UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4630
John Hancock Investment Trust III
(Exact name of registrant as specified in charter)
101 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Alfred P. Ouellette
Senior Attorney and Assistant Secretary
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-375-1513
Date of fiscal year end: October 31
Date of reporting period: April 30, 2005
ITEM 1. REPORT TO SHAREHOLDERS.
JOHN HANCOCK
Mid Cap
Growth Fund
4.30.2005
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, Chief Executive Officer, flush left next
to first paragraph.]
CEO CORNER
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
Your expenses
page 8
Fund's investments
page 10
Financial statements
page 13
For more information
page 29
Dear Fellow Shareholders,
After advancing for a second straight year in 2004, the stock market
pulled back in the first four months of 2005. For much of 2004 the market
had been in the doldrums as investors fretted about rising oil prices,
higher interest rates, the war in Iraq and a closely contested
presidential race. But the year ended on a high note with a sharp rally
sparked by a definitive end to the U.S. presidential election and
moderating oil prices.
Investors were brought back down to earth in January, however, as the
market declined in three of the four weeks and produced negative results
for the month in a broad-based move downward. Rising oil prices and
interest rates, and concerns about less robust corporate earnings growth
were among the culprits that kept investors on the sidelines. Investors
began to re-enter the market in February, reversing January's decline. But
as the month progressed into March and April investors again grew
concerned about further spikes in oil prices and rising interest rates. As
a result, the first four months of 2005 ended with the major indexes in
the red. By the end of April, the Dow Jones Industrial Average had
returned -4.81%, the S&P 500 Index returned -4.00%, while the Nasdaq
Composite Index fell by 11.67%. Bonds performed slightly better, managing
to produce positive results, with the Lehman Brothers Aggregate Bond Index
returning 0.87%.
In October, you may recall we requested your vote on a proposal regarding
the election of your fund's Board of Trustees. We are pleased to report
that shareholders overwhelmingly approved the proposal, which became
effective January 1, 2005. As a result, all open-end John Hancock funds
now have the same Board of Trustees, comprised of ten members -- nine of
them, including the Chairman, are independent Trustees with no direct or
indirect interest in John Hancock Advisers, LLC, your fund's investment
adviser. We believe this move is a way to improve the effectiveness of the
Trustees' oversight of the funds, and we are grateful for your support.
Sincerely,
/S/ James A. Shepherdson
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of April 30, 2005. 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
* U.S. stocks posted only modest gains, pressured by higher interest
rates, rising energy prices and increased commodity costs.
* Mid-cap stocks beat small- and large-cap stocks, while growth lagged
value.
* Weak returns from the Fund's health care, industrials and energy stocks
overshadowed strong gains from the consumer discretionary and materials
sectors.
[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, 2005." The chart is scaled in increments of 1% with -2% at the
bottom and 0% at the top. The first bar represents the -1.08% total return
for Class A. The second bar represents the -1.32% total return for Class B.
The third bar represents the -1.32% total return for Class C. The fourth
bar represents the -0.71% 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. These returns do not reflect the deduction of the
maximum sales charge, which would reduce the performance shown above."]
Top 10 holdings
4.9% Comverse Technology, Inc.
4.5% Affiliated Managers Group, Inc.
4.3% Owens-Illinois, Inc.
4.0% Sotheby's, Holding, Inc.
3.8% Jarden Corp.
3.7% Toreador Resources Corp.
3.6% Coach, Inc.
3.6% Rowan Cos., Inc.
3.5% Fastenal Co.
3.3% BJ Services Co.
As a percentage of net assets on April 30, 2005.
1
BY THOMAS P. NORTON, CFA, PORTFOLIO MANAGER
MANAGER'S
REPORT
JOHN HANCOCK
Mid Cap Growth Fund
Mid-cap stocks led the stock market, which made modest headway during the
six months ended April 30, 2005. After a strong start last fall, the
market ran into headwinds in 2005 as rising interest rates, record energy
prices and increased commodity prices pressured corporate and consumer
spending. Most companies were unable to put through price hikes to offset
these higher costs, dampening their profit outlook. In this environment,
investors became more cautious, favoring bargain value stocks over more
expensive growth stocks. Utilities, energy and consumer staples stocks did
well, while technology and financials struggled. The Russell Mid Cap
Growth Index closed the period with a 4.07% return, ahead of the 3.28%
return for the Standard and Poor's 500 Index.
"Mid-cap stocks led the stock
market, which made modest
headway during the six months
ended April 30, 2005."
Strategy and performance review
John Hancock Mid Cap Growth Fund maintained its focus on mid-size
companies with market capitalizations between $3 billion and $10 billion.
The portfolio remained diversified with a bias toward economically
sensitive sectors. We concentrated on stocks with the best potential to
grow earnings over the long term, either through increased sales or
improved profit margins. The Fund's health care, industrial and energy
stocks turned in disappointing near-term returns, outweighing positive
contributions from materials and consumer discretionary investments.
For the six months ended April 30, 2005, the Fund's Class A, Class B,
Class C and Class I shares posted total returns of -1.08%, -1.32%, -1.32%
and -0.71%, respectively, at net asset value. The Fund trailed the average
mid-cap growth fund, which returned 1.68% during the same period,
according to Lipper, Inc.1 Keep in mind that your net asset value return
will be different from the Fund's if you were not invested in the Fund for
the entire period and did not reinvest all distributions. Long-term
performance information can be found on pages six and seven.
2
Biotech and pharmaceutical detractors
In health care, our hunt for strong long-term earnings growth led us to
biotechnology and pharmaceutical stocks. These industries suffered as
investors grew more risk averse. Biogen Idec, a biotech leader, declined
sharply when news surfaced that its promising new multiple sclerosis drug,
Tysabri, might be linked to a deadly brain virus. We sold our stake as the
company's near-term growth prospects weakened. On the pharmaceutical side,
Medicines Co. fell after the Federal Drug Administration rejected a
proposal to change the labeling on one of its heart-related drugs. Rigel
Pharmaceuticals, a company that is developing closely related allergy and
asthma drugs, sank as investors worried about why Pfizer had signed on as
a partner on the asthma drug, but not the allergy drug. We believed
management would realize more value by doing separate deals and added to
our stake.
[A photo of Thomas Norton, flush right next to first paragraph.]
Offsetting some of these losses were strong gains from a few companies
that investors viewed as less risky. Gen-Probe, which provides testing
equipment for blood and urine samples, benefited from increased sales of a
new machine, as well as the highly profitable assay solutions it uses.
Invitrogen, which makes kits that help biotech and pharmaceutical
companies develop and research drugs, rebounded from an earlier earnings
disappointment.
"While the Fund benefited from
paring back on technology,
specific stocks still detracted
from returns..."
Bias toward industrials and energy sectors
The Fund had a sizable investment in industrials, but avoided rust-belt
type companies that we thought would be especially vulnerable to rising
raw materials and energy costs. Instead, we targeted business services
companies such as Monster Worldwide and Manpower. These stocks declined
amid worries that economic growth would stall and hurt hiring. We held on,
believing the long-term growth prospects for each company remained intact.
We exited, however, from AirTran Holdings, a low-cost airline pressured by
rising energy costs and increased competition.
We also focused on energy stocks, which we expected to benefit from rising
oil and gas commodity prices. Initially, we targeted oil service
companies, which supply drilling and pumping equipment to the exploration
and production (e&p) companies. When the
3
e&p companies did not step up spending on services as quickly as expected,
the service stocks suffered. We decided to diversify, adding Toreador
Resources, an e&p company that is developing promising new assets in the
Black Sea (offshore from Turkey) and Romania. Its stock price declined
sharply when investors became concerned that energy prices had peaked.
[Table at top left-hand side of page entitled "Sector distribution 2." The
first listing is Consumer discretionary - 20%, the second is Information
technology - 17%, the third is Health care - 17%, the fourth is Industrials
- - 16%, the fifth is Materials - 11%, the sixth is Energy - 11%, the seventh
is Financials - 5% and the eighth is Consumer staples - 2%.]
Strong stock picking in materials and consumer discretionary
We boosted the Fund's stake in materials, a sector that tends to do well
when the economy picks up. The Fund's top performers included
Owens-Illinois, a glass manufacturer, and Crown Packaging, which makes
cans for beverages and foods. Both stocks rallied as industry
consolidation eased competition and improved pricing. In addition,
Owens-Illinois restructured its European operations, while Crown
strengthened its balance sheet. On the consumer discretionary side, Panera
Bread and Jarden posted strong gains. As the Atkins diet craze faded from
popularity, Panera benefited from improved same store sales, growing
profitability and continued expansion. Jarden, a diversified consumer
products company that recently acquired Sunbeam and Coleman, also rallied
nicely. In financials, Affiliated Managers -- a conglomerate of investment
management companies -- climbed after announcing some new acquisitions.
[Pie chart at middle of page with heading "Portfolio diversification 2."
The chart is divided into two sections (from top to right): Common stocks
99% and Short-term investments & other 1%. ]
Reduced stake in technology
While the Fund benefited from paring back on technology, specific stocks
still detracted from returns. Motive, which develops software for the
broadband market, tumbled as prospects for corporate
4
spending weakened. Affiliated Computer, which is an outsourcer that
processes paperwork, such as Medicare, Medicaid, welfare and student loan
payments, fell when it lost a bid for a major contract with the state of
Texas. Lexmark International, which manufactures printers, declined as
industry pricing weakened and sales of printer cartridges slowed. By
contrast, VERITAS Software rallied nicely following a premium buy-out
offer from Symantec.
