June 24, 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 April 30, 2004.
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 SHAREHOLDERS.
JOHN HANCOCK
Large Cap Growth Fund
4.30.2004
Semiannual Report
[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 James A. Shepherdson, Chairman, President 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
For your information
page 25
To Our Shareholders,
I am pleased to be writing to you as Chairman, President and Chief
Executive Officer of John Hancock Funds, LLC.
As you may know, John Hancock Financial Services, Inc. -- the parent
company of John Hancock Funds -- was acquired by Manulife Financial
Corporation on April 28, 2004. The merger combines two exceptionally strong
companies into a single, integrated, global market leader whose scale and
capital will create an industry pacesetter strengthening our company's
leadership in markets around the world.
Although this change has no impact on the mutual funds you have invested
in, it did bring with it some changes in the executive-level management of
John Hancock Funds. Specifically, Maureen Ford Goldfarb has decided to step
down as chairman, president and chief executive officer in order to pursue
personal interests. Since her appointment in January 2000, Maureen has
provided John Hancock Funds with strong leadership and steady guidance
through several years of extremely turbulent market and industry
conditions.
Effective May 12, 2004, I have also been appointed by your Board of
Trustees to the roles of Trustee, President and Chief Executive Officer of
your fund. I have been in the investment business for over 25 years, most
recently as President of Retirement Services at John Hancock Financial
Services. In that role, my responsibilities included developing and
directing the sale of John Hancock's variable and fixed annuity businesses
through a diverse distribution network of banks and broker-dealers --
including wirehouses, regional brokerage houses and financial planners.
Prior to joining John Hancock, I served as Co-Chief Executive Officer of
MetLife Investors Group, a subsidiary of MetLife, Inc. In that capacity my
responsibilities included the design, manufacture and distribution of
MetLife's annuity and life insurance products sold through third-party
channels.
Although there has been a change in executive-level management, the one
thing that never wavers is John Hancock Funds' commitment to placing the
needs of our shareholders above all else. We are all dedicated to the task
of working with you and your financial advisors to help you reach your
long-term financial goals.
Sincerely,
/S/ JAMES A. SHEPHERDSON
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of April 30, 2004. 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 stocks
of large-capitaliza-
tion companies in
the capitalization
range of the
Russell Top 200
Growth Index.
Over the last six months
* Stock prices moved up despite a volatile market environment.
* Large- and mega-cap stocks continued to lag small- and mid-cap stocks.
* The Fund maintained an economically sensitive bias, which hurt
performance as investors shifted into more defensive sectors.
[Bar chart with heading "John Hancock Large Cap Growth Fund." Under the
heading is a note that reads "Fund performance for the six months ended
April 30, 2004." The chart is scaled in increments of 1% with -1% at the
bottom and 1% at the top. The first bar represents the 0.10% total return
for Class A. The second bar represents the -0.34% total return for Class B.
The third bar represents the -0.23% 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.
3.5% Pfizer, Inc.
3.4% Intel Corp.
3.3% Comcast Corp. (Special Class A)
3.2% Microsoft Corp.
3.0% EMC Corp.
2.5% Time Warner, Inc.
2.4% Amgen, Inc.
2.4% Cisco Systems, Inc.
2.3% Johnson & Johnson
As a percentage of net assets on April 30, 2004.
1
BY ROGER C. HAMILTON AND ROBERT C. JUNKIN, CPA, PORTFOLIO MANAGERS
MANAGERS'
REPORT
JOHN HANCOCK
Large Cap Growth Fund
Recently, Roger C. Hamilton became a member of the Fund's management team,
replacing Robert J. Uek. Mr. Hamilton, who has been with John Hancock since
1994, currently serves as a member of several of John Hancock's large-cap
mutual fund equity teams. He began his business career in 1980.
Positive reports on the economy, job growth and corporate earnings
dominated headlines during the six months ended April 30, 2004. Stock
prices, however, were choppy as investors worried about the war in Iraq,
the sustainability of the U.S. economic recovery and the potential for a
slowdown in China's rapid growth. Concerns about whether interest rates
would rise sooner or faster than originally anticipated weighed heavily on
the market. Economically sensitive sectors such as technology, which had
done well early in the period, faltered in the new year, as investors
rotated into sectors that would be less affected by rising interest rates.
Despite this volatility, the Standard & Poor's 500 Index delivered a 6.27%
return for the six-month period. Although large-cap stocks benefited from
the weak U.S. dollar, they lagged small- and mid-cap stocks, which received
the biggest boost from the economic recovery.
"Concerns about
whether interest rates
would rise sooner or
faster than originally
anticipated weighed
heavily on the market."
PERFORMANCE REVIEW
To take advantage of an improving economy, we invested heavily in
technology and consumer cyclical stocks and kept below-average stakes in
the health-care and consumer staples sectors. This positioning hurt
performance as market leadership shifted. John Hancock Large Cap Growth
Fund's Class A, Class B and Class C shares returned 0.10%, -0.34% and
- -0.23%, respectively, at net asset value, for the six months ended April
30, 2004. By comparison, the Russell Top 200 Growth Index, which tracks the
performance of the largest growth stocks, returned 3.72% during the same
period. The average large-cap growth fund returned 2.47%, according to
Lipper, Inc.1 Keep in mind that your net asset
2
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.
[Photos of Roger Hamilton and Robert Junkin flush right next to first
paragraph.]
WEAKNESS IN TECHNOLOGY SECTOR
The Fund had a very sizable stake in technology, which was the
worst-performing sector in the large-cap growth universe during the
six-month period. Investments in semiconductor companies Intel and
Fairchild Semiconductor and semiconductor equipment manufacturer Applied
Materials were among our biggest disappointments. Although earnings for the
semiconductor companies were strong and valuations remained attractive,
stock prices fell sharply as investors worried that the best times might be
over. We took advantage of the downturn and added to some of our holdings,
believing that technology spending would continue to drive strong demand. A
large investment in EMC, a storage company, also hurt performance, as
problems at other storage-related companies dampened returns for the whole
industry. Partially offsetting some of our technology losses were sharp
gains from Motorola, which benefited from a recovery in telecommunications
equipment spending, as well as from initiatives under new management that
focused on improved profitability. In addition, Yahoo!, a leader in the
Internet search market, did well as advertising spending continued to
migrate online.
"The Fund had a very sizable
stake in technology, which
was the worst-performing
sector in the large-cap
growth universe..."
GAINS FROM ENERGY AND
HEALTH-CARE STOCKS
The Fund's above-average stake in the energy sector helped performance.
Tight supply and growing demand fueled continued high oil and natural gas
commodity prices. As exploration and production companies saw improved
revenues, they began spending more to find new reserves. This benefited
energy services stocks, such as BJ Services, which supplies drilling
equipment. Strong stock selection in the health-care sector also
contributed positively to performance. Biogen Idec, a biotechnology
company, posted exceptionally strong gains as its new multiple sclerosis
drug posted better-than-expected results in trials. Pfizer, a leading
3
branded-drug company, and Forest Laboratories, which manufactures and
distributes generic and specialty drugs, also rallied as investors renewed
their interest in pharmaceuticals. We added to Amgen, a large biotechnology
company whose stock price looked attractive given its strong earnings
growth prospects. The Fund lost ground, however, by not having a bigger
stake in the health-care sector, which generated some of the best returns
for the period. In addition, our below-average stake in consumer staples
stocks -- which include food and beverage companies -- hurt performance as
investors shifted into these more defensive names.
[Table at top left-hand side of page entitled "Top five industry groups."
The first listing is Medical 18%, the second is Computers 15%, the third
Electronics 12%, the fourth Media 11%, and the fifth Retail 7%.]
[Pie chart at middle of page with heading "Portfolio diversification As a
percentage of net assets on 4-30-04." The chart is divided into two
sections (from top to left): Common stocks 99%, and Short-term investments
& other 1%.]
SHIFT IN CONSUMER POSITIONING
In response to an expected increase in interest rates, we lowered the
Fund's sensitivity to the consumer side of the economy. To do this, we
trimmed various retail investments, including The Gap, which had had
disappointing revenue growth. Our focus instead was on media names, many of
which stand to benefit from increased advertising spending related to an
improving economy, the upcoming presidential election and the summer
Olympics. Within the consumer discretionary sector, winners offset losers.
Comcast, a leading cable provider, detracted from performance, as investors
worried about whether the company would bid too high to acquire Disney. We
added to our stake as the price tumbled, believing these concerns were
overdone. We also purchased Liberty Media, a media holding company. The
stock was selling at an attractive valuation despite strong execution by
management. By contrast, media giant Time Warner rallied as investors
anticipated that various catalysts would boost the stock price. Slot
machine manufacturer International Game
4
Technology also did well, benefiting as more fiscally troubled states
legalized gambling in an effort to boost revenues.
[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 Motorola
followed by an up arrow with the phrase "Rebound in telecom equipment
spending; new management." The second listing is Intel followed by a down
arrow with the phrase "Questions about sustainability of semiconductor
cycle." The third listing is Comcast followed by a down arrow with the
phrase "Concerns about bid for Disney and cable industry growth rate."]
PATIENT AND HOPEFUL OUTLOOK
Despite the market's recent volatility, we remain optimistic about its
prospects, particularly in the large-cap growth area. Our expectation is
that the economic recovery will continue longer than people think, driven
by stronger-than-expected corporate spending. The manufacturing and
industrial sectors were in a slump for four years, so we don't think they
will slow down after just a few quarters of recovery. Given this outlook,
we plan to keep the Fund heavily weighted toward sectors such as technology
and industrials that will benefit from increased corporate spending.
However, we most likely will continue to cut back on more economically
sensitive consumer holdings, which tend to weaken when interest rates rise.
Going forward, we think large-cap growth stocks are due to lead the market.
We expect their high dividend yields to attract renewed attention in an
environment of rising interest rates. We also think large-cap stocks will
benefit as higher-quality companies with strong balance sheets and stable
earnings move back into favor with investors.
"Despite the market's recent
volatility, we remain opti-
mistic about its prospects,
particularly in the large-cap
growth area."
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.
5
A LOOK AT
PERFORMANCE
For the period ended
April 30, 2004
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 10.15% 9.95% 12.75%
Five years -15.52% -15.55% -15.41%
Ten years 0.48% 0.43% --
Since inception -- -- -10.04%
Cumulative total returns with maximum sales charge (POP)
Six months -4.88% -5.33% -2.24%
One year 10.15% 9.95% 12.75%
Five years -56.98% -57.05% -56.69%
Ten years 4.89% 4.36% --
Since inception -- -- -46.51%
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.
6
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.
Russell
Cum Value Cum Value Top 200
of $10K of $10K Growth
Plot Date (No Load) (w/Load) Index
4-30-04 $10,000 $9,500 $10,000
5-31-94 9,899 9,406 10,212
10-31-94 10,322 9,808 11,049
4-30-95 10,962 10,417 12,260
10-31-95 12,997 12,351 14,530
4-30-96 14,612 13,885 16,184
10-31-96 15,386 14,620 17,990
4-30-97 15,327 14,564 21,075
10-31-97 17,854 16,966 23,935
4-30-98 20,424 19,407 30,036
10-31-98 19,605 18,630 31,555
4-30-99 24,382 23,169 39,251
10-31-99 25,011 23,767 42,105
4-30-00 26,352 25,041 48,208
10-31-00 22,972 21,829 43,825
4-30-01 15,073 14,323 32,383
10-31-01 11,998 11,401 26,583
4-30-02 11,963 11,368 25,524
10-31-02 9,409 8,941 21,285
4-30-03 9,525 9,051 21,995
10-31-03 11,027 10,478 25,062
4-30-04 11,039 10,489 25,993
Line chart with the heading "GROWTH OF $10,000." Within the chart are three
lines. The first line represents the Index and is equal to $25,993 as of
April 30, 2004. 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 $11,039 as of April 30, 2004. 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
$10,489 as of April 30, 2004.
