INTERNATIONAL EQUITIES Charting a course for global opportunities
Three things to know about investing abroad 1 International markets have periods of outperformance Historically, non-u.s. stocks and U.S. stocks have alternated in cycles of performance, with one leading the other for an extended period of time before reversing. 2 Nearly half the world s opportunities are overseas The share of the global stock market represented by non-u.s. companies is large and growing. What s more, many of the world s largest and most successful companies are headquartered outside our borders industry leaders such as HSBC Holdings, Novartis, Vodafone, and Royal Dutch Shell. If your equity portfolio is limited to U.S. companies, you re leaving nearly half of the world s investment opportunities on the table. After their longest period of underperformance, international equities may now be leading Cumulative relative performance of the MSCI EAFE Index against the S&P 5 Index MSCI EAFE Index relative return 36% 24 12 12 24 23 41 25 49 67 5 1 75 7 1 1 3 1 1972 Length of cycle in months Cumulative outperformance of international equities Cumulative underperformance of international equities 1977 192 197 1992 1997 22 Recent outperformance of international stocks may mark the beginning of a longer-term trend. Source: Bloomberg, FactSet, as of 12/31/17. International equities are represented by the MSCI Europe, Australasia, and Far East (EAFE) Index, which tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. Total returns are calculated gross of foreign withholding tax on dividends. U.S. equities are represented by the S&P 5 Index, which tracks the performance of 5 of the largest publicly traded companies in the United States. Japan, the United Kingdom, France, Switzerland, and Germany are represented by the MSCI Japan Index, the MSCI United Kingdom Index, the MSCI France Index, the MSCI Switzerland Index, and the MSCI Germany Index, respectively, which track the performance of publicly traded large- and mid-cap stocks of companies in those countries. It is not possible to invest directly in an index. Forward price-toearnings (P/E) ratio is a stock valuation measure comparing the current share price of a stock with the underlying company s estimated earnings per share over the next 12 months. Performance of the Investments funds will differ. Past performance does not guarantee future results. 27 212 International markets are home to nearly half of the world s investment opportunities Global market capitalization (%) United States 52 6 15 7 12 Europe (ex-u.k.) Emerging markets Japan Other United Kingdom Yet most individual investors allocate a far smaller percentage of their portfolio to international stocks Average asset allocation (%) Fixed income 22 U.S. equity 4 Cash 16 Individual investors Hybrid International 14 19 equity U.S. equity 16 4 Alternatives 53 Endowment funds Fixed income Cash 3 The future looks bright for overseas A lack of international exposure could also mean missing out on one of the most important forces in the economy: the rise of the global middle class. Across most of the world, the ranks of the middle class have expanded since 2 at much faster rates than they have in the United States. This trend is expected to continue, driving significant changes in consumer spending worldwide. The middle class is growing much faster overseas Increases in number of middle-class adults by region and selected countries, 2 215 (%) 6 4 2 6.3 China 43.6 43.5 India Latin America 36.4 Asia- Pacific 22.1 United States 1.2 Europe 3. Africa Source: MSCI AC World Index, as of 12/31/17. Data may not equal 1% due to rounding. Source: Investment Company Institute, National Association of College and University Business Officers,. Source: Credit Suisse Global Wealth Databook 215, Credit Suisse Research Institute, October 215. Middle class is defined as those with wealth between US$5, and US$5,. Data is the latest available. 2 3
The case for international investing has never been stronger Growth and earnings are turning up Supported by broadly accommodative monetary policy, economic has accelerated across key markets, with six of the largest non-u.s. developed economies showing expansionary Purchasing Managers Index (PMI) readings, led by Germany. We ve also seen a sharp improvement in earnings expectations from non-u.s. companies, albeit off low levels. Six of the largest international developed economies are showing expansionary PMI readings 64 62 International developed economies are seeing a synchronized rebound in economic. 63.3 Germany Valuations and dividend yields are more attractive overseas After lagging U.S. markets as a whole since the financial crisis of 2 29, the valuations of many international stocks, measured by forward P/E ratios, are lower than their counterparts in the United States, while their dividend yields are higher. Even after recent gains, many international markets are cheaper than U.S. stocks Top 5 countries in the MSCI EAFE Index by market capitalization 25.45x 21.46x 19.45x 17.95x 16.15x 3.79% More attractive Yield P/E 3.2% 3.5% 2.51% 1.91% 24.42x U.S. forward P/E Forward P/E (x) Dividend yield (%) 1.6% U.S. dividend yield 6 Germany Japan United Kingdom France Switzerland United States 5 56 54 5. France 57.4 Italy 56.3 U.K. 55. Spain 54.2 Japan Source: Bloomberg, FactSet, as of 12/31/17. