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 811-22056
John Hancock Tax-Advantaged Global Shareholder Yield Fund
(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
Tax-Advantaged Global Shareholder Yield Fund
Ticker: HTY
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 in the United States.
Despite uncertainty raised by tariffs and rising inflation and interest rates, the U.S. economy has remained on track during the period. That said, in many global economies outside of the United States, growth has not been particularly strong. International investors have faced some challenging headwinds—including a populist movement in Italy and trade disputes between the United States and several other countries—that may not abate in the near future.
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
Tax-Advantaged Global Shareholder Yield Fund
Table of contents
| 2 | Your fund at a glance | |
| 4 | Discussion of fund performance | |
| 8 | Fund's investments | |
| 13 | Financial statements | |
| 16 | Financial highlights | |
| 17 | Notes to financial statements | |
| 23 | Report of independent registered public accounting firm | |
| 24 | Tax information | |
| 25 | Additional information | |
| 28 | Continuation of investment advisory and subadvisory agreements | |
| 34 | Trustees and Officers | |
| 38 | More information |
INVESTMENT OBJECTIVE
The fund seeks to provide total return consisting of a high level of current income and gains and long-term capital appreciation. The fund will seek to achieve favorable after-tax returns for shareholders by seeking to minimize the U.S. federal income tax consequences on income and gains generated by the fund.
AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/18 (%)
The MSCI World Index is a free float-adjusted capitalization-weighted index that is designed to measure the equity market performance of developed markets.
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.
The performance data contained within this material represents past performance, which does not guarantee future results.
Investment returns and principal value will fluctuate and a shareholder may sustain losses. Further, the fund's performance at net asset value (NAV) is different from the fund's performance at closing market price because the closing market price is subject to the dynamics of secondary market trading. Market risk may be augmented when shares are purchased at a premium to NAV or sold at a discount to NAV. Current month-end performance may be higher or lower than the performance cited. The fund's most recent performance can be found at jhinvestments.com or by calling 800-852-0218.
PERFORMANCE HIGHLIGHTS OVER THE LAST TWELVE MONTHS
Volatility, geopolitical risks limited equity gains
U.S. stocks delivered positive performance, yet spikes in volatility tied to rising interest rates and the threat of a global trade war affected most other markets.
Limited exposure to growth sectors impacted performance
The fund underperformed a comparative index, the MSCI World Index, as lower exposure to high-flying sectors such as information technology hurt.
Healthcare stocks had a positive influence
Stock selection in the healthcare sector performed well.
SECTOR COMPOSITION AS OF
10/31/18 (%)
A note about risks
As is the case with all exchange-listed closed-end funds, shares of this fund may trade at a discount or a premium to the fund's net asset value (NAV). An investment in the fund is subject to investment and market risks, including the possible loss of the entire principal invested. The value of a company's equity securities is subject to changes in its financial condition and overall market and economic conditions. Foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. There is no guarantee prior distribution levels will be maintained, and distributions may include a substantial return of capital. For the fiscal year ended October 31, 2018, the fund's aggregate distributions included a return of capital of $0.41 per share, or 51% of aggregate distributions, which may increase the potential tax gain or decrease the potential tax loss of a subsequent sale of shares of the fund. See the financial highlights and notes to the financial statements for details of the return of capital and risks associated with distributions made by the fund. Cybersecurity incidents may allow an unauthorized party to gain access to fund assets, customer data, or proprietary information, or cause a fund or its service providers to suffer data corruption or lose operational functionality. Similar incidents affecting issuers of fund securities may negatively impact performance. Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if an issuer, grantor, or counterparty is unable or unwilling to make principal, interest, or settlement payments. Investments in higher-yielding, lower-rated securities are subject to a higher risk of default. An issuer of securities held by the fund may default, have its credit rating downgraded, or otherwise perform poorly, which may affect fund performance. Liquidity—the extent to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. Focusing on a particular industry or sector may increase the fund's volatility and make it more susceptible to market, economic, and regulatory risks as well as other factors affecting those industries or sectors. Derivatives transactions, such as hedging and other strategic transactions, may increase a fund's volatility and could produce disproportionate losses, potentially more than the fund's principal investment.
Kera Van Valen, CFA
Portfolio Manager
Epoch Investment Partners, Inc.
What factors affected global equity markets during the 12 months ended October 31, 2018?
Global equities withstood increasing periods of volatility to deliver modest gains. Several sharp increases in interest rates, spurred by fears of inflation in the United States, led to a correction for most global stock markets in February and another drawdown toward the end of the reporting period. Volatility remained elevated as the U.S. government introduced tariffs and related trade sanctions against China, sparking concern about a global trade war. The United States delivered the strongest performance on a regional basis, boosted by exceptional corporate profit growth, tax cuts, and a robust economic expansion. Gains were pared in October as investors lost confidence in certain social media and related technology stocks. Europe and the United Kingdom suffered losses for the period as political instability in Italy hurt bank stocks, while a stall in economic growth in the eurozone and fears of a hard Brexit for the United Kingdom weighed on the overall equity markets. Japanese stocks also trended lower in October after the Nikkei 225 Index hit a 27-year high during the reporting period.
The global Purchasing Managers' Index readings on manufacturing signaled expansion, while low unemployment in the United States, Europe, and Japan benefited consumer spending. The U.S. Federal Reserve raised interest rates four times and remained on course for future increases should inflation firm, while the Bank of England raised rates for the first time in 10 years. The European Central Bank confirmed plans to wind down quantitative easing by halving monthly bond purchases. The Japanese economy returned to growth, but the country will continue its quantitative easing program after Shinzo Abe won a third term as prime minister. Foreign currencies ended mostly lower against the U.S. dollar.
How did the fund respond to these market conditions?
Solid global growth and corporate earnings favored more cyclically oriented companies over the yield-oriented companies that we favor, causing the fund to record a loss and underperform a comparative benchmark, the MSCI World Index, for the reporting period.
Stock selection and asset allocation both detracted from relative performance. Stock selection in the consumer discretionary and consumer staples sectors as well as underweights in the information technology and consumer discretionary sectors and an overweight in the utilities sector hurt performance the most. On the positive side, stock selection in the healthcare sector was the primary contributor for the period. From a regional perspective, stock selection in the United States and the United Kingdom as well as overweights in the United States and Germany hurt relative performance.
What were the main areas of weakness for the fund?
Among the largest individual detractors for the period was Vodafone Group PLC, a provider of telecom services in Europe, Asia, and Africa. The stock underperformed on worries about competitive pressures in Spain and Italy. A recently closed joint venture in India and the pending closure of Liberty Global PLC created additional uncertainty. The company's primary market of Germany remains constructive and Vodafone is committed to growing free cash flow to fund a progressively higher dividend.
Las Vegas Sands Corp., the world's largest developer, owner, and operator of casino resorts, was also a significant detractor. Shares traded lower on concerns related to Macao, including decelerating revenue growth, Chinese economic conditions, a U.S.-China trade war as well as uncertainty over regional competition among casinos. Nevertheless, we believe the company's cash
TOP 10 COUNTRIES AS OF 10/31/18 (%)
| United States | 46.0 |
| United Kingdom | 14.5 |
| Germany | 6.9 |
| France | 6.9 |
| Canada | 6.3 |
| Switzerland | 3.1 |
| Italy | 2.9 |
| Australia | 2.5 |
| Spain | 1.7 |
| Netherlands | 1.6 |
| TOTAL | 92.4 |
| As a percentage of net assets. | |
| Cash and cash equivalents are not included. |
Which holdings contributed the most to performance?
Pharmaceutical makers were among the leading individual contributors for the period, as shares traded higher on improving sentiment around drug pricing. Shares of U.S.-based Pfizer, Inc. rose following solid quarterly results and higher 2018 guidance. The stock also benefited from promising Phase III trial results for a cardiology drug; Pfizer expects 2020 to be a base year from which sales and cash flow growth should accelerate as it moves past the loss of exclusivity on select drugs. The company has a strong balance sheet and free cash flow to support a growing dividend and steady share repurchases.
Networking equipment maker Cisco Systems, Inc. and communications chipmaker QUALCOMM, Inc. were also significant contributors.
How was the fund positioned at the end of the period?
The companies in the fund continued to grow free cash flow during the period and remained committed to consistently returning cash to shareholders through a combination of cash dividends, share buybacks, and debt reduction. With global interest rates still at low levels, we believe shareholder yield will be a key source of income and growth for investors and believe the yields being captured in the fund are sustainable and have room to grow.