[Table at top of page entitled "Scorecard." The header for the left column
is "Investment" and the header for the right column is "Periods
performance...and what's behind the numbers." The first listing is Panera
Bread followed by an up arrow with the phrase "Improved same store sales,
good profitability, continued expansion." The second listing is Toreador
Resources followed by a down arrow with the phrase "Concerns that energy
prices had peaked." The third listing is Biogen Idec followed by a down
arrow with the phrase "Promising new multiple sclerosis drug pulled from
market."]
Potential shift in positioning
We plan to continue looking for mid-cap companies with strong earnings
growth potential. If short-term interest rates and inflation move higher,
we will most likely shift more assets toward intellectual property
companies in such industries as software and biotech that are not as
exposed to rising commodity and energy costs. As the recovery ages, we may
also reduce the Fund's bias toward more economically sensitive sectors
such as materials.
"We plan to continue looking for
mid-cap companies with strong earn
ings growth potential."
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.
2 As a percentage of net assets on 4-30-05.
5
A LOOK AT
PERFORMANCE
For the period ended
April 30, 2005
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 -7.10% -7.71% -3.82% -1.63%
Five years -12.83 -12.88 -12.54 --
Ten years 3.67 3.61 -- --
Since inception -- -- -2.39 1.07
Cumulative total returns with maximum sales charge (POP)
Six months -6.04 -6.25 -2.30 -0.71
One year -7.10 -7.71 -3.82 -1.63
Five years -49.68 -49.82 -48.81 --
Ten years 43.42 42.56 -- --
Since inception -- -- -15.41 3.43
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge reflect a sales charge on Class A shares of 5%, and
the applicable contingent deferred sales charge (CDSC) on Class B and
Class C shares. The returns for Class C shares have been adjusted to
reflect the elimination of the front-end sales charge effective July 15,
2004. 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 returns reflect past results and should not be considered indicative
of future performance. The return and principal value of an investment
will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Due to market volatility, the Fund's current
performance may be higher or lower than the performance shown. For
performance data current to the most recent month-end, please call
1-800-225-5291 or visit the Fund's Web site at www.jhfunds.com.
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.
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.
[Line chart with the heading "GROWTH OF $10,000." Within the chart are four
lines. The first line represents the Standard & Poor's 500 Index and is
equal to $26,562 as of April 30, 2005. The second line represents the
Russell Midcap Growth Index and is equal to $24,505 as of April 30, 2005.
The third line represents the value of the hypothetical $10,000 investment
made in the John Hancock Mid Cap Growth Fund, before sales charge, and is
equal to $15,093 as of April 30, 2005. The fourth line represents the value
of the same hypothetical investment made in the John Hancock Mid Cap Growth
Fund, after sales charge, and is equal to $14,342 as of April 30, 2005.]
Class B 1 Class C 1 Class I 2
Period beginning 4-30-95 6-1-98 3-1-02
Mid Cap Growth Fund $14,256 $8,459 $10,343
Index 1 26,562 11,756 10,797
Index 2 24,505 13,190 12,022
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, 2005. The Class
C shares investment with maximum sales charge has been adjusted to reflect
the elimination of the front-end sales charge effective July 15, 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 Class I share
prospectus.
7
YOUR
EXPENSES
These examples are intended to help you understand your ongoing operating
expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
* Transaction costs which include sales charges (loads) on purchases or
redemptions (varies by share class), minimum account fee charge, etc.
* Ongoing operating expenses including management fees, distribution and
service fees (if applicable) and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund's actual
ongoing operating expenses, and is based on your fund's actual return. It
assumes an account value of $1,000.00 on October 31, 2004, with the same
investment held until April 30, 2005.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $989.20 $8.65
Class B 986.80 12.02
Class C 986.80 12.12
Class I 992.90 5.18
Together with the value of your account, you may use this information to
estimate the operating expenses that you paid over the period. Simply
divide your account value at April 30, 2005 by $1,000.00, then multiply it
by the "expenses paid" for your share class from the table above. For
example, for an account value of $8,600.00, the operating expenses should
be calculated as follows:
Example
-- -- -- --
| My account value / | | "expenses paid" | My
| / $1,000.00 = 8.6 | X $| | = actual
| $8,600.00 / | | from table | expenses
-- -- -- --
8
Hypothetical example for comparison purposes
This table allows you to compare your fund's ongoing operating expenses
with those of any other fund. It provides an example of the Fund's
hypothetical account values and hypothetical expenses based on each
class's actual expense ratio and an assumed 5% annual return before
expenses (which is not your fund's actual return). It assumes an account
value of $1,000.00 on October 31, 2004, with the same investment held
until April 30, 2005. Look in any other fund shareholder report to find
its hypothetical example and you will be able to compare these expenses.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $1,016.10 $8.77
Class B 1,012.70 12.18
Class C 1,012.60 12.28
Class I 1,019.60 5.25
Remember, these examples do not include any transaction costs, such as
sales charges; therefore, these examples will not help you to determine
the relative total costs of owning different funds. If transaction costs
were included, your expenses would have been higher. See the prospectus
for details regarding transaction costs.
1 Expenses are equal to the Fund's annualized expense ratio of 1.75%,
2.45%, 2.45% and 1.04% for Class A, Class B, Class C and Class I,
respectively, multiplied by the average account value over the period,
multiplied by number of days in most recent fiscal half-year/365 or 366
(to reflect the one-half year period).
9
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
April 30, 2005
(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 98.58% $120,967,776
(Cost $111,627,433)
Advertising 2.11% 2,586,480
Omnicom Group, Inc. 31,200 2,586,480
Aerospace & Defense 2.81% 3,443,700
Engineered Support Systems, Inc. 97,500 3,443,700
Apparel -- Retail 3.01% 3,699,050
Urban Outfitters, Inc. (I) 83,500 3,699,050
Apparel, Accessories & Luxury Goods 3.62% 4,448,800
Coach, Inc. (I) 166,000 4,448,800
Application Software 1.11% 1,364,130
BEA Systems, Inc. (I)(L) 197,700 1,364,130
Asset Management & Custody Banks 4.46% 5,471,375
Affiliated Managers Group, Inc. (I)(L) 87,500 5,471,375
Biotechnology 6.85% 8,406,208
Gilead Sciences, Inc. (I) 56,000 2,077,600
Invitrogen Corp. (I)(L) 28,000 2,051,560
Protein Design Labs, Inc. (I)(L) 152,100 2,719,548
Threshold Pharmaceuticals, Inc. (I) 250,000 1,557,500
Broadcasting & Cable TV 3.06% 3,756,000
Univision Communications, Inc. (Class A) (I)(L) 75,000 1,971,750
Westwood One, Inc. (I)(L) 97,500 1,784,250
Communications Equipment 4.95% 6,071,256
Comverse Technology, Inc. (I) 266,400 6,071,256
Computer Storage & Peripherals 2.15% 2,639,100
Lexmark International, Inc. (Class A) (I) 38,000 2,639,100
Data Processing & Outsourced Services 2.52% 3,098,550
Affiliated Computer Services, Inc. (Class A) (I)(L) 65,000 3,098,550
See notes to
financial statements.
10
FINANCIAL STATEMENTS
Issuer Shares Value
Diversified Commercial Services 4.03% $4,942,665
Sotheby's Holdings, Inc. (Class A) (I) 301,750 4,942,665
Diversified Metals & Mining 3.73% 4,573,090
Freeport-McMoRan Copper & Gold, Inc. (Class B) 72,000 2,495,520
Phelps Dodge Corp. 24,200 2,077,570
Electronic Manufacturing Services 2.00% 2,450,880
Jabil Circuit, Inc. (I)(L) 88,800 2,450,880
Employment Services 6.05% 7,421,004
Manpower, Inc. 89,600 3,454,080
Monster Worldwide, Inc. (I) 172,400 3,966,924
Health Care Equipment 3.11% 3,814,440
Gen-Probe, Inc. (I) 76,000 3,814,440
Internet Software & Services 2.28% 2,794,086
Motive, Inc. (I) 337,450 2,794,086
Leisure Products 3.83% 4,694,817
Jarden Corp. (I)(L) 105,100 4,694,817
Metal & Glass Containers 7.01% 8,600,640
Crown Holdings, Inc. (I) 222,000 3,341,100
Owens-Illinois, Inc. (I) 214,500 5,259,540
Movies & Entertainment 1.45% 1,784,055
Radio One, Inc. (Class D) (I)(L) 136,500 1,784,055
Oil & Gas Drilling 3.55% 4,358,879
Rowan Cos., Inc. (I) 164,300 4,358,879
Oil & Gas Equipment & Services 3.28% 4,021,875
BJ Services Co. 82,500 4,021,875
Oil & Gas Exploration & Production 3.68% 4,521,540
Toreador Resources Corp. (I) 268,500 4,521,540
Personal Products 2.16% 2,650,290
Estee Lauder Cos., Inc. (The) (Class A) 69,000 2,650,290
Pharmaceuticals 6.73% 8,264,871
Medicines Co. (The) (I)(L) 153,500 3,277,225
Rigel Pharmaceuticals, Inc. (I) 165,350 2,835,753
Taro Pharmaceutical Industries Ltd. (Israel) (I)(L) 74,050 2,151,893
Restaurants 3.18% 3,901,560
Panera Bread Co. (Class A) (I)(L) 78,000 3,901,560
See notes to
financial statements.
