 05/01/21 | 100,000 | 109,750 |
| MPT Operating Partnership LP | 6.375 | 02/15/22 | 35,000 | 37,538 |
| ProLogis International Funding II (S) | 4.875 | 02/15/20 | 20,000 | 19,908 |
| Prologis LP | 6.875 | 03/15/20 | 200,000 | 244,938 |
| SL Green Realty Corp. | 7.750 | 03/15/20 | 100,000 | 122,290 |
| Weyerhaeuser Company | 7.375 | 03/15/32 | 200,000 | 243,721 |
| See notes to financial statements | |
| 7 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Financials (continued) | ||||
| Real Estate Management & Development 0.4% | ||||
| General Shopping Investments, Ltd. (12.000% to 03/20/17, | ||||
| then 5 Year USGG + 11.052%) (Q)(S) | 12.000 | 03/20/17 | 30,000 | $27,000 |
| Mattamy Group Corp. (S) | 6.500 | 11/15/20 | 55,000 | 55,413 |
| Realogy Corp. (S) | 7.875 | 02/15/19 | 100,000 | 110,000 |
| Thrifts & Mortgage Finance 0.4% | ||||
| Nationstar Mortgage LLC | 10.875 | 04/01/15 | 125,000 | 133,125 |
| Nationstar Mortgage LLC (S) | 7.875 | 10/01/20 | 30,000 | 32,700 |
| Health Care 1.6% | 676,008 | |||
| Health Care Equipment & Supplies 0.5% | ||||
| Alere, Inc. | 8.625 | 10/01/18 | 150,000 | 155,625 |
| Alere, Inc. (S) | 7.250 | 07/01/18 | 40,000 | 41,600 |
| DJO Finance LLC (S) | 9.875 | 04/15/18 | 10,000 | 10,675 |
| Health Care Providers & Services 0.7% | ||||
| BioScrip, Inc. | 10.250 | 10/01/15 | 100,000 | 106,125 |
| Catalent Pharma Solutions, Inc. (S) | 7.875 | 10/15/18 | 25,000 | 25,250 |
| HCA, Inc. | 7.500 | 02/15/22 | 100,000 | 115,500 |
| National Mentor Holdings, Inc. (S) | 12.500 | 02/15/18 | 45,000 | 47,475 |
| Pharmaceuticals 0.4% | ||||
| Endo Health Solutions, Inc. | 7.250 | 01/15/22 | 100,000 | 109,500 |
| Mylan, Inc. (S) | 7.875 | 07/15/20 | 55,000 | 64,258 |
| Industrials 7.0% | 2,992,344 | |||
| Aerospace & Defense 1.4% | ||||
| Ducommun, Inc. | 9.750 | 07/15/18 | 100,000 | 109,750 |
| Huntington Ingalls Industries, Inc. | 7.125 | 03/15/21 | 150,000 | 165,000 |
| Kratos Defense & Security Solutions, Inc. | 10.000 | 06/01/17 | 120,000 | 131,700 |
| Textron Financial Corp. (6.000% to 02/15/2017, then 3 month | ||||
| LIBOR + 1.735%) (S) | 6.000 | 02/15/67 | 150,000 | 135,000 |
| Textron, Inc. | 7.250 | 10/01/19 | 30,000 | 36,256 |
| Airlines 2.3% | ||||
| American Airlines 2011-1 Class B Pass Through Trust (S) | 7.000 | 01/31/18 | 93,948 | 98,411 |
| Continental Airlines 1997-4 Class A Pass Through Trust | 6.900 | 01/02/18 | 29,369 | 31,957 |
| Continental Airlines 2010-1 Class A Pass Through Trust | 4.750 | 01/12/21 | 184,638 | 202,179 |
| Delta Air Lines 2002-1 Class G-1 Pass Through Trust | 6.718 | 01/02/23 | 68,416 | 75,600 |
| Delta Air Lines 2007-1 Class A Pass Through Trust | 6.821 | 08/10/22 | 141,939 | 160,576 |
| Delta Air Lines 2010-1 Class A Pass Through Trust | 6.200 | 07/02/18 | 160,911 | 181,025 |
| United Air Lines 2007-1 Class C Pass Through Trust (P) | 2.758 | 07/02/14 | 164,564 | 162,507 |
| US Airways 2012-1 Class A Pass Through Trust | 5.900 | 10/01/24 | 25,000 | 27,500 |
| US Airways 2012-2 Class A Pass Through Trust | 4.625 | 06/03/25 | 50,000 | 51,625 |
| Building Products 0.7% | ||||
| Gibraltar Industries Inc (S) | 6.250 | 02/01/21 | 70,000 | 72,713 |
| Voto-Votorantim, Ltd. (S) | 6.750 | 04/05/21 | 200,000 | 237,000 |
| Commercial Services & Supplies 0.7% | ||||
| Casella Waste Systems, Inc. | 7.750 | 02/15/19 | 40,000 | 38,600 |
| Iron Mountain, Inc. | 5.750 | 08/15/24 | 20,000 | 20,175 |
| Steelcase, Inc. | 6.375 | 02/15/21 | 200,000 | 219,807 |
| See notes to financial statements | |
| 8 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Industrials (continued) | ||||
| Electrical Equipment 0.3% | ||||
| Coleman Cable, Inc. | 9.000 | 02/15/18 | 130,000 | $141,050 |
| Industrial Conglomerates 0.5% | ||||
| Odebrecht Finance, Ltd. (Q)(S) | 7.500 | 09/14/15 | 200,000 | 215,500 |
| Marine 0.1% | ||||
| Navios South American Logistics, Inc. | 9.250 | 04/15/19 | 50,000 | 50,000 |
| Road & Rail 0.9% | ||||
| Avis Budget Car Rental LLC | 8.250 | 01/15/19 | 100,000 | 110,750 |
| Florida East Coast Railway Corp. | 8.125 | 02/01/17 | 100,000 | 107,250 |
| The Hertz Corp. | 6.750 | 04/15/19 | 100,000 | 108,500 |
| The Kenan Advantage Group, Inc. (S) | 8.375 | 12/15/18 | 40,000 | 41,200 |
| Trading Companies & Distributors 0.1% | ||||
| Aircastle, Ltd. | 6.250 | 12/01/19 | 25,000 | 27,000 |
| Aircastle, Ltd. | 6.750 | 04/15/17 | 15,000 | 16,500 |
| Aircastle, Ltd. | 7.625 | 04/15/20 | 15,000 | 17,213 |
| Information Technology 0.5% | 203,738 | |||
| Communications Equipment 0.1% | ||||
| Global Generations Merger Sub, Inc. (S) | 11.000 | 12/15/20 | 45,000 | 47,363 |
| IT Services 0.3% | ||||
| Brightstar Corp. (S) | 9.500 | 12/01/16 | 100,000 | 107,500 |
| Software 0.1% | ||||
| Aspect Software, Inc. | 10.625 | 05/15/17 | 50,000 | 48,875 |
| Materials 4.9% | 2,098,169 | |||
| Chemicals 0.7% | ||||
| Braskem Finance, Ltd. (S) | 7.000 | 05/07/20 | 100,000 | 112,000 |
| Ineos Finance PLC (S) | 7.500 | 05/01/20 | 100,000 | 107,750 |
| LyondellBasell Industries NV | 5.000 | 04/15/19 | 25,000 | 27,563 |
| Nufarm Australia, Ltd. (S) | 6.375 | 10/15/19 | 40,000 | 42,400 |
| Construction Materials 0.2% | ||||
| American Gilsonite Company (S) | 11.500 | 09/01/17 | 70,000 | 73,850 |
| Containers & Packaging 0.4% | ||||
| Consolidated Container Company LLC (S) | 10.125 | 07/15/20 | 35,000 | 37,800 |
| Pretium Packaging LLC | 11.500 | 04/01/16 | 100,000 | 105,000 |
| Tekni-Plex, Inc. (S) | 9.750 | 06/01/19 | 43,000 | 47,300 |
| Metals & Mining 2.3% | ||||
| Commercial Metals Company | 7.350 | 08/15/18 | 200,000 | 220,500 |
| Edgen Murray Corp. (S) | 8.750 | 11/01/20 | 30,000 | 30,675 |
| FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 02/01/18 | 25,000 | 25,938 |
| FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 04/01/22 | 100,000 | 103,500 |
| FMG Resources August 2006 Pty, Ltd. (S) | 8.250 | 11/01/19 | 25,000 | 26,813 |
| JMC Steel Group (S) | 8.250 | 03/15/18 | 100,000 | 106,500 |
| Metinvest BV (S) | 8.750 | 02/14/18 | 200,000 | 202,910 |
| Rain CII Carbon LLC (S) | 8.000 | 12/01/18 | 40,000 | 41,800 |
| SunCoke Energy, Inc. | 7.625 | 08/01/19 | 100,000 | 105,750 |
| Vale Overseas, Ltd. | 6.875 | 11/10/39 | 75,000 | 88,996 |
| Walter Energy, Inc. (S) | 9.875 | 12/15/20 | 30,000 | 33,075 |
| See notes to financial statements | |
| 9 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Materials (continued) | ||||
| Paper & Forest Products 1.3% | ||||
| Georgia-Pacific LLC | 7.250 | 06/01/28 | 171,000 | $221,905 |
| International Paper Company | 9.375 | 05/15/19 | 200,000 | 272,982 |
| Westvaco Corp. | 7.950 | 02/15/31 | 50,000 | 63,162 |
| Telecommunication Services 4.1% | 1,768,888 | |||
| Diversified Telecommunication Services 3.7% | ||||
| American Tower Corp. | 4.700 | 03/15/22 | 40,000 | 43,123 |
| CenturyLink, Inc. | 5.800 | 03/15/22 | 50,000 | 52,326 |
| CenturyLink, Inc. | 7.600 | 09/15/39 | 200,000 | 204,365 |
| Cincinnati Bell, Inc. | 8.750 | 03/15/18 | 30,000 | 31,688 |
| GTP Towers Issuer LLC (S) | 8.112 | 02/15/15 | 100,000 | 104,136 |
| Intelsat Jackson Holdings SA | 7.250 | 10/15/20 | 100,000 | 107,000 |
| Level 3 Communications, Inc. (S) | 8.875 | 06/01/19 | 200,000 | 217,500 |
| PAETEC Holding Corp. | 9.875 | 12/01/18 | 100,000 | 115,375 |
| Telecom Italia Capital SA | 6.999 | 06/04/18 | 35,000 | 40,849 |
| Telecom Italia Capital SA | 7.200 | 07/18/36 | 200,000 | 212,718 |
| Telefonica Emisiones SAU | 5.134 | 04/27/20 | 200,000 | 211,745 |
| West Corp. | 11.000 | 10/15/16 | 100,000 | 104,000 |
| Windstream Corp. | 7.750 | 10/01/21 | 150,000 | 163,875 |
| Wireless Telecommunication Services 0.4% | ||||
| Clearwire Communications LLC (S) | 12.000 | 12/01/15 | 50,000 | 54,188 |
| Digicel, Ltd. (S) | 8.250 | 09/01/17 | 100,000 | 106,000 |
| Utilities 2.9% | 1,270,159 | |||
| Electric Utilities 2.2% | ||||
| Allegheny Energy Supply Company LLC (S) | 6.750 | 10/15/39 | 200,000 | 213,968 |
| DPL, Inc. | 7.250 | 10/15/21 | 200,000 | 215,500 |
| Electricite de France SA (Q)(S) | 5.250 | 01/29/23 | 100,000 | 97,689 |
| Ipalco Enterprises, Inc. | 5.000 | 05/01/18 | 200,000 | 213,000 |
| PNM Resources, Inc. | 9.250 | 05/15/15 | 150,000 | 171,000 |
| Southern California Edison Company (6.250% to 02/01/2022, | ||||
| then 3 month LIBOR + 4.199%) (Q) | 6.250 | 02/01/22 | 35,000 | 38,670 |
| Independent Power Producers & Energy Traders 0.4% | ||||
| NRG Energy, Inc. | 8.250 | 09/01/20 | 150,000 | 169,500 |
| Multi-Utilities 0.3% | ||||
| CMS Energy Corp. | 5.050 | 03/15/22 | 40,000 | 44,582 |
| Integrys Energy Group, Inc. (6.110% to 12/01/2016, then 3 | ||||
| month LIBOR + 2.120%) | 6.110 | 12/01/66 | 100,000 | 106,250 |
| U.S. Government & Agency Obligations 1.6% | $673,036 | |||
| (Cost $721,602) | ||||
| U.S. Government 1.6% | 673,036 | |||
| U.S. Treasury Strip PO | 5.029 | 08/15/41 | 1,750,000 | 673,036 |
| See notes to financial statements | |
| 10 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Capital Preferred Securities 1.0% | $448,063 | |||
| (Cost $397,638) | ||||
| Financials 1.0% | 448,063 | |||
| Fifth Third Capital Trust IV (6.500% to 04/15/2017 then 3 | ||||
| month LIBOR + 1.368%) | 6.500 | 04/15/37 | 150,000 | 149,813 |
| MetLife Capital Trust X (9.250% to 04/08/2038, then 3 month | ||||
| LIBOR + 5.540%) (S) | 9.250 | 04/08/38 | 30,000 | 41,250 |
| Regions Financing Trust II (6.625% to 05/15/2027, then 3 | ||||
| month LIBOR + 1.290%) | 6.625 | 05/15/47 | 150,000 | 150,000 |
| ZFS Finance USA Trust II (6.450% to 06/15/2016, then 3 | ||||
| month LIBOR + 2.000%) (S) | 6.450 | 12/15/65 | 100,000 | 107,000 |
| Municipal Bonds 0.1% | $34,382 | |||
| (Cost $32,269) | ||||
| State of Illinois, General Obligation | 5.100 | 06/01/33 | 35,000 | 34,382 |
| Term Loans (M) 1.7% | $713,792 | |||
| (Cost $670,935) | ||||
| Consumer Discretionary 0.6% | 266,321 | |||
| Hotels, Restaurants & Leisure 0.3% | ||||
| Kalispel Tribal Economic Authority | 7.500 | 02/22/17 | 138,059 | 138,405 |
| Media 0.3% | ||||
| Clear Channel Communications, Inc. | 3.920 | 01/28/16 | 147,640 | 127,916 |
| Financials 0.2% | 95,474 | |||
| Real Estate Investment Trusts 0.2% | ||||
| iStar Financial, Inc. | 5.750 | 09/28/17 | 94,063 | 95,474 |
| Health Care 0.4% | 149,597 | |||
| Health Care Providers & Services 0.4% | ||||
| National Mentor Holdings, Inc. | 7.000 | 02/09/17 | 148,116 | 149,597 |
| Industrials 0.5% | 202,400 | |||
| Aerospace & Defense 0.3% | ||||
| Consolidated Precision Product (T) | TBD | 12/20/19 | 100,000 | 101,250 |
| Airlines 0.2% | ||||
| Delta Air Lines, Inc. | 5.250 | 10/18/18 | 100,000 | 101,150 |
| Collateralized Mortgage Obligations 4.2% | $1,785,834 | |||
| (Cost $1,607,964) | ||||
| Commercial & Residential 3.5% | 1,480,057 | |||
| American Home Mortgage Assets LLC | ||||
| Series 2006-6, Class XP IO | 2.050 | 12/25/46 | 1,509,797 | 130,099 |
| Americold 2010 LLC Trust | ||||
| Series 2010-ARTA, Class D (S) | 7.443 | 01/14/29 | 100,000 | 121,403 |
| See notes to financial statements | |
| 11 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Commercial & Residential (continued) | ||||
| Commercial Mortgage Pass Through Certificates | ||||
| Series 2012-CR5, Class XA IO | 1.952 | 12/10/45 | 519,397 | $63,909 |
| Countrywide Alternative Loan Trust | ||||
| Series 2007-16CB, Class 4A7 | 6.000 | 08/25/37 | 126,401 | 110,942 |
| Extended Stay America Trust (S) | 7.625 | 12/05/19 | 100,000 | 104,037 |
| Fontainebleau Miami Beach Trust | ||||
| Series 2012-FBLU, Class D (S) | 5.007 | 05/05/27 | 100,000 | 105,729 |
| Greenwich Capital Commercial Funding Corp. | ||||
| Series 2006-GG7, Class AM (P) | 5.867 | 07/10/38 | 220,000 | 246,875 |
| JPMorgan Chase Commercial Mortgage Securities Corp. | ||||
| Series 2006-LDP7, Class AM (P) | 5.872 | 04/15/45 | 250,000 | 283,620 |
| Motel 6 Trust | ||||
| Series 2012-MTL6, Class D (S) | 3.781 | 10/05/25 | 100,000 | 100,213 |
| UBS-Barclays Commercial Mortgage Trust | ||||
| Series 2012-C2, Class XA IO (S) | 1.822 | 05/10/63 | 546,301 | 57,645 |
| WaMu Mortgage Pass Through Certificates | ||||
| Series 2005-AR6, Class X IO | 1.160 | 04/25/45 | 1,848,124 | 108,231 |
| Wells Fargo Mortgage Backed Securities Trust | ||||
| Series 2005-AR5, Class 1A1 (P) | 2.613 | 04/25/35 | 48,243 | 47,354 |
| U.S. Government Agency 0.7% | 305,777 | |||
| Federal Home Loan Mortgage Corp. | ||||
| Series 288, Class IO | 3.000 | 10/15/27 | 391,442 | 58,344 |
| Series 4077, Class IK IO | 5.000 | 07/15/42 | 114,697 | 33,577 |
| Series K018, Class X1 IO | 1.465 | 01/25/22 | 407,421 | 40,683 |
| Series K710, Class X1 IO | 1.784 | 05/25/19 | 279,507 | 26,373 |
| Federal National Mortgage Association | ||||
| Series 2012-118, Class IB IO | 3.500 | 11/25/42 | 164,820 | 43,074 |
| Series 2012-137, Class WI IO | 3.500 | 12/25/32 | 238,504 | 49,398 |
| Series 407, Class C6 IO | 5.500 | 01/25/40 | 188,459 | 31,803 |
| Government National Mortgage Association | ||||
| Series 2012-114, Class IO | 1.026 | 01/16/53 | 228,647 | 22,525 |
| Asset Backed Securities 1.4% | $598,375 | |||
| (Cost $548,550) | ||||
| ACE Securities Corp. | ||||
| Series 2006-ASP5, Class A2B (P) | 0.334 | 10/25/36 | 37,411 | 18,003 |
| Series 2006-ASP5, Class A2C (P) | 0.384 | 10/25/36 | 32,568 | 15,792 |
| Series 2006-ASP5, Class A2D (P) | 0.464 | 10/25/36 | 65,136 | 31,960 |
| Aegis Asset Backed Securities Trust | ||||
| Series 2005-4, Class M1 (P) | 0.654 | 10/25/35 | 75,000 | 63,788 |
| Argent Securities, Inc. | ||||
| Series 2006-M2, Class A2C (P) | 0.354 | 09/25/36 | 176,924 | 67,952 |
| Asset Backed Securities Corp. Home Equity | ||||
| Series 2006-HE1, Class A3 (P) | 0.404 | 01/25/36 | 62,673 | 59,388 |
| Citicorp Residential Mortgage Securities, Inc. | ||||
| Series 2007-2, Class A6 | 6.265 | 06/25/37 | 36,659 | 36,310 |
| Countrywide Asset-Backed Certificates | ||||
| Series 2004-10, Class AF5B | 5.113 | 02/25/35 | 60,568 | 61,866 |
| Dominos Pizza Master Issuer LLC | ||||
| Series 2012-1A, Class A2 (S) | 5.216 | 01/25/42 | 118,200 | 133,411 |
| See notes to financial statements | |
| 12 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Maturity | ||||
| Rate (%) | date | Par value^ | Value | |
| Asset Backed Securities (continued) | ||||
| MASTR Asset Backed Securities Trust | ||||
| Series 2007-HE2, Class A2 (P) | 0.904 | 08/25/37 | 42,393 | $40,924 |
| Morgan Stanley ABS Capital I | ||||
| Series 2006-HE4, Class A3 (P) | 0.354 | 06/25/36 | 60,023 | 41,688 |
| Soundview Home Loan Trust | ||||
| Series 2006-OPT2, Class A3 (P) | 0.384 | 05/25/36 | 30,574 | 27,293 |
| Shares | Value | |||
| Preferred Securities 0.6% | $276,431 | |||
| (Cost $261,190) | ||||
| Financials 0.4% | 180,102 | |||
| Discover Financial Services, 6.500% | 1,100 | 28,050 | ||
| PNC Financial Services Group, Inc., 6.125% | 2,150 | 58,179 | ||
| Regions Financial Corp., 6.375% | 1,935 | 48,143 | ||
| U.S. Bancorp, 6.000% | 1,700 | 45,730 | ||
| Industrials 0.1% | 65,016 | |||
| Continental Airlines Finance Trust II, 6.000% | 700 | 27,322 | ||
| United Technologies Corp., 7.000% | 662 | 37,694 | ||
| Materials 0.0% | 6,488 | |||
| Arcelormittal, 6.000% | 250 | 6,488 | ||
| Utilities 0.1% | 24,825 | |||
| Duke Energy Corp., 5.125% | 995 | 24,825 | ||
| Affiliated Investment Companies 32.1% | $13,724,737 | |||
| (Cost $12,717,436) | ||||
| Alternative 8.0% | 3,440,015 | |||
| John Hancock Funds II (G) 8.0% | ||||
| Currency Strategies, Class NAV (First Quadrant) (I) | 221,029 | 2,161,666 | ||
| Global Absolute Return Strategies, Class NAV (Standard | ||||
| Life) | 119,249 | 1,278,349 | ||
| Equity 14.1% | 6,024,441 | |||
| John Hancock Funds II (G) 10.1% | ||||
| Global Real Estate, Class NAV (Deutsche) | 50,652 | 431,045 | ||
| Capital Appreciation Value, Class NAV (T.Rowe Price) | 150,622 | 1,723,116 | ||
| Redwood, Class NAV (RCM) | 196,018 | 2,142,480 | ||
| John Hancock Funds III (G) 4.0% | ||||
| Global Shareholder Yield, Class NAV (Epoch) | 165,024 | 1,727,800 | ||
| Fixed Income 10.0% | 4,260,281 | |||
| John Hancock Funds II (G) 10.0% | ||||
| Asia Total Return Bond Fund, Class NAV (John Hancock1) | 257,635 | 2,550,589 | ||
| Multi Sector Bond, Class NAV (Stone Harbor) | 162,828 | 1,709,692 | ||
| See notes to financial statements | |
| 13 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Shares | Value | |
| Unaffiliated Investment Companies 6.1% | $2,593,530 | |
| (Cost $2,583,428) | ||
| Alternative 3.1% | 1,299,954 | |
| AQR Managed Futures Strategy Fund, Class I | 128,708 | 1,299,954 |
| Equity 3.0% | 1,293,576 | |
| Turner Spectrum Fund, Institutional Class I | 115,808 | 1,293,576 |
| Total investments (Cost $39,044,590)† 99.0% | $42,341,743 | |
| Other assets and liabilities, net 1.0% | $425,123 | |
| Total net assets 100.0% | $42,766,866 | |
^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.
Notes to Schedule of Investments
1 Manulife Asset Management (US) LLC is doing business as John Hancock Asset Management.
IO Interest Only Security – (Interest Tranche of Stripped Mortgage Pool). Rate shown is the annualized yield at the end of the period.
LIBOR London Interbank Offered Rate.
PIK Paid in Kind.
PO Principal Only Security – (Principal Tranche of Stripped Security). Rate shown is the annualized yield on date of purchase.
TBD To Be Determined.
USGG U.S. Generic Government Index
(G) The Fund's sub-adviser is shown parenthetically.
(I) Non-income producing security.
(M) Term loans are variable rate obligations. The coupon rate shown represents the rate at period end.
(P) Variable rate obligation. The coupon rate shown represents the rate at period end.
(Q) Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date.
(S) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $7,836,917 or 18.3% of the Fund's net assets as of 1-31-13.
(T) This position represents an unsettled loan commitment at period end. Certain details associated with this purchase are not known prior to the settlement date, including coupon rate.
† At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $39,085,896. Net unrealized depreciation aggregated $3,255,847, of which $3,404,425 related to appreciated investment securities and $148,578 related to depreciated investment securities.
| See notes to financial statements | |
| 14 | |
Diversified Strategies Fund
As of 1-31-13 (Unaudited)
Fund’s Investments
| Investment Companies | |
| Underlying Funds’ Investment Managers | |
| Deutsche Investment Asset Management, Inc. | (Deutsche) |
| Epoch Investment Partners, Inc. | (Epoch) |
| First Quadrant, L.P. | (First Quadrant) |
| John Hancock Asset Management | (John Hancock1) |
| RCM Capital Management LLC | (RCM) |
| Standard Life Investments | |
| (Corporate Funds) Limited | (Standard Life) |
| Stone Harbor Investment Partners LP | (Stone Harbor) |
| T. Rowe Price Associates, Inc. | (T. Rowe Price) |
1 Manulife Asset Management (US) LLC is doing business as John Hancock Asset Management.
| See notes to financial statements | |
| 15 | |
Diversified Strategies Fund
Statement of Assets and Liabilities — 1-31-13 (Unaudited)
| Assets | ||
| Investments in unaffiliated issuers, at value | ||
| (Cost $26,327,154) | $28,617,006 | |
| Investments in affiliated funds, at value (Cost | ||
| $12,717,436) | 13,724,737 | |
| Total investments, at value (Cost | ||
| $39,044,590) | 42,341,743 | |
| Cash | 224,389 | |
| Receivable for investments sold | 948 | |
| Dividends and interest receivable | 438,934 | |
| Receivable due from adviser | 335 | |
| Other receivables and prepaid expenses | 30 | |
| Total assets | 43,006,379 | |
| Liabilities | ||
| Payable for investments purchased | 209,546 | |
| Payable to affiliates | ||
| Accounting and legal services fees | 302 | |
| Transfer agent fees | 6,302 | |
| Trustees' fees | 104 | |
| Other liabilities and accrued expenses | 23,259 | |
| Total liabilities | 239,513 | |
| Net assets | 42,766,866 | |
| Net assets consist of | ||
| Paid-in capital | $38,977,459 | |
| Undistributed net investment income | 78,388 | |
| Accumulated net realized gain (loss) on | ||
| investments | 413,866 | |
| Net unrealized appreciation (depreciation) on | ||
| investments | 3,297,153 | |
| Net assets | $42,766,866 | |
| 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 ($32,893,518 ÷ 3,000,000 shares)1 | $10.96 | |
| Class I ($9,873,348 ÷ 900,000 shares) | $10.97 | |
| Maximum offering price per share | ||
| Class A (net asset value per share ÷ 95%)2 | $11.54 | |
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.
| See notes to financial statements | |
| 16 | |
Diversified Strategies Fund
Statement of Operations — For the six-month period ended 1-31-13 (Unaudited)
| Investment income | ||
| Interest | $931,571 | |
| Income distributions received from affiliated | ||
| underlying funds | 130,528 | |
| Dividends | 15,077 | |
| Total investment income | 1,077,176 | |
| Expenses | ||
| Investment management fees | 127,346 | |
| Distribution and service fees | 50,676 | |
| Accounting and legal services fees | 2,856 | |
| Transfer agent fees | 37,547 | |
| Trustees' fees | 287 | |
| Professional fees | 21,125 | |
| Custodian fees | 6,037 | |
| Registration and filing fees | 16,372 | |
| Other | 1,896 | |
| Total expenses | 264,142 | |
| Less expense reductions | (26,599) | |
| Net expenses | 237,543 | |
| Net investment income | 839,633 | |
| Realized and unrealized gain (loss) | ||
| Net realized gain (loss) on | ||
| Investments in unaffiliated issuers | 456,927 | |
| Investments in affiliated issuers | 80,625 | |
| Capital gain distributions received from affiliated | ||
| underlying funds | 126,052 | |
| 663,604 | ||
| Change in net unrealized appreciation | ||
| (depreciation) of | ||
| Investments in unaffiliated issuers | 240,148 | |
| Investments in affiliated issuers | 336,614 | |
| 576,762 | ||
| Net realized and unrealized gain | 1,240,366 | |
| Increase in net assets from operations | $2,079,999 | |
| See notes to financial statements | |
| 17 | |
Diversified Strategies Fund
Statements of Changes in Net Assets
| Diversified Strategies Fund | ||||||
| Six months | ||||||
| ended | Period ended | |||||
| 1/31/13 | 7/31/12 1 | |||||
| (Unaudited) | ||||||
| Increase (decrease) in net assets | ||||||
| From operations | ||||||
| Net investment income | $ | 839,633 | $ | 1,267,003 | ||
| Net realized gain | 663,604 | 534,227 | ||||
| Change in net unrealized appreciation | ||||||
| (depreciation) | 576,762 | 2,720,391 | ||||
| Increase in net assets resulting from | ||||||
| operations | 2,079,999 | 4,521,621 | ||||
| Distributions to shareholders | ||||||
| From net investment income | ||||||
| Class A | (1,269,180) | (298,380) | ||||
| Class I | (419,031) | (98,865) | ||||
| From net realized gain | ||||||
| Class A | (528,330) | (48,060) | ||||
| Class I | (158,490) | (14,418) | ||||
| Total distributions | (2,375,031) | (459,723) | ||||
| From Fund share transactions | — | 39,000,000 | ||||
| Total increase (decrease) | (295,032) | 43,061,898 | ||||
| Net assets | ||||||
| Beginning of period | 43,061,898 | — | ||||
| End of period | $ | 42,766,866 | $ | 43,061,898 | ||
| Undistributed net investment income | $ | 78,388 | $ | 926,966 | ||
1 Period from 9-30-11 (commencement of operations) to 7-31-12.
| See notes to financial statements | |
| 18 | |
Diversified Strategies Fund
Financial Highlights (For a share outstanding throughout the periods)
| Class A Shares | ||||||||
| Period ended | 1-31-131 | 7-31-122 | ||||||
| Per share operating performance | ||||||||
| Net asset value, beginning of period | $11.04 | $10.00 | ||||||
| Net investment income3 | 0.22 | 0.32 | ||||||
| Net realized and unrealized gain on | ||||||||
| investments | 0.30 | 0.84 | ||||||
| Total from investment operations | 0.52 | 1.16 | ||||||
| Less distributions | ||||||||
| From net investment income | (0.42) | (0.10) | ||||||
| From net realized gain | (0.18) | (0.02) | ||||||
| Total distributions | (0.60) | (0.12) | ||||||
| Net asset value, end of period | $10.96 | $11.04 | ||||||
| Total return (%)4,5 | 4.766 | 11.656 | ||||||
| Ratios and supplemental data | ||||||||
| Net assets, end of period (in millions) | $33 | $33 | ||||||
| Ratios (as a percentage of average net | ||||||||
| assets): | ||||||||
| Expenses before reductions and amounts | ||||||||
| recaptured7 | 1.298 | 1.358 | ||||||
| Expenses including reductions and amounts | ||||||||
| recaptured7 | 1.178 | 1.178 | ||||||
| Net investment income | 3.848 | 3.608 | ||||||
| Portfolio turnover (%) | 24 | 21 | ||||||
1 Six months ended 1-31-13. Unaudited
2 Period from 9-30-11 (commencement of operations) to 7-31-12.
3 Based on the 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 shown.
6 Not annualized.
7 Ratios do not include expenses indirectly incurred from underlying funds whose expense ratios can vary based on the underlying funds held by the Fund. The range of expense ratios of the underlying funds held by the Fund was as follows: 0.74% to 1.89% and 0.75% to 1.43% for the periods ended 1-31-13 and 7-31-12, respectively.
