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- 1677
John Hancock Capital Series
(Exact name of registrant as specified in charter)
200 Berkeley Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
Salvatore Schiavone
Treasurer
200 Berkeley Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4497 | |
Date of fiscal year end: | October 31 |
Date of reporting period: | October 31, 2018 |
ITEM 1. REPORTS TO STOCKHOLDERS.
John Hancock
U.S. Global Leaders Growth Fund
Annual report 10/31/18
A message to shareholders
Dear shareholder,
Financial markets around the world have experienced a meaningful rise in volatility this year, particularly when compared with the unusual calm of 2017. Announcements of new rounds of tariffs and heightened fears of a full-blown trade war with China overshadowed a period of strong economic growth. Despite the uncertainty raised by tariffs and rising inflation and interest rates, the U.S. economy has remained on track.
Short-term uncertainty notwithstanding, the good news is that asset prices of stocks are ultimately driven by company fundamentals—such as balance sheet strength and earnings growth—and those continue to appear extremely supportive. Unemployment sits close to historic lows, consumer confidence is up and trending higher, and the housing market has continued to strengthen, buoyed in part by rising demand. The question for investors as 2018 draws to a close is whether equities will regain their footing in terms of these positives, or will they continue to experience volatility.
Your best resource in unpredictable and volatile markets is your financial advisor, who can help position your portfolio so that it's sufficiently diversified to meet your long-term objectives and to withstand the inevitable turbulence along the way.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to welcome new shareholders and to thank existing shareholders for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and CEO,
John Hancock Investments
Head of Wealth and Asset Management,
United States and Europe
This commentary reflects the CEO's views, which are subject to change at any time. Investing involves risks, including the potential loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. It is not possible to invest directly in an index. For more up-to-date information, please visit our website at jhinvestments.com.
John Hancock
U.S. Global Leaders Growth Fund
Table of contents
2 | Your fund at a glance | |
4 | Discussion of fund performance | |
8 | A look at performance | |
10 | Your expenses | |
12 | Fund's investments | |
14 | Financial statements | |
17 | Financial highlights | |
23 | Notes to financial statements | |
29 | Report of independent registered public accounting firm | |
30 | Tax information | |
31 | Continuation of investment advisory agreement and approval of subadvisory agreement | |
38 | Trustees and Officers | |
42 | Shareholder meeting | |
43 | More information |
INVESTMENT OBJECTIVE
The fund seeks long-term growth of capital.
AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/18 (%)
The Russell 1000 Growth Index is an unmanaged index of companies in the Russell 1000 Index (the 1,000 largest U.S. publicly traded companies) with high price-to-book ratios and higher forecasted growth values.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST TWELVE MONTHS
Stocks rallied as market volatility increased
U.S. stocks rallied amid a strengthening economy and healthy corporate earnings growth, while rising interest rates and intensifying global trade tensions led to an uptick in market volatility.
The fund posted strong results
The fund's double-digit gain outpaced the broader U.S. equity market and its benchmark, the Russell 1000 Growth Index.
Sector allocation and stock selection drove outperformance
An overweight position in the consumer discretionary sector and stock selection in the information technology and materials sectors contributed the most to the outperformance.
SECTOR COMPOSITION AS OF 10/31/18 (%)
A note about risks
The fund is subject to various risks as described in the fund's prospectus. For more information, please refer to the "Principal risks" section of the prospectus.
An interview with Portfolio Manager Gordon M. Marchand, CPA, CFA, CIC, Sustainable Growth Advisers, LP
Gordon M. Marchand, CPA, CFA, CIC
Portfolio Manager
Sustainable Growth Advisors
Can you discuss the U.S. stock market environment during the 12 months ended October 31, 2018?
U.S. stocks posted solid gains for the period in an environment of increasing market volatility. Stocks rallied thanks to robust economic growth, high consumer and business confidence, and expectations that recent tax cuts and regulatory reform would spur further improvements in economic activity. These factors led to strong corporate earnings growth, which in turn contributed to the advance in the U.S. equity market.
Despite the positive overall returns, stocks experienced two significant declines during the reporting period—one in early 2018 and another during the last six weeks of the period—and a meaningful increase in day-to-day market volatility. Concerns about rising interest rates (the U.S. Federal Reserve continued to normalize monetary policy by raising short-term interest rates four times in the past year), slowing economic growth outside of the United States, escalating trade tensions between the United States and China, and geopolitical developments in Turkey and Iran were contributing factors to the higher levels of market volatility.
For the 12-month period, the broad S&P 500 Index returned 7.35%. Growth stocks outperformed, with the fund's benchmark, the Russell 1000 Growth Index, returning 10.71%. On a sector basis, the economically sensitive information technology and consumer discretionary sectors led the market's advance.
How did the fund perform in this environment?
The fund outperformed its benchmark for the reporting period. Increased equity market volatility has historically been favorable for our investment approach, which emphasizes superior business quality, predictable revenue streams, high cash flow generation, and attractive valuations for the businesses in which we invest. Our investment approach tends to shine in an environment where investors differentiate more between individual stocks, as they often do in periods of uncertainty and volatility.
What holdings contributed the most to the fund's outperformance?
Discount clothing retailer TJX Companies, Inc. was a key contributor. The company continued to acquire products from vendors that have overproduced and e-commerce brands that have misgauged consumer demand. These inexpensive sources of inventory helped boost profit margins for TJX. The company also invested in supply chain and distribution system improvements that should enhance the company's competitive position going forward.
Another leading individual contributor was apparel maker NIKE, Inc., which benefited from robust sales growth outside of the United States, particularly in China, and a series of successful new product launches. In addition, the company's increased emphasis on e-commerce sales, both directly to consumers and through online partners, helped drive higher revenues and improving profit margins.
The fund's holdings in the information technology sector were also meaningful contributors to relative results, led by open source software provider Red Hat, Inc. The company continued to derive significant revenue growth from subscriptions to its hybrid cloud platform. Late in the reporting period, Red Hat agreed to be acquired by IT services company International Business Machines, Inc. (not held by the fund), leading to further share price gains.
TOP 10 HOLDINGS AS OF 10/31/18 (%)
Yum! Brands, Inc. | 4.6 |
Ecolab, Inc. | 4.3 |
UnitedHealth Group, Inc. | 4.3 |
Visa, Inc., Class A | 4.2 |
Alphabet, Inc., Class C | 4.1 |
Autodesk, Inc. | 4.1 |
Amazon.com, Inc. | 4.1 |
Microsoft Corp. | 4.0 |
The Walt Disney Company | 3.8 |
Equinix, Inc. | 3.8 |
TOTAL | 41.3 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
Shifting gears, what fund holdings detracted from performance?
Fund holdings in the energy and real estate sectors detracted the most. In the energy sector, energy equipment and services provider Schlumberger, Ltd. weighed on performance. A lack of pipeline capacity contributed to a temporary slowdown in North American oilfield production in mid-2018, resulting in reduced demand for oil equipment and services. Uncertainty related to trade tariffs and their impact on global economic growth going forward put further downward pressure on the energy sector. We added to the fund's position in Schlumberger on weakness as we expect to see growing capital spending in the energy sector in 2019 after years of underinvestment, particularly from international oil companies.
Data center operator Equinix, Inc., the fund's sole holding in the real estate sector, was also a meaningful detractor. The company is well positioned to benefit from the continued growth of cloud computing, but acquisition integration costs and a stronger U.S. dollar weighed on Equinix's earnings during the reporting period. An unexpected leadership change also affected the stock's performance.
Biotechnology firm Regeneron Pharmaceuticals, Inc. was another detractor from relative results. The stock underperformed as investors expressed concern about a more challenging competitive environment for Eylea, a medication that treats a leading cause of vision loss. We believe Eylea will remain an important product for Regeneron, and we also see promising prospects in the company's pipeline of new products.
What changes did you make to the portfolio during the reporting period?
Market volatility frequently provides us with opportunities to upgrade the quality and growth potential of the portfolio, and the last 12 months were no exception. We eliminated seven stocks from the portfolio during the period in order to fund more attractive growth opportunities elsewhere.
Examples of better growth opportunities can be found in the seven new holdings added. In our last report six months ago, we discussed four of those holdings—media and entertainment company The Walt Disney Company, restaurant chain Yum! Brands, Inc., specialty gas provider Praxair, Inc. (now Linde PLC after a recent merger), and medical technology company Becton Dickinson and Company—all of which generate substantial recurring revenues in their respective businesses.
More recent new holdings include technology giant Microsoft Corp., beauty products maker The Estee Lauder Companies, Inc., and healthcare products company Abbott Laboratories. Microsoft has expanded the scope of its future growth prospects thanks to the success of its cloud computing service, and the company has also improved its financial discipline, leading to improving profit margins. Estee Lauder has a strong portfolio of prestige beauty products that generate recurring revenues through a variety of global sales channels. Abbott Labs is poised to benefit from the
addition of new higher-growth products from its development pipeline, as well as strong demographic trends and rising consumer demand.
How was the fund positioned at the end of the reporting period?
The fund's largest sector weightings, which are driven entirely by individual security selection, remained in the consumer discretionary, information technology, and healthcare sectors. Going forward, we expect to see greater differentiation between businesses as the unprecedented monetary accommodation of the last decade continues to recede. Business quality and considerations of underlying risk, which were overshadowed by accommodative monetary policy, are beginning to matter more as rising financing costs put pressure on subpar businesses that thrived in the easy-money era. While the transition won't be linear, we strongly believe that this trend is securely in place, and slowing global economic growth and trade tensions will continue to drive the shift toward increased differentiation by investors.
Can you discuss a recent organizational change?
On July 1, 2018, Virtus Investment Partners, Inc. purchased a majority investment in Sustainable Growth Advisers. The change in control had no effect on the objectives of the fund or the personnel who manage it.
MANAGED BY
George P. Fraise On the fund since 2000 Investing since 1987 | |
Gordon M. Marchand, CPA, CFA, CIC On the fund since 1995 Investing since 1977 | |
Robert L. Rohn On the fund since 2003 Investing since 1983 |
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2018
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||
1-year | 5-year | 10-year | 5-year | 10-year | |||
Class A | 6.51 | 9.80 | 13.26 | 59.59 | 247.36 | ||
Class B | 6.28 | 9.83 | 13.16 | 59.80 | 244.32 | ||
Class C | 10.28 | 10.10 | 13.00 | 61.81 | 239.33 | ||
Class I1 | 12.37 | 11.21 | 14.22 | 70.12 | 278.05 | ||
Class R21,2 | 11.95 | 10.77 | 13.78 | 66.77 | 263.48 | ||
Class R61,2 | 12.50 | 11.34 | 14.16 | 71.08 | 275.87 | ||
Index 1† | 10.71 | 13.43 | 15.45 | 87.80 | 320.82 | ||
Index 2† | 7.35 | 11.34 | 13.24 | 71.11 | 246.68 |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 5% and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The Class B shares' CDSC declines annually between years 1 to 6 according to the following schedule: 5%, 4%, 3%, 3%, 2%, 1%. No sales charge will be assessed after the sixth year. Class C shares sold within one year of purchase are subject to a 1% CDSC. Sales charges are not applicable to Class I, Class R2, and Class R6 shares.
The expense ratios of the fund, both net (including any fee waivers and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectus for the fund and may differ from those disclosed in the Financial highlights tables in this report. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R2 | Class R6 | ||
Gross/Net (%) | 1.17 | 1.92 | 1.92 | 0.91 | 1.32 | 0.82 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index 1 is the Russell 1000 Growth Index; Index 2 is the S&P 500 Index. |
See the following page for footnotes.
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock U.S. Global Leaders Growth Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in two separate indexes.
The Russell 1000 Growth Index is an unmanaged index of companies in the Russell 1000 Index (the 1,000 largest U.S. publicly traded companies) with high price-to-book ratios and higher forecasted growth values.
The S&P 500 Index is an unmanaged index that includes 500 widely traded common stocks.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would result in lower returns.
