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 811-22303 | |
John Hancock Collateral Investment Trust | |
(Exact name of registrant as specified in charter) | |
601 Congress Street, Boston, Massachusetts 02210 | |
(Address of principal executive offices) (Zip code) | |
Michael J. Leary | |
Treasurer | |
601 Congress Street | |
Boston, Massachusetts 02210 | |
(Name and address of agent for service) | |
Registrant's telephone number, including area code: 617-663-4490 | |
Date of fiscal year end: | December 31 |
Date of reporting period: | June 30, 2011 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSRS/0000928816-11-001242/collateralinvtrustx1x1.jpg)
John Hancock Collateral Investment Trust
Table of Contents | |
Your expenses | Page 3 |
Portfolio summary | Page 4 |
Portfolio of investments | Page 5 |
Financial statements | Page 10 |
Financial highlights | Page 13 |
Notes to financial statements | Page 14 |
Board Considerations Disclosure | Page 18 |
More Information | Page 21 |
2 |
Your expenses
These examples are intended to help you understand your ongoing operating expenses.
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 redemption (if appilicable), 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 January 1, 2011 with the same investment held until June 30, 2011.
Account value | Ending value | Expenses paid during | |
on 1-1-11 | on 6-30-11 | period ended 6-30-111 | |
Common | |||
Shares | $1,000.00 | $1,001.30 | $0.25 |
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at June 30, 2011, 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 January 1, 2011, with the same investment held until June 30, 2011. 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 1-1-11 | on 6-30-11 | period ended 6-30-111 | |
Common | |||
Shares | $1,000.00 | $1,024.50 | $0.25 |
Remember, these examples do not include any security 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 0.05%, for the Fund's shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
3 |
Portfolio Summary
Top 10 Issuers1 | Yield* | Percentage of Net Assets (43.0% | |
of Net Assets on 6-30-11) | |||
Sanofi-Aventis SA | |||
10/14/11 to 03/28/12 | 0.200 to 0.370% | 6.6% | |
General Electric Capital Corp. | |||
08/15/11 to 04/10/12 | 0.331 to 5.875% | 6.4% | |
Bank of Nova Scotia | |||
07/01/11 to 01/05/12 | 0.040 to 0.330% | 5.3% | |
Royal Bank of Canada | |||
12/02/11 to 04/05/12 | 0.265 to 0.320% | 4.0% | |
Falcon Asset Securitization Company LLC | |||
07/06/11 to 07/12/11 | 0.130 to 0.210% | 3.7% | |
Credit Suisse USA, Inc. | |||
08/16/11 to 01/15/12 | 0.461 to 6.500% | 3.6% | |
Societe Generale | |||
02/10/12 to 03/01/12 | 0.747 to 0.804% | 3.5% | |
Wachovia Corp. | |||
10/15/11 to 04/23/12 | 0.404 to 5.300% | 3.4% | |
Jupiter Securitization Company LLC | |||
07/07/11 to 07/18/11 | 0.130 to 0.210% | 3.3% | |
Wells Fargo & Company | |||
08/26/11 to 06/15/12 | 0.364 to 5.300% | 3.2% |
Sector Composition1,2 | |||
Financials | |||
Commercial Banks | 26% | ||
Diversified Financial Services | 16% | ||
Capital Markets | 14% | ||
Consumer Finance | 3% | ||
Health Care | 9% | ||
Industrials | 9% | ||
U.S. Government & Agency Obligations | 8% | ||
Consumer Staples | 5% | ||
Asset Backed Securities | 4% | ||
Materials | 2% | ||
Consumer Discretionary | 2% | ||
Information Technology | 1% | ||
Telecommunication Services | 1% | ||
Portfolio Composition1,2 | |||
Corporate Interest-Bearing Obligations | 57% | ||
Commercial Paper | 31% | ||
U.S. Government & Agency Obligations | 8% | ||
Asset Backed Securities | 4% |
1 As a percentage of net assets on 6-30-11.
2 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.
* 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.