8 Annualized.
| See notes to financial statements | |
| 19 | |
Diversified Strategies Fund
Financial Highlights (For a share outstanding throughout the periods)
| Class I Shares | ||||||||
| Period ended | 1-31-131 | 7-31-122 | ||||||
| Per share operating performance | ||||||||
| Net asset value, beginning of period | $11.06 | $10.00 | ||||||
| Net investment income3 | 0.24 | 0.35 | ||||||
| Net realized and unrealized gain on | ||||||||
| investments | 0.32 | 0.84 | ||||||
| Total from investment operations | 0.56 | 1.19 | ||||||
| Less distributions | ||||||||
| From net investment income | (0.47) | (0.11) | ||||||
| From net realized gain | (0.18) | (0.02) | ||||||
| Total distributions | (0.65) | (0.13) | ||||||
| Net asset value, end of period | $10.97 | $11.06 | ||||||
| Total return (%)4 | 5.055 | 11.965 | ||||||
| Ratios and supplemental data | ||||||||
| Net assets, end of period (in millions) | $10 | $10 | ||||||
| Ratios (as a percentage of average net | ||||||||
| assets): | ||||||||
| Expenses before reductions and amounts | ||||||||
| recaptured6 | 0.907 | 0.957 | ||||||
| Expenses including reductions and amounts | ||||||||
| recaptured6 | 0.787 | 0.787 | ||||||
| Net investment income | 4.237 | 3.997 | ||||||
| Portfolio turnover (%) | 24 | 21 | ||||||
1 Six months ended 1-31-13. Unaudited
2 Period from 9-30-11 (commencement of operations) to 7-31-12.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Ratios do not include expenses indirectly incurred from underlying funds whose expense ratios can vary based on the underlying funds held by the Fund. The range of expense ratios of the underlying funds held by the Fund was as follows: 0.74% to 1.89% and 0.75% to 1.43% for the periods ended 1-31-13 and 7-31-12, respectively.
7 Annualized.
| See notes to financial statements | |
| 20 | |
Notes to Financial Statements (unaudited)
Note 1 — Organization
John Hancock Diversified Strategies Fund (the Fund) is a series of John Hancock Funds II (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek to achieve consistent returns over the long term with a focus on capital preservation.
The Fund operates as a “fund of funds” investing in Class NAV shares of affiliated underlying funds of the Trust and other funds in the John Hancock Funds complex and other permitted investments, including other unaffiliated funds.
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. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
The accounting policies of the underlying funds of the Fund are outlined in the underlying funds’ shareholder reports, available without charge by calling 1-800-344-1029 and on the Fund’s website at www.jhfunds.com, on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or at the SEC’s public reference room in Washington, D.C. The underlying funds are not covered by this report.
Note 2 - Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Investments by the Fund in underlying affiliated funds and/or other open-end management investment companies are valued at their respective net asset values each business day. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, taking 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. Certain short-term securities are valued at amortized cost. Other portfolio securities and assets, where market quotations are not readily available, are valued at fair value, as determined in good faith by the Fund’s Pricing Committee, following procedures established by the Board of Trustees, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted.
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, including registered investment companies. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment
| 21 |
speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| Level 2 | Level 3 | |||||||||
| Total Market | Significant | Significant | ||||||||
| Value at | Level 1 Quoted | Observable | Unobservable | |||||||
| 01/31/13 | Price | Inputs | Inputs | |||||||
| Corporate Bonds | $21,493,563 | — | $21,466,563 | $27,000 | ||||||
| U.S. Government & Agency Obligations | 673,036 | — | 673,036 | — | ||||||
| Capital Preferred Securities | 448,063 | — | 448,063 | — | ||||||
| Municipal Bonds | 34,382 | — | 34,382 | — | ||||||
| Term Loans | 713,792 | — | 713,792 | — | ||||||
| Collateralized Mortgage Obligations | 1,785,834 | — | 1,785,834 | — | ||||||
| Asset Backed Securities | 598,375 | — | 598,375 | — | ||||||
| Preferred Securities | 276,431 | $249,109 | 27,322 | — | ||||||
| Affiliated Investment Companies | 13,724,737 | 13,724,737 | — | — | ||||||
| Unaffiliated Investment Companies | 2,593,530 | 2,593,530 | — | — | ||||||
| Total Investments in Securities | $42,341,743 | $16,567,376 | $25,747,367 | $27,000 |
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date. Income and capital gain distributions from underlying funds are recorded on ex-date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended month January 31, 2013 were $197. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other
| 22 |
things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees are calculated daily for each class, based on the net asset value of the class and the applicable specific expense rates.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends and capital gain distributions, if any, at least annually.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class.
Such distributions on a tax basis are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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 amortization and accretion on debt securities and non-deductible Rule 12b-1 fees.
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 Investment Management Services, LLC (the Adviser), serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis based on two components: (a) a fee on assets invested in a fund of John Hancock Funds III (JHF III) or John Hancock Funds II (JHF II) and (b) a fee on assets invested in investments other than a fund of JHF III and JHF II (Other Assets). The fee on assets invested in the fund of JHF III or JHF II is stated as an annual percentage of the current value of the aggregate net assets of the Fund and is equivalent to the sum of: (a) 0.250% of the first $1,000,000,000 of the Fund’s aggregate net assets
| 23 |
and (b) 0.225% of the excess over $1,000,000,000 of the Fund’s aggregate net assets. The fee on Other Assets is stated as an annual percentage of the current value of the aggregate net assets of the Fund and is equivalent to the sum of: (a) 0.700% of the first $1,000,000,000 of the Fund’s aggregate net assets and (b) 0.675% of the excess over $1,000,000,000 of the Fund’s aggregate net assets. The Adviser 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 Adviser. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has voluntarily agreed to waive fees and/or reimburse certain expenses for each share class of the Fund excluding certain expenses such as taxes, brokerage commissions, interest expense, acquired fund fees and litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. The fee waivers and/or reimbursements are such that these expenses will not exceed 1.22% and 0.80% for Class A and Class I shares, respectively. The fee waivers and/or reimbursements will continue in effect until terminated at any time by the Adviser on notice to the Fund.
The Adviser has voluntarily agreed to waive other fund level expenses excluding taxes, brokerage commissions, interest expense, advisory fees, 12b-1 fees, transfer agent fees, service fees, blue sky fees, printing and postage, acquired fund fees, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. This voluntary expense reimbursement may be terminated at any time by the Adviser on notice to the Fund. The waivers are such that these expenses will not exceed 0.10% of the Fund’s average daily net assets.
Additionally, the Adviser has voluntarily agreed to waive its advisory fee for the Fund so that the aggregate advisory fee retained by the Adviser with respect to both the Fund and its underlying investments (after payment of subadvisory fees) does not exceed 0.70% of the Fund’s first $1.0 billion of average annual net assets and 0.675% of the Fund’s average annual net assets in excess of $1.0 billion. The adviser may terminate this voluntary waiver at any time upon notice to the Fund.
The investment management fees including the impact of waivers and reimbursements described above, incurred for the six months ended January 31, 2013 were equivalent to a net effective rate of 0.46% of the Fund’s average daily net assets.
Accordingly, the fee waivers and/or expense reimbursements described above amounted to $20,449 and $6,150 for Class A and Class I shares, respectively, for the six months ended January 31, 2013.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. The table below outlines the amount of waived or reimbursed expenses subject to potential recovery and the respective expiration dates and the amounts recovered during the six months ended January 31, 2013. Certain reimbursements or waivers are not subject to recapture.
| Amounts | ||||
| Amounts eligble | Amounts eligble | Amounts eligble | Amounts eligble | recovered during |
| for recovery | for recovery | for recovery | for recovery | the six months |
| through | through | through | through | ended |
| July 1, 2013 | July 1, 2014 | July 1, 2015 | July 1, 2016 | January 31, 2013 |
| - | - | $58,475 | $26,599 | - |
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting
| 24 |
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 January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets.
Sales charges. Class A shares are assessed up-front sales charges. For the six months ended January 31, 2013, there were no up-front sales charges received by the Distributor with regard to sales of Class A shares.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, there were no CDCSs received by the Distributor for Class A shares.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| Class | Distribution and service fees | Transfer agent fees |
| A | $50,676 | $32,418 |
| I | - | 5,129 |
| Total | $50,676 | $37,547 |
The Fund did not incur printing and postage and state registration fees for the six months ended January 31, 2013.
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
| 25 |
Note 5 - Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and the period ended July 31, 2012 were as follows:
| Six months ended | Period ended | ||||||||
| 1/31/13 | 7/31/121 | ||||||||
| Shares | Amount | Shares | Amount | ||||||
| Class A shares | |||||||||
| Sold | — | — | 3,000,000 | $30,000,000 | |||||
| Net increase | — | — | 3,000,000 | $30,000,000 | |||||
| Class I shares | |||||||||
| Sold | — | — | 900,000 | $9,000,000 | |||||
| Net increase | — | — | 900,000 | $9,000,000 | |||||
| Net increase | — | — | 3,900,000 | $39,000,000 | |||||
1 Period from 9-30-11 (commencement of operations) to 7-31-12.
Affiliates of the Fund owned 100% of shares of beneficial interest of Class A and Class I on January 31, 2013.
Note 6 - Purchase and sale of securities
Purchases and sales of securities, other than short-term securities and U.S. Treasury obligations, aggregated $9,328,988 and $9,905,761, respectively, for the six months ended January 31, 2013. Purchases and sales of U.S. Treasury obligations aggregated $840,502 and $1,420,426, respectively, for the six months ended January 31, 2013.
Note 7 – Investment in affiliated underlying funds
The Fund invests in affiliated underlying funds that are managed by the Adviser and its affiliates. The Fund does not invest in the affiliated underlying funds for the purpose of exercising management or control; however, the Fund’s investment may represent a significant portion of each underlying fund’s net assets. For the six months ended January 31, 2013, the Fund did not hold 5% or more of an underlying Fund’s net assets.
| 26 |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Diversified Strategies Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| 27 |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management Services, LLC |
| Steven R. Pruchansky, Vice Chairperson | |
| Charles L. Bardelis* | Investment subadviser |
| James R. Boyle† | John Hancock Asset Management a division of |
| Craig Bromley† | Manulife Asset Management (US) LLC |
| Peter S. Burgess* | |
| William H. Cunningham | Principal distributor |
| Grace K. Fey | John Hancock Funds, LLC |
| Theron S. Hoffman* | |
| Deborah C. Jackson | Custodian |
| Hassell H. McClellan | State Street Bank and Trust Company |
| Gregory A. Russo | |
| Warren A. Thomson† | Transfer agent |
| *Member of the Audit Committee | John Hancock Signature Services, Inc. |
| †Non-Independent Trustee | |
| Legal counsel | |
| Officers | K&L Gates LLP |
| Hugh McHaffie | |
| President | |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record, if any, for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 28 |
| John Hancock China Emerging Leaders Fund | |
| Table of Contents | |
| Your expenses | Page 3 |
| Portfolio summary | Page 4 |
| Fund's investments | Page 5 |
| Financial statements | Page 7 |
| Financial highlights | Page 10 |
| Notes to financial statements | Page 13 |
| Special shareholder meeting | Page 20 |
| More information | Page 21 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding your fund expenses
As a shareholder of the Fund, you incur two types of costs:
● Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
● Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,210.20 | $10.03 |
| Class I | 1,000.00 | 1,212.70 | 7.64 |
| Class NAV | 1,000.00 | 1,213.70 | 7.14 |
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 January 31, 2013, 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:
Example
[ My account value $8,600.00 / $1,000.00 = 8.6 ] x $[ “expenses paid” from table ] = My actual expenses
Hypothetical example for comparison purposes
This table allows you to compare your 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 August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,016.10 | $9.15 |
| Class I | 1,000.00 | 1,018.30 | 6.97 |
| Class NAV | 1,000.00 | 1,018.80 | 6.51 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund's annualized expense ratio of 1.80%, 1.37% and 1.28% for Class A, Class I and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| 3 |
China Emerging Leaders Fund
As of 1-31-13
Portfolio Summary
| Top 10 Holdings (50.6% of Net Assets on 1-31-13)1,2 | |
| Renhe Commercial Holdings Company, Ltd. | 7.6% |
| Silver Base Group Holdings, Ltd. | 6.3% |
| People's Insurance Company Group of China, Ltd. | 5.7% |
| China Metal Recycling Holdings, Ltd. | 5.3% |
| China Resource Power Holdings, Ltd. | 5.2% |
| China Yurun Food Group, Ltd. | 4.9% |
| Hua Han Bio-Pharmaceutical Holdings, Ltd., H Shares | 4.1% |
| Biosensors International Group, Ltd. | 4.1% |
| Haier Electronics Group Company, Ltd. | 3.8% |
| Baoxin Auto Group, Ltd. | 3.6% |
| Country Concentration1,3 | |
| China | 53.7% |
| Hong Kong | 37.2% |
| Singapore | 4.1% |
| Bermuda | 2.5% |
| United States | 1.8% |
| Mongolia | 0.7% |
| Sector Composition1,3 | |
| Financials | 17.9% |
| Consumer Discretionary | 16.1% |
| Consumer Staples | 13.7% |
| Health Care | 13.3% |
| Materials | 9.8% |
| Industrials | 8.9% |
| Utilities | 7.0% |
| Telecommunication Services | 5.1% |
| Energy | 3.2% |
| Information Technology | 1.0% |
| Exchange Traded Fund and Short-Term Investments | 4.0% |
1 As a percentage of net assets on 1-31-13.
2 Cash and cash equivalents not included.
3 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. International investing involves special risks such as political, economic and currency risks and differences in accounting standards and financial reporting. Although they are larger and/or more established than many emerging markets, the markets of China function in many ways as emerging markets and carry the high levels of risk associated with emerging markets.
| 4 |
China Emerging Leaders Fund
Fund’s investments
As of 1-31-13 (Unaudited)
| Shares | Value | |
| Common Stocks 93.5% | $324,309,419 | |
| (Cost $295,059,507) | ||
| China 53.7% | 186,097,928 | |
| Baoxin Auto Group, Ltd. (I) | 12,000,000 | 12,462,450 |
| Beijing Capital International Airport Company, Ltd., H Shares | 10,000,000 | 8,353,120 |
| China Communications Construction Company, Ltd., H Shares | 10,000,000 | 10,209,900 |
| China Communications Services Corp., Ltd., H Shares | 10,000,000 | 6,101,262 |
| China Qinfa Group, Ltd. | 10,000,000 | 1,406,831 |
| China Shipping Container Lines Company, Ltd., H Shares (I) | 13,000,000 | 4,021,099 |
| China Telecom Corp., Ltd., H Shares | 15,000,000 | 8,187,139 |
| China Yurun Food Group, Ltd. (I) | 23,000,000 | 16,952,264 |
| Chinasoft International, Ltd. (I) | 15,000,000 | 3,634,120 |
| CITIC Securities Company, Ltd. | 2,000,000 | 5,347,008 |
| Huili Resources Group Ltd. (I) | 12,000,000 | 3,883,054 |
| Inner Mongolia Yitai Coal Company, H Shares (I) | 1,733,000 | 9,745,160 |
| People's Insurance Company Group of China, Ltd. (I) | 33,000,000 | 19,616,009 |
| Ping An Insurance Group Company, H Shares | 1,000,000 | 8,994,364 |
| Renhe Commercial Holdings Company, Ltd. (I) | 290,000,000 | 26,197,036 |
| Sany Heavy Equipment International Holdings Company, Ltd. | 12,000,000 | 5,692,906 |
| Shandong Weigao Group Medical Polymer Company, Ltd., H Shares | 7,000,000 | 6,736,577 |
| Sinopharm Group Company, Ltd., H Shares | 3,500,000 | 10,749,120 |
| Tsingtao Brewery Company, Ltd., H Shares | 1,000,000 | 5,792,762 |
| Xiao Nan Guo Restaurants Holdings, Ltd. | 25,000,000 | 4,478,937 |
| Zhaojin Mining Industry Company, Ltd., H Shares | 5,000,000 | 7,536,810 |
| Hong Kong 35.0% | 121,501,763 | |
| China Foods, Ltd. | 10,000,000 | 8,671,974 |
| China Mengniu Dairy Company, Ltd. | 2,500,000 | 7,302,029 |
| China Metal Recycling Holdings, Ltd. | 15,000,000 | 18,248,351 |
| China Resource Power Holdings, Ltd. | 6,500,000 | 18,085,070 |
| China Water Affairs Group, Ltd. | 20,000,000 | 6,119,009 |
| Citic Telecom International Holdings, Ltd. | 10,000,000 | 3,496,571 |
| Far East Global Group Ltd. (I) | 8,000,000 | 2,479,049 |
| Haier Electronics Group Company, Ltd. (I) | 8,000,000 | 13,321,800 |
| Hao Tian Resources Group, Ltd. (I) | 35,000,000 | 1,716,432 |
| Hua Han Bio-Pharmaceutical Holdings, Ltd., H Shares | 53,000,000 | 14,367,221 |
| Ming Fung Jewellery Group, Ltd. (I) | 83,000,000 | 3,858,868 |
| Silver Base Group Holdings, Ltd. (V) | 70,000,000 | 21,928,077 |
| Silver Grant International, Ltd. | 10,000,000 | 1,907,312 |
| Mongolia 0.7% | 2,475,261 | |
| Mongolian Mining Corp. (I) | 5,000,000 | 2,475,261 |
| Singapore 4.1% | 14,234,467 | |
| Biosensors International Group, Ltd. (I) | 13,000,000 | 14,234,467 |
| Participation Notes (K) 2.5% | $8,706,354 | |
| (Cost $11,847,334) | ||
| Bermuda 2.5% | 8,706,354 | |
| Anhui Quanchai Engine Company, A Shares (Expiration Date: 3-30-17; Counterparty: | ||
| CLSA Asia-Pacific Markets) (I) | 3,000,111 | 4,608,759 |
| Wuliangye Yibin Company, Ltd. (Expiration Date: 12-11-13; Counterparty: CLSA Asia- | ||
| Pacific Markets) (I)(S) | 1,000,000 | 4,097,595 |
| See notes to financial statements | |
| 5 | |
China Emerging Leaders Fund
Fund’s investments
As of 1-31-13 (Unaudited)
| Shares | Value | |
| Exchange Traded Funds 2.2% | $7,606,571 | |
| (Cost $6,226,169) | ||
| Hong Kong 2.2% | 7,606,571 | |
| iShares Asia Trust Fund | 5,000,000 | 7,606,571 |
| Short-Term Investments 1.8% | $6,331,229 | |
| (Cost $6,331,229) | ||
| Money Market Funds 1.8% | 6,331,229 | |
| State Street Institutional Liquid Reserves Fund, 0.1447% (Y) | 6,331,229 | 6,331,229 |
| Total investments (Cost $319,464,239)† 100.0% | $346,953,573 | |
| Other assets and liabilities, net 0.0% | ($97,492) | |
| Total net assets 100.0% | $346,856,081 | |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
(I) Non-income producing security.
(K) Counterparty/Issuer is shown parenthetically in security description.
(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.
(V) The Fund owns 5% or more of the outstanding voting shares of the issuer and the security is considered an affiliate of the Fund. For more information on this security refer to Note 8 of the Notes to financial statements.
(Y) The rate shown is the annualized seven-day yield as of 1-31-13.
† At 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $319,465,484. Net unrealized depreciation aggregated $27,488,089, of which $47,271,311 related to appreciated investment securities and $19,783,222 related to depreciated investment securities.
The Fund had the following sector composition as of 1-31-13 (as a percentage of total net assets):
| Financials | 17.9% | ||
| Consumer Discretionary | 16.1% | ||
| Consumer Staples | 13.7% | ||
| Health Care | 13.3% | ||
| Materials | 9.8% | ||
| Industrials | 8.9% | ||
| Utilities | 7.0% | ||
| Telecommunication Services | 5.1% | ||
| Energy | 3.2% | ||
| Information Technology | 1.0% | ||
| Exchange Traded Funds and Short-Term Investments | 4.0% |
| See notes to financial statements | |
| 6 | |
China Emerging Leaders Fund
Statement of assets and liabilities — 1-31-13 (Unaudited)
| Assets | ||||||
| Investments in unaffiliated issuers, at value | ||||||
| (Cost $291,173,512) | $ | 325,025,496 | ||||
| Investments in affiliated issuers, at value (Cost | ||||||
| $28,290,727) | 21,928,077 | |||||
| Total investments, at value (Cost | ||||||
| $319,464,239) | 346,953,573 | |||||
| Receivable for fund shares sold | 4,988 | |||||
| Dividends and interest receivable | 1,117 | |||||
| Other receivables and prepaid expenses | 1,094 | |||||
| Total assets | 346,960,772 | |||||
| Liabilities | ||||||
| Payable to affiliates | ||||||
| Accounting and legal services fees | 2,916 | |||||
| Transfer agent fees | 28 | |||||
| Other liabilities and accrued expenses | 101,747 | |||||
| Total liabilities | 104,691 | |||||
| Net assets | 346,856,081 | |||||
| Net assets consist of | ||||||
| Paid-in capital | $ | 314,706,631 | ||||
| Accumulated distributions in excess of net | ||||||
| investment income | (91,810) | |||||
| Accumulated net realized gain (loss) on | ||||||
| investments and foreign currency transactions | 4,751,926 | |||||
| Net unrealized appreciation (depreciation) on | ||||||
| investments and translation of assets and | ||||||
| liabilities in foreign currencies | 27,489,334 | |||||
| Net assets | $ | 346,856,081 | ||||
| Net asset value per share | ||||||
| Based on net asset values and shares | ||||||
| outstanding-the Fund has an unlimited number | ||||||
| of shares authorized with no par value | ||||||
| Class A ($109,028 ÷ 10,000 shares)1 | $ | 10.90 | ||||
| Class I ($109,234 ÷ 10,000 shares) | $ | 10.92 | ||||
| Class NAV ($346,637,819 ÷ 31,731,221 shares) | $ | 10.92 | ||||
| Maximum offering price per share | ||||||
| Class A (net asset value per share ÷ 95%)2 | $ | 11.47 | ||||
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.
| See notes to financial statements | |
| 7 | |
China Emerging Leaders Fund
Statement of operations — For the six-month period ended 1-31-13 (Unaudited)
| Investment income | ||||||
| Dividends | $ | 2,282,359 | ||||
| Interest | 15,170 | |||||
| Less foreign taxes withheld | (113,237) | |||||
| Total investment income | 2,184,292 | |||||
| Expenses | ||||||
| Investment management fees | 1,737,509 | |||||
| Distribution and service fees | 153 | |||||
| Accounting and legal services fees | 20,459 | |||||
| Transfer agent fees | 150 | |||||
| Trustees' fees | 1,768 | |||||
| Professional fees | 29,684 | |||||
| Custodian fees | 179,334 | |||||
| Registration and filing fees | 49,633 | |||||
| Other | 2,247 | |||||
| Total expenses | 2,020,937 | |||||
| Less expense reductions and amounts | ||||||
| recaptured | (5,136) | |||||
| Net expenses | 2,015,801 | |||||
| Net investment income | 168,491 | |||||
| Realized and unrealized gain (loss) | ||||||
| Net realized gain (loss) on | ||||||
| Investments in unaffiliated issuers | 9,236,835 | |||||
| Foreign currency transactions | 1,030 | |||||
| 9,237,865 | ||||||
| Change in net unrealized appreciation | ||||||
| (depreciation) of | ||||||
| Investments in unaffiliated issuers | 58,184,011 | |||||
| Investments in affiliated issuers | (6,362,650) | |||||
| Translation of assets and liabilities in foreign | ||||||
| currencies | 64 | |||||
| 51,821,425 | ||||||
| Net realized and unrealized gain | 61,059,290 | |||||
| Increase in net assets from operations | $ | 61,227,781 | ||||
| See notes to financial statements | |
| 8 | |
China Emerging Leaders Fund
Statements of changes in net assets
| Six months | ||||||||
| ended | Period ended | |||||||
| 1-31-13 | 7-31-12 1 | |||||||
| (Unaudited) | ||||||||
| Increase (decrease) in net assets | ||||||||
| From operations | ||||||||
| Net investment income | $ | 168,491 | $ | 838,340 | ||||
| Net realized gain | 9,237,865 | 6,354,139 | ||||||
| Change in net unrealized appreciation | ||||||||
| (depreciation) | 51,821,425 | (24,332,091) | ||||||
| Increase (decrease) in net assets resulting | ||||||||
| from operations | 61,227,781 | (17,139,612) | ||||||
| Distributions to shareholders | ||||||||
| From net investment income | ||||||||
| Class I | (256) | — | ||||||
| Class NAV | (1,058,174) | — | ||||||
| From net realized gain | ||||||||
| Class A | (3,558) | — | ||||||
| Class I | (3,558) | — | ||||||
| Class NAV | (10,873,252) | — | ||||||
| Total distributions | (11,938,798) | — | ||||||
| From Fund share transactions | 12,837,437 | 301,869,273 | ||||||
| Total increase | 62,126,420 | 284,729,661 | ||||||
| Net assets | ||||||||
| Beginning of period | 284,729,661 | — | ||||||
| End of period | $ | 346,856,081 | $ | 284,729,661 | ||||
| Undistributed (accumulated distributions in | ||||||||
| excess of) net investment income | $ | (91,810) | $ | 798,129 | ||||
1 Period from 12-29-11 (commencement of operations) to 7-31-12.
| See notes to financial statements | |
| 9 | |
China Emerging Leaders Fund
Financial Highlights
| Class A Shares | ||||||||
| Period ended | 1-31-131 | 7-31-122 | ||||||
| Per share operating performance | ||||||||
| Net asset value, beginning of period | $9.32 | $10.00 | ||||||
| Net investment income (loss) 3 | (0.02) | 0.02 | ||||||
| Net realized and unrealized gain (loss) on | ||||||||
| investments | 1.96 | (0.70) | ||||||
| Total from investment operations | 1.94 | (0.68) | ||||||
| Less distributions | ||||||||
| From net realized gain | (0.36) | — | ||||||
| Net asset value, end of period | $10.90 | $9.32 | ||||||
| Total return (%)4,5 | 21.026 | (6.80)6 | ||||||
| Ratios and supplemental data | ||||||||
| Net assets, end of period (in millions) | $— 7 | $— 7 | ||||||
| Ratios (as a percentage of average net | ||||||||
| assets): | ||||||||
| Expenses before reductions and amounts | ||||||||
| recaptured | 1.778 | 1.838 | ||||||
| Expenses net of fee waivers and amounts | ||||||||
| recaptured | 1.808 | 1.808 | ||||||
| Net investment income (loss) | (0.41)8 | 0.358 | ||||||
| Portfolio turnover (%) | 36 | 35 | ||||||
1 Six months ended 1-31-13. Unaudited
2 Period from 12-29-11 (commencement of operations) to 7-31-12.
3 Based on the 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 shown.
6 Not annualized.
7 Less than $500,000.
8 Annualized.
| See notes to financial statements | |
| 10 | |
China Emerging Leaders Fund
Financial Highlights
| Class I Shares | ||||||||
| Period ended | 1-31-131 | 7-31-122 | ||||||
| Per share operating performance | ||||||||
| Net asset value, beginning of period | $9.34 | $10.00 | ||||||
| Net investment income3 | — 4 | 0.04 | ||||||
| Net realized and unrealized gain (loss) on | ||||||||
| investments | 1.96 | (0.70) | ||||||
| Total from investment operations | 1.96 | (0.66) | ||||||
| Less distributions | ||||||||
| From net investment income | (0.02) | — | ||||||
| From net realized gain | (0.36) | — | ||||||
| Total distributions | (0.38) | — | ||||||
| Net asset value, end of period | $10.92 | $9.34 | ||||||
| Total return (%)5 | 21.276 | (6.60)6 | ||||||
| Ratios and supplemental data | ||||||||
| Net assets, end of period (in millions) | $— 7 | $— 7 | ||||||
| Ratios (as a percentage of average net | ||||||||
| assets): | ||||||||
| Expenses before reductions | 1.388 | 1.448 | ||||||
| Expenses net of fee waivers and credits | 1.378 | 1.448 | ||||||
| Net investment income | 0.018 | 0.728 | ||||||
| Portfolio turnover (%) | 36 | 35 | ||||||
1 Six months ended 1-31-13. Unaudited
2 Period from 12-29-11 (commencement of operations) to 7-31-12.
3 Based on the average daily shares outstanding.
4 Less than $0.005 per share.
5 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
6 Not annualized.
7 Less than $500,000.
8 Annualized.
| See notes to financial statements | |
| 11 | |
China Emerging Leaders Fund
Financial Highlights
| Class NAV Shares | ||||||||
| Period ended | 1-31-131 | 7-31-122 | ||||||
| Per share operating performance | ||||||||
| Net asset value, beginning of period | $9.34 | $10.00 | ||||||
| Net investment income3 | 0.01 | 0.05 | ||||||
| Net realized and unrealized gain (loss) on | ||||||||
| investments | 1.96 | (0.71) | ||||||
| Total from investment operations | 1.97 | (0.66) | ||||||
| Less distributions | ||||||||
| From net investment income | (0.03) | — | ||||||
| From net realized gain | (0.36) | — | ||||||
| Total distributions | (0.39) | — | ||||||
| Net asset value, end of period | $10.92 | $9.34 | ||||||
| Total return (%)4 | 21.375 | (6.60)5 | ||||||
| Ratios and supplemental data | ||||||||
| Net assets, end of period (in millions) | $347 | $285 | ||||||
| Ratios (as a percentage of average net | ||||||||
| assets): | ||||||||
| Expenses before reductions | 1.286 | 1.346 | ||||||
| Expenses net of fee waivers and credits | 1.286 | 1.346 | ||||||
| Net investment income | 0.116 | 0.846 | ||||||
| Portfolio turnover (%) | 36 | 35 | ||||||
1 Six months ended 1-31-13. Unaudited
2 Period from 12-29-11 (commencement of operations) to 7-31-12.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| See notes to financial statements | |
| 12 | |
China Emerging Leaders Fund
Notes to Financial Statements
(unaudited)
Note 1 — Organization
John Hancock China Emerging Leaders Fund (the Fund) is a series of John Hancock Funds II (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 achieve long-term capital appreciation.
The Fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A shares are offered to all investors. Class I shares are offered to institutions and certain investors. Class NAV shares are offered to John Hancock affiliated funds of funds and 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 - Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those estimates could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities, including exchange-traded and closed-end funds, held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of foreign securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value foreign securities in order to adjust for events that may occur between the close of foreign exchanges 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
| 13 |
available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| Level 2 | Level 3 | |||
| Total Market | Level 1 | Significant | Significant | |
| Value at | Quoted | Observable | Unobservable | |
| 01-31-13 | Price | Inputs | Inputs | |
| Common Stocks | ||||
| China | $186,097,928 | — | $186,097,928 | — |
| Hong Kong | 121,501,763 | — | 103,253,412 | $18,248,351 |
| Mongolia | 2,475,261 | — | 2,475,261 | — |
| Singapore | 14,234,467 | — | 14,234,467 | — |
| Participation notes | ||||
| Bermuda | 8,706,354 | — | 8,706,354 | — |
| Exchange Traded Funds | 7,606,571 | — | 7,606,571 | — |
| Short-Term Investments | 6,331,229 | $6,331,229 | — | — |
| Total Investments in Securities | $346,953,573 | $6,331,229 | $322,373,993 | $18,248,351 |
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value. Transfers into or out of Level 3 represent the beginning value of any security or instrument where a change in the level has occurred from the beginning to the end of the period and in all cases were transferred into or out of Level 2. Securities were transferred into Level 3 because of a lack of observable market data which resulted from an absence of market activity for these securities.
| Common | ||||
| Stocks | ||||
| Balance as of 7-31-12 | - | |||
| Accrued discounts/premiums | - | |||
| Realized gain (loss) | - | |||
| Changed in unrealized appreciation | ||||
| (depreciation) | $7,622,027 | |||
| Purchases | - | |||
| Sales | - | |||
| Transfers into Level 3 | 10,626,324 | |||
| Transfers out of Level 3 | - | |||
| Balance as of 1-31-13 | $18,248,351 | |||
| Change in unrealized at period end* | $7,622,027 |
* Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at the period end. This balance is included in the change in unrealized appreciation (depreciation) on the Statement of operations.
