January 2, 2004
EDGAR
United States Securities and
Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form N-CSR
John Hancock Investment Trust III (the "Registrant") on behalf of:
John Hancock Large Cap Growth Fund
John Hancock International Fund
John Hancock Mid Cap Growth Fund
File Nos. 33-4559; 811-4630
Ladies and Gentlemen:
Enclosed herewith for filing pursuant to the Investment Company Act of 1940 and
the Securities Exchange Act of 1934 is the Registrant's Form N-CSR filing for
the period ending October 31, 2003.
If you have any questions or comments regarding this filing, please contact the
undersigned at (617) 375-1513.
Sincerely,
/s/Alfred P. Ouellette
Alfred P. Ouellette
Senior Attorney and Assistant Secretary
ITEM 1. REPORT TO STOCKHOLDERS.
John Hancock
Large Cap
Growth
Fund
ANNUAL REPORT
10.31.03
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen Ford Goldfarb, Chairman and Chief Executive Officer,
flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Fund's investments
page 8
Financial statements
page 12
Trustees & officers
page 26
For your information
page 29
Dear Fellow Shareholders,
The stock market has made a strong recovery in 2003. Historically low
interest rates, improving corporate earnings and government stimulus
in the form of tax cuts gave investors hope that the economy would
begin to strengthen, which it did. The market's move up began in April
and the breadth of the rally was enormous. As a result, the major
indexes were able to wipe out their first-quarter losses and post
solid gains year-to-date through October 31. With technology leading
the way, the tech-heavy Nasdaq Composite Index rose 45.22% through
October, while the Dow Jones Industrial Average was up 19.82% and the
Standard & Poor's 500 Index returned 21.19%. With falling interest
rates, bonds also did well, although they began to reverse course in
July. High yield bonds led the pack, returning 24.23% through October,
as measured by the Lehman Brothers High Yield Index.
In other news, we are pleased to inform you that on September 28,
2003, the Boards of Directors of Canada-based Manulife Financial
Corporation and Boston-based John Hancock Financial Services, Inc.,
the parent company of John Hancock Funds, unanimously voted to merge
the two companies.
Please be assured that the completion of the merger -- anticipated to
occur in the first half of 2004 -- will have no effect on your
investment in our John Hancock mutual funds. Your fund's adviser and
board of trustees will remain the same, as will your relationship with
your financial adviser.
The merger is subject to customary closing conditions, including
receipt of required regulatory approvals and approval by John Hancock
stockholders. If you only own shares in a John Hancock mutual fund you
are not affected and will not receive a proxy.
Additional information on this transaction is available on our Web
site: www.jhfunds.com. If you have questions about the merger, you may
also call 800-732-5543. Separately, for information about your
investments in John Hancock funds, please contact your financial
adviser or our Customer Service representatives at 800-225-5291.
Sincerely,
/S/ MAUREEN FORD GOLDFARB
Maureen Ford Goldfarb,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of October 31, 2003.
They are subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
long-term capital
appreciation by
normally invest-
ing at least 80% of
its assets in large-
capitalization
companies in the
capitalization
range of the
Russell Top 200
Growth Index.
Over the last twelve months
* The stock market made a strong comeback, led by economically
sensitive technology and consumer discretionary stocks.
* Large-cap stocks turned in strong absolute returns, but lagged
small-cap stocks.
* The Fund was positioned to take advantage of an economic recovery.
[Bar chart with heading "John Hancock Large Cap Growth Fund." Under the
heading is a note that reads "Fund performance for the year ended October
31, 2003." The chart is scaled in increments of 5% with 0% at the bottom
and 20% at the top. The first bar represents the 17.20% total return for
Class A. The second bar represents the 16.42% total return for Class B. The
third bar represents the 16.29% total return for Class C. A note below the
chart reads "Total returns for the Fund are at net asset value with all
distributions reinvested."]
Top 10 holdings
4.3% General Electric Co.
3.7% Microsoft Corp.
3.2% Pfizer, Inc.
2.8% Intel Corp.
2.5% Johnson & Johnson
2.2% Cisco Systems, Inc.
2.2% EMC Corp.
2.1% Staples, Inc.
2.1% Home Depot, Inc.
2.1% Nokia
As a percentage of net assets on October 31, 2003.
MANAGERS'
REPORT
BY ROBERT J. UEK, CFA, AND ROBERT C. JUNKIN, CPA, PORTFOLIO MANAGERS
John Hancock
Large Cap Growth
Fund
Recently Robert Junkin joined the Fund's management team, replacing
Paul Berlinguet and Thomas Norton. Mr. Junkin, who joined John Hancock
in 2003, began his business career in 1988.
The stock market finally turned the corner, buoyed by an improving
economy, low interest rates and continued strong consumer spending.
Revenues began to stabilize in many industries, boosting cash flows
and earnings at companies that had already slashed costs. More
economically sensitive sectors, such as technology and consumer
discretionary, did especially well. Sectors less affected by the
economy's moves, including consumer staples and health care, made the
least headway. The biggest gains came from lower-quality stocks that
had been hardest hit in the market downturn. Although large-cap stocks
lagged smaller-cap stocks in the rebound, they still did quite well,
benefiting in part from the weak U.S. dollar. For the fiscal year
ended October 31, 2003, the Standard & Poor's 500 Index returned
20.79%.
"The stock market finally
turned the corner..."
PERFORMANCE AND STRATEGY REVIEW
John Hancock Large Cap Growth Fund's Class A, Class B and Class C
shares returned 17.20%, 16.42% and 16.29%, respectively, at net asset
value, for the year ended October 31, 2003. The Fund slightly trailed
the 17.75% return of the Russell Top 200 Growth Index, which tracks
the performance of the largest growth stocks, and the average
large-cap growth fund, which returned 19.03% over the same period,
according to Lipper, Inc.1 Keep in mind that your net asset value
return will be different from the Fund's if you were not invested in
the Fund for the entire period and did not reinvest all distributions.
Long-term performance information can be found on pages six and seven.
The Fund remained diversified across industries and attempted to gain
ground through strong stock selection. We targeted quality companies
with strong managements, steady or accelerating cash flows and
demonstrated earnings growth. Our focus on higher-growth names within
the index helped the Fund stay close to the return of our benchmark,
the Russell Top 200 Growth Index. Our below-average stake in
low-quality companies, however, hampered returns relative to our
Lipper peer group, as these names rebounded sharply early in the
period. We maintained our strict buy-and-sell discipline, setting
price targets in advance to determine when to move in and out of a
stock.
[Photos of Robert Uek and Robert Junkin flush right next to first paragraph.]
GAINS FROM ECONOMICALLY SENSITIVE STOCKS
Financial stocks were definite winners for the Fund. We targeted
stocks that would benefit from a stock market rebound, including firms
with strong brokerage and investment banking businesses. Our best
performers included Merrill Lynch, Charles Schwab, Goldman Sachs and
Citigroup. Stock selection in the consumer discretionary sector was
also quite strong, as many of these names benefited from solid
consumer spending. Staples, McDonald's and Home Depot gained as new
company-specific initiatives took effect, boosting their bottom lines.
Best Buy, the consumer electronics retailer, did well, as it continued
to take market share from the competition in an environment where
demand remained strong.
"Financial stocks were
definite winners for
the Fund."
Technology stocks posted the biggest gains, benefiting from renewed
investor interest as the economy improved. Both Intel and Cisco
Systems saw profit margins jump, thanks in part to earlier
cost-cutting initiatives. EMC, which makes storage systems, rallied
amid strong demand, new product rollouts and news of new acquisitions.
DISAPPOINTMENTS FROM ENERGY AND STAPLES
Energy stocks were the biggest detractors from performance. We had an
above-average stake in the sector, believing that high oil and natural
gas prices would push up stock prices. Although commodity prices
remained high and cash flows improved, earnings did not pick up as
quickly as expected. Exploration and production companies stuck with
the cost-cutting initiatives that investors had applauded, causing the
energy services stocks that we owned to languish. Consumer staples
stocks -- a group that includes grocers and beverage companies -- also
lagged the market. We had a below-average stake in what was a weak
sector, but somewhat disappointing stock selection.
[Table at top left-hand side of page entitled "Top five industry groups."
The first listing is Computers 16%, the second is Medical 16%, the third
Retail 10%, the fourth Electronics 10%, and the fifth Diversified
operations 7%.]
CHALLENGES IN HEALTH CARE
Health-care stocks, which tend to be more defensive, also hampered
returns. The large, branded pharmaceutical companies struggled with
changes in Medicare reimbursements, upcoming patent expirations, a
lack of new blockbuster products in the pipeline and the issue of U.S.
consumers re-importing drugs from Canada. We maintained a large stake
in Pfizer, believing it has fewer patent expiration issues than its
competitors and the potential for greater cost savings. Johnson &
Johnson, a diversified medical device and products company, Baxter
International, which makes blood plasma products, and HCA, a
health-services company, were all among our worst performers for the
period. We sold HCA and Baxter due to company specific issues, but
maintained a significant position in Johnson & Johnson. We also held
onto Mylan Laboratories, a generic pharmaceutical company that
benefits as more drugs come off patent.
[Pie chart at middle of page with heading "Portfolio diversification As a
percentage of net assets on 10-31-03." The chart is divided into two
sections (from top to left): Common stocks 99%, and Short-term investments
& other 1%.]
CUTS IN HEALTH CARE AND FINANCIALS
We trimmed our investment in health care, as we saw no near-term
catalysts to jumpstart prospects for the large pharmaceutical
companies. We also pared back on financials in anticipation of a
future rise in interest rates. While we're not sure exactly when
interest rates will shift direction, we do think that a lot of banks
and other financial companies have already had the better part of
their runs. We added opportunistically to investments in other
sectors, including Nokia, which makes wireless handsets. As
legislation governing wireless phone number portability goes into
effect, we expect more people to switch carriers, which should boost
demand for handsets.
[Table at top of page entitled "SCORECARD." The header for the left column
is "INVESTMENT" and the header for the right column is "PERIOD'S
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is Staples
followed by an up arrow with the phrase "Improving economy, new store
layouts." The second listing is American International Group followed by a
down arrow with the phrase "Restatement of past profitability." The third
listing is Intel followed by an up arrow with the phrase "Strong laptop
processor sales, better manufacturing efficiencies."]
POSITIVE OUTLOOK
We believe conditions are favorable for stock prices to continue to
climb. The economy has shown signs of strengthening. Interest rates
remain at historic lows. And consumer spending seems intact. The
outstanding question is whether corporate spending will pick up any
time soon. Assuming the economy continues to improve, we believe
stocks can benefit. We believe large-cap stocks have especially strong
prospects, given the recent disparity between their performance and
that of small-cap stocks. Over time, we believe investors could return
to large-cap stocks, which continue to offer attractive valuations and
higher dividend yields than smaller-company stocks. In addition,
large-cap stocks are the biggest beneficiaries of strengthening
overseas economies and a weak U.S. dollar. In the coming months, we
plan to maintain the Fund's bias toward economically sensitive
companies.
"We believe large-cap stocks
have especially strong
prospects, given the recent
disparity between their
performance and that of
small-cap stocks."
This commentary reflects the views of the portfolio managers through
the end of the Fund's period discussed in this report. The managers'
statements reflect their own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not
take into account sales charges. Actual load-adjusted performance is
lower.
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2003
Class A Class B Class C
Inception date 12-24-68 1-3-94 6-1-98
Average annual returns with maximum sales charge (POP)
One year 11.32% 11.42% 14.07%
Five years -11.78% -11.75% -11.67%
Ten years -0.52% -- --
Since inception -- -0.34% -10.87%
Cumulative total returns with maximum sales charge (POP)
One year 11.32% 11.42% 14.07%
Five years -46.56% -46.47% -46.24%
Ten years -5.04% -- --
Since inception -- -3.33% -46.39%
Performance figures assume all distributions are reinvested. Returns
with maximum sales charge reflect a sales charge on Class A shares of
5% and Class C shares of 1%, and the applicable contingent deferred
sales charge (CDSC) on Class B and Class C shares. The Class B shares'
CDSC declines annually between years 1-6 according to the following
schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after
the sixth year. Class C shares held for less than one year are subject
to a 1% CDSC. The return and principal value of an investment in the
Fund will fluctuate, so that shares, when redeemed, may be worth more
or less than the original cost.
The returns reflect past results and should not be considered
indicative of future performance. The performance table above and the
chart on the next page do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
The Fund's performance results reflect any applicable expense
reductions, without which the expenses would increase and results
would have been less favorable. These reductions can be terminated in
the future. See the prospectus for details.
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown
the same investment in the Russell Top 200 Growth Index.
Line chart with the heading "GROWTH OF $10,000." Within the chart are three
lines. The first line represents the Russell Top 200 Growth Index and is
equal to $24,203 as of October 31, 2003. The second line represents the
value of the hypothetical $10,000 investment made in the John Hancock Large
Cap Growth Fund, before sales charge, and is equal to $9,997 as of October
31, 2003. The third line represents the value of the same hypothetical
$10,000 investment made in the John Hancock Large Cap Growth Fund, after
sales charge, and is equal to $9,496 as of October 31, 2003.
Cum Value of $10K Cum Value of $10K Russell Top 200
Plot Date (No Load) (w/Load) Growth Index
10/31/1993 $10,000 $9,500 $10,000
4/30/1994 9,066 8,612 9,658
10/31/1994 9,358 8,889 10,670
4/30/1995 9,938 9,440 11,840
10/31/1995 11,784 11,193 14,032
4/30/1996 13,248 12,584 15,630
10/31/1996 13,949 13,249 17,374
4/30/1997 13,896 13,199 20,354
10/31/1997 16,187 15,375 23,115
4/30/1998 18,516 17,588 29,008
10/31/1998 17,774 16,883 30,474
4/30/1999 22,105 20,996 37,907
10/31/1999 22,675 21,538 40,663
4/30/2000 23,891 22,693 46,557
10/31/2000 20,827 19,782 42,324
4/30/2001 13,665 12,980 31,274
10/31/2001 10,878 10,332 25,673
4/30/2002 10,846 10,302 24,650
10/31/2002 8,530 8,102 20,556
4/30/2003 8,635 8,202 21,242
10/31/2003 $9,997 $9,496 $24,203
Class B 1 Class C 1
Period beginning 1-3-94 6-1-98
Without sales charge $9,667 $5,416
With maximum sales charge $9,667 $5,361
Index $24,004 $8,580
Assuming all distributions were reinvested for the period indicated,
the table above shows the value of a $10,000 investment in the Fund's
Class B and Class C shares, respectively, as of October 31, 2003.
Performance of the classes will vary based on the difference in sales
charges paid by shareholders investing in the different classes and
the fee structure of those classes.
Russell Top 200 Growth Index is an unmanaged index containing growth-
oriented stocks from the Russell Top 200 Index.
It is not possible to invest directly in an index. Index figures do
not reflect sales charges and would be lower if they did.
1 No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2003
This schedule is divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by
industry group. Short-term investments, which represent the Fund's
cash position, are listed last.
SHARES ISSUER VALUE
COMMON STOCKS 98.52% $198,567,122
(Cost $159,341,685)
Advertising 1.11% 2,234,400
28,000 Omnicom Group, Inc. 2,234,400
Automobiles/Trucks 0.78% 1,575,500
50,000 CarMax, Inc.* 1,575,500
Banks -- United States 1.08% 2,173,600
20,000 State Street Corp. 1,047,200
20,000 Wells Fargo & Co. 1,126,400
Beverages 2.61% 5,255,029
50,163 Anheuser-Busch Cos., Inc. 2,471,029
60,000 Coca-Cola Co. (The) 2,784,000
Broker Services 2.62% 5,273,990
34,100 Goldman Sachs Group, Inc. (The)+ 3,201,990
35,000 Merrill Lynch & Co., Inc.+ 2,072,000
Computers 16.45% 33,147,280
45,700 Accenture Ltd. (Class A) (Bermuda)*+ 1,069,380
60,000 Affiliated Computer Services, Inc.*+ 2,935,800
194,500 BEA Systems, Inc.*+ 2,703,550
214,500 Cisco Systems, Inc.* 4,500,210
100,000 Dell, Inc.* 3,612,000
325,000 EMC Corp.*+ 4,498,000
15,000 Lexmark International, Inc.* 1,104,150
282,200 Microsoft Corp. 7,379,530
160,000 Oracle Corp.* 1,913,600
64,000 SAP AG, American Depositary Receipt (ADR) (Germany)+ 2,338,560
25,000 Yahoo! Inc.*+ 1,092,500
Consumer Products Misc. 0.83% 1,676,100
37,000 Clorox Co. (The) 1,676,100
Cosmetics & Personal Care 3.98% 8,029,450
20,000 Avon Products, Inc. 1,359,200
30,000 Colgate-Palmolive Co. 1,595,700
70,000 Estee Lauder Cos., Inc. (The) (Class A) 2,617,300
25,000 Procter & Gamble Co. (The) 2,457,250
Diversified Operations 7.11% 14,322,629
40,000 3M Co. 3,154,800
120,000 Cendant Corp.* 2,451,600
300,456 General Electric Co.+ 8,716,229
Electronics 10.00% 20,159,160
25,000 Analog Devices, Inc.* 1,108,250
100,000 Applied Materials, Inc.*+ 2,337,000
100,000 ASML Holding N.V. (NY Reg Shares) (Netherlands)* 1,755,000
40,000 Emerson Electric Co. 2,270,000
192,000 Flextronics International Ltd. (Singapore)*+ 2,688,000
169,000 Intel Corp. 5,585,450
70,000 Intersil Corp. (Class A) 1,805,300
236,000 Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) (Taiwan)* 2,610,160
Fiber Optics 0.88% 1,775,000
500,000 JDS Uniphase Corp.*+ 1,775,000
Finance 4.23% 8,535,050
25,000 American Express Co. 1,173,250
32,000 Capital One Financial Corp. 1,945,600
65,000 Citigroup, Inc. 3,081,000
60,000 Paychex, Inc. 2,335,200
Insurance 2.35% 4,737,740
20,000 American International Group, Inc. 1,216,600
30,000 Radian Group, Inc. 1,587,000
43,000 RenaissanceRe Holdings Ltd. (Bermuda) 1,934,140
Leisure 1.46% 2,947,500
90,000 International Game Technology+ 2,947,500
Linen Supply & Related 0.64% 1,279,800
30,000 Cintas Corp. 1,279,800
Media 5.47% 11,024,600
40,000 Clear Channel Communications, Inc. 1,632,800
102,500 Comcast Corp. (Special Class A)*+ 3,343,550
200,000 Time Warner, Inc.* 3,058,000
75,000 Viacom, Inc. (Class B)* 2,990,250
Medical 15.91% 32,059,118
40,000 Abbott Laboratories 1,704,800
50,000 Amgen, Inc.* 3,088,000
20,000 Biogen Idec, Inc.* 702,600
45,000 Forest Laboratories, Inc.* 2,250,450
100,017 Johnson & Johnson 5,033,856
64,776 Medtronic, Inc. 2,951,842
25,000 Merck & Co., Inc. 1,106,250
50,000 Millennium Pharmaceuticals, Inc.* 796,000
93,750 Mylan Laboratories, Inc. 2,264,062
206,561 Pfizer, Inc. 6,527,328
36,000 UnitedHealth Group, Inc. 1,831,680
50,000 Wyeth 2,207,000
25,000 Zimmer Holdings, Inc.* 1,595,250
Mortgage Banking 1.30% 2,628,000
25,000 Countrywide Financial Corp. 2,628,000
Oil & Gas 3.63% 7,319,100
30,000 Apache Corp. 2,091,600
75,000 BJ Services Co.*+ 2,460,750
105,000 ENSCO International, Inc. 2,766,750
Retail 10.12% 20,400,376
40,000 Best Buy Co., Inc.* 2,332,400
50,000 Costco Wholesale Corp.* 1,768,500
115,000 Home Depot, Inc. (The) 4,263,050
95,000 McDonald's Corp. 2,375,950
160,400 Staples, Inc.*+ 4,301,928
45,000 Target Corp. 1,788,300
60,564 Wal-Mart Stores, Inc. 3,570,248
Telecommunications 5.96% 12,013,700
150,000 AT&T Wireless Services, Inc.* 1,087,500
180,000 General Motors Corp. (Class H)* 2,957,400
125,000 Motorola, Inc. 1,691,250
245,000 Nokia Oyj (ADR) (Finland) 4,162,550
100,000 Vodafone Group Plc (ADR) (United Kingdom) 2,115,000
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 18.74% $37,775,900
(Cost $37,775,900)
Joint Repurchase Agreement 0.87%
Investment in a joint repurchase agreement transaction with
Barclays Capital, Inc. -- Dated 10-31-03, due 11-03-03
(Secured by U.S. Treasury Inflation Indexed Bond 3.625%
due 04-15-28, U.S. Treasury Inflation Indexed Note 1.875%
due 07-15-13) 1.02% $1,748 1,748,000
SHARES
Cash Equivalents 17.87%
AIM Cash Investment Trust** 36,027,900 36,027,900
TOTAL INVESTMENTS 117.26% $236,343,022
OTHER ASSETS AND LIABILITIES, NET (17.26%) ($34,791,985)
TOTAL NET ASSETS 100.00% $201,551,037
+ All or a portion of this security is on loan as of October 31, 2003.