4 |
John Hancock Collateral Investment Trust
As of 6-30-11 (Unaudited)
Maturity Date | Yield* (%) | Par value | Value | ||
Asset Backed Securities 3.85% | $219,103,083 | ||||
(Cost $218,970,895) | |||||
BMW Vehicle Lease Trust, Series 2009-1, Class A3 | |||||
03/15/12 | 2.910 | $451,575 | 452,080 | ||
BMW Vehicle Lease Trust, Series 2011-1, Class A1 | |||||
04/20/12 | 0.289 | 20,457,645 | 20,475,764 | ||
CNH Equipment Trust, Series 2010-C, Class A1 | |||||
12/09/11 | 0.427 | 10,525,158 | 10,526,492 | ||
Ford Credit Auto Owner Trust, Series 2011-A, Class A1 (S) | |||||
02/15/12 | 0.289 | 6,708,941 | 6,709,065 | ||
Honda Auto Receivables Owner Trust, Series 2010-3, Class A1 | |||||
10/21/11 | 0.310 | 958,110 | 958,292 | ||
Honda Auto Receivables Owner Trust, Series 2011-2, Class A1 | |||||
06/18/12 | 0.251 | 39,938,896 | 39,972,568 | ||
Hyundai Auto Receivables Trust, Series 2011-A, Class A1 | |||||
02/15/12 | 0.318 | 21,587,344 | 21,596,100 | ||
Hyundai Auto Receivables Trust, Series 2011-B, Class A1 | |||||
05/15/12 | 0.248 | 28,000,000 | 28,014,470 | ||
John Deere Owner Trust, Series 2011-A, Class A1 | |||||
05/11/12 | 0.306 | 67,115,466 | 67,173,373 | ||
Nissan Auto Lease Trust, Series 2010-B, Class A1 | |||||
11/15/11 | 0.317 | 3,961,800 | 3,962,332 | ||
Nissan Auto Receivables Owner Trust, Series 2010-A, Class A1 | |||||
10/17/11 | 0.356 | 222,348 | 222,382 | ||
Nissan Auto Receivables Owner Trust, Series 2011-A, Class A1 | |||||
04/16/12 | 0.261 | 19,038,124 | 19,040,165 | ||
Commercial Paper 31.77% | $1,810,171,859 | ||||
(Cost $1,810,268,435) | |||||
Amsterdam Funding Corp. | |||||
07/01/11 | 0.050 | $6,000,000�� | 6,000,000 | ||
Australia & New Zealand Banking Group, Ltd. | |||||
11/08/11 | 0.288 | 60,000,000 | 59,884,200 | ||
Bank of Nova Scotia | |||||
07/01/11 | 0.040 | 100,000,000 | 100,000,000 | ||
BNP Paribas Finance, Inc. | |||||
07/01/11 | 0.040 | 24,500,000 | 24,500,000 | ||
Caterpillar Financial Services Corp. | |||||
07/01/11 | 0.070 | 45,000,000 | 45,000,000 | ||
Deutsche Bank Financial LLC | |||||
10/06/11 | 0.460 | 30,000,000 | 29,979,300 | ||
E.I. du Pont de Nemours & Company | |||||
07/11/11 to 07/12/11 | 0.150 | 118,800,000 | 118,795,248 | ||
Falcon Asset Securitization Company LLC | |||||
07/06/11 to 07/12/11 | 0.130 to 0.210 | 212,100,000 | 212,096,508 |
5 |
John Hancock Collateral Investment Trust
As of 6-30-11 (Unaudited)
Maturity Date | Yield* (%) | Par value | Value | ||
Commercial Paper (continued) | |||||
Govco LLC | |||||
07/08/11 to 08/19/11 | 0.200 to 0.230 | $160,000,000 | $159,977,450 | ||
Jupiter Securitization Company LLC | |||||
07/07/11 to 07/18/11 | 0.130 to 0.210 | 187,299,000 | 187,286,943 | ||
Nestle Capital Corp. | |||||
08/26/11 | 0.160 | 150,000,000 | 149,980,500 | ||
Novartis Finance Corp. | |||||
07/01/11 to 07/05/11 | 0.060 to 0.080 | 84,000,000 | 83,999,550 | ||
Novartis Securities Investment Ltd. | |||||
11/14/11 | 0.190 | 20,600,000 | 20,579,812 | ||
Sanofi-Aventis SA | |||||
10/14/11 to 12/16/11 | 0.200 to 0.370 | 167,700,000 | 167,495,464 | ||
Starbird Funding Corp. | |||||
07/05/11 to 08/01/11 | 0.140 to 0.220 | 154,175,000 | 154,158,694 | ||
State Street Corp. | |||||
07/11/11 to 10/21/11 | 0.260 to 0.320 | 125,000,000 | 124,955,500 | ||
Toyota Motor Credit Corp. | |||||
07/05/11 to 09/13/11 | 0.350 to 0.380 | 100,000,000 | 99,984,000 | ||
Unilever Capital Corp. | |||||