During the period, we added 10 new positions, including U.S. companies Hanesbrands, Inc., LyondellBasell Industries NV, and The Kraft Heinz Company. Seven positions in the fund were closed during the period, including German-based vehicle manufacturer Daimler AG.
TOP 10 HOLDINGS AS OF 10/31/18 (%)
| MetLife, Inc. | 2.0 |
| Verizon Communications, Inc. | 2.0 |
| Eaton Corp. PLC | 2.0 |
| AstraZeneca PLC, ADR | 1.9 |
| BCE, Inc. | 1.9 |
| Unilever PLC | 1.8 |
| Altria Group, Inc. | 1.8 |
| FirstEnergy Corp. | 1.7 |
| TOTAL SA | 1.7 |
| Duke Energy Corp. | 1.7 |
| TOTAL | 18.5 |
| As a percentage of net assets. | |
| Cash and cash equivalents are not included. | |
We increased the fund's allocation to financials, decreased its overweight positions in telecommunication services, and lowered its allocation to industrials. The fund remained overweight in the United Kingdom and Europe, home to many large multinational companies with strong dividend-paying histories. Sector and country weights were an outcome of our bottom-up fundamental investment process. We continued to manage the fund's distribution level, but were unable to avoid a return of capital.
MANAGED BY
|
William W. Priest, CFA, Epoch On the fund since inception Investing since 1965 |
|
John Tobin, Ph.D., CFA, Epoch On the fund since 2014 Investing since 1981 |
|
|
Kera Van Valen, CFA, Epoch On the fund since 2014 Investing since 2001 |
|
Michael A. Welhoelter, CFA, Epoch On the fund since inception Investing since 1986 |
|
Gregory McMurran, Analytic Investors On the fund since inception Investing since 1976 |
|
Dennis Bein, CFA, Analytic Investors On the fund since inception Investing since 1992 |
|
Harindra de Silva, Ph.D., CFA, Analytic Investors On the fund since inception Investing since 1988 |
|
Megan N. Miller, CFA, Analytic Investors On the fund since 2018 Investing since 2008 |
| Fund’s investments |
| Shares | Value | ||||
| Common stocks 95.9% | $80,893,132 | ||||
| (Cost $85,615,436) | |||||
| Australia 2.5% | 2,125,531 | ||||
| Commonwealth Bank of Australia | 11,800 | 580,216 | |||
| Macquarie Group, Ltd. | 5,313 | 443,063 | |||
| Sonic Healthcare, Ltd. | 26,000 | 416,126 | |||
| Westpac Banking Corp. | 36,120 | 686,126 | |||
| Canada 6.3% | 5,286,930 | ||||
| BCE, Inc. | 40,500 | 1,567,454 | |||
| Nutrien, Ltd. | 13,723 | 726,358 | |||
| Pembina Pipeline Corp. | 23,767 | 768,733 | |||
| Rogers Communications, Inc., Class B | 19,000 | 978,396 | |||
| Royal Bank of Canada | 8,124 | 591,936 | |||
| TELUS Corp. | 19,100 | 654,053 | |||
| France 6.9% | 5,785,080 | ||||
| AXA SA | 54,000 | 1,351,440 | |||
| Cie Generale des Etablissements Michelin SCA | 4,400 | 450,448 | |||
| Sanofi | 7,400 | 661,268 | |||
| SCOR SE | 15,200 | 702,404 | |||
| TOTAL SA | 24,319 | 1,426,928 | |||
| Vinci SA | 13,400 | 1,192,592 | |||
| Germany 6.9% | 5,792,864 | ||||
| Allianz SE | 6,800 | 1,416,575 | |||
| BASF SE | 8,900 | 682,973 | |||
| Deutsche Post AG | 17,600 | 555,725 | |||
| Deutsche Telekom AG | 74,500 | 1,221,925 | |||
| Muenchener Rueckversicherungs-Gesellschaft AG | 6,500 | 1,396,106 | |||
| Siemens AG | 4,520 | 519,560 | |||
| Italy 2.9% | 2,478,368 | ||||
| Assicurazioni Generali SpA | 27,871 | 449,750 | |||
| Snam SpA | 189,807 | 784,768 | |||
| Terna Rete Elettrica Nazionale SpA | 240,800 | 1,243,850 | |||
| Netherlands 1.6% | 1,358,459 | ||||
| Royal Dutch Shell PLC, ADR, Class A (A) | 21,498 | 1,358,459 | |||
| Norway 1.3% | 1,135,671 | ||||
| Equinor ASA | 20,219 | 522,990 | |||
| Orkla ASA | 71,000 | 612,681 | |||
| Singapore 1.0% | 857,969 | ||||
| Singapore Exchange, Ltd. | 87,700 | 433,833 | |||
| Singapore Telecommunications, Ltd. | 186,900 | 424,136 |
| 8 | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
| Shares | Value | ||||
| Spain 1.7% | $1,408,755 | ||||
| Naturgy Energy Group SA | 23,800 | 584,948 | |||
| Red Electrica Corp. SA | 39,785 | 823,807 | |||
| Sweden 0.6% | 525,970 | ||||
| Svenska Handelsbanken AB, A Shares | 48,388 | 525,970 | |||
| Switzerland 3.1% | 2,601,889 | ||||
| Nestle SA | 9,800 | 827,346 | |||
| Novartis AG | 10,390 | 909,876 | |||
| Roche Holding AG | 3,553 | 864,667 | |||
| Taiwan 0.6% | 479,146 | ||||
| Taiwan Semiconductor Manufacturing Company, Ltd., ADR | 12,576 | 479,146 | |||
| United Kingdom 14.5% | 12,257,345 | ||||
| AstraZeneca PLC, ADR (A) | 41,331 | 1,602,816 | |||
| BAE Systems PLC | 131,500 | 881,745 | |||
| British American Tobacco PLC | 17,900 | 775,970 | |||
| British American Tobacco PLC, ADR | 15,346 | 666,016 | |||
| Diageo PLC | 12,900 | 445,973 | |||
| GlaxoSmithKline PLC | 72,700 | 1,408,036 | |||
| Imperial Brands PLC | 39,077 | 1,323,640 | |||
| Lloyds Banking Group PLC | 878,120 | 640,798 | |||
| Micro Focus International PLC | 20,979 | 325,221 | |||
| National Grid PLC | 108,750 | 1,148,839 | |||
| SSE PLC | 37,300 | 543,663 | |||
| Unilever PLC | 28,400 | 1,504,337 | |||
| Vodafone Group PLC (A) | 526,600 | 990,291 | |||
| United States 46.0% | 38,799,155 | ||||
| AbbVie, Inc. | 6,500 | 506,025 | |||
| Altria Group, Inc. (A) | 23,000 | 1,495,920 | |||
| Ameren Corp. (A) | 10,400 | 671,632 | |||
| American Electric Power Company, Inc. (A) | 9,300 | 682,248 | |||
| Arthur J. Gallagher & Company (A) | 7,300 | 540,273 | |||
| AT&T, Inc. (A) | 46,023 | 1,411,986 | |||
| BB&T Corp. | 9,300 | 457,188 | |||
| BlackRock, Inc. (A) | 900 | 370,278 | |||
| CenturyLink, Inc. (A) | 30,700 | 633,648 | |||
| Chevron Corp. | 1,710 | 190,922 | |||
| Cisco Systems, Inc. (A) | 26,125 | 1,195,219 | |||
| CME Group, Inc. (A) | 2,798 | 512,706 | |||
| Dominion Energy, Inc. (A) | 13,899 | 992,667 | |||
| DowDuPont, Inc. | 9,200 | 496,064 | |||
| Duke Energy Corp. (A) | 17,200 | 1,421,236 | |||
| Eaton Corp. PLC | 23,668 | 1,696,286 | |||
| Emerson Electric Company (A) | 7,920 | 537,610 | |||
| Entergy Corp. (A) | 12,600 | 1,057,770 |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND | 9 |
| Shares | Value | ||||
| United States (continued) | |||||
| Exxon Mobil Corp. (A) | 12,800 | $1,019,904 | |||
| FirstEnergy Corp. | 38,770 | 1,445,346 | |||
| Hanesbrands, Inc. | 26,382 | 452,715 | |||
| Intel Corp. | 21,731 | 1,018,749 | |||
| Johnson & Johnson (A) | 4,525 | 633,455 | |||
| Kimberly-Clark Corp. (A) | 6,300 | 657,090 | |||
| Las Vegas Sands Corp. | 11,100 | 566,433 | |||
| Leggett & Platt, Inc. | 15,577 | 565,601 | |||
| Lockheed Martin Corp. (A) | 1,900 | 558,315 | |||
| LyondellBasell Industries NV, Class A | 5,094 | 454,736 | |||
| McDonald's Corp. (A) | 4,100 | 725,290 | |||
| Merck & Company, Inc. (A) | 10,400 | 765,544 | |||
| MetLife, Inc. (A) | 41,834 | 1,723,142 | |||
| Microsoft Corp. (A) | 6,500 | 694,265 | |||
| Occidental Petroleum Corp. (A) | 14,600 | 979,222 | |||
| People's United Financial, Inc. (A) | 53,500 | 837,810 | |||
| PepsiCo, Inc. | 5,600 | 629,328 | |||
| Pfizer, Inc. (A) | 27,875 | 1,200,298 | |||
| Philip Morris International, Inc. (A) | 12,700 | 1,118,489 | |||
| PPL Corp. (A) | 29,800 | 905,920 | |||
| QUALCOMM, Inc. (A) | 9,200 | 578,588 | |||
| Texas Instruments, Inc. (A) | 8,200 | 761,206 | |||
| The Coca-Cola Company (A) | 15,300 | 732,564 | |||
| The Kraft Heinz Company | 9,513 | 522,930 | |||
| The Procter & Gamble Company (A) | 4,600 | 407,928 | |||
| The Southern Company | 13,200 | 594,396 | |||
| United Parcel Service, Inc., Class B | 5,395 | 574,783 | |||
| Verizon Communications, Inc. (A) | 30,125 | 1,719,836 | |||
| WEC Energy Group, Inc. (A) | 9,500 | 649,800 | |||
| Wells Fargo & Company | 8,187 | 435,794 | |||
| Yield (%) | Shares | Value | |||
| Short-term investments 3.6% | $3,031,107 | ||||
| (Cost $3,031,107) | |||||
| Money market funds 2.6% | 2,230,107 | ||||
| State Street Institutional Treasury Money Market Fund, Premier Class | 2.0896(B) | 2,230,107 | 2,230,107 | ||
| Par value^ | Value | ||||
| Repurchase agreement 1.0% | 801,000 | ||||