Class B 1 Class C 1
Period beginning 4-30-94 6-1-98
Without sales charge $10,436 $5,404
With maximum sales charge $10,436 $5,349
Index $25,993 $8,899
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 April 30, 2004. 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.
7
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
April 30, 2004
(unaudited)
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.
ISSUER SHARES VALUE
COMMON STOCKS 99.76% $190,405,326
(Cost $160,435,701)
Beverages 2.14% 4,080,752
Anheuser-Busch Cos., Inc. 40,163 2,057,952
Coca-Cola Co. (The) 40,000 2,022,800
Broker Services 2.35% 4,491,950
Goldman Sachs Group, Inc. (The) 15,600 1,509,300
Merrill Lynch & Co., Inc. 55,000 2,982,650
Business Services -- Misc. 1.46% 2,788,205
Manpower, Inc. 59,450 2,788,205
Computers 14.89% 28,414,944
BEA Systems, Inc.*+ 194,500 2,219,245
Cisco Systems, Inc.* 214,500 4,476,615
EMC Corp.* 505,000 5,635,800
Emulex Corp.*+ 75,000 1,250,250
Mercury Interactive Corp.*+ 50,000 2,127,500
Microsoft Corp. 232,200 6,030,234
Oracle Corp.* 160,000 1,795,200
VERITAS Software Corp.* 60,000 1,600,200
Yahoo! Inc.*+ 65,000 3,279,900
Consumer Products Misc. 0.73% 1,398,060
Clorox Co. (The) 27,000 1,398,060
Cosmetics & Personal Care 2.46% 4,700,700
Estee Lauder Cos., Inc. (The) (Class A)+ 45,000 2,056,950
Procter & Gamble Co. (The) 25,000 2,643,750
Diversified Operations 6.72% 12,821,107
3M Co. 20,000 1,729,600
Cendant Corp.*+ 120,000 2,841,600
General Electric Co. 275,456 8,249,907
Electronics 12.44% 23,740,770
Analog Devices, Inc.* 65,000 2,769,000
Applied Materials, Inc.*+ 155,000 2,825,650
ASML Holding N.V. (NY Reg Shares) (Netherlands)* 105,000 1,632,750
See notes to
financial statements.
8
FINANCIAL STATEMENTS
ISSUER SHARES VALUE
Electronics (continued)
Emerson Electric Co. 40,000 $2,408,800
Fairchild Semiconductor International, Inc.* 135,000 2,628,450
Flextronics International Ltd. (Singapore)*+ 72,000 1,159,200
Intel Corp. 249,000 6,406,770
Intersil Corp. (Class A) 100,000 1,975,000
Parker Hannifin Corp. 35,000 1,935,150
Fiber Optics 0.83% 1,580,800
JDS Uniphase Corp.*+ 520,000 1,580,800
Finance 3.60% 6,860,110
Capital One Financial Corp.+ 22,000 1,441,660
Citigroup, Inc. 35,000 1,683,150
Paychex, Inc. 60,000 2,236,800
Sovereign Bancorp, Inc. 75,000 1,498,500
Insurance 2.88% 5,489,920
American International Group, Inc. 45,000 3,224,250
RenaissanceRe Holdings Ltd. (Bermuda) 43,000 2,265,670
Leisure 0.59% 1,132,200
International Game Technology 30,000 1,132,200
Machinery 1.55% 2,953,740
Caterpillar, Inc. 38,000 2,953,740
Media 11.16% 21,302,587
Comcast Corp. (Special Class A)*+ 215,500 6,247,345
DIRECTV Group, Inc. (The)* 204,642 3,663,092
InterActiveCorp.*+ 40,000 1,274,800
Liberty Media Corp. (Class A)* 300,000 3,282,000
Time Warner, Inc.*+ 280,000 4,709,600
Viacom, Inc. (Class B)*+ 55,000 2,125,750
Medical 18.17% 34,676,129
Abbott Laboratories 40,000 1,760,800
Amgen, Inc.* 80,000 4,501,600
Biogen Idec, Inc.*+ 42,000 2,478,000
Express Scripts, Inc.*+ 30,000 2,320,200
Forest Laboratories, Inc.* 30,000 1,934,400
Johnson & Johnson 80,017 4,323,319
Medtronic, Inc. 64,776 3,268,597
Merck & Co., Inc. 25,000 1,175,000
Mylan Laboratories, Inc. 88,750 2,033,262
Pfizer, Inc. 186,561 6,671,421
UnitedHealth Group, Inc. 36,000 2,213,280
Zimmer Holdings, Inc.* 25,000 1,996,250
Metal 0.56% 1,076,250
Alcoa, Inc.+ 35,000 1,076,250
See notes to
financial statements.
9
FINANCIAL STATEMENTS
ISSUER SHARES VALUE
Oil & Gas 4.50% $8,590,050
Apache Corp. 40,000 1,674,800
BJ Services Co.*+ 65,000 2,892,500
ENSCO International, Inc. 75,000 2,052,750
EOG Resources, Inc. 40,000 1,970,000
Retail 6.97% 13,300,002
Best Buy Co., Inc. 55,000 2,983,750
Costco Wholesale Corp.*+ 30,000 1,123,500
Home Depot, Inc. (The) 70,000 2,463,300
McDonald's Corp. 75,000 2,042,250
Staples, Inc.* 55,400 1,427,104
Target Corp. 35,000 1,517,950
Wal-Mart Stores, Inc. 30,564 1,742,148
Telecommunications 5.02% 9,587,050
Avaya, Inc.* 105,000 1,436,400
Motorola, Inc. 215,000 3,923,750
Nortel Networks Corp. (Canada)* 310,000 1,159,400
Vodafone Group Plc, American Depositary Receipt (United Kingdom) 125,000 3,067,500
Waste Disposal Service & Equip. 0.74% 1,420,000
Waste Management, Inc. 50,000 1,420,000
INTEREST PAR VALUE
ISSUER, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 21.77% $41,550,539
(Cost $41,550,539)
Joint Repurchase Agreement 0.93%
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc. --
Dated 04-30-04, due 05-03-04 (Secured by
U.S. Treasury Inflation Indexed Bond 3.875%
due 04-15-29, U.S. Treasury Inflation Indexed
Note 3.00% due 07-15-12) 0.930% $1,778 1,778,000
SHARES
Cash Equivalents 20.84%
AIM Cash Investment Trust** 39,772,539 39,772,539
See notes to
financial statements.
10
FINANCIAL STATEMENTS
ISSUER VALUE
TOTAL INVESTMENTS 121.53% $231,955,865
OTHER ASSETS AND LIABILITIES, NET (21.53%) ($41,101,981)
TOTAL NET ASSETS 100.00% $190,853,884
+ All or a portion of this security is on loan as of April 30, 2004.
* 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.
11
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2004
(unaudited)
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 $201,986,240)
including $38,190,586 of securities loaned $231,955,865
Cash 103
Receivable for investments sold 644,925
Receivable for shares sold 14,335
Dividends and interest receivable 90,626
Other assets 41,553
Total assets 232,747,407
LIABILITIES
Payable for investments purchased 1,705,467
Payable for shares repurchased 91,093
Payable for securities on loan 39,772,539
Payable to affiliates
Management fees 123,626
Distribution and service fees 7,675
Other 110,932
Other payables and accrued expenses 82,191
Total liabilities 41,893,523
NET ASSETS
Capital paid-in 423,580,420
Accumulated net realized loss on investments (261,621,842)
Net unrealized appreciation of investments 29,969,625
Accumulated net investment loss (1,074,319)
Net assets $190,853,884
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($142,976,752 [DIV] 14,976,321 shares) $9.55
Class B ($44,377,769 [DIV] 5,104,254 shares) $8.69
Class C ($3,499,363 [DIV] 402,708 shares) $8.69
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($9.55 [DIV] 95%) $10.05
Class C ($8.69 [DIV] 99%) $8.78
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.
12
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
April 30, 2004
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in oper-
ating the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $5,911) $834,748
Securities lending 50,183
Interest 9,669
Total investment income 894,600
EXPENSES
Investment management fees 760,833
Class A distribution and service fees 224,578
Class B distribution and service fees 247,198
Class C distribution and service fees 18,653
Transfer agent fees 595,924
Accounting and legal services fees 30,433
Printing 24,667
Registration and filing fees 22,729
Professional fees 21,054
Miscellaneous 6,512
Custodian fees 6,060
Trustees' fees 5,477
Interest 3,115
Securities lending fees 1,233
Total expenses 1,968,466
Less expense reductions (28,247)
Net expenses 1,940,219
Net investment loss (1,045,619)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investments 10,657,090
Change in unrealized appreciation
(depreciation) of investments (9,255,812)
Net realized and unrealized gain 1,401,278
Increase in net assets from operations $355,659
1 Semiannual period from 11-1-03 through 4-30-04.
See notes to
financial statements.
13
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 PERIOD
ENDED ENDED
10-31-03 4-30-04 1
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($1,915,137) ($1,045,619)
Net realized gain 2,702,645 10,657,090
Change in net unrealized
appreciation (depreciation) 28,948,933 (9,255,812)
Increase in net assets
resulting from operations 29,736,441 355,659
From Fund share transactions (22,118,554) (11,052,812)
NET ASSETS
Beginning of period 193,933,150 201,551,037
End of period 2 $201,551,037 $190,853,884
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
2 Includes accumulated net investment loss of $28,700 and $1,074,319,
respectively.
See notes to
financial statements.
14
FINANCIAL HIGHLIGHTS
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 4-30-04 2
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $22.27 $25.04 $20.73 $10.38 $8.14 $9.54
Net investment loss 3 (0.17) (0.23) (0.13) (0.10) (0.07) (0.06)
Net realized and unrealized
gain (loss) on investments 5.65 (1.48) (9.42) (2.14) 1.47 0.07
Total from
investment operations 5.48 (1.71) (9.55) (2.24) 1.40 0.01
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 $9.55
Total return 4 (%) 27.58 (8.15) (47.77) (21.58) 17.20 5 0.10 5,6
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $484 $421 $209 $140 $148 $143
Ratio of expenses
to average net assets (%) 1.35 1.36 1.59 1.75 1.86 1.73 7
Ratio of adjusted expenses
to average net assets 8 (%) -- -- -- -- 1.87 1.76 7
Ratio of net investment loss
to average net assets (%) (0.70) (0.97) (0.99) (0.96) (0.82) (0.85) 7
Portfolio turnover (%) 183 162 131 228 121 45
See notes to
financial statements.
15
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 4-30-04 2
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $21.38 $23.74 $19.40 $9.62 $7.49 $8.72
Net investment loss 3 (0.31) (0.37) (0.21) (0.15) (0.12) (0.10)
Net realized and unrealized
gain (loss) on investments 5.38 (1.37) (8.77) (1.98) 1.35 0.07
Total from
investment operations 5.07 (1.74) (8.98) (2.13) 1.23 (0.03)
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 $8.69
Total return 4 (%) 26.70 (8.79) (48.12) (22.14) 16.42 5 (0.34) 5,6
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $312 $239 $88 $51 $50 $44
Ratio of expenses
to average net assets (%) 2.02 2.05 2.24 2.45 2.56 2.43 7
Ratio of adjusted expenses
to average net assets 8 (%) -- -- -- -- 2.57 2.46 7
Ratio of net investment loss
to average net assets (%) (1.37) (1.66) (1.65) (1.66) (1.52) (1.55) 7
Portfolio turnover (%) 183 162 131 228 121 45
See notes to
financial statements.