* Non-income-producing security.
** Represents investment of security lending collateral.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
The percentage shown for each investment category is the total of that
category as a percentage of the net assets of the Fund.
See notes to
financial statements.
ASSETS AND
LIABILITIES
October 31, 2003
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.
ASSETS
Investments at value (cost $197,117,585),
including $35,518,735 of securities loaned $236,343,022
Cash 151
Receivable for investments sold 5,464,815
Receivable for shares sold 12,600
Dividends and interest receivable 139,841
Other assets 39,367
Total assets 241,999,796
LIABILITIES
Payable for investments purchased 3,899,037
Payable for shares repurchased 174,998
Payable for securities on loan 36,027,900
Payable to affiliates
Management fee 127,821
Distribution and service fee 8,074
Other 118,239
Other payables and accrued expenses 92,690
Total liabilities 40,448,759
NET ASSETS
Capital paid-in 434,633,232
Accumulated net realized loss on investments
and written options (272,278,932)
Net unrealized appreciation of investments 39,225,437
Accumulated net investment loss (28,700)
Net assets $201,551,037
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($147,607,255 [DIV] 15,473,703 shares) $9.54
Class B ($50,420,669 [DIV] 5,783,851 shares) $8.72
Class C ($3,523,113 [DIV] 404,371 shares) $8.71
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($9.54 [DIV] 95%) $10.04
Class C ($8.71 [DIV] 99%) $8.80
1 On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
See notes to
financial statements.
OPERATIONS
For the year ended
October 31, 2003
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat-
ing the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $11,252) $1,871,493
Securities lending 52,147
Interest 42,202
Total investment income 1,965,842
EXPENSES
Investment management fee 1,418,015
Class A distribution and service fee 412,765
Class B distribution and service fee 483,937
Class C distribution and service fee 30,864
Transfer agent fee 1,273,227
Accounting and legal services fee 68,290
Custodian fee 51,596
Registration and filing fee 42,987
Printing 41,966
Auditing fee 36,700
Miscellaneous 14,399
Trustees' fee 11,685
Interest 7,041
Legal fee 3,306
Total expenses 3,896,778
Less expense reductions (15,799)
Net expenses 3,880,979
Net investment loss (1,915,137)
REALIZED AND UNREALIZED GAIN
Net realized gain on
Investments 2,429,768
Written options 272,877
Change in unrealized appreciation
(depreciation) of investments 28,948,933
Net realized and unrealized gain 31,651,578
Increase in net assets from operations $29,736,441
See notes to
financial statements.
CHANGES IN
NET ASSETS
These Statements
of Changes in
Net Assets show
how the value
of the Fund's
net assets has
changed during
the last two
periods. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses,
distributions, if
any, paid to
shareholders and
any increase or
decrease in
money share-
holders invested
in the Fund.
YEAR YEAR
ENDED ENDED
10-31-02 1 10-31-03
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($3,115,869) ($1,915,137)
Net realized gain (loss) (53,440,499) 2,702,645
Change in net unrealized
appreciation (depreciation) (984,611) 28,948,933
Increase (decrease) in net assets
resulting from operations (57,540,979) 29,736,441
From Fund share transactions (48,397,414) (22,118,554)
NET ASSETS
Beginning of period 299,871,543 193,933,150
End of period 2 $193,933,150 $201,551,037
1 Audited by previous auditor.
2 Includes accumulated net investment loss of $28,479 and $28,700,
respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a
share has changed since the end of the previous period.
PERIOD ENDED 10-31-99 1 10-31-00 1 10-31-01 1 10-31-02 1 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $22.27 $25.04 $20.73 $10.38 $8.14
Net investment loss 2 (0.17) (0.23) (0.13) (0.10) (0.07)
Net realized and unrealized
gain (loss) on investments 5.65 (1.48) (9.42) (2.14) 1.47
Total from
investment operations 5.48 (1.71) (9.55) (2.24) 1.40
Less distributions
From net realized gain (2.71) (2.60) (0.80) -- --
Net asset value,
end of period $25.04 $20.73 $10.38 $8.14 $9.54
Total return 3 (%) 27.58 (8.15) (47.77) (21.58) 17.20 4
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $484 $421 $209 $140 $148
Ratio of expenses
to average net assets (%) 1.35 1.36 1.59 1.75 1.86
Ratio of adjusted expenses
to average net assets 5 (%) -- -- -- -- 1.87
Ratio of net investment loss
to average net assets (%) (0.70) (0.97) (0.99) (0.96) (0.82)
Portfolio turnover (%) 183 162 131 228 121
See notes to
financial statements.
FINANCIAL HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-99 1 10-31-00 1 10-31-01 1 10-31-02 1 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $21.38 $23.74 $19.40 $9.62 $7.49
Net investment loss 2 (0.31) (0.37) (0.21) (0.15) (0.12)
Net realized and unrealized
gain (loss) on investments 5.38 (1.37) (8.77) (1.98) 1.35
Total from
investment operations 5.07 (1.74) (8.98) (2.13) 1.23
Less distributions
From net realized gain (2.71) (2.60) (0.80) -- --
Net asset value,
end of period $23.74 $19.40 $9.62 $7.49 $8.72
Total return 3 (%) 26.70 (8.79) (48.12) (22.14) 16.42 4
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $312 $239 $88 $51 $50
Ratio of expenses
to average net assets (%) 2.02 2.05 2.24 2.45 2.56
Ratio of adjusted expenses
to average net assets 5 (%) -- -- -- -- 2.57
Ratio of net investment loss
to average net assets (%) (1.37) (1.66) (1.65) (1.66) (1.52)
Portfolio turnover (%) 183 162 131 228 121
See notes to
financial statements.
FINANCIAL HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-99 1 10-31-00 1 10-31-01 1 10-31-02 1 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $21.37 $23.73 $19.39 $9.61 $7.49
Net investment loss 2 (0.31) (0.37) (0.20) (0.15) (0.12)
Net realized and unrealized
gain (loss) on investments 5.38 (1.37) (8.78) (1.97) 1.34
Total from
investment operations 5.07 (1.74) (8.98) (2.12) 1.22
Less distributions
From net realized gain (2.71) (2.60) (0.80) -- --
Net asset value,
end of period $23.73 $19.39 $9.61 $7.49 $8.71
Total return 3 (%) 26.72 (8.80) (48.15) (22.06) 16.29 4
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1 $3 $4 $3 $4
Ratio of expenses
to average net assets (%) 2.05 2.06 2.29 2.45 2.56
Ratio of adjusted expenses
to average net assets 5 (%) -- -- -- -- 2.57
Ratio of net investment loss
to average net assets (%) (1.36) (1.71) (1.68) (1.66) (1.53)
Portfolio turnover (%) 183 162 131 228 121
1 Audited by previous auditor.
2 Based on the average of the shares outstanding.
3 Assumes dividend reinvestment and does not reflect the effect of
sales charges.
4 Total return would have been lower had certain expenses not been
reduced during the period shown.
5 Does not take into consideration expense reductions during the period shown.
See notes to
financial statements.
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock Large Cap Growth Fund (the "Fund") is a diversified
series of John Hancock Investment Trust III, an open-end management
investment company registered under the Investment Company Act of
1940. The investment objective of the Fund is to achieve long-term
capital appreciation.
The Trustees have authorized the issuance of multiple classes of
shares of the Fund, designated as Class A, Class B and Class C. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights as to voting,
redemptions, dividends and liquidation, except that certain expenses,
subject to the approval of the Trustees, may be applied differently to
each class of shares in accordance with current regulations of the
Securities and Exchange Commission and the Internal Revenue Service.
Shareholders of a class that bears distribution and service expenses
under the terms of a distribution plan have exclusive voting rights to
that distribution plan.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within
60 days are valued at amortized cost, which approximates market value.
Investments in AIM Cash Investment Trust are valued at their net asset
value each business day.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
LLC, may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Fund's custodian bank receives
delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares
based on the appropriate net asset value of the respective classes.
Distribution and service fees, if any, are calculated daily at the class
level based on the appropriate net asset value of each class and the
specific expense rate(s) applicable to each class.
Expenses
The majority of expenses are directly identifiable to an individual fund.
Expenses that are not readily identifiable to a specific fund are allocated
in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
funds.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. The
Fund has entered into a syndicated line of credit agreement with
various banks. This agreement enables the Fund to participate with
other funds managed by the Adviser in an unsecured line of credit with
banks, which permits borrowings of up to $250 million, collectively.
Interest is charged to each fund, based on its borrowing. In addition,
a commitment fee is charged to each fund based on the average daily
unused portion of the line of credit and is allocated among the
participating funds. The Fund had no borrowing activity under the line
of credit during the year ended October 31, 2003.
Options
The Fund may enter into option contracts. Listed options will be
valued at the last quoted sales price on the exchange on which they
are primarily traded. Over-the-counter options are valued at the mean
between the last bid and asked prices. Upon the writing of a call or
put option, an amount equal to the premium received by the Fund will
be included in the Fund's Statement of Assets and Liabilities as an
asset and corresponding liability. The amount of the liability will be
subsequently marked to market to reflect the current market value of
the written option.
The Fund may use option contracts to manage its exposure to the price
volatility of financial instruments. Writing puts and buying calls
will tend to increase the Fund's exposure to the underlying
instrument, and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited
to the premium initially paid for the option. In all other cases, the
face (or "notional") amount of each contract at value will reflect the
maximum exposure of the Fund in these contracts, but the actual
exposure will be limited to the change in value of the contract over
the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms ("credit risk") or if the Fund is unable to offset a
contract with a counterparty on a timely basis ("liquidity risk").
Exchange-traded options have minimal credit risk, as the exchanges act
as counterparties to each transaction and only present liquidity risk
in highly unusual market conditions. To minimize credit and liquidity
risks in over-the-counter option contracts, the Fund will continuously
monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's
Statement of Assets and Liabilities. The Fund had no open written
option positions on October 31, 2003.
Written options for the year ended October 31, 2003 were as follows:
NUMBER OF CONTRACTS PREMIUMS
- -------------------------------------------------------------------
Outstanding, beginning of period -- --
Options written 1,830 $330,332
Option closed (1,100) (205,691)
Options expired (730) (124,641)
Outstanding, end of period -- --
Securities lending
The Fund may lend securities to certain qualified brokers who pay the
Fund negotiated lender fees. The loans are collateralized at all times
with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Fund may bear the risk of delay of the loaned securities
in recovery or even loss of rights in the collateral, should the
borrower of the securities fail financially. At October 31, 2003, the
Fund loaned securities having a market value of $35,518,735
collateralized by cash in the amount of $36,027,900. The cash
collateral was invested in a short-term instrument.
Federal income taxes
The Fund qualifies 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. There fore, no federal income tax
provision is required. For federal income tax purposes, the Fund has
$271,450,368 of a capital loss carryforward available, to the extent
provided by regulations, to offset future net realized capital gains.
To the extent that such carryforward is used by the Fund, no capital
gain distributions will be made. The loss carryforward expires as
follows: October 31, 2009 -- $216,254,383 and October 31, 2010 --
$55,195,985.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the
ex-dividend date or, in the case of some foreign securities, on the
date thereafter when the Fund identifies the dividend. Interest income
on investment securities is recorded on the accrual basis. Foreign
income may be subject to foreign withholding taxes, which are accrued
as applicable.
The Fund records distributions to shareholders from net investment
income and net realized gains on the ex-dividend date. Distributions
paid by the Fund with respect to each class of shares are calculated
in the same manner, at the same time and are in the same amount,
except for the effect of expenses that may be applied differently to
each class.
As of October 31, 2003, the Fund had no distributable earning on a tax
basis. Such distributions and distributable earnings, on a tax basis,
are determined in conformity with income tax regulations, which may
differ from accounting principles generally accepted in the United
States of America. Distributions in excess of tax basis earnings and
profits, if any, are reported in the Fund's financial statements as a
return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.75% of the first $750,000,000 of the Fund's average daily net asset
value and (b) 0.70% of the Fund's average daily net asset value in
excess of $750,000,000.
The Fund has an agreement with its custodian bank under which custody
fees are reduced by brokerage commissions offsets applied during the
period. Accordingly, the expense reductions related to custody fee
offsets amounted to $15,799, or 0.01% of the Fund's average net asset
value, for the year ended October 31, 2003.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH
Funds"), a wholly owned subsidiary of the Adviser. The Fund has
adopted Distribution Plans with respect to Class A, Class B and Class
C pursuant to Rule 12b-1 under the Investment Company Act of 1940 to
reimburse JH Funds for the services it provides as distributor of
shares of the Fund. Accordingly, the Fund makes monthly payments to JH
Funds at an annual rate not to exceed 0.30% of Class A average daily
net asset value and 1.00% of Class B and Class C average daily net
asset value. A maximum of 0.25% of such payments may be service fees
as defined by the Conduct Rules of the National Association of
Securities Dealers. Under the Conduct Rules, curtailment of a portion
of the Fund's 12b-1 payments could occur under certain circumstances.
Class A and Class C shares are assessed up-front sales charges. During
the year ended October 31, 2003, JH Funds received net up-front sales
charges of $115,505 with regard to sales of Class A shares. Of this
amount, $15,970 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $56,217 was paid as
sales commissions to unrelated broker-dealers and $43,318 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's
indirect parent, John Hancock Life Insurance Company ("JHLICo"), is
the indirect sole shareholder of Signator Investors. During the year
ended October 31, 2003, JH Funds received net up-front sales charges
of $5,707 with regard to sales of Class C shares. Of this amount,
$4,407 was paid as sales commissions to unrelated broker-dealers and
$1,300 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares that are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates, beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares
being redeemed. Class C shares that are redeemed within one year of
purchase are subject to a CDSC at a rate of 1.00% of the lesser of the
current market value at the time of redemption or the original
purchase cost of the shares being redeemed. Proceeds from the CDSCs
are paid to JH Funds and are used in whole or in part to defray its
expenses for providing distribution related services to the Fund in
connection with the sale of Class B and Class C shares. During the
year ended October 31, 2003, CDSCs received by JH Funds amounted to
$105,171 for Class B shares and $783 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect subsidiary of JHLICo. Effective January 1,
2003, the Fund pays a monthly transfer agent fee at an annual rate of
0.05% of the average daily net asset value, plus a fee based on the
number of shareholder accounts and reimbursement for certain
out-of-pocket expenses. Until January 1, 2003, the Fund paid a monthly
transfer agent fee based on the number of shareholder accounts, plus
certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
year was at an annual rate of approximately 0.04% of the average net
asset value of the Fund.
Ms. Maureen Ford Goldfarb and Mr. John M. DeCiccio are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of the
Fund. The compensation of unaffiliated Trustees is borne by the Fund. The
unaffiliated Trustees may elect to defer for tax purposes their receipt of
this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock
funds, as applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are
recorded on the Fund's books as an other asset. The deferred compensation
liability and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the investments
as well as any unrealized gains or losses. The Deferred Compensation Plan
investments had no impact on the operations of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of Fund shares sold and
repurchased during the last two periods, along with the corresponding
dollar value. The Fund has an unlimited number of shares authorized
with no par value.