| Repurchase Agreement with State Street Corp. dated 10-31-18 at 1.050% to be repurchased at $801,023 on 11-1-18, collateralized by $815,000 U.S. Treasury Notes, 2.625% due 6-15-21 (valued at $817,816, including interest) | 801,000 | 801,000 | |||
| Total investments (Cost $88,646,543) 99.5% | $83,924,239 | ||||
| Other assets and liabilities, net 0.5% | 390,313 | ||||
| Total net assets 100.0% | $84,314,552 | ||||
| 10 | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
| The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund unless otherwise indicated. | |
| ^All par values are denominated in U.S. dollars unless otherwise indicated. | |
| Security Abbreviations and Legend | |
| ADR | American Depositary Receipt |
| (A) | All or a portion of this security is segregated as collateral for options. Total collateral value at 10-31-18 was $26,530,651. |
| (B) | The rate shown is the annualized seven-day yield as of 10-31-18. |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND | 11 |
| Options on index | ||||||||
| Counterparty
(OTC)/ Exchange- traded |
Name
of issuer |
Exercise
price |
Expiration
date |
Number
of contracts |
Notional
amount |
Premium | Value | |
| Calls | ||||||||
| Exchange-traded | Dow Jones Industrial Average | USD | 287.00 | Dec 2018 | 102 | 10,200 | $5,020 | $(459) |
| Exchange-traded | Philadelphia Stock Exchange Utility Sector Index | USD | 745.00 | Dec 2018 | 20 | 2,000 | 3,839 | (5,000) |
| Exchange-traded | S&P 500 Index | USD | 2,950.00 | Nov 2018 | 9 | 900 | 6,563 | (23) |
| Exchange-traded | S&P 500 Index | USD | 2,825.00 | Nov 2018 | 9 | 900 | 21,593 | (1,980) |
| Exchange-traded | S&P 500 Index | USD | 2,845.00 | Nov 2018 | 8 | 800 | 14,233 | (2,639) |
| Exchange-traded | S&P 500 Index | USD | 2,785.00 | Nov 2018 | 23 | 2,300 | 106,012 | (31,740) |
| Exchange-traded | S&P 500 Index | USD | 2,725.00 | Nov 2018 | 9 | 900 | 25,781 | (38,610) |
| Exchange-traded | S&P 500 Index | USD | 3,130.00 | Dec 2018 | 35 | 3,500 | 14,673 | (1,138) |
| Exchange-traded | S&P 500 Index | USD | 2,785.00 | Jan 2019 | 32 | 3,200 | 284,775 | (172,960) |
| $482,489 | $(254,549) | |||||||
| $482,489 | $(254,549) | |||||||
| Derivatives Currency Abbreviations | |
| USD | U.S. Dollar |
| 12 | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
| Financial statements |
| Assets | |
| Unaffiliated investments, at value (Cost $88,646,543) | $83,924,239 |
| Cash | 32 |
| Dividends and interest receivable | 677,065 |
| Receivable for investments sold | 4,309,488 |
| Other assets | 61,305 |
| Total assets | 88,972,129 |
| Liabilities | |
| Written options, at value (Premiums received $482,489) | 254,549 |
| Payable for investments purchased | 4,308,487 |
| Payable to affiliates | |
| Accounting and legal services fees | 9,173 |
| Trustees' fees | 202 |
| Other liabilities and accrued expenses | 85,166 |
| Total liabilities | 4,657,577 |
| Net assets | $84,314,552 |
| Net assets consist of | |
| Paid-in capital | $108,416,115 |
| Accumulated distributable earnings (accumulated loss) | (24,101,563) |
| Net assets | $84,314,552 |
| Net asset value per share | |
| Based on 11,044,437 shares of beneficial interest outstanding - unlimited number of shares authorized with $0.01 par value | $ 7.63 |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND | 13 |
| Investment income | |
| Dividends | $6,065,058 |
| Interest | 21,022 |
| Less foreign taxes withheld | (357,818) |
| Total investment income | 5,728,262 |
| Expenses | |
| Investment management fees | 871,617 |
| Accounting and legal services fees | 19,226 |
| Transfer agent fees | 19,866 |
| Trustees' fees | 44,848 |
| Custodian fees | 30,577 |
| Printing and postage | 92,480 |
| Professional fees | 128,049 |
| Stock exchange listing fees | 25,842 |
| Other | 8,546 |
| Total expenses | 1,241,051 |
| Less expense reductions | (7,769) |
| Net expenses | 1,233,282 |
| Net investment income | 4,494,980 |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Unaffiliated investments and foreign currency transactions | (820,806) |
| Written options | (1,632,308) |
| (2,453,114) | |
| Change in net unrealized appreciation (depreciation) of | |
| Unaffiliated investments and translation of assets and liabilities in foreign currencies | (7,345,088) |
| Written options | 422,279 |
| (6,922,809) | |
| Net realized and unrealized loss | (9,375,923) |
| Decrease in net assets from operations | $(4,880,943) |
| 14 | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD 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 | $4,494,980 | $4,818,369 |
| Net realized gain (loss) | (2,453,114) | 847,902 |
| Change in net unrealized appreciation (depreciation) | (6,922,809) | 6,419,640 |
| Increase (decrease) in net assets resulting from operations | (4,880,943) | 12,085,911 |
| Distributions to shareholders | ||
| From net investment income and net realized gain | (4,509,993) | — |
| From net investment income | — | (4,813,101) |
| From tax return of capital | (4,540,867) | (5,984,711) |
| Total distributions | (9,050,860) | (10,797,812) |
| Fund share transactions | ||
| Issued in reorganization | — | 655,193 |
| Issued pursuant to Dividend Reinvestment Plan | 85,293 | 227,035 |
| Total from fund share transactions | 85,293 | 882,228 |
| Total increase (decrease) | (13,846,510) | 2,170,327 |
| Net assets | ||
| Beginning of year | 98,161,062 | 95,990,735 |
| End of year1 | $84,314,552 | $98,161,062 |
| Share activity | ||
| Shares outstanding | ||
| Beginning of year | 11,034,238 | 10,943,329 |
| Issued in shelf offering | — | 65,747 |
| Issued pursuant to Dividend Reinvestment Plan | 10,199 | 25,162 |
| End of year | 11,044,437 | 11,034,238 |
| 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. |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT | JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND | 15 |
| Financial highlights |
| 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 | $8.90 | $8.77 | $10.07 | $11.44 | $12.25 |
| Net investment income1 | 0.41 | 0.44 | 0.52 | 0.64 | 0.80 |
| Net realized and unrealized gain (loss) on investments | (0.86) | 0.66 | (0.57) | (0.75) | (0.36) |
| Total from investment operations | (0.45) | 1.10 | (0.05) | (0.11) | 0.44 |
| Less distributions | |||||
| From net investment income | (0.41) | (0.44) | (0.52) | (0.75) | (1.28) |
| From tax return of capital | (0.41) | (0.54) | (0.76) | (0.53) | — |
| Total distributions | (0.82) | (0.98) | (1.28) | (1.28) | (1.28) |
| Anti-dilutive impact of shelf offering | — | 0.01 | 0.03 | 0.02 | 0.03 |
| Net asset value, end of period | $7.63 | $8.90 | $8.77 | $10.07 | $11.44 |
| Per share market value, end of period | $6.91 | $8.97 | $10.35 | $9.51 | $12.59 |
| Total return at net asset value (%)2,3 | (5.45) | 12.95 | (1.28) | (0.65) | 3.65 |
| Total return at market value (%)2 | (15.04) | (3.54) | 23.37 | (14.74) | 10.55 |
| Ratios and supplemental data | |||||
| Net assets, end of period (in millions) | $84 | $98 | $96 | $106 | $117 |
| Ratios (as a percentage of average net assets): | |||||
| Expenses before reductions | 1.35 | 1.32 | 1.32 | 1.27 | 1.32 |
| Expenses including reductions | 1.34 | 1.31 | 1.32 | 1.26 | 1.32 |
| Net investment income | 4.90 | 4.96 | 5.60 | 6.01 | 6.60 |
| Portfolio turnover (%) | 208 | 220 | 253 | 261 | 228 |
| 1 | Based on average daily shares outstanding. |
| 2 | Total return based on net asset value reflects changes in the fund’s net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested. |
| 3 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
| 16 | JOHN HANCOCK Tax-Advantaged Global Shareholder Yield Fund | ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Note 1 — Organization
John Hancock Tax-Advantaged Global Shareholder Yield Fund (the fund) is a closed-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act).