The valuation techniques and significant amounts of unobservable inputs used in the fair value measurement of the Fund’s Level 3 securities are outlined in the table below:
| FAIR VALUE AT | VALUATION | UNOBSERVABLE | |||
| 1-31-13 | TECHNIQUE | INPUTS | INPUT/RANGE | ||
| Common Stock | $ 18,248,351 | Market Approach | Aged Transactions | $ 1.216557 | |
Increases/decreases in aged transactions may result in increases/decreases in security valuation.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting
| 14 |
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.
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 investing in a single country or in a limited geographic region tend to be riskier than funds that invest more broadly. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs), 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 or capital gains or repatriation taxes as imposed by certain countries in which it invests. Taxes are accrued based upon net investment income, net realized gains or net unrealized appreciation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $220. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement
| 15 |
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 declares and pays dividends and capital gain distributions, if any, at least annually.
Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
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. The Fund had no material book-tax differences at July 31, 2012.
Note 3 - Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the 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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Distributors, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management agreement with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: a) 1.10% of the first $500,000,000 of the Fund’s average daily net assets; b) 1.05% of the next $500,000,000 of the Fund’s average daily net assets; and c) 1.00% of the Fund’s average daily net assets in excess of $1,000,000,000. The Adviser has a subadvisory agreement with Atlantis Investment Management (Hong Kong) Ltd. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive a portion of its management fee for certain funds (the Participating Portfolios) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Portfolios that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each Fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the funds and with the approval of the Board of Trustees.
The Adviser has voluntarily agreed to waive and/or reimburse operating expenses for Class A and Class I 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. The fee waivers and/or reimbursements are such that the expenses will not exceed 1.80% and 1.44% for Class A and Class I shares, respectively. Prior to January 1, 2013, the fee waivers and/or reimbursements were contractual. This voluntary expense reimbursement may be terminated at any time by
| 16 |
the Adviser on notice to the Fund.
Additionally, the Adviser has voluntarily agreed to waive and/or reimburse a portion of its management fee or other expenses of the Fund in order to limit the Fund’s expenses, 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, advisory fees, Rule 12b-1 fees, transfer agent fees and service fees, state registration fees and printing and postage, to 0.25% of the Fund’s average net assets. This voluntary expense reimbursement may be terminated at any time by the Adviser on notice to the Fund.
Accordingly, these expense reductions amounted to $2, $2 and $5,147 for Class A, Class I and Class NAV shares, respectively, for the six months ended January 31, 2013.
The investment management fees, including the impact of waivers and reimbursements described above, incurred for the six months ended January 31, 2013, were equivalent to a net annual effective rate of 1.10% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. Certain reimbursements or waivers are not subject to recapture. For the six months ended January 31, 2013, the Fund recaptured $15 on Class A shares.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 amounted to an annual rate of 0.01% of the Fund’s average daily net assets.
Distribution and service plans. The Fund has a distribution agreement with the Distributor. The Fund has adopted distribution and service plans with respect to Class A shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays 0.30% for Class A shares for distribution and service fees, expressed as an annual percentage of average daily net assets.
Sales charges. Class A shares are assessed up-front sales charges. For the six months ended January 31, 2013, there were no up-front sales charges received by the Distributor for Class A shares.
Class A shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, no CDSCs were received by the Distributor for Class A shares.
Transfer agent fees. The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly
| 17 |
and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| Distribution and | Transfer agent | State | |
| Class | service fees | fees | Registration fees |
| A | $153 | $98 | $16 |
| I | - | 52 | 17 |
| NAV | - | - | 49,600 |
| Total | $153 | $150 | $49,633 |
There were no printing and postage expenses for the six months ended January 31, 2013.
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to the Fund based on its average daily net assets.
Note 5 - Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the period ended July 31, 2012 were as follows:
| Six months ended | Period ended | |||||||
| 1-31-13 | 7-31-121 | |||||||
| Shares | Amount | Shares | Amount | |||||
| Class A shares | ||||||||
| Sold | — | — | 10,000 | $ | 100,000 | |||
| Net increase | — | — | 10,000 | $ | 100,000 | |||
| Class I shares | ||||||||
| Sold | — | — | 10,000 | $ | 100,000 | |||
| Net increase | — | — | 10,000 | $ | 100,000 | |||
| Class NAV shares | ||||||||
| Sold | 488,022 | $ | 4,595,743 | 30,477,216 | $ | 301,911,759 | ||
| Distributions reinvested | 1,165,178 | 11,931,426 | — | — | ||||
| Repurchased | (374,729) | (3,689,732) | (24,466) | (242,486) | ||||
| Net increase | 1,278,471 | $ | 12,837,437 | 30,452,750 | $ | 301,669,273 | ||
| Net increase | 1,278,471 | $ | 12,837,437 | 30,472,750 | $ | 301,869,273 | ||
1 Period from 12-29-11 (commencement from operations) to 7-31-12.
Affiliates of the Fund owned 100% of shares of beneficial interest of the Fund on January 31, 2013.
Note 6 - Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $125,442,706 and $107,034,091, respectively, for the six months ended January 31, 2013.
Note 7 - Investment by affiliated funds
Certain investors in the Fund are affiliated funds and are managed by the Adviser 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. For the six months ended January 31, 2013, the following funds had an affiliate ownership of 5% or more of the Fund’s net assets:
| 18 |
| Affiliated | |||
| Fund | Concentration | ||
| John Hancock Lifestyle Growth Portfolio | 39.0% | ||
| John Hancock Lifestyle Balanced Portfolio | 28.7% | ||
| John Hancock Lifestyle Aggressive Portfolio | 16.7% |
Note 8 – Transactions in securities of affiliated issuers
Affiliated issuers, as defined by the Investment Company Act of 1940, are those in which Fund’s holdings of an issuer represent 5% or more of the outstanding voting securities of the issuer. A summary of the Fund’s transactions in the securities of these issuers during the six months ended January 31, 2013, is set forth below:
| Beginning | Ending | Realized | |||
| share | share | gain | Dividend | Ending | |
| Affiliate | amount | amount | (loss) | income | value |
| Silver Base Group Holdings, Ltd. | |||||
| Bought: 43,286,000 Sold: None | 26,714,000 | 70,000,000 | - | - | $21,928,077 |
| 19 |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock China Emerging Leaders Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| 20 |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management Services, LLC |
| Steven R. Pruchansky, Vice Chairperson | |
| Charles L. Bardelis* | Investment subadviser |
| James R. Boyle† | Atlantis Investment Management (Hong Kong) Ltd. |
| Craig Bromley† | |
| Peter S. Burgess* | Principal distributor |
| William H. Cunningham | John Hancock Distributors, LLC |
| Grace K. Fey | |
| Theron S. Hoffman* | Custodian |
| Deborah C. Jackson | State Street Bank and Trust Company |
| Hassell H. McClellan | |
| Gregory A. Russo | Transfer agent |
| Warren A. Thomson† | John Hancock Signature Services, Inc. |
| *Member of the Audit Committee | |
| †Non-Independent Trustee | Legal counsel |
| K&L Gates LLP | |
| Officers | |
| Hugh McHaffie | |
| President | |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record, if any, for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| 21 |
A look at performance
Total returns for the period ended January 31, 2013
| Average annual total returns (%) | Cumulative total returns (%) | |||||||||
| with maximum sales charge | with maximum sales charge | |||||||||
| Since | Since | |||||||||
| 1-year | 5-year | 10-year | inception | 6-months | 1-year | 5-year | 10-year | inception | ||
| Class A1 | –1.67 | — | — | 2.45 | –2.97 | –1.67 | — | — | 2.76 | |
| Class C2 | — | — | — | — | 0.74 | — | — | — | 0.74 | |
| Class I1,3 | 3.98 | — | — | 7.65 | 2.32 | 3.98 | — | — | 8.66 | |
| Class R23,4 | — | — | — | — | 2.03 | — | — | — | 1.17 | |
| Class R63,4 | — | — | — | — | 2.33 | — | — | — | 1.65 | |
| Class NAV1,3 | 4.01 | — | — | 7.69 | 2.45 | 4.01 | — | — | 8.69 | |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 5.00%, and the applicable contingent deferred sales charge (CDSC) on Class C shares. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable to Class I, Class R2, Class R6 or Class NAV shares.
The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectuses for the Fund and may differ from those disclosed in the Financial highlights tables in this report. The fee waivers and expense limitations are contractual at least until 11-30-13 for Class A, Class C, Class I, Class R2 and Class R6 shares. Had the fee waivers and expense limitations not been in place, gross expenses would apply. For Class NAV the net expenses equal the gross expenses. The expense ratios are as follows:
| Class A | Class C | Class I | Class R2 | Class R6 | Class NAV | ||||
| Net (%) | 1.95 | 2.65 | 1.59 | 2.00 | 1.50 | 1.43 | |||
| Gross (%) | 1.97 | 17.65 | 1.60 | 17.12 | 16.60 | 1.43 |
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 1-800-225-5291 or visit the Fund’s Web site at www.jhfunds.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on 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.
See the following page for footnotes.
| 6 | Global Absolute Return Strategies Fund | Semiannual report |
| Without | With maximum | ||||
| Start date | sales charge | sales charge | Index 1 | Index 2 | |
| Class C | 8-1-12 | $10,174 | $10,074 | $10,005 | $11,398 |
| Class I3 | 12-19-11 | 10,866 | 10,866 | 10,014 | 12,647 |
| Class R23 | 3-1-12 | 10,117 | 10,117 | 10,011 | 11,063 |
| Class R63 | 3-1-12 | 10,165 | 10,165 | 10,011 | 11,063 |
| Class NAV3 | 12-19-11 | 10,869 | 10,869 | 10,014 | 12,647 |
Bank of America Merrill Lynch US Dollar 1-Month LIBID Average Index — Index 1 — tracks the performance of a synthetic asset paying LIBID (London Interbank Bid Rate) to a stated maturity.
MSCI World Index (gross of foreign withholding taxes on dividends) — Index 2 — is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance of developed markets.
It is not possible to invest directly in an index. Index figures do not reflect expenses, which would have resulted in lower values if they did.
Footnotes related to performance pages
1 From 12-19-11.
2 From 8-1-12.
3 For certain types of investors as described in the Fund’s prospectuses.
4 From 3-1-12.
| Semiannual report | Global Absolute Return Strategies Fund | 7 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses of investing in the Fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.
▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about the Fund’s actual ongoing operating expenses, and is based on the Fund’s actual return. It assumes an account value of $1,000.00 on August 1, 2012 with the same investment held until January 31, 2013.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,021.40 | $9.32 |
| Class C | 1,000.00 | 1,017.40 | 13.48 |
| Class I | 1,000.00 | 1,023.20 | 7.29 |
| Class R2 | 1,000.00 | 1,020.30 | 10.18 |
| Class R6 | 1,000.00 | 1,023.30 | 7.65 |
| Class NAV | 1,000.00 | 1,024.50 | 6.58 |
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 January 31, 2013, 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:
| 8 | Global Absolute Return Strategies Fund | Semiannual report |
Hypothetical example for comparison purposes
This table allows you to compare the Fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the Fund’s actual return). It assumes an account value of $1,000.00 on August 1, 2012, with the same investment held until January 31, 2013. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.
| Account value | Ending value | Expenses paid during | |
| on 8-1-12 | on 1-31-13 | period ended 1-31-131 | |
| Class A | $1,000.00 | $1,016.00 | $9.30 |
| Class C | 1,000.00 | 1,011.80 | 13.44 |
| Class I | 1,000.00 | 1,018.80 | 7.27 |
| Class R2 | 1,000.00 | 1,015.10 | 10.16 |
| Class R6 | 1,000.00 | 1,017.60 | 7.63 |
| Class NAV | 1,000.00 | 1,018.70 | 6.56 |
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
1 Expenses are equal to the Fund’s annualized expense ratio of 1.83%, 2.65%, 1.43%, 2.00%, 1.50% and 1.29% for Class A, Class C, Class I, Class R2, Class R6 and Class NAV shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| Semiannual report | Global Absolute Return Strategies Fund | 9 |
Portfolio summary
| Corporate Bonds | 16.6% | |
| United States | 6.5% | |
| United Kingdom | 3.1% | |
| France | 1.7% | |
| Netherlands | 1.5% | |
| Luxembourg | 0.7% | |
| Spain | 0.5% | |
| Italy | 0.4% | |
| Ireland | 0.4% | |
| Germany | 0.4% | |
| Other Countries | 1.4% | |
| Equities | 26.5% | |
| United States | 11.0% | |
| Russia | 2.2% | |
| United Kingdom | 2.0% | |
| France | 1.7% | |
| Hong Kong | 1.5% | |
| Australia | 1.5% | |
| Japan | 1.2% | |
| Sweden | 0.7% | |
| Germany | 0.5% | |
| Netherlands | 0.4% | |
| Other Countries | 3.8% | |
| U.S. Government | 16.8% | |
| Treasury Inflation | ||
| Protected Securities | 16.8% | |
| Foreign Government Obligations | 5.8% | |
| Mexico | 5.3% | |
| Germany | 0.4% | |
| Other Countries | 0.1% | |
| Certificate of Deposit | 5.4% | |
| Netherlands | 2.6% | |
| United Kingdom | 1.8% | |
| France | 1.0% | |
| Purchased Options | 1.8% | |
| Time Deposits | 22.6% | |
| United States | 20.4% | |
| United Kingdom | 2.2% | |
| Short-Term Investments & Other | 4.5% | |
| U.S. Government | 3.6% | |
| Other assets & Liabilties | 0.9% | |
As a percentage of net assets on 1-31-13.
Absolute return funds are not designed to outperform stocks and bonds in strong markets and there is no guarantee of positive returns. They employ certain techniques which are intended to reduce risk and volatility in the portfolio and provide protection against a decline in the Fund’s assets. However, there is no guarantee that any investment strategy will be successful or that the Fund’s objectives will be achieved. The use of hedging and derivatives transactions could produce disproportionate gains or losses and may increase volatility and costs.
Currency transactions are impacted by fluctuations in exchange rates, which may adversely affect the U.S. dollar value of a fund’s investments. Foreign investing, especially in emerging markets, has additional risks such as currency and market volatility and political and social instability.
| 10 | Global Absolute Return Strategies Fund | Semiannual report |
Fund’s investments
As of 1-31-13 (unaudited)
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| Corporate Bonds 16.6% | $324,529,071 | ||||
| (Cost $304,829,591) | |||||
| Australia 0.1% | 2,171,508 | ||||
| FMG Resources August 2006 Pty, Ltd. (S) | 6.875 | 04-01-22 | 95,000 | 98,325 | |
| FMG Resources August 2006 Pty, Ltd. (S) | 8.250 | 11-01-19 | 1,100,000 | 1,179,750 | |
| Origin Energy Finance, Ltd. (P) | 7.875 | 06-16-71 | EUR 225,000 | 317,725 | |
| Santos Finance, Ltd. (8.250% to 9-22-17, | |||||
| then 3 month EURIBOR + 6.851%) | 8.250 | 09-22-70 | EUR 400,000 | 575,708 | |
| Austria 0.0% | 467,540 | ||||
| Sappi Papier Holding GmbH (S) | 6.625 | 04-15-21 | 250,000 | 262,500 | |
| VERBUND International Finance GmbH | 4.750 | 07-16-19 | EUR 130,000 | 205,040 | |
| Belgium 0.0% | 658,059 | ||||
| Anheuser-Busch InBev NV | 2.000 | 12-16-19 | EUR 350,000 | 474,565 | |
| Anheuser-Busch InBev NV | 4.000 | 06-02-21 | EUR 120,000 | 183,494 | |
| Bermuda 0.0% | 142,569 | ||||
| Central European Media Enterprises, Ltd. | 11.625 | 09-15-16 | EUR 100,000 | 142,569 | |
| Brazil 0.1% | 1,651,891 | ||||
| OGX Austria GmbH (S) | 8.500 | 06-01-18 | 650,000 | 606,125 | |
| Vale SA | 3.750 | 01-10-23 | EUR 400,000 | 568,185 | |
| Vale SA | 4.375 | 03-24-18 | EUR 320,000 | 477,581 | |
| Canada 0.2% | 3,176,548 | ||||
| Ainsworth Lumber Company, Ltd. (S) | 7.500 | 12-15-17 | 240,000 | 256,200 | |
| Air Canada (S) | 9.250 | 08-01-15 | 755,000 | 796,525 | |
| Bombardier, Inc. (S) | 6.125 | 01-15-23 | 725,000 | 737,688 | |
| HudBay Minerals, Inc. (S) | 9.500 | 10-01-20 | 683,000 | 747,885 | |
| Inmet Mining Corp. (S) | 8.750 | 06-01-20 | 575,000 | 638,250 | |
| Cayman Islands 0.1% | 2,570,504 | ||||
| Hutchison Whampoa Finance 09, Ltd. | 4.750 | 11-14-16 | EUR 750,000 | 1,135,257 | |
| IPIC GMTN, Ltd. | 4.875 | 05-14-16 | EUR 610,000 | 911,084 | |
| Thames Water Utilities Cayman | |||||
| Finance, Ltd. | 3.250 | 11-09-16 | EUR 100,000 | 144,658 | |
| UPCB Finance, Ltd. | 7.625 | 01-15-20 | EUR 260,000 | 379,505 | |
| Czech Republic 0.0% | 712,960 | ||||
| CEZ A/S | 4.500 | 06-29-20 | EUR 460,000 | 712,960 | |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 11 |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| Denmark 0.2% | $4,253,724 | ||||
| A.P. Moeller — Maersk A/S | 4.875 | 10-30-14 | EUR 530,000 | 759,698 | |
| Danske Bank A/S | 3.875 | 05-18-16 | EUR 200,000 | 289,937 | |
| Danske Bank A/S | 3.875 | 02-28-17 | EUR 350,000 | 510,654 | |
| Danske Bank A/S | 4.750 | 06-04-14 | EUR 450,000 | 640,285 | |
| Danske Bank A/S (4.100% to 3-16-18, | |||||
| then 3 month EURIBOR + 1.810%) | 4.100 | 03-16-18 | EUR 300,000 | 412,432 | |
| DONG Energy A/S | 4.875 | 12-16-21 | EUR 300,000 | 473,073 | |
| DONG Energy A/S | 6.500 | 05-07-19 | EUR 150,000 | 252,242 | |
| DONG Energy A/S (7.750 to 6-1-21, | |||||
| then 12 month EURIBOR + 5.500%)) | 7.750 | 06-01-21 | EUR 280,000 | 417,252 | |
| TDC A/S | 4.375 | 02-23-18 | EUR 330,000 | 498,151 | |
| Finland 0.1% | 1,272,220 | ||||
| Fortum OYJ | 4.000 | 05-24-21 | EUR 200,000 | 302,351 | |
| Pohjola Bank PLC | 5.750 | 02-28-22 | EUR 300,000 | 471,513 | |
| Teollisuuden Voima OYJ | 4.625 | 02-04-19 | EUR 330,000 | 498,356 | |
| France 1.7% | 33,204,764 | ||||
| Alstom SA | 3.875 | 03-02-16 | EUR 500,000 | 722,607 | |
| Alstom SA | 4.000 | 09-23-14 | EUR 100,000 | 141,781 | |
| Areva SA | 4.625 | 10-05-17 | EUR 600,000 | 879,974 | |
| Autoroutes du Sud de la France SA | 4.000 | 09-24-18 | EUR 300,000 | 447,326 | |
| AXA SA (5.250% to 4-16-20, then | |||||
| 3 month EURIBOR + 3.050%) | 5.250 | 04-16-40 | EUR 400,000 | 552,074 | |
| Banque PSA Finance SA | 6.000 | 07-16-14 | EUR 300,000 | 423,944 | |
| BNP Paribas SA | 2.875 | 11-27-17 | EUR 700,000 | 994,102 | |
| BNP Paribas SA | 3.000 | 02-24-17 | EUR 300,000 | 426,795 | |
| BNP Paribas SA | 3.500 | 03-07-16 | EUR 500,000 | 719,590 | |
| BNP Paribas SA (4.730% to 4-12-16, | |||||
| then 3 month EURIBOR + 1.690%) (Q) | 4.730 | 04-12-16 | EUR 150,000 | 186,155 | |
| Bouygues SA | 4.375 | 10-29-14 | EUR 60,000 | 86,108 | |
| BPCE SA | 2.000 | 04-24-18 | EUR 400,000 | 541,141 | |
| BPCE SA | 4.500 | 02-10-22 | EUR 300,000 | 460,992 | |
| Casino Guichard Perrachon SA | 3.157 | 08-06-19 | EUR 300,000 | 415,204 | |
| Casino Guichard Perrachon SA | 4.379 | 02-08-17 | EUR 200,000 | 294,277 | |
| Casino Guichard Perrachon SA | 4.472 | 04-04-16 | EUR 700,000 | 1,026,748 | |
| Christian Dior SA | 3.750 | 09-23-14 | EUR 450,000 | 631,209 | |
| Cie de Saint-Gobain | 3.500 | 09-30-15 | EUR 200,000 | 284,963 | |
| Cie de Saint-Gobain | 3.625 | 06-15-21 | EUR 250,000 | 346,317 | |
| Cie de Saint-Gobain | 4.500 | 09-30-19 | EUR 440,000 | 654,917 | |
| Cie de Saint-Gobain | 8.250 | 07-28-14 | EUR 100,000 | 149,603 | |
| Cie Financiere et Industrielle des | |||||
| Autoroutes SA | 5.000 | 05-24-21 | EUR 350,000 | 550,082 | |
| Cie Generale de Geophysique-Veritas | 9.500 | 05-15-16 | 100,000 | 106,250 | |
| CNP Assurances (P) | 6.875 | 09-30-41 | EUR 200,000 | 270,202 | |
| Credit Agricole SA | 3.900 | 04-19-21 | EUR 200,000 | 266,963 | |
| Credit Agricole SA | 5.971 | 02-01-18 | EUR 700,000 | 1,051,468 | |
| Credit Logement SA | 5.454 | 02-16-21 | EUR 200,000 | 299,001 | |
| Electricite de France SA | 3.875 | 01-18-22 | EUR 700,000 | 1,036,686 | |
| Electricite de France SA | 4.625 | 09-11-24 | EUR 250,000 | 387,312 | |
| 12 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| France (continued) | |||||
| Europcar Groupe SA | 11.500 | 05-15-17 | EUR 200,000 | $293,339 | |
| Eutelsat SA | 5.000 | 01-14-19 | EUR 700,000 | 1,089,931 | |
| Faurecia | 8.750 | 06-15-19 | EUR 100,000 | 140,532 | |
| France Telecom SA | 3.875 | 04-09-20 | EUR 330,000 | 490,554 | |
| GDF Suez | 3.500 | 10-18-22 | EUR 875,000 | 1,274,836 | |
| GDF Suez | 6.875 | 01-24-19 | EUR 300,000 | 519,768 | |
| Lafarge SA | 6.625 | 11-29-18 | EUR 875,000 | 1,312,824 | |
| Lafarge SA | 8.875 | 05-27-14 | EUR 330,000 | 485,525 | |
| Lagardere SCA | 4.875 | 10-06-14 | EUR 400,000 | 566,517 | |
| Legrand SA | 4.375 | 03-21-18 | EUR 300,000 | 456,099 | |
| Mercialys SA | 4.125 | 03-26-19 | EUR 300,000 | 438,442 | |
| Pernod-Ricard SA | 4.875 | 03-18-16 | EUR 500,000 | 743,830 | |
| Pernod-Ricard SA | 5.000 | 03-15-17 | EUR 300,000 | 457,673 | |
| PPR SA | 3.125 | 04-23-19 | EUR 592,000 | 852,144 | |
| PPR SA | 3.750 | 04-08-15 | EUR 77,000 | 109,966 | |
| PPR SA | 8.625 | 04-03-14 | EUR 120,000 | 177,141 | |
| RCI Banque SA | 4.000 | 12-02-13 | EUR 110,000 | 152,650 | |
| RCI Banque SA | 5.625 | 03-13-15 | EUR 776,000 | 1,127,582 | |
| RTE EDF Transport SA | 4.125 | 02-03-21 | EUR 200,000 | 303,132 | |
| Societe des Autoroutes Paris-Rhin-Rhone | 7.500 | 01-12-15 | EUR 300,000 | 453,818 | |
| Societe Fonciere Lyonnaise SA | 4.625 | 05-25-16 | EUR 300,000 | 431,920 | |
| Societe Generale SA | 2.500 | 01-15-14 | 110,000 | 111,364 | |
| Societe Generale SA | 4.000 | 04-20-16 | EUR 500,000 | 730,904 | |
| Societe Generale SA | 4.250 | 07-13-22 | EUR 300,000 | 450,652 | |
| Societe Generale SA | 4.750 | 03-02-21 | EUR 200,000 | 312,570 | |
| Societe Generale SA (7.756% to 5-22-13, | |||||
| then 3 month EURIBOR + 3.350%) (Q) | 7.756 | 05-22-13 | EUR 150,000 | 196,542 | |
| Societe Generale SA (9.375% to 9-4-19, | |||||
| then 3 month EURIBOR + 8.901%) (Q) | 9.375 | 09-04-19 | EUR 150,000 | 223,996 | |
| Suez Environnement SA | 6.250 | 04-08-19 | EUR 100,000 | 168,123 | |
| Unibail-Rodamco SE | 3.375 | 03-11-15 | EUR 100,000 | 141,800 | |
| Unibail-Rodamco SE | 3.875 | 12-13-17 | EUR 390,000 | 579,521 | |
| Unibail-Rodamco SE | 4.625 | 09-23-16 | EUR 75,000 | 112,588 | |
| Valeo SA | 5.750 | 01-19-17 | EUR 200,000 | 304,495 | |
| Veolia Environnement SA (P)(Q) | 4.450 | 04-16-18 | EUR 500,000 | 659,212 | |
| Veolia Environnement SA | 4.625 | 03-30-27 | EUR 200,000 | 296,555 | |
| Veolia Environnement SA | 5.125 | 05-24-22 | EUR 100,000 | 157,384 | |
| Veolia Environnement SA | 6.750 | 04-24-19 | EUR 640,000 | 1,081,884 | |
| Vivendi SA | 3.875 | 11-30-15 | EUR 600,000 | 860,132 | |
| Vivendi SA | 4.125 | 07-18-17 | EUR 400,000 | 585,028 | |
| Germany 0.4% | 7,069,163 | ||||
| Evonik Industries AG | 7.000 | 10-14-14 | EUR 390,000 | 579,641 | |
| FMC Finance VIII SA | 6.500 | 09-15-18 | EUR 200,000 | 315,010 | |
| Henkel AG & Company KgaA (5.375% | |||||
| to 11-25-15, then 3 month EURIBOR | |||||
| + 2.850%) | 5.375 | 11-25-04 | EUR 280,000 | 404,042 | |
| IKB Deutsche Industriebank AG | 4.500 | 07-09-13 | EUR 350,000 | 472,260 | |
| KM Germany Holdings Gmbh | 8.750 | 12-15-20 | EUR 100,000 | 142,569 | |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 13 |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| Germany (continued) | |||||
| Nordenia International AG | 9.750 | 07-15-17 | EUR 150,000 | $230,147 | |
| RWE AG (4.625 to 9-25-15, then reset | |||||
| of 5 year mid-swaps + 265 until 9-28-20, | |||||
| then EURIBOR + 365 bps) (Q) | 4.625 | 09-25-15 | EUR 400,000 | 549,146 | |
| Schaeffler Finance BV | 7.750 | 02-15-17 | EUR 200,000 | 305,505 | |
| ThyssenKrupp AG | 8.000 | 06-18-14 | EUR 730,000 | 1,075,843 | |
| UniCredit Bank AG | 6.000 | 02-05-14 | EUR 300,000 | 421,606 | |
| Unitymedia GmbH | 9.500 | 03-15-21 | EUR 100,000 | 155,312 | |
| Unitymedia GmbH) | 9.625 | 12-01-19 | EUR 500,000 | 749,404 | |
| Unitymedia Hessen GmbH & Company KG | 8.125 | 12-01-17 | EUR 214,713 | 314,132 | |
| Volkswagen Leasing GmbH | 2.750 | 07-13-15 | EUR 550,000 | 774,347 | |
| Volkswagen Leasing Gmbh | 3.250 | 05-10-18 | EUR 400,000 | 580,199 | |
| Hong Kong 0.0% | 221,500 | ||||
| Nord Anglia Education UK Holdings PLC (S) | 10.250 | 04-01-17 | 200,000 | 221,500 | |
| Ireland 0.4% | 7,603,657 | ||||
| Ardagh Glass Finance PLC | 8.750 | 02-01-20 | EUR 100,000 | 140,872 | |