11
FINANCIAL STATEMENTS
Issuer Shares Value
Semiconductor Equipment 2.36% $2,898,279
Broadcom Corp. (Class A) (I) 96,900 2,898,279
Trading Companies & Distributors 3.50% 4,290,156
Fastenal Co. 80,100 4,290,156
Interest Par value
Issuer, description, maturity date rate (000) Value
Short-term investments 28.14% $34,533,432
(Cost $34,533,432)
Joint Repurchase Agreement 2.89% 3,547,000
Investment in a joint repurchase agreement transaction
with Bank of America Corp. -- Dated 4-29-05
due 5-2-05 (secured by U.S. Treasury STRIPS
due 11-15-10 thru 8-15-25) 2.85% $3,547 3,547,000
Shares
Cash Equivalents 25.25% 30,986,432
AIM Cash Investment Trust (T) 30,986,432 30,986,432
Total investments 126.72% $155,501,208
Other assets and liabilities, net (26.72%) ($32,793,914)
Total net assets 100.00% $122,707,294
(I) Non-income-producing security.
(L) All or a portion of this security is on loan as of April 30, 2005.
(T) 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.
12
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2005
(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 $146,160,865)
including $30,378,855 of securities loaned $155,501,208
Cash 576
Receivable for shares sold 16,106
Dividends and interest receivable 18,562
Other assets 24,240
Total assets 155,560,692
Liabilities
Payable for investments purchased 1,438,292
Payable for shares repurchased 202,366
Payable upon receipt of securities loaned 30,986,432
Payable to affiliates
Management fees 90,395
Distribution and service fees 6,268
Other 63,782
Other payables and accrued expenses 65,863
Total liabilities 32,853,398
Net assets
Capital paid-in 206,059,827
Accumulated net realized loss on investments (91,702,247)
Net unrealized appreciation of investments 9,340,343
Accumulated net investment loss (990,629)
Net assets $122,707,294
Net asset value per share
Based on net asset values and shares outstanding --
the Fund has an unlimited number of shares
authorized with no par value
Class A ($92,090,482 [DIV] 11,177,007 shares) $8.24
Class B ($25,497,803 [DIV] 3,406,216 shares) $7.49
Class C ($2,887,534 [DIV] 385,636 shares) $7.49
Class I ($2,231,475 [DIV] 264,331 shares) $8.44
Maximum offering price per share
Class A 1 ($8.24 [DIV] 95%) $8.67
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.
13
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
April 30, 2005
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned and
expenses incurred
in operating the
Fund. It also shows
net gains (losses)
for the period
stated.
Investment income
Dividends $250,201
Securities lending 72,583
Interest 21,878
Total investment income 344,662
Expenses
Investment management fees 548,977
Class A distribution and service fees 150,063
Class B distribution and service fees 158,237
Class C distribution and service fees 15,468
Class A, B and C transfer agent fees 341,928
Class I transfer agent fees 615
Printing 36,070
Registration and filing fees 26,022
Professional fees 17,876
Custodian fees 16,988
Accounting and legal services fees 15,141
Miscellaneous 13,682
Securities lending fees 3,367
Trustees' fees 2,313
Interest 1,383
Total expenses 1,348,130
Less expense reductions (34,200)
Net expenses 1,313,930
Net investment loss (969,268)
Realized and unrealized gain (loss)
Net realized gain on investments 1,077,676
Change in net unrealized appreciation (depreciation)
of investments (810,210)
Net realized and unrealized gain 267,466
Decrease in net assets from operations ($701,802)
1 Semiannual period from 11-1-04 through 4-30-05.
See notes to
financial statements.
14
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
difference reflects
earnings less
expenses, any
investment
gains and losses,
distributions, if
any, paid to
shareholders and
the net of Fund
share transactions.
Year Period
ended ended
10-31-04 4-30-05 1
Increase (decrease) in net assets
From operations
Net investment loss ($2,502,591) ($969,268)
Net realized gain 16,496,734 1,077,676
Change in net unrealized
appreciation (depreciation) (16,196,116) (810,210)
Decrease in net assets resulting
from operations (2,201,973) (701,802)
From Fund share transactions (21,349,161) (13,919,247)
Net assets
Beginning of period 160,879,477 137,328,343
End of period 2 $137,328,343 $122,707,294
1 Semiannual period from 11-1-04 through 4-30-05. Unaudited.
2 Includes accumulated net investment loss of $21,361 and $990,629,
respectively.
See notes to
financial statements.
15
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 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $12.85 $16.03 $7.66 $6.47 $8.43 $8.33
Net investment loss 2 (0.17) (0.12) (0.11) (0.11) (0.12) (0.05)
Net realized and unrealized
gain (loss) on investments 4.23 (7.48) (1.08) 2.07 0.02 (0.04)
Total from
investment operations 4.06 (7.60) (1.19) 1.96 (0.10) (0.09)
Less distributions
From net realized gain (0.88) (0.77) -- -- -- --
Net asset value,
end of period $16.03 $7.66 $6.47 $8.43 $8.33 $8.24
Total return 3 (%) 33.26 (49.87) (15.54) 30.29 (1.19) 4 (1.08) 4,5
Ratios and supplemental data
Net assets, end of period
(in millions) $176 $85 $85 $107 $98 $92
Ratio of expenses
to average net assets (%) 1.46 1.63 1.89 1.98 1.75 1.75 6
Ratio of adjusted expenses
to average net assets 7 (%) -- -- -- -- 1.79 1.80 6
Ratio of net investment loss
to average net assets (%) (1.08) (1.13) (1.52) (1.62) (1.44) (1.25) 6
Portfolio turnover (%) 146 211 267 8 183 75 21
See notes to
financial statements.
16
FINANCIAL HIGHLIGHTS
CLASS B SHARES
Period ended 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $12.22 $15.08 $7.13 $5.98 $7.74 $7.59
Net investment loss 2 (0.27) (0.18) (0.16) (0.15) (0.17) (0.08)
Net realized and unrealized
gain (loss) on investments 4.01 (7.00) (0.99) 1.91 0.02 (0.02)
Total from
investment operations 3.74 (7.18) (1.15) 1.76 (0.15) (0.10)
Less distributions
From net realized gain (0.88) (0.77) -- -- -- --
Net asset value,
end of period $15.08 $7.13 $5.98 $7.74 $7.59 $7.49
Total return 3 (%) 32.30 (50.24) (16.13) 29.43 (1.94) 4 (1.32) 4,5
Ratios and supplemental data
Net assets, end of period
(in millions) $241 $101 $46 $48 $34 $25
Ratio of expenses
to average net assets (%) 2.16 2.33 2.56 2.67 2.45 2.45 6
Ratio of adjusted expenses
to average net assets 7 (%) -- -- -- -- 2.49 2.50 6
Ratio of net investment loss
to average net assets (%) (1.78) (1.83) (2.20) (2.31) (2.14) (1.94) 6
Portfolio turnover (%) 146 211 267 8 183 75 21
See notes to
financial statements.
17
FINANCIAL HIGHLIGHTS
CLASS C SHARES
Period ended 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $12.21 $15.07 $7.13 $5.99 $7.74 $7.59
Net investment loss 2 (0.27) (0.18) (0.16) (0.15) (0.17) (0.08)
Net realized and unrealized
gain (loss) on investments 4.01 (6.99) (0.98) 1.90 0.02 (0.02)
Total from
investment operations 3.74 (7.17) (1.14) 1.75 (0.15) (0.10)
Less distributions
From net realized gain (0.88) (0.77) -- -- -- --
Net asset value,
end of period $15.07 $7.13 $5.99 $7.74 $7.59 $7.49
Total return 3 (%) 32.32 (50.21) (15.99) 29.22 (1.94) 4 (1.32) 4,5
Ratios and supplemental data
Net assets, end of period
(in millions) $5 $3 $2 $3 $3 $3
Ratio of expenses
to average net assets (%) 2.16 2.33 2.58 2.68 2.45 2.45 6
Ratio of adjusted expenses
to average net assets 7 (%) -- -- -- -- 2.49 2.50 6
Ratio of net investment loss
to average net assets (%) (1.80) ( 1.83) (2.21) (2.32) (2.14) (1.95) 6
Portfolio turnover (%) 146 211 267 8 183 75 21
See notes to
financial statements.
18
FINANCIAL HIGHLIGHTS
CLASS I SHARES
Period ended 10-31-02 9 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $8.16 $6.51 $8.54 $8.50
Net investment loss 2 (0.06) (0.06) (0.06) (0.02)
Net realized and unrealized
gain (loss) on investments (1.59) 2.09 0.02 (0.04)
Total from
investment operations (1.65) 2.03 (0.04) (0.06)
Net asset value,
end of period $6.51 $8.54 $8.50 $8.44
Total return 3 (%) (20.22) 5 31.18 (0.47) (0.71) 5
Ratios and supplemental data
Net assets, end of period
(in millions) $3 $3 $3 $2
Ratio of expenses
to average net assets (%) 1.46 6 1.22 1.02 1.04 6
Ratio of net investment loss
to average net assets (%) (1.00) 6 (0.85) (0.71) (0.54) 6
Portfolio turnover (%) 267 8 183 75 21
1 Semiannual period from 11-1-04 through 4-30-05. 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 Class I shares began operations on 3-1-02.
See notes to
financial statements.
19
NOTES TO
STATEMENTS
Unaudited
Note A
Accounting policies
John Hancock Mid Cap Growth Fund (the "Fund") is a diversified series of
John Hancock Invest ment Trust III, an open-end management investment
company registered under the Investment Company Act of 1940. The
investment objective of the Fund is to achieve long-term capital
appreciation.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B, Class C and Class I shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights as to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class that bears distribution and service expenses under the terms of a
distribution plan have exclusive voting rights to that distribution plan.
