John Hancock International Growth Fund

Transcription

1 John Hancock International Growth Fund Wellington Management Company LLP, is an SEC registered investment advisor and the sub adviser to the John Hancock International Growth Fund. John Hancock Funds, LLC is the distributor of the Funds. Wellington Management is an independent and unaffiliated investment sub advisor to John Hancock. NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. NOT INSURED BY ANY GOVERNMENT AGENCY. 1

2 Investment philosophy 1. Alpha generation requires disciplined focus on five enduring attributes High organic revenue growth High quality business models Low free cash flow valuation Capital return to shareholders Improving fundamentals 2. Consistent alpha generation requires high active share 3. Downside protection is just as important as upmarket capture Please note: effective close of business on July 15, 2014, Wellington Management replaced the fund s manager, GMO (predecessor manager). Performance prior to July 15, 2014 reflects the performance of the predecessor manager. 2

3 Predictive power of quality, growth, valuation, and capital return Quality Relative Returns (%) Free Cash Flow Margin Best Quintile Incremental Free Cash Flow Margin 1 Second Third Fourth Worst Quintile Best Quintile Second Third Fourth Worst Quintile Capital Return Growth/Valuation Relative Returns (%) Free Cash Flow Yield Quintile Highest Quintile Annual Free Cash Flow Growth 2 Second Third Fourth Lowest Quintile Best Quintile Second Third Fourth Worst Quintile Dividend Yield 3 Change in Shares Outstanding Quintile Highest Quintile Second Third Fourth Lowest Quintile Best Quintile Second Third Primary Areas of Focus Typically Avoid Fourth Worst Quintile Source: Wellington Management. Universes and data are sourced from Empirical Research Partners analysis and measured from September Relative returns by free cash flow margin and incremental free cash flow margin quintiles. 2 Relative returns by free cash flow yield and annual free cash flow growth quintiles. 3 Relative returns by change in common shares outstanding and dividend yield quintiles. Relative returns are one-year forward returns which are determined by comparing the performance of each asset in the universe against the universe average. Relative returns shown in the grid represent the return of the quintile (which is determined by applying criteria as applicable) relative to the universe average. Returns are measured annually and averaged across the measurement period for an international universe of 704 to 1,462 European and Asian stocks. Over the last 30 years the numbers of stock have increased significantly so an average would overestimate the early years while underestimate the recent period Quality chart: This universe is grouped into quintiles based on free cash flow margin, with the highest margin being in the best quintile. Then additional criteria - incremental cash flow margin, is applied to each quintile to narrow down the grouping, with the highest incremental free cash flow margin being categorized as the best quintile. Once the universe is grouped into these 25 subsets based on their combined characteristics of free cash flow margin and incremental cash flow margin, the average one-year forward returns are calculated and averaged across the sample period for each subset. Growth/Valuation chart: Same as above, except grouped into quintiles based on free cash flow valuation and free cash flow growth. Shareholder Return chart: Same as above, except grouped into quintiles based on dividend yield and share repurchase. Universes and quintiles are for illustrative purposes only and cannot be invested in. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RETURNS. 3

4 Investment Process Broad universe 2,000 companies Ranked list 500 companies Research 250 companies Portfolio companies Thematic weightings Quality Growth Value Companies with best combined scores on forecast of Quality Growth Valuation Capital return Analyze Industry fundamentals Company growth and stability FCF generation Capital allocation process Conviction level drives weight (Active bps) Capital return Exclude companies with poor earnings revisions Incentive compensation Valuation and surprise The characteristics presented are sought during the portfolio management process. Actual experience may not reflect all of these characteristics, or may be outside of stated ranges. 4

5 Market indicators are monitored to recognize turning points in the macro cycle Examples of global indicators we look at: Industrial confidence Consumer confidence Capacity utilization Employment Producer prices Credit spreads Earnings revisions These indicators often show meaningful correlation with global equity market performance Positive trend generally leads us to: Increase emphasis on valuation, growth Decrease emphasis on quality, capital return Negative trend generally leads us to: Increase emphasis on quality, capital return Decrease emphasis on valuation, growth 5