16
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 4-30-04 2
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $21.37 $23.73 $19.39 $9.61 $7.49 $8.71
Net investment loss 3 (0.31) (0.37) (0.20) (0.15) (0.12) (0.10)
Net realized and unrealized
gain (loss) on investments 5.38 (1.37) (8.78) (1.97) 1.34 0.08
Total from
investment operations 5.07 (1.74) (8.98) (2.12) 1.22 (0.02)
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 $8.69
Total return 4 (%) 26.72 (8.80) (48.15) (22.06) 16.29 5 (0.23) 5,6
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1 $3 $4 $3 $4 $3
Ratio of expenses
to average net assets (%) 2.05 2.06 2.29 2.45 2.56 2.43 7
Ratio of adjusted expenses
to average net assets 8 (%) -- -- -- -- 2.57 2.46 7
Ratio of net investment loss
to average net assets (%) (1.36) (1.71) (1.68) (1.66) (1.53) (1.55) 7
Portfolio turnover (%) 183 162 131 228 121 45
1 Audited by previous auditor.
2 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
3 Based on the average of the shares outstanding.
4 Assumes dividend reinvestment and does not reflect the effect of sales
charges.
5 Total returns would have been lower had certain expenses not been
reduced during the periods shown.
6 Not annualized.
7 Annualized.
8 Does not take into consideration expense reductions during the periods
shown.
See notes to
financial statements.
17
NOTES TO
STATEMENTS
Unaudited
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 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 John Hancock Financial Services,
Inc., 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.
18
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 period ended April 30, 2004.
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 April 30, 2004, the Fund loaned securities having a market
value of $38,190,586 collateralized by cash in the amount of $39,772,539.
The cash collateral was invested in a short-term instrument. Securities
lending expenses are paid by the Fund to the Adviser.
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 $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
19
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.
Such distributions, 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 $2,220 and had no impact on the Fund's ratio of expenses to average net
assets, for the period ended April 30, 2004.
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
period ended April 30, 2004, JH Funds received net up-front sales charges
of $65,393 with regard to sales of Class A shares. Of this amount, $9,572
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $34,221 was paid as sales commissions to
unrelated broker-dealers and $21,600 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 period ended April 30, 2004, JH Funds received net up-front
sales charges of $2,782 with regard to sales of Class C shares. Of this
amount, $2,594 was paid as sales commissions to unrelated broker-dealers
and $188 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
20
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 period ended April 30, 2004, CDSCs received by JH Funds amounted to
$45,243 for Class B shares and $322 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
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. Signature Services reduced the transfer agent fee for Class A,
Class B and Class C shares by $26,027 during the period ended April 30,
2004. 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 period
was at an annual rate of approximately 0.03% of the average daily net asset
value of the Fund. The Fund also paid the Adviser the amount of $160 for
certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and/or officer of the Adviser and/or
its affiliates, as well as Trustee 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.
21
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 10-31-03 PERIOD ENDED 4-30-04 1
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 1,307,717 $11,137,303 718,063 $7,086,674
Repurchased (3,054,320) (25,747,820) (1,215,445) (12,030,572)
Net decrease (1,746,603) ($14,610,517) (497,382) ($4,943,898)
CLASS B SHARES
Sold 1,154,106 $8,948,550 388,455 $3,523,678
Repurchased (2,151,843) (16,592,814) (1,068,052) (9,621,137)
Net decrease (997,737) ($7,644,264) (679,597) ($6,097,459)
CLASS C SHARES
Sold 118,376 $923,718 62,530 $565,418
Repurchased (102,019) (787,491) (64,193) (576,873)
Net increase (decrease) 16,357 $136,227 (1,663) ($11,455)
NET DECREASE (2,727,983) ($22,118,554) (1,178,642) ($11,052,812)
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
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
period ended April 30, 2004, aggregated $90,377,137 and $99,940,210,
respectively.
The cost of investments owned on April 30, 2004, including short-term
investments, for federal income tax purposes, was $202,591,371. Gross
unrealized appreciation and depreciation of investments aggregated
$34,126,619 and $4,762,125, respectively, resulting in net unrealized
appreciation of $29,364,494. 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.
22
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 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.
23
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DELIVERY
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24
FOR YOUR
INFORMATION
TRUSTEES
Dennis S. Aronowitz
Richard P. Chapman, Jr.
William J. Cosgrove
Richard A. Farrell
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt
James A. Shepherdson
*Members of the Audit Committee
OFFICERS
James A. Shepherdson
President and Chief Executive Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President and Secretary
William H. King
Vice President and Treasurer
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
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
25
[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.
200SA 4/04
6/04
JOHN HANCOCK
International Fund
4.30.2004
Semiannual Report
[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 James A. Shepherdson, Chairman, President 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 14
For your information
page 29
To Our Shareholders,
I am pleased to be writing to you as Chairman, President and Chief
Executive Officer of John Hancock Funds, LLC.
As you may know, John Hancock Financial Services, Inc. -- the parent
company of John Hancock Funds -- was acquired by Manulife Financial
Corporation on April 28, 2004. The merger combines two exceptionally strong
companies into a single, integrated, global market leader whose scale and
capital will create an industry pacesetter strengthening our company's
leadership in markets around the world.
Although this change has no impact on the mutual funds you have invested
in, it did bring with it some changes in the executive-level management of
John Hancock Funds. Specifically, Maureen Ford Goldfarb has decided to step
down as chairman, president and chief executive officer in order to pursue
personal interests. Since her appointment in January 2000, Maureen has
provided John Hancock Funds with strong leadership and steady guidance
through several years of extremely turbulent market and industry
conditions.
Effective May 12, 2004, I have also been appointed by your Board of
Trustees to the roles of Trustee, President and Chief Executive Officer of
your fund. I have been in the investment business for over 25 years, most
recently as President of Retirement Services at John Hancock Financial
Services. In that role, my responsibilities included developing and
directing the sale of John Hancock's variable and fixed annuity businesses
through a diverse distribution network of banks and broker-dealers --
including wirehouses, regional brokerage houses and financial planners.
Prior to joining John Hancock, I served as Co-Chief Executive Officer of
MetLife Investors Group, a subsidiary of MetLife, Inc. In that capacity my
responsibilities included the design, manufacture and distribution of
MetLife's annuity and life insurance products sold through third-party
channels.
Although there has been a change in executive-level management, the one
thing that never wavers is John Hancock Funds' commitment to placing the
needs of our shareholders above all else. We are all dedicated to the task
of working with you and your financial advisors to help you reach your
long-term financial goals.
Sincerely,
/S/ JAMES A. SHEPHERDSON
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of April 30, 2004. 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 six months
* Rising corporate profits and accelerating growth boosted international
equity markets.
* The Fund's holdings in most countries and sectors produced positive
results.
* On a relative basis, the Fund's emphasis on growth stocks held it back as
value stocks outperformed growth.
[Bar chart with heading "John Hancock International Fund." Under the
heading is a note that reads "Fund performance for the six months ended
April 30, 2004." The chart is scaled in increments of 4% with 0% at the
bottom and 8% at the top. The first bar represents the 7.25% total return
for Class A. The second bar represents the 6.88% total return for Class B.
The third bar represents the 6.88% total return for Class C. The fourth bar
represents the 7.78% 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
2.5% Roche Holding AG
2.2% Vodafone Group Plc
2.2% Mizuho Financial Group, Inc.
1.7% Diageo Plc
1.7% Kyocera Corp.
1.6% Toyota Motor Corp.
1.5% Man Group Plc
1.4% Holcim Ltd.
1.4% Siemens AG
1.4% HSBC Holdings Plc
As a percentage of net assets on April 30, 2004.
1
BY HORACIO A. VALEIRAS, CFA, FOR THE NICHOLAS-APPLEGATE
CAPITAL MANAGEMENT PORTFOLIO MANAGEMENT TEAM
MANAGERS'
REPORT
JOHN HANCOCK
International Fund
International equity markets rallied sharply during the six months ended
April 30, 2004. Investors bid stock prices higher in response to rising
corporate profits and accelerating growth in many of the world's economies.
Depreciation of the U.S. dollar boosted performance for U.S.-based
investors, as returns in local currencies were generally worth more in
dollar terms.
In Japan, the world's second-largest economy, a number of favorable
developments inspired investor enthusiasm. Japanese banks, which were at
the center of the country's problems in the 1990s, saw non-performing loans
decline and evidence of a revival in loan growth. In February, Japan
reported that its economy grew at a 7% annual rate in the fourth quarter of
2003 -- its best performance since 1990. Business sentiment among large
manufacturers reached a seven-year high and domestic consumption picked up,
illustrated by better-than-expected earnings from Japanese retailers.
"International equity
markets rallied sharply
during the six months
ended April 30, 2004."
In Europe, while high unemployment and the strength of the euro restrained
economic activity, corporate profit growth soared to a level unseen in more
than two decades. Earnings acceleration was driven by easy year-over-year
comparisons and a recovery in the global capital-expenditure cycle that
fueled demand for European exports. Business with China was particularly
strong, as European companies supplied infrastructure equipment used to
build Chinese power plants, railways and water-treatment systems.
This period's gain in international equity prices was broad-based, with
stocks in most countries and economic sectors posting solid increases. On a
comparative basis, developed markets outperformed emerging markets, and
defensive sectors beat economically sensitive groups. Investors shied away
from riskier equities given concerns the surging U.S. economy would prompt
the Federal Reserve to begin raising U.S. interest rates sooner than
expected. Weak domestic demand in Europe made an early rate hike from
2
the European Central Bank less likely, despite brisk exports, an upturn in
manufacturing and a rebound in business confidence.
FUND PERFORMANCE EXPLAINED
For the six months ended April 30, 2004, John Hancock International Fund's
Class A, Class B, Class C and Class I shares gained 7.25%, 6.88%, 6.88% and
7.78%, respectively, at net asset value. According to Lipper, Inc.,1 the
average international fund increased 10.46% during the same period, while
the benchmark MSCI All Country World Free Ex-U.S. Index rose 11.71%. 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.
"The Fund's holdings
in most countries and
sectors of investment
generated gains, result-
ing in a solid total return
for the period."
The Fund's holdings in most countries and sectors of investment generated
gains, resulting in a solid total return for the period. Absolute
performance was especially strong in Mexico, Spain and the energy sector,
where positions were up more than 20% on average. On a relative basis, the
Fund lagged its peer group and the MSCI All Country World Free Ex-U.S.
Index. The Fund had more exposure to companies with higher growth
expectations than its peer group and the index, which hurt performance
given that growth stocks trailed value stocks. Issue selection in
Switzerland, the Netherlands and the consumer discretionary sector also
negatively affected the Fund's results versus the benchmark.
On the positive side, security selection in Japan helped relative
performance, as did a modest overweight in Russia, which was one of the
best-performing countries this period. Stock selection among financial
services companies favorably impacted relative results, and an underweight
in basic materials, a sector that trailed the broad market, was another
plus.
LEADERS AND LAGGARDS
The Fund's top-performing stocks included Shinsei Bank and Mizuho Financial
Group, two Japanese banks that benefited
3
from increased confidence in the country's economic recovery. U.K.-based
mmO2, a provider of mobile communications services, was another strong
performer amid rumors the company was being purchased. Decliners included
Adecco, a Swiss staffing firm that confronted accounting issues in its U.S.
division; Netherlands-based ASM International, a semiconductor equipment
maker with near-term profit concerns; and Aegis Group, a U.K. advertising
and market research company that experienced a slowdown in new business.
[Table at top left-hand side of page entitled "Top five industry groups."