07/08/11 | 0.090 | 65,500,000 | 65,498,690 | ||
Corporate Interest-Bearing Obligations 55.85% | $3,181,876,298 | ||||
(Cost $3,182,333,981) | |||||
American Honda Finance Corp. (P)(S) | |||||
12/09/11 to 02/07/12 | 0.318 to 0.502 | $98,800,000 | 98,553,510 | ||
AT&T Mobility LLC | |||||
12/15/11 | 6.500 | 43,855,000 | 44,973,829 | ||
Australia & New Zealand Banking Group, Ltd. (P)(S) | |||||
10/21/11 | 0.573 | 63,500,000 | 63,554,356 | ||
Bank of America Corp. | |||||
08/15/11 | 5.375 | 7,800,000 | 7,841,067 | ||
Bank of America Corp. (P) | |||||
08/15/11 | 0.361 | 15,000,000 | 15,000,450 | ||
Bank of Nova Scotia (P) | |||||
12/08/11 to 01/05/12 | 0.290 to 0.330 | 200,000,000 | 200,222,900 | ||
Bank of Tokyo-Mitsubishi UFJ Ltd. | |||||
01/24/12 | 0.650 | 100,000,000 | 100,132,000 | ||
BellSouth Corp. | |||||
10/15/11 | 6.000 | 3,966,000 | 4,026,240 | ||
Caterpillar Financial Services Corp. | |||||
10/12/11 to 02/15/12 | 5.125 to 5.750 | 71,134,000 | 72,779,853 | ||
CIBC Capital Funding IV LP (P)(S) | |||||
01/31/12 | 0.413 | 81,000,000 | 80,650,161 |
6 |
John Hancock Collateral Investment Trust
As of 6-30-11 (Unaudited)
Maturity Date | Yield* (%) | Par value | Value | ||
Corporate Interest-Bearing Obligations (continued) | |||||
Credit Suisse USA, Inc. | |||||
08/16/11 to 01/15/12 | 5.500 to 6.500 | $109,138,000 | $111,721,942 | ||
Credit Suisse USA, Inc. (P) | |||||
08/16/11 | 0.461 | 91,150,000 | 91,174,519 | ||
Deutsche Bank AG/New York NY (P) | |||||
04/03/12 | 0.385 | 100,000,000 | 100,000,000 | ||
General Electric Capital Corp. | |||||
02/15/12 to 04/10/12 | 4.375 to 5.875 | 149,112,000 | 153,867,162 | ||
General Electric Capital Corp. (P) | |||||
08/15/11 to 04/10/12 | 0.331 to 0.596 | 200,834,000 | 201,009,220 | ||
International Business Machines Corp. (P) | |||||
07/28/11 to 06/15/12 | 0.277 to 0.853 | 76,515,000 | 76,545,789 | ||
John Deere Capital Corp. | |||||
10/17/11 to 03/15/12 | 5.400 to 7.000 | 43,675,000 | 44,469,878 | ||
JPMorgan Chase & Company (P) | |||||
12/21/11 to 02/22/12 | 0.349 to 0.372 | 65,010,000 | 65,040,417 | ||
Merrill Lynch & Company, Inc. (P) | |||||
07/25/11 | 0.474 | 53,510,000 | 53,520,916 | ||
Morgan Stanley (P) | |||||
01/09/12 | 0.540 | 46,450,000 | 46,500,027 | ||
PepsiCo, Inc. | |||||
05/15/12 | 5.150 | 6,462,000 | 6,726,431 | ||
PepsiCo, Inc. (P) | |||||
07/15/11 | 0.308 | 63,010,000 | 63,013,466 | ||
Pfizer, Inc. | |||||
03/15/12 | 4.450 | 46,613,000 | 47,941,098 | ||
Procter & Gamble International Funding SCA | |||||
08/26/11 | 1.350 | 10,000,000 | 10,013,800 | ||
Rabobank Nederland NV (P)(S) | |||||
08/05/11 to 01/26/12 | 0.287 to 0.474 | 38,790,000 | 38,798,669 | ||
Royal Bank of Canada (P) | |||||
12/02/11 to 04/05/12 | 0.265 to 0.320 | 228,000,000 | 227,952,440 | ||
Sanofi-Aventis SA (P) | |||||
03/28/12 | 0.296 | 207,400,000 | 207,438,020 | ||
Societe Generale (P) | |||||
02/10/12 to 03/01/12 | 0.747 to 0.804 | 200,000,000 | 199,954,400 | ||
The Goldman Sachs Group, Inc. (P) | |||||
08/05/11 to 02/06/12 | 0.450 to 0.693 | 128,947,000 | 128,951,871 | ||
Toyota Motor Credit Corp. (P) | |||||
12/14/11 | 0.320 | 50,000,000 | 50,018,250 | ||
UBS AG (P) | |||||
02/23/12 | 1.359 | 167,200,000 | 168,255,366 | ||
Wachovia Corp. | |||||
10/15/11 | 5.300 | 5,000,000 | 5,066,335 |
7 |
John Hancock Collateral Investment Trust
As of 6-30-11 (Unaudited)
Maturity Date | Yield* (%) | Par value | Value | ||