Significant accounting policies
of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at fair
value as determined in good faith in accordance with procedures approved
by the Trustees. Short-term debt investments which have a remaining
maturity of 60 days or less may be valued at amortized cost, which
approximates market value. Investments in AIM Cash Invest ment 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.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to
20
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 size
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, 2005.
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, 2005, the Fund loaned securities having a
market value of $30,378,855 collateralized by cash in the amount of
$30,986,432. 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 $92,779,923 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 -- $821,684, October 31,
2009 -- $66,951,793 and October 31, 2010 -- $25,006,446. Availability of a
certain amount of loss carryforward, which was acquired on June 7, 2002,
in a merger, may be limited in a given year.
Dividends, interest
and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income
and net realized gains, if any, 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
21
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 shares are assessed up-front sales charges. During the period
ended April 30, 2005, JH Funds received net up-front sales charges of
$33,991 with regard to sales of Class A shares. Of this amount, $3,972 was
retained and used for printing prospectuses, advertising, sales literature
and other purposes, $22,498 was paid as sales commissions to unrelated
broker-dealers and $7,521 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.
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, 2005, CDSCs
received by JH Funds amounted to $45,147 for Class B shares and $156 for
Class C shares.
The Fund has a transfer agent agreement with John Hancock Signature
Services,
22
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 a total annual rate
of 0.05% of Class I average daily net asset value. Signature Services
agreed to voluntarily reduce the Fund's asset-based portion of the
transfer agent fee if the total transfer agent fee exceeds the Lipper,
Inc. median transfer agency fee for comparable mutual funds by 0.05%.
Accordingly, the transfer agent expense for Class A, Class B and Class C
shares was reduced by $34,200 for the period ended April 30, 2005.
Signature Services reserves the right to terminate this limitation at any
time.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period amounted to $15,141. The Fund also paid the Adviser the amount of
$127 for certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and officer of the Adviser, as well
as affiliated Trustee of the Fund, and is compensated by the Adviser. 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 another 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.
23
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.
Year ended 10-31-04 Period ended 4-30-05 1
Shares Amount Shares Amount
Class A shares
Sold 1,967,512 $16,799,745 897,408 $7,855,208
Repurchased (2,857,998) (24,115,884) (1,471,166) (12,940,859)
Net decrease (890,486) ($7,316,139) (573,758) ($5,085,651)
Class B shares
Sold 902,062 $6,933,222 219,309 $1,754,778
Repurchased (2,635,622) (20,261,037) (1,285,946) (10,255,704)
Net decrease (1,733,560) ($13,327,815) (1,066,637) ($8,500,926)
Class C shares
Sold 120,684 $934,329 43,585 $350,838
Repurchased (144,186) (1,101,394) (50,808) (408,521)
Net decrease (23,502) ($167,065) (7,223) ($57,683)
Class I shares
Sold 57,520 $502,107 18,869 $169,802
Repurchased (120,524) (1,040,249) (49,681) (444,789)
Net decrease (63,004) ($538,142) (30,812) ($274,987)
Net decrease (2,710,552) ($21,349,161) (1,678,430) ($13,919,247)
1 Semiannual period from 11-1-04 through 4-30-05. 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, 2005, aggregated $28,238,906 and $44,097,433,
respectively.
The cost of investments owned on April 30, 2005, including short-term
investments, for federal income tax purposes, was $146,160,865. Gross
unrealized appreciation and depreciation of investments aggregated
$18,598,634 and $9,258,291, respectively, resulting in net unrealized
appreciation of $9,340,343.
24
Note E
Shareholder meeting
On December 1, 2004, a Special Meeting of shareholders of the Fund was
held to elect nine Trustees effective January 1, 2005.
Proxies covering 11,700,644 shares of beneficial interest were voted at
the meeting.
The shareholders elected the following Trustees to serve until their
respective successors are duly elected and qualified, with the votes
tabulated as follows:
WITHHELD
FOR AUTHORITY
- ---------------------------------------------------------------------
James F. Carlin 11,442,183 258,461
Richard P. Chapman, Jr. 11,459,078 241,566
William H. Cunningham 11,441,776 258,868
Ronald R. Dion 11,451,594 249,050
Charles L. Ladner 11,460,509 240,135
Dr. John A. Moore 11,461,587 239,057
Patti McGill Peterson 11,435,141 265,503
Steven R. Pruchansky 11,461,625 239,019
James A. Shepherdson 11,459,267 241,377
25
OUR FAMILY
OF FUNDS
- --------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Greater China Opportunities Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- --------------------------------------------------------
Sector 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
A fund's investment objectives, risks, charges and expenses are included
in the prospectus and should be considered carefully before investing. For
a prospectus, call your financial professional, call John Hancock Funds at
1-800-225-5291 or visit our Web site at www.jhfunds.com. Please read the
prospectus carefully before investing or sending money.
26
ELECTRONIC
DELIVERY
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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.
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Sign up for electronic delivery today at www.jhfunds.com/edelivery
27
OUR WEB SITE
A wealth of information --
www.jhfunds.com
View the latest information for your account.
- ------------------------------------------------
Transfer money from one account to another.
- ------------------------------------------------
Get current quotes for major market indexes.
- ------------------------------------------------
Use our online calculators to help you with your
financial goals.
- ------------------------------------------------
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investment experts.
- ------------------------------------------------
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- ------------------------------------------------
28
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Trustees
Charles L. Ladner, Chairman*
James F. Carlin
Richard P. Chapman, Jr.*
William H. Cunningham
Ronald R. Dion
Dr. John A. Moore*
Patti McGill Peterson*
Steven R. Pruchansky
James A. Shepherdson
Lt. Gen. Norman H. Smith,
USMC (Ret.)
*Members of the Audit Committee
Officers
James A. Shepherdson
President and
Chief Executive Officer
William H. King
Vice President and Treasurer
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Principal distributor
John Hancock Funds, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent
John Hancock Signature
Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
The Fund's investment objective, risks, charges and expenses are included
in the prospectus and should be considered carefully before investing. For
a prospectus, call your financial professional, call John Hancock Funds at
1-800-225-5291, or visit the Fund's Web site at www.jhfunds.com. Please
read the prospectus carefully before investing or sending money.
How to contact us
Internet www.jhfunds.com
Mail Regular mail: Express mail:
John Hancock John Hancock
Signature Services, Inc. Signature Services, Inc.
1 John Hancock Way, Suite 1000 Mutual Fund Image Operations
Boston, MA 02217-1000 529 Main Street
Charlestown, MA 02129
Phone Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
A listing of month-end portfolio holdings is available on our Web site,
www.jhfunds.com. A more detailed portfolio holdings summary is available
on a quarterly basis 60 days after the fiscal quarter on our Web site or
upon request by calling 1-800-225-5291, or on the Securities and Exchange
Commission'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."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of
the shareholders of John Hancock
Mid Cap Growth Fund.
390SA 4/05
6/05
JOHN HANCOCK
International Fund
4.30.2005
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, Chief Executive Officer, flush left next
to first paragraph.]
CEO CORNER
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
Your expenses
page 8
Fund's investments
page 10
Financial statements
page 14
For more information
page 29
Dear Fellow Shareholders,
After advancing for a second straight year in 2004, the stock market
pulled back in the first four months of 2005. For much of 2004 the market
had been in the doldrums as investors fretted about rising oil prices,
higher interest rates, the war in Iraq and a closely contested
presidential race. But the year ended on a high note with a sharp rally
sparked by a definitive end to the U.S. presidential election and
moderating oil prices.
Investors were brought back down to earth in January, however, as the
market declined in three of the four weeks and produced negative results
for the month in a broad-based move downward. Rising oil prices and
interest rates, and concerns about less robust corporate earnings growth
were among the culprits that kept investors on the sidelines. Investors
began to re-enter the market in February, reversing January's decline. But
as the month progressed into March and April investors again grew
concerned about further spikes in oil prices and rising interest rates. As
a result, the first four months of 2005 ended with the major indexes in
the red. By the end of April, the Dow Jones Industrial Average had
returned -4.81%, the S&P 500 Index returned -4.00%, while the Nasdaq
Composite Index fell by 11.67%. Bonds performed slightly better, managing
to produce positive results, with the Lehman Brothers Aggregate Bond Index
returning 0.87%.
In October, you may recall we requested your vote on a proposal regarding
the election of your fund's Board of Trustees. We are pleased to report
that shareholders overwhelmingly approved the proposal, which became
effective January 1, 2005. As a result, all open-end John Hancock funds
now have the same Board of Trustees, comprised of ten members -- nine of
them, including the Chairman, are independent Trustees with no direct or
indirect interest in John Hancock Advisers, LLC, your fund's investment
adviser. We believe this move is a way to improve the effectiveness of the
Trustees' oversight of the funds, and we are grateful for your support.
Sincerely,
/S/ James A. Shepherdson
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of April 30, 2005. 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
* International stock markets produced strong results, outperforming U.S.
equity markets.
* The Fund's holdings in Canada, Hong Kong and the Netherlands were major
sources of relative strength, primarily due to stock selection.
* The Fund's focus on growth stocks was a source of weakness, as value
stocks continued to outperform growth stocks.
[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, 2005." The chart is scaled in increments of 3% with 0% at the
bottom and 9% at the top. The first bar represents the 8.03% total return
for Class A. The second bar represents the 7.69% total return for Class B.
