John Hancock Emerging Markets Fund

Transcription

1 John Hancock Emerging Markets Fund December 2014 Portfolio management of the John Hancock Emerging Markets Fund is provided by Dimensional Fund Advisors LP, the Fund s sub-advisor. John Hancock Funds, LLC is the distributor of the Fund MF

2 Agenda Dimensional Investment Philosophy John Hancock Emerging Markets Fund Performance 2

3 Dimensional Fund Advisors Putting financial science to work for clients We use information in market prices throughout our investment process to build solutions with higher expected returns. We add value by identifying relevant dimensions of expected returns and continually balancing the tradeoffs among competing premiums, diversification, and costs. We work with clients to understand their long-term needs and to add to their success. 3

4 Leading Financial Economists and Researchers Academics on Dimensional s Board of Directors Eugene Fama, PhD, Nobel laureate University of Chicago Kenneth French, PhD Dartmouth College Academics on Dimensional s Mutual Funds Board of Directors George Constantinides, PhD University of Chicago John Gould, PhD University of Chicago Edward Lazear, PhD Stanford University Roger Ibbotson, PhD Yale University Myron Scholes, PhD, Nobel laureate Stanford University Abbie Smith, PhD University of Chicago Academics Providing Ongoing Consulting Services to Dimensional Robert Merton, PhD, Nobel laureate Massachusetts Institute of Technology Robert Novy-Marx, PhD University of Rochester Sunil Wahal, PhD Arizona State University Leaders of Dimensional s Internal Research Staff Eduardo Repetto, PhD, Director, Co-Chief Executive Officer, and Co-Chief Investment Officer Gerard O Reilly, PhD, Co-Chief Investment Officer and Head of Research James Davis, PhD, Vice President Marlena Lee, PhD, Vice President Savina Rizova, PhD, Vice President Stanley Black, PhD Wes Crill, PhD Tu Nguyen, CFA, PhD Massi De Santis, PhD Vito Sciaraffia, PhD Dave Twardowski, PhD Yusun Samuel Wang, PhD 4

5 Dimensional Global Investment Solutions $381 billion in global AUM as of December 31, 2014 US $122.9 All Cap Core $36.1 All Cap Value $5.3 Growth $0.7 Large Cap $8.9 Large Cap Value $20.6 SMID Cap Value $11.8 Small Cap $16.5 Small Cap Value $16.3 Micro Cap $6.6 Emerging Markets $61.1 All Cap Core $19.9 Value $29.2 Large Cap $7.1 Small Cap $4.9 Global Equity $23.9 All Cap/Large Cap $13.6 Value $7.6 Small/SMID Cap $2.7 Developed ex US $73.4 All Cap Core $17.8 All Cap Value $5.5 Growth $0.2 Large Cap $6.3 Large Cap Value $16.8 Small Cap $13.8 Small Cap Value $13.0 Other $17.2 Real Estate $10.9 Commodities $1.0 Global Balanced $5.3 REITs & Commodities 3.1% (in billions) Fixed Income $82.2 US $46.6 US Tax-Exempt $3.6 Non-US & Global $28.7 Inflation-Protected $3.2 Global Balanced 1.4% Global Equity 6.3% US Equities 32.3% Fixed Income 21.6% Developed ex US Equities 19.3% Emerging Markets 16.0% Source: Dimensional Fund Advisors. Dimensional refers to the Dimensional entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd. All assets in US dollars. Numbers may not total 100% due to rounding. 5

6 Dynamic Investment Process An integrated approach to adding value The Market Use information in prices and fundamental data to pursue higher expected returns. Portfolio Structure Identify the dimensions of expected returns and consider the interactions among premiums, diversification, and costs. Implementation Maintain strategy focus while balancing tradeoffs among competing premiums and use a flexible process to help control costs. 6

7 John Hancock Emerging Markets Fund* Using an integrated approach to add value across all aspects of the investment process Structured based on systematic expected premiums: Market Company size Relative price (value) Profitability Offers broad sector and security diversification Balances competing premiums and controls implementation costs by using a disciplined and patient trading strategy Number of names and countries as of December 31, *As of December 31, 2010, the name of the John Hancock Funds II Emerging Markets Value Fund was changed to John Hancock Funds II Emerging Markets Fund. 5/1/07 is the inception date for the oldest class of shares, NAV shares. Class A shares were first offered on 3/31/11. Before investing in the Fund, an investor should consider the investment objectives, risks, charges and expenses of the Fund. The prospectus contains this and other information about the Fund. Please call the John Hancock Funds at to obtain a copy of the Fund's prospectus. You should read the prospectus carefully before investing in the Fund. 7