The first listing is Banks -- foreign 12%, the second is Electronics 12%, the
third Telecommunications 12%, the fourth Medical 8%, and the fifth Oil &
gas 6%.]
FUND MOVES
As a result of our stock-by-stock investment decisions, there were some
changes to the Fund's country and sector weightings during the period. For
example, we reduced holdings in emerging Asian countries, most notably
Taiwan, and increased holdings in Europe, where we identified more
promising growth opportunities. In terms of sectors, we decreased positions
in basic materials and financial services stocks, and increased the Fund's
weighting in consumer discretionary names.
[Bar chart at middle of page with heading "Top five countries As a
percentage of net assets on 4-30-04." The chart is divided into five
sections: Japan 21%, United Kingdom 21%, Switzerland 9%, France 9% and
South Korea 5%.]
As of April 30, 2004, we believe the Fund is well positioned to capitalize
on the favorable investment climate. The Fund was overweight stocks in
emerging Asia and underweight European companies relative to the benchmark,
despite the changes to country exposures described above. The Fund was
overweight the consumer discretionary and technology sectors and
underweight basic materials and financial services companies.
4
[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 Shinsei
Bank followed by an up arrow with the phrase "Increased confidence in the
country's economic recovery." The second listing is mm02 followed by an up
arrow with the phrase "Acquisition rumors boost stock." The third listing
is Adecco followed by a down arrow with the phrase "Accounting issues in
U.S. division."]
OUTLOOK
Nicholas-Applegate's outlook for international equities remains positive.
Many of the world's economies are experiencing accelerating growth rates as
business and consumer spending picks up. In particular, strength in Asian
export markets and signs of a recovery in U.S. employment bode well for
continued global economic expansion. Growth expectations for Europe and
Japan are more subdued, but corporate earnings are strong in both regions.
Although interest rates may be headed higher in the near future, global
monetary policy remains accommodative and supports corporate investment. We
are especially optimistic in our outlook for international growth stocks,
given increased advertising and media budgets, robust retail sales and
solid demand from consumers and corporations for the latest technology.
"Many of the world's
economies are experiencing
accelerating growth rates
as business and consumer
spending picks up."
Throughout the rest of 2004 and beyond, we will consistently adhere to our
research-intensive stock selection process. We are confident that our focus
on making timely investments in companies exhibiting positive, sustainable
change will benefit the Fund's shareholders over the long term.
This commentary reflects the views of the portfolio management team 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.
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.
5
A LOOK AT
PERFORMANCE
For the period ended
April 30, 2004
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 24.02% 24.92% 27.58% 31.84%
Five years -8.03% -8.08% -7.92% --
Ten years -1.93% -1.98% -- --
Since inception -- -- -6.19% 4.45%
Cumulative total returns with maximum sales charge (POP)
Six months 1.83% 1.88% 4.80% 7.78%
One year 24.02% 24.92% 27.58% 31.84%
Five years -34.22% -34.39% -33.79% --
Ten years -17.72% -18.16% -- --
Since inception -- -- -31.48% 9.87%
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.
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.
1 For certain types of investors as described in the Fund's Class I share
prospectus.
6
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.
MSCI
All Country
Cum Value Cum Value World
of $10K of $10K Ex-U.S.
Plot Date (No Load) (w/Load) Free Index
4-30-04 $10,000 $9,500 $10,000
5-31-94 10,196 9,686 9,988
10-31-94 10,600 10,070 10,507
4-30-95 9,901 9,406 10,300
10-31-95 10,075 9,570 10,112
4-30-96 10,990 10,440 11,338
10-31-96 10,768 10,229 10,968
4-30-97 11,103 10,547 11,219
10-31-97 10,421 9,900 11,292
4-30-98 12,155 11,546 12,798
10-31-98 11,006 10,455 11,625
4-30-99 12,505 11,879 13,504
10-31-99 13,679 12,994 14,317
4-30-00 14,423 13,701 15,411
10-31-00 12,290 11,675 13,818
4-30-01 10,170 9,661 12,540
10-31-01 8,037 7,635 10,169
4-30-02 8,311 7,895 10,919
10-31-02 6,633 6,301 8,871
4-30-03 6,633 6,301 9,014
10-31-03 8,076 7,672 11,250
4-30-04 8,662 8,228 12,416
Line chart with the heading "GROWTH OF $10,000." Within the chart are three
lines. The first line represents the Index and is equal to $12,416 as of
April 30, 2004. 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 $8,662 as of April 30, 2004. 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 $8,228 as
of April 30, 2004.
Class B 1 Class C 1 Class I 2
Period beginning 4-30-94 6-1-98 3-1-02
Without sales charge $8,184 $6,918 $10,987
With maximum sales charge $8,184 $6,852 $10,987
Index $12,416 $10,005 $11,854
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 April 30, 2004. 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.
7
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
April 30, 2004
(unaudited)
This schedule is divided into five main categories: common stocks,
preferred stocks, securities-linked warrants, units and short-term
investments. The common and preferred stocks, securities-linked warrants
and units are further broken down by country. Short-term investments, which
represent the Fund's cash position, are listed last.
ISSUER SHARES VALUE
COMMON STOCKS 91.91% $94,559,338
(Cost $84,638,884)
Australia 3.43% 3,526,267
BNP Billiton Ltd. (Diversified Operations) 59,800 495,361
News Corp. Ltd. (The) (Media) 135,081 1,245,782
Rio Tinto Ltd. (Diversified Operations) 18,900 444,020
Westpac Banking Corp. (Banks -- Foreign) 106,295 1,341,104
Austria 1.01% 1,041,867
Telekom Austria AG* (Telecommunications) 70,949 1,041,867
Canada 2.04% 2,096,335
ATI Technologies, Inc.* (Electronics) 47,200 686,760
Petro-Canada (Oil & Gas) 14,700 647,965
Precision Drilling Corp.* (Oil & Gas) 15,900 761,610
France 9.36% 9,633,782
Alcatel SA* (Telecommunications) 53,872 802,720
Axa SA (Insurance) 20,600 433,879
Bouygues SA (Building) 30,600 1,045,066
Christian Dior SA (Cosmetics & Personal Care) 17,565 1,103,340
Havas SA (Advertising) 198,771 1,098,459
L'Oreal SA (Cosmetics & Personal Care) 15,146 1,142,032
Societe Generale SA (Banks -- Foreign) 14,483 1,206,627
Television Francaise 1 SA (Media) 25,472 786,878
Thales SA (Electronics) 25,416 944,188
Total SA (Oil & Gas) 5,788 1,070,593
Germany 3.87% 3,985,353
Deutsche Post AG (Transportation) 43,897 968,239
Merck KGaA (Medical) 21,046 1,125,212
SAP AG (Computers) 3,000 458,883
Siemens AG (Diversified Operations) 19,957 1,433,019
Hong Kong 3.10% 3,188,075
CLP Holdings Ltd. (Utilities) 20,300 108,009
Esprit Holdings Ltd. (Diversified Operations) 177,300 727,403
Hang Lung Properties Ltd. (Real Estate Operations) 472,000 638,427
See notes to
financial statements.
8
FINANCIAL STATEMENTS
ISSUER SHARES VALUE
Hong Kong (continued)
Henderson Land Development Co., Ltd. (Real Estate Operations) 168,000 $753,865
Hutchison Whampoa Ltd. (Diversified Operations) 57,000 383,664
Sino Land Co., Ltd. (Real Estate Operations) 952,000 576,707
Italy 2.29% 2,358,489
ENI SpA (Oil & Gas) 33,900 689,216
Mediaset SpA (Media) 7,800 85,555
Saipem SpA (Oil & Gas) 77,700 728,379
Telecom Italia Mobile SpA (Telecommunications) 149,900 855,339
Japan 21.36% 21,970,813
Ajinomoto Co., Inc. (Food) 90,000 1,052,875
Asahi Glass Co., Ltd. (Building) 76,000 804,386
Canon, Inc. (Office) 22,000 1,154,275
Chugai Pharmaceutical Co., Ltd. (Medical) 72,800 1,101,681
Daiwa Securities Group, Inc. (Finance) 157,000 1,180,826
Fuji Photo Film Co., Ltd. (Leisure) 36,000 1,158,081
Ito-Yokado Co., Ltd. (Retail) 24,000 998,233
JFE Holdings, Inc. (Steel) 23,600 529,292
Kyocera Corp. (Electronics) 20,800 1,720,846
Matsushita Electric Industrial Co., Ltd. (Electronics) 89,000 1,307,317
Mitsubishi Estate Co., Ltd. (Real Estate Operations) 57,000 674,052
Mizuho Financial Group, Inc. (Banks -- Foreign) 472 2,232,649
Nintendo Co., Ltd. (Leisure) 9,200 868,687
NTT DoCoMo, Inc. (Telecommunications) 676 1,341,525
Sumitomo Corp. (Diversified Operations) 118,000 905,677
Sumitomo Mitsui Financial Group, Inc. (Banks -- Foreign) 93 702,841
Sumitomo Trust & Banking Co., Ltd. (Banks -- Foreign) 113,000 679,915
Tokyo Gas Co., Ltd. (Utilities) 226,000 837,606
Toppan Printing Co., Ltd. (Printing -- Commercial) 93,000 1,093,027
Toyota Motor Corp. (Automobiles/Trucks) 45,000 1,627,022
Mexico 1.09% 1,125,540
America Movil SA de CV, American Depositary Receipts (ADR)
(Telecommunications) 33,300 1,125,540
Netherlands 3.45% 3,553,954
ASM International NV* (Electronics) 30,259 627,524
ASML Holding NV (NY Reg Shares)* (Electronics) 61,000 948,550
ING Groep NV (Insurance) 46,000 985,951
Royal Philips Electronics NV (Electronics) 17,700 482,071
STMicroelectronics NV (Electronics) 23,128 509,858
Norway 0.92% 947,507
Telenor ASA (Telecommunications) 144,123 947,507
Russia 1.74% 1,792,016
Gazprom (ADR) (Oil & Gas) 16,400 506,760
Lukoil (ADR) (Oil & Gas) 11,800 1,285,256
See notes to
financial statements.
9
FINANCIAL STATEMENTS
ISSUER SHARES VALUE
Singapore 0.57% $588,322
Keppel Corp. Ltd. (Diversified Operations) 140,000 588,322
South Korea 4.36% 4,482,226
Hana Bank (Banks -- Foreign) 22,900 494,750
Hyundai Department Store Co., Ltd. (Retail) 4,440 119,954
Korean Air Co. Ltd. (Transportation) 16,260 221,724
LG Chem Ltd. (Chemicals) 4,470 180,575
LG Electronics, Inc. (Electronics) 14,670 890,190
NHN Corp. (Computers) 5,558 495,476
Samsung Electronics Co., Ltd. (Electronics) 2,060 977,901
Shinhan Financial Group Co., Ltd. (Finance) 16,150 281,474
Shinsegae Co., Ltd. (Retail) 780 176,162
SK Telecom Co., Ltd. (Telecommunications) 2,370 403,972
Ssangyong Motor Co.* (Automobiles/Trucks) 33,020 240,048
Spain 0.82% 839,410
Banco Bilbao Vizcaya Argentaria SA (Banks -- Foreign) 63,600 839,410
Sweden 2.34% 2,403,393
Ericsson (LM) Telefonaktiebolaget AB* (ADR) (Telecommunications) 50,400 1,344,168
Skandinaviska Enskilda Banken AB (A Shares) (Banks -- Foreign) 72,900 1,059,225
Switzerland 8.39% 8,634,998
Adecco SA (Business Services -- Misc.) 19,499 871,485
Holcim Ltd. (Building) 28,416 1,467,261
Nestle SA (Food) 3,195 808,237
Novartis AG (Medical) 20,188 899,943
Roche Holding AG (Medical) 24,701 2,590,881
Synthes, Inc. (Medical) 777 844,357
UBS AG (Banks -- Foreign) 16,221 1,152,834
Taiwan 0.01% 6,813
Eva Airways Corp.* (Transportation) 16,704 6,813
Thailand 0.78% 802,049
Advanced Info Service Pcl (Telecommunications) 320,900 802,049
United Kingdom 20.98% 21,582,129
Aegis Group Plc (Advertising) 324,730 519,718
Berkeley Group Plc (Building) 61,603 1,070,597
British Sky Broadcasting Group Plc* (Media) 76,300 901,149
Carnival Plc (Leisure) 18,148 813,265
Celltech Group Plc* (Medical) 160,576 1,196,703
Diageo Plc (Beverages) 128,395 1,722,483
Electrocomponents Plc (Electronics) 128,006 809,259
George Wimpey Plc (Building) 177,700 1,292,808
HSBC Holdings Plc (Banks -- Foreign) 97,607 1,398,589
Imperial Tobacco Group Plc (Tobacco) 48,000 1,063,167
InterContinental Hotels Group Plc (Leisure) 106,349 993,898
Man Group Plc (Finance) 51,000 1,526,654
mm02 Plc* (Telecommunications) 604,673 1,072,305
See notes to
financial statements.