The third bar represents the 7.69% total return for Class C. The fourth
bar represents the 8.43% 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. These returns do not reflect the deduction of the
maximum sales charge, which would reduce the performance shown above."]
Top 10 holdings
3.1% Vodafone Group Plc
3.1% Morrison (WM) Supermarkets Plc
2.7% Koninklijke Numico N.V.
2.5% Sanofi-Aventis SA
2.4% Sumitomo Mitsui Financial Group, Inc.
2.4% Esprit Holdings Ltd.
2.4% ENI Spa
2.4% Merck KGaA
2.2% Japan Tobacco, Inc.
2.2% Roche Holding AG
As a percentage of net assets on April 30, 2005.
1
BY HORACIO A. VALEIRAS, CFA, FOR THE NICHOLAS-APPLEGATE
CAPITAL MANAGEMENT PORTFOLIO MANAGEMENT TEAM
MANAGERS' REPORT
JOHN HANCOCK
International Fund
International stock markets turned in a strong performance for the six
months ended April 30, 2005. While registering gains during the period,
equity prices lacked a clear direction, as both positive and negative
factors influenced investor sentiment. The U.S. dollar weakened against a
basket of foreign currencies, enhancing international equity performance
when translated into dollar terms.
In Japan, the world's second-largest economy, equities posted increases
but trailed the broad market, as measured by the MSCI All Country World
Ex-U.S. Index. Japan's economic recovery stalled in 2004 as exports slowed
on softer global demand. Weakness continued into 2005, with retail sales,
industrial production and a key measure of business confidence failing to
meet expectations. Positive trends in company fundamentals, including
rising earnings and strengthening balance sheets, helped drive equity
prices higher during the six-month period.
"International stock markets
turned in a strong performance
for the six months ended
April 30, 2005."
The investment environment was similar in Europe. Continental European
economies continued to struggle -- particularly Germany, where the
unemployment rate hit a record high of 12%. After rising 3.1% in 2004,
economic activity in the United Kingdom slowed in the first quarter of
2005 amid a drop in industrial production. However, European corporate
profits were close to a 25-year high as a percentage of GDP, contributing
to equity gains in the region and modest outperformance of the MSCI All
Country World Ex-U.S. Index.
Stocks in emerging markets delivered the best returns, despite a 1.0%
increase in short-term U.S. interest rates. Higher U.S. rates have
traditionally encouraged capital to flow away from developing nations,
putting pressure on their currencies and increasing borrowing costs.
However, policy reforms and debt restructuring have made a number of
countries -- and companies -- more
2
financially sound than in prior periods of U.S. monetary tightening. In
addition, economies in many emerging countries experienced rapid growth,
fueled by strong global demand for oil and other commodities.
Fund performance explained
For the six months ended April 30, 2005, John Hancock International Fund's
Class A, Class B, Class C and Class I shares gained 8.03%, 7.69%, 7.69%
and 8.43%, respectively, at net asset value. During the same period, the
average international multi-cap growth fund rose 7.32%, according to
Lipper, Inc.1, and the benchmark MSCI All Country World Ex-U.S. Index
advanced 7.63%. 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 the majority of countries and sectors of investment
produced gains, resulting in a strong total return for the six-month
period. On a relative basis, the Fund slightly outperformed both its
Lipper peer group average and the MSCI All Country World Ex-U.S. Index.
The Fund's holdings in Canada, Hong Kong and the Netherlands were major
sources of relative strength, primarily due to favorable stock selection.
Issue selection among consumer discretionary and telecommunications
services stocks also benefited relative results, as did an overweight in
health care, a sector which outperformed the broad market.
"The Fund's holdings in the
majority of countries and sectors
of investment produced gains..."
In contrast, stock selection in the United Kingdom, France, Switzerland
and the materials and financial sectors negatively affected performance
versus the index. The fact that value stocks outperformed growth stocks
during the period was another source of relative weakness. Consistent with
our investment philosophy, the Fund's holdings are concentrated in growth
stocks, while the style-neutral MSCI All Country World Ex-U.S. Index
includes both growth and value names.
Top-performing positions included Esprit Holdings, a Hong Kong specialty
retailer that experienced significant gross margin expansion;
3
ASM International, a Dutch semiconductor equipment manufacturer which
gained market share and we later sold it; and True Corporation, a Thai
telecommunications services provider that benefited from rapid subscriber
growth in its cellular subsidiary. Decliners included Actelion, a French
biotechnology firm which withdrew a drug from its pipeline, and we sold
it; HeidelbergCement, a German building materials manufacturer whose
management provided a cautious outlook for 2005; and Italian-Thai
Development, a Thailand-based construction company that faced several
project-specific issues.
[Table at top left-hand side of page entitled "Sector distribution 2." The
first listing is Financials - 19%, the second is Consumer discretionary -
15%, the third is Telecommunication services - 13%, the fourth is Consumer
staples - 12%, the fifth is Health care - 10%, the sixth is Industrials -
9%, the seventh is Energy - 7%, the eighth is Materials - 6%, the ninth is
Information technology - 5% and the tenth is Utilities - 2%.]
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 the Asia Pacific region, most notably in
Japan and Australia, and increased exposure to developed European
countries where we found more promising growth opportunities. Changes in
sector weightings included a decrease in the Fund's consumer
discretionary, financials and information technology positions and an
increase in consumer staples and health care stocks.
[Bar chart at middle of page with heading "Top five countries 2." The
chart is divided into five sections: Japan 17%, United Kingdom 16%, France
9%, Germany 8% and Switzerland 8%.]
The Fund's holdings remained well diversified across countries and sectors
as of April 30, 2005, despite these shifts. Compared to the MSCI All
Country World Ex-U.S. Index, the Fund was underweight stocks in Latin
America and developed European and Asian Pacific countries and overweight
companies in emerging Asian nations, particularly China. The Fund was
underweight financials, utilities and energy and overweight
telecommunications services, consumer staples and consumer discretionary
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
performanceand what's behind the numbers." The first listing is Esprit
Holdings followed by an up arrow with the phrase "Significant gross margin
expansion." The second listing is True Corporation followed by an up arrow
with the phrase "Rapid subscriber growth in cellular subsidiary." The
third listing is HeidelbergCement followed by a down arrow with the phrase
"Management provides cautious outlook."]
Outlook
Our outlook for international equities is mixed over the remainder of
2005. Economic data for Japan continues to deteriorate, and growth in
continental Europe remains tepid, restrained by weak consumer spending.
Recent slowing in the information technology sector has negative
implications for technology-dependent markets in emerging Asia, such as
Taiwan and South Korea. On the other hand, economic activity is strong in
many parts of the world, including India and China. In addition, corporate
profits in Japan remain robust, and many European businesses are flush
with cash, offering the potential for higher dividend payouts, company
stock repurchases and mergers and acquisitions activity.
"...we believe companies that can
deliver strong earnings growth should
once again command a
premium valuation relative
to others."
In this environment, we believe companies that can deliver strong earnings
growth should once again command a premium valuation relative to others.
Following several years of growth-stock underperformance, the valuation
difference between growth and value globally is at its lowest level since
the early 1990s. We also believe this kind of environment is ideal for
stock selection, particularly for investing in companies where positive
change is leading to increased earnings estimates.
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. The team's
statements reflect their own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as investment
advice or a recommendation regarding any specific security. They are also
subject to change at any time as market and other conditions warrant.
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
2 As a percentage of net assets on 4-30-05.
5
A LOOK AT
PERFORMANCE
For the period ended
April 30, 2005
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 4.49% 4.25% 8.25% 10.82%
Five years -8.89 -8.97 -8.62 --
Ten years -0.89 -0.97 -- --
Since inception -- -- -3.97 6.42
Cumulative total returns with maximum sales charge (POP)
Six months 2.59 2.69 6.69 8.43
One year 4.49 4.25 8.25 10.82
Five years -37.24 -37.49 -36.30 --
Ten years -8.59 -9.32 -- --
Since inception -- -- -24.42 21.76
Performance figures assume all distributions are reinvested. Returns with
maximum sales charge reflect a sales charge on Class A shares of 5%, and
the applicable contingent deferred sales charge (CDSC) on Class B and
Class C shares. The returns for Class C shares have been adjusted to
reflect the elimination of the front-end sales charge effective July 15,
2004. 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 returns reflect past results and should not be considered indicative
of future performance. The return and principal value of an investment
will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Due to market volatility, the Fund's current
performance may be higher or lower than the performance shown. For
performance data current to the most recent month-end, please call
1-800-225-5291 or visit the Fund's Web site at www.jhfunds.com.
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.
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 Ex-U.S. Index.
[Line chart with the heading "GROWTH OF $10,000." Within the chart are
three lines. The first line represents the MSCI All Country World Ex-U.S.
Index and is equal to $13,716 as of April 30, 2005. 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
$9,621 as of April 30, 2005. 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 $9,141 as of April 30, 2005.]
Class B 1 Class C 1 Class I 2
Period beginning 4-30-95 6-1-98 3-1-02
International Fund $9,068 $7,558 $12,176
Index 13,716 11,383 13,487
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, 2005. The Class
C shares investment with maximum sales charge has been adjusted to reflect
the elimination of the front-end sales charge effective July 15, 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 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
YOUR
EXPENSES
These examples are intended to help you understand your ongoing operating
expenses.
Understanding fund expenses
As a shareholder of the Fund, you incur two types of costs:
* Transaction costs which include sales charges (loads) on purchases or
redemptions (varies by share class), minimum account fee charge, etc.
* Ongoing operating expenses including management fees, distribution and
service fees (if applicable) and other fund expenses.