Corporate Interest-Bearing Obligations (continued) | |||||
Wachovia Corp. (P) | |||||
10/15/11 to 04/23/12 | 0.404 to 0.408 | $190,304,000 | $190,427,129 | ||
Wells Fargo & Company | |||||
08/26/11 | 5.300 | 10,000,000 | 10,067,640 | ||
Wells Fargo & Company (P) | |||||
01/24/12 | 0.364 | 159,530,000 | 159,630,823 | ||
Westpac Banking Corp. (P) | |||||
12/30/11 | 0.495 | 36,000,000 | 36,036,324 | ||
U.S. Government & Agency Obligations 8.37% | $476,746,086 | ||||
(Cost $476,009,513) | |||||
Bank of America Corp. (J)(P) | |||||
06/22/12 | 0.447 | $41,000,000 | 41,110,454 | ||
Citibank NA (J)(P) | |||||
07/12/11 to 11/15/12 | 0.261 to 0.298 | 143,445,000 | 143,578,275 | ||
Citigroup Funding, Inc. (J)(P) | |||||
03/30/12 | 0.546 | 13,000,000 | 13,030,017 | ||
Citigroup, Inc. (J)(P) | |||||
12/09/11 | 0.990 | 22,340,000 | 22,429,002 | ||
Federal Home Loan Bank | |||||
04/27/12 | 0.400 | 25,000,000 | 25,002,225 | ||
General Electric Capital Corp. (J)(P) | |||||
03/12/12 | 0.450 | 10,000,000 | 10,027,890 | ||
JPMorgan Chase & Company (J)(P) | |||||
06/15/12 to 12/26/12 | 0.477 to 0.497 | 53,000,000 | 53,186,893 | ||
Morgan Stanley (J)(P) | |||||
02/10/12 to 06/20/12 | 0.450 to 0.597 | 55,000,000 | 55,164,872 | ||
PNC Funding Corp. (J)(P) | |||||
04/01/12 | 0.504 | 10,000,000 | 10,022,150 | ||
State Street Bank & Trust Company (J)(P) | |||||
09/15/11 | 0.447 | 10,000,000 | 10,007,460 | ||
The Goldman Sachs Group, Inc. (J)(P) | |||||
11/09/11 to 03/15/12 | 0.447 to 0.518 | 36,000,000 | 36,059,604 | ||
The Huntington National Bank (J)(P) | |||||
06/01/12 | 0.654 | 18,000,000 | 18,076,122 | ||
U.S. Central Federal Credit Union (K)(P) | |||||
10/19/11 | 0.275 | 23,000,000 | 23,007,682 | ||
Union Bank NA (J)(P) | |||||
03/16/12 | 0.445 | 6,000,000 | 6,012,270 | ||
Wells Fargo & Company (J)(P) | |||||
06/15/12 | 0.467 | 10,000,000 | 10,031,170 |
8 |
John Hancock Collateral Investment Trust
As of 6-30-11 (Unaudited)
Par value | Value | |
Short-Term Investments 0.00% | $200,000 | |
(Cost $200,000) | ||
Repurchase Agreement 0.00% | 200,000 | |
Repurchase Agreement with State Street Corp. dated 6-30-11 at | ||
0.010% to be repurchased at $200,000 on 7-1-11, collateralized by | ||
$200,000 U.S. Treasury Notes, 1.750% due 8-15-12 (valued at | ||
$204,750, including interest) | $200,000 | 200,000 |
Total investments (Cost $5,687,782,824)† 99.84% | $5,688,097,326 | |
Other assets and liabilities, net 0.16% | $9,079,036 | |
Total net assets 100.00% | $5,697,176,362 | |
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 either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end.
(J) These securities are issued under the Temporary Liquidity Guarantee Program and are insured by the Federal Deposit Insurance Corporation until the earlier of the maturity date or 6-30-12.
(K) This security is issued under the Temporary Corporate Credit Union Liquidity Guarantee Program and is insured by the National Credit Union Administration until maturity.
(P) Variable rate obligation. The coupon rate shown represents the rate at period end.
(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.
† At 6-30-11, the aggregate cost of investment securities for federal income tax purposes was $5,687,782,824. Net unrealized appreciation aggregated $314,502, of which $1,509,135 related to appreciated investment securities and $1,194,633 related to depreciated investment securities.