8 Dimensions of Expected Returns Expected returns are driven by prices investors pay and cash flows they expect to receive Market Market Beta (Equity Premium) Equity premium stocks vs bonds Company Size Company Size Market Cap (Small Cap Premium) Small cap premium small vs large companies Relative Price Relative Price 1 Price-to-Book (Value Premium) Value premium value vs growth companies Expected Profitability Profitability 2 Direct Profitability 1 (Profitability Premium) Profitability premium high vs low profitability companies To be considered a dimension of expected return, a premium must be: Sensible Persistent across time periods Pervasive across markets Robust to alternative specifications Cost-effective to capture in welldiversified portfolios Diversification does not guarantee investment returns and does not eliminate risk of loss. 1 Relative Price is measured by the price-to-book ratio: value stocks are those with lower price-to-book ratios. 2 Profitability is a measure of current profitability based on information from individual companies income statements. 8

9 Dimensions of Expected Returns Illustrative index performance US STOCKS NON-US DEVELOPED MARKETS STOCKS EMERGING MARKETS STOCKS SMALL LARGE SMALL LARGE SMALL LARGE Profitability Relative Price Size Dimensional US Small Cap Index LOW Fama/French US Value Index HIGH Dimensional US High Profitability Index S&P 500 Index HIGH 8.94 Fama/French US Growth Index LOW 8.26 Dimensional US Low Profitability Index Dimensional Intl. Small Cap Index LOW HIGH LOW HIGH Fama/French International Value Index HIGH 9.03 MSCI World ex USA Index (gross div.) Fama/French International Growth Index Annualized compound returns (%) in US dollars. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. See Index Descriptions in the appendix for descriptions of Dimensional and Fama/French index data. The S&P data are provided by Standard & Poor s Index Services Group. MSCI data MSCI 2015, all rights reserved. It is not possible to invest directly into an index LOW 3.88 Dimensional Dimensional International International Low High Profitability Index Profitability Index Dimensional Emerging Markets Small Cap Index Fama/French Emerging Markets Value Index HIGH Dimensional Emerging Markets High Profitability Index MSCI Emerging Markets Index Fama/French Emerging Markets Growth Index LOW 4.23 Dimensional Emerging Markets Low Profitability Index 9

10 Country Selection Criteria Emerging Markets Determining Investment in Local or Foreign Listings 1 Local Market Infrastructure Rule of Law Good legal system Reasonable treatment of foreign ownership Accurate financial statements Reliable trading and settlement systems Market Capitalization / Liquidity Minimum $10 billion in market capitalization Minimum $10 million average daily turnover ADRs, GDRs, and Foreign Shares Alleviate Concerns Unique to Local Markets Primary exchanges located in US, UK, and Hong Kong No capital repatriation restrictions Listed companies abide by strict accounting standards Reliable settlement Cost Efficiency Countries where we invest in ADRs/GDRs/foreign shares but not local shares include China (H shares, Red Chips, and ADRs), Egypt (GDRs), Peru (ADRs), and Russia (ADRs and GDRs) 2. 1.Countries are subject to change. 2. As of December 31,

11 Country Weight Targets Dimensional s capped free-float adjusted market cap targets: Maintain limits on single-country exposure. Mitigate single-country risk. An event in one country can have a negative impact on the whole portfolio. Provide broad country diversification. As of December 31, 2014 JOHN HANCOCK EMERGING MARKETS FUND Dimensional Targets (buys capped at 15.0%) China 15.0 Taiwan 15.0 South Korea 15.0 India 11.1 Brazil 9.2 South Africa 8.8 Mexico 5.2 Malaysia 4.0 Indonesia 3.6 Thailand 3.0 Poland 2.0 Turkey 1.9 Philippines 1.8 Chile 1.5 Russia 1.0 Colombia 0.7 Greece 0.5 Peru 0.3 Czech Republic 0.2 Hungary 0.2 Egypt 0.1 Defined by Dimensional as the market capitalization of the strategy s eligible universe, adjusted for shares outstanding that are publicly available to trade. Listed holdings are a portion of the fund s total and may change at any time. They are not recommendations to buy or sell any security. Data is expressed as a percentage of net assets and excludes cash and cash equivalents. 11