| Ardagh Packaging Finance PLC (S) | 7.000 | 11-15-20 | 400,000 | 403,000 | |
| Ardagh Packaging Finance PLC | 7.375 | 10-15-17 | EUR 200,000 | 290,569 | |
| Ardagh Packaging Finance PLC (S) | 9.125 | 10-15-20 | 505,000 | 554,238 | |
| Ardagh Packaging Finance PLC | 9.250 | 10-15-20 | EUR 125,000 | 182,488 | |
| Bank of Ireland Mortgage Bank | 3.125 | 11-20-15 | EUR 300,000 | 413,379 | |
| CRH Finance, Ltd. | 7.375 | 05-28-14 | EUR 210,000 | 308,289 | |
| ESB Finance, Ltd. | 6.250 | 09-11-17 | EUR 550,000 | 842,753 | |
| FGA Capital Ireland PLC | 5.250 | 02-28-14 | EUR 330,000 | 460,838 | |
| GE Capital European Funding | 2.000 | 02-27-15 | EUR 46,000 | 63,477 | |
| GE Capital European Funding | 3.625 | 06-15-17 | EUR 336,000 | 487,986 | |
| GE Capital European Funding | 4.250 | 03-01-17 | EUR 350,000 | 521,915 | |
| GE Capital European Funding | 4.625 | 02-22-27 | EUR 300,000 | 474,960 | |
| GE Capital European Funding | 4.750 | 07-30-14 | EUR 9,000 | 12,888 | |
| GE Capital European Funding | 5.375 | 01-16-18 | EUR 570,000 | 900,603 | |
| Ono Finance II PLC | 11.125 | 07-15-19 | EUR 100,000 | 139,514 | |
| Rottapharm, Ltd. | 6.125 | 11-15-19 | EUR 400,000 | 562,904 | |
| Smurfit Kappa Acquisitions | 4.125 | 01-30-20 | EUR 100,000 | 132,046 | |
| Smurfit Kappa Acquisitions | 5.125 | 09-15-18 | EUR 100,000 | 141,551 | |
| Smurfit Kappa Acquisitions | 7.750 | 11-15-19 | EUR 150,000 | 223,019 | |
| The Governor & Company of the | |||||
| Bank of Ireland | 4.625 | 04-08-13 | EUR 150,000 | 203,670 | |
| Willow No.2 Ireland PLC for Zurich | |||||
| Insurance Company, Ltd. | 3.375 | 06-27-22 | EUR 100,000 | 142,698 | |
| Italy 0.4% | 7,625,990 | ||||
| Banco Popolare SC | 4.000 | 04-06-13 | EUR 300,000 | 408,464 | |
| Edison SpA | 3.250 | 03-17-15 | EUR 200,000 | 281,066 | |
| Edison SpA | 3.875 | 11-10-17 | EUR 300,000 | 437,316 | |
| Intesa Sanpaolo SpA | 3.750 | 11-23-16 | EUR 950,000 | 1,306,293 | |
| Intesa Sanpaolo SpA | 3.875 | 04-01-15 | EUR 100,000 | 139,900 | |
| Intesa Sanpaolo Spa | 4.125 | 09-19-16 | EUR 100,000 | 139,107 | |
| Intesa Sanpaolo Spa | 4.875 | 07-10-15 | EUR 100,000 | 142,645 | |
| 14 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| Italy (continued) | |||||
| Intesa Sanpaolo SpA | 5.000 | 02-28-17 | EUR 700,000 | $1,003,483 | |
| Intesa Sanpaolo SpA (3.750% to 3-2-15, | |||||
| then 3 month EURIBOR + 0.890%) | 3.750 | 03-02-20 | EUR 250,000 | 293,624 | |
| Lottomatica Group SpA | 5.375 | 12-05-16 | EUR 300,000 | 446,388 | |
| Snam Spa | 3.875 | 03-19-18 | EUR 300,000 | 421,892 | |
| Snam SpA | 5.000 | 01-18-19 | EUR 500,000 | 739,126 | |
| Telecom Italia SpA | 5.125 | 01-25-16 | EUR 300,000 | 435,593 | |
| Telecom Italia SpA | 7.000 | 01-20-17 | EUR 300,000 | 462,520 | |
| Unicredit SpA | 4.875 | 03-07-17 | EUR 470,000 | 673,264 | |
| Unicredit SpA | 5.250 | 01-14-14 | EUR 210,000 | 295,309 | |
| Jamaica 0.0% | 540,775 | ||||
| Digicel Group, Ltd. (S) | 8.250 | 09-30-20 | 485,000 | 540,775 | |
| Jersey, C.I. 0.2% | 3,903,045 | ||||
| ASIF III Jersey, Ltd. | 4.750 | 09-11-13 | EUR 570,000 | 790,648 | |
| BAA Funding, Ltd. | 4.125 | 10-12-16 | EUR 960,000 | 1,418,678 | |
| BAA Funding, Ltd. | 4.600 | 09-30-14 | EUR 180,000 | 258,201 | |
| BAA Funding, Ltd. | 4.600 | 02-15-18 | EUR 300,000 | 454,029 | |
| HSBC Capital Funding LP (5.369% to | |||||
| 3-24-14, then 3 month EURIBOR | |||||
| + 2.000%) (Q) | 5.369 | 03-24-14 | EUR 260,000 | 352,146 | |
| UBS AG (4.500% to 9-16-14, then | |||||
| 3 month EURIBOR + 1.260%) | 4.500 | 09-16-19 | EUR 450,000 | 629,343 | |
| Luxembourg 0.7% | 14,176,074 | ||||
| ArcelorMittal | 6.000 | 03-01-21 | 1,015,000 | 1,067,040 | |
| ArcelorMittal | 7.250 | 03-01-41 | 1,391,000 | 1,389,231 | |
| ArcelorMittal | 8.250 | 06-03-13 | EUR 150,000 | 207,907 | |
| ArcelorMittal | 9.500 | 02-15-15 | 200,000 | 225,508 | |
| ARD Finance SA, PIK | 11.125 | 06-01-18 | EUR 205,562 | 297,255 | |
| Cabot Financial Luxembourg SA | 10.375 | 10-01-19 | GBP 300,000 | 523,380 | |
| Cemex Espana Luxembourg (S) | 9.250 | 05-12-20 | 660,000 | 709,500 | |
| Cirsa Funding Luxembourg SA | 8.750 | 05-15-18 | EUR 100,000 | 134,083 | |
| Codere Finance Luxembourg SA | 8.250 | 06-15-15 | EUR 100,000 | 110,661 | |
| Expro Finance Luxembourg SCA (S) | 8.500 | 12-15-16 | 825,000 | 870,375 | |
| Fiat Industrial Finance Europe SA | 5.250 | 03-11-15 | EUR 520,000 | 736,965 | |
| Fiat Industrial Finance Europe SA | 6.250 | 03-09-18 | EUR 500,000 | 751,373 | |
| Finmeccanica Finance SA | 8.125 | 12-03-13 | EUR 130,000 | 185,749 | |
| Gazprom Oao Via Gaz Capital SA | 3.755 | 03-15-17 | EUR 500,000 | 710,334 | |
| Geo Debt Finance SCA | 7.500 | 08-01-18 | EUR 100,000 | 134,762 | |
| Geo Travel Finance SCA | 10.375 | 05-01-19 | EUR 100,000 | 138,496 | |
| Hannover Finance Luxembourg SA (P) | 5.750 | 02-26-24 | EUR 420,000 | 584,533 | |
| INEOS Group Holdings SA | 7.875 | 02-15-16 | EUR 300,000 | 408,359 | |
| Intelsat Jackson Holdings SA | 7.250 | 10-15-20 | 450,000 | 481,500 | |
| Intelsat Luxembourg SA | 11.250 | 02-04-17 | 1,625,000 | 1,722,500 | |
| Matterhorn Mobile Holdings SA | 8.250 | 02-15-20 | EUR 300,000 | 444,001 | |
| Sunrise Communications Holdings SA | 8.500 | 12-31-18 | EUR 200,000 | 293,285 | |
| Talanx Finanz Luxembourg SA (P) | 8.367 | 06-15-42 | EUR 100,000 | 158,216 | |
| Telecom Italia Finance SA | 7.750 | 01-24-33 | EUR 50,000 | 78,153 | |
| Wind Acquisition Finance SA | 7.375 | 02-15-18 | EUR 430,000 | 607,209 | |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 15 |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| Luxembourg (continued) | |||||
| Wind Acquisition Finance SA (S) | 11.750 | 07-15-17 | 400,000 | $430,000 | |
| Wind Acquisition Finance SA | 11.750 | 07-15-17 | EUR 150,000 | 215,890 | |
| Wind Acquisition Holdings | |||||
| Finance SA, PIK (S) | 12.250 | 07-15-17 | 530,625 | 559,809 | |
| Mexico 0.1% | 1,257,516 | ||||
| America Movil SAB de CV | 3.000 | 07-12-21 | EUR 200,000 | 280,763 | |
| America Movil SAB de CV | 3.750 | 06-28-17 | EUR 450,000 | 665,207 | |
| Kansas City Southern de Mexico SA de CV | 6.125 | 06-15-21 | 100,000 | 112,500 | |
| Petroleos Mexicanos | 5.500 | 01-09-17 | EUR 130,000 | 199,046 | |
| Netherlands 1.5% | 29,389,621 | ||||
| ABB Finance BV | 2.625 | 03-26-19 | EUR 390,000 | 547,371 | |
| ABN Amro Bank NV | 3.625 | 10-06-17 | EUR 710,000 | 1,043,084 | |
| ABN Amro Bank NV | 6.375 | 04-27-21 | EUR 590,000 | 886,955 | |
| Aegon NV | 4.125 | 12-08-14 | EUR 300,000 | 429,447 | |
| Allianz Finance II BV | 4.750 | 07-22-19 | EUR 150,000 | 235,745 | |
| Allianz Finance II BV (5.750% to 7-8-21, | |||||
| then 3 month EURIBOR + 2.349%) | 5.750 | 07-08-41 | EUR 800,000 | 1,179,179 | |
| BMW Finance NV | 3.625 | 01-29-18 | EUR 300,000 | 444,605 | |
| BMW Finance NV | 3.875 | 01-18-17 | EUR 200,000 | 296,218 | |
| Coca-Cola HBC Finance BV | 4.250 | 11-16-16 | EUR 128,000 | 186,551 | |
| Coca-Cola HBC Finance BV | 7.875 | 01-15-14 | EUR 150,000 | 215,925 | |
| Conti-Gummi Finance BV | 6.500 | 01-15-16 | EUR 340,000 | 487,449 | |
| Conti-Gummi Finance BV | 7.500 | 09-15-17 | EUR 325,000 | 468,442 | |
| CRH Finance BV | 5.000 | 01-25-19 | EUR 400,000 | 617,495 | |
| Deutsche Bahn Finance BV | 3.000 | 03-08-24 | EUR 400,000 | 568,998 | |
| Deutsche Bahn Finance BV | 4.750 | 03-14-18 | EUR 130,000 | 205,059 | |
| Deutsche Telekom International | |||||
| Finance BV | 4.250 | 07-13-22 | EUR 280,000 | 427,061 | |
| Deutsche Telekom International | |||||
| Finance BV | 6.000 | 01-20-17 | EUR 325,000 | 513,207 | |
| Deutsche Telekom International | |||||
| Finance BV | 6.625 | 03-29-18 | EUR 13,000 | 21,771 | |
| E.ON International Finance BV | 5.750 | 05-07-20 | EUR 430,000 | 726,017 | |
| EADS Finance BV | 4.625 | 08-12-16 | EUR 150,000 | 226,392 | |
| EDP Finance BV | 5.750 | 09-21-17 | EUR 400,000 | 575,708 | |
| EN Germany Holdings BV | 10.750 | 11-15-15 | EUR 100,000 | 126,208 | |
| Enel Finance International NV | 4.625 | 06-24-15 | EUR 625,000 | 894,545 | |
| Enel Finance International NV | 4.875 | 03-11-20 | EUR 500,000 | 712,913 | |
| Enel Finance International NV (S) | 5.750 | 10-24-18 | EUR 700,000 | 1,050,354 | |
| HeidelbergCement Finance BV | 6.750 | 12-15-15 | EUR 300,000 | 448,074 | |
| HeidelbergCement Finance BV | 7.500 | 04-03-20 | EUR 150,000 | 236,257 | |
| HeidelbergCement Finance BV | 8.000 | 01-31-17 | EUR 350,000 | 547,941 | |
| HIT Finance BV | 5.750 | 03-09-18 | EUR 200,000 | 296,652 | |
| ING Bank NV | 3.375 | 03-03-15 | EUR 510,000 | 722,984 | |
| ING Bank NV | 4.000 | 12-23-16 | EUR 100,000 | 147,731 | |
| ING Bank NV | 4.250 | 01-13-17 | EUR 500,000 | 746,628 | |
| ING Bank NV (4.625% to 3-15-14, | |||||
| then 3 month EURIBOR + 1.440%) | 4.625 | 03-15-19 | EUR 520,000 | 695,036 | |
| ING Bank NV | 4.875 | 01-18-21 | EUR 330,000 | 521,052 | |
| InterXion Holding NV | 9.500 | 02-12-17 | EUR 50,000 | 75,019 | |
| 16 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| Netherlands (continued) | |||||
| KBC IFIMA NV | 3.875 | 03-31-15 | EUR 300,000 | $427,429 | |
| KBC IFIMA NV | 4.500 | 09-17-14 | EUR 550,000 | 783,876 | |
| KBC IFIMA NV | 4.500 | 03-27-17 | EUR 200,000 | 298,408 | |
| KPN NV | 4.750 | 05-29-14 | EUR 100,000 | 142,011 | |
| KPN NV | 5.625 | 09-30-24 | EUR 510,000 | 783,974 | |
| KPN NV | 6.500 | 01-15-16 | EUR 150,000 | 229,375 | |
| Leaseplan Corp. NV | 2.500 | 09-19-16 | EUR 200,000 | 275,179 | |
| LeasePlan Corp. NV | 4.125 | 01-13-15 | EUR 500,000 | 710,306 | |
| Linde Finance BV (6.000% to 7-13-13, | |||||
| then 3 month EURIBOR + 3.375%) (Q) | 6.000 | 07-13-13 | EUR 300,000 | 412,970 | |
| Linde Finance BV (7.375% to 7-14-16, | |||||
| then 3 month EURIBOR + 4.125%) | 7.375 | 07-14-66 | EUR 340,000 | 532,424 | |
| LyondellBasell Industries NV | 5.000 | 04-15-19 | 200,000 | 220,500 | |
| LyondellBasell Industries NV | 5.750 | 04-15-24 | 600,000 | 694,500 | |
| NXP BV (S) | 9.750 | 08-01-18 | 100,000 | 115,000 | |
| NXP Funding LLC (S) | 5.750 | 02-15-21 | 230,000 | 230,000 | |
| Rabobank Netherlands | 3.500 | 10-17-18 | EUR 850,000 | 1,250,182 | |
| Rabobank Nederland NV | 3.875 | 04-20-16 | EUR 153,000 | 223,797 | |
| Rabobank Nederland NV | 4.125 | 01-14-20 | EUR 750,000 | 1,139,286 | |
| Rabobank Nederland NV (8.375% to | |||||
| 7-26-16, then 5 Year U.S. Treasury | |||||
| Note Rate + 6.425%) (Q) | 8.375 | 07-26-16 | 150,000 | 159,000 | |
| Repsol International Finance BV | 4.250 | 02-12-16 | EUR 200,000 | 284,150 | |
| RWE Finance BV | 6.500 | 08-10-21 | EUR 500,000 | 888,284 | |
| RWE Finance BV | 6.625 | 01-31-19 | EUR 300,000 | 512,867 | |
| Swiss Reinsurance Company (5.252% | |||||
| to 5-25-16, then 6 month EURIBOR | |||||
| + 2.090%) (Q) | 5.252 | 05-25-16 | EUR 150,000 | 199,699 | |
| Telefonica Europe BV | 5.875 | 02-14-33 | EUR 120,000 | 177,058 | |
| TenneT Holding BV (6.655% to 6-1-17, then | |||||
| 5 Year EUR Swap Rate + 3.600%) (Q) | 6.655 | 06-01-17 | EUR 300,000 | 441,778 | |
| UPC Holding BV | 8.375 | 08-15-20 | EUR 350,000 | 522,753 | |
| Ziggo Bond Company BV | 8.000 | 05-15-18 | EUR 300,000 | 440,742 | |
| Norway 0.1% | 771,015 | ||||
| DNB Bank ASA | 4.375 | 02-24-21 | EUR 410,000 | 633,898 | |
| Statkraft AS | 6.625 | 04-02-19 | EUR 80,000 | 137,117 | |
| South Africa 0.0% | 65,514 | ||||
| Peermont Global Pty, Ltd. | 7.750 | 04-30-14 | EUR 50,000 | 65,514 | |
| Spain 0.5% | 8,793,705 | ||||
| Amadeus Capital Markets SA | 4.875 | 07-15-16 | EUR 530,000 | 774,417 | |
| Banco Bilbao Vizcaya Argentaria SA | 3.500 | 12-05-17 | EUR 300,000 | 410,033 | |
| Banco Bilbao Vizcaya Argentaria SA | 4.250 | 03-30-15 | EUR 150,000 | 210,810 | |
| Banco Santander SA | 4.375 | 03-16-15 | EUR 200,000 | 281,798 | |
| BBVA Senior Finance SAU | 3.250 | 04-23-15 | EUR 550,000 | 750,224 | |
| BBVA Senior Finance SAU | 4.375 | 09-21-15 | EUR 300,000 | 417,151 | |
| BBVA Senior Finance SAU | 4.875 | 01-23-14 | EUR 100,000 | 139,397 | |
| Gas Natural Capital Markets SA | 5.000 | 02-13-18 | EUR 600,000 | 870,820 | |
| Gas Natural Capital Markets SA | 5.625 | 02-09-17 | EUR 400,000 | 595,214 | |
| Iberdrola Finanzas SAU | 4.750 | 01-25-16 | EUR 1,100,000 | 1,581,892 | |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 17 |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| Spain (continued) | |||||
| Iberdrola Finanzas SAU | 5.625 | 05-09-18 | EUR 200,000 | $300,970 | |
| Santander International Debt SAU | 4.500 | 05-18-15 | EUR 300,000 | 420,607 | |
| Telefonica Emisiones SAU | 3.661 | 09-18-17 | EUR 550,000 | 751,255 | |
| Telefonica Emisiones SAU | 4.750 | 02-07-17 | EUR 300,000 | 428,385 | |
| Telefonica Emisiones SAU | 4.967 | 02-03-16 | EUR 600,000 | 860,732 | |
| Sweden 0.2% | 4,356,431 | ||||
| Handelsbanken AB | 4.375 | 10-20-21 | EUR 250,000 | 388,877 | |
| Investor AB | 3.250 | 09-17-18 | EUR 500,000 | 730,252 | |
| Norcell Sweden Holding 2 AB | 10.750 | 09-29-19 | EUR 200,000 | 293,964 | |
| Nordea Bank AB | 4.000 | 06-29-20 | EUR 430,000 | 652,105 | |
| Nordea Bank AB | 4.000 | 03-29-21 | EUR 210,000 | 299,939 | |
| Nordea Bank AB (P) | 4.625 | 02-15-22 | EUR 200,000 | 288,470 | |
| Nordea Bank AB (6.250% to 9-10-13, | |||||
| then 3 month EURIBOR + 3.200%) | 6.250 | 09-10-18 | EUR 140,000 | 195,217 | |
| Swedbank AB | 3.375 | 02-09-17 | EUR 430,000 | 623,367 | |
| TeliaSonera AB | 3.625 | 02-14-24 | EUR 430,000 | 625,282 | |
| Vattenfall AB | 6.750 | 01-31-19 | EUR 150,000 | 258,958 | |
| United Arab Emirates 0.0% | 763,820 | ||||
| Shelf Drilling Holdings, Ltd. (S) | 8.625 | 11-01-18 | 724,000 | 763,820 | |
| United Kingdom 3.1% | 60,355,615 | ||||
| Abbey National Treasury Services PLC | 3.375 | 10-20-15 | EUR 405,000 | 574,530 | |
| Aviva PLC (5.700% to 9-29-15, then | |||||
| 3 month EURIBOR + 2.350%) (Q) | 5.700 | 09-29-15 | EUR 170,000 | 226,080 | |
| Bank of Tokyo-Mitsubishi UFJ, Ltd. | 0.420 | 03-25-13 | 18,000,000 | 18,006,084 | |
| Barclays Bank PLC | 4.000 | 01-20-17 | EUR 470,000 | 696,028 | |
| Barclays Bank PLC | 5.250 | 05-27-14 | EUR 100,000 | 143,238 | |
| Barclays Bank PLC | 6.625 | 03-30-22 | EUR 150,000 | 229,013 | |
| Barclays Bank PLC | 7.625 | 11-21-22 | 690,000 | 680,513 | |
| Barclays Bank PLC (4.500% to 3-4-14, | |||||
| then 3 month EURIBOR + 3.200%) | 4.500 | 03-04-19 | EUR 190,000 | 259,123 | |
| BAT International Finance PLC | 3.625 | 11-09-21 | EUR 360,000 | 531,872 | |
| Boparan Finance PLC | 9.750 | 04-30-18 | EUR 100,000 | 151,191 | |
| Brambles Finance PLC | 4.625 | 04-20-18 | EUR 230,000 | 351,987 | |
| British Telecommunications PLC | 6.500 | 07-07-15 | EUR 555,000 | 846,059 | |
| Coventry Building Society | 2.250 | 12-04-17 | EUR 600,000 | 814,084 | |
| Credit Agricole SA London | 3.000 | 07-20-15 | EUR 650,000 | 917,170 | |
| DNB Bank ASA | 0.390 | 02-20-13 | 18,000,000 | 18,002,394 | |
| EC Finance PLC | 9.750 | 08-01-17 | EUR 100,000 | 146,643 | |
| Experian Finance PLC | 4.750 | 02-04-20 | EUR 300,000 | 470,352 | |
| FCE Bank PLC | 4.750 | 01-19-15 | EUR 430,000 | 618,851 | |
| FCE Bank PLC | 7.250 | 07-15-13 | EUR 150,000 | 209,083 | |
| G4S International Finance PLC | 2.625 | 12-06-18 | EUR 290,000 | 387,825 | |
| G4S International Finance PLC | 2.875 | 05-02-17 | EUR 281,000 | 388,364 | |
| Hammerson PLC | 2.750 | 09-26-19 | EUR 300,000 | 409,222 | |
| Hammerson PLC | 4.875 | 06-19-15 | EUR 660,000 | 964,926 | |
| HBOS PLC (4.375% to 10-30-14, then | |||||
| 3 month EURIBOR + 1.36%) | 4.375 | 10-30-19 | EUR 115,000 | 147,169 | |
| Heathrow Finance PLC | 5.375 | 09-02-19 | GBP 300,000 | 477,976 | |
| 18 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| United Kingdom (continued) | |||||
| Imperial Tobacco Finance PLC | 5.000 | 12-02-19 | EUR 300,000 | $472,044 | |
| Imperial Tobacco Finance PLC | 7.250 | 09-15-14 | EUR 300,000 | 446,240 | |
| Imperial Tobacco Finance PLC | 8.375 | 02-17-16 | EUR 445,000 | 721,803 | |
| Jaguar Land Rover Automotive PLC (S) | 5.625 | 02-01-23 | 150,000 | 153,000 | |
| Jaguar Land Rover PLC | 8.125 | 05-15-18 | GBP 175,000 | 303,917 | |
| Kerling PLC | 10.625 | 02-01-17 | EUR 100,000 | 132,046 | |
| Legal & General Group PLC (4.000% to | |||||
| 6-8-15 then 3 month EURIBOR +1.700%) | 4.000 | 06-08-25 | EUR 380,000 | 514,674 | |
| Lloyds TSB Bank PLC | 3.750 | 09-07-15 | EUR 980,000 | 1,413,478 | |
| Lloyds TSB Bank PLC | 6.375 | 06-17-16 | EUR 310,000 | 486,145 | |
| Lloyds TSB Bank PLC | 6.500 | 03-24-20 | EUR 620,000 | 921,127 | |
| Matalan Finance PLC | 8.875 | 04-29-16 | GBP 100,000 | 159,790 | |
| Matalan Finance PLC | 9.625 | 03-31-17 | GBP 125,000 | 188,338 | |
| Mondi Finance PLC | 3.375 | 09-28-20 | EUR 200,000 | 274,660 | |
| Mondi Finance PLC | 5.750 | 04-03-17 | EUR 180,000 | 275,370 | |
| Motability Operations Group PLC | 3.250 | 11-30-18 | EUR 390,000 | 567,226 | |
| National Grid PLC | 4.375 | 03-10-20 | EUR 150,000 | 233,355 | |
| National Grid PLC | 5.000 | 07-02-18 | EUR 305,000 | 481,344 | |
| Nationwide Building Society | 3.750 | 01-20-15 | EUR 860,000 | 1,222,280 | |
| Nationwide Building Society | 6.750 | 07-22-20 | EUR 550,000 | 860,796 | |
| Phones4u Finance PLC | 9.500 | 04-01-18 | GBP 100,000 | 168,116 | |
| Rexam PLC (6.750% to 6-29-17, then | |||||
| 3 month EURIBOR + 2.900%) | 6.750 | 06-29-67 | EUR 100,000 | 142,175 | |
| Royal Bank of Scotland PLC | 4.875 | 01-20-17 | EUR 300,000 | 454,106 | |
| Royal Bank of Scotland PLC | 6.000 | 05-10-13 | EUR 520,000 | 712,242 | |
| Royal Bank of Scotland PLC | 6.934 | 04-09-18 | EUR 300,000 | 451,536 | |
| SABMiller PLC | 4.500 | 01-20-15 | EUR 210,000 | 303,981 | |
| SSE PLC (5.025% to 10-1-15, then | |||||
| 5 Year EUR Swap Rate + 3.150%) (Q) | 5.025 | 10-01-15 | EUR 350,000 | 488,953 | |
| Thomas Cook Group PLC | 6.750 | 06-22-15 | EUR 150,000 | 185,340 | |
| UBS AG | 6.000 | 04-18-18 | EUR 280,000 | 459,048 | |
| United Utilities Water PLC | 4.250 | 01-24-20 | EUR 220,000 | 335,710 | |
| Virgin Media Finance PLC | 8.875 | 10-15-19 | GBP 100,000 | 176,998 | |
| United States 6.5% | 127,123,343 | ||||
| 313 Group, Inc. (S) | 6.375 | 12-01-19 | 590,000 | 578,200 | |
| 313 Group, Inc. (S) | 8.750 | 12-01-20 | 740,000 | 725,200 | |
| Accellent, Inc. | 8.375 | 02-01-17 | 225,000 | 237,375 | |
| Aleris International, Inc. | 7.625 | 02-15-18 | 250,000 | 260,000 | |
| Aleris International, Inc. | 7.875 | 11-01-20 | 1,060,000 | 1,123,600 | |
| Alliance One International, Inc. | 10.000 | 07-15-16 | 985,000 | 1,046,563 | |
| AMC Entertainment, Inc. | 9.750 | 12-01-20 | 1,060,000 | 1,234,900 | |
| American Axle & Manufacturing, Inc. | 6.625 | 10-15-22 | 457,000 | 475,280 | |
| American Axle & Manufacturing, Inc. | 7.750 | 11-15-19 | 289,000 | 322,235 | |
| Amgen, Inc. | 4.375 | 12-05-18 | EUR 250,000 | 384,801 | |
| Apria Healthcare Group, Inc. | 11.250 | 11-01-14 | 375,000 | 383,438 | |
| Ashland, Inc. (S) | 4.750 | 08-15-22 | 870,000 | 893,925 | |
| Atlas Pipeline Partners LP (S) | 5.875 | 08-01-23 | 650,000 | 648,375 | |
| Atlas Pipeline Partners LP (S) | 6.625 | 10-01-20 | 620,000 | 651,000 | |
| Atlas Pipeline Partners LP | 8.750 | 06-15-18 | 100,000 | 107,200 | |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 19 |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| United States (continued) | |||||
| Atwood Oceanics, Inc. | 6.500 | 02-01-20 | 373,000 | $405,638 | |
| Avis Budget Car Rental LLC | 9.625 | 03-15-18 | 625,000 | 693,750 | |
| Bank of America Corp. (4.000% to 3-28-13, | |||||
| then 3 month EURIBOR + 0.840%) | 4.000 | 03-28-18 | EUR 450,000 | 556,019 | |
| Bank of America Corp. | 4.625 | 02-18-14 | EUR 100,000 | 140,583 | |
| Bank of America Corp. | 4.750 | 04-03-17 | EUR 100,000 | 150,132 | |
| Bank of America Corp. | 5.125 | 09-26-14 | EUR 550,000 | 792,930 | |
| Bank of America Corp. | 7.000 | 06-15-16 | EUR 850,000 | 1,345,855 | |
| BE Aerospace, Inc. | 5.250 | 04-01-22 | 660,000 | 694,650 | |
| Beazer Homes USA, Inc. | 6.625 | 04-15-18 | 360,000 | 385,200 | |
| Beazer Homes USA, Inc. | 8.125 | 06-15-16 | 195,000 | 212,063 | |
| Beazer Homes USA, Inc. | 9.125 | 06-15-18 | 660,000 | 702,900 | |
| Berry Plastics Corp. | 8.250 | 11-15-15 | 125,000 | 130,625 | |
| BI-LO LLC/BI-LO Finance Corp. (S) | 9.250 | 02-15-19 | 270,000 | 289,575 | |
| Biomet, Inc. (S) | 6.500 | 08-01-20 | 420,000 | 441,000 | |
| Boe Merger Corp. (S) | 9.500 | 11-01-17 | 1,100,000 | 1,144,000 | |
| Boise Paper Holdings LLC | 8.000 | 04-01-20 | 1,630,000 | 1,805,225 | |
| Boyd Gaming Corp. (S) | 9.000 | 07-01-20 | 1,335,000 | 1,355,025 | |
| Cablevision Systems Corp. | 8.625 | 09-15-17 | 1,650,000 | 1,934,625 | |
| Caesars Entertainment Operating | |||||
| Company, Inc. | 8.500 | 02-15-20 | 290,000 | 291,450 | |
| Caesars Operating Escrow LLC (S) | 9.000 | 02-15-20 | 1,790,000 | 1,821,325 | |
| Calpine Corp. (S) | 7.875 | 07-31-20 | 730,000 | 804,825 | |
| Casella Waste Systems, Inc. | 7.750 | 02-15-19 | 1,610,000 | 1,553,650 | |
| CCO Holdings LLC | 7.375 | 06-01-20 | 1,300,000 | 1,446,250 | |
| CCO Holdings LLC | 7.875 | 04-30-18 | 525,000 | 561,094 | |
| CDW LLC | 8.500 | 04-01-19 | 1,225,000 | 1,356,688 | |
| Cequel Communications Escrow 1 LLC (S) | 6.375 | 09-15-20 | 500,000 | 523,750 | |
| Chaparral Energy, Inc. | 8.250 | 09-01-21 | 825,000 | 915,750 | |
| Chesapeake Energy Corp. | 6.875 | 11-15-20 | 90,000 | 99,000 | |
| Chesapeake Energy Corp. | 7.250 | 12-15-18 | 740,000 | 832,500 | |
| Chesapeake Oilfield Operating LLC (S) | 6.625 | 11-15-19 | 125,000 | 123,750 | |
| Chrysler Group LLC | 8.250 | 06-15-21 | 1,000,000 | 1,110,000 | |
| Citigroup, Inc. (P) | 1.458 | 11-30-17 | EUR 300,000 | 382,533 | |
| Citigroup, Inc. | 4.000 | 11-26-15 | EUR 730,000 | 1,059,092 | |
| Citigroup, Inc. (4.750% to 2-10-14, | |||||
| then 3 month EURIBOR + 1.400%) | 4.750 | 02-10-19 | EUR 520,000 | 685,757 | |
| Citigroup, Inc. | 5.000 | 08-02-19 | EUR 120,000 | 186,308 | |
| Citigroup, Inc. | 7.375 | 09-04-19 | EUR 850,000 | 1,473,959 | |
| CityCenter Holdings LLC, PIK | 10.750 | 01-15-17 | 725,788 | 801,089 | |
| Clear Channel Communications, Inc. | 9.000 | 03-01-21 | 950,000 | 883,500 | |
| Clear Channel Worldwide Holdings, Inc. | 7.625 | 03-15-20 | 730,000 | 762,750 | |
| Concho Resources, Inc. | 5.500 | 10-01-22 | 40,000 | 42,400 | |
| Concho Resources, Inc. | 6.500 | 01-15-22 | 500,000 | 545,000 | |
| Concho Resources, Inc. | 7.000 | 01-15-21 | 250,000 | 276,250 | |
| Continental Resources, Inc. | 5.000 | 09-15-22 | 572,000 | 609,180 | |
| Cricket Communications, Inc. | 7.750 | 10-15-20 | 950,000 | 985,625 | |
| Crown Americas LLC (S) | 4.500 | 01-15-23 | 120,000 | 118,200 | |
| Crown Americas LLC | 6.250 | 02-01-21 | 100,000 | 108,750 | |
| 20 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| United States (continued) | |||||
| D.R. Horton, Inc. | 6.500 | 04-15-16 | 65,000 | $72,313 | |
| DaVita, Inc. | 5.750 | 08-15-22 | 290,000 | 304,500 | |
| Del Monte Corp. | 7.625 | 02-15-19 | 1,170,000 | 1,219,725 | |
| DISH DBS Corp. | 5.875 | 07-15-22 | 1,425,000 | 1,514,063 | |
| DISH DBS Corp. | 6.750 | 06-01-21 | 575,000 | 644,000 | |
| DJO Finance LLC | 7.750 | 04-15-18 | 850,000 | 843,625 | |
| DJO Finance LLC (S) | 9.875 | 04-15-18 | 400,000 | 427,000 | |
| DR Horton, Inc | 4.375 | 09-15-22 | 660,000 | 656,700 | |
| DR Horton, Inc. | 3.625 | 02-15-18 | 290,000 | 292,175 | |
| DR Horton, Inc. | 4.750 | 02-15-23 | 120,000 | 119,850 | |
| El Paso Corp. | 7.000 | 06-15-17 | 1,170,000 | 1,341,311 | |
| El Paso Corp. | 7.750 | 01-15-32 | 50,000 | 58,814 | |
| El Paso Pipeline Partners Operating | |||||
| Company LLC | 6.500 | 04-01-20 | 62,000 | 74,844 | |
| Endo Pharmaceuticals Holdings, Inc. | 7.000 | 12-15-20 | 725,000 | 792,063 | |
| Energy Future Intermediate Holding | |||||
| Company LLC | 10.000 | 12-01-20 | 1,450,000 | 1,663,875 | |
| Energy XXI Gulf Coast, Inc. | 7.750 | 06-15-19 | 1,050,000 | 1,139,250 | |
| EP Energy LLC | 9.375 | 05-01-20 | 995,000 | 1,114,400 | |
| EP Energy LLC | 7.750 | 09-01-22 | 55,000 | 59,125 | |
| First Data Corp. (S) | 8.250 | 01-15-21 | 575,000 | 592,250 | |
| First Data Corp., PIK (S) | 8.750 | 01-15-22 | 970,000 | 1,008,800 | |
| First Data Corp. | 10.550 | 09-24-15 | 100,000 | 103,063 | |
| Ford Motor Company | 7.450 | 07-16-31 | 146,000 | 186,150 | |
| Ford Motor Company | 8.900 | 01-15-32 | 60,000 | 80,250 | |
| Freescale Semiconductor, Inc. | 10.750 | 08-01-20 | 967,000 | 1,073,370 | |
| Frontier Communications Corp. | 8.125 | 10-01-18 | 1,075,000 | 1,244,313 | |
| Frontier Communications Corp. | 8.250 | 04-15-17 | 975,000 | 1,128,563 | |
| GE Capital Trust IV (4.625% to 9-15-16, | |||||
| then month EURIBOR +1.600%) (S) | 4.625 | 09-15-66 | EUR 335,000 | 445,812 | |
| GenOn Americas Generation LLC | 8.500 | 10-01-21 | 125,000 | 145,000 | |
| GenOn Energy, Inc. | 9.500 | 10-15-18 | 820,000 | 973,750 | |
| Goodrich Petroleum Corp. | 8.875 | 03-15-19 | 575,000 | 563,500 | |
| GWR Operating Partnership LLP | 10.875 | 04-01-17 | 100,000 | 113,750 | |
| Halcon Resources Corp. (S) | 8.875 | 05-15-21 | 315,000 | 336,263 | |
| Halcon Resources Corp. (S) | 9.750 | 07-15-20 | 645,000 | 706,275 | |
| HCA, Inc. | 5.875 | 05-01-23 | 750,000 | 781,875 | |
| HCA, Inc. | 7.250 | 09-15-20 | 905,000 | 1,004,550 | |
| HCA, Inc. | 7.500 | 11-15-95 | 545,000 | 486,413 | |
| HD Supply, Inc. (S) | 7.500 | 07-15-20 | 600,000 | 593,250 | |
| HDTFS, Inc. (S) | 5.875 | 10-15-20 | 665,000 | 706,563 | |
| Health Management Associates, Inc. | 7.375 | 01-15-20 | 378,000 | 415,328 | |
| Hexion US Finance Corp. | 6.625 | 04-15-20 | 760,000 | 748,600 | |
| Hexion US Finance Corp. | 8.875 | 02-01-18 | 725,000 | 732,250 | |
| Hiland Partners LP (S) | 7.250 | 10-01-20 | 710,000 | 768,575 | |
| HSBC Finance Corp. | 3.750 | 11-04-15 | EUR 700,000 | 1,009,583 | |
| HSTFS, Inc. (S) | 6.250 | 10-15-22 | 60,000 | 65,100 | |
| IASIS Healthcare LLC | 8.375 | 05-15-19 | 1,025,000 | 1,040,375 | |