9 |
John Hancock Collateral Investment Trust
Statement of Assets and Liabilities — June 30, 2011 (Unaudited)
Assets | |
Investments, at value (Cost $5,687,782,824) | $5,688,097,326 |
Cash | 2,445 |
Interest receivable | 10,574,746 |
Other receivables and prepaid expenses | 3,492 |
Total assets | 5,698,678,009 |
Liabilities | |
Distributions payable | 1,388,889 |
Payable to affiliates (Note 4) | |
Chief compliance officer fees | 2,876 |
Transfer agent fees | 16,551 |
Trustees' fees | 26,361 |
Other liabilities and accrued expenses | 66,970 |
Total liabilities | 1,501,647 |
Net assets | |
Capital paid-in | $5,696,975,223 |
Accumulated distributions in excess of net | |
investment income | (251,671) |
Accumulated net realized gain on investments | 138,308 |
Net unrealized appreciation (depreciation) on | |
investments | 314,502 |
Net assets | $5,697,176,362 |
Net asset value per share | |
Based on 569,270,013 shares of beneficial | |
interest outstanding - unlimited number of | |
shares authorized with no par value | $10.01 |
The accompanying notes are an integral part of the financial statements.
10 |
John Hancock Collateral Investment Trust
Statement of Operations — For the six month period ended June 30, 2011 (Unaudited)
Investment income | |
Interest | $11,450,795 |
Expenses | |
Investment management fees (Note 4) | 1,215,390 |
Administrative services fees (Note 4) | 148,819 |
Transfer agent fees (Note 4) | 49,589 |
Trustees' fees (Note 4) | 63,551 |
Professional fees | 80,087 |
Custodian fees | 208,556 |
Registration and filing fees | 4,192 |
Chief compliance officer fees (Note 4) | 17,356 |
Other | 27,219 |
Total expenses | 1,814,759 |
Net investment income | 9,636,036 |
Realized and unrealized gain | |
Net realized gain on investments | 185,613 |
Change in net unrealized appreciation | |
(depreciation) on investments | 463,972 |
Net realized and unrealized gain | 649,585 |
Increase in net assets from operations | $10,285,621 |
The accompanying notes are an integral part of the financial statements.
11 |
John Hancock Collateral Investment Trust
Statements of Changes in Net Assets
Six months | ||
ended | ||
6/30/11 | Year ended | |
Increase (decrease) in net assets | (Unaudited) | 12/31/10 |
From operations | ||
Net investment income | $9,636,036 | $17,283,696 |
Net realized gain (loss) | 185,613 | (47,305) |
Change in net unrealized appreciation | ||
(depreciation) | 463,972 | (1,714,332) |
Increase in net assets resulting from | ||
operations | 10,285,621 | 15,522,059 |
Distributions to shareholders | ||
From net investment income | (9,642,879) | (17,391,310) |
From Fund share transactions (Note 5) | (1,059,046,109) | 1,856,535,067 |
Total increase (decrease) | (1,058,403,367) | 1,854,665,816 |
Net assets | ||
Beginning of period | 6,755,579,729 | 4,900,913,913 |
End of period | $5,697,176,362 | $6,755,579,729 |
Accumulated distributions in excess of net | ||
investment income | ($251,671) | ($244,828) |
The accompanying notes are an integral part of the financial statements.
12 |
John Hancock Collateral Investment Trust
Financial Highlights (For a share outstanding throughout the period)
Period ended | |||||
6-30-111 | 12-31-10 | 12-31-092 | |||
Per share operating performance | |||||
Net asset value, beginning of period | $10.01 | $10.01 | $10.00 | ||
Net investment income3 | 0.01 | 0.03 | 0.02 | ||
Net realized and unrealized gain on | |||||
investments | — | —4 | 0.01 | ||
Total from investment operations | 0.01 | 0.03 | 0.03 | ||
Less distributions | |||||
From net investment income | (0.01) | (0.03) | (0.02) | ||
Net asset value, end of period | $10.01 | $10.01 | $10.01 | ||
Total return (%) | 0.135 | 0.27 | 0.295 | ||
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $5,697 | $6,756 | $4,901 | ||
Ratios (as a percentage of average net | |||||
assets): | |||||
Expenses | 0.056 | 0.06 | 0.096 | ||
Net investment income | 0.276 | 0.27 | 0.296 | ||
Portfolio turnover (%)7 | 69 | 153 | 51 |
1 Semiannual period from 1-1-11 to 6-30-11. Unaudited.
2 Period from 6-1-09 (inception date) to 12-31-09.
3 Based on the average daily shares outstanding.
4 Less than ($0.005) per share.
5 Not annualized.
6 Annualized.
7 The calculation of portfolio turnover excludes amounts from all securities whose maturities or expiration dates at the time of acquisition were one year or less, which represents a significant amount of the investments held by the Fund.