We are going to present only your ongoing operating expenses here.
Actual expenses/actual returns
This example is intended to provide information about your fund's actual
ongoing operating expenses, and is based on your fund's actual return. It
assumes an account value of $1,000.00 on October 31, 2004, with the same
investment held until April 30, 2005.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $1,080.30 $10.25
Class B 1,076.90 13.85
Class C 1,076.90 13.85
Class I 1,084.30 6.59
Together with the value of your account, you may use this information to
estimate the operating expenses that you paid over the period. Simply
divide your account value at April 30, 2005 by $1,000.00, then multiply it
by the "expenses paid" for your share class from the table above. For
example, for an account value of $8,600.00, the operating expenses should
be calculated as follows:
Example
-- -- -- --
| My account value / | | "expenses paid" | My
| / $1,000.00 = 8.6 | X $| | = actual
| $8,600.00 / | | from table | expenses
-- -- -- --
8
Hypothetical example for comparison purposes
This table allows you to compare your fund's ongoing operating expenses
with those of any other fund. It provides an example of the Fund's
hypothetical account values and hypothetical expenses based on each
class's actual expense ratio and an assumed 5% annual return before
expenses (which is not your fund's actual return). It assumes an account
value of $1,000.00 on October 31, 2004, with the same investment held
until April 30, 2005. Look in any other fund shareholder report to find
its hypothetical example and you will be able to compare these expenses.
Account value Expenses paid
$1,000.00 Ending value during period
on 10-31-04 on 4-30-05 ended 4-30-05 1
Class A $1,014.94 $9.93
Class B 1,011.46 13.41
Class C 1,011.46 13.41
Class I 1,018.47 6.38
Remember, these examples do not include any transaction costs, such as
sales charges; therefore, these examples will not help you to determine
the relative total costs of owning different funds. If transaction costs
were included, your expenses would have been higher. See the prospectus
for details regarding transaction costs.
1 Expenses are equal to the Fund's annualized expense ratio of 1.99%,
2.69%, 2.69% and 1.28% for Class A, Class B, Class C and Class I,
respectively, multiplied by the average account value over the period,
multiplied by number of days in most recent fiscal half-year/365 or 366
(to reflect the one-half year period).
9
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
April 30, 2005
(unaudited)
This schedule is divided into three main categories: common stocks,
securities-linked warrants and short-term investments. The common stocks
and securities-linked warrants are further broken down by country.
Short-term investments, which represent the Fund's cash position, are
listed last.
Issuer Shares Value
Common stocks 95.65% $93,214,706
(Cost $86,950,857)
Belgium 2.00% 1,948,043
KBC Groupe SA (Diversified Banks) 24,543 1,948,043
Canada 5.62% 5,474,726
Cameco Corp. (Diversified Metals & Mining) 41,900 1,645,016
Canadian Pacific Railway Ltd. (Railroads) 30,400 1,064,648
Precision Drilling Corp. (Oil & Gas Drilling) (I) 16,700 1,205,239
Rogers Communications, Inc. (Broadcasting & Cable TV) 54,000 1,559,823
Cayman Islands 0.82% 800,384
Global Bio-chem Technology Group Co., Ltd. (Biotechnology) 1,222,000 800,384
China 2.48% 2,418,719
China Telecom Corp. Ltd., American Depositary Receipts (ADR)
(Integrated Telecommunication Services) 28,900 987,802
PetroChina Co., Ltd. (Integrated Oil & Gas) 2,396,000 1,430,917
Egypt 0.99% 963,172
Orascom Telecom Holdings SAE, Global Depositary Receipts
(Integrated Telecommunication Services) (I) 23,492 963,172
France 8.81% 8,589,164
France Telecom SA (Integrated Telecommunication Services) 33,071 975,380
Lagardere SCA (Publishing) 13,416 973,341
Pinault-Printemps-Redoute SA (Department Stores) 18,733 1,850,588
Publicis Groupe (Advertising) 50,661 1,454,386
Sanofi-Aventis SA (Pharmaceuticals) 26,888 2,388,688
Total SA (Integrated Oil & Gas) 4,244 946,781
See notes to
financial statements.
10
FINANCIAL STATEMENTS
Issuer Shares Value
Germany 8.36% $8,141,988
Adidas-Salomon AG (Apparel, Accessories & Luxury Goods) 6,256 977,953
Bayer AG (Diversified Chemicals) 49,761 1,651,600
Bayerische Motoren Werke (BMW) AG (Automobile Manufacturers) 35,591 1,511,503
HeidelbergCement AG (Construction Materials) 12,339 717,603
Hypo Real Estate Holdings AG (Thrifts & Mortgage Finance) 23,471 975,778
Merck KGaA (Pharmaceuticals) 30,206 2,307,551
Greece 2.16% 2,106,087
Coca-Cola Hellenic Bottling Co. S.A. (Soft Drinks) 39,710 1,076,818
Hellenic Telecommunications Organization SA
(Intergrated Telecommunication Services) 54,910 1,029,269
Hong Kong 4.03% 3,926,712
Esprit Holdings Ltd. (Apparel Retail) 313,800 2,337,555
Foxconn International Holdings Ltd. (Communications Equipment) (I) 2,650,000 1,589,157
Indonesia 0.90% 876,417
PT Indosat Tbk (ADR) (Integrated Telecommunication Services) 38,900 876,417
Israel 0.85% 824,137
Makhteshim-Agan Industries Ltd. (Diversified Chemicals) 131,584 824,137
Italy 4.05% 3,944,458
ENI Spa (Integrated Oil & Gas) 91,784 2,315,395
Mediobanca SpA (Investment Banking & Brokerage) 98,770 1,629,063
Japan 16.99% 16,560,987
Asahi Glass Co., Ltd. (Building Products) 119,000 1,317,505
Canon, Inc. (Office Electronics) 27,900 1,450,275
Eisai Co., Ltd. (Pharmaceuticals) 30,100 1,002,276
Fuji Photo Film Co., Ltd. (Photographic Products) 30,100 992,318
Japan Tobacco, Inc. (Tobacco) 170 2,187,964
Mitsubishi Estate Co., Ltd. (Real Estate Management & Development) 155,000 1,665,987
Mitsubishi Tokyo Financial Group, Inc. (Diversified Banks) 205 1,770,750
Shin-Etsu Chemcial Co., Ltd. (Specialty Chemicals) 37,600 1,385,355
Sumitomo Mitsui Financial Group, Inc. (Diversified Banks) 364 2,348,005
Tokyo Gas Co., Ltd. (Gas Utilities) 315,000 1,263,933
Toppan Printing Co., Ltd. (Commercial Printing) 108,000 1,176,619
Luxembourg 2.00% 1,950,104
Millicom International Cellular SA (Wireless Telecommunication Services) (I) 48,900 870,909
Stolt Offshore SA (Oil & Gas Equipment & Services) (I) 146,000 1,079,195
See notes to
financial statements.
11
FINANCIAL STATEMENTS
Issuer Shares Value
Netherlands 2.69% $2,617,235
Royal Numico NV (Packaged Foods & Meats) (I) 63,058 2,617,235
Norway 0.93% 910,830
Telenor ASA (Integrated Telecommunication Services) 108,800 910,830
South Korea 1.88% 1,832,509
Daewoo Shipbuilding & Marine Engineering Co., Ltd. (Marine) 46,940 846,554
LG Electronics, Inc. (Consumer Electronics) 14,670 985,955
Spain 3.49% 3,405,573
Banco Bilbao Vizcaya Argentaria SA (Diversified Banks) 106,289 1,651,465
Gestevision Telecinco SA (Broadcasting & Cable TV) 76,401 1,754,108
Switzerland 8.22% 8,005,645
Adecco SA (Employment Services) 31,660 1,537,476
Roche Holding AG (Pharmaceuticals) 17,473 2,122,523
Straumann AG (Health Care Equipment) 4,735 1,025,831
Swiss Life Holding (Life & Health Insurance) (I) 9,832 1,361,418
UBS AG (Diversified Capital Markets) 24,393 1,958,397
Thailand 2.25% 2,196,623
Italian-Thai Development Public Co., Ltd. (Construction & Engineering) 3,224,000 757,371
True Corp. Pcl (Integrated Telecommunication Services) (I) 5,978,200 1,439,252
United Kingdom 16.13% 15,721,193
Allied Domecq Plc (Distillers & Vintners) 76,862 1,009,240
ARM Holdings Plc (Semiconductors) 739,734 1,351,203
Diageo Plc (Distillers & Vintners) 121,696 1,805,760
easyJet Plc (Airlines) (I) 191,390 802,037
Man Group Plc (Asset Management & Custody Banks) 72,272 1,684,712
Morrison (Wm) Supermarkets Plc (Food Retail) 808,144 3,011,140
Premier Farnell Plc (Technology Distributors) 300,955 852,131
Royal Bank of Scotland Group Plc (Diversified Banks) 56,667 1,713,027
Taylor Woodrow Plc (Homebuilding) 85,977 472,368
Vodafone Group Plc (Wireless Telecommunication Services) 1,153,696 3,019,575
See notes to
financial statements.
12
FINANCIAL STATEMENTS
Issuer Shares Value
Securities-linked warrants 2.03% $1,973,844
(Cost $2,045,563)
Taiwan 2.03% 1,973,844
Far Eastone Telecommunications Co., Ltd.