YEAR ENDED 10-31-02 1 YEAR ENDED 10-31-03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 1,947,091 $19,544,311 1,307,717 $11,137,303
Repurchased (4,847,316) (47,395,047) (3,054,320) (25,747,820)
Net decrease (2,900,225) ($27,850,736) (1,746,603) ($14,610,517)
CLASS B SHARES
Sold 1,608,344 $15,305,021 1,154,106 $8,948,550
Repurchased (3,934,461) (36,201,222) (2,151,843) (16,592,814)
Net decrease (2,326,117) ($20,896,201) (997,737) ($7,644,264)
CLASS C SHARES
Sold 151,406 $1,482,455 118,376 $923,718
Repurchased (128,882) (1,132,932) (102,019) (787,491)
Net increase 22,524 $349,523 16,357 $136,227
NET DECREASE (5,203,818) ($48,397,414) (2,727,983) ($22,118,554)
1 Audited by previous auditor.
NOTE D
Investment transactions
Purchases and proceeds from sales or maturities of securities other
than short-term securities and obligations of the U.S. government,
during the year ended October 31, 2003, aggregated $225,340,535 and
$241,341,627, respectively.
The cost of investments owned on October 31, 2003, including
short-term investments, for federal income tax purposes was
$197,946,148. Gross unrealized appreciation and depreciation of
investments aggregated $41,300,207 and $2,903,333, respectively,
resulting in net unrealized appreciation of $38,396,874. The
difference between book basis and tax basis net unrealized
appreciation of investments is attributable primarily to the tax
deferral of losses on certain sales of securities.
NOTE E
Reclassification of accounts
During the year ended October 31, 2003, the Fund reclassified amounts
to reflect a decrease in accumulated net realized loss on investments
of $198, a decrease in accumulated net investment loss of $1,914,916
and a decrease in capital paid-in of $1,915,114. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary differences, as of October 31, 2003. Additional
adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the
Fund, are primarily attributable to certain differences in the
computation of distributable income and capital gains under federal
tax rules versus accounting principles generally accepted in the
United States of America, and book and tax differences in accounting
for deferred compensation. The calculation of net investment loss per
share in the Fund's Financial Highlights excludes these adjustments.
NOTE F
Change in Independent Auditor
Based on the recommendation of the Audit Committee of the Fund, the
Board of Trustees has determined not to retain Ernst & Young LLP as
the Fund's independent auditor and voted to appoint
PricewaterhouseCoopers LLP for the fiscal year ended October 31, 2003.
During the two most recent fiscal years, Ernst & Young LLP's audit
reports contained no adverse opinion or disclaimer of opinion; nor
were their reports qualified as to uncertainty, audit scope, or
accounting principles. Further, there were no disagreements between
the Fund and Ernst & Young LLP on accounting principles, financial
statements disclosure or audit scope, which if not resolved to the
satisfaction of Ernst & Young LLP would have caused them to make
reference to the disagreement in their report.
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent
Auditors
To the Board of Trustees and Shareholders of
John Hancock Large Cap Growth Fund,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
the John Hancock Large Cap Growth Fund (the "Fund") at October 31,
2003, the results of its operations, the changes in its net assets and
the financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which
included confirmation of securities owned at October 31, 2003, by
correspondence with the custodian and brokers, provides a reasonable
basis for our opinion. The statement of changes in net assets of the
Fund for the year ended October 31, 2002, and the financial highlights
for each of the periods ended on or before October 31, 2002, were
audited by other independent auditors, whose report dated December 11,
2002, expressed an unqualified opinion thereon.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 15, 2003
TAX
INFORMATION
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, 2003.
The fund hereby designates 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. This amount will be
reflected on Form 1099-DIV for the calendar year 2003.
Shareholders will be mailed a 2003 U.S. Treasury Department Form
1099-DIV in January 2004. This will reflect the total of all
distributions that are taxable for the calendar year 2003.
TRUSTEES
& OFFICERS
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
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Dennis S. Aronowitz, Born: 1931 1988 21
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp (since 1998).
Richard P. Chapman, Jr., Born: 1935 1978 21
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Director, Lumber Insurance Co. (insurance) (until 2000);
Chairman and Director, Northeast Retirement Services, Inc. (retirement
administration) (since 1998).
William J. Cosgrove, Born: 1933 1991 21
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc. (financial reinsurance); Trustee, Hudson City Savings Bank (since 1995);
Director, Hudson City Bancorp (since 1999); Trustee, Scholarship Fund for
Inner City Children (since 1986).
Richard A. Farrell, Born: 1932 1996 21
President, Farrell, Healer & Co., Inc. (venture capital management firm)
(since 1980) and President, the Venture Capital Fund of NE (since 1980);
prior to 1980, headed the venture capital group at Bank of Boston Corporation;
Trustee, Marblehead Savings Bank (since 1994).
William F. Glavin, 2 Born: 1932 1996 21
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
John A. Moore, 2 Born: 1939 1996 29
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (since 1998); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson, 2 Born: 1943 1996 29
Executive Director, Council for International Exchange of Scholars (since
1998); Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1997); President Emerita of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (electric utility).
John W. Pratt, Born: 1931 1996 21
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 51
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC (Subsidiaries, LLC), Hancock
Natural Resource Group, Independence Investment LLC, Declaration
Management Research LLC, John Hancock Advisers, LLC (the "Adviser"),
The Berkeley Financial Group, LLC ("The Berkeley Group"), John Hancock
Funds, LLC ("John Hancock Funds") and Massachusetts Business Development
Corporation; Director, John Hancock Insurance Agency, Inc. ("Insurance
Agency, Inc.") (until 1999).
Maureen Ford Goldfarb, Born: 1955 2000 51
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director, President and Chief Executive Officer, John Hancock Funds;
Chairman, Director, President and Chief Executive Officer, Sovereign Asset
Management Corporation ("SAMCorp."); Director, Independence
Investment LLC, Subsidiaries, LLC and Signature Services; Senior Vice
President, MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1992
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1988
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each of
the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 1984
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes
additional information about members of the Board of Trustees of the
Fund and is available, without charge, upon request, by calling
1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his
or her successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment
adviser, underwriter and certain other affiliates.
FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
125 High Street
Boston, Massachusetts 02110
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service
representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
The Fund's voting policies and procedures are available without
charge, upon request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhancock.com/funds/edelivery
This report is for the information of
the shareholders of the John Hancock
Large Cap Growth Fund.
2000A 10/03
12/03
John Hancock
Mid Cap
Growth
Fund
ANNUAL
REPORT
10.31.03
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen Ford Goldfarb, Chairman and Chief Executive Officer,
flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Fund's investments
page 8
Financial statements
page 11
Trustees & officers
page 26
For your information
page 29
Dear Fellow Shareholders,
The stock market has made a strong recovery in 2003. Historically low
interest rates, improving corporate earnings and government stimulus
in the form of tax cuts gave investors hope that the economy would
begin to strengthen, which it did. The market's move up began in April
and the breadth of the rally was enormous. As a result, the major
indexes were able to wipe out their first-quarter losses and post
solid gains year-to-date through October 31. With technology leading
the way, the tech-heavy Nasdaq Composite Index rose 45.22% through
October, while the Dow Jones Industrial Average was up 19.82% and the
Standard & Poor's 500 Index returned 21.19%. With falling interest
rates, bonds also did well, although they began to reverse course in
July. High yield bonds led the pack, returning 24.23% through October,
as measured by the Lehman Brothers High Yield Index.
In other news, we are pleased to inform you that on September 28,
2003, the Boards of Directors of Canada-based Manulife Financial
Corporation and Boston-based John Hancock Financial Services, Inc.,
the parent company of John Hancock Funds, unanimously voted to merge
the two companies.
Please be assured that the completion of the merger -- anticipated to
occur in the first half of 2004 -- will have no effect on your
investment in our John Hancock mutual funds. Your fund's adviser and
board of trustees will remain the same, as will your relationship with
your financial adviser.
The merger is subject to customary closing conditions, including
receipt of required regulatory approvals and approval by John Hancock
stockholders. If you only own shares in a John Hancock mutual fund you
are not affected and will not receive a proxy.
Additional information on this transaction is available on our Web
site: www.jhfunds.com. If you have questions about the merger, you may
also call 800-732-5543. Separately, for information about your
investments in John Hancock funds, please contact your financial
adviser or our Customer Service representatives at 800-225-5291.
Sincerely,
/S/ MAUREEN FORD GOLDFARB
Maureen Ford Goldfarb,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of October 31, 2003.
They are subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
long-term capital
appreciation by
investing at least
80% of its assets
in stocks of
medium capital
ization companies
(in the capitaliza-
tion range of the
Russell Midcap
Growth Index).
Over the past twelve months
* Stocks staged a major recovery in anticipation of improved revenues
and earnings.
* Economically sensitive technology and consumer discretionary stocks,
as well as small-cap companies, were among the year's top performers.
* Mid-cap stocks did nearly as well as small-cap names during the
market rebound and handily beat large-cap stocks.
[Bar chart with heading "John Hancock Mid Cap Growth Fund." Under the
heading is a note that reads "Fund performance for the year ended October
31, 2003." The chart is scaled in increments of 10% with 0% at the bottom
and 40% at the top. The first bar represents the 30.29% total return for
Class A. The second bar represents the 29.43% total return for Class B. The
third bar represents the 29.22% total return for Class C. The fourth bar
represents the 31.18% total return for Class I. A note below the chart
reads "Total returns for the Fund are at net asset value with all
distributions reinvested.]
Top 10 holdings
2.7% Symantec Corp.
2.4% Axcelis Technologies, Inc.
2.4% Zimmer Holdings, Inc.
2.3% BEA Systems, Inc.
2.3% Yankee Candle Co, Inc. (The)
2.3% Omnicom Group, Inc.
2.1% Pactiv Corp.
2.1% Intuit, Inc.
2.0% Microchip Technology, Inc.
2.0% Affiliated Computer Services, Inc.
As a percentage of net assets on October 31, 2003.
MANAGERS'
REPORT
BY THOMAS P. NORTON, CFA, AND ROBERT J. UEK, CFA, PORTFOLIO MANAGERS
John Hancock
Mid Cap Growth Fund
Recently, Paul Berlinguet, formerly a member of the Fund's management
team, left the company.
Stocks made a long-awaited comeback this past year. After a strong
start last fall, the market retreated in the months leading up to the
war with Iraq. The swift end of major military conflict, coupled with
strong consumer spending, low interest rates and increased money
supply, led to an improved economic environment. As business
conditions picked up, corporate earnings and stock prices moved
higher. For the year, the biggest gains came from companies that had
been the hardest hit in the downturn, including lower-quality,
smaller-cap stocks. Mid-cap growth stocks fared almost as well as
small-cap stocks and much better than large-cap stocks, with the
Russell Midcap Growth Index returning 39.30% for the year ended
October 31, 2003.
"Stocks made a long-
awaited comeback this
past year."
PERFORMANCE REVIEW
John Hancock Mid Cap Growth Fund remained broadly diversified across
industries with a bias toward mid-cap companies that would benefit from an
economic recovery. Our focus was on solid, well-run companies with strong
earnings growth prospects which were selling at reasonable valuations. We
maintained a disciplined approach, setting price targets in advance to
determine when to buy or sell a particular stock.
For the year ended October 31, 2003, the Fund's Class A, Class B,
Class C shares and Class I shares returned 30.29%, 29.43%, 29.22% and
31.18%, respectively, at net asset value. The Fund trailed its
benchmark, the Russell Midcap Growth Index, in part because of our
focus on higher-quality companies. Strong stock selection, however,
helped us keep pace with the average mid-cap growth fund, which
returned 30.87%, according to Lipper, Inc. 1 Keep in mind that your
net asset value will be different from the Fund's if you were not
invested in the Fund for the entire period and did not reinvest all
distributions. Long-term performance information can be found on pages
six and seven.
[Photos of Thomas Norton and Robert Uek flush right next to first
paragraph.]
STRENGTH IN INDUSTRIALS AND MATERIALS
The Fund benefited from above-average stock returns in the industrial
sector. JetBlue Airways, a discount airline, gained handsomely as
expansion into new markets, continued strength from its existing
routes, an attractive cost structure and an experienced management
team attracted investor interest. We sold our stake as the stock
approached full valuation.
Our stock selection in the materials sector was also very strong. Top
performers included Sealed Air, which makes specialty packaging, such
as the bubble wrap used for shipping consumer electronic products, and
Crown Holdings, which makes cans for beverages. When Sealed Air
reached our price target, we eliminated it from the portfolio. We also
had superior stock selection in the financial area, where companies
such as Legg Mason, an asset manager and brokerage firm, benefited
from the market rebound. We later sold our investment in Legg Mason.
TECHNOLOGY AND CONSUMER WINNERS
Economically sensitive technology stocks generated some of the Fund's
biggest absolute gains. Symantec, which makes Norton anti-virus
software, had a great run, thanks in part to increased demand and
strong pricing power in the aftermath of the worm virus. BEA Systems
benefited from its leadership position in the growing application
server software market, while Jabil Circuit, an electronic
manufacturing services company, gained as companies continued to find
outsourcing cheaper than in-house production. Our slightly
below-average stake in the technology sector, however, hampered
performance relative to our Russell benchmark.
"Economically sensitive
technology stocks gener
ated some of the Fund's
biggest absolute gains."
Consumer discretionary stocks, which benefit from strong consumer
spending, were also top contributors to performance. Coach, a leather
goods company, rallied amid growing same-store sales, new store
openings and successful new product launches. Staples, an office
supply chain, also did well, benefiting from new store designs and a
renewed focus on small businesses. Top performers elsewhere included
Gilead Sciences, a biotechnology company specializing in HIV drugs;
Caremark Rx, a pharmaceutical benefits manager that continued to gain
market share; and UTStarcom, a wireless phone company operating in
China and other developing markets.
[Table at top left-hand side of page entitled "Top five industry groups."
The first listing is Medical 20%, the second is Computers 17%, the third
Electronics 15%, the fourth Retail 9%, and the fifth Business
services-Misc. 5%.]
ENERGY AND HEALTH CARE DISAPPOINTMENTS
The Fund had an above-average stake in energy stocks, which have historically
benefited from high oil and natural gas prices. Unfortunately, exploration and
production companies did not increase spending on drilling as quickly as
expected, causing energy services stocks to lag the market and hamper our
overall returns. Although we still believe in the long-term outlook for the
sector, we decided to reduce our stake.
[Pie chart at middle of page with heading "Portfolio diversification As a
percentage of net assets on 10-31-03." The chart is divided into two
sections (from top to left): Common stocks 97%, and Short-term investments
& other 3%.]
A number of individual health-care and tech stocks also turned in
disappointing returns. Baxter International, which makes blood plasma
products and medical devices, and King Pharmaceuticals, a branded
pharmaceutical company, both suffered from weak execution. We sold
Baxter and cut back on King. In the technology sector, RF
Microdevices, which makes semiconductors used in cell phones, and
Atmel, a semiconductor equipment manufacturer, declined last spring
amid weaker-than-expected demand. We sold our positions as
fundamentals deteriorated.
[Table at top of page entitled "SCORECARD." The header for the left column
is "INVESTMENT" and the header for the right column is "PERIOD'S
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is JetBlue
Airways followed by an up arrow with the phrase "Strong niche, cost
efficient, increased traffic." The second listing is Symantec followed by
an up arrow with the phrase "Strong demand following worm virus." The third
listing is GameStop followed by a down arrow with the phrase "Missed
earnings, sell-off in stock."]
POSITIONED FOR RECOVERY
Throughout the year, the Fund was set up to take advantage of steady
improvement in the economy. By the period's end, we had above-average stakes
in both the consumer discretionary and technology sectors. New additions in
the consumer area focused on retailers, such as CarMax, a nationwide used car
dealership, and Yankee Candle, which makes high-quality candles. We also added
to our tech stake in the fall, buying shares in companies such as Axcelis
Technologies, a semiconductor capital equipment maker. We believe tech stocks
stand to benefit as corporations step up spending in the fourth quarter of
2003.
"The economy appears to be
on the road to recovery."
OPTIMISTIC OUTLOOK
The economy appears to be on the road to recovery. The Federal Reserve has
signaled that it is in no hurry to raise interest rates, which are still at
historic lows. Consumer spending remains strong. And corporate profitability
and cash flows have started to improve, leading to expectations that corporate
spending will pick up. All of this bodes well for stocks. In the next leg of
the market rebound, we believe investors could shift toward the higher-quality
companies we favor. We believe the mid-cap sector is particularly attractive
as it boasts a greater percentage of those companies than the small-cap
sector.
This commentary reflects the views of the portfolio managers through
the end of the Fund's period discussed in this report. The managers'
statements reflect their own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not
take into account sales charges. Actual load-adjusted performance is
lower.
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2003
Class A Class B Class C Class I 1
Inception date 11-1-93 11-1-93 6-1-98 3-1-02
Average annual returns with maximum sales charge (POP)
One year 23.79% 24.43% 26.94% 31.18%
Five years -0.30% -0.33% -0.18% --
Ten years 3.78% 3.74% -- --
Since inception -- -- -2.63% 2.77%
Cumulative total returns with maximum sales charge (POP)
One year 23.79% 24.43% 26.94% 31.18%
Five years -1.48% -1.63% -0.88% --
Ten years 44.92% 44.42% -- --
Since inception -- -- -13.45% 4.66%
Performance figures assume all distributions are reinvested. Returns
with maximum sales charge reflect a sales charge on Class A shares of
5% and Class C shares of 1%, and the applicable contingent deferred
sales charge (CDSC) on Class B and Class C shares. The Class B shares'
CDSC declines annually between years 1-6 according to the following
schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after
the sixth year. Class C shares held for less than one year are subject
to a 1% CDSC. Sales charge is not applicable for Class I shares. The
return and principal value of an investment in the Fund will
fluctuate, so that shares, when redeemed, may be worth more or less
than the original cost.
The returns reflect past results and should not be considered indicative of
future performance. The performance table above and the chart on the next
page do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares.
1 For certain types of investors as described in the Fund's prospectus
for Class I shares.
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown
the same investment in two separate indexes.