See notes to financial statements
13 |
John Hancock Collateral Investment Trust
Notes to financial statements (unaudited)
Note 1 — Organization
John Hancock Collateral Investment Trust (the Fund) is a Massachusetts business trust organized on May 19, 2009. The Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The Fund is the successor to John Hancock Cash Investment Trust (CIT). Most of the current investors in the Fund are affiliated funds of John Hancock Mutual Funds family of funds. The Fund serves primarily as an investment vehicle for cash collateral received by such affiliated funds for securities lending.
The investment objective of the Fund is to maximize income, while maintaining adequate liquidity, safeguarding the return of principal and minimizing risk of default. The Fund invests only in U.S. dollar denominated securities rated within the two highest short-term credit categories and their unrated equivalents. The Fund is a floating net asset value (NAV) fund and its NAV may fluctuate.
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. 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. 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 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, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
As of June 30, 2011, all investments are categorized as Level 2 under the hierarchy described above. Changes in valuation techniques may result in transfers in or out of an
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assigned level within the disclosure hierarchy. During the six month period ended June 30, 2011, there were no significant transfers in or out of Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Debt obligations, including short term debt investments, 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 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. Debt obligations, for which there are no prices available from an independent pricing service, are valued based on broker quotes or fair valued as determined in good faith by the Fund’s Pricing Committee, following procedures established by the Board of Trustees.
New Accounting Pronouncement. In May 2011, Accounting Standards Update 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued and is effective during interim and annual periods beginning after December 15, 2011. ASU 2011-04 amends Financial Accounting Standards Board (FASB) Topic 820, Fair Value Measurement. The amendments are the result of the work by the FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. Management is currently evaluating the application of ASU 2011-04 and its impact, if any, on the Fund’s financial statements.
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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. 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.
Expenses. 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.
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As of December 31, 2010, 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 net of fee paid to the fund security lending agent, if any, are distributed annually.
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. The final determination of tax characteristics of the Fund's distribution will occur at the end of the year and will subsequently be reported to shareholders.
Capital accounts within 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 Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to 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
Manulife Asset Management (US) LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Placement Agent) performs services related to the offering and sale of shares of the Fund. The Adviser and the Placement Agent are indirect wholly owned subsidiaries of Manulife Financial Corporation.
Management fee. The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.05% of the first $1,500,000,000 of the Fund’s average daily net assets and (b) 0.03% of the Fund’s average daily net assets in excess of $1,500,000,000.
The investment management fees incurred for the six months ended June 30, 2011, were equivalent to an annual effective rate of 0.034% of the Fund’s average daily net assets.
Administrative services. The Fund entered into an Administrative Services Agreement with John Hancock Advisers, LLC (JHA), an affiliate of the Adviser, under which JHA
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provides accounting, valuation, financial reporting and certain other services. As of June 30, 2011, the Fund pays such affiliate, monthly in arrears for these services at a rate of 0.02% of the Fund’s average daily net assets, up to a maximum of $300,000 annually. The administrative service fees incurred for the six month period ended June 30, 2011, were equivalent to an annual effective rate of 0.004% of the Fund’s average daily net asset.
Chief Compliance Officer services. The Fund, as of June 30, 2011, has contracted with the Adviser’s Chief Compliance Officer (CCO) to provide certain services, including ongoing evaluation of the Fund’s Federal Security Law policies and procedures. In addition, the CCO will provide annual reporting to the Board of Trustees detailing the results of this review. The Fund pays an annual flat rate of $35,000 to the Adviser, paid monthly in arrears, for these services.
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Adviser or its affiliates.
Transfer agent fees. The Fund, as of June 30, 2011, has a transfer agent agreement with John Hancock Signature Services, Inc. (Transfer Agent), an affiliate of the Adviser. The Fund pays the Transfer Agent monthly a fee which is based on an annual rate of $100,000. The Fund also pays certain out-of-pocket expenses.
Note 5 - Fund share transactions
Transactions in Fund shares for the six months ended June 30, 2011 and the year ended December 31, 2010 were as follows:
Six months ended | Year ended | ||||
6-30-11 | 12-31-10 | ||||
Shares | Amount | Shares | Amount | ||
Common shares | |||||
Sold | 2,152,951,633 | $21,545,570,231 | 3,572,336,077 | $35,754,481,630 | |
Repurchased | (2,258,771,358) | (22,604,616,340) | (3,386,873,227) | (33,897,946,563) | |
Net increase (decrease) | (105,819,725) | ($1,059,046,109) | 185,462,850 | $1,856,535,067 |
Note 6 - Purchase and sale of securities
Purchases and proceeds from sales or maturities of securities, other than short-term securities, during the six months ended June 30, 2011, aggregated $2,029,470,299 and $1,427,503,099, respectively.