| Infor US, Inc. | 9.375 | 04-01-19 | 350,000 | 395,500 | |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 21 |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| United States (continued) | |||||
| Infor US, Inc. | 11.500 | 07-15-18 | 733,000 | $863,108 | |
| Innovation Ventures LLC (S) | 9.500 | 08-15-19 | 570,000 | 518,700 | |
| Interface Security Systems Holdings, Inc. (S) | 9.250 | 01-15-18 | 520,000 | 529,100 | |
| Jabil Circuit, Inc. | 4.700 | 09-15-22 | 845,000 | 866,125 | |
| Jarden Corp. | 6.125 | 11-15-22 | 175,000 | 188,344 | |
| Jarden Corp. | 7.500 | 05-01-17 | 1,000,000 | 1,128,750 | |
| JPMorgan Chase & Company | 3.750 | 06-15-16 | EUR 400,000 | 584,732 | |
| JPMorgan Chase & Company (4.375% | |||||
| to 11-12-14, then 3 month EURIBOR | |||||
| + 1.500%) | 4.375 | 11-12-19 | EUR 200,000 | 271,560 | |
| Kinetic Concepts, Inc. (S) | 10.500 | 11-01-18 | 548,000 | 586,360 | |
| Laredo Petroleum, Inc. | 7.375 | 05-01-22 | 215,000 | 232,738 | |
| Laredo Petroleum, Inc. | 9.500 | 02-15-19 | 450,000 | 508,500 | |
| Laureate Education, Inc. (S) | 9.250 | 09-01-19 | 1,765,000 | 1,923,850 | |
| Level 3 Communications, Inc. (S) | 8.875 | 06-01-19 | 200,000 | 217,500 | |
| Level 3 Financing, Inc. | 8.125 | 07-01-19 | 250,000 | 272,500 | |
| Level 3 Financing, Inc. | 8.625 | 07-15-20 | 1,095,000 | 1,226,400 | |
| Libbey Glass, Inc. | 6.875 | 05-15-20 | 535,000 | 575,794 | |
| Limited Brands, Inc. | 5.625 | 02-15-22 | 1,020,000 | 1,096,500 | |
| Limited Brands, Inc. | 6.625 | 04-01-21 | 100,000 | 113,750 | |
| Linn Energy LLC (S) | 6.250 | 11-01-19 | 280,000 | 279,300 | |
| Linn Energy LLC | 6.500 | 05-15-19 | 493,000 | 502,244 | |
| Longview Fibre Paper & Packaging, Inc. (S) | 8.000 | 06-01-16 | 575,000 | 605,188 | |
| Merrill Lynch & Company, Inc. | 4.875 | 05-30-14 | EUR 150,000 | 213,211 | |
| MetroPCS Wireless, Inc. | 6.625 | 11-15-20 | 700,000 | 742,000 | |
| MGM Resorts International | 7.625 | 01-15-17 | 875,000 | 959,219 | |
| Michael Foods Holding, Inc. (S) | 8.500 | 07-15-18 | 130,000 | 133,575 | |
| Michael Foods, Inc. | 9.750 | 07-15-18 | 500,000 | 555,000 | |
| Midstates Petroleum Company, Inc. (S) | 10.750 | 10-01-20 | 568,000 | 619,120 | |
| Mobile Mini, Inc, | 7.875 | 12-01-20 | 28,000 | 30,940 | |
| Morgan Stanley | 4.500 | 02-23-16 | EUR 1,200,000 | 1,737,319 | |
| Morgan Stanley | 5.375 | 08-10-20 | EUR 100,000 | 153,147 | |
| Morgan Stanley | 5.500 | 10-02-17 | EUR 150,000 | 229,427 | |
| Newfield Exploration Company | 5.625 | 07-01-24 | 825,000 | 886,875 | |
| Novelis, Inc. | 8.750 | 12-15-20 | 780,000 | 881,400 | |
| NPC International, Inc. | 10.500 | 01-15-20 | 730,000 | 846,800 | |
| NRG Energy, Inc. (S) | 6.625 | 03-15-23 | 1,010,000 | 1,083,225 | |
| NRG Energy, Inc. | 8.250 | 09-01-20 | 1,110,000 | 1,254,300 | |
| Peabody Energy Corp. | 6.250 | 11-15-21 | 465,000 | 485,925 | |
| Pemex Project Funding Master Trust | 6.375 | 08-05-16 | EUR 473,000 | 734,915 | |
| Pfizer, Inc. | 5.750 | 06-03-21 | EUR 450,000 | 773,258 | |
| Pioneer Natural Resources Company | 7.500 | 01-15-20 | 80,000 | 100,682 | |
| Plains Exploration & Production Company | 7.625 | 04-01-20 | 875,000 | 984,375 | |
| Production Resource Group, Inc. | 8.875 | 05-01-19 | 490,000 | 380,975 | |
| Quicksilver Resources, Inc. | 8.250 | 08-01-15 | 200,000 | 193,000 | |
| Quicksilver Resources, Inc. | 9.125 | 08-15-19 | 25,000 | 23,125 | |
| Rain CII Carbon LLC (S) | 8.250 | 01-15-21 | 750,000 | 787,500 | |
| Rain CII Carbon LLC | 8.500 | 01-15-21 | EUR 300,000 | 422,616 | |
| Regions Bank | 7.500 | 05-15-18 | 750,000 | 913,875 | |
| 22 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| United States (continued) | |||||
| Reynolds Group Issuer, Inc. | 7.875 | 08-15-19 | 905,000 | $995,500 | |
| Reynolds Group Issuer, Inc. | 8.500 | 05-15-18 | 180,000 | 189,000 | |
| Rite Aid Corp. | 7.500 | 03-01-17 | 710,000 | 725,975 | |
| Rite Aid Corp. | 9.250 | 03-15-20 | 1,365,000 | 1,518,563 | |
| Roche Holdings, Inc. | 6.500 | 03-04-21 | EUR 550,000 | 989,650 | |
| Sabine Pass Liquefaction LLC (S) | 5.625 | 02-01-21 | 680,000 | 688,500 | |
| SandRidge Energy, Inc. | 8.750 | 01-15-20 | 1,264,000 | 1,371,440 | |
| Sealed Air Corp. (S) | 6.500 | 12-01-20 | 213,000 | 235,365 | |
| Service Corp. International | 4.500 | 11-15-20 | 90,000 | 91,238 | |
| Service Corp. International | 7.000 | 05-15-19 | 600,000 | 659,250 | |
| Service Corp. International | 8.000 | 11-15-21 | 450,000 | 550,125 | |
| Sky Growth Acquisition Corp. (S) | 7.375 | 10-15-20 | 550,000 | 561,000 | |
| Sprint Capital Corp. | 6.875 | 11-15-28 | 1,925,000 | 1,944,250 | |
| Sprint Nextel Corp. | 6.000 | 11-15-22 | 1,400,000 | 1,407,000 | |
| Sprint Nextel Corp. | 7.000 | 08-15-20 | 400,000 | 433,000 | |
| Sprint Nextel Corp. | 9.125 | 03-01-17 | 45,000 | 52,875 | |
| Summit Materials LLC (S) | 10.500 | 01-31-20 | 465,000 | 509,175 | |
| SunGard Data Systems, Inc. | 7.625 | 11-15-20 | 850,000 | 926,500 | |
| Taminco Global Chemical Corp. (S) | 9.750 | 03-31-20 | 50,000 | 55,000 | |
| Tenet Healthcare Corp. (S) | 4.500 | 04-01-21 | 480,000 | 472,200 | |
| TransUnion Holding Company, Inc. | 9.625 | 06-15-18 | 389,000 | 415,258 | |
| TransUnion Holding Company, Inc., PIK (S) | 8.125 | 06-15-18 | 170,000 | 178,075 | |
| Triumph Group, Inc. | 8.625 | 07-15-18 | 105,000 | 116,025 | |
| Tronox Finance LLC (S) | 6.375 | 08-15-20 | 505,000 | 507,525 | |
| UAL 2007-1 Pass Through Trust | 6.636 | 07-02-22 | 944,066 | 1,024,312 | |
| United Rentals North America, Inc. | 5.750 | 07-15-18 | 840,000 | 903,000 | |
| United Rentals North America, Inc. | 7.625 | 04-15-22 | 320,000 | 356,800 | |
| Univision Communications, Inc. (S) | 7.875 | 11-01-20 | 1,050,000 | 1,136,625 | |
| US Airways 2011-1 Class A Pass Through Trust | 7.125 | 10-22-23 | 485,896 | 552,707 | |
| Valeant Pharmaceuticals International, Inc. (S) | 6.750 | 10-01-17 | 200,000 | 212,500 | |
| Valeant Pharmaceuticals International, Inc. (S) | 6.750 | 08-15-21 | 620,000 | 649,450 | |
| Visant Corp. | 10.000 | 10-01-17 | 690,000 | 631,350 | |
| Wachovia Corp. | 4.375 | 11-27-18 | EUR 500,000 | 736,519 | |
| Wal-Mart Stores, Inc. | 4.875 | 09-21-29 | EUR 100,000 | 167,531 | |
| Wells Fargo & Company | 4.125 | 11-03-16 | EUR 300,000 | 448,604 | |
| Westvaco Corp. | 8.200 | 01-15-30 | 57,000 | 73,820 | |
| Wex, Inc. (S) | 4.750 | 02-01-23 | 580,000 | 578,550 | |
| Windstream Corp. | 7.750 | 10-01-21 | 1,675,000 | 1,829,938 | |
| Zurich Finance USA, Inc. (5.750% to | |||||
| 10-2-13, then 3 month EURIBOR | |||||
| + 2.670%) | 5.750 | 10-02-23 | EUR 445,000 | 613,285 | |
| U.S. Government & Agency Obligations 16.8% | $329,241,830 | ||||
| (Cost $326,981,440) | |||||
| United States 16.8% | 329,241,830 | ||||
| Treasury Inflation Protected Securities | |||||
| Inflation Indexed Bond | 0.750 | 02-15-42 | 1,192,242 | 1,264,428 | |
| Inflation Indexed Bond | 1.750 | 01-15-28 | 13,900,191 | 17,691,246 | |
| Inflation Indexed Bond | 2.000 | 01-15-26 | 15,734,572 | 20,365,209 | |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 23 |
| Maturity | |||||
| Rate (%) | date | Par value^ | Value | ||
| United States (continued) | |||||
| Treasury Inflation Protected Securities | |||||
| Inflation Indexed Bond | 2.125 | 02-15-40 | 14,071,680 | $20,085,128 | |
| Inflation Indexed Bond | 2.125 | 02-15-41 | 3,920,820 | 5,634,955 | |
| Inflation Indexed Bond | 2.375 | 01-15-25 | 8,478,709 | 11,318,415 | |
| Inflation Indexed Bond | 2.375 | 01-15-27 | 1,544,828 | 2,096,743 | |
| Inflation Indexed Bond | 3.375 | 04-15-32 | 773,143 | 1,247,599 | |
| Inflation Indexed Bond | 3.875 | 04-15-29 | 22,279,980 | 36,264,144 | |
| Inflation Indexed Note | 0.125 | 04-15-16 | 10,046,674 | 10,662,033 | |
| Inflation Indexed Note | 0.125 | 01-15-22 | 8,176,281 | 8,838,691 | |
| Inflation Indexed Note | 0.500 | 04-15-15 | 22,312,500 | 23,469,961 | |
| Inflation Indexed Note | 0.625 | 07-15-21 | 817,296 | 926,226 | |
| Inflation Indexed Note | 1.125 | 01-15-21 | 10,222,754 | 11,966,214 | |
| Inflation Indexed Note | 1.250 | 07-15-20 | 37,447,469 | 44,360,609 | |
| Inflation Indexed Note | 1.375 | 07-15-18 | 45,844,067 | 53,648,285 | |
| Inflation Indexed Note | 1.625 | 01-15-15 | 2,397,289 | 2,565,100 | |
| Inflation Indexed Note | 1.875 | 07-15-13 | 431,266 | 440,666 | |
| Inflation Indexed Note | 1.875 | 07-15-15 | 1,970,994 | 2,166,091 | |
| Inflation Indexed Note | 2.000 | 01-15-14 | 498,460 | 516,451 | |
| Inflation Indexed Note | 2.000 | 07-15-14 | 12,093,246 | 12,827,342 | |
| Inflation Indexed Note | 2.375 | 01-15-17 | 24,408,973 | 28,487,932 | |
| Inflation Indexed Note | 2.625 | 07-15-17 | 10,306,469 | 12,398,362 | |
| Foreign Government Obligations 5.8% | $114,170,215 | ||||
| (Cost $108,440,048) | |||||
| Australia 0.0% | 144,949 | ||||
| Commonwealth of Australia Bond | 3.000 | 09-20-25 | AUD 102,000 | 144,949 | |
| Germany 0.4% | 9,115,441 | ||||
| Federal Republic of Germany | |||||
| Bond | 1.500 | 09-04-22 | EUR 500,000 | 670,957 | |
| Bond | 1.500 | 02-15-23 | EUR 1,500,000 | 2,001,629 | |
| Bond | 1.750 | 07-04-22 | EUR 2,250,000 | 3,093,882 | |
| Bond | 2.000 | 01-04-22 | EUR 500,000 | 705,724 | |
| Bond | 2.500 | 01-04-21 | EUR 855,000 | 1,263,998 | |
| Bond | 5.625 | 01-04-28 | EUR 700,000 | 1,379,251 | |
| Mexico 5.3% | 103,273,817 | ||||
| Government of Mexico | |||||
| Bond | 6.500 | 06-10-21 | MXN 299,400,000 | 25,863,558 | |
| Bond | 7.500 | 06-03-27 | MXN 275,312,200 | 25,785,190 | |
| Bond | 8.500 | 05-31-29 | MXN 253,360,000 | 25,724,272 | |
| Bond | 10.000 | 12-05-24 | MXN 231,200,000 | 25,900,797 | |
| Sweden 0.1% | 1,633,538 | ||||
| Sweden Government Bond | 3.500 | 12-01-28 | SEK 5,820,000 | 1,633,538 | |
| United Kingdom 0.0% | 2,470 | ||||
| Government of United Kingdom Bond | 1.875 | 11-22-22 | GBP 1,194 | 2,470 | |
| 24 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Shares | Value | |
| Common Stocks 26.4% | $517,878,121 | |
| (Cost $466,249,897) | ||
| Australia 1.5% | 29,098,557 | |
| Brambles, Ltd. | 730,053 | 6,186,428 |
| Dexus Property Group | 1,928,421 | 2,103,286 |
| Federation Centres | 671,536 | 1,632,281 |
| GPT Group | 654,129 | 2,590,302 |
| Mirvac Group | 1,821,214 | 3,019,364 |
| Oil Search, Ltd. | 638,011 | 4,862,855 |
| Santos, Ltd. | 373,386 | 4,659,299 |
| Westfield Group | 346,523 | 4,044,742 |
| Austria 0.2% | 3,144,741 | |
| Oesterreichische Post AG | 71,986 | 3,144,741 |
| Belgium 0.2% | 4,681,171 | |
| Umicore SA | 89,976 | 4,681,171 |
| Bermuda 0.2% | 4,663,717 | |
| Lazard, Ltd., Class A | 134,595 | 4,663,717 |
| Canada 0.3% | 6,162,139 | |
| Cenovus Energy, Inc. | 64,435 | 2,139,004 |
| Suncor Energy, Inc. | 118,368 | 4,023,135 |
| China 0.3% | 6,518,123 | |
| 51job, Inc., ADR (I) | 61,873 | 3,341,142 |
| Baidu, Inc., ADR (I) | 29,335 | 3,176,981 |
| Denmark 0.3% | 5,447,050 | |
| Novo Nordisk A/S, Class B | 29,558 | 5,447,050 |
| Finland 0.3% | 5,535,749 | |
| Wartsila OYJ | 116,277 | 5,535,749 |
| France 1.7% | 32,679,230 | |
| BNP Paribas SA | 103,479 | 6,441,197 |
| Gecina SA | 5,083 | 576,268 |
| Ingenico SA | 53,170 | 3,350,929 |
| Klepierre | 21,379 | 843,842 |
| L’Oreal SA | 28,182 | 4,186,142 |
| Renault SA | 72,250 | 4,365,958 |
| Sanofi | 66,346 | 6,467,178 |
| Societe Generale SA (I) | 87,667 | 3,966,646 |
| Unibail-Rodamco SE | 10,539 | 2,481,070 |
| Germany 0.4% | 6,907,588 | |
| Deutsche Wohnen AG | 44,442 | 855,881 |
| Kabel Deutschland Holding AG | 74,632 | 6,051,707 |
| Hong Kong 1.5% | 29,795,635 | |
| BOC Hong Kong Holdings, Ltd. | 1,949,000 | 6,685,562 |
| China Mengniu Dairy Company, Ltd. | 925,000 | 2,701,751 |
| China Metal Recycling Holdings, Ltd. | 1,799,400 | 2,189,072 |
| China Overseas Land & Investment, Ltd. | 540,000 | 1,680,783 |
| China Resources Land, Ltd. | 444,000 | 1,349,488 |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 25 |
| Shares | Value | |
| Hong Kong (continued) | ||
| Henderson Land Development Company, Ltd. | 1,061,000 | $7,625,641 |
| Hong Kong Land Holdings, Ltd. | 168,000 | 1,316,241 |
| Kerry Properties, Ltd. | 157,000 | 850,533 |
| Sun Hung Kai Properties, Ltd. | 218,000 | 3,576,526 |
| Swire Properties, Ltd. | 497,400 | 1,820,038 |
| India 0.2% | 3,132,689 | |
| Tata Motors, Ltd., ADR | 113,380 | 3,132,689 |
| Indonesia 0.0% | 419,280 | |
| Lippo Karawaci Tbk PT | 3,964,624 | 419,280 |
| Japan 1.2% | 24,441,576 | |
| Japan Tobacco, Inc. | 81,500 | 2,527,594 |
| Mitsubishi Estate Company, Ltd. | 103,000 | 2,491,270 |
| Mitsui Fudosan Company, Ltd. | 249,000 | 5,656,834 |
| ORIX Corp. | 29,190 | 3,116,148 |
| Sekisui House, Ltd. | 297,000 | 3,265,570 |
| Seven & I Holdings Company, Ltd. | 140,800 | 4,273,435 |
| Yokogawa Electric Corp. | 280,600 | 3,110,725 |
| Malaysia 0.2% | 3,296,964 | |
| UEM Land Holdings BHD (I) | 4,653,500 | 3,296,964 |
| Netherlands 0.4% | 8,699,559 | |
| Gemalto NV | 41,206 | 3,671,875 |
| LyondellBasell Industries NV, Class A | 79,276 | 5,027,684 |
| Norway 0.3% | 6,539,736 | |
| DNB ASA | 467,913 | 6,539,736 |
| Portugal 0.2% | 4,664,322 | |
| Galp Energia SGPS SA | 286,999 | 4,664,322 |
| Russia 2.2% | 42,594,053 | |
| Gazprom OAO, ADR | 1,059,505 | 10,012,322 |
| LUKOIL OAO, ADR | 117,758 | 7,960,441 |
| Magnit OJSC, GDR | 81,576 | 3,626,869 |
| MMC Norilsk Nickel OJSC, ADR | 138,058 | 2,745,974 |
| NovaTek OAO, GDR | 6,417 | 752,454 |
| NovaTek OAO, GDR | 15,000 | 1,756,500 |
| Rosneft OAO, GDR | 623,068 | 5,482,998 |
| Sberbank of Russia, ADR | 487,857 | 7,209,181 |
| Uralkali OSJC, GDR | 42,896 | 1,636,053 |
| VTB Bank OJSC, GDR | 386,118 | 1,411,261 |
| Singapore 0.2% | 3,842,867 | |
| Ascendas Real Estate Investment Trust | 413,000 | 844,869 |
| CapitaLand, Ltd. | 826,000 | 2,677,691 |
| Mapletree Commercial Trust | 297,000 | 320,307 |
| South Korea 0.1% | 2,299,534 | |
| Samsung Electronics Company, Ltd. | 1,730 | 2,299,534 |
| 26 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Shares | Value | |
| Spain 0.3% | $6,286,017 | |
| Banco Bilbao Vizcaya Argentaria SA | 7,958 | 79,144 |
| Banco de Sabadell SA | 31,000 | 83,043 |
| Banco Popular Espanol SA | 80,000 | 72,120 |
| Grifols SA (I) | 98,159 | 3,338,593 |
| Grifols SA, B Shares (I) | 4,907 | 129,994 |
| Iberdrola SA | 119,865 | 647,415 |
| Repsol SA | 19,903 | 444,382 |
| Telefonica SA | 103,240 | 1,491,326 |
| Sweden 0.7% | 12,873,339 | |
| Elekta AB, Series B | 301,920 | 4,492,921 |
| Lundin Petroleum AB (I) | 172,021 | 4,418,265 |
| Swedbank AB, Class A | 168,342 | 3,962,153 |
| Switzerland 0.4% | 7,611,570 | |
| ACE, Ltd. | 29,706 | 2,534,813 |
| Syngenta AG | 11,778 | 5,076,757 |
| Turkey 0.1% | 1,899,907 | |
| Koza Altin Isletmeleri AS | 77,163 | 1,899,907 |
| United Kingdom 2.0% | 39,377,418 | |
| ARM Holdings PLC | 337,148 | 4,615,173 |
| Aveva Group PLC | 70,175 | 2,406,675 |
| British Land Company PLC | 181,984 | 1,619,884 |
| Burberry Group PLC | 144,148 | 3,103,647 |
| Capital & Counties Properties PLC | 103,391 | 396,881 |
| Croda International PLC | 49,899 | 1,919,717 |
| D.S. Smith PLC | 559,110 | 1,966,876 |
| Derwent London PLC | 23,901 | 818,836 |
| Great Portland Estates PLC | 103,950 | 801,257 |
| Hammerson PLC | 209,688 | 1,613,675 |
| Inmarsat PLC | 422,999 | 4,329,221 |
| Lancashire Holdings, Ltd. | 142,251 | 1,846,775 |
| Land Securities Group PLC | 124,301 | 1,582,993 |
| Lloyds Banking Group PLC (I) | 7,015,621 | 5,729,355 |
| Petrofac, Ltd. | 147,014 | 3,821,326 |
| Telecity Group PLC | 208,826 | 2,805,127 |
| United States 11.0% | 215,265,590 | |
| Acuity Brands, Inc. | 58,586 | 4,030,717 |
| Altria Group, Inc. | 173,228 | 5,834,319 |
| Amgen, Inc. | 43,562 | 3,722,809 |
| Apple, Inc. | 14,041 | 6,393,008 |
| Arthur J. Gallagher & Company | 81,122 | 2,997,458 |
| AvalonBay Communities, Inc. | 24,009 | 3,116,128 |
| Baxter International, Inc. | 52,194 | 3,540,841 |
| Beam, Inc. | 57,245 | 3,511,408 |
| BorgWarner, Inc. (I) | 66,286 | 4,917,095 |
| Boston Properties, Inc. | 35,712 | 3,759,759 |
| Brookdale Senior Living, Inc. (I) | 123,913 | 3,346,890 |
| Calpine Corp. (I) | 280,468 | 5,533,634 |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 27 |
| Shares | Value | |
| United States (continued) | ||
| Citigroup, Inc. | 210,108 | $8,858,153 |
| Cobalt International Energy, Inc. (I) | 84,400 | 2,043,324 |
| DDR Corp. | 140,242 | 2,326,615 |
| Dr. Pepper Snapple Group, Inc. | 80,366 | 3,622,096 |
| eBay, Inc. (I) | 111,670 | 6,245,703 |
| Essex Property Trust, Inc. | 7,934 | 1,220,091 |
| Express Scripts Holding Company (I) | 98,001 | 5,235,213 |
| Extra Space Storage, Inc. | 40,725 | 1,622,484 |
| Facebook, Inc., Class A (I) | 8,882 | 275,076 |
| Federal Realty Investment Trust | 15,375 | 1,627,444 |
| Ford Motor Company | 226,511 | 2,933,317 |
| Freeport-McMoRan Copper & Gold, Inc. | 63,782 | 2,248,316 |
| General Growth Properties, Inc. | 146,104 | 2,851,950 |
| Google, Inc., Class A (I) | 8,909 | 6,732,442 |
| Hanesbrands, Inc. (I) | 111,588 | 4,182,318 |
| Health Care REIT, Inc. | 35,216 | 2,212,973 |
| Host Hotels & Resorts, Inc. | 150,644 | 2,529,313 |
| J.B. Hunt Transport Services, Inc. | 50,202 | 3,377,089 |
| JPMorgan Chase & Company | 160,649 | 7,558,535 |
| Kansas City Southern | 37,426 | 3,484,735 |
| Kimco Realty Corp. | 64,246 | 1,334,389 |
| Kraft Foods Group, Inc. | 82,624 | 3,818,881 |
| Mead Johnson Nutrition Company | 38,229 | 2,905,404 |
| Micron Technology, Inc. (I) | 548,658 | 4,147,854 |
| Monster Beverage Corp. (I) | 56,966 | 2,728,671 |
| National Oilwell Varco, Inc. | 53,654 | 3,977,908 |
| ON Semiconductor Corp. (I) | 533,270 | 4,186,170 |
| Pall Corp. | 84,107 | 5,744,508 |
| Philip Morris International, Inc. | 57,070 | 5,031,291 |
| Polycom, Inc. (I) | 255,379 | 2,816,830 |
| Precision Castparts Corp. | 23,900 | 4,383,260 |
| priceline.com, Inc. (I) | 3,353 | 2,298,381 |
| Prologis, Inc. | 64,389 | 2,569,121 |
| Public Storage | 11,327 | 1,743,565 |
| Simon Property Group, Inc. | 28,669 | 4,592,200 |
| SL Green Realty Corp. | 38,740 | 3,113,921 |
| Sprint Nextel Corp. (I) | 394,592 | 2,221,553 |
| Starbucks Corp. | 59,835 | 3,357,940 |
| Starwood Hotels & Resorts Worldwide, Inc. | 27,628 | 1,696,635 |
| The Charles Schwab Corp. | 230,913 | 3,816,992 |
| The Estee Lauder Companies, Inc., Class A | 64,060 | 3,903,176 |
| The Home Depot, Inc. | 51,451 | 3,443,101 |
| The Walt Disney Company | 120,335 | 6,483,650 |
| Time Warner Cable, Inc. | 40,256 | 3,596,471 |
| TJX Companies, Inc. | 77,767 | 3,513,513 |
| TransDigm Group, Inc. | 27,213 | 3,685,729 |
| Virgin Media, Inc. | 57,457 | 2,263,223 |
| 28 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Shares | Value | ||||
| Preferred Securities 0.1% | $2,229,014 | ||||
| (Cost $1,642,606) | |||||
| Germany 0.1% | 2,229,014 | ||||
| Henkel AG & Company KgaA, 0.080% | 25,241 | 2,229,014 | |||
| Maturity | |||||
| Rate (%) | date | Par value | Value | ||
| Certificate of Deposit 5.4% | $106,040,698 | ||||
| (Cost $106,000,000) | |||||
| ING Bank NV | 0.430 | 07-31-13 | 15,000,000 | 15,000,000 | |
| ING Direct NV | 0.890 | 10-17-13 | 18,000,000 | 18,037,188 | |
| Natixis | 0.630 | 04-15-13 | 20,000,000 | 20,000,000 | |
| RBS Holdings NV | 0.280 | 05-28-13 | 17,000,000 | 17,000,000 | |
| RBS Holdings NV | 0.300 | 05-28-13 | 18,000,000 | 18,000,000 | |
| Skandinaviska Enskilda Banken AB | 0.580 | 02-15-13 | 18,000,000 | 18,003,510 | |
| Number of | |||||
| contracts/ | |||||
| notional | Value | ||||
| Purchased Options 1.8% | $34,057,603 | ||||
| (Cost $36,473,742) | |||||
| Call Options 1.5% | 28,289,364 | ||||
| Exchange Traded on S&P 500 Index | |||||
| (Expiration Date: 9-21-13; Strike Price: $1,425 (I) | 120,000 | 12,876,000 | |||
| Over the Counter on 10 Year Interest Rate Swap | |||||
| (Expiration Date: 11-24-14; Strike Price: EUR 1.50; | |||||
| Counterparty: Royal Bank of Scotland) (I) | 110,600,000 | 1,644,017 | |||
| Over the Counter on 10 Year Interest Rate Swap | |||||
| (Expiration Date: 7-23-14; Strike Price: EUR 1.50; | |||||
| Counterparty: Royal Bank of Scotland) (I) | 30,000,000 | 439,854 | |||
| Over the Counter on 10 Year Interest Rate Swap | |||||
| (Expiration Date: 1-19-15; Strike Price: EUR 2.60; | |||||
| Counterparty: Royal Bank of Scotland) (I) | 2,800,000 | 164,687 | |||
| Over the Counter on 10 Year Interest Rate Swap | |||||
| (Expiration Date: 12-19-14; Strike Price: EUR 2.60; | |||||
| Counterparty: Morgan Stanley & Company) (I) | 33,100,000 | 2,049,244 | |||
| Over the Counter on 10 Year Interest Rate Swap | |||||
| (Expiration Date: 6-22-15; Strike Price: EUR 2.60; | |||||
| Counterparty: Royal Bank of Scotland) (I) | 50,000,000 | 2,732,411 | |||
| Over the Counter on 10 Year Interest Rate Swap | |||||
| (Expiration Date: 6-29-15; Strike Price: EUR 2.60; | |||||
| Counterparty: Royal Bank of Scotland) (I) | 37,500,000 | 2,041,768 | |||
| Over the Counter on KOSPI 200 Index | |||||
| (Expiration Date: 12-12-13; Strike Price: KRW 249.32; | |||||
| Counterparty: UBS Securities LLC) (I) | 92,748,752 | 2,004,196 | |||
| Over the Counter on KOSPI 200 Index | |||||
| (Expiration Date: 6-12-14; Strike Price: KRW 242.36; | |||||
| Counterparty: UBS Securities LLC) (I) | 39,820,635 | 1,178,072 | |||
| Over the Counter on KOSPI 200 Index | |||||
| (Expiration Date: 6-12-14; Strike Price: KRW 267.94; | |||||
| Counterparty: UBS Securities LLC) (I) | 36,889,594 | 613,983 | |||
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 29 |
| Number of | ||
| contracts/ | ||
| notional | Value | |
| Call Options (continued) | ||
| Over the Counter on the USD vs. CNY | ||
| (Expiration Date: 12-11-13; Strike Price: $6.38; | ||
| Counterparty: UBS Securities LLC) (I) | 151,531,346 | $478,535 |
| Over the Counter on the USD vs. CNY | ||
| (Expiration Date: 8-28-13; Strike Price: $6.45: | ||
| Counterparty: UBS Securities LLC) (I) | 19,717,779 | 16,622 |
| Over the Counter on the USD vs. JPY | ||
| (Expiration Date: 12-18-14; Strike Price: $83.00; | ||
| Counterparty: Goldman Sachs & Company) (I) | 18,750,000 | 2,007,975 |
| Exchange Traded on CBOE SPX Volatility Index | ||
| (Expiration Date: 2-13-13; Strike Price: $22) (I) | 560,000 | 42,000 |
| Put Options 0.3% | 5,768,239 | |
| Exchange Traded on Apple CBOE Flex Options | ||
| (Expiration Date: 10-19-13; Strike Price: $515) (I) | 27,000 | 2,269,569 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 15,982.72; | ||
| Counterparty: Goldman Sachs & Company) (I) | 2,400 | 30,145 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 15,995.83; | ||
| Counterparty: UBS Securities LLC) (I) | 2,000 | 25,242 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 16,003.08; | ||
| Counterparty: UBS Securities LLC) (I) | 3,650 | 46,191 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 16,140.43; | ||
| Counterparty: UBS Securities LLC) (I) | 2,000 | 26,623 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 16,199.60; | ||
| Counterparty: UBS Securities LLC) (I) | 2,500 | 34,012 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 16,304.39; | ||
| Counterparty: UBS Securities LLC) (I) | 3,500 | 49,494 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 16,531.99; | ||
| Counterparty: Royal Bank of Scotland) (I) | 5,000 | 76,919 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 16,858.17; | ||
| Counterparty: UBS Securities LLC) (I) | 7,430 | 129,048 |
| Over the Counter on Hang Seng Index | ||
| (Expiration Date: 12-30-13; Strike Price: HKD 16,907.08; | ||
| Counterparty: UBS Securities LLC) (I) | 9,200 | 162,737 |
| Over the Counter on the USD vs. CNY | ||
| (Expiration Date: 12-11-13; Strike Price: $6.38: | ||
| Counterparty: UBS Securities LLC) (I) | 158,468,654 | 2,427,711 |
| Over the Counter on the USD vs. CNY | ||
| (Expiration Date: 8-28-13; Strike Price $6.45; | ||
| Counterparty: UBS Securities LLC) (I) | 19,171,779 | 490,548 |
| 30 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| Maturity | |||||
| Yield* | date | Par value^ | Value | ||
| Short-Term Investments 27.1% | $530,379,382 | ||||
| (Cost $530,369,562) | |||||
| Time Deposits 22.6% | 443,389,942 | ||||
| Abbey National | 0.150 | 02-04-13 | 43,960,177 | 43,960,177 | |
| Bank of Montreal | 0.080 | 02-04-13 | 13,800,369 | 13,800,369 | |
| Bank of Nova Scotia | 0.120 | 02-04-13 | 44,503,205 | 44,503,205 | |
| Barclays Bank PLC | 0.120 | 02-04-13 | 44,504,960 | 44,504,960 | |
| BNP Paribas | 0.110 | 02-04-13 | 44,521,074 | 44,521,074 | |
| Calyon Paris | 0.160 | 02-04-13 | 44,523,491 | 44,523,491 | |
| Commonwealth of Australia | 0.050 | 02-04-13 | 44,502,153 | 44,502,153 | |
| Danske Bank | 0.120 | 02-04-13 | 29,505,818 | 29,505,818 | |
| DZ Bank AG | 0.120 | 02-04-13 | 89,042,153 | 89,042,153 | |
| Societe Generale SA | 0.150 | 02-04-13 | 44,526,542 | 44,526,542 | |
| U.S. Government 3.6% | 69,989,440 | ||||
| U.S. Treasury Bill | 0.115 | 04-18-13 | 20,000,000 | 19,997,460 | |
| U.S. Treasury Bill | 0.130 | 05-23-13 | 20,000,000 | 19,995,060 | |
| U.S. Treasury Bill | 0.135 | 03-21-13 | 20,000,000 | 19,998,940 | |
| U.S. Treasury Bill | 0.145 | 05-09-13 | 10,000,000 | 9,997,980 | |
| Repurchase Agreement 0.9% | 17,000,000 | ||||
| Repurchase Agreement with State Street Corp. | |||||
| dated 1-31-13 at 0.010% to be repurchased | |||||
| at $17,000,005 on 2-1-13, collateralized | |||||
| by $17,150,000 Federal National Mortgage | |||||
| Association 1.000% due 7-30-14 (valued at | |||||
| $17,345,020, including interest) | 17,000,000 | 17,000,000 | |||
| Total investments (Cost $1,880,986,886)† 100.0% | $1,958,525,934 | ||||
| Other assets and liabilities, net 0.0% | $753,224 | ||||
| Total net assets 100.0% | $1,959,279,158 | ||||
^ The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund. All par values are denominated in U.S. Dollars unless otherwise indicated.