Line chart with the heading "GROWTH OF $10,000." Within the chart are four
lines. The first line represents Standard & Poor's 500 Index and is equal
to $26,889 as of October 31, 2003. The second line represents Russell
Midcap Growth Index and is equal to $24,044 as of October 31, 2003. The
third line represents the value of the hypothetical $10,000 investment made
in the John Hancock Mid Cap Growth Fund, before sales charge, and is equal
to $15,259 as of October 31, 2003. The fourth line represents the value of
the same hypothetical investment made in the John Hancock Mid Cap Growth
Fund, after sales charge, and is equal to $14,492 as of October 31, 2003.
Cum Value of $10K Cum Value of $10K S&P 500 Russell Midcap
Plot Date (No Load) (w/Load) Index Growth Index
11/1/93 $10,000 $9,500 $10,000 $10,000
4/30/1994 9,471 8,994 9,768 9,820
10/31/1994 9,329 8,860 10,387 10,254
4/30/1995 9,882 9,385 11,474 11,107
10/31/1995 10,965 10,413 13,133 12,740
4/30/1996 14,341 13,620 14,941 14,860
10/31/1996 14,929 14,178 16,297 15,027
4/30/1997 13,520 12,840 18,696 15,443
10/31/1997 16,241 15,424 21,531 18,725
4/30/1998 17,976 17,072 26,373 21,750
10/31/1998 14,713 13,974 26,266 19,181
4/30/1999 18,202 17,287 32,129 24,432
10/31/1999 20,754 19,710 33,008 26,405
4/30/2000 28,157 26,742 35,383 37,386
10/31/2000 27,657 26,266 35,018 36,616
4/30/2001 18,898 17,948 30,793 26,368
10/31/2001 13,866 13,168 26,297 20,951
4/30/2002 14,680 13,942 26,905 22,411
10/31/2002 11,712 11,123 22,325 17,261
4/30/2003 12,200 11,587 23,324 18,675
10/31/2003 15,259 14,492 26,889 24,044
Class B 1 Class C 1 Class I 2
Period beginning 11-1-93 6-1-98 3-1-02
Without sales charge $14,442 $8,741 $10,466
With maximum sales charge $14,442 $8,655 $10,466
Index 1 $26,889 $10,403 $9,554
Index 2 $24,044 $11,652 $10,620
Assuming all distributions were reinvested for the period indicated,
the table above shows the value of a $10,000 investment in the Fund's
Class B, Class C and Class I shares, respectively, as of October 31,
2003. Performance of the classes will vary based on the difference in
sales charges paid by shareholders investing in the different classes
and the fee structure of those classes.
Standard & Poor's 500 Index -- Index 1 -- is an unmanaged index that
includes 500 widely traded common stocks.
Russell Midcap Growth Index -- Index 2 -- is an unmanaged index that
contains those stocks from the Russell Midcap Index with a
greater-than-average growth orientation.
It is not possible to invest directly in an index. Index figures do
not reflect sales charges and would be lower if they did.
1 No contingent deferred sales charge applicable.
2 For certain types of investors as described in the Fund's prospectus
for Class I shares.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2003
This schedule is divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by
industry group. Short-term investments, which represent the Fund's
cash position, are listed last.
SHARES ISSUER VALUE
COMMON STOCKS 97.33% $156,595,357
(Cost $130,248,688)
Advertising 2.32% 3,735,837
46,815 Omnicom Group, Inc. 3,735,837
Automobiles/Trucks 1.96% 3,151,000
100,000 CarMax, Inc.* 3,151,000
Banks -- United States 1.62% 2,609,000
50,000 TCF Financial Corp. 2,609,000
Business Services -- Misc. 5.16% 8,309,501
77,597 ChoicePoint, Inc.* 2,718,999
54,200 Corporate Executive Board Co. (The)* 2,764,742
60,900 Manpower, Inc. + 2,825,760
Computers 17.34% 27,897,888
65,000 Affiliated Computer Services, Inc.* + 3,180,450
500,000 Atari, Inc. * 1,930,000
269,900 BEA Systems, Inc.* 3,751,610
60,000 Emulex Corp.* + 1,699,200
82,000 Fiserv, Inc.* 2,896,240
84,000 Foundry Networks, Inc.* 1,953,840
66,600 Intuit, Inc.* 3,328,668
38,000 Lexmark International, Inc.* 2,797,180
205,000 McDATA Corp. (Class B)* + 2,095,100
64,000 Symantec Corp.* + 4,265,600
Consumer Products -- Misc. 2.33% 3,749,320
134,000 Yankee Candle Co, Inc. (The)* 3,749,320
Containers 3.91% 6,289,040
364,850 Crown Holdings, Inc.* 2,882,315
154,500 Pactiv Corp.* 3,406,725
Cosmetics & Personal Care 1.60% 2,579,910
69,000 Estee Lauder Cos., Inc. (The) (Class A) + 2,579,910
Electronics 14.94% 24,031,130
600,000 Agere Systems, Inc. * 2,034,000
433,500 Applied Micro Circuits Corp.* 2,522,970
371,000 Axcelis Technologies, Inc.* 3,925,180
200,000 ChipPAC, Inc. * 1,668,000
181,900 Flextronics International Ltd. (Singapore)* 2,546,600
69,000 Intersil Corp. (Class A) 1,779,510
88,800 Jabil Circuit, Inc.* + 2,473,080
29,000 KLA-Tencor Corp.* + 1,662,570
98,000 Microchip Technology, Inc. + 3,205,580
258,000 Skyworks Solutions, Inc.* + 2,213,640
Finance 1.58% 2,537,500
35,000 Affiliated Managers Group, Inc.* 2,537,500
Insurance 0.62% 989,560
22,000 RenaissanceRe Holdings Ltd. (Bermuda) 989,560
Leisure 0.95% 1,521,080
44,000 LeapFrog Enterprises, Inc.* + 1,521,080
Manufacturing 1.32% 2,130,487
25,715 Danaher Corp. 2,130,487
Media 4.10% 6,594,810
41,000 Entercom Communications Corp.* 1,878,210
136,500 Radio One, Inc. (Class D)* 2,170,350
75,000 Univision Communications, Inc. (Class A)* + 2,546,250
Medical 20.46% 32,918,510
32,000 Aetna, Inc. 1,837,120
24,000 Barr Laboratories, Inc.* 1,842,480
35,000 Biogen, Inc.* + 1,416,450
83,000 Biovail Corp. (Canada)* 1,996,150
117,500 Caremark Rx, Inc.* 2,943,375
57,000 Cephalon, Inc. + 2,676,720
73,000 Community Health Systems, Inc.* + 1,753,460
78,500 Edwards Lifesciences Corp.* 2,276,500
28,000 Gilead Sciences, Inc.* 1,528,240
112,000 Health Management Associates, Inc. (Class A) 2,480,800
75,000 IDEC Pharmaceuticals Corp.* 2,634,750
41,000 Invitrogen Corp.* 2,607,190
60,000 King Pharmaceuticals, Inc.* 804,000
138,000 Millennium Pharmaceuticals, Inc.* 2,196,960
61,500 Zimmer Holdings, Inc.* 3,924,315
Oil & Gas 4.28% 6,891,900
39,000 Nabors Industries Ltd. (Bermuda)* 1,474,200
55,000 Patterson-UTI Energy, Inc.* 1,572,450
90,000 Pride International, Inc.* + 1,474,200
99,000 Rowan Cos., Inc. + 2,371,050
Paper & Paper Products 1.07% 1,720,500
111,000 Smurfit-Stone Container Corp.* 1,720,500
Retail 9.32% 15,000,236
79,000 Dollar Tree Stores, Inc.* 3,016,220
55,200 Fastenal Co. + 2,454,744
97,500 Linens 'n Things, Inc.* 2,878,200
52,400 Panera Bread Co.* + 2,108,052
49,000 Talbots, Inc. (The) 1,610,630
83,000 Williams-Sonoma, Inc.* + 2,932,390
Telecommunications 0.94% 1,512,000
48,000 UTStarcom, Inc.* + 1,512,000
Textile 1.51% 2,426,148
68,400 Coach, Inc.* 2,426,148
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 28.91% $46,505,078
(Cost $46,505,078)
Joint Repurchase Agreement 0.74%
Investment in a joint repurchase agreement transaction
with Barclays Capital, Inc. -- Dated 10-31-03,
due 11-03-03 (Secured by U.S. Treasury Inflation
Indexed Bond 3.625% due 04-15-28, U.S. Treasury
Inflation Indexed Note 1.875% due 07-15-13) 1.020% $1,185 1,185,000
SHARES
Cash Equivalents 28.17%
AIM Cash Investment Trust ** 45,320,078 45,320,078
TOTAL INVESTMENTS 126.24% $203,100,435
OTHER ASSETS AND LIABILITIES, NET (26.24%) ($42,220,958)
TOTAL NET ASSETS 100.00% $160,879,477
* Non-income producing security.
** Represents investment of security lending collateral.
+ All or a portion of this security is on loan as of October 31, 2003.
The percentage shown for each investment category is the total value
of that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
October 31, 2003
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.
ASSETS
Investments at value (cost $176,753,766),
including $43,808,340 of securities loaned $203,100,435
Cash 52
Receivable for investments sold 6,545,346
Receivable for shares sold 102,949
Dividends and interest receivable 5,091
Other assets 24,726
Total assets 209,778,599
LIABILITIES
Payable for investments purchased 3,177,944
Payable for shares repurchased 98,559
Payable for securities on loan 45,320,078
Payable to affiliates
Management fee 112,827
Distribution and service fee 6,923
Other 104,088
Other payables and accrued expenses 78,703
Total liabilities 48,899,122
NET ASSETS
Capital paid-in 245,054,431
Accumulated net realized loss on investments (110,500,814)
Net unrealized appreciation of investments 26,346,669
Accumulated net investment loss (20,809)
Net assets $160,879,477
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($106,563,270 [DIV] 12,641,251 shares) $8.43
Class B ($48,033,109 [DIV] 6,206,413 shares) $7.74
Class C ($3,223,268 [DIV] 416,361 shares) $7.74
Class I ($3,059,830 [DIV] 358,147 shares) $8.54
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($8.43 [DIV] 95%) $8.87
Class C ($7.74 [DIV] 99%) $7.82
1 On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
See notes to
financial statements.
OPERATIONS
For the year ended
October 31, 2003
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat-
ing the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends (net of foreign taxes withholding of $17,085) $376,316
Securities lending 80,749
Interest 55,727
Total investment income 512,792
EXPENSES
Investment management fee 1,121,680
Class A distribution and service fee 271,246
Class B distribution and service fee 436,265
Class C distribution and service fee 27,391
Class A, B and C transfer agent fee 1,006,110
Class I transfer agent fee 7,647
Registration and filing fee 60,976
Accounting and legal services fee 50,347
Printing 27,591
Custodian fee 26,357
Auditing fee 21,700
Miscellaneous 10,868
Trustees' fee 8,464
Interest 3,095
Legal fee 2,369
Total expenses 3,082,106
Net investment loss (2,569,314)
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 16,717,797
Change in unrealized appreciation
(depreciation) of investments 23,244,385
Net realized and unrealized gain 39,962,182
Increase in net assets from operations $37,392,868
See notes to
financial statements.
CHANGES IN
NET ASSETS
These Statements
of Changes in
Net Assets show
how the value
of the Fund's
net assets has
changed during
the last two
periods. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses,
distributions, if
any, paid to
shareholders and
any increase or
decrease in
money share-
holders invested
in the Fund.
YEAR YEAR
ENDED ENDED
10-31-02 10-31-03
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($3,202,072) ($2,569,314)
Net realized gain (loss) (24,492,579) 16,717,797
Change in net unrealized
appreciation (depreciation) 791,079 23,244,385
Increase (decrease) in net assets
resulting from operations (26,903,572) 37,392,868
From Fund share transactions (25,804,343) (13,076,268)
NET ASSETS
Beginning of period 189,270,792 136,562,877
End of period 1 $136,562,877 $160,879,477
1 Includes accumulated net investment loss of $20,674 and $20,809, respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a
share has changed since the end of the previous period.
FINANCIAL HIGHLIGHTS
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $9.11 $12.85 $16.03 $7.66 $6.47
Net investment loss 1 (0.12) (0.17) (0.12) (0.11) (0.11)
Net realized and unrealized
gain (loss) on investments 3.86 4.23 (7.48) (1.08) 2.07
Total from
investment operations 3.74 4.06 (7.60) (1.19) 1.96
Less distributions
From net realized gain -- (0.88) (0.77) -- --
Net asset value,
end of period $12.85 $16.03 $7.66 $6.47 $8.43
Total return 2 (%) 41.05 33.26 (49.87) (15.54) 30.29
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $112 $176 $85 $85 $107
Ratio of expenses
to average net assets (%) 1.60 1.46 1.63 1.89 1.98
Ratio of net investment loss
to average net assets (%) (1.14) (1.08) (1.13) (1.52) (1.62)
Portfolio turnover (%) 153 146 211 267 3 183
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.72 $12.22 $15.08 $7.13 $5.98
Net investment loss 1 (0.18) (0.27) (0.18) (0.16) (0.15)
Net realized and unrealized
gain (loss) on investments 3.68 4.01 (7.00) (0.99) 1.91
Total from
investment operations 3.50 3.74 (7.18) (1.15) 1.76
Less distributions
From net realized gain -- (0.88) (0.77) -- --
Net asset value,
end of period $12.22 $15.08 $7.13 $5.98 $7.74
Total return 2 (%) 40.14 32.30 (50.24) (16.13) 29.43
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $146 $241 $101 $46 $48
Ratio of expenses to
average net assets (%) 2.23 2.16 2.33 2.56 2.67
Ratio of net investment loss to
average net assets (%) (1.77) (1.78) (1.83) (2.20) (2.31)
Portfolio turnover (%) 153 146 211 267 3 183
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.72 $12.21 $15.07 $7.13 $5.99
Net investment loss 1 (0.19) (0.27) (0.18) (0.16) (0.15)
Net realized and unrealized
gain (loss) on investments 3.68 4.01 (6.99) (0.98) 1.90
Total from
investment operations 3.49 3.74 (7.17) (1.14) 1.75
Less distributions
From net realized gain -- (0.88) (0.77) -- --
Net asset value,
end of period $12.21 $15.07 $7.13 $5.99 $7.74
Total return 2 (%) 40.02 32.32 (50.21) (15.99) 29.22
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 4 $5 $3 $2 $3
Ratio of expenses to
average net assets (%) 2.30 2.16 2.33 2.58 2.68
Ratio of net investment loss to
average net assets (%) (1.82) (1.80) (1.83) (2.21) (2.32)
Portfolio turnover (%) 153 146 211 267 3 183
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
CLASS I SHARES
PERIOD ENDED 10-31-02 5 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.16 $6.51
Net investment loss 1 (0.06) (0.06)
Net realized and unrealized
gain (loss) on investments (1.59) 2.09
Total from
investment operations (1.65) 2.03
Net asset value,
end of period $6.51 $8.54
Total return 2 (%) (20.22) 6 31.18
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $3 $3
Ratio of expenses
to average net assets (%) 1.46 7 1.22
Ratio of net investment loss
to average net assets (%) (1.00) 7 (0.85)
Portfolio turnover (%) 267 3 183
1 Based on the average of the shares outstanding.
2 Assumes dividend reinvestment and does not reflect the effect of
sales charges.
3 Excludes merger activity.
4 Less than $500,000.
5 Class I shares began operations on 3-1-02.
6 Not annualized.
7 Annualized.
See notes to
financial statements.
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock Mid Cap Growth Fund (the "Fund") is a diversified series
of John Hancock Investment Trust III, an open-end management
investment company registered under the Investment Company Act of
1940. The investment objective of the Fund is to achieve long-term
capital appreciation.
The Trustees have authorized the issuance of multiple classes of
shares of the Fund, designated as Class A, Class B, Class C and Class
I shares. The shares of each class represent an interest in the same
portfolio of investments of the Fund and have equal rights as to
voting, redemptions, dividends and liquidation, except that certain
expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal
Revenue Service. Shareholders of a class that bears distribution and
service expenses under the terms of a distribution plan have exclusive
voting rights to that distribution plan.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within
60 days are valued at amortized cost, which approximates market value.
Investments in AIM Cash Investment Trust are valued at their net asset
value each business day.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
LLC, may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large repurchase
agreements, whose underlying securities are obligations of the U.S.
government and/or its agencies. The Fund's custodian bank receives
delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale
or maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of
shares based on the appropriate net asset value of the respective
classes. Distribution and service fees, if any, and transfer agent
fees for Class I shares, are calculated daily at the class level based
on the appropriate net asset value of each class and the specific
expense rate(s) applicable to each class.
Expenses
The majority of expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund
are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and
the relative sizes of the funds.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. The
Fund has entered into a syndicated line of credit agreement with
various banks. This agreement enables the Fund to participate with
other funds managed by the Adviser in an unsecured line of credit with
banks, which permits borrowings of up to $250 million, collectively.
Interest is charged to each fund, based on its borrowing. In addition,
a commit ment fee is charged to each fund based on the average daily
unused portion of the line of credit and is allocated among the
participating funds. The Fund had no borrowing activity under the line
of credit during the year ended October 31, 2003.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the
Fund negotiated lender fees. The loans are collateralized at all times
with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Fund may bear the risk of delay of the loaned securities
in recovery or even loss of rights in the collateral, should the
borrower of the securities fail financially. At October 31, 2003, the
Fund loaned securities having a market value of $43,808,340
collateralized by cash in the amount of $45,320,078. The cash
collateral was invested in a short-term instrument.
Federal income taxes
The Fund qualifies 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. For federal income tax purposes, the Fund has
$109,741,917 of a capital loss carryforward available, to the extent
provided by regulations, to offset future net realized capital gains.
To the extent that such carryforward is used by the Fund, no capital
gain distributions will be made. The loss carryforward expires as
follows: October 31, 2008 -- $2,538,691, October 31, 2009 --
$82,196,780 and October 31, 2010 -- $25,006,446. Availability of a
certain amount of loss carryforward, which was acquired on September
7, 2002, in a merger, may be limited in a given year.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the
ex-dividend date or, in the case of some foreign securities, on the
date thereafter when the Fund identifies the dividend. Interest income
on investment securities is recorded on the accrual basis. Foreign
income may be subject to foreign withholding taxes, which are accrued
as applicable.