Footnotes related to performance pages
1 | For certain types of investors, as described in the fund's prospectus. |
2 | Class R2 and Class R6 shares were first offered on 3-1-12 and 9-1-11, respectively. Returns prior to these dates are those of Class A shares that have not been adjusted for class-specific expenses; otherwise, returns would vary. |
3 | The contingent deferred sales charge is not applicable. |
Your expenses |
10 | JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND | ANNUAL REPORT |
Account value on 5-1-2018 | Ending value on 10-31-2018 | Expenses paid during period ended 10-31-20181 | Annualized expense ratio | ||
Class A | Actual expenses/actual returns | $1,000.00 | $1,047.90 | $5.94 | 1.15% |
Hypothetical example | 1,000.00 | 1,019.40 | 5.85 | 1.15% | |
Class B | Actual expenses/actual returns | 1,000.00 | 1,043.90 | 9.79 | 1.90% |
Hypothetical example | 1,000.00 | 1,015.60 | 9.65 | 1.90% | |
Class C | Actual expenses/actual returns | 1,000.00 | 1,043.90 | 9.79 | 1.90% |
Hypothetical example | 1,000.00 | 1,015.60 | 9.65 | 1.90% | |
Class I | Actual expenses/actual returns | 1,000.00 | 1,049.00 | 4.75 | 0.92% |
Hypothetical example | 1,000.00 | 1,020.60 | 4.69 | 0.92% | |
Class R2 | Actual expenses/actual returns | 1,000.00 | 1,047.10 | 6.66 | 1.29% |
Hypothetical example | 1,000.00 | 1,018.70 | 6.56 | 1.29% | |
Class R6 | Actual expenses/actual returns | 1,000.00 | 1,049.80 | 4.18 | 0.81% |
Hypothetical example | 1,000.00 | 1,021.10 | 4.13 | 0.81% |
1 | Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
ANNUAL REPORT | JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND | 11 |
Fund’s investments |
Shares | Value | ||||
Common stocks 97.7% | $1,498,229,423 | ||||
(Cost $1,069,337,271) | |||||
Communication services 7.9% | 121,892,535 | ||||
Entertainment 3.8% | |||||
The Walt Disney Company | 510,057 | 58,569,845 | |||
Interactive media and services 4.1% | |||||
Alphabet, Inc., Class C (A) | 58,808 | 63,322,690 | |||
Consumer discretionary 23.9% | 366,415,067 | ||||
Hotels, restaurants and leisure 4.6% | |||||
Yum! Brands, Inc. | 788,014 | 71,244,344 | |||
Internet and direct marketing retail 7.0% | |||||
Amazon.com, Inc. (A) | 39,139 | 62,544,513 | |||
Booking Holdings, Inc. (A) | 23,521 | 44,091,996 | |||
Specialty retail 8.8% | |||||
Lowe's Companies, Inc. | 467,813 | 44,545,154 | |||
The TJX Companies, Inc. | 508,208 | 55,841,895 | |||
Ulta Beauty, Inc. (A) | 124,609 | 34,207,663 | |||
Textiles, apparel and luxury goods 3.5% | |||||
NIKE, Inc., Class B | 718,810 | 53,939,502 | |||
Consumer staples 6.3% | 97,322,464 | ||||
Food products 3.0% | |||||
Mondelez International, Inc., Class A | 1,121,042 | 47,061,343 | |||
Personal products 3.3% | |||||
The Estee Lauder Companies, Inc., Class A | 365,695 | 50,261,121 | |||
Energy 3.5% | 53,212,421 | ||||
Energy equipment and services 3.5% | |||||
Schlumberger, Ltd. | 1,037,077 | 53,212,421 | |||
Health care 17.3% | 264,706,719 | ||||
Biotechnology 3.4% | |||||
Regeneron Pharmaceuticals, Inc. (A) | 155,578 | 52,778,281 | |||
Health care equipment and supplies 6.5% | |||||
Abbott Laboratories | 769,268 | 53,033,336 | |||
Becton, Dickinson and Company | 202,633 | 46,706,907 | |||
Health care providers and services 4.3% | |||||
UnitedHealth Group, Inc. | 249,565 | 65,223,813 | |||
Pharmaceuticals 3.1% | |||||
Novo Nordisk A/S, ADR | 1,087,642 | 46,964,382 |
12 | JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Shares | Value | ||||
Information technology 27.5% | $421,731,932 | ||||
IT services 13.9% | |||||
Alliance Data Systems Corp. | 191,558 | 39,495,428 | |||
Automatic Data Processing, Inc. | 366,030 | 52,737,602 | |||
FleetCor Technologies, Inc. (A) | 278,561 | 55,720,557 | |||
Visa, Inc., Class A | 470,029 | 64,793,498 | |||
Software 13.6% | |||||
Autodesk, Inc. (A) | 489,425 | 63,258,181 | |||
Microsoft Corp. | 569,191 | 60,795,291 | |||
Red Hat, Inc. (A) | 174,478 | 29,947,404 | |||
salesforce.com, Inc. (A) | 400,641 | 54,983,971 | |||
Materials 7.5% | 114,961,297 | ||||
Chemicals 7.5% | |||||
Ecolab, Inc. | 431,644 | 66,106,279 | |||
Linde PLC | 295,250 | 48,855,018 | |||
Real estate 3.8% | 57,986,988 | ||||
Equity real estate investment trusts 3.8% | |||||
Equinix, Inc. | 153,105 | 57,986,988 | |||
Yield (%) | Shares | Value | |||
Short-term investments 3.4% | $52,488,784 | ||||
(Cost $52,488,784) | |||||
Money market funds 3.4% | 52,488,784 | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 2.0858(B) | 52,488,784 | 52,488,784 |
Total investments (Cost $1,121,826,055) 101.1% | $1,550,718,207 | ||||
Other assets and liabilities, net (1.1%) | (16,565,437) | ||||
Total net assets 100.0% | $1,534,152,770 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund. | |
Security Abbreviations and Legend | |
ADR | American Depositary Receipt |
(A) | Non-income producing security. |
(B) | The rate shown is the annualized seven-day yield as of 10-31-18. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK U.S. GLOBAL LEADERS GROWTH FUND | 13 |
Financial statements |
Assets | |
Unaffiliated investments, at value (Cost $1,121,826,055) | $1,550,718,207 |
Dividends and interest receivable | 777,437 |
Receivable for fund shares sold | 2,185,239 |
Receivable for investments sold | 41,583,212 |
Other assets | 87,662 |
Total assets | 1,595,351,757 |
Liabilities | |
Due to custodian | 41,583,212 |
Payable for investments purchased | 15,971,933 |
Payable for fund shares repurchased | 1,840,277 |
Payable to affiliates | |
Investment management fees | 967,715 |
Accounting and legal services fees | 170,376 |
Transfer agent fees | 139,786 |
Distribution and service fees | 204,333 |
Trustees' fees | 771 |
Other liabilities and accrued expenses | 320,584 |
Total liabilities | 61,198,987 |
Net assets | $1,534,152,770 |
Net assets consist of | |
Paid-in capital | $939,999,879 |
Accumulated distributable earnings (accumulated loss) | 594,152,891 |
Net assets | $1,534,152,770 |
Net asset value per share | |
Based on net asset value and shares outstanding - the fund has an unlimited number of shares authorized with no par value | |
Class A ($612,125,916 ÷ 12,426,309 shares)1 | $49.26 |
Class B ($12,867,149 ÷ 309,532 shares)1 | $41.57 |
Class C ($69,747,776 ÷ 1,677,097 shares)1 | $41.59 |
Class I ($694,358,662 ÷ 13,134,647 shares) | $52.86 |
Class R2 ($2,268,210 ÷ 43,785 shares) | $51.80 |
Class R6 ($142,785,057 ÷ 2,685,677 shares) | $53.17 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $51.85 |
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 | JOHN HANCOCK U.S. Global Leaders Growth Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Investment income | |
Dividends | $15,091,566 |
Interest | 546,966 |
Securities lending | 119,842 |
Less foreign taxes withheld | (408,547) |
Total investment income | 15,349,827 |
Expenses | |
Investment management fees | 11,115,764 |
Distribution and service fees | 2,572,750 |
Accounting and legal services fees | 330,235 |
Transfer agent fees | 1,581,165 |
Trustees' fees | 22,650 |
Custodian fees | 193,824 |
State registration fees | 175,658 |
Printing and postage | 237,805 |
Professional fees | 77,770 |
Other | 48,402 |
Total expenses | 16,356,023 |
Less expense reductions | (128,930) |
Net expenses | 16,227,093 |
Net investment loss | (877,266) |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Unaffiliated investments | 184,862,998 |
Affiliated investments | (6,699) |
184,856,299 | |
Change in net unrealized appreciation (depreciation) of | |
Unaffiliated investments | (13,251,497) |
Affiliated investments | (838) |
(13,252,335) | |
Net realized and unrealized gain | 171,603,964 |
Increase in net assets from operations | $170,726,698 |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK U.S. Global Leaders Growth Fund | 15 |
Year ended 10-31-18 | Year ended 10-31-17 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment loss | $(877,266) | $(1,047,544) |
Net realized gain | 184,856,299 | 100,999,283 |
Change in net unrealized appreciation (depreciation) | (13,252,335) | 142,938,280 |
Increase in net assets resulting from operations | 170,726,698 | 242,890,019 |
Distributions to shareholders | ||
From net investment income and net realized gain | ||
Class A | (40,115,324) | — |
Class B | (1,232,810) | — |
Class C | (8,254,625) | — |
Class I | (42,870,457) | — |
Class R2 | (354,874) | — |
Class R6 | (7,877,251) | — |
From net realized gain | ||
Class A | — | (30,348,038) |
Class B | — | (1,064,374) |
Class C | — | (6,633,373) |
Class I | — | (15,554,816) |
Class R2 | — | (299,904) |
Class R6 | — | (253,662) |
Total distributions | (100,705,341) | (54,154,167) |
From fund share transactions | 6,463,786 | 200,952,038 |
Total increase | 76,485,143 | 389,687,890 |
Net assets | ||
Beginning of year | 1,457,667,627 | 1,067,979,737 |
End of year1 | $1,534,152,770 | $1,457,667,627 |
1 | Net assets - End of year includes undistributed net investment income of $0 in 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018. |
16 | JOHN HANCOCK U.S. Global Leaders Growth Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Financial highlights |
CLASS A SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $47.15 | $41.00 | $43.87 | $45.02 | $42.25 |
Net investment income (loss)1 | (0.07) | (0.05) | (0.03) | 0.07 | 0.11 |
Net realized and unrealized gain (loss) on investments | 5.51 | 8.31 | (0.13) | 4.98 | 3.90 |
Total from investment operations | 5.44 | 8.26 | (0.16) | 5.05 | 4.01 |
Less distributions | |||||
From net investment income | — | — | (0.04) | (0.10) | (0.03) |
From net realized gain | (3.33) | (2.11) | (2.67) | (6.10) | (1.21) |
Total distributions | (3.33) | (2.11) | (2.71) | (6.20) | (1.24) |
Net asset value, end of period | $49.26 | $47.15 | $41.00 | $43.87 | $45.02 |
Total return (%)2,3 | 12.11 | 21.12 | (0.42) | 13.19 | 9.74 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $612 | $577 | $608 | $660 | $600 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.16 | 1.17 | 1.18 | 1.18 | 1.19 |
Expenses including reductions | 1.15 | 1.16 | 1.17 | 1.17 | 1.18 |
Net investment income (loss) | (0.14) | (0.12) | (0.07) | 0.16 | 0.27 |
Portfolio turnover (%) | 42 | 41 | 44 | 30 | 43 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Does not reflect the effect of sales charges, if any. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK U.S. Global Leaders Growth Fund | 17 |
CLASS B SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $40.57 | $35.82 | $38.90 | $40.80 | $38.65 |
Net investment loss1 | (0.37) | (0.32) | (0.29) | (0.22) | (0.19) |
Net realized and unrealized gain (loss) on investments | 4.70 | 7.18 | (0.12) | 4.42 | 3.55 |
Total from investment operations | 4.33 | 6.86 | (0.41) | 4.20 | 3.36 |
Less distributions | |||||
From net realized gain | (3.33) | (2.11) | (2.67) | (6.10) | (1.21) |
Net asset value, end of period | $41.57 | $40.57 | $35.82 | $38.90 | $40.80 |
Total return (%)2,3 | 11.28 | 20.22 | (1.16) | 12.33 | 8.93 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $13 | $16 | $19 | $24 | $27 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.91 | 1.92 | 1.93 | 1.93 | 1.94 |
Expenses including reductions | 1.90 | 1.91 | 1.92 | 1.92 | 1.93 |
Net investment loss | (0.89) | (0.86) | (0.82) | (0.60) | (0.48) |
Portfolio turnover (%) | 42 | 41 | 44 | 30 | 43 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Does not reflect the effect of sales charges, if any. |
18 | JOHN HANCOCK U.S. Global Leaders Growth Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
CLASS C SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $40.59 | $35.84 | $38.92 | $40.81 | $38.66 |
Net investment loss1 | (0.37) | (0.32) | (0.29) | (0.22) | (0.19) |
Net realized and unrealized gain (loss) on investments | 4.70 | 7.18 | (0.12) | 4.43 | 3.55 |
Total from investment operations | 4.33 | 6.86 | (0.41) | 4.21 | 3.36 |
Less distributions | |||||
From net realized gain | (3.33) | (2.11) | (2.67) | (6.10) | (1.21) |
Net asset value, end of period | $41.59 | $40.59 | $35.84 | $38.92 | $40.81 |
Total return (%)2,3 | 11.28 | 20.21 | (1.16) | 12.36 | 8.92 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $70 | $102 | $117 | $136 | $133 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.91 | 1.92 | 1.93 | 1.93 | 1.94 |
Expenses including reductions | 1.90 | 1.91 | 1.92 | 1.92 | 1.93 |
Net investment loss | (0.91) | (0.86) | (0.82) | (0.59) | (0.48) |
Portfolio turnover (%) | 42 | 41 | 44 | 30 | 43 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Does not reflect the effect of sales charges, if any. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK U.S. Global Leaders Growth Fund | 19 |
CLASS I SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $50.25 | $43.45 | $46.27 | $47.12 | $44.12 |
Net investment income1 | 0.05 | 0.06 | 0.08 | 0.18 | 0.24 |
Net realized and unrealized gain (loss) on investments | 5.89 | 8.85 | (0.13) | 5.25 | 4.07 |
Total from investment operations | 5.94 | 8.91 | (0.05) | 5.43 | 4.31 |
Less distributions | |||||
From net investment income | — | — | (0.10) | (0.18) | (0.10) |
From net realized gain | (3.33) | (2.11) | (2.67) | (6.10) | (1.21) |
Total distributions | (3.33) | (2.11) | (2.77) | (6.28) | (1.31) |
Net asset value, end of period | $52.86 | $50.25 | $43.45 | $46.27 | $47.12 |
Total return (%)2 | 12.37 | 21.44 | (0.14) | 13.48 | 10.01 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $694 | $751 | $313 | $293 | $317 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.92 | 0.91 | 0.92 | 0.91 | 0.93 |
Expenses including reductions | 0.91 | 0.90 | 0.91 | 0.91 | 0.92 |
Net investment income | 0.09 | 0.13 | 0.19 | 0.41 | 0.53 |
Portfolio turnover (%) | 42 | 41 | 44 | 30 | 43 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
20 | JOHN HANCOCK U.S. Global Leaders Growth Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
CLASS R2 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $49.48 | $42.99 | $45.89 | $46.82 | $43.93 |
Net investment income (loss)1 | (0.14) | (0.12) | (0.09) | (0.05) | 0.06 |
Net realized and unrealized gain (loss) on investments | 5.79 | 8.72 | (0.13) | 5.27 | 4.06 |
Total from investment operations | 5.65 | 8.60 | (0.22) | 5.22 | 4.12 |
Less distributions | |||||
From net investment income | — | — | (0.01) | (0.05) | (0.02) |
From net realized gain | (3.33) | (2.11) | (2.67) | (6.10) | (1.21) |
Total distributions | (3.33) | (2.11) | (2.68) | (6.15) | (1.23) |
Net asset value, end of period | $51.80 | $49.48 | $42.99 | $45.89 | $46.82 |
Total return (%)2 | 11.95 | 20.93 | (0.54) | 13.01 | 9.59 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $2 | $5 | $6 | $8 | $34 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.30 | 1.31 | 1.32 | 1.30 | 1.33 |
Expenses including reductions | 1.29 | 1.30 | 1.32 | 1.29 | 1.32 |
Net investment income (loss) | (0.28) | (0.26) | (0.21) | (0.11) | 0.13 |
Portfolio turnover (%) | 42 | 41 | 44 | 30 | 43 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK U.S. Global Leaders Growth Fund | 21 |
CLASS R6 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $50.47 | $43.59 | $46.39 | $47.23 | $44.19 |
Net investment income1 | 0.11 | 0.11 | 0.13 | 0.24 | 0.28 |
Net realized and unrealized gain (loss) on investments | 5.92 | 8.88 | (0.13) | 5.25 | 4.09 |
Total from investment operations | 6.03 | 8.99 | — | 5.49 | 4.37 |
Less distributions | |||||
From net investment income | — | — | (0.13) | (0.23) | (0.12) |
From net realized gain | (3.33) | (2.11) | (2.67) | (6.10) | (1.21) |
Total distributions | (3.33) | (2.11) | (2.80) | (6.33) | (1.33) |
Net asset value, end of period | $53.17 | $50.47 | $43.59 | $46.39 | $47.23 |
Total return (%)2 | 12.50 | 21.56 | (0.03) | 13.61 | 10.15 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $143 | $6 | $5 | $6 | $4 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.81 | 0.82 | 0.82 | 0.82 | 0.83 |
Expenses including reductions | 0.80 | 0.80 | 0.80 | 0.80 | 0.80 |
Net investment income | 0.21 | 0.23 | 0.30 | 0.55 | 0.64 |
Portfolio turnover (%) | 42 | 41 | 44 | 30 | 43 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
22 | JOHN HANCOCK U.S. Global Leaders Growth Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Note 1 — Organization
John Hancock U.S. Global Leaders Growth Fund (the fund) is a series of John Hancock Capital Series (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to seek long-term growth of capital.
The fund may offer multiple classes of shares. The shares currently outstanding are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions and certain investors. Class R2 shares are available only to certain retirement and 529 plans. Class R6 shares are only available to certain retirement plans, institutions and other investors. Class B shares convert to Class A shares eight years after purchase. Class C shares convert to Class A shares ten years after purchase (certain exclusions may apply). Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures.
In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market where the security trades. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. Investments by the fund in open-end mutual funds are valued at their respective NAVs each business day.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market. Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund's Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund's own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of October 31, 2018, all investments are categorized as Level 1 under the hierarchy described above.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily NAV calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Real estate investment trusts. The fund may invest in real estate investment trusts (REITs). Distributions from REITs may be recorded as income and subsequently characterized by the REIT at the end of the fiscal year as a reduction of cost of investments and/or as a realized gain. As a result, the fund will estimate the components of distributions from these securities. Such estimates are revised when the actual components of the distributions are known.
Securities lending. The fund may lend its securities to earn additional income. The fund receives cash collateral from the borrower in an amount not less than the market value of the loaned securities. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The fund will invest its collateral in JHCT, an affiliate of the fund, which has a floating NAV and is registered with the Securities and Exchange Commission as an investment company. JHCT invests in short-term money market investments. The fund will receive the benefit of any gains and bear any losses generated by JHCT with respect to the cash collateral.