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 31 |
Notes to Portfolio of Investments
| ADR | American Depositary Receipts |
| EURIBOR | Euro Interbank Offered Rate |
| GDR | Global Depositary Receipt |
| PIK | Paid In Kind |
(I) Non-income producing security.
(P) Variable rate obligation. The coupon rate shown represents the rate at period end.
(Q) Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date.
(S) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration.
* 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 1-31-13, the aggregate cost of investment securities for federal income tax purposes was $1,883,312,652. Net unrealized appreciation aggregated $75,213,282, of which $90,216,729 related to appreciated investment securities and $15,003,447 related to depreciated investment securities.
Currency abreviations
| AUD | Australian Dollar |
| CNY | Chinese Yuan Renminbi |
| EUR | Euro |
| GBP | Pound Sterling |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
| KRW | Korean Won |
| MXN | Mexican Peso |
| SEK | Swedish Krona |
The Fund had the following portfolio allocation as a percentage of net assets on 1-31-13:
| U.S. Government | 16.8% | |||||
| Financials | 18.1% | |||||
| Foreign Government Obligations | 5.8% | |||||
| Consumer Discretionary | 5.1% | |||||
| Consumer Staples | 4.4% | |||||
| Energy | 4.4% | |||||
| Industrials | 3.6% | |||||
| Information Technology | 3.4% | |||||
| Materials | 3.0% | |||||
| Health Care | 2.4% | |||||
| Telecommunication Services | 1.8% | |||||
| Purchased Options | 1.7% | |||||
| Utilities | 1.6% | |||||
| Short-Term Investments & Other | 27.9% |
| 32 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 1-31-13 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.
| Assets | |
| Investments, at value (Cost $1,880,986,886) | $1,958,525,934 |
| Cash | 1,611,268 |
| Foreign currency, at value (Cost $2,319,752) | 2,321,519 |
| Cash held at broker for futures contracts | 35,457,968 |
| Receivable for investments sold | 2,964,662 |
| Receivable for fund shares sold | 36,792,549 |
| Receivable for forward foreign currency exchange contracts | 17,181,361 |
| Dividends and interest receivable | 8,048,109 |
| Swap contracts, at value (includes net unamortized upfront payments | |
| of $862,466) | 22,162,365 |
| Receivable due from adviser | 3,889 |
| Other receivables and prepaid expenses | 107,306 |
| Total assets | 2,085,176,930 |
| Liabilities | |
| Payable for investments purchased | 51,109,868 |
| Payable for forward foreign currency exchange contracts | 24,980,895 |
| Swap premium payable | 131,695 |
| Payable for fund shares repurchased | 1,887,246 |
| Written options, at value (premiums received $30,895,748) | 24,684,018 |
| Swap contracts, at value (includes net unamortized upfront payments | |
| of $5,676,288) | 19,101,392 |
| Payable for futures variation margin | 3,528,861 |
| Payable to affiliates | |
| Accounting and legal services fees | 13,144 |
| Transfer agent fees | 154,721 |
| Trustees’ fees | 20 |
| Other liabilities and accrued expenses | 305,912 |
| Total liabilities | 125,897,772 |
| Net assets | 1,959,279,158 |
| Net assets consist of | |
| Paid-in capital | $1,932,277,907 |
| Undistributed net investment income | 6,147,502 |
| Accumulated net realized gain (loss) on investments, futures contracts, | |
| written options, foreign currency transactions and swap agreements | (38,670,273) |
| Net unrealized appreciation (depreciation) on investments, futures | |
| contracts, written options, translation of assets and liabilities in foreign | |
| currencies and swap agreements | 59,524,022 |
| Net assets | $1,959,279,158 |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 33 |
F I N A N C I A L S T A T E M E N T S
Statement of assets and liabilities (continued)
| Net asset value per share | |
| Based on net asset values and shares outstanding — the Fund has an | |
| unlimited number of shares authorized with no par value | |
| Class A ($581,694,915 ÷ 54,272,026 shares)1 | $10.72 |
| Class C ($43,177,327 ÷ 4,028,427 shares)1 | $10.72 |
| Class I ($750,814,922 ÷ 69,985,925 shares) | $10.73 |
| Class R2 ($123,342 ÷ 11,504 shares) | $10.72 |
| Class R6 ($11,305,125 ÷ 1,054,308 shares) | $10.72 |
| Class NAV ($572,163,527 ÷ 53,386,869 shares) | $10.72 |
| Maximum offering price per share2 | |
| Class A (net asset value per share ÷ 95%) | $11.28 |
1 Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charges.
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.
| 34 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the six-month period ended 1-31-13
(unaudited)
This Statement of operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.
| Investment income | |
| Interest | $10,799,491 |
| Dividends | 2,851,627 |
| Less foreign taxes withheld | (182,526) |
| Total investment income | 13,468,592 |
| Expenses | |
| Investment management fees | 8,042,616 |
| Distribution and service fees | 588,084 |
| Accounting and legal services fees | 87,128 |
| Transfer agent fees | 574,884 |
| Trustees’ fees | 7,321 |
| State registration fees | 60,701 |
| Printing and postage | 51,080 |
| Professional fees | 131,090 |
| Custodian fees | 357,307 |
| Registration and filing fees | 128,586 |
| Other | 5,036 |
| Total expenses | 10,033,833 |
| Less expense reductions and amounts recaptured | (36,107) |
| Net expenses | 9,997,726 |
| Net investment income | 3,470,866 |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Investments | (2,939,752) |
| Futures contracts | (26,449,913) |
| Written options | 1,927,735 |
| Swap contracts | 2,463,905 |
| Foreign currency transactions | (8,803,970) |
| (33,801,995) | |
| Change in net unrealized appreciation (depreciation) of | |
| Investments | 69,960,910 |
| Futures contracts | (28,437,014) |
| Written options | 10,563,699 |
| Swap contracts | 13,677,440 |
| Translation of assets and liabilities in foreign currencies | (6,768,388) |
| 58,996,647 | |
| Net realized and unrealized gain | 25,194,652 |
| Increase in net assets from operations | $28,665,518 |
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 35 |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| Six months | ||
| ended | Year | |
| 1-31-13 | ended | |
| (Unaudited) | 7-31-121 | |
| Increase (decrease) in net assets | ||
| From operations | ||
| Net investment income | $3,470,866 | $1,227,312 |
| Net realized gain (loss) | (33,801,995) | 16,210,939 |
| Change in net unrealized appreciation (depreciation) | 58,996,647 | 527,375 |
| Increase in net assets resulting from operations | 28,665,518 | 17,965,626 |
| Distributions to shareholders | ||
| From net investment income | ||
| Class A | (950,792) | — |
| Class I | (3,500,081) | — |
| Class R2 | (4) | — |
| Class R6 | (19,029) | — |
| Class NAV | (3,794,422) | — |
| From net realized gain | ||
| Class A | (3,171,454) | — |
| Class C | (195,118) | — |
| Class I | (4,218,720) | — |
| Class R2 | (848) | — |
| Class R6 | (27,087) | — |
| Class NAV | (3,753,256) | — |
| Total distributions | (19,630,811) | — |
| From Fund share transactions | 1,110,866,954 | 821,411,871 |
| Total increase | 1,119,901,661 | 839,377,497 |
| Net assets | ||
| Beginning of period | 839,377,497 | — |
| End of period | $1,959,279,158 | $839,377,497 |
| Undistributed net investment income | $6,147,502 | $10,940,964 |
1 Period from 12-19-11 (commencement of operations) to 7-31-12.
| 36 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
| CLASS A SHARES Period ended | 1-31-131 | 7-31-122 | ||||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.59 | $10.00 | ||||
| Net investment income3 | 0.01 | —4 | ||||
| Net realized and unrealized gain on investments | 0.22 | 0.59 | ||||
| Total from investment operations | 0.23 | 0.59 | ||||
| Less distributions | ||||||
| From net investment income | (0.03) | — | ||||
| From net realized gain | (0.07) | — | ||||
| Total distributions | (0.10) | — | ||||
| Net asset value, end of period | $10.72 | $10.59 | ||||
| Total return (%)5,6 | 2.147 | 5.907 | ||||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $582 | $175 | ||||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions and amounts recaptured | 1.838 | 1.978 | ||||
| Expenses including reductions and amounts recaptured | 1.838 | 1.958 | ||||
| Net investment income (loss) | 0.128 | (0.01)8 | ||||
| Portfolio turnover (%) | 25 | 33 | ||||
1 Six months ended 1-31-13. Unaudited.
2 Period from 12-19-11 (commencement of operations) to 7-31-12.
3 Based on the 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 shown.
7 Not annualized.
8 Annualized.
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 37 |
| CLASS C SHARES Period ended | 1-31-131 | |||||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.61 | |||||
| Net investment loss2 | (0.04) | |||||
| Net realized and unrealized gain on investments | 0.22 | |||||
| Total from investment operations | 0.18 | |||||
| Less distributions | ||||||
| From net realized gain | (0.07) | |||||
| Total distributions | (0.07) | |||||
| Net asset value, end of period | $10.72 | |||||
| Total return (%)3,4 | 1.745 | |||||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $43 | |||||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions | 2.666 | |||||
| Expenses including reductions and amounts recaptured | 2.656 | |||||
| Net investment loss | (0.71)6 | |||||
| Portfolio turnover (%) | 25 | |||||
1 Period from 8-1-12 (inception date) to 1-31-13. Unaudited.
2 Based on the average daily shares outstanding.
3 Does not reflect the effect of sales charges, if any.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| CLASS I SHARES Period ended | 1-31-131 | 7-31-122 | ||||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.62 | $10.00 | ||||
| Net investment income3 | 0.03 | 0.04 | ||||
| Net realized and unrealized gain on investments | 0.22 | 0.58 | ||||
| Total from investment operations | 0.25 | 0.62 | ||||
| Less distributions | ||||||
| From net investment income | (0.07) | — | ||||
| From net realized gain | (0.07) | — | ||||
| Total distributions | (0.14) | — | ||||
| Net asset value, end of period | $10.73 | $10.62 | ||||
| Total return (%)4 | 2.325 | 6.205 | ||||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $751 | $167 | ||||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions and amounts recaptured | 1.436 | 1.606 | ||||
| Expenses including reductions and amounts recaptured | 1.436 | 1.596 | ||||
| Net investment income | 0.586 | 0.586 | ||||
| Portfolio turnover (%) | 25 | 33 | ||||
1 Six months ended 1-31-13. Unaudited.
2 Period from 12-19-11 (commencement of operations) to 7-31-12.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| 38 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
| CLASS R2 SHARES Period ended | 1-31-131 | 7-31-122 | ||||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.58 | $10.67 | ||||
| Net investment income3 | —4 | 0.01 | ||||
| Net realized and unrealized gain (loss) on investments | 0.21 | (0.10) | ||||
| Total from investment operations | 0.21 | (0.09) | ||||
| Less distributions | ||||||
| From net investment income | —4 | — | ||||
| From net realized gain | (0.07) | — | ||||
| Total distributions | (0.07) | — | ||||
| Net asset value, end of period | $10.72 | $10.58 | ||||
| Total return (%)5 | 2.036 | (0.84)6 | ||||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | —7 | —7 | ||||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions and amounts recaptured | 22.128 | 18.318 | ||||
| Expenses including reductions and amounts recaptured | 2.008 | 2.008 | ||||
| Net investment income | 0.058 | 0.198 | ||||
| Portfolio turnover (%) | 25 | 33 | ||||
1 Six months ended 1-31-13. Unaudited.
2 Period from 3-1-12 (inception date) to 7-31-12.
3 Based on the average daily shares outstanding.
4 Less than $0.005 per share.
5 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
6 Not annualized.
7 Less than $500,000.
8 Annualized.
| CLASS R6 SHARES Period ended | 1-31-131 | 7-31-122 | ||||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.60 | $10.67 | ||||
| Net investment income3 | 0.02 | 0.03 | ||||
| Net realized and unrealized gain (loss) on investments | 0.23 | (0.10) | ||||
| Total from investment operations | 0.25 | (0.07) | ||||
| Less distributions | ||||||
| From net investment income | (0.06) | — | ||||
| From net realized gain | (0.07) | — | ||||
| Total distributions | (0.13) | — | ||||
| Net asset value, end of period | $10.72 | $10.60 | ||||
| Total return (%)4 | 2.335 | (0.66)5 | ||||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $11 | —6 | ||||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions and amounts recaptured | 2.157 | 18.047 | ||||
| Expenses including reductions and amounts recaptured | 1.507 | 1.507 | ||||
| Net investment income | 0.467 | 0.697 | ||||
| Portfolio turnover (%) | 25 | 33 | ||||
1 Six months ended 1-31-13. Unaudited.
2 Period from 3-1-12 (inception date) to 7-31-12.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Less than $500,000.
7 Annualized.
| See notes to financial statements | Semiannual report | Global Absolute Return Strategies Fund | 39 |
| CLASS NAV SHARES Period ended | 1-31-131 | 7-31-122 | ||||
| Per share operating performance | ||||||
| Net asset value, beginning of period | $10.61 | $10.00 | ||||
| Net investment income3 | 0.04 | 0.04 | ||||
| Net realized and unrealized gain on investments | 0.22 | 0.57 | ||||
| Total from investment operations | 0.26 | 0.61 | ||||
| Less distributions | ||||||
| From net investment income | (0.08) | — | ||||
| From net realized gain | (0.07) | — | ||||
| Total distributions | (0.15) | — | ||||
| Net asset value, end of period | $10.72 | $10.61 | ||||
| Total return (%)4 | 2.455 | 6.105 | ||||
| Ratios and supplemental data | ||||||
| Net assets, end of period (in millions) | $572 | $497 | ||||
| Ratios (as a percentage of average net assets): | ||||||
| Expenses before reductions and amounts recaptured | 1.296 | 1.436 | ||||
| Expenses including reductions and amounts recaptured | 1.296 | 1.436 | ||||
| Net investment income | 0.756 | 0.696 | ||||
| Portfolio turnover (%) | 25 | 33 | ||||
1 Six months ended 1-31-13. Unaudited.
2 Period from 12-19-11 (commencement of operations) to 7-31-12.
3 Based on the average daily shares outstanding.
4 Total returns would have been lower had certain expenses not been reduced during the applicable periods shown.
5 Not annualized.
6 Annualized.
| 40 | Global Absolute Return Strategies Fund | Semiannual report | See notes to financial statements |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock Global Absolute Return Strategies Fund (the Fund) is a series of John Hancock Funds II (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 total return.
The Fund may offer multiple classes of shares. The shares currently offered by the Trust are detailed in the Statements of assets and liabilities. Class A and Class C shares are open to all investors. Class I shares are offered to institutions and certain investors. Class R2 shares are available only to certain retirement plans. Class R6 shares are only available to certain retirement plans, institutions and other investors. Class NAV shares are offered to John Hancock affiliated funds of funds and 529 plans. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, transfer agent fees, printing and postage and state registration fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, taking 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. Options listed on an exchange are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. For options not listed on an exchange, an independent pricing source is used to value the options at the mean between the last bid and ask prices. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. Swaps are marked-to-market daily based upon values from third party vendors, which may include a registered commodities exchange, or broker quotations. Foreign securities and currencies, including forward foreign currency contracts, are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities and forward foreign currency contracts traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
| Semiannual report | Global Absolute Return Strategies Fund | 41 |
Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of trading on the NYSE. Significant market events that affect the values of foreign securities may occur between the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees. The Fund may use a fair valuation model to value foreign securities in order to adjust for events that may occur between the close of foreign exchanges and the close of the NYSE.
The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the Fund’s investments as of January 31, 2013, by major security category or type:
| LEVEL 3 | ||||
| LEVEL 2 | SIGNIFICANT | |||
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
| INVESTMENTS IN SECURITIES | VALUE AT 1-31-13 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS |
| Corporate Bonds | $324,529,071 | — | $324,529,071 | — |
| U.S. Government & | ||||
| Agency Obligations | 329,241,830 | — | 329,241,830 | — |
| Foreign Government | ||||
| Obligations | 114,170,215 | — | 114,170,215 | — |
| Common Stocks | 517,878,121 | $261,277,518 | 254,411,531 | $2,189,072 |
| Preferred Securities | 2,229,014 | — | 2,229,014 | — |
| Certificate of Deposit | 106,040,698 | — | 106,040,698 | — |
| Options Purchased | 34,057,603 | 12,918,000 | 21,139,603 | — |
| Short-Term Investments | 530,379,382 | — | 530,379,382 | — |
| Total Investments in | ||||
| Securities | $1,958,525,934 | $274,195,518 | $1,682,141,344 | $2,189,072 |
| Other Financial Instruments | ||||
| Futures | ($24,470,466) | ($20,239,901) | $540,839 | ($4,771,404) |
| Forward Foreign Currency | ||||
| Contracts | ($7,799,534) | — | ($7,799,534) | — |
| Written Options | ($24,684,018) | — | ($24,684,018) | — |
| Interest Rate Swaps | ($320,015) | — | ($320,015) | — |
| Credit Default Swaps | ($2,505,527) | — | ($2,505,527) | — |
| Variance Swaps | $5,648,415 | — | $5,648,415 | — |
| Inflation Swaps | $238,100 | — | $238,100 | — |
| 42 | Global Absolute Return Strategies Fund | Semiannual report |
Repurchase agreements. The Fund may enter into repurchase agreements. When the Fund enters into a repurchase agreement, it receives collateral, which 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. 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.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the Fund becomes aware of the dividends. 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.
Inflation-indexed bonds. Inflation-indexed bonds are securities that generally have a lower coupon interest rate fixed at issuance but whose principal value is periodically adjusted to a rate of inflation, such as the Consumer Price Index. Over the life of an inflation-indexed bond, interest is paid on the inflation adjusted principal value as described above. Increases in the principal amount of these securities are recorded as interest income. Decreases in the principal amount of these securities may reduce interest income to the extent of income previously recorded. Excess amounts are recorded as an adjustment to cost.
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 or capital gains or repatriation taxes as imposed by certain countries in which it invests. Taxes are accrued based upon net investment income, net realized gains or net unrealized appreciation.
Line of credit. The Fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the custodian agreement, the custodian may loan money to the Fund to make properly authorized payments. The Fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
| Semiannual report | Global Absolute Return Strategies Fund | 43 |
In addition, the Fund and other affiliated funds have entered into an agreement with Citibank N.A. which enables them to participate in a $200 million unsecured committed line of credit. A commitment fee, payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund on a pro rata basis and is reflected in other expenses on the Statement of operations. Commitment fees for the six months ended January 31, 2013 were $254. For the six months ended January 31, 2013, the Fund had no borrowings under the line of credit.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, transfer agent fees, state registration fees and printing and postage, for all classes, are calculated daily at the class level based on the appropriate net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The Fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of July 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund 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 accounting principles generally accepted in the United States of America.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to foreign currency transactions, derivative transactions, and amortization and accretion on debt securities.
New accounting pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. ASU 2011-11
| 44 | Global Absolute Return Strategies Fund | Semiannual report |
may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. The use of derivatives may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the Fund to the risk of loss of up to the notional value of the futures contracts. Use of short futures contracts subjects the Fund to unlimited risk of loss.
Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is generally based on a percentage of the contract value; this amount is the initial margin for the trade. The margin deposit must then be maintained at the established level over the life of the contract. Futures collateral receivable/payable is included on the Statement of assets and liabilities. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) and unrealized gain or loss is recorded by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
During the six months ended January 31, 2013, the Fund used futures contracts to manage against anticipated changes in securities markets, gain exposure to certain securities markets and/or substitute for securities purchased (or to be purchased) and maintain diversity and liquidity of the portfolio. During the six months ended January 31, 2013, the Fund held futures contracts with aggregate settlement values ranging from $473.2 million to $1.4 billion as measured at each quarter end. The following table summarizes the contracts held at January 31, 2013.
| AGGREGATE | UNREALIZED | ||||
| OPEN | NUMBER OF | EXPIRATION | SETTLEMENT | APPRECIATION | |
| CONTRACTS | CONTRACTS | POSITION | DATE | VALUE | (DEPRECIATION) |
| 10-Year Government | 69 | Long | Mar 2013 | $9,250,040 | ($52,407) |
| of Canada Bond | |||||
| Futures | |||||
| E-Mini NASDAQ 100 | 2,578 | Long | Mar 2013 | 140,501,000 | 2,981,198 |
| Index Futures | |||||
| FTSE 100 Index | 161 | Long | Mar 2013 | 15,939,975 | 414,490 |
| Futures | |||||
| German Euro BUND | 482 | Long | Mar 2013 | 92,867,879 | (1,322,154) |
| Futures | |||||
| Hang Seng Index | 10 | Long | Feb 2013 | 1,532,867 | 5,555 |
| Futures | |||||
| Hang Seng Index | 311 | Long | Feb 2013 | 24,355,398 | 81,619 |
| Futures | |||||
| Semiannual report | Global Absolute Return Strategies Fund | 45 |
| AGGREGATE | UNREALIZED | ||||
| OPEN | NUMBER OF | EXPIRATION | SETTLEMENT | APPRECIATION | |
| CONTRACTS | CONTRACTS | POSITION | DATE | VALUE | (DEPRECIATION) |
| U.S. Treasury 10-Year | 2,989 | Long | Mar 2013 | $392,399,656 | ($5,546,240) |
| Note Futures | |||||
| ASX SPI 200 Index | 107 | Short | Mar 2013 | (13,515,074) | (776,036) |
| Futures | |||||
| Dow Jones Euro | 1,320 | Short | Mar 2013 | (48,356,178) | 126,349 |
| STOXX 50 Index | |||||
| Futures | |||||
| E-Mini S&P 500 Index | 129 | Short | Mar 2013 | (9,631,785) | (542,832) |
| Futures | |||||
| Euro-OAT Futures | 545 | Short | Mar 2013 | (98,901,200) | 995,317 |
| Kospi 200 Index | 115 | Short | Mar 2013 | (13,639,369) | (136,737) |
| Futures | |||||
| MSCI Taiwan Index | 1,670 | Short | Feb 2013 | (47,077,300) | (1,115,142) |
| Futures | |||||
| OMX 30 Index | 645 | Short | Feb 2013 | (11,849,289) | (327,365) |
| Futures | |||||
| Russell 2000 Mini | 2,811 | Short | Mar 2013 | (253,580,310) | (21,344,369) |
| Index Futures | |||||
| Swiss Market Index | 185 | Short | Mar 2013 | (14,927,257) | (153,671) |
| Futures | |||||
| TOPIX Index Futures | 295 | Short | Mar 2013 | (30,270,808) | (4,771,404) |
| Ultra Long U.S. | 924 | Short | Mar 2013 | (144,634,875) | 6,988,032 |
| Treasury Bond Futures | |||||
| United Kingdom Long | 119 | Short | Mar 2013 | (21,962,976) | 25,331 |
| Gilt Bond Futures | |||||
| ($24,470,466) | |||||
Forward foreign currency contracts. A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral, the risk that currency movements will not occur thereby reducing the Fund’s total return, and the potential for losses in excess of the amounts recognized on the Statement of assets and liabilities.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. Realized gains or losses, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, are recorded upon delivery or receipt of the currency or settlement with the counterparty.