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Evaluation of the Investment Management Contract by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the “Board”) of John Hancock Collateral Investment Trust (the “Trust”) of the Investment Management Contract (the “Management Contract”) between the Trust and Manulife Asset Management (U.S.), LLC (the “Adviser”) that took place at an in-person meeting of the Board of Trustees on January 20, 2011 (the “Meeting”).
Board Considerations
The Board, including the Independent Trustees, considered the continuance of the Management Contract. In considering of the continuance of the Management Contract, the Board considered the following factors:
The Nature, Extent and Quality of Services Provided by the Adviser
The Board considered the high value to the Trust of its relationship with the Adviser, in particular noting the Adviser’s strong reputation in the asset management industry and the skills and competency with which the Adviser has managed the affairs of the Trust and other affiliated funds, together with the Adviser’s investment philosophy, research and investment decision-making process. The Board also particularly noted the experience and performance of the Adviser in managing the Trust, the qualifications of the Adviser’s personnel, the commitment of the Adviser and its personnel to the Trust’s continued successful operation and management and the Adviser’s ability to attract and retain qualified investment professionals, including research, advisory and supervisory personnel.
Additionally, the Board considered the Adviser’s compliance policies and procedures and the Adviser’s record of compliance with those policies and procedures, noting in particular the Adviser’s dedication to its compliance program, the lack of any material compliance incidents and the Adviser’s strong culture of compliance. The Board also considered the Adviser’s administrative capabilities and its demonstrated ability to supervise other service providers for the Trust and to draw upon its many and varied organizational resources and affiliated companies to enhance the services it provides to the Trust.
Advisory Fees, Expenses and Investment Performance of the Trust
The Board considered and received information regarding the advisory fees charged by the Adviser and the other expenses borne by the Trust, including administrative fees, transfer agent fees, custodial fees and other miscellaneous fees and expenses. The Board also considered and received information regarding the Trust’s investment performance for the year ended December 31, 2010. The Board then reviewed and considered comparative advisory fee and performance information for a peer group of fifteen other funds that, like the Trust, are vehicles for the investment of cash collateral from securities lending programs (the “Peer Group”). The Board noted that no members of the Peer Group operated in a manner exactly like the Trust – i.e., as a 1940 Act-registered fund investing in money market instruments and maintaining a floating NAV – but that the members of the Peer Group were sufficiently comparable to the Trust for a meaningful analysis.
The Board noted that the Adviser charged the Trust an advisory fee of 0.05% of the Trust’s first $1.5 billion of average daily net assets and 0.03% of the Trust’s average daily net assets in
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excess of $1.5 billion. The Board recognized that, for the year ended December 31, 2010, this resulted in an effective advisory fee rate of 0.035% of the Trust’s average daily net assets. The Board compared this effective advisory fee rate to the Peer Group, and noted that it was on the low end of the advisory fee rates of the Peer Group, which ranged from no advisory fee to 0.21% of net assets, with a median advisory fee rate of 0.13% of net assets. The Board then further noted that the Trust’s net yield for the year ended December 31, 2010 was 0.27%, which was on the high end of the Peer Group, whose net yields ranged from 0.01% to 0.42%, with a median of 0.18%. There was then a discussion of the fees charged by the Adviser to other non-investment company clients for similar services. It was noted that the fees charged to the Trust compared favorably to the fees charged to such other clients.
Upon reviewing and considering the foregoing information and considering the overall expenses and performance of the Trust over various period and since its inception, the Board concluded that the Adviser’s performance was exemplary, and in particular noted the fact that the Trust achieved a high net yield relative to the Peer Group while the Adviser maintained a low rate of compensation relative to the Peer Group.
Economies of Scale
The Board received and considered general information regarding economies of scale with respect to the management of the Trust, including the Trust’s ability to appropriately benefit from economies of scale under the Trust’s fee structure, which included a breakpoint at $1.5 billion average daily net assets. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s costs are not specific to individual funds, but rather are incurred across a variety of products and services and would generally stem from the Adviser’s common corporate ownership or shared services. To the extent the Board and the Adviser were able to identify actual or potential economies of scale, in order to ensure that any such economies continue to be reasonably shared with the Trust as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the advisory fee rate.