10
FINANCIAL STATEMENTS
ISSUER SHARES VALUE
United Kingdom (continued)
Next Plc (Retail) 37,855 $936,473
Reckitt Benckiser Plc (Soap & Cleaning Preparations) 44,000 1,143,891
Royal Bank of Scotland Group Plc (Banks -- Foreign) 44,819 1,345,603
Tesco Plc (Retail) 124,400 548,759
United Business Media Plc (Printing -- Commercial) 115,510 942,270
Vodafone Group Plc (Telecommunications) 940,329 2,284,538
PREFERRED STOCKS 0.91% $941,282
(Cost $358,022)
South Korea 0.91% 941,282
LG Household & Health Care Ltd. (Soap & Cleaning Preparations) 9,780 148,782
Samsung Electronics Co., Ltd. (Electronics) 2,870 792,500
SECURITIES-LINKED WARRANTS 2.47% $2,545,926
(Cost $2,756,944)
India 0.02% 16,842
Hindustan Lever Ltd.*+ (Soap & Cleaning Preparations) 115,000 16,842
Taiwan 2.45% 2,529,084
Cathay Financial Holding Co., Ltd.*# (Insurance) 562,000 998,286
United Microelectronics Corp.*# (Electronics) 1,132,245 1,015,839
Yageo Corp.*# (Electronics) 945,000 514,959
UNITS 1.06% $1,086,023
(Cost $1,078,968)
Switzerland 1.06% 1,086,023
Compagnie Financiere Richemont AG* (Retail) 42,223 1,086,023
See notes to
financial statements.
11
FINANCIAL STATEMENTS
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000S OMITTED) VALUE
SHORT-TERM INVESTMENTS 2.90% $2,986,000
(Cost $2,986,000)
Joint Repurchase Agreement 2.90%
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc. --
Dated 04-30-04, due 05-03-04 (Secured by
U.S. Treasury Inflation Indexed Bond, 3.875%
due 04-15-29 and U.S. Treasury Inflation
Indexed Note, 3.000% due 07-15-12) 0.930% $2,986 2,986,000
TOTAL INVESTMENTS 99.25% $102,118,569
OTHER ASSETS AND LIABILITIES, NET 0.75% $768,748
TOTAL NET ASSETS 100.00% $102,887,317
* Non-income-producing security.
+ Credit-linked warrant.
# Equity-linked warrant.
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.
12
FINANCIAL STATEMENTS
PORTFOLIO
CONCENTRATION
April 30, 2004
(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 1.57%
Automobiles/Trucks 1.82
Banks -- Foreign 12.10
Beverages 1.67
Building 5.52
Business Services -- Misc. 0.85
Chemicals 0.18
Computers 0.93
Cosmetics & Personal Care 2.18
Diversified Operations 4.84
Electronics 11.88
Finance 2.91
Food 1.81
Insurance 2.35
Leisure 3.73
Media 2.94
Medical 7.54
Office 1.12
Oil & Gas 5.53
Printing -- Commercial 1.98
Real Estate Operations 2.57
Retail 3.76
Soap & Cleaning Preparations 1.27
Steel 0.51
Telecommunications 11.68
Tobacco 1.03
Transportation 1.16
Utilities 0.92
Short-term investments 2.90
Total Investments 99.25%
See notes to
financial statements.
13
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2004
(unaudited)
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 $91,818,723) $102,118,569
Cash 805
Foreign cash at value (cost $45,865) 45,868
Receivable for investments sold 2,849,048
Receivable for shares sold 52,968
Dividends and interest receivable 338,097
Other assets 63,427
Total assets 105,468,782
LIABILITIES
Payable for investments purchased 2,000,485
Payable for shares repurchased 108,519
Payable to affiliates
Management fees 94,880
Distribution and service fees 6,533
Other 158,586
Other payables and accrued expenses 212,462
Total liabilities 2,581,465
NET ASSETS
Capital paid-in 166,438,217
Accumulated net realized loss on investments
and foreign currency transactions (73,399,889)
Net unrealized appreciation of investments and
translation of assets and liabilities in foreign currencies 10,288,230
Accumulated net investment loss (439,241)
Net assets $102,887,317
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($67,056,309 [DIV] 10,065,827 shares) $6.66
Class B ($30,458,595 [DIV] 4,905,291 shares) $6.21
Class C ($4,101,138 [DIV] 660,135 shares) $6.21
Class I ($1,271,275 [DIV] 187,114 shares) $6.79
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($6.66 [DIV] 95%) $7.01
Class C ($6.21 [DIV] 99%) $6.27
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.
14
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
April 30, 2004
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in oper-
ating the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $115,982) $876,841
Interest 8,620
Total investment income 885,461
EXPENSES
Investment management fees 456,844
Class A distribution and service fees 98,986
Class B distribution and service fees 155,012
Class C distribution and service fees 18,553
Class A, B and C transfer agent fees 392,745
Class I transfer agent fees 293
Custodian fees 92,917
Registration and filing fees 36,291
Professional fees 17,000
Accounting and legal services fees 15,282
Printing 10,355
Miscellaneous 9,148
Interest expense 5,060
Trustees' fees 4,017
Total expenses 1,312,503
Less expense reductions (8,592)
Net expenses 1,303,911
Net investment loss (418,450)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
Investments 14,422,253
Foreign currency transactions (448,051)
Change in net unrealized appreciation (depreciation) of
Investments (6,789,458)
Translation of assets and liabilities in foreign currencies (10,872)
Net realized and unrealized gain 7,173,872
Increase in net assets from operations $6,755,422
1 Semiannual period from 11-1-03 through 4-30-04.
See notes to
financial statements.
15
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 differ-
ence reflects
earnings less
expenses, any
investment gains
and losses,
distributions, if
any, paid to share-
holders and any
increase or
decrease in money
shareholders
invested in the
Fund.
YEAR PERIOD
ENDED ENDED
10-31-03 4-30-04 1
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($332,738) ($418,450)
Net realized gain 3,128,084 13,974,202
Change in net unrealized
appreciation (depreciation) 10,775,633 (6,800,330)
Increase in net assets
resulting from operations 13,570,979 6,755,422
From Fund share transactions 71,228,289 (731,730)
NET ASSETS
Beginning of period 12,064,357 96,863,625
End of period 2 $96,863,625 $102,887,317
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
2 Includes accumulated net investment loss of $20,791 and $439,241,
respectively.
See notes to
financial statements.
16
FINANCIAL HIGHLIGHTS
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 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.81 $10.95 $9.45 $6.18 $5.10 $6.21
Net investment loss 2 (0.02) (0.04) (0.05) (0.04) (0.04) (0.02)
Net realized and unrealized
gain (loss) on investments 2.16 (1.01) (3.22) (1.04) 1.15 0.47
Total from
investment operations 2.14 (1.05) (3.27) (1.08) 1.11 0.45
Less distributions
From net realized gain -- (0.45) -- -- -- --
Net asset value,
end of period $10.95 $9.45 $6.18 $5.10 $6.21 $6.66
Total return 3,4 (%) 24.29 (10.15) (34.60) (17.48) 21.76 7.25 5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $7 $15 $8 $6 $62 $67
Ratio of expenses
to average net assets (%) 1.96 1.88 2.23 2.38 2.45 2.33 6
Ratio of adjusted expenses
to average net assets 7 (%) 3.81 3.44 3.83 4.43 3.00 2.35 6
Ratio of net investment loss
to average net assets (%) (0.20) (0.43) (0.65) (0.68) (0.63) (0.59) 6
Portfolio turnover (%) 113 163 278 228 8 216 8 99
See notes to
financial statements.
17
FINANCIAL HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.55 $10.55 $9.04 $5.86 $4.81 $5.81
Net investment loss 2 (0.09) (0.12) (0.10) (0.08) (0.07) (0.04)
Net realized and unrealized
gain (loss) on investments 2.09 (0.94) (3.08) (0.97) 1.07 0.44
Total from
investment operations 2.00 (1.06) (3.18) (1.05) 1.00 0.40
Less distributions
From net realized gain -- (0.45) -- -- -- --
Net asset value,
end of period $10.55 $9.04 $5.86 $4.81 $5.81 $6.21
Total return 3,4 (%) 23.39 (10.65) (35.18) (17.92) 20.79 6.88 5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $9 $12 $6 $5 $30 $30
Ratio of expenses
to average net assets (%) 2.63 2.57 2.93 3.08 3.15 3.03 6
Ratio of adjusted expenses
to average net assets 7 (%) 4.48 4.13 4.53 5.13 3.70 3.05 6
Ratio of net investment loss
to average net assets (%) (0.91) (1.13) (1.34) (1.38) (1.28) (1.31) 6
Portfolio turnover (%) 113 163 278 228 8 216 8 99
See notes to
financial statements.
18
FINANCIAL HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.55 $10.57 $9.05 $5.87 $4.81 $5.81
Net investment loss 2 (0.10) (0.11) (0.10) (0.08) (0.06) (0.04)
Net realized and unrealized
gain (loss) on investments 2.12 (0.96) (3.08) (0.98) 1.06 0.44
Total from
investment operations 2.02 (1.07) (3.18) (1.06) 1.00 0.40
Less distributions
From net realized gain -- (0.45) -- -- -- --
Net asset value,
end of period $10.57 $9.05 $5.87 $4.81 $5.81 $6.21
Total return 3,4 (%) 23.63 (10.72) (35.14) (18.06) 20.79 6.88 5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 9 $1 $1 $1 $3 $4
Ratio of expenses
to average net assets (%) 2.66 2.57 2.93 3.08 3.15 3.03 6
Ratio of adjusted expenses
to average net assets 7 (%) 4.51 4.13 4.53 5.13 3.70 3.05 6
Ratio of net investment loss
to average net assets (%) (1.04) (1.07) (1.35) (1.38) (1.11) (1.26) 6
Portfolio turnover (%) 113 163 278 228 8 216 8 99
See notes to
financial statements.