The Fund records distributions to shareholders from net investment
income and net realized gains on the ex-dividend date. Distri butions
paid by the Fund with respect to each class of shares are calculated
in the same manner, at the same time and are in the same amount,
except for the effect of expenses that may be applied differently to
each class.
As of October 31, 2003, there were no distributable earnings on a tax basis.
Such distributions and distributable earnings, on a tax basis, are
determined in conformity with income tax regulations, which may differ
from accounting principles generally accepted in the United States of
America. Distributions in excess of tax basis earnings and profits, if
any, are reported in the Fund's financial statements as a return of
capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.80% of the first $500,000,000 of the Fund's average daily net asset
value (b) 0.75% of the next $500,000,000 and (c) 0.70% of the Fund's
average daily net asset value in excess of $1,000,000,000.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH Funds"), a
wholly owned subsidiary of the Adviser. The Fund has adopted Distribution
Plans with respect to Class A, Class B and Class C pursuant to Rule 12b-1
under the Investment Company Act of 1940 to reimburse JH Funds for the
services it provides as distributor of shares of the Fund. Accordingly, the
Fund makes monthly payments to JH Funds at an annual rate not to exceed
0.30% of Class A average daily net asset value and 1.00% of Class B and
Class C average daily net asset value. A maximum of 0.25% of such payments
may be service fees as defined by the Conduct Rules of the National
Association of Securities Dealers. Under the Conduct Rules, curtailment of a
portion of the Fund's 12b-1 payments could occur under certain
circumstances.
Class A and Class C shares are assessed up-front sales charges. During
the year ended October 31, 2003, JH Funds received net up-front sales
charges of $79,946 with regard to sales of Class A shares. Of this
amount, $9,105 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $49,900 was paid as
sales commissions to unrelated broker-dealers and $20,941 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's
indirect parent, John Hancock Life Insurance Company ("JHLICo"), is
the indirect sole shareholder of Signator Investors. During the year
ended October 31, 2003, JH Funds received net up-front sales charges
of $6,411 with regard to sales of Class C shares. Of this amount,
$5,574 was paid as sales commissions to unrelated broker-dealers and
$837 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares that are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates, beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares
being redeemed. Class C shares that are redeemed within one year of
purchase are subject to a CDSC at a rate of 1.00% of the lesser of the
current market value at the time of redemption or the original
purchase cost of the shares being redeemed. Proceeds from the CDSCs
are paid to JH Funds and are used in whole or in part to defray its
expenses for providing distribution related services to the Fund in
connection with the sale of Class B and Class C shares. During the
year ended October 31, 2003, CDSCs received by JH Funds amounted to
$78,271 for Class B shares and $403 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect subsidiary of JHLICo. Effective January 1,
2003, for Class A, Class B and Class C shares, the Fund pays a monthly
transfer agent fee at an annual rate of 0.05% of the average daily net
asset value, plus a fee based on the number of shareholder accounts
and reimbursement for certain out-of-pocket expenses, aggregated and
allocated to each class on the basis of its relative net asset value.
Until January 1, 2003, for Class A, Class B and Class C shares, the
Fund paid monthly transfer agent fees based on the number of
shareholder accounts plus certain out-of-pocket expenses. Effective
June 1, 2003, for Class I shares, the Fund pays a monthly transfer
agent fee at a total annual rate of 0.05% of Class I average daily net
asset value. Until June 1, 2003, for Class I shares, the Fund paid a
monthly transfer agent fee at an annual rate of 0.05% of the average
daily net asset value plus certain out-of-pocket expenses attributable
to Class I shares.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
year was at an annual rate of approximately 0.04% of the average net
asset value of the Fund.
Ms. Maureen Ford Goldfarb and Mr. John M. DeCiccio are directors
and/or officers of the Adviser and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is
borne by the Fund. The unaffiliated Trustees may elect to defer for
tax purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund makes investments
into other John Hancock funds, as applicable, to cover its liability
for the deferred compensation. Investments to cover the Fund's
deferred compensation liability are recorded on the Fund's books as an
other asset. The deferred compensation liability and the related other
asset are always equal and are marked to market on a periodic basis to
reflect any income earned by the investments as well as any unrealized
gains or losses. The Deferred Compensation Plan investments had no
impact on the operations of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of Fund shares sold, issued in
reorganization and repurchased during the last two periods, along with
the corresponding dollar value. The Fund has an unlimited number of
shares authorized with no par value.
YEAR ENDED 10-31-02 YEAR ENDED 10-31-03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 6,779,923 $53,607,931 2,334,794 $16,511,673
Repurchased (4,712,845) (36,297,979) (2,850,728) (19,782,837)
Net increase (decrease) 2,067,078 $17,309,952 (515,934) ($3,271,164)
CLASS B SHARES
Sold 951,215 $6,872,300 913,561 $6,171,951
Repurchased (7,448,783) (53,300,949) (2,400,880) (15,429,942)
Net decrease (6,497,568) ($46,428,649) (1,487,319) ($9,257,991)
CLASS C SHARES
Sold 138,670 $1,002,856 128,247 $829,129
Repurchased (170,318) (1,164,263) (122,444) (789,063)
Net increase (decrease) (31,648) ($161,407) 5,803 $40,066
CLASS I SHARES 1
Shares sold 41,324 $272,525 173,708 $1,227,046
Shares issued in reorganization 533,703 4,100,229 -- --
Shares reinvested (131,455) (896,993) (259,133) (1,814,225)
Net increase (decrease) 443,572 $3,475,761 (85,425) ($587,179)
NET DECREASE (4,018,566) ($25,804,343) (2,082,875) ($13,076,268)
1 Class I shares began operations 3-1-02.
NOTE D
Investment transactions
Purchases and proceeds from sales or maturities of securities other
than short-term securities and obligations of the U.S. government,
during the year ended October 31, 2003, aggregated $251,165,157 and
$271,932,884, respectively.
The cost of investments owned on October 31, 2003, including
short-term investments, for federal income tax purposes was
$177,512,663. Gross unrealized appreciation and depreciation of
investments aggregated $27,949,412 and $2,361,640, respectively,
resulting in net unrealized appreciation of $25,587,772. The
difference between book basis and tax basis net unrealized
appreciation of investments is attributable primarily to the tax
deferral of losses on certain sales of securities.
NOTE E
Reclassification of accounts
During the year ended October 31, 2003, the Fund reclassified amounts
to reflect a decrease in accumulated net realized loss on investments
of $144, a decrease in accumulated net investment loss of $2,569,179
and a decrease in capital paid-in of $2,569,323. This represents the
amount necessary to report these balances on a tax basis, excluding
certain temporary differences, as of October 31, 2003. Additional
adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the
Fund, are primarily attributable to certain differences in the
computation of distributable income and capital gains under federal
tax rules versus accounting principles generally accepted in the
United States of America, and book and tax differences in accounting
of net operating loss and deferred compensa tion. The calculation of
net investment loss per share in the Fund's Financial Highlights
excludes these adjustments.
NOTE F
Reorganization
On May 29, 2002, the shareholders of the John Hancock Medium
Capitalization Growth Fund ("Medium Capitalization Growth Fund")
approved an Agreement and Plan of Reorganization, which provided for
the transfer of substantially all of the assets and liabilities of the
Medium Capitalization Growth Fund in exchange solely for Class I
shares of the Fund. The acquisition was accounted for as a tax-free
exchange of 533,703 Class I shares of the Fund for the net assets of
the Medium Capitalization Growth Fund, which amounted to $4,100,229,
including $120,950 of unrealized appreciation, after the close of
business on June 7, 2002.
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent
Auditors
To the Board of Trustees and Shareholders
of John Hancock Mid Cap Growth Fund,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
the John Hancock Mid Cap Growth Fund (the "Fund") at October 31, 2003,
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at October 31, 2003, by
correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 15, 2003
TAX
INFORMATION
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, 2003.
The fund hereby designates 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. This amount will be
reflected on Form 1099-DIV for the calendar year 2003.
Shareholders will be mailed a 2003 U.S. Treasury Department Form
1099-DIV in January 2004. This will reflect the total of all
distributions that are taxable for the calendar year 2003.
TRUSTEES
& OFFICERS
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
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Dennis S. Aronowitz, Born: 1931 1996 21
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp (since 1998).
Richard P. Chapman, Jr., Born: 1935 1996 21
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Director, Lumber Insurance Co. (insurance) (until 2000);
Chairman and Director, Northeast Retirement Services, Inc. (retirement
administration) (since 1998).
William J. Cosgrove, Born: 1933 1996 21
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc. (financial reinsurance); Trustee, Hudson City Savings Bank (since 1995);
Director, Hudson City Bancorp (since 1999); Trustee, Scholarship Fund for
Inner City Children (since 1986).
Richard A. Farrell, Born: 1932 1993 21
President, Farrell, Healer & Co., Inc. (venture capital management firm)
(since 1980) and President, the Venture Capital Fund of NE (since 1980);
prior to 1980, headed the venture capital group at Bank of Boston Corporation;
Trustee, Marblehead Savings Bank (since 1994).
William F. Glavin, 2 Born: 1932 1993 21
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
John A. Moore, 2 Born: 1939 1993 29
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (since 1998); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson, 2 Born: 1943 1993 29
Executive Director, Council for International Exchange of Scholars (since
1998); Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1997); President Emerita of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (electric utility).
John W. Pratt, Born: 1931 1993 21
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 51
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC (Subsidiaries, LLC), Hancock
Natural Resource Group, Independence Investment LLC, Declaration
Management Research LLC, John Hancock Advisers, LLC (the "Adviser"),
The Berkeley Financial Group, LLC ("The Berkeley Group"), John Hancock
Funds, LLC ("John Hancock Funds") and Massachusetts Business Development
Corporation; Director, John Hancock Insurance Agency, Inc. ("Insurance
Agency, Inc.") (until 1999).
Maureen Ford Goldfarb, Born: 1955 2000 51
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director, President and Chief Executive Officer, John Hancock Funds;
Chairman, Director, President and Chief Executive Officer, Sovereign Asset
Management Corporation ("SAMCorp."); Director, Independence
Investment LLC, Subsidiaries, LLC and Signature Services; Senior Vice
President, MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1993
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1993
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each of
the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 1993
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his
or her successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment
adviser, underwriter and certain other affiliates.
FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
125 High Street
Boston, Massachusetts 02110
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
The Fund's voting policies and procedures are available without
charge, upon request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhancock.com/funds/edelivery
This report is for the information of
the shareholders of the John Hancock
Mid Cap Growth Fund.
3900A 10/03
12/03
John Hancock
International
Fund
ANNUAL REPORT
10.31.03
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen Ford Goldfarb, Chairman and Chief Executive Officer,
flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
A look at performance
page 6
Growth of $10,000
page 7
Fund's investments
page 8
Financial statements
page 16
Trustees & officers
page 33
For your information
page 37
Dear Fellow Shareholders,
The stock market has made a strong recovery in 2003. Historically low
interest rates, improving corporate earnings and government stimulus
in the form of tax cuts gave investors hope that the economy would
begin to strengthen, which it did. The market's move up began in April
and the breadth of the rally was enormous. As a result, the major
indexes were able to wipe out their first-quarter losses and post
solid gains year-to-date through October 31. With technology leading
the way, the tech-heavy Nasdaq Composite Index rose 45.22% through
October, while the Dow Jones Industrial Average was up 19.82% and the
Standard & Poor's 500 Index returned 21.19%. With falling interest
rates, bonds also did well, although they began to reverse course in
July. High yield bonds led the pack, returning 24.23% through October,
as measured by the Lehman Brothers High Yield Index.
In other news, we are pleased to inform you that on September 28,
2003, the Boards of Directors of Canada-based Manulife Financial
Corporation and Boston-based John Hancock Financial Services, Inc.,
the parent company of John Hancock Funds, unanimously voted to merge
the two companies.
Please be assured that the completion of the merger -- anticipated to
occur in the first half of 2004 -- will have no effect on your
investment in our John Hancock mutual funds. Your fund's adviser and
board of trustees will remain the same, as will your relationship with
your financial adviser.
The merger is subject to customary closing conditions, including
receipt of required regulatory approvals and approval by John Hancock
stockholders. If you only own shares in a John Hancock mutual fund you
are not affected and will not receive a proxy.
Additional information on this transaction is available on our Web
site: www.jhfunds.com. If you have questions about the merger, you may
also call 800-732-5543. Separately, for information about your
investments in John Hancock funds, please contact your financial
adviser or our Customer Service representatives at 800-225-5291.
Sincerely,
/S/ MAUREEN FORD GOLDFARB
Maureen Ford Goldfarb,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of October 31, 2003.
They are subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
long-term growth
of capital by
normally investing
at least 80% of its
assets in stocks of
foreign companies.
Over the last twelve months
* Non-U.S. stocks posted strong gains after struggling through several
tough years.
* The Fund posted strong absolute returns, but its growth focus hurt
relative returns, as value stocks outperformed.
* The Fund's utilities holdings and slight overweight in technology
helped performance.
[Bar chart with heading "John Hancock International Fund." Under the
heading is a note that reads "Fund performance for the year ended October
31, 2003." The chart is scaled in increments of 10% with 0% at the bottom
and 30% at the top. The first bar represents the 21.76% total return for
Class A. The second bar represents the 20.79% total return for Class B. The
third bar represents the 20.79% total return for Class C. The fourth bar
represents the 23.05% total return for Class I. A note below the chart
reads "Total returns for the Fund are at net asset value with all
distributions reinvested."]
Top 10 holdings
2.1% HSBC Holdings Plc
1.9% Mitsubishi Tokyo Financial Group, Inc.
1.3% Vodafone Group Plc
1.3% BHP Billiton Plc
1.2% GlaxoSmithKline Plc
1.1% Canadian National Railway Co.
1.1% Henderson Land Development Co., Ltd.
1.1% Total Fina SA
1.0% Ito-Yokado Co., Ltd.
1.0% Hoya Corp.
As a percentage of net assets on October 31, 2003.
MANAGERS'
REPORT
BY HORACIO A. VALEIRAS, CFA, FOR THE NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT PORTFOLIO MANAGEMENT TEAM
John Hancock
International Fund
Upon shareholder approval, John Hancock Global Fund and John Hancock
European Equity Fund were merged into John Hancock International Fund
at the close of business on May 9, 2003, and John Hancock Pacific
Basin Equities Fund was merged into the International Fund on
September 26, 2003.
Investors in international equities were well rewarded during the 12
months ended October 31, 2003. Following a disappointing few years,
non-U.S. stock markets posted strong increases this reporting period.
The sharp appreciation of foreign currencies added to equity gains for
U.S.-based investors by substantially boosting returns in dollar
terms.
During the first several months of the fiscal year, international
stock prices fell due to concerns about war and weakness in the global
economy. The tide turned in April, however, as investors cheered the
end of major military conflict in Iraq. Stimulative monetary policies
pursued by central banks worldwide contributed to positive market
sentiment, as did the diminishing threat of severe acute respiratory
syndrome (SARS).
"This period's gains were
broadly based, with
stocks in nearly every
country registering
steep price increases."
The rally extended through the end of October, fueled by positive
economic and earnings reports from the United States and around the
world.
This period's gains were broadly based, with stocks in nearly every
country registering steep price increases. Among developed markets,
Japan was a notable bright spot amid signs that the government was
getting serious about long-awaited banking reforms. In addition,
economic conditions in Japan improved -- exports rose strongly,
industrial production began to recover and trends in consumer
confidence and income growth pointed to a rebound in domestic
spending. Similarly, in Europe, mounting evidence of economic
improvement helped send stock prices higher throughout the region.
Emerging-market equities also turned in impressive returns, with
numerous countries posting gains in excess of 50%.
Investment performance among economic sectors was strong across the
board, with technology companies leading the way. Evidence of a
revival in corporate IT spending buoyed prices of technology stocks,
many of which had been trading at severely depressed levels.
Additionally, a number of global technology bellwethers, including
Nokia and Intel, stated that their businesses were improving -- the
first significantly upbeat comments from major companies such as these
in several years. Stocks in the economically sensitive transportation
and producers/manufacturing sectors also did particularly well given
investors' expectations for a pickup in GDP growth.
FUND PERFORMANCE EXPLAINED
For the 12 months ended October 31, 2003, John Hancock International
Fund's Class A, Class B, Class C and Class I shares gained 21.76%,
20.79%, 20.79% and 23.05%, respectively, at net asset value. During
the same period, the average international fund returned 24.51%,
according to Lipper, Inc.,1 while the benchmark MSCI All Country World
Free Ex-U.S. Index advanced 30.40%. Keep in mind that your net asset
value return will be different from the Fund's performance if you were
not invested in the Fund for the entire period and did not reinvest
all distributions. See pages six and seven for historical performance
information.
"A modest overweight
in technology compa-
nies compared with
the benchmark was
another plus."
The Fund participated in this period's market rally, with holdings in
the majority of countries and sectors posting strong, double-digit
returns. Compared with its peers and benchmark, however, the Fund
trailed. One reason for the underperformance was investors' preference
for value stocks over growth stocks. This hurt the Fund's relative
performance since its holdings were concentrated in companies with
higher growth expectations. In contrast, the Fund's peer group
includes value-oriented, growth-oriented and style-neutral funds, and
its benchmark contains both value and growth stocks. Another
unfavorable influence was disappointing security selection among
companies in Japan and in the consumer durables sector.
[Table at top left-hand side of page entitled "Top five industry groups."
The first listing is Banks--foreign 14%, the second is Electronics 12%, the
third Telecommunications 10%, the fourth Oil & gas 9%, and the fifth
Transportation 5%.]
On a positive note, select positions in France and Switzerland
favorably impacted performance versus the MSCI All Country World Free
Ex-U.S. Index. From a sector perspective, the Fund's utilities
holdings, which rose by approximately 40%, boosted relative results. A
modest overweight in technology companies compared with the benchmark
was another plus.
[Bar chart at middle of page with heading "Top five countries As a
percentage of net assets on 10-31-03." The chart is divided into five
sections: Japan 22%, United Kingdom 14%, Taiwan 8%, South Korea 6% and Hong
Kong 6%.]
Among the best-performing stocks were Endesa SA, a Spanish electric
utility that benefited from financial restructuring; JC Decaux, a
French advertiser that gained amid acceleration in free cash-flow
growth; and Credit Suisse Group, a Swiss financial services firm that
advanced on strength in its equity and private banking units.