During the six months ended January 31, 2013, the Fund used forward foreign currency contracts to manage against anticipated currency exchange rates and gain exposure to foreign currency. During the six months ended January 31, 2013, the Fund held forward foreign currency contracts with USD notional values ranging from $558.5 million to $1.5 billion as measured at each quarter end. The following table summarizes the contracts held at January 31, 2013.
| 46 | Global Absolute Return Strategies Fund | Semiannual report |
| PRINCIPAL | ||||||
| PRINCIPAL AMOUNT | AMOUNT | UNREALIZED | ||||
| COVERED BY | COVERED BY | SETTLEMENT | APPRECIATION | |||
| CURRENCY | CONTRACT | CONTRACT (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
| Buys | ||||||
| AUD | $11,443 | $11,980 | Royal Bank of Scotland PLC | 2-13-13 | ($55) | |
| AUD | 1,379,257 | 1,449,642 | Barclays Bank PLC | 3-5-13 | (14,536) | |
| AUD | 40,520 | 42,448 | BNP Paribas SA | 3-5-13 | (287) | |
| AUD | 36,522 | 38,244 | Royal Bank of Scotland PLC | 3-5-13 | (244) | |
| CHF | 33,935 | 36,270 | Barclays Bank PLC | 2-13-13 | 1,023 | |
| CNY | 39,705,750 | 6,300,000 | BNP Paribas SA | 8-29-13 | 29,388 | |
| EUR | 159,733 | 211,782 | Barclays Bank PLC | 3-5-13 | 5,139 | |
| EUR | 2,758,810 | 3,603,132 | BNP Paribas SA | 3-5-13 | 143,381 | |
| EUR | 536,814 | 727,704 | BNP Paribas SA | 3-12-13 | 1,327 | |
| GBP | 32,626 | 52,742 | Barclays Bank PLC | 3-5-13 | (1,007) | |
| GBP | 1,009,853 | 1,621,057 | Royal Bank of Scotland PLC | 3-5-13 | (19,701) | |
| HKD | 28,081,565 | 3,620,096 | Royal Bank of Scotland PLC | 2-8-13 | 865 | |
| HKD | 1,277,524 | 164,717 | BNP Paribas SA | 3-12-13 | 33 | |
| HKD | 2,032,629 | 262,058 | Royal Bank of Scotland PLC | 3-12-13 | 71 | |
| INR | 2,119,522,663 | 38,575,000 | Barclays Bank PLC | 4-19-13 | 678,259 | |
| INR | 1,958,425,000 | 35,000,000 | Barclays Bank PLC | 5-21-13 | 1,044,036 | |
| MXN | 650,000,000 | 48,792,712 | Barclays Bank PLC | 4-22-13 | 1,944,667 | |
| MXN | 310,000,000 | 23,434,792 | Royal Bank of Scotland PLC | 4-22-13 | 763,035 | |
| SEK | 179,030 | 27,466 | Royal Bank of Scotland PLC | 3-5-13 | 676 | |
| SGD | 238,793 | 192,760 | Barclays Bank PLC | 2-4-13 | 181 | |
| SGD | 2,200,000 | 1,778,344 | Barclays Bank PLC | 2-8-13 | (790) | |
| $165,942,946 | $4,575,461 | |||||
| Sells | ||||||
| AUD | $290,265 | $298,843 | Barclays Bank PLC | 2-13-13 | ($3,637) | |
| AUD | 6,600,000 | 6,860,073 | Royal Bank of Scotland PLC | 2-13-13 | (17,667) | |
| AUD | 22,258 | 23,018 | Barclays Bank PLC | 3-5-13 | (141) | |
| AUD | 20,564 | 21,452 | BNP Paribas SA | 3-5-13 | 55 | |
| AUD | 1,562,903 | 1,623,717 | Royal Bank of Scotland PLC | 3-5-13 | (2,471) | |
| AUD | 6,400,000 | 6,638,221 | UBS AG | 3-7-13 | (19,935) | |
| AUD | 2,812,927 | 2,933,403 | Barclays Bank PLC | 3-12-13 | 8,102 | |
| AUD | 2,896,093 | 3,029,878 | BNP Paribas SA | 3-12-13 | 18,088 | |
| AUD | 6,626,407 | 6,919,629 | Royal Bank of Scotland PLC | 3-12-13 | 28,502 | |
| AUD | 38,400,000 | 39,537,790 | BNP Paribas SA | 3-26-13 | (354,636) | |
| AUD | 32,850,000 | 33,676,389 | UBS AG | 3-26-13 | (450,335) | |
| CAD | 157,653 | 157,747 | Barclays Bank PLC | 2-13-13 | (276) | |
| CAD | 9,200,000 | 9,242,339 | UBS AG | 2-13-13 | 20,734 | |
| CAD | 44,217,774 | 44,048,934 | Royal Bank of Scotland PLC | 2-20-13 | (266,016) | |
| CAD | 54,613,900 | 54,421,466 | Barclays Bank PLC | 2-22-13 | (310,107) | |
| CAD | 9,050,000 | 9,089,220 | Royal Bank of Scotland PLC | 3-7-13 | 22,262 | |
| CAD | 26,455,940 | 27,263,203 | Royal Bank of Scotland PLC | 5-21-13 | 800,602 | |
| CAD | 39,296,777 | 40,139,711 | BNP Paribas SA | 5-22-13 | 833,881 | |
| CAD | 54,763,836 | 54,650,000 | UBS AG | 5-22-13 | (126,452) | |
| CAD | 57,877,628 | 57,750,000 | Royal Bank of Scotland PLC | 5-23-13 | (139,721) | |
| CHF | 6,500,000 | 6,988,894 | UBS AG | 2-13-13 | (154,252) | |
| CHF | 6,470,000 | 6,958,426 | Royal Bank of Scotland PLC | 3-7-13 | (153,441) | |
| CNY | 301,344,000 | 48,000,000 | BNP Paribas SA | 8-21-13 | (54,797) | |
| CNY | 20,597,615 | 3,280,397 | BNP Paribas SA | 8-23-13 | (3,954) | |
| CNY | 4,107,864 | 654,901 | BNP Paribas SA | 8-26-13 | (17) | |
| CNY | 4,107,864 | 654,901 | BNP Paribas SA | 8-27-13 | 14 | |
| CNY | 4,115,920 | 654,901 | Barclays Bank PLC | 8-28-13 | (1,238) | |
| CNY | 4,115,920 | 654,901 | Barclays Bank PLC | 8-29-13 | (1,207) | |
| CNY | 48,633,740 | 7,700,000 | UBS AG | 8-30-13 | (52,205) | |
| Semiannual report | Global Absolute Return Strategies Fund | 47 |
| PRINCIPAL | ||||||
| PRINCIPAL AMOUNT | AMOUNT | UNREALIZED | ||||
| COVERED BY | COVERED BY | SETTLEMENT | APPRECIATION | |||
| CURRENCY | CONTRACT | CONTRACT (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
| Sells | ||||||
| DKK | $924,221 | $159,854 | Barclays Bank PLC | 2-13-13 | ($8,365) | |
| DKK | 7,000,000 | 1,215,187 | Royal Bank of Scotland PLC | 2-13-13 | (58,894) | |
| DKK | 2,740,000 | 475,773 | UBS AG | 3-7-13 | (23,057) | |
| EUR | 901,840 | 1,162,725 | Barclays Bank PLC | 2-13-13 | (61,855) | |
| EUR | 17,000,000 | 21,990,792 | Royal Bank of Scotland PLC | 2-13-13 | (1,092,971) | |
| EUR | 10,026,346 | 12,753,031 | Royal Bank of Scotland PLC | 2-19-13 | (861,879) | |
| EUR | 78,473,325 | 102,398,831 | Royal Bank of Scotland PLC | 2-25-13 | (4,164,681) | |
| EUR | 703,074 | 918,281 | Barclays Bank PLC | 3-5-13 | (36,506) | |
| EUR | 1,739,133 | 2,297,776 | BNP Paribas SA | 3-5-13 | (63,999) | |
| EUR | 9,836,003 | 12,788,102 | Royal Bank of Scotland PLC | 3-5-13 | (569,370) | |
| EUR | 110,740,425 | 144,009,653 | UBS AG | 3-5-13 | (6,377,874) | |
| EUR | 19,070,000 | 24,783,542 | Barclays Bank PLC | 3-7-13 | (1,114,151) | |
| EUR | 1,525,369 | 1,998,483 | Barclays Bank PLC | 3-12-13 | (73,076) | |
| EUR | 2,057,165 | 2,710,724 | BNP Paribas SA | 3-12-13 | (83,051) | |
| EUR | 454,425 | 587,184 | Royal Bank of Scotland PLC | 3-12-13 | (29,957) | |
| EUR | 48,685 | 62,930 | UBS AG | 3-12-13 | (3,187) | |
| EUR | 27,986,316 | 36,445,907 | Barclays Bank PLC | 3-22-13 | (1,563,552) | |
| EUR | 42,955,925 | 55,074,651 | BNP Paribas SA | 3-25-13 | (3,266,656) | |
| EUR | 28,427,212 | 36,500,000 | UBS AG | 3-25-13 | (2,108,893) | |
| EUR | 5,063,752 | 6,761,314 | Barclays Bank PLC | 4-16-13 | (116,842) | |
| EUR | 28,512,902 | 38,000,000 | Royal Bank of Scotland PLC | 4-16-13 | (729,421) | |
| EUR | 911,699 | 1,181,518 | Barclays Bank PLC | 12-6-13 | (57,680) | |
| GBP | 57 | 91 | Barclays Bank PLC | 2-13-13 | — | |
| GBP | 11,752,217 | 18,821,879 | Royal Bank of Scotland PLC | 2-13-13 | 183,845 | |
| GBP | 17,869 | 28,751 | Barclays Bank PLC | 3-5-13 | 416 | |
| GBP | 116,512 | 186,782 | BNP Paribas SA | 3-5-13 | 2,026 | |
| GBP | 2,183,845 | 3,505,721 | Royal Bank of Scotland PLC | 3-5-13 | 42,729 | |
| GBP | 10,490,000 | 16,791,909 | Royal Bank of Scotland PLC | 3-7-13 | 157,760 | |
| GBP | 1,812,267 | 2,929,764 | Barclays Bank PLC | 3-12-13 | 56,101 | |
| GBP | 1,704,124 | 2,750,228 | BNP Paribas SA | 3-12-13 | 48,045 | |
| GBP | 835,806 | 1,345,422 | Royal Bank of Scotland PLC | 3-12-13 | 20,107 | |
| HKD | 28,081,565 | 3,623,498 | Royal Bank of Scotland PLC | 2-8-13 | 2,537 | |
| HKD | 10,900,000 | 1,406,507 | Royal Bank of Scotland PLC | 3-7-13 | 865 | |
| HKD | 6,403,154 | 825,629 | Barclays Bank PLC | 3-12-13 | (125) | |
| HKD | 90,550,339 | 11,685,309 | Royal Bank of Scotland PLC | 3-12-13 | 7,892 | |
| HKD | 1,227,249 | 158,365 | UBS AG | 3-12-13 | 98 | |
| HKD | 28,081,565 | 3,621,227 | Royal Bank of Scotland PLC | 5-8-13 | (1,008) | |
| JPY | 15,308,455 | 190,824 | Royal Bank of Scotland PLC | 2-13-13 | 23,407 | |
| JPY | 1,300,000,000 | 15,909,108 | UBS AG | 2-13-13 | 1,692,068 | |
| JPY | 400,000,000 | 4,513,756 | Barclays Bank PLC | 3-7-13 | 138,637 | |
| JPY | 1,225,000,000 | 14,977,216 | Royal Bank of Scotland PLC | 3-7-13 | 1,578,416 | |
| JPY | 71,930,801 | 868,973 | BNP Paribas SA | 3-12-13 | 82,180 | |
| JPY | 353,771,747 | 4,186,129 | Royal Bank of Scotland PLC | 3-12-13 | 316,505 | |
| JPY | 2,228,465,550 | 25,259,806 | Barclays Bank PLC | 4-23-13 | 876,679 | |
| JPY | 2,825,770,000 | 31,753,828 | Royal Bank of Scotland PLC | 4-24-13 | 834,952 | |
| JPY | 7,807,597,600 | 88,000,000 | Barclays Bank PLC | 8-21-13 | 2,469,942 | |
| JPY | 259,441,692 | 2,948,037 | Royal Bank of Scotland PLC | 8-22-13 | 105,889 | |
| JPY | 176,201,000 | 2,000,000 | Royal Bank of Scotland PLC | 8-23-13 | 69,718 | |
| JPY | 141,628,607 | 1,613,615 | Barclays Bank PLC | 8-26-13 | 62,014 | |
| JPY | 141,626,993 | 1,613,615 | Barclays Bank PLC | 8-27-13 | 62,012 | |
| JPY | 154,399,122 | 1,762,366 | Royal Bank of Scotland PLC | 8-28-13 | 70,815 | |
| JPY | 153,911,916 | 1,762,367 | Royal Bank of Scotland PLC | 8-29-13 | 76,132 | |
| 48 | Global Absolute Return Strategies Fund | Semiannual report |
| PRINCIPAL | ||||||
| PRINCIPAL AMOUNT | AMOUNT | UNREALIZED | ||||
| COVERED BY | COVERED BY | SETTLEMENT | APPRECIATION | |||
| CURRENCY | CONTRACT | CONTRACT (USD) | COUNTERPARTY | DATE | (DEPRECIATION) | |
| Sells | ||||||
| JPY | $1,360,207,500 | $15,000,000 | BNP Paribas SA | 8-30-13 | $97,592 | |
| JPY | 657,340,000 | 8,000,000 | UBS AG | 8-30-13 | 798,195 | |
| NOK | 5,600,000 | 980,506 | BNP Paribas SA | 2-13-13 | (44,222) | |
| NOK | 662,413 | 115,571 | Royal Bank of Scotland PLC | 2-13-13 | (5,643) | |
| NOK | 2,350,000 | 411,463 | Barclays Bank PLC | 3-7-13 | (18,178) | |
| SEK | 2,460,917 | 367,125 | BNP Paribas SA | 2-13-13 | (19,868) | |
| SEK | 22,000,000 | 3,286,047 | Royal Bank of Scotland PLC | 2-13-13 | (173,578) | |
| SEK | 10,648,006 | 1,643,585 | BNP Paribas SA | 3-5-13 | (30,160) | |
| SEK | 9,200,000 | 1,373,003 | UBS AG | 3-7-13 | (73,071) | |
| SGD | 2,200,000 | 1,798,713 | UBS AG | 2-8-13 | 21,159 | |
| SGD | 1,345,000 | 1,099,850 | UBS AG | 3-7-13 | 13,149 | |
| SGD | 1,027,098 | 838,948 | Barclays Bank PLC | 3-12-13 | 9,098 | |
| SGD | 3,635,538 | 2,968,002 | Royal Bank of Scotland PLC | 3-12-13 | 30,651 | |
| SGD | 47,163,724 | 38,575,000 | Barclays Bank PLC | 4-19-13 | 468,914 | |
| SGD | 2,200,000 | 1,778,209 | Barclays Bank PLC | 5-8-13 | 703 | |
| SGD | 42,804,300 | 35,000,000 | Barclays Bank PLC | 5-21-13 | 415,792 | |
| $1,356,425,356 | ($12,374,995) | |||||
Options. There are two types of options, a put option and a call option. Options are traded either over-the-counter or on an exchange. A call option gives the purchaser of the option the right to buy (and the seller the obligation to sell) the underlying instrument at the exercise price. A put option gives the purchaser of the option the right to sell (and the writer the obligation to buy) the underlying instrument at the exercise price. Writing puts and buying calls may increase the Fund’s exposure to changes in the value of the underlying instrument. Buying puts and writing calls may decrease the Fund’s exposure to such changes. Risks related to the use of options include the loss of the premium, possible illiquidity of the options markets, trading restrictions imposed by an exchange and movements in underlying security values, and for written options, potential losses in excess of the amounts recognized on the Statement of assets and liabilities. In addition, over-the-counter options are subject to the risks of all over-the-counter derivatives contracts.
When the Fund purchases an option, the premium paid by the Fund is included in the portfolio of investments and subsequently “marked-to-market” to reflect current market value. If the purchased option expires, the Fund realizes a loss equal to the cost of the option. If the Fund exercises a call option, the cost of the securities acquired by exercising the call is increased by the premium paid to buy the call. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium paid. If the Fund enters into a closing sale transaction, the Fund realizes a gain or loss, depending on whether proceeds from the closing sale are greater or less than the original cost. When the Fund writes an option, the premium received is included as a liability and subsequently “marked-to-market” to reflect current market value of the option written. Premiums received from writing options that expire unexercised are recorded as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option on a security is exercised, the premium received reduces the cost basis of the securities purchased by the Fund.
During the six months ended January 31, 2013, the Fund used purchased options to manage against anticipated currency exchange rates, changes in securities markets and to gain exposure to foreign currency, certain markets and/or substitute for securities purchased or to be purchased. During the six months ended January 31, 2013, the Fund held purchased options with market values ranging from $25.7 million to $34.1 million as measured at each quarter end.
| Semiannual report | Global Absolute Return Strategies Fund | 49 |
During the six months ended January 31, 2013, the Fund wrote option contracts to manage against anticipated currency exchange rates, changes in securities markets and anticipated interest rate changes and to gain exposure to foreign currency and certain markets and/or substitute for securities purchase or to be purchased. The following tables summarize the Fund’s written options activities during the six months ended January 31, 2013 and the contracts held at January 31, 2013.
| NUMBER OF | NOTIONAL | ||
| CONTRACTS | (CURRENCY & | PREMIUMS | |
| (EQUITY) | INTEREST RATE) | RECEIVED | |
| Outstanding, beginning of period | 70,588 | 272,000,000 | $31,367,081 |
| Options written | 4,870 | 500,293,558 | 22,791,331 |
| Options closed | (16,078) | (145,000,000) | (23,262,664) |
| Options exercised | — | — | — |
| Options expired | — | — | — |
| Outstanding, end of period | 59,380 | 627,293,558 | $30,895,748 |
Options on securities
| EXPIRATION | NUMBER OF | |||||
| NAME OF ISSUER | EXERCISE PRICE | DATE | CONTRACTS | PREMIUM | VALUE | |
| Calls | ||||||
| Apple, Inc. | $515.00 | Oct 2013 | 270 | $1,483,812 | ($450,948) | |
Index options
| EXPIRATION | NUMBER OF | |||||
| NAME OF ISSUER | EXERCISE PRICE | DATE | CONTRACTS | PREMIUM | VALUE | |
| Puts | ||||||
| S&P 500 Index | $1,137 | Dec 2013 | 4,000 | $416,316 | ($65,712) | |
| S&P 500 Index | 1,151 | Dec 2013 | 6,500 | 647,023 | (114,700) | |
| S&P 500 Index | 1,144 | Dec 2013 | 4,500 | 465,608 | (76,607) | |
| S&P 500 Index | 1,159 | Dec 2013 | 3,170 | 324,316 | (58,207) | |
| S&P 500 Index | 1,183 | Dec 2013 | 13,800 | 1,339,079 | (287,162) | |
| S&P 500 Index | 1,178 | Dec 2013 | 17,940 | 1,668,061 | (363,903) | |
| S&P 500 Index | 1,168 | Dec 2013 | 9,200 | 830,980 | (177,907) | |
| 59,110 | $5,691,383 | ($1,144,198) | ||||
Foreign currency options
| EXERCISE | EXPIRATION | NOTIONAL | |||||
| DESCRIPTION | COUNTERPARTY | PRICE | DATE | AMOUNT | PREMIUM | VALUE | |
| Calls | |||||||
| USD versus JPY | UBS AG | $81.00 | Aug 2013 | $7,668,712 | $181,518 | ($882,262) | |
| USD versus JPY | UBS AG | 81.00 | Aug 2013 | 5,368,098 | 126,419 | (617,583) | |
| USD versus JPY | UBS AG | 81.00 | Aug 2013 | 6,134,969 | 139,448 | (705,810) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 9,249,743 | 234,712 | (785,248) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 11,562,179 | 314,491 | (981,560) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 6,937,307 | 195,285 | (588,936) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 4,624,872 | 130,190 | (392,624) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 11,562,179 | 319,694 | (981,560) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 11,562,179 | 376,060 | (981,560) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 3,468,654 | 121,836 | (294,468) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 23,124,357 | 1,188,014 | (1,963,119) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 11,562,179 | 585,624 | (981,560) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 23,124,357 | 1,263,977 | (1,963,119) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 18,221,994 | 1,008,223 | (1,546,938) | |
| USD versus JPY | UBS AG | 84.50 | Dec 2013 | 20,000,000 | 1,172,000 | (1,697,880) | |
| $174,171,779 | $7,357,491 | ($15,364,227) | |||||
| 50 | Global Absolute Return Strategies Fund | Semiannual report |
| EXERCISE | EXPIRATION | NOTIONAL | |||||
| DESCRIPTION | COUNTERPARTY | PRICE | DATE | AMOUNT | PREMIUM | VALUE | |
| Puts | |||||||
| USD versus JPY | UBS AG | $76.00 | Aug 2013 | 7,668,712 | $193,252 | ($5,675) | |
| USD versus JPY | UBS AG | 76.00 | Aug 2013 | 5,368,098 | 135,008 | (3,972) | |
| USD versus JPY | UBS AG | 76.00 | Aug 2013 | 6,134,969 | 157,362 | (4,540) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 9,249,743 | 229,162 | (43,834) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 11,562,179 | 266,219 | (54,793) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 6,937,307 | 156,610 | (32,876) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 4,624,872 | 104,406 | (21,917) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 11,562,179 | 264,485 | (54,793) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 11,562,179 | 225,752 | (54,793) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 3,468,654 | 54,284 | (16,438) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 23,124,357 | 168,230 | (109,586) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 11,562,179 | 84,982 | (54,793) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 23,124,357 | 147,533 | (109,586) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 18,221,994 | 119,354 | (86,354) | |
| USD versus JPY | UBS AG | 79.50 | Dec 2013 | 20,000,000 | 129,500 | (94,780) | |
| USD versus JPY | Goldman Sachs | 68.00 | Dec 2014 | 18,750,000 | 1,066,375 | (62,644) | |
| & Company | |||||||
| 192,921,779 | $3,502,514 | ($811,374) | |||||
Interest rate swaptions
An interest rate swaption is an option to enter into an interest rate swap.
| FLOATING | PAY/RECEIVE | ||||||||
| RATE | FLOATING | EXERCISE | EXPIRATION | CUR- | NOTIONAL | ||||
| DESCRIPTION | COUNTERPARTY | INDEX | RATE | RATE | DATE | RENCY | AMOUNT | PREMIUM | VALUE |
| Calls | |||||||||
| 10-Year Interest | UBS AG | EUR | Receive | 1.70% | Jul 2014 | EUR | 15,000,000 | $433,201 | ($197,234) |
| Rate Swap | EURIBOR | ||||||||
| TELERATE | |||||||||
| 10-Year Interest | Barclays Bank | EUR | Receive | 1.70% | Nov 2014 | EUR | 58,450,000 | 1,262,534 | (884,672) |
| Rate Swap | PLC | EURIBOR | |||||||
| TELERATE | |||||||||
| 10-Year Interest | Morgan Stanley | EUR | Receive | 2.70% | Dec 2014 | EUR | 17,300,000 | 968,127 | (1,203,278) |
| Rate Swap | EURIBOR | ||||||||
| TELERATE | |||||||||
| 10-Year Interest | Royal Bank of | EUR | Receive | 2.80% | Jan 2015 | EUR | 1,500,000 | 90,054 | (115,916) |
| Rate Swap | Scotland PLC | EURIBOR | |||||||
| TELERATE | |||||||||
| 10-Year Interest | Royal Bank of | EUR | Receive | 2.80% | Jun 2015 | EUR | 26,000,000 | 2,201,021 | (1,947,505) |
| Rate Swap | Scotland PLC | EURIBOR | |||||||
| TELERATE | |||||||||
| 10-Year Interest | Royal Bank of | EUR | Receive | 2.80% | Jun 2015 | EUR | 19,750,000 | 1,481,673 | (1,476,879) |
| Rate Swap | Scotland PLC | EURIBOR | |||||||
| TELERATE | |||||||||
| 30-Year Interest | Barclays Bank | USD LIBOR | Receive | 2.80% | Apr 2013 | USD | 6,812,000 | 373,929 | (64,428) |
| Rate Swap | PLC | BBA | |||||||
| 30-Year Interest | Royal Bank of | USD LIBOR | Receive | 2.80% | Apr 2013 | USD | 12,488,000 | 738,209 | (118,113) |
| Rate Swap | Scotland PLC | BBA | |||||||
| 30-Year Interest | Royal Bank of | USD LIBOR | Receive | 2.80% | May 2013 | USD | 6,400,000 | 540,800 | (87,439) |
| Rate Swap | Scotland PLC | BBA | |||||||
| 30-Year Interest | Royal Bank of | USD LIBOR | Receive | 2.40% | Jun 2013 | USD | 16,000,000 | 927,900 | (61,138) |
| Rate Swap | Scotland PLC | BBA | |||||||
| 30-Year Interest | Morgan Stanley | USD LIBOR | Receive | 2.40% | Jul 2013 | USD | 7,500,000 | 562,500 | (33,631) |
| Rate Swap | BBA | ||||||||
| 30-Year Interest | Morgan Stanley | USD LIBOR | Receive | 2.40% | Sep 2013 | USD | 27,000,000 | 1,185,300 | (218,827) |
| Rate Swap | BBA | ||||||||
| 30-Year Interest | Royal Bank of | USD LIBOR | Receive | 2.40% | Nov 2013 | USD | 46,000,000 | 2,095,300 | (504,211) |
| Rate Swap | Scotland PLC | BBA | |||||||
| 260,200,000 | $12,860,548 | ($6,913,271) | |||||||
| Semiannual report | Global Absolute Return Strategies Fund | 51 |
Swaps. Swap agreements are agreements between a Fund and counterparty to exchange cash flows, assets, foreign currencies or market-linked returns at specified intervals. Swap agreements are privately negotiated in the over-the-counter market (OTC swaps) or may be executed on a registered commodities exchange (centrally cleared swaps). Swaps are marked-to-market daily and the change in value is recorded as a component of unrealized appreciation/depreciation of swap contracts. The value of the swap will typically impose collateral posting obligations on the party that is considered out-of-the-money on the swap.
Upfront payments made/received by the Fund are amortized/accreted for financial reporting purposes, with the unamortized/unaccreted portion included in the Statement of assets and liabilities. A termination payment by the counterparty or the Fund is recorded as realized gain or loss, as well as the net periodic payments received or paid by the Fund.
Entering into swap agreements involves, to varying degrees, elements of credit, market and documentation risk that may amount to values that are in excess of the amounts recognized on the Statement of assets and liabilities. Such risks involve the possibility that there will be no liquid market for the swap, or that a counterparty may default on its obligation or delay payment under the swap terms. The counterparty may disagree or contest the terms of the swap. Market risks may also accompany the swap, including interest rate risk. The Fund may also suffer losses if it is unable to terminate or assign outstanding swaps or reduce its exposure through offsetting transactions.
Interest rate swaps. Interest rate swaps represent an agreement between a Fund and counterparty to exchange cash flows based on the difference between two interest rates applied to a notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. The Fund settles accrued net interest receivable or payable under the swap contracts at specified, future intervals.
During the six months ended January 31, 2013, the Fund used interest rate swaps to manage against anticipated interest rate changes and maintain diversity and liquidity of the portfolio. During the six months ended January 31, 2013, the Fund held interest rate swaps with total USD notional amounts ranging from $64.4 million to $373.4 million as measured at each quarter end. The following table summarizes the interest rate swap contracts held as of January 31, 2013.
| UNREALIZED | |||||||||
| APPRECIATION | |||||||||
| NOTIONAL | USD NOTIONAL | PAYMENTS MADE | PAYMENTS RECEIVED | MATURITY | (DEPRECIATION)/ | ||||
| COUNTERPARTY | AMOUNT | CURRENCY | AMOUNT | BY FUND | BY FUND | DATE | MARKET VALUE | ||
| Barclays Bank | 8,600,000 | GBP | $13,591,444 | Fixed 1.201% | GBP-LIBOR-BBA | Jan 2018 | ($4,550) | ||
| PLC | |||||||||
| Barclays Bank | 13,500,000 | USD | 13,500,000 | 3 Month LIBOR | Fixed 1.044% | Feb 2018 | 15,755 | ||
| PLC | |||||||||
| Barclays Bank | 9,250,000 | EUR | 12,169,307 | EUR-EURIBOR- | Fixed 1.540% | Dec 2018 | (106,831) | ||
| PLC | TELERATE | ||||||||
| Morgan Stanley | 9,250,000 | EUR | 12,169,307 | EUR-EURIBOR- | Fixed 1.520% | Dec 2018 | (114,049) | ||
| TELERATE | |||||||||
| The Royal Bank | 9,800,000 | EUR | 12,957,564 | EUR-EURIBOR- | Fixed 1.550% | Dec 2018 | (110,340) | ||
| of Scotland PLC | TELERATE | ||||||||
| $64,387,622 | ($320,015) | ||||||||
Credit default swaps. Credit default swaps (CDS) involve the exchange of a fixed rate premium (paid by the Buyer), for protection against the loss in value of an underlying debt instrument, referenced entity or index, in the event of a defined credit event (such as payment default or
| 52 | Global Absolute Return Strategies Fund | Semiannual report |
bankruptcy). Under the terms of the swap, one party acts as a “guarantor” (the Seller), receiving the premium and agreeing to contingent payments that are specified within the credit default agreement. The Fund may enter into CDS in which it may act as either Buyer or Seller. By acting as the Seller, the Fund may incur economic leverage since it would be obligated to pay the Buyer the notional amount of the contract in the event of a default. The amount of loss in such case could be significant, but would typically be reduced by any recovery value on the underlying credit.
During the six months ended January 31, 2013, the Fund used CDS as a Buyer of protection to manage against potential credit events and gain exposure to security or credit index. During the six months ended January 31, 2013, the Fund held credit default swap contracts with total USD notional amounts ranging from $49.4 million to $96.1 million as measured at each quarter end. The following table summarizes the credit default swap contracts the Fund held as of January 31, 2013 as a Buyer of protection.
| UNAMORTIZED | |||||||||||
| USD | (PAY)/ | UPFRONT | UNREALIZED | ||||||||
| COUNTER- | REFERENCE | NOTIONAL | NOTIONAL | RECEIVED | MATURITY | PAYMENT PAID | APPRECIATION | MARKET | |||
| PARTY | OBLIGATION | AMOUNT | CURRENCY | AMOUNT | FIXED RATE | DATE | (RECEIVED) | (DEPRECIATION) | VALUE | ||
| Buy | |||||||||||
| BNP Paribas | itraxx Europe Main | 24,200,000.00 | EUR | $31,424,898 | (1.000)% | Dec 2017 | $383,684 | ($232,929) | $150,755 | ||
| SA | Series 18 5-year index | ||||||||||
| Credit Suisse | itraxx Europe Main | 5,200,000 | EUR | 6,752,457 | (1.000)% | Dec 2017 | 83,213 | ($50,819) | 32,394 | ||
| International | Series 18 5-year index | ||||||||||
| Morgan | itraxx Europe Main | 40,650,000 | EUR | 52,369,376 | (1.000)% | Dec 2017 | 569,426 | ($316,195) | 253,231 | ||
| Stanley | Series 18 5-year index | ||||||||||
| $90,546,731 | $1,036,323 | ($599,943) | $436,380 | ||||||||
Implied credit spreads are utilized in determining the market value of CDS agreements in which the Fund is the Seller at period end. The implied credit spread generally represents the yield of the instrument above a credit-risk free rate, such as the U.S. Treasury Bond Yield, and may include upfront payments required to be made to enter into the agreement. It also serves as an indicator of the current status of the payment/performance risk and represents the likelihood or risk of default for the credit derivative. Wider credit spreads represent a deterioration of the referenced entity’s creditworthiness and an increased risk of default or other credit event occurring as defined under the terms of the agreement.
For CDS agreements where implied credit spreads are not reported or available, the resulting values of these agreements are the indicator of the current status of the payment/performance risk and represent the likelihood or risk of default. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s creditworthiness and a greater likelihood of a credit event occurring. The maximum potential amount of future payments (undiscounted) that a Fund as the Seller could be required to make under any CDS agreement would be an amount equal to the notional amount of the agreement.