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. Total returns are calculated gross of foreign withholding tax on dividends. It is not possible to invest directly in an index. Past performance does not guarantee future results. Key foreign currencies have strengthened versus the dollar Currency markets reflected a shift in economic momentum entering, and the euro and other currencies rallied relative to the U.S. dollar. This reversal turned what had been a negative for investment returns into a positive, as strength in foreign currencies is favorable for U.S. investors international equity returns after local currencies are translated into dollars. Contractionary Expansionary 52 5 4 46 214 215 216 Strengthening currencies can provide a tailwind for international equities Returns of selected foreign currencies vs. the U.S. dollar, 1/1/17 12/31/17 Currency returns, indexed to 1 115 11 15 1 95 Euro: 112.3 Emerging-market currency basket: 1. U.K. pound: 1.6 Japanese yen, 14. Source: Markit, World Bank, FactSet, as of 12/31/17. The Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment. Earnings per share (EPS) is a measure of how much profit a company has generated calculated by dividing the company s net income by its total number of outstanding shares. Past performance does not guarantee future results. 9 U.S. dollar: 91.1 5 1/17 2/17 3/17 4/17 5/17 6/17 7/17 /17 9/17 1/17 11/17 12/17 Source: Bloomberg,. Past performance does not guarantee future results. 4 5
Investing abroad with Investments Our multimanager approach puts us in a position to hire some of the world s best portfolio teams for our funds and to develop unique strategies both passively and actively managed designed to deliver results for investors. Holdings by investment style Five largest countries as of 12/31/17 1 (%) Key data 2 Average annual total returns as of 12/31/17 (%) Expense ratios (%) Morningstar ratings 3 Fund Benchmark 1 year 3 year 5 year Life of fund Life of fund date Gross Net Class I as of 12/31/17 Disciplined Value International Fund 4 Boston Partners Japan 23. United Kingdom 2.5 France 12.34 Germany.34 Switzerland 4.9 P/E ratio (trailing) 17.2x 17.4x Number 14 92 Active share (%) 5.5 Developed/emerging (%) 92/ 1/ FCF yield (%) 5.9 4.2 Class I (without sales charge) 25.23.34 9.4 1.6 12/3/11 Class A (without sales charge) 24.. 9.1 1.42 12/3/11 Class A (with 5.% sales charge) 1.63 6.17.6 9.4 12/3/11 MSCI EAFE Index 6 25.62.3.39 1.16 Share classes A: JDIBX C: JDICX I: JDVIX R2: JDISX R4: JDITX R6: JDIUX 1.9.9 5 1.41 1.31 5 1.41 1.31 5 Overall Category Foreign large blend (Based on Morningstar Risk-Adjusted Returns) ESG International Equity Fund Boston Common Asset Management Japan 15.17 United Kingdom.43 Germany 7.2 China 6.34 Switzerland 5.94 P/E ratio (trailing) 19.9x 16.7x Number 72 1,66 Active share (%). Developed/emerging (%) 72/2 7/3 Class I (without sales charge) 3.63 29.5 12/14/16 Class A (without sales charge) 3.34 29.1 12/14/16 Class A (with 5.% sales charge) 23. 22.9 12/14/16 MSCI AC World ex-usa Index 6 27.77 25.4 Share classes A: JTQAX I: JTQIX R6: JTQRX 1.46 1.2 5 1.72 1.2 5 1.72 1.2 5 Overall Category Foreign large blend Multifactor Developed International ETF Dimensional Fund Advisors Japan 24.67 United Kingdom 16.32 Germany 1.5 France 9.75 Switzerland.15 P/E ratio (trailing) 15.1x 17.4x Number 757 92 market cap ($B) 51.39 64.11 Developed/emerging (%) 1/ 1/ Net asset 25.13 22.96 12/15/16 Market price 25.7 23.17 12/15/16 Dimensional Developed International Index 26.12 23.9 MSCI EAFE Index 6 25.62 23.61 Ticker JHMD.6.45 5.6.45 5 Overall Category Foreign large blend -cap stocks may be poised to build on their historical performance advantage over large caps Rolling 12-month excess returns of international small-cap stocks vs. international large-cap stocks 2% 1 1 23 24 25 26 27 2 29 21 Median 12-month excess return vs. MSCI EAFE Index 211 212 213 214 % of periods with positive excess returns MSCI EAFE SMID Cap Index 3.55% % 215 216 Ask your advisor Ask your financial advisor how international equity funds can help you better position your portfolio for building wealth. 1 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. 2 Price to earnings (P/E) is a valuation measure comparing the ratio of a stock s price with its earnings per share. Active share is a measure of how much an equity portfolio s holdings differ from the portfolio s benchmark index. Free cash flow (FCF) yield is a measure of a company s cash available for distribution to shareholders per share after capital expenditures and taxes, divided by its share price. 3 For each managed product, including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts, with at least a 3-year history, Morningstar calculates a Morningstar Rating TM based on a Morningstar Risk-Adjusted Return that accounts for variation in a fund s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Exchange-traded funds and open-end mutual funds are considered a single population for comparative purposes. The top 1.% of funds in each category, the next 22.5%, 35.%, 22.5%, and bottom 1.% receive 5, 4, 3, 2, or 1 star(s), respectively. The overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its 3-, 5-, and 1-year (if applicable) Morningstar Rating metrics. The rating formula most heavily weights the 3-year rating, using the following calculation: 1% 3-year rating for 36 to 59 months of total returns, 6% 5-year rating/4% 3-year rating for 6 to 119 months of total returns, and 5% 1-year rating/3% 5-year rating/2% 3-year rating for 12 or more months of total returns. Star ratings do not reflect the effect of any applicable sales load. As of 12/31/17, Disciplined Value International Fund was rated 4 and 5 stars out of 597 and 535 foreign large blend funds for the 3- and 5-year periods, respectively. Please note that Class I shares may not be available to all investors and that performance of other share classes may vary. Past performance does not guarantee future results. 