12 Portfolio Construction Security Selection and Weighting JOHN HANCOCK EMERGING MARKETS MSCI EMERGING MARKETS INDEX PROFITABILITY 1 VALUE GROWTH SIZE LARGE SMALL HIGH LOW SMALL LARGE LOW RELATIVE PRICE HIGH KEY CHARACTERISTICS As of 12/31/2014 Weighted Average Market Cap (millions) Aggregate Price-to-Book Weighted Average Profitability-to-Book John Hancock Emerging Markets Fund $32, MSCI Emerging Markets Index $48, Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book. Please see index definitions. Large cap is defined as approximately the largest 70% of total US market capitalization; mid cap is approximately the next 20%; and small cap is approximately the bottom 10%. Growth is defined as approximately the bottom 25% of securities based on book-to-market; Neutral is approximately the next 50%; and Value is approximately the highest 25% of securities based on book-to-market. MSCI data copyright MSCI 2014, all rights reserved. It is not possible to invest directly into an index. 12

13 Refining the Universe Considerations and potential exclusions Structural REITs 1 Highly regulated utilities 1 Event-Driven Recent IPO Merger or target of acquisition Upcoming announcements Share classes with foreign restrictions and with significant premiums Bankruptcy Extraordinary events Ongoing Listing requirements Limited operating history Insufficient data Insufficient float or liquidity Considerations and potential exclusions apply to securities Dimensional determines to fall within these categories at the time of potential purchase. This is not a complete list of all possible considerations and potential exclusions, and is subject to change in all respects. 1. Not applicable to all strategies. 13

14 Managing Momentum We incorporate momentum when making buy and sell decisions NEGATIVE MOMENTUM POSITIVE MOMENTUM PAST TODAY FUTURE PAST TODAY FUTURE Stock returns may exhibit momentum: RELATIVE RETURN Stocks with large relative underperformance tend to have negative excess returns in the next period. Stocks with large relative outperformance tend to have positive excess returns in the next period. Delay buys of securities otherwise eligible for purchase. Delay sells of securities otherwise eligible for sale. Charts for illustrative purposes only. 14

15 Trading Costs Matter Our approach helps minimize the total costs of trading Trading Costs = Explicit Costs + Implicit Costs Commissions, Custody Fees, Exchange Fees Bid/Offer Spread, Market Impact Low turnover by design keeps overall trading costs down. We deal with explicit costs by keeping commissions as low as possible without sacrificing overall execution. Implicit costs can be hidden, and potentially large. We apply a trading philosophy that emphasizes patience and flexibility. 15

16 Implicit Cost of Executing Trades at the Bid/Ask Spread Cost of being on the wrong side of the spread increases at lower levels of liquidity EMERGING MARKETS Average Daily Trading Volume Average Bid/Ask Spread Average Daily Trading Volume per Issue ($1MM) $80 $60 $40 $20 1.0% 0.8% 0.6% 0.4% 0.2% Average Bid/Ask Spread The bid/ask spread is generally regarded as an indication of the cost of liquidity. Wrong side of spread equates to buying at the offer and selling at the bid. $0 Large Cap Small Cap 0.0% Source: Dimensional Fund Advisors LP. Data as of September 30, Past performance is not indicative to future results. 16

17 Dimensional s Progressive Approach to Trading Trading utilizes technology and internal resources to maximize opportunities and control costs Quarterly: January 2006 March 2014 PERCENTAGE OF DIMENSIONAL S GLOBAL TRADE VALUE BY BROKER TYPE High Touch Low Touch Direct Market Access 100% 50% Trading and portfolio management desks placed strategically to cover the global equity markets. Traders use Direct Market Access (DMA), when available, to maintain full control of trading process and reduce commissions. 0% Source: Dimensional. Chart data based on all equity agency trades, globally. 17