In 2012, 2015 and 2018, the fund filed registration statements with the Securities and Exchange Commission (SEC), registering an additional 1,200,000, 1,500,000 and 1,000,000 common shares, respectively, through equity shelf offering programs. Under these programs, the fund, subject to market conditions, may raise additional equity capital from time to time by offering new common shares at a price equal to or above the fund's net asset value (NAV) per common share.
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 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. Options listed on an exchange are valued at the mean of the most recent bid and ask prices from the exchange where the option trades. Foreign securities and currencies are valued in U.S. dollars based on foreign currency exchange rates supplied by an independent pricing vendor.
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. Trading in foreign securities may be completed before the scheduled daily close of trading on the NYSE. Significant events at the issuer or market level may affect the values of securities between the time when the valuation of the securities is generally determined and the close of the NYSE. If a significant event occurs, these securities may be fair valued, as determined in good faith by the fund's Pricing Committee, following procedures established by the Board of Trustees. The fund uses fair value adjustment factors provided by an independent pricing vendor to value certain foreign securities in order to adjust for events that may occur between the close of foreign exchanges or markets and the close of the NYSE.
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.
The following is a summary of the values by input classification of the fund's investments as of October 31, 2018, by major security category or type:
| Total value at 10-31-18 |
Level 1 quoted price |
Level 2 significant observable inputs |
Level 3 significant unobservable inputs |
||||||||||||||
| Investments in securities: | |||||||||||||||||
| Assets | |||||||||||||||||
| Common stocks | |||||||||||||||||
| Australia | $2,125,531 | — | $2,125,531 | — | |||||||||||||
| Canada | 5,286,930 | $5,286,930 | — | — | |||||||||||||
| France | 5,785,080 | — | 5,785,080 | — | |||||||||||||
| Germany | 5,792,864 | — | 5,792,864 | — | |||||||||||||
| Italy | 2,478,368 | — | 2,478,368 | — | |||||||||||||
| Netherlands | 1,358,459 | 1,358,459 | — | — | |||||||||||||
| Norway | 1,135,671 | — | 1,135,671 | — | |||||||||||||
| Singapore | 857,969 | — | 857,969 | — | |||||||||||||
| Spain | 1,408,755 | — | 1,408,755 | — | |||||||||||||
| Sweden | 525,970 | — | 525,970 | — | |||||||||||||
| Switzerland | 2,601,889 | — | 2,601,889 | — | |||||||||||||
| Taiwan | 479,146 | 479,146 | — | — | |||||||||||||
| United Kingdom | 12,257,345 | 2,268,832 | 9,988,513 | — | |||||||||||||
| United States | 38,799,155 | 38,799,155 | — | — | |||||||||||||
| Short-term investments | 3,031,107 | 2,230,107 | 801,000 | — | |||||||||||||
| Total investments in securities | $83,924,239 | $50,422,629 | $33,501,610 | — | |||||||||||||
| Derivatives: | |||||||||||||||||
| Liabilities | |||||||||||||||||
| Written options | $(254,549 | ) | $(254,549 | ) | — | — | |||||||||||
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. 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. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Foreign investing. Assets, including investments and liabilities denominated in foreign currencies, are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments. Foreign investments are also subject to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. These risks are heightened for investments in emerging markets. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs), accounting standards and other factors.
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, less any amounts reclaimable.
Overdrafts. Pursuant to the custodian agreement, the fund's custodian may, in its discretion, advance funds to the fund to make properly authorized payments. When such payments result in an overdraft, the fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
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.
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.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
For federal income tax purposes, as of October 31, 2018, the fund has a capital loss carryforward of $6,812,310 available to offset future net realized capital gains.
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 quarterly 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 | $4,509,993 | $4,813,101 |
| Tax return of capital | 4,540,867 | 5,984,711 |
| Total | $9,050,860 | $10,797,812 |
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, expiration of capital loss carryforwards and derivative transactions.
Note 3 — Derivative Instruments
The fund may invest in derivatives in order to meet its investment objective. Derivatives include a variety of different instruments that may be traded in the over-the-counter (OTC) market, on a regulated exchange or through a clearing facility. The risks in using derivatives vary depending upon the structure of the instruments, including the use of leverage, optionality, the liquidity or lack of liquidity of the contract, the creditworthiness of the counterparty or clearing organization and the volatility of the position. Some derivatives involve risks that are potentially greater than the risks associated with investing directly in the referenced securities or other referenced underlying instrument. Specifically, the fund is exposed to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction.
Certain options are traded on an exchange. Exchange-traded transactions generally present less counterparty risk to a fund than OTC transactions. The exchange stands between the fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the exchange and the clearing member. Securities pledged by the fund for exchange-traded transactions, if any, are identified in the Fund's investments.
Options. There are two types of options, put options and call options. Options are traded either OTC or on an exchange. A call option gives the purchaser of the option the right to buy (and the seller the obligation to sell) the underlying instrument at the exercise price. A put option gives the purchaser of the option the right to sell (and the writer the obligation to buy) the underlying instrument at the exercise price. Writing puts and buying calls may increase the fund's exposure to changes in the value of the underlying instrument. Buying puts and writing calls may decrease the fund's exposure to such changes. Risks related to the use of options include the loss of premiums, possible illiquidity of the options markets, trading restrictions imposed by an exchange and movements in underlying security values, and for written options, potential losses in excess of the amounts recognized on the Statement of assets and liabilities. In addition, OTC options are subject to the risks of all OTC derivatives contracts.
When the fund purchases an option, the premium paid by the fund is included in the Fund's investments and subsequently "marked-to-market" to reflect current market value. If the purchased option expires, the fund realizes a loss equal to the cost
of the option. If the fund exercises a call option, the cost of the securities acquired by exercising the call is increased by the premium paid to buy the call. If the fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium paid. If the fund enters into a closing sale transaction, the fund realizes a gain or loss, depending on whether proceeds from the closing sale are greater or less than the original cost. When the fund writes an option, the premium received is included as a liability and subsequently "marked-to-market" to reflect the current market value of the option written. Premiums received from writing options that expire unexercised are recorded as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option on a security is exercised, the premium received reduces the cost basis of the securities purchased by the fund.