19
FINANCIAL HIGHLIGHTS
CLASS I SHARES
PERIOD ENDED 10-31-02 10 10-31-03 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $6.18 $5.12 $6.30
Net investment income (loss) 2 (0.01) 0.03 0.01
Net realized and unrealized
gain (loss) on investments (1.05) 1.15 0.48
Total from
investment operations (1.06) 1.18 0.49
Net asset value,
end of period $5.12 $6.30 $6.79
Total return 3 (%) (17.15) 4,5 23.05 4 7.78 5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1 $1 $1
Ratio of expenses
to average net assets (%) 2.04 6 1.60 1.32 6
Ratio of adjusted expenses
to average net assets 7 (%) 4.09 6 2.15 --
Ratio of net investment income
(loss) to average net assets (%) (0.34) 6 0.58 0.44 6
Portfolio turnover (%) 228 8 216 8 99
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
2 Based on the average of the shares outstanding.
3 Assumes dividend reinvestment and does not reflect the effect of sales
charges.
4 Total returns would have been lower had certain expenses not been reduced
during the periods shown.
5 Not annualized.
6 Annualized.
7 Does not take into consideration expense reductions during the periods
shown.
8 Excludes merger activity.
9 Less than $500,000.
10 Class I shares began operations on 3-01-02.
See notes to
financial statements.
20
NOTES TO
STATEMENTS
Unaudited
NOTE A
Accounting policies
John Hancock International Fund (the "Fund") is a diversified series of
John Hancock Investment III Trust, 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 John Hancock Financial Services,
Inc., 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.
21
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 period ended April 30, 2004.
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 underlying securities are sold and
22
the warrant redeemed 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 redeemed for 100% of the
value of the underlying securities, less transaction costs.
Securities-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 April 30, 2004.
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 acquired 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
23
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.
Such distributions, 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) 0.90% 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. The
Adviser has a subadvisory agreement with Nicholas-Applegate Capital
Management LP. The Fund is not responsible for payment of the subadvisory
fees.
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.
There were no expense reductions related to this total expense limitation
for the period ended April 30, 2004. 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
period ended April 30, 2004, JH Funds received net up-front sales charges
of $34,758 with regard to sales of Class A shares. Of this amount, $4,645
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $21,345 was paid as sales commissions to
unrelated broker-dealers and $8,768 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 period ended April 30, 2004, JH Funds received net up-front
sales charges of $3,691 with regard to sales of Class C shares. Of this
amount, $3,675 was paid as sales commissions to unrelated broker-dealers
and $16 was paid as sales commissions to sales personnel of Signator
Investors.
24
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 period ended April 30, 2004, CDSCs received by JH Funds
amounted to $26,219 for Class B shares and $396 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
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 each class'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. 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. 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. Signature Services also reduced the transfer agent fee for Class A,
Class B and Class C shares by $8,592 during the period ended April 30,
2004. Signature Services reserves the right to terminate these limitations
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 period
was at an annual rate of approximately 0.03% of the average daily net asset
value of the Fund. The Fund also paid the Adviser the amount of $195 for
certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and/or officer of the Adviser and/or
its affiliates, as well as Trustee 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.
25
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 10-31-03 PERIOD ENDED 4-30-04 1
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 1,647,644 $9,092,862 1,223,602 $8,309,167
Issued in reorganizations 9,576,643 51,258,116 -- --
Repurchased (2,256,593) (12,418,091) (1,217,628) (8,141,716)
Net increase 8,967,694 $47,932,887 5,974 $167,451
CLASS B SHARES
Sold 452,210 $2,359,494 704,090 $4,468,904
Issued in reorganizations 4,660,904 23,715,852 -- --
Repurchased (894,451) (4,591,171) (996,021) (6,226,667)
Net increase (decrease) 4,218,663 $21,484,175 (291,931) ($1,757,763)
CLASS C SHARES
Sold 193,720 $972,776 217,038 $1,368,926
Issued in reorganizations 313,872 1,607,553 -- --
Repurchased (129,277) (641,150) (98,037) (618,550)
Net increase 378,315 $1,939,179 119,001 $750,376
CLASS I SHARES
Sold 177,491 $978,406 32,723 $226,359
Repurchased (201,766) (1,106,358) (17,286) (118,153)
Net increase (decrease) (24,275) ($127,952) 15,437 $108,206
NET INCREASE (DECREASE) 13,540,397 $71,228,289 (151,519) ($731,730)
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
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
period ended April 30, 2004, aggregated $98,916,910 and $104,407,433,
respectively.
The cost of investments owned on April 30, 2004, including short-term
investments, for federal income tax purposes, was $91,872,973. Gross
unrealized appreciation and depreciation of investments aggregated
$12,668,293 and $2,422,697, respectively, resulting in net unrealized
appreciation of $10,245,596. 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.
26
NOTE E
Reorganizations
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.
27
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 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.
28
FOR YOUR
INFORMATION
TRUSTEES
Dennis S. Aronowitz
Richard P. Chapman, Jr.
William J. Cosgrove
Richard A. Farrell
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt
James A. Shepherdson
*Members of the Audit Committee
OFFICERS
James A. Shepherdson
President and
Chief Executive Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President
and Secretary
William H. King
Vice President and Treasurer
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
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
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On the SEC's Web site www.sec.gov
29
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
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This report is for the information
of the shareholders of the John Hancock
International Fund
400SA 4/04
6/04
JOHN HANCOCK
Mid Cap Growth Fund
4.30.2004
Semiannual Report
[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 James A. Shepherdson, Chairman, President 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
For your information
page 25
To Our Shareholders,
I am pleased to be writing to you as Chairman, President and Chief
Executive Officer of John Hancock Funds, LLC.
As you may know, John Hancock Financial Services, Inc. -- the parent
company of John Hancock Funds -- was acquired by Manulife Financial
Corporation on April 28, 2004. The merger combines two exceptionally strong
companies into a single, integrated, global market leader whose scale and
capital will create an industry pacesetter strengthening our company's
leadership in markets around the world.
Although this change has no impact on the mutual funds you have invested
in, it did bring with it some changes in the executive-level management of
John Hancock Funds. Specifically, Maureen Ford Goldfarb has decided to step
down as chairman, president and chief executive officer in order to pursue
personal interests. Since her appointment in January 2000, Maureen has
provided John Hancock Funds with strong leadership and steady guidance
through several years of extremely turbulent market and industry
conditions.
Effective May 12, 2004, I have also been appointed by your Board of
Trustees to the roles of Trustee, President and Chief Executive Officer of
your fund. I have been in the investment business for over 25 years, most
recently as President of Retirement Services at John Hancock Financial
Services. In that role, my responsibilities included developing and
directing the sale of John Hancock's variable and fixed annuity businesses
through a diverse distribution network of banks and broker-dealers --
including wirehouses, regional brokerage houses and financial planners.
Prior to joining John Hancock, I served as Co-Chief Executive Officer of
MetLife Investors Group, a subsidiary of MetLife, Inc. In that capacity my
responsibilities included the design, manufacture and distribution of
MetLife's annuity and life insurance products sold through third-party
channels.
Although there has been a change in executive-level management, the one
thing that never wavers is John Hancock Funds' commitment to placing the
needs of our shareholders above all else. We are all dedicated to the task
of working with you and your financial advisors to help you reach your
long-term financial goals.
Sincerely,
/S/ JAMES A. SHEPHERDSON
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of April 30, 2004. 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-
capitalization
companies (in
the capitalization
range of the
Russell Midcap
Growth Index)
with above-
average earnings
growth.
Over the last six months
* The stock market was volatile as investors rotated from economically
sensitive sectors such as technology to more defensive sectors such as
health care.
* Mid-cap stocks held up well, beating large-cap stocks, but lagging
small-cap stocks.
* Disappointing stock selection in the technology and consumer
discretionary sectors hurt Fund performance.
[Bar chart with heading "John Hancock Mid Cap Growth Fund." Under the
heading is a note that reads "Fund performance for the six months ended
April 30, 2004." The chart is scaled in increments of 1% with -1% at the
bottom and 1% at the top. The first bar represents the 0.00% total return
for Class A. The second bar represents the -0.39% total return for Class B.
The third bar represents the -0.39% total return for Class C. The fourth
bar represents the 0.47% 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
2.8% Comverse Technology, Inc.
2.8% Biogen Idec, Inc.
2.6% Caremark Rx, Inc.
2.6% Symantec Corp.
2.4% BJ Services Co.
2.4% Yankee Candle Co, Inc. (The)
2.3% Panera Bread Co.
2.3% Pactiv Corp.
2.3% Coach, Inc.
2.2% Patterson-UTI Energy, Inc.
As a percentage of net assets on April 30, 2004.
1
MANAGER'S
REPORT
BY THOMAS F. NORTON, CFA, PORTFOLIO MANAGER
JOHN HANCOCK
Mid Cap Growth Fund
Robert J. Uek, previously a member of the Fund's portfolio management team,
recently left John Hancock Advisers, LLC to pursue other opportunities.
Stock prices closed higher for the six months ended April 30, 2004, but
gave investors a bumpy ride. The market gained ground early on, fueled by
signs the economy was improving and corporate earnings were meeting or
beating expectations. Economically sensitive sectors such as technology and
industrials led the rally. After the New Year began, however, sentiment
shifted. Investors began to lock in profits, selling stocks that had
previously performed well and moving into sectors such as health care that
tend to be less affected by changes in the economy or interest rates. In
April, the market changed course again, as investors began to reward
companies that met expectations. In this volatile six-month period, the
Russell Midcap Growth Index returned 5.74%. Mid-cap stocks beat their
large-cap peers, but lagged small-cap names, which reaped the most benefit
from an improving economy.
"Stock prices closed
higher for the six
months ended April 30,
2004, but gave a bumpy
ride to investors."
STRATEGY AND PERFORMANCE REVIEW
John Hancock Mid Cap Growth Fund remained diversified across industries,
focusing on solid, well-run companies with strong earnings growth prospects
that were selling at reasonable valuations. We continued to tilt the Fund
toward economically sensitive sectors, even though stocks in these areas
faltered in the first quarter of 2004. We took a long-term approach,
believing that stocks that continued to meet or exceed investors'
expectations would be rewarded with higher prices. However, we also
continued our disciplined approach of re-evaluating and often selling
individual stocks that reached our pre-established price targets.
2
[A photo of Thomas Norton flush right next to first paragraph.]
For the six months ended April 30, 2004, the Fund's Class A, Class B, Class
C and Class I shares returned 0.00%, -0.39%, -0.39% and 0.47%,
respectively, at net asset value. The Fund trailed the average mid-cap
growth fund, which returned 2.64%, 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. Weak performance from technology and consumer discretionary
stocks -- sectors that represented sizable weights in the portfolio -- hurt
performance. In addition, specific stocks declined when their companies
missed earnings or revenue expectations.
WINNERS AND LOSERS IN TECHNOLOGY
Technology stocks suffered overall, as investors took profits amid concerns
the sector's run might be over. In addition, certain stocks that we owned
tumbled sharply for company specific reasons. McDATA, a storage-based
company, fell after missing earnings estimates for the fourth quarter of
2003 and then announcing that first quarter 2004 earnings would be lower
than originally expected. Foundry Networks, a networking company, also took
a hard hit as rumors circulated that the company's earnings and revenue
numbers would fall short of investors' expectations.
"The Fund's above-average
investment in the poorly
performing technology
sector detracted from
performance."
Strong performance from a few technology names somewhat eased these
disappointments. Symantec, which makes Norton Anti-Virus software, soared
as demand remained strong, enabling the company to raise prices. The result
was strong revenue and profit growth. Lexmark International benefited as
prices for the printers it makes remained stable. In addition, order flow
increased under a recent deal to produce printers for Dell. We added a
large stake in Comverse Technology, a company that sells voice-mail
software to wireless and wireline carriers. Although Comverse had little
impact on performance during the period, we believe it has strong growth
potential as demand for its services increases.
3
[Table at top left-hand side of page entitled "Top five industry groups."
The first listing is Computers 19%, the second is Medical 15%, the third
Oil & gas 10%, the fourth Electronics 8%, and the fifth Retail 6%.]