18 Portfolio Characteristics As of December 31, 2014 Market Characteristics John Hancock Emerging Markets MSCI Emerging Markets Index Total Value of Eligible Universe $4,163,953 $3,805,142 Number of Holdings 3, Size Characteristics Wtd. Average Market Cap (millions) $32,019 $48,089 Median Market Cap (millions) $550 $5,692 Valuation Characteristics Aggregate Price-to-Book Price/Earnings (excludes negatives) Wtd. Average Dividend-to-Price 2.44% 2.42% Profitability Characteristics Weighted Average Profitability-to-Book Source: Dimensional 1 Operating income before depreciation and amortization minus interest expense scaled by book. MSCI data copyright MSCI 2014, all rights reserved. It is not possible to invest directly into an index. Please see appendix for index definitions. 18

19 Sector Allocations Portfolio Weights (%) As of December 31, 2014 John Hancock Emerging Markets MSCI Emerging Markets Index Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials REITs Telecommunications Services Utilities Other 0.7 Total Source: Dimensional Fund Advisors. Numbers may not total 100% due to rounding. Sectors defined by MSCI. MSCI data copyright MSCI 2014, all rights reserved. The REITs industry, a member of the Financials sector, is shown separately to illustrate its exclusion from certain funds. It is not possible to invest directly into an index. Please see appendix for index definitions. Listed holdings are a portion of the fund s total and may change at any time. They are not recommendations to buy or sell any security. Data is expressed as a percentage of net assets and excludes cash and cash equivalents. 19

20 John Hancock Emerging Markets Fund Performance as of December 31, 2014 JH Emerging Markets Fund (Class A) YTD 1-Year 3-Years 5-Years Since Inception (5/1/07) Without Sales Charge With Maximum Sales Charge of 5% MSCI Emerging Markets /1/07 is the inception date for the oldest class of shares, NAV shares. Class A shares were first offered on 3/31/11; returns prior to this date are those of Class NAV shares that have been recalculated to apply the gross fees and expenses of Class A. The Fund s net annual operating expense ratio as of the current prospectus is 1.53%. Performance figures assume that all distributions are reinvested. Performance quoted without sales charges would be reduced if the sales charges were 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. Past performance is not indicative of future results. See page 23 for index definitions 20

21 Experienced Teams Ensure Consistency Eduardo Repetto, 1 Director, Co-Chief Executive Officer and Co-Chief Investment Officer David Booth, 1 Chairman and Co-Chief Executive Officer Stephen Clark, 1 Head of Global Institutional Services and Senior Portfolio Manager Gerard O Reilly, 1 Co-Chief Investment Officer and Head of Research Joseph Chi, 1 Co-Head of Portfolio Management * Jed Fogdall, 1 Co-Head of Portfolio Management * Robert Deere, 1 Investment Director and Senior Portfolio Manager Karen Umland, 1 Senior Portfolio Manager * Global Portfolio Management Graham Lennon, Head of International Portfolio Management and Senior Portfolio Manager Arthur Barlow, Managing Director and Senior Portfolio Manager Akbar Ali, Senior Portfolio Manager Grady Smith, Senior Portfolio Manager Stephen Garth, Portfolio Manager Trading Henry Gray, 1 Head of Global Equity Trading* John Romiza, Head of International Equity Trading Jason Lapping, Head of Asia Pacific Trading International Equity Portfolio Management Portfolio Managers: Marcus Axthelm, Murray Cockerell, Paul Foley, Jason Ha, Kotaro Hama, David Kershner, Arun Keswani, Nathan Lacaze, John Law, Robert Ness, Daniel Ong, Mary Phillips, Slava Platkov, Allen Pu, Stephen Quance, Ted Randall, Joel Schneider, Bhanu Singh, Lukas Smart, Adam Ward, Brian Walsh, Craig Wright Investment Associates: Ashish Bhagwanjee, Joshua Clifford, Will Collins-Dean, Emily Cornell, Gavin Crabb, Damian Dormer, Mitchell Firestein, Krati Gokharu, Edward Grace, John Hertzer, Joe Hohn, David Quinn, Sunil Suri, Althea Trevor, Jim Whittington, Alex Yaftali Global Equity Trading Senior Traders: Mark Butterworth, Christian Gunther, Carl Snyder, Ryan Wiley, Sam Willis Traders: William Letheren, Richard Mar, Erhan Oktay, Chris Rink, Frances Ritter, James Simpson, Jonathan Smith, Le Tran, Scott Van Pelt, David Vrolyk, Hayato Yonemori *Named portfolio managers of the John Hancock Emerging Markets Fund As of December 31, Investment Committee Member. 21