The fund has the right to recall loaned securities on demand. If a borrower fails to return loaned securities when due, then the lending agent is responsible and indemnifies the fund for the lent securities. The lending agent uses the collateral received from the borrower to purchase replacement securities of the same issue, type, class and series of the loaned securities. If the value of the collateral is less than the purchase cost of replacement securities, the lending agent is responsible for satisfying the shortfall but only to the extent that the shortfall is not due to any decrease in the value of JHCT.
Although the risk of the loss of the securities lent is mitigated by receiving collateral from the borrower and through lending agent indemnification, the fund could experience a delay in recovering securities or could experience a lower than expected return if the borrower fails to return the securities on a timely basis. The fund receives compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Securities lending income received by the fund is net of fees retained by the securities lending agent. Net income received from JHCT is a component of securities lending income as recorded on the Statement of operations. As of October 31, 2018, there were no securities on loan.
Foreign taxes. The fund may be subject to withholding tax on income, capital gains or repatriation taxes imposed by certain countries, a portion of which may be recoverable. Foreign taxes are accrued based upon the fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Taxes are accrued based on gains realized by the fund as a result of certain foreign security sales. In certain circumstances, estimated taxes are accrued based on unrealized appreciation of such securities. Investment income is recorded net of foreign withholding taxes.
Line of credit. The fund may have the ability to borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund's custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the extent of any overdraft, and to the maximum extent permitted by law. Overdrafts at period end are presented under the caption Due to custodian in the Statement of assets and liabilities.
The fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $750 million unsecured committed line of credit. Excluding commitments designated for a certain fund and subject to the needs of all other affiliated funds, the fund can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. A commitment fee payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. For the year ended October 31, 2018, the fund had no borrowings under the line of credit. Commitment fees for the year ended October 31, 2018 were $4,557.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund's relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees, for all classes, are charged daily at the class level based on the net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of October 31, 2018, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually.
The tax character of distributions for the years ended October 31, 2018 and 2017 was as follows:
October 31, 2018 | October 31, 2017 | |
Ordinary income | $41,707,086 | $9,952,088 |
Long-term capital gains | 58,998,255 | 44,202,079 |
Total | $100,705,341 | $54,154,167 |
Distributions paid by the fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of October 31, 2018, the components of distributable earnings on a tax basis consisted of $7,697,388 of undistributed ordinary income and $160,272,169 of undistributed long-term capital gains.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in the fund's financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to net operating losses, treating a portion of the proceeds from redemptions as distributions for tax purposes and wash sale loss deferrals.
Note 3 — Guarantees and indemnifications
Under the Trust's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment advisor for the fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a monthly management fee to the Advisor equivalent on an annual basis to the sum of: (a) 0.75% of the first $500 million of the fund's
average daily net assets; (b) 0.73% of the next $500 million of the fund's average daily net assets; (c) 0.71% of the next $1 billion of the fund's average daily net assets; (d) 0.70% of the next $3 billion of the fund's average daily net assets; and (e) 0.65% of the fund's average daily net assets in excess of $5 billion. The Advisor has a subadvisory agreement with Sustainable Growth Advisers, LP. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the year ended October 31, 2018, this waiver amounted to 0.01% of the fund's average net assets. This agreement expires on June 30, 2020, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
For the year ended October 31, 2018, the expense reductions described above amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $51,334 | Class R2 | $285 | |
Class B | 1,230 | Class R6 | 11,369 | |
Class C | 7,575 | Total | $128,930 | |
Class I | 57,137 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursement as described above, incurred for the year ended October 31, 2018 were equivalent to a net annual effective rate of 0.72% of the fund's average daily net assets.
Accounting and legal services. Pursuant to the Accounting and Legal Services Agreement the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, compliance, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended October 31, 2018 amounted to an annual rate of 0.02% of the fund's average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B, Class C 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. In addition, under a service plan for Class R2 shares, the fund pays for certain other services. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund's shares.
Class | Rule 12b-1 fee | Service fee | Class | Rule 12b-1 fee | Service fee | |
Class A | 0.25% | — | Class C | 1.00% | — | |
Class B | 1.00% | — | Class R2 | 0.25% | 0.25% |
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $531,875 for the year ended October 31, 2018. Of this amount, $88,636 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $426,162 was paid as sales commissions to broker-dealers and $17,077 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended October 31, 2018, CDSCs received by the Distributor amounted to $5,120, $6,919 and $3,441 for Class A, Class B and Class C shares, respectively.
Transfer agent fees. The John Hancock group of funds has a complex-wide transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Share Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the year ended October 31, 2018 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $1,516,520 | $653,868 |
Class B | 145,307 | 15,647 |
Class C | 894,536 | 96,243 |
Class I | — | 798,426 |
Class R2 | 16,387 | 411 |
Class R6 | — | 16,570 |
Total | $2,572,750 | $1,581,165 |
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to the fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the years ended October 31, 2018 and 2017 were as follows:
Year ended 10-31-18 | Year ended 10-31-17 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 1,728,175 | $83,523,760 | 1,650,569 | $71,553,086 | ||||||||||||||||||||||
Distributions reinvested | 842,616 | 38,431,702 | 741,848 | 29,399,464 | ||||||||||||||||||||||
Repurchased | (2,391,458 | ) | (115,390,942 | ) | (4,975,171 | ) | (211,142,536 | ) | ||||||||||||||||||
Net increase (decrease) | 179,333 | $6,564,520 | (2,582,754 | ) | $(110,189,986 | ) | ||||||||||||||||||||
Class B shares | ||||||||||||||||||||||||||
Sold | 9,909 | $407,228 | 10,974 | $413,702 | ||||||||||||||||||||||
Distributions reinvested | 29,529 | 1,143,957 | 28,642 | 982,997 | ||||||||||||||||||||||
Repurchased | (113,601 | ) | (4,648,778 | ) | (180,095 | ) | (6,728,361 | ) | ||||||||||||||||||
Net decrease | (74,163 | ) | $(3,097,593 | ) | (140,479 | ) | $(5,331,662 | ) | ||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 178,632 | $7,356,278 | 248,122 | $9,281,668 | ||||||||||||||||||||||
Distributions reinvested | 201,802 | 7,821,856 | 163,819 | 5,625,549 | ||||||||||||||||||||||
Repurchased | (1,228,507 | ) | (50,092,307 | ) | (1,150,876 | ) | (43,215,342 | ) | ||||||||||||||||||
Net decrease | (848,073 | ) | $(34,914,173 | ) | (738,935 | ) | $(28,308,125 | ) |
Year ended 10-31-18 | Year ended 10-31-17 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 5,104,265 | $266,498,529 | 12,795,709 | $581,560,007 | ||||||||||||||||||||||
Distributions reinvested | 844,360 | 41,246,991 | 323,792 | 13,644,599 | ||||||||||||||||||||||
Repurchased | (7,761,361 | ) | (396,298,832 | ) | (5,369,963 | ) | (248,528,151 | ) | ||||||||||||||||||
Net increase (decrease) | (1,812,736 | ) | $(88,553,312 | ) | 7,749,538 | $346,676,455 | ||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 15,755 | $780,375 | 40,931 | $1,805,950 | ||||||||||||||||||||||
Distributions reinvested | 6,094 | 292,693 | 6,010 | 250,320 | ||||||||||||||||||||||
Repurchased | (88,104 | ) | (4,405,952 | ) | (77,570 | ) | (3,526,106 | ) | ||||||||||||||||||
Net decrease | (66,255 | ) | $(3,332,884 | ) | (30,629 | ) | $(1,469,836 | ) | ||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 3,154,507 | $160,962,893 | 27,047 | $1,277,851 | ||||||||||||||||||||||
Distributions reinvested | 160,487 | 7,876,721 | 5,998 | 253,662 | ||||||||||||||||||||||
Repurchased | (741,743 | ) | (39,042,386 | ) | (43,886 | ) | (1,956,321 | ) | ||||||||||||||||||
Net increase (decrease) | 2,573,251 | $129,797,228 | (10,841 | ) | $(424,808 | ) | ||||||||||||||||||||
Total net increase (decrease) | (48,643 | ) | $6,463,786 | 4,245,900 | $200,952,038 |
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $621,179,482 and $725,654,472, respectively, for the year ended October 31, 2018.
Note 7 — Investment in affiliated underlying funds
The fund may invest in affiliated underlying funds that are managed by the Advisor and its affiliates. Information regarding the fund's purchases and sales of the affiliated underlying funds as well as income and capital gains earned, if any, during the period is as follows:
Dividends and distributions | ||||||||||||||||||||||||||||||||||||||
Fund | Beginning share amount | Shares purchased | Shares sold | Ending share amount | Income distributions received | Capital gain distributions received | Realized gain (loss) | Change in unrealized appreciation (depreciation) | Ending value | |||||||||||||||||||||||||||||
John Hancock Collateral Trust* | 9,808,610 | 10,780,921 | (20,589,531 | ) | — | — | — | ($6,699 | ) | ($838 | ) | — | ||||||||||||||||||||||||||
*Refer to the Securities lending note within Note 2 for details regarding this investment. |
Note 8 — Industry or sector risk
The fund may invest a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the fund's assets are economically tied to a single or small number of industries or sectors of the economy, the fund will be less diversified than a more broadly diversified fund, and it may cause the fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the fund's NAV more volatile. Further, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of John Hancock Capital Series and Shareholders of John Hancock U.S. Global Leaders Growth Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund's investments, of John Hancock U.S. Global Leaders Growth Fund (one of the funds constituting John Hancock Capital Series, referred to hereafter as the "Fund") as of October 31, 2018, the related statement of operations for the year ended October 31, 2018, the statements of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2018 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2018 and the financial highlights for each of the five years in the period ended October 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers or transfer agent, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
December 18, 2018
We have served as the auditor of one or more investment companies in the John Hancock group of funds since 1988.
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended October 31, 2018.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund paid $73,266,429 in long term capital gain dividends.
Eligible shareholders will be mailed a 2018 Form 1099-DIV in early 2019. This will reflect the tax character of all distributions paid in calendar year 2018.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
Continuation of Investment Advisory Agreement and Approval of Subadvisory Agreement
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Capital Series (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Sustainable Growth Advisers, LP (the Subadvisor), for John Hancock U.S. Global Leaders Growth Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 18-21, 2018 in-person meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 29-31, 2018.
Approval of New Subadvisory Agreement with Respect to Subadvisory Change in Control
At an in-person meeting on March 19-22, 2018, the Board, including the Trustees who are not parties to any Agreement or considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), approved the new Subadvisory Agreement with the Subadvisor, subject to shareholder approval which was subsequently received on August 3, 2018. The Board noted that the new Subadvisory Agreement reflected the change in control with the Subadvisor after it sold a majority ownership stake to Virtus Investment Partners. The Board also noted that under the new Subadvisory Agreement, the subadvisory fee that the Advisor currently pays to the Subadvisor would not change and no changes are expected in the Subadvisor's personnel or operations, or its investment approach with respect to the fund's portfolio management.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 18-21, 2018, the Board, including the Independent Trustees, reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board noted that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board (including its various committees) at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The information received and considered by the Board in connection with the May and June meetings and throughout the year was both written and oral. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services. The Board considered the Advisory Agreement and Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Advisor and Subadvisor in providing services to the fund.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel
throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and did not treat any single factor as determinative, and each Trustee may have attributed different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board observed that the scope of services provided by the Advisor, and of the undertakings required of the Advisor in connection with those services, including maintaining and monitoring its own and the fund's compliance programs, risk management programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and other third-party service providers. The Board also considered the significant risks assumed by the Advisor in connection with the services provided to the fund including entrepreneurial risk in sponsoring new funds and ongoing risks including investment, operational, enterprise, litigation, regulatory and compliance risks with respect to all funds.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the John Hancock group of funds complex (the John Hancock Fund Complex).
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; | |||||||
(f) | the Advisor's initiatives intended to improve various aspects of the Trust's operations and the investor experience with the fund; and | |||||||
(g) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that while it found the data provided by the independent third-party generally useful it recognized its limitations, including in particular that the data may vary depending on the end date selected and the results of the performance comparisons may vary depending on the selection of the peer group. The Board noted that the fund underperformed its benchmark index for the one-, three-, five- and ten-year periods ended December 31, 2017. The Board also noted that the fund underperformed its peer group average for the one-, three- and five-year periods and outperformed its peer group average for the ten-year period ended December 31, 2017. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the peer group for the ten-year period. The Board took into account management's discussion of the reasons for the fund's recent underperformance. The Board concluded that the fund's performance is being monitored and reasonably addressed, where appropriate.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund in light of the nature, extent and quality of the management and advisory and subadvisory services provided by the Advisor to the Subadvisor. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees and net total expenses for the fund are higher than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the overall management fee and the fees of the Subadvisor, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee, in each case in light of the services rendered for those amounts and the risks undertaken by the Advisor. The Board also noted that the Advisor pays the subadvisory fee, and that such fees are negotiated at arm's length with respect to the Subadvisor. In addition, the Board took into account that management had agreed to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets
increase. The Board noted that the fund has a voluntary waiver fee and/or expense reimbursement, which reduces certain expenses of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the John Hancock Fund Complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable in light of the nature, extent and quality of the services provided to the fund under the Advisory Agreement.
Profitability/Fall out benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |
(c) | received and reviewed profitability information with respect to the John Hancock Fund Complex as a whole and with respect to the fund; | |
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data and considered that the Advisor hired an independent third-party consultant to provide an analysis of the Advisor's allocation methodologies; | |
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability information reviewed by the Board; | |
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |
(h) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |
(i) | noted that the subadvisory fee for the fund is paid by the Advisor and is negotiated at arm's length; | |
(j) | considered the Advisor's ongoing costs and expenditures necessary to improve services, meet new regulatory and compliance requirements, and adapt to other challenges impacting the fund industry; and | |
(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the risks that it assumes as Advisor, including entrepreneurial, operational, reputational, litigation and regulatory risk. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund; | |
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | |
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock Fund Complex); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data; and | |
(4) | information relating to the nature and scope of any material relationships and their significance to the Trust's Advisor and Subadvisor. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the
purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund.
The Board also relied on the ability of the Advisor to negotiate the Subadvisory Agreement with the Subadvisor, which is not affiliated with the Advisor, and the fees thereunder at arm's length. As a result, the costs of the services to be provided and the profits to be realized by the Subadvisor from its relationship with the Trust were not a material factor in the Board's consideration of the Subadvisory Agreement.