6 Improving fundamentals Industry Investment themes in portfolio Immuno oncology impact on cancer Software and services driven productivity Low cost and secure internet distribution Mobile device component manufacturers Demand for investment advisory services Favorable environment for generic drug pricing and volumes Cloud, mobility, and security 6

7 Wellington Management Supporting investment resources Equity Portfolio Managers/Team Analysts Niraj Bhagwat Asia Pac ex Japan BS, University of Mumbai, years professional experience 6 years with Wellington Management Dirk Enderlein, CFA Europe MS, Technische Universitaet Berlin, years professional experience 5 years with Wellington Management Gregory A. Mattiko, CFA Emerging Markets MS, Boston University, years professional experience 3 years with Wellington Management Bo Z. Meunier, CFA Emerging Markets MBA, Babson College (Olin), years professional experience 14 years with Wellington Management Jun Y. Oh Japan & Asia MBA, Massachusetts Institute of Technology (Sloan), years professional experience 13 years with Wellington Management Katsuhiro Iwai Japan MBA, Cornell University, years professional experience 10 years with Wellington Management Global Industry Analysts Bruce L. Glazer Computer & Business Services MBA, University of Pennsylvania (Wharton), years professional experience 18 years with Wellington Management Devashish Chopra Asia Pacific Banks MBA, Indian Institute of Management, years professional experience 8 years with Wellington Management Yolanda C. Courtines, CFA European & Latin American Banks Columbia University (Master of Intl Affairs), years professional experience 9 years with Wellington Management Amit R. Desai, CFA US Hardline Retail and Supermarkets MBA, UCLA, years professional experience 8 years with Wellington Management Ann C. Gallo Healthcare Services MS, Massachusetts Institute of Technology (Sloan), years professional experience 17 years with Wellington Management Andrew R. Heiskell Life Insurance MBA, University of Chicago, years professional experience 13 years with Wellington Management Jean M. Hynes, CFA Healthcare BA Wellesley College, years professional experience 24 years with Wellington Management Anita M. Killian, CFA Asian Technology MS, Massachusetts Institute of Technology, years professional experience 15 years with Wellington Management Michael T. Masdea Semiconductors & Equipment MS, Northwestern University, years professional experience 7 years with Wellington Management Jennifer Nettesheim Berg, CFA Capital Markets BBA, University of Notre Dame, years professional experience 13 years with Wellington Management Jawan S. Parker Household & Personal Care Products, Tobacco MBA, Harvard Business School, years professional experience 10 years with Wellington Management Steven A. Richter, CFA Luxury Goods, European & Asian Retailers MBA, University of Southern California, years professional experience 13 years with Wellington Management 7

8 Portfolio and risk management considerations Portfolio construction Position size/holdings Typical active weight of bps in portfolio holdings Sector/country/regional weights Diversified; driven by stock selection Risk Tracking risk: not targeted; ex post range of 3 7% Beta: not targeted; ex post range of Market cap Generally greater than US$3 billion net float Broadly in line with the benchmark Cash Generally less than 5% Limited to a maximum of 10% Currency Unhedged Risk oversight Portfolio management Understand the risks to the investment thesis in individual stocks Balance risk and reward expectations when setting position sizes Ensure adequate diversification across sectors and stocks Understand liquidity expectations for each investment Product management Independent portfolio analysis Style consistency/factor risks/stress testing Capacity/business risks Investments and risk management Research and insights on risk and market trends Lead independent Risk Advisory Council Develop new analytics/tools Line management and senior management review groups Philosophy/process/performance/characteristics Resource assessment Compliance Active pre and post trade compliance monitorings The above characteristics are sought during the portfolio management process. Actual experience may not reflect all of these characteristics, or may be outside of stated ranges. 8