22 Country Allocations Portfolio Weights (%) As of December 31, 2014 Country John Hancock Emerging Markets MSCI Emerging Markets Index Brazil Chile China Colombia Czech Egypt Greece Hong Kong Hungary India Indonesia Korea Malaysia Mexico Peru Philippines Poland Qatar Russia South Africa Spain Taiwan Thailand Turkey United Arab Emirates United States Source: Dimensional Fund Advisors. Numbers may not total 100% due to rounding. MSCI data copyright MSCI 2014, all rights reserved. See Appendix: Standardized Performance Data & Disclosures to learn how to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of John Hancock Investments. It is not possible to invest directly into an index. Listed holdings are a portion of the fund s total and may change at any time. They are not recommendations to buy or sell any security. Data is expressed as a percentage of net assets and excludes cash and cash equivalents. 22

23 Index Definitions Russell Microcap - The Russell Microcap Index measures the performance of the microcap segment of the U.S. equity market. Russell The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. Russell 2000 Value - The Russell 2000 Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Russell 1000 Value - The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. Russell The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. MSCI World ex US Small - The MSCI World Index ex US Small is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding United States small cap stocks. MSCI World ex US - The MSCI World Index ex US is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. MSCI EAFE - The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. S&P 500 The S&P 500 Index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities. CRSP 6-10 The CRSP 6-10 Index is comprised of the smallest four deciles (by market capitalization) of all stocks on the New York Stock Exchange, the American Stock Exchange and the NASDAQ. The index measures the performance of U.S. listed small- and micro-cap stocks. MSCI Emerging Markets Index The Index is a free float-adjusted market capitalization index that consists of indices in 23 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. 23

24 Index Definitions Dimensional US Small Cap Index was created by Dimensional in March 2007 and is compiled by Dimensional. It represents a market-capitalization-weighted index of securities of the smallest US companies whose market capitalization falls in the lowest 8% of the total market capitalization of the Eligible Market. The Eligible Market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: Non- US companies, REITs, UITs, and Investment Companies. From January 1975 to the present, the index also excludes companies with the lowest profitability and highest relative price within the small cap universe. Profitability is measured as Operating Income before Depreciation and Amortization minus Interest Expense scaled by Book. Source: CRSP and Compustat. The index monthly returns are computed as the simple average of the monthly returns of 12 subindices, each one reconstituted once a year at the end of a different month of the year. The calculation methodology for the Dimensional US Small Cap Index was amended on January 1, 2014, to include profitability as a factor in selecting securities for inclusion in the index. Dimensional US High Profitability Index was created by Dimensional in January 2014 and represents an index consisting of US companies. It is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price. The index represents the average return of the three high-profitability subgroups. It is rebalanced twice per year. Profitability is measured as Operating Income before Depreciation and Amortization minus Interest Expense scaled by Book. Source: CRSP and Compustat. Dimensional US Low Profitability Index was created by Dimensional in January 2014 and represents an index consisting of US companies. It is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price. The index represents the average return of the three low-profitability subgroups. It is rebalanced twice per year. Profitability is measured as Operating Income before Depreciation and Amortization minus Interest Expense scaled by Book. Source: CRSP and Compustat. Dimensional International Small Cap Index was created by Dimensional in April 2008 and is compiled by Dimensional. July December 1993: it Includes non-us developed securities in the bottom 10% of market capitalization in each eligible country. All securities are market capitalization weighted. Each country is capped at 50%. Rebalanced semiannually. January Present: Market-capitalization-weighted index of small company securities in the eligible markets excluding those with the lowest profitability and highest relative price within the small cap universe. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book. The index monthly returns are computed as the simple average of the monthly returns of four sub-indices, each one reconstituted once a year at the end of a different quarter of the year. Prior to July 1981, the index is 50% UK and 50% Japan. The calculation methodology for the Dimensional International Small Cap Index was amended on January 1, 2014, to include profitability as a factor in selecting securities for inclusion in the index. The Dimensional Indices have been retrospectively calculated by Dimensional Fund Advisors LP and did not exist prior to their index inceptions dates. Accordingly, results shown during the periods prior to each Index s index inception date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains. 24