The Board also received information regarding the nature and scope (including their significance to the Advisor and its affiliates and to the Subadvisor) of any material relationships with respect to the Subadvisor, which include arrangements in which the Subadvisor or its affiliates provide advisory, distribution, or management services in connection with financial products sponsored by the Advisor or its affiliates, and may include other registered investment companies, a 529 education savings plan, managed separate accounts and exempt group annuity contracts sold to qualified plans. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock Fund Complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fees as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund and compared them to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the performance of the fund is being monitored and reasonably addressed, where appropriate; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided under the Subadvisory Agreement; and | |
(4) | noted that the subadvisory fees are paid by the Advisor not the fund and that the subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Hassell H. McClellan, Born: 1945 | 2012 | 215 |
Trustee and Chairperson of the Board Director/Trustee, Virtus Funds (since 2008); Director, The Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston College (retired 2013). Trustee (since 2014) and Chairperson of the Board (since 2017), John Hancock Collateral Trust; Trustee (since 2015) and Chairperson of the Board (since 2017), John Hancock Exchange-Traded Fund Trust; Trustee (since 2012) and Chairperson of the Board (since 2017), John Hancock retail funds3; Trustee (2005-2006 and since 2012) and Chairperson of the Board (since 2017), John Hancock Funds III; Trustee (since 2005) and Chairperson of the Board (since 2017), John Hancock Variable Insurance Trust and John Hancock Funds II. |
Charles L. Bardelis,2 Born: 1941 | 2012 | 215 |
Trustee Director, Island Commuter Corp. (marine transport). Trustee, John Hancock Collateral Trust (since 2014), Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005-2006 and since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock Funds II (since 2005). |
James R. Boyle, Born: 1959 | 2015 | 215 |
Trustee Chief Executive Officer, Foresters Financial (since 2018); Chairman and Chief Executive Officer, Zillion Group, Inc. (formerly HealthFleet, Inc.) (healthcare) (2014-2018); Executive Vice President and Chief Executive Officer, U.S. Life Insurance Division of Genworth Financial, Inc. (insurance) (January 2014-July 2014); Senior Executive Vice President, Manulife Financial, President and Chief Executive Officer, John Hancock (1999-2012); Chairman and Director, John Hancock Advisers, LLC, John Hancock Funds, LLC, and John Hancock Investment Management Services, LLC (2005-2010). Trustee, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (2005-2010; 2012-2014 and since 2015); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (2005-2014 and since 2015). |
Peter S. Burgess,2 Born: 1942 | 2012 | 215 |
Trustee Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (2010-2016); Director, PMA Capital Corporation (2004-2010). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005-2006 and since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). |
William H. Cunningham, Born: 1944 | 2005 | 215 |
Trustee Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000); former Director, LIN Television (2009-2014). Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust (since 2012); Trustee, John Hancock Funds II (2005-2006 and since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
Independent Trustees (continued)
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Grace K. Fey, Born: 1946 | 2012 | 215 |
Trustee Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company (1988-2007); Director, Fiduciary Trust (since 2009). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2008). |
Theron S. Hoffman,2 Born: 1947 | 2012 | 215 |
Trustee Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd Organization (consulting firm) (2003-2010); President, Westport Resources Management (investment management consulting firm) (2006-2008); Board Member, Senior Managing Director, Partner, and Operating Head, Putnam Investments (2000-2003); Executive Vice President, The Thomson Corp. (financial and legal information publishing) (1997-2000). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2008). |
Deborah C. Jackson, Born: 1952 | 2008 | 215 |
Trustee President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, National Association of Corporate Directors/New England (since 2015); Board of Directors, Association of Independent Colleges and Universities of Massachusetts (since 2014); Chief Executive Officer, American Red Cross of Massachusetts Bay (2002-2011); Board of Directors of Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors of American Student Assistance Corporation (1996-2009); Board of Directors of Boston Stock Exchange (2002-2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007-2011). Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); and Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
James M. Oates, Born: 1946 | 2012 | 215 |
Trustee |
Steven R. Pruchansky, Born: 1944 | 2005 | 215 |
Trustee and Vice Chairperson of the Board Managing Director, Pru Realty (since 2017); Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Partner, Right Funding, LLC (2014-2017); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991). Trustee (since 1992) and Chairperson of the Board (2011-2012), John Hancock retail funds3; Trustee and Vice Chairperson of the Board, John Hancock retail funds3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2012); Trustee and Vice Chairperson of the Board, John Hancock Collateral Trust (since 2014); Trustee and Vice Chairperson of the Board, John Hancock Exchange-Traded Fund Trust (since 2015). |
Independent Trustees (continued)
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Gregory A. Russo, Born: 1949 | 2009 | 215 |
Trustee Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare system); Director and Member (since 2012) and Finance Committee Chairman (since 2014), The Moorings, Inc. (nonprofit continuing care community); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002-2006); Vice Chairman, Industrial Markets, KPMG (1998-2002); Chairman and Treasurer, Westchester County, New York, Chamber of Commerce (1986-1992); Director, Treasurer, and Chairman of Audit and Finance Committees, Putnam Hospital Center (1989-1995); Director and Chairman of Fundraising Campaign, United Way of Westchester and Putnam Counties, New York (1990-1995). Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
Non-Independent Trustees4
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Andrew G. Arnott, Born: 1971 | 2017 | 215 |
President and Non-Independent Trustee Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (since 2018); Executive Vice President, John Hancock Financial Services (since 2009, including prior positions); Director and Executive Vice President, John Hancock Advisers, LLC (since 2005, including prior positions); Director and Executive Vice President, John Hancock Investment Management Services, LLC (since 2006, including prior positions); President, John Hancock Funds, LLC (since 2004, including prior positions); President, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2007, including prior positions); President, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). Trustee, John Hancock Collateral Trust, John Hancock Exchange-Traded Fund Trust, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2017). |
Marianne Harrison, Born: 1963 | 2018 | 215 |
Non-Independent Trustee President and CEO, John Hancock (since 2017); President and CEO, Manulife Canadian Division (2013-2017); Member, Board of Directors, American Council of Life Insurers (ACLI) (since 2018); Member, Board of Directors, Communitech, an industry-led innovation center that fosters technology companies in Canada (since 2017); Member, Board of Directors, Manulife Assurance Canada (since 2015); Board Member, St. Mary's General Hospital Foundation (since 2014); Member, Board of Directors, Manulife Bank of Canada (since 2013); Member, Standing Committee of the Canadian Life & Health Assurance Association (since 2013); Member, Board of Directors, John Hancock USA, John Hancock Life & Health, John Hancock New York (2012-2013). Trustee, John Hancock Collateral Trust, John Hancock Exchange-Traded Fund Trust, John Hancock retail funds3, John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2018). |
Warren A. Thomson, Born: 1955 | 2012 | 215 |
Non-Independent Trustee Senior Executive Vice President and Chief Investment Officer, Manulife Financial and The Manufacturers Life Insurance Company (since 2009); Chairman, Manulife Asset Management (since 2001, including prior positions); Director and Chairman, Manulife Asset Management Limited (since 2006); Director and Chairman, Hancock Natural Resources Group, Inc. (since 2013). Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
Principal officers who are not Trustees
Name, year of birth Position(s) held with Trust Principal occupation(s) during past 5 years | Officer of the Trust since |
Francis V. Knox, Jr., Born: 1947 | 2005 |
Chief Compliance Officer Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, LLC, and John Hancock Investment Management Services, LLC (since 2005); Chief Compliance Officer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock Funds II (since 2007); Chief Financial Officer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable Insurance Trust and John Hancock Funds II (2007-2009 and since 2010, including prior positions); Treasurer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). |
Christopher (Kit) Sechler, Born: 1973 | 2018 |
Chief Legal Officer and Secretary Vice President and Deputy Chief Counsel, John Hancock Investments (since 2015); Assistant Vice President and Senior Counsel (2009-2015), John Hancock Investments; Chief Legal Officer and Secretary, John Hancock retail funds(2), John Hancock Variable Insurance Trust, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2018); Assistant Secretary of John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2009). |
The business address for all Trustees and Officers is 200 Berkeley Street, Boston, Massachusetts 02116.
The Statement of Additional Information of the fund includes additional information about members of the Board of Trustees of the Trust and is available without charge, upon request, by calling 800-225-5291.
1 | Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee's death, retirement, resignation, or removal. Mr. Boyle has served as Trustee at various times prior to the date listed in the table. |
2 | Member of the Audit Committee. |
3 | "John Hancock retail funds" comprises John Hancock Funds III and 40 other John Hancock funds consisting of 30 series of other John Hancock trusts and 10 closed-end funds. |
4 | The Trustee is a Non-Independent Trustee due to current or former positions with the Advisor and certain affiliates. |
The Fund held a Special Meeting of Shareholders on August 3, 2018 (adjourned on June 15, 2018 and reconvened August 3, 2018).
The following proposals were considered by the shareholders:
THE PROPOSALS PASSED ON August 3, 2018.
Proposal | For | Against | Abstain | |||
1. | Approve a new subadvisory agreement between John Hancock Advisers, LLC and Sustainable Growth Advisers, LP. | 13,950,285.617 | 377,881.641 | 1,372,814.796 | ||
2. | Approve a manager of managers' structure. | 13,810,373.274 | 566,534.505 | 1,324,074.275 | ||
3. | Approve revised fundamental investment restrictions regarding: | |||||
(a) | Concentration | 13,821,561.349 | 487,748.220 | 1,391,672.485 | ||
(b) | Borrowing | 13,556,036.223 | 554,525.731 | 1,590,420.100 | ||
(c) | Underwriting | 13,793,437.128 | 500,850.224 | 1,406,694.702 | ||
(d) | Real Estate | 13,616,479.874 | 506,155.523 | 1,578,346.657 | ||
(e) | Commodities | 13,608,904.766 | 692,452.165 | 1,399,625.123 | ||
(f) | Loans | 13,577,727.426 | 712,482.101 | 1,410,772.527 | ||
(g) | Senior Securities | 13,578,051.849 | 515,555.902 | 1,607,374.303 | ||
Approve a new fundamental investment restriction regarding: | ||||||
(h) | Diversification | 13,657,951.452 | 670,607.583 | 1,372,423.019 |
Trustees Hassell H. McClellan, Chairperson Officers Andrew G. Arnott Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone Christopher (Kit) Sechler** | Investment advisor John Hancock Advisers, LLC Subadvisor Sustainable Growth Advisers, LP (SGA) Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP Independent registered public accounting firm PricewaterhouseCoopers LLP |
* Member of the Audit Committee
† Non-Independent Trustee
#Effective 6-19-18
**Effective 9-13-18
The fund's proxy voting policies and procedures, as well as the fund proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund's complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund's Form N-Q is available on our website and the SEC's website, sec.gov, and can be reviewed and copied (for a fee) at the SEC's Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | |||
800-225-5291 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Financial Industries Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Regional Bank Small Cap Core Small Cap Growth Small Cap Value U.S. Global Leaders Growth U.S. Growth U.S. Quality Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Fundamental Global Franchise Global Equity Global Shareholder Yield Global Thematic Opportunities Greater China Opportunities International Growth International Small Company | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Redwood Seaport Long/Short Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Balanced Income Allocation Multi-Index Lifetime Portfolios Multi-Index Preservation Portfolios Multimanager Lifestyle Portfolios Multimanager Lifetime Portfolios Retirement Income 2040 EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Developed International ETF John Hancock Multifactor Emerging Markets ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Small Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Core Bond ESG International Equity ESG Large Cap Core CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We serve investors globally through a unique multimanager approach:
We search the world to find proven portfolio teams with specialized
expertise for every strategy we offer, then we apply robust investment
oversight to ensure they continue to meet our uncompromising standards
and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, along with strong
risk-adjusted returns across asset classes.
| John Hancock Funds, LLC n Member FINRA, SIPC 200 Berkeley Street n Boston, MA 02116-5010 800-225-5291 n jhinvestments.com | |
This report is for the information of the shareholders of John Hancock U.S. Global Leaders Growth Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | ||
MF647955 | 26A 10/18 12/18 |
John Hancock
Classic Value Fund
Annual report 10/31/18
A message to shareholders
Dear shareholder,
Financial markets around the world have experienced a meaningful rise in volatility this year, particularly when compared with the unusual calm of 2017. Announcements of new rounds of tariffs and heightened fears of a full-blown trade war with China overshadowed a period of strong economic growth. Despite the uncertainty raised by tariffs and rising inflation and interest rates, the U.S. economy has remained on track.
Short-term uncertainty notwithstanding, the good news is that asset prices of stocks are ultimately driven by company fundamentals—such as balance sheet strength and earnings growth—and those continue to appear extremely supportive. Unemployment sits close to historic lows, consumer confidence is up and trending higher, and the housing market has continued to strengthen, buoyed in part by rising demand. The question for investors as 2018 draws to a close is whether equities will regain their footing in terms of these positives, or will they continue to experience volatility.
Your best resource in unpredictable and volatile markets is your financial advisor, who can help position your portfolio so that it's sufficiently diversified to meet your long-term objectives and to withstand the inevitable turbulence along the way.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to welcome new shareholders and to thank existing shareholders for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and CEO,
John Hancock Investments
Head of Wealth and Asset Management,
United States and Europe
This commentary reflects the CEO's views, which are subject to change at any time. Investing involves risks, including the potential loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. It is not possible to invest directly in an index. For more up-to-date information, please visit our website at jhinvestments.com.
John Hancock
Classic Value Fund
Table of contents
2 | Your fund at a glance | |
4 | Discussion of fund performance | |
8 | A look at performance | |
10 | Your expenses | |
12 | Fund's investments | |
15 | Financial statements | |
18 | Financial highlights | |
28 | Notes to financial statements | |
35 | Report of independent registered public accounting firm | |
36 | Tax information | |
37 | Continuation of investment advisory and subadvisory agreements | |
43 | Trustees and Officers | |
47 | More information |
INVESTMENT OBJECTIVE
The fund seeks long-term growth of capital.
AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/18 (%)
The 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 or sales charges, which would result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST TWELVE MONTHS
Market volatility returned
The nine-year bull market hit several rocky patches during the period, due largely to tightening monetary policy and escalating trade tensions.
A tough market for value stocks
Value stocks lagged the broader stock market as growth-oriented sectors, such as information technology, drove the market's overall advance.
The fund underperformed its benchmark
The fund lagged the Russell 1000 Value Index due primarily to its greater exposure to economically sensitive sectors, such as financials.
SECTOR COMPOSITION AS OF 10/31/18 (%)
A note about risks
The fund is subject to various risks as described in the fund's prospectus. For more information, please refer to the "Principal risks" section of the prospectus.
Richard S. Pzena
Portfolio Manager
Pzena Investment Management, LLC
John Flynn
Portfolio Manager
Pzena Investment Management, LLC
Benjamin S. Silver, CFA, CPA
Portfolio Manager
Pzena Investment Management, LLC
How did the markets perform during the 12 months ended October 31, 2018?
U.S. equities withstood notable volatility in 2018. Alongside concerns that the nine-year rally had become long in the tooth, tightening monetary policy, heightened protectionism, and escalating trade tensions largely offset the benefits of tax reform and strong earnings growth. In terms of the equity markets, large-cap value continued to underperform growth for the full year but outperformed toward the end of the period.
The fund's benchmark, the Russell 1000 Value Index, posted a 3.03% return for the period. Severe market upheaval punished the most undervalued stocks. The pain was felt by companies in a wide range of industries, but sector-level returns in healthcare, information technology, and communication services were solid for the year. Valuation spreads widened to historical levels, leading to broad-based opportunities for value investors.
How did the fund perform in this environment?
Against a backdrop that continued to be characterized as anti-value, unsurprisingly, the most undervalued companies underperformed. The fund lagged its benchmark largely due to its greater exposure to economically sensitive sectors. Financials were particularly challenged during the year amid rising interest rates and slower economic growth.
What were some of the detractors?
Insurance provider American International Group, Inc. (AIG), consumer products company Newell Brands, Inc., and General Electric Company (GE) were among the key detractors. AIG's stock weakened based on adverse development in its insurance reserves early in the period and subsequently on higher-than-expected catastrophe losses in 2018. AIG's new management team is its most experienced ever in property and casualty, now its core business—and we believe the company represents an attractive turnaround story. We added Newell Brands, Inc. in the wake of its acquisition of Jarden Corp. and continued to build the position as integration concerns and the bankruptcy of Toys-R-Us weighed on the stock. We believe the overall franchise has a strong lineup of consumer brands, and management's plan to sell noncore businesses is credible.
GE came under heavy pressure amid cyclical weakness in one of its core power businesses, concerns surrounding its balance sheet health, and legacy liabilities relating to GE Capital. In our view, GE remains a market leader in high-barrier-to-entry industries. Its management team is implementing effective self-help initiatives and considering the most effective ways to shore up its balance sheet. We believe GE's path to earnings recovery remains viable and that the market has underappreciated its skewed upside potential, particularly at current valuations.