During the year ended October 31, 2018, the fund wrote option contracts to hedge against changes in securities markets and to generate potential income. The fund held written options contracts with market values ranging from $239,000 to $552,000, as measured at each quarter end.
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at October 31, 2018 by risk category:
| Risk | Statement of assets and liabilities location |
Financial instruments location |
Assets derivatives fair value |
Liabilities derivatives fair value |
|||||||||||||
| Equity | Written options, at value | Written options | — | ($254,549 | ) |
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended October 31, 2018:
| Statement of operations location - net realized gain (loss) on: | |||||
| Risk | Written options | ||||
| Equity | ($1,632,308 | ) | |||
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended October 31, 2018:
| Statement of operations location - change in net unrealized appreciation (depreciation) of: | |
| Risk | Written options |
| Equity | $422,279 |
Note 4 — Guarantees and indemnifications
Under the fund's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — 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 distributor for the common shares offered through the equity shelf offering. The Advisor and the Distributor are indirect, wholly owned subsidiary of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor, equivalent on an annual basis to 0.95% of the fund's average daily managed assets.
The Advisor has a subadvisory agreement with Epoch Investment Partners, Inc. and a subadvisory agreement with Analytic Investors, 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 daily managed assets (on an annualized basis). 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.
The expense reductions described above amounted to $7,769 for the year ended October 31, 2018.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended October 31, 2018 were equivalent to a net annual effective rate of 0.94% of the fund's average daily managed assets.
Accounting and legal services. Pursuant to a service 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 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 managed assets.
Distributor. The fund will compensate the Distributor with respect to sales of the common shares offered through the equity shelf offering at a commission rate of 1.00% of the gross proceeds of the sale of common shares, a portion of which is allocated to the selling dealers. During the years ended October 31, 2018 and 2017, there were no compensation to the Distributor. The Distributor has an agreement with a sub-placement agent in the sale of common shares. The fund is not responsible for payment of commissions to the sub placement agent.
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. These Trustees receive from the fund and the other John Hancock closed-end funds an annual retainer. In addition, 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 6 — Fund share transactions
Transactions in common shares for the years ended October 31, 2018 and 2017 are presented on the Statements of changes in net assets. Proceeds received in connection with the shelf offering are net of commissions and offering costs. Total offering costs of $207,613 have been prepaid by the fund. These costs are deducted from proceeds as shares are issued. As of October 31, 2018, $160,763 has been deducted from proceeds of shares issued and the remaining $46,850 is included in Other assets on the Statement of assets and liabilities.
Note 7 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $186,634,075 and $193,139,098, respectively, for the year ended October 31, 2018.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of John Hancock Tax-Advantaged Global Shareholder Yield Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund's investments, of John Hancock Tax-Advantaged Global Shareholder Yield Fund (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, 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.
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.
Unaudited
Investment objective and policy
The fund is a diversified, closed-end management investment company, common shares of which were initially offered to the public in 2007. The fund's investment objective is to provide total return consisting of a high level of current income and gains and long term capital appreciation. In pursuing its investment objective of total return, the fund will seek to emphasize high current income. The fund will seek to achieve favorable after-tax returns for its shareholders by seeking to minimize the U.S. federal income tax consequences on income and gains generated by the fund. Under normal market conditions, the fund will invest at least 80% of its total assets in a diversified portfolio of dividend-paying securities of issuers located throughout the world. The fund will notify shareholders at least 60 days prior to any change in this 80% investment policy. The fund also intends to write (sell) call options on a variety of both U.S. and non-U.S. broad-based indices.
Dividends and distributions
During the year ended October 31, 2018, distributions from net investment income totaling $0.8200 per share were paid to shareholders. The dates of payments and the amounts per share were as follows:
| Payment Date | Income Distributions* |
| December 29, 2017 | $0.2200 |
| March 29, 2018 | 0.2200 |
| June 29, 2018 | 0.2200 |
| September 28, 2018 | 0.1600 |
| Total | $0.8200 |
* A portion of the distributions may be deemed a tax return of capital at the fiscal year end.
Dividend reinvestment plan
The fund's Dividend Reinvestment Plan (the Plan) provides that distributions of dividends and capital gains are automatically reinvested in common shares of the fund by Computershare Trust Company, N.A. (the Plan Agent). Every shareholder holding at least one full share of the fund is entitled to participate in the Plan. In addition, every shareholder who became a shareholder of the fund after June 30, 2011, and holds at least one full share of the fund will be automatically enrolled in the Plan. Shareholders may withdraw from the Plan at any time and shareholders who do not participate in the Plan will receive all distributions in cash.
If the fund declares a dividend or distribution payable either in cash or in common shares of the fund and the market price of shares on the payment date for the distribution or dividend equals or exceeds the fund's net asset value per share (NAV), the fund will issue common shares to participants at a value equal to the higher of NAV or 95% of the market price. The number of additional shares to be credited to each participant's account will be determined by dividing the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If the market price is lower than NAV, or if dividends or distributions are payable only in cash, then participants will receive shares purchased by the Plan Agent on participants' behalf on the NYSE or otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed its purchases, the average per share purchase price may exceed NAV, resulting in fewer shares being acquired than if the fund had issued new shares.
There are no brokerage charges with respect to common shares issued directly by the fund. However, whenever shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently $0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested.
The reinvestment of dividends and net capital gains distributions does not relieve participants of any income tax that may be payable on such dividends or distributions.
Shareholders participating in the Plan may buy additional shares of the fund through the Plan at any time in amounts of at least $50 per investment, up to a maximum of $10,000, with a total calendar year limit of $100,000. Shareholders will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. Purchases of additional shares of the fund will be made on the open market. Shareholders who elect to utilize monthly electronic fund transfers to buy additional shares of the fund will be charged a $2 transaction fee plus $0.05 per share brokerage trading fee for each automatic purchase. Shareholders can also sell fund shares held in the Plan account at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent's website at www.computershare.com/investor. The Plan Agent will mail a check (less applicable brokerage trading fees) on settlement date. Pursuant to regulatory changes, effective September 5, 2017, the settlement date is changed from three business days after the shares have been sold to two business days after the shares have been sold. If shareholders choose to sell shares through their stockbroker, they will need to request that the Plan Agent electronically transfer those shares to their stockbroker through the Direct Registration System.
Shareholders participating in the Plan may withdraw from the Plan at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent's website at www.computershare.com/investor. Such termination will be effective immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on the first trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. If shareholders withdraw from the Plan, their shares will be credited to their account; or, if they wish, the Plan Agent will sell their full and fractional shares and send the shareholders the proceeds, less a transaction fee of $5 and less brokerage trading fees of $0.05 per share. If a shareholder does not maintain at least one whole share of common stock in the Plan account, the Plan Agent may terminate such shareholder's participation in the Plan after written notice. Upon termination, shareholders will be sent a check for the cash value of any fractional share in the Plan account, less any applicable broker commissions and taxes.
Shareholders who hold at least one full share of the fund may join the Plan by notifying the Plan Agent by telephone, in writing or by visiting the Plan Agent's website at www.computershare.com/investor. If received in proper form by the Plan Agent before the record date of a dividend, the election will be effective with respect to all dividends paid after such record date. If shareholders wish to participate in the Plan and their shares are held in the name of a brokerage firm, bank or other nominee, shareholders should contact their nominee to see if it will participate in the Plan. If shareholders wish to participate in the Plan, but their brokerage firm, bank or other nominee is unable to participate on their behalf, they will need to request that their shares be re-registered in their own name, or they will not be able to participate. The Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by shareholders as representing the total amount registered in their name and held for their account by their nominee.
Experience under the Plan may indicate that changes are desirable. Accordingly, the fund and the Plan Agent reserve the right to amend or terminate the Plan. Participants generally will receive written notice at least 90 days before the effective date of any amendment. In the case of termination, participants will receive written notice at least 90 days before the record date for the payment of any dividend or distribution by the fund.
Effective November 1, 2013, the Plan was revised to provide that Computershare Trust Company, N.A. no longer provides mail loss insurance coverage when shareholders mail their certificates to the fund's administrator.
All correspondence or requests for additional information about the Plan should be directed to Computershare Trust Company, N.A., at the address stated below, or by calling 800-852-0218, 201-680-6578 (For International Telephone Inquiries) and 800-952-9245 (For the Hearing Impaired (TDD)).