25 Index Definitions Dimensional International Low Profitability Index was created by Dimensional in January 2013 and represents an index consisting of non-us Developed companies. It is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization of each eligible country. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price. The index represents the average return of the three lowprofitability subgroups. The index is rebalanced twice per year. Profitability is measured as Operating Income before Depreciation and Amortization minus Interest Expense scaled by Book. Source: Bloomberg. Dimensional International High Profitability Index was created by Dimensional in January 2013 and represents an index consisting of non-us Developed companies. It is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization of each eligible country. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price. The index represents the average return of the three highprofitability subgroups. The index is rebalanced twice per year. Profitability is measured as Operating Income before Depreciation and Amortization minus Interest Expense scaled by Book. Source: Bloomberg. Dimensional Emerging Markets Low Profitability Index was created by Dimensional in April 2013 and represents an index consisting of emerging markets companies and is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low. Each group represents onethird of the market capitalization of each eligible country. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price. The index represents the average return of the three low-profitability subgroups. The index is rebalanced twice per year. Profitability is measured as Operating Income before Depreciation and Amortization minus Interest Expense scaled by Book. Source: Bloomberg. Dimensional Emerging Markets High Profitability Index was created by Dimensional in April 2013 and represents an index consisting of emerging markets companies and is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low. Each group represents onethird of the market capitalization of each eligible country. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price. The index represents the average return of the three high-profitability subgroups. The index is rebalanced twice per year. Profitability is measured as Operating Income before Depreciation and Amortization minus Interest Expense scaled by Book. Source: Bloomberg. Dimensional Emerging Markets Small Cap Index was created by Dimensional in April 2008 and is compiled by Dimensional. January December 1993: Fama/French Emerging Markets Small Cap Index. January Present: Dimensional Emerging Markets Small Index Composition: Market-capitalizationweighted index of small company securities in the eligible markets excluding those with the lowest profitability and highest relative price within the small cap universe. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book. The index monthly returns are computed as the simple average of the monthly returns of four subindices, each one reconstituted once a year at the end of a different quarter of the year. Source: Bloomberg. The calculation methodology for the Dimensional Emerging Markets Small Cap Index was amended on January 1, 2014, to include profitability as a factor in selecting securities for inclusion in the index. The Dimensional Indices have been retrospectively calculated by Dimensional Fund Advisors LP and did not exist prior to their index inceptions dates. Accordingly, results shown during the periods prior to each Index s index inception date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Back tested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Back tested performance results assume the reinvestment of dividends and capital gains. 25

26 Index Definitions Fama/French US Value Index Provided by Fama/French from CRSP securities data. Includes the lower 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973). Fama/French US Growth Index Provided by Fama/French from CRSP securities data. Includes the higher 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973). Fama/French International Value Index: 2008 present: Provided by Fama/French from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the lower 30% price-to-book range : Provided by Fama/French from MSCI securities data. Fama/French International Growth Index: 2008 present: Provided by Fama/French from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the higher 30% price-to-book range : Provided by Fama/French from MSCI securities data. Fama/French Emerging Markets Value Index: 2009 present: Provided by Fama/French from Bloomberg securities data. Simulated strategy using IFC investable universe countries. Companies in the lower 30% price-to-book range; companies weighted by float-adjusted market cap; countries weighted by country float-adjusted market cap; rebalanced monthly : Provided by Fama/French from IFC securities data. IFC data provided by International Finance Corporation. Fama/French Emerging Markets Growth Index: 2009 present: Provided by Fama/French from Bloomberg securities data. Simulated strategy using IFC investable universe countries. Companies in the higher 30% price-to-book range; companies weighted by float-adjusted market cap; countries weighted by country float-adjusted market cap; rebalanced monthly : Provided by Fama/French from IFC securities data. IFC data provided by International Finance Corporation. Results shown during periods prior to each Index s index inception date do not represent actual returns of the respective index. Other periods selected may have different results, including losses. Back tested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Back tested performance results assume the reinvestment of dividends and capital gains. 26

27 A Word About Risk John Hancock Emerging Markets Fund Symbols A shares = JEVAX I shares = JEVIX Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Value stocks may decline in price. The stock prices of midsize and small companies can change more frequently and dramatically than those of large companies, and illiquid securities may be difficult to sell at a price approximating their value. Currency transactions are affected by fluctuations in exchange rates. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. 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