TOP 10 HOLDINGS AS OF 10/31/18 (%)
Oracle Corp. | 3.6 |
Ford Motor Company | 3.5 |
Edison International | 3.5 |
Capital One Financial Corp. | 3.0 |
The Interpublic Group of Companies, Inc. | 3.0 |
Royal Dutch Shell PLC, ADR, Class A | 3.0 |
MetLife, Inc. | 3.0 |
Citigroup, Inc. | 2.9 |
Hewlett Packard Enterprise Company | 2.9 |
Wells Fargo & Company | 2.9 |
TOTAL | 31.3 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
What were some of the key contributors?
Certain healthcare and communication services stocks added to performance, as did a lack of exposure to the underperforming materials sector. Specific holdings that helped returns included pharmacy benefits manager Express Scripts Holdings Company, biopharmaceutical provider Merck & Company, Inc., and U.S. advertiser The Interpublic Group of Companies, Inc.
Express Scripts, a top-three U.S. competitor in its segment, rose on news of a merger with global health service giant Cigna Corp., a position previously held by the fund that we sold during the period. We added Merck to the portfolio after its stock came under pressure as news of a temporary setback with its recently launched drug Keytruda turned negative. We saw the market reaction as exaggerated, providing us the opportunity to purchase a diverse drug portfolio at what we believed was an attractive price. Keytruda became a blockbuster cancer drug for Merck that helped drive its share price higher during the period. Lastly, Interpublic Group's robust return during the year was based on its organic growth and ability to improve market share in an increasingly competitive industry.
What changes did you make to the fund over the period?
Reductions in financials and information technology were offset by a meaningful increase in healthcare and by initiating exposure to utilities. In financials, we sold off positions in trust bank State Street Corp. on valuation strength and in annuity and life insurance provider Brighthouse Financial, Inc. after its spin-off from MetLife, Inc., currently one of the fund's top holdings. We added positions in alternative asset manager KKR & Company, Inc. and participated in the initial public offering of life insurer AXA Equitable Holdings, Inc. KKR manages $191 billion across private equity, energy, infrastructure, real estate, and credit. At the time of purchase, the shares traded at a discount to our assessment of fair value because we believed the market had underestimated the
COUNTRY COMPOSITION AS OF 10/31/18 (%)
United States | 89.4 |
Netherlands | 3.0 |
Bermuda | 2.6 |
Canada | 1.8 |
United Kingdom | 1.6 |
Switzerland | 1.6 |
TOTAL | 100.0 |
As a percentage of net assets. |
impact of carried interest on KKR's fee revenue. We felt that AXA Equitable (the majority shareholder of AllianceBernstein Holding LP, a stock not held by the fund) was unfairly penalized in its IPO because of the market's discomfort with variable annuities. As AXA's stock was priced well below the midpoint of its expected offering price, we saw it as an opportunity to own a well-capitalized franchise with strong captive distribution and an attractive return on capital.
Early in 2018, we increased the fund's healthcare exposure, adding new positions in Merck (as mentioned), Amgen, Inc., and Cardinal Health, Inc. Amgen, a leading biotechnology company, came under pressure amid pending patent expirations and a slower-than-expected launch of one of its new drugs. In contrast, we saw more value in the company's existing drugs, which, in our view, offered significant downside protection for valuations. We also added Cardinal Health, a pharmaceutical distributor amid disruption concerns in the pharmaceutical supply chain. We were attracted by the durability of returns in this business, its concentrated industry structure, and long-term growth potential.
How was the fund positioned at period end?
The fund remains exposed to economically sensitive sectors such as financials and consumer discretionary. Financials continue to be the fund's largest exposure, and we see the sector's valuations as still appealing. Throughout the year, we added substantially to healthcare and bought the fund's first utility stock in quite a while. This shift reflected the widening opportunity set across all sectors that arose in 2018. The heightened volatility allowed us to buy great franchises, in our view, at deeply discounted prices with likely outcomes that are positively skewed. We remain excited about the portfolio and the opportunity it presents for future outperformance.
MANAGED BY
Richard S. Pzena On the fund since 1996 Investing since 1980 | |
John Flynn On the fund since 2017 Investing since 2000 | |
Benjamin S. Silver, CFA, CPA On the fund since 2012 Investing since 1991 |
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2018
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | ||||||
1-year | 5-year | 10-year | 5-year | 10-year | |||
Class A | -6.45 | 6.54 | 11.04 | 37.24 | 184.93 | ||
Class B | -7.10 | 6.53 | 10.94 | 37.18 | 182.34 | ||
Class C | -3.23 | 6.83 | 10.78 | 39.15 | 178.29 | ||
Class I1 | -1.29 | 7.91 | 11.95 | 46.34 | 209.32 | ||
Class R11 | -1.92 | 7.22 | 11.22 | 41.73 | 189.67 | ||
Class R21,2 | -1.66 | 7.53 | 11.58 | 43.74 | 199.15 | ||
Class R31,2 | -1.74 | 7.34 | 11.33 | 42.53 | 192.57 | ||
Class R41,2 | -1.33 | 7.87 | 11.78 | 46.02 | 204.51 | ||
Class R51,2 | -1.22 | 7.99 | 11.96 | 46.84 | 209.38 | ||
Class R61,2 | -1.17 | 8.04 | 11.91 | 47.21 | 208.12 | ||
Index† | 3.03 | 8.61 | 11.30 | 51.13 | 191.70 |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 5% and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The Class B shares' CDSC declines annually between years 1 to 6 according to the following schedule: 5%, 4%, 3%, 3%, 2%, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC. Sales charges are not applicable to Class I, Class R1, Class R2, Class R3, Class R4, Class R5, and Class R6 shares.
The expense ratios of the fund, both net (including any fee waivers and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectuses for the fund and may differ from those disclosed in the Financial highlights tables in this report. Net expenses reflect contractual expense limitations in effect until February 28, 2019 and are subject to change. Had the contractual fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | Class I | Class R1 | Class R2 | Class R3 | Class R4 | Class R5 | Class R6 | |
Gross (%) | 1.18 | 1.93 | 1.93 | 0.92 | 1.58 | 1.33 | 1.48 | 1.18 | 0.88 | 0.83 |
Net (%) | 1.18 | 1.93 | 1.93 | 0.92 | 1.58 | 1.33 | 1.48 | 1.08 | 0.88 | 0.83 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index is the Russell 1000 Value Index. |
See the following page for footnotes.
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock Classic Value Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in the Russell 1000 Value Index.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index ($) | |
Class B3 | 10-31-08 | 28,234 | 28,234 | 29,170 |
Class C3 | 10-31-08 | 27,829 | 27,829 | 29,170 |
Class I1 | 10-31-08 | 30,932 | 30,932 | 29,170 |
Class R11 | 10-31-08 | 28,967 | 28,967 | 29,170 |
Class R21,2 | 10-31-08 | 29,915 | 29,915 | 29,170 |
Class R31,2 | 10-31-08 | 29,257 | 29,257 | 29,170 |
Class R41,2 | 10-31-08 | 30,451 | 30,451 | 29,170 |
Class R51,2 | 10-31-08 | 30,938 | 30,938 | 29,170 |
Class R61,2 | 10-31-08 | 30,812 | 30,812 | 29,170 |
The 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 or sales charges, which would result in lower returns.
Footnotes related to performance pages
1 | For certain types of investors, as described in the fund's prospectus. |
2 | Class R2 shares were first offered on 3-1-12; Class R3, Class R4, and Class R5 shares were first offered on 5-22-09; Class R6 shares were first offered on 9-1-11. Returns prior to these dates are those of Class A shares and have not been adjusted for expenses; otherwise, returns would vary. |
3 | The contingent deferred sales charge is not applicable. |
Your expenses |
10 | JOHN HANCOCK CLASSIC VALUE FUND | ANNUAL REPORT |
Account value on 5-1-2018 | Ending value on 10-31-2018 | Expenses paid during period ended 10-31-20181 | Annualized expense ratio | ||
Class A | Actual expenses/actual returns | $1,000.00 | $ 932.80 | $5.65 | 1.16% |
Hypothetical example | 1,000.00 | 1,019.40 | 5.90 | 1.16% | |
Class B | Actual expenses/actual returns | 1,000.00 | 929.30 | 9.29 | 1.91% |
Hypothetical example | 1,000.00 | 1,015.60 | 9.70 | 1.91% | |
Class C | Actual expenses/actual returns | 1,000.00 | 929.00 | 9.24 | 1.90% |
Hypothetical example | 1,000.00 | 1,015.60 | 9.65 | 1.90% | |
Class I | Actual expenses/actual returns | 1,000.00 | 933.80 | 4.53 | 0.93% |
Hypothetical example | 1,000.00 | 1,020.50 | 4.74 | 0.93% | |
Class R1 | Actual expenses/actual returns | 1,000.00 | 930.90 | 7.54 | 1.55% |
Hypothetical example | 1,000.00 | 1,017.40 | 7.88 | 1.55% | |
Class R2 | Actual expenses/actual returns | 1,000.00 | 932.10 | 6.43 | 1.32% |
Hypothetical example | 1,000.00 | 1,018.60 | 6.72 | 1.32% | |
Class R3 | Actual expenses/actual returns | 1,000.00 | 931.80 | 6.87 | 1.41% |
Hypothetical example | 1,000.00 | 1,018.10 | 7.17 | 1.41% | |
Class R4 | Actual expenses/actual returns | 1,000.00 | 933.80 | 4.68 | 0.96% |
Hypothetical example | 1,000.00 | 1,020.40 | 4.89 | 0.96% | |
Class R5 | Actual expenses/actual returns | 1,000.00 | 934.20 | 4.19 | 0.86% |
Hypothetical example | 1,000.00 | 1,020.90 | 4.38 | 0.86% | |
Class R6 | Actual expenses/actual returns | 1,000.00 | 934.50 | 4.00 | 0.82% |
Hypothetical example | 1,000.00 | 1,021.10 | 4.18 | 0.82% |
1 | Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
ANNUAL REPORT | JOHN HANCOCK CLASSIC VALUE FUND | 11 |
Fund’s investments |
Shares | Value | ||||
Common stocks 99.7% | $2,286,908,388 | ||||
(Cost $2,082,904,837) | |||||
Communication services 6.3% | 145,408,320 | ||||
Media 6.3% | |||||
News Corp., Class A | 2,160,052 | 28,491,086 | |||
Omnicom Group, Inc. | 645,742 | 47,991,545 | |||
The Interpublic Group of Companies, Inc. | 2,976,066 | 68,925,689 | |||
Consumer discretionary 6.8% | 156,362,434 | ||||
Auto components 2.0% | |||||
Lear Corp. | 344,689 | 45,809,168 | |||
Automobiles 3.5% | |||||
Ford Motor Company | 8,480,049 | 80,984,468 | |||
Household durables 1.3% | |||||
Newell Brands, Inc. | 1,862,015 | 29,568,798 | |||
Consumer staples 2.0% | 46,219,553 | ||||
Food and staples retailing 2.0% | |||||
Walmart, Inc. | 460,905 | 46,219,553 | |||
Energy 13.8% | 317,160,932 | ||||
Energy equipment and services 4.7% | |||||
Halliburton Company | 1,599,712 | 55,478,012 | |||
National Oilwell Varco, Inc. | 1,441,936 | 53,063,245 | |||
Oil, gas and consumable fuels 9.1% | |||||
BP PLC, ADR | 836,645 | 36,285,294 | |||
Cenovus Energy, Inc. | 4,855,238 | 41,075,313 | |||
Exxon Mobil Corp. | 747,723 | 59,578,569 | |||
Murphy Oil Corp. | 88,370 | 2,815,468 | |||
Royal Dutch Shell PLC, ADR, Class A | 1,089,809 | 68,865,031 | |||
Financials 37.3% | 854,371,244 | ||||
Banks 11.3% | |||||
Bank of America Corp. | 2,376,024 | 65,340,660 | |||
Citigroup, Inc. | 1,031,718 | 67,536,260 | |||
JPMorgan Chase & Co. | 537,719 | 58,622,125 | |||
Wells Fargo & Company | 1,251,604 | 66,622,881 | |||
Capital markets 10.4% | |||||
Franklin Resources, Inc. | 1,528,305 | 46,613,303 | |||
KKR & Company, Inc., Class A | 1,330,285 | 31,461,240 | |||
Morgan Stanley | 1,429,596 | 65,275,353 | |||
The Goldman Sachs Group, Inc. | 265,715 | 59,884,190 | |||
UBS Group AG (A) | 2,577,126 | 35,822,051 |
12 | JOHN HANCOCK CLASSIC VALUE FUND | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Shares | Value | ||||
Financials (continued) | |||||
Consumer finance 3.0% | |||||
Capital One Financial Corp. | 775,281 | $69,232,593 | |||
Diversified financial services 4.6% | |||||
AXA Equitable Holdings, Inc. | 2,280,941 | 46,280,293 | |||
Voya Financial, Inc. | 1,350,509 | 59,098,274 | |||
Insurance 8.0% | |||||
American International Group, Inc. | 1,340,451 | 55,347,222 | |||
Axis Capital Holdings, Ltd. | 1,056,738 | 58,955,413 | |||
MetLife, Inc. | 1,657,669 | 68,279,386 | |||
Health care 14.4% | 330,484,002 | ||||
Biotechnology 2.2% | |||||
Amgen, Inc. | 257,415 | 49,627,038 | |||
Health care providers and services 6.6% | |||||
Cardinal Health, Inc. | 560,830 | 28,377,998 | |||
Express Scripts Holding Company (A) | 671,456 | 65,111,088 | |||
McKesson Corp. | 472,956 | 59,005,991 | |||
Pharmaceuticals 5.6% | |||||
Merck & Company, Inc. | 892,128 | 65,669,542 | |||
Mylan NV (A) | 2,006,155 | 62,692,345 | |||
Industrials 5.4% | 122,946,544 | ||||
Industrial conglomerates 2.6% | |||||
General Electric Company | 5,896,893 | 59,558,619 | |||
Machinery 2.8% | |||||
Dover Corp. | 765,185 | 63,387,925 | |||
Information technology 10.2% | 233,616,519 | ||||
IT services 2.6% | |||||
Cognizant Technology Solutions Corp., Class A | 872,012 | 60,194,988 | |||
Software 3.6% | |||||
Oracle Corp. | 1,659,113 | 81,031,079 | |||
Technology hardware, storage and peripherals 4.0% | |||||
Hewlett Packard Enterprise Company | 4,369,434 | 66,633,869 | |||
HP, Inc. | 1,066,967 | 25,756,583 | |||
Utilities 3.5% | 80,338,840 | ||||
Electric utilities 3.5% | |||||
Edison International | 1,157,787 | 80,338,840 | |||
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK CLASSIC VALUE FUND | 13 |
Par value^ | Value | ||||
Short-term investments 0.7% | $14,910,000 | ||||
(Cost $14,910,000) | |||||
Repurchase agreement 0.7% | 14,910,000 | ||||
Repurchase Agreement with State Street Corp. dated 10-31-18 at 1.050% to be repurchased at $14,910,435 on 11-1-18, collateralized by $15,160,000 U.S. Treasury Notes, 2.625% due 6-15-21 (valued at $15,212,378, including interest) | 14,910,000 | 14,910,000 |
Total investments (Cost $2,097,814,837) 100.4% | $2,301,818,388 | ||||
Other assets and liabilities, net (0.4%) | (8,126,251) | ||||
Total net assets 100.0% | $2,293,692,137 |
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. | |
Security Abbreviations and Legend | |
ADR | American Depositary Receipt |
(A) | Non-income producing security. |
14 | JOHN HANCOCK CLASSIC VALUE FUND | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Financial statements |
Assets | |
Unaffiliated investments, at value (Cost $2,097,814,837) | $2,301,818,388 |
Cash | 73 |
Dividends and interest receivable | 1,316,471 |
Receivable for fund shares sold | 3,462,248 |
Receivable for investments sold | 63,043,274 |
Other assets | 152,255 |
Total assets | 2,369,792,709 |
Liabilities | |
Payable for investments purchased | 71,009,054 |
Payable for fund shares repurchased | 2,627,842 |
Payable to affiliates | |