Financial Condition and Profitability of, and Other Benefits to, the Adviser
The Board next received and considered information regarding the Adviser’s estimated net profit margin attributable to its management of the Trust, and noted that the Trust’s affiliated service providers were providing their services based upon estimated costs or for a nominal fee and such affiliated service providers, where applicable, reflected economies of scale in such fees. The Board also considered the Adviser’s views as to its projected profitability in connection with its relationship with the Trust in terms of the total amount of annual management fees it is projected to received with respect to the Trust and whether the Adviser has the financial ability to provide a high level of services to the Trust. The Board further considered the Adviser’s balance sheet as of December 31, 2010 and noted the Adviser’s strong capitalization and financial condition and considered favorably the Adviser’s representation that it sought to reinvest profits and retained earnings in its business.
The Board also received and considered information regarding any additional, indirect or “fall out” benefits to the Adviser as a result of its management of the Trust. The Board noted in particular that the Trust invests in fixed-income money market securities, which are generally
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traded in an over-the-counter market and are generally purchased from the issuer or a primary market maker acting as principal on a net basis with no stated brokerage commission paid by the Trust. The Board recognized that, in these markets, any commission or net markup (or markdown) was implied by the difference or “spread” between the price the dealer purchases the bond for and the price the dealer sells the bond at. In this regard, the Board considered the quality of the execution achieved for the Trust by the Adviser and noted its satisfaction with the Adviser’s performance.
Additionally, the Board considered the Adviser’s representations regarding the receipt of research and other brokerage services from broker-dealers in connection with trades made for the Trust and noted the Adviser’s representation that, due to the nature of the Trust’s investments, the Adviser does not receive research and other brokerage services in connection with trades made for the Trust’s account.
The Board also considered the various other service agreements that the Trust has with the Adviser’s affiliates, including the Service Agreement (for administrative services), the Placement Agency Agreement, the Transfer Agency and Service Agreement and the Chief Compliance Officer Services Agreement. The Board reviewed and considered the terms of each of these agreements and the services provided thereunder, together with the fees charged under these agreements. After reviewing these service arrangements, the Board concluded that each such service agreement was in the best interests of the Trust and its shareholders, that the services performed pursuant to each such service agreement are required for the operation of the Trust, that each such service provider provides services the nature and quality of which are at least equal to those provided by other unaffiliated service providers offering the same or similar services, and that the fees charged under each such service agreement are fair and reasonable in light of the usual and customary charges made by other unaffiliated service providers for services of the same nature and quality.
The Board then concluded that, in light of the costs of providing investment management and other services to the Trust, the profits and other ancillary benefits reported by the Adviser were not unreasonable.
Conclusion
The Board also generally took into account the level and quality of services that the Adviser is capable of providing, as well as the other factors considered, including all of the information presented at the previous meetings of the Trust.
As a result of the above considerations and discussion with management of the Adviser during the Meeting, the Board, though it did not identify one factor as controlling, concluded that: (i) the Adviser may reasonably be expected to perform its services under the Management Contract; (ii) although economies of scale cannot be measured with precision, the management fee breakpoint currently allows shareholders to benefit from economies of scale; and (iii) the Trust’s management fees are generally within a competitive range of those incurred by other comparable funds.
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More information | ||
Trustees | Investment adviser | |
Harlan D. Platt* | Manulife Asset Management (US) LLC | |
John A. Frabotta* | ||
Frank Saeli† | ||
*Member of the Audit Committee | Placement agent | |
†Non-Independent Trustee | John Hancock Funds, LLC | |
Officers | Custodian | |
Barry H. Evans | State Street Bank and Trust Company | |
President and Chief Executive Officer | ||
Carolyn M. Flanagan | Transfer agent | |
Secretary and Chief Legal Officer | John Hancock Signature Services, Inc. | |
William E. Corson | ||
Chief Compliance Officer | Legal counsel | |
Charles A. Rizzo | Skadden, Arps, Slate, Meagher & Flom LLP | |
Chief Financial Officer | ||
Michael J. Leary | Independent registered public accounting firm | |
Treasurer | PricewaterhouseCoopers LLP | |
The report is certified under the Sarbanes-Oxley Act, | ||
which requires mutual funds and other public companies | ||
to affirm that, to the best of their knowledge, the information | ||
in their financial reports is fairly and accurately stated in | ||
all material respects. | ||
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 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 1-800-SEC-0330 to receive information on the operation of the SEC's Public Reference Room.
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ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Governance Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Governance Committee Charter”.
(c)(2) Contact person at the registrant.
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Collateral Investment Trust
By: /s/ Barry H. Evans
Barry H. Evans
President and Chief Executive Officer
Date: August 22, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Barry H. Evans
Barry H. Evans
President and Chief Executive Officer
Date: August 22, 2011
By: /s/ Charles A. Rizzo
Charles A. Rizzo
Chief Financial Officer
Date: August 22, 2011