The Fund used CDS as a Seller of protection during the six months ended January 31, 2013 to take a long position in the exposure of the benchmark credit and gain exposure to security or credit index. During the six months ended January 31, 2013, the Fund acted as Seller on credit default swap contracts with total USD notional amounts ranging from $78.6 million to $194.8 million as measured at each quarter end. The following table summarizes the credit default swap contracts the Fund held as of January 31, 2013 where the Fund acted as a Seller of protection.
| Semiannual report | Global Absolute Return Strategies Fund | 53 |
| UNAMORTIZED | |||||||||||
| IMPLIED | (PAY)/ | UPFRONT | |||||||||
| CREDIT | USD | RECEIVED | PAYMENT | UNREALIZED | |||||||
| REFERENCE | SPREAD AT | NOTIONAL | CUR- | NOTIONAL | FIXED | MATURITY | PAID | APPRECIATION | MARKET | ||
| COUNTERPARTY | OBLIGATION | 1-31-13 | AMOUNT | RENCY | AMOUNT | RATE | DATE | (RECEIVED) | (DEPRECIATION) | VALUE | |
| Sell | |||||||||||
| BNP Paribas SA | iTraxx Europe | 1.46% | 60,500,000 | EUR | $78,562,246 | 1.000 % | Dec 2017 | ($2,795,822) | $1,150,694 | ($1,645,128) | |
| Senior Financials | |||||||||||
| S18 5-year index | |||||||||||
| BNP Paribas SA | CDX North | 4.46% | 30,000,000 | USD | 30,000,000 | 1.000 % | Dec 2017 | (173,857) | 1,030,700 | 856,843 | |
| America High | |||||||||||
| Yield S19 5-year | |||||||||||
| index | |||||||||||
| Morgan Stanley | iTraxx Europe | 1.46% | 79,200,000 | EUR | 102,033,323 | 1.000 % | Dec 2017 | (2,880,466) | 726,844 | (2,153,622) | |
| Senior Financials | |||||||||||
| S18 5-year index | |||||||||||
| $210,595,569 | ($5,850,145) | $2,908,238 | ($2,941,907) | ||||||||
Variance swaps. Variance swap agreements involve two parties agreeing to exchange cash flows based on the measured variance (or square of volatility) of a specified underlying asset. One party agrees to exchange a “fixed rate” or strike price payment for the “floating rate” or realized price variance on the underlying asset with respect to the notional amount. At inception, the strike price is generally chosen such that the fair value of the swap is zero. At the maturity date, a net cash flow is exchanged, where the payoff amount is equivalent to the difference between the realized price variance of the underlying asset and the strike price multiplied by the notional amount. As a receiver of the realized price variance, the Fund would receive the payoff amount when the realized price variance of the underlying asset is greater than the strike price and would owe the payoff amount when the variance is less than the strike. As a payer of the realized price variance the Fund would owe the payoff amount when the realized price variance of the underlying asset is greater than the strike price and would receive the payoff amount when the variance is less than the strike.
The Fund used variance swaps during the six months ended January 31, 2013 to manage against anticipated changes in securities markets. During the six months ended January 31, 2013, the Fund held variance swap contracts with total USD notional amounts ranging from $3.5 million to $5.1 million, as measured at each quarter end. The following table summarizes the variance swap contracts the Fund held as of January 31, 2013.
| UNREALIZED | |||||||||
| USD | PAY/ | APPRECIATION | |||||||
| REFERENCE | CUR- | NOTIONAL | NOTIONAL | RECEIVE | MATURITY | VOLATILITY | (DEPRECIATION)/ | ||
| COUNTERPARTY | ENTITY | RENCY | AMOUNT | AMOUNT | VARIANCE | DATE | STRIKE PRICE | MARKET VALUE | |
| BNP Paribas SA | Nikkei 225 | JPY | 1,000,000 | $12,342 | Receive | Dec 2013 | 28.70% | ($75,445) | |
| BNP Paribas SA | Nikkei 225 | JPY | 6,350,000 | 79,464 | Receive | Dec 2013 | 28.75% | (481,225) | |
| BNP Paribas SA | Nikkei 225 | JPY | 2,000,000 | 25,042 | Receive | Dec 2013 | 28.75% | (150,311) | |
| BNP Paribas SA | Nikkei 225 | JPY | 4,500,000 | 56,745 | Receive | Dec 2013 | 31.00% | (421,953) | |
| BNP Paribas SA | Nikkei 225 | JPY | 19,059,026 | 237,361 | Receive | Dec 2013 | 30.00% | (1,619,205) | |
| BNP Paribas SA | Nikkei 225 | JPY | 865,000 | 11,026 | Receive | Dec 2013 | 29.70% | (74,916) | |
| BNP Paribas SA | FTSE 100 | GBP | 35,000 | 56,760 | Pay | Dec 2013 | 24.00% | 376,821 | |
| BNP Paribas SA | S&P 500 | USD | 5,000 | 5,000 | Pay | Dec 2013 | 26.70% | 41,203 | |
| BNP Paribas SA | S&P 500 | USD | 105,000 | 105,000 | Pay | Dec 2013 | 26.80% | 863,673 | |
| BNP Paribas SA | S&P 500 | USD | 10,000 | 10,000 | Pay | Dec 2013 | 27.00% | 83,236 | |
| BNP Paribas SA | S&P 500 | USD | 60,000 | 60,000 | Pay | Dec 2013 | 29.50% | 600,496 | |
| BNP Paribas SA | S&P 500 | USD | 221,958 | 221,958 | Pay | Dec 2013 | 28.30% | 2,042,763 | |
| BNP Paribas SA | S&P 500 | USD | 265,000 | 265,000 | Pay | Dec 2013 | 26.50% | 2,122,242 | |
| BNP Paribas SA | S&P 500 | USD | 10,000 | 10,000 | Pay | Dec 2013 | 29.00% | 98,837 | |
| BNP Paribas SA | S&P 500 | USD | 11,000 | 11,000 | Pay | Dec 2013 | 27.80% | 101,038 | |
| BNP Paribas SA | China Enterprises Index | HKD | 500,000 | 64,451 | Receive | Dec 2013 | 36.50% | (686,105) | |
| (Hang Seng) | |||||||||
| 54 | Global Absolute Return Strategies Fund | Semiannual report |
| UNREALIZED | |||||||||
| USD | PAY/ | APPRECIATION | |||||||
| REFERENCE | CUR- | NOTIONAL | NOTIONAL | RECEIVE | MATURITY | VOLATILITY | (DEPRECIATION)/ | ||
| COUNTERPARTY | ENTITY | RENCY | AMOUNT | AMOUNT | VARIANCE | DATE | STRIKE PRICE | MARKET VALUE | |
| BNP Paribas SA | China Enterprises Index | HKD | 450,000 | $58,041 | Receive | Dec 2013 | 32.60% | ($433,636) | |
| (Hang Seng) | |||||||||
| BNP Paribas SA | FTSE 100 | GBP | 57,000 | 88,766 | Pay | Dec 2013 | 26.50% | 709,149 | |
| BNP Paribas SA | Nikkei 225 | JPY | 21,500,000 | 271,287 | Receive | Dec 2013 | 27.80% | (1,388,197) | |
| BNP Paribas SA | Nikkei 225 | JPY | 48,373,000 | 609,355 | Receive | Dec 2014 | 26.00% | (1,139,796) | |
| BNP Paribas SA | FTSE 100 | GBP | 16,178 | 25,725 | Pay | Dec 2014 | 28.50% | 198,445 | |
| BNP Paribas SA | FTSE 100 | GBP | 34,377 | 54,788 | Pay | Dec 2014 | 28.20% | 411,132 | |
| BNP Paribas SA | FTSE 100 | GBP | 44,000 | 70,436 | Pay | Dec 2014 | 26.90% | 459,066 | |
| BNP Paribas SA | FTSE 100 | GBP | 35,000 | 56,759 | Pay | Dec 2014 | 25.20% | 287,599 | |
| BNP Paribas SA | FTSE 100 | GBP | 90,000 | 143,901 | Pay | Dec 2014 | 25.00% | 704,163 | |
| BNP Paribas SA | S&P 500 | USD | 610,000 | 610,000 | Pay | Dec 2014 | 25.50% | 2,660,233 | |
| BNP Paribas SA | China Enterprises Index | HKD | 317,178 | 40,891 | Receive | Dec 2014 | 34.00% | (264,543) | |
| (Hang Seng) | |||||||||
| BNP Paribas SA | China Enterprises Index | HKD | 480,000 | 61,891 | Receive | Dec 2014 | 33.65% | (387,866) | |
| (Hang Seng) | |||||||||
| BNP Paribas SA | China Enterprises Index | HKD | 109,541 | 14,123 | Receive | Dec 2014 | 34.25% | (94,404) | |
| (Hang Seng) | |||||||||
| BNP Paribas SA | China Enterprises Index | HKD | 450,000 | 58,041 | Receive | Dec 2014 | 33.30% | (343,721) | |
| (Hang Seng) | |||||||||
| BNP Paribas SA | China Enterprises Index | HKD | 800,000 | 103,203 | Receive | Dec 2014 | 33.50% | (616,066) | |
| (Hang Seng) | |||||||||
| Goldman Sachs | Nikkei 225 | JPY | 23,000,000 | 287,730 | Receive | Dec 2013 | 29.40% | (1,831,443) | |
| Goldman Sachs | S&P 500 | USD | 290,000 | 290,000 | Pay | Dec 2013 | 27.80% | 2,597,528 | |
| Morgan Stanley | Nikkei 225 | JPY | 29,000,000 | 371,664 | Receive | Dec 2013 | 33.00% | (3,341,958) | |
| Morgan Stanley | Nikkei 225 | JPY | 3,750,000 | 46,354 | Receive | Dec 2013 | 28.70% | (283,573) | |
| Morgan Stanley | Nikkei 225 | JPY | 1,225,000 | 15,228 | Receive | Dec 2013 | 28.50% | (90,581) | |
| Morgan Stanley | Nikkei 225 | JPY | 237,000 | 3,060 | Receive | Dec 2013 | 29.00% | (19,587) | |
| Morgan Stanley | Nikkei 225 | JPY | 353,000 | 4,603 | Receive | Dec 2013 | 29.00% | (29,116) | |
| Morgan Stanley | FTSE 100 | GBP | 62,000 | 98,059 | Pay | Dec 2013 | 27.80% | 920,442 | |
| Morgan Stanley | S&P 500 | USD | 370,000 | 370,000 | Pay | Dec 2013 | 33.65% | 4,820,933 | |
| Morgan Stanley | S&P 500 | USD | 5,000 | 5,000 | Pay | Dec 2013 | 27.00% | 43,640 | |
| Morgan Stanley | S&P 500 | USD | 46,440 | 46,440 | Pay | Dec 2013 | 27.20% | 397,965 | |
| Morgan Stanley | S&P 500 | USD | 3,000 | 3,000 | Pay | Dec 2013 | 27.00% | 26,216 | |
| Morgan Stanley | China Enterprises Index | HKD | 762,600 | 98,196 | Receive | Dec 2013 | 37.70% | (1,144,758) | |
| (Hang Seng) | |||||||||
| $5,137,690 | $5,648,415 | ||||||||
Inflation swaps. In an inflation swap, one party pays a fixed rate on a notional principal amount while the other party pays a floating rate linked to an inflation index on that same notional amount. The party paying the floating rate pays the inflation adjusted rate multiplied by the notional principal amount. If the average inflation rate over the term of the swap is the same as the fixed rate of the swap, the two legs will have the same value and the swap will break even.
The Fund used inflation swaps during the six months ended January 31, 2013 to maintain diversity and liquidity of the portfolio and manage against anticipated changes in inflation. During the six months ended January 31, 2013, the Fund held inflation swap contracts with total USD notional amounts ranging from $9.8 million to $31.3 million, as measured at each quarter end. The following table summarizes the inflation swap contracts the Fund held as of January 31, 2013.
| Semiannual report | Global Absolute Return Strategies Fund | 55 |
| UNREALIZED | |||||||||
| APPRECIATION | |||||||||
| NOTIONAL | CUR- | USD NOTIONAL | PAYMENTS MADE | PAYMENTS RECEIVED | MATURITY | (DEPRECIATION)/ | |||
| COUNTERPARTY | AMOUNT | RENCY | AMOUNT | BY FUND | BY FUND | DATE | MARKET VALUE | ||
| BNP Paribas SA | 1,900,000 | GBP | $3,068,025 | Fixed 3.180% | GBP- Non Revised RPI | Jan 2023 | $66,558 | ||
| Morgan Stanley | 480,000 | GBP | 777,168 | Fixed 3.190% | GBP- Non Revised RPI | Oct 2042 | 133,897 | ||
| The Royal Bank of Scotland PLC | 6,017,410 | USD | 6,017,410 | USD - Non-Revised CPI | Fixed 2.755% | Dec 2017 | (9,896) | ||
| The Royal Bank of Scotland PLC | 10,572,590 | USD | 10,572,590 | USD - Non-Revised CPI | Fixed 2.815% | Dec 2017 | 37 | ||
| The Royal Bank of Scotland PLC | 1,990,476 | USD | 1,990,476 | USD - Non-Revised CPI | Fixed 2.848% | Sep 2022 | 13,007 | ||
| The Royal Bank of Scotland PLC | 1,554,224 | EUR | 2,037,277 | Fixed 2.165% | EUR-EX Tobacco | Sep 2022 | (22,019) | ||
| NR CPI | |||||||||
| The Royal Bank of Scotland PLC | 1,809,524 | USD | 1,809,524 | USD - Non-Revised CPI | Fixed 2.763% | Sep 2022 | (5,406) | ||
| The Royal Bank of Scotland PLC | 1,545,776 | EUR | 2,004,484 | Fixed 2.115% | EUR-EX Tobacco | Sep 2022 | (11,146) | ||
| NR CPI | |||||||||
| The Royal Bank of Scotland PLC | 1,900,000 | GBP | 3,068,025 | Fixed 3.160% | GBP- Non Revised RPI | Jan 2023 | 73,068 | ||
| $31,344,979 | $238,100 | ||||||||
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at January 31, 2013 by risk category:
| FINANCIAL | ASSET | LIABILITY | ||
| STATEMENT OF ASSETS | INSTRUMENTS | DERIVATIVES | DERIVATIVES | |
| RISK | AND LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
| Interest rate contracts | Investments, at value* | Purchased options | $9,071,981 | — |
| Interest rate contracts | Written options, at value | Written options | — | ($6,913,271) |
| Interest rate contracts | Receivable/payable for futures | Futures† | 8,008,680 | (6,920,801) |
| Interest rate contracts | Swap contracts, at value | Interest rate swaps | 15,755 | (335,770) |
| Interest rate contracts | Swap contracts, at value | Inflation swaps | 286,567 | (48,467) |
| Foreign exchange contracts | Investments, at value* | Purchased options | 5,421,391 | — |
| Foreign exchange contracts | Written options, at value | Written options | — | (811,374) |
| Foreign exchange contracts | Receivable/payable for forward | Forward foreign | 17,181,361 | (24,980,895) |
| foreign currency exchange contracts | currency contracts | |||
| Equity contracts | Investments, at value* | Purchased options | 19,564,231 | — |
| Equity contracts | Written options, at value | Written options | — | (1,595,146) |
| Equity contracts | Receivable/payable for futures | Futures† | 3,609,211 | (29,167,556) |
| Equity contracts | Swap contracts, at value | Variance swaps | 20,566,820 | (14,918,405) |
| Credit contracts | Swap contracts, at value | Credit default swaps | 1,293,223 | (3,798,750) |
* Purchased options are included in the Portfolio of investments.
† Reflects cumulative appreciation/depreciation on futures as disclosed in Note 3. Only the period end variation margin is separately disclosed on the Statement of assets and liabilities.
| 56 | Global Absolute Return Strategies Fund | Semiannual report |
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 January 31, 2013:
| STATEMENT OF | INVESTMENTS | FOREIGN | |||||
| OPERATIONS | (PURCHASED | WRITTEN | FUTURES | SWAP | CURRENCY | ||
| RISK | LOCATION | OPTIONS) | OPTIONS | CONTRACTS | CONTRACTS | TRANSACTIONS* | TOTAL |
| Interest rate | Net realized gain | — | $1,923,044 | $465,987 | ($2,573,752) | — | ($184,721) |
| contracts | (loss) | ||||||
| Foreign exchange | Net realized gain | — | — | — | — | ($9,330,801) | ($9,330,801) |
| contracts | (loss) | ||||||
| Equity contracts | Net realized gain | ($6,068,745) | 4,691 | (26,915,900) | (350,514) | — | ($33,330,468) |
| (loss) | |||||||
| Credit contracts | Net realized gain | — | — | — | 5,388,171 | — | $5,388,171 |
| (loss) | |||||||
| Total | ($6,068,745) | $1,927,735 | ($26,449,913) | $2,463,905 | ($9,330,801) | ($37,457,819) | |
*Realized gain/loss associated with forward foreign currency contracts is included in the 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 January 31, 2013:
| TRANSLATION | |||||||
| OF ASSETS | |||||||
| STATEMENT OF | INVESTMENTS | AND LIABILITIES | |||||
| OPERATIONS | (PURCHASED | FUTURES | WRITTEN | SWAP | IN FOREIGN | ||
| RISK | LOCATION | OPTIONS) | CONTRACTS | OPTIONS | CONTRACTS | CURRENCIES* | TOTAL |
| Interest rate | Change in | ($545,840) | ($3,132,478) | $11,457,776 | $2,260,279 | — | $10,039,737 |
| contracts | unrealized | ||||||
| appreciation | |||||||
| (depreciation) | |||||||
| Foreign exchange | Change in | 875,328 | — | (5,885,640) | — | ($7,003,507) | ($12,013,819) |
| contracts | unrealized | ||||||
| appreciation | |||||||
| (depreciation) | |||||||
| Equity contracts | Change in | (44,358) | (25,304,536) | 4,991,563 | 7,869,867 | — | ($12,487,464) |
| unrealized | |||||||
| appreciation | |||||||
| (depreciation) | |||||||
| Credit contracts | Change in | — | — | — | 3,547,294 | — | $3,547,294 |
| unrealized | |||||||
| appreciation | |||||||
| (depreciation) | |||||||
| Total | $285,130 | ($28,437,014) | $10,563,699 | $13,677,440 | ($7,003,507) | ($10,914,252) | |
* Change in unrealized appreciation/depreciation associated with forward foreign currency contracts is included in the caption on the Statement of operations.
| Semiannual report | Global Absolute Return Strategies Fund | 57 |
Note 4 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the 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 Investment Management Services, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The Fund pays the Adviser a daily management fee for its services. If the net assets of the Fund were equal to or less than $500,000,000, the management fee paid to the Adviser is equivalent, on an annual basis, to the sum of: a) 1.30% of the first $200,000,000 of the Fund’s average daily net assets and b) 1.25% of the next $300,000,000 of average daily net assets. If the net assets of the Fund exceed $500,000,000, the management fee paid to the Adviser is equivalent, on an annual basis, to 1.20% of average daily net assets. The Adviser has a subadvisory agreement with Standard Life Investments (Corporate Funds) Limited. The Fund is not responsible for payment of the subadvisory fees.
The Adviser has contractually agreed to waive a portion of its management fee for certain funds (the Participating Funds) of the Trust and John Hancock Variable Insurance Trust. The waiver equals, on an annualized basis, 0.01% of that portion of the aggregate net assets of all the Participating Funds that exceeds $75 billion but is less than $100 billion; and 0.015% of that portion of the aggregate net assets of all the Participating Funds that equals or exceeds $100 billion. The amount of the reimbursement is calculated daily and allocated among all the Participating Funds in proportion to the daily net assets of each fund. This arrangement may be amended or terminated at any time by the Adviser upon notice to the funds and with approval of the Board of Trustees.
The Adviser has contractually agreed to waive all or a portion of its management fee and/or reimburse operating expenses of the Fund to the extent necessary to maintain the Fund’s total operating expenses at 1.95%, 2.65%, 1.59%, 2.00% and 1.50% for Class A, Class C, Class I, Class R2 and Class R6 shares, respectively, excluding certain expenses such as taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses. The fee waivers and/or reimbursements will continue in effect until November 30, 2013 for Class A, Class C, Class I, Class R2 and Class R6 shares, unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at the time.
The Adviser has voluntarily agreed to waive a portion of its management fee and/or reimburse the Fund, in order to limit the Fund’s expenses, excluding taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund’s business, advisory fees, 12b-1 fees, transfer agent fees and service fees, state registration fees and printing and postage fees, to 0.20% of the Fund’s average daily net asset value, on an annual basis. This voluntary arrangement may be amended or terminated at any time by the Adviser upon notice to the Fund.
| 58 | Global Absolute Return Strategies Fund | Semiannual report |
For the six months ended January 31, 2013, the expense reductions amounted to the following:
| EXPENSE | |||||
| CLASS | REDUCTIONS | ||||
| Class A | $5,590 | ||||
| Class C | 1,088 | ||||
| Class I | 7,486 | ||||
| Class R2 | 11,582 | ||||
| Class R6 | 11,433 | ||||
| Class NAV | 8,668 | ||||
| Total | $45,847 | ||||
The investment management fees, including the impact of waivers and reimbursements incurred for the six months ended January 31, 2013 were equivalent to a net effective rate of 1.19% of the Fund’s average daily net assets.
Expense recapture. The Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements for a period of three years following the beginning of the month in which such reimbursements or waivers originally occurred to the extent that the Fund is below its expense limitation during this period. The table below outlines the amounts recovered during the six months ended January 31, 2013, and the amount of waived or reimbursed expenses subject to potential recovery and the respective expiration dates. Certain reimbursements or waivers are not subject to recapture.
| AMOUNT RECOVERED | ||||
| AMOUNTS ELIGIBLE FOR | AMOUNTS ELIGIBLE FOR | AMOUNTS ELIGIBLE FOR | AMOUNTS ELIGIBLE FOR | DURING THE |
| RECOVERY THROUGH | RECOVERY THROUGH | RECOVERY THROUGH | RECOVERY THROUGH | PERIOD ENDED |
| JULY 1, 2013 | JULY 1, 2014 | JULY 1, 2015 | JANUARY 1, 2016 | JANUARY 31, 2013 |
| — | — | $13,527 | $23,752 | $9,740 |
Amounts recovered by class
| FUND | CLASS C | CLASS I | ||||
| Global Absolute Return Strategies | $5,323 | $4,417 | ||||
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended January 31, 2013 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 and Class R2 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the Fund. The Fund pays up to 0.30%, 1.00% and 0.25% for Class A, Class C and Class R2 shares, respectively, for distribution and service fees, expressed as an annual percentage of average daily net assets.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $795,112 for the six months ended January 31, 2013. Of this amount, $128,560 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $663,932 was paid as sales commissions to broker-dealers and $2,620 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Adviser.
| Semiannual report | Global Absolute Return Strategies Fund | 59 |
Class A and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that 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 January 31, 2013, CDSCs received by the Distributor amounted to $0 and $271 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 Adviser. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. The Signature Services Cost includes a component of allocated John Hancock corporate overhead for providing transfer agent services to the Fund and to all other John Hancock affiliated funds. It also includes out-of-pocket expenses that are comprised of payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to four categories of share classes: Institutional Share Classes, Retirement Share Classes, Municipal Bond Classes and all other Retail Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended January 31, 2013 were:
| DISTRIBUTION | TRANSFER | STATE | PRINTING AND | |
| CLASS | AND SERVICE FEES | AGENT FEES | REGISTRATION FEES | POSTAGE |
| Class A | $503,594 | $327,705 | $14,085 | $24,315 |
| Class C | 84,346 | 16,669 | 8,480 | 2,096 |
| Class I | — | 230,025 | 17,911 | 19,116 |
| Class R2 | 144 | 15 | 10,112 | 1,719 |
| Class R6 | — | 470 | 10,113 | 3,834 |
| Total | $588,084 | $574,884 | $60,701 | $51,080 |
Trustee expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its average daily net assets.
Note 6 — Fund share transactions
Transactions in Fund shares for the six months ended January 31, 2013 and for the period ended July 31, 2012 were as follows:
| Six months ended 1-31-13 | Year ended 7-31-12 | |||
| Shares | Amount | Shares | Amount | |
| Class A shares1 | ||||
| Sold | 41,049,938 | $439,417,896 | 17,012,010 | $178,509,182 |
| Distributions reinvested | 384,649 | 4,096,508 | — | — |
| Repurchased | (3,682,637) | (39,467,634) | (491,934) | (5,169,958) |
| Net increase | 37,751,950 | $404,046,770 | 16,520,076 | $173,339,224 |
| Class C shares2 | ||||
| Sold | 4,095,570 | $43,891,336 | — | — |
| Distributions reinvested | 18,002 | 191,898 | — | — |
| Repurchased | (85,145) | (914,315) | — | — |
| Net increase | 4,028,427 | $43,168,919 | — | — |
| 60 | Global Absolute Return Strategies Fund | Semiannual report |
| Six months ended 1-31-13 | Year ended 7-31-12 | |||
| Shares | Amount | Shares | Amount | |
| Class I shares1 | ||||
| Sold | 59,438,039 | $638,021,080 | 16,693,504 | $176,277,719 |
| Distributions reinvested | 716,331 | 7,636,093 | — | — |
| Repurchased | (5,923,920) | (63,590,544) | (938,029) | (9,894,949) |
| Net increase | 54,230,450 | $582,066,629 | 15,755,475 | $166,382,770 |
| Class R2 shares3 | ||||
| Sold | 2,117 | $22,653 | 9,372 | $100,000 |
| Distributions reinvested | 15 | 157 | — | — |
| Net increase | 2,132 | $22,810 | 9,372 | $100,000 |
| Class R6 shares3 | ||||
| Sold | 1,085,660 | $11,661,833 | 9,372 | $100,000 |
| Distributions reinvested | 4,219 | 44,938 | — | — |
| Repurchased | (44,943) | (482,068) | — | — |
| Net increase | 1,044,936 | $11,224,703 | 9,372 | $100,000 |
| Class NAV shares1 | ||||
| Sold | 6,104,184 | $65,499,413 | 47,020,792 | $483,507,167 |
| Distributions reinvested | 708,702 | 7,547,678 | — | — |
| Repurchased | (253,255) | (2,709,968) | (193,554) | (2,017,290) |
| Net increase | 6,559,631 | $70,337,123 | 46,827,238 | $481,489,877 |
| Net increase | 103,617,526 | $1,110,866,954 | 79,121,533 | $821,411,871 |
1 Prior period presented is from 12-19-11 (commencement of operations) to 7-31-12.
2 Period from 8-1-12 (inception date) to 1-31-13.
3 Prior period presented is from 3-1-12 (inception date) to 7-31-12.
Affiliates of the Fund owned 81%, 1% and 100% of shares of beneficial interest of Class R2, Class R6 and Class NAV, respectively, on January 31, 2013.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities and U.S. Treasury obligations, aggregated $725,701,716 and $237,714,536, respectively, for the six months ended January 31, 2013. Purchases and sales of U.S. Treasury obligations aggregated $201,406,785 and $25,759,851, respectively, for the six months ended January 31, 2013.
Note 8 — Investment by affiliated funds
Certain investors in the Fund are affiliated funds and are managed by the Adviser 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. For the six months ended January 31, 2013, the following funds had an affiliate ownership of 5% or more of the Fund’s net assets:
| AFFILIATED | |||
| FUND | CONCENTRATION | ||
| John Hancock Lifestyle Balanced Portfolio | 8.3% | ||
| John Hancock Lifestyle Growth Portfolio | 6.1% | ||
| Semiannual report | Global Absolute Return Strategies Fund | 61 |
Special Shareholder Meeting
Unaudited
On November 14, 2012, a Special Meeting of the Shareholders of John Hancock Funds II and each of its series, including John Hancock Global Absolute Return Strategies Fund, was held at 601 Congress Street, Boston, Massachusetts, for the purpose of considering and voting on the following proposal:
Proposal: Election of thirteen (13) Trustees as members of the Board of Trustees of John Hancock Funds II.
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 7,616,504,618.81 | 68,337,736.33 |
| Peter S. Burgess | 7,615,970,679.45 | 68,871,675.70 |
| William H. Cunningham | 7,617,896,790.36 | 66,945,564.78 |
| Grace K. Fey | 7,615,778,673.96 | 69,063,681.18 |
| Theron S. Hoffman | 7,615,274,624.90 | 69,567,730.24 |
| Deborah C. Jackson | 7,613,243,797.95 | 71,598,557.20 |
| Hassell H. McClellan | 7,613,775,261.17 | 71,067,093.97 |
| James M. Oates | 7,609,760,388.78 | 75,081,966.36 |
| Steven R. Pruchansky | 7,616,850,614.43 | 67,991,740.71 |
| Gregory A. Russo | 7,622,347,084.59 | 62,495,270.55 |
| Non-Independent Trustees | ||
| James R. Boyle | 7,622,433,052.00 | 62,409,303.15 |
| Craig Bromley | 7,617,300,092.72 | 67,542,262.42 |
| Warren A. Thomson | 7,620,483,794.58 | 64,358,560.56 |
| 62 | Global Absolute Return Strategies Fund | Semiannual report |
More information
| Trustees | Investment adviser |
| James M. Oates, Chairperson | John Hancock Investment Management |
| Steven R. Pruchansky, Vice Chairperson | Services, LLC |
| Charles L. Bardelis* | |
| James R. Boyle† | Subadviser |
| Craig Bromley† | Standard Life Investments (Corporate Funds) |
| Peter S. Burgess* | Limited |
| William H. Cunningham | |
| Grace K. Fey | Principal distributor |
| Theron S. Hoffman* | John Hancock Funds, LLC |
| Deborah C. Jackson | |
| Hassell H. McClellan | Custodian |
| Gregory A. Russo | State Street Bank and Trust Company |
| Warren A. Thomson† | |
| Transfer agent | |
| Officers | John Hancock Signature Services, Inc. |
| Hugh McHaffie | |
| President | Legal counsel |
| K&L Gates LLP | |
| Andrew G. Arnott | |
| Executive Vice President | |
| Thomas M. Kinzler | |
| Secretary and Chief Legal Officer | |
| Francis V. Knox, Jr. | |
| Chief Compliance Officer | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Salvatore Schiavone | |
| Treasurer | |
| *Member of the Audit Committee | |
| †Non-Independent Trustee | |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-202-551-8090 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-225-5291.
| You can also contact us: | ||
| 1-800-225-5291 | Regular mail: | Express mail: |
| jhfunds.com | John Hancock Signature Services, Inc. | John Hancock Signature Services, Inc. |
| P.O. Box 55913 | Mutual Fund Image Operations | |
| Boston, MA 02205-5913 | 30 Dan Road | |
| Canton, MA 02021 |
| Semiannual report | Global Absolute Return Strategies Fund | 63 |
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
| This report is for the information of the shareholders of John Hancock Global Absolute Return Strategies Fund. | 395SA 1/13 |
| It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | 3/13 |
ITEM 2. CODE OF ETHICS.
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
(d) Not Applicable
(e) Not Applicable
(f) Not Applicable
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
(d) Not Applicable
(e) Not Applicable
(f) Not Applicable.
(g) Not Applicable
(h) Not Applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Included with Item 1.
(b) Not Applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not Applicable.
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 periods specified in the rules and forms of the Securities and Exchange Commission. Such disclosure controls 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) Not applicable
(a)(2)(i) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER.
(a)(2)(ii) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER.
(b) CERTIFICATION PURSUANT TO Rule 30a-2(b) OF THE INVESTMENT COMPANY ACT OF 1940
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 II
/s/ Hugh McHaffie
Hugh McHaffie
President
Date: March 14, 2013
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.
/s/ Hugh McHaffie
Hugh McHaffie
President
Date: March 14, 2013
/s/ Charles A. Rizzo
Charles A. Rizzo
Chief Financial Officer
Date: March 14, 2013