Investment management fees | 1,507,339 |
Accounting and legal services fees | 255,643 |
Transfer agent fees | 202,712 |
Distribution and service fees | 106,453 |
Trustees' fees | 1,118 |
Other liabilities and accrued expenses | 390,411 |
Total liabilities | 76,100,572 |
Net assets | $2,293,692,137 |
Net assets consist of | |
Paid-in capital | $2,043,609,375 |
Accumulated distributable earnings (accumulated loss) | 250,082,762 |
Net assets | $2,293,692,137 |
Net asset value per share | |
Based on net asset value and shares outstanding - the fund has an unlimited number of shares authorized with no par value | |
Class A ($348,370,553 ÷ 11,051,376 shares)1 | $31.52 |
Class B ($2,730,628 ÷ 88,355 shares)1 | $30.91 |
Class C ($26,348,532 ÷ 852,882 shares)1 | $30.89 |
Class I ($1,518,224,397 ÷ 48,008,727 shares) | $31.62 |
Class R1 ($3,209,170 ÷ 101,865 shares) | $31.50 |
Class R2 ($9,011,427 ÷ 286,615 shares) | $31.44 |
Class R3 ($1,355,031 ÷ 43,130 shares) | $31.42 |
Class R4 ($70,286 ÷ 2,224 shares) | $31.60 |
Class R5 ($68,468 ÷ 2,163 shares) | $31.65 |
Class R6 ($384,303,645 ÷ 12,136,346 shares) | $31.67 |
Maximum offering price per share | |
Class A (net asset value per share ÷ 95%)2 | $33.18 |
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 | ANNUAL REPORT | JOHN HANCOCK Classic Value Fund | 15 |
Investment income | |
Dividends | $60,463,240 |
Interest | 566,013 |
Securities lending | 11,647 |
Less foreign taxes withheld | (659,576) |
Total investment income | 60,381,324 |
Expenses | |
Investment management fees | 17,821,123 |
Distribution and service fees | 1,592,158 |
Accounting and legal services fees | 505,320 |
Transfer agent fees | 2,365,833 |
Trustees' fees | 35,345 |
Custodian fees | 293,868 |
State registration fees | 226,975 |
Printing and postage | 234,851 |
Professional fees | 96,814 |
Other | 67,760 |
Total expenses | 23,240,047 |
Less expense reductions | (201,210) |
Net expenses | 23,038,837 |
Net investment income | 37,342,487 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Unaffiliated investments and foreign currency transactions | 24,254,628 |
Affiliated investments | (916) |
24,253,712 | |
Change in net unrealized appreciation (depreciation) of | |
Unaffiliated investments | (96,996,536) |
Affiliated investments | 66 |
(96,996,470) | |
Net realized and unrealized loss | (72,742,758) |
Decrease in net assets from operations | $(35,400,271) |
16 | JOHN HANCOCK Classic Value Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Year ended 10-31-18 | Year ended 10-31-17 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $37,342,487 | $24,683,648 |
Net realized gain | 24,253,712 | 268,089,327 |
Change in net unrealized appreciation (depreciation) | (96,996,470) | 126,279,672 |
Increase (decrease) in net assets resulting from operations | (35,400,271) | 419,052,647 |
Distributions to shareholders | ||
From net investment income and net realized gain | ||
Class A | (3,493,763) | — |
Class B | (11,751) | — |
Class C | (213,388) | — |
Class I | (17,742,839) | — |
Class R1 | (22,029) | — |
Class R2 | (60,489) | — |
Class R3 | (9,760) | — |
Class R4 | (870) | — |
Class R5 | (869) | — |
Class R6 | (4,515,692) | — |
From net investment income | ||
Class A | — | (6,123,008) |
Class B | — | (69,061) |
Class C | — | (1,011,833) |
Class I | — | (25,583,802) |
Class R1 | — | (47,697) |
Class R2 | — | (15,242) |
Class R3 | — | (16,786) |
Class R4 | — | (1,277) |
Class R5 | — | (1,025) |
Class R6 | — | (64,570) |
Total distributions | (26,071,450) | (32,934,301) |
From fund share transactions | 140,624,274 | 285,906,812 |
Total increase | 79,152,553 | 672,025,158 |
Net assets | ||
Beginning of year | 2,214,539,584 | 1,542,514,426 |
End of year1 | $2,293,692,137 | $2,214,539,584 |
1 | Net assets - End of year includes undistributed net investment income of $19,397,004 in 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK Classic Value Fund | 17 |
Financial highlights |
CLASS A SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.32 | $26.12 | $25.49 | $25.82 | $23.12 |
Net investment income1 | 0.46 | 0.34 | 0.43 | 0.28 | 0.18 |
Net realized and unrealized gain (loss) on investments | (0.94) | 6.38 | 0.54 | (0.39) | 2.72 |
Total from investment operations | (0.48) | 6.72 | 0.97 | (0.11) | 2.90 |
Less distributions | |||||
From net investment income | (0.32) | (0.52) | (0.34) | (0.22) | (0.20) |
Net asset value, end of period | $31.52 | $32.32 | $26.12 | $25.49 | $25.82 |
Total return (%)2,3 | (1.53) | 25.91 | 3.90 | (0.42) | 12.64 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $348 | $354 | $308 | $351 | $384 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.17 | 1.18 | 1.19 | 1.19 | 1.19 |
Expenses including reductions | 1.16 | 1.17 | 1.18 | 1.18 | 1.18 |
Net investment income | 1.37 | 1.12 | 1.76 | 1.07 | 0.73 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Does not reflect the effect of sales charges, if any. |
18 | JOHN HANCOCK Classic Value Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
CLASS B SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $31.70 | $25.66 | $25.04 | $25.37 | $22.72 |
Net investment income1 | 0.22 | 0.12 | 0.25 | 0.08 | — 2 |
Net realized and unrealized gain (loss) on investments | (0.92) | 6.26 | 0.52 | (0.38) | 2.68 |
Total from investment operations | (0.70) | 6.38 | 0.77 | (0.30) | 2.68 |
Less distributions | |||||
From net investment income | (0.09) | (0.34) | (0.15) | (0.03) | (0.03) |
Net asset value, end of period | $30.91 | $31.70 | $25.66 | $25.04 | $25.37 |
Total return (%)3,4 | (2.22) | 24.96 | 3.10 | (1.18) | 11.79 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $3 | $4 | $6 | $8 | $11 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.92 | 1.93 | 1.94 | 1.93 | 1.94 |
Expenses including reductions | 1.91 | 1.92 | 1.93 | 1.93 | 1.93 |
Net investment income | 0.65 | 0.40 | 1.03 | 0.32 | 0.01 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Less than $0.005 per share. |
3 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
4 | Does not reflect the effect of sales charges, if any. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK Classic Value Fund | 19 |
CLASS C SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $31.69 | $25.65 | $25.03 | $25.36 | $22.71 |
Net investment income (loss)1 | 0.26 | 0.11 | 0.24 | 0.08 | (0.01) |
Net realized and unrealized gain (loss) on investments | (0.97) | 6.27 | 0.53 | (0.38) | 2.69 |
Total from investment operations | (0.71) | 6.38 | 0.77 | (0.30) | 2.68 |
Less distributions | |||||
From net investment income | (0.09) | (0.34) | (0.15) | (0.03) | (0.03) |
Net asset value, end of period | $30.89 | $31.69 | $25.65 | $25.03 | $25.36 |
Total return (%)2,3 | (2.25) | 24.96 | 3.11 | (1.18) | 11.80 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $26 | $75 | $76 | $88 | $101 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.92 | 1.93 | 1.94 | 1.94 | 1.94 |
Expenses including reductions | 1.91 | 1.92 | 1.93 | 1.93 | 1.93 |
Net investment income (loss) | 0.76 | 0.38 | 1.01 | 0.32 | (0.04) |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Does not reflect the effect of sales charges, if any. |
20 | JOHN HANCOCK Classic Value Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
CLASS I SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.42 | $26.19 | $25.56 | $25.90 | $23.19 |
Net investment income1 | 0.55 | 0.41 | 0.51 | 0.35 | 0.24 |
Net realized and unrealized gain (loss) on investments | (0.95) | 6.41 | 0.53 | (0.40) | 2.74 |
Total from investment operations | (0.40) | 6.82 | 1.04 | (0.05) | 2.98 |
Less distributions | |||||
From net investment income | (0.40) | (0.59) | (0.41) | (0.29) | (0.27) |
Net asset value, end of period | $31.62 | $32.42 | $26.19 | $25.56 | $25.90 |
Total return (%)2 | (1.29) | 26.24 | 4.18 | (0.19) | 12.95 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1,518 | $1,767 | $1,146 | $1,591 | $2,355 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.93 | 0.92 | 0.93 | 0.92 | 0.93 |
Expenses including reductions | 0.92 | 0.91 | 0.92 | 0.91 | 0.92 |
Net investment income | 1.62 | 1.35 | 2.07 | 1.34 | 0.97 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK Classic Value Fund | 21 |
CLASS R1 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.31 | $26.13 | $25.49 | $25.83 | $23.13 |
Net investment income1 | 0.33 | 0.21 | 0.34 | 0.17 | 0.08 |
Net realized and unrealized gain (loss) on investments | (0.94) | 6.40 | 0.55 | (0.38) | 2.73 |
Total from investment operations | (0.61) | 6.61 | 0.89 | (0.21) | 2.81 |
Less distributions | |||||
From net investment income | (0.20) | (0.43) | (0.25) | (0.13) | (0.11) |
Net asset value, end of period | $31.50 | $32.31 | $26.13 | $25.49 | $25.83 |
Total return (%)2 | (1.92) | 25.43 | 3.53 | (0.82) | 12.21 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $3 | $4 | $3 | $3 | $7 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.56 | 1.57 | 1.55 | 1.57 | 1.57 |
Expenses including reductions | 1.56 | 1.56 | 1.55 | 1.57 | 1.57 |
Net investment income | 0.99 | 0.71 | 1.40 | 0.64 | 0.32 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
22 | JOHN HANCOCK Classic Value Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
CLASS R2 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.24 | $26.07 | $25.46 | $25.85 | $23.16 |
Net investment income1 | 0.40 | 0.25 | 0.36 | 0.26 | 0.17 |
Net realized and unrealized gain (loss) on investments | (0.92) | 6.41 | 0.58 | (0.41) | 2.75 |
Total from investment operations | (0.52) | 6.66 | 0.94 | (0.15) | 2.92 |
Less distributions | |||||
From net investment income | (0.28) | (0.49) | (0.33) | (0.24) | (0.23) |
Net asset value, end of period | $31.44 | $32.24 | $26.07 | $25.46 | $25.85 |
Total return (%)2 | (1.66) | 25.71 | 3.76 | (0.56) | 12.70 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $9 | $7 | $1 | $— 3 | $— 3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.32 | 1.33 | 1.33 | 1.26 | 1.19 |
Expenses including reductions | 1.31 | 1.32 | 1.32 | 1.26 | 1.18 |
Net investment income | 1.21 | 0.84 | 1.47 | 0.99 | 0.68 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Less than $500,000. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK Classic Value Fund | 23 |
CLASS R3 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.20 | $26.03 | $25.41 | $25.75 | $23.08 |
Net investment income1 | 0.39 | 0.24 | 0.36 | 0.20 | 0.09 |
Net realized and unrealized gain (loss) on investments | (0.94) | 6.38 | 0.53 | (0.39) | 2.74 |
Total from investment operations | (0.55) | 6.62 | 0.89 | (0.19) | 2.83 |
Less distributions | |||||
From net investment income | (0.23) | (0.45) | (0.27) | (0.15) | (0.16) |
Net asset value, end of period | $31.42 | $32.20 | $26.03 | $25.41 | $25.75 |
Total return (%)2 | (1.74) | 25.58 | 3.57 | (0.73) | 12.34 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $1 | $1 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.40 | 1.47 | 1.48 | 1.48 | 1.47 |
Expenses including reductions | 1.40 | 1.47 | 1.47 | 1.47 | 1.47 |
Net investment income | 1.17 | 0.79 | 1.48 | 0.78 | 0.37 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
24 | JOHN HANCOCK Classic Value Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
CLASS R4 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.40 | $26.17 | $25.55 | $25.90 | $23.19 |
Net investment income1 | 0.53 | 0.40 | 0.48 | 0.34 | 0.23 |
Net realized and unrealized gain (loss) on investments | (0.94) | 6.40 | 0.54 | (0.41) | 2.74 |
Total from investment operations | (0.41) | 6.80 | 1.02 | (0.07) | 2.97 |
Less distributions | |||||
From net investment income | (0.39) | (0.57) | (0.40) | (0.28) | (0.26) |
Net asset value, end of period | $31.60 | $32.40 | $26.17 | $25.55 | $25.90 |
Total return (%)2 | (1.33) | 26.20 | 4.10 | (0.24) | 12.92 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $— 3 | $— 3 | $— 3 | $— 3 | $— 3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 1.07 | 1.08 | 1.08 | 1.08 | 1.07 |
Expenses including reductions | 0.96 | 0.97 | 0.97 | 0.97 | 0.96 |
Net investment income | 1.58 | 1.31 | 1.96 | 1.28 | 0.93 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Less than $500,000. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK Classic Value Fund | 25 |
CLASS R5 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.44 | $26.21 | $25.57 | $25.92 | $23.22 |
Net investment income1 | 0.57 | 0.43 | 0.54 | 0.37 | 0.25 |
Net realized and unrealized gain (loss) on investments | (0.94) | 6.40 | 0.52 | (0.40) | 2.74 |
Total from investment operations | (0.37) | 6.83 | 1.06 | (0.03) | 2.99 |
Less distributions | |||||
From net investment income | (0.42) | (0.60) | (0.42) | (0.32) | (0.29) |
Net asset value, end of period | $31.65 | $32.44 | $26.21 | $25.57 | $25.92 |
Total return (%)2 | (1.22) | 26.27 | 4.27 | (0.11) | 13.02 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $— 3 | $— 3 | $— 3 | $— 3 | $— 3 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.87 | 0.88 | 0.86 | 0.85 | 0.84 |
Expenses including reductions | 0.87 | 0.87 | 0.86 | 0.84 | 0.83 |
Net investment income | 1.68 | 1.40 | 2.22 | 1.40 | 1.03 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
3 | Less than $500,000. |
26 | JOHN HANCOCK Classic Value Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
CLASS R6 SHARES Period ended | 10-31-18 | 10-31-17 | 10-31-16 | 10-31-15 | 10-31-14 |
Per share operating performance | |||||
Net asset value, beginning of period | $32.46 | $26.21 | $25.59 | $25.94 | $23.21 |
Net investment income1 | 0.57 | 0.47 | 0.52 | 0.39 | 0.27 |
Net realized and unrealized gain (loss) on investments | (0.93) | 6.39 | 0.54 | (0.42) | 2.74 |
Total from investment operations | (0.36) | 6.86 | 1.06 | (0.03) | 3.01 |
Less distributions | |||||
From net investment income | (0.43) | (0.61) | (0.44) | (0.32) | (0.28) |
Net asset value, end of period | $31.67 | $32.46 | $26.21 | $25.59 | $25.94 |
Total return (%)2 | (1.17) | 26.41 | 4.26 | (0.09) | 13.11 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $384 | $1 | $1 | $1 | $1 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 0.82 | 0.83 | 0.83 | 0.83 | 0.83 |
Expenses including reductions | 0.81 | 0.81 | 0.81 | 0.81 | 0.80 |
Net investment income | 1.71 | 1.53 | 2.11 | 1.51 | 1.08 |
Portfolio turnover (%) | 28 | 45 | 21 | 17 | 24 |
1 | Based on average daily shares outstanding. |
2 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK Classic Value Fund | 27 |
Note 1 — Organization
John Hancock Classic Value Fund (the fund) is a series of John Hancock Capital Series (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to seek long-term growth of capital.