Shareholder communication and assistance
If you have any questions concerning the fund, we will be pleased to assist you. If you hold shares in your own name and not with a brokerage firm, please address all notices, correspondence, questions or other communications regarding the fund to the transfer agent at:
Regular Mail:
Computershare
P.O. Box 505000
Louisville, KY 40233
Registered or Overnight Mail:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
If your shares are held with a brokerage firm, you should contact that firm, bank or other nominee for assistance.
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 Tax-Advantaged Global Shareholder Yield Fund (the fund) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreements (the Subadvisory Agreements) with Epoch Investment Partners, Inc. and Analytic Investors, LLC (collectively, the Subadvisors). The Advisory Agreement and Subadvisory Agreements 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 fund 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 fund and the Advisor and the Subadvisory Agreements between the Advisor and the Subadvisors with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreements, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisors, 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 other pertinent information, such as the market premium and discount information, and, with respect to the Subadvisors, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisors regarding the nature, extent and quality of services provided by the Advisor and the Subadvisors 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 Agreements 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 Subadvisors 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 Subadvisors to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisors 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 Subadvisors 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 fund 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 fund'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 Subadvisors, and is also responsible for monitoring and reviewing the activities of the Subadvisors 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.
The Board also considered the differences between the Advisor's services to the fund and the services it provides to other clients that are not closed-end funds, including, for example, the differences in services related to the regulatory and legal obligations of closed-end 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 fund and of the other funds 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:
| (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; |
| (d) | took into account the Advisor's analysis of the fund's performance; and |
| (e) | considered the fund's share performance and premium/discount information. |
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, based on its net asset value, the fund underperformed its benchmark index for the one-, three- five- and ten-year periods ended December 31, 2017. The Board also noted that, based on its net asset value, the fund underperformed its peer group average for the one-year period and outperformed its peer group average for the three-, five- and ten-year periods 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 three-, five- and ten-year periods. 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 and the Subadvisors. 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 for the fund are lower than the peer group median and that 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 took into account management's discussion with respect to the overall management fee and the fees of the Subadvisors, 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 fees and that such fees are negotiated at arm's length with respect to the Subadvisors. 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 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 Subadvisors' 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 fund, 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 Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; |
| (f) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; |
| (g) | noted that the subadvisory fees for the fund are paid by the Advisor, and are negotiated at arm's length; |
| (h) | 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 |
| (i) | 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 the fund may realize any economies of scale and whether fee levels reflect these economies of scale for the benefit of the fund shareholders, the Board noted that the fund has a limited ability to increase its assets as a closed-end fund. The Board took into account management's discussions of the current advisory fee structure, and, as noted above, the services the Advisor provides in performing its functions under the Advisory Agreement and in supervising the Subadvisors.
The Board also considered potential economies of scale that may be realized by the fund as part of the John Hancock Fund Complex. Among them, the Board noted that the Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock Fund 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. The Board also considered the Advisor's overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the fund. The Board determined that the management fee structure for the fund was reasonable.
Approval of Subadvisory Agreements
In making its determination with respect to approval of the Subadvisory Agreements, the Board reviewed:
| (1) | information relating to the Subadvisors' business, including current subadvisory services to the fund (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 fees for the fund 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 fund's Advisor and the Subadvisors. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisors, the Board received information provided to the Board by the Subadvisors, including the Subadvisors' respective Form ADV, as well as took into account information presented throughout the past year. The Board considered each Subadvisor's current level of staffing and its overall resources, as well as received information relating to each Subadvisor's compensation program. The Board reviewed each Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of each Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, each Subadvisor's compliance program and any disciplinary history. The Board also considered each Subadvisor's risk assessment and monitoring process. The Board reviewed each 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 each Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the fund's CCO and his staff conduct regular, periodic compliance reviews with each Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of each Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of each Subadvisor.
The Board considered each Subadvisor's investment process and philosophy. The Board took into account that each 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 each 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 each Subadvisor and the profitability to each Subadvisor of its relationship with the fund, the Board noted that the fees under each 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 Agreements 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 Subadvisors from its relationship with the fund were not a material factor in the Board's consideration of Subadvisory Agreements.
The Board also received information regarding the nature and scope (including their significance to the Advisor and its affiliates and the Subadvisors) of any material relationships with respect to the Subadvisors, which include arrangements in which a 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 Agreements.
In addition, the Board considered other potential indirect benefits that the Subadvisors and its affiliates may receive from the Subadvisors' 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 subadvisory fees to the Subadvisors. 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 Subadvisors with respect to the fund and compared them to fees charged by the Subadvisors 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 Subadvisors. The Board was mindful of the Advisor's focus on the Subadvisors' performance. The Board also noted the Subadvisors' long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreements was based on a number of determinations, including the following:
| (1) | the Subadvisors have extensive experience and demonstrated skills as a manager; |
| (2) | the fund's performance, based on net asset value, is being monitored and reasonably addressed, where appropriate; and |
| (3) | the subadvisory fees are reasonable in relation to the level and quality of services being provided under the Subadvisory Agreements. |
* * *
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 Agreements 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 Agreements 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 fund 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 | 216 |
| 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. |
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| Charles L. Bardelis,2 Born: 1941 | 2012 | 216 |
| 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). |
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| James R. Boyle, Born: 1959 | 2015 | 216 |
| 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). |
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| Peter S. Burgess,2 Born: 1942 | 2012 | 216 |
| 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). |
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| William H. Cunningham, Born: 1944 | 2007 | 216 |
| 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). |
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Independent Trustees (continued)
| Name, year of birth Position(s) held with fund 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 | 216 |
| 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). |
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| Theron S. Hoffman,2 Born: 1947 | 2012 | 216 |
| 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). |
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| Deborah C. Jackson, Born: 1952 | 2008 | 216 |
| 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). |
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| James M. Oates, Born: 1946 | 2012 | 216 |
|
Trustee
|
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| Steven R. Pruchansky, Born: 1944 | 2007 | 216 |
| 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). |
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Independent Trustees (continued)
| Name, year of birth Position(s) held with fund 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 | 2008 | 216 |
| 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). |
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Non-Independent Trustees4
| Name, year of birth Position(s) held with fund 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 | 216 |
| 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). |
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| Marianne Harrison, Born: 1963 | 2018 | 216 |
| 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 | 216 |
| 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 fund 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 197 Clarendon Street, Boston, Massachusetts 02116-5010.
|
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 Subadvisors Epoch Investment Partners, Inc. Distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent Computershare Shareowner Services, LLC Legal counsel K&L Gates LLP Independent registered public accounting firm PricewaterhouseCoopers LLP Stock symbol Listed New York Stock Exchange: HTY |
* Member of the Audit Committee
† Non-Independent Trustee
#Effective
6-19-18
**Effective 9-13-18
For shareholder assistance refer to page 26
| You can also contact us: | |||
| 800-852-0218 jhinvestments.com |
Regular mail: Computershare |
Express mail: Computershare |
|
The fund's proxy voting policies and procedures, as well as the fund's 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 800-852-0218.
The report is certified under the Sarbanes-Oxley Act, which requires closed-end funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.
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 |
The fund's investment objectives, risks, charges, and expenses are included in the prospectus and should be considered carefully before investing. For a prospectus, contact your financial professional, call John Hancock Investments at 800-852-0218, or visit the fund's 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 Advisers, LLC 200 Berkeley Street n Boston, MA 02116-5010 800-852-0218 n jhinvestments.com |
|
| MF647952 | P14A 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 for John Hancock Tax-Advantaged Global Shareholder Yield Fund billed for professional services rendered by the principal accountant(s) for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant(s) in connection with statutory and regulatory filings or engagements amounted to $44,363 for the fiscal year ended October 31, 2018 and $39,763 for the fiscal year ended October 31, 2017. These fees were billed to the registrant and were approved by the registrant’s audit committee.
(b) Audit-Related Services
The aggregate fees for John Hancock Tax-Advantaged Global Shareholder Yield Fund billed for audit-related fees amounted to $0 for the fiscal year ended October 31, 2018 and $0 for the fiscal year ended October 31, 2017 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 that provides ongoing services to the registrant ("control affiliates"). 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 for
John Hancock Tax-Advantaged Global Shareholder Yield Fund billed for professional services rendered by the principal
accountant(s) for the tax compliance, tax advice and tax planning (“tax fees”) amounted to $3,725 for the fiscal
year ended October 31, 2018 and $4,475 for the fiscal year ended October 31, 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.