DISAPPOINTMENTS FROM CONSUMER STOCKS
Weak stock selection and a below-average stake in the consumer
discretionary sector further hampered returns. Among our biggest detractors
were LeapFrog Enterprises, a company that makes educational toys, and
Dollar Tree Stores, a retail chain that sells items for a dollar or less.
LeapFrog continued to gain market share, but suffered because of a slight
miss in expected revenues. Rising fuel prices contributed to higher costs
for Dollar Tree, while also crimping spending by shoppers and ultimately
hurting same-store sales comparisons. We sold our stake in Dollar Tree,
concerned that higher energy costs would continue to hamper performance.
Amid concerns about rising interest rates, we reduced our overall stake in
consumer discretionary stocks.
[Pie chart at middle of page with heading "Portfolio diversification As a
percentage of net assets on 4-30-04." The chart is divided into two
sections (from top to left): Common stocks 99% and Short-term investments &
other 1%.]
STRENGTH FROM HEALTH CARE AND ENERGY
The Fund benefited from a sizable investment and strong stock selection in
health care. The biggest gains came from a handful of companies. Biogen
Idec, a biotechnology company, climbed sharply after announcing very
successful trial results for its new multiple sclerosis drug. Investors'
expectations for the drug and the stock soared. Caremark Rx, a pharmacy
benefits manager, also took off, as more investors recognized the company's
strengths in terms of management, product offerings, services and market
share. Aetna, a health insurer, enjoyed a strong turnaround after
restructuring its business and delivering higher profits. We trimmed our
stakes in some of these winners, reducing our overall investment in the
health-care sector. The Fund also had an above-average stake in energy
stocks, which
4
contributed positively to performance. Tightening supplies and increased
demand resulted in continued strong oil and natural gas commodity prices.
High prices boosted cash flows for the exploration and production
companies, giving them more resources to spend on finding new reserves. We
favored energy service companies that supply drilling equipment. Among our
additions were Smith International, which rallied nicely amid improved
demand for its services and better pricing, and BJ Services.
[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 Biogen
Idec followed by an up arrow with the phrase "Better-than-expected trial
results for new multiple sclerosis drug." The second listing is McDATA followed
by a down arrow with the phrase "Missed and lowered earnings expectations."
The third listing is LeapFrog Enterprises followed by a down arrow with the
phrase "Slightly disappointing revenues in highly competitive business."]
CAUTIOUS OPTIMISM
We think that improving economic growth and the prospect of higher interest
rates will most likely result in continued market volatility. However, we
remain optimistic that mid-cap stocks will continue to do well, benefiting
from a combination of attractive valuations and strong growth outlooks. Our
plan is to maintain the Fund's economically sensitive tilt with a focus on
companies that continue to exhibit improved earnings and revenue growth. We
think that investors will eventually reward these companies with higher
stock prices.
"We think that improving
economic growth and the
prospect of higher interest
rates will most likely
result in continued
market volatility."
This commentary reflects the views of the portfolio manager through the end
of the Fund's period discussed in this report. The manager's statements
reflect his 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.
5
A LOOK AT
PERFORMANCE
For the period ended
April 30, 2004
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 18.90% 19.15% 21.98% 26.18%
Five years -4.45% -4.49% -4.32% --
Ten years 4.35% 4.30% -- --
Since inception -- -- -2.48% 2.35%
Cumulative total returns with maximum sales charge (POP)
Six months -4.96% -5.37% -2.39% 0.47%
One year 18.90% 19.15% 21.98% 26.18%
Five years -20.34% -20.52% -19.83% --
Ten years 53.13% 52.28% -- --
Since inception -- -- -13.79% 5.15%
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.
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.
1 For certain types of investors as described in the Fund's Class I share
prospectus.
6
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.
Russell
Cum Value Cum Value Midcap
of $10K of $10K S&P 500 Growth
Plot Date (No Load) (w/Load) Index Index
4-30-04 $10,000 $9,500 $10,000 $10,000
5-31-94 9,950 9,457 10,164 10,015
10-31-94 9,851 9,362 10,633 10,442
4-30-95 10,435 9,917 11,747 11,310
10-31-95 11,578 11,004 13,445 12,973
4-30-96 15,143 14,392 15,295 15,132
10-31-96 15,763 14,982 16,684 15,302
4-30-97 14,275 13,567 19,140 15,726
10-31-97 17,148 16,298 22,042 19,068
4-30-98 18,981 18,040 27,000 22,148
10-31-98 15,536 14,766 26,890 19,532
4-30-99 19,219 18,266 32,892 24,879
10-31-99 21,914 20,827 33,792 26,888
4-30-00 29,731 28,257 36,223 38,071
10-31-00 29,203 27,755 35,850 37,287
4-30-01 19,954 18,965 31,524 26,851
10-31-01 14,641 13,915 26,922 21,335
4-30-02 15,501 14,732 27,544 22,821
10-31-02 12,366 11,753 22,855 17,577
4-30-03 12,882 12,243 23,879 19,017
10-31-03 16,112 15,313 27,609 24,484
4-30-04 16,112 15,313 29,341 25,890
Line chart with the heading "GROWTH OF $10,000." Within the chart are four
lines. The first line represents Index 1 and is equal to $29,341 as of
April 30, 2004. The second line represents Index 2 and is equal to $25,890
as of April 30, 2004. 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 $16,112 as of April 30, 2004.
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 $15,313 as of April 30, 2004.
Class B 1 Class C 1 Class I 2
Period beginning 4-30-94 6-1-98 3-1-02
Without sales charge $15,228 $8,707 $10,515
With maximum sales charge $15,228 $8,621 $10,515
Index 1 $29,341 $11,055 $10,153
Index 2 $25,890 $12,322 $11,230
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 April 30, 2004. 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.
7
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
April 30, 2004
(unaudited)
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.
ISSUER SHARES VALUE
COMMON STOCKS 99.24% $152,560,370
(Cost $136,375,547)
Advertising 1.61% 2,480,712
Omnicom Group, Inc. 31,200 2,480,712
Business Services -- Misc. 5.90% 9,063,700
ChoicePoint, Inc.* + 77,597 3,408,060
Corporate Executive Board Co. (The)* 54,200 2,799,430
Manpower, Inc. 60,900 2,856,210
Computers 19.10% 29,365,858
Affiliated Computer Services, Inc.* + 65,000 3,152,500
BEA Systems, Inc.* + 197,700 2,255,757
Emulex Corp.* + 60,000 1,000,200
Fiserv, Inc.* 82,000 2,997,920
Foundry Networks, Inc.* 211,650 2,391,645
Lexmark International, Inc.* 38,000 3,437,480
Manhattan Associates, Inc.* 57,500 1,545,025
McDATA Corp. (Class B)* 281,000 1,441,530
Mercury Interactive Corp.* 65,500 2,787,025
SanDisk Corp.* + 101,200 2,338,732
Symantec Corp.* + 87,350 3,935,117
VERITAS Software Corp.* 78,100 2,082,927
Consumer Products Misc. 4.18% 6,418,720
Jarden Corp.* 75,000 2,790,000
Yankee Candle Co, Inc. (The)* 134,000 3,628,720
Containers 4.31% 6,625,109
Crown Holdings, Inc.* 364,850 3,079,334
Pactiv Corp.* 154,500 3,545,775
Cosmetics & Personal Care 2.05% 3,153,990
Estee Lauder Cos., Inc. (The) (Class A) + 69,000 3,153,990
Electronics 8.17% 12,554,220
Agere Systems, Inc.* 600,000 1,302,000
Applied Micro Circuits Corp.* + 433,500 1,911,735
ASML Holding NV (N Y Reg Shares) (Netherlands)* 87,000 1,352,850
Axcelis Technologies, Inc.* + 175,000 1,839,250
See notes to
financial statements.
8
FINANCIAL STATEMENTS
ISSUER SHARES VALUE
Electronics (continued)
Flextronics International Ltd. (Singapore)* 53,000 853,300
Jabil Circuit, Inc.* + 88,800 2,343,432
LTX Corp.* 114,500 1,251,485
Parker-Hannifin Corp. 30,750 1,700,168
Fiber Optics 1.15% 1,770,800
JDS Uniphase Corp.* 582,500 1,770,800
Finance 1.66% 2,556,750
Affiliated Managers Group, Inc.* + 52,500 2,556,750
Insurance 1.49% 2,292,015
RenaissanceRe Holdings Ltd. (Bermuda) 43,500 2,292,015
Leisure 1.09% 1,677,780
LeapFrog Enterprises, Inc.* + 78,000 1,677,780
Machinery 1.51% 2,321,550
AGCO Corp.* 120,600 2,321,550
Manufacturing 1.55% 2,379,152
Danaher Corp. 25,715 2,379,152
Media 5.21% 8,006,940
Radio One, Inc. (Class D)* + 136,500 2,588,040
Univision Communications, Inc. (Class A)* + 75,000 2,538,750
Westwood One, Inc.* 97,500 2,880,150
Medical 14.95% 22,977,700
Aetna, Inc. 32,000 2,648,000
Barr Pharmaceuticals, Inc.* 36,000 1,491,120
Biogen Idec, Inc.* + 73,750 4,351,250
Caremark Rx, Inc.* 117,500 3,977,375
Community Health Systems, Inc.* + 73,000 1,882,670
Gilead Sciences, Inc.* 28,000 1,703,240
Invitrogen Corp.* + 41,000 2,961,430
Kinetic Concepts, Inc.* 4,550 220,220
Millennium Pharmaceuticals, Inc.* 138,000 2,068,620
Taro Pharmaceutical Industries Ltd. (Israel)* 38,700 1,673,775
Oil & Gas 9.76% 15,000,000
BJ Services Co.* 82,500 3,671,250
EOG Resources, Inc. + 63,800 3,142,150
Patterson-UTI Energy, Inc.* + 95,000 3,438,050
Pride International, Inc.* + 90,000 1,518,300
Smith International, Inc.* 59,000 3,230,250
Paper & Paper Products 1.24% 1,908,090
Smurfit-Stone Container Corp.* + 111,000 1,908,090
Retail 6.33% 9,739,240
Fastenal Co. + 55,200 3,028,824
Linens 'n Things, Inc.* + 97,500 3,162,900
Panera Bread Co.* 86,800 3,547,516
See notes to
financial statements.
9
FINANCIAL STATEMENTS
ISSUER SHARES VALUE
Telecommunications 4.33% $6,656,544
Avaya, Inc.* + 168,000 2,298,240
Comverse Technology, Inc.* 266,400 4,358,304
Textile 2.30% 3,535,800
Coach, Inc.* 83,000 3,535,800
Transportation 1.35% 2,075,700
AirTran Holdings, Inc.* 170,000 2,075,700
INTEREST PAR VALUE
ISSUER, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 34.22% $52,601,712
(Cost $52,601,712)
Joint Repurchase Agreement 1.06%
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc. --
Dated 04-30-04, due 05-03-04 (Secured by
U.S. Treasury Inflation Indexed Bond 3.875%,
due 04-15-29, and U.S. Treasury Inflation
Indexed Note 3.000%, due 07-15-12) 0.930% $1,623 1,623,000
SHARES
Cash Equivalents 33.16%
AIM Cash Investment Trust ** 50,978,712 50,978,712
TOTAL INVESTMENTS 133.46% $205,162,082
OTHER ASSETS AND LIABILITIES, NET (33.46%) ($51,432,750)
TOTAL NET ASSETS 100.00% $153,729,332
+ All or a portion of this security is on loan as of April 30, 2004.
* Non-income-producing security.