The funds may offer multiple classes of shares. The shares currently offered by the fund are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class B shares are closed to new investors. Class I shares are offered to institutions and certain investors. Class R1, Class R2, Class R3, Class R4, and Class R5 shares are available only to certain retirement and 529 plans. Class R6 shares are only available to certain retirement plans, institutions and other investors. Class B shares convert to Class A shares eight years after purchase. Class C shares convert to Class A shares ten years after purchase (certain exclusions may apply). Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees for each class may differ.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures.
In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market where the security trades. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. Debt obligations are valued based on the evaluated prices provided by an independent pricing vendor or from broker-dealers. Independent pricing vendors utilize matrix pricing which takes into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, as well as broker supplied prices.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market. Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund's Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund's own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of October 31, 2018, all investments are categorized as Level 1 under the hierarchy described above, except repurchase agreements, which are categorized as Level 2.
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund's custodian. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. Collateral received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, assets and liabilities resulting from repurchase agreements are not offset in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay back claims resulting from close-out of the transactions.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily NAV calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. 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. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Securities lending. The fund may lend its securities to earn additional income. The fund receives cash collateral from the borrower in an amount not less than the market value of the loaned securities. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The fund will invest its collateral in John Hancock Collateral Trust (JHCT), an affiliate of the fund, which has a floating NAV and is registered with the Securities and Exchange Commission as an investment company. JHCT invests in short-term money market investments. The fund will receive the benefit of any gains and bear any losses generated by JHCT with respect to the cash collateral.
The fund has the right to recall loaned securities on demand. If a borrower fails to return loaned securities when due, then the lending agent is responsible and indemnifies the fund for the lent securities. The lending agent uses the collateral received from the borrower to purchase replacement securities of the same issue, type, class and series of the loaned securities. If the value of the collateral is less than the purchase cost of replacement securities, the lending agent is responsible for satisfying the shortfall but only to the extent that the shortfall is not due to any decrease in the value of JHCT.
Although the risk of the loss of the securities lent is mitigated by receiving collateral from the borrower and through lending agent indemnification, the fund could experience a delay in recovering securities or could experience a lower than expected return if the borrower fails to return the securities on a timely basis. The fund receives compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Securities lending income received by the fund is net of fees retained by the securities lending agent. Net income received from JHCT is a component of securities lending income as recorded on the Statement of operations. As of October 31, 2018, there were no securities on loan.
Foreign taxes. The fund may be subject to withholding tax on income, capital gains or repatriation taxes imposed by certain countries, a portion of which may be recoverable. Foreign taxes are accrued based upon the fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Taxes are accrued based on gains realized by the fund as a result of certain foreign security sales. In certain circumstances, estimated taxes are accrued based on unrealized appreciation of such securities. Investment income is recorded net of foreign withholding taxes.
Line of credit. The fund may have the ability to borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund's custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the extent of any overdraft, and to the maximum extent permitted by law.
The fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $750 million unsecured committed line of credit. Excluding commitments designated for a certain fund and subject to the needs of all other affiliated funds, the fund can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. A commitment fee payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. For the year ended October 31, 2018, the fund had no borrowings under the line of credit. Commitment fees for the year ended October 31, 2018 were $6,261.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund's relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees, for all classes, are charged daily at the class level based on the net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
As of October 31, 2018, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends and capital gain distributions, if any, annually.
The tax character of distributions for the years ended October 31, 2018 and 2017 was as follows:
October 31, 2018 | October 31, 2017 | |
Ordinary income | $26,071,450 | $32,934,301 |
Distributions paid by the fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class. As of October 31, 2018, the components of distributable earnings on a tax basis consisted of $47,715,843 of undistributed ordinary income and $5,459,947 of undistributed long-term capital gains.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in the fund's financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to wash sale loss deferrals and litigation proceeds.
Note 3 — Guarantees and indemnifications
Under the Trust's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment advisor for the fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a monthly management fee to the Advisor equivalent on an annual basis to the sum of: (a) 0.750% of the first $2.5 billion of the fund's average daily net assets; (b) 0.740% of the next $2.5 billion of the fund's average daily net assets and (3) 0.730% of the fund's average daily net assets in excess of $5 billion. The Advisor has a subadvisory agreement with Pzena Investment Management, LLC. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the year ended October 31, 2018, this waiver amounted to 0.01% of the fund's average net assets. This agreement expires on June 30, 2020, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
For the year ended October 31, 2018, these expense reductions described above amounted to the following:
Class | Expense reduction | Class | Expense reduction | |
Class A | $31,413 | Class R3 | $123 | |
Class B | 313 | Class R4 | 7 | |
Class C | 4,654 | Class R5 | 7 | |
Class I | 133,020 | Class R6 | 30,567 | |
Class R1 | 303 | Total | $201,135 | |
Class R2 | 728 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fee, including the impact of the waivers and reimbursement as described above, incurred for the year ended October 31, 2018 were equivalent to a net annual effective rate of 0.74% of the fund's average daily net assets.
Accounting and legal services. Pursuant to the Accounting and Legal Services Agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, compliance, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the year ended October 31, 2018 amounted to an annual rate of 0.02% of the fund's average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B, Class C, Class R1, Class R2, Class R3 and Class R4 shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. In addition, under a service plan for Class R1, Class R2, Class R3, Class R4, and Class R5 shares, the fund pays for
certain other services. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund's shares:
Class | Rule 12b-1 fee | Service fee | Class | Rule 12b-1 fee | Service fee | |
Class A | 0.25% | — | Class R2 | 0.25% | 0.25% | |
Class B | 1.00% | — | Class R3 | 0.50% | 0.15% | |
Class C | 1.00% | — | Class R4 | 0.25% | 0.10% | |
Class R1 | 0.50% | 0.25% | Class R5 | — | 0.05% |
The fund's Distributor has contractually agreed to waive 0.10% of Rule12b-1 fees for Class R4 shares. The current waiver agreement expires on February 28, 2019, unless renewed by mutual agreement of the fund and the Distributor based upon a determination that this is appropriate under the circumstances at the time. This contractual waiver amounted to $75 for Class R4 shares for the year ended October 31, 2018.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $198,785 for the year ended October 31, 2018. Of this amount, $32,775 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $156,304 was paid as sales commissions to broker-dealers and $9,706 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the year ended October 31, 2018, CDSCs received by the Distributor amounted to $1,376, $729, and $1,062 for Class A, Class B, and Class C shares, respectively.
Transfer agent fees. The John Hancock group of funds has a complex-wide transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Share Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the year ended October 31, 2018 were:
Class | Distribution and service fees | Transfer agent fees | ||||||
Class A | $927,908 | $400,075 | ||||||
Class B | 36,982 | 3,978 | ||||||
Class C | 549,202 | 58,969 | ||||||
Class I | — | 1,856,576 | ||||||
Class R1 | 26,519 | 440 | ||||||
Class R2 | 42,866 | 1,056 | ||||||
Class R3 | 8,457 | 179 | ||||||
Class R4 | 187 | 9 | ||||||
Class R5 | 37 | 9 |
Class | Distribution and service fees | Transfer agent fees | ||||||
Class R6 | — | $44,542 | ||||||
Total | $1,592,158 | $2,365,833 |
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to the fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the years ended October 31, 2018 and 2017 were as follows:
Year ended 10-31-18 | Year ended 10-31-17 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 2,006,273 | $68,327,765 | 1,741,170 | $52,263,842 | ||||||||||||||||||||||
Distributions reinvested | 96,879 | 3,228,010 | 194,622 | 5,762,744 | ||||||||||||||||||||||
Repurchased | (2,014,562 | ) | (67,661,377 | ) | (2,780,522 | ) | (83,623,434 | ) | ||||||||||||||||||
Net increase (decrease) | 88,590 | $3,894,398 | (844,730 | ) | $(25,596,848 | ) | ||||||||||||||||||||
Class B shares | ||||||||||||||||||||||||||
Sold | 2,773 | $90,175 | 13,322 | $394,186 | ||||||||||||||||||||||
Distributions reinvested | 338 | 11,102 | 2,126 | 62,173 | ||||||||||||||||||||||
Repurchased | (52,999 | ) | (1,750,841 | ) | (92,083 | ) | (2,729,048 | ) | ||||||||||||||||||
Net decrease | (49,888 | ) | $(1,649,564 | ) | (76,635 | ) | $(2,272,689 | ) | ||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 78,780 | $2,614,557 | 292,354 | $8,475,115 | ||||||||||||||||||||||
Distributions reinvested | 6,124 | 201,289 | 28,499 | 833,017 | ||||||||||||||||||||||
Repurchased | (1,611,127 | ) | (54,059,338 | ) | (913,769 | ) | (27,079,294 | ) | ||||||||||||||||||
Net decrease | (1,526,223 | ) | $(51,243,492 | ) | (592,916 | ) | $(17,771,162 | ) | ||||||||||||||||||
Class I shares | ||||||||||||||||||||||||||
Sold | 13,499,554 | $456,832,057 | 24,224,480 | $734,272,624 | ||||||||||||||||||||||
Distributions reinvested | 489,456 | 16,328,256 | 740,798 | 21,957,249 | ||||||||||||||||||||||
Repurchased | (20,486,916 | ) | (680,004,271 | ) | (14,232,178 | ) | (430,352,129 | ) | ||||||||||||||||||
Net increase (decrease) | (6,497,906 | ) | $(206,843,958 | ) | 10,733,100 | $325,877,744 | ||||||||||||||||||||
Class R1 shares | ||||||||||||||||||||||||||
Sold | 13,832 | $464,484 | 46,404 | $1,403,455 | ||||||||||||||||||||||
Distributions reinvested | 561 | 18,732 | 1,389 | 41,265 | ||||||||||||||||||||||
Repurchased | (23,545 | ) | (785,740 | ) | (40,644 | ) | (1,239,448 | ) | ||||||||||||||||||
Net increase (decrease) | (9,152 | ) | $(302,524 | ) | 7,149 | $205,272 | ||||||||||||||||||||
Class R2 shares | ||||||||||||||||||||||||||
Sold | 120,982 | $4,127,774 | 261,929 | $8,125,842 | ||||||||||||||||||||||
Distributions reinvested | 1,813 | 60,331 | 511 | 15,123 | ||||||||||||||||||||||
Repurchased | (58,238 | ) | (1,944,693 | ) | (72,289 | ) | (2,311,603 | ) | ||||||||||||||||||
Net increase | 64,557 | $2,243,412 | 190,151 | $5,829,362 | ||||||||||||||||||||||
Class R3 shares | ||||||||||||||||||||||||||
Sold | 7,362 | $253,881 | 16,571 | $501,803 | ||||||||||||||||||||||
Distributions reinvested | 293 | 9,760 | 568 | 16,786 | ||||||||||||||||||||||
Repurchased | (6,046 | ) | (204,359 | ) | (9,868 | ) | (298,569 | ) | ||||||||||||||||||
Net increase | 1,609 | $59,282 | 7,271 | $220,020 |
Year ended 10-31-18 | Year ended 10-31-17 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class R5 shares | ||||||||||||||||||||||||||
Sold | 313 | $10,451 | 455 | $13,864 | ||||||||||||||||||||||
Distributions reinvested | 26 | 869 | 35 | 1,025 | ||||||||||||||||||||||
Repurchased | (230 | ) | (7,723 | ) | (366 | ) | (11,071 | ) | ||||||||||||||||||
Net increase | 109 | $3,597 | 124 | $3,818 | ||||||||||||||||||||||
Class R6 shares | ||||||||||||||||||||||||||
Sold | 14,035,414 | $459,838,473 | 77,044 | $2,334,880 | ||||||||||||||||||||||
Distributions reinvested | 135,322 | 4,515,692 | 2,179 | 64,570 | ||||||||||||||||||||||
Repurchased | (2,070,964 | ) | (69,891,042 | ) | (97,493 | ) | (2,988,155 | ) | ||||||||||||||||||
Net increase (decrease) | 12,099,772 | $394,463,123 | (18,270 | ) | $(588,705 | ) | ||||||||||||||||||||
Total net increase | 4,171,468 | $140,624,274 | 9,405,244 | $285,906,812 |
There were no share transactions for Class R4 for the years ended October 31, 2018 and 2017. Affiliates of the fund owned 100% of shares of Class R4 on October 31, 2018.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term, amounted to $891,016,030 and $645,563,504, respectively, for the year ended October 31, 2018.
Note 7 — Industry or sector risk
The fund may invest a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the fund's assets are economically tied to a single or small number of industries or sectors of the economy, the fund will be less diversified than a more broadly diversified fund, and it may cause the fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the fund's NAV more volatile. Further, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors.
Note 8 — Investment in affiliated underlying funds
The fund may invest in affiliated underlying funds that are managed by the Advisor and its affiliates. Information regarding the fund's purchases and sales of affiliated underlying funds as well as income and capital gains earned, if any, during the period is as follows:
Dividends and distributions | ||||||||||||||||||||||||||||||||||||||
Fund | Beginning share amount | Shares purchased | Shares sold | Ending share amount | Income distributions received | Capital gain distributions received | Realized gain (loss) | Change in unrealized appreciation (depreciation) | Ending value | |||||||||||||||||||||||||||||
John Hancock Collateral Trust* | 250,499 | 11,700,881 | (11,951,380 | ) | — | — | — | ($916 | ) | $66 | — | |||||||||||||||||||||||||||
*Refer to the Securities lending note within Note 2 for details regarding this investment. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of John Hancock Capital Series and Shareholders of John Hancock Classic Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund's investments, of John Hancock Classic Value Fund (one of the funds constituting John Hancock Capital Series, referred to hereafter as the "Fund") as of October 31, 2018, the related statement of operations for the year ended October 31, 2018, the statements of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2018 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2018 and the financial highlights for each of the five years in the period ended October 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
December 18, 2018
We have served as the auditor of one or more investment companies in the John Hancock group of funds since 1988.
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended October 31, 2018.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Eligible shareholders will be mailed a 2018 Form 1099-DIV in early 2019. This will reflect the tax character of all distributions paid in calendar year 2018.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
Continuation of Investment Advisory and Subadvisory Agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Capital Series (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Pzena Investment Management, LLC (the Subadvisor), for John Hancock Classic Value Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 18-21, 2018 in-person meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 29-31, 2018.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 18-21, 2018, the Board, including the Trustees who are not parties to any Agreement or considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board noted that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board (including its various committees) at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The information received and considered by the Board in connection with the May and June meetings and throughout the year was both written and oral. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services. The Board considered the Advisory Agreement and the Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Advisor and Subadvisor in providing services to the fund.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and did not treat any single factor as determinative, and each Trustee may have attributed different weights to different factors. The Board's conclusions may be
based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services . Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board observed that the scope of services provided by the Advisor, and of the undertakings required of the Advisor in connection with those services, including maintaining and monitoring its own and the fund's compliance programs, risk management programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and other third-party service providers. The Board also considered the significant risks assumed by the Advisor in connection with the services provided to the fund including entrepreneurial risk in sponsoring new funds and ongoing risks including investment, operational, enterprise, litigation, regulatory and compliance risks with respect to all funds.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the John Hancock group of funds complex (the John Hancock Fund Complex).