(Wireless Telecommunication Services) (B)(I)(R) 1,610,000 1,973,844
Interest Par value
Issuer, description, maturity date rate (000) Value
Short-term investments 2.31% $2,254,000
(Cost $2,254,000)
Joint Repurchase Agreement 2.31% 2,254,000
Investment in a joint repurchase agreement transaction
with Bank of America Corp. -- Dated 04-29-05
due 05-02-05 (secured by U.S. Treasury STRIPS due
11-15-10 thru 08-15-25) 2.85% $2,254 2,254,000
Total investments 99.99% $97,442,550
Other assets and liabilities, net 0.01% $8,006
Total net assets 100.00% $97,450,556
(B) This security is fair valued in good faith under procedures
established by the Board of Trustees.
(I) Non-income-producing security.
(R) 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.
13
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2005
(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 $91,250,420) $97,442,550
Cash 630
Foreign cash, at value (cost $6,330) 6,886
Receivable for investments sold 961,850
Receivable for shares sold 23,094
Dividends and interest receivable 296,010
Other assets 13,636
Total assets 98,744,656
Liabilities
Payable for investments purchased 1,028,724
Payable for shares repurchased 107,863
Payable to affiliates
Management fees 80,707
Distribution and service fees 7,226
Other 26,005
Other payables and accrued expenses 43,575
Total liabilities 1,294,100
Net assets
Capital paid-in 152,708,721
Accumulated net realized loss on investments
and foreign currency transactions (61,094,808)
Net unrealized appreciation of investments
and translation of assets and liabilities in
foreign currencies 6,196,287
Accumulated net investment loss (359,644)
Net assets $97,450,556
Net asset value per share
Based on net asset values and shares outstanding --
the Fund has an unlimited number of shares
authorized with no par value
Class A ($68,487,071 [DIV] 9,514,481 shares) $7.20
Class B ($24,156,141 [DIV] 3,629,475 shares) $6.66
Class C ($3,547,857 [DIV] 532,867 shares) $6.66
Class I ($1,259,487 [DIV] 170,270 shares) $7.40
Maximum offering price per share
Class A 1 ($7.20 [DIV] 95%) $7.58
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, 2005
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned and
expenses incurred
in operating the
Fund. It also shows
net gains (losses)
for the period
stated.
Investment income
Dividends (including $12,985 received from
affiliated issuers and net of foreign withholding
taxes of $57,310) $652,714
Interest 14,939
Total investment income 667,653
Expenses
Investment management fees 442,448
Class A distribution and service fees 101,098
Class B distribution and service fees 128,312
Class C distribution and service fees 20,382
Class A, B and C transfer agent fees 248,148
Class I transfer agent fees 313
Custodian fees 62,937
Printing 31,153
Registration and filing fees 21,898
Professional fees 19,791
Accounting and legal services fees 12,299
Miscellaneous 9,249
Interest 2,159
Trustees' fees 1,472
Total expenses 1,101,659
Less expense reductions (24,098)
Net expenses 1,077,561
Net investment loss (409,908)
Realized and unrealized gain (loss)
Net realized gain (loss) on
Investments (including $339,764 net realized gain
on sales of investments in affiliated issuers) 11,058,006
Foreign currency transactions (500,043)
Change in net unrealized appreciation (depreciation) of
Investments (2,863,367)
Translation of assets and liabilities in foreign currencies 65,755
Net realized and unrealized gain 7,760,351
Increase in net assets from operations $7,350,443
1 Semiannual period from 11-1-04 through 4-30-05.
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
difference reflects
earnings less
expenses, any
investment
gains and losses,
distributions, if
any, paid to
shareholders and
the net of Fund
share transactions.
Year Period
ended ended
10-31-04 4-30-05 1
Increase (decrease) in net assets
From operations
Net investment loss ($492,570) ($409,908)
Net realized gain 16,578,291 10,557,963
Change in net unrealized
appreciation (depreciation) (8,094,661) (2,797,612)
Increase in net assets
resulting from operations 7,991,060 7,350,443
Distributions to shareholders
From net realized gain
Class A -- (1,112,572)
Class B -- (483,477)
Class C -- (70,732)
Class I -- (22,383)
-- (1,689,164)
From Fund share transactions (10,403,583) (2,661,825)
Net assets
Beginning of period 96,863,625 94,451,102
End of period 2 $94,451,102 $97,450,556
1 Semiannual period from 11-1-04 through 4-30-05. Unaudited.
2 Includes accumulated net investment income (loss) of $50,264 and
($359,644), 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 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $10.95 $9.45 $6.18 $5.10 $6.21 $6.78
Net investment loss 2 (0.04) (0.05) (0.04) (0.04) (0.02) (0.02)
Net realized and unrealized
gain (loss) on investments (1.01) (3.22) (1.04) 1.15 0.59 0.56
Total from
investment operations (1.05) (3.27) (1.08) 1.11 0.57 0.54
Less distributions
From net realized gain (0.45) -- -- -- -- (0.12)
Net asset value, end of period $9.45 $6.18 $5.10 $6.21 $6.78 $7.20
Total return 3,4 (%) (10.15) (34.60) (17.48) 21.76 9.18 8.03 5
Ratios and supplemental data
Net assets, end of period
(in millions) $15 $8 $6 $62 $64 $68
Ratio of expenses
to average net assets (%) 1.88 2.23 2.38 2.45 2.04 1.99 6
Ratio of adjusted expenses
to average net assets 7 (%) 3.44 3.83 4.43 3.00 2.07 2.04 6
Ratio of net investment loss
to average net assets (%) (0.43) (0.65) (0.68) (0.63) (0.27) (0.62) 6
Portfolio turnover (%) 163 278 228 8 216 8 201 100
See notes to
financial statements.
17
FINANCIAL HIGHLIGHTS
CLASS B SHARES
Period ended 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $10.55 $9.04 $5.86 $4.81 $5.81 $6.30
Net investment loss 2 (0.12) (0.10) (0.08) (0.07) (0.06) (0.05)
Net realized and unrealized
gain (loss) on investments (0.94) (3.08) (0.97) 1.07 0.55 0.53
Total from
investment operations (1.06) (3.18) (1.05) 1.00 0.49 0.48
Less distributions
From net realized gain (0.45) -- -- -- -- (0.12)
Net asset value, end of period $9.04 $5.86 $4.81 $5.81 $6.30 $6.66
Total return 3,4 (%) (10.65) (35.18) (17.92) 20.79 8.43 7.69 5
Ratios and supplemental data
Net assets, end of period
(in millions) $12 $6 $5 $30 $26 $24
Ratio of expenses
to average net assets (%) 2.57 2.93 3.08 3.15 2.74 2.69 6
Ratio of adjusted expenses
to average net assets 7 (%) 4.13 4.53 5.13 3.70 2.77 2.74 6
Ratio of net investment loss
to average net assets (%) (1.13) (1.34) (1.38) (1.28) (0.98) (1.35) 6
Portfolio turnover (%) 163 278 228 8 216 8 201 100
See notes to
financial statements.
18
FINANCIAL HIGHLIGHTS
CLASS C SHARES
Period ended 10-31-00 10-31-01 10-31-02 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $10.57 $9.05 $5.87 $4.81 $5.81 $6.30
Net investment loss 2 (0.11) (0.10) (0.08) (0.06) (0.06) (0.05)
Net realized and unrealized
gain (loss) on investments (0.96) (3.08) (0.98) 1.06 0.55 0.53
Total from
investment operations (1.07) (3.18) (1.06) 1.00 0.49 0.48
Less distributions
From net realized gain (0.45) -- -- -- -- (0.12)
Net asset value, end of period $9.05 $5.87 $4.81 $5.81 $6.30 $6.66
Total return 3,4 (%) (10.72) (35.14) (18.06) 20.79 8.43 7.69 5
Ratios and supplemental data
Net assets, end of period
(in millions) $1 $1 $1 $3 $4 $4
Ratio of expenses
to average net assets (%) 2.57 2.93 3.08 3.15 2.73 2.69 6
Ratio of adjusted expenses
to average net assets 7 (%) 4.13 4.53 5.13 3.70 2.76 2.74 6
Ratio of net investment loss
to average net assets (%) (1.07) (1.35) (1.38) (1.11) (0.96) (1.37) 6
Portfolio turnover (%) 163 278 228 8 216 8 201 100
See notes to
financial statements.
19
FINANCIAL HIGHLIGHTS
CLASS I SHARES
Period ended 10-31-02 9 10-31-03 10-31-04 4-30-05 1
Per share operating performance
Net asset value,
beginning of period $6.18 $5.12 $6.30 $6.94
Net investment income (loss) 2 (0.01) 0.03 0.04 -- 10
Net realized and unrealized
gain (loss) on investments (1.05) 1.15 0.60 0.58
Total from
investment operations (1.06) 1.18 0.64 0.58
Less distributions
From net realized gain -- -- -- (0.12)
Net asset value, end of period $5.12 $6.30 $6.94 $7.40
Total return 3 (%) (17.15) 4,5 23.05 4 10.16 8.43 5
Ratios and supplemental data
Net assets, end of period
(in millions) $1 $1 $1 $1
Ratio of expenses
to average net assets (%) 2.04 6 1.60 1.17 1.28 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 0.60 0.09 6
Portfolio turnover (%) 228 8 216 8 201 100
1 Semiannual period from 11-1-04 through 4-30-05. 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 Class I shares began operations on 3-1-02.
10 Less than $0.01 per share.
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 Trust III, an open-end management investment
company registered under the Investment Company Act of 1940. The
investment objective of the Fund is to achieve long-term growth of
capital.