Decliners included Prudential Plc, a U.K. insurer that announced
disappointing sales; Sony, a Japanese electronics manufacturer that
suffered from declining profits; and Yamato Transport, a Japanese
parcel delivery company that experienced sluggish volume growth and
unfavorable pricing trends. We sold all three stocks.
FUND MOVES
During the period, our stock-by-stock analysis of companies'
fundamental prospects resulted in some changes in the Fund's country
and sector weightings. We decreased holdings in developed European
countries, particularly Italy and the United Kingdom, and increased
holdings in Taiwan and Japan, where we identified better
opportunities. By sector, we reduced positions in utilities and
non-cyclical consumer goods stocks, and increased the Fund's weighting
in general industrial and cyclical services companies.
[Table at top of page entitled "SCORECARD." The header for the left column
is "INVESTMENT" and the header for the right column is "PERIOD'S
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is JC
Decaux followed by an up arrow with the phrase "Stock boosted by free
cash-flow growth." The second listing is Credit Suisse Group followed by an
up arrow with the phrase "Strength in equity and private banking units."
The third listing is Prudential Pic followed by a down arrow with the
phrase "Disappointing sales."]
"The upturn in economic and
earnings growth world
wide, along with the more
stable geopolitical back
drop, inspire confidence in
the future."
OUTLOOK
The upturn in economic and earnings growth worldwide, along with the
more stable geopolitical backdrop, inspire confidence in the future.
We find the recent improvement in the U.S. employment market
especially encouraging given that we believe this has been a key risk
to a sustained global recovery. We are also optimistic that
corporations, which have held back spending for the past several
years, will once again make a contribution to global growth. In
particular, we are excited about the investment potential of many
Asian companies that are leveraged to a cyclical resurgence in
economic activity.
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. The
team's statements reflect their own opinions. As such, they are in no
way guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards
and financial reporting.
1 Figures from Lipper, Inc. include reinvested dividends and do not
take into account sales charges. Actual load-adjusted performance is
lower.
A LOOK AT
PERFORMANCE
For the period ended
October 31, 2003
Class A Class B Class C Class I 1
Inception date 1-3-94 1-3-94 6-1-98 3-1-02
Average annual returns with maximum sales charge (POP)
One year 15.64% 15.79% 18.56% 23.05%
Five years -6.95% -7.02% -6.85% --
Since inception -3.07% -3.12% -7.88% 1.16%
Cumulative total returns with maximum sales charge (POP)
One year 15.64% 15.79% 18.56% 23.05%
Five years -30.26% -30.50% -29.88% --
Since inception -26.36% -26.77% -35.89% 1.94%
Performance figures assume all distributions are reinvested. Returns
with maximum sales charge reflect a sales charge on Class A shares of
5% and Class C shares of 1%, and the applicable contingent deferred
sales charge (CDSC) on Class B and Class C shares. The Class B shares'
CDSC declines annually between years 1-6 according to the following
schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after
the sixth year. Class C shares held for less than one year are subject
to a 1% CDSC. Sales charge is not applicable for Class I shares. The
return and principal value of an investment in the Fund will
fluctuate, so that shares, when redeemed, may be worth more or less
than the original cost.
The returns reflect past results and should not be considered
indicative of future performance. The performance table above and the
chart on the next page do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund
shares.
1 For certain types of investors as described in the Fund's Class I
share prospectus.
GROWTH OF
$10,000
This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown
the same investment in the MSCI All Country World Free Ex-U.S. Index.
Line chart with the heading "GROWTH OF $10,000." Within the chart are three
lines. The first line represents the MSCI All Country World Free Ex-U.S.
Index and is equal to $11,834 as of October 31, 2003. The second line
represents the value of the hypothetical $10,000 investment made in the
John Hancock International Fund, before sales charge, and is equal to
$7,753 as of October 31, 2003. The third line represents the value of the
same hypothetical investment made in the John Hancock International Fund,
after sales charge, and is equal to $7,364 as of October 31, 2003.
Cum Value of $10K Cum Value of $10K MSCI All Country World
Plot Date (No Load) (w/Load) Ex-U.S. Free Index
1/3/94 $10,000 $9,500 $10,000
4/30/1994 9,600 9,117 10,595
10/31/1994 10,176 9,665 11,230
4/30/1995 9,505 9,027 11,115
10/31/1995 9,672 9,185 11,021
4/30/1996 10,551 10,020 12,474
10/31/1996 10,337 9,817 12,185
4/30/1997 10,659 10,123 12,581
10/31/1997 10,005 9,501 12,779
4/30/1998 11,669 11,082 14,612
10/31/1998 10,565 10,034 13,403
4/30/1999 12,004 11,401 15,704
10/31/1999 13,132 12,471 16,789
4/30/2000 13,846 13,150 18,199
10/31/2000 11,799 11,205 16,440
4/30/2001 9,763 9,273 15,063
10/31/2001 7,716 7,328 12,342
4/30/2002 7,978 7,577 13,374
10/31/2002 6,367 6,047 10,997
4/30/2003 6,367 6,047 11,336
10/31/2003 7,753 7,364 14,340
Class B 1 Class C 1 Class I 2
Period beginning 1-3-94 6-1-98 3-1-02
Without sales charge $7,323 $6,473 $10,194
With maximum sales charge $7,323 $6,411 $10,194
Index $14,340 $9,998 $11,247
Assuming all distributions were reinvested for the period indicated,
the table above shows the value of a $10,000 investment in the Fund's
Class B, Class C and Class I shares, respectively, as of October 31,
2003. Performance of the classes will vary based on the difference in
sales charges paid by shareholders investing in the different classes
and the fee structure of those classes.
Morgan Stanley Capital International (MSCI) All Country World Free
Ex-U.S. Index is an unmanaged index of freely traded stocks of foreign
companies.
It is not possible to invest directly in an index. Index figures do
not reflect sales charges and would be lower if they did.
1 No contingent deferred sales charge applicable.
2 For certain types of investors as described in the Fund's Class I
share prospectus.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2003
This schedule is divided into five main categories: common stocks,
preferred stocks, rights, securities-linked warrants and bonds, all of
which are further broken down by country.
SHARES ISSUER VALUE
COMMON STOCKS 95.17% $92,191,334
(Cost $76,208,594)
Australia 2.40% 2,327,928
59,800 BHP Billiton Plc (Diversified Operations) 497,294
13,800 Commonwealth Bank of Australia (Banks -- Foreign) 269,275
65,000 News Corp., Ltd. (The) (Media) 578,817
59,000 Publishing & Broadcasting Ltd. (Media) 504,456
18,900 Rio Tinto Ltd. (Diversified Operations) 478,086
Belgium 0.40% 386,308
16,500 Interbrew SA (Beverages) 386,308
Brazil 1.47% 1,424,411
8,100 Aracruz Celulose SA, American Depositary Receipts (ADR)
(Paper & Paper Products) 227,610
13,900 Companhia de Bebidas das Americas (ADR) (Beverages) 294,680
16,500 Petroleo Brasileiro SA (ADR) (Oil & Gas) 387,750
36,300 Tele Norte Leste Participacoes SA (ADR) (Telecommunications) 514,371
Canada 4.48% 4,336,836
10,000 Alcan, Inc. (Metal) 399,300
18,100 Canadian National Railway Co. (Transportation) 1,089,620
18,200 Cott Corp.* (Beverages) 474,110
18,300 EnCana Corp. (Oil & Gas) 628,971
2,900 Magna International, Inc. (Class A) (Automobiles/Trucks) 232,629
6,500 Petro-Canada (Oil & Gas) 262,012
15,000 Precision Drilling Corp.* (Oil & Gas) 590,700
7,600 Talisman Energy, Inc. (Oil & Gas) 370,880
13,250 WestJet Airlines Ltd.* (Transportation) 288,614
China 1.09% 1,058,682
120,000 BYD Co., Ltd. (Electronics) 312,915
594,000 Jiangsu Expressway Co., Ltd. (H Shares) (Transportation) 298,312
348,000 Shangri-La Asia Ltd. (Leisure) 333,853
401,000 Sinopec Shanghai Petrochemical Co., Ltd.* (Chemicals) 113,602
Denmark 1.60% 1,547,192
73 A.P. Moeller-Maersk AS (Transportation) 573,082
11,000 Novo Nordisk AS (Medical) 395,649
18,000 TDC AS (Telecommunications) 578,461
Finland 1.78% 1,724,184
49,400 Nokia Oyj (ADR) (Telecommunications) 839,306
37,400 Stora Enso Oyj (R shares) (Paper & Paper Products) 508,684
20,100 UPM-Kymmene Oyj (Paper & Paper Products) 376,194
France 5.55% 5,372,522
35,000 Alcatel SA* (Telecommunications) 461,800
20,600 Axa SA (Insurance) 390,342
8,100 Cap Gemini SA* (Computers) 408,192
10,000 Cie. de Saint-Gobain SA (Building) 421,869
38,900 JC Decaux SA* (Advertising) 572,498
7,800 LVMH Moet Hennessy-Louis Vuitton SA (Diversified Operations) 539,060
6,200 Renault SA (Automobiles/Trucks) 410,104
8,200 Societe Generale SA (Banks -- Foreign) 609,123
24,600 Thomson SA (Electronics) 518,184
6,700 Total Fina SA (Oil & Gas) 1,041,350
Germany 4.05% 3,926,405
12,200 BASF AG (Chemicals) 560,206
14,300 Bayerische Motoren Werke AG (Automobiles/Trucks) 573,516
3,100 Continental AG (Rubber -- Tires & Misc.) 105,589
22,500 Deutsche Post AG (Transportation) 435,499
3,600 Medion AG (Business Services -- Misc.) 160,661
7,700 Metro AG (Retail) 312,397
5,500 SAP AG (Computers) 797,296
9,000 Siemens AG (Diversified Operations) 604,729
29,100 T-Online International AG* (Computers) 376,512
Hong Kong 5.89% 5,709,330
458,000 BOC Hong Kong Holdings Ltd. (Banks -- Foreign) 793,245
98,000 Cheung Kong Holdings Ltd. (Real Estate Operations) 817,119
572,000 China Unicom Ltd. (Telecommunications) 537,698
100,300 CLP Holdings Ltd. (Utilities) 453,344
416,500 CNOOC Ltd. (Oil & Gas) 785,728
574,500 Dickson Concepts International Ltd. (Retail) 299,616
254,000 Henderson Land Development Co., Ltd. (Real Estate Operations) 1,066,279
57,000 Hutchison Whampoa Ltd. (Diversified Operations) 442,233
952,000 Sino Land Co., Ltd. (Real Estate Operations) 496,491
78,000 Tingyi Holding Corp. (Food) 17,577
Indonesia 0.88% 856,411
4,625,000 PT Bank Pan Indonesia Tbk (Banks -- Foreign) 152,416
5,255,500 PT Bentoel Internasional Investama Tbk* (Tobacco) 55,669
3,030,500 PT Perusahaan Perkebunan London Sumatra
Indonesia Tbk* (Agricultural Operations) 356,676
413,000 PT Telekomunikasi Indonesia (Telecommunications) 291,650
Israel 0.13% 128,500
2,000 Taro Pharmaceutical Industries Ltd.* (Medical) 128,500
Italy 1.12% 1,088,631
33,900 ENI SpA (Oil & Gas) 538,320
39,684 Fiat SpA* (Automobiles/Trucks) 310,932
175,000 Impregilo SpA (Building) 112,093
12,600 Mediaset SpA (Media) 127,286
Japan 21.58% 20,904,563
4,000 Advantest Corp. (Electronics) 297,994
68,000 Asahi Glass Co., Ltd. (Building) 536,899
116,000 Asahi Kasei Corp. (Chemicals) 552,909
143,000 Bank of Yokohama, Ltd. (Banks -- Foreign) 617,865
11,000 Canon, Inc. (Office) 532,315
19,300 Capcom Co., Ltd. (Computers) 249,293
38,000 Chugai Pharmaceutical Co., Ltd. (Medical) 541,302
45,000 Dai Nippon Printing Co., Ltd. (Printing -- Commercial) 695,047
93 Dentsu, Inc. (Advertising) 418,747
169 East Japan Railway Co. (Transportation) 765,561
1,800 Fanuc Ltd. (Electronics) 108,228
1,700 Funai Electric Co., Ltd. (Electronics) 226,543
5,500 Hogy Medical Co., Inc. (Medical) 269,659
10,700 Hoya Corp. (Electronics) 968,436
27,000 Ito-Yokado Co., Ltd. (Retail) 992,223
22,000 Kao Corp. (Cosmetics & Personal Care) 452,267
160 KDDI Corp. (Telecommunications) 868,877
1,650 Keyence Corp. (Electronics) 362,914
10,800 Kyocera Corp. (Electronics) 650,348
31,800 Matsui Securities Co., Ltd. (Broker Services) 763,651
71,000 Matsushita Electric Industrial Co., Ltd. (Electronics) 935,817
51 Millea Holdings, Inc.* (Insurance) 607,723
65,000 Mitsubishi Estate Co., Ltd. (Real Estate Operations) 623,186
256 Mitsubishi Tokyo Financial Group, Inc. (Banks -- Foreign) 1,839,633
14,500 Murata Manufacturing Co., Ltd. (Electronics) 824,351
44,000 Nomura Holdings, Inc. (Broker Services) 755,647
38,000 Sega Corp.* (Leisure) 420,667
9,600 Shin-Etsu Chemical Co., Ltd. (Chemicals) 357,157
5,800 SMC Corp. (Machinery) 697,994
75,000 Sumitomo Corp. (Diversified Operations) 520,535
113,000 Sumitomo Trust & Banking Co., Ltd. (Banks -- Foreign) 631,118
134,000 Tokyo Gas Co., Ltd. (Utilities) 459,526
27,200 Toyota Motor Corp. (Automobiles/Trucks) 774,421
137 UFJ Holdings, Inc. (Banks -- Foreign) 585,710
Malaysia 0.88% 847,926
172,700 New Straits Times Press Berhad (Media) 188,152
55,000 Perusahaan Otomobil Nasional Berhad (Automobiles/Trucks) 117,237
50,600 Resorts World Berhad (Leisure) 146,474
187,000 Road Builder (M) Holdings Berhad (Building) 194,874
83,100 Telekom Malaysia Berhad (Telecommunications) 201,189
Mexico 0.51% 496,366
178,000 Wal-Mart de Mexico SA de CV (Retail) 496,366
Netherlands 3.23% 3,126,544
34,300 ASML Holding NV (NY Reg Shares)* (Electronics) 601,965
46,000 ING Groep NV (Insurance) 955,058
17,700 Royal Philips Electronics NV (Electronics) 477,161
15,300 Royal Philips Electronics NV (NY Reg Shares) (Electronics) 410,652
14,600 STMicroelectronics NV (Electronics) 388,668
11,000 STMicroelectronics NV (NY Reg Shares) (Electronics) 293,040
Norway 0.86% 829,043
39,000 Statoil ASA (Oil & Gas) 366,725
84,923 Telenor ASA (Telecommunications) 462,318
Philippine Islands 0.32% 313,647
2,409,000 Ayala Corp. (Diversified Operations) 222,108
779,000 Ayala Land, Inc. (Real Estate Operations) 91,539
Portugal 0.42% 402,591
47,900 Portugal Telecom SGPS SA (Telecommunications) 402,591
Russia 2.05% 1,988,746
16,400 Gazprom (ADR) (Oil & Gas) 393,600
11,800 Lukoil (ADR) (Oil & Gas) 953,440
7,700 VimpelCom* (ADR) (Telecommunications) 501,270
3,107 YUKOS (ADR) (Oil & Gas) 140,436
Singapore 1.53% 1,484,184
75,000 City Developments, Ltd. (Real Estate Operations) 260,634
56,000 DBS Group Holdings Ltd. (Banks -- Foreign) 459,979
140,000 Keppel Corp., Ltd. (Diversified Operations) 478,474
299,000 Singapore Exchange Ltd. (Finance) 285,097
South Korea 5.43% 5,264,073
22,900 Hana Bank (Banks -- Foreign) 398,597
4,440 Hyundai Department Store Co., Ltd. (Retail) 112,360
10,000 Kookmin Bank (Banks -- Foreign) 365,019
16,260 Korean Air Co., Ltd. (Transportation) 217,075
16,370 LG Chem Ltd. (Chemicals) 657,013
12,850 LG Electronics, Inc. (Electronics) 665,572
2,900 POSCO (Steel) 338,150
1,500 Samsung Electronics Co., Ltd. (Electronics) 595,691
800 Samsung Electronics Co., Ltd., Global Depositary
Receipts (GDR) (Electronics) (R) 158,851
90,000 Samsung Heavy Industries Co., Ltd. (Building) 416,730
16,150 Shinhan Financial Group Co., Ltd. (Finance) 231,981
780 Shinsegae Co., Ltd. (Retail) 156,527
4,000 SK Telecom Co., Ltd. (Telecommunications) 706,379
33,020 Sangyong Motor Co. * (Automobiles/Trucks) 244,128
Spain 0.61% 586,180
191 Antena 3 Television SA* (Media) 6,239
46,624 Telefonica SA* (Telecommunications) 579,941
Sweden 2.26% 2,189,743
7,900 Elekta AB (B Shares)* (Medical) 156,970
552,000 Ericsson (LM) Telefonaktiebolaget AB (B Shares)*
(Telecommunications) 948,204
94,400 Nordea AB (Banks -- Foreign) 585,700
41,400 Skandinaviska Enskilda Banken AB (A Shares)
(Banks -- Foreign) 498,869
Switzerland 4.69% 4,537,552
1,200 Actelion Ltd.* (Medical) 114,127
11,100 Adecco SA (Business Services -- Misc) 654,604
26,000 Credit Suisse Group (Banks -- Foreign) 916,089
2,400 Nestle SA (Food) 528,401
19,773 Novartis AG (Medical) 753,694
6,900 Roche Holding AG (Medical) 570,974
150 SGS Societe Generale de Surveillance Holding SA
(Business Services -- Misc.) 84,697
14,900 UBS AG (Banks -- Foreign) 914,966
Taiwan 4.05% 3,924,982
3,274 Acer, Inc. (GDR) (Computers) 24,490
481,800 Advanced Semiconductor Engineering, Inc.* (Electronics) 446,702
9,250 Asustek Computer, Inc. (Computers) 22,053
725,000 Cheng Loong Corp. (Paper & Paper Products) 247,535
30,000 China Steel Corp. (GDR) (Steel) 487,500
28,000 Chunghwa Telecom Co., Ltd. (ADR) (Telecommunications) 433,440
906,705 Eva Airways Corp.* (Transportation) 384,299
207,000 Fubon Financial Holding Co., Ltd. (Finance) 218,119
184,000 Giant Manufacturing Co., Ltd. (Manufacturing) 238,293
14,100 Largan Precision Co., Ltd. (Leisure) 150,649
810 Nanya Technology Corp.* (Electronics) 515
399,000 Phihong Technology Co., Ltd. (Utilities) 209,042
348,000 Phoenix Precision Technology Corp.* (Electronics) 254,022
169,280 Taiwan Semiconductor Manufacturing Co. Ltd.* (Electronics) 333,827
267,000 Taiwan Styrene Monomer Corp. (Chemicals) 231,046
392,000 Yuanta Core Pacific Securities Co.* (Finance) 243,450
Thailand 0.32% 311,859
648,000 United Securities Pcl * (Broker Services) 311,859
United Kingdom 14.38% 13,928,142
43,700 BAA Plc (Transportation) 345,572
80,798 Barclays Plc (Banks -- Foreign) 681,441
36,000 Berkeley Group Plc (Building) 466,120
10,600 BG Group Plc (Oil & Gas) 48,342
159,975 BHP Billiton Plc (Metal) 1,256,231
133,000 BP Plc (Oil & Gas) 923,094
72,400 British Airways Plc* (Transportation) 255,548
76,300 British Sky Broadcasting Group Plc* (Media) 828,658
11,300 Carnival Plc (Leisure) 390,224
42,500 George Wimpey Plc (Building) 235,835
55,200 GlaxoSmithKline Plc (Medical) 1,182,141
136,000 HSBC Holdings Plc (Banks -- Foreign) 2,042,458
48,000 Imperial Tobacco Group Plc (Tobacco) 795,805
31,949 Kingfisher Plc (Retail) 153,160
38,500 Man Group Plc (Finance) 946,673
28,300 Peninsular and Oriental Steam Navigation Co. (Transportation) 132,786
19,100 Reckitt Benckiser Plc (Soap & Cleaning Preparations) 401,907
28,419 Royal Bank of Scotland Group Plc (Banks -- Foreign) 761,486
293,000 SkyePharma Plc* (Medical) 321,943
124,400 Tesco Plc (Retail) 498,727
600,000 Vodafone Group Plc (Telecommunications) 1,259,991
United States 1.21% 1,167,853
3,410 Apache Corp. (Oil & Gas) 237,745
28,800 GlobalSantaFe Corp. (Oil & Gas) 648,288
6,000 Schlumberger Ltd. (Oil & Gas) 281,820
PREFERRED STOCKS 0.84% $810,126
(Cost $357,163)
Germany 0.10% 98,114
200 Porsche AG (Automobiles/Trucks) 98,114
South Korea 0.74% 712,012
9,780 LG Household & Health Care Ltd.