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that while it found the data provided by the independent third-party generally useful it recognized its limitations, including in particular that the data may vary depending on the end date selected and the results of the performance comparisons may vary depending on the selection of the peer group. The Board noted that the fund outperformed its benchmark index and peer group average for the one-, three- and five-year periods ended December 31, 2017 and underperformed its benchmark index and peer group average for the ten-year period ended December 31, 2017. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the benchmark index and peer group average for the one-, three- and five-year periods. The Board concluded that the fund's performance has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund in light of the nature, extent and quality of the management and advisory and subadvisory services provided by the Advisor and the Subadvisor. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees and net total expenses for the fund are higher than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the overall management fee and the fees of the Subadvisor, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee, in each case in light of the services rendered for those amounts and the risks undertaken by the Advisor. The Board also noted that the Advisor pays the subadvisory fee, and that such fees are negotiated at arm's length with respect to the Subadvisor. In addition, the Board took into account that management had agreed to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduce management fees as assets increase. The Board also noted that the fund's distributor, an affiliate of the Advisor, has agreed to waive a portion of its Rule 12b-1 fee for a share class of the fund. The Board noted that the fund has a voluntary fee waiver and/or expense reimbursement, which reduces certain expenses of the fund. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the John Hancock Fund Complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable in light of the nature, extent and quality of the services provided to the fund under the Advisory Agreement.
Profitability/Fall out benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |
(c) | received and reviewed profitability information with respect to the John Hancock Fund Complex as a whole and with respect to the fund; | |
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data and considered that the Advisor hired an independent third-party consultant to provide an analysis of the Advisor's allocation methodologies; | |
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability information reviewed by the Board; | |
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |
(h) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |
(i) | noted that the subadvisory fee for the fund is paid by the Advisor and is negotiated at arm's length; | |
(j) | considered the Advisor's ongoing costs and expenditures necessary to improve services, meet new regulatory and compliance requirements, and adapt to other challenges impacting the fund industry; and | |
(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the risks that it assumes as Advisor, including entrepreneurial, operational, reputational, litigation and regulatory risk. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund; |
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | |||||||
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock Fund Complex); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third-party provider of fund data; and | |
(4) | information relating to the nature and scope of any material relationships and their significance to the Trust's Advisor and Subadvisor. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund.
The Board also relied on the ability of the Advisor to negotiate the Subadvisory Agreement with the Subadvisor, which is not affiliated with the Advisor, and the fees thereunder at arm's length. As a result, the costs of the services to be provided and the profits to be realized by the Subadvisor from its relationship with the Trust were not a material factor in the Board's consideration of the Subadvisory Agreement.
The Board also received information regarding the nature and scope (including their significance to the Advisor and its affiliates and to the Subadvisor) of any material relationships with respect to the Subadvisor, which include arrangements in which the Subadvisor or its affiliates provide advisory, distribution, or management services in connection with financial products sponsored by the Advisor or its affiliates, and may include other registered investment companies, a 529 education savings plan, managed separate accounts and exempt group annuity contracts sold to qualified plans. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock Fund Complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fees as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third-party provider of fund data, to the extent available. The Board also noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund and compared them to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the performance of the fund has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided under the Subadvisory Agreement; and | |
(4) | noted that the subadvisory fees are paid by the Advisor not the fund and that the subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Hassell H. McClellan, Born: 1945 | 2012 | 215 |
Trustee and Chairperson of the Board Director/Trustee, Virtus Funds (since 2008); Director, The Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston College (retired 2013). Trustee (since 2014) and Chairperson of the Board (since 2017), John Hancock Collateral Trust; Trustee (since 2015) and Chairperson of the Board (since 2017), John Hancock Exchange-Traded Fund Trust; Trustee (since 2012) and Chairperson of the Board (since 2017), John Hancock retail funds3; Trustee (2005-2006 and since 2012) and Chairperson of the Board (since 2017), John Hancock Funds III; Trustee (since 2005) and Chairperson of the Board (since 2017), John Hancock Variable Insurance Trust and John Hancock Funds II. |
Charles L. Bardelis,2 Born: 1941 | 2012 | 215 |
Trustee Director, Island Commuter Corp. (marine transport). Trustee, John Hancock Collateral Trust (since 2014), Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005-2006 and since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock Funds II (since 2005). |
James R. Boyle, Born: 1959 | 2015 | 215 |
Trustee Chief Executive Officer, Foresters Financial (since 2018); Chairman and Chief Executive Officer, Zillion Group, Inc. (formerly HealthFleet, Inc.) (healthcare) (2014-2018); Executive Vice President and Chief Executive Officer, U.S. Life Insurance Division of Genworth Financial, Inc. (insurance) (January 2014-July 2014); Senior Executive Vice President, Manulife Financial, President and Chief Executive Officer, John Hancock (1999-2012); Chairman and Director, John Hancock Advisers, LLC, John Hancock Funds, LLC, and John Hancock Investment Management Services, LLC (2005-2010). Trustee, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (2005-2010; 2012-2014 and since 2015); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (2005-2014 and since 2015). |
Peter S. Burgess,2 Born: 1942 | 2012 | 215 |
Trustee Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (2010-2016); Director, PMA Capital Corporation (2004-2010). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005-2006 and since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). |
William H. Cunningham, Born: 1944 | 2005 | 215 |
Trustee Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000); former Director, LIN Television (2009-2014). Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust (since 2012); Trustee, John Hancock Funds II (2005-2006 and since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
Independent Trustees (continued)
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Grace K. Fey, Born: 1946 | 2012 | 215 |
Trustee Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company (1988-2007); Director, Fiduciary Trust (since 2009). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2008). |
Theron S. Hoffman,2 Born: 1947 | 2012 | 215 |
Trustee Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd Organization (consulting firm) (2003-2010); President, Westport Resources Management (investment management consulting firm) (2006-2008); Board Member, Senior Managing Director, Partner, and Operating Head, Putnam Investments (2000-2003); Executive Vice President, The Thomson Corp. (financial and legal information publishing) (1997-2000). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2008). |
Deborah C. Jackson, Born: 1952 | 2008 | 215 |
Trustee President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, National Association of Corporate Directors/New England (since 2015); Board of Directors, Association of Independent Colleges and Universities of Massachusetts (since 2014); Chief Executive Officer, American Red Cross of Massachusetts Bay (2002-2011); Board of Directors of Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors of American Student Assistance Corporation (1996-2009); Board of Directors of Boston Stock Exchange (2002-2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007-2011). Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); and Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
James M. Oates, Born: 1946 | 2012 | 215 |
Trustee |
Steven R. Pruchansky, Born: 1944 | 2005 | 215 |
Trustee and Vice Chairperson of the Board Managing Director, Pru Realty (since 2017); Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Partner, Right Funding, LLC (2014-2017); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991). Trustee (since 1992) and Chairperson of the Board (2011-2012), John Hancock retail funds3; Trustee and Vice Chairperson of the Board, John Hancock retail funds3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2012); Trustee and Vice Chairperson of the Board, John Hancock Collateral Trust (since 2014); Trustee and Vice Chairperson of the Board, John Hancock Exchange-Traded Fund Trust (since 2015). |
Independent Trustees (continued)
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Gregory A. Russo, Born: 1949 | 2009 | 215 |
Trustee Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare system); Director and Member (since 2012) and Finance Committee Chairman (since 2014), The Moorings, Inc. (nonprofit continuing care community); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002-2006); Vice Chairman, Industrial Markets, KPMG (1998-2002); Chairman and Treasurer, Westchester County, New York, Chamber of Commerce (1986-1992); Director, Treasurer, and Chairman of Audit and Finance Committees, Putnam Hospital Center (1989-1995); Director and Chairman of Fundraising Campaign, United Way of Westchester and Putnam Counties, New York (1990-1995). Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
Non-Independent Trustees4
Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
Andrew G. Arnott, Born: 1971 | 2017 | 215 |
President and Non-Independent Trustee Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (since 2018); Executive Vice President, John Hancock Financial Services (since 2009, including prior positions); Director and Executive Vice President, John Hancock Advisers, LLC (since 2005, including prior positions); Director and Executive Vice President, John Hancock Investment Management Services, LLC (since 2006, including prior positions); President, John Hancock Funds, LLC (since 2004, including prior positions); President, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2007, including prior positions); President, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). Trustee, John Hancock Collateral Trust, John Hancock Exchange-Traded Fund Trust, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2017). |
Marianne Harrison, Born: 1963 | 2018 | 215 |
Non-Independent Trustee President and CEO, John Hancock (since 2017); President and CEO, Manulife Canadian Division (2013-2017); Member, Board of Directors, American Council of Life Insurers (ACLI) (since 2018); Member, Board of Directors, Communitech, an industry-led innovation center that fosters technology companies in Canada (since 2017); Member, Board of Directors, Manulife Assurance Canada (since 2015); Board Member, St. Mary's General Hospital Foundation (since 2014); Member, Board of Directors, Manulife Bank of Canada (since 2013); Member, Standing Committee of the Canadian Life & Health Assurance Association (since 2013); Member, Board of Directors, John Hancock USA, John Hancock Life & Health, John Hancock New York (2012-2013). Trustee, John Hancock Collateral Trust, John Hancock Exchange-Traded Fund Trust, John Hancock retail funds3, John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2018). |
Warren A. Thomson, Born: 1955 | 2012 | 215 |
Non-Independent Trustee Senior Executive Vice President and Chief Investment Officer, Manulife Financial and The Manufacturers Life Insurance Company (since 2009); Chairman, Manulife Asset Management (since 2001, including prior positions); Director and Chairman, Manulife Asset Management Limited (since 2006); Director and Chairman, Hancock Natural Resources Group, Inc. (since 2013). Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). |
Principal officers who are not Trustees
Name, year of birth Position(s) held with Trust Principal occupation(s) during past 5 years | Officer of the Trust since |
Francis V. Knox, Jr., Born: 1947 | 2005 |
Chief Compliance Officer Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, LLC, and John Hancock Investment Management Services, LLC (since 2005); Chief Compliance Officer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). |
Charles A. Rizzo, Born: 1957 | 2007 |
Chief Financial Officer Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock Funds II (since 2007); Chief Financial Officer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). |
Salvatore Schiavone, Born: 1965 | 2010 |
Treasurer Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable Insurance Trust and John Hancock Funds II (2007-2009 and since 2010, including prior positions); Treasurer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). |
Christopher (Kit) Sechler, Born: 1973 | 2018 |
Chief Legal Officer and Secretary Vice President and Deputy Chief Counsel, John Hancock Investments (since 2015); Assistant Vice President and Senior Counsel (2009-2015), John Hancock Investments; Chief Legal Officer and Secretary, John Hancock retail funds(2), John Hancock Variable Insurance Trust, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2018); Assistant Secretary of John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2009). |
The business address for all Trustees and Officers is 200 Berkeley Street, Boston, Massachusetts 02116.
The Statement of Additional Information of the fund includes additional information about members of the Board of Trustees of the Trust and is available without charge, upon request, by calling 800-225-5291.
1 | Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee's death, retirement, resignation, or removal. Mr. Boyle has served as Trustee at various times prior to the date listed in the table. |
2 | Member of the Audit Committee. |
3 | "John Hancock retail funds" comprises John Hancock Funds III and 40 other John Hancock funds consisting of 30 series of other John Hancock trusts and 10 closed-end funds. |
4 | The Trustee is a Non-Independent Trustee due to current or former positions with the Advisor and certain affiliates. |
Trustees Hassell H. McClellan, Chairperson Officers Andrew G. Arnott Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone Christopher (Kit) Sechler** | Investment advisor John Hancock Advisers, LLC Subadvisor Pzena Investment Management, LLC Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP Independent registered public accounting firm PricewaterhouseCoopers LLP |
* Member of the Audit Committee
† Non-Independent Trustee
#Effective 6-19-18
**Effective 9-13-18
The fund's proxy voting policies and procedures, as well as the fund proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund's complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund's Form N-Q is available on our website and the SEC's website, sec.gov, and can be reviewed and copied (for a fee) at the SEC's Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | |||
800-225-5291 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Financial Industries Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Regional Bank Small Cap Core Small Cap Growth Small Cap Value U.S. Global Leaders Growth U.S. Growth U.S. Quality Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Fundamental Global Franchise Global Equity Global Shareholder Yield Global Thematic Opportunities Greater China Opportunities International Growth International Small Company | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Redwood Seaport Long/Short Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Balanced Income Allocation Multi-Index Lifetime Portfolios Multi-Index Preservation Portfolios Multimanager Lifestyle Portfolios Multimanager Lifetime Portfolios Retirement Income 2040 EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Developed International ETF John Hancock Multifactor Emerging Markets ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Small Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Core Bond ESG International Equity ESG Large Cap Core CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We serve investors globally through a unique multimanager approach:
We search the world to find proven portfolio teams with specialized
expertise for every strategy we offer, then we apply robust investment
oversight to ensure they continue to meet our uncompromising standards
and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, along with strong
risk-adjusted returns across asset classes.
| John Hancock Funds, LLC n Member FINRA, SIPC 200 Berkeley Street n Boston, MA 02116-5010 800-225-5291 n jhinvestments.com | |
This report is for the information of the shareholders of John Hancock Classic Value Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | ||
MF647890 | 38A 10/18 12/18 |
ITEM 2. CODE OF ETHICS.
As of the end of the period, October 31, 2018, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Senior Financial Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Peter S. Burgess is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to the following for the fiscal years ended October 31, 2018 and 2017. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | October 31, 2018 | October 31, 2017 |
John Hancock Classic Value Fund | $37,337 | $32,737 |
John Hancock U.S. Global Leaders Growth Fund | 35,368 | 30,768 |
Total | $72,705 | $63,505 |
(b) Audit-Related Services
Audit-related service fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser (“control affiliates”) that provides ongoing services to the registrant. The nature of the services provided was affiliated service provider internal controls reviews.
Fund | October 31, 2018 | October 31, 2017 |
John Hancock Classic Value Fund | $540 | $524 |
John Hancock U.S. Global Leaders Growth Fund | 540 | 524 |
Total | $1,080 | $1,048 |
In addition, amounts billed to control affiliates for service provider internal controls reviews were $110,200 and $106,517 for the fiscal years ended October 31, 2018 and 2017, respectively.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to the following for the fiscal years ended October 31, 2018 and 2017. The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
Fund | October 31, 2018 | October 31, 2017 |
John Hancock Classic Value Fund | $3,725 | $3,850 |
John Hancock U.S. Global Leaders Growth Fund | 3,725 | 3,725 |
Total | $7,450 | $7,575 |
(d) All Other Fees
Other fees billed for professional services rendered by the principal accountant to the registrant or to the control affiliates for the fiscal years ended October 31, 2018 and 2017 amounted to the following:
Fund | October 31, 2018 | October 31, 2017 |
John Hancock Classic Value Fund | $239 | $839 |
John Hancock U.S. Global Leaders Growth Fund | 239 | 839 |
Total | $478 | $1,678 |
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust’s Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the “Auditor”) relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust’s Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per instance/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per instance/per fund are subject to specific pre-approval by the Audit Committee.
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees, Tax Fees and All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f) According to the registrant’s principal accountant, for the fiscal period ended October 31, 2018, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant for non- audit services rendered to the registrant and rendered to the registrant's control affiliates for the fiscal years ended October 31, 2018 and 2017 amounted to the following:
Trust | October 31, 2018 | October 31, 2017 |
John Hancock Capital Series | $2,064,999 | $8,888,919 |
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant(s) to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant(s)' independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:
Peter S. Burgess - Chairman
Charles L. Bardelis
Theron S. Hoffman
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to previously disclosed John Hancock Funds – Nominating and 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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating and Governance Committee Charter”.
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 Capital Series
By: | /s/ Andrew Arnott | |
Andrew Arnott | ||
President | ||
Date: | December 18, 2018 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | ||
By: | /s/ Andrew Arnott | |
Andrew Arnott | ||
President | ||
Date: | December 18, 2018 | |
By: | /s/ Charles A. Rizzo | |
Charles A. Rizzo | ||
Chief Financial Officer | ||
Date: | December 18, 2018 |