9 Sector weights as of December 31, 2014 % of equity Overweight Underweight Source: Factset The MSCI ACWI ex USA Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 22 Developed Markets (DM) countries and 23 Emerging Markets (EM) countries*. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and long-term historical EPS growth trend and long-term historical sales per share growth trend. It is impossible to invest into an index. 9

10 Regional weights as of December 31, 2014 % of equity Overweight Underweight Source: Factset The MSCI ACWI ex USA Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 22 Developed Markets (DM) countries and 23 Emerging Markets (EM) countries*. The growth investment style characteristics for index construction are defined using five variables: long term forward EPS growth rate, short term forward EPS growth rate, current internal growth rate and long term historical EPS growth trend and long term historical sales per share growth trend. It is impossible to invest into an index. 10

11 Top ten holdings as of December 31, 2014 Company Industry % of equities % of benchmark Novartis AG Pharmaceuticals Roche Holdings AG Pharmaceuticals Taiwan Semiconductor Manufacturing Company, Ltd., ADR Semiconductors & Semiconductor Equipment British American Tobacco PLC Food Beverage & Tobacco Anheuser Busch InBev NV Food Beverage & Tobacco Novo Nordisk A/S Household & Personal Products Reckitt Benckiser PLC Household Products AIA Group, Ltd. Insurance Tencent Holdings, Ltd. Software & Services Prudential Corp. Insurance Number of equity names: 59 Source: Factset Portfolio Holdings are subject to change at any time and are not a recommendation to buy/sell a security. The securities identified and described do not represent all of the securities purchased, sold or recommended for the fund. It should not be assumed that an investment in these securities or sectors was or will be profitable. The MSCI ACWI ex USA Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 22 Developed Markets (DM) countries and 23 Emerging Markets (EM) countries*. The growth investment style characteristics for index construction are defined using five variables: long term forward EPS growth rate, short term forward EPS growth rate, current internal growth rate and long term historical EPS growth trend and long term historical sales per share growth trend. It is impossible to invest into an index. 11

12 Largest active positions as of December 31, 2014 Top five overweight positions Company Industry Portfolio weight (%) 1 Benchmark weight (%) 2 Active position (%) Magna International Automobiles & Components Zurich Insurance Group Insurance WABCO Holdings Capital Goods Smith & Nephew Health Care Equipment & Services Sampo Oyj Class A Insurance Top five underweight positions Company Industry Portfolio weight (%) 1 Benchmark weight (%) 2 Active position (%) Royal Bank of Canada Banks GlaxoSmithKline plc Pharma, Biotech & Life Sciences Bayer AG Pharma, Biotech & Life Sciences Samsung Electronics Co., Ltd. Technology Hardware & Equipment Nestle S.A. Food, Beverage & Tobacco Source: Factset 1 Percent of Equities 2 MSCI AC World ex US Growth Listed holdings are a portion of the funds total and may change at any time. The MSCI ACWI ex USA Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 22 Developed Markets (DM) countries and 23 Emerging Markets (EM) countries*. The growth investment style characteristics for index construction are defined using five variables: long term forward EPS growth rate, short term forward EPS growth rate, current internal growth rate and long term historical EPS growth trend and long term historical sales per share growth trend. It is impossible to invest into an index. 12

13 Portfolio characteristics as of December 31, 2014 International Growth MSCI AC World ex US Growth Index Size Asset weighted Market Cap $57.6bil $55.1bil Over US$50 billion 34% 36% US$20 50 billion 24% 29% US$10 20 billion 17% 17% US$2 10 billion 25% 18% Under US$2 billion 0% 0% Risk 1 Projected Tracking Risk 3.97% Projected Beta 0.95 Active Share 86% Source: Factset and Barra Global Long term Model (GEM2L) 1 The MSCI ACWI ex USA Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 22 Developed Markets (DM) countries and 23 Emerging Markets (EM) countries*. The growth investment style characteristics for index construction are defined using five variables: long term forward EPS growth rate, short term forward EPS growth rate, current internal growth rate and long term historical EPS growth trend and long term historical sales per share growth trend. It is impossible to invest into an index. 13