(Soap & Cleaning Preparations) 142,134
2,870 Samsung Electronics Co., Ltd. (Electronics) 569,878
RIGHTS 0.00% $405
(Cost $0)
Sweden 0.00%
7,900 Elekta AB* (Medical) 405
SECURITIES-LINKED WARRANTS 4.12% $3,988,683
(Cost $3,338,183)
India 0.42% 402,361
115,000 Hindustan Lever Ltd.* + (Soap & Cleaning Preparations) 16,309
100,095 Hindustan Lever Ltd.* # (Soap & Cleaning Preparations) 386,052
Taiwan 3.70% 3,586,322
553,000 Advanced Semiconductor Engineering* # (Electronics) 553,813
605,000 Chinatrust Financial Holding Co., Ltd.* # (Banks -- Foreign) 605,889
331,338 Formosa Plastics Corp.* # (Chemicals) 507,799
385,000 Fubon Financial Holding Co., Ltd.* # (Finance) 406,217
12,720 Nanya Technology Corp.* # (Electronics) 8,098
186,654 Quanta Computer, Inc.* # (Computers) 508,856
279,904 Taiwan Semiconductor Manufacturing Co., Ltd.* # (Electronics) 552,712
483,245 United Microelectronics Corp.* # (Electronics) 442,938
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING** (000s OMITTED) VALUE
BONDS 0.02% $22,038
(Cost $19,342)
France 0.02%
Axa SA (Insurance) Conv Bond, 12-21-04 Zero A $129 22,038
TOTAL INVESTMENTS 100.15% $97,012,586
OTHER ASSETS & LIABILITIES, NET (0.15%) ($148,961)
TOTAL NET ASSETS 100.00% $96,863,625
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service, Fitch or John Hancock Advisors,
LLC, where Standard & Poor's ratings are not available.
+ Credit-linked warrant.
# Equity-linked warrant.
(R) These securities are exempt from registration under rule 144A of
the Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $158,851 or 0.16% of
net assets as of October 31, 2003.
The percentage shown for each investment category is the total value
of that category as a percentage of the net assets of the Fund.
See notes to
financial statements
PORTFOLIO
CONCENTRATION
October 31, 2003
(unaudited)
This table shows
the percentages
of the Fund's
investments
aggregated
by various
industries.
VALUE AS A PERCENTAGE
INVESTMENT DISTRIBUTION OF NET ASSETS
- ----------------------------------------------------------
Advertising 1.02%
Agricultural Operations 0.37
Automobiles/Trucks 2.85
Banks -- Foreign 14.17
Beverages 1.19
Broker Services 1.89
Building 2.46
Business Services -- Misc. 0.93
Chemicals 3.08
Computers 2.46
Cosmetics & Personal Care 0.47
Diversified Operations 3.90
Electronics 12.35
Finance 2.41
Food 0.56
Insurance 2.04
Leisure 1.49
Machinery 0.72
Manufacturing 0.25
Media 2.30
Medical 4.58
Metal 1.71
Office 0.55
Oil & Gas 8.88
Paper & Paper Products 1.40
Printing -- Commercial 0.72
Real Estate Operations 3.46
Retail 3.12
Rubber -- Tires & Misc. 0.11
Soap & Cleaning Preparations 0.98
Steel 0.85
Telecommunications 9.90
Tobacco 0.88
Transportation 4.94
Utilities 1.16
Total Investments 100.15%
See notes to
financial statements
ASSETS AND
LIABILITIES
October 31, 2003
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.
ASSETS
Investments at value (cost $79,923,282) $97,012,586
Foreign cash at value (cost $2,749) 2,740
Receivable for investments sold 3,027,441
Receivable for shares sold 15,012
Dividends and interest receivable 184,168
Receivable from affiliates 70,127
Other assets 13,742
Total assets 100,325,816
LIABILITIES
Due to custodian 290,187
Payable for investments purchased 2,727,933
Payable for shares repurchased 29,687
Payable to affiliates
Management fee 90,792
Distribution and service fee 6,262
Other 70,737
Other payables and accrued expenses 246,593
Total liabilities 3,462,191
NET ASSETS
Capital paid-in 167,169,947
Accumulated net realized loss on investments,
foreign currency transactions and options (87,374,091)
Net unrealized appreciation of investments and
translation of assets and liabilities in foreign currencies 17,088,560
Accumulated net investment loss (20,791)
Net assets $96,863,625
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($62,456,496 [DIV] 10,059,853 shares) $6.21
Class B ($30,181,474 [DIV] 5,197,222 shares) $5.81
Class C ($3,144,003 [DIV] 541,134 shares) $5.81
Class I ($1,081,652 [DIV] 171,677 shares) $6.30
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($6.21 [DIV] 95%) $6.54
Class C ($5.81 [DIV] 99%) $5.87
1 On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
See notes to
financial statements
OPERATIONS
For the year ended
October 31, 2003
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat-
ing the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $106,900) $743,788
Interest 10,763
Total investment income 754,551
EXPENSES
Investment management fee 373,514
Class A distribution and service fee 78,218
Class B distribution and service fee 123,321
Class C distribution and service fee 14,493
Class A, B and C transfer agent fee 438,132
Class I transfer agent fee 3,781
Custodian fee 123,500
Registration and filing fee 70,319
Auditing fee 48,790
Printing 16,159
Accounting and legal services fee 12,077
Miscellaneous 5,461
Interest 1,392
Trustees' fee 1,314
Legal fee 1,211
Total expenses 1,311,682
Less expense reductions (224,393)
Net expenses 1,087,289
Net investment loss (332,738)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
Investments 3,428,490
Foreign currency transactions (301,980)
Options 1,574
Change in net unrealized appreciation (depreciation) of
Investments 10,775,829
Translation of assets and liabilities in foreign currencies (196)
Net realized and unrealized gain 13,903,717
Increase in net assets from operations $13,570,979
See notes to
financial statements
CHANGES IN
NET ASSETS
These Statements
of Changes in
Net Assets show
how the value
of the Fund's
net assets has
changed during
the last two
periods. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses,
distributions, if
any, paid to
shareholders and
any increase or
decrease in
money share-
holders invested
in the Fund.
YEAR YEAR
ENDED ENDED
10-31-02 10-31-03
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($144,114) ($332,738)
Net realized gain (loss) (2,546,024) 3,128,084
Change in net unrealized
appreciation (depreciation) 56,756 10,775,633
Increase (decrease) in net assets
resulting from operations (2,633,382) 13,570,979
From Fund share transactions (280,938) 71,228,289
NET ASSETS
Beginning of period 14,978,677 12,064,357
End of period 1 $12,064,357 $96,863,625
1 Includes accumulated net investment loss of $624 and $20,791, respectively.
See notes to
financial statements
FINANCIAL
HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a
share has changed since the end of the previous period.
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.81 $10.95 $9.45 $6.18 $5.10
Net investment loss 1 (0.02) (0.04) (0.05) (0.04) (0.04)
Net realized and unrealized
gain (loss) on investments 2.16 (1.01) (3.22) (1.04) 1.15
Total from
investment operations 2.14 (1.05) (3.27) (1.08) 1.11
Less distributions
From net realized gain -- (0.45) -- -- --
Net asset value,
end of period $10.95 $9.45 $6.18 $5.10 $6.21
Total return 2,3 (%) 24.29 (10.15) (34.60) (17.48) 21.76
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $7 $15 $8 $6 $62
Ratio of expenses
to average net assets (%) 1.96 1.88 2.23 2.38 2.45
Ratio of adjusted expenses
to average net assets 4 (%) 3.81 3.44 3.83 4.43 3.00
Ratio of net investment loss
to average net assets (%) (0.20) (0.43) (0.65) (0.68) (0.63)
Portfolio turnover (%) 113 163 278 228 5 216 5
See notes to
financial statements
FINANCIAL
HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.55 $10.55 $9.04 $5.86 $4.81
Net investment loss 1 (0.09) (0.12) (0.10) (0.08) (0.07)
Net realized and unrealized
gain (loss) on investments 2.09 (0.94) (3.08) (0.97) 1.07
Total from
investment operations 2.00 (1.06) (3.18) (1.05) 1.00
Less distributions
From net realized gain -- (0.45) -- -- --
Net asset value,
end of period $10.55 $9.04 $5.86 $4.81 $5.81
Total return 2,3 (%) 23.39 (10.65) (35.18) (17.92) 20.79
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $9 $12 $6 $5 $30
Ratio of expenses
to average net assets (%) 2.63 2.57 2.93 3.08 3.15
Ratio of adjusted expenses
to average net assets 4 (%) 4.48 4.13 4.53 5.13 3.70
Ratio of net investment loss
to average net assets (%) (0.91) (1.13) (1.34) (1.38) (1.28)
Portfolio turnover (%) 113 163 278 228 5 216 5
See notes to
financial statements
FINANCIAL
HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.55 $10.57 $9.05 $5.87 $4.81
Net investment loss 1 (0.10) (0.11) (0.10) (0.08) (0.06)
Net realized and unrealized
gain (loss) on investments 2.12 (0.96) (3.08) (0.98) 1.06
Total from
investment operations 2.02 (1.07) (3.18) (1.06) 1.00
Less distributions
From net realized gain -- (0.45) -- -- --
Net asset value,
end of period $10.57 $9.05 $5.87 $4.81 $5.81
Total return 2,3 (%) 23.63 (10.72) (35.14) (18.06) 20.79
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 6 $1 $1 $1 $3
Ratio of expenses
to average net assets (%) 2.66 2.57 2.93 3.08 3.15
Ratio of adjusted expenses
to average net assets 4 (%) 4.51 4.13 4.53 5.13 3.70
Ratio of net investment loss
to average net assets (%) (1.04) (1.07) (1.35) (1.38) (1.11)
Portfolio turnover (%) 113 163 278 228 5 216 5
See notes to
financial statements
FINANCIAL
HIGHLIGHTS
CLASS I SHARES
PERIOD ENDED 10-31-02 7 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $6.18 $5.12
Net investment gain (loss)1 (0.01) 0.03
Net realized and unrealized
gain (loss) on investments (1.05) 1.15
Total from
investment operations (1.06) 1.18
Net asset value,
end of period $5.12 $6.30
Total return 2,3 (%) (17.15) 8 23.05
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1 $1
Ratio of expenses
to average net assets (%) 2.04 9 1.60
Ratio of adjusted expenses
to average net assets 4 (%) 4.09 9 2.15
Ratio of net investment income (loss)
to average net assets (%) (0.34) 9 0.58
Portfolio turnover (%) 228 5 216 5
1 Based on the average of the shares outstanding.
2 Assumes dividend reinvestment and does not reflect the effect of
sales charges.
3 Total returns would have been lower had certain expenses not been
reduced during the periods shown.
4 Does not take into consideration expense reductions during the periods shown.
5 Excludes merger activity.
6 Less than $500,000.
7 Class I shares began operations on 3-1-02.
8 Not annualized.
9 Annualized.
See notes to
financial statements
`
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock International Fund (the "Fund") is a diversified series
of John Hancock Investment Trust III, an open-end management
investment company registered under the Investment Company Act of
1940. The investment objective of the Fund is to achieve long-term
growth of capital.
The Trustees have authorized the issuance of multiple classes of
shares of the Fund, designated as Class A, Class B, Class C and Class
I shares. The shares of each class represent an interest in the same
portfolio of investments of the Fund and have equal rights as to
voting, redemptions, dividends and liquidation, except that certain
expenses, subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal
Revenue Service. Shareholders of a class that bears distribution and
service expenses under the terms of a distribution plan have exclusive
voting rights to that distribution plan.
Significant accounting policies
of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, if
quotations are not readily available, or the value has been materially
affected by events occurring after the closing of a foreign market, at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within
60 days are valued at amortized cost, which approximates market value.
All portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in
"Foreign currency translation" below.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group, LLC,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
Foreign currency translation
All assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars based on London currency
exchange quotations as of 4:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign currency exchange gains or losses arise
from sales of foreign currency, currency gains or losses realized
between the trade and settlement dates on securities transactions and
the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign currency exchange gains and losses arise from changes in the
value of assets and liabilities, other than investments in securities,
resulting from changes in the exchange rates.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Capital gains realized on some
foreign securities are subject to foreign taxes, which are accrued as
applicable.
Discount and premium on securities
The Fund accretes discount and amortizes premium from par value on
securities from either the date of issue or the date of purchase over
the life of the security.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares
based on the appropriate net asset value of the respective classes.
Distribution and service fees, if any, and transfer agent fees for Class I
shares are calculated daily at the class level based on the appropriate net
asset value of each class and the specific expense rate(s) applicable to
each class.
Expenses
The majority of expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund
are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and
the relative sizes of the funds.
Bank borrowings
The Fund is permitted to have bank borrowings for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. The Fund has entered into a
syndicated line of credit agreement with various banks. This agreement
enables the Fund to participate with other funds managed by the Adviser in
an unsecured line of credit with banks, which permits borrowings of up to
$250 million, collectively. Interest is charged to each fund, based on its
borrowing. In addition, a commitment fee is charged to each fund based on
the average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no borrowing activity under the
line of credit during the year ended October 31, 2003.
Options
The Fund may enter into option contracts. Listed options will
be valued at the last quoted sales price on the exchange on which they
are primarily traded. Over-the-counter options are valued at the mean
between the last bid and asked prices. Upon the writing of a call or
put option, an amount equal to the premium received by the Fund will
be included in the Fund's Statement of Assets and Liabilities as an
asset and corresponding liability. The amount of the liability will be
subsequently marked to market to reflect the current market value of
the written option.
The Fund may use option contracts to manage its exposure to the price
volatility of financial instruments. Writing puts and buying calls
will tend to increase the Fund's exposure to the underlying instrument
and buying puts and writing calls will tend to decrease the Fund's
exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited
to the premium initially paid for the option. In all other cases, the
face (or "notional") amount of each contract at value will reflect the
maximum exposure of the Fund in these contracts, but the actual
exposure will be limited to the change in value of the contract over
the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms ("credit risk") or if the Fund is unable to offset a
contract with a counterparty on a timely basis ("liquidity risk").
Exchange-traded options have minimal credit risk as the exchanges act
as counterparties to each transaction, and only present liquidity risk
in highly unusual market conditions. To minimize credit and liquidity
risks in over-the-counter option contracts, the Fund will continuously
monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's
Statement of Assets and Liabilities. The Fund had no out standing
written options during the year ended October 31, 2003.
Securities-linked warrants
The Fund may buy and sell securities-linked warrants. The Fund
purchases the equity-linked and credit-linked warrants from a broker,
who in turn purchases the underlying securities in the local market
and issues a call warrant hedged on the underlying holding. If the
Fund exercises its call and closes its position, the under lying
securities are sold and the warrant re deemed with the proceeds. Each
warrant represents one share of the underlying stock or unit of fixed
income security, therefore the price, performance and liquidity of the
warrant are all directly linked to the underlying investments. The
warrants can be re deemed for 100% of the value of the underlying
securities, less transaction costs. Equity-linked and credit-linked
warrants are subject to risks related to the counterparty's ability to
perform under the contract, and to the market risk of the underlying
holding. The Fund may also suffer losses if it is unable to sell
outstanding securities-linked warrants or reduce its exposure through
offsetting transactions.