The Trustees have authorized the issuance of multiple classes of shares of
the Fund, designated as Class A, Class B, Class C and Class I shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights as to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class that bears distribution and service expenses under the terms of a
distribution plan have exclusive voting rights to that distribution plan.
Significant accounting policies
of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, if
quotations are not readily available, or the value has been materially
affected by events occurring after the close of a foreign market, at fair
value as determined in good faith in accordance with procedures approved
by the Trustees. Short-term debt investments which have a remaining
maturity of 60 days or less may be 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.
21
Foreign currency
translation
All assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars based on London currency
exchange quotations as of 4:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on
investments are translated at the rates prevailing at the dates of the
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign currency exchange gains or losses arise from
sales of foreign currency, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign currency exchange gains
and losses arise from changes in the value of assets and liabilities,
other than investments in securities, resulting from changes in the
exchange rates.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Capital gains realized on some
foreign securities are subject to foreign taxes, which are accrued as
applicable.
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, 2005.
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 the
warrant redeemed with the proceeds. Each warrant represents one share of
the underlying stock or unit of fixed income security,
22
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, 2005.
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 $71,426,399 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 -- $99,966, October 31,
2006 -- $1,234,369, October 31, 2007 -- $442,948, October 31, 2008 --
$51,797,156, October 31, 2009 -- $13,925,126 and October 31, 2010 --
$3,926,834. Availability of a certain amount of the carryforwards, which
were acquired in a merger on June 7, 2002, May 9, 2003 and 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, if any, 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.
23
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, on an annual basis, at least until
February 28, 2006. There were no expense reductions related to this total
expense limitation for the period ended April 30, 2005. 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 shares are assessed up-front sales charges. During the period
ended April 30, 2005, JH Funds received net up-front sales charges of
$36,561 with regard to sales of Class A shares. Of this amount, $5,342 was
retained and used for printing prospectuses, advertising, sales literature
and other purposes, $22,436 was paid as sales commissions to unrelated
broker-dealers and $8,783 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.
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
24
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, 2005, CDSCs received by JH Funds
amounted to $27,559 for Class B shares and $5,062 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 a total annual rate
of 0.05% of Class I 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, 2006. There were no transfer agent fee reductions under this
limitation during the period ended April 30, 2005. Signature Services also
agreed to voluntarily reduce the Fund's asset-based portion of the
transfer agent fee if the total transfer agent fee exceeds the Lipper,
Inc. median transfer agency fee for comparable mutual funds by 0.05%.
Accordingly, the transfer agent expense for Class A, Class B and Class C
shares was reduced by $24,098 for the period ended April 30, 2005.
Signature Services reserves the right to terminate this limitation at any
time.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period amounted to $12,299. The Fund also paid the Adviser the amount of
$114 for certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and officer of the Adviser, as well
as affiliated Trustee of the Fund, and is compensated by the Adviser. 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, reinvested and
repurchased during the last two periods, along with the corresponding
dollar value.
Year ended 10-31-04 Period ended 4-30-05 1
Shares Amount Shares Amount
Class A shares
Sold 1,973,699 $13,194,450 1,076,117 $7,900,849
Reinvested -- -- 153,373 1,067,479
Repurchased (2,637,147) (17,370,134) (1,111,414) (8,050,344)
Net increase (decrease) (663,448) ($4,175,684) 118,076 $917,984
Class B shares
Sold 1,369,403 $8,533,931 469,356 $3,214,128
Reinvested -- -- 71,179 459,815
Repurchased (2,491,843) (15,289,617) (985,842) (6,651,183)
Net decrease (1,122,440) ($6,755,686) (445,307) ($2,977,240)
Class C shares
Sold 317,706 $1,985,539 157,003 $994,350
Reinvested -- -- 491 69,404
Repurchased (254,252) (1,557,702) (229,215) (1,555,107)
Net increase (decrease) 63,454 $427,837 (71,721) ($491,353)
Class I shares
Sold 42,406 $290,627 30,937 $233,048
Reinvested -- -- 3,135 22,383
Repurchased (28,340) (190,677) (49,545) (366,647)
Net increase (decrease) 14,066 $99,950 (15,473) ($111,216)
Net decrease (1,708,368) ($10,403,583) (414,425) ($2,661,825)
1 Semiannual period from 11-1-04 through 4-30-05. 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, 2005, aggregated $97,102,565 and $102,067,104,
respectively.
The cost of investments owned on April 30, 2005, including short-term
investments, for federal income tax purposes, was $91,341,041. Gross
unrealized appreciation and depreciation of investments aggregated
$8,857,796 and $2,756,287, respectively, resulting in net unrealized
appreciation of $6,101,509. 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
Transactions in securities of affiliated issuers
Affiliated issuers, as defined by the Investment Company Act of 1940, are
those in which the Fund's holdings of an issuer represent 5% or more of
the outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the period ended
April 30, 2005 is set forth below.
Beginning Ending
share share Realized Dividend Ending
Affiliate amount amount gain income value
Asustek Computer, Inc.
GDR 144A:
bought none;
sold 469,260 469,260 -- $339,764 $12,985 --
Note F
Shareholder meeting
On December 1, 2004, a Special Meeting of shareholders of the Fund was
held to elect nine Trustees effective January 1, 2005.
Proxies covering 10,166,622 shares of beneficial interest were voted at
the meeting.
The shareholders elected the following Trustees to serve until their
respective successors are duly elected and qualified, with the votes
tabulated as follows:
WITHHELD
FOR AUTHORITY
- --------------------------------------------------------------------
James F. Carlin 9,776,216 390,406
Richard P. Chapman, Jr. 9,796,179 370,443
William H. Cunningham 9,763,608 403,014
Ronald R. Dion 9,778,953 387,669
Charles L. Ladner 9,790,396 376,226
Dr. John A. Moore 9,796,412 370,210
Patti McGill Peterson 9,758,408 408,214
Steven R. Pruchansky 9,795,461 371,161
James A. Shepherdson 9,800,075 366,547
27
OUR FAMILY
OF FUNDS
- ---------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Greater China Opportunities Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- ---------------------------------------------------------
Sector 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
A fund's investment objectives, risks, charges and expenses are included
in the prospectus and should be considered carefully before investing. For
a prospectus, call your financial professional, call John Hancock Funds at
1-800-225-5291 or visit our Web site at www.jhfunds.com. Please read the
prospectus carefully before investing or sending money.
28
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Trustees
Charles L. Ladner, Chairman*
James F. Carlin
Richard P. Chapman, Jr.*
William H. Cunningham
Ronald R. Dion
Dr. John A. Moore*
Patti McGill Peterson*
Steven R. Pruchansky
James A. Shepherdson
Lt. Gen. Norman H. Smith,
USMC (Ret.)
*Members of the Audit Committee
Officers
James A. Shepherdson
President and
Chief Executive Officer
William H. King
Vice President and Treasurer
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Sub-Investment adviser
Nicholas-Applegate Capital
Management, LLC
600 West Broadway
San Diego, CA 92101
Principal distributor
John Hancock Funds, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent
John Hancock Signature
Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
The Fund's investment objective, risks, charges and expenses are included
in the prospectus and should be considered carefully before investing. For
a prospectus, call your financial professional, call John Hancock Funds at
1-800-225-5291, or visit the Fund's Web site at www.jhfunds.com. Please
read the prospectus carefully before investing or sending money.
How to contact us
Internet www.jhfunds.com
Mail Regular mail: Express mail:
John Hancock John Hancock
Signature Services, Inc. Signature Services, Inc.
1 John Hancock Way, Suite 1000 Mutual Fund Image Operations
Boston, MA 02217-1000 529 Main Street
Charlestown, MA 02129
Phone Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
A listing of month-end portfolio holdings is available on our Web site,
www.jhfunds.com. A more detailed portfolio holdings summary is available
on a quarterly basis 60 days after the fiscal quarter on our Web site or
upon request by calling 1-800-225-5291, or on the Securities and Exchange
Commission'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."]
1-800-225-5291
1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
Now available: electronic delivery
www.jhfunds.com/edelivery
This report is for the information of
the shareholders of John Hancock
International Fund.
400SA 4/05
6/05
ITEM 2. CODE OF ETHICS.
As of the end of the period, April 30, 2005, the registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, that applies to its
Chief Executive Officer, Chief Financial Officer and Treasurer
(respectively, the principal executive officer, the principal financial
officer and the principal accounting officer, the "Senior Financial
Officers"). A copy of the code of ethics is filed as an exhibit to this
Form N-CSR.
The code of ethics was amended effective February 1, 2005 to address new
Rule 204A-1 under the Investment Advisers Act of 1940 and to make other
related changes.
The most significant amendments were:
(a) Broadening of the General Principles of the code to cover compliance
with all federal securities laws.
(b) Eliminating the interim requirements (since the first quarter of 2004)
for access persons to preclear their personal trades of John Hancock mutual
funds. This was replaced by post-trade reporting and a 30 day hold
requirement for all employees.
(c) A new requirement for "heightened preclearance" with investment
supervisors by any access person trading in a personal position worth
$100,000 or more.
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 at this time.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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"
and "John Hancock Funds - Governance Committee Charter".
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of
this Form N-CSR, the registrant's principal executive officer and principal
financial officer have concluded that those disclosure controls and
procedures provide reasonable assurance that the material information
required to be disclosed by the registrant on this report is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the 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 12. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive
officer and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company
Act of 1940, are attached.
(b) 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" and "John
Hancock Funds - Governance 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 Trust III
By:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: June 30, 2005
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 30, 2005
By:
------------------------------
William H. King
Vice President and Treasurer
Date: June 30, 2005