4 Disciplined Value International Fund is the successor to Robeco Investment Management International Equity Fund (predecessor fund) and was first offered on 9/29/14. Returns prior to this date are those of the predecessor fund s institutional class shares, launched on 12/3/11, and may be higher than if adjusted to reflect the expenses of any other share classes. 5 Represents the effect of a fee waiver and/or expense reimbursement through 2/2/1 for Disciplined Value International Fund, through 2/2/19 for ESG International Equity Fund, and through /31/1 for Developed International ETF. 6 The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The MSCI All Country (AC) World ex-usa Index tracks the performance of publicly traded large- and mid-cap stocks in 22 developed markets and 24 emerging markets. It is not possible to invest directly in an index. 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. Market performance is determined using the bid/ask midpoint at 4 P.M., Eastern time, when the NAV is typically calculated; your returns may differ if you traded shares at other times. NAV is calculated by dividing the total of all the securities in the fund s portfolio plus cash, interest, and receivables, minus any liabilities, by the number of fund shares outstanding. The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited. For the most recent month-end performance, visit jhinvestments.com. Source: FactSet, as of 12/31/17. The MSCI Europe, Australasia, and Far East (EAFE) Mid (SMID) Cap Index tracks the performance of publicly traded small- and mid-cap stocks of companies in those regions. Total returns are calculated gross of foreign withholding tax on dividends. The MSCI EAFE Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. 6 Total returns are calculated gross of foreign withholding tax on dividends. It is not possible to invest directly in an index. Past performance does not guarantee future results. 7
Investments A trusted brand Investments is a premier asset manager representing one of America s most trusted brands, with a heritage of financial stewardship dating back to 162. 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. 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. Hedging and other strategic transactions may increase volatility and result in losses if not successful. company stocks could fall out of favor, and illiquid securities may be difficult to sell at a price approximating their. The stock prices of small and midsize companies can change more frequently and dramatically than those of large companies. The fund may invest its assets in a small number of issuers. Performance could suffer significantly from adverse events affecting these issuers. The fund s ESG policy could cause it to perform differently than similar funds that do not have such a policy. Investing involves risks, including the potential loss of principal. There is no guarantee that a fund s investment strategy will be successful. The fund is nondiversified, and a portfolio concentrated in one industry or sector or that holds a limited number of securities may fluctuate more than a diversified portfolio. Shares may trade at a premium or discount to their NAV in the secondary market, and a fund s holdings and returns may deviate from those of its index. These variations may be greater when markets are volatile or subject to unusual conditions. Errors in the construction or calculation of a fund s index may occur from time to time. Please see the funds prospectuses for additional risks. Dimensional Fund Advisors LP receives compensation from in connection with licensing rights to the Dimensional indexes. Neither Advisers, LLC nor Dimensional Fund Advisors LP guarantees the accuracy and/or completeness of an index (each an underlying index) or any data included therein, and neither Advisers, LLC nor Dimensional Fund Advisors LP shall have any liability for any errors, omissions, or interruptions therein. Neither Advisers, LLC nor Dimensional Fund Advisors LP makes any warranty, express or implied, as to results to be obtained by a fund, owners of the shares of a fund, or any other person or entity from the use of an underlying index, trading based on an underlying index, or any data included therein, either in connection with a fund or for any other use. Neither Advisers, LLC nor Dimensional Fund Advisors LP makes any express or implied warranties, and expressly disclaims all warranties, of merchantability or fitness for a particular purpose or use with respect to an underlying index or any data included therein. Without limiting any of the foregoing, in no event shall either Advisers, LLC or Dimensional Fund Advisors LP have any liability for any special, punitive, direct, indirect, or consequential damages, including lost profits, arising out of matters relating to the use of an underlying index, even if notified of the possibility of such damages. ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP. Foreside is not affiliated with Funds, LLC or Dimensional Fund Advisors LP. Request a prospectus or summary prospectus from your financial advisor, by visiting jhinvestments.com, or by calling us at -225-5291. The prospectus includes investment objectives, risks, fees, expenses, and other information that you should consider carefully before investing. Connect with Investments: @JH_Investments jhinvestmentsblog.com Funds, LLC Member FINRA, SIPC 61 Congress Street Boston, MA 221-25 -225-5291 jhinvestments.com NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. NOT INSURED BY ANY GOVERNMENT AGENCY. MF427721 JHAN-21125-6 PIINTLBR 1/1