** Represents investment of securities 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 value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
10
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2004
(unaudited)
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 $188,977,259)
including $49,244,911 of securities loaned $205,162,082
Cash 435
Receivable for investments sold 2,595,799
Receivable for shares sold 11,522
Interest receivable 42
Other assets 25,867
Total assets 207,795,747
LIABILITIES
Payable for investments purchased 2,711,286
Payable for shares repurchased 143,577
Payable for securities on loan 50,978,712
Payable to affiliates
Management fees 113,005
Distribution and service fees 6,649
Other 55,637
Other payables and accrued expenses 57,549
Total liabilities 54,066,415
NET ASSETS
Capital paid-in 237,772,527
Accumulated net realized loss on investments (98,885,674)
Net unrealized appreciation of investments 16,184,823
Accumulated net investment loss (1,342,344)
Net assets $153,729,332
NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($105,606,248 [DIV] 12,525,180 shares) $8.43
Class B ($42,044,432 [DIV] 5,450,391 shares) $7.71
Class C ($3,258,937 [DIV] 422,420 shares) $7.71
Class I ($2,819,715 [DIV] 328,777 shares) $8.58
MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($8.43 [DIV] 95%) $8.87
Class C ($7.71 [DIV] 99%) $7.79
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.
11
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
April 30, 2004
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in oper-
ating the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Securities lending $123,663
Dividends (net of foreign withholding taxes of $167) 104,600
Interest 10,385
Total investment income 238,648
EXPENSES
Investment management fees 652,651
Class A distribution and service fees 163,656
Class B distribution and service fees 237,661
Class C distribution and service fees 17,295
Class A, B and C transfer agent fees 400,240
Class I transfer agent fees 767
Registration and filing fees 28,416
Accounting and legal services fees 24,474
Custodian fees 15,614
Professional fees 15,333
Printing 12,393
Miscellaneous 4,467
Trustees' fees 4,027
Securities lending fees 3,048
Interest 602
Total expenses 1,580,644
Less expense reductions (20,461)
Net expenses 1,560,183
Net investment loss (1,321,535)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investments 11,615,140
Change in unrealized appreciation
(depreciation) of investments (10,161,846)
Net realized and unrealized gain 1,453,294
Increase in net assets from operations $131,759
1 Semiannual period from 11-1-03 through 4-30-04.
See notes to
financial statements.
12
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 PERIOD
ENDED ENDED
10-31-03 4-30-04 1
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ($2,569,314) ($1,321,535)
Net realized gain 16,717,797 11,615,140
Change in net unrealized
appreciation (depreciation) 23,244,385 (10,161,846)
Increase in net assets
resulting from operations 37,392,868 131,759
From Fund share transactions (13,076,268) (7,281,904)
NET ASSETS
Beginning of period 136,562,877 160,879,477
End of period 2 $160,879,477 $153,729,332
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
2 Includes accumulated net investment loss of $20,809 and $1,342,344,
respectively.
See notes to
financial statements.
13
FINANCIAL HIGHLIGHTS
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 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $9.11 $12.85 $16.03 $7.66 $6.47 $8.43
Net investment loss 2 (0.12) (0.17) (0.12) (0.11) (0.11) (0.06)
Net realized and unrealized
gain (loss) on investments 3.86 4.23 (7.48) (1.08) 2.07 0.06
Total from
investment operations 3.74 4.06 (7.60) (1.19) 1.96 0.00
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 $8.43
Total return 3 (%) 41.05 33.26 (49.87) (15.54) 30.29 0.00 4,5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $112 $176 $85 $85 $107 $106
Ratio of expenses
to average net assets (%) 1.60 1.46 1.63 1.89 1.98 1.71 6
Ratio of adjusted expenses
to average net assets 7 (%) -- -- -- -- -- 1.74 6
Ratio of net investment loss
to average net assets (%) (1.14) (1.08) (1.13) (1.52) (1.62) (1.42) 6
Portfolio turnover (%) 153 146 211 267 8 183 40
See notes to
financial statements.
14
FINANCIAL HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.72 $12.22 $15.08 $7.13 $5.98 $7.74
Net investment loss 2 (0.18) (0.27) (0.18) (0.16) (0.15) (0.08)
Net realized and unrealized
gain (loss) on investments 3.68 4.01 (7.00) (0.99) 1.91 0.05
Total from
investment operations 3.50 3.74 (7.18) (1.15) 1.76 (0.03)
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 $7.71
Total return 3 (%) 40.14 32.30 (50.24) (16.13) 29.43 (0.39) 4,5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $146 $241 $101 $46 $48 $42
Ratio of expenses
to average net assets (%) 2.23 2.16 2.33 2.56 2.67 2.41 6
Ratio of adjusted expenses
to average net assets 7 (%) -- -- -- -- -- 2.44 6
Ratio of net investment loss
to average net assets (%) (1.77) (1.78) (1.83) (2.20) (2.31) (2.11) 6
Portfolio turnover (%) 153 146 211 267 8 183 40
See notes to
financial statements.
15
FINANCIAL HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.72 $12.21 $15.07 $7.13 $5.99 $7.74
Net investment loss 2 (0.19) (0.27) (0.18) (0.16) (0.15) (0.08)
Net realized and unrealized
gain (loss) on investments 3.68 4.01 (6.99) (0.98) 1.90 0.05
Total from
investment operations 3.49 3.74 (7.17) (1.14) 1.75 (0.03)
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 $7.71
Total return 3 (%) 40.02 32.32 (50.21) (15.99) 29.22 (0.39) 4,5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) -- 9 $5 $3 $2 $3 $3
Ratio of expenses
to average net assets (%) 2.30 2.16 2.33 2.58 2.68 2.41 6
Ratio of adjusted expenses
to average net assets 7 (%) -- -- -- -- -- 2.44 6
Ratio of net investment loss
to average net assets (%) (1.82) (1.80) (1.83) (2.21) (2.32) (2.12) 6
Portfolio turnover (%) 153 146 211 267 8 183 40
See notes to
financial statements.
16
FINANCIAL HIGHLIGHTS
CLASS I SHARES
PERIOD ENDED 10-31-02 10 10-31-03 4-30-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $8.16 $6.51 $8.54
Net investment loss 2 (0.06) (0.06) (0.03)
Net realized and unrealized
gain (loss) on investments (1.59) 2.09 0.07
Total from
investment operations (1.65) 2.03 0.04
Net asset value,
end of period $6.51 $8.54 $8.58
Total return 3 (%) (20.22) 4 31.18 0.47 4,5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $3 $3 $3
Ratio of expenses to average net assets (%) 1.46 6 1.22 0.98 6
Ratio of net investment loss
to average net assets (%) (1.00) 6 (0.85) (0.69) 6
Portfolio turnover (%) 267 8 183 40
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
2 Based on the average of the shares outstanding.
3 Assumes dividend reinvestment and does not reflect the effect
of sales charges.
4 Not annualized.
5 Total return would have been lower had certain expenses not
been reduced during the period shown.
6 Annualized.
7 Does not take into consideration expense reductions during the period shown.
8 Excludes merger activity.
9 Less than $500,000
10 Class I shares began operations on 3-1-02.
See notes to
financial statements.
17
NOTES TO
STATEMENTS
Unaudited
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 seek 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 John Hancock Financial Services,
Inc., 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.
18
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 consider ation, 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 period ended April 30, 2004.
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 April 30, 2004, the Fund loaned securities having a market
value of $49,244,911 collateralized by cash in the amount of $50,978,712.
The cash collateral was invested in a short-term instrument. Securities
lending expenses are paid by the Fund to the Adviser.
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.
19
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.
Such distributions, 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
period ended April 30, 2004, JH Funds received net up-front sales charges
of $57,330 with regard to sales of Class A shares. Of this amount, $7,295
was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $37,322 was paid as sales commissions to
unrelated broker-dealers and $12,713 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 period ended April 30, 2004, JH Funds received net up-front
sales charges of $1,192 with regard to sales of Class C shares. Of this
amount, $1,118 was paid as sales commissions to unrelated broker-dealers
and $74 was paid as sales commissions to sales personnel of Signator
Investors.
20
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 period ended April 30, 2004, CDSCs received by JH Funds
amounted to $33,766 for Class B shares and $174 for Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of JHLICo.
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 each class'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. For Class I
shares, the Fund pays a monthly transfer agent fee at an annual rate of
0.05% of Class I average daily net asset value. Signature Services reduced
the transfer agent fee for Class A, Class B and Class C shares by $20,461
during the period ended April 30, 2004. 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 period
was at an annual rate of approximately 0.03% of the average daily net asset
value of the Fund. The Fund also paid the Adviser the amount of $161 for
certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and/or officer of the Adviser and/or
its affiliates, as well as Trustee 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 Compensa tion Plan investments had no impact
on the operations of the Fund.
21
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 10-31-03 PERIOD ENDED 4-30-04 1
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Sold 2,334,794 $16,511,673 1,179,926 $10,369,689
Repurchased (2,850,728) (19,782,837) (1,295,997) (11,367,229)
Net decrease (515,934) ($3,271,164) (116,071) ($997,540)
CLASS B SHARES
Sold 913,561 $6,171,951 418,504 $3,350,124
Repurchased (2,400,880) (15,429,942) (1,174,526) (9,414,289)
Net decrease (1,487,319) ($9,257,991) (756,022) ($6,064,165)
CLASS C SHARES
Sold 128,247 $829,129 67,349 $536,952
Repurchased (122,444) (789,063) (61,290) (492,306)
Net increase 5,803 $40,066 6,059 $44,646
CLASS I SHARES
Shares sold 173,708 $1,227,046 37,113 $331,487
Shares reinvested (259,133) (1,814,225) (66,483) (596,332)
Net decrease (85,425) ($587,179) (29,370) ($264,845)
NET DECREASE (2,082,875) ($13,076,268) (895,404) ($7,281,904)
1 Semiannual period from 11-1-03 through 4-30-04. Unaudited.
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
period ended April 30, 2004, aggregated $64,747,217 and $70,235,498,
respectively.
The cost of investments owned on April 30, 2004, including short-term
investments, for federal income tax purposes, was $188,977,259. Gross
unrealized appreciation and depreciation of investments aggregated
$26,797,323 and $10,612,500, respectively, resulting in net unrealized
appreciation of $16,184,823.
22
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 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.
23
ELECTRONIC
DELIVERY
Now available from
John Hancock Funds
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the U.S. mail, we'll notify you by e-mail when these documents are
available for online viewing.
How does electronic delivery benefit you?
* No more waiting for the mail to arrive; you'll receive an e-mail
notification as soon as the document is ready for online viewing.
* Reduces the amount of paper mail you receive from John Hancock Funds.
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Sign up for electronic delivery today at
www.jhancock.com/funds/edelivery
24
FOR YOUR
INFORMATION
TRUSTEES
Dennis S. Aronowitz
Richard P. Chapman, Jr.
William J. Cosgrove
Richard A. Farrell
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt
James A. Shepherdson
*Members of the Audit Committee
OFFICERS
James A. Shepherdson
President
and Chief Executive Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President
and Secretary
William H. King
Vice President and Treasurer
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
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
25
[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.
390SA 4/04
6/04
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The registrant has adopted procedures by which shareholders may recommend
nominees to the registrant's Board of Trustees. A copy of the procedures is
filed as an exhibit to this Form N-CSR. See attached "John Hancock Funds -
Administration Committee Charter".
ITEM 10. 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 11. EXHIBITS.
(a)(1) 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) Submission of Matters to a Vote of Security Holders is attached. See
attached "John Hancock Funds - Administration Committee Charter".
(c)(2) 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.
John Hancock Investment III Trust
By:
- ---------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: June 24, 2004
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:
- ---------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: June 24, 2004
By:
- ---------------------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: June 24, 2004