14 Fund Performance Standardized performance, as of December 31, 2014 John Hancock International Growth Fund 1 Year 3 Year 5 Year Since Inception (6/12/2006) Without sales charge (Class A) 1.27% 13.82% 8.82% 5.39% With 5% maximum sales charge (Class A) 3.79% 11.89% 7.71% 4.76% Without sales charge (Class I) 1.58% 14.20% 9.22% 5.82% MSCI AC World ex USA Growth index 2.29% 9.84% 5.54% 4.38% Wellington Management took over management responsibilities of the fund after the close of business on July 15, All performance prior to that date should be attributed to GMO, the prior investment manager. The Fund s net annual operating expense ratio as of the current prospectus is 1.56%. Expenses for other share classes will vary, which will affect returns. Performance figures assume that all distributions are reinvested. Performance quoted without saleschargeswould be reduced if the sales chargeswere applied. For performance data current to the most recent month end, contact your financial professional or call John Hancock Investments at The performance data contained within this material represents past performance, which does not guarantee future results. The return and principal value of an investment will fluctuate, so that shares, when redeemed, may be worth more or less than the original cost. The Fund s current performance may be higher or lower and is subject to substantial changes. The MSCI ACWI ex USA Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 22 Developed Markets (DM) countries and 23 Emerging Markets (EM) countries*. The growth investment style characteristics for index construction are defined using five variables: long term forward EPS growth rate, short term forward EPS growth rate, current internal growth rate and long term historical EPS growth trend and long term historical sales per share growth trend. It is impossible to invest into an index. The MSCI EAFE Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across Developed Markets countries* around the world, excluding the US and Canada. The growth investment style characteristics for index construction are defined using five variables: long term forward EPS growth rate, short term forward EPS growth rate, current internal growth rate and long term historical EPS growth trend and long term historical sales per share growth trend. It is impossible to invest into an index. 14

15 Distinguishing characteristics Focus on free cash flow Disciplined process focused on bottom up stock selection Breadth and accuracy of inputs Higher quality and growth can provide downside mitigation 15

16 Portfolio Manager Biography John A. Boselli, CFA Senior Managing Director and Equity Portfolio Manager John is a portfolio manager in Global Equity Portfolio Management on the team that manages Global, EAFE, and European Quality Growth portfolios. He manages equity assets on the behalf of our clients, drawing on research from Wellington Management s global industry analysts, equity portfolio managers, and team analysts. He works in our Boston office. Prior to joining Wellington Management in 2002, John worked as a managing director in the Global Equity Research Group at Putnam Investments Inc. ( ). During his time at Putnam, he covered the industrials, telecom, technology, and consumer sectors. Before that, he worked as a senior manager at PricewaterhouseCoopers, llp ( ) and as a geophysical engineer at Western Geophysical International, Inc. ( ). John earned his MBA with a concentration in finance from DePaul University (1989) and his BS in geophysical engineering from the Colorado School of Mines (1985). Additionally, he holds the Chartered Financial Analyst designation and is a member of the CFA Institute. 16

17 A Word About Risk John Hancock International Growth Fund Class A: GOIGX Class B: GONBX Class C: GONCX Class I: GOGIX Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Growth stocks may be more susceptible to earnings disappointments. Hedging and other strategic transactions may increase volatility and result in losses if not successful. Please see the fund s prospectus for additional risks. Clients should carefully consider a fund s objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, call John Hancock Investments at or visit our Web site at Clients should read the prospectus carefully before investing or sending money. John Hancock Funds, LLC MEMBER FINRA SIPC 601 Congress Street, Boston, MA NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. NOT INSURED BY ANY GOVERNMENT AGENCY. MF