(d) All Other Fees
The all other fees for John Hancock Tax-Advantaged Global Shareholder Yield Fund billed to the registrant for products and services provided by the principal accountant were $239 for the fiscal year ended October 31, 2018 and $832 for the fiscal year ended October 31, 2017 billed to control affiliates for products and services provided by the principal accountant. These fees were approved by the registrant’s audit committee.
(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 year 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(s) for services rendered to the registrant and rendered to the registrant's control affiliates for each of the last two fiscal years of the registrant were $2,064,999 for the fiscal year ended October 31, 2018 and $8,884,973 for the fiscal year ended October 31, 2017.
(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.
See attached exhibit - Proxy Voting Policies and Procedures.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Information about the Analytic portfolio managers
Management Biographies
Below is an alphabetical list of the Analytic portfolio managers who share joint responsibility for the implementation and execution of the Fund’s options strategy. It provides a brief summary of their business careers over the past five years. Information is provided as of October 31, 2018.
Dennis Bein, CFA
Chief Investment Officer and Portfolio Manager, Analytic Investors, LLC since 1995
Began business career in 1990
Managed the Fund since 2007
Harindra de Silva, Ph. D., CFA
President and Portfolio Manager, Analytic Investors, LLC since 1995
Began business career in 1984
Managed the Fund since 2007
Gregory M. McMurran
Chief Investment Officer and Portfolio Manager, Analytic Investors, LLC since 1976
Began business career in 1976
Managed the Fund since 2007
Megan N. Miller, CFA
Portfolio Manager, Analytic Investors, LLC since 2014
Began business career in 2008
Managed Fund since 2017
Other Accounts the Portfolio Managers are Managing
The table below indicates for each portfolio manager information about the accounts over which the portfolio manager has day-to-day investment responsibility. All information on the number of accounts and total assets in the table is as of October 31, 2018. For purposes of the table, “Other Pooled Investment Vehicles” may include investment partnerships and group trusts, and “Other Accounts” may include separate accounts for institutions or individuals, insurance company general or separate accounts, pension funds and other similar institutional accounts.
| Registered Investment Companies |
Other Pooled Investment Vehicles |
Other Accounts | ||||
| Number of Accounts |
Total Assets $Million |
Number of Accounts |
Total Assets $Million |
Number of Accounts |
Total Assets $Million | |
| Dennis Bein | 16 | 6,404.54 | 21 | 6,513.81 | 23 | 5,145.20 |
| (0) | (0) | (4) | (496.90) | (2) | (312.74) | |
| Harindra de Silva., CFA |
18 | 6,916.23 | 22 | 6,529.61 | 24 | 5,865.30 |
| (0) | (0) | (4) | (496.90) | (2) | (312.74) | |
| Gregory McMurran |
3 | 606.65 | 1 | 15.80 | 1 | 720.01 |
| (0) | (0) | (0) | (0) | (0) | (0) | |
| Megan N. Miller, CFA |
3 | 606.65 | 1 | 15.80 | 1 | 720.01 |
| (0) | (0) | (0) | (0) | (0) | (0) | |
Note: (*) represents the number and value of accounts, within the total accounts that are subject to a performance-based advisory fee.
Conflicts of Interest. Conflicts of interest may arise because the Fund’s portfolio managers have day-to-day management responsibilities with respect to both the Fund and various other accounts. These potential conflicts include:
● Limited Resources. The portfolio managers cannot devote their full time and attention to the management of each of the accounts that they manage. Accordingly, the portfolio managers may be limited in their ability to identify investment opportunities for each of the accounts that are as attractive as might be the case if the portfolio managers were to devote substantially more attention to the management of a single account. The effects of this potential conflict may be more pronounced where the accounts have different investment strategies.
● Limited Investment Opportunities. Other clients of either Subadviser may have investment objectives and policies similar to those of the Fund. Either Subadviser may, from time to time, make recommendations which result in the purchase or sale of a particular security by its other clients simultaneously with the Fund. If transactions on behalf of more than one client during the same period increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price or quantity. It is the policy of each Subadviser to allocate advisory recommendations and the placing of orders in a manner that it believes is equitable to the accounts involved, including the Fund. When two or more clients of a Subadviser are purchasing or selling the same security on a given day from the same broker-dealer, such transactions may be averaged as to price.
● Different Investment Strategies. The accounts managed by the portfolio managers have differing investment strategies. If the portfolio managers determine that an investment opportunity may be appropriate for only some of the accounts or decide that certain of the accounts should take different positions with respect to a particular security, the portfolio managers may effect transactions for one or more accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other accounts.
● Variation in Compensation. A conflict of interest may arise where a Subadviser is compensated differently by the accounts that are managed by the portfolio managers. If certain accounts pay higher management fees or performance-based incentive fees, the portfolio managers might be motivated to prefer certain accounts over others. The portfolio managers might also be motivated to favor accounts in which they have a greater ownership interest or accounts that are more likely to enhance the portfolio managers’ performance record or to otherwise benefit the portfolio managers.
● Selection of Brokers. The portfolio managers select the brokers that execute securities transactions for the accounts that they supervise. In addition to executing trades, some brokers provide the portfolio managers with research and other services which may require the payment of higher brokerage fees than might otherwise be available. The portfolio managers’ decision as to the selection of brokers could yield disproportionate costs and benefits among the accounts that they manage, since the research and other services provided by brokers may be more beneficial to some accounts than to others.
Where conflicts of interest arise between the Fund and other accounts managed by the portfolio managers, the portfolio managers will use good faith efforts so that the Fund will not be treated materially less favorably than other accounts. There may be instances where similar portfolio transactions may be executed for the same security for numerous accounts managed by the portfolio managers. In such instances, securities will be allocated in accordance with the Adviser’s trade allocation policy.
Compensation of Portfolio Managers.
Analytic uses two primary compensation tools to reward and incentivize its portfolio managers and research analysts; (i) a competitive base salary and benefits package and (ii) annual variable compensation payments based on Analytic’s investment performance and individual merit. A portion of the annual variable compensation is deferred over three years in conjunction with current Wells Fargo Asset Management compensation philosophy. Incentive bonuses are typically tied to relative, pre-tax investment performance of all accounts under his or her management within acceptable risk parameters. Relative investment performance is generally evaluated for 1, 3, and 5-year performance results, with a predominant weighting on the 3- and 5-year time periods, versus the relevant benchmarks and/or peer groups consistent with the investment style. This evaluation takes into account relative performance of the accounts to each account’s individual benchmark and/or the relative composite performance of all accounts to one or more relevant benchmarks consistent with the overall investment style. Research analysts are evaluated on the overall team's relative investment performance as well as the performance and quality of their individual research.
| Fund | Benchmark Index for Incentive Period |
| Tax-Advantaged Global Shareholder Yield Fund |
CBOE S&P 500 BuyWrite Index |
Share Ownership by Portfolio Managers. The following table indicates as of October 31, 2018 the value of shares beneficially owned by the portfolio managers in the Fund.
| Portfolio Manager | Range of Beneficial Ownership in the Fund |
|
| Dennis Bein, CFA | None | |
| Harindra de Silva, PH. D., CFA |
None | |
| Gregory M McMurran |
None | |
| Megan N. Miller, CFA |
None |
Information about the EPOCH portfolio managers
Management Biographies
Below is a list of the Epoch portfolio managers who share joint responsibility for the day-to-day investment management of the Fund. It provides a brief summary of their business careers over the past five years. Information is provided as of October 21, 2018.
William W. Priest
Founder, Chief Executive Officer, Co-Chief Investment Officer and Portfolio Manager,
Epoch Investment Partners, Inc. since 2004
Co-managing partner and portfolio manager
Began business career in 1965
Managed the Fund since 2007
Bill is Chief Executive Officer and Co-Chief Investment Officer of Epoch Investment Partners. He is a portfolio manager for Epoch’s global equity investment strategies and leads the Investment Policy Group, a forum for analyzing broader secular and cyclical trends that Epoch believes will influence investment opportunities. Prior to co-founding Epoch in 2004 with David Pearl, Tim Taussig and Phil Clark, Bill was a Co-Managing Partner and portfolio manager at Steinberg Priest & Sloane Capital Management, LLC for three years. Before joining Steinberg Priest, he was a member of the Global Executive Committee of Credit Suisse Asset Management (CSAM), Chairman and Chief Executive Officer of Credit Suisse Asset Management Americas and CEO and portfolio manager of its predecessor firm BEA Associates, which he co-founded in 1972. During his 30-year tenure at BEA and CSAM, he developed the firm into a well-recognized investment manager with over $100 billion under management. Bill is the author of several published articles and papers on investing and finance, including the books, The Financial Reality of Pension Funding Under ERISA and the more recent, Free Cash Flow and Shareholder Yield: New Priorities for the Global Investor which details the underpinnings of our investment approach, published by John Wiley & Sons. He holds the Chartered Financial Analyst designation, is a former CPA and a graduate of Duke University and the University of Pennsylvania Wharton Graduate School of Business. He is a member of the Council on Foreign Relations.