Forward foreign currency exchange contracts
The Fund may enter into forward foreign currency exchange contracts as a
hedge against the effect of fluctuations in currency exchange rates. A
forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked to market daily at
the applicable foreign currency exchange rates. Any resulting unrealized
gains and losses are included in the determination of the Fund's daily net
asset value. The Fund records realized gains and losses at the time the
forward foreign currency exchange contracts are closed out. Risks may arise
upon entering these contracts from the potential inability of
counterparties to meet the terms of the contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Fund's Statement of Assets and Liabilities.
The Fund may also purchase and sell forward contracts to facilitate
the settlement of foreign currency denominated portfolio transactions,
under which it intends to take delivery of the foreign currency. Such
contracts normally involve no market risk if they are offset by the
currency amount of the underlying transactions. The Fund had no open
forward foreign currency exchange contracts on October 31, 2003.
Federal income taxes
The Fund qualifies 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. For federal income tax purposes, the Fund has
$86,921,411 of a capital loss carryforward available, to the extent
provided by regulations, to offset future net realized capital gains.
To the extent that such carryforward is used by the Fund, no capital
gain distributions will be made. The loss carryforward expires as
follows: October 31, 2005 -- $587,636, October 31, 2006 -- $1,234,369,
October 31, 2007 -- $523,573, October 31, 2008 -- $57,323,110, October
31, 2009 -- $20,736,888 and October 31, 2010 -- $6,515,835.
Availability of a certain amount of the carryforwards which were ac
quired on June 7, 2002, in a merger with John Hancock International
Equity Fund, on May 9, 2003, in mergers with John Hancock European
Equity Fund and John Hancock Global Fund and in a merger with John
Hancock Pacific Basin Equity Fund on September 26, 2003, may be
limited in a given year.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment
income and net realized gains on the ex-dividend date. Distributions
paid by the Fund with respect to each class of shares are calculated
in the same manner, at the same time and are in the same amount,
except for the effect of expenses that may be applied differently to
each class.
As of October 31, 2003, there were no distributable earnings on a tax basis.
Such distributions and distributable earnings, on a tax basis, are
determined in conformity with income tax regulations, which may differ
from accounting principles generally accepted in the United States of
America. Distributions in excess of tax basis earnings and profits, if
any, are reported in the Fund's financial statements as a return of
capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under
the investment management contract, effective May 9, 2003, the Fund
pays a monthly management fee to the Adviser equivalent, on an annual
basis, to the sum of: (a) 0.90% of the first $100,000,000 of the
Fund's average daily net asset value, (b) 0.80% of the next
$200,000,000, (c) 0.75% of the next $200,000,000 and (d) 0.625% of the
Fund's average daily net asset value in excess of $500,000,000. Until
May 9, 2003, the Fund paid a monthly management fee equivalent, on an
annual basis, to the sum of: (a) 1.00% of the first $250,000,000 of
the Fund's average daily net asset value, (b) 0.80% of the next $
250,000,000, (c) 0.75% of the next $250,000,000 and (d) 0.625% of the
Fund's average daily net asset value in excess of $750,000,000. The
Adviser has a subadvisory agreement with Nicholas-Applegate Capital
Management LP. The Fund is not responsible for the payment of the
subadvisory fees.
Effective May 9, 2003, the Adviser has agreed to limit the Fund's
total expenses, excluding the distribution and service fees and
transfer agent fees, to 1.27% of the Fund's average daily net asset
value, at least until February 28, 2005. Prior to May 9, 2003, the
Adviser had agreed to limit the Fund's total expenses, excluding the
distribution and service fees and transfer agent fees, to 0.90% of the
Fund's average net asset value. Accordingly, the expense reductions
related to the Fund's total expense limitation amounted to $156,502
for the year ended October 31, 2003. The Adviser reserves the right to
terminate this limitation in the future.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH
Funds"), a wholly owned subsidiary of the Adviser. The Fund has
adopted Distribution Plans with respect to Class A, Class B and Class
C pursuant to Rule 12b-1 under the Investment Company Act of 1940 to
reimburse JH Funds for the services it provides as distributor of
shares of the Fund. Accordingly, the Fund makes monthly payments to JH
Funds at an annual rate not to exceed 0.30% of Class A average daily
net asset value and 1.00% of Class B and Class C average daily net
asset value. A maximum of 0.25% of such payments may be service fees
as defined by the Conduct Rules of the National Association of
Securities Dealers. Under the Conduct Rules, curtailment of a portion
of the Fund's 12b-1 payments could occur under certain circumstances.
Class A and Class C shares are assessed up-front sales charges. During
the year ended October 31, 2003, JH Funds received net up-front sales
charges of $30,451 with regard to sales of Class A shares. Of this
amount, $3,693 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $20,060 was paid as
sales commissions to unrelated broker-dealers and $6,698 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's
indirect parent, John Hancock Life Insurance Company ("JHLICo"), is
the indirect sole shareholder of Signator Investors. During the year
ended October 31, 2003, JH Funds received net up-front sales charges
of $5,893 with regard to sales of Class C shares. Of this amount,
$5,174 was paid as sales commissions to unrelated broker-dealers and
$719 was paid as sales commissions to sales personnel of Signator
Investors.
Class B shares that are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates, beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares
being redeemed. Class C shares that are redeemed within one year of
purchase are subject to a CDSC at a rate of 1.00% of the lesser of the
current market value at the time of redemption or the original
purchase cost of the shares being redeemed. Proceeds from the CDSCs
are paid to JH Funds and are used in whole or in part to defray its
expenses for providing distribution-related services to the Fund in
connection with the sale of Class B and Class C shares. During the
year ended October 31, 2003, CDSCs received by JH Funds amounted to
$40,962 for Class B shares and $79 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of
JHLICo. Effective January 1, 2003, for Class A, Class B and Class C
shares, the Fund pays a monthly transfer agent fee at an annual rate
of 0.05% of the Fund's average daily net asset value, plus a fee based
on the number of shareholder accounts and reimbursement for certain
out-of-pocket expenses, aggregated and allocated to each class on the
basis of its relative net asset value. Until January 1, 2003, for
Class A, Class B and Class C shares, the Fund paid a monthly transfer
agent fee based on the number of shareholder accounts plus certain
out-of-pocket expenses. For Class I shares, the Fund pays a monthly
transfer agent fee at an annual rate of 0.05% of the average daily net
asset value plus certain out-of-pocket expenses attributable to Class
I shares. Effective May 9, 2003, Signature Services agreed to limit
Class A, Class B and Class C shares transfer agent fees to 0.78% of
each Class's average daily net asset value, at least until February
28, 2005. Accordingly, the expense reductions related to transfer
agent fee limitation amounted to $67,891 for the year ended October
31, 2003. Signature Services reserves the right to terminate this
limitation in the future.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
year was at an annual rate of approximately 0.03% of the average net
asset value of the Fund.
Ms. Maureen Ford Goldfarb and Mr. John M. DeCiccio are directors
and/or officers of the Adviser and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is
borne by the Fund. The unaffiliated Trustees may elect to defer for
tax purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. The Fund makes investments
into other John Hancock funds, as applicable, to cover its liability
for the deferred compensation. Investments to cover the Fund's
deferred compensation liability are recorded on the Fund's books as an
other asset. The deferred compensation liability and the related other
asset are always equal and are marked to market on a periodic basis to
reflect any income earned by the investments as well as any unrealized
gains or losses. The Deferred Compensation Plan investments had no
impact on the operations of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of Fund shares sold, issued in
reorganizations and repurchased during the last two periods, along
with the corresponding dollar value. The Fund has an unlimited number
of shares authorized with no par value.
YEAR ENDED 10-31-02 YEAR ENDED 10-31-03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 1,608,472 $9,646,755 1,647,644 $9,092,862
Issued in reorganizations -- -- 9,576,643 51,258,116
Repurchased (1,773,317) (10,715,750) (2,256,593) (12,418,091)
Net increase (decrease) (164,845) ($1,068,995) 8,967,694 $47,932,887
CLASS B SHARES
Sold 397,117 $2,291,714 452,210 $2,359,494
Issued in reorganizations -- -- 4,660,904 23,715,852
Repurchased (510,300) (2,891,269) (894,451) (4,591,171)
Net increase (decrease) (113,183) ($599,555) 4,218,663 $21,484,175
CLASS C SHARES
Sold 295,202 $1,675,337 193,720 $972,776
Issued in reorganizations -- -- 313,872 1,607,553
Repurchased (271,816) (1,534,260) (129,277) (641,150)
Net increase 23,386 $141,077 378,315 $1,939,179
CLASS I SHARES 1
Shares sold 34,945 $187,366 177,491 $978,406
Issued in reorganization 257,801 1,609,274 -- --
Shares reinvested (96,794) (550,105) (201,766) (1,106,358)
Net increase (decrease) 195,952 $1,246,535 (24,275) ($127,952)
NET INCREASE (DECREASE) (58,690) ($280,938) 13,540,397 $71,228,289
1 Class I shares began operations 3-1-02.
NOTE D
Investment transactions
Purchases and proceeds from sales or maturities of securities other
than short-term securities and obligations of the U.S. government,
during the year ended October 31, 2003, aggregated $151,450,814 and
$86,771,780, respectively.
The cost of investments owned on October 31, 2003, including
short-term investments, for federal income tax purposes was
$80,375,961. Gross unrealized appreciation and depreciation of
investments aggregated $16,886,337 and $249,712, respectively,
resulting in net unrealized appreciation of $16,636,625. The
difference between book basis and tax basis net unrealized
appreciation of investments is attributable primarily to the tax
deferral of losses on certain sales of securities.
NOTE E
Reclassification of accounts
During the year ended October 31, 2003, the Fund reclassified amounts
to reflect an increase in accumulated net realized loss on investments
of $76,536,139, a decrease in accumulated net investment loss of
$312,571 and an increase in capital paid-in of $76,223,568. This
represents the amount necessary to report these balances on a tax
basis, excluding certain temporary differences, as of October 31,
2003. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to certain
differences in the computation of distributable income and capital
gains under federal tax rules versus accounting principles generally
accepted in the United States of America, and book and tax differences
in accounting for deferred compensation, net operating loss,
adjustments due to Fund mergers and foreign currency adjustments. The
calculation of net investment income (loss) per share in the Fund's
Financial Highlights excludes these adjustments.
NOTE F
Reorganizations
On May 29, 2002, the shareholders of John Hancock International Equity
Fund ("Inter national Equity Fund") approved an Agreement and Plan of
Reorganization, which provided for the transfer of substantially all
of the assets and liabilities of International Equity Fund in exchange
for Class I shares of the Fund. The acquisition was accounted for as a
tax-free exchange of 257,801 Class I shares of the Fund for the net
assets of the Inter national Equity Fund, which amounted to
$1,609,274, including $62,490 of unrealized appreciation, after the
close of business on June 7, 2002.
On May 7, 2003, the shareholders of the John Hancock Global Fund
("Global Fund") approved an Agreement and Plan of Reorganization,
which provided for the transfer of substantially all of the assets and
liabilities of the Global Fund in exchange for Class A, Class B and
Class C shares of the Fund. The acquisition was accounted for as a
tax-free exchange of 6,558,929 Class A shares, 1,864,356 Class B
shares and 130,784 of Class C shares of the Fund for the net assets of
the Global Fund, which amounted to $34,316,962, $9,149,332 and
$642,073 for Class A, Class B and Class C shares of the Global Fund,
respectively, including the total of $1,730,018 of unrealized
appreciation, after the close of business on May 9, 2003.
On May 7, 2003, the shareholders of the John Hancock European Equity
Fund ("European Equity Fund") approved an Agreement and Plan of
Reorganization, which provided for the transfer of substantially all
of the assets and liabilities of the European Equity Fund in exchange
for Class A, Class B and Class C shares of the Fund. The acquisition
was accounted for as a tax-free exchange of 889,585 Class A shares,
1,099,066 Class B shares and 48,954 Class C shares of the Fund for the
net assets of the European Equity Fund, which amounted to $4,654,400,
$5,393,668 and $240,336 for Class A, Class B and Class C shares of the
European Equity Fund, respectively, including the total of $1,183,872
of unrealized appreciation, after the close of business on May 9,
2003.
On September 24, 2003, the shareholders of the John Hancock Pacific
Basin Equities Fund ("Pacific Basin Equities Fund") approved an
Agreement and Plan of Reorganization, which provided for the transfer
of substantially all of the assets and liabilities of the Pacific
Basin Equities Fund in exchange for Class A, Class B and Class C
shares of the Fund. The acquisition was accounted for as a tax-free
exchange of 2,128,129 Class A shares, 1,697,482 Class B shares and
134,134 Class C shares of the Fund for the net assets of the Pacific
Basin Equities Fund, which amounted to $12,286,754, $9,172,852 and
$725,144 for Class A, Class B and Class C shares of the Pacific Basin
Equities Fund, respectively, including the total of $3,956,781 of
unrealized appreciation, after the close of business on September 26,
2003.
AUDITORS'
REPORT
Report of
Pricewaterhouse-
Coopers LLP,
Independent
Auditors
To the Board of Trustees and Shareholders
of John Hancock International Fund,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
the John Hancock International Fund (the "Fund") at October 31, 2003,
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at October 31, 2003, by
correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 15, 2003
TAX
INFORMATION
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, 2003.
The fund hereby designates 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. This amount will be
reflected on Form 1099-DIV for the calendar year 2003.
Shareholders will be mailed a 2003 U.S. Treasury Department Form
1099-DIV in January 2004. This will reflect the total of all
distributions that are taxable for the calendar year 2003.
TRUSTEES
& OFFICERS
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
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Dennis S. Aronowitz, Born: 1931 1996 21
Professor of Law, Emeritus, Boston University School of Law
(as of 1996); Director, Brookline Bancorp (since 1998).
Richard P. Chapman, Jr., Born: 1935 1996 21
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Director, Lumber Insurance Co. (insurance) (until 2000);
Chairman and Director, Northeast Retirement Services, Inc. (retirement
administration) (since 1998).
William J. Cosgrove, Born: 1933 1996 21
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc. (financial reinsurance); Trustee, Hudson City Savings Bank (since 1995);
Director, Hudson City Bancorp (since 1999); Trustee, Scholarship Fund for
Inner City Children (since 1986).
Richard A. Farrell, Born: 1932 1994 21
President, Farrell, Healer & Co., Inc. (venture capital management firm)
(since 1980) and President, the Venture Capital Fund of NE (since 1980);
prior to 1980, headed the venture capital group at Bank of Boston Corporation;
Trustee, Marblehead Savings Bank (since 1994).
William F. Glavin,2 Born: 1932 1994 21
President Emeritus, Babson College (as of 1998); Vice Chairman, Xerox
Corporation (until 1989); Director, Reebok, Inc. (until 2002) and Inco Ltd.
(until 2002).
John A. Moore,2 Born: 1939 1994 29
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (since 1998); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson,2 Born: 1943 1994 29
Executive Director, Council for International Exchange of Scholars (since
1998); Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1997); President Emerita of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (electric utility).
John W. Pratt, Born: 1931 1994 21
Professor of Business Administration Emeritus, Harvard University
Graduate School of Business Administration (as of 1998).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 51
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC (Subsidiaries, LLC), Hancock
Natural Resource Group, Independence Investment LLC, Declaration
Management Research LLC, John Hancock Advisers, LLC (the "Adviser"),
The Berkeley Financial Group, LLC ("The Berkeley Group"), John Hancock
Funds, LLC ("John Hancock Funds") and Massachusetts Business Development
Corporation; Director, John Hancock Insurance Agency, Inc. ("Insurance
Agency, Inc.") (until 1999).
Maureen Ford Goldfarb, Born: 1955 2000 51
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director, President and Chief Executive Officer, John Hancock Funds;
Chairman, Director, President and Chief Executive Officer, Sovereign Asset
Management Corporation ("SAMCorp."); Director, Independence
Investment LLC, Subsidiaries, LLC and Signature Services; Senior Vice
President, MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1994
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1994
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each of
the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 1994
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes
additional information about members of the Board of Trustees of the
Fund and is available, without charge, upon request, by calling
1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his
or her successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment
adviser, underwriter and certain other affiliates.
OUR FAMILY
OF FUNDS
- ------------------------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Growth Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- ------------------------------------------------------------------------
Sector Biotechnology Fund
Financial Industries Fund
Health Sciences Fund
Real Estate Fund
Regional Bank Fund
Technology Fund
- ------------------------------------------------------------------------
Income Bond Fund
Government Income Fund
High Income Fund
High Yield Bond Fund
Investment Grade Bond Fund
Strategic Income Fund
- ------------------------------------------------------------------------
Tax-Free Income California Tax-Free Income Fund
High Yield Municipal Bond Fund
Massachusetts Tax-Free Income Fund
New York Tax-Free Income Fund
Tax-Free Bond Fund
- ------------------------------------------------------------------------
Money Market Money Market Fund
U.S. Government Cash Reserve
For more complete information on any John Hancock Fund
and a prospectus, which includes charges and expenses,
call your financial professional, or John Hancock Funds at
1-800-225-5291. Please read the prospectus carefully before
investing or sending money.
FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUBADVISER
Nicholas-Applegate Capital Management LP
600 West Broadway
San Diego, California 92101
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
125 High Street
Boston, Massachusetts 02110
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service
representatives 1-800-225-5291
24-hour automated
information 1-800-338-8080
TDD line 1-800-554-6713
The Fund's voting policies and procedures are available without
charge, upon request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhancock.com/funds/edelivery
This report is for the information of
the shareholders of the John Hancock
International Fund.
4000A 10/03
12/03
ITEM 2. CODE OF ETHICS.
As of the end of the period, October 31, 2003, 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.
William F. Glavin 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.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. 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 registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. 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) Contact person at the registrant
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.
By:
- ------------------------------
Maureen Ford Goldfarb
Chairman, President and Chief Executive Officer
Date: December 18, 2003
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:
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Maureen Ford Goldfarb
Chairman, President and Chief Executive Officer
Date: December 18, 2003
By:
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Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: December 18, 2003