Kera Van Valen, CFA
Managing Director, Portfolio Manager, and Senior Research Analyst
Epoch Investment Partners
Began business career in 2001
Managed the Fund since 2014
Kera is a portfolio manager for our Global and U.S. Equity Shareholder Yield strategies. Prior to joining the Global Equity team Kera was an analyst within Epoch’s Quantitative Research and Risk Management team. Before joining Epoch in 2005, she was a portfolio manager of Structured Equities and Quantitative Research at Columbia Management Group where she was responsible for the day-to-day management of two index funds. She also worked at Credit Suisse Asset Management. Kera received her BA in Mathematics at Colgate University and her MBA at Columbia University, Graduate School of Business. She holds the Chartered Financial Analyst designation
John Tobin, CFA
Managing Director, Portfolio Manager, and Senior Research Analyst
Epoch Investment Partners, Inc. since 2012
Lecturer in the Economics Department, Fordham University (2009–2012)
Senior Vice President, HSBC Global Asset Management (2005–2009)
Began business career in 1981
Managed the Fund since 2014
John is a portfolio manager for our Global and U.S. Equity Shareholder Yield strategies. Prior to joining Epoch in 2012, John taught undergraduate economics as a lecturer at Fordham University. Before that he spent four years at HSBC Global Asset Management as a senior research analyst and almost twenty years at Credit Suisse Asset Management where he was a senior research analyst for the U.S. High Yield Bond team. Previously he worked at Bankers Trust Company where he began his career. John received AB, AM and PhD degrees in Economics from Fordham University and holds the Chartered Financial Analyst designation.
Michael A. Welhoelter, CFA
Managing Director, Co-CIO, Portfolio Manager, Head of Risk Management
Epoch Investment Partners, Inc. since 2005
Began business career in 1986
Managed the Fund since 2007
Mike is Co-Chief Investment Officer of Epoch Investment Partners. He is also Chief Risk Officer. Mike is responsible for integrating risk management into the investment process. Prior to joining Epoch in 2005, he was a director and portfolio manager in the Quantitative Strategies Group at Columbia Management Group, Inc. Before that, Mike was at Credit Suisse Asset Management Group (“CSAM”), where he was a portfolio manager in the Structured Equity group. Before joining CSAM, he was a portfolio manager and quantitative research analyst at Chancellor/LGT Asset Management. Mike is an author (with co-authors Bill Priest and Steven Bleiberg) of Winning at Active Management: The Essential Roles of Culture, Philosophy and Technology. Mike holds a BA degree in Computer and Information Science from Colgate University. He is a member of the New York Society of Security Analysts and the Society of Quantitative Analysts.
Other Accounts the Portfolio Managers are Managing
The table below indicates for each portfolio manager information about the accounts over which the portfolio manager has day-to-day investment responsibility. All information on the number of accounts and total assets in the table is as of October 31, 2018. For purposes of the table, “Other Pooled Investment Vehicles” may include investment partnerships and group trusts, and “Other Accounts” may include separate accounts for institutions or individuals, insurance company general or separate accounts, pension funds and other similar institutional accounts.
| Registered Investment Companies |
Other Pooled Investment Vehicles |
Other Accounts | ||||
| Number of Accounts |
Total Assets $Million |
Number of Accounts |
Total Assets $Million |
Number of Accounts |
Total Assets $Million | |
| William W. Priest |
11 | 9,109 | 37 | 15,039 | 97 | 9,737 |
| (0)* | (0)* | (1)* | (40)* | (9)* | (860)* | |
| Kera Van Valen, CFA |
7 | 7,763 | 17 | 5,837 | 19 | 4,834 |
| (0)* | (0) | (0)* | (0)* | (0)* | (0)* | |
| John Tobin, CFA |
7 | 7,763 | 17 | 5,837 | 19 | 4,834 |
| (0)* | (0)* | (0)* | (0)* | (0)* | (0)* | |
| Michael A. Welhoelter |
17 | 10,906 | 45 | 14,971 | 104 | 10,471 |
| (0)* | (0)* | (1)* | (40)* | (9)* | (860)* | |
Note: (*) represents the number and value of accounts, within the total accounts that are subject to a performance-based advisory fee.
Conflicts of Interest. Epoch’s sole line of business is investment management. We do not believe we have any significant conflicts of interest in the management of client’s portfolios other than those conflicts of interest that are customary in asset management. For example, as an asset manager to multiple accounts, Epoch faces conflicts of interest related to the allocation of securities, the sequencing of transactions, fee arrangements, the use of brokerage activity to acquire research or brokerage services, and proxy voting. Epoch faces potential conflicts of interest related to the personal trading activities of its employees as well as the corporate investment activities of Epoch itself.
Epoch has developed specific policies and procedures to disclose and mitigate these potential conflicts of interest. For example, Epoch’s Code of Ethics contains, among other things, policies and procedures that address the potential conflicts of interest that exist when Epoch employees purchase or sell for their personal accounts. These potential conflicts are discussed in more detail in our Form ADV Part II which is available on our website and upon request.
As a subsidiary of TD Bank Epoch has a number of TD broker/dealer affiliates, some of which may be perceived as presenting a potential conflict of interest. We avoid any potential conflicts by not conducting business with these entities.
Compensation of Portfolio Managers. Epoch seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate all employees. Epoch employees receive a base salary and an annual bonus. For senior employees, a portion of the bonus is deferred and vests over time. Employee compensation is reviewed annually and determined by the Firm’s Operating Committee. The level of compensation for each employee is based on a number of factors including individual performance, Firm performance and marketplace compensation information.
Investment professionals are compensated based on the performance of their strategy, their contribution to that performance, the overall performance of the Firm and their contribution to the betterment of the Firm through corporate citizenship.
Management reviews product performance, including risk-adjusted returns over one- and three-year periods in assessing an investment professional’s performance and compensation. Each portfolio manager and analyst’s security selection and weighting recommendations are reviewed on an annual basis against relevant benchmarks. Benchmarks are selected based on the individual’s coverage and contribution to a particular strategy. For example, a U.S. Equity portfolio manager’s portfolio performance would be measured against a total market benchmark while an analyst’s performance would be measured against the relevant industry, sector or region-specific benchmark corresponding with that analyst’s coverage.
A portion of deferred compensation payable to senior employees is invested into Epoch managed vehicles and a portion is in the form of TD RSU’s, both of which will be subject to a three-year vesting schedule.
| Fund | Benchmark Index for Incentive Period |
| Tax-Advantaged Global | MSCI World (Net) Index |
| Shareholder Yield Fund |
Share Ownership by Portfolio Managers. The following table indicates as of October 31, 2018 the value of shares beneficially owned by the portfolio managers in the Fund and in similarly managed accounts. For purposes of these tables, “similarly managed accounts” include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the Fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the Fund.
| Range of | ||
| Beneficial | ||
| Range of | Ownership in | |
| Beneficial | Similarly | |
| Ownership in the | Managed | |
| Portfolio Manager | Fund | Accounts |
| William W. Priest | $50,001--$100,000 | More than $1 million |
| John Tobin, CFA | None | None |
| Kera Van Valen, CFA | None | None |
| Michael A. Welhoelter | None | $ 100,001--$500,000 |
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.
(a) The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached "John Hancock Funds – 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)(1) 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) Proxy Voting Policies and Procedures are attached.
(c)(2) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating and Governance Committee Charter.”
(c)(3) Registrant’s notice to shareholders pursuant to Registrant’s exemptive order granting an exemption from Section 19(b) of the Investment Company Act of 1940, as amended and Rule 19b-1 thereunder regarding distributions made pursuant to the Registrant’s Managed Distribution Plan.
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 Tax-Advantaged Global Shareholder Yield